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

Hello and welcome. My name is [ Pasi Kash ], and I'm associate at JPMorgan. It's my pleasure to introduce our speaker for today, Eric Shaff, President and CEO of Seres Therapeutics. And with that, I'll hand over to Eric to get us started.

Good morning, everybody, and thanks to JPMorgan for inviting us to present today. We're thrilled to be in person with those in the room as well as those joining us on the phone or online after a couple of years of being virtual, it's terrific to be together. And we think it's a great time to connect with you with the opportunity to talk about Seres and in some sense, what we've accomplished in 2022. But more importantly, what we think about in 2023, and we think that 2023 will be an incredibly important year for series for the microbiome space and really most importantly for patients. And in any new treatment modality and any new therapeutic modality, there can be hope, there can be the kind of aspiration of treating patients sometime in the future. And we feel that we're at that moment now with SER-109 for recurrent C. diff, and we think that the time is now for the microbiome to really help patients and drive this space forward. So pleased to be here to connect. And at the end of the session, certainly, we'll invite my colleagues up to talk about our work together in helping patients through the microbiome. Now I will be making forward-looking statements in today's presentation, and I would encourage you, as usual, to review our safe harbor statements and risk factors included in our last 10-Q. Now I always like to start with our mission, which is to transform the lives of patients worldwide with revolutionary microbiome therapeutics. And as we look forward in 2023, I think it's important to start with where we started, right, which was kind of an audacious or surprising notion of what if question. What if we could use bacteria as therapy, right? And there was this proof of -- maybe crude proof of concept through fecal transplants that you could potentially interdict into the health of a patient's microbiome and have an impact into serious diseases like recurrent C. diff infection. But the founders of Seres took it further and they said, what if you could deliver therapy in a reliably safe and effective way? And what if you could do it under GMP manufactured conditions? And what if you could do it under rigorous FDA oversight, and importantly, what if you could put it into oral presentation. And we know that the microbiome is essential to human health. And here we sit today with our BLA accepted and in process with a PDUFA date of April 26. So this what if question that was considered over 10 years ago, we think is about to come to fruition with SER-109. So my goal for today is to cover 3 important topics. The first is to talk about SER-109 and our intention and what we expect will soon be -- we believe will soon be a reality to change the lives of patients broadly with the recurrent C. diff infection. The BLA is submitted and accepted. We have a PDUFA date of April 26. The FDA has indicated to us that they don't expect us to require an AdCom and we continue the critical work with our partners at Nestle Health Science to prepare the market for the launch of SER-109. Second is to continue a conversation that we have around our infection modality and the idea that through our platform, we can take learnings capabilities, insights from SER-109 into adjacencies and infection where we think we can address unmet need. Next, after SER-109 is 155, we announced earlier this week that we had cleared a preplanned DSMB that allows us to go into the second cohort. We expect to have initial safety and engraftment data for SER-155 early this year. And lastly, to update you on our work in IBD and specifically our 287 and 301 programs, where we're in the process of mining data-rich study results to better frame our path forward in UC as well as our platform. So speaking of platform and pipeline, this is the pipeline. It starts with SER-109 for recurrent C. diff infection. SER-109 is a program that has both breakthrough and orphan designation from the FDA. SER-109 is partnered with Nestle Health Science globally, including a co-commercialization agreement to bring 109 to patients in the US. And we continue to be incredibly excited about what we think will be a tipping point for the microbiome space, but also an opportunity to help patients and change the standard of care in recurrent C. diff. SER-155 currently in a Ib study for patients with GvHD and other infections. We talked about the DSMB. We think that 155 is really the next step in infections. Further, in the infection space we've talked about, including an R&D event that we had about a year ago, our actions in pointing our R&D engine into the areas of infections where, like with 155, we think we can take capabilities to help patients in other areas, including an AMR, which we think is a growing problem. You've heard us speak about these efforts. I think you will continue to hear us talk about our interest in pursuing the pipeline, progressing the pipeline as we can drive value further for patients for the company. But let's start by digging deeper into 109, and we're excited about the prospect of helping patients with 109 in the launch because we're proud of the journey that has taken us here, because we think that 109 will be the tipping point for microbiome therapeutics. But most of all, because we think that the profile of SER-109, the safety and the efficacy that's incumbent upon what we saw in our Phase III results really puts us in a position to change patients' lives for the better. And we think that the opportunity to help patients with SER-109 is considerable. So just for background, C. diff is an urgent threat, as designated by the CDC. It's estimated that over 20,000 people die each year in the U.S. from C. diff. This is a major health care issue. And if you think about the nature of the disease, you understand that you're more likely to get C. diff once you've already had C. diff. And once you get into the recurrent patient segment, which is the group that we're looking to help with SER-109, it's an orphan disease, high unmet medical need. It's extremely costly to the system, and there are, we believe, inadequate solutions today for patients in this space. So the study results from our Phase III program were and are, we believe, remarkable. Approximately 88% sustained clinical response rate for those that were treated with SER-109 versus those with placebo. So that's a 27% absolute delta in reduction of recurrence, which is a significant effect for these patients. Of course, a significantly greater relative delta. The results were statistically significant in our 8 stratify groups and a sustained clinical benefit over a significant period of time. Now the FDA had set for us a statistical bar by which we could potentially qualify for one single pivotal study from an efficacy perspective. As we have mentioned before, we believe we not only met but meaningfully exceeded that bar. So in a field where there has been