Seer, Inc. — Q3 2022 Form 10-Q
Business context and period. Seer is an early-stage life sciences company commercializing its Proteograph Product Suite for proteomics research. This unaudited report covers the quarter and nine months ended September 30, 2022; comparisons are with the corresponding 2021 periods. Amounts below are in U.S. dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $4.0 million | $2.2 million | $10.9 million | $3.6 million |
| Gross profit / margin | $1.9 million / 49% | $1.2 million / 54% | $4.8 million / 44% | $2.0 million / 56% |
| Operating expenses | $27.0 million | $19.6 million | $77.1 million | $53.6 million |
| Operating loss | $(25.1) million | $(18.4) million | $(72.3) million | $(51.6) million |
| Net loss | $(24.0) million | $(18.4) million | $(70.4) million | $(51.4) million |
| Net loss per share, diluted | $(0.38) | $(0.30) | $(1.13) | $(0.85) |
| Cash used in operating activities | — | — | $46.5 million | $34.0 million |
Revenue growth was driven mainly by Proteograph instrument, consumable and platform-evaluation sales. Product revenue from non-related customers was $2.6 million in Q3 and $7.1 million year to date. Related-party revenue was $1.3 million in Q3 and $3.5 million year to date. Q3 revenue rose 84% year over year, while nine-month revenue rose 207%.
At September 30, 2022, cash and cash equivalents were $68.1 million and short- and long-term investments were $372.9 million, totaling approximately $440.9 million. Total liabilities were $42.4 million, including $29.8 million of operating lease liabilities; the filing reports no debt borrowings. Current assets were $450.5 million and current liabilities $13.6 million. Stockholders’ equity was $457.8 million.
For the first nine months, investing activities used $120.0 million, principally reflecting net purchases of available-for-sale securities, plus $5.3 million of property and equipment purchases. Financing activities provided $1.8 million, primarily from option exercises and the employee stock purchase plan. Cash, cash equivalents and restricted cash declined by $164.7 million; much of the reported investing outflow was investment-portfolio activity rather than operating expenditure.
Changes, outlook and risks
- Revenue growth was accompanied by cost of revenue rising faster than revenue: nine-month cost of revenue increased 287%, and gross margin fell to 44% from 56%. Operating expenses increased 44%, with higher R&D spending and SG&A costs, including compensation, stock-based compensation, professional services and commercial infrastructure.
- Interest income increased to $1.3 million in Q3 and $2.1 million year to date as rates rose. Available-for-sale securities generated a $2.2 million nine-month unrealized loss in other comprehensive income; the company said these losses were temporary and not attributable to credit risk.
- Management expects significant expenses and operating losses to continue, does not expect positive operating cash flow for the foreseeable future, and anticipates increasing investment in commercialization, personnel, R&D and manufacturing capacity. It believes available cash and investments are sufficient for at least 12 months from the filing date. No specific revenue or earnings guidance is provided.
- Commercialization is at an early stage. Risks include uncertain market adoption and customer budgets, revenue concentration, and dependence on Hamilton Company as the sole SP100 instrument manufacturer. COVID-19-related access restrictions and supplier lead times have caused delays. Three customers represented 62% of Q3 revenue; PrognomIQ alone represented 33%.
- Seer reported $3.6 million of supplier purchase commitments and $40.98 million of undiscounted future minimum facility lease payments. It was not party to material legal proceedings. The former president resigned effective September 30, 2022; the CEO assumed the president role and the chief commercial officer took full responsibility for commercialization. The company also repriced certain employee stock options, recording incremental compensation expense.
Important facts for investors to verify
- Whether commercial instrument placements translate into recurring consumables revenue, broader adoption and improving gross margins.
- How much of future revenue remains concentrated in a few customers, particularly PrognomIQ, and the terms and durability of that related-party relationship.
- Actual operating cash burn, investment maturities and liquidity relative to management’s stated 12-month-plus runway and planned spending.
- Whether Hamilton’s instrument lead times and other supplier constraints affect deliveries, installations or customer utilization.
- The impact of ongoing operating losses, stock-based compensation, facility commitments and any future need for additional capital.