Seres Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated financial statements; amounts below are in millions of dollars unless stated otherwise. Seres is a commercial-stage microbiome therapeutics company. VOWST, its FDA-approved product to prevent recurrent C. difficile infection, is commercialized with Nestlé; SER-155 is in Phase 1b development.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $0 | $(0.5), including a revenue reversal |
| Research and development expense | $21.7 | $44.0; down $22.3 |
| General and administrative expense | $15.5 | $22.5; down $7.0 |
| VOWST collaboration profit/loss sharing expense | $2.4 net expense | $3.6 expense |
| Operating loss | $39.6 | $70.6 |
| Net loss | $40.1 | $71.2 |
| Net loss per share | $0.27 | $0.57 |
| Cash used in operating activities | $35.2 | $76.6 |
Q1 2024 VOWST collaboration results included a $7.1 million share of net loss, offset by $4.7 million profit on inventory transfers to Nestlé. Nestlé reported 642 units sold and $10.1 million in net sales for the quarter. Seres reported no gross margin; product sales are recorded by Nestlé, while Seres records its share of collaboration profit or loss.
At March 31, cash and cash equivalents were $111.2 million, down from $128.0 million at year-end; cash, cash equivalents and restricted cash totaled $119.6 million. Current assets were $165.2 million and current liabilities $98.5 million. Total assets were $341.3 million, total liabilities $401.0 million, and stockholders’ deficit $59.7 million. The balance sheet included $41.0 million of inventory and $95.4 million of deferred revenue related to Nestlé.
Oaktree term-loan carrying value was $102.0 million, representing $110.0 million principal, classified as long-term. The loan bears variable-rate interest; its effective rate was 15.9%. Lease liabilities totaled $112.2 million. The filing reports compliance with Oaktree financial covenants as of March 31.
Material changes versus the prior period
- Net loss narrowed by $31.0 million year over year, primarily alongside lower operating expenses following the 2023 restructuring and reduced VOWST-related R&D spending. The improvement does not reflect revenue growth: reported revenue was zero.
- Operating cash use decreased by $41.3 million year over year. Q1 2024 cash movement also reflected a $12.3 million increase in inventory.
- Seres raised $18.4 million net through its at-the-market offering, issuing 15.4 million shares at an average price of approximately $1.23. Weighted-average shares rose to 146.1 million from 125.9 million.
- Inventory increased from $29.6 million to $42.0 million, largely reflecting capitalized VOWST manufacturing costs after FDA approval.
Outlook, risks and unusual items
- Going concern and financing: Management expects available cash to support operations into Q4 2024 and says additional funding will be required. It concluded substantial doubt exists about the company’s ability to continue as a going concern for 12 months after issuance of the financial statements. Future financing or strategic transactions are not assured.
- VOWST outlook: Seres is focused on commercialization with Nestlé. As of March 31, coverage policies were reported for approximately 83% of commercial and 55% of Medicare Part D covered lives. About 56% of Q1 new patient starts were reimbursed through patients’ drug benefits; approximately 44% used free-drug programs. The filing describes continued work on provider engagement, patient conversion and payer coverage, but provides no quantified sales guidance.
- Clinical outlook: SER-155 cohort 2 enrollment, comprising 45 participants, was completed in April 2024. A randomized, placebo-controlled data readout was anticipated late in Q3 2024. Cohort 1 findings were preliminary, including engraftment in evaluable subjects and no serious adverse events attributed to treatment.
- Restructuring: The plan reduced the workforce by approximately 41% (about 160 positions) and curtailed non-partnered R&D except completion of SER-155 Phase 1b. Management estimated 2024 cash savings of $75–$85 million; realization is uncertain.
- Oaktree/Bacthera dispute: On May 1, 2024, after quarter-end, the Oaktree agent issued a notice asserting possible defaults related to a disputed Bacthera milestone payment and notice obligation. Seres disputes that a default occurred and says it is seeking resolution. Approximately $28 million would be payable upon substantial completion of Bacthera’s production suite; Seres says required completion elements remain outstanding. Remaining Bacthera commitments were stated as $284 million, including construction and long-term operating fees.
- Manufacturing and liquidity risks: Bacthera suite construction and acceptance milestones, third-party supply dependence, and the ability to finance operating needs are material uncertainties. The Oaktree loan is secured by substantially all loan-party assets, including intellectual property, and includes cash-control and other covenants.
- Listing risk: Nasdaq notified Seres on April 19, 2024 that its share price had been below the $1 minimum bid requirement for 30 consecutive business days. The initial compliance deadline was October 16, 2024; a reverse split or transfer to Nasdaq Capital Market were possible actions, not assured outcomes.
- Unusual charge: Seres recorded a $3.3 million long-lived-asset impairment related to an idled Cambridge donor-collection facility. It also subleased a portion of Cambridge office and laboratory space, with stated lease payments to Seres totaling $10.4 million over the sublease term.
Key facts investors should verify
- Cash runway assumptions, financing availability, and the timing and terms of any capital raise or strategic transaction.
- VOWST unit demand, net sales, patient-start conversion, gross-to-net deductions, payer coverage, and progress toward collaboration profitability.
- Resolution of the Oaktree notice and the parties’ positions on whether the Bacthera milestone is due or constitutes a loan-agreement default.
- Bacthera suite completion, acceptance, manufacturing readiness, and the timing and funding of the related milestone and ongoing commitments.
- SER-155 cohort 2 readout timing and results, including safety and clinical outcomes; cohort 1 biomarker findings are not confirmatory evidence.
- Execution of planned restructuring savings and compliance with Nasdaq listing requirements.