PureTech Regulatory News (PRTC)

9 April 2020

PureTech Health plc

PureTech Health Announces Annual Results for Year Ended 31 December 2019

Strong capital base with $321.5 million1 in Pro-forma Cash held at the PureTech level, consisting of $120.6 million2 as of 31 December 2019 along with $200.9 million in proceeds from the January 2020 sale of Karuna shares, enables extension of cash runway into the first quarter of 2024

Growth of Wholly Owned Pipeline with addition of clinical-stage programme, monetisation of partial stake in Karuna, and one FDA clearance, 5 clinical trial readouts and 6 clinical trial initiations across Founded Entities

Founded Entities raised $666.8 million3 in financing transactions, of which 93.4% came from third party investors

Regarding the COVID19 outbreak, PureTech has not experienced any material delays in ongoing work or anticipated milestones and continues to monitor the situation closely

Company to host a webcast and conference call today at 9.00 EDT / 14.00 GMT

PureTech Health plc (LSE: PRTC) ("PureTech Health", "PureTech", or "the Company"; together with its Founded Entities4, "the Group") a clinical-stage biotherapeutics company dedicated to discovering, developing and commercialising highly differentiated medicines for devastating diseases, today announced its annual results for the year ended 31 December 2019. The following information represents select highlights from the full Report, which is available on the Investor Relations section of the PureTech Health website at http://puretechhealth.com/reports-presentations.

Webcast and conference call details

Members of the PureTech management team will host a conference call at 9.00 EDT / 14.00 GMT today, 9 April, to discuss these results. A live webcast and presentation slides will be available on the investors section of PureTech's website () under the Reports and Presentations tab. To join the conference call please dial:

United Kingdom: 0800 640 6441

United Kingdom (Local): 020 3936 2999

USA (Local): 1 646 664 1960

All other locations: +44 20 3936 2999

Access code: 007425

Participants should log on approximately 10 minutes in advance to download slides and ensure proper setup to receive the webcast. For those unable to listen to the call live, a replay will be available on the PureTech website.

Cash Position

· As of 31 December 2019, the Company reports PureTech Level Cash Reserves of $120.6 million2 along with $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares, totalling PureTech Level Pro-forma Cash Reserves of $321.5 million1

· In 2019, PureTech's Founded Entities raised $666.8 million3 in financing transactions, of which 622.8 million (93.4 per cent) came from third parties.

Continued growth and expansion of Wholly Owned Pipeline

In 2019, PureTech grew and strengthened its Wholly Owned Internal Pipeline, which is centred on the lymphatic system and related immunological disorders. This pipeline includes one clinical-stage product candidate for the potential treatment of a range of conditions involving fibrosis, inflammation and impaired lymphatic flow (LYT-100), two preclinical product candidates for intractable cancers (LYT-200 and LYT-210) and three discovery platforms. Key developments include the following:

· In July 2019, PureTech announced the acquisition of a clinical‑stage product candidate LYT-100 (deupirfenidone) for the potential treatment of a range of conditions of fibrosis, inflammation and impaired lymphatic flow, including lymphoedema, idiopathic pulmonary fibrosis (IPF), acute lung injury and inflammation, unclassifiable interstitial lung disease (uILD), focal segmental glomerulosclerosis (FSGS) and radiation-induced fibrosis.

· In the March 2020 post-period, PureTech announced the initiation of a multiple ascending dose study to evaluate the safety, tolerability and pharmacokinetic profile of LYT-100 in healthy participants. Results are expected in 2020 and may enable the initiation of a proof-of-concept study in people with breast cancer-related, upper limb secondary lymphoedema and an additional fibrosis and inflammation indication in 2020.

· In April 2019, PureTech announced a collaboration agreement with Boehringer Ingelheim (BI) to evaluate the feasibility of applying PureTech's lymphatic targeting technology to advance certain of BI's immuno-oncology product candidates. Under the terms of the agreement, PureTech is eligible to receive up to $26 million in upfront payments, research support and preclinical milestones, and is eligible to receive more than $200 million in development and sales milestones, in addition to royalties on product sales.

· PureTech presented preclinical data supporting its first-in-class, fully-human monoclonal antibodies targeting galectin-9 (LYT-200) and immunosuppressive γδ1 (gamma delta-1) T cells (LYT-210) at the American Association for Cancer Research (AACR) Annual Meeting in April 2019 and the Society for Immunotherapy of Cancer (SITC) Annual Meeting in November 2019. PureTech is developing LYT-200 and LYT-210 to treat intractable cancers, including colorectal cancer (CRC), cholangiocarcinoma and pancreatic cancer, along with other relevant cancers and immunological disorders.

· In June 2019, PureTech expanded to new corporate headquarters and labs in Boston's Seaport District to advance and accelerate development of the Company's Wholly Owned Pipeline. In addition to the programmes mentioned above (LYT‑100, LYT‑200, LYT-210 and the lymphatic targeting chemistry platform), PureTech's Wholly Owned Pipeline includes a milk exosome platform to traffic therapeutics via the lymphatic system and a meningeal lymphatics platform for treating neurodegenerative diseases.

Strong clinical, regulatory and financial progress across the Founded Entities

PureTech's Founded Entities have made significant progress advancing 20 product candidates, 13 of which are clinical stage. Key developments include the following:

Karuna

· In June 2019, Karuna announced the successful pricing of its initial public offering (IPO) of common stock on the Nasdaq Global Market under the symbol "KRTX." Gross proceeds were approximately $102.6 million, including the full exercise of the underwriters' over-allotment option. Karuna previously completed an $82.1 million Series B round in April 2019, including the issuance of $7.1 million in shares upon conversion of debt into equity.

· In November 2019, Karuna announced that KarXT achieved the primary endpoint of its Phase 2 clinical trial for the treatment of acute psychosis in patients with schizophrenia. In the clinical trial, KarXT demonstrated a statistically significant and clinically meaningful 11.6 point mean reduction in total Positive and Negative Syndrome Scale (PANSS) score compared to placebo (p

· In November 2019, Karuna completed a follow-on offering of 2,600,000 shares of its common stock, with gross proceeds of approximately $250 million.

· In the January 2020 post-period, PureTech sold 2.1 million of its Karuna shares for a cash consideration of approximately $200 million. PureTech intends to use the proceeds from this transaction to fund its operations and growth for the foreseeable future and to further expand and advance its clinical-stage Wholly Owned Pipeline. Following the sale, PureTech continues to hold 5,295,397 shares of Karuna common stock (20.3% as of 13 March 2020) and has a right to royalty payments as a percentage of net sales.

Gelesis

· In April 2019, Gelesis received clearance from the FDA for its first product, Plenity™5 (Gelesis100), a prescription aid for weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exercise. Gelesis initiated a Plenity early experience programme in the United States in the second half of 2019 and anticipates Plenity will be available by prescription in the United States in the second half of 2020, with a broad launch in early 2021. Gelesis also filed Plenity for marketing authorisation in Europe in February 2019. Important safety information regarding Plenity can be found at www.myplenity.com.

· In December 2019, Gelesis announced a partnership with Ro, a leading US telehealth provider, to support the US commercialisation of Plenity, which is expected in the second half of 2020, with a broad launch in early 2021.

· In 2019, Gelesis secured nearly $100 million in new capital and non-dilutive grants to support the US commercialisation of Plenity, including over $84 million announced in December 2019 and $10.6 million announced in April 2019.

· In 2019, Gelesis and its research collaborators presented clinical data supporting its proprietary hydrogel platform. Additional safety and efficacy data for Plenity was presented at ObesityWeek, and clinical data for a GS500 prototype in patients with chronic idiopathic constipation (CIC) was presented at Digestive Disease Week. Gelesis also presented preclinical research at the Endocrine Society Annual Meeting and The International Liver Congress suggesting that GS300 may restore gut barrier function after damage as well as prevent the harmful effects of a high-fat diet on the liver and associated metabolic disorders.

· In the March 2020 post-period, Gelesis was named to Fast Company's annual list of the World's Most Innovative Companies for 2020, which honours the businesses making the most profound impact on both industry and culture.

Akili

· In the January 2020 post-period, Akili announced that a study achieved its primary endpoint evaluating the effects of lead product candidate AKL-T01 in children with Attention Deficit Hyperactivity Disorder (ADHD) when used with and without stimulant medication.

· In December 2019, Akili presented the results from a trial of AKL-T03 as a potential treatment for cognitive impairments adjunct to anti-depressant medication in adults with Major Depressive Disorder (MDD) at the 58th Annual Meeting of the American College of Neuropsychopharmacology. In the trial, AKL-T03 demonstrated a statistically significant improvement in sustained attention compared to control. AKL-T03 is designed to improve specific cognitive functions and may play a complementary role to antidepressants in the holistic treatment of MDD.

· Akili is currently actively pursuing FDA clearance for AKL-T01. Clearance for AKL-T01 has not yet been granted, and Akili continues to work with the FDA in an effort to make the product available for children living with ADHD.

· In March 2019, Akili entered into a strategic partnership with Shionogi & Co., Ltd. for the development and commercialisation of two of Akili's digital medicine product candidates, AKL-T01 and AKL-T02 (in development for children with ADHD and Autism Spectrum Disorder, respectively), in Japan and Taiwan. Under the terms of the agreement, Akili will build and own the platform technology and received upfront payments totalling $20 million, with potential milestone payments for Japan and Taiwan commercialisation of up to an additional $105 million in addition to substantial royalties.

Follica

· In December 2019, Follica announced topline results from its safety and efficacy optimisation study of its lead candidate to treat hair loss in male androgenetic alopecia. The study was designed to select the optimal treatment regimen using Follica's proprietary device in combination with a topical drug and successfully met its primary endpoint. The selected treatment regimen demonstrated a statistically significant 44% improvement of non-vellus (visible) hair count after three months of treatment compared to baseline (p < 0.001, n = 19). The initiation of a Phase 3 registration study in male androgenetic alopecia is expected in 2020.

Vedanta

· In December 2019, Vedanta Biosciences announced the initiation of a first-in-patient clinical trial of its immuno-oncology candidate, VE800, in patients with select types of advanced or metastatic cancer. The trial will evaluate clinical activity of VE800 in combination with Bristol-Myers Squibb's programmed death-1 (PD-1) immune checkpoint inhibitor Opdivo® (nivolumab). Topline results are anticipated in 2021.

· In July 2019, Vedanta Biosciences announced the enrolment of the first patient in its Phase 1/2 clinical study of its product candidate VE416 for food allergy. Topline results are expected in 2021.

· In January 2019, Vedanta Biosciences published seminal research in Nature that underlies Vedanta's proprietary oral immuno-oncology product candidate, VE800.

· In May 2019 and September 2019, Vedanta Biosciences announced extensions to its Series C financing round, bringing the total capital raised in the round to $62.1 million.

· In December 2019, Vedanta Biosciences announced that it had been awarded a $5.8 million grant from Combating Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) to advance its VE707 programme targeting multi-drug resistant organisms.

· In May 2019, Vedanta Biosciences presented expanded data from its Phase 1a/1b study of VE303, the company's product candidate for high-risk Clostridioides difficile infection (CDI) at Digestive Disease Week.

Alivio

· In January 2019, Alivio Therapeutics entered into a partnership focused on non-opioid approaches to pain management with Imbrium Therapeutics L.P. to advance ALV-107, a non-opioid treatment being developed for interstitial cystitis/bladder pain syndrome (IC/BPS), through clinical development. Under the terms of the agreement, Alivio is eligible to receive up to $14.75 million in upfront and near-term license exercise payments and is eligible to receive royalties on product sales and over $260 million in research and development milestones. Alivio retains the rights of its inflammation targeting platform for a broad range of internal and partnering applications.

Vor

· In February 2019, Vor completed a $42.9 million Series A financing round to advance its lead cell therapy product candidate for the treatment of acute myeloid leukaemia (AML) and to further build its pipeline to treat haematologic malignancies.

· In May 2019, the scientific founder of Vor Biopharma, Dr Siddhartha Mukherjee, and key individuals from his lab at Columbia University, published a preclinical proof-of-concept study supporting Vor's lead product candidate, VOR33, and its technology platform for treating cancer via engineered haematopoietic stem cells (HSCs) in the Proceedings of the National Academy of Sciences (PNAS).

· In the January 2020 post-period, Vor held a pre-IND meeting with the FDA to gather important feedback to assemble the data package necessary for a potential IND filing.

Sonde

· In April 2019, Sonde completed a $16 million Series A financing round, including the issuance of $6 million in shares upon conversion of debt into equity, to expand the capability of its voice-based technology platform for monitoring and diagnosing mental and physical medical conditions across additional health conditions and device types and to fund commercialisation activities.

· Sonde has collected voice data from over 40,000 subjects as a part of the ongoing validation of its platform, and it has also initiated research and development to expand its proprietary technology into Alzheimer's disease and respiratory and cardiovascular disease, as well as other health and wellness conditions.

Entrega

· Entrega continued to advance its platform for the oral delivery of biologics, vaccines and other drugs that are otherwise not efficiently absorbed when taken orally, progressing a broad range of prototypes in additional preclinical studies as part of its collaboration with Eli Lilly.

Commenting on the annual results, Daphne Zohar, founder and chief executive officer of PureTech said:

"2019 was an unprecedented year, and our unique model for drug development and value creation was validated in many ways. Across our Wholly Owned Pipeline and our Founded Entities, we now have one FDA cleared product and 23 product candidates, all of which potentially address major healthcare needs. 14 of these candidates are clinical-stage, and we anticipate at least seven readouts and ten initiations over the course of 2020. We are very proud of this remarkable clinical progress.

"We also saw the value of our innovation recognized when the positive results from Karuna's (Nasdaq: KRTX) Phase 2 study of KarXT, a candidate [co-]invented by PureTech, generated over several hundred million dollars in value for PureTech. We were able to monetise a portion of that stake in January 2020, resulting in $200.9 million in proceeds and extending our cash runway into the first quarter of 2024, while still maintaining 20.3% share and the right to receive royalties.

