Good day, ladies and gentlemen, and welcome to the Second Quarter 2017 Seres Therapeutics Earnings Conference Call. At this time, all participants are in a listen-only mode and 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 would now like to introduce your host for today’s conference Mr. Carlo Tanzi, Head of Investor Relations and Corporate Communications. Sir, you may begin.

Thank you, Amanda. And good morning, everyone. A press release with the company's second quarter 2017 financial results and a progress update became available at 7 A.M. Eastern time this morning and can be found on the Investors & Media section of the company's website. I'd like to remind you that we'll be making forward-looking statements, including on timing of data for our clinical studies, the design of our clinical studies, whether we’re on track in our clinical development plan, any potential approval or registration of our various therapeutic candidates, the objective for SER-109 to meaningfully reduce the risk of recurrence of C. diff infection, the potential for SER-287 to operate a novel, non-immunosuppressive treatment option for ulcerative colitis patients, the timing of accounting for the Nestlé SER-109 Phase 3 milestone payment. 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. And with that, I'll pass it over to Roger.

Thanks, Carlo. And thank you all for joining us. Seres have continue to make excellent progress in our efforts to develop an entirely new class of therapeutics based on restoring the function of the healthy human microbiome. Seres is focused on developing new therapeutics for serious human diseases where dysbiosis of the gastrointestinal tract microbiome is thought to play a central role. We believe that microbiome therapeutics have the potential to address multiple disease states and our R&D efforts target three therapeutic areas where compelling clinical and or preclinical data indicate that the microbiome is important. These include infectious diseases, metabolic diseases and inflammatory and immune diseases, including immuno-oncology. On today's call, I will provide an update on Seres substantial recent operational progress, including most notably the start of the first ever Phase III microbiome drug trial, the Seres 109 ECOSPOR III study. Seres 109 is a biologically sourced, highly purified microbiome therapeutic candidate containing a consortium of about 50 bacterial spore types, that represent a significant proportion of the microbiome found in a healthy human gastrointestinal tract. Our therapeutic objective with Seres 109 is to develop a convenient, highly effective and safe product that will meaningfully reduce the risk of recurrence of C. diff. The risk of C. diff infection is strongly linked to the use of broad spectrum antibiotics. Antibiotics are known to cause a dysbiosis of the gastrointestinal microbiome, leading to a loss of the normal pathogen resistance provided by healthy gut bacteria. Ironically, the current standard of care for treating C. diff infection is only using even more antibiotics. While these antibiotics count can effectively treat the immediate C-diff infection, these drugs further exacerbates the dysbiosis of the microbiome and result in a higher risk of recurrence of C. diff infection. The goal of SER-109 is…

Thanks, Roger. And good morning, everyone. Seres reported a net loss of $28 million for the second quarter of 2017, as compared to a net loss of $27.9 million for the same period in 2016. The second quarter net loss was driven primarily by clinical and development expenses, personnel expenses and ongoing development of the company's microbiome therapeutics platform. The second quarter net loss figure was inclusive of $3 million in recognized revenue, associated with the company's collaboration with collaboration. Research and development expenses for the second quarter were $23.1 million, as compared to $22.2 million for the same period in 2016. R&D expense in Q2 was primarily related to Seres microbiome therapeutics platform, the clinical development of SER-109, SER-252 and SER-287, as well as the company’s SER-301 and SER-155 preclinical programs. General and administrative expenses for the second quarter were $8.4 million, as compared to $9 million for the same period in the prior year. G&A expense was primarily driven by headcount, professional fees and facilities cost. The decrease in cash balance during the quarter was $27 million. Seres ended the second quarter with approximately $175.2 million in cash, cash equivalent and investment. This cash balance does not include the previously disclosed $20 million milestone payment from Nestle Health Science, associated with the start of the SER-109 Phase III study. We expect to account for the receipt of this payment in the third quarter of 2017. I'll now pass the call back over to Roger.

