PureTech Regulatory News (PRTC)

24 April 2019

PureTech Health plc

PureTech Health Announces Annual Results for Year Ended 31 December 2018

Landmark FDA clearance for product conceived at PureTech Health, rollout of internal pipeline with two validating pharmaceutical partnerships with Roche and Boehringer Ingelheim, and five successful clinical trial readouts across affiliate pipeline

PureTech's strong cash position includes $177 million on a parent company level which extends cash runway guidance into the first quarter of 2022 and $425 million in Group cash leaving Group well positioned for execution

PureTech's affiliates raised $274 million in financing transactions, including $242 million from third party investors

PureTech Health plc (LSE: PRTC) ("PureTech Health"), an advanced biopharmaceutical company developing novel medicines for dysfunctions of the Brain-Immune-Gut (BIG) axis, today announced its annual results for the year ended 31 December 2018. 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.

Cash Position

· As of 31 December 2018, PureTech Health reports a consolidated cash balance of approximately $250.9 million, with approximately $177.7 million held at the Parent Company. Group cash and short-term investments (APM) were $425.0 million including the cash and short-term investment balances held at Independent affiliatesi.

· In 2018, PureTech's affiliates raised $274 millionii in financing transactions, including $242 million from third party investors. In the 2019 post-period, affiliates have raised $140 millioniii, of which $121.2 million was from third party investors. PureTech Health also successfully raised gross proceeds of approximately $100 million (£72 million) through a placing in 2018.

New Internal R&D Group Yields Value in First Months

PureTech Health announced the formation of its Internal R&D group, with a focus on tissue selective immunomodulation. Key developments included the following:

· In July 2018, PureTech Health announced a collaboration with Roche to advance PureTech's milk-derived exosome platform technology for the oral administration of Roche's locked nucleic acid (LNA) antisense oligonucleotide platform, designed to facilitate the oral administration of complex payloads. PureTech Health will receive up to $36 million in upfront payments, research support, and preclinical milestones and is eligible to potentially receive over $1 billion in development milestones in addition to sales milestones and royalties for an undisclosed number of products.

· Also in July 2018, PureTech's central nervous system (CNS) lymphatics programme was published as the cover story in Nature. The publication by PureTech Health collaborator Jonathan Kipnis, PhD, revealed that modulation of lymphatic function in the brain may prevent or delay diseases associated with ageing, including Alzheimer's disease, Huntington's disease and age-associated cognitive decline. The same programme was also published in Nature Neuroscience in September 2018, highlighting the key role of brain lymphatics in neuroinflammatory conditions like multiple sclerosis.

· In the April 2019 post-period, PureTech Health entered into a partnership with Boehringer Ingelheim (BI) to advance BI's immuno-oncology product candidates using PureTech's lymphatic targeting platform. Under the terms of the agreement, PureTech Health will receive up to $26 million, including upfront payments, research support, and preclinical milestones, and is eligible to potentially receive over $200 million in development and sales milestones, in addition to royalties on product sales.

· Also in the April 2019 post-period, PureTech Health was selected to present data detailing its immuno-oncology programmes at the American Association for Cancer Research (AACR) Annual Meeting. The presentations detailed PureTech's development of first- in-class, fully-human monoclonal antibodies (mAbs) targeting Galectin-9 (LYT-200) and immunosuppressive γδ1 (gamma delta) T cells (LYT-210). LYT-200 and LYT-210 are unique mAbs targeting foundational, novel mechanisms of tumoural immune escape and immunosuppression in cancer, and have been tested as single agents, as well as in combination with anti-PD1 in preclinical murine and human-derived ex vivo models.

Affiliate Pipeline Clinical and Regulatory Highlights

In 2018, PureTech Health made significant clinical progress across its Affiliates division, which includes seven clinical-stage programmes and three preclinical programmes focused on the biological processes associated with the Brain-Immune-Gut (BIG) axis. Clinical developments included the following:

· Gelesis filed an application with the United States Food and Drug Administration (FDA) for review of its lead product candidate in weight management. In the April 2019 post-period, Gelesis received FDA clearance for PLENITY™ as an aid for weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, when used in conjunction with diet and exerciseiv. Gelesis also filed PLENITY for marketing authorisation in Europe in the first quarter of 2019 and expects to receive feedback in 2019.

· Akili also filed an application with FDA in 2018 for review of its lead product candidate in paediatric attention deficit hyperactivity disorder (ADHD). Also in 2018, Akili successfully completed a Phase 2 study of AKL-T03 in depression and a proof-of-concept study of AKL-T03 in multiple sclerosis. Full analyses are underway, and - based on the results of the studies - both programmes are expected to advance into larger studies in 2020.

· resTORbio announced positive results from a Phase 2b study of its proprietary target of rapamycin complex 1 (TORC1) inhibitor, RTB101. In the March 2019 post-period, resTORbio announced a positive end of Phase 2 meeting with the FDA and the planned initiation of a global Phase 3 programme for RTB101 in 2019. In the April 2019 post-period, resTORbio announced the initiation of a Phase 1b/2a trial of RTB101 alone or in combination with sirolimus, in Parkinson's disease.

· Karuna initiated a Phase 2 study of KarXT (Karuna-Xanomeline-Trospium), its lead product candidate, for the treatment of psychosis in schizophrenia, with results anticipated by the end of 2019. Karuna is using a proprietary co-formulation of KarXT that successfully demonstrated tolerability at a dose level exceeding those shown to be efficacious in previous studies of xanomeline alone.

· Vedanta Biosciences advanced two clinical-stage product candidates. In October 2018, the company announced results from a successful Phase 1a/1b study of lead candidate VE303 in recurrent Clostridium difficile (rCDI). A Phase 2 study of VE303 was initiated in December 2018, and results are anticipated in early 2020. In November 2018, Vedanta Biosciences' partner Janssen Biotech, Inc. also initiated a Phase 1 clinical study of inflammatory bowel disease (IBD) candidate VE202, triggering a milestone payment of $12 million. Results are anticipated in the second half of 2019.

· Follica made significant progress towards the initiation of a pivotal study in androgenetic alopecia, which is anticipated to begin in 2019 following the completion of an ongoing optimisation study.

· Sonde has tested 10,000 patient samples in expanded development of its proprietary technology in neurodegenerative disease, respiratory and cardiovascular disease, and other health and wellness conditions.

· In the January 2019 post-period, PureTech Health made the decision to de-prioritise Commense. PureTech Health has decided to retain all intellectual property, but it will not allocate further resources to this programme pending the outcome of ongoing preclinical research with academic collaborators.

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

"It has been an exhilarating year and we believe we are on the cusp of unlocking significant value for our shareholders. We are gratified by the excellent reception of our Internal R&D group, which has already secured partnerships with two major pharmaceutical companies, validating the science while enabling PureTech Health to retain most of the rights to the core platforms.

"We believe that six of our affiliates have the potential for monetisation over the next 12 to 18 months, and we are extremely excited by the post-period news about Gelesis' landmark FDA clearance last week, which is a testament to what our team has been able to accomplish by thinking differently about major health issues.

"We are pleased to be in the position to realise value for our strong base of investors who have supported us since IPO as well as a new group of investors who will take the journey with us to the next level of growth. We approach 2019 energetic about delivering on our vision. I thank our talented and dedicated team, wise board, visionary investors, and the patients and clinicians who inspire us to reach beyond current thinking."

PureTech Health today released its Annual Report for the year ended 31 December 2018. 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 2018; and

· Notice of 2019 Annual General Meeting.

Printed copies of these documents together with the Form of Proxy have been 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 Health's 2019 Annual General Meeting will be held at 15.00 BST on Wednesday 29 May 2019 at the offices of DLA Piper UK LLP at 160 Aldersgate Street, London, EC1A 4HT, United Kingdom.

About PureTech Health

PureTech Health (LSE: PRTC) is an advanced biopharmaceutical company developing BIG medicines for dysfunctions of the Brain-Immune-Gut axis. The Company has gained deep insights into the connection between these systems and the resulting role in diseases that have proven resistant to established therapeutic approaches. By harnessing this emerging field of human biology, PureTech Health is developing new categories of medicines with the potential to have great impact on people with serious diseases.

PureTech Health is advancing a rich pipeline of innovative therapies with an unbiased, non-binary, and capital efficient R&D model across its affiliates and its internal labs. PureTech's affiliates include seven clinical-stage platforms, including one product that has been cleared by the US Food and Drug Administration (FDA) and a second product candidate that has been filed with the FDA for review, and several other novel preclinical programmes. The PureTech Health pipeline includes ground-breaking platforms and therapeutic candidates that were developed in collaboration with some of the world's leading experts.

PureTech's internal research and development is centred on tissue-selective immunomodulation for the treatment of oncology, autoimmune, and CNS-related disorders, with a near-term focus on targeting newly-discovered, foundational immunosuppressive mechanisms in oncology and novel approaches that harness the lymphatic infrastructure.

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

(i) Group Cash is an alternative performance measure (APM) which includes $174.1 million of cash reserves and short-term investments from our Independent Affiliates (resTORbio and Akili). These Independent Affiliates are not included in the consolidated statement of financial position. Therefore Group Cash is considered to be more representative of the Group's cash available to advance product candidates within its Independent Affiliates which could ultimately result in value accretion for the Group.

(ii) This number includes the issuance of $22 million in shares upon conversion of debt into equity as part of Karuna's Series A financing round. Of the $22 million converted into equity, $2 million came from the $8 million Wellcome Trust award. Excluded from the amount of funding secured for affiliates is $12 million in milestone payments made to Vedanta Biosciences from Janssen Biotech, Inc as part of an ongoing collaboration.

(iii) This number includes an issuance of $7 million in shares upon conversion of debt into equity as part of Karuna's Series B financing round, all of which came from the Wellcome Trust award announced in June 2018. It also included an issuance of $7.3 million and $6 million in shares upon conversion of debt into equity as part of Vor's Series A financing round and Sonde's Series A-2 financing round, respectively.

(iv) Rx Only. For the safe and proper use of PLENITY, refer to the Instructions for Use.

(v) Nature of announcement

The financial information set out in this Annual Results Release does not constitute the Company's statutory accounts for 2017 or 2018. 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 2018 have been reported on by the Independent Auditor and will be delivered to the Registrar when due.

(vi) 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

Reflecting on PureTech's most ambitious year yet, it has been a pleasure to observe the growth in value across the breadth and depth of its programmes. First-ever late stage milestones, including filings for regulatory review of two first-in-class therapeutics and multiple other clinical advances, have complemented the expansion and validation of our internal R&D activity, which we see as a major driver of long-term, sustainable growth.

Scientific excellence, value-driving partnerships, and prudent stewardship of growth are the heart of biopharma development. As Chairman, I have found it rewarding to watch PureTech Health continue to deliver on all these fronts, burnishing its credentials as one of the most productive and innovative biopharma companies in the industry with a management team that leads with a highly effective combination of vision and practicality.

Our Board of Directors includes some of the most seasoned and experienced healthcare experts, and I thank them for another year of steady oversight and thoughtful counsel. Their guidance and commitment to the highest standards of governance enable PureTech Health to focus on its core mission of delivering bold ideas to transform healthcare.

To that end, PureTech Health has fostered the development of multiple exceptional technologies, drawing on its emergence as a major global hub of expertise around the Brain-Immune-Gut (BIG) axis. This biological framework continues to gain momentum as the key to understanding the human body's response to the external environment via adaptive, inherently modifiable systems.

PureTech Health has already achieved remarkable things in this field through its Affiliate division and is breaking new scientific ground to address indications with significant unmet need. In April 2019, Gelesis achieved a truly exciting milestone as it received clearance from the United States Food and Drug Administration (FDA) for its first product, PLENITY™, a new and highly differentiated aid for weight management in adults with a Body Mass Index (BMI) of 25-40 kg/m2, in conjunction with diet and exercise.

Akili also is seeking clearance from FDA for its digital medicine that is designed for the targeted activation of specific neural systems in the brain to treat cognitive dysfunction in paediatric ADHD without pharmacological intervention - a treatment that is the first of its kind.

Internal R&D programmes, meanwhile, have rapidly advanced by leveraging the Group's considerable expertise in the BIG axis. Drawing on these insights, the PureTech Health team is identifying promising technologies, including the exciting prospect of intervening in a wide range of diseases by modulating immunity at a local level, such as via the immune-cell highway of the lymphatic system.

Within PureTech Health lies the vision, talent and organisational capability to seize opportunities where others do not think to look, and I thank our shareholders for supporting and enabling that vision. Every year, the PureTech Health team's success validates its daring and transformative spirit and takes the company to new heights. I very much look forward to the advances and milestones that lie ahead in 2019.

Joichi Ito

Chairman

Strategic report

Letter from the Chief Executive Officer

At PureTech Health, our vision is to pioneer new frontiers in medicine. In the past year, I'm pleased to report that we have taken major strides toward that goal, delivering significant value for both the business and patients as we continued to pursue breakthroughs in harnessing the Brain-Immune-Gut (BIG) axis, the heart of PureTech's R&D strategy. We have demonstrated repeatedly that our talented team can turn momentous discoveries in the lab into novel therapeutic candidates designed to have maximum impact for patients - and then guide those candidates successfully through clinical study and into regulatory review.

Our most important affiliate milestone to date came in April 2019, when Gelesis received clearance from the US Food and Drug Administration to market its first product, PLENITY, a first-in-class aid for weight management.

PLENITY is the only prescription weight management product to be cleared for use by overweight adults with a BMI as low as 25 kg/m2 (the beginning of the overweight range) through 40 kg/m2, whether or not they have other weight-related health issues. That broad label makes PLENITY a brand new option for adults with overweight or obesity who may forego treatment due to the side effects or surgical nature of other available therapies.

Gelesis plans to initiate a targeted US launch of PLENITY in the second half of 2019 and anticipates PLENITY will be broadly available by prescription in the US in 2020.

PLENITY's clearance was a landmark moment for PureTech Health, as it showcased our ability to identify unique and transformational technologies and bring them all the way from concept to FDA clearance. It also has the potential to deliver significant value to our shareholders.

Another example of a frontier we are pioneering is Akili, which has developed a ground-breaking approach to leverage the plasticity of the brain and central nervous system (CNS) for therapeutic effect across multiple neurology and psychiatry conditions, including attention deficit hyperactivity disorder (ADHD), major depressive disorder (MDD), multiple sclerosis (MS), and autism spectrum disorders (ASD), through the activation of specific neural systems in the brain through precisely targeted sensory and motor stimuli.

As you will see throughout this report, these are just two examples of the excellent progress at PureTech Health as we advance ground-breaking science stemming from our focus on the BIG axis across our affiliates and our internal labs. Our nimble, entrepreneurial structure and commitment to unbiased drug development allows us to move resources quickly to capitalise on exciting ideas - and to move resources away from programmes where emerging data suggests they will not deliver the high bar for patient impact we set for our programmes.

Among our milestones in 2018:

· Our Internal division secured validating partnerships with two major pharmaceutical companies. We are now engaged in collaborative research with Roche to advance our milk-derived exosome technology. PureTech Health receives up to $36 million in upfront fees, R&D support and early preclinical payments; total payments in development milestones could exceed $1 billion. PureTech is also eligible to receive royalties on product sales under this partnership with Roche. Another partnership with Boehringer Ingelheim (BI), announced in April 2019, opens the potential for broad validation of our lymphatic targeting platform. The approach will be paired with BI's immuno-oncology therapies. Our scientific concept is that the body will direct therapies - once wrapped in the lymphatic targeting technology - into the lymphatic vasculature around the gut, offering a far more targeted way to ferry drugs directly to sites of immune cell education and trafficking. PureTech Health stands to receive up to $26 million, including 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. This partnership has the potential to improve the efficacy of important cancer drugs - and potentially a wide array of other therapeutics - for patients worldwide.

· Our affiliates also secured significant partnerships: Vedanta Biosciences announced a clinical trial collaboration to evaluate Bristol-Myers Squibb's PD-1 immune checkpoint inhibitor OPDIVO® (nivolumab) in combination with VE800, a patented and rationally-defined human bacterial consortium, in patients with advanced or metastatic cancers. Also, Alivio Therapeutics announced a deal in January 2019 with Purdue Pharma to advance Alivio's non-opioid therapy under development for the treatment of interstitial cystitis/bladder pain syndrome (IC/BPS). Alivio will receive up to $14.75 million in upfront fees and is eligible for future milestone and royalty payments. Purdue also has an option to invest in Alivio's next equity financing. This is another example of significant validation of an exciting new technology developed and advanced rapidly toward the clinic through the PureTech Health model. Additionally, in the March 2019 post-period, Akili entered into a strategic partnership with Shionogi & Co., Ltd. for the commercialisation of two of Akili's digital medicine product candidates in Japan and Taiwan. Under the terms of the agreement, Akili receives 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.

· Our affiliates raised $274 million in financing transactions, including $242 million from third party investors. In the 2019 post-period, our affiliates have raised $140 million, of which $121.2 million was from third party investors.

· Our affiliates and collaborators published cutting-edge research in the top-tier journals, including multiple in Nature, Nature Neuroscience, Science Translational Medicine, Nature Communications, and Obesity, and were invited to present at top scientific conferences like AACR, ObesityWeek, ENDO, and EASL.

· Our affiliates were granted foundational IP with broad US patents in fields including oncology (Vor), inflammation (Alivio) and digital medicine (Akili and Sonde).

All this activity is ultimately directed toward delivering new medicines to patients, so I am especially pleased to have reported the conclusion of several successful clinical trials.

We are exceedingly proud of the achievements of our Affiliates, and of how we've leveraged those achievements to the benefit of all our operations. We are applying similar strategies and unbiased scientific rigour to identify, discover and develop promising new medicines in our Internal division, which is centred on tissue- selective immunomodulation for the treatment of oncology, autoimmune, and CNS-related disorders. Our lead candidate for the potential treatment of pancreatic, colorectal and other cancers is moving rapidly toward the clinic, and we expect to file an investigational new drug (IND) application in the first half of 2020 and we have been reviewing a few promising clinical-stage compounds that leverage our insights into these recently appreciated foundational immune mechanisms. We are fortunate to have the scientific leadership of our Chief Scientific Officer Joe Bolen, a leading immunologist who has successfully brought dozens of oncology and autoimmune medicines through the clinic, including several to FDA approval. Joe highlights the potential of our internal R&D efforts on the next page.

These successes advancing a portfolio of therapeutics built on our unique expertise around the BIG axis made 2018 an incredibly rewarding year for our team. We approach 2019 more energetic than ever about delivering on our vision, and as part of our ongoing evolution, we may also consider evaluating capital markets opportunities in the United States.

I'd like to thank the incredibly dedicated PureTech Health team, as well as our Directors and collaborators, for the terrific progress we've made this year. I am also appreciative for the support of our new and existing shareholders as we advance our shared vision of bringing high-value, first-in-class therapies to patients in need.

Daphne Zohar

Chief Executive

Letter from the Chief Scientific Officer

There's never been a more exciting time to be in drug development, and there are few places more rewarding to do that work than PureTech Health, where I believe we have created something special: an innovative yet critical and scientifically creative culture that has made us a true trailblazer.

Our affiliates have advanced our work targeting the Brain-Immune-Gut (BIG) axis through a variety of highly differentiated approaches, building a compelling evidence base for our key thesis that we can develop powerful new medicines by harnessing and modulating the crosstalk between these biological systems. PureTech Health is now moving to seize an even more defined leadership position by focusing internal R&D on a critical part of this axis: tissue-selective immunomodulation, which involves regionally directing and tuning the immune response according to medical need.

Our internal R&D focuses on two core areas. First, we seek to leverage the underappreciated and undeniably powerful lymphatic infrastructure to develop new modalities for treating autoimmune, oncology, and central nervous system (CNS) indications. Second, we are targeting newly discovered immunosuppressive mechanisms in oncology. Our goal with both programmes - as with all our R&D - is to develop and deliver novel therapies that will truly make a difference to patients living with incredibly difficult diseases. As excited as we get by advances in the lab, we are always thinking about that goal: leveraging our insights to develop transformational therapies that will improve patients' quality of life.

One of our core research priorities involves modulating foundational immune mechanisms to treat cancer, and we were pleased to have debuted our programmes with two accepted abstracts at the prestigious American Association for Cancer Research 2019 Annual Meeting.

Our lead programme in this category is LYT-200, an antibody designed to target Galectin-9, a protein that mediates multiple pathways of immunosuppression in tumours. Exciting preclinical data indicate that targeting Galectin-9 activates T cells in the patient's tumours - and significantly extends survival in animal models of pancreatic cancer. These data suggest that LYT-200 has strong single-agent activity; we intend to test it both as a monotherapy and potentially in combination with existing immuno-oncology therapies. We are moving rapidly through additional preclinical work on LYT-200 and expect to file an IND in the first half of 2020.

Just behind LYT-200 in our internal pipeline is LYT-210, an anti-Delta-1 antibody to target the gamma-delta T cell class, which is connected to immunosuppression in the tumour microenvironment. We believe this approach has strong potential in solid tumours such as pancreatic, colon and breast cancers, which harbour immunosuppressive gamma-delta T cells. Our preclinical data show that by targeting those cells, LYT-210 spurs activation of anti-tumour T cells. We believe LYT-210 can modulate both innate and adaptive immune responses and generate strong anti-tumour activity.

A second core research priority involves leveraging new insights into the lymphatic system to develop first-in-class therapeutics. For years, the vast network of lymphatic vasculature that extends throughout our bodies was overlooked, dismissed as a relatively unimportant cousin of the circulatory system. Conventional wisdom held that there was no lymphatic vasculature in the brain - until one of our scientific collaborators proved otherwise.

We now know that the lymphatic system plays a crucial role in programming immune cells for specific functions and trafficking them to specific tissues. The mesenteric lymph nodes around the intestine, for instance, programme as many as 70 per cent of circulating adaptive immune cells, which suggests potentially huge systemic ramifications from their dysfunction. Intervening in this process could give us a potentially powerful tool for modulating the immune system to develop therapeutics for gastrointestinal, CNS and autoimmune diseases, as well as immunotherapies for cancer.

Our rigorous focus on the lymphatic system also gives us an exciting new lens for exploring disease states and identifying new modalities of treatment. For example, we are advancing approaches to mask drugs as fats through our proprietary lymphatic targeting platform. Enabling the body to process therapeutics like fat may make it possible to bypass the primary metabolism of the liver and give the drug access to the mesenteric lymph nodes, the crucial 'regional immune centres', which could shunt the 'disguised' drug straight into systemic circulation. It's a prospect we're progressing with great excitement.

This approach recently received significant external validation when we announced a partnership with Boehringer Ingelheim to affix our lymphatic targeting platform to their GI-directed immunotherapies. The drug, now masked as a fat, should enter the lymphatic vasculature and from there, be ferried directly into the gut - and into direct contact with the tumour cells it's targeting. We are hopeful that this approach could improve the efficacy and reduce the toxicity of cancer drugs - and eventually, a wide array of other therapeutics - for patients worldwide.

Our selection of technologies has been highly strategic and informed by some of the most exceptional science I've seen in my career. Our CNS lymphatics technology was published as a cover story in Nature in 2018. The publication revealed that modulation of lymphatic function in the brain may prevent or delay diseases associated with ageing, including Alzheimer's and Huntington's. A subsequent publication in Nature Neuroscience then identified the direct connection between the brain and the meningeal lymphatic system, which point to a novel pathway to potentially address debilitating neuroinflammatory diseases such as multiple sclerosis. These publications built on the discovery of lymphatic vessels in the brain by our collaborator Dr Jonathan Kipnis. We hold an exclusive license to this technology platform and look forward to taking these recent discoveries into therapeutic development.

I am truly excited to continue moving forward our innovative R&D, with the urgent goal of delivering powerful new therapies to patients. Thanks to the foundation we've laid this past year, PureTech Health is positioned to deliver the next generation of immune modulating medicines. I look forward to sharing additional updates as we advance.

Joseph Bolen

Chief Scientific Officer

Letter from the Chief Financial Officer

In my prior position as a portfolio manager, I spent significant time evaluating companies in search of the most compelling mix of talent, technology, and need. When I met the team at PureTech Health in 2017, the Company immediately struck me as unique for its new R&D model and its genuinely novel technologies. This strength was further bolstered by the calibre of the team and the active involvement of a wide-ranging and expert scientific advisory network.

These are some of the most insightful and informed researchers and innovators in the world, pulling together to identify breakthrough opportunities. I joined the team in early 2018, drawn by their passion, experience, and commitment to maximising patient impact. In my first year on the team I have only grown more impressed with PureTech's capabilities and the depth of its value-creating activities.

Our affiliate structure, expert advisors, high-value partnerships, and nimble spirit of entrepreneurship enable us to capture and evaluate new technologies in a highly capital-efficient manner. We have demonstrated an ability to translate these technologies into promising therapeutic options for complex chronic diseases that could move the standard-of-care from management to prevention or potential cure.

In less than four years since listing, PureTech Health has taken multiple technologies to an advanced stage, a great achievement for any therapeutics developer, but even more remarkable for having occurred in such a capital efficient way and across a number of highly differentiated R&D programmes through our Affiliate division.

The PureTech Health team benefits from the strength of its operations and portfolio, creating a critical mass of expertise, creativity, and experience that continues to deliver value across the organisation. We see this value reflected every day in our culture, research excellence and entrepreneurial climate. This virtuous cycle has resulted in an internal R&D pipeline that has put us on the map as a pre-eminent Brain-Immune-Gut (BIG) axis biopharma of note.

With a strong capital base, PureTech Health is in an excellent position to deliver additional meaningful catalysts across its Affiliate and Internal divisions in the foreseeable future. In April 2018, PureTech Health successfully raised gross proceeds of approximately $100 million (£72 million) through a placing. As discussed in the Highlights of this report, our affiliates raised an aggregate sum of $274.0 million last year. The Group's cash reserves at 31 December 2018 were $425.0 million (30 June 2018: $416.9 million), of which $177.7 million (30 June 2018: $196.7 million) was held on a PureTech Health parent company level.

I look forward to the exciting milestones ahead and am proud to work with this team in building the capabilities and successes of a remarkable organisation. Special thanks to our shareholders, both long-term and new; we welcome your continued support in the years ahead.

Joep Muijrers

Chief Financial Officer

How PureTech Health is building value for investors

PureTech Health, which is comprised of PureTech Health plc and its affiliates (together, "the Group," or "the Company"), was founded with a vision to advance breakthrough science into promising new medicines for patients. Each programme was historically housed in an independent corporate entity, and cash was raised as needed from internal resources and validating third-party investors. Over the years, the Group has successfully executed against this vision by progressing BIG (Brain-Immune-Gut) medicines for serious diseases through human proof-of-concept to regulatory clearance. At the same time, the Group has also forged strategic relationships with major pharmaceutical companies and leading academic scientists and institutions. All of this has been achieved in a capital-efficient manner while maintaining significant ownership in each entity.

PureTech's proven track record has resulted in deep intellectual insights and financial resources that support two ways to advance new medicines. The first path is through the affiliates, which includes one product that has been cleared by the US Food and Drug Administration (FDA) (Gelesis' PLENITY™), as well as multiple other product candidates that have demonstrated clinical proof-of- concept. The affiliates have access to various avenues of funding to fuel their continued growth, including potential private rounds of equity financing, IPOs, strategic transactions, and industry partnerships at the global or regional levels. PureTech's advantageous position of having significant ownership in the affiliates creates near- to mid-term value as well as a source of non-dilutive funding at the parent company level.

The second path is through PureTech's internal labs. Derived from PureTech's deep understanding of the BIG axis, these programmes are centred on tissue-selective immunomodulation for the treatment of oncology, autoimmune, and CNS-related disorders, with a near-term focus on targeting newly-discovered, foundational immunosuppressive mechanisms in oncology and novel approaches that harness the lymphatic infrastructure. To date, PureTech Health has announced four of the programmes that have been consolidated into this internal pipeline, including two programmes inspired by the gut-immune interface that enable oral administration of a range of therapeutics (formerly known as Glyph and Calix), an immuno-oncology programme (formerly known as Nybo) and a central nervous system (CNS) lymphatics programme.

The Company will continue its sourcing activities to identify and review additional innovative approaches and clinical stage assets, that will also focus around tissue-selective immunomodulation to further grow this Internal pipeline. Equity investors can only access these internal programmes through shareholding on a PureTech Health parent company level, and the Company may also consider evaluating capital markets opportunities in the United States.

PureTech's affiliates and internal pipeline are connected through a shared focus on the BIG axis and a mission to address some of the greatest medical needs. Together with a seasoned management team, an outstanding Board, and leading scientific advisors, the Company has made exceptional progress in 2018 across both divisions towards executing this vision.

Affiliates

PureTech's affiliates have made excellent progress over the course of 2018, with multiple programmes advancing in clinical development and approaching commercialisation.

Clinical stage affiliates

In 2018, Gelesis and Akili filed applications with the US FDA for review of their lead product candidates in weight management and paediatric attention deficit hyperactivity disorder (ADHD), respectively. In the April 2019 post-period, Gelesis received FDA clearance for PLENITY™ as an 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 plans to initiate a targeted US launch of PLENITY in the second half of 2019 and anticipates PLENITY will be broadly available by prescription in the US in 2020. Gelesis also filed PLENITY for marketing authorisation in Europe in the first quarter of 2019 and expects to receive feedback in 2019. Building on its success with PLENITY, Gelesis also advanced its broad pipeline of additional product candidates based on its novel mechanobiology platform in 2018. Gelesis200, a hydrogel optimised for weight loss and glycaemic control in people with type 2 diabetes and prediabetes, is currently being evaluated in a Phase 2 study that is expected to read out in 2020. Gelesis also completed preclinical work on its third product candidate, GS300, which is being evaluated for the treatment of non-alcoholic steatohepatitis (NASH) and non-alcoholic fatty liver disease (NAFLD). A proof-of- concept study is expected to begin in 2019. Preclinical work on GS400 for inflammatory bowel disease (IBD) and intestinal mucositis is ongoing, and a pivotal study of GS500 in chronic idiopathic constipation (CIC) is expected to begin in 2020. To support this ongoing clinical and preclinical work and build towards commercialisation prior to FDA clearance, Gelesis completed a $30 million raise in March 2018.

In addition to filing with the US FDA for review of lead product candidate AKL-T01 in paediatric ADHD, Akili progressed a number of other product candidates from its industry-leading pipeline of digital medicines to treat cognitive deficiency and improve symptoms associated with medical conditions across neurology and psychiatry. In late 2018, Akili successfully completed a Phase 2 study of AKL-T03 in major depressive disorder (MDD) and a proof-of-concept study of AKL-T03 in multiple sclerosis. Based on the results of these studies, Akili plans to initiate larger clinical studies in both indications in 2020. Results of a successful pilot study of Akili's AKL-T02, a third product candidate being evaluated in children with autism spectrum disorder (ASD) with co-occurring ADHD, were published in December. Early-stage clinical evaluation of Akili's technology platform in additional indications is also underway, including in Parkinson's disease, traumatic brain injury, ICU delirium, and lupus. In addition to this clinical work, Akili is developing complementary and integrated clinical monitors and measurement-based care applications. To further advance development and deployment of its pipeline, Akili completed a $68 million financing in 2018. In the March 2019 post-period, Akili entered into a strategic partnership with Shionogi & Co., Ltd. for the commercialisation of two of Akili's digital medicine product candidates, AKL-T01 and AKL-T02 (in development for children with autism spectrum disorder), in Japan and Taiwan. Under the terms of the agreement, Akili will build and own a newly created R&D and commercial platform and receives 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.

resTORbio continued to advance its lead product candidate, RTB101, a selective inhibitor of the target of rapamycin complex 1 (TORC1), for the improvement of the function of the ageing immune system. Following its January 2018 IPO on NASDAQ, resTORbio announced positive topline results from its dose-ranging Phase 2b clinical trial of RTB101 in elderly patients at increased risk of morbidity and mortality associated with respiratory tract infections (RTIs). Additional 24-week data from the Phase 2b study was released in the second half of 2018, and in the March 2019 post-period, resTORbio announced a positive end of Phase 2 meeting with the FDA. The initiation of a global Phase 3 programme for RTB101 is expected to begin in the second quarter of 2019. In the April 2019 post-period, resTORbio also initiated a Phase 1b/2a study in Parkinson's disease.

Karuna has also completed work in 2018 to advance its pipeline based on the targeting of muscarinic cholinergic receptors for the treatment of psychosis and cognitive impairment across central nervous system (CNS) disorders, including schizophrenia, psychosis in Alzheimer's disease, and pain. In October, Karuna announced the initiation of a Phase 2 study of KarXT (Karuna-Xanomeline-Trospium), its lead product candidate, for the treatment of psychosis in schizophrenia, with results anticipated by the end of 2019. Karuna is using a proprietary co-formulation of KarXT in its Phase 2 study that successfully demonstrated tolerability at a dose level exceeding those shown to be efficacious in previous studies of xanomeline alone. Additionally, Karuna plans to initiate a Phase 1b experimental pain study in healthy volunteers and clinical work towards treating Alzheimer's disease psychosis later this year. In August 2018, Karuna successfully completed a $42 million Series A financing round, including the issuance of $22 million in shares upon conversion of debt into equity, and in the 2019 post- period the company also completed an $82 million Series B, including the issuance of $7 million in shares upon conversion of debt into equity.

During the past year, Vedanta Biosciences rapidly advanced its pipeline of rationally-defined bacterial consortia-based product candidates to address immune-mediated diseases, including results from one clinical study and the initiation of two additional studies. In October, the company announced results from a successful Phase 1a/1b study of lead candidate VE303 in recurrent Clostridium difficile (rCDI). A Phase 2 study of VE303 was initiated in December, and results are anticipated in 2020. In November, Vedanta Biosciences also initiated a Phase 1 clinical study of inflammatory bowel disease (IBD) candidate VE202 with Janssen Biotech, Inc., which licensed VE202 from Vedanta Biosciences in 2015 as part of a collaboration that has development and commercialisation milestone payments of up to a total of $339 million, in addition to royalty payments. Top-line results from this study are anticipated in the second half of 2019. In December, the company announced a clinical collaboration to evaluate Bristol-Myers Squibb's programmed death-1 (PD-1) immune checkpoint inhibitor Opdivo (nivolumab) in combination with Vedanta Biosciences' VE800, a rationally-defined human bacterial consortium, in patients with advanced or metastatic cancers. Vedanta Biosciences will maintain control of its VE800 programme, including global R&D and commercial rights, and a Phase 1b/2 study is expected to begin mid-2019. Preclinical research supporting the identification and development of VE800 was published in one of the top scientific journals Nature in the January post-period. Vedanta Biosciences also announced a $27 million financing round in December to advance its clinical pipeline of microbiome-derived product candidates. Vedanta Biosciences anticipates the initiation of a Phase 1b/2 study of product candidate VE416 in food allergy in 2019.

Sonde has advanced its vocal biomarker technology, which has demonstrated the potential to effectively screen and monitor for disease using information obtained from an individual's voice on commonly-owned devices. Sonde has made its scalable cross-platform mobile research app and administrator interface available to academic collaborators and study participants. Sonde generated and analysed voice data from over 14,000 subjects for the detection of depression, suicidality, asthma, congestive heart failure, and Parkinson's disease. In the April 2019 post-period, Sonde completed a $16 million Series A round, including the issuance of $6 million in shares upon conversion of debt into equity, to expand its capability across additional health conditions and device types and to fund commercialisation activities.

Follica has made good progress towards the initiation of a pivotal study in androgenetic alopecia. The company expects to begin a pivotal study in 2019 following the completion of an ongoing optimisation study.

Preclinical affiliates

Alivio, Vor, and Entrega have all made significant progress towards human clinical trials in 2018.

Alivio advanced its inflammation- targeting immunomodulation platform towards the clinic, which received two US patents broadly covering compositions of matter and other aspects of the inflammation-targeting microfibre materials with embedded molecules of interest. Alivio's pipeline includes candidates for interstitial cystitis/bladder pain syndrome (IC/ BPS), inflammatory pouchitis, and inflammatory bowel disease (IBD), and the platform technology has been validated in multiple preclinical models, including in models of osteoarthritis, the results of which were published in one of the leading scientific journals, Nature Communications, in April. Additionally, Alivio's work in IC/BPS with Hunner's lesions was awarded a $3.3 million US Department of Defense (DoD) Technology/Therapeutic Development grant in September, which supports preclinical research and development activities for product candidate, ALV-107. ALV-107 is also being advanced under a partnership with Purdue Pharma LP, which was announced in the January 2019 post-period. Under the terms of the agreement, Alivio will 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. Purdue also has an option to collaborate on a limited number of additional compounds utilising Alivio's inflammation-targeting technology.

Vor has also progressed its engineered haematopoietic stem cell (HSC) therapy platform, and in November the company was granted a first-in-class patent broadly covering this technology platform for the treatment of haematological malignancies. This foundational patent is the first of its kind in the immuno-oncology field and it broadly covers compositions and therapeutic methods related to using novel modified HSCs to enable targeted immunotherapies. In the February post-period, Vor announced a $42 million Series A financing round, the proceeds from which will be used to advance Vor's lead candidate for the treatment of acute myeloid leukaemia (AML) towards the clinic, and to further build its pipeline to treat haematologic malignancies.

Entrega has continued to progress its platform for the oral delivery of biologics, vaccines, and other drugs that are otherwise not efficiently absorbed when taken orally. Entrega's research collaboration with Eli Lilly progressed over the past year as they worked to apply Entrega's peptide delivery technology to certain Lilly therapeutic candidates. Entrega has also generated proof-of-concept data demonstrating delivery of therapeutic peptides into the bloodstream of large animals, with additional formulation work in large animals ongoing.

In the January 2019 post-period, PureTech Health made the decision to de-prioritise Commense. PureTech Health has decided to retain all intellectual property, but it will not allocate further resources to this programme pending the outcome of ongoing preclinical research with academic collaborators.

Internal R&D

PureTech Health has also made progress advancing its pipeline of internal programmes centred on tissue-selective immunomodulation for the treatment of oncology, autoimmune, and CNS-related disorders.

PureTech's lead internal programme is an immuno-oncology approach focused on developing two first-in-class, fully human monoclonal antibodies that are aimed at countering fundamental mechanisms of immunosuppression in cancer. LYT-200 is a human IgG4 directed against Galectin-9 which exerts immunosuppression by binding to multiple partners, facilitating a tumour-permissive microenvironment. LYT-200 has the potential to target difficult to treat cancers that do not respond well to approved checkpoint inhibitors, such as pancreatic cancer, cholangiocarcinoma, and certain types of colon cancer. The programme has rapidly progressed to select and characterise the lead clinical candidate. Preclinical pharmacology efficacy/mode of action studies have been executed, with toxicology and analytics under way, to enable the filing of an investigational new drug (IND) application in the first half of 2020. The second immuno-oncology candidate, LYT-210, is directed against immunosuppressive γδ (gamma delta) T cells, which have a distinct phenotype, as well as functional properties to make them uniquely targetable in cancer. PureTech Health has demonstrated that targeting immunosuppressive γδ T cells in multiple aggressive solid tumours that do not respond to checkpoint inhibitors re-activates effector T cells. In the April 2019 post-period, PureTech Health presented two posters detailing LYT-200 and LYT-210 development and preclinical efficacy data at the prestigious American Association for Cancer Research (AACR) 2019 Annual Meeting.

PureTech Health has also progressed its milk exosome-based technology, which is designed to facilitate the oral administration of complex payloads such as nucleic acids, peptides and small molecules. In July, the Company announced a multiyear collaboration with Roche to advance this technology for the oral administration of Roche's LNA antisense oligonucleotide platform. Under the terms of the agreement, PureTech Health receives up to $36 million, including upfront payments, research support and early preclinical milestones. PureTech Health is also eligible to receive development milestone payments of over $1 billion, in addition to sales milestones and royalties.

PureTech Health is also developing a lymphatic targeting approach that uses the body's natural lipid transport mechanisms to substantially enhance the transport of orally-administered drugs into the lymphatic system. This proprietary platform achieves this by reversibly attaching a dietary fat to the drug of interest via a linker optimised to release the drug at the site of interest. PureTech Health has successfully extended this approach to encompass new drugs and linker chemistries, which have demonstrated promising selective lymphatic targeting in preclinical studies. Successful pharmacokinetic studies in large animals are supportive of translation of this technology into higher species. In the April 2019 post-period PureTech Health announced a collaboration with Boehringer Ingelheim (BI) to advance BI's immuno-oncology product candidates using this lymphatic targeting platform. Under terms of the agreement, PureTech Health will receive up to $26 million, including 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.

Foundational science underlying another internal programme centred around the central nervous system (CNS) lymphatics system was published by our collaborator in July as the cover story in the prestigious scientific journal Nature. The research revealed that modulation of lymphatic function in the brain may prevent or delay diseases associated with ageing, including Alzheimer's disease, Huntington's disease and age-associated cognitive decline. In September, additional research from our collaborator was featured in Nature Neuroscience that identified the physical connection between the brain's fluid reservoirs and the meningeal lymphatics, through which immune cells traffic out of the central nervous system (CNS). The publication also demonstrated that modulation of this trafficking pattern has the potential to improve symptoms in many neuroinflammatory conditions, such as multiple sclerosis (MS).

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. 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. 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. 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. 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. 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.

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. 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.

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. 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. 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 affiliate companies and its Internal division. 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 affiliate companies are able to raise money directly from third party investors and strategic partners.

8. 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.

Brexit

On 23 June 2016, the UK held a referendum on the UK's continuing membership of the EU, whereby the UK electorate voted to leave the EU (Brexit). The progress of current negotiations between the UK Government and the EU and the ratification of the outcome of those negotiations by the UK and EU parliaments will likely determine the future terms of the UK's relationship with the EU, as well as to what extent the UK will be able to continue to benefit from the EU's single market and other arrangements.

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 is significant risk associated with 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

16 April 2019

Financial Review

During 2018, PureTech Health continued to prudently deploy its cash reserves to advance both its affiliate and internal pipeline. The Company has progressed research and clinical activities across the pipeline in line with its forecasted expectations and continues to invest in infrastructure to support the potential launches (pending regulatory approval) of both Gelesis100 for the treatment of obesity and AKL-T01 for the treatment of paediatric ADHD.

Additionally, the Company continued to attract capital both at PureTech Health and the Affiliates division. $97.5 million (net) proceeds were raised at the PureTech Health level as part of the Company's offering in April 2018 which will be used to advance both the Affiliates and Internal divisions. In addition to the PureTech raise, $242.4 million was attracted from third-party, validating, financial and strategic investors across the Group in 2018, resulting in total attracted capital for the Group of $274.0 million. This included resTORbio's initial public offering (IPO), which generated $97.8 million of gross proceeds (including PureTech's $3.5 million investment).

Additionally, PureTech Health has continued to develop its Internal division focusing on the Brain-Immune-Gut (BIG) Axis. As a result, the Company entered into a multiyear collaboration agreement with Roche to advance PureTech's milk-derived exosome platform technology. Under the terms of the agreement, PureTech Health will receive up to $36.0 million, including upfront payments, research support, and early preclinical milestones. PureTech Health will be eligible to potentially receive development milestone payments of over $1.0 billion and additional sales milestones and royalties for an undisclosed number of products.

The Affiliates division also had key events in 2018. Akili and Gelesis filed applications with the FDA for review of their lead product candidates and Gelesis received FDA clearance for PLENITY as an aid for weight management in April 2019. resTORbio completed its IPO on NASDAQ and Gelesis, Vedanta, Akili and Karuna each completed major equity financings in 2018.

The Group continues to source and develop new ideas as well as execute on pipeline opportunities. In addition, PureTech Health continues to evolve shared functions to support the increased level of activities of its Internal division and Affiliates division.

Financial Highlights

1 Group Cash Reserves is an alternative performance measure (APM) which includes cash reserves held at deconsolidated affiliates of $174.0 million that are not included in the consolidated statement of financial position. Group Cash Reserves is therefore considered to be more representative of the Group's cash available to advance product candidates within the full breadth of its operations, as the cash held at deconsolidated affiliates not included in Consolidated Cash Reserves will be invested in activities that could ultimately result in value accretion for the Group.

2 Cash Reserves includes cash balances and short-term investments and long-term investments, but does not include future committed tranches of previously closed financings which will be received in future periods. PureTech Level Cash Reserves represent cash and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, and PureTech Securities Corporation.

3 Stated before the effect of share-based payment of $12.6 million (2017 - $11.8 million), depreciation of $2.5 million (2017 - $1.6 million), amortisation of $0.3 million (2017 - $0.5 million) and impairment of tangible assets of nil (2017 - $0.6 million). These items are non-cash charges. Adjusted operating loss is therefore considered to be more representative of the operating performance of the Group. Non-cash items are excluded due to the nature of the Group in that the businesses require the cash investment in order to operate and continue with their R&D activities and this is therefore deemed to be an appropriate alternative performance measure.

4 Stated before the charges discussed in note 3 above as well as the fair value accounting income of $22.6 million (2017 - charge of $71.7 million) and finance cost - subsidiary preferred shares of $0.1 million (2017 - $9.5 million) and share of net loss of associates accounted for using the equity method of $11.5 million (2017 - $17.6 million). Adjusted Loss for the Period is also adjusted for the non-cash gain from the deconsolidation of subsidiary of $41.7 million (2017 - $85.0 million) and a Loss on investments held at fair value of $20.3 million for the year ended 31 December 2018, compared to a Gain on available for sale investments of $57.3 million for the year ended 31 December 2017. 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 2018 relates primarily to Vedanta's collaboration agreement and grant awards, the Internal division's Roche agreement and Entrega's research agreement. Future revenues may be earned under existing and license and collaboration agreements, including pursuant to the Roche agreement. Management evaluates opportunities to enter new license and collaboration agreements with the aim of balancing the value of these partnerships and retaining ownership in our programmes to achieve meaningful milestones. Revenue from license and collaboration agreements during the development and approval period is typically driven by achievement of contractual milestones, which tend to be event-driven. Furthermore, grant revenues are typically associated with specific deliverables that have finite timelines. 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

Adjusted Operating Expenses (before the impact of the non-cash items noted in Footnote 3 of the Results of Operations Schedule above) increased by 5.7 per cent on a year-over-year basis. The largest driver of the increase was related to an increase in General and Administrative Spending, which is a result of the pre-launch preparations for Akili and additional costs related to Vedanta Biosciences as well as PureTech Health, which grew in line with expectations. Adjusted Research & Development Expense (APM) increased by 5.0 per cent on a year-over-year basis.

The Group carried out development activities to advance its Affiliates division and Internal division by initiating new clinical trials, expanding its current clinical studies and increasing headcount, which resulted in an increase of $5.7 million, or 8.0 per cent, in research and development expenses for the year ended 31 December 2018, compared to the year ended 31 December 2017.

General and administrative expenses increased by $1.1 million, or 2.3 per cent, for the year ended 31 December 2018, compared to the year ended 31 December 2017. The slight year-over-year increase in general and administrative expenses reflects the ability of the Group to leverage its existing infrastructure.

The 2017 Adjusted Operating Expenses included resTORbio, which was deconsolidated as of November 2017, and six months of expense for Akili, which was deconsolidated as of 8 May 2018. Excluding these two entities in both periods, Adjusted Operating Expenses increased by 37.2 per cent, which included a 44.0 per cent increase to research and development expenses and a 26.8 per cent increase to general and administration costs. Research and development expense growth excluding these two subsidiaries was mainly driven by Vedanta Biosciences, Karuna and the Internal division.

The Directors anticipate that operating expenses, particularly research and development-related expenses, will continue to increase as the Consolidated Group advances its pipeline. These operating expenses will include regulatory activities, preparation for the potential commercial launch of Gelesis, 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 both marketing and sales efforts for Gelesis as well as increases in overall corporate expenses.

Net finance costs

The Consolidated Group's results of finance activities before consideration of the items noted in Footnote 4 in the Results of Operations Schedule above increased by $2.2 million to $3.4 million for the year ended 31 December 2018, compared to $1.2 million for the year ended 31 December 2017. 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 $3.4 million and $1.7 million of income from interest earned on these securities for the years ended 31 December 2018 and 2017, respectively.

On 1 January 2018 the Consolidated Group adopted IFRS 9. Under IFRS 9, the Consolidated Group reassessed certain financial instruments and whether it qualified for fair value accounting, and concluded that it did qualify. As a result of the adoption of IFRS 9, there was a cumulative effect adjustment to equity of $12.2 million. The net finance income in 2018 was mainly attributable to fair value adjustments associated with third- party financial instruments, including preferred stock, convertible notes, and warrants held at the subsidiary level. Consistent with IAS 39, when the Consolidated Group realises a change in the value of the subsidiaries that are consolidated for accounting purposes, income or expense will be recognised when there are external preferred shareholders. The Consolidated Group continues to hold certain financial instruments at amortised cost, resulting in modest costs categorised as Finance cost - subsidiary preferred shares. These costs are expected to be insignificant in future periods.

The income generated within Finance income/(costs) - fair value accounting during 2018 is a result of the reduction of the fair value liability, which is primarily attributable to a decrease in the third-party liability for Akili. The third-party liability attributable to the Akili shares decreased as a result of the proceeds from the Series C financing having first order liquidation preference, decreasing the fair value of the other outstanding preferred securities. Excluding Akili, the fair value of liabilities decreased by $7.8 million, attributable to the growth in the underlying value of the subsidiaries.

The balance of subsidiary preferred stock held by external parties, and therefore the related balance of the aggregate liquidation preference, decreased during the first half of 2018 due to the deconsolidation of Akili and the asset sale of The Sync Project to Bose Corporation, which was partially offset by new issuances of Series 2 Growth Preferred Stock by Gelesis. Refer to note 15 in the financial statements for more information.

During the year ended 31 December 2018, the Group realised a year-over-year increase of $94.3 million as it recognised finance income of $22.6 million, compared to a finance cost of $71.7 million for the year ended 31 December 2017. The increase resulted from the change in fair value of the Group's preferred shares and convertible note liabilities

Deconsolidation of Akili Interactive Labs

In May 2018, Akili completed the first closing of its Series C Preferred Stock financing, which reduced PureTech's voting ownership percentage of Akili to 44.7 per cent (from 53.7 per cent), triggering deconsolidation. Although PureTech Health no longer controls Akili, 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 Akili's Board of Directors.

Upon deconsolidation, PureTech Health recognised the fair value of the Series A-1, Series A-2, and Series B Preferred Stock (collectively the "Akili Preferred Stock") held in Akili, resulting in a gain of $41.7 million. The Akili Preferred Stock was classified as an Investment held at fair value upon deconsolidation. On 9 August 2018, Akili completed a second closing of its Series C Preferred Stock financing, which raised an additional $13.0 million. This resulted in PureTech's voting ownership decreasing to 41.9 per cent.

PureTech Health does not hold common stock in Akili and therefore is not subject to equity method accounting under IAS 28. PureTech Health will continue to account for the Akili Preferred Stock as an Investment held at fair value until such time that Akili Preferred Stock is converted to common stock.

Refer to note 5 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 of $259.8 million for the year ended 31 December 2018, compared to $198.1 million for the year ended 31 December 2017. 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 $250.9 million at 31 December 2018, compared to $188.7 million for the year ended 31 December 2017. Of this amount, $177.7 million (31 December 2017 - $126.7 million) of cash reserves is held at the PureTech Health level to fund activities of the Group, including supporting future activities, progressing affiliate programmes toward meaningful milestone events, funding the internal pipeline and maintaining an appropriate infrastructure.

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

· Investments held at fair value and Investments in associates increased by $38.4 million to $169.8 million, primarily driven by the deconsolidation of Akili but partially offset by the fair value decrease and equity method accounting of the Series A Preferred Stock in resTORbio, which was converted to common stock at the time of resTORbio's IPO. PureTech holds 9,800,396 shares of resTORbio's common stock, which is publicly traded on NASDAQ.

· Current Liabilities decreased by $8.1 million, or 3.0 per cent, to $265.8 million for the year ended 31 December 2018, compared to $273.9 million for the year ended 31 December 2017, which is primarily attributable to the change in fair value of the preferred shares and convertible notes held by subsidiaries, partially offset by additional issuances of these financial instruments during the year ended 31 December 2018.

As noted above, the Group increased spending as expected. The Directors anticipate that the Consolidated Group's funds are sufficient to continue to progress both the deconsolidated affiliates and Affiliates division programmes to meaningful milestone events, and to invest in the Internal division into the first quarter of 2022.

Cash Flows

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 3 and 4 of the Results of Operations Schedule above, are primarily cash based.

The net cash outflow from investing activities during 2018 relates to investments in US Treasuries with durations of less than two years as well as the deconsolidation of Akili's cash balance as of 8 May 2018 which totalled $13.4 million. In addition, PureTech Health invested $3.5 million in resTORbio's IPO and the Consolidated Group expended $2.0 million for property and equipment.

The net cash inflow from financing activities during 2018 primarily relates to the April 2018 offering completed by PureTech Health, where the Company issued 45,000,000 ordinary shares at 160 pence per share, which were admitted to the premium listing segment of the Official List of the Financial Conduct Authority and are trading on the Main Market for listed securities of the London Stock Exchange plc.

The placing represented a discount of approximately 3.0 per cent to the closing price of the Company's ordinary shares on 12 March 2018. Existing shareholder Invesco Asset Management Limited participated in the offering, purchasing 14,365,000 ordinary shares at the placing price of 160 pence per share. Based on the exchange rates at the time of the completion of the transaction, the gross proceeds of £72 million translated into $101.2 million. There were approximately $3.7 million of transaction costs associated with the offering, resulting in net proceeds of $97.5 million. In addition to the PureTech Offering, Gelesis received $8.5 million as part of its Series 2 Growth Preferred financing.

Offsetting the two aforementioned cash inflows was an outflow of $1.1 million related to distribution to third-party Sync preferred shareholders as a result of the asset purchase by Bose Corporation. 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.

At 31 December 2018, the Group had $2.0 million of cash reserves held in Euros. These cash reserves are used to fund the operation of Gelesis' Italian manufacturing and research and development subsidiary. The Directors believe it is prudent to have these cash reserves denominated in Euro to fund operations.

Consolidated Statements of Comprehensive Income/(Loss)

For the years ended 31 December

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

* Prior year tax numbers have been adjusted - see note 1.

Consolidated Statements of Financial Position

For the years ended 31 December

See the accompanying notes to the consolidated financial information. Registered number: 09582467.

The financial statements on pages 88 to 135 were approved by the Board of Directors and authorised for issuance on 24 April 2019 and signed on its behalf by:

Daphne Zohar

Chief Executive Officer 24 April 2019

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

* Prior year tax numbers have been adjusted - see note 1.

Consolidated Statements of Changes in Equity

For the years ended 31 December

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

* Prior year tax numbers have been adjusted - see note 1.

Consolidated Statements of Cash Flows

For the years ended 31 December

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

* Prior year tax numbers have been adjusted - see note 1.

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 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK.

PureTech's group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates. 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 Annual Report and Accounts of the Group are presented for the years ended 31 December 2018 and 2017. The Group financial statements have been prepared and approved by the Directors 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, derivative financial instruments 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.

Revisions to estimates are recognised prospectively. Significant estimation applied in determining the following:

· Revenue recognition (note 3): when determining the correct amount of revenue to be recognised. This includes making certain estimates and judgements when determining the appropriate accounting treatment of key customer contract terms in accordance with the applicable accounting standards. In particular, estimates are required to determine the timing of revenue recognition (on delivery or over a period of time). The Directors also make estimates of the fair values of each component of a contract to be able to allocate the overall consideration to each component based on the relative fair value method.

· Financial instruments valuations (note 21): when determining the appropriate valuation methodology and deriving the estimated fair value of subsidiary undertakings and subsidiary preferred shares. This includes 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.

Significant judgement is also applied in determining the following:

· 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 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's 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; and

· When the power to control the subsidiaries exists

Going Concern

After making enquiries and considering the impact of risks and opportunities on expected cash flows, the Directors have a reasonable expectation that the Group has adequate cash to continue in operational existence into Q1 2022. Based on the cash and cash equivalents available to the Group as of 31 December 2018, the Group has sufficient cash reserves to continue to provide capital, alongside outside investors, to its existing subsidiary companies and to create and fund project stage programmes and growth stage affiliates into Q1 2022, assuming broadly our expected level of required investments in businesses and other operating expenditures.

Basis of Consolidation

The consolidated financial information for each of the years ended 31 December 2018 and 2017 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

Subsidiaries are entities that are controlled by the Group. 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. 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 ownership percentage, based on outstanding voting ordinary and preferred shares, is outlined below.

Notes:

1. All subsidiaries are registered in the United States ("US") except for Gelesis, S.r.l., which is registered in Italy.

2. The ownership percentage includes liability classified preferred shares, which results in the ownership percentage not agreeing to the ownership percentage used in allocations to non-controlling interests disclosed in note 16.

3. On 18 June 2015, PureTech Health plc completed a reorganisation of the corporate structure of the group of companies controlled by its predecessor PureTech Health LLC pursuant to which PureTech Health plc became the holding company of the group.

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

5. Registered address is Via Verde 188, 73021 Calmera (LE), Italy.

6. Registered address is 901 N. Market St., Suite 705, Wilmington, DE 19801, USA.

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

8. The Company's interests in its subsidiaries are predominantly in the form of preferred shares, which have a liquidation preference over the ordinary shares, are convertible into ordinary shares at the subsidiary'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 ordinary shares 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.

9. On 8 May 2018, Akili completed the first close of a Series C Preferred Stock financing with certain and other existing investors. As a result of the issuance of the preferred shares to third-party investors, following the first close of the Series C financing, PureTech's ownership percentage and corresponding voting rights related to Akili dropped from 61.8 per cent to 41.9 per cent, triggering a loss of control over the entity. As of May 2018, Akili was deconsolidated from the Group's financial statements and is no longer considered a subsidiary.

10. On 18 July 2018, Calix Biopharma, Inc., Glyph Biosciences, Inc., and Nybo Therapeutics, Inc. merged into Ariya Therapeutics, Inc. Thus, the Group no longer holds interest in Calix, Glyph and Nybo and owns 100 per cent of Ariya as of 31 December 2018.

11. It was concluded that PureTech Health still has control over Gelesis by virtue of its large, albeit minority, ownership stake and its continued control of Gelesis' Board of Directors, resulting in PureTech having the power to participate in the financial and operating policy decisions of the entity. Therefore, the Group has consolidated Gelesis' financial operations for the year ended 31 December 2018.

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") and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Associates

Associates are those entities in which the Group has lost 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 another 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 decision 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 fair value. 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 interest in an equity accounted investee, 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 ordinary shares and that have debt-like features, 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 financial instruments and revenue recognition. All other accounting policies have remained unchanged from the previous year. See updated accounting policies for financial instruments (IFRS 9) and revenue recognition (IFRS 15) below.

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 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 Group has applied IFRS 9 retrospectively but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Group's previous accounting policy. The reclassification and adjustment arising from the adoption of the new accounting policy has been recognised in the opening balance sheet as of 1 January 2018.

The accounting policy that reflects the new accounting standard for financial instruments (guidance under IAS 32 and IFRS 9) is effective from 1 January 2018 and 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. The Group adopted this policy as of 1 January 2018.

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 are expensed and carried at FVTPL.

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 and other deposits. The Group's financial assets are classified into the following categories: investments held at fair value and trade and other receivables. 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 the Consolidated Statements of Comprehensive Income/ (Loss), 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.

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 ageing, 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.

The Group reviewed the financial assets reported in its Consolidated Statements of Financial Position and completed an assessment between IAS 39 and IFRS 9 to identify any accounting changes. The financial assets subject to this review were: Cash and cash equivalents, US Treasuries, Certificates of deposits, Other deposits, Trade and other receivables, and Investments held at fair value. Due to the nature of the financial assets held and their lack of complexity, the classification and measurement model, impairment, and interest income, the accounting impact on financial assets was not material.

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 gain/(loss) 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, Revenue from Contracts with Customers

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 is effective for annual periods beginning on or after 1 January 2018, and supersedes: IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC-31 Revenue - Barter Transactions Involving Advertising Services. 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 revenue from customers 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 Health has entered into transactions that generate revenue and meet the scope of either IFRS 15 or IAS 20 Accounting for Government Grants. Revenue is recognised at either a point-in-time or over time, depending on the nature of the services and existence of acceptance clauses.

The accounting policy that reflects the new accounting standard for IFRS 15 is effective from 1 January 2018 and is as follows:

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 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 the following criteria and revenue is recognised 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 Health 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 all members of the Group is the US dollar, except for an Italian subsidiary whose functional currency is the Euro. The assets and liabilities of this subsidiary are translated to US dollars at the exchange rate prevailing on the balance sheet date and revenues and expenses are translated at the average exchange rate for the period. Foreign exchange differences resulting from the translation of this subsidiary are 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 and impairment losses. 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.

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.

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).

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. These financial assets 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, 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 valuation 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 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). 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. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditures considered for capitalisation include the cost of materials, direct labour and an appropriate proportion of overhead costs. Otherwise, the development expenditure is recognised as incurred in the Consolidated Statements of Comprehensive Income/(Loss).

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.

Operating Leases

The Group classifies its leases at inception as either finance or operating leases, depending on whether substantially all the risks and rewards of ownership transfer to the Group. Leases where the lessee has substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. The Group only has operating leases during the reporting periods. Payments made under operating leases are recognised in the Consolidated Statements of Comprehensive Income/(Loss) on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

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 expense 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. 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 2018 and 2017, the Group filed a consolidated US income tax return.

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 have been billed per contractual terms but has not been recognised as revenue. Deferred costs represent direct costs related to deferred revenues 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.

Certain prior period amounts have been reclassified to conform with the current-period financial statement presentation. Deferred Tax Adjustment

During 2018 the Directors identified that as at 31 December 2017, a non-cash net deferred tax liability of $4.4 million (net of the offset of available tax losses) should have been recorded in respect of 'Investments held at fair value' of $131.4 million. As a result, a prior year adjustment has been made to correct the position. The impact of this has been as follows:

· The tax (charge)/ credit for the year ended 31 December 2017 is now reported as a charge of $4.4 million (previously a credit of approximately $0.1 million).

· The net loss for the year ended 31 December 2017 is now reported as $75.1 million (previously a loss of $70.7 million).

· Income attributable to the owners of the company for the year ended 31 December 2017 is now reported as $26.5 million (previously as income of $30.9 million).

· The total comprehensive loss for the year ended 31 December 2017 is now reported as $72.9 million (previously a loss of $68.5 million).

· The accumulated deficit at 31 December 2017 is now reported as $132.3 million (previously $127.9 million).

· The Equity attributable to owners of the company at 31 December 2017 is now reported as $209.9 million (previously $214.3 million).

· The total equity at 31 December 2017 is now reported as $59.6 million (previously $64.0 million).

· Deferred tax liability at 31 December 2017 is now reported as $4.4 million (previously nil).

· There is no impact on the balance sheet as at 31 December 2016.

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 2019 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.

IFRS 16, Leases

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard is effective for annual periods beginning on or after 1 January 2019 and supersedes: IAS 17 Leases; IFRIC 4 Determining whether an Arrangement contains a Lease; SIC-15 Operating Leases - Incentives; and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard introduces a single, on-balance sheet accounting model which requires the lessee to recognise assets representative of the right to use the leased item, and liabilities to pay rentals for all leases.

The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the entity. The Group expects the adoption of IFRS 16 will not materially increase the assets and liabilities on the Consolidated Statements of Financial Position and affect its results of operations.

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

Existing finance leases will continue to be treated as finance leases. For existing operating leases, the Group will apply the 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 will not be restated. Upon transition the Group will also apply the following practical expedients:

· Exclude initial direct costs from the right-of-use assets;

· Use hindsight when assessing the lease term; and

· Not to reassess whether a contract is or contains a lease.

· Will not separate the lease components from the non-lease components in lease contracts.

The Group will elect 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 is initially measured at the present value of the lease payments that are not paid at the transition date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group will use its incremental borrowing rate. The right-of-use asset will be depreciated on a straight-line basis and the lease liability will give rise to an interest charge.

The Group estimates that the financial impact of adopting IFRS 16 will be to:

· Recognise a $10.8 million right-of-use asset and an $11.5 million additional lease liability on adoption; and

· Increase FY2019 Operating profit by $0.1 million net.

The undiscounted lease liability upon adoption is $0.9 million higher than the $9.9 million minimum rental commitments under all non-cancellable operating leases as at 31 December 2018 disclosed in note 22 - Commitments and Contingencies, the differences are due to lease term extensions under IFRS 16 offset by the exclusion of short leases and leases of low value assets.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

3. Revenue

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

The Group adopted IFRS 15 effective 1 January 2018, using the modified retrospective method and has only applied this method to contracts that were not completed as of the effective date and all new contracts initiated on or after the effective date. Results for reporting periods beginning on or after 1 January 2018 are presented under IFRS 15, while prior period amounts have not been restated and continue to be reported in accordance with the governing revenue recognition standards applicable to that period. The adoption of this standard had an insignificant impact to the Groups financial statements on the date of adoption.

Disaggregated Revenue

The Group disaggregates revenue from contracts with customers 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 the transfer of control of the underlying performance obligations and the geographic location of the customer.

All amounts recorded in revenue from customers were generated in the United States.

Additionally, 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 which 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. 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.

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 December 31, 2018 was $10.3 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. We capitalise incremental costs incurred to fulfil our contracts that (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 capitalized $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.

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 Directors monitor the results of four operating segments. Each operating segment is considered a distinct unit by the Directors. The Group's operating segments, which are also reportable segments, 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 2018, the Company revised its definition of operating segments. The change reflects how the Company's Board of Directors review 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 division (the "Internal division"), 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 division 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 division is conducted by the PureTech Health team, who is responsible for the strategy, business development, and research and development. As of 31 December 2018, this segment included Ariya Therapeutics, Inc., Calix Biopharma, Inc., Glyph Biosciences, Inc., and Nybo Therapeutics, Inc.

Affiliates

The Affiliate segment (the "Affiliate segment") is comprised of the programmes within PureTech's Affiliates division 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. Currently, 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 networks, as well as, additional funding to continue the pursued growth of the company. As of 31 December 2018, this segment included Alivio Therapeutics, Inc., Entrega, Inc., Follica, Inc., Karuna Pharmaceuticals, Inc., Gelesis Inc., Sonde Health, Inc., CommenSe, Inc., Vedanta Biosciences, Inc., and Vor Biopharma, Inc.

Deconsolidated Affiliates

The Deconsolidated Affiliates segment (the "Deconsolidated Affiliates segment") is comprised of the programmes within PureTech's Affiliates division 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 affiliate's Board of Directors. As of 31 December 2018, resTORbio, Inc. ("resTORbio") and Akili Interactive Labs, Inc. ("Akili") are Deconsolidated Affiliates. PureTech utilises the equity method of accounting when it owns ordinary shares in this segment. For the twelve months ended 31 December 2018, the spend and loss from continuing operations before taxes in the Deconsolidated Affiliates segment reflects Akili for the period between 8 May 2018 and 31 December 2018 and resTORbio for the period between 1 January 2018 and 6 November 2018.

Information About Reportable Segments:

The Parent commences initiatives in theme-based technologies, raises capital for investment in new companies and existing subsidiaries, provides other corporate shared services and support for all subsidiaries and manages the new programme creation process.

The activity between the Parent and the reporting segments has been eliminated in consolidation. These elimination amounts are allocated to the subsidiaries.

The proportion of net assets shown above that is attributable to non-controlling interest is disclosed in note 16.

