Q3 2024 Seres Therapeutics Inc Earnings Call
David Arkowitz, John Bohnsack,
Speaker Change: Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience.
Bella: Thank you for standing by. My name is Bella and I will be your conference operator today.
Bella: At this time, I would like to welcome everyone to the Q3 2024 Series Therapeutics Earnings Conference Call.
Bella: After the speaker's remarks, there will be a question and answer session.
Bella: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Dr. Carlo Tanzi, Investor Relations. Please go ahead.
Speaker Change: Thank you and good morning. Our press release with the company's third quarter 2024 financial results and business updates became available at 7 a.m. Eastern Time this morning and can be found on the Investors & News section of the company's website. The company has also posted an updated corporate presentation to the website.
Speaker Change: I'd like to remind you that we'll be making forward-looking statements, including statements about the financial terms and future payments related to the VAL sale, the timing and results of our clinical studies and data readouts.
Speaker Change: Future Product Candidates, Development Plans and Commercial Opportunities, Interactions with Regulatory Agencies, Operating Plans and our Cash Runway, our ability to generate additional capital.
Actual results may differ materially.
Speaker Change: On today's call, with prepared remarks, I'm joined by Eric Shaff, Ceres President and CEO, Marella Thorell, CFO, Dr. Lisa von Moltke, Chief Medical Officer, and Dr. Terry Young, Chief Commercial and Strategy Officer.
Speaker Change: Additional members of the team will also be available during the Q&A portion of the call. With that, I'll pass the call to Eric.
Unknown Speaker 0 Okay.
Thank you, Carlo, and good morning, everyone.
Speaker Change: The last period has been a particularly eventful time for Ceres, highlighted by two major milestones.
Speaker Change: The first being our positive 0155 Phase 1b Cohort 2 clinical results, and the second being the sale of VAUST, which has strengthened our balance sheet and provided resources to support advancement of 0155, our lead clinical candidates.
Speaker Change: I'll begin my remarks today with the highly encouraging SIR155 clinical results from the placebo-controlled cohort 2 from our Phase 1b study, evaluating SIR155 in patients undergoing alo HSCT.
Speaker Change: The SIR-155 data we reported in September demonstrates the potential of this program to reduce the risk of bacterial bloodstream infections, a leading cause of mortality in patients undergoing aloe HSCT.
Speaker Change: Lisa will review the specific study results in greater detail shortly.
Speaker Change: Importantly, we believe that 0155 could transform how infection risk in patients undergoing aloe HSA-T is managed, meaningfully improving outcomes.
Speaker Change: We have applied for Breakthrough Therapy Designation and Qualified Infectious Disease Product Designation, or QIDP, and anticipate having feedback from the FDA by the end of this year on both.
Speaker Change: Our CR155 Phase 1B study data further validates the promise of our live biotherapeutics approach and bolsters our corporate strategy to bring new treatments to medically vulnerable patient groups.
Speaker Change: Importantly, we believe that the results we observed in Aloe HSCT represent only a piece of a much larger opportunity.
Speaker Change: Bacterial bloodstream infections are a major medical problem experienced by multiple patient groups beyond aloe HSCT, including autologous HSCT patients, cancer patients with neutropenia, CAR-T recipients,
Speaker Change: individuals with chronic liver disease, solid organ transplant recipients, as well as patients in the intensive care unit and long-term acute care facilities.
Speaker Change: Addressing the issue of BSIs represents a substantial commercial opportunity for series in each of these patient populations.
Speaker Change: Terry will discuss the commercial potential supported by feedback we've received through market research later on the call.
Speaker Change: As a reminder, Ceres wholly owns global worldwide rights for commercializing CR155 and our pipeline candidates including CR147.
Speaker Change: To most effectively advance 0155 and AlloHSCT in additional patient populations, we are actively seeking a partner.
Speaker Change: who shares our vision and who would provide financial support and other capabilities to enable us to maximize CIR 155's broad potential.