This has been an important period for Seres, where the company meaningfully advanced its pipeline with the completion of the SER-287 Phase 1b study enrolment, continued execution of the SER-262 Phase 1b trial and most notably the start of the SER-109 Phase III study. With SER-109 now in registrational study series, Seres is now a late stage development biopharmaceutical company and the fully differentiated leader in the microbiome field. I am very pleased with the progress Seres has made as we continue to develop this new field of medicine and grow towards becoming a commercial stage organization. Thank you for your continued interest in Seres. We look forward to keeping you updated on our continued progress. Amanda, open the line up for questions.

Thank you [Operator Instructions] Our first question comes from the line of Terence Lynn of Goldman Sachs. Your line is open.

Hi, there. This Cameron on for Terence. Thank you for taking our question. It be a three part question on SER-287. So first can you remind us where in the treatment of IBD you are hoping to position the drug? Then second can you remind us you know, what we should be thinking as clinically meaningful when we do see the data later this year? And then finally are you still confident in the dosing regimen in light of the prior Phase II ECOSPOR results? Thanks.

Those are three great questions. So thank you for them. First, as some of you may remember, but I'll remind everyone, the SER-287 is being placed in the scale of ulcerative colitis patients, where patients have failed first line therapy. Remember those are patients who have gotten five assay, plus minus steroid boluses. We think this is a very important part of the compendium of patients that are not doing well on standard of care. Firstly, as I said before almost half of these patients will fail first line therapy and or cannot be maintained in maintenance. If you look at what their options are, when that happens now, is they have to go into immunosuppressive drugs, including expensive and dangerous monoclonal. We think that this is the spot both for patient care and commercially where a oral, easy to take non-immunosuppressive drugs would be highly important in the armamentarium of the future. We want to keep everyone out of immunosuppressive drugs and we expect this drug to not be immunosuppressive. Number two. You asked about what results would be meaningful to us. Obviously we're looking at safety and tolerability first, because this is a 1b trial. Number two, we are looking at effects on the microbiome that is our PK, PD in these drugs. And then obviously we'll look at the exploratory endpoints where we as I said are looking at Mayo Clinic score, we're looking at endoscopic findings both before and after treatment and we'll look at a variety of biomarkers. So that's how we will think about success of this drug and how we would move it forward. I believe that the third point was dose. We are - we did obviously look and make changes in the SER-262 trial, but did not make 287 changes based on our learning’s from the root cause analysis of 109. But that's a good question. I will remind you that the people who are getting this drug are - as I said in the script, get it on a daily or a weekly basis. The people on a daily basis are getting 50 times or more what we gave to patients in the Phase 2 109 trial for a totally different indication of C. diff. So we're comfortable that this is a large continuous dose that can be given safely and easily, shows by how rapidly we completed the study. So we don't plan and didn't think that there needed to be a change in the 287 trial.

Okay. Thank you…

Next question?

Hope that helps.

Thank you. The next question comes from the line of Chris Shibutani of Cowen. Your line is open.

Good morning. Thank you. On Seres [ph] 109 Phase III study it’s obviously helpful to know that that is a Phase III study. We're trying to get a sense for when we can expect enrolment to be complete. Appreciated the update on some of the initial progress, but can you help us a little bit with metrics or timelines for completion of enrolment?

Yeah, it's a great question. And nothing is more important to Seres than moving with alacrity, but in a careful way in this trial. As I as I said, we've just gotten started trial. We're opening up large numbers of sites in this international trial, both in the U.S. and Canada. And we have learning’s that we expect to increase our enrolment and moving patients through these trials and screening them. It's really early for me to make a prognostication. I like to see a slope of a curve over several months before we see, especially with sites still opening and less than a quarter of our large trial sites up and running. So I would say give me - give us a little more time to see what the slope looks like, so we can say something meaningful. But again with our learning’s from Phase 2, with the sites that we had in Phase II that are now being opened in Phase III, we expect to have the best chance to move with all due speed, but care in this trial.

What do you think is the rate limiting process, as far as new sites in particular?

No, it's just getting them up and running. We've had amazing interest from sites, everybody wants this drug for obvious reasons. And so we don't think that there's anything that slowing it down. It's just you know we had over two dozen sites open already. We're moving forward. As I said, we're going to get the Canadian sites later in this year. We don't see a block at this point.

Great. Thank you.

Thank you. And our next question comes from the line of Joseph Schwartz of Leerink Partners. Your line is open.

Hi, guys. Thanks for taking the question. This is Dagon actually diving in for Joe. Hi, Roger. Hi, Eric.

Hey, Dagon.

How are things? So thanks for the update today. So just two quick ones for me. You mentioned the alignment with now the initiation of the Phase III ECOSPOR III study. FDA has been really interested in getting this across the goal line. But can you just comment on where you are with regard to the EMEA or some of the other worldwide agencies where they might be a little more taken a different stance in terms of microbiome therapeutics? And then on the second one, I just wanted to get a sense of how the community of the physicians have been evolving there sort of grasp of the microbiome therapeutics and how that might be impacting positively or negatively to getting the sites up and running? Thanks.

Yeah, you know, they're both two great questions. Thank you for that. So when you think about how other regulatory agencies are looking at it, as I said we've had great interactions with Health Canada. We see no blocks there. They are obvious - they are you know similar to the FDA is very excited about trying to move this drug forward to patients. We have talked to the EU where they have told us in initial discussions last year that 109 source sourced in the United States could be used in Europe, which makes sense because the microbiome is virtually the same, and where we've accelerated with our partners Nestle going to EMEA to move this product forward. As I've said in previous calls, we don't want big separation internationally between the patients and the markets in the U.S., in Canada and in the European Union. And as I - as we've said in a press release, Nestle and Seres are working to accelerate going into Europe based on our very positive results with the FDA. Your second question is how physicians are looking at the microbiome and that's a great question because this is a totally new field in medicine and physicians being one are usually conservative. But I think what we've seen is something different than the microbiome, people are - it's well-known in the physician communities, especially in the in IV and GI which our primary call points for this disease, everyone is excited about it, because of the lack of safety signals that have been seen in our drugs, people look at it with a different light than a new field in small molecules or genetic diseases and we have seen not only no pushback, but the physicians again all want microbiome drug And that's what's helping us open up sites in the 109 trial.

Great. If I can just ask - squeeze in one more, it's more of a personal curiosity. So I guess looking at some of the mice studies we see that the diet with chow has a serious impact on the microbiome composition. So I was wondering is the protocol for the ECOSPOR 3, including some kind of a diet restriction protocol to make sure you're standardizing any kind of dietary effects on a microbiome?

Yes. So that's a great question. I would point out that that one of the reasons we use both animal models, as well as human models is there is clear differences in studying human microbiome in rodent and in the normal background, which is a human. But you're exactly right, chow affects it. There hasn't been great data that diet affects the microbiome greatly in humans. There's a little data. Most of those though are in chronic diseases. We think one of the things that's important when you think of 109 is the complexity of C. diff that’s acute alien pathogen is very different than if you were thinking of treating patients with diabetes and obesity and thinking about how the food might have an impact on the microbiome. I think the question is good. I'm not sure it's going to be totally relevant when you deal with acute infectious diseases.

Great. Thank you very much for the answers.

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

Hey, Bill.

Hey, Roger. How are you?. Thanks for taking the questions. I had a couple of them. One on the - on 109 and you talked about the C. diff cytotoxin test. Could you just maybe describe a little bit better. I mean, if this is quantitative, if it's qualitative, is there a threshold or will there be a possibility that patients would be stratified by this - by the severity of the disease as it relates to the level of the toxin?

Yes. So let's deal with that first and foremost. So again, as I said before toxin testing was the way C. diff was diagnosed back in the old days when I trained in medicine. At that time it was a CPE test with psychopathic effect on cell lines. It was very sort of [indiscernible] Over that time period since then that approach has died down, as a LYSA [ph] assays, first, second, third and now fourth generation of LYSA that makes cytotoxin detection of the protein itself almost as sensitive and specific as PCR in many studies. So this is not going to be - this is going to be done in a central lab. It's going to not be a quantitative assay, you're either positive or negative for cytotoxin. It's not like some people have tried to push up and down PCR. We expect this to be a very important part of who gets into the trial as I said and who gets out of the trial, meaning is diagnosed with a recurrence on the trial. We think this is making a C. diff objective again. And we've done everything we can to make sure that this approach is most important in making the diagnosis yes or no, not in gradations to active true C. diff infection.

Okay. That makes sense. And then as it relates to 287 and then you see - just you know, you mentioned obviously that patients are have been treated with repetitive FMT and it sounds like there's going to be a repetitive aspect to 287 and I'm just curious one is, you know, the underlying biology that makes repetitive treatment important perhaps, irrespective of the source. And then you know, it's a hard question to answer I guess, is there is any contemplation that perhaps 287 could enhance the engraftment or reduce the repetitive requirement?

So again two great questions. Let me point out that when we deal with C. diff although it is an inflammatory colitis when the C. diff is active, when you treat people for recurrence you have a healing less immunologically active, less inflamed colon. That's different from ulcerative colitis, from Crohn's from several other diseases where you have ongoing continuous regenerating inflammation. The data would suggest because of that reason that's why repetitively hitting the microbiome to get further engraftment, to keep turning down the immune tone in this case in ulcerative colitis not only made sense empirically, but were shown in animal models in our hands and others and in fecal transplant trials. I think it's the difference in the pathogenesis of the disease, the diseases that make the repetition important here. And when you think about whether 287 could decrease the repetitive need for engraftment, we thought about that. If we move forward to Phase II, we would think about a maintenance therapy in that trial. In maintenance the use of this drug may decrease the need for repetition. Not that it would be one and done, but you might be able to expand that greater than once a day or greater than once a week or greater than once a month. So we think that's the place where you might see a change in the dynamics of treatment.

And maybe just as a follow on to that I mean, is there any – in the preclinical animal model literature that would suggest that there may be some either GI or otherwise immuno-modulation as it relates to the microbiome?’

Yes, that’s how we think this works. The data in our hands and others has shown that in ulcerative colitis there's increased immune tone in the colon and the T-regulatory cells are damp down. What we know is that a normal microbiome, especially from clostridium [ph] release will produce short chain fatty acids, which are the signalling molecules to increase T-reg tone, T-regulatory cell tone. So we believe that is how this drug works in animals and how fecal transplants may work in some of the human studies by reintroducing a normal microbiome, reintroducing the signalling molecules that increase T-reg tone which dampens down the ulcerative colitis inflammation.

Got it. Okay, that's very helpful. Thanks a lot.

No problem.

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

Hey, Roger. Good morning.

Hey, John.

I just had a question on the Phase III SER-109 study. I think you mentioned that the primary endpoint in terms of recurrence will be measured up to 8 week. I'm just wondering if there will be other time point beside 8 week, when you will be looking at recurrence. Thanks.

So thanks for that question. The primary efficacy endpoint agreed on with the FDA is 8 weeks. But like we've done in all our trials, we will follow these patients for both safety, as well as efficacy at 12 and 24 weeks. What I would remind you is one of the problems when you take these complex patients out over time is many of them need antibiotics for other reasons, sick older people left with mobile medical problems. So we had to both and in thinking in our 1b trial and II and I expect III, as you get farther out some of this data will be corrupted by the need for broad spectrum antibiotics again. But we will have that data. What's important to remember is as we think about commercializing this drug, of course, based on a hopeful persuasive data in Phase III, is that that's what makes this such an interesting drug. There is no resistance to this drug, so that if people get 109 and are cured of their recurrent C. diff and then the broad spectrum antibiotics which a lot of them will in the real world, as they get sick from other causes, and they take antibiotics if they get C. diff this they can still just take 109 again. So re-treatment should not have - there is no resistance as you would see with a standard use of an antibiotic. So we're interested in that and we think we'll get data on that in Phase III and certainly in post-marketing assuming we can commercialize the drug.

And in the Phase III study for 109. Will you be allowed to retrieve patients after the initial dose?

Remember we are having both a Open Label Extension and expanded access after recruitment. So we think especially with the Open Label Extension everyone will be offered an active drug. It's the most important thing in building a safety database that is necessary for approval and it also is the ethical thing to do in this disease. No one wants to join a trial where they can't get the active agent. So there will be summary treatment in patients that have gotten 109 failed in the trial and then are retreated in an Open Label Extension if they chose to join.

Okay, great. Thanks.

Thank you. Our next question comes from the line of Carol Werther of H.C. Wainwright. Your line is open.

Hi. Thanks for taking my questions. So with 109, what is the power of the trial and what difference are we looking for?

Yeah. So we haven't described that exactly. I can tell you that it is highly powered and it's for superiority of SER-109 and placebo with 320 patients the power is - even though we haven't given the exact number is extremely high and not a worry.

Okay. And then with the higher dose. Are you concerned at all that you might get more diarrhea?

So it's an interesting question. There have been studies with fecal transplants that have shown that early on after the transplant some patients get a little bit of an upset stomach and a little bit of a diarrhea syndrome for a day or two. We might have seen some of that in Phase II, it’s hard to tell because of small numbers. I would remind you that we're not seeing it. We haven't had patients drop out for any reason in 287, which as I said have gotten up to 50 times the dose. So I'm not sure that's a huge worry, but we'll monitor for it. And again, it wasn't seen in the Phase 1b trial which is important because in the first cohort there were patients who got the same dose that were giving in the Phase III.

Okay. That's helpful. And then you said that you know, there was just another article saying that there's a higher incidence of recurrent C. diff. Do you have any idea about whether or not the FMT's are on the rise to use that FMT?

So you know, we don't follow the use of it. We know that it's being used. When I was practicing in the 90s we even used it. I would say sitting in front and I have this article in front of me by [indiscernible] and the annals, I didn't mention, but the difference in increase over the decade that was studied here in recurrent C. diff, this is not primary, is almost 200%. This is not a small increase, significantly higher than primary C-diff. So again as I've said before on these calls, the most of the suffering in patients, most of the cost and a significant amount of the deaths are actually in the recurrent population. If you break the back of a recurrence and we don't think FMT’s can do that, we think you need an oral safe a re-produceable, easy to take true drug. But that's going to be - that's going to be the important part of breaking the back of the epidemic both financially for the health system and of course for the patients suffering with it. It's by the numbers and the quality of the problem is highest in recurrence.

And then my last question is on 287.

Sure.

Do you imagine that when we're - I'm assuming positive results and you go forward, would you need to compare it to second line drugs like anti-TNFs and other immunosuppressive drugs…

Yes…

Is that where you’re positioning it…

Yes, I mean, it's a good question. Let us see the data. Let us see how robust it is then we'll know whether we go after - what the next trial design looks like, whether it's superiority, whether it's compared or where we go. But certainly in the future as I alluded to in the talk, one of the things that's important, there is another inflammatory bowel disease out there it's called Crohn's and that would be the other decision based on the data we see in Phase 1b trial.

Thanks so much for taking my questions. I appreciate it.

Thank you.

Thank you. And this time, I am showing no further questions. I’d like to turn the call back over the company for any closing remarks.

Thanks. This is Roger. I would like to thank everyone on the call for their thoughtful questions. We had a very productive quarter. We advance our pipeline, transitioning Seres into a late stage bio pharmaceutical company and we've extended our position as the leader in the microbiome therapeutic development field. Looking ahead, we are entering an exciting second half of the year with the pending CER-287 study results in ulcerative colitis and continued advancement of our early stage microbiome programs. I want to thank all the listeners for your continued interest in Seres and please reach out to us with any additional questions. We will be participating in two upcoming investor conferences, including of Canaccord next Wednesday and the Baird conference in September. And with that, we will conclude today's call. Thank you very much.

Well, ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everybody have a great day.