Welcome to Seres Therapeutics First Quarter 2022 Financial Results Conference Call. All participants are in a listen-only mode [Operator Instructions]. I'd now like to turn the conference over to Dr. Carlo Tanzi, Head of Investor Relations. Please go ahead.

Thank you, Amulet and good morning. Our press release with the company’s first quarter 2022 financial results and a business update became available at 7.00 AM Eastern Time this morning, and can be found on the new Investors and News sections of the company’s Web site. I would like to remind you that, we will be making forward-looking statements, including potential approval of SER-109 and its status as a first-in-class therapeutic, the timing of a BLA filing and potential product launch, market for SER-109, our development opportunities and the ultimate safety and efficacy data for our product. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties, which are discussed under the Risk Factor 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 with prepared remarks, I’m joined by Eric Shaff, President and Chief Executive Officer; Dr. Lisa von Moltke, Chief Medical Officer; Dr. Matthew Henn, Chief Scientific Officer; and David Arkowitz, Chief Financial Officer. During the Q&A portion of the call, we will also be joined by Dr. Terri Young, Chief Commercial and Strategy Officer; and Dr. David Ege, Chief Technology Officer. And with that, I’ll pass the call to Eric.

Thank you, Carlo and good morning, everyone. We entered 2022 excited about the opportunity for Seres to bring the first microbiome therapeutic to patients. Throughout the first quarter and in recent weeks, Seres continued to make steady progress across our microbiome therapeutics pipeline. At the center of these advances is our SER-109 program, where we expect to complete a BLA filing in the middle of this year in support of a potential commercial launch in the first half of next year. We believe that SER-109 has the potential to become the first ever FDA approved microbiome therapeutic, a landmark for this emerging class of medicines. Having SER-109 FDA approval, we believe we have the opportunity to fundamentally transform the treatment of recurrent C diff infection and potentially provide patients with a far superior treatment option that is available today. You will recall, our Phase III SER-109 results demonstrated a dramatic reduction in the proportion of recurrency to patients experiencing a further occurrence, demonstrating clear superiority versus antibiotics alone. The Phase III data surpassed statistical thresholds communicated by the FDA and we expect a single clinical study to fulfill efficacy requirements, supporting a BLA filing. The FDA also communicated that our BLA filing should include a safety database of at least 300 subjects receiving a Phase III dose, and with a 24 week follow-up. Our SER-109 open label study is nearing completion and we are looking forward to meaningful clinical results later this quarter. These results will include both safety and efficacy data across a broad group of recurrent CDI patients. As we prepare for a SER-109 BLA filing, we are also continuing to administer SER-109 via an expanded access program. This program enables eligible adults with recurrent C diff infection, including those with the first recurrence to obtain access to…

Thanks, Eric. I'll begin with our SER-109 open label study. This fully-enrolled study includes over 260 individuals with recurrent CDI, who have been administered SER-109. The study enrolled patients with a clinical profile, consistent with those commonly evaluated, diagnosed and treated in clinical practice, including over 25% of enrolled subjects with a first recurrence of CDI. Furthermore, the study allowed for initial CDI diagnosis to be made with either toxin or PCR, reflecting the variability in local medical practices. However, we continue to use confirmatory toxin testing, on all suspected recurrences to ensure data quality and trial rigor. We anticipate the pending data will reaffirm the highly favorable safety profile observed in our Phase III study. In addition, we expect to obtain supportive efficacy results in this open-label setting, including in individuals who have experienced only a first recurrence of disease. We look forward to reporting SER-109 open label study results later this quarter. We also made progress preparing for SER-109 BLA filing. I am pleased to announce that, we recently received feedback from the FDA, where the agency agreed with our proposed ruling BLA submission plan. Our interactions with the FDA continue to be constructive and we expect to begin the BLA filing process in the coming weeks. We anticipate filing completion for the full BLA package, including the required 24 week safety database in mid 2022. Now I'll remind you that SER-109 has obtained breakthrough therapy designation. And as a result, we expect to receive priority review with the FDA. This would result in an expedited review timeline, including a two month BLA acceptance period followed by a six month review period. We therefore anticipate an approval decision in the first half of 2023. I'll now pass the call to Matt.