We have engaged MTS Health Partners to facilitate the process.
Moving on now to the sale of the house.
Speaker Change: In September, we announced completion of the sale of Voused to Nestle Health Science in exchange for substantial immediate and future financial consideration.
Speaker Change: Streamline our operations and focus on advancing the next generation of programs to patients in need.
Speaker Change: Vaust was the first successful medicine to emerge from our core technology platform, the result of over a decade of product development.
Speaker Change: This effort required our team to overcome many challenges as we created an entirely new therapeutic modality.
Speaker Change: Our organization developed numerous capabilities during this period, including proprietary manufacturing and analytical methods related to live biotherapeutics.
Speaker Change: We also work closely with the FDA to secure approval of this important medication, the first in this new therapeutic class, and we gain important insights into the unique regulatory considerations related to live biotherapeutics.
Speaker Change: These capabilities will continue to serve the company well as we advance new product candidates.
through the VALS transaction.
Speaker Change: Serious has received a meaningful immediate capital infusion, and we expect to receive payments of approximately $73.5 million in 2025, and we are eligible to receive future milestone payments upon certain net sales targets.
Speaker Change: The capital allowed us to retire our debt and will continue to provide series with resources to support the advancement of 0155.
Speaker Change: I'll now pass the call over to Lisa to expand on SIR 155 and how we plan to move the program forward.
Thank you, Eric.
Lisa: SIR155 is a live biotherapeutic product designed to decolonize specific GI pathogens and improve epithelial barrier integrity to prevent bacterial bloodstream infections, including those involving pathogens with antimicrobial resistance.
Inpatients undergoing Allo HSDT.
Lisa: Notably, infection rates appear to be increasing in this patient population as a result of the growing use of post-transplantation cyclophosphamide, often termed PTCI, to prevent GVHD.
Lisa: Study Cohort 2 utilized a randomized, double-blinded, one-to-one, placebo-controlled design to evaluate further safety, drug strain engraftment, and the incidence of infection.
Lisa: Particularly bacterial bloodstream infections, as well as medical consequences such as incidence of febrile neutropenia and cumulative antibiotic exposure.
We were very pleased with the efficacy results.
Lisa: Patients administered CR155 experienced a significantly lower rate of bacterial bloodstream infection than the placebo group as measured through HSCT day 100.
Lisa: In the SEER 155 arm, 2 out of 20 patients experienced a BSI, versus 6 out of 14 in the placebo arm, resulting in a highly meaningful relative risk reduction of approximately 77%.
Lisa: This corresponds to an odds ratio of 0.15 with a p-value of 0.0423, and we believe this result is very clinically meaningful.
The End
Lisa: During the 100-day observation period, febrile neutropenia occurred at a lower incidence in CR155-treated patients versus placebo patients, with 13 out of 20, or 65%, experiencing febrile neutropenia compared to 11 of 14, or 78.6, respectively.
Lisa: In our study, we observed a meaningfully lower mean cumulative exposure to systemic antibacterial and antimicotic therapies.
Lisa: When we adjusted for the time on study, the results remained highly meaningful, and a lower antibiotic exposure rate in the CR155 group versus the placebo group.
Additionally, CR 155 was generally well tolerated.
Lisa: This was especially reassuring given that the patients in the study were highly immunocompromised.
Lisa: No serious adverse events were attributed to SIR 155, and no SIR 155 species were identified in any cultures from any subjects.
Lisa: In summary, these data show important potential clinical benefits associated with CR 155 across three different measures, along with a favorable safety profile, all of which we believe supports future development.
Lisa: We are working to advance CR 155 to the next stage of development for LOHSCT while exploring opportunities in additional patient populations such as auto HSCT, patients with cancer neutropenia, and CAR T recipients.
Lisa: Based on the results observed and significant unmet need, as Eric noted, we have requested breakthrough therapy designation and QIDP designation with the FDA, and we anticipate hearing responses from the agency by the end of the year.
