10-Q 1 mcrb-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37465

 

 

Seres Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-4326290

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

200 Sidney Street - 4th Floor

Cambridge, MA

 

02139

(Address of principal executive offices)

 

(Zip Code)

 

(617) 945-9626

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001

MCRB

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of October 28, 2022, the registrant had 124,591,741 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Seres Therapeutics, Inc.

INDEX

 

 

 

Page

 

 

 

PART I – FINANCIAL INFORMATION

 

 

Item 1. Condensed Consolidated Financial Statements (unaudited)

 

5

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

 

5

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2022 and 2021

 

6

Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

 

7

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

 

9

Notes to Condensed Consolidated Financial Statements

 

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4. Controls and Procedures

 

41

 

 

 

PART II – OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

42

Item 1A. Risk Factors

 

42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

82

Item 3. Defaults Upon Senior Securities

 

82

Item 4. Mine Safety Disclosures

 

82

Item 5. Other Information

 

82

Item 6. Exhibits

 

83

 

 

 

SIGNATURES

 

84

 

 

2


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, including the anticipated PDUFA target action date and potential FDA approval of SER-109, manufacturing activities and related timing, commercialization efforts and related timing, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the sections in this report titled “Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

TRADEMARKS, SERVICE MARKS AND TRADENAMES

We have proprietary rights to trademarks used in this Quarterly Report, which are important to our business and many of which are registered under applicable intellectual property laws. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Quarterly Report are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. This Quarterly Report contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this Quarterly Report are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

We are a development-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
We will need additional funding in order to complete development of our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

3


 

Other than SER-109, we are early in our development efforts and may not be successful in our efforts to use our microbiome therapeutics platform to build a pipeline of product candidates and develop marketable drugs.
Our product candidates are based on microbiome therapeutics, which is an unproven approach to therapeutic intervention.
Clinical drug development involves a risky, lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Delays or difficulties in the enrollment of patients in clinical trials, could result in our receipt of necessary regulatory approvals being delayed or prevented.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or our collaborators will not be able to commercialize our product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired. Additionally, failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
Our collaboration and license agreements with Société des Produits Nestlé S.A., successor in interest to Nestec Ltd., and NHSc Rx License GmbH, successor in interest to NHSc Pharma Partners (collectively, and together with their affiliates and subsidiaries, Nestlé) are important to our business. If we or Nestlé fail to adequately perform under these agreements, or if we or Nestlé terminate the agreements, the development and commercialization of our CDI and IBD product candidates, including SER-109, SER-287, and SER-301, could be delayed or terminated and our business would be adversely affected.
We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.
We rely on third parties for certain aspects of the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or that such quantities may not be available at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
Even if any of our product candidates receive marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community necessary for commercial success.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
If we are unable to adequately protect our proprietary technology or obtain and maintain issued patents that are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.
The COVID-19 pandemic has adversely impacted and could continue to adversely impact, our business, including our preclinical studies and clinical trials, results of operations and financial condition.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We may expand our operational capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We will continue to incur costs as a result of being a public company, and our management will continue to devote substantial time to compliance initiatives and corporate governance practices.

 

4


 

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

205,398

 

 

$

180,002

 

Short term investments

 

 

27,605

 

 

 

110,704

 

Prepaid expenses and other current assets

 

 

14,510

 

 

 

12,922

 

Total current assets

 

 

247,513

 

 

 

303,628

 

Property and equipment, net

 

 

19,484

 

 

 

17,938

 

Operating lease assets

 

 

23,747

 

 

 

18,208

 

Restricted cash

 

 

8,185

 

 

 

8,000

 

Restricted investments

 

 

1,401

 

 

 

1,401

 

Long term investments

 

 

 

 

 

495

 

Other non-current assets

 

 

11,538

 

 

 

5,189

 

Total assets

 

$

311,868

 

 

$

354,859

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,449

 

 

$

13,735

 

Accrued expenses and other current liabilities (1)

 

 

59,169

 

 

 

45,094

 

Operating lease liabilities

 

 

7,333

 

 

 

6,610

 

Deferred revenue - related party

 

 

4,868

 

 

 

16,819

 

Total current liabilities

 

 

81,819

 

 

 

82,258

 

Long term portion of note payable, net of discount

 

 

50,857

 

 

 

24,643

 

Operating lease liabilities, net of current portion

 

 

17,850

 

 

 

17,958

 

Deferred revenue, net of current portion - related party

 

 

92,796

 

 

 

86,998

 

Other long-term liabilities (2)

 

 

961

 

 

 

11,495

 

Total liabilities

 

 

244,283

 

 

 

223,352

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding at September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2022 and December 31, 2021; 124,410,917 and 91,889,418 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

124

 

 

 

92

 

Additional paid-in capital

 

 

863,294

 

 

 

745,829

 

Accumulated other comprehensive loss

 

 

(118

)

 

 

(60

)

Accumulated deficit

 

 

(795,715

)

 

 

(614,354

)

Total stockholders’ equity

 

 

67,585

 

 

 

131,507

 

Total liabilities and stockholders’ equity

 

$

311,868

 

 

$

354,859

 

[1] Includes related party amounts of $34,112 and $21,098 at September 30, 2022 and December 31, 2021, respectively (see Note 11)

[2] Includes related party amounts of $0 and $10,585 at September 30, 2022 and December 31, 2021, respectively (see Note 11)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(unaudited, in thousands, except share and per share data)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Collaboration revenue - related party

$

3,444

 

 

$

126,725

 

 

$

6,153

 

 

$

136,636

 

Grant revenue

 

 

 

$

 

 

 

 

 

 

1,070

 

Total revenue

 

3,444

 

 

 

126,725

 

 

 

6,153

 

 

 

137,706

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

43,116

 

 

 

39,882

 

 

 

126,700

 

 

 

105,139

 

General and administrative expenses

 

18,384

 

 

 

19,563

 

 

 

57,290

 

 

 

48,755

 

Collaboration (profit) loss sharing - related party

 

1,051

 

 

 

(1,127

)

 

 

346

 

 

 

(1,127

)

Total operating expenses

 

62,551

 

 

 

58,318

 

 

 

184,336

 

 

 

152,767

 

(Loss) income from operations

 

(59,107

)

 

 

68,407

 

 

 

(178,183

)

 

 

(15,061

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

865

 

 

 

590

 

 

 

1,644

 

 

 

2,385

 

Interest expense

 

(1,727

)

 

 

(744

)

 

 

(4,140

)

 

 

(2,172

)

Other expense

 

(33

)

 

 

(35

)

 

 

(682

)

 

 

(729

)

Total other (expense) income, net

 

(895

)

 

 

(189

)

 

 

(3,178

)

 

 

(516

)

Net (loss) income

$

(60,002

)

 

$

68,218

 

 

$

(181,361

)

 

$

(15,577

)

Net (loss) income per share attributable to common stockholders, basic

$

(0.49

)

 

$

0.74

 

 

$

(1.77

)

 

$

(0.17

)

Net (loss) income per share attributable to common stockholders, diluted

$

(0.49

)

 

$

0.72

 

 

$

(1.77

)

 

$

(0.17

)

Weighted average common shares outstanding, basic

 

122,527,275

 

 

 

91,757,614

 

 

 

102,380,700

 

 

 

91,649,035

 

Weighted average common shares outstanding, diluted

 

122,527,275

 

 

 

94,953,117

 

 

 

102,380,700

 

 

 

91,649,035

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments, net of tax of $0

 

140

 

 

 

(1

)

 

 

(56

)

 

 

58

 

Currency translation adjustment

 

(2

)

 

 

 

 

 

(2

)

 

 

 

Total other comprehensive income (loss)

 

138

 

 

 

(1

)

 

 

(58

)

 

 

58

 

Comprehensive (loss) income

$

(59,864

)

 

$

68,217

 

 

$

(181,419

)

 

$

(15,519

)

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except share data)

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
(Loss) Income

 

 

Stockholders’
Equity

 

Balance at December 31, 2020

 

 

91,459,239

 

 

$

91

 

 

$

723,482

 

 

$

(548,776

)

 

$

(47

)

 

$

174,750

 

Issuance of common stock upon exercise of stock options

 

 

104,184

 

 

 

1

 

 

 

371

 

 

 

 

 

 

 

 

 

372

 

Issuance of common stock upon vesting of RSUs, net of tax withholdings

 

 

650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under ESPP

 

 

24,191

 

 

 

 

 

 

392

 

 

 

 

 

 

 

 

 

392

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,624

 

 

 

 

 

 

 

 

 

3,624

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

32

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,465

)

 

 

 

 

 

(35,465

)

Balance at March 31, 2021

 

 

91,588,264

 

 

$

92

 

 

$

727,869

 

 

$

(584,241

)

 

$

(15

)

 

$

143,705

 

Issuance of common stock upon exercise of stock options

 

 

125,546

 

 

 

 

 

 

586

 

 

 

 

 

 

 

 

 

586

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,078

 

 

 

 

 

 

 

 

 

5,078

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

27

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(48,330

)

 

 

 

 

 

(48,330

)

Balance at June 30, 2021

 

 

91,713,810

 

 

$

92

 

 

$

733,533

 

 

$

(632,571

)

 

$

12

 

 

$

101,066

 

Issuance of common stock upon exercise of stock options

 

 

51,938

 

 

 

 

 

 

174

 

 

 

 

 

 

 

 

 

174

 

Issuance of common stock under ESPP

 

 

76,226

 

 

 

 

 

 

435

 

 

 

 

 

 

 

 

 

435

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,846

 

 

 

 

 

 

 

 

 

5,846

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Net income

 

 

 

 

 

 

 

 

 

 

 

68,218

 

 

 

 

 

 

68,218

 

Balance at September 30, 2021

 

 

91,841,974

 

 

$

92

 

 

$

739,988

 

 

$

(564,353

)

 

$

11

 

 

$

175,738

 

 

7


 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
Loss

 

 

Stockholders’
Equity

 

Balance at December 31, 2021

 

 

91,889,418

 

 

$

92

 

 

$

745,829

 

 

$

(614,354

)

 

$

(60

)

 

$

131,507

 

Issuance of common stock upon exercise of stock options

 

 

92,478

 

 

 

 

 

 

257

 

 

 

 

 

 

 

 

 

257

 

Issuance of common stock upon vesting of RSUs, net of tax withholdings

 

 

69,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under ESPP

 

 

159,214

 

 

 

 

 

 

892

 

 

 

 

 

 

 

 

 

892

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,079

 

 

 

 

 

 

 

 

 

5,079

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(155

)

 

 

(155

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(56,624

)

 

 

 

 

 

(56,624

)

Balance at March 31, 2022

 

 

92,210,305

 

 

$

92

 

 

$

752,057

 

 

$

(670,978

)

 

$

(215

)

 

$

80,956

 

Issuance of common stock upon exercise of stock options

 

 

39,208

 

 

 

 

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Issuance of common stock upon vesting of RSUs, net of tax withholdings

 

 

57,431