Thank you, Lisa and good morning. Beyond SER-109, our most advanced program in infection protection is SER-155, which we are developing for individuals receiving allogeneic stem cell transplant. This program represents an additional clinical effort targeting gastrointestinal seeded infections. The patients targeted by SER-155 are at very high risk of serious infections, as well as graft versus host disease, and we believe that SER-155 has the potential to address both issues. We are currently conducting a Phase 1b trial to assess safety, a graphing of bacteria in SER-155 and efficacy of SER-155 alongside our partners and Memorial Sloan Kettering and the University of Chicago. The subjects in this study will be undergoing treatment for hematologic malignancies, such as leukemia. Based on historical data, we expect that over 50% of these patients will experience infection or graft versus host disease. If SER-155 is able to reduce the instance of either of these conditions, we believe we would meaningfully improve health outcome for these patients. The study is designed with two cohorts. The first open label cohort, including 10 subjects is designed to assess safety and a graphing of bacteria in SER-155. We are pleased to announce that the SER-155 Data and Safety Monitoring Committee recently met as part of a planned data review and after evaluating preliminary safety data recommend continuation with cohort one enrollment. This provides important support for a likely favorable safety profile of our novel therapeutics [and] immunocompromised patient populations. Following that first cohort, we plan to enroll a second cohort, including 60 patients in a randomized double blinded design to further evaluate safety and engraftment as well as efficacy. Efficacy will be measured by assessing the rates of bloodstream infections in graft versus host disease. Ideally, we would see reduced incidents of bloodstream infections and/or acute GvDH…

Thanks, Matt. The details of our quarterly financials are included in the press release issued this morning. Seres ended the first quarter of 2022 with approximately $248 million in cash, cash equivalents and marketable securities. This compares with a cash position of $291 million at the end of 2021. With respect to our operating expenses and efforts over the near term, we continue to be focused on a number of critical SER-109 related activities, which include preparing and filing the BLA submission, continuing to ramp up manufacturing operations for commercial supply, including expanding our longer term SER-109 product supply through our Bacthera collaboration, and in conjunction with Aimmune continuing and accelerating launch readiness activities. In addition, we continue you to invest to advance and expand our pipeline with a focus on infection protection opportunities and further build upon and enhance our platforms and capabilities. As a result of these high priority and value generating activities, we expect our expenses to increase in the coming quarters as we approach a potential commercial launch, but at a moderating rate of growth, as we have already expanded our capabilities across much of the organization. In summary, the company is well resourced to prepare for SER-109 commercialization, drive our ongoing development and preclinical programs, while also deploying resources to continue to advance our research platforms where we believe we have differentiated proprietary and sustainable advantages. I’ll now turn the call back to Eric.

Thank you, David. We have an exciting year ahead. As we continue to mature from an R&D focused organization to a commercial entity. This process is already underway and we have several key inflection points along this pathway, including near term SER-109 open label study data, the filing of our complete BLA submission, assignment to the timely PDUFA date given our breakthrough therapy status and continued progress with our pre-launch activities alongside Aimmune. In tandem, we remain focused on advancing the other important infection protection programs in our pipeline. In addition, our R&D engine continues to evaluate other opportunities for our core technologies, as Matt discussed, that will maintain our microbiome leadership position. We look forward to keeping you appraised of our progress in the months ahead. With that now operator we'll open up the call to question.

[Operator Instructions] The first comes from Mark Breidenbach from Oppenheimer.