Lisa: The receipt of these designations could provide important benefits, with the potential to expedite development and review through mechanisms such as frequent engagement with the agency and priority review.
Lisa: Additionally, we intend to engage with the agency in the first quarter of next year regarding our clinical development plans for CR 155 studies.
Lisa: We believe the next study could potentially be a single registration study based on the high degree of unmet need in LOHSCT and our prior experience with the vouched approval process.
Lisa: We also believe that BSI incidence, as compared to placebo, could be the basis for the potential primary endpoint.
Lisa: Additionally, the study size could be tractable and we will be informed as to the next steps and study design following our interactions with SBA.
With that, I will now pass the call to Terry.
Terry Young: Good morning everyone. As you've heard from Eric and Lisa, bacterial bloodstream infections or BSIs are a major medical problem experienced by multiple patient groups including allogenic and autologous stem cell transplant recipients.
Terry Young: CAR T recipients, other cancer patients with neutropenia, individuals with chronic liver disease, solid organ transplant recipients, as well as patients in the intensive care unit and long-term acute care facilities.
Terry Young: Our first opportunity is to address BSIs and LOHSCT patients, and this could be highly significant for CERES.
Terry Young: In recent market research, HCPs treating these patients rated their concern about infections a 6 on a 7 point scale, reflecting a high level of concern.
Terry Young: While prophylaxis of BSIs with antibiotics is common, antibiotics do not address the root cause like CR155 is designed to do.
Terry Young: Therefore, infection rates remain quite high and are reportedly increasing, as Lisa shared earlier, due to adoption of PTCI.
Terry Young: The course for AlloHSCT patients with BSIs is quite complex, problematic, and costly due to hospital and ICU readmission.
Terry Young: In fact, incremental costs were estimated at $180,000 per patient using cost data from 2016.
This would clearly be much higher in today's dollars.
Terry Young: Therefore, it should be no surprise that HCPs tell us that a product like SEER 155, which can potentially cut infection rates in half, would be transformative and quickly incorporated into standard treatment protocols.
Terry Young: Furthermore, since the 40,000 AlloHSCP patients are treated in a subset of large oncology centers across the globe, it is possible to reach and educate HCPs about a transformative new option in a rapid and efficient manner.
Terry Young: In summary, while the opportunity to prevent infections in medically vulnerable populations begins with CR155 and Aloe Hsct,
Terry Young: It extends to nearby adjacencies within hematologic malignancies for CR155, as well as to areas outside of oncology for our other biotherapeutic candidates.
Terry Young: Considering all the target patient populations for which we see potential, our strategy could deliver multiple highly significant blockbuster opportunities. With that I'll now pass the call to Marella.
Thanks, Keri, and good morning, everyone.
Marella Thorell: I will review the VALS transaction terms and impact to the financial statement presentation as well as our quarterly financials.
Marella Thorell: Beginning with the vouched transaction at the close on September 30,
Series received a payment of $155 million.
Marella Thorell: which was consideration of $175 million, less approximately $20 million related to the settlement of net payables to Nestle from Ceres.
Marella Thorell: Included in the upfront consideration was $60 million related to a prepaid milestone and $15 million related to an equity investment in Series Common Stock by Nestle.
Marella Thorell: Series is also due to receive installment payments of $50 million in January 2025 and $25 million, less approximately $1.5 million in employment related payments in July 2025.
Marella Thorell: We fully retired our debt to Oaktree using proceeds from the transaction.
Marella Thorell: Additionally, following the transaction, the company's headcount decreased by 100 team members to a team of approximately 100, principally due to manufacturing and quality team members transitioning from Ceres to Nestle Health Science.
Marella Thorell: The company is well positioned to progress our strategy more efficiently with a lower cash burn rate. We continue to identify and implement further cash preservation actions.
Now turning to our quarterly financials.
in the September 30th, 2024 financial statements.
The company has classified the Valst business as discontinued operations
2023.
