Seer, Inc. — Q3 2021 Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited consolidated results. Seer is an early-stage life sciences company developing and commercializing its Proteograph Product Suite for proteomic research.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $2.2 million | $0.1 million | $3.6 million | $0.3 million |
| Gross profit | $1.2 million | $0.1 million | $2.0 million | $0.3 million |
| Gross margin | 54.2% | 100.0% | 55.7% | 100.0% |
| Operating expenses | $19.6 million | $8.5 million | $53.6 million | $20.9 million |
| Operating loss | $18.4 million | $8.4 million | $51.6 million | $20.6 million |
| Net loss | $18.4 million | $8.2 million | $51.4 million | $19.8 million |
| Basic and diluted loss per share | $0.30 | $0.80 | $0.85 | $2.04 |
Revenue growth primarily reflects initial Proteograph product sales, which began shipping in Q2 2021. Q3 revenue comprised $0.9 million product, $0.5 million service, $0.8 million related-party revenue, and $0.01 million grant revenue. Nine-month revenue included $1.7 million product, $0.5 million service, $1.2 million related-party, and $0.2 million grant revenue. Related-party revenue was principally from PrognomIQ.
Research and development expense rose 63% to $7.7 million in Q3 and 55% to $20.9 million for nine months. Selling, general and administrative expense increased 218% to $11.9 million and 341% to $32.7 million, respectively. Increases included personnel and stock-based compensation, facilities and commercialization investment, and public-company costs.
Cash, liquidity and obligations
- At September 30, 2021, cash and cash equivalents were $331.4 million and investments were $175.2 million, totaling $506.6 million. Total assets were $527.8 million; total liabilities were $12.6 million.
- The filing reports no debt. Current liabilities were $9.6 million; stockholders’ equity was $515.2 million.
- For the first nine months, operating cash use was $34.0 million, versus $15.3 million in 2020. Investing cash use was $83.4 million, including net purchases of marketable securities and $5.6 million of capital expenditures. Financing provided $115.4 million, including $103.0 million net proceeds from the February follow-on offering and $11.4 million returned short-swing profits.
- Cash, cash equivalents and restricted cash decreased $2.0 million during the nine-month period. Management said available resources were sufficient for at least 12 months from the financial-statement issuance date, while anticipating continued losses and negative operating cash flows.
- Future minimum facility lease commitments were $42.9 million as of September 30, 2021; supplier purchase commitments were $7.2 million. These are commitments, not reported debt.
Changes, outlook and material risks
- Commercialization was in the Limited Release phase; management expected that phase to continue through 2021 and Broad Release to begin in early 2022. No quantitative revenue or profitability guidance was provided.
- Management expected significant and increasing expenses for product development, manufacturing capacity, hiring, sales and marketing, customer support, and public-company operations. Profitability and positive operating cash flow were not expected in the foreseeable future.
- COVID-19-related supplier constraints had lengthened Hamilton instrument lead times and delayed supplies of critical equipment and consumables. These constraints, customer laboratory access, and research budgets could impede the launch and adoption plan.
- Seer identified material weaknesses in financial reporting controls: insufficient accounting staff and segregation of duties, inadequate formal account-reconciliation and review controls, and insufficient U.S. GAAP technical expertise. Disclosure controls were deemed ineffective at a reasonable-assurance level. Remediation was underway but not complete.
- Other key risks include uncertain market acceptance and commercialization at scale; reliance on Hamilton as the sole instrument manufacturer and other limited suppliers; ongoing losses; and risks to intellectual property and product quality. No material legal proceedings were reported.
- CEO and board chair Omid Farokhzad disclosed that COO Omead Ostadan would take an approximately three-month leave beginning November 20, 2021.
- Class B shares carry ten votes per share, concentrating voting power. The company reported approximately 19% ownership of PrognomIQ and continues to provide it products, services, and transition support.
Investor facts to verify
- Progress toward Broad Release, customer adoption, instrument placements, consumable utilization, and the conversion of limited-release activity into recurring revenue.
- Revenue quality and customer concentration, particularly the related-party component and the extent of PrognomIQ purchases.
- Cash burn and runway against planned hiring, manufacturing expansion, capital spending, lease obligations, and supplier commitments.
- Hamilton instrument delivery times and the company’s ability to scale production and secure critical components.
- Remediation and independent testing of the disclosed material weaknesses, especially ahead of expanded auditor attestation requirements.