Just kind of a couple that are all related to the open label extension trial. First and foremost, you mentioned that the FDA is looking for 300 patient safety database. And then I think Lisa said 260 patients were treated with SER-109 in the open label extension. Maybe just comment on the discrepancies, is 260 close enough to 300? And kind of a second question is, whether the results are going to be stratified by diagnosis methodology, PCR versus toxins test, to confirm C difficile. And then, maybe one final part of the question, is on the 25% of patients who had a single recurrent C diff versus multiply recurrent C diff. Is that enough of a population to potentially support a label that's inclusive of first time recurrence? So kind of of a three part question but thanks for telling me what you can.

So let me take that one and clear up any confusion, and I'll ask Lisa take the next two. But let me just provide a little bit of context in history. So as a reminder, when we had the Phase III readout with what was outstanding results, we announced then that the FDA had set a bar, a statistical threshold for us to one single pivotal study. We not only met that bar but we far exceeded it. However, the FDA was looking for at least 300 subjects on what was the successful Phase III dose. At the time, we had, I think, the number was 105, Lisa can correct me if that's wrong. But we had roughly a third of those 300 subjects that were either in the active arm of the Phase III or a handful of subjects that had rolled from the Phase into our open label study. So we had roughly a third. And basically what we did is we designed the open label study to fulfill the residual, to fulfill that two-thirds or roughly 200 subjects that the FDA was looking for to support BLA from a safety perspective. So that was the basis of fulfilling that safety database that has been the kind of critical path item for us on submitting the BLA. We were really pleased with the momentum that we saw in enrollments throughout the course of the open label, which we think is suggestive of the fact, and this is even before the New England Journal article came out, of the fact that the profile that drug is really getting there. So hopefully, that answers the question of the 300. With the 100 that was in the Phase III plus the 260 that is added from the open label, we are well in advance, we think it will be at least 300 that the FDA was looking for. And then maybe I can ask Lisa to talk about stratifying by methodology and then our thoughts on the first occurrence and how the agency might look at that.

It really is in the process of stratification since we -- the patients were being randomized and balanced, but we'll be able to look at PCR versus toxin. I think it's worth saying that a lot of these things are actually algorithms, so PCR plus a GvH or toxin plus a GvH, so it's not as simple as just that. But this is just how patients are diagnosed in the community. And then with regard to your question on the 25%, I think it's important to remember that we've always said that one very important factor in obtaining a broader label is the pathophysiology of the disease. And by guidance, you can see that the agency has the ability and does take that opportunity to broaden a label based on pathophysiology of the disease compared to an expected outcome compared to how the trial was specifically run. So I think the 25% of the data in 013 will be something that they'll look at. I think it's going to be very interesting in support of data, but I think it's going to be a couple of factors. And again, as I primarily said, the fact that the field really see C diff as primary versus everything else. Once you get into the first recurrence, I mean, the reason you're recurring is you've got a microbiome injury and you can look back at some of the papers in the field and you can see vanco rates of recurrence really into the 30%. So it's already a problem at first recurrence.

Our next question comes from Peyton Bohnsack from Cowen.

This is on Peyton on for Joe, and thanks for taking our questions. Kind of maybe just to follow-up on the question that was asked earlier. Is there a specific group of patients that you would think would be like earlier adopters of this therapy? And then kind of with your medical affairs feedback, do you believe that patients would use this in first line or do you expect this to change over time as physicians get more comfortable with the therapy? And then I have a follow-up.

Peyton, could you ask the first question again? I didn't hear -- is there a group of patients that what, could you mind ask -- repeat that please?

Is there a specific group of patients that you would be early adopters in the therapy and then maybe…

So maybe I can start and then ask Lisa or Terri to comment. But I think Lisa just answered in the prior question that the field looks at primary recurrence -- at primary C diff and then recurrent C diff. And we feel strongly that SER-109, given the profile, the safety and the efficacy is appropriate for all recurrent C. diff patients. And I invite Lisa or Terri to comment further.

No, I completely agree. And with regard to early adopters I’ll turn it to Terri.

