Seer, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; financial statements are unaudited. Seer is an early-stage life sciences company developing the Proteograph Product Suite for proteomics research. The product was not broadly commercialized, and the company reported no product-sales revenue.
Financial results and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $0.06 million | $0.18 million; down 65% |
| Research and development expense | $6.23 million | $4.22 million; up 47% |
| Selling, general and administrative expense | $10.33 million | $1.78 million; up 481% |
| Total operating expenses | $16.56 million | $6.00 million; up 176% |
| Operating loss | $16.50 million | $5.83 million |
| Net loss | $16.43 million | $5.49 million |
| Net loss per share, basic and diluted | $0.27 | $0.61 |
| Cash used in operating activities | $14.87 million | $5.07 million |
Revenue was entirely grant revenue: $62,000 versus $177,000, primarily reflecting lower NIH grant-funded activity. Seer reported no research revenue in either quarter and no product-sales revenue to date. Gross margin is not meaningfully presented because revenue was nominal and no product sales were reported.
At March 31, 2021, cash and cash equivalents were $445.8 million and investments were $85.4 million, or $531.1 million combined. Current assets were $536.2 million, current liabilities $7.4 million, total assets $545.6 million, and total liabilities $9.9 million. The filing reports no borrowings or interest expense. Accumulated deficit was $71.8 million.
Cash and restricted cash increased $112.2 million in the quarter. Financing provided $115.2 million, including $103.0 million net proceeds from a February follow-on offering and $11.4 million received as a return of short-swing profits from a beneficial owner. Investing activities provided $11.9 million, principally from net maturities of short-term securities, partly offset by property and equipment purchases. Stock-based compensation was $6.0 million.
Changes versus the prior comparable period
- Net loss increased from $5.5 million to $16.4 million, as operating expenses expanded substantially while revenue declined.
- R&D expense rose $2.0 million, mainly from Proteograph development and increased personnel, facilities, and equipment costs.
- SG&A rose $8.6 million, reflecting higher personnel and stock-based compensation, limited-release marketing, and public-company, legal, audit, insurance, and other costs.
- Loss per share was lower year over year despite the larger net loss; weighted-average shares increased to 59.9 million from 8.9 million, so the per-share comparison is affected by the company’s IPO and subsequent share issuances.
Outlook, risks, and unusual items
- Management expects significant expenses, operating losses, and negative operating cash flow for the foreseeable future. It stated that cash and cash equivalents at March 31, 2021 were sufficient for at least 12 months from issuance of the financial statements.
- Seer had completed its collaboration launch phase and recently entered limited release. It expected limited release to continue through 2021, with broad release targeted for early 2022; these are plans, not guarantees.
- Management expects R&D and SG&A to increase as it develops and commercializes Proteograph, expands manufacturing and commercial capabilities, hires personnel, and operates as a public company. No quantified revenue or earnings guidance was provided.
- COVID-19 had contributed to laboratory-access limitations, hiring constraints, supplier delays, and longer lead times for Hamilton-manufactured SP100 instruments; further disruption could delay development, installations, and commercialization.
- Seer relies on Hamilton as its sole instrument contract manufacturer and has limited experience scaling production. Other risks include market acceptance, competition, customer research budgets, supply availability, and intellectual-property protection.
- In April 2021, Seer agreed to expand its Redwood City facilities by approximately 25,000 square feet, at about $160,000 per month plus operating expenses, for an approximately 11-year term. This was subsequent to quarter-end and was not included in the reported lease commitments.
- As of March 31, 2021, purchase commitments to manufacturing suppliers were $4.6 million. The filing also reports existing facility lease commitments of $20.6 million, excluding the April expansion.
- Disclosure controls were not effective at a reasonable assurance level due to material weaknesses involving segregation of accounting duties, account reconciliations and review, and technical U.S. GAAP expertise. Management described remediation efforts, including additional hires, consulting support, and control documentation.
- Seer reported no material legal proceedings and no material indemnification claims considered probable or reasonably possible.
Important facts for investors to verify
- Progress against the limited-release and early-2022 broad-release timetable, including customer adoption, product performance, and any product-sales revenue.
- Cash burn and available liquidity as commercialization, hiring, manufacturing, facility expansion, and supplier commitments increase.
- Whether the material weaknesses in internal controls are remediated effectively and whether future filings report any additional control issues.
- Hamilton instrument supply and lead times, consumables manufacturing capacity, and the effects of COVID-related or other supply disruptions.
- The economics and execution of the April 2021 facility expansion, and the company’s ongoing lease and purchase commitments.
- The effects of equity issuance and the dual-class share structure: Class B shares carry ten votes each, and the filing stated Class B holders held 45.7% of voting power after the February offering.