Marella Thorell: And historical operating results for the vouched business are reflected within discontinued operations in the condensed consolidated statement of operations for all periods presented in the 10-Q.
Marella Thorell: and a reduction in interest income of $2 million offset by lower operating expenses in the quarter of $15.4 million.
Marella Thorell: The year-over-year decrease was primarily driven by lower personnel costs as a result of the restructuring plan announced in the fourth quarter of last year.
Marella Thorell: and cost reduction efforts resulting in overall lower operating costs, such as contractors and consultants.
Marella Thorell: The decrease was primarily driven by lower personnel costs, again as a result of the aforementioned restructuring plan, and lower headcount-related operating costs, such as IT, along with lower professional fees.
Marella Thorell: was $139.8 million for the third quarter of 2024 as compared with a net loss of $6.8 million for the same period in 2023.
Marella Thorell: The difference is primarily the result of the gain on the sale of the vouched business, net of tax, of approximately $146.7 million, which was recognized upon the completion in September.
Marella Thorell: Moving now to our cash position. As of September 30th, 2024, we had $66.8 million in cash and cash equivalents.
Marella Thorell: Based on existing cash, projected installment payments to be received in 2025, ongoing transaction-related obligations, and current operating plans, we expect to fund operations into the fourth quarter of 2025.
Marella Thorell: We continue to evaluate opportunities to maximize value creation as we seek to develop our live biotherapeutic programs in various patient groups.
Marella Thorell: We believe there is potential to pursue both internal clinical development and externally supported efforts, including through partnerships, as highlighted by Eric.
Marella Thorell: to evaluate our programs in target populations that could benefit patients and create significant commercial value.
Marella Thorell: A partnership could deliver both financial and other capabilities and accommodate sharing of development costs while enabling us to realize the commercial value of our products across multiple patient populations.
I'll now pass the call back to Eric.
Thank you, Marella.
Eric Shaff: We are excited about the progress we have made to our pipeline, as well as the actions that we have taken with the sale of Vaust in support of our future strategy.
With regard to the 0155 program.
Eric Shaff: We are especially encouraged by the consistency of related clinical measures we have observed.
Eric Shaff: including the observed significant impact on the rate of bloodstream infections.
Speaker Change: The Reduction in Systemic Antibiotic Exposure and the Observed Lower Rate of Febrile Neutropenia.
Speaker Change: The results support the continued development of 0155 and AllohSCT, a patient group at exceptionally high risk of serious infection and with a substantial need for a new treatment approach.
Speaker Change: We also believe that our CR155 data validates our broader corporate strategy to bring live biotherapeutics to medically vulnerable groups at risk of bacterial bloodstream infections, a major unmet need in multiple patient groups.
Speaker Change: Based on our analysis of these markets, we believe a substantial commercial opportunity exists for CERES to address serious bacterial infections and infection-related negative clinical outcomes in various patient groups, including aloe and auto HSAT.
Speaker Change: Cancer Patients with Neutropenia, CAR T recipients, amongst the others previously mentioned.
Speaker Change: These represent large patient populations with substantial needs for new approaches to address the high risk of bacterial infections, many of which have severe consequences.
Speaker Change: Furthermore, we believe that CERV 155, and our additional pipeline candidates, have the potential to not only protect individuals against bacterial infections, but also to protect themselves and their families. Thank you.
Speaker Change: but also deliver value by reducing the proliferation of antimicrobial-resistant pathogens, a serious emerging global health concern.
Speaker Change: We look forward to continuing to keep you updated on our progress, including our interactions with the FDA and our breakthrough and QIDP applications.
Speaker Change: Beyond SIR155, we are also developing another proprietary live biotherapeutic composition, SIR147.
Speaker Change: Designed to Prevent Bacterial Bloodstream Antimicrobial Resistant and Spontaneous Bacterial Peritonitis Infections in Patients with Metabolic Disease, including Chronic Liver Disease, and we are Advancing IND Enabling Activities.
