Seres Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited results; balance-sheet comparisons are with December 31, 2021. Seres is a clinical-stage microbiome therapeutics company and reported no product-sale revenue.
Key financial metrics
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2022 | Q1 2021 or prior balance date |
|---|---|---|
| Revenue | $1.5 | $5.7 |
| Research and development expense | $39.6 | $29.3 |
| General and administrative expense | $18.6 | $11.7 |
| Operating loss | $(55.8) | $(35.3) |
| Net loss | $(56.6) | $(35.5) |
| Basic and diluted net loss per share | $(0.61) | $(0.39) |
| Cash used in operating activities | $(66.4) | $(29.5) |
At March 31, cash and cash equivalents were $153.2 million and short-term investments were $94.8 million, totaling $248.0 million in cash, cash equivalents and investments. Current assets were $263.3 million; current liabilities were $82.4 million. Total assets were $319.9 million, total liabilities $238.9 million, and stockholders’ equity $81.0 million. The company reported an accumulated deficit of $671.0 million.
Debt had a $50.4 million carrying value at quarter-end; outstanding principal was $50.0 million. Q1 financing activities included $27.6 million of net proceeds from the amended Hercules facility. The facility’s stated interest rate is the greater of prime plus 6.40% or 9.65%. No product gross margin was reported; given the absence of product sales, conventional product-margin comparisons are not meaningful.
Changes versus the prior comparable period
- Revenue fell $4.2 million, to $1.5 million. Related-party collaboration revenue decreased to $1.5 million from $4.6 million, partly because Seres revised estimated future costs for services under its collaboration agreement, including updated labor-market and inflation assumptions. Q1 2021 also included $1.1 million of grant revenue; Seres said it would receive no further CARB-X funding after graduating from the program in May 2021.
- Operating expenses increased $16.2 million. R&D rose $10.3 million, primarily from higher personnel costs and increased SER-109 spending; G&A rose $6.8 million, including personnel and professional fees. SER-287 spending declined $2.9 million.
- Net loss widened by $21.2 million. Operating cash use increased by $36.9 million, with the filing citing the higher net loss and changes in operating assets and liabilities.
- Cash, cash equivalents and short-term investments declined from $290.7 million at December 31, 2021 to $248.0 million at March 31, 2022. Quarter-end cash, cash equivalents and restricted cash were $161.4 million, down $26.6 million during the quarter.
Outlook, management commentary and risks
- Runway and funding: Management said available cash, cash equivalents and investments were expected to fund operating expenses, capital expenditures and debt service for at least 12 months from issuance of the financial statements. The estimate is assumption-dependent; the company expects continuing losses and says it will need additional financing to support operations beyond that period. Its $150 million at-the-market equity program had not been used as of March 31, 2022.
- SER-109: Seres’ highest priority was preparing a rolling BLA submission to the FDA, with completion, including open-label study data, planned for mid-2022. SER-109 had Breakthrough Therapy designation, and management expected priority review and a potential launch in the first half of 2023. These were forward-looking plans, not approval or launch guarantees. Reported Phase 3 results included an 18.0% recurrence rate at 12 weeks versus 46.2% for placebo, and 21.3% versus 47.3% through 24 weeks.
- Other programs: SER-155 was in a Phase 1b study for patients receiving allogeneic stem-cell transplants. In April 2022, Seres announced it would not proceed with the planned second cohort of the SER-301 Phase 1b study; no first-cohort subjects achieved clinical remission after 10 weeks, although some individual measures improved. The company said it continued analyzing ulcerative-colitis program data.
- Debt and manufacturing commitments: The amended Hercules facility makes up to $100 million available in tranches. A further $25 million tranche is conditional, including on FDA approval of a SER-109 BLA by December 15, 2023; another tranche of up to $25 million is subject to conditions including lender investment-committee approval. The facility is secured by substantially all assets other than intellectual property and includes a conditional liquidity covenant beginning June 15, 2023. Seres also disclosed a Bacthera manufacturing agreement requiring at least CHF 240 million (approximately $262 million) over its initial term, including construction and operating fees.
- Principal risks: Clinical and regulatory uncertainty; the unproven nature of microbiome therapeutics; reliance on collaborators and third-party manufacturers; manufacturing scale-up, donor-material supply and trial execution; competition and commercialization or reimbursement challenges; COVID-19-related disruption; and the need to raise additional capital. Potential equity financing may dilute shareholders; debt may add restrictions and fixed obligations.
- Contingencies and controls: The filing reported no accrued legal-contingency liabilities. It described a pending appeal in a European Patent Office opposition concerning a University of Tokyo patent. Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2022, and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether and when the SER-109 BLA was submitted, accepted and acted upon by the FDA, and whether the stated review and launch timelines changed.
- Whether the reported SER-109 efficacy and safety data support approval and commercial uptake, and what labeling or additional regulatory requirements may apply.
- Actual cash burn and financing needs against management’s stated minimum 12-month runway, including the availability and conditions of remaining Hercules tranches.
- The total cash and operating commitments under the Bacthera agreement, construction progress, and any manufacturing or supply delays.
- How the SER-301 decision and further ulcerative-colitis analyses affect pipeline priorities, spending and development plans.