Seres Therapeutics, Inc. (MCRB) Earnings Call Transcript & Summary

Great. Good afternoon, everybody. Thank you for joining us. I'm Terence Flynn, the biopharma analyst at Goldman Sachs, and we're very pleased to have Seres Therapeutics with us. Today from the company, we have Eric Shaff, President and CEO; Matt Henn, Chief Scientific Officer; and Lisa von Moltke, who's Chief Medical Officer. Thank you all for joining us. Really appreciate your time today. Maybe just to get started, I was wondering if you could just give a brief overview of the company and the current development programs for those of us that aren't as familiar with the company.

Sure, Terence, and thank you, again, for having us here today. Thanks to Goldman for having us here to talk about Seres and what we think is going to be an incredibly important year for the company and for the microbiome space. Before I start, I'll just note, we will be making forward-looking statements. So as usual, please refer to our risk factors and safe harbor statement in our last 10-Q. So pleased to be joined by Lisa and Matt, as you introduced, and look forward to the discussion. So Terence, to your question, Seres is leading the microbiome space, and we think of this year as a critically important year and in some ways, a tipping point for the microbiome sector. We get the question frequently, what moves hearts and minds in a new field. And in our view, it's late-stage data and line of sight to a BLA. And we're fortunate to have the opportunity and I would say, the responsibility to deliver this late-stage data set with our SER-109 program this summer. So just to take you through the pipeline, it starts with SER-109 for recurrent C. diff infection currently in a Phase III study. SER-109 is an orphan breakthrough designated program by the FDA, and as I noted, we do expect the data readout this summer. SER-287, where we are actively enrolling patients in a Phase IIb study following our really encouraging results from our Ib study, as designed, the FDA has told us that this IIb study could be 1 of 2 pivotal studies with compelling clinical results. So we're excited by SER-287. SER-301, which is the fermented designed approach to IBD or follow-on to SER-287 where we are working to enroll patients; SER-301, which is a fermented designed approach to IBD where we intend to initiate clinical development in Australia and New Zealand; SER-401, which is intended to increase the efficacy of checkpoint inhibitors in immuno-oncology; and then lastly, SER-155, which is approaching an IND for infection, bacteremia and GvHD, utilizing our design fermented technology program. So we are excited about this year. We think that SER-109 is really the tip of the iceberg. We're particularly excited about the opportunity with SER-109 in recurrent C. diff infection, but we're also excited about the read-through to the rest of the pipeline. So that is the overview of our current development programs, and we're excited to move forward with it.

Great. Well, definitely, interesting times for the microbiome space. I guess just from a big picture, maybe just remind us how your platform differs from some of the other players because I know that's a question we get a lot as well is just how to think about the different approaches that companies are taking in the space.

Yes, sure, Terence. First, I'd say we expect this to be a big field, right? And we're here to help patients, and we think that there is room for different approaches and different technologies to be successful. I do think that there are aspects of what we have built over time, which relate to scientific leadership, so the rigor of our studies, including our requirement of using toxin for our SER-109 Phase III study, capabilities such as CMC and our microbiome sciences group. On the CMC side, I think many people don't realize that this is not commoditized. If you think about gene therapy maybe as a comparator, a number of people didn't realize that manufacturing was actually a strategic asset for gene therapy and until they look to access it and realize that it wasn't available off the shelf. I think there's a similarity with the microbiome and also our microbiome sciences group. I think we have insights into the organisms that we deploy and their properties and their functions, which are really field leading. So we also leverage human datasets in designing trials but also advancing the next-generation technologies to help patients, including our fermented programs. And we're excited about our approach with SER-301 which, again, is the follow-on to SER-287, and hopefully, we can talk about a little bit later.

Great. Well, maybe just to dig into a lead program, 109, obviously, you mentioned Phase III data is imminent and then followed by a potential BLA filing. Maybe just again give us a little bit of the background about the drug and how it differs from FMT, which is the current approach for multiply recurrent C. diff.