"The team at PureTech has consistently been united behind a shared goal: to make a difference in human health by bringing truly novel and differentiated therapeutics to patients where great needs exist. I can think of no greater need at the present date than the global SARS-CoV-2 (COVID-19) pandemic, which we have been monitoring closely. Our mission to develop new classes of medicines for serious and underserved diseases will continue to be driven by our internal capabilities and collaborations with our network of leading experts in an effort to improve care for vulnerable populations affected by immunological diseases, severe infections, neurological disorders and intractable cancers, among other serious disorders."

Across our organisation, we have taken measures to ensure the safety and well-being of our employees and do our part as global citizens, while continuing to execute against our business objectives. As of 8 April, we do not believe that any of our ongoing work has been materially delayed, but we do anticipate the strain on the global healthcare system may eventually impact timelines, as healthcare providers rightly prioritise acute, near-term needs. We are so grateful to those on the front lines, and we have donated lab supplies and personal protective equipment (PPE) to local hospitals to aid in their heroic efforts.

"This has been an incredibly productive year, as well as a tremendous display of our commitment to developing transformational treatments for devastating diseases and building value for our shareholders. I am grateful to our team, our Board, and our wide network of collaborators who all share our vision, and I thank our shareholders for their continued support as we enter this exciting new phase of PureTech's development."

PureTech also notes that Bennett Shapiro, MD, co-founder of PureTech, non-executive director and member of the R&D Committee, will not stand for re-election at the Company's 2020 Annual General Meeting. As a co-founder, Dr Shapiro has played a critical role in driving the scientific and clinical direction of PureTech since the genesis of the Company. When he led R&D at Merck, he emphasised the external R&D model that Merck and other large pharma companies subsequently embraced, and Dr Shapiro's guidance was vital to the formation of PureTech's innovation model and shaping what it is today. His strategic scientific guidance has contributed to the advancement of all of the Company's current programs, and he has played a particularly noteworthy role in driving successes across Karuna, Gelesis, Vedanta and Akili.

Dr Shapiro will continue to serve on PureTech's R&D Committee, which is also comprised of:

· Dennis Ausiello, MD: Massachusetts General Hospital (MGH), chief emeritus of medicine and director of the Center for Assessment Technology and Continuous Health (CATCH); Harvard Medical School, Jackson distinguished professor of clinical medicine

· Robert Horvitz, PhD: Nobel laureate; MIT, David H. Koch professor of biology; Howard Hughes Medical Institute investigator; MGH neurobiologist (neurology)

· Raju Kucherlapati, PhD: Harvard Medical School, Paul C. Cabot professor of genetics and a professor of medicine

· John LaMattina, PhD: Pfizer, former president of Global Research and Development

· Robert Langer, ScD: MIT, David H. Koch Institute professor of biology

"It has been an honour to serve as a founding member of PureTech's Board and to contribute to the Company's unique, highly-productive and mission-oriented enterprise," said Dr Shapiro. "Together we have opened up new insights and pathways for improving human health, and I look forward to continuing those advancements in my role on the R&D Committee."

PureTech Health today released its Annual Report for the year ended 31 December 2019. In compliance with the Financial Conduct Authority's Listing Rule 9.6.3, the following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

· Annual Report and Accounts for the year ended 31 December 2019; and

· Notice of 2020 Annual General Meeting.

Printed copies of these documents together with the Form of Proxy will be posted to shareholders. Copies are also available electronically on the Investor Relations section of the Company's website at http://puretechhealth.com/reports-presentations.

PureTech's 2020 Annual General Meeting (AGM) will be held on 11 June 2020 at 11.00 EDT / 16.00 BST at PureTech's headquarters, which is located at 6 Tide Street, Boston, Massachusetts, United States. Please note that in light of the spread of COVID-19 and recent travel restrictions imposed by a number of governments, it will not be possible for the Directors to travel to the United Kingdom. Further, the UK Government has published compulsory measures prohibiting, among other things, public gatherings of more than two people. These "Stay at Home" measures were passed into law in England and Wales with immediate effect on 26 March 2020. The Company has therefore decided to hold the AGM in the United States where most of the Directors are resident. The Company continues to closely monitor the evolving situation in respect of COVID-19 and its forthcoming AGM.

The health and welfare of the Company's shareholders, as well as its employees and partners, is the Company's number one priority. The AGM therefore will be kept as concise and efficient as possible, with social interactions kept to a minimum and additional hygiene requirements in force at the meeting and venue.

We appreciate that a number of our shareholders are not resident or located in the United States. Given the recent Government guidance not to travel unless it is essential, we ask shareholders to participate in the AGM by submitting any questions in advance and voting via proxy rather than attending in person. As such, any specific questions on the business of the AGM and resolutions can be submitted ahead of meeting by e-mail to ir@puretechhealth.com (marked for the attention of Mr. Stephen Muniz).

Shareholders are also encouraged to submit their votes by proxy regardless of whether they expect to attend in person, and to do so no later than 16.00 BST on Tuesday 9 June 2020. Details of how to appoint a proxy are set out in the notice of AGM. Shareholders are reminded of their right to appoint the Chairman of the AGM, or any other person, as their proxy to attend the meeting and vote on their behalf.

PureTech is monitoring the rapidly evolving situation and will refuse entry to the AGM where necessary to ensure the safety of attendees and compliance with governmental or regulatory orders. The Company will keep shareholders updated of any changes to the current plans for the AGM. Please visit the Company's website at www.puretechhealth.com for the most up to date information.

About PureTech Health

PureTech is a clinical-stage biotherapeutics company dedicated to discovering, developing and commercialising highly differentiated medicines for devastating diseases, including intractable cancers, lymphatic and gastrointestinal diseases, central nervous system disorders and inflammatory and immunological diseases, among others. The Company has created a broad and deep pipeline through the expertise of its experienced research and development team and its extensive network of scientists, clinicians and industry leaders. This pipeline, which is being advanced both internally and through PureTech's affiliates, is comprised of 23 product candidates and one product that has been cleared by the US Food and Drug Administration (FDA). All of the underlying programmes and platforms that resulted in this pipeline of product candidates were initially identified or discovered and then advanced by the PureTech team through key validation points based on the Company's unique insights into the biology of the brain, immune and gut, or BIG, systems and the interface between those systems, referred to as the BIG Axis.

For more information, visit www.puretechhealth.com or connect with us on Twitter @puretechh.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

Notes

(1) PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more representative of the Corporate's cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.

(2) PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech Securities Corporation of $112.0 million for the year ended 2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities. The balance excludes the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares.

(3) Funding figure includes private equity financings, public offerings or grant awards. Funding figure excludes upfront payments and future milestone considerations received in conjunction with partnerships and collaborations such as those with Roche, Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly.

(4) Unless the context specifically indicates otherwise, references in this report to "Founded Entities" refer to the entities that PureTech founded and in which PureTech continues to hold equity. While PureTech maintains ownership of equity interests in its Founded Entities, the Company does not, in all cases, maintain control over these entities (by virtue of (i) majority voting control and (ii) the right to elect representation to the entities' board of directors) or direct the management and development efforts for these entities. Consequently, not all such entities are consolidated in the financial statements. Where PureTech maintains control, the entity is referred to as a Controlled Founded Entity in this report and is consolidated in the financial statements. Where PureTech does not maintain control, the entity is referred to as a Non-Controlled Founded Entity in this report and is not consolidated in the financial statements. As of 31 December 2019, Controlled Founded Entities include Alivio Therapeutics, Inc., Follica, Incorporated, Entrega, Inc., Vedanta Biosciences, Inc. and Sonde Health, Inc., and Non-Controlled Founded Entities include Akili Interactive Labs, Inc., Gelesis, Inc., Karuna Therapeutics, Inc., Vor Biopharma Inc. and, for all periods prior to December 18, 2019, resTORbio, Inc.

(5) Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exercise. Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients with Crohn's disease); or complications from prior gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.

(6) Nature of announcement: The financial information set out in this Annual Results Release does not constitute the Company's statutory accounts for 2018 or 2019. Any references to page numbers in this announcement are to pages within the Annual Report and Accounts. Statutory accounts for the year ended 31 December 2019 have been reported on by the Independent Auditor and will be delivered to the Registrar when due.

(7) Forward looking statements: This Annual Results Release and the Annual Report and Accounts contain statements that are or may be forward-looking statements, including statements that relate to the Company's future prospects, developments and strategies. The forward-looking statements are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results, performance and achievements to differ materially from current expectations, including, but not limited to, those risks and uncertainties described in the risk management section. 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 Annual Results Release. Except as required by law, regulatory requirement, the Listing Rules and the Disclosure Guidance and Transparency Rules, neither the Company nor any other party intends to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Letter from the Chairman

2019 was a year of validation and transformation for PureTech. PureTech has a long track record of identifying and incubating highly innovative technologies to address significant unmet need, then building highly talented and passionate teams around each programme while making remarkably efficient use of resources. What really drives value for investors and patients alike are positive clinical outcomes, regulatory progress and the validation of third-party investors - and PureTech has had an incredible series of such results this past year.

One such example is Karuna. The team identified a portfolio medicine from Eli Lilly with compelling efficacy signals in schizophrenia and Alzheimer's disease suggesting it could outstrip existing therapies. But, unable to resolve the tolerability profile, Eli Lilly abandoned the drug. PureTech came up with a novel, scientifically elegant way to offset the mechanism causing the tolerability problems without reducing efficacy. Karuna's successful proof-of-concept studies showed that PureTech's patience and persistence paid off. Karuna subsequently completed an IPO in July 2019 and, following positive Phase 2 results in November 2019, became a company worth approximately $2 billion1. Now seeking to validate its Phase 2 findings in a Phase 3 trial, there is new hope for patients with schizophrenia, who have had very few new therapeutic options for decades. At the same time, tremendous value has been created for PureTech investors.

The Karuna results were outstanding in our industry but this was only one of many positive developments for PureTech in 2019.

Among the many metrics that validate PureTech's novel approach to drug development, this one stands out as particularly striking: 23 product candidates are now in development across PureTech's Founded Entities and Wholly Owned Pipeline, including 14 in the clinic. Another point of pride: Gelesis' Plenity™2, a highly differentiated approach for weight management, is moving rapidly toward commercialisation after receiving clearance from the US Food and Drug Administration in April 2019.

Across PureTech's Founded Entities are novel therapeutic approaches to address cancer, schizophrenia, severe infection, ADHD, inflammatory bowel disease and other serious disorders. Tellingly, all these potential breakthroughs originated from research conducted by PureTech's internal team together with its global network of advisers and collaborators. We have built a truly unparalleled ecosystem for identifying pioneering ideas, subjecting them to rigorous evaluation and then moving the best forward.

This track record of success makes me even more excited about our focused work to advance our Wholly Owned Pipeline. In these programmes, we aim to translate our expertise in the Brain-Immune-Gut axis into novel therapeutics for lymphatic and immunological disorders and intractable cancers. It's a thrill to be in the clinic with our most advanced wholly-owned programme, LYT-100, which we are initially evaluating for a range of immune and fibrotic disorders, including the potential treatment of lymphoedema, a serious and often disfiguring disease for which there are no approved drugs. LYT-100 has the potential to be developed for a range of fibrotic conditions in addition to lymphoedema. Also advancing quickly through our pipeline are two novel antibody candidates for hard-to-treat cancers. Our proprietary lymphatic targeting platform and our meningeal discovery platform are also building value through substantial partnerships with top-notch collaborators, such as Boehringer Ingelheim, and through our own internal R&D efforts.

PureTech is able to take on such an ambitious scope of work due to strong leadership from the executive team and thoughtful guidance from our wonderful board. We are all committed to creating value as we bring transformational medicines to patients living with substantial need. I extend a sincere thank you to all our shareholders for supporting and enabling our continued growth and to my fellow board members for their thoughtful and strategic guidance. I am proud to be part of the PureTech team and I look forward to continued success in 2020.

Christopher Viehbacher

Chairman

(1) Based on market cap of $1.96 billion on 31 December 2019.

(2) Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exercise. Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients with Crohn's disease); or complications from prior gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.

Strategic report

Letter from the Chief Executive Officer

Making a difference in human health

The team at PureTech has consistently been united behind a shared goal: to make a difference in human health by bringing truly novel and differentiated therapeutics to patients where great needs exist.

We are proud of our record of rapidly advancing therapies that could prove transformational for millions of people who have long struggled to find effective treatments. These potential breakthroughs include Karuna's KarXT, which achieved the primary endpoint in a Phase 2 clinical trial of acute psychosis in patients with schizophrenia, a condition estimated to affect one per cent of the population; our wholly-owned product candidate LYT-100, which entered a clinical trial and has the potential to treat a range of serious conditions related to fibrosis, inflammation and impaired lymphatic flow, including lymphoedema, a condition that affects approximately one million people in the United States and has no FDA-approved drug treatment; our wholly-owned LYT-200 and LYT-210 programmes for intractable cancers, such as pancreatic cancer, colorectal cancer and cholangiocarcinoma as well as gastrointestinal autoimmune diseases; Vedanta's microbiome product candidates, four of which are being evaluated in the clinic for the potential treatment of severe infection, cancer, food allergy and inflammatory bowel disease; Akili's digital therapeutics for cognition and attention in multiple conditions, such as paediatric attention deficit hyperactivity disorder, multiple sclerosis and major depressive disorder; Follica's new approach to potentially treat millions of men and women with androgenetic alopecia, which is expected to enter a Phase 3 registration study in 2020; and - importantly - Gelesis' Plenity™1, a novel weight management aid that was cleared by the US Food and Drug Administration in April 2019, with a label that extends to approximately 150 million2 people in the US with overweight and obesity.

That's a remarkable record of which I am very proud.

Leveraging strategic partnerships to accelerate programme development has always been core to the PureTech strategy. In 2019, a number of new collaborations were formed, including PureTech's research collaboration with Boehringer Ingelheim to leverage PureTech's proprietary lymphatic targeting technology for immune modulation, starting in immuno-oncology; Akili's strategic partnership with Shionogi & Co., Ltd to commercialise two of Akili's digital medicine product candidates, AKL-T01 and AKL-T02, in Japan and Taiwan; Gelesis' deal with leading US telehealth provider Ro, making Plenity the first FDA-cleared weight management aid and first primary care product to launch with both traditional healthcare provider and telehealth services; and Alivio's partnership with Imbrium Therapeutics L.P. to advance ALV 107, a non-opioid treatment being developed for interstitial cystitis/ bladder pain syndrome.

Meanwhile, PureTech's scientific team and collaborators continued to generate high quality publications and engage at leading conferences. Among the highlights of 2019: cutting-edge science being advanced by the Company was published in Nature and the Proceedings of the National Academy of Sciences and presented at the annual meetings of the Society for Immunotherapy of Cancer (SITC) and the American Association for Cancer Research (AACR).

All of these programmes - and indeed, the underlying programmes and platforms resulting in all 23 of the product candidates in development across our Wholly Owned Pipeline and those of our Founded Entities - were discovered and launched by PureTech's team of world-class scientists and entrepreneurs. In fact, employees of PureTech have contributed as inventors of key intellectual property supporting nearly all of our Founded Entities. Our unique model for drug development and value creation was validated again and again over the course of last year: we now have 14 product candidates in the clinic, spanning multiple modalities and indications, across our wholly-owned programmes and our Founded Entities. These milestones across the Wholly Owned Pipeline and Founded Entities resulted in significant share price appreciation in 2019 and drove value of several hundred millions of dollars, well beyond what was reflected in our share price. There are many additional value-driving milestones on the horizon.

We got to this point by thinking differently - very differently.

Many biotech companies start with a target, a specific discovery technology or a molecule. We start with a disease where there is significant unmet need. Our unmatched network of experts helps us scour the globe for breakthrough research that might suggest a new way of tackling the disease. Long before it has hit scientific journals, we've usually seen the best and most novel research in our area of focus anywhere in the world. If we're intrigued, we bring the concept or research into our labs and subject it to rigorous evaluation designed to answer our key "sceptical" questions. If it fails, we've lost little in the way of investment, and we've gained substantial scientific knowledge along the way. If it passes our stringent evaluation, we advance it to the next step of research and development and in the process have de-risked the concept.

Historically, we've housed many of those promising early programmes in Founded Entities, of which we would initially own close to one hundred per cent. Our model is unique in our industry, where many companies face binary readouts that will determine their fate. Biology is a surprising discipline, so we have chosen to carefully spread risk across multiple wholly-owned programmes and our Founded Entities. We saw this strategy validated in 2019 with an outstanding Phase 2 clinical readout from Karuna Therapeutics that generated nearly $600 million in value for PureTech as of 31 March 2020, along with a binary setback for resTORbio that resulted in limited losses to PureTech. After resTORbio's disappointing development, we were able to recover approximately half of our investment; therefore, our total cash loss on resTORbio was only around $10 million. This juxtaposition of two binary events is a perfect example of how our model decreases the risk of any individual event while creating the opportunity for tremendous value realisation.

In the January 2020 post-period, we sold a minority of our Karuna shares for approximately $200 million, and, while this was a significant sale, we continue to own over 20 per cent of Karuna. In addition to our equity stake, we also have a right to receive royalty payments on net sales of its lead product.

While we continue to hold significant equity stakes in our Founded Entities, which we believe will continue to grow and potentially serve as a source of funding for us, we have also embarked on a carefully considered strategy to focus on our internal research programmes, backed by a stellar R&D team helmed by chief scientific officer Joe Bolen, PhD. This Wholly Owned Pipeline is exciting for its scientific promise in the areas of immunology and oncology, and the potential it holds for patients. This evolution of our model also allows us to more fully capture the value of future milestones at a PureTech parent company level.

In our Wholly Owned Pipeline, we already have a clinical stage programme, which could be applicable to a range of conditions involving fibrosis, inflammation and impaired lymphatic flow, including lymphoedema, idiopathic pulmonary fibrosis (IPF), interstitial pneumonias, unclassifiable interstitial lung disease (uILD) and other interstitial lung disease (ILD), radiation-induced fibrosis and focal segmental glomerulosclerosis (FSGS), multiple immunomodulatory programmes for cancer and autoimmunity, and strong milk exosome and lymphatic targeting platforms that hold promise for expanding a variety of modalities, such as messenger RNA and antisense, to new disease areas and treatment regimens. This work has benefited enormously from our leadership position at the forefront of Brain-Immune-Gut (BIG) and lymphatic biology, which has given us unparalleled insights and an edge in identifying the opportunities that will enable us to tackle some of the most devastating diseases facing humans.

We used a similar lens to identify our immuno-oncology candidates, undertaking a global, proactive search to discover important new scientific insights and technologies that could address the challenge of multiple mechanisms of immunosuppression in current therapeutics. We identified pioneering research prior to its publication that formed the basis for our two product candidates, LYT-200 and LYT-210, and we are planning to file an Investigational New Drug (IND) application for LYT-200 and initiate a Phase 1a/1b in solid tumours in 2020.

COVID-19 perspective and update

Given our focus on making a difference in human health, we have been closely monitoring the global SARS-CoV-2 (COVID-19) outbreak since January and have put plans and contingencies in place to enable our business to progress productively while doing our part as global citizens. This pandemic has brought significant healthcare concerns to the forefront, and we believe it will also surface significant opportunities for the industry to innovate, including the importance of telemedicine and fast monitoring and screening. The broader community has also begun to glimpse the power of a more collaborative and fast-moving approach engaging academic, clinical and industry scientists - a collaborative and inter-disciplinary problem-solving approach that PureTech has been harnessing for years.

For the team at PureTech, our mission to develop new classes of medicines for serious and underserved diseases will continue to be driven by our internal capabilities and collaborations with our network of leading experts in an effort to advance important healthcare needs for vulnerable populations affected by immunological diseases, severe infections, neurological disorders and intractable cancers, among other serious disorders.

We've also demonstrated a longstanding commitment to healthcare innovation, with our eyes set on identifying and addressing significant unmet needs well ahead of the curve. For example, Sonde is using seconds of voice that can be captured in consumer devices to detect and quantify disease in a low to no-burden manner that could allow for more proactive and potentially effective interventions. Near-continuous health information, powered by Sonde's technology, has the potential to improve screening, monitoring and timeliness of high-cost conditions, broadly improving outcomes and care efficiency in areas like mental health, respiratory and cardiovascular disease. Gelesis is another example of the forward thinking nature of the approaches that we have taken. The Gelesis-Ro partnership is dedicated to high-quality remote care for weight management and prescription fulfilment of Plenity. Akili has also been building a commercial infrastructure that is based on remote monitoring, care and fulfilment. These are a few examples of the forward thinking remote medicine driven approaches deployed across the Group.

Across our organisation, we have also taken measures to ensure the safety and well-being of our employees while continuing to execute against our business objectives. As of 8 April, we do not believe that any of our ongoing work has been materially delayed, but we do anticipate the strain on the global healthcare system may eventually impact timelines, as healthcare providers rightly prioritise acute, near-term needs. We are so grateful to those on the front lines, and we have donated lab supplies and personal protective equipment (PPE) to local hospitals to aid in their heroic efforts.

Strong financing to support focused development

This was an unprecedented period for new capital raising for PureTech and our Founded Entities with over $666.8 million raised, $622.8 million of which came from third party investors.

At the PureTech level, we are in a strong cash position. With the 31 December 2019 cash balance of $120.6 million3, we had enough funding to extend operations into the first quarter of 2022. Following the sale of Karuna common shares worth $200.9 million on 22 January 2020, our pro-forma cash reserves of $321.5 million4 will now extend operations over a four-year period into the first quarter of 2024.

We also announced in July that we are exploring the potential for a US listing on Nasdaq of American Depository Shares. Given the catalysts of the past year and the strength of our current cash position, we're still very much committed to considering the ADR listing or other means to broaden our access to the US capital markets, and we will launch that process from a position of strength in due course. We believe we have built significant value for our stakeholders across our growing clinical and preclinical research programmes, business developments, regulatory achievements and a deepened capital base, and we are committed to making sure that value is realised by our shareholders.

I would like to thank Joep Muijrers, PhD, for helping to drive these accomplishments in his role as chief financial officer (CFO). Joep has recently moved to Europe with his family, and he will continue to lead our portfolio analysis, monetisation and strategy in his new role as chief of portfolio strategy, effective May 2020, which is a natural fit with his significant background as a portfolio manager. It is important to have someone based in Boston full-time to manage operational aspects, so we have begun a search for a new CFO. We have a strong finance team in place that will be overseen by our chief operating officer, Stephen Muniz, Esq., who has run this function for us in the past, until a new CFO is selected.

I congratulate the PureTech team on an incredibly productive year and thank our Board for their oversight and counsel. Our wide network of collaborators continues to be incredible partners in our shared vision of developing transformational treatments for devastating diseases, and we look forward to deepening our work together in the year ahead. To our shareholders - thank you for your support in this exciting new phase of PureTech's development as we focus on maximising the value of our ground-breaking platform.

Daphne Zohar

Chief Executive

(1) Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exercise. Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients with Crohn's disease); or complications from prior gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.

(2) Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exercise. A BMI of 25 kg/m2 and over is the accepted definition of overweight, and a BMI of 30 kg/m2 and above commonly defines obesity. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.

(3) PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech Securities Corporation of $112.0 million for the year ended 2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities. The balance excludes the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares.

(4) PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more representative of the Corporate's cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.

Letter from the Chief Scientific Officer

This has been a year of immense excitement for PureTech's formidable R&D team as we built out and advanced a promising Wholly Owned Pipeline that leverages our leadership position in the Brain-Immune-Gut (BIG) Axis and the lymphatic system in service of our mission to develop new classes of medicines for serious and underserved diseases.

As our Founded Entities advance a number of highly differentiated approaches targeting the BIG Axis, we have a strong focus in our internal programmes on the lymphatic system and related immunology mechanisms. We have been harnessing our understanding of the underappreciated lymphatic infrastructure to develop immunomodulatory drugs to treat an array of serious diseases, including lymphatic and immunological disorders and intractable cancers.

We're thrilled that our most advanced wholly-owned programme, LYT-100, has entered the clinic, with the first participants dosed in a Phase 1 multiple ascending dose study in March 2020. LYT-100 is a deuterium-containing analogue of pirfenidone, which is approved for the treatment of idiopathic pulmonary fibrosis (IPF) in the United States, European Union and a number of other countries. Pirfenidone has also recently been granted Breakthrough Therapy designation from the FDA for unclassifiable interstitial lung disease (uILD). LYT-100 retains the same intrinsic pharmacology of pirfenidone, while potentially improving its tolerability and safety through its enhanced pharmacokinetic profile. LYT-100 previously completed a Phase 1 clinical trial conducted by Auspex Pharmaceuticals (now a wholly-owned subsidiary of Teva Pharmaceuticals) for another indication, and it may hold therapeutic potential across a range of disorders characterised by fibrosis, inflammation and impaired lymphatic flow.

We are initially evaluating LYT-100 for the potential treatment of lymphoedema, a painful and chronic condition that can lead to disability, disfigurement and risks of serious comorbidities. There are currently no FDA-approved drugs for lymphoedema; the standard of care is management, primarily via compression and physical therapy. We hope to bring this large patient population - estimated to be at least one million people in the US alone - the first drug to address the root cause of this debilitating disease, and we plan to initiate a proof-of-concept study in patients with breast cancer-related secondary lymphoedema later this year.

LYT-100 also has the potential to treat a range of fibrotic and inflammatory conditions of the lung, kidney, liver and other organs, including IPF, interstitial pneumonias, uILD and other interstitial lung disease (ILD), radiation-induced fibrosis and focal segmental glomerulosclerosis (FSGS). There are several lung diseases that have a common mechanism of fibrosis and inflammation. There are acute diseases that have high mortality and lead to long‑term fibrosis. There are chronic diseases linked to a specific cause, like a virus or autoimmune disease. And there are diseases like idiopathic pulmonary fibrosis (IPF), where the cause is unclear. Outside of IPF, there are no approved treatments that address inflammation and fibrosis. Many of these diseases can increase risk for worsening lung fibrosis, and there is a clear unmet need to stop inflammation and fibrosis and preserve lung function. We have GMP supply of LYT-100 from our ongoing Phase 1, multiple ascending dose study, which is designed to evaluate the safety, tolerability and pharmacokinetics of LYT-100, and we have increased our clinical supply and are actively pursuing a path forward for this candidate for the treatment of fibrotic and inflammatory disorders in 2020.

We are also delighted with the progress of both our novel, fully-human monoclonal antibody candidates targeting powerful immunosuppressors to treat intractable cancers and other immune disorders. We are advancing LYT-200, which targets galectin-9 for a range of cancer indications, and LYT‑210, which targets γδ1 T cells for a range of solid tumours and autoimmune disorders. We were proud to present significant - and quite encouraging - preclinical findings for these candidates at the Society for Immunotherapy of Cancer (SITC) 34th Annual Meeting and the American Association for Cancer Research (AACR) 110th Annual Meeting.

For LYT-200, we have shown preliminary proof-of-concept in both human organoids and preclinical cancer models. We're particularly excited about this compound because galectin-9 is a foundational immunosuppressive protein that is prominently expressed in a number of cancers, especially in hard-to-treat cancers, such as colorectal and pancreatic cancer and cholangiocarcinomas. This is aligned with our mission to deliver transformative therapies to patients with serious diseases who are not well served by existing therapies. We intend to file an Investigational New Drug (IND) application for LYT-200 in 2020 and anticipate initiating a Phase 1a/1b in solid tumours soon after.

LYT-210 targets pathogenic and immunosuppressive γδ1 T cells. To our knowledge, no other company is developing a candidate against this target. We believe LYT-210 has strong potential as a novel immuno-oncology agent acting against solid tumours by killing immunosuppressive γδ1 T cells. We also plan to evaluate it in autoimmune diseases affecting the gastrointestinal (GI) tract.

