Seres Therapeutics, Inc. (MCRB) Q4 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Seres Therapeutics Q4 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I'd like to introduce your host for today's conference, Mr. Carlo Tanzi, Head of Investor Relations and Corporate Communications. Sir, please begin.

Thank you and good morning. A press release with the company's fourth quarter 2016 financial results and a progress update became available at 7:00 AM Eastern Time this morning and can be found on the Investors and Media section of the company's Web site. We also issued a second press release this morning summarizing recent FDA feedback regarding the SER-109 program and our plans for further development. I'd like to remind you, that we'll be making forward-looking statements including those about our future expectations, our SER-109 development plans, the potential for the SER -- for ECOSPOR 3 trial to quality as a pivotal study, the timing and results of our clinical studies and our cash flow and business forecasts. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties which are discussed under the Risk Factors section of our recent SEC filings. Any forward-looking statements made on today's call represent our views as of today only. We may update these statements in the future but we disclaim any obligation to do so. On today's call, I'm joined by Dr. Roger Pomerantz, Seres' President, CEO and Chairman; and Eric Shaff, Chief Financial Officer. I will now pass the call over to Roger.

Thanks, Carlo, and thank you all for joining us. Seres continues to make excellent progress in our efforts to develop a totally new field of medicine, using bacteria to treat disease. We are working to advance our microbiome therapeutics platform to develop a novel class of biologically active drugs that are designed to treat serious human diseases by restoring the function of a dysbiotic microbiome where the natural state of bacterial diversity is imbalanced. We are specifically focused on serious human diseases where dysbiosis in the gastrointestinal tract is thought to play a key role. Seres is a pioneer and leader in this new microbiome field, and we have continued to advance our understanding of the underlying new science with the goal of developing innovative novel therapeutics. We believe that microbiome therapeutics have the potential to address multiple serious diseases and our R&D efforts target three therapeutic areas. They are infectious diseases, inflammatory and immune diseases, and metabolic diseases. On today's conference call, I will provide an update on our lead program, SER-109, for multiple recurrent C. diff infection and our plans to further clinical development of this program. I will also provide an update on our other clinical development stage microbiome therapeutic candidates. Let's begin with SER-109 and recurrent C. diff infection. Now the standard of care approach for treating C. diff infection is to use of course a specific antibiotics. While antibiotics are often able to treat the C. diff infection, antibiotics also directly disrupt the normal microbiome and place the patient at an increased risk of a C. diff recurrence. After a patient is treated with antibiotics for a C. diff infection, a competitive and dynamic race occurs between the repair and reconstitution of the normal commensal microbiome and the outgrowth of C. diff bacteria from residual spores and residual -- and/or residual bacteria. We call this the race to repair. Our therapeutic objective with SER-109 is to catalyze repair towards a more healthy microbiome immediately following antibiotic use, and thereby meaningfully reduce the risk of a C. diff recurrence. SER-109 is a biologically sourced highly purified microbiome therapeutic candidate containing consortia of bacterial spores found in healthy individuals. In preclinical studies and a C. diff challenge model system, SER-109 administration was shown to potently block C. diff infection. In this model system our data indicate that SER-109 spores are at least as potent as entire fecal matter transplants. However, we believe there are a number of important advantages to our spore-based approach compared to fecal transplant-based approaches, including the ability to generate orally available highly purified compositions using processes that inactivate potential infectious human pathogens. As we have discussed in our previous conference calls after we obtain the unexpected SER-109 Phase 2 study results late last summer, our focus has been on completing comprehensive analyses to more fully understand the study data. We have completed those analyses and earlier this year we provided a detailed summary of our scientific and clinical findings. In the interest of time I would reiterate these findings, however, I will summarize the key conclusions. We believe that our diverse and robust analysis -- two core issues were identified, they are clinical diagnosis and dose. Let me repeat that, they are clinical diagnosis and dose. We believe that misdiagnosis of C. diff infection, both at study entry and during the study may have contributed to inclusion of inappropriate study subjects in the prior Phase 2 study and may have resulted in errors in the measurement of recurrences within the trial itself. Regarding dose, we have determined based on the application of newly developed higher resolution whole metagenomic sequencing techniques that the dose of SER-109 used in the prior Phase 2 trial may have been suboptimal in certain patients. This suboptimal dosing may have resulted in the outgrowth of C. difficile bacteria and the production of C. diff toxins before SER-109 was able to sufficiently repair the microbiome and reestablish pathogen resistance. In summary, our prior SER-109 studies provided important new biological and clinical data that have meaningfully advanced our understanding of recurrent C. diff infection and our microbiome therapeutic development approach. Based on this refined understanding, we believe that we have a strong rationale for further development as SER-109 and have developed plans for a new SER-109 clinical study. Equipped with our detailed SER-109 data we requested a Type B meeting with our partners at the FDA to review our findings and our proposed plans for a new SER-109 clinical study. I will remind you that SER-109 has both breakthrough and orphan drug designations, thereby facilitating streamlined and efficient regulatory interactions. We have now completed our dialogue with the FDA and we are pleased to have received highly constructive guidance regarding further SER-109 clinical development. Based on this feedback, we plan to initiate a new SER-109 clinical study termed the ECOSPOR 3 as soon as possible. ECOSPOR 3 will include approximately 320 patients with multiple recurrent C. diff infection randomized one to one between SER-109 and placebo. The size of the study is driven both by assumptions regarding SER-109 efficacy and study powering, as well as our desire to obtain an adequate safety database. Diagnosis of recurrent C. diff infection at both study entry and for primary endpoint analysis will be confirmed by