Sure. So SER-109 is a consortia of bacteria in spore form, and it's formulated as an oral, right? And we believe that FMT is helpful in the sense that it provides proof of concept with mechanism, but there are real-world limitations. And we actually held a SER-109-focused investor event 2 weeks ago, which is still available on our website. I would encourage folks, if you haven't had a chance to look at it, please do so and I think it goes into a fair amount of depth. But you have limitations around FMT certainly related to safety. It's not easy to manufacture. It's not approved. It's being made available under enforcement discretion. And of course, route of administration we think is suboptimal relative to an oral. So in SER-109, we utilize only the spore fraction in our GMP process, which also includes pathogen deactivation steps, including our treatments with ethanol. And Terence, we get the question all the time, why not give the full spectrum. We believe that the spore fraction is the active, but more than ever, I think the answer of why we don't give the full spectrum really relates to safety. We've seen a number of different safety events through the transmission of pathogens through FMT, and we think that the FDA is really looking to approve a product here. So let me pass it over to Lisa to comment on some of the safety issues related to FMT and perhaps our approach using toxin, which is another differentiator.

Yes, sure. So the safety concerns around FMT, as Eric noted, have been noticeably growing. And since last spring, the FDA has issued a couple of safety alerts now around initially bacterial pathogens and these were unfortunately accompanied by some patient deaths. But more recently, FDA has been worrying about the potential risk of transmission of SARS-CoV-2. And that's because the virus is now known to be detected in the feces and can persist long after respiratory shedding stops. So the increased risk, the recognition of the risk really highlights that the donor screening alone, which is a necessary first step, is really insufficient. The Seres manufacturing process really mitigates risk further with pathogen inactivation and inactivation and clearance steps that have been validated against a panel of not only vegetative bacteria but viruses, fungi and parasites. And this really makes the SER-109 product much less susceptible to any kind of unrecognized or emergent pathogens such as SARS-CoV-2. So then with regard to efficacy, we're similarly rigorous around that, and we require an actual toxin test to verify that C. diff toxin and C. diff disease is actually present as opposed to a PCR or a less rigorous approach. And we believe that this is going to give us the most robust dataset for recurrent C. diff patients that's actually out there. And this is of course important because when you try to marry up risk and benefit, if you've got something like FMT where the efficacy rates are all over the place as are the doses and the routes of administration, it makes that very hard to calculate a risk-benefit analysis.

Great. Maybe the one thing that I think people have been focused on is just some of the key changes here that were made from the Phase II trial that didn't show a benefit to the Phase III program and why you guys are so confident in achieving a positive outcome this time around. And so maybe you could just remind us of that kind of several of the key changes that were made and how you think about the impact that you're going to have on the ongoing study and hopefully seeing a different outcome here.

Yes. Terence, great question. So let me take the first, and then I'm going to ask Matt Henn to comment on the changes. And then we'll come back to our confidence around the Phase III at the end. So Lisa just talked about the importance of toxin testing. As you remember, we had patients in the Phase II that were PCR positive and cytotoxin negative. We disclosed throughout the Phase III that we continue to have patients that came in that were PCR positive and cytotoxin negative. So we think that requiring toxin both at inclusion in the study as well as what we call the recurrence is likely to give us the most reliable, most interpretable, clearest dataset in the field. The other major change that was made between the Phase II and the Phase III related to the dose that we use. So let me ask Matt to comment on that, and then I'll come back to our overall outlook on the study.

