Seer, Inc. quarterly report, Q1 FY2023

Business context and reporting period

Seer, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2023. The early-commercialization life sciences company is focused on its Proteograph Product Suite, an integrated proteomics platform of instruments, consumables and software. Its strategy is to expand adoption and the installed base, then grow consumables sales and utilization.

Financial performance and position

Revenue growth primarily reflected increased Proteograph consumable-kit sales; grant revenue also rose. Product revenue was $2.3 million, related-party revenue $1.3 million, grant and other revenue $0.3 million, and service revenue $0.1 million. The related-party customer PrognomiQ accounted for 32% of revenue in both periods.

At March 31, Seer reported $48.4 million of cash and cash equivalents, $303.7 million of short-term investments and $58.4 million of long-term investments—$410.5 million in cash, cash equivalents and investments in total. Current assets were $367.4 million and current liabilities $11.8 million. Total liabilities were $39.8 million, including $29.9 million of operating lease liabilities; the filing reports no borrowings or other debt. Stockholders’ equity was $433.0 million, and the accumulated deficit was $243.5 million.

Changes, outlook and risks

• Revenue increased 22% year over year, while gross margin improved to 51.0% from 37.6%, reflecting a higher mix of consumable-kit sales and lower total cost of revenue.
• Operating expenses increased 18%, including a 35% rise in R&D spending. Higher employee and product-development costs and facility expenses contributed. Stock-based compensation was $8.7 million, including $2.0 million related to an earlier option repricing.
• Interest income rose to $3.7 million from $0.1 million, substantially offsetting the larger operating loss and helping keep net loss close to the prior-year level.
• Cash and cash equivalents and investments totaled $410.5 million; operating cash outflow was $19.3 million for the quarter. Management expects significant expenses and operating losses to continue, does not expect positive operating cash flow for the foreseeable future, and believes available resources are sufficient for at least 12 months from the filing date. No specific revenue or earnings guidance is provided.
• Key uncertainties include early-stage commercialization and market acceptance, customer research budgets and sales-cycle timing, revenue concentration in PrognomiQ, reliance on Hamilton as the sole instrument manufacturer, and potential supply, product-quality, economic, and financing risks. The company reported $4.3 million in supplier purchase commitments and no material legal proceedings.
• The filing notes $0.8 million held at Silicon Valley Bank at quarter-end and says Seer did not believe it had loss exposure following the bank’s receivership. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported. Seer also disclosed that Chief Commercial Officer Scott Thomas would transition out in July 2023.

Important facts for investors to verify

• Whether product adoption, instrument placements and consumable utilization are growing sufficiently to support recurring revenue, and how much revenue remains concentrated in PrognomiQ.
• Whether the improved gross margin is sustainable as the sales mix and commercial scale develop, against rising R&D and other operating expenses.
• Cash burn, investment maturities and liquidity runway; the balance sheet shows $352.1 million in cash and short-term investments, while management’s $410.5 million liquidity figure includes long-term investments.
• Execution and continuity of instrument supply through Hamilton, along with inventory quality, supplier commitments and customer installation and service needs.
• The effect of stock-based compensation and equity awards on future expenses and shareholder dilution.