Speaker Change: As noted, in the longer term, we are focused on broadening the patient populations for SIR 155, as well as expanding our pipeline.
Speaker Change: We look forward to updating you as we advance our priorities across CEDAWR 155 and ALO-HSAT and the strategic goals we've outlined this morning.
With that, Operator, please open the call up to questions.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Joseph Othome of TD Cohen. Your line is now open. Please go ahead.
Speaker Change: Good morning and thank you for taking my questions. Maybe the first one on some of those additional patient populations that you mentioned, the auto HSCT and cancer neutropenia, I guess, would these each be separate phase one studies or could you do sort of a basket?
Speaker Change: Is this something that you would do independently from a partner or is this something that you would like to help from a partner with as well? And then second, just on the difference between CR 147 and 155, maybe is there a difference in strains or kind of what's sort of the composition difference between those two molecules? Thank you.
Yeah, Joe, good morning and thanks for the questions.
I think one of the really interesting aspects of 155
Speaker Change: is the adjacencies, right? It's the idea that the mechanism that we're looking to impact is similar.
for patients with
As it relates to the design of a clinical study,
Speaker Change: Maybe I'll ask Lisa to comment. I would comment that, you know, we always refrain from getting ahead of the FDA. We have applied for breakthrough QIDP, as we've said. We await the responses of those applications. But let me ask Lisa to comment, and then we can answer your second question.
was nicely established in our current program.
Lisa: Yeah maybe I can just add to that as we've interacted with KOLs following the second cohort data release.
Lisa: We've heard the interest of thinking about adjacencies from from aloe HSAT. So we know that that's on on physicians mind
Lisa: Joe, in your second question, as it relates to 147 or 155 and the compositional differences, I'll ask Matt to comment about 147.
Lisa: We have not disclosed what those specific strains are between 147 and 155, but maybe I can ask Matt to comment on 147, the design of 147, and perhaps what we're hoping to achieve with it.
Speaker Change: Sure. Good morning, Joe. So, 155 and 147 are different consortia of bacteria in the context of 155. You know that that was designed to target a particular set of bacterial pathogens that are commonly found in hematic stem cell transplant patients, as well as have an impact on epi barrier. In the context of 147, chronic liver disease, we're talking about an overlapping but distinct set, as well, of pathogens that exist and are commonly causing problems in liver disease patients. So, 147 is optimized to address that set of pathogens. It does also have that capacity around epithelial barrier. So, those are kind of the two of the main differences. And then, in addition, the 147, the chronic liver disease patient population,
Speaker Change: has environmental conditions in the in the gastrointestinal tract that are quite unique and so the consortia is actually designed to take that into consideration so there's there's formulation and strain selection decisions on that on that asset to address those challenges.
Great. Thank you very much.
Thanks for the questions, Joe.
Speaker Change: Your next question comes from the line of Tessa Romero of J.P. Morgan. Please go ahead.
Speaker Change: Good morning, team. This is Caroline Pocher. I'm for Tessa Romero with JPMorgan. Thanks for taking our questions.
Speaker Change: Just a few from us. We're just curious if you could provide a little bit more color on the profile of an ideal potential partner for CR 155 and what the potential terms you are targeting for a potential partnership. Is there an internal timeframe by when you would seek to finalize a partnership for CR 155? And what would be the steps you could take in the event a partnership does not materialize?
Caroline, good morning and thanks for the question.
As it relates to partnership,
You know, we look for for several things. One is
Speaker Change: Of course, capital and support of the program itself. But beyond that, we think about capabilities that could allow us to accelerate bringing 0155 to patients. So, as an example, we know that the next study is likely to be a global study.
expertise, relationships.
Speaker Change: in global sites that could see these patients as part of the next study. You know, that's one example of a way in which we think we could work with someone else to move more quickly than we can move ourselves. Beyond that, you know, we really look for an alignment of.
Speaker Change: Values of Interests, of Objectives, and someone who really sees the potential of what 0155 could do for patients.
