Seer, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Seer is an early-stage life sciences company commercializing its Proteograph Product Suite for proteomics research. All amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $4.0 million | $3.6 million | $8.1 million | $6.9 million |
| Gross profit / margin | $2.3 million / 56.9% | $1.6 million / 44.4% | $4.3 million / 54.0% | $2.9 million / 41.2% |
| Operating expenses | $30.2 million | $25.0 million | $59.7 million | $50.1 million |
| Loss from operations | $(27.9) million | $(23.4) million | $(55.4) million | $(47.2) million |
| Net loss | $(23.4) million | $(22.8) million | $(47.4) million | $(46.5) million |
| Net loss per share, diluted | $(0.37) | $(0.37) | $(0.74) | $(0.75) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(34.5) million | $(33.2) million |
Q2 revenue grew 11%; six-month revenue grew 16%. Product revenue fell 32% in Q2 and 12% for the six-month period, primarily reflecting fewer instrument sales. Consumable sales, services, and grant and other revenue increased. Gross margin improved as consumables, which carry lower costs than instruments, made up more of sales. Higher operating expenses—principally R&D and personnel-related costs—more than offset gross-profit growth, widening the operating loss. Higher investment yields increased interest income to $4.6 million in Q2 and $8.3 million for the six months; the net loss nevertheless increased year over year.
At June 30, Seer had $56.4 million in cash and cash equivalents, $263.8 million in short-term investments, and $75.8 million in long-term investments. Total cash, cash equivalents, and investments were approximately $396.0 million; cash and cash equivalents plus short-term investments were $320.2 million. Total liabilities were $43.1 million, including $29.3 million of operating lease liabilities; the filing reports no debt borrowing. Stockholders’ equity was $418.1 million and accumulated deficit was $266.9 million. Cash, cash equivalents, and restricted cash increased $3.2 million in the first half, largely reflecting investment maturities and purchases rather than operating cash generation.
Material changes, outlook, and risks
- R&D expense rose 32% to $28.6 million for the first half, and SG&A rose 9% to $31.1 million. Stock-based compensation was $18.5 million for the six months.
- Management expects significant expenses and operating losses to continue and does not expect positive operating cash flows for the foreseeable future. It believes available cash and investments can fund operations for at least 12 months from the filing date. No specific revenue or earnings guidance is provided.
- On August 8, 2023, after quarter-end, Seer announced a reduction in force of approximately 12% of its workforce and estimated about $0.6 million in related costs, primarily severance, to be recognized in Q3. Management also described broader efforts to reduce non-personnel expenses.
- Revenue concentration remains material: related-party revenue, primarily sales to PrognomiQ, was 34% of Q2 revenue and 33% for the first half. PrognomiQ accounted for approximately 15% of its outstanding shares held by Seer; Seer reported its investment carrying value as nil.
- Key risks include early-stage commercialization and uncertain customer adoption, continued losses and potential future financing needs, customer and related-party concentration, reliance on Hamilton as the sole instrument contract manufacturer, dependence on research funding and third-party suppliers, and competition, intellectual-property, regulatory, and cybersecurity risks.
- Seer reported no material legal proceedings, stated disclosure controls were effective, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth translates into broader instrument adoption, increased consumable utilization, and reduced dependence on grant and related-party revenue.
- The reconciliation and composition of reported liquidity: $320.2 million of cash and cash equivalents plus short-term investments versus approximately $396.0 million including long-term investments.
- Operating cash burn, investment maturity profile, and whether the stated liquidity runway remains adequate as losses continue.
- The impact of the 12% workforce reduction and other expense actions on spending, product development, customer support, and commercialization.
- Customer concentration and PrognomiQ’s ability and willingness to sustain purchases, as well as supplier capacity and instrument availability.