Seres Therapeutics, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 7, 2023. This is an annual report, not a standalone fourth-quarter earnings report. Seres is a clinical-stage microbiome therapeutics company and had no product sales.
Business context and pipeline
- SER-109: Lead oral candidate for preventing recurrent Clostridioides difficile infection (CDI). The FDA accepted its BLA for Priority Review in October 2022, with a PDUFA target action date of April 26, 2023. The company planned a U.S. launch with Nestlé Health Science soon after approval.
- SER-155: Phase 1b study in allogeneic stem-cell transplant patients; the safety board cleared advancement to cohort 2 in December 2022. Enrollment in cohort 2 began in February 2023, and initial cohort 1 data were planned for May 2023.
- Inflammatory bowel disease: SER-287’s Phase 2b study did not meet its primary endpoint. Seres discontinued the planned second cohort of the SER-301 Phase 1b study and continued research to identify potentially responsive patient groups.
Financial results and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $7.1 million | $144.9 million |
| Research and development expense | $172.9 million | $141.9 million |
| General and administrative expense | $79.7 million | $69.3 million |
| Operating loss | $246.5 million | $64.5 million |
| Net loss | $250.2 million | $65.6 million |
| Net loss per share, basic and diluted | $2.31 | $0.72 |
| Cash used in operating activities | $228.8 million | Cash provided: $6.7 million |
- Revenue fell sharply because 2021 included $131.3 million recognized when the U.S. and Canada SER-109 license transferred to Nestlé; 2022 revenue primarily reflected ongoing collaboration services. Seres has not generated product revenue.
- R&D expense rose $31.0 million, largely from personnel and SER-109 manufacturing and commercialization preparation. G&A increased $10.4 million, primarily from personnel and facility-related costs. The company reported no meaningful operating margins given its pre-commercial stage and losses.
- At year-end, cash, cash equivalents and short- and long-term investments totaled $181.3 million. Cash and cash equivalents were $163.0 million and short-term investments were $18.3 million. Total assets were $348.8 million, total liabilities $338.0 million, and stockholders’ equity $10.8 million.
- Outstanding Hercules debt principal was $50.0 million at December 31, 2022; the stated interest rate then was 13.40%. The facility is secured by substantially all assets other than intellectual property and includes a conditional liquidity covenant beginning June 15, 2023.
- Seres raised approximately $96.7 million net in a July 2022 registered offering and $4.4 million net through its at-the-market program. Year-end common shares outstanding were 125.2 million.
Changes, outlook and material risks
- The net loss widened by $184.6 million year over year, reflecting the prior-year license revenue comparison and higher operating expenses. Operating cash flow swung from a $6.7 million inflow in 2021 to a $228.8 million outflow in 2022.
- Management said available resources and forecast operations make additional funding likely to be needed in early 2024. The independent auditor and management identified substantial doubt about the company’s ability to continue as a going concern for 12 months after issuance of the financial statements.
- Management expected a $125 million Nestlé milestone and eligibility for a $25 million Hercules tranche if SER-109 received FDA approval. Both were contingent, not assured, and were excluded as probable mitigating resources in the going-concern assessment. If approved, Seres would also receive supply payments and share equally in SER-109 commercial profits and losses with Nestlé.
- Long-term commitments include $187.2 million of operating lease payments and at least CHF 256 million (approximately $277 million as disclosed) under the Bacthera manufacturing agreement. The Bacthera facility was under construction; construction and manufacturing performance, cost and timing remain risks.
- Key risks include FDA review or approval delays or denial, uncertain commercial uptake and reimbursement, dependence on Nestlé and third-party manufacturers, need for additional capital, clinical and manufacturing execution, and the unproven nature of microbiome therapeutics. SER-287’s Phase 2b failure and the decision not to advance SER-301’s second cohort underscore pipeline risk.
- The company reported effective disclosure controls and internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements and controls, while separately highlighting the going-concern uncertainty. A European Patent Office proceeding ended with revocation of a University of Tokyo patent in December 2022.
Most important facts for investors to verify
- Subsequent FDA action on SER-109, the timing and receipt of the contingent Nestlé and Hercules funding, and any post-approval obligations.
- Updated cash, operating burn, financing needs and liquidity-covenant status, especially against management’s early-2024 funding expectation.
- SER-109 launch readiness, payer coverage, actual supply capacity, commercial costs and any reported sales or profit-sharing.
- Bacthera construction milestones, the scope and timing of the substantial contractual commitment, and alternative manufacturing capacity.
- SER-155 cohort 1 results and cohort 2 progress, and whether Seres resumes or otherwise advances its UC programs.