Speaker Change: So, you know, as we think about that basket of attributes, those are some of the parameters that we think about that guides this partnership process. As it relates to timeline, it's hard to guide. We've been through several partnership processes in the past.
Speaker Change: We obviously want to move quickly and we think that there's...
Speaker Change: Certain judgments as it relates to the design of the next study and interactions with the FDA that we'd like to do with a partner, but these processes don't always move in a straight line from point A to point B, and they're not always predictable as it relates to timing. So we're doing the things that we need to do to move forward with the study.
Speaker Change: including manufacturing clinical material for the next study, including selecting the CRO, thinking about the process of identifying and activating new sites.
Speaker Change: All of that is not being held, but we do look forward to working with someone else and bringing this program forward. Last question was steps that we might take if we don't get a partnership.
Speaker Change: The short answer is we're focused on getting a partnership. That's where our attention is and our focus is, and we're excited about the prospect of moving forward with a partner on 155 and being able to move forward with other areas within our portfolio.
Great, thank you so much. Thanks for the question, Caroline.
Speaker Change: Your next question comes from the line of Ted Tenth Hope of Piper Sandler. Please go ahead.
Good morning. Thank you for taking my question.
Thank you. Bye-bye.
Speaker Change: I really get the transition and the focus on infections. It makes a lot of sense. I think the data supporting this. I'm trying to get a sense for sort of how you see series maybe three to five years down the road now with multiple of these targeted
Programs in Development,
Is the goal here to maybe partner 1-5-5 and then...
focus on 147 and those beyond.
Speaker Change: Just trying to get a sense for sort of where you see Ceres down the road. Is there the likelihood you would ever take one of these for yourselves, or do you envision yourself really being the front end research and discovery arm of these products for larger companies? Thanks, guys.
Speaker Change: Yeah, thanks for the question. And it's an interesting one. I think that
Speaker Change: As we think about where we have created the most value.
Speaker Change: At least to date in the company's history, it's been in the collaboration, the innovation, the calculated risk-taking, and kind of the pioneering in a new field, right? And that, by definition, I think, tends to be on the front end of drug development, the discovery and the development.
Speaker Change: And, you know, we've kind of forged the path on a totally new treatment modality with the FDA with some pretty important...
Speaker Change: learnings, including things like release specs in a totally new area, right? So we think that there's there's a framework for us to move forward and really become an engine of creating multiple shots on goal for patients.
Speaker Change: 0155 is definitely the first one, but we're excited about 147, we're excited about other opportunities to prevent infections in medically vulnerable patient groups.
Speaker Change: I will say, in my personal opinion, if you think about the history of the biotech space, the really important legacy companies that have created sustainable, significant value, many of those were vertically integrated.
Speaker Change: Discovery, Development, Manufacturing, and ultimately Commercialization. Think of the Genentechs and the Amgens, the Genzymes, the Biogens, etc.
Speaker Change: We absolutely have an aspiration to do that. I think that there are certain indications that we're working on and thinking about.
which have targeted...
Call Points.
Speaker Change: And actually could be, really could lend themselves to the idea of ending up in that state where we have a small focused commercial footprint that really knows the science, really knows the physicians that are the prescribers for these different infections and these different patient populations.
Speaker Change: So that's our goal. But in the short term, obviously, we're focused on driving shareholder value in the best way that we can. And for now that as a function of the Nestle transaction and kind of remaking the company in a more streamlined fashion, it's really focused on the R&D side.
Speaker Change: Yeah, and certainly all the expertise on the manufacturing, it makes a lot of sense, and the ability to manufacture medicine for our future partner. Great. I appreciate that, Carlo and Eric. Thanks so much. Thanks for the question, Ted.
Speaker Change: I will now turn the call back over to the management for closing remarks.
Speaker Change: Thank you, Operator, and thanks to all of you for joining us this morning. We look forward to connecting with you soon. Have a great week. We'll connect soon. Thanks very much.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.