Seres Therapeutics, Inc.

Thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2024 Series Therapeutics Earnings Conference Call. All lines have in place to mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Dr. Carlo Tanzi, Investor Relations. Please go ahead.

Thank you and good morning. Our press release with the company's third quarter 2024 financial results and business updates became available at 7 AM Eastern Time this morning and can be found on the Investors and News section of the company's website. The company has also posted an updated corporate presentation to the website. 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 bow sale, the timing and results of our clinical studies and data readouts, future product candidates, development plans, and commercial opportunities, interactions with regulatory agencies, operating plans, and our cash runway, our ability to generate additional capital, our planned strategic focus, and anticipated timing of any of the foregoing and other statements which are not historical facts. Actual results may differ materially. On today's call with prepared remarks, I'm joined by Eric Schaff, series president and CEO, Morella Thoreau, CFO, Dr. Lisa Von Mulkey, chief medical officer, and Dr. Terry Young, chief commercial and strategy officer. 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.

Thank you, Carlo, and good morning, everyone. The last period has been a particularly eventful time for series, highlighted by two major milestones, 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 and provided resources to support advancement of 0155, our lead clinical candidate. I'll begin my remarks today with a highly encouraging 0155 clinical results from the placebo-controlled cohort 2 from our phase 1b study evaluating 0155 in patients undergoing AlloHSCT. The 0155 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 AlloHSCT. Lisa will review the specific study results in greater detail shortly. Importantly, we believe that 0155 could transform how infection risk in patients undergoing AlloHSCT is managed, meaningfully improving outcomes. 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. Our 0155 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. Importantly, we believe that the results we observed in AlloHSCT represent only a piece of a much larger opportunity. Bacterial bloodstream infections are a major medical problem experienced by multiple patient groups beyond AlloHSCT, including autologous HSCT patients, cancer patients with neutropenia, CAR T recipients, individuals with chronic liver disease, solid organ transplant recipients, as well as patients in the intensive care unit, and long-term acute care facilities. Addressing the issue of BSI's represents a substantial commercial opportunity for Ceres in each of these patient populations. Terry will discuss the commercial potential supported by feedback we've received through market research later on in the call. As a reminder, Ceres wholly owns global worldwide rights for commercializing 0155 and our pipeline candidates, including 0147. We believe our pipeline candidates have the potential to not only protect individuals against bloodstream infections, but also deliver value more broadly in the public health fight against the growing concern of antimicrobial resistant pathogens. To most effectively advance 0155 and AlloHSCT in additional patient populations, we are actively seeking a partner who shares our vision and who would provide financial support and other capabilities to enable us to maximize 0155's broad potential. We have engaged MTS health partners to facilitate the process. Moving on now to the sale of VAUST. In September, we announced completion of the sale of VAUST to Nestle Health Science in exchange for substantial, immediate, and future financial consideration. The agreement supports our longer term corporate strategy to advance our live biotherapeutic drug candidates by bringing meaningful capital into the company, enabling Ceres to retire our debt, streamline our operations, and focus on advancing the next generation of programs to patients in need. VAUST was the first successful medicine to emerge from our core technology platform, the result of over a decade of product development. This effort required our team to overcome many challenges as we created an entirely new therapeutic modality. Our organization developed numerous capabilities during this period, including proprietary manufacturing and analytical methods related to live biotherapeutics. We also worked closely with the FDA to secure approval of this important medication, the first in this new therapeutic class, and we gained important insights into the unique regulatory considerations related to live biotherapeutics. These capabilities will continue to serve the company well as we advance new product candidates. Through the VAUST transaction, Ceres 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. The capital allowed us to retire our debt and will continue to provide Ceres with resources to support the advancement of 0155. I'll now pass the call over to Lisa to expand on 0155 and how we plan to move the program forward.