I think it's important to understand kind of how this disease operates for patients and physicians to really depreciate that question. And patients describe this as a very acute frightening isolating and debilitating condition, and that's upon the primary occurrence. The first time it comes back, the patient becomes very frustrated, fearful. They know that vancomycin or the antibiotic that they were administered didn't work the way that it's supposed to. And they turn up in the physician's office with a very different demeanor than they did the first time. And the physician have the similar experience. It's a bit of, oh God, the disease is back. And physicians refer to this disease is the bane of their existence, because it keeps coming back. This is the number one unmet need in the category, the prevention of recurrences. And it's the number one unmet need despite availability of treatments today. And you can see what SER-109 brings to the table versus standard of care antibiotics in our pivotal results. So we expect across the recurrent patient population that we would have adoption, we believe we can help all 170,000 of annual cases in the US once approved.

We've also seen some programs -- just kind of switching over to manufacturing really quick. We've seen some programs just keep a clinical hold after requirements for additional screening protocols for pathogens. Kind of in your discussions with the FDA, have they mentioned or asked for anything for additional pathogen screening with SER-109 manufacturing?

Peyton, maybe I can start and I'll ask Dave Ege who's with us to comment further. I mean, we said for a long time, maybe even before the Phase 3 read out that we felt that our process was differentiated versus the others were taking. We don't rely only on donor screening. We think that donor screening is inherently reactive. You can screen for the things that you know about, but you can't screen for things that you don't know about, which unfortunately in the last couple of years included SARS-CoV-2. And the FDA actually put out a warning, a year ago March around the potential transmission of SARS-CoV-2 and through [phasing]. So we do think that our process is differentiated. And maybe I can ask Dave to comment further on the question.

And so the direct answer to your question is no, they didn't contact us about that. However, because we have breakthrough, we've been in ongoing conversations with the FDA over the whole development cycle. And we had previously shared with them what Eric alluded to, both our donor screening paradigm, as well as our manufacturing process details, whereby we inactivate pathogens as part of that process. So it's an inherent element of our process from the very beginning that safety is foundational to how we manufacture our products. So we feel very confident as we move this BLA forward.

Our next question comes from John Newman from Canaccord.

So I had a question on SER-155, which you are studying in transplant. Wondered if you could remind us what types of flexibility you have built into the study in terms of testing different levels of dosing, if you can do that? And then also just curious what you hope to learn from this study upon completion. I've seen some of the secondary endpoints or some of the typical things that people look at, acute graft versus host disease. I think you are also filing patients for survival. But just curious as to what you are most interested in learning about as you take this program forward beyond Phase I.

Really excited about 155, thrilled that you are asking about it. Two questions, dosing and then what are we hoping to learn. And maybe I'll ask Lisa to comment first and then perhaps Matt on the scientific side of things.

We haven't been very specific at all yet on dosing other than to say that we’re dosing it in a very intentional way through the course of the transplant process. And with regard to what we are hoping to get from the study, it's important to remember that this is, first and foremost, a safety study. This is a very compromised patient population, medically fragile. It's important for us to confirm what we expect, which is that this will be a safe therapy in those patients. But obviously, we want to see the data, and we will be looking at engraftment as well. And then along with that, we are going to be paying close attention to the incidents of infection of any kind, whether it's bloodstream infections or localized infections, neutropenia fever, graft versus host. And there is a number of different endpoints that we can look at, if any of those hit, that's an interesting signal for us. And unfortunately for the patients, the rate of some of these things is so high that even in a relatively small-ish Phase I study, we expect that there will be enough rate of occurrence that we'll be able to see a signal if it's there.