C. diff cytotoxin assays. We believe that the use of a C. diff cytotoxin assay in the study will significantly reduce the rate of misdiagnosis that we have shown to have occurred in our prior Phase 2 trial. As in our previous SER-109 studies, all ECOSPOR 3 study patients will be treated with standard of care antibiotics to address the qualifying acute C. diff infection patients. Patients in the ECOSPOR 3 SER-109 arm will receive a total treatment dose that is approximately 10-fold higher than the SER-109 dose used in the prior ECOSPOR study. This total dose will be administered over three consecutive days. We expect that administration of SER-109 at a higher dose and over multiple days will further support more rapid SER-109. After antibiotic therapy thereby reducing the risk of C. diff recucurrents. ECOSPOR 3 will evaluate patients for 24 weeks and the primary endpoint will compare the C. diff recurrence rate in subjects who receive SER-109 versus placebo at up to eight weeks after dosing. Importantly, the FDA agreed that ECOSPOR 3 may qualify as a pivotal study. With the achievement of a persuasive clinical effect and addressing FDA requirements. These requirements include clinical and statistical factors and adequately sized database and certain see in say parameters that would be ready for commercial launch. As commensurate with a potentially pivotal trial it will be highly powered at 97%. We will start the ECOSPOR 3 study as soon as possible and we plan to implement a number of measures to expedite enrollment. We will leverage our clinical operations learning's from our prior C. diff infection studies and we plan to utilize an expanded number of clinical sites across the United States and we now are also adding Canadian sides. I will now transition to discuss the important progress we have been making with our other microbiome therapeutic candidates. Let's begin with the SER-262 program. We have continued to make good progress with the execution of the SER-262 Phase 1b study to prevent recurrence in patients with primary C. diff infection. SER-262 is manufactured by a synthetic process that is fundamentally different than that used to generate SER-109 and does not require human donor material. SER-262 contains a consortium of 12 bacterial strains in spore form, rationally selected from Seres field leading proprietary bacterial strain library of over 14,000 well characterized human microbiome strains. The strains chosen for SER-262 were rationally selected based on multiple criteria and the final SER-262 composition was optimized from 100 different consortia that were evaluated in in diverse pre-clinical study. The SER-262 Phase 1b trial is a 24-week randomized placebo controlled dose escalation study. The study is planned to include approximately 60 patients who have experienced a first episode a C. diff infection. Our objective with the study is to demonstrate that SER-262 is safe and reduces the risk of recurrence infection and primary C. diff pay continue to advance the execution of the study and patient recruitment and we expect SER-262 top line study results in the second half of two thousand and seventeen. Moving to see SER-287 program; we continue to execute our SER-287 Phase 1b B study in patients with mild to moderate ulcerative colitis who have failed first-line therapy. The SER-287 would evaluate the ongoing dosing of this micro biome therapeutic candidate in minutes thirty another dosing if this microbiome therapeutic candidate other daily. The total dosing of the patients in the daily arm to see -- of the SER-287 study includes to approximately a 50-fold higher total dose; than the SER-109 dose used in the ECOSPOR trails. The SER-287 study will evaluate changes in the microbiome as well as efficacy and safety measures in this chronic inflammatory and auto-immune disease. The rationale for evaluating microbiome therapy in this indication is supported by several controlled clinical studies which have demonstrated that repetitive fecal microbiota transplantation led to meaningful clinical responses in patients with all sort of colitis. I will note that the largest and most recent of these positive studies reported to date and 85% placebo controlled study in the ulcer -- in ulcerative colitis patients was published just last month in the prestigious Lancet Journal. While repetitive administration of FMT is not likely to represent a viable commercial product, these studies provide compelling proof-of-concept suggesting that modification of the microbiome could have meaningful clinical impact in patients with inflammatory bowel disease, as well and importantly, we expect SER-287 to be non-immunosuppressive. Our objective with SER-287 is to develop a safe and effective product which is not immunosuppressive targeting the substantial proportion of all sorts of colitis patients that are not well managed by currently available drugs or suffer from the side-effects of these drugs including but not limited to immunosuppression. We have continue to make progress advancing the SER-287 study and we look forward to SER-287 study results also in the second half of this year. Moving on to others company updates. Seres continues to strengthen its intellectual property estate related to microbiome therapeutics. The United States Patent & Trademark Office has issued yet another new patent assigned to Seres covering compositions of bacterial spores for treating multiple gastrointestinal diseases associated with this biosis of the microbiome. Seres has also continued to broaden its differentiated microbiome therapeutic development capabilities. The company has made excellent progress significantly expanding its manufacturing case capacities. This construction of a new GMP facility capable of the manufacture and formulation of microbiome therapeutic candidates has been completed and is now fully operational. The manufacturing of microbiome therapeutic candidates is a highly specialized process and we believe that our facility is unparalleled in the industry and provides the company with a distinct competitive advantage over others seeking to develop and launch microbiome therapeutics. In addition, Seres has several other new capabilities which extend our lead in the microbiome space. We are the only company to have reported human data with microbiome therapeutics. In addition, Seres has developed several new technologies to analyze human microbiomes before and after therapeutic interventions; these include higher resolution, whole metagenomic shotgun sequencing and proprietary in-silico algorithms which allow us to now analyze complex human microbiome ecologies all the way down to the bacterial strain level. In addition, we now have perfected metabolomic methodologies for the human gastrointestinal tract to evaluate downstream microbiome function in vivo. These new state-of-the-art technologies and extensive human microbiome datasets before and after perturbation with a drug candidate allow us to gain knowledge to further rationally design new synthetic microbiome therapies in many diverse therapeutic areas. I'll now pass the call to Eric to review our recent financial performance.