Sure. So a critical learning from our Phase III -- II study when we dug into the data, we realized that if a subject was to recur, they recurred very early after treatment. In fact, 50% of our subjects that recurred in that study recurred within the first 11 days. In addition, when we went and looked at the microbiome dynamics in these patients after treatment and how the various bacteria that we are giving to patients via SER-109 engraft, meaning they germinate and populate in the gut, we also saw that the larger number of subjects that were engrafted, particularly by 1 week after treatment, was associated significantly with patients that did not recur. So when we originally established the Phase II dose, it was done based on the kinetics of engraftment through 8 weeks, which was the endpoint and was the target to look at based on discussions with KOLs. But the Phase II data actually supports that the therapeutic window for a microbiome therapeutic, which is a novel modality to treat CDI, is early after the completion of antibiotic treatment to control C. diff. So in light of these insights, we reevaluated the engraftment data from our Phase Ib dose-ranging data that included subjects administered both a high dose over multiple days of dosing. And when we reevaluated those data and compared what looked like in subjects who received that higher dose versus subjects who received the lower dose in the Phase Ib or a dose comparable to what was used in the Phase II, we realize that the dosing should be increased to get the kinetics of engraftment that were required to have that quick, rapid response and onboarding of the drug. So based on this, we've actually increased the total dose in the Phase III study significantly. And in addition, before we made that final decision, we worked with Dr. Mark Wilcox and evaluated the Phase II versus the Phase III dose in a bioreactor system that simulates the human gut and confirmed in that system that improved engraftment and prevention of C. diff growth was better with the Phase III dose.

And Terence, let me come back to the second part of your question, which is our overall outlook. And look, I would say this is a new field. We have been at the forefront of it. We learned quite a bit from the Phase II study as we described with both dosing and diagnosis. What we're looking for is an efficacy read that has a clinically compelling and statistically significant delta between treatment and placebo, and we're also looking and expecting to have a safety profile, which is comparable to that of the other -- the earlier trials, which, of course, is favorable. So why are we confident? We're taking the scientifically rigorous approach. We have a fundamental belief in the role of the microbiome in C. diff, in part, based on FMT as our proof of concept. We have data points, including when we redesigned the trial at the time, the overall recurrence rate or open label data. But if we are clinically successful, I'm particularly excited that it will fill -- fit a need based on, first, the patient population that really needs a new solution. Second is really based on safety, which is clearly in view and I think will set us up for success both commercially and with the regulators. And lastly, as Lisa described, our reliance on toxin testing, which I think gives us the most rigorous data set possible. So that's why we are looking forward to this top line result.

Okay. Understood. Anything in terms of timing that you can share? And any more refinement in terms of when we might see the day? I think you guys have said midyear, but anything more specific?

At our investor event a couple of weeks ago, we said summer. So obviously, we're coming closer and closer to that endpoint. So we do look forward to top line results this summer.

Okay. And then I guess the other question is just that you guys have said, again, pending the data, this could support a BLA filing on one study alone. And so how quickly would you be able to have the conversations with the regulators regarding the data and then be able to kind of circle back with the street so just as we think about the likelihood that this single study would be sufficient for approval?

Sure. So remember, this is -- it's a breakthrough designated program. It's an orphan designated program. We will move aggressively to meet with the FDA following a top line result to discuss the next step, which we would expect will be in the second half of this year. So as always, turn -- of course, we don't speak for the FDA, but we do think that they're looking for action here. And I think that the meeting that the FDA held in November following the first patient deaths from the transmission of a pathogen through fecal transplant, I think, is just illustrative of the fact that they are looking for a solution in the space. And specifically, a rigorously tested GMP manufactured solution, which is what we're hoping to provide with 109. So we'll get the top line data set in the summer. And certainly, we will aggressively move to meet with the FDA following that top line data set.

Okay. Great. And I guess the last one, the trial is just any preliminary thoughts on how much more data on kind of the primary endpoint you'd share in the press -- be on primary endpoint for efficacy and safety? Any more details on other endpoints that we could get insight on in the initial release? Or is that something we'd have to wait for until presentation at a conference or a publication?

Yes. I think it's probably a good summary, Terence. And certainly, we have precedence for releasing data. Obviously, we're looking to be as scientifically rigorous as possible, so I would expect the preliminary efficacy data and safety. Obviously, we're always interested in the microbiome analysis to complement the clinical analysis, but the microbiome analysis will likely be gated. We can't start that without unblinding the head of the clinical data readout. So there likely will be sometime between top line clinical results at 8 weeks and then the microbiome analysis that will follow at some point thereafter.

Okay. Understood. And then obviously, the other important piece of it is just the commercial opportunity. And so I'm assuming you guys have -- you already did some initial payer work, market research. But maybe anything more recent you can share as we think about the size of the opportunity, the potential reimbursement dynamics and then also your relevant respective commercial investment ahead of a potential launch and kind of what that looks like from a number of people perspective?