And I think a couple important additional points, which is, one, as a reminder, our drugs are designed to target multiple different therapeutic pathways. And one thing that we find attractive about the 155 program is that, given the unmet need in this population, success both in either reducing the incidence of bloodstream infections or reducing the incidence of graft versus host disease, combined as well as independently, would be meaningful for these particular patients. And then of course, we have designed this study to be very translationally rich, as we often do, because as you know we deploy a reverse translational strategy and have a platform to really be able to leverage those insights that we get out of human datasets, combining that with learnings on the three clinical side and the tools and capabilities we have there, to really understand how the microbes are specifically course with each other and as well as with the host. And so I think something that's very exciting about this program is the insights that we will get there in terms of both, our ability to impact gut seeded infections and do so in a novel way, as well as around host immune modulation, I think will be meaningful. And I think the last point I'll make is, again, this is a highly immunocompromised patient population. This is the sickest of the sick patients. And we just had a DSMC that gave us the green light to continue dosing patients. And if that safety profile is maintained, I think it really opens up how we can think about deploying this transformative technology in other medically immunocompromised patient population. When you think about the number of patients that are compromised, and one of the leading causes medically of mortality in many of these patient populations, are infections that often are gut seeded. You can think about cancer neutropenia, you can think of about cirrhosis, you can think about ICU patients, huge opportunity.

Next question comes from Chris Howerton from Jeffries.

I think, one question that I've been curious about is that obviously as we've seen different healthcare utilizations over the course of the pandemic, wondering if there's any changes in the rates of recurrent C diff infections that we've been observing epidemiologically. And if so, would there be any expectations of lasting effects of that? As a second question, just wanted to help understand what the capital needs of the company might be to develop the pipeline further? Obviously, given the fact that you have a robust partnership for this program.

Maybe I'll ask Lisa to comment on the first. And we are active in our efforts, which I think will provide some perspective on that. And then maybe I can ask David to comment on how we look at capital and especially on the front end of the pipeline.

I think early on in the pandemic, there was some suggestion that perhaps rates were dropping as people were staying away from medical care in general and medical institutions. But it is quickly back to normal, both with regard to reports that we're seeing in terms of papers but also just physician feedback as people are returning to their more typical medical encounters.

David, do you want to comment on the capital question?

So as we've discussed, we ended the quarter with $248 million in cash. Look, we've got a lot of value generating opportunities ahead of us and in the near-term, and we are ensuring that we're investing appropriately to achieve those. For example, SER-109 approval, we receive $125 million milestone payment from Nestle. Once SER-109 is approved, then we are sharing the profits 50/50 with Nestle, that provides a future cash flow to us. And we've got up to $225 million in sales related milestones and we believe those are very achievable. So we think we've got plenty of opportunities to add to our balance sheet and continue to grow and fund the company in that manner.

The only thing I'll add maybe to David's comment, Chris, is just -- I think 155 is an interesting illustration for us where, at a time when we were really constrained as a company and resources with grit and creativity and partnership, we were able to move that program forward to the point where now we're in the clinic. And the capital requirements for some of these early stage investment tend to be more efficient than the later stage investment. So we do think there's an opportunity to continue planting seeds and having them grow and into what we think is an exciting opportunity in infection protection.

And maybe just as point of clarification, perhaps to you, David, would be as we anticipate an approval and commercial launch for SER-109? Will there be any significant capital investments by Seres to support that launch or activity?

So we are sharing in the expenses. And so there's nothing really out of the ordinary other than sharing in the expenses as it relates to the commercialization of SER-109.

I think maybe it's worth just reminding some of the parameters around the deal, and $125 million approval and just the 50/50 split.

So as I mentioned, $125 million upon approval, once SER-109 is commercialized, we are splitting the profits. We are splitting the expenses 50/50. We are responsible for manufacturing SER-109 that goes into the whole equation, the cost sharing equation. And as we talked about before, this transaction, this deal with Nestle, is a tremendous way to leverage the capabilities that they bring to the table, leverage our knowledge and our expertise and capabilities. But also I think it's financially very attractive and ensures that we are not in a position where we're having to make massive investments to watch a product on our own. So we think this is tremendously efficient and effective.

