Seer, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Seer is an early-stage life sciences company commercializing its Proteograph Product Suite for proteomics research. The unaudited financial statements are prepared under U.S. GAAP.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $3.1 million | $4.1 million | Down 24% |
| Gross profit / margin | $1.4 million / approximately 44% | $2.1 million / approximately 51% | Gross profit down 34% |
| Operating expenses | $26.6 million | $29.5 million | Down 10% |
| Operating loss | $25.2 million | $27.4 million | Loss narrowed 8% |
| Net loss | $20.7 million | $24.0 million | Loss narrowed 14% |
| Net loss per share, basic and diluted | $0.32 | $0.38 | Loss per share narrowed |
| Cash used in operating activities | $10.5 million | $19.3 million | Use decreased |
Product revenue fell 29% to $1.7 million; service revenue increased to $0.4 million from $0.1 million. Related-party revenue was $1.0 million, or 31% of total revenue, versus $1.3 million, or 32%, a year earlier. Grant and other revenue declined to $0.04 million from $0.34 million. Interest income rose to $4.6 million from $3.7 million, helping reduce the net loss despite lower revenue and gross profit.
Liquidity and obligations: At March 31, cash and cash equivalents were $54.4 million; short- and long-term investments totaled $304.8 million. Together, cash and investments were approximately $359.2 million. Current liabilities were $12.8 million and total liabilities $38.4 million; the filing reports no conventional borrowing debt. Operating lease liabilities totaled $27.7 million. Management expects available cash and investments to fund operations for at least 12 months from issuance of the statements, while anticipating continued losses and negative operating cash flow.
Operating cash use improved year over year. Investing activities provided $32.4 million, primarily reflecting investment maturities exceeding purchases; financing activities had no cash flow. Cash, cash equivalents and restricted cash ended the quarter at $54.9 million. Remaining performance obligations were $1.6 million, with 97% expected to be recognized within 12 months.
Material changes and developments
- Revenue decreased mainly because of lower product sales and reduced grant revenue; increased service revenue partly offset the decline.
- Research and development expense fell 15%, primarily due to lower headcount, laboratory expenses and stock-based compensation. Selling, general and administrative expense fell 5%, partly offset by higher professional-service costs.
- On May 8, 2024, Seer implemented a reduction in force affecting approximately 10% of its workforce and estimated about $0.3 million in costs, primarily severance, for Q2 2024.
- On May 3, 2024, the board authorized repurchases of up to $25 million of Class A common stock. The program is discretionary and does not require purchases.
Outlook, risks and unusual items
Management provided no specific revenue or earnings guidance in the supplied filing text. It expects continued significant expenses, operating losses and negative operating cash flow while investing in commercialization, manufacturing, research and development, and commercial infrastructure. Seer says it may seek additional capital if resources and anticipated cash flows do not meet requirements.
- Commercial adoption of the Proteograph remains early-stage; revenue is low and concentrated, including material dependence on related party PrognomiQ. Customer acceptance, sales cycles, research budgets and instrument and consumable demand are key uncertainties.
- Seer relies on Hamilton Company as the sole contract manufacturer of its SP100 instruments and identifies supplier, manufacturing, product-quality and scale-up risks.
- The filing identifies an inventorship lawsuit filed in December 2023 concerning patents exclusively licensed from Brigham and Women’s Hospital. The company also states it is not currently a party to material legal proceedings; investors should verify the lawsuit’s status and potential implications.
- The filing discusses the FDA’s April 2024 final rule on laboratory-developed tests as a potential source of changes to customer use and the company’s business model. Seer’s products are currently labeled for research use only.
- Available-for-sale investments had $0.6 million of gross unrealized losses at quarter-end; Seer said these were not credit-related and considered temporary. Approximately $7.9 million of investments had been in a continuous unrealized-loss position for at least 12 months.
- Disclosure controls were assessed as effective at March 31, 2024; the company reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Proteograph instrument placements and consumable utilization are growing enough to reverse the revenue decline and support improved margins.
- How much revenue and receivables depend on PrognomiQ and other concentrated customers, and whether those relationships are continuing on expected terms.
- Cash burn, investment maturities and management’s runway assessment, including the effect of the workforce reduction and any share repurchases.
- The status and potential exposure of the disclosed patent inventorship lawsuit, and the practical impact of the FDA’s LDT rule on customers and commercialization.