Thanks Roger and good morning, everyone. Seres reported a net loss of $91.6 million for the full year of 2016 as compared to a net loss of $54.8 million for the prior year. The company reported a net loss of $25.3 million for the fourth quarter of 2016 as compared to a net loss of $19.6 million for the same period in 2015. The increase in Q4 net loss was driven primarily by continued growth in clinical and development expenses as well as increased headcount and ongoing development of the company's microbiome therapeutics platform. The fourth quarter net loss figure was inclusive of $3 million in revenue recognized in association with the company's collaboration with Nestle Health Science. Research and development expenses for the full year of 2016 were $82 million as compared to $38.1 million for the prior year. R&D expenses for the fourth quarter were $20.3 million as compared to $13.9 million for the same period in 2015. The increase in R&D expense during 2016 was primarily due to expenses related to costs associated with our clinical-stage programs, increased headcounts and the advancement of our pre-clinical programs. General and administrative expenses for the full year were $32.6 million as compared to $16.8 million for the prior year. G&A expenses for the fourth quarter were $8.5 million as compared to $5.9 million for the same period in the prior year. The increase in G&A expense was primarily due to increased headcounts and increase in professional fees, and facility expansion support overall growth. 2016 also reflects a full year of costs associated with operating as a public company following our IPO in June of 2015. The decrease in cash balance during the quarter was $26.5 million. Seres ended the fourth quarter with approximately $230 million in cash, cash equivalents, and investments. Cash usage during the fourth quarter was driven primarily by facilities costs, clinical trial costs, and personnel expenses. Included in cash spend for facilities cost for the fourth quarter was $3.4 million related to the completion of our facility buildout including our microbiome manufacturing facility. Our expenses related to the buildout of this facility have now been substantially completed. Now moving to our financial guidance; based on the company's current operating plan including the planned ECOSPOR 3 trial Roger described, we expect that our current -- our existing cash resources will enable us to fund operating expenses and capital expenditure requirements excluding cash inflows or outflows from future business development activities through 2018. I'll now passing the call back over to Roger.