perhaps more speculation historically than actual data as to how effective unapproved procedures like FMT can be for patients, we think that these study results really set the bar. Now just to support that, notable that our Phase III results have been published in 2 top journals. The New England Journal of Medicine article, which came out roughly this time last year, and then additional data, including the durability of response published in JAMA, which we put out this past fall. I will say that we are incredibly proud of both of these papers. But further, we're active with key stakeholders in med affairs, and we're hearing more and more about the traction that these papers are actually getting with key providers in the field. Now importantly, SER-109 showed a favorable safety profile in our Phase III study. This profile is important compared to the safety profile and safety concerns from potential contamination and viral transmission that's possible with FMT or FMT-like approaches that just rely on donor screening alone, which is inherently backwards looking. We think that the differentiated efficacy for SER-109 sets the bar. But beyond that, we also strongly believe that our approach to safety, including our CMC process, which includes important pathogen and activation and purification steps is importantly differentiated as well. We think that is important to health care providers, and we absolutely think that will be important to patients as well. Now we had, in addition to our ECOSPOR III study, what we call our ECOSPOR IV study following the efficacy that was demonstrated in ECOSPOR III, we designed the ECOSPOR IV study to fulfill the safety requirement that was set by the FDA. We announced these results earlier this year. The dimensions of the study were similar to ECOSPOR III, but we did modify the program to include 2 changes. One is the inclusion of first recurrent subjects. We also modified the entry criteria to broaden a little bit. We were thrilled with the ECOSPOR IV results. We believe that the ECOSPOR IV results were confirmatory of the ECOSPOR III results, both in terms of safety and efficacy. As you can see, 91% clinical response, 94% in first recurrence, of course, ECOSPOR IV was designed first as a safety study. But importantly, the combination of these 2 Phase III studies really allowed us to move forward with the BLA. So where are we? The BLA was submitted at the end of the summer. It was accepted for priority or accelerated [ revenue ] critically important upon the acceptance of the BLA, the FDA notified us that they did not expect that we would need an AdCom. I can tell you that, that was a tremendous win for us and for our team. We had a considerable amount of time that was deployed towards the preparation of that outcome and having that time freed up to deploy towards other activities has been great. The PDUFA is set for April 26, then we're deep in our preparations for commercialization, which I'll just talk about in a minute. But in this journey of the what if question that was asked 10 years ago, it's incredibly exciting to me that we believe we'll be in a position soon to change patients' lives for the better and potentially change the practice of medicine with SER-109. So let's talk about the commercial opportunity with SER-109. And I would mention that we held an investor event at the end of last year, which is available on our website, and I encourage you to take a look at it, where we dug pretty deep into our assessment of the recurrent CDI market as well as our preparations with our partners at Nestle. We know that once you've had a recurrence of C. diff, you become a marked person for the risk of further recurrences, which escalates dramatically. And our market research and really every conversation that we've had with the health care provider maintains or confirms that the high unmet need exists in preventing recurrence of infection. Now the ability of SER-109 to meet that need, we believe, allows us to potentially fundamentally transform the standard of care for patients. And once we are on the market, we believe that health care physicians and providers will have an option that they simply just haven't had historically. So within this opportunity, we think that the profile is unique. The data that I presented is meaningfully differentiated. We think that based on the opportunity, the profile, the unmet need, we have the opportunity to create a significant amount of value for patients. And the capabilities that we have been investing in for over a decade, combined with the strengths that we're leveraging from our partners at Nestle Health Science, we believe put us in a position to really maximize the opportunity after a potential approval. Now on the heels of the ECOSPOR III trial, we continued building out our marketing, our market access and our med affairs capabilities at Seres. We're also leveraging and accessing capabilities at our partners at Nestle Health Science. So for example, we deployed their payer field team last spring to begin our pre-approval information exchange with payers. Our market access capabilities across the 2 companies have extensive experience managing complex products through specialty pharmacies. We'll also be leveraging additional elements of Nestle's GI pharma commercial and medical infrastructure, including a highly experienced and tendered sales force of about 150 sales reps covering more than 85% of GI practices to set up SER-109 for a successful launch. I'll note that we will also be standing up an additional sales team at Nestle to cover the top volume hospitals in addition to infectious disease specialists who tend to spend much of their time in hospitals. So between the 2 companies, we feel we have proven capabilities, and we will continue to work together to bring SER-109 to patients. So in summary, from the commercial lens towards things, we will continue to take a very deliberate step-wise approach to gaining our foothold and then broadening that over time. Here on the slide, you can see our activities both in the shorter and the longer term that we think will help us focus during the launch period and after, creating a broad market and patient access and a positive experience for those that take SER-109 is critically important, mission-critical for us within the space. We are well aware that we have an innovative medicine that really could fundamentally transform care over time for a patient population that is really in desperate need of a better option. So we'll start with areas where we're prime for early use, and then we will grow as we continue to launch the product. Now lastly, before I move on, I just want to note, at least in my opinion, one of the more chronically underappreciated aspects of being successful in a new area really relates to manufacturing. We've been investing in manufacturing really since the company's inception. We recently announced a significant collaboration with Bacthera, which is a global leader in biopharmaceutical product manufacturing that further increases our long-term commercial product supply. So Bacthera is a joint venture between Lonza and Chