Pharma and biotech analysts based here in London. It's my pleasure to be joined by the PureTech team here. So we have Bharatt Chowrira, the CEO, and Eric Elenko, the president. Bharatt's going to kick off with a short presentation, and then we'll move on to questions. If anyone does have any questions in the audience, please just raise your hand, and we can get the microphone to you. But with that, over to you.
Great. Thank you, Lucy, and thank you to everyone who's here in the room here and those who are following on the webcast. So thank you to Jefferies for inviting us to present here today. So I'm joined here on this fireside chat with my colleague, Eric Elenko. And together, we would like to share with you the story of PureTech. I know it's a fireside chat. I wish we had the fireplace here, especially given the cold weather outside. But just imagine there's a fireplace here. So we are a, for those of you who are not familiar with PureTech, we are a Boston-based clinical stage biotherapeutics company. We've had a tremendously productive R&D model, and we'll tell you more about it, that has enabled us to really bring meaningful, breathe new life into molecules and drugs that have a significant impact on patients going forward.
We'll be able to tell you more about our story. Before I jump in, I do want to remind people who are following this about some forward-looking statements that we may be making during this presentation. And we encourage you to look at our regulatory filings for the up-to-date information. So with that, we are one of the more really exciting biopharma biotech companies out there. Given the last couple of years, we've had a tremendous, we're on a roll in terms of the type of milestones and catalysts that we've been able to achieve. We've had a tremendous amount of success. One of our biggest success stories has been Karuna Therapeutics, which was recently acquired by Bristol Myers Squibb for $14 billion.
The product that recently got approved as part of that Karuna is Cobenfy, the first new mechanism for treating schizophrenia in adults in over 50 years. That was invented at PureTech. My colleague here, Eric, is the first lead inventor on that, and we'll tell you more about it. That's an example of the success that we've had. We recently launched another neuropsychiatric company called Seaport Therapeutics that's pursuing programs in depression and anxiety. They were able to raise a combined $325 million in the past six months to advance these programs. We have a wholly owned program, LYT-100, that's currently in phase 2b clinical trials that's going to read out before the end of this year.
We have also a strategic royalty agreement with Royalty Pharma that we were able to use that to monetize our royalty stake in Cobenfy and Vedanta, our other founded entity that they are in phase 3 clinical trial right now for C. difficile infection. They also have a phase 2 program. So it's been a really tremendously successful R&D model. And underpinning this success is our hub-and-spoke model, which we have pioneered over the years. And essentially, this hub-and-spoke model has been very productive in generating really novel new medicines that have the potential to make significant impact on the patients.
And what the elements of the hub-and-spoke model is that PureTech is the hub that contains the expertise, the talent, and the people behind and the track record that we've been able to achieve over the years that comes up with the new product concepts a lot of times from a blank sheet of paper and trying to address big problems with the potentially straightforward, simple solutions. And each of the programs that we launch within PureTech at the hub are called spokes within our hub and are called founded entities. And we actually advance them to a certain stage of validation before we decide to house them into these founded entities. And these founded entities then can attract a significant amount of outside capital. And then over time, they become more independent, and our equity stake goes down over time.
And a number of these founded entities, we are also inventors on these products. And so we are eligible for milestones and royalties in addition to our equity stake. So this has been a very productive and highly effective model. And to give you an example of the success that we've had, around 80% of our clinical trials, whether run by PureTech or our founded entities over the last 15 years, have been successful, which is unprecedented when you think about the biotech biopharma industry. And this is highlighted by the recent approval of Cobenfy, which we think is going to help millions of people. And what is the secret behind this high success rate? So there are three key elements when you think about it. We start with a problem that has high significant unmet need.
With that problem, then we try to find a solution that would actually have a significant impact on the patients. That solution can be in an unbiased manner from a small molecule or a conventional biologic, such as antibodies or proteins. Then we do the de-risking experiments in the early stage for a small amount of investment internally at the hub, at the PureTech. Those that survive that early de-risking then become programs in our pipeline. Then we have the optionality to house them into our spokes, our founded entities. This kind of hub-and-spoke model has really resulted in this high clinical success that we have had. Then this early de-risking gives us additional confidence to advance these programs.
Those that don't survive the early de-risking, then we can actually move the resources away from those programs and into the programs that are showing more promise. This diversified portfolio of multiple programs across our pipeline also is a risk mitigation in terms of conventional biotech that have a binary bet, usually on a one product or one platform. We have multiple, to use a soccer analogy, multiple shots on goal. Those that are successful will continue to get investments either from PureTech or from outside investors. This R&D model has really proven quite effective, and we've had a lot of success. As I mentioned, Cobenfy is the latest approval that we've gotten. This was really invented at PureTech. We advanced the program initially through early validation in phase 1.
Once we demonstrated that this concept actually can work, then we were able to then attract significant investment from outside investors, and we took them public in 2019, and that led to further phase 2b studies as well as phase 3, and now it's approval, so that's an example of how we have started from a concept that started at PureTech, was able to now become a leading product, potentially helping millions of patients, and so this R&D model is repeatable and scalable, and so we've been able to do this over and over again, and another great example is the Seaport Therapeutics that we recently launched, and that was a set of programs that we were developing internally at PureTech for the last four plus years, and underlying that is a technology platform called the Glyph that was able to produce a number of product concepts.
And after we ran the initial phase 2a study that validated that whole platform, then we felt that it needed critical mass. And we put those programs together. And then we were able to attract a significant amount of investment, and we spun it out. And we still own about 36% ownership in that founded entity after the $325 million Series A/B financing. And in addition to equity, we are eligible for milestones and royalties as the programs and products advance. Another great example of this hub-and-spoke model is our LYT-100 program, which is wholly owned within PureTech, is currently in phase 2b clinical trials for potential treatment of idiopathic pulmonary fibrosis, or IPF, a really devastating, fatal lung disorder. And we expect to have data from that phase 2b study before the end of this year. And that data is going to be quite consequential in this field.
This field has seen a significant number of trial failures, and we see this as potentially the opportunity to become the frontline therapy in treating IPF, and so we'll tell you more about it during this conversation, so we are well positioned to maximize patient benefit as well as shareholder value, and we have a proven track record of success. As I mentioned, 80% of our clinical trials have been successful. We are self-funded. Because of the success of our R&D model, we've been able to generate a lot of capital from monetizing our equity stake in these founded entities, as well as monetizing the milestones and royalties, and we're able to reinvest that at PureTech and into our new programs that we generate from our R&D engine, so we have a robust portfolio of programs that, again, we'll talk some more about it during this conversation. Strong balance sheet.
Last time we reported was end of June. We had $400 million at the PureTech level, and that does not include any additional capital inflows that we expect over the coming months and years. There are also recurring capital inflows from potential equity monetizations that are possible over the coming months and years, as well as equity stakes in our future founded entities that may create. So there is this self-funded, highly productive R&D engine that is going to be quite productive in going forward in the future as we continue to advance these programs. We have a number of catalysts, and so as part of this overall execution, we also have a steady stream of catalysts. And this, as I mentioned, at the outset, we have had last two years a significant number of high-value catalysts that have been achieved.
And we have, before the end of the year, two major catalysts coming up with LYT-100 phase 2b readout. We have an oncology program, LYT-200, that's currently in phase 1b clinical studies in AML as well as in head and neck cancer. And we'll have some additional data in December. With AML, we plan to present at the ASH. And so we'll have some more data that we can report. In addition, our founded entities are going to continue to generate value for us going forward as they read out the clinical trials, such as Vedanta with their phase 3 study and so on. So there is going to be a continuous flow of potentially positive news across the portfolio as well as our internal pipeline. So with that, I'm going to hand it back to you, Lucy, so that we can tell you more about some of these programs.
Great. Thanks for that, Bharatt. So just when it comes, you can talk very elegantly about the model of PureTech. I guess once you've got a concept or a product in your hub and you're moving it out to the spoke level, how do you decide whether you're going to develop that as an internal pipeline asset or as a founded entity? And also, is there a focus or a priority going forwards there?
Yeah. So over the years, we have learned from this R&D model. In the early days, when we did not have a strong balance sheet, the tendency was to, as soon as we launch a new product, we would then bring in outside investors into those programs. And the valuation obviously will be significantly lower at the early stages of these pipelines. And so over the years, as our balance sheet has become stronger, we are able to keep these programs within PureTech longer, add more value. And then we have the optionality to decide whether to bring in outside investors or keep going. So LYT-100 is an example where we have continued to invest in it because we think there is a tremendous amount of opportunity in addressing a pretty large patient population.
As a small company in a rare orphan indication, we should be able to advance this quite far. We'll have the data readout later this year. Then we can decide. We have optionality on how best to fund the next stage, which is the phase 3 study, which could be a fairly expensive study. We can decide how we want to fund that. We have optionality now that we have a strong balance sheet.
Very clear. And Karuna is obviously a great example of the strength of the PureTech model. So you've generated over a billion from the equity stake itself and then another $100 million from your deal upfront from Royalty Pharma. What's the structure in terms of your agreement with Royalty Pharma with regards to future royalties? And is there potential to do any similar transactions again in the future?
Yeah. So the Karuna, like I said, it's been a tremendously successful program for us. And so we put in about $18.5 million into the program and have been able to, so far, monetize over $1.1 billion, which we have reinvested in our R&D engine, as well as we have returned some capital to our shareholders, about $150 million in share buyback, as well as tender offer. And we still have about $400 million last reported on our balance sheet. And we continue to advance that. And then we sold our 3% royalty to Royalty Pharma. And we got $100 million upfront. And then we have up to another $400 million in milestones based on regulatory and commercial milestones. And we also structured it that in the event Cobenfy becomes this wildly successful product, that we still continue to have an upside.
So we said when the sales cross $2 billion in a given year, we retain 2% royalty and Royalty Pharma keeps 1%. So there is an ongoing revenue stream from that product as the product advances into commercial launch.
Great. And then let's talk about LYT-100 then. That's your internal asset. We're approaching some pretty critical phase 2b data by the end of this year. You mentioned in your presentation that IPF is a challenging indication. There's a reason there's not many options available at the moment. Perhaps you could outline where your confidence lies in the LYT-100 approach and kind of how you've gone about kind of addressing those issues of this disease that has halted development. And also, I guess, what we would be looking for in the phase 2b that would constitute success.
I'll invite my colleague Eric to comment on this.
Absolutely. So IPF really is this devastating disease, expected lifespan, unfortunately, of only two to five years. Really, the challenge has been the I part, the idiopathic part. If one doesn't know the underlying cause of a disease, then going and trialing a new mechanism is inherently challenging. If you look, there are two drugs that are currently approved, pirfenidone and nintedanib. And pirfenidone clearly slows down the rate of decline of pulmonary function. The challenge with the drug, as is the case with nintedanib, has really been around adverse events. If you look at pirfenidone, you have this series of gastrointestinal adverse events, such as nausea. nintedanib also has GI side effects, such as unexpected diarrhea. As a result of that, amazingly, even though this is a deadly disease, only one in four patients is on one of these two standard of care drugs.
In addition to that, what you see is over half of patients dosing down or discontinuing. As you can imagine, if someone's not actually taking a drug, then, of course, it's not going to have an effect. LYT-100 is a deuterium substituted or deuterated form of pirfenidone. Deuterium is a form of heavy hydrogen. Essentially, it forms a stronger bond. Think of it, the analogy would be almost like glue that's stickier. That's harder to break if you pry it apart. What we've done is, in a phase 1 study, we were able to demonstrate that a dose of LYT-100, 550 milligrams taken three times a day, gave the same exposure as the highest commercially used dose of pirfenidone, 801 milligrams taken three times a day, also known as TID.
But in a healthy older adult population in a crossover study of those two doses, we were actually able to see this clear reduction in GI adverse events with the LYT-100. So Lucy, as you indicated, we're running this phase 2b study with data expected to read out by the end of the year. And in that study, four arms, that 550 dose that I was mentioning equivalent to the highest commercially used dose of pirfenidone in terms of exposure. And we were actually in a separate phase 1 study able to dose up even higher. And that's why we have another arm of 825 milligrams of LYT-100. And then we have a fourth arm that's placebo. And so we really see two ways to demonstrate patient benefit, to your question. One is that 550 dose gives about the same efficacy as pirfenidone, but we demonstrate better tolerability.
The other is, of course, of the LYT-100 trends to having greater efficacy. The primary endpoint of the study itself will be combining those two LYT-100 arms, comparing it to placebo, and looking at a very standard measure of lung function in IPF called forced vital capacity. So when it breathes in and then breathes out as hard as possible, as quickly as possible into a spirometer. And so we look forward to seeing data later this year.
Yeah. So what's really remarkable about this program, this again follows up on our approach of looking at a problem, which is here, in this case, a rare fatal lung dysfunction where life expectancy is two to five years, and only one in four patients are actually taking the two approved drugs, and so there is a tremendous amount of need, and so what we have done is taken something that we know works in these patients. pirfenidone and Nintedanib are expected, they actually are shown to double the life expectancy in these patients if they stay on the drug on the approved dose, but most of them cannot, half of them dose reduced, so we took the advantage of a clinical benefit and then said, could we make it more tolerable so that the patients can stay on the drug longer so that they get a better disease management?
And so that's the potential impact that this has, assuming the data are positive. We'll be able to advance it quite rapidly into phase 3, where then we can look at having this. We think LYT-100 has the potential to become the frontline therapy and become the standard of care, on top of which all the other new mechanisms are going to be used. So it's going to go towards combination. And we think we'll be the preferred backbone of choice for all of those new mechanisms.
Great. That was very clear. You outlined, you mentioned in your presentation, you've got a very healthy cash position, particularly for a typical biotech, or at least compared to most of my company's undercoverage. You've previously launched or completed a $100 million capital return via a tender offer process. What is PureTech's long-term capital allocation strategy?
Yeah. So we looked at the recent $100 million tender offer. There were really three objectives that we wanted to accomplish with that. One is provide liquidity to our shareholders because we don't have a lot of liquidity and trading volume in the existing LLC. The second was, and we wanted to provide that liquidity at a premium. So we provided a 25% premium over the then market price. And then we also wanted to reduce the number of outstanding shares in our trading so we have fewer shares out there. And the third objective really was to try and return some of the capital that we got from the acquisition of Karuna by Bristol Myers Squibb. We got $293 million in cash. And so we wanted to return a meaningful amount back to the shareholders after looking at our capital allocation, which is there are multiple components to that.
We have a bucket of capital allocated for existing programs to complete their existing studies. We have a bucket of capital to support our existing founded entities to the extent we can be helpful. So Seaport Therapeutics, which we recently launched, so far we have invested $46 million in those financings. That's an example. And then we have set aside a small amount of money for future innovation. So we have a scale of up to two new programs per year. Some years, and we're very selective. Some years, it's no programs. Some years, one. So we have some capital allocated for that. And then we are one of those few biotech companies we have to pay taxes in the U.S. So in the past, we were able to offset those gains through net operating loss and other losses. So we have used up all of that.
So this year, we've not been able to offset a lot of that gain. So we are going to pay somewhere in the neighborhood of $40 million in taxes this year in the U.S. between federal and state tax. So that's sort of how you should think about the capital allocation. And then at any given time, we maintain about three years of operating cash. So the current cash balance, it gets us into 2027 at a minimum. And from future monetizations, we'll look at and evaluate how our capital allocation looks like and what are the studies that are underway, and then look at if there are additional opportunities to return cash.
Great. With that, we have run down the clock. I'd like to take this opportunity to thank Bharatt and Eric again for their time and to the audience for attending.
No, thank you for joining us. And we look forward to sharing the phase 2 data pretty soon. So thank you.