Seres Therapeutics, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 5, 2024. This is an annual report, not a standalone fourth-quarter earnings report. Seres is a commercial-stage microbiome therapeutics company. Its lead product, VOWST, was FDA-approved in April 2023 to prevent recurrent C. difficile infection after antibacterial treatment and launched in the U.S. in June 2023 with Nestlé Health Science.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $126.3 million | $7.1 million |
| Research and development expense | $145.9 million | $172.9 million |
| General and administrative expense | $87.7 million | $79.7 million |
| Loss from operations | $108.0 million | $246.5 million |
| Net loss | $113.7 million | $250.2 million |
| Net loss per share | $0.89 | $2.31 |
| Cash used in operating activities | $117.4 million | $228.8 million |
- Revenue was primarily collaboration revenue, including a $125 million Nestlé milestone payment following VOWST’s FDA approval. The company reported no product-sale revenue; VOWST sales are recorded by Nestlé, with Seres sharing commercial profits and losses.
- Nestlé reported 1,284 VOWST units sold and $19.6 million in net sales in 2023. Seres recorded an $18.9 million share of the launch-period collaboration loss, offset in part by $23.3 million of profit on inventory transferred to Nestlé and other collaboration items.
- At December 31, 2023, cash and cash equivalents were $128.0 million; current assets were $175.4 million and current liabilities $98.7 million. Operating cash use declined year over year. No standalone product gross margin is reported.
- Oaktree term-loan principal outstanding was $110 million, with a $101.5 million carrying value. The loan bears interest at 3-month SOFR, subject to a 2.5% floor and 5.0% cap, plus 7.875%; the effective rate was 15.9% at year-end. The loan is secured by substantially all company assets, including intellectual property, and includes a minimum controlled-cash covenant. Seres reported covenant compliance at year-end.
- Total liabilities were $403.5 million, exceeding total assets of $358.6 million; stockholders’ deficit was $44.9 million. Undiscounted lease commitments were $177.4 million.
Changes, outlook, and material items
- Compared with 2022, revenue rose sharply on the VOWST approval milestone, while operating expenses declined 7.6%, primarily due to lower R&D spending. Net loss narrowed by $136.4 million. G&A expense increased 10.1%.
- In November 2023, Seres announced a restructuring that eliminated approximately 160 positions, or 41% of its workforce, curtailed non-partnered R&D other than completion of SER-155’s Phase 1b study, and reduced G&A costs. The plan was substantially implemented by year-end. Seres recorded $5.6 million of restructuring charges, mostly cash costs, and forecast annual cash savings of $75–$85 million in 2024. Savings are estimates and may not be achieved.
- SER-155’s open-label Phase 1b cohort 1 showed bacterial engraftment and a reduction in a pathogen-domination biomarker versus a reference cohort; no serious adverse events were attributed to treatment. The randomized, placebo-controlled cohort 2 was enrolling, with results anticipated in Q3 2024. The FDA granted SER-155 Fast Track designation in December 2023.
- Seres reported VOWST coverage policies across plans representing 80% of commercial and 54% of Medicare Part D covered lives. About 56% of fourth-quarter new patient starts were reimbursed through patients’ drug benefits; approximately 46% of 2023 starts used free-drug programs, mostly for Medicare patients. Management expects free-drug use to decline after Medicare Part D benefit changes take effect in 2025.
- Seres expects to need additional funding before the end of 2024. Management and the auditor disclosed substantial doubt about the company’s ability to continue as a going concern for at least 12 months after issuance of the financial statements. Management cited financing plans, including ATM share sales and a potential Oaktree tranche, but their availability is not assured.
- The Oaktree facility provides additional borrowing only if VOWST sales and growth conditions are met. Seres also disclosed that $30 million owed to Bacthera after substantial completion of its manufacturing suite remained unpaid, with additional construction milestones expected within 12 months; the company was negotiating to realign payment timing. Longer-term Bacthera commitments are substantial.
- After year-end, Seres sold 15.4 million shares through its ATM for approximately $18.5 million net proceeds through February 29, 2024. A proposed increase in authorized common shares from 240 million to 360 million required stockholder approval. The company also disclosed the CFO’s planned retirement and transition arrangements in March 2024.
Key investor verification points
- Whether available cash, subsequent ATM proceeds, VOWST economics, and any qualifying Oaktree draw are sufficient to fund operations through the stated funding need—and whether further financing will be required.
- VOWST sales growth, prescription-to-start conversion, payer reimbursement, free-drug utilization, and the timing and amount of Seres’s collaboration profit or loss.
- SER-155 cohort 2 results and whether the early biomarker findings translate into clinically meaningful outcomes.
- Whether the projected 2024 cost savings are realized without impairing VOWST commercialization or SER-155 execution.
- Bacthera facility readiness, regulatory qualification, outstanding milestone payments, and any revised payment schedule or manufacturing commitments.
- Potential dilution from additional ATM sales, the proposed authorized-share increase, equity awards, or warrants.