In addition to these three product candidates, our R&D team is exploring other mechanisms to modulate lymphatic flow throughout the body and brain. This is a cutting-edge line of inquiry, driven in part by ground-breaking research from one of our collaborators, Jonathan Kipnis, PhD. He discovered a functional lymphatic system in the meninges of the brain and then demonstrated that blocking the lymphatic flow in the meninges leads to an accumulation of pathogenic macromolecules, such as amyloid-beta and tau, which are both associated with Alzheimer's disease, and alpha-synuclein, which is associated with Parkinson's disease. This research adds to the large body of evidence we have developed about the crucial role of the lymphatic system in health and disease. In the past year, we have made significant progress in mapping the lymphatics networks in the brain - something that has never been done before.

This meningeal discovery platform is just one plank of our internal R&D. Lymphatic flow also plays a critical role in the immune and GI systems. Our insights into these connections have guided our development of two additional discovery platforms: a synthetic lymphatic targeting chemistry platform and a milk exosome platform.

In April of 2019, we announced a research collaboration with Boehringer Ingelheim to develop novel product candidates to leverage our proprietary lymphatic targeting chemistry platform for immune modulation. The collaboration will initially focus on applying our technology to an immuno-oncology product candidate. By masking the drug as a fat, we hope to steer it into the lymphatic vasculature and thereby send it directly to the gut, where it will come into direct contact with the tumour cells it's targeting. Outside of the specific programmes covered under this partnership, we have maintained ownership for all other applications, which we will advance through both our own discovery efforts and other potential partnerships.

We have also made significant progress with our milk exosome technology for the oral administration of macromolecules. This technology is designed to ferry macromolecular medicines, such as peptides, proteins and nucleic acids, to selected mucosal cell types of the intestinal tract where the therapeutics act either directly in the GI tract, transit through the mucosa to the underlying lymphatic vascular network or, in the case of cargos that yield mRNAs, produce complex biologics such as antibodies within mucosal cells that are secreted into the mucosal lymphatic vascular network for subsequent systemic distribution. We believe our proprietary milk exosome technology has the potential to transform the treatment paradigm for a number of serious diseases, such as rheumatoid arthritis, diabetes and cancer, in which the standard of care requires intravenous infusion or subcutaneous injection of monoclonal antibodies (e.g. anti-PD1, anti-TNF) or protein/peptides (e.g. GLP‑1, β-glucocerebrosidase, Factor IX, Erythropoietin). Using our milk exosome technology, it may be possible for a patient to take an oral drug product that will permit their own GI tract cells to make virtually any type of therapeutic protein. This approach also has the potential to provide a more convenient and significantly less expensive means to deliver biological medicines.

This approach is particularly relevant as world health authorities consider the potential impact of infectious diseases, and the clear utility of providing passive immune protection for those most seriously affected, as well as for health care professionals on the front line of treatment has been highlighted. Towards this goal, scientists around the world have generated monoclonal antibodies that have the ability to lessen the impact of disease in SARS-CoV-2 infected individuals and lower the inter-individual transmission rate. However, the lengthy time required to produce sufficient supplies of such monoclonal antibodies by standard manufacturing processes, accompanied by the significant manufacturing cost and the need for intravenous monoclonal antibody infusion, render this approach less than ideal. This is underscored if it turns out that not one, but two, or potentially three anti-virus antibodies need to be combined in order to achieve virus control. In contrast, the milk exosome platform may allow for rapid transfer of the DNA sequences or other nucleic acid expression systems coding for the monoclonal antibodies into the milk exosomes, thereby enabling the body to make its own "drug" and permitting oral administration at significantly lower cost than traditional approaches. Importantly, we believe this approach will permit the generation of multiple antibody combinations where needed for more optimal therapeutic efficacy. Thus, whether combating emerging epidemic/pandemic pathogens or other diseases where monoclonal antibody therapeutics offer significant clinical benefit, our milk exosome platform has the potential to transform the range of biotherapeutics clinical indications while also lowering costs and simplifying administration. As you can see, this has been quite a momentous year for PureTech's R&D team. It's exciting to see what we have been able to accomplish since we combined our labs and corporate activities in our new headquarters in Boston's Seaport District. The first thing you see when you step off the elevator is the lab, front and centre, which buzzes with energy and ideas. It's a statement about our commitment to science leading the way as we tackle important diseases.

Our insights into to the lymphatic system have paved the way for pioneering drug discovery. Our internal team and our global network of collaborators bring unmatched experience to bolster these efforts. Most importantly, we all share an unquenchable drive to transform the lives of patients, and I am overjoyed to see this aspiration coming to fruition through several of our Founded Entities. We are proud of what we've accomplished across the organisation in 2019 and are excited about the milestones to come. I look forward to sharing updates as we advance towards these goals.

Joseph Bolen

Chief Scientific Officer

How PureTech is building value for investors

PureTech, which is comprised of PureTech Health plc and its Founded Entities (together, "the Group"), is a clinical-stage biotherapeutics company dedicated to discovering, developing and commercialising highly differentiated medicines for devastating diseases, including intractable cancers, lymphatic and gastrointestinal (GI) diseases, central nervous system (CNS) disorders and inflammatory and immunological diseases, among others.

PureTech established the underlying programmes and platforms that have resulted in 23 product candidates and one product cleared by the US Food and Drug Administration (FDA) that are being advanced within PureTech's Wholly Owned Pipeline or by its Founded Entities.

All of these underlying programmes and platforms were initially identified or discovered and then advanced by PureTech through key validation points based on the Company's unique insights into the biology of the Brain, Immune and Gut (BIG) systems and the interface between those systems (the BIG Axis).

The architectural framework supporting BIG Axis cross-talk is built on evidence highlighting the presence of 70 per cent of the entire immune cell population in the gut, approximately 500 million neurons innervating the GI tract, enteric neurons as part of the autonomic nervous system and key components such as the gut epithelial barrier, microbiome, metabolites and neurotransmitters that play important roles in protecting and influencing the immune system and CNS.

The brain, immune system and gut lymphatic system form an interconnected adaptive network to respond to acute and chronic environmental change. Using the immune system to act as a bridge, the body relies on the bidirectional relationship between the gut and brain to maintain normal homoeostasis. Dysregulation of immune signalling through gut inflammation, microbiome changes and a compromised intestinal barrier all contribute to a range of immunological, GI and CNS disorders. PureTech has been at the forefront of research and development in the BIG Axis, including the role of gut-immune transport, immune-microbial signalling, gut barrier dysfunction and repair and gut and inflammation selective targeting strategies. Through the Company's wholly-owned programmes, PureTech is pursuing strategies to directly reach the immune system via the mesenteric lymph nodes, addressing lymphatic flow and vessel restoration disorders and targeting immunosuppressive and pathogenic lymphocytes.

PureTech's team, network and expertise in the BIG Axis enable it to identify and advance the latest scientific discoveries at the interface of the BIG systems. PureTech begins by collaborating with a cross-disciplinary group of experienced clinicians and the world's leading experts in brain, immune and gut biology in a discovery process that breaks down specific diseases and comprehensively identifies, reviews and empirically tests unpublished scientific discoveries in a modality agnostic and unbiased way. Through this process, PureTech prioritises approaches that have the potential to reduce early development risk based on preliminary signals of human efficacy and favourable expected safety profiles. PureTech identifies potential programmes from their laboratories of origin, other companies or its own internal discovery platforms. The Company's key relationships have consistently provided access to important discoveries before they were known to others in the industry. This proactive approach has enabled PureTech to license or file patents around the discoveries underlying its Wholly Owned Pipeline and Founded Entities' product candidates prior to the publication of that work in dozens of papers in top tier scientific journals like Science, Cell and Nature.

This model has enabled PureTech to rapidly convert these findings into valuable therapeutic product candidates. Historically, these programmes and product candidates have been developed with strategic allies, including equity partners who helped advance those programmes via PureTech's Founded Entities. As these programmes have succeeded and PureTech's resources have grown, the Company has increasingly focused on its wholly-owned programmes.

PureTech will continue to leverage its experience and network with the goal of identifying, inventing, developing and commercialising innovative new therapeutics leveraging the science of the BIG Axis to address significant medical needs. This also enables the accretion of value via three paths as illustrated above. The first is centred on the development of PureTech's wholly-owned programmes, which includes three product candidates (LYT-100, LYT-200 and LYT-210) and three innovative technology platforms. The second is based on the strategic monetisation of PureTech's equity holdings in its Founded Entities after significant value creation has occurred. The third is through advancing PureTech's discovery programmes by partnering non-core applications via non-dilutive funding sources, including partnerships and grants, to enable retention of value.

This combination of development of the wholly-owned programmes, advancement of the Founded Entities and non-dilutive partnerships and funding provides a unique and multi-pronged engine fuelling potential future growth.

As part of PureTech's commitment to driving value for shareholders, the Company announced in July 2019 that it is exploring the potential for a US listing on Nasdaq of American Depository Shares. Given the catalysts of 2019 and the strength of the Company's current cash position, PureTech is assessing the ADR listing or other means to access US capital and will launch that process in due course.

Risk management

The execution of the Group's strategy is subject to a number of risks and uncertainties. As a developer of advanced and early stage technologies addressing significant unmet medical needs, the Group inherently operates in a high-risk environment. The overall aim of the Group's risk management effort is to achieve an effective balancing of risk and reward, although ultimately no strategy can provide an absolute assurance against loss.

Risks are formally identified by the Board and appropriate processes are put in place to monitor and mitigate them on an ongoing basis. If more than one event occurs, it is possible that the overall effect of such events would compound the possible effect on the Group. The principal risks that the Board has identified as the key business risks facing the Group are set out in the table below along with the consequences and mitigation of each risk. Any number of these could have a material adverse effect on the Group or its financial condition, development, results of operations, subsidiary companies and/or future prospects.

1. Risks related to science and technology failure

The science and technology being developed or commercialised by some of the Group's businesses may fail and/or the Group's businesses may not be able to develop their intellectual property into commercially viable products or technologies.

There is also a risk that certain of the businesses may fail or not succeed as anticipated, resulting in significant decline of the Group's value.

Impact: The failure of any of the Group's businesses could decrease the Group's value. A failure of one of the major businesses could also impact on the perception of the Group as a developer of high value technologies and possibly make additional fundraising at the PureTech or subsidiary company level more difficult.

Mitigation: Before making any decision to develop any technology, extensive due diligence is carried out by the Group that covers all the major business risks, including technological feasibility, market size, strategy, adoption and intellectual property protection.

A capital efficient approach is pursued such that some level of proof of concept has to be achieved before substantial capital is committed and thereafter allocated. Capital deployment is generally tranched so as to fund programmes only to their next value milestone. Members of the Group's Board serve on the Board of directors of each business so as to continue to guide each business's strategy and to oversee proper execution thereof. The Group uses its extensive network of advisors to ensure that each business has appropriate domain expertise as it develops and executes on its strategy. Additionally, the Group has a diversified model with numerous assets such that the failure of any one of the Group's businesses would not result in a significant decline of the Group's value.

2. Risks related to clinical trial failure

Clinical trials and other tests to assess the commercial viability of a product candidate are typically expensive, complex and time-consuming, and have uncertain outcomes.

Conditions in which clinical trials are conducted differ, and results achieved in one set of conditions could be different from the results achieved in different conditions or with different subject populations. If the Group's product candidates fail to achieve successful outcomes in their respective clinical trials, the products will not receive regulatory approval and in such event cannot be commercialised. In addition, if the Group fails to complete or experiences delays in completing clinical tests for any of its product candidates, it may not be able to obtain regulatory approval or commercialise its product candidates on a timely basis, or at all.

Impact: A critical failure of a clinical trial may result in termination of the programme and a significant decrease in the Group's value. Significant delays in a clinical trial to support the appropriate regulatory approvals could impact the amount of capital required for the business to become fully sustainable on a cash flow basis.

Mitigation: The Group has a diversified model such that any one clinical trial outcome would not significantly impact the Group's ability to operate as a going concern. It has dedicated internal resources to establish and monitor each of the clinical programmes in order to try to maximise successful outcomes. Significant scientific due diligence and preclinical experiments are done prior to a clinical trial to attempt to assess the odds of the success of the trial. In the event of the outsourcing of these trials, care and attention is given to assure the quality of the vendors used to perform the work.

3. Risks related to regulatory approval

The pharmaceutical industry is highly regulated. Regulatory authorities across the world enforce a range of laws and regulations which govern the testing, approval, manufacturing, labelling and marketing of pharmaceutical products. Stringent standards are imposed which relate to the quality, safety and efficacy of these products. These requirements are a major determinant of whether it is commercially feasible to develop a drug substance or medical device given the time, expertise, and expense which must be invested. The Group may not obtain regulatory approval for its products. Moreover, approval in one territory offers no guarantee that regulatory approval will be obtained in any other territory. Even if products are approved, subsequent regulatory difficulties may arise, or the conditions relating to the approval may be more onerous or restrictive than the Group expects.

Impact: The failure of one of the Group's products to obtain any required regulatory approval, or conditions imposed in connection with any such approval, may result in a significant decrease in the Group's value.

Mitigation: The Group manages its regulatory risk by employing highly experienced clinical managers and regulatory affairs professionals who, where appropriate, will commission advice from external advisors and consult with the regulatory authorities on the design of the Group's preclinical and clinical programmes. These experts ensure that high-quality protocols and other documentation are submitted during the regulatory process, and that well-reputed contract research organisations with global capabilities are retained to manage the trials. Additionally, the Group has a diversified model with numerous assets such that the failure to receive regulatory approval or subsequent regulatory difficulties with respect to any one product would not result in a significant decline of the Group's value.

4. Risks related to product safety

There is a risk of adverse reactions with all drugs and medical devices. If any of the Group's products are found to cause adverse reactions or unacceptable side effects, then product development may be delayed, additional expenses may be incurred if further studies are required, and, in extreme circumstances, it may prove necessary to suspend or terminate development. This may occur even after regulatory approval has been obtained, in which case additional trials may be required, the approval may be suspended or withdrawn or additional safety warnings may have to be included on the label. Adverse events or unforeseen side effects may also potentially lead to product liability claims being raised against the Group as the developer of the products and sponsor of the relevant clinical trials. These risks are also applicable to our Founded Entities and any trials they conduct or product candidates they develop.