Our next question comes from Chris Shibutani and that's from Goldman Sachs.

This is [C.J.] on for Chris. Thanks for the updates this morning. I wanted to ask a few more around sort of the regulatory and commercialization process for 109. I know we haven't seen this nearly as much as historically. But do you have any anticipation for the FDA requiring an adcom approval for the regulatory component? And then on the commercialization side, can you provide any more details on the preparations that are ongoing, any feedback from your payer discussions to date? Or give us your thoughts on kind of the expected size of your commercial piece of the organization?

I'll start with the adcom question, or maybe I'll ask Lisa to comment. But the short answer is yes, we would expect that an adcom would happen. But maybe Lisa can comment and then ask Terri to comment on the commercial prep side.

Novel therapy first-in-class, we absolutely are planning for an adcom.

And then Terri, do you want to comment on the commercial prep question.

Well, we obviously scale those on the back of the receipt of the Phase III data in 2020, but I'll focus on a couple of areas where we've really amplified our efforts this year. One is around educating HCPs. We're doing a lot of work there to ensure that physicians understand the role that restoring function of the microbiome plays in preventing future recurrences C diff. And as I mentioned earlier, that's the number one unmet need in the category. So a lot of disease education and in fact, our disease education campaign, just one the nationally prestigious Manny Award, which we were very excited about for best professional web campaign. So I'm quite proud of the team across Seres and Aimmune for that. We're also engaging broadly with our payer audience. And this is a great example of one of the benefits of our co-commercialization agreement with Nestle, the Aimmune division of Nestle already has an existing payer field team that is covering their inline products. So I'm able to deploy that field team early on in the pre-launch process to educate payers around the disease, but also we’re able to educate them about the robust profile of SER-109. And we are hearing feedback from that engagement process with the field team that really mirrors the early research we did with payers. And you may recall from previous discussions that research resulted in a very high clinical value rating from payers and in the neighborhood of somewhat recently approved and commercialized hepatitis C product. So we are hearing great feedback from HCP, the broader swath of them, payers, a broader swath of them. You asked about our commercial structure, we will be deploying the field team at Aimmune and two calls on gastroenterology today. And so we'll be building upon that to cover the highest prescribing infectious disease physicians as well. And obviously, we are building an in-house commercial organization across those companies.

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

Just wanted to get a little bit more detail. You already alluded to the milestone you received with the BLA filing. But you did have some collaboration revenue from related party in the first quarter. Just wondering if you could perhaps describe a little bit what other expectations you may have as far as revenue from the collaboration into 2022?

Maybe I'll ask David just to provide a reminder on the structure of the deal with Nestle and maybe just a review on the milestone, which I think is pretty straight forward.

So the related party revenue that you saw in the first quarter, that relates to the two agreements we have with Nestle. The 2016 agreement we have with Nestle, that is for C diff and ulcerative colitis, ex-North America, and it is the recognition of deferred revenue overtime. And then also in there is a small piece of deferred revenue related to our co-commercialization agreement that we executed with Nestle in the middle of last year. We recognized that overtime as well. So that roughly 1.5 million in revenue is the addition of these two deferred revenue recognition, that's jumped around just from an accounting standpoint in a range of $4 million to $5 million a quarter. And there is some variability just based on the accounting of that. So that's going to continue over the subsequent quarters. And then as we bring in milestones and as we have co-commercialization revenue, once SER-109 is approved, we will have additional revenue.

And as a follow that's related to the line item in your balance sheet, as far as the deferred revenue in the liability section…

Yes.

This concludes our question and answer session. I would now like to turn the conference back over to management for any closing remarks.

Thank you, operator and thanks to everyone for tuning in this morning. We are extremely excited about this next period in the company's evolution. We think that there are exciting milestones ahead and we continue to get closer to fulfilling our mission of serving patients with microbiome therapeutics. So have a great week and we will be in touch soon. Thanks very much.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.