Yes. So just for background, C. diff is a major health care issue in the U.S. and globally. In the U.S., there are over 400,000 C. diff patients, approximately 170,000 recurrent patient population, which is the group that we're looking to help with SER-109. And of course, as I mentioned, C. diff is a worldwide issue. The treating physicians, Terence, are usually certain ID docs and certain GI docs. It's a relatively specialized call point, and we have been considering and investing in some of the longer lead time items, which are necessary to put us in the best position to move forward with positive clinical data, so payer research, reimbursement work, thinking about MSL strategy, naming conventions and other investments of the like. From a value perspective, we think that if you can break the cycle of recurrence for what is a particularly sick and expensive patient population, we think that there's a win-win of charging a price that reflects the value of stopping those recurrences and stopping that cumulative cost but also returning resources to the system. And we think that these are the types of solutions that are needed today in the space. So we've continued to do the work to put ourselves in the best position to create value with the program but most importantly, get this drug to patients as quickly as possible, following what we hope will be late-stage positive data.

Okay. Great. And anything -- any more details you can share in terms of kind of like the cost of keeping patients out of the hospital, especially these multiply recurrent patients? I know that's a kind of important part of the value proposition. But anything...

Yes. Yes, sure. Yes. Yes, we actually went into some depth in the -- in our IR Day, but these are -- for recurrent patients who've had the disease 3, 4, 5 times, if you're recurring multiple times, it's tens of thousands of dollars a year for the system. So we really do think that there's an opportunity if you can stop that recurrence cycle to charge a premium price, a value price but at the same time, return resources to the system.

Okay. Got it. And so I'm assuming that the commercial footprint, just given the target audience you talked about, is it's more like a specialty detail kind of in the hundreds would be the right kind of number?

We think so, Terence, absolutely. We think that there's a certain number of ID docs and GI docs that really focus on recurrent C. diff. We know who those -- we know they are. We've begun doing some of the mapping, and we think that it could be handled with a relatively small specialized sales force.

Okay. Great. All right. Well, best of luck with the upcoming readout. Maybe just moving on to the rest of the pipeline. SER-287, again, here, just remind us of the structure of the drug and the ongoing clinical program for UC.

Sure. And I'll try to squeeze in it with the time that we have left. So 287 is an oral biologically derived microbiome therapeutic. It's designed to normalize the gastrointestinal microbiome of individuals that have mild to moderate ulcerative colitis. We're excited by it, Terence, by, first and foremost, the clinical data that we saw in our Ib study, by the microbiome analysis, by the metabolite analyses that we put together and really the unmet medical need based on both safety and efficacy. So current development efforts are focusing on the mild to moderate patient population. But we also believe that SER-287 could benefit patients with more severe disease, and it could be ideal for combination therapy given the safety profile that we expect with it. So we've seen a number of different data readouts recently, which had, in our view, relatively modest deltas between active and placebo. So we think that there's a tremendous opportunity to serve these patients with not only efficacy but also safety, a number of agents that are either in development or on the market today can carry with them serious side effects, including immunosuppression, which is not something that we expect with SER-287. So we think there's a great opportunity, and we were really encouraged with our Ib dataset and excited to continue to move forward in our IIb study.

And can you just remind us of that Phase IIb design? Like what's the kind of number of patients, the control arm? What's the primary endpoint? How much follow-up should we expect? And then what do you view as clinically meaningful, I guess, in the context of some of the other competitor data that you referenced in terms of modest activity?

Sure. So let me ask Lisa to start, and then maybe I'll add some color at the end.

Yes. So the IIb study is a randomized, placebo-controlled 3-arm induction trial that is designed to enroll 201 patients with mild to moderate ulcerative colitis. It's based on the data from the Ib study. So we have 3 arms, and in arm a, patients are receiving a short course of vancomycin pretreatment. And then they're followed by -- that's followed by 10 weeks of the same daily regimen that was used in the arm of the Ib study that had the highest clinical remission. In arm b, patients received the same vancomycin pretreatment followed by 2 weeks of that same regimen as in arm a but then followed by a step-down dose for 8 weeks. And then arm c is placebo. The treatment period is induction for 10 weeks -- over 10 weeks, and then they're followed on for the rest of a 26-week safety period.

Great. And maybe just the -- remind us the reason for the vanco pretreatment in terms of what you saw and why you decided to include that here in this study. And then the follow-up was on the effect size, like how to think about what kind of effect you guys would view as meaningful in the induction setting.

Sure. So Terence, let me ask Matt to first talk about the importance of vanc, and then we'll circle back on expectations.

Sure. So with respect to the vancomycin preconditioning, we had a hypothesis going into the Phase Ib study that a preconditioning treatment would potentially be important to ensure the rapid and robust engraftment of bacteria in our drugs. We had preclinical data that's supportive that this might be important, and that was a hypothesis we wanted to test in the Phase Ib. And that hypothesis was confirmed in the Phase Ib where in a -- and it was a 4-arm study. The Phase Ib, 2 of the arms, 1 was weekly dosing with and the other arm without vancomycin preconditioning. And we saw significantly greater engraftment in the weekly dosing arm with that vancomycin preconditioning and limited engraftment of the drug in the absence of it.

And then, Terence, just to your question around defining success, I mean, what I would say is that in the Ib study in the so-called winning arm, the most effective arm, which was the vancomycin followed by SER-287 daily, we saw a 40% remission, which is the endpoint that we're really focused on -- I think the field is focused on versus 0% in placebo, so obviously a meaningful delta. Small study, early study, small end but nevertheless, it provides a lot of encouragement to us that there was a signal. And as you compare it versus some of the other studies that have been published recently, we think that really, there's an opportunity not only on the efficacy side but also importantly, the safety side. I think if we could replicate a meaningful delta versus placebo and couple it with, again, what we expect will be a relatively safe profile -- remember that these are organisms that have coevolved with us for millions of years. So we have not seen a meaningful safety event. We don't expect to see it going forward. We think that really would be a win commercially as well as for patients. So that's how we think about our expectations around 287.

Okay. Great. And maybe just the last one is probably just remind us about kind of the pace of enrollment. I think COVID has had somewhat of an impact on your program and obviously across the industry but -- and especially in the IBD setting. So anything to report there in terms of enrollment trends or changes and how to think about timing of the data?

Sure. So we were in a very good spot in the beginning of the year. When the pandemic hit, we were impacted, as we disclosed, based on the overall constraints around the availability of endoscopies, which are central to part of our clinical protocol. What I will say is that we continue to enroll. We continue to screen, and we're actually seeing signs of encouragement in terms of the overall availability of endoscopies. And maybe I can ask Lisa to add just a little bit more color on that.

Yes. So we're -- it's a very fluid situation, and as you can probably imagine, it's different regions of the country are opening up at different rates. But in parallel to continuing to offer different ways to make sure we can monitor patients and get data, we're assessing which places are likely to open, and at the same time, we're also keeping an open mind regarding anything that we might have to do to the trial to make sure we can continue to get data that allows us to make decisions about the program.

Okay. And so in terms of the data timing, though, is that likely later this year?

Yes. We haven't disclosed. Obviously, what we're -- we continue to gather information, including the rate of how the world improves, and I think there's still a little bit of time left before we can really have a sense of that. But we continue to connect with sites as Lisa alluded to. Some of the smaller GI-focused practices have been opened, continue to be open. Some of the large academic centers have been shut to endoscopies as nonessential and have been slowly reopening. And so we're cautiously optimistic. And as we gather more information, then we have -- we may have more to say later.

Okay. Understood. And the last topic I wanted to touch on here is just your oncology portfolio or efforts. Maybe just remind us where things stand here. You have a collaboration with AstraZeneca. But just what's the rationale, I guess, at a high level for how the microbiome is involved here on the cancer side? And then what gave you that -- what gave you and AstraZeneca kind of the confidence to move forward here with a program?

Yes. Terence, thanks for the question. So really exciting early program with SER-401 and complemented now with our relationship with AstraZeneca. So to your question, Terence, the genesis of some of this work was really -- it was really catalyzed by a scientist that -- at MD Anderson named Dr. Jennifer Wargo. And Dr. Wargo published a paper, which identified a signature in patients that tend to respond to checkpoint therapy. And what was really interesting to us about the signature was that it included a number of organisms that we feel we have -- so we started a collaboration with MD Anderson and with the Parker Center around 401, which is looking at a microbiome approach to a checkpoint therapy. And maybe I can ask Matt to comment on the program and the study and what we're hoping to get out of it.

Sure. So in collaboration with MD Anderson and the Parker Institute, as Eric said, we launched the 401 program, and I think what we drove towards first was using our platform and our highly sensitive and specific analytical tools and cell-based assays as well as in vivo models to refine the signature of response that we thought was the target that we wanted to drive towards, and that was the basis of SER-401. And so we've moved that into the clinic in collaboration with the Parker Institute and MD Anderson. That's a placebo-controlled study that is currently ongoing. It's a Phase Ib study where we're evaluating the potential of SER-401 to improve clinical response to nivolumab, an approved anti-PD-1 checkpoint inhibitor therapy. And with that, we will evaluate tumor biopsies and various biomarkers that come out of that study. So we hope to see a favorable safety profile and clear signals of biological activity of the drug such as CD8 T cell infiltration into the tumors. We have the partnership with AstraZeneca as well, which is building off the early work at Seres and at AstraZeneca -- sorry, and at MD Anderson where we've continued to further explore the role of the microbiome in improving efficacy and toxicity to checkpoint inhibitor therapies. And our collaboration with AZ continues to advance. The collaboration is focused on identifying microbiome biomarker and response in different patient populations treated with durvalumab or durva combos in the AZ pipeline and then the assessment of how microbiome modulation using our technology may actually improve response.

Okay. Great. And maybe any -- I'm assuming that enrollment is still ongoing there. There hasn't really been an impact from COVID.

So correct, the trial continues to -- I'm sorry, go ahead.

No, I was going to say, Terence, we have said that the pandemic has impacted enrollment that we've got sites that -- it's a smaller number of sites, of course, than our 287 study. And amidst the pandemic, there's been constraints around enrollment there as well, but we continue to move forward with the study. And it's also a Ib study. So what we care about is, of course, seeing the impact of our therapy in combination with -- on the microbiome, and I think it's likely that no matter what happens with the study, we're likely to get quality data that will provide insights to us as to how we move forward.

Okay. And similar question is it sounds like timing TBD in terms of when we might see the data.

Yes. I think that's the right answer, Terence. It's TBD. I think that, as a company, we are incredibly fortunate to be in a position to deliver our -- the lead program, the Phase III study, SER-109 on time and unplanned. And of course, we have been impacted by the pandemic in other areas of our pipeline. But as Lisa mentioned, we are seeing signs of encouragement, and we're cautiously optimistic about really our portfolio in general.

Okay. And maybe just the last one for me as we come up on time here is just how to think about the current cash balance, cash needs as you look forward. Obviously, 109 is an important input. But what's the latest on the cash side?

Yes. So we had $75 million in cash as of the end of the first quarter, and we have guided that cash will take us into the second quarter of 2021. And importantly, of course, that will take us through our Phase III 109 readout, but we're also hopeful and optimistic that it'll take us through other readouts as well, so [ a 7 ]. But we've also got the support of some great partners, including our partners at Nestlé Health Science, which are supporting SER-301 with a milestone; our partners at AstraZeneca, which are funding a good portion of our work in IO; and then our partners at CARB-X, which are funding a good deal of our work in 155. So we're putting our resources, not just capital, but people in targeted fashion to create the best return in the short term that we can build the company for the long term.

Great. Well, best of luck in the coming months. Looking forward to seeing the 109 data. And thanks again for joining us this afternoon, everyone.

Thanks very much for having us, Terence. We really appreciate it. Thank you. Thank Goldman, and good luck with the rest of the conference.

Thank you.