Thank you, Eric. 0155 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 in patients undergoing AlloHSCT. 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. In September, we reported results from our Phase 1B study of 0155 in AlloHSCT. Study Cohort 2 utilized a randomized, double-blinded, -to-one placebo-controlled design to evaluate further safety, drug strain engraftment, and the incidence of infections, 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. Patients administered 0155 experienced a significantly lower rate of bacterial bloodstream infection than the placebo group, as measured through HSCT Day 100. In the SIR 155 arm, two out of 20 patients experienced a VSI, versus six out of 14 in the placebo arm, resulting in a highly meaningful relative risk reduction of approximately 77%. 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. During the 100-day observation period, febrile neutropenia occurred at a lower incidence in SIR 155 treated patients versus placebo patients, with 13 out of 20, or 65%, experiencing febrile neutropenia, compared to 11 to 14, or 78.6, respectively. In clinical practice, HSCT patients who experience a BSI or febrile neutropenia are aggressively treated, often with broad spectrum antibiotics, as infections are a leading cause of death in alloh-HSCT patients in the first 100 days post-transplant. In our study, we observed a meaningfully lower mean cumulative exposure to systemic antibacterial and antimicotic therapies, with SIR 155 treated patients being administered these drugs for a mean duration of 9.2 days versus 21.2 days for placebo patients. When we adjusted for the time on study, the results remained highly meaningful, and a lower antibiotic exposure rate in the SIR 155 group versus the placebo group. Additionally, SIR 155 was generally well tolerated. This was especially reassuring, given that the patients in the study were highly immunocompromised. No serious adverse events were attributed to SIR 155, and no SIR 155 species were identified in any cultures from any subjects. The study confirmed that SIR 155 and grafted into the GI tract as designed. In summary, these data show important potential clinical benefits associated with SIR 155 across three different measures, along with a favorable safety profile, all of which we believe supports future development. We are working to advance SIR 155 to the next stage of development for AlloHSCT, while exploring opportunities in additional patient populations, such as AutoHSCT, patients with cancer neutropenia, and CAR-T recipients. 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. 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. Additionally, we intend to engage with the agency in the first quarter of next year regarding our clinical development plans for SIR 155 studies. We believe the next study could potentially be a single registration study based on the high degree of unmet need in AlloHSCT and our prior experience with the vouched approval process. We also believe that BSI incidents, as compared to placebo, could be the basis for the potential primary endpoint. Additionally, the study size could be tractable, and we will be informed as to the next steps in study design following our interactions with FDA. That, I will now pass the

call to Terri. Good morning, everyone. As you've heard from Eric and Lisa, bacterial bloodstream infections, or BSI, are major medical problems experienced by multiple patient groups, including allogenic and autologous stem cell transplant recipients, 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. Our first opportunity is to address BSI in AlloHSCT patients, and this could be highly significant for Ceres. In recent market research, HCPs treating these patients rated their concern about infections a six on a seven-point scale, reflecting a high level of concern. While prophylaxis of BSIs with antibiotics is common, antibiotics do not address the root cause, like SIR155 is designed to do. Therefore, infection rates remain quite high and are reportedly increasing, as Lisa shared earlier, due to adoption of PTCi. The course for AlloHSCT patients with BSIs is quite complex, problematic, and costly due to hospital and ICU readmission. 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. Therefore, it should be no surprise that HCPs tell us that a product like SIR155, which can potentially cut infection rates in half, would be transformative and quickly incorporated into standard treatment protocols. Furthermore, since the 40,000 AlloHSCT 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. In summary, while the opportunity to prevent infections in medically vulnerable populations begins with SIR155 and AlloHSCT, it extends to nearby adjacencies within hematologic malignancies for SIR155, as well as to areas outside of oncology for other biotherapeutic candidates. 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 Mirela.

Thanks, Terri, and good morning, everyone. I will review the VAUST transaction terms and impact to the financial statement presentation as well as our quarterly financials. Beginning with the VAUST transaction, at the close on September 30th, Ceres received a payment of $155 million, which was consideration of $175 million, less approximately $20 million related to the settlement of net payables to Nestle from Ceres. Included in the upfront consideration was $60 million related to a prepaid milestone, and $15 million related to an equity investment in Ceres common stock by Nestle. Ceres 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, provided we are in material compliance with the terms of the transition services agreement. We fully retired our debt to Oak Tree using proceeds from the transaction. 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. 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 VAUST business as discontinued operations in the condensed consolidated balance sheet for the comparative period of December 31st, 2023, and historical operating results for the VAUST business are reflected within discontinued operations in the condensed consolidated statement of operations for all periods presented in the 10Q. Ceres reported a net loss from continuing operations of $51 million for the third quarter, as compared to $41 million for the same period in 2023. The higher loss is primarily the result of a loss of $23.4 million associated with the extinguishment of the oak tree debt, which was retired at the completion of the VAUST sale in September, and a reduction in interest income of $2 million, offset by lower operating expenses in the quarter of $15.4 million. In the continuing operations, research and development expenses for the third quarter were $16.5 million, compared with $25.2 million for the same period in 2023. The -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, and cost reduction efforts resulting in overall lower operating costs, such as contractors and consultants. General and administrative expenses in the continuing operations were $12.7 million for the third quarter, compared with $19.4 million for the same period in 2023. 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. Net income from discontinued operations, net of tax, 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. The difference is primarily the result of the gain on the sale of the vast business, net of tax, of approximately $146.7 million, which was recognized upon the completion in September. Moving now to our cash position, as of September 30th, 2024, we had $66.8 million in cash and cash equivalents. 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. We continue to evaluate opportunities to maximize value creation, as we seek to develop our live biotherapeutic programs in various patient groups. We believe there is potential to pursue both internal clinical development and externally supported efforts, including through partnerships, as highlighted by Eric, to evaluate our programs in target populations that could benefit patients and create significant commercial value. 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, Marilla. 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 SERE 155 program, we are especially encouraged by the consistency of related clinical measures we have observed, including the observed significant impact on the rate of bloodstream infections, the reduction in systemic antibiotic exposure, and the observed lower rate of febrile neutropenia. The results support the continued development of SERE 155 and AlloHSCT, a patient group at exceptionally high risk of serious infection and with a substantial need for a new treatment approach. We also believe that our SERE 155 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. Based on our analysis of these markets, we believe a substantial commercial opportunity exists for SEREs to address serious bacterial infections and infection-related negative clinical outcomes in various patient groups, including Allo and AutoHSCT, cancer patients with neutropenia, CAR-T recipients, amongst the others previously mentioned. 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. Furthermore, we believe that SERE 155 and our additional pipeline candidates have the potential to not only protect individuals against bacterial infections, but also deliver value by reducing the proliferation of antimicrobial-resistant pathogens, a serious emerging global health concern. We look forward to continuing to keep you updated on our progress, including our interactions with the FDA and our breakthrough and QIDP applications. Beyond SERE 155, we are also developing another proprietary live biotherapeutic composition, SERE 147, 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. As noted, in the longer term, we are focused on broadening the patient populations for SERE 155, as well as expanding our pipeline. We look forward to updating you as we advance our priorities across SERE 155 and ALOHSCT and the strategic goals we've outlined this morning. With that, operator, please open the call up to questions.