Impact: Adverse reactions or unacceptable side effects may result in a smaller market for the Group's products, or even cause the products to fail to meet regulatory requirements necessary for sale of the product. This, as well as any claims for injury or harm resulting from the Group's products, may result in a significant decrease in the Group's value.

Mitigation: The Group designs its products with safety as a top priority and conducts extensive preclinical and clinical trials which test for and identify any adverse side effects. Insurance is in place to cover product liability claims which may arise during the conduct of clinical trials.

5. Risks related to product profitability

The Group may not be able to sell its products profitably if reimbursement from third-party payers such as private health insurers and government health authorities is restricted or not available because, for example, it proves difficult to build a sufficiently strong economic case based on the burden of illness and population impact.

Third-party payers are increasingly attempting to curtail healthcare costs by challenging the prices that are charged for pharmaceutical products and denying or limiting coverage and the level of reimbursement. Moreover, even if the products can be sold profitably, they may not be accepted by patients and the medical community.

Alternatively, the Group's competitors - many of whom have considerably greater financial and human resources - may develop safer or more effective products or be able to compete more effectively in the markets targeted by the Group. New companies may enter these markets and novel products and technologies may become available which are more commercially successful than those being developed by the Group. These risks are also applicable to our Founded Entities and could result in a decrease in their value.

Impact: The failure of the Group to obtain reimbursement from third party payers, as well as competition from other products, could significantly decrease the amount of revenue the Group may receive from product sales for certain products. This may result in a significant decrease in the Group's value.

Mitigation: The Group engages reimbursement experts to conduct pricing and reimbursement studies for its products to ensure that a viable path to reimbursement, or direct user payment, is available. The Group also closely monitors the competitive landscape for all of its products and adapts its business plans accordingly.

6. Risks related to intellectual property protection

The Group may not be able to obtain patent protection for some of its products or maintain the secrecy of its trade secrets and know-how. If the Group is unsuccessful in doing so, others may market competitive products at significantly lower prices. Alternatively, the Group may be sued for infringement of third-party patent rights. If these actions are successful, then the Group would have to pay substantial damages and potentially remove its products from the market. The Group licenses certain intellectual property rights from third parties. If the Group fails to comply with its obligations under these agreements, it may enable the other party to terminate the agreement. This could impair the Group's freedom to operate and potentially lead to third parties preventing it from selling certain of its products.

Impact: The failure of the Group to obtain patent protection and maintain the secrecy of key information may significantly decrease the amount of revenue the Group may receive from product sales. Any infringement litigation against the Group may result in the payment of substantial damages by the Group and result in a significant decrease in the Group's value.

Mitigation: The Group spends significant resources in the prosecution of its patent applications and has an in-house patent counsel. Third party patent filings are monitored to ensure the Group continues to have freedom to operate. Confidential information (both of the Group and belonging to third parties) is protected through use of confidential disclosure agreements with third parties, and suitable provisions relating to confidentiality and intellectual property exist in the Group's employment and advisory contracts. Licenses are monitored for compliance with their terms.

7. Risks related to enterprise profitability

The Group expects to continue to incur substantial expenditure in further research and development activities. There is no guarantee that the Group will become profitable, either through commercial sales, strategic partnerships or sales of a business, and, even if it does so, it may be unable to sustain profitability.

Impact: The strategic aim of the business is to generate profits for its shareholders through the commercialisation of technologies through product sales, strategic partnerships and sales of businesses. The timing and size of these potential inflows is uncertain, and should revenues from our activities not be achieved, or in the event that they are achieved but at values significantly less than the amount of capital invested, then it would be difficult to sustain the Group's business.

Mitigation: The Group retains significant cash in order to support funding of its Founded Entities and its Wholly Owned Pipeline. The Group has close relationships with a wide group of investors and strategic partners to ensure it can continue to access the capital markets and additional monetisation and funding for its businesses. Additionally, its Founded Entities are able to raise money directly from third party investors and strategic partners.

8. Risks related to hiring and retaining qualified employees

The Group operates in complex and specialised business domains and requires highly qualified and experienced management to implement its strategy successfully. The Group and many of its businesses are located in the United States which is a highly competitive employment market.

Moreover, the rapid development which is envisaged by the Group may place unsupportable demands on the Group's current managers and employees, particularly if it cannot attract sufficient new employees. There is also risk that the Group may lose key personnel.

Impact: The failure to attract highly effective personnel or the loss of key personnel would have an adverse impact on the ability of the Group to continue to grow and may negatively affect the Group's competitive advantage.

Mitigation: The Board annually seeks external expertise to assess the competitiveness of the compensation packages of its senior management. Senior management continually monitors and assesses compensation levels to ensure the Group remains competitive in the employment market. The Group maintains an extensive recruiting network through its Board members, advisors and scientific community involvement. The Group also employs an executive as a full-time in-house recruiter.

9. Risks related to business, economic or public health disruptions

Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.

Impact: Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. For example, in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of other countries, including the United States. To date, this outbreak has already resulted in extended shutdowns of certain businesses around the world. Global health concerns, such as coronavirus, could also result in social, economic, and labour instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact the hospitals and clinical sites in which we conduct any of our current and/or future clinical trials, which could have a material adverse effect on our business and our results of operation and financial impact.

Mitigation: To date, we have seen limited impact on our research and development activities and the operation of our company more generally, but we will continuously monitor this pandemic and its impact on our business going forward and may see further impact as the situation continues to develop.

Brexit

The United Kingdom withdrew from the European Union on 31 January 2020 (Brexit). However, it remains unclear what the regulatory and economic position will be for the United Kingdom after the transition period ends on 31 December 2020. The uncertainty in the political, economic and regulatory landscape is expected to continue while negotiations between the United Kingdom and the European Union continue to establish an exit agreement and ongoing trade arrangements. The uncertainty surrounding Brexit has and may continue to contribute to volatility in the prices of securities of companies listed in Europe and currency exchange rates, including the valuation of the euro and British pound in particular. Any one of these factors, or the combination of more than one of these factors, could negatively affect such foreign securities market and the price of securities therein.

Although the Board has considered the potential impact of Brexit as part of its risk management, given that the Group principally operates in the United States and holds substantially all assets in US dollars, the Group does not believe there will be any material financial effect on our business, or any significant operational issues which could arise, as a result of Brexit.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

By Order of the Board

Stephen Muniz

Company Secretary

8 April 2020

Financial Review

Financial Highlights

1. Consolidated Cash Reserves includes cash balances of $132.4 million and $117.1 million, and short-term investments of $30.1 million and $133.8 million for the year ended 2019 and 2018, respectively as shown on the Consolidated Statements of Financial Position.

2. PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech Securities Corporation of $112.0 million and $177.7 million for the year ended 2019 and 2018, respectively, and the internal pipeline of $8.6 million and $0.5 million for the year ended 2019 and 2018, respectively, all of which are wholly owned entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities.

3. Consolidated Pro-Forma Cash Reserves is an alternative performance measure (APM) which includes the Consolidated Cash Reserves of $162.4 million and the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. As of 13 March 2020, PureTech Health held 5.3 million common shares, or 20.3 per cent of Karuna. Consolidated Pro-Forma Cash Reserves is therefore considered to be more representative of the Group's cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.

4. PureTech Level Pro-Forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the $200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-Forma Cash Reserves is therefore considered to be more representative of the Corporate's cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.

5. Stated before the effect of non-cash charges consisting of share-based payments of $14.5 million (2018 - $12.6 million), depreciation of $3.2 million (2018 - $2.5 million) and amortisation of $3.4 million (2018 - $0.3 million). Non-cash items are excluded due to the fact that the Group's businesses require cash investment in order to operate and continue with their R&D activities. Adjusted operating loss is therefore considered to be more representative of the operating performance of the Group and an appropriate alternative performance measure.

6. Stated before the charges discussed in Note 5 above as well as fair value accounting costs of $46.5 million (2018 - charge of $22.6 million) and finance cost - subsidiary preferred shares of $1.5 million (2018 - $0.1 million) and share of net gain/ (loss) of associates accounted for using the equity method of $30.8 million (2018 - ($11.5) million). Adjusted Loss for the Period is also adjusted for impairment of investment in associate totalling $42.9 million (2018 - nil), the non-cash gain from the deconsolidation of subsidiary of $264.4 million (2018 - $41.7 million), a Loss on investments held at fair value of $37.9 million (2018 - $34.6), and tax impact of $112.4 million. Adjusted Loss for the Period is further adjusted for the Gain on Loss of Significant Influence of $445.6 million for the year ended 31 December 2019 (2018 - $10.3 million). These items are also non-cash expenses and income, respectively. Adjusted loss for the period is therefore considered to be more representative of the operating performance of the Group.

Revenue

Revenue for 2019 relates primarily to the Internal segment's agreements with Roche and Boehringer Ingelheim, and Entrega's research collaboration agreement with Eli Lilly, as well as the Alivio's agreement with Imbrium Therapeutics, and grant revenue. Future revenue may be earned under existing license and collaboration agreements, as well as under grant awards. Management evaluates opportunities to enter new license and collaboration agreements with the aim of balancing the potential value of these partnerships with our interest in retaining ownership over our programmes as they achieve meaningful milestones. Revenue from license and collaboration agreements during the development and approval period is typically driven by the achievement of contractual milestones, which tend to be event-driven. Furthermore, grant revenues are typically associated with specific deliverables that have finite timelines and do not extend over long periods. Therefore, significant period to period changes in revenue are to be expected and are not necessarily indicative of the Consolidated Group's overall revenue trend.

Operating Expenses

Operating Losses increased by 30.2 per cent, or $31.4 million, for the year ended 31 December 2019 compared to the year ended 31 December 2018. The largest driver of the increase was the increase in research and development expenditures within the Internal segment. In 2019, the Group continued to shift its focus towards the Internal segment, investing in research and development activities to advance a wholly owned pipeline of lymphatic system and related immuno-oncology programmes. We progressed LYT-100 and LYT-200 towards first patient dosing in 2020. Research and development expenditures within the Internal segment increased by 190.9 per cent, or $17.0 million, for the year ended 31 December 2019 compared to the year ended 31 December 2018.

Within the Internal segment, general and administrative expenses increased by $0.9 million, or 59.2 per cent, for the year ended 31 December 2019 compared to the year ended 31 December 2018. The year-over-year increase in general and administrative expenses reflects costs incurred in conjunction with the move to new corporate headquarters and labs in Boston's Seaport area and the subsequent development of this space, as well as wage and benefit growth related to increased headcount.

The Group continued to support research and development activities within its Controlled Founded Entities segment, which resulted in an increase of 15.8 per cent, or $5.8 million, for the year ended 31 December 2019 compared to the year ended 31 December 2018. As the Controlled Founded Entities approached meaningful milestones, general and administrative expenses within the Controlled Founded Entities segment increased by $4.2 million or 40.7 per cent for the year ended 31 December compared to the year ended 31 December 2019.

The Parent segment continued to support the operating activities of the Internal and Controlled Founded Entities segments. General and administrative expenses increased by $12.8 million, or 66.8 per cent, for the year ended 31 December 2019 compared to the year ended 31 December 2018. In 2019, the Parent segment incurred one-time costs associated with the acquisition of minority interests in internal pipeline programmes, the move to Boston's Seaport area, and additional tax expense related to share based payment awards.

The Directors anticipate that operating expenses, particularly research and development-related expenses, will continue to increase as the Group advances its pipeline. These operating expenses will include regulatory activities, conducting clinical and preclinical studies, intellectual property registration and the cost of acquiring, developing and manufacturing clinical study materials. General and administrative costs, consisting primarily of personnel-related costs, lease costs and professional fees, are anticipated to grow as well, and are primarily attributed to increases in overall corporate expenses.

Net finance costs

Net finance costs excluding finance income/(costs) in respect of fair value accounting (2019 - $46.5 million expense ; 2018 - $22.6 million income) and finance costs - subsidiary preferred shares (2019 - $1.5 million expense; 2018 - $0.1 million expense) resulted in income of $1.8 million for the year ended 31 December 2019 compared to income of $3.4 million for the year ended 31 December 2018, a decrease in income of $1.6 million. The income in both periods is related to interest received on short-term investments held at PureTech Health and certain subsidiaries. The Consolidated Group, as described below, has adopted a conservative cash management policy and invested the significant cash reserves generated since the IPO in US Treasuries, which resulted in $4.4 million and $3.4 million of income from interest earned on these securities for the years ended 31 December 2019 and 2018, respectively. The increase in interest income was more than offset by an increase in contractual finance costs of $2.6 million for the year ended 31 December 2019 in respect of the Company's lease obligations. The lease obligations resulted from the adoption of IFRS 16 Leases as of 1 January 2019 as well as from new lease agreements the Company entered into during the year ended 31 December 2019. Therefore no such finance costs exist for the year ended 31 December 2018.

During the year ended 31 December 2019, the Group recognised finance costs related to fair value accounting of $46.5 million, as compared to a finance income related to fair value accounting for the year ended 31 December 2018 of $22.6 million. The costs generated within Finance income/(costs) - fair value accounting during 2019 is primarily attributable to the increase in fair value of the Group's investments in Follica, Sonde and Vedanta as well as Gelesis during the period of consolidation in addition to Sonde and Vedanta preferred share issuances during the year.

The balance of subsidiary preferred shares held by external parties, and therefore the related balance of the aggregate liquidation preference, decreased during 2019 due to the deconsolidations of Vor, Karuna and Gelesis, which was partially offset by new issuances of Series A-2 preferred shares by Sonde and Series C and C-2 preferred shares by Vedanta. Please refer to Note 15 in the financial statements for more information.

During the year ended 31 December 2019, the Group realised a year-over-year decrease of $72.1 million as it recognised finance costs of $46.1 million, compared to a finance income of $25.9 million for the year ended 31 December 2018. The decrease resulted from the change in fair value of the Group's investments in the common and preferred shares of other entities.

Deconsolidations

Vor

In February 2019, Vor completed the first closing of its Series A-2 preferred shares financing round. As a result of this closing, PureTech Health's ownership percentage of Vor's voting shares dropped from 79.5 per cent to 47.5 per cent , triggering deconsolidation. Although PureTech Health no longer controls Vor, PureTech Health maintains significant influence over the Company's strategy and the direction of the Company by virtue of its large, albeit non-majority, ownership stake and continued representation on Vor's Board of Directors.