The Group's revenue generated outside of the US was approximately nil and $0.5 million for the years ended 31 December 2018 and 2017, respectively.

5. Investments in Associates

resTORbio

As of November 2017, resTORbio was deconsolidated from the Group's financial statements and was accounted for as an Associate rather than a subsidiary, resulting in only the profits and losses generated by resTORbio through November 2017 being included in the Group's Consolidated Statements of Comprehensive Income/(Loss) as of 31 December 2017. Upon the date of deconsolidation, PureTech Health recognised an investment in resTORbio related to its ordinary shares of $17.6 million and an investment held at fair value related to its Series A Preferred Shares of $72.2 million. As a result of the deconsolidation and fair value accounting for investments held on the date of deconsolidation, PureTech Health recorded an unrealised gain of $85.0 million in the Consolidated Statements of Comprehensive Income/(Loss).

As of 31 December 2017, PureTech's investment in resTORbio was subject to equity method accounting. In accordance with IAS 28, PureTech's investment was adjusted by the share of profits and losses generated by resTORbio subsequent to the date of deconsolidation. resTORbio's loss for December 2017 was greater than the initial investment recorded by PureTech Health upon deconsolidation, therefore, the share of net loss was accounted for using the equity method and was constrained to the investment recognised upon deconsolidation. PureTech Health recognised $17.6 million as its share of loss from resTORbio through the Consolidated Statements of Comprehensive Income/(Loss), bringing PureTech's investment to nil.

On 26 January 2018, resTORbio, Inc., closed its initial public offering. Prior to the resTORbio IPO, PureTech Health recorded a loss of $14.3 million during the year ended 31 December 2018 to the Consolidated Statement of Income/(Loss) on the line item Finance costs - subsidiary preferred shares to adjust the fair value related to its resTORbio Series A Preferred Share investment. Upon completion of the public offering, the resTORbio Series A Preferred Shares held by PureTech Health converted to ordinary shares. In light of PureTech's common stock holdings in resTORbio and corresponding voting rights, PureTech Health had re-established a basis to account for its investment in resTORbio under IAS 28. The preferred stock investment held at fair value was therefore reclassified to investment in associate upon the completion of the conversion.

The Company continuously re-evaluated its relationship with its Associates to identify any changes which may result in the loss of significant influence. As of 6 November 2018, it concluded the Company no longer exerted significant influence over resTORbio as PureTech lost the power to participate in the financial and operating policy decisions of resTORbio. As a result, PureTech's investment no longer met the scope of equity method accounting resulting in the investment being accounted for as an investment held at fair value. For the period of 1 January 2018 through 5 November 2018 PureTech's investment in resTORbio was subject to equity method accounting. In accordance with IAS 28, PureTech's investment was adjusted by the share of profits and losses generated by resTORbio, that resulted a net loss of associates accounted for using the equity method of $11.5 million that was recorded to the Consolidated Statement of Income/(Loss) on the line item Share of net loss of associates accounted for using the equity method during the year ended 31 December 2018. Upon loss of significant influence PureTech's investment was reclassified as an investment held at fair value, resulting in PureTech recognising a gain on loss of significant influence of $10.3 million that was recorded to the Consolidated Statement of Income/(Loss) on the line item Gain on loss of significant influence during the year ended 31 December 2018. Additionally, PureTech recorded a $33.0 million loss for the adjustment to fair value in connection with its investment in resTORbio to the Consolidated Statement of Income/(Loss) on the line item Loss on financial asset during the year ended 31 December 2018.

1. The calculation of the share of net loss is shown in the table below.

Akili

As of 31 December 2017, PureTech Health maintained control of Akili and the subsidiary's financial results were fully consolidated in the Group's annual report.

On 8 May 2018, Akili completed the first close of a Series C Preferred Stock financing in which PureTech Health did not participate in this investment round. As a result of the issuance of the preferred shares to third-party investors, following the first close of the Series C financing, PureTech's ownership percentage and corresponding voting rights related to Akili dropped from 61.8 per cent to 41.9 per cent, triggering a loss of control over the entity. As of May 2018, Akili was deconsolidated from the Group's financial statements, resulting in only the profits and losses generated by Akili through May 2018 being included in the Group's Consolidated Statements Comprehensive Income/(Loss). As a result of the deconsolidation, PureTech recognized a $41.7 million gain on the deconsolidation during the year ended 31 December 2018, which was recorded to the Consolidated Statement of Comprehensive Income/(Loss) on the line item the Gain on the deconsolidation of subsidiary.

PureTech Health removed all Akili's outstanding balances as of the date of deconsolidation, including all assets and liabilities as well as historical equity, as seen in the Consolidated Statement of Changes in Equity. Upon the date of deconsolidation, PureTech Health held preferred shares in Akili and no ordinary shares. As PureTech Health does not hold ordinary shares in Akili, the voting percentage attributable to common stock is nil. Therefore, PureTech Health had no basis to account for its investment in Akili under IAS 28, Investment in Associates and Joint Ventures. The preferred shares held by PureTech Health fall under the guidance of IFRS 9 and will be treated as a financial asset held at fair value and all movements to the value of PureTech's share in the preferred stock will be recorded through the Consolidated Statements of Comprehensive Income/ (Loss), in accordance with IFRS 9. During the year ended 31 December 2018, the Company recognised a gain of $12.7 million that was recorded on the line item Loss on investments held at fair value within the Consolidated Statements of Comprehensive Income/(Loss).

6. Operating Expenses

The average number of persons employed by the Group during the year, analysed by category, was as follows:

The aggregate payroll costs of these persons were as follows:

Operating expenses were as follows:

Total operating expenses were as follows:

Auditors remuneration:

See note 7 for further disclosures related to share-based payments and note 23 for management's remuneration disclosures.

7. Share-based Payments

Share-based payments includes stock options, restricted stock units ("RSUs") and performance-based restricted share unit awards in which the expense is recognised based on the grant date fair value of these awards.

Share-based Payment Expense

The Group share-based payment expense for the years ended 31 December 2018 and 2017, were comprised of charges related to the PureTech Health plc incentive stock and stock option issuances and subsidiary stock plans, as disclosed in the annual report and accounts.

The following table provides the classification of the Group's consolidated share-based payment expense as reflected in the Consolidated Statement of Income/(Loss):

There was no income tax benefit recognised for share-based payment arrangements during the periods presented due to existence of operating losses for all issuing entities.

The Performance Share Plan

In June 2015, the Group adopted the Performance Share Plan ("PSP"). Under the PSP, awards of ordinary shares may be made to the Directors, senior managers and employees of, and other individuals providing services to the Company and its subsidiaries up to a maximum authorised amount of 22,724,800 ordinary shares. The shares have various vesting terms over a period of service between two and four years, provided the recipient remains continuously engaged as a service provider.

The share-based awards granted under The Performance Share Plan are equity settled and expire 10 years from the grant date. As of the years ended 31 December 2018 and 2017, the Company had issued share-based awards to purchase an aggregate of 5,657,602 and 1,486,576 shares, respectively, under this plan.

RSUs

During the twelve months ended 31 December 2018, the Company issued 2,860,782 performance based RSUs under the PSP plan.

Each RSU entitles the holder to one ordinary share on vesting and the RSU awards are based on a cliff vesting schedule over a three-year requisite service period in which the Company recognises compensation expense on a graded basis for the RSUs. Following vesting, each recipient will be required to make a payment of one pence per ordinary share on settlement of the RSUs. Vesting of the RSUs is subject to the satisfaction of performance conditions.

The Company recognises the estimated fair value of performance-based awards as share-based compensation expense over the performance period based upon its determination of whether it is probable that the performance targets will be achieved. The Company assesses the probability of achieving the performance targets at each reporting period. Cumulative adjustments, if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions.

The fair value of the performance-based awards is based on the Monte Carlo simulation analysis utilising a Geometric Brownian Motion process with 250,000 simulations to value those shares. The model considers share price volatilities, risk-free rate and other covariance of comparable public companies and other market data to predict distribution of relative share performance.

The performance conditions attached to the RSUs are based on the achievement of total shareholder return ("TSR"), with 50 per cent of the shares under award vesting based on the achievement of absolute TSR targets, 12.5 per cent of the shares under the award vesting based on TSR as compared to the FTSE SmallCap Index, 12.5 per cent of the shares under the award vesting based on TSR as compared to the MSCI Europe Health Care Index, and 25 per cent of the shares under the award vesting based on the achievement of strategic targets.

The Company incurred share-based payment expense for the performance based RSUs of $2.3 million and $1.5 million for the twelve months ended 31 December 2018 and 2017, respectively.

Stock Options

During the twelve months ended 31 December 2018, the Company granted 2,796,820 stock option awards under the PSP.

The fair value of the stock options awarded by the Company was estimated at the grant date using the Black-Scholes option valuation model, considering the terms and conditions upon which options were granted, with the following weighted- average assumptions:

The Company incurred share-based payment expense for the stock options of $1.4 million and $0.6 million for the twelve months ended 31 December 2018 and 2017, respectively.

PureTech LLC Incentive Stock Issuance

In May 2015 and August 2014, PureTech Health LLC Directors approved the issuance of shares to management, the directors and advisors of PureTech Health LLC, subject to vesting restrictions. The share-based awards granted under the 2016 PureTech LLC Incentive Stock Issuance Plan are equity settled and expire 10 years from the grant date. No additional shares will be granted under this compensation arrangement. The fair value of the shares awarded was estimated as of the date of grant.

The Company incurred an expense of $0.2 million and $1.7 million in share-based payment expense for the twelve months ended 31 December 2018 and 2017, respectively, related to PureTech Health LLC incentive compensation.

As of 31 December 2018, all shares related to the pre-IPO incentive compensation plan had fully vested.

Subsidiary Plans

Certain subsidiaries of the Group have adopted stock option plans. A summary of stock option activity by number of shares in these subsidiaries is presented in the following table: