Ladies and gentlemen, thank you for standing by and welcome to Q3 2019 Seres Therapeutics Earnings Conference Call. At this time, all participants lines are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to turn the call over to your speaker today, Mr. Carlo Tanzi, with Investor Relations. Thank you. Please sir, go ahead.

Thank you, and good morning. Our press release with the company's third quarter 2019 financial results and a business update became available at 7:00 a.m. Eastern Time this morning and can be found on the Investors and Media section of the company's website. I'd like to remind you that we'll be making forward-looking statements relating to the timing, enrollment, and results of our clinical studies, regulatory approval, the promise and potential impact of any of our microbiome therapeutics, the sufficiency of our cash and cash equivalents to fund operations, and the availability of additional cash resources. 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 Eric Shaff, Seres' President and CEO; and Dr. Matt Henn, Seres’ Chief Scientific Officer, and also Dr. Kevin Horgan, our Chief Medical Officer will be available during the Q&A portion of the call. And with that, I'll pass the call to Eric.

Thanks, Carlo and good morning everyone. 2019 has been an important year of focus and advancement for Seres and as we move into the final months of the year, we are pleased to note that we are in the stronger position to deliver on our mission to advance our microbiome therapeutics platform and to execute on the development of our promising pipeline of drug candidates. To summarize some of our accomplishments, we have focused our pipeline on our highest priority programs, modified the SER-109 Phase 3 study to expediting top line results, initiated our SER-287 and SER-401 clinical studies, entered into a collaboration with AstraZeneca in immuno-oncology, nominated our SER-301 lead candidate, and strengthened our balance sheet with a $51 million equity raise. More recently, we further strengthened our balance sheet with access to up to an additional $50 million in debt financing. All of these efforts lay the foundation for Seres to execute on a data rich 2020 that we believe could be transformative for the company. Seres differentiated core competencies include our field leading R&D capabilities and deep domain expertise in microbiome therapeutic drug discovery, manufacturing, and clinical development. We are able to identify key signatures in the microbiome associated with disease and design tailored oral therapeutic microbial candidates aimed at improving patient outcomes by establishing a healthy and more diverse microbiome. Turning now to an update on our development programs. Let me begin with SER-287, which is in a potentially pivotal Phase 2b study in patients with mild to moderate active ulcerative colitis. SER-287 is an orally administered biologically derived live drug candidate comprised of commensal bacterial spores derived from the healthy human gastrointestinal tracts. Our objective with SER-287 is to develop a first-in-class microbiome therapeutic that modulates the microbiome in microbe associated metabolites in UC patients.…

Thanks, Eric. I’ll begin with SER-301. We have made excellent recent progress with SER-301. This is a next generation rationally-designed, live microbiome therapeutic candidate for the treatment of ulcerative colitis. SER-301 was designed using our in-human reverse translational drug discovery and development platform that leverages insights from our clinical studies. We believe that our next generation drugs like SER-301 may provide important benefits that include optimization of microbiome therapeutic candidates’ pharmacological properties for target disease and streamlined drug product manufacturing. We are pleased to report today that we have finalized the design of SER-301 and nominated a candidate that incorporates specific defined commensal bacterial species. The consortia of bacteria in SER-301 are designed to modify the microbiome and microbiome associated metabolites in the gastrointestinal tract to favorably impact UC relevant anti-inflammatory and immune pathways and to improve epithelial barrier integrity. The design of SER-301 incorporates insights on microbiome biomarkers and microbial mediated functional pathways associated with clinical remission and endoscopic improvement from our SER-287 phase 1b study. Further, bacterial species selected for inclusion in SER-301 have been confirmed to engraft across human subjects. The SER-301 consortia has demonstrated the capacity to modulate disease relevant to cellular mechanisms in human cell-based screening assays and in vivo models. SER-301 is manufactured in Seres in-house GMP facility and we are moving quickly to transition SER-301 to clinical development to evaluate safety and efficacy in patients with ulcerative colitis. We expect to initiate clinical development in early 2020. Moving now to SER-401. SER-401 is an orally administered biologically derived live microbiome therapeutic candidate comprising bacteria that reflect the bacterial signature in the gastrointestinal microbiome associated with response to checkpoint inhibitor immunotherapy. In collaboration with the Parker Institute for Cancer Immunotherapy and The MD Anderson Cancer Center, we continue to enroll our SER-401 randomized placebo-controlled…

Thanks, Matt. Turning now to an overview of the financials, and I’ll note the additional details included in the press release issued earlier this morning. Seres reported a net loss of $16.4 million for the third quarter of 2019, as compared to a net loss of $21.9 million for the same period in 2018. The third quarter net loss was driven primarily by clinical and development expenses, personnel expenses, and ongoing development of the company’s microbiome therapeutics platform. The lower level of cash used in the third quarter, relative to prior quarters, is the result of the streamlining of our investments and focusing of our pipeline implemented earlier this year. Seres ended the third quarter with approximately $83.8 million in cash, and cash equivalents. This figure does not include capital that we obtained with our recent debt financing. We obtained $25 million upon the closing of the agreement late last month and we could also have access to up to an additional approximately $25 million with the achievement of certain milestones. The company’s cash resources are expected to fund operating expenses and capital expenditure requirements, excluding net cash flows from future business development activities or potential incoming milestone payments, into the second quarter of 2021. This cash run rate does not include a $10 million SER-301 phase 1 milestone payment that Seres would be entitled to next year as part of our Nestlé Health Science collaboration. Importantly, we believe our resources are sufficient to enable the company to reach multiple significant R&D milestones we are looking forward to in 2020. We have made considerable progress this year across all areas important to building a sustainable company. We have refocused our clinical strategy and made important advances to these programs. In addition, we have partnered with AstraZeneca to further elucidate the potential of microbiome therapeutics to augment immuno-oncology treatment for cancer. We have streamlined our operations, implemented disciplined financial management, and added key skills and experience to our board of directors. Importantly, we have strengthened our balance sheet with a $61 million equity financing and secured up to 50 million in debt funding to support our R&D efforts. We are closing out 2019 on strong footing and looking ahead, we anticipate a data rich 2020 with important milestones and data readouts. Before opening up the call to your questions, I want to take this opportunity to thank the patients and clinicians involved in our studies, our supportive investor base, and our dedicated and passionate team here at Seres. Operator, let’s open the line for questions.

[Operator Instructions] Your first question comes from Chris Shibutani.

Thank you for taking our questions. Hi. My first question is, can you help us understand the trend for enrollment in the pivotal SER-109 trial, just looking at what you disclosed previously at the end of April, 135 patients or so out of 188 were enrolled and now you’ve reported that at the end of October there were 160, so just extending that without knowing any trends once would think that another six to seven months may be needed for enrollment, can you provide any color on that?

Sure. So, there certainly is variability in month-to-month enrollment and we provided our current estimate, which is based on the latest trends for topline side of results. So, we've had some months that are softer, we’ve had some months which are more firm. In the last couple months, we’ve been pleased that the trend is really positive, but we’re pleased that the study is really now close to fully enrolled. We disclosed this morning that we’re over 85% enrolled. So, that really allows us to narrow the focus of our projections, and, you know, look, I’d say that we are happy to be in the last lap of this clinical study and we’re really looking forward to next year's clinical results. This – the FDA meeting yesterday, I think, further evidence there continues to be an unmet medical need for patients in the space and it’s a need that we think that SER-109 could really fill. So, we’re pleased to be towards the end of this study, and we’re very pleased to be preparing for topline results next year.

Got it, thanks. And we have a second question on SER-287, can you talk about the pros and cons of potentially starting a second potentially pivotal trial for SER-287 before that current potentially pivotal trial is complete?

Yes, I would say, you know, we are focused on the 2b study, which as we said, could be one of two pivot studies based on the feedback from the FDA. I would point out that we’re really looking to replicate the data that we saw in the 1b study, both in terms of the topline clinical result, as well as some of the really interesting microbiome analysis, which correlated with those topline clinical results. So, there’s more to learn and I would say that we – as you remember, we’ve designed a study with both a dose, which replicates the dose that was most efficacious in the 1b study, as well as a step-down dose. So, it’s unlikely that we would move forward with a second pivotal study before seeing the results of this 2b study, which we’re really focused on.

Got it. Very helpful, thank you.

Thanks for the question.

Your next question comes from Terence Flynn with Goldman Sachs.

Hi, this is Holly on for Terence. Thanks so much for taking the question. For the SER-401 Phase 1b data expected next year, what are you hoping to see in orders to advance that program? And can you remind us why you chose melanoma as a first indication and if you considered exploring other tumor types? Thank you.

Sure, Holly. Thanks for the question. I’m going to ask Matt to comment and Kevin, if he can get on the line to maybe provide his views as well.

Sure. So basically, first with respect to why metastatic melanoma, there’s been various different publications over the past couple of years that have explored how the microbiome is associated with improved response to checkpoint inhibitor therapies, and several of those studies point to a potential response in the context of metastatic melanoma. We had developed free clinical data sets in-house that have looked at several different cancer types and metastatic melanoma [indiscernible] we’re using an area where we have been able to recapitulate important free clinical results, which give us confidence in that particular cancer type. As part of our collaboration with AstraZeneca, where the fundamental components of that collaboration is to generate data and acquire data for other potential cancer types and other therapies, and so, that’s an ongoing investigation to identify where the next best opportunities are with respect to a microbiome therapeutic in combination with an immune checkpoint inhibitor. In terms of the Phase 1b study, in that particular study, we are first and foremost evaluating safety of SER-401, and then, we are looking at efficacy in the context of the ability to improve response, and that we are measuring using various resist measurements for measurements of response. And then in addition, we’ll be basically looking at what the microbiome dynamics are post-treatment with SER-401and understanding how those changes modulate post-immunological properties, and in particular, we’re acquiring tumor biopsies, which will allow us to look at specific immunological responses at the tumors themselves.

Great. Thanks, that’s very helpful.

Thanks for the question.

Your next question comes from Mark Breidenbach with Oppenheimer.

This is [Matt] on for Mark. Thanks for taking our questions. So, Eric, I – you know with the spotlight now on donor-drive therapies from that New England Journal paper you mentioned, have you had any additional interactions with the FDA? I mean, have they voiced any concerns around your process?

Yes, let me answer. I’m glad you brought up the question because as I think most people are aware, but if you’re not, there was a forum at the FDA yesterday that talked about FMT, and, you know, overall, I thought it was a good discussion. You heard a number of different points of view. I think it’s helpful for the FDA to hold these types of forums, particularly following some of the safety issues that we’ve seem with FMT and there were a different issues or questions that were addressed, including headwinds to enrollment created by FMT, which is something that we long talked about. But look, Seres position is that in light of the recent reports of Seres adverse events with FMT, the policy of enforcement discretion really could be revisited. It may not be in the best interest of patient safety, but in any case, you heard multiple points of view that strongly agree that when an approved therapy is available, that enforcement discretion may not be appropriate. So, I think the idea of safety is one that’s on everyone’s minds and its one in which we think that we are well situated to provide a solution for patients. I do want to – I’ll ask Matt to comment some of our processes from a manufacturing perspective and why we think we’re differentiated from some other concern that you heard yesterday.

Sure. Thanks, Eric. So, SER-109 is a highly purified composition of spores from commensal bacterial [indiscernible], as such it a fundamentally different product than FMT. The donor screening protocol that we use in combination with our GMP manufacturing process to fractionate and purify the spores on SER-109 yields a drug product that does not contain any vegetative bacteria, including E. coli and pro-carcinogenic bacteria that had been associated with FMT safety risks in the past. In addition, our manufacturing process, in a very meaningful way removes other impurities that are inherent in FMT and may have unknown safety risks, and importantly we’ve conducted validation studies to demonstrate reduction of viruses, parasites, other still component, and we’ve actually have posters on our website that even speak to that. And lastly, SER-109 drug product is released under rigorous GMP identity impurity [indiscernible] assays that include bio-burden testing. In that bio-burden testing, we would pick up any potential problems that were with a particular product.

Got it. Thanks for that insight. And then maybe just a quick housekeeping question, so the updated cash run way that you’ve guided, doe s that include the new debt facility?

It does, Matt. So, into the second quarter of 2021 includes the $25 million, which is the first charge of the debt that we received in closing the transaction last month.

Got it. Thanks for taking our question.

Sure.

Your next question comes from Chris Howerton with Jefferies.

Thanks for taking the question. I guess the first question that I want to start with is, you know, related to 301, I’m getting to the IND stage, what are the gating factors to get into that IND, and what are boxes that you have to check from now until the filing of that? And then, a follow-up to that is should we expect a similar early clinical program similar to [287 or 301]? Or should expect a more traditional type of drug development pathway? And then, I have a couple more as well.

I will – let’s start with the first couple, Chris. And on 301, I’d say that a number of the gating items towards moving to clinical initiation, you know, Matt talked about and certainly the most significant were nominating the consortium itself, as well as some of the CMC activities that, you know, on the clinical path. I’ll ask Matt to comment on that. We have not talked about the design of the study yet, but I can tell you that we’re in the final stages of designing and finalizing that clinical study. So, let me ask Matt to comment and then we can take from there.

And so, we’ve moved – as I noted earlier, we’ve moved SER-301 our lead nomination stage. So, we have the design of the composition and that particular consortium is in manufacturing, as we speak, and is nearing completion, and as soon as we have all the requisite appropriate stability data etcetera, as you know, are required for regulatory filings, we will initiate our filings. In terms of the Phase 1b trial itself, we expect to initiate, as we said, the Phase 1B in early 2020. This trial is intended to assess SER-301 safety, but in addition, we will be evaluating efficacy and drug activity using various microbiome metabolomic and disease relevant host readouts.

And, Chris, I’ll just add, you know, we are incredibly excited about moving forward with SER-301. We’ve talked, I think in depth, in the past that the benefits of our biologically sourced platform providing insights into our synthetic platform, including some of the learnings that we have from our 287 1b study which have been incorporated into the design of SER-301. So, you know, we're excited. Our partners at Nestle are excited and we’re looking forward to moving this as quickly as possible.

Great, thank you for that. So, in terms of 109, just kind of related to the enrollment question asked earlier, you know, what gives you confidence in the timing of the 109 coming in middle of the next year?

Yes, Chris, I think I provided some comments before here, but, you know, we’re more than 85% enrolled in this study and we think that that allows us to really narrow the bands of our projections and gives us confidence in that projection. So, you know, we’re excited to be, as I said, at the final stages of clinical enrollment and we’re even more excited about the opportunity for topline results, not only for this program, but really we think that this will be a significant moment, not just for Seres, but for the microbiome space. So, we’re excited to be moving forward.

Great, thank you. And the last one is related to your debt financing that you did. What would trigger those additional $12.5 million tranches?

Yes, Chris, we provided a – I think a fair amount of detail in 8-K that we filed last night. But basically, we haven’t disclosed exactly what they are, but you can envision that with positive clinical progress, the opportunity to assess additional funds would be unlocked, and, you know, we think that it's really – we’re pleased to have done this transaction. We think it’s a great way to opportunistically support the financial health of the company, provides additional run way. Given where our stock price is, we think that this cost of capital is highly attractive. So, we think, based on the terms of the transaction, we’re pleased about moving forward with that as well.

Great, thank you guys. Thank for taking the questions.

Thanks for the questions, Chris.

Your next question comes from John Newman from Canaccord.

Hi, good morning guys. This is [Justin] filling on for John. Congrats on the progress for the quarter and just had a question on 109, have you had any additional interactions with the FDA on [indiscernible] data from the ECOSPOR trail would be sufficient for filing [indiscernible], if you could give some color there?

Yes, thanks for the question. We have not. I’ll reiterate what we’ve said in the past, which is we’re extremely pleased with the opportunity to provide topline results next year in this study, and based on the fact that it’s a breakthrough therapy, it’s an orphan therapy based on some of the unmet medical needs that I thought was highlighted yesterday at the FDA meeting with positive topline clinical results, we will be very pleased to engage with the FDA in a dialogue about next steps next year after we get those topline results.

Great, guys. Well, thanks for answering my question.

Thanks for the question.

Your next question comes from Vernon Bernardino from H.C. Wainwright.

Hi, good morning everyone, and congrats on the progress. Most of my questions have been asked and answered, but just one question I have is, you have additional cash and you’re focusing on the current programs, including initiation 301, any activities that could be to the investment of other product candidates, not [indiscernible]?

Yes, Vernon, thanks for – good morning and thanks for the question.

Good morning.

The answer is, we are highly focused right now, and we think that next year’s milestones, including the two late stage milestones will be, we believe, potentially transformative not only for the company, but also for the industry, and I think that’s a tremendous responsibility. So, we are continually evaluating how we’re deploying capital in the most effective way to treat patients and to reward shareholders and I’d say that’s not a static exercise, it’s continually ongoing. If there’s ways in which we can move the science forward, the medicine forward, we will explore those ways. But I can tell you that as of now, we’re highly focused on executing on these two last stage clinical results that we think will be significant for the field. You we’ve, as I’ve said, we’ve found a way to work with AstraZeneca in a resource efficient way. There are other opportunities that we have available to us, but again, we’re focused on our late stage clinical results, which we think will be potentially transformative for the field.

Do you anticipate, with the expenses you have, a ramp down so far with the programs you’ve identified and the cuts are earlier and last year that you anticipate any further operating expense efficiencies? Or that’s all built-in that and just allows you to look forward to second quarter 2021?

I think, you know, Vernon, you saw a fairly significant reduction from the burden that we had in Q1 and earlier versus where we’ve been in the last couple of quarters. Our expectation is that that’s the model for going forward and I think that’s how we get into the second quarter of 2021. So, we continue to invest in the best methods, the best investments to help patients and provide return to shareholders. So, that’s where we’re focused.

Perfect. Congrats again on the progress. I’m looking forward to more.

Thanks for the question, Vernon. I appreciate it.

I am showing no further questions at this time. I would like to now turn the conference back over to the company.

Thank you, operator and thank you for your continued interest in Seres Therapeutics and we look forward to keeping you upright of our progress. Have a great morning and a good week. Thanks.

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.