Seer, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Seer is a life sciences technology company commercializing its Proteograph Product Suite for proteomics research. The results reflect an early stage of broad commercial release.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $3.312 million | $0.062 million |
| Gross profit | $1.244 million | $0.062 million |
| Gross margin | 37.6% | Not meaningfully comparable |
| Operating expenses | $25.030 million | $16.560 million |
| Operating loss | $23.786 million | $16.498 million |
| Net loss | $23.646 million | $16.429 million |
| Net loss per share, basic and diluted | $0.38 | $0.27 |
| Cash used in operating activities | $19.151 million | $14.872 million |
Product revenue was $2.149 million; service revenue was $0.079 million; related-party revenue was $1.070 million; and grant and other revenue was $0.014 million. Product and service costs contributed to total cost of revenue of $2.068 million.
At March 31, 2022, cash and cash equivalents were $225.334 million and investments were $246.442 million, totaling $471.776 million. Current assets were $457.456 million and current liabilities were $11.152 million. The company reported no borrowings or financial debt; operating lease liabilities totaled $30.224 million. Total assets were $527.085 million, and stockholders’ equity was $486.458 million. Accumulated deficit was $150.176 million.
Changes versus the prior period
- Revenue increased by $3.250 million, primarily because Proteograph product sales began in 2021 and expanded in 2022. Product revenue to non-related customers was $2.1 million; no product revenue was reported in Q1 2021.
- Operating expenses rose 51%: research and development increased 72% to $10.732 million, while selling, general and administrative expenses rose 38% to $14.298 million. Seer attributed increases to product development, staffing and facilities, stock-based compensation, and public-company costs.
- Net loss increased 44% to $23.646 million, and operating cash use increased to $19.151 million.
- Investing activities provided $10.920 million, mainly from investment maturities, while financing activities provided $0.752 million, primarily from employee stock option exercises. In Q1 2021, financing included a follow-on offering and return of profits totaling approximately $114.4 million.
- Unrealized losses on available-for-sale securities were $1.691 million for the quarter; accumulated other comprehensive loss was $2.227 million at quarter-end.
Outlook, risks and other notable matters
- Management expects significant expenses and operating losses to continue, with no positive operating cash flow expected for the foreseeable future. Seer said its cash and investments were sufficient for anticipated needs for more than 12 months from the filing date; it provided no quantitative revenue or earnings guidance.
- Commercial outcomes depend on adoption of the recently broadly released Proteograph suite, customer research budgets, and Seer’s ability to expand sales, support and manufacturing. One customer represented 32% of Q1 revenue; PrognomIQ, a related party, accounted for that 32%.
- Seer reported COVID-19-related customer access and installation delays, longer lead times from its SP100 instrument manufacturer Hamilton, and supply delays for certain components. It also relies on a single contract manufacturer for its instruments. Inventory purchase commitments were $5.7 million.
- Facility expansion commenced in February 2022, adding a right-of-use asset of $8.8 million and lease liability of $6.9 million. The Redwood City facility lease runs through September 2032. A February 2022 executive-award modification is expected to result in $0.9 million of incremental stock-based compensation over eight years.
- Seer stated that it was not party to material legal proceedings. Management concluded disclosure controls were effective as of March 31, 2022, and reported no material quarter-over-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether commercial revenue and consumables demand grow beyond the small customer base, particularly given the 32% contribution from one customer and PrognomIQ.
- Whether gross margin improves as product volumes scale, and how much ongoing losses and cash use exceed current expectations.
- Whether Hamilton and other suppliers can deliver instruments and components on time, and whether Seer can expand manufacturing capacity and customer installation support.
- How investment values, interest rates, lease commitments and the $5.7 million of purchase commitments affect liquidity and future cash needs.
- Whether the company’s stated cash runway remains adequate as commercialization, research and development, and operating costs increase.