At this time, I would like to remind everyone in order to ask a question, press star, get the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Joseph Assam of TD Cohen. Your line is now open, please go ahead.

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 trial? And 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 SERE 147 and 155, maybe is there a difference in strains or kind of what 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 is the adjacencies, right? It's the idea that the mechanism that we're looking to impact is similar for patients with aloe HSCT as well as auto HSCT as one example. But as it relates to the design of a clinical study, maybe I'll ask Lisa to comment. I would comment that 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 we can hit your second question.

Yeah, we would definitely be looking to have synergies within the clinical trial structure and whether that's a basket study or just more formally having specific arms that might get triggered on the result of an interim analysis in the aloe patient. That will remain to be seen in terms of details, but absolutely and we would not anticipate needing to start over in a phase one, given that the safety that we've established in this population, which is probably the most vulnerable population, was nicely established in our current program.

Yeah, maybe I can just add to that. As we've interacted with KOLs following the second cohort data release, we've heard the interest of thinking about adjacencies from aloe HSCT, so we know that that's on physicians' minds. Joe, and your second question as it relates to 147 or 155 and the compositional differences, I'll ask Matt to comment about 147, but 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.

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 hematocytosine 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 has environmental conditions in the gastrointestinal tract that are quite unique, and so the consortia is actually designed to take that into consideration. So there's formulation and strain selection decisions on that asset to address those challenges.

Great, thank you very much. Thanks for the questions, Joe.

Your next question comes from the line of Tessa Romero of JP Morgan. Please go ahead.

Good morning, team. This is Caroline Pocher on for Tessa Romero with JP Morgan. Thanks for seeking our questions. 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. So as it relates to partnership, we look for several things. One is, of course, capital and support of the program itself, but beyond that, we think about capabilities that could allow us to accelerate bringing CR 155 to patients. So as an example, we know that the next study is likely to be a global study. So expertise, relationships in global sites that could see these patients as part of the next study, 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, we really look for an alignment of values, of interests, of objectives, and someone who really sees the potential of what CR 155 could do for patients. So 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. We obviously wanna move quickly, and we think that there's 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, including manufacturing clinical material for the next study, including selecting the CRO, thinking about the process of identifying and activating new sites. All of that is not being held, but we do look forward to working with someone else and bring this program forward. Last question was steps that we might take if we don't get a partnership. I think 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.

Your next question comes from the line of Ted, 10th Hope of Piper Sandler. Please go ahead.

Good morning. Thank you for taking my question. So I really get the transition and the focus on infections. It makes a lot of sense. I think the data is 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 155 and then focus on 147 and those beyond? Just trying to get a sense for sort of where you see series down the road. Is there the likelihood you would ever take one of these for yourselves? Or do you envision yourselves really being the front end research and discovery arm of these products for larger companies? Thanks, guys.

Yeah, Ted, thanks for the question and it's an interesting one. I think that as we think about where we have created the most value, 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. And we've kind of forged the path on a totally new treatment modality with the FDA with some pretty important learnings, including things like release specs in a totally new area, right? So we think that there's a framework for us to move forward and really become an engine of creating multiple shots on goal for patients. 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. 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 and they included discovery, development, manufacturing, and ultimately commercialization. And think of the Genentex and the Mgen, the Genzymes, the Biogens, et cetera. 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 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. 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, 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.

Yeah, and certainly all the expertise on manufacturing makes a lot of sense, and the ability to manufacture medicine for future partners. Great, I appreciate that, Keller, Eric. Thanks so much.

Thanks for the question, Ted.

I will now turn the call back over

to the management for closing remarks.

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.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.