Upon deconsolidation, PureTech Health recognised the fair value of the Series A-1 and Series A-2 preferred shares (collectively the "Vor preferred shares"), resulting in a gain of $6.4 million. The Vor preferred shares were classified as an Investment held at fair value upon deconsolidation.

PureTech Health does not hold common shares in Vor and therefore is not subject to equity method accounting under IAS 28. PureTech Health will continue to account for the Vor preferred shares as an Investment held at fair value until such time that Vor Preferred Shares is converted to common shares. Please refer to Note 5 in the financial statements for further information.

Karuna

In March 2019, Karuna completed a Series B preferred shares financing round. As a result of this financing, PureTech Health's ownership percentage of Karuna's voting shares dropped from 70.9 per cent to 44.3 per cent, triggering deconsolidation. Upon the date of deconsolidation, PureTech Health held preferred shares, preferred share warrants and common shares of Karuna. Although PureTech Health no longer controlled Karuna, PureTech Health maintained significant influence over the Company's strategy and the direction of the Company by virtue of its large, albeit non-majority, ownership stake and continued representation on Karuna's Board of Directors through December 2019.

Upon deconsolidation, PureTech Health recognised the fair value of the Karuna preferred shares and the preferred shares warrant, resulting in a gain of $102.0 million. The Karuna preferred shares and warrant were classified as Investments held at fair value upon deconsolidation. PureTech Health's investment in the common shares of Karuna is subject to equity method accounting following deconsolidation and has been adjusted for PureTech Health's share of Karuna's net income or loss. Due to the relatively small initial fair value of the common shares investment, it was remeasured to nil immediately following deconsolidation.

In June 2019, Karuna completed an initial public offering ("IPO"). Upon completion of the IPO, the Karuna preferred shares held by PureTech Health converted to common shares. In light of PureTech's common share holdings in Karuna and corresponding voting rights, PureTech had re-established a basis to account for its investment in Karuna under the equity method. The preferred shares investment held at fair value was therefore reclassified to an investment in associate upon completion of the conversion and the Company recognised a gain of $40.6 million related to the IPO. Subsequent to the IPO, PureTech's ownership percentage of Karuna's voting shares was 31.6 per cent.

In December 2019, it was concluded that PureTech Health no longer exerted significant influence over Karuna. As a result, Karuna was no longer deemed an associate of PureTech Health and did not meet the scope of equity method accounting. Upon PureTech Health's loss of significant influence, the investment in Karuna was reclassified to an investment held at fair value and PureTech Health recognised a gain on loss of significant influence of Karuna of $445.6 million. Please refer to Note 5 in the financial statements for further information.

Gelesis

In July 2019, the Gelesis Board of Directors was restructured, resulting in two of the three PureTech representatives resigning from the Board and triggering the deconsolidation of Gelesis. At the deconsolidation date, PureTech held 25.2 per cent of the outstanding voting shares of Gelesis. While the Company no longer controls Gelesis, it was concluded that PureTech Health still had significant influence over Gelesis by virtue of its large, albeit minority, ownership stake and its continued representation on Gelesis' Board of Directors.

Upon the date of deconsolidation, PureTech Health held preferred shares and common shares of Gelesis, as well as a preferred share warrant. Upon deconsolidation, PureTech Health recognised the fair value of the Gelesis preferred shares and the preferred shares warrant resulting in a gain of $156.0 million. The Gelesis preferred shares and warrant were classified as Investments held at fair value upon deconsolidation. As PureTech Health is able to demonstrate that it has significant influence over Gelesis, PureTech Health's investment in the Gelesis common shares will be subject to equity method accounting following deconsolidation and will subsequently be adjusted for PureTech Health's share of Gelesis' net income or loss. Please refer to Note 6 in the financial statements for further information.

Financial Position

Cash and short-term investments make up a significant portion of the Consolidated Group's current assets, which were $168.8 million for the year ended 31 December 2019 compared to $259.8 million for the year ended 31 December 2018. The decrease in cash and short-term investments of 31 December 2019 compared to 31 December 2018 was attributable to the deconsolidation of Vor, Karuna and Gelesis. Amounts that cannot be immediately deployed have been used to purchase US Treasuries with durations of less than two years. The consolidated cash reserves, consisting of cash, cash equivalents and US Treasuries, which are classified as both long and short term, were $162.4 million at 31 December 2019, compared to $250.9 million for the year ended 31 December 2018. Of this amount, $120.6 million (31 December 2018 - $178.2 million) of cash reserves is held at the PureTech Health level (refer to footnotes 1 to 4 of Financial Highlights) to fund activities of the Group including funding the Internal segment's wholly owned internal pipeline, progressing Founded Entity programmes toward meaningful milestone events where necessary and appropriate, and maintaining a robust Parent support infrastructure.

In November 2019, Karuna announced results from its Phase 2 clinical trial of KarXT for the treatment of acute psychosis in patients with schizophrenia. As such, Karuna's share price witnessed significant price appreciation. On 22 January 2020, PureTech Health monetised a portion of its common shares holdings in Karuna. PureTech sold 2.1 million Karuna common shares for aggregate proceeds of $200.9 million. As of 13 March 2020, PureTech Health held 5.3 million shares, or 20.3 per cent, of Karuna.

The sale of a minority of its holding in Karuna provided the Group with additional cash resources to fund operational growth within the Internal segment. The Group's consolidated cash position as of 31 December 2019 on a pro-forma basis, inclusive of the Karuna share sale proceeds, was $363.3 million. The parent level cash position as of 31 December 2019 on such a pro-forma basis was $321.5 million.

Other significant items impacting the Consolidated Group's financial position and health include:

• Investments held at fair value and Investments in associates increased by $545.2 million to $725.5 million as of 31 December 2019 compared to 31 December 2018, primarily driven by the deconsolidation of Vor, Karuna and Gelesis and subsequent fair value increases, which were partially offset by the fair value decrease of our resTORbio shares and subsequent reduction of ownership.

• In November and December 2019, PureTech sold 7.7 million common shares of resTORbio for aggregate proceeds of $9.3 million. As of 31 December 2019, PureTech held 2.1 million common shares, or 5.8 per cent, of resTORbio.

• Current Liabilities decreased by $126.6 million, or 47.6 per cent, to $139.2 million for the year ended 31 December 2019 compared to $265.8 million for the year ended 31 December 2018, which is primarily attributable to the deconsolidation of Vor, Karuna and Gelesis. This was partially offset by additional Controlled Founded Entity preferred share issuances and subsidiary preferred share and subsidiary warrant fair value increases during the year ended 31 December 2019.

The Directors anticipate the continued strong financial health of the Group's Parent and expect the Group's wholly owned internal pipeline to significantly progress during this period. The Group also expects key Controlled Founded Entities and Non-Controlled Founded Entities to achieve meaningful milestones. The Consolidated Group's funds are sufficient to continue to progress the Internal segment, Controlled Founded Entities and Non-Controlled Founded Entities to meaningful milestone events into the first quarter of 2024.

The Group's net cash used in operating activities reflects the payment of operating expenses, which, with the exception of its non-cash charges highlighted in footnotes 5 and 6 of the Results of Operations Schedule above, are primarily cash based.

Net cash used in operating activities was $98.2 million for the year ended 31 December 2019, compared to $72.8 million for the year ended 31 December 2018. The increase in outflows was primarily due to the increased Company operating loss that resulted from increased research and development activities throughout the Group. In 2019 the Company's income resulted from increased non-cash gains, that had no impact on the cash used in operating activities.

The net cash inflow of $63.7 million from investing activities during 2019 relates to the maturity of investments in US Treasuries with durations of less than two years which totalled $104.5 million. The cash provided by the maturity of short-term investments was offset by the purchase of fixed assets totalling $12.1 million and the purchase of intangible assets totalling $0.4 million. The inflow was further offset by the Group's investment in Gelesis convertible promissory notes totalling $6.5 million as well as Gelesis Series 3 Growth and Karuna Series B preferred shares totalling $13.7 million. The inflow was further offset by the derecognition of cash totalling $16.0 million held by Vor, Karuna and Gelesis upon deconsolidation.

The net cash inflow of $49.9 million from financing activities during 2019 was primarily attributable to $51.0 million in aggregate proceeds received from the Vedanta Series C and Series C-2 closings ($32.2 million), Sonde Series A-2 closings ($7.3 million) and Gelesis Series 2 Growth closings ($8.6 million). Further inflows were attributable the sale of resTORbio shares. In November and December 2019, PureTech sold 7.7 million common shares of resTORbio for aggregate proceeds of $9.3 million. As of 31 December 2019, PureTech held 2.1 million common shares, or 5.8 per cent, of resTORbio.

The Group is focused on maintaining liquidity as well as capital preservation of investments. As a result, surplus cash reserves have been placed in highly- rated, short duration vehicles, primarily US Treasuries with maturities under one year. The Group monitors market conditions to manage any risk to the investment portfolio and investigates opportunities to increase the yield on the amounts invested, while maintaining the Group's liquidity and capital preservation objectives.

Consolidated Statements of Comprehensive Income/(Loss)

For the years ended 31 December

The accompanying Notes are an integral part of these financial statements.

Consolidated Statements of Financial Position

For the years ended 31 December

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 authorised for issuance on 8 April 2020 and signed on its behalf by:

Daphne Zohar

Chief Executive Officer

8 April 2020

The accompanying Notes are an integral part of these financial statements.

Consolidated Statements of Changes in Equity

For the years ended 31 December

The accompanying Notes are an integral part of these financial statements.

Consolidated Statements of Cash Flows

For the years ended 31 December

The accompanying Notes are an integral part of these financial statements.

Notes to the Consolidated Financial Statements

1. Accounting policies

Description of Business

PureTech Health plc ("PureTech," the "Parent" or the "Company") is a public company incorporated, domiciled and registered in the United Kingdom ("UK"). The registered number is 09582467 and the registered address is 8th Floor, 20 Farringdon Street, London EC4A 3AE, United Kingdom.

PureTech's group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Parent company financial statements present financial information about the Company as a separate entity and not about its Group.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these group financial statements

Basis of Presentation

The consolidated financial statements of the Group are presented for the years ended 31 December 2019 and 2018. The Group financial statements have been approved by the Directors and are prepared in accordance with the International Financial Reporting Standards, International Accounting Standards, and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union (adopted IFRSs).

For presentation of the Consolidated Statements of Comprehensive Income/(Loss), the Company uses a classification based on the function of expenses, rather than based on their nature, as it is more representative of the format used for internal reporting and management purposes and is consistent with international practice.

Basis of Measurement

The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: investments held at fair value and financial instruments classified as fair value through the profit or loss.

Use of Judgements and Estimates

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis.

Significant estimation applied in determining the following:

· Financial instruments valuations (Note 21): when estimating the fair value of subsidiary undertakings, subsidiary preferred shares and investments carried at fair value through profit and loss (FVTPL) according to IFRS 9 at initial recognition and upon subsequent measurement. This includes determining the appropriate valuation methodology and making certain estimates of the future earnings potential of the subsidiary businesses, appropriate discount rate and earnings multiple to be applied, marketability and other industry and company specific risk factors.

· Revenue recognition (Note 3): when estimating the costs to complete for overtime revenue recognition. This includes making certain estimates of costs to be incurred relating to contracts with customers in meeting the overtime performance obligation. The costs are for research and development activity and the estimation uncertainty is regarding the level of activity required to meet the performance obligation and the timing in which that arises during the term of the contract.

Significant judgement is also applied in determining the following:

· Revenue recognition (Note 3): when determining the correct amount of revenue to be recognised. This includes making certain judgements when determining the appropriate accounting treatment of key customer contract terms in accordance with the applicable accounting standards. In particular, judgement is required to determine the performance obligations in a contract (if promised goods and services are distinct or not) and timing of revenue recognition (on delivery or over a period of time).

· Subsidiary preferred shares liability classification (Note 21): when determining the classification of financial instruments in terms of liability or equity. These judgements include an assessment of whether the financial instrument include any embedded derivative features, whether they include contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party, and whether that obligation will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. Further information about these critical judgements and estimates is included below under Financial Instruments.

· When the power to control the subsidiaries exists (Please refer to Notes 5 and 6 and accounting policy below Subsidiaries). This judgement includes an assessment of whether the Company has i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and

· (iii) the ability to use its power over the investee to affect the amount of the investor's returns. The Company considers among others its voting shares, representation on the board, rights to appoint management, investee dependence on the Company etc.

· When the Company has significant influence over financial and operating policies of investees in order to determine if the Company should account for its investment as an associate based on IAS 28 or based on IFRS 9, Financial Instruments (Please refer to Note 5). This judgement includes, among others, an assessment whether the Company has representation on the board of directors of the investee, whether the Company participates in the policy making processes of the investee, whether there is any interchange of managerial personnel, whether there is any essential technical information provided to the investee and if there are any transactions between the Company and the investee.

· Upon determining that the Company does have significant influence over the financial and operating policies of an investee, if the Company holds more than a single instrument issued by its equity-accounted investee, judgement is required to determine whether the additional instrument

· forms part of the investment in the associate, which is accounted for under IAS 28 and scoped out of IFRS 9, or it is a separate financial instrument that falls in the scope of IFRS 9 (Please refer to Notes 5 and 6). This judgement includes an assessment of the characteristics of the financial instrument of the investee held by the Company and whether such financial instrument provides access to returns underlying an ownership interest.

Going Concern

After making inquiries and considering the impact of risks and opportunities on expected cash flows and based on the cash and cash equivalents available to the Group as of 31 December 2019, the Directors have a reasonable expectation that the Group had adequate cash to continue in operational existence into the first quarter of 2022 and, following the sale of 2,100,000 shares of Karuna common shares worth $200.9 million on 22 January 2020, the Group now has sufficient cash reserves to fund its operations into the first quarter of 2024, assuming broadly our expected level of required investments in businesses and other operating expenditures. The financial statements have been prepared using the going concern basis of accounting.