This has been a productive period for Seres as we have continued to advance our pipeline and as we have completed a very successful dialogue with the FDA and obtained clarity on the design of a new study for SER-109, our lead clinical program. We plan to move our pipeline programs forward with focus and alacrity, and we expect an eventful year ahead. During 2017 we expect to initiate a new and potentially pivotal clinical study with SER-109. We also look forward to two important clinical data readouts from our SER-262 and SER-287 microbiome programs. In addition, we expect continued progress in our other R&D efforts including those in important new disease areas such as metabolic diseases, liver diseases and especially immune-oncology. As I close, I will mention that we have also posted an updated corporate slide presentation on our website that provides a broader overview of the company. Thank you for your continued interest in Seres, and we look forward to keeping you updated on our progress during the coming year. Operator, let's open the line for questions and we would ask that analyst keep to one question and return into the queue with additional questions.

Yes, sir. [Operator Instructions] Our first question is from Ritu Baral of Cowen. Your line is open.

Good morning. Thanks for taking the question. Roger, how confident are you in the new dose and dose timing, but basically was there -- were any additional data internally generated in this interim period or are you -- have you gone with the dosing based on picking apart the Phase 1/2 data? And just related to that, you did mention there was a 97% powering; have your assumptions for placebo response and the delta of a treatment response change given the change in diagnosis methodology?

Those are two great questions. Let me get to the dose first and then go to the powering of the study and what we've learned. So, if -- as you may remember but I'll just remind everyone, with our root cause analysis we did deep microbiome analyses now using home edited genomic sequencing, not only on our Phase 2 subjects but also in our Phase 1b look back trial where we had excellent data. And as you remember there were two cohorts in 1b. The second cohort used one times 10 to the A dose, the same as we used in Phase 2 but the first cohort was dose ranging from 10 to the 7, all the way up to 10 to the 10. Now with these new technologies that -- that series has been able to develop to look down into the species and even strain level. We were able to show both an engraftment and diversity, there was a dose effect in the first cohort that was not able to be seen using the older 16S Ribosomal Technology that we had back at the time the 1b was done. So using the new technology we had new learning's, we saw this microbiome effect, both kinetically early on as well as the height of diversity; and we compared it to what we saw in the Phase 2 trial. And what we saw is that one times 10 to the eight the effect on the microbiome in the 1b trial versus the Phase 2 were the same but the patients that had the higher doses had a better microbiome effect. When we talked to the FDA, they agreed with us that the dose of about 10-fold what we put in in the Phase 2 trial made the most sense looking at this new novel microbiome research. They -- it really has become a biomarker for drug effect if you will, so we look at this as PK and PD, only in the microbiome space; so we're pretty comfortable that there is deep scientific data, both in Phase 2 and the look back in phase 1b that gives us comfort that we can increase the probability of success of the trial by using a higher dose. I would point out that we have not seen no serious safety AEs ascribed to this drug in any of the trials including open label, including expanded access and this gives us comfort that -- and the FDA comfort that we can expand the dose of the drug with safety to the patients. To your second good question; we look at the assumptions for most of our currency depth as difficult to obtain. So we looked at our trials as you pointed out, we looked at the first and the second trial, we thought about misdiagnosis, we looked at natural history studies, remember there has never been a placebo-controlled trial until we did it in the Phase 2 which is why we're an orphan disease and why we're studying an orphan disease. So the assumptions will be similar to what we've seen in the past, there may be a little jiggering for cytotoxin, if you were not putting cytotoxin but we think that the assumptions -- we using cytotoxin will be similar and the reason is we're changing this disease we believe to being far more objective again. As I've said before and this is very important which is why I'm going on with it; when I trained in infectious disease everyone used cytotoxin, that lost when PCR came along being cheap and easy to do but it made the diagnosis less objective. We want to make C. diff objective again and therefore make the assumptions similar to what we thought when we hypothesized that this was an objectively diagnosis disease.

Great, thanks for taking -- very helpful. Thanks, Roger. Thanks for taking the question.

Thank you. Our next question is from Terence Lynn of Goldman Sachs. Your line is open.

This is Cameron [ph] on for Terence. Thank you for taking our question. Maybe just one quick one, what does the FDA define as a persuasive clinical effect for the new trial?

I think what persuasive effect, I don't want to put words in the FDA's mouth, so I'm going to speak for myself. I think persuasive means -- having heard the FDA use that term on many other drugs in my past is that it has to be statistically significant and it has to be clinically meaningful. Clinically meaningful is an interesting topic because depending on the disease, the risk benefit of what you need in the space that varies. I will point out that the Merck monoclonal antibodies that I know pretty well were approved in just C. diff not multiple recurrent, just recurrence depth and there there was only a statistical difference -- there was a statistical difference but it was only 11% active to placebo. I think that shows how desperate people are to get a drug in the space. C. diff is still the largest most communal [ph] infection in the United States, bigger than MRSA. And I think the FDA is looking at this as what it is; a high unmet medical need and the need for drugs for patients who are suffering and dying at about 30,000 a year in the U.S. alone. Hope that helped.

That does, thanks.

Thank you. Our next question is from Joseph Schwartz with Leerink Partners. Your line is open.

Good morning, guys. Thanks for all the clarity. So yes, speaking of the clinical characterization of C. diff, multiply recurrent C. diff relative to the cytotoxin assay, positive C. diff; I know you're going out to a lot more sites and so I'm wondering how would you manage the variability in the way that different clinicians diagnose multiply recurrent C. diff clinically.

Thank you for that question, it's very important. As I've said, compared to much of ID drawing one test -- if you do not pick the right test in multiple recurrent C. diff, you can make an error and I just go through that is that -- well, how does that happen? There can be a patient come in to see me as a clinician saying I've had C. diff many times before, I'm having diarrhea and abdominal pain. You get a PCR test that's positive and you say -- you have C. diff and you can be wrong, that's what we've proven that why it cannot happen because many of these patients have a post C. diff IBS, Irritable Bowel Syndrome, which could be the cause of these symptoms. And number two is, PCR only shows the presence of C. diff genes and carriage of C. diff asymptomatically with outside of toxin production is seen in 30% to 40% of these patients. So in order to make it objective again, cytotoxin, we believe will help the clinicians make the diagnosis and not be led astray by IBS and a carriage state of C. diff. We look forward to making this disease more like Hepatitis C or HIV where a test if done -- if the right test is done, the diagnosis is known.

So then it sounds like the objective measure will be the primary endpoint and then maybe subjective measures of secondary endpoints?

There will be a lots of secondary endpoints Joe. We want to be very deep in understanding what this drug is so that if we get -- if and when we get persuasive clinical data and launch the drug, we know a lot about its characteristics as we commercialize it.

Great, thanks for taking my questions.

They were great questions. Thanks Joe.

Thank you. Our next question is from Bill Tanner of Cantor Fitzgerald. Your line is open.

Thanks for taking the question, congrats on the progress. So Roger just on the idea on the toxins; [indiscernible] positive. If 109 makes it to the market, will there be a contemplation that patients that would receive the drug need to be confirmed toxin positive? And I'm wondering if you could just speak maybe to the ability of that to be done with current technologies. I mean it seems like that wouldn't be that hard but it does seem like perhaps…

No, it's not. It never went away, it's available to all the centers at anywhere that it wouldn't be. We can get it to them easily, this is a very simple fourth generation ELISA and EIA. The only reason PCR was used is because it seemed there was no drawback to it. What we're saying and again, we would like to prove this in our next trial that standard-of-care also has to change, not only for our drug but for patients who we believe are not getting the best diagnosis in this syndrome. It is clear to me that primary C. diff and secondary -- and multiple recurrent C. diff are different clinical syndromes. They may be caused by the same bug but you have syndromatic differences and one of them is, this inability to use PCR with sensitivity and most importantly, specificity in a case and make the diagnosis in multiply recurrent. So where we'd like to see in the trial that we change -- not only how we use 109 after diagnosis but with confirmatory data how standard-of-care in this syndrome changes; this is what happens in orphan diseases though, you learn about them.

And Roger, just on -- I don't know if you want to comment on the SAP. Wondering specifically if there might be an ability to look at the data on a responder basis, I guess looking to obviously see to the extent that engraftment took place and patients on a patient by patient basis.

Yes, we're pretty comfortable that engraftment takes place. As I've said what we've learned is that this -- that the dice is cast very early in this disease. It's the race to repair happens within the first week. Remember that almost all recurrences occur in eight weeks but the vast majority occur within two or three weeks. So we think that the kinetics of this is very important and we do think that the engraftment will be more robust as we've shown in the 1b data with new metagenomics sequencing and that's how we're looking at it.

Okay, thanks.

Thank you, good question.

Thank you. Our next question is from John Newman of Canaccord. Your line is open.

Good morning, thanks for taking my question. I just wondered, do patients need to have a toxin positive results on more than one occasion in order to qualify for study entry? And also how quickly after positive toxin test to patients has to be randomized? Thank you.

Yes, so that those are both good operational questions. They just need a toxin positive in the qualifying episode. We'll assume if they had it there, they've had it before because the qualifying episode is what gets you into the trial. After a cytotoxin positive within 48 hours they would start on their antibiotics, it will only be vancomycin and fidaxomicin. Remember now standard-of-care has changed in recurrent C. diff with Flagyl/metronidazole no longer showing the efficacy, and therefore, not part of guidelines. It is part of guidelines in primary, so it will be vanco or fidaxo. And then after you're done with your 7 to 10 days of this standard-of-care antibiotics, within 48 hours we'll be getting patients randomized and into the trial, again one to one to either get placebo or this increased dose of 109 divided over three days.

Okay, great. Thank you.

Thank you.

Thank you. Our next question is from Ted Tenthoff of Piper Jaffray. Your line is open.

Sometimes I have to take a step back to move forward, so we're pleased to hear about the progress that you guys are making. I have a kind of higher level question, just with respect to -- appreciating that the C. diff results were clinical and in finding some of those -- that said, was all of this process for you and new technology, it's a new approach that you guys are willing to get. How can you apply those to other programs and really accelerate the path for microbiome therapies more broadly?

Yes. So thank you for a very insightful question and I'd mentioned that a little bit I'd like to talk more about it now with that question. What we have and as the only company as human data sets is that the human microbiome is best studied in humans, as we've said many times before. Now with whole metagenomic shotgun sequencing that can get down to the resolution of not only species but strains. We can determine what -- in different diseases what particular organisms, what strains are important, we can functionally characterize them, both in metabolomics and other approaches and interactions with the immune system. And we know exactly which organisms engraft in humans. And this is proprietary information, they all don't have the same engraftment capabilities and if you can't look at species and strains, you can figure that out. Then from that data, we do what's called reverse translation and use that data to better rationally design a synthetic drug in a particular space. Think of ulcerative colitis; from the 2H7 trial with whole metagenomic shotgun sequencing in our in silico algorithms, we will know and we already know a little bit about this already, which are the organisms that are present in this biosis, what happens with an initial drug such as to 2H7 and there how can we design based on that retro-translation, the consortia that we would put together in the follow-on to 2H7, the synthetics, in this case CR301 that we've talked about. This can be done in many therapeutic areas and we look forward to using this technology for this reverse translation approach to get at synthetics, not using [indiscernible] but using real data. I hope that helps.

It is, very helpful. And I guess maybe just looking a little bit over the horizon; I appreciate that 109's focus now in getting that clinical potentially registrational study. You know, what are some of the other kind of corporate objectives in terms of applying these learning and these preclinical development efforts to other disease area? Sort of where is the priority going equivalent?

Yes, so as I tried to say before we're focused in these three therapeutic areas, we're staying in the gut microbiome, what we think we have a lot of very sick important patient groups to interact with. Let me talk a little bit about -- and you'll remember we have interactions with lots of great academics inflammatory bowel disease that Penn -- heamatopeotic stem cell transplantation at Sloan Kettering [ph], liver disease at Mass General, metabolic and obesity at At Mass General, and rare diseases at Penn. But let me highlight one that I haven't mentioned, I did in the script, immuno-oncology is very interesting to us, let me tell you why. We believe that we have knowledge having done the ulcerative colitis data in mouse and in humans to inform our interactions with developing drugs for immuno-oncology purposes, both efficacy, increasing efficacy of checkpoint inhibitors and increasing safety; why is that the case? Autoimmune diseases are clearly the ying-yang of immuno-oncology; why is that? They both are directed to T-regulatory cells, T-regs in the colon, so if you learn about ulcerative colitis or Crohn's disease, you actually learn about the interactions of the microbiome with T-regs that you can then apply to immuno-oncology approaches which we are doing with some depth and alacrity. There has been a number of different papers and there is one presentation that just came out at ASCO that we are looking at very carefully where a signature -- finally a signature for effects of checkpoint inhibitors in patients and the signature is in the microbiome has been reported. These are the sort of data readouts from both our internal labs and our external labs which give us cautious optimism that we can walk into that field and make a meaningful impact for some of these patients. So that's an example.

It really makes a lot of sense Roger, really helpful, thanks very much.

Thanks for the great question.

Thank you. Our next question is from [indiscernible]. Your line is open.

Roger, congrats on the excellent outcome of the ASP [ph] meeting.

Thanks.

So my question is, given the -- perhaps perception SER-109 has drug-like profile; can you make the comment as to what's the FDA's view on any drug dose response given that perhaps the dose were inadequate in the Phase 2 study?

Yes, that was -- that's a great question. As I said before in 1b we did have a cohort with a dose ranging study, we've obviously done a lot in animal models; the key point Vernon is the FDA looked at the data and agreed we did not need a dose finding study. They agreed with the single dose increase at about 10-fold what we gave in Phase 2. And I want to just underline, I think both us and the FDA were able to do this with flexibility because of the safety profile of the drug. If this had a high safety signal on something, I'm sure having had experience with that the FDA and our company would want to have and needed to do a dose ranging study to look for maximal tolerated effect. We don't have to do that, we think that's one of the important parts of -- a nice part as someone who has developed small molecules which always have some safety AEs; this gives us the flexibility and the FDA the flexibility to be comfortable with this being the best approach for patients in the next trial. But it's a good question.

Awesome, that's awesome and thanks for that confirmation. As a follow-up and I'm sorry if I missed this; you had mentioned that cytotoxin will be used to confirm disease status before each patient is randomized but will you also be -- and I know PCR lead to erroneous diagnosis but will PCR be still conducted and/or be used as confirmation in anyway?

We will do both tests in patients, we want to accumulate as much data as we can with every trial we do to not only show -- we will use cytotoxin as the primary diagnostic but we will collect PCR data. Again, we want to know as much as we can about this drug and its interaction with humans; if this is a pivotal trial because it teaches us about the commercialization of the drug.

Awesome. Thanks for taking my question and the follow-up question. Congrats again.

Thank you.

Thank you. And we have a follow-up from Bill Tanner of Cantor Fitzgerald. Your line is open.

Roger, you know, you mentioned in your prepared remarks that 109 might be approved as a priority. And you made a comment about CMC and so I wonder if you could elaborate a little bit on that? I mean I'm assuming that the quality isn't something that would really be an issue, but is it more a matter of being able to meet the market demand? And if so, you know, how you think your processes are in place or coming in place to meet that? And whether or not that might provide some kind of an impediment?

Yes, so this -- it's a great question and I'm very happy to talk about our manufacturing capabilities. As I said we have what we think is something that's unknown in the industry, a true first microbiome GMP-certified lab that can not only deal with our trials but deal with commercialization. We're looking carefully at that, we think we're well prepared to deal with commercialization whenever the drug is approved and launched. We have a Commercial Head as some of you know from Amgen, While Hashad [ph], who is putting together the evaluation of market in this new space in an orphan disease. We feel comfortable that we have a great team, a great lab, a great plan for commercialization to deal with how the FDA would look at it. I'm not going to put words in their mouth but we look at it as the ability to validate the CMC parameters so that they are validated to the level that if this is a pivotal trial, this will be -- that CMC will be considered necessary and sufficient for launch. I would point out that our manufacturing group is led by a number of people who have launched already vaccines and biological drugs at other pharmaceutical companies. So we're comfortable with the people we have, the lab we have, the commercial plan we have, and our interactions with our partners at the FDA.

Perfect, thank you very much.

Appreciate the question.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.