Seer, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. Seer is an early-stage life sciences technology company developing and commercializing the Proteograph Product Suite, an integrated proteomics system. This unaudited filing covers the quarter and six months ended June 30, 2021. The company began shipping the product suite in Q2 and entered its Limited Release commercialization phase.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $1.334 million | $71,000 | $1.396 million | $248,000 |
| Gross profit | $748,000 | $71,000 | $810,000 | $248,000 |
| Gross margin | 56% | 100% | 58% | 100% |
| Operating expenses | $17.419 million | $6.438 million | $33.978 million | $12.440 million |
| Operating loss | $16.671 million | $6.367 million | $33.168 million | $12.192 million |
| Net loss | $16.616 million | $6.117 million | $33.045 million | $11.610 million |
| Net loss per share, basic and diluted | $0.27 | $0.63 | $0.55 | $1.25 |
| Cash used in operating activities | Not separately stated for Q2 | $25.222 million | $9.853 million |
Product sales began in Q2: product revenue was $837,000, related-party revenue was $380,000, and grant revenue was $117,000. The filing says product revenue primarily included SP100 instruments, assay kits, platform evaluations, and services. Six-month revenue growth reflected initial product sales; grant revenue declined to $179,000 from $248,000.
At June 30, 2021, cash and cash equivalents were $370.7 million and investments were $147.1 million, for combined cash, cash equivalents, and investments of $517.8 million. Current assets were $525.3 million and current liabilities $8.4 million. Total liabilities were $11.0 million; the filing reports no borrowings or debt balance. Accumulated deficit was $88.4 million. Six-month cash from financing was $114.8 million, including $103.0 million net proceeds from a February follow-on offering and $11.4 million returned short-swing profits. Cash used in investing was $52.3 million, mainly reflecting net purchases of investments and property and equipment.
Changes and notable items
- Q2 revenue rose from $71,000 to $1.334 million as product shipments commenced, but losses widened: quarterly net loss increased by $10.5 million year over year.
- For the first six months, operating expenses increased 173% year over year. R&D rose 50% to $13.2 million; selling, general and administrative expense rose 465% to $20.8 million.
- Stock-based compensation was $12.5 million for the first six months, versus $1.4 million a year earlier, and was a major contributor to the expense increase.
- On February 1, 2021, Seer sold 1.65 million Class A shares at $67 per share, receiving $103.0 million net. Class B shares carry ten votes per share; the filing reports Class B holders retained 45.7% of voting power following the offering.
- The company expanded its Redwood City office and laboratory footprint, including a further 25,000-square-foot expansion in April 2021. Facility operating lease commitments disclosed at June 30 totaled $41.2 million; purchase commitments to manufacturing suppliers were $5.1 million.
Outlook, risks, and contingencies
Management expects significant expenses and operating losses to continue and does not expect positive operating cash flow for the foreseeable future. It expects the Limited Release phase to continue through 2021, with Broad Release planned for early 2022. Management stated that available cash and cash equivalents were sufficient for at least 12 months from issuance of the financial statements. No quantified revenue or earnings guidance was provided.
- Commercialization and demand remain unproven; adoption, pricing, customer research budgets, and successful transition to Broad Release are uncertain.
- COVID-19 has affected laboratory access, hiring, facility expansion, and supply availability. Seer reported longer lead times for Hamilton-made SP100 instruments and other supply delays.
- Seer depends on Hamilton as its single SP100 contract manufacturer and faces manufacturing scale-up, product quality, and consumable shelf-life risks.
- Disclosure controls were assessed as ineffective at June 30 because of material weaknesses in accounting staffing and segregation of duties, account reconciliations and review, and U.S. GAAP technical expertise. Remediation efforts were underway; effectiveness was not yet established.
- Seer held approximately 19% of PrognomIQ after distributing most of its shares to Seer stockholders. PrognomIQ is a related party and generated $380,000 of Q2 revenue; Seer also recorded $439,000 of related-party receivables at quarter-end.
- The company reported no material legal proceedings and no material indemnification claims considered probable or reasonably possible. Its principal commitments include long-term facility leases and supplier purchase commitments.
Investor facts to verify
- Whether Limited Release activity converts into sustained instrument placements, recurring consumables sales, and meaningful customer adoption.
- Whether the planned early-2022 Broad Release remains achievable, including whether Hamilton supply lead times and manufacturing capacity support the launch.
- Cash burn and runway as operating expenses grow; management’s runway statement is based on June 30 resources and anticipated requirements.
- Progress in remediating the disclosed material weaknesses and the implications of the company’s anticipated transition from emerging growth company status.
- The scale and terms of related-party business with PrognomIQ, including future sales, receivables, and any commercial arrangements.