Basis of Consolidation

The consolidated financial information for each of the years ended 31 December 2019 and 2018 comprises an aggregation of financial information of the Company and the consolidated financial information of PureTech Health LLC ("PureTech LLC"). Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Subsidiaries

As used in these financial statements, the term subsidiaries refers to entities that are controlled by the Group. Financial results of subsidiaries of the Group as of 31 December 2019 are reported within the Internal segment, Controlled Founded Entities segment or the Parent Company and Other segment (Please refer to Note 4). Under applicable accounting rules, the Group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights and board interest and holding. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

A list of all subsidiaries and the Group's total voting percentage, based on outstanding voting common and preferred shares as of 31 December 2019 and 2018, is outlined below. All subsidiaries are domiciled within the United States and conduct business activities solely within the United States.

1. The ownership percentage includes liability classified preferred shares, which results in the ownership percentage not being the same as the ownership percentage used in allocations to non-controlling interests disclosed in Note 16. The allocation of losses/profits to the noncontrolling interest is based on the common share ownership of the subsidiaries. The ownership of liability classified preferred shares are quantified in Note 15.

2. Registered address is Corporation Trust Center, 1209 Orange St., Wilmington, DE 19801, USA.

3. Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.

4. The Company's interests in its subsidiaries are predominantly in the form of preferred shares, which have a liquidation preference over the common stock, are convertible into common stock at the holder's discretion or upon certain liquidity events, are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to receive dividends when and if declared, except in the case of Enlight, Mandara and PureTech Health LLC in which the holdings are membership interests in an LLC. The holders of common stock are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to receive dividends when and if declared.

5. On 19 July 2019, all of the outstanding notes, plus accrued interest, issued by Follica to PureTech converted into 15,216,214 shares of Series A-3 Preferred Shares and 12,777,287 shares of common share pursuant to a Series A-3 Note Conversion Agreement between Follica and the noteholders. Please refer to Note 16.

6. CommenSe turned inactive during 2019.

Change in subsidiary ownership and loss of control

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest ("NCI"). Any interest retained in the former subsidiary is measured at fair value when control is lost. Any resulting gain or loss is recognised as profit or loss in the Consolidated Statements of Comprehensive Income/(Loss).

Associates

As used in these financial statements, the term associates are those entities in which the Group has no control but maintains significant influence over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of an entity, unless it can be clearly demonstrated that this is not the case. The Group evaluates if it maintains significant influence over associates by assessing if the Group has lost the power to participate in the financial and operating policy decisions of the associate.

Application of the equity method to associates

Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost, or if recognised upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated financial statements include the Group's share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its investment in an equity accounted investee, including the Group's investments in other long-term interests, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. To the extent the Group holds interests in associates that are not providing access to returns underlying ownership interests and are more akin to debt like securities, the instrument held by PureTech is accounted for in accordance with IFRS 9.

Change in Accounting Policy

In these financial statements, the Group has adopted new accounting policies resulting in a change in accounting for leases. See updated accounting policy for leases (IFRS 16) below.

The Group has also adopted the amendments to IAS 28 Investments in Associates that addresses the dual application of IAS 28 and IFRS 9 (see below) when equity method losses are applied against Long-Term Investments (LTI), as defined in IAS 28. The amendments provide the annual sequence in which both standards are to be applied in such a case. The amendment did not have an impact on the Group's financial statements as the Group has not yet had an investment in an associate where it applied the equity method losses against a LTI.

All other accounting policies have remained unchanged from the previous year.

IFRS 9, Financial Instruments

As of 1 January 2018, the Company adopted IFRS 9, Financial Instruments ("IFRS 9"), which replaced IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and recognition of financial assets and liabilities. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income ("FVOCI"), and fair value through the profit and loss statement ("FVTPL"). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the entity's business model and of the financial asset. Investments in equity instruments are required to be measured at FVTPL with the irrevocable option at inception to present changes in fair value in other comprehensive income. There is now a new expected credit losses model that replaces the incurred loss impairment model previously used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in the Company's own credit risk in Other Comprehensive Income/(Loss) for liabilities designated at FVTPL. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management uses for risk management purposes.

Contemporaneous documentation is still required but is different than what was prepared under IAS 39

The Group reviewed the financial liabilities reported on its Consolidated Statements of Financial Position and completed an assessment between IAS 39 and IFRS 9 to identify any accounting changes. The financial liabilities subject to this review were the Subsidiary notes payable, Derivative liability, Warrant liability, and Preferred share liability. Based on this assessment of the classification and measurement model, impairment and interest income, the accounting impact on financial liabilities was determined not to be material. As part of the transition requirement, entities have the option upon implementation of the new standard to designate a financial liability as measured at FVTPL. The Group re-assessed its financial liabilities and has elected not to split out embedded derivatives and retrospectively recorded changes in fair value of the entire financial liability instrument through the statement of profit and loss, leading to changes in the carrying value of the instruments when looked at in the aggregate.

The Group also reviewed the financial assets reported on its Consolidated Statements of Financial Position and notes no changes in the application of IFRS 9.

The accounting policy (effective from 1 January 2018) is as follows:

Financial Instruments

Classification

From 1 January 2018, the Group classifies its financial assets in the following measurement categories:

· Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

· Those to be measured at amortised cost.

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets that are carried at FVTPL are expensed.

Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The Group has reviewed the financial assets and liabilities and determined the following impact from the adoption of the new standard:

Financial Assets

The Group's financial assets consist of cash and cash equivalents, trade and other receivables, debt and equity securities, other deposits and investments in associates' preferred shares and promissory notes. The Group's financial assets are classified into the following categories: investments held at fair value, trade and other receivables and cash and cash equivalents. The Group determines the classification of financial assets at initial recognition depending on the purpose for which the financial assets were acquired.

Investments held at fair value are non-derivative instruments that are designated in this category or not classified in any other category. These financial assets are initially measured at fair value and subsequently re-measured at fair value at each reporting date. The Company elects if the gain or loss will be recognised in Other Comprehensive Income/(Loss) or through profit and loss on an instrument by instrument basis. Financial assets that are recognised through FVOCI are presented in the Consolidated Statements of Financial Position as non-current assets, unless the Group intends to dispose of them within 12 months after the end of the reporting period. The Company has elected to record the changes in fair values for most financial assets falling under this category through profit and loss. Please refer to Note 5.

Trade and other receivables are non-derivative financial assets with fixed and determinable payments that are not quoted on active markets. These financial assets are carried at the amounts expected to be received less any allowance for doubtful debts. Provisions are made where there is evidence of a risk of nonpayment, taking into account aging, previous experience and economic conditions. When a trade receivable is determined to be uncollectible, it is written off against the available provision and then to the Consolidated Statements of Comprehensive Income/(Loss). Trade and other receivables are included in current assets, unless maturities are greater than 12 months after the end of the reporting period.

Financial Liabilities

The Group's financial liabilities consist of trade and other payables, subsidiary notes payable, preferred shares, and warrant liability. Warrant liabilities are initially recognised at fair value. After initial recognition, these financial liabilities are re-measured at FVTPL using an appropriate valuation technique. Subsidiary notes payable and subsidiary preferred shares without embedded derivatives are accounted for at amortised cost.

The majority of the Group's subsidiaries have preferred shares and notes payable with embedded derivatives, which are classified as current liabilities. These financial instruments are assessed under IFRS 9 to determine if the instrument qualifies to be accounted for under the FVTPL method. When the Group has preferred shares with embedded derivatives that qualify for bifurcation, the Group has elected to account for the entire instrument as FVTPL.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Equity Instruments Issued by the Group

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions, in accordance with IAS 32:

1. They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

2. Where the instrument will or may be settled in the Group's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group's own equity instruments or is a derivative that will be settled by the Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the financial instrument is classified as a financial liability. Where the instrument so classified takes the legal form of the Group's own shares, the amounts presented in the financial information for share capital and merger reserve account exclude amounts in relation to those shares.

The Group subsequently measures all equity investments at fair value. Where the Group's management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payment is established.

Changes in the fair value of financial assets at FVTPL are recognised in other income/(expense) in the Consolidated Statements of Comprehensive Income/(Loss) as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

IFRS 15, Contract Revenue

IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The standard establishes a five-step principle-based approach for revenue recognition and is based on the concept of recognising an amount that reflects the consideration for performance obligations only when they are satisfied and the control of goods or services is transferred.

The majority of the Group's contract revenue is generated from licenses, services, and collaboration arrangements. The Group adopted IFRS 15 with effect from 1 January 2018 using the Modified Retrospective approach. The adoption of this standard did not have an impact to the consolidated results.

Management reviewed contracts where the Group received consideration in order to determine whether or not they should be accounted for in accordance with IFRS 15. To date, PureTech has entered into transactions that generate revenue and meet the scope of either IFRS 15 or IAS 20 Accounting for Government Grants. Contract revenue is recognised at either a point-in-time or over time, depending on the nature of the services and existence of acceptance clauses.

Revenue generated by collaboration and service agreements is accounted for under IFRS 15. The Group accounts for agreements that meet the definition of IFRS 15 by applying the following five step model:

• Identify the contract(s) with a customer - A contract with a customer exists when (i) the Group enters into an enforceable contract with a customer that defines each party's rights regarding the goods or services to be transferred and identifies the payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Group determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer's intent and ability to pay the promised consideration.

• Identify the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Group, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

• Determine the transaction price - The transaction price is determined based on the consideration to which the Group will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Group estimates the amount of variable consideration that should be included in the transaction price utilising either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Group's judgement, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Determining the transaction price requires significant judgement, which is discussed by revenue category in further detail below.

• Allocate the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation. The Group determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Group estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

• Recognise revenue when (or as) the Group satisfies a performance obligation - The Group satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognised at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Revenue generated from services agreements (typically where licenses and related services were combined into one performance obligation) is determined to be recognised over time when it can be determined that the services meet one of the following: (a) the customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs; (b) the entity's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

It was determined that the Group has contracts that meet criteria (a), since the customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs as well as one contract that meets criteria (b) above. Therefore revenue is recognised over time using the input method based on labour hours, laboratory expenses and supplies.

For cases where the entity does not have an enforceable right to payment due to acceptance clauses, it was determined that costs incurred to fulfil the services are to be capitalised until acceptance is received for the milestone. This resulted in PureTech capitalising service-related expenses as of 31 December 2017 and recognising the consideration as revenue once acceptance was received during 2018.

Grant Income

The Company recognises grants from governmental agencies as grant income in the Consolidated Statement of Comprehensive Income/(Loss), gross of the expenditures that were related to obtaining the grant, when there is reasonable assurance that the Company will comply with the conditions within the grant agreement and there is reasonable assurance that payments under the grants will be received. The Company evaluates the conditions of each grant as of each reporting date to ensure that the Company has reasonable assurance of meeting the conditions of each grant arrangement and it is expected that the grant payment will be received as a result of meeting the necessary conditions.

The Company submits qualifying expenses for reimbursement for certain expenses after the Company has incurred the research and development expense. The Company records an unbilled receivable upon incurring such expenses. Grant income is recognised in the Consolidated Statements of Comprehensive Income/(Loss) over the periods in which the Company recognises the related reimbursable expense for which the grant is intended to compensate.

Functional and Presentation Currency

These consolidated financial statements are presented in United States dollars ("US dollars"). The functional currency of virtually all members of the Group is the US dollar. The assets and liabilities of a previously held subsidiary were translated to US dollars at the exchange rate prevailing on the balance sheet date and revenues and expenses were translated at the average exchange rate for the period. Foreign exchange differences resulting from the translation of this subsidiary were reported in the Consolidated Statements of Comprehensive Income/(Loss) in Other Comprehensive Income/(Loss).

Foreign Currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on remeasurement are recognised in the Consolidated Statement of Comprehensive Income/(Loss) except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid instruments with original maturities of three months or less.

Share Capital

Ordinary shares are classified as equity. The Group is comprised of share capital, share premium, merger reserve, other reserve, translation reserve, and accumulated deficit.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Assets under construction represent leasehold improvements and machinery and equipment to be used in operations or research and development activities. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Depreciation is calculated using the straight-line method over the estimated useful life of the related asset:

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

Intangible Assets

Intangible assets, which include purchased patents and licenses with finite useful lives, are carried at historical cost less accumulated amortisation, if amortisation has commenced, and impairment losses. Intangible assets with finite lives are amortised from the time they are available for use. Amortisation is calculated using the straight-line method to allocate the costs of patents and licenses over their estimated useful lives, which is typically the remaining life of the underlying patents.

Research and development intangible assets, which are still under development and have accordingly not yet obtained marketing approval, are presented as In-Process Research and Development (IPR&D). IPR&D is not amortised since it is not yet available for its intended use, but it is evaluated for potential impairment on an annual basis or more frequently when facts and circumstances warrant.

Impairment

Impairment of Non-Financial Assets

The Group reviews the carrying amounts of its property and equipment and intangible assets at each reporting date to determine whether there are indicators of impairment. If any such indicators of impairment exist, then an asset's recoverable amount is estimated. The recoverable amount is the higher of an asset's fair value less cost of disposal and value in use.

The Company's IPR&D intangible assets are not yet available for their intended use. As such, they are to be tested for impairment at least annually.

An impairment loss is recognised when an asset's carrying amount exceeds its recoverable amount. For the purposes of impairment testing, assets are grouped at the lowest levels for which there are largely independent cash flows. If a non- financial asset instrument is impaired, an impairment loss is recognised in the Consolidated Statements of Comprehensive Income/(Loss).

Investments in associates are considered impaired if, and only if, objective evidence indicates that one or more events, which occurred after the initial recognition, have had an impact on the future cash flows from the net investment and that impact can be reliably estimated. If an impairment exists the Company measures an impairment by comparing the carrying value of the net investment in the associate to its recoverable amount and recording any excess as an impairment loss. See Note 6 for impairment recorded in respect of investment in associate.

Impairment of Financial Assets Carried at Fair Value

The Group's financial assets are carried at fair value through Other Comprehensive Income/(Loss) or through profit and loss, depending on the election taken for each instrument. Financial assets that carried at fair value through Other Comprehensive Income/(Loss) are reviewed at each reporting period to assess whether there is objective evidence that the assets should be impaired. An impairment loss is recognised when there is a significant or prolonged decline in fair value below the instrument's cost. If an instrument is impaired, the impairment loss is calculated and recognised in the Consolidated Statements of Comprehensive Income/(Loss).

Impairment of Financial Assets Measured at Amortised Cost

The Group assesses financial assets measured at amortised cost for impairment at each reporting period. These financial assets are impaired if one or more loss events occur after initial recognition that impact the estimated future cash flows of the asset. An impairment loss is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate and is recognised in the Consolidated Statements of Comprehensive Income/(Loss).

Employee Benefits

Short-Term Employee Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation due to past service provided by the employee, and the obligation can be estimated reliably.

Defined Contribution Plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Share-based Payments

Share-based payment arrangements, in which the Group receives goods or services as consideration for its own equity instruments, are accounted for as equity-settled share-based payment transactions in accordance with IFRS 2, regardless of how the equity instruments are obtained by the Group. The grant date fair value of employee share-based payment awards is recognised as an expense with a corresponding increase in equity over the period that the employee is unconditionally entitled to the awards. The fair value is measured using an option pricing model, which takes into account the terms and conditions of the options granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting and non-market performance conditions, the grant date fair value is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Development Costs

Expenditures on research activities are recognised as incurred in the Consolidated Statements of Comprehensive Income/ (Loss). In accordance with IAS 38 development costs are capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, the Group intends to and has sufficient resources to complete development and to use or sell the asset, and it is able to measure reliably the expenditure attributable to the intangible asset during its development. The point at which technical feasibility is determined to have been reached is when regulatory approval has been received where applicable. Management determines that commercial viability has been reached when a clear market and pricing point have been identified, which may coincide with achieving recurring sales. Otherwise, the development expenditure is recognised as incurred in the Consolidated Statements of Comprehensive Income/(Loss). As of balance sheet date the Group has not capitalised any development costs.

Provisions

A provision is recognised in the Consolidated Statements of Financial Position when the Group has a present legal or constructive obligation due to a past event that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

Leases

On 1 January 2019, the Group adopted a new accounting standard for leases. The Group leases real estate and equipment for use in operations. These leases generally have lease terms of 1 to 10 years. We include options that are reasonably certain to be exercised as part of the determination of the lease term. We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the new standard and we perform the lease classification test as of the lease commencement date. ROU assets represent the Group's right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognised at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use the Group's estimated incremental borrowing rate based on information available at commencement date in determining the present value of future payments.

The Group's operating leases impacted by IFRS 16 principally include leases from real estate.

Existing finance leases continue to be treated as finance leases. For existing operating leases, the Group has applied a modified retrospective approach by measuring the right-of-use asset at an amount equal to the lease liability at the date of transition and therefore comparative information was not restated. Upon transition, the Group has applied the following practical expedients:

• excluding initial direct costs from the right-of-use assets;

• using hindsight when assessing the lease term;

• not reassessing whether a contract is or contains a lease; and

• not separating the lease components from the non-lease components in lease contracts.

The Group has elected to account for lease payments as an expense on a straight-line basis over the life of the lease for:

• Leases with a term of 12 months or less and containing no purchase options; and

• Leases where the underlying asset has a value of less than $5,000.

The lease liability was initially measured at the present value of the lease payments that were not paid at the transition date, discounted by using the rate implicit in the lease, or if that rate was not readily determinable, the Group used its incremental borrowing rate. The right-of-use asset is depreciated on a straight-line basis and the lease liability will give rise to an interest charge.

The financial impact of adopting IFRS 16 on the Group was as follows:

The cumulative impact resulted mainly from lease term extensions under IFRS 16 offset by the exclusion of short term leases and leases of low value assets.

In January and April 2019, the Company entered into additional leases that added substantially more right of use assets and lease liabilities to the statement of financial position. This includes three different spaces for the Company and its consolidated subsidiaries, amounting to approximately $42 million of additional future lease commitments. In June and August 2019, the Company entered into two sublease agreements. Further information regarding the subleases, right of use asset and lease liability can be found in Note 20.

Finance Income and Finance Costs

Finance income is comprised of interest income on funds invested in US treasuries, which is recognised as it accrues in the Consolidated Statements of Comprehensive Income/(Loss) via the effective interest method. Finance costs comprise loan interest expenses and the changes in the fair value of warrant and derivative liabilities associated with financing transactions.

Taxation

Tax on the profit or loss for the year comprises current and deferred income tax. In accordance with IAS 12, tax is recognised in the Consolidated Statements of Comprehensive Income/(Loss) except to the extent that it relates to items recognised directly in equity.

For the years ended 31 December 2019 and 2018, the Group filed a consolidated US income tax return which included all subsidiaries in which the Company owned greater than 80.0 per cent of the vote and value. For the years ended 31 December 2019 and 2018, the Group filed certain consolidated state income tax returns which included all subsidiaries in which the Company owned greater than 50.0 per cent of the vote and value. The remaining subsidiaries file separate US tax returns.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Deferred taxes are recognised in Consolidated Statements of Comprehensive Income/(Loss) except to the extent that they relate to items recognised directly in equity or in other comprehensive income.

Deferred Revenue and Deferred Costs

Deferred revenue includes amounts that are receivable or have been received per contractual terms but have not been recognised as revenue since performance has not yet occurred or has not yet been completed. Deferred costs represent costs to fulfil a contract and include capitalised labour and research and development expenditures. The Company classifies non-current deferred revenue and deferred costs for any transaction which is expected to be recognised beyond one year or one operating cycle.

Fair Value Measurements

The Group's accounting policies require that its financial and non-financial assets and liabilities be measured at their fair value.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

The carrying amount of cash and cash equivalents, accounts receivable, short-term investments, restricted cash, deposits, accounts payable, accrued expenses and other current liabilities in the Group's Consolidated Statements of Financial Position approximates their fair value because of the short maturities of these instruments.

Operating Segments

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker ("CODM"). The CODM reviews discrete financial information for the operating segments in order to assess their performance and is responsible for making decisions about resources allocated to the segments. The CODM has been identified as the Group's Directors.

Prior period reclassification

During 2019 management identified that for the year ended 31 December 2018, Gain/(loss) on investments held at fair value of $14.3 million was incorrectly classified as Finance costs - subsidiary preferred shares. As a result, a prior year reclassification has been made in the Consolidated Statement of Comprehensive Income/(Loss) for the year ended 31 December 2018.

2. New Standards and Interpretations Not Yet Adopted

A number of new standards, interpretations, and amendments to existing standards are effective for annual periods commencing on or after 1 January 2020 and have not been applied in preparing the consolidated financial information. The Company's assessment of the impact of these new standards and interpretations is set out below.

Effective 1 January 2020 the definition of a "business" has been amended as an amendment to IFRS 3 Business Combinations. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If an entity chooses not to apply the concentration test, or fails the test, then the assessment focuses on the existence of an input and a substantive process applied to the input/s. These amendments are not expected to have an impact on the Company's financial statements.

As part of its amendments to IAS 1 and IAS 8, the IASB has refined its definition of 'material' and issued practical guidance on applying the concept of materiality. These amendments are effective 1 January 2020 and are not expected to have an impact on the Company's financial statements.

None of the other new standards, interpretations, and amendments are applicable to the Company's financial statements and therefore will not have an impact on the Company. 

3. Revenue

Revenue recorded in the Consolidated Statement of Comprehensive Income/(Loss) consists of the following:

All amounts recorded in contract revenue were generated in the United States. All of the Company's contracts as of 31 December 2019 and 2018 were determined to have a single performance obligation which consists of a combined deliverable of license to intellectual property and research and development services. Therefore revenue is recognised over time based on the inputs method which is a faithful depiction of the transfer of goods and services. Progress is measured based on costs incurred to date as compared to total projected costs.

Disaggregated Revenue

The Group disaggregates contract revenue in a manner that depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Group disaggregates revenue based on contract revenue or grant revenue, and further disaggregates contract revenue based on the transfer of control of the underlying performance obligations.

An estimation uncertainty arises due to management's application of the inputs method in recognising revenue overtime. In doing so, the total cost to satisfy the performance obligation includes a significant estimate by management in its budgets and projected cash flows. The sensitivity of this calculation for the years ended 31 December 2019 and 2018 is detailed below:

Contract Balances

Accounts receivables represent rights to consideration in exchange for products or services that have been transferred by the Group, when payment is unconditional and only the passage of time is required before payment is due. Accounts receivables do not bear interest and are recorded at the invoiced amount. Accounts receivable are included within Trade and other receivables on the Consolidated Statement of Financial Position.

Contract liabilities represent the Group's obligation to transfer products or services to a customer for which consideration has been received, or for which an amount of consideration is due from the customer. When applicable, contract assets and liabilities are reported on a net basis at the contract level, depending on the contracts position at the end of each reporting period. Contract liabilities are included within deferred revenue on the Consolidated Statement of Financial Position.

During the year ended 31 December 2019, $5.0 million of revenue was recognised on deferred revenue outstanding at 31 December 2018.

Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations within contracts with an original expected contract term that is greater than one year and for which fulfilment of the contract has started as of the end of the reporting period. The aggregate amount of transaction consideration allocated to remaining performance obligations as of 31 December 2019 was $7.6 million. The following table summarises when the Group expects to recognise the remaining performance obligations as revenue. The Group will recognise revenue associated with these performance obligations as transfer of control occurs:

Cost to Fulfil a Contract

Contract fulfilment costs include direct labour for professional services, payments made to third parties for intellectual property licenses and direct materials. Incremental costs incurred to fulfil our contracts are capitalised if these costs (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company's performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. The revenue associated with direct labour for professional services is recognised over time; therefore the costs associated are expensed as incurred. The payments made to third parties for intellectual property licenses are capitalised when paid and recognised in line with associated revenue, whether this be over time or at a point in time. As of 31 December 2018, the Group has capitalised $0.8 million of cost to fulfil which are included within Prepaid expenses and other current assets as well as Other non-current assets on the Consolidated Statement of Financial Position. As of 31 December 2019 the remaining unamortised balance was $0.3 million.

4. Segment Information

Basis for Segmentation

The Directors are the Group's strategic decision-makers. The Group's operating segments are reported based on the financial information provided to the Directors at least quarterly for the purposes of allocating resources and assessing performance. The Group has determined that each entity is representative of a single operating segment as the Directors monitor the financial results at this level. When identifying the reportable segments the Group has determined that it is appropriate to aggregate multiple operating segments into a single reportable segment given the high level of operational and financial similarities across the entities. The Group has identified four reportable segments which are outlined below. Substantially, all of the revenue and profit generating activities of the Group are generated within the US and accordingly, no geographical disclosures are provided.

During the year ended 31 December 2019, the Company deconsolidated three of its subsidiaries which resulted in a change to the composition of its reportable segments. Consequently, the Company has revised the 2018 financial information to conform to the presentation as of and for the period ending 31 December 2019. The change in segments reflects how the Company's Board of Directors reviews the Group's results, allocates resources and assesses performance. This change has been adjusted in both the current and the prior period in the tables below.

Internal

The Internal segment (the "Internal segment"), is advancing a pipeline fuelled by recent discoveries in lymphatics and immune cell trafficking to modulate disease in a tissue-specific manner. These programmes leverage the transport and biodistribution of various immune system components for the targeted treatment of diseases with major unmet needs, including cancers, autoimmune diseases, and neuroimmune disorders. The Internal segment is comprised of the technologies that will be advanced through either PureTech Health funding or non-dilutive sources of financing in the near-term. The operational management of the Internal segment is conducted by the PureTech Health team, which is responsible for the strategy, business development, and research and development. As of 31 December 2019, this segment included PureTech LYT (formerly Ariya Therapeutics) and PureTech LYT 100.

Controlled Founded Entities

The Controlled Founded Entity segment (the "Controlled Founded Entity segment") is comprised of the Group's subsidiaries that are currently consolidated operational subsidiaries that either have, or have plans to hire, independent management teams and currently have already raised, or are currently in the process of raising, third-party dilutive capital. These subsidiaries have active research and development programmes and either have entered into or plan to seek a strategic partnership with 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 company. As of 31 December 2019, this segment included Alivio Therapeutics, Inc., CommenSe Inc., Entrega Inc., Follica Incorporated, Sonde Health Inc., and Vedanta Biosciences Inc.

Non-Controlled Founded Entities

The Non-Controlled Founded Entities segment (the "Non-Controlled Founded Entities segment") is comprised of the entities in respect of which PureTech Health (i) no longer holds majority voting control as a shareholder and (ii) no longer has the right to elect a majority of the members of the subsidiaries' Board of Directors. Upon deconsolidation of an entity the segment disclosure is restated to reflect the change on a retrospective basis, as this constitutes a change in the composition of its reportable segments. As of 31 December 2019, the Non-Controlled Founded Entities segment included resTORbio, Inc. ("resTORbio"), Akili Interactive Labs, Inc. ("Akili"), Vor Biopharma Inc. ("Vor"), Karuna Therapeutics, Inc. ("Karuna"), and Gelesis Inc. ("Gelesis").

The Non-Controlled Founded Entities segment incorporates the operational results of the aforementioned entities to the date of deconsolidation. Following the date of deconsolidation, the Company accounts for its investment in each entity at the parent level, and therefore the results associated with investment activity following the date of deconsolidation is included in the Parent Company and Other segment (the "Parent Company and Other segment").

Parent Company and Other Segment

The Parent Company and Other segment includes activities that are not directly attributable to the operating segments, such as 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 segment also captures the accounting for the Company's holdings in entities for which control has been lost, which is inclusive of the following items: gain on deconsolidation, gain or loss on investments held at fair value, gain on loss of significant influence, and the share of net loss of associates accounted for using the equity method. As of 31 December 2019, this segment included PureTech Health plc, PureTech Health LLC, PureTech Management, Inc. and PureTech Securities Corp., as well as certain other dormant, inactive and shell entities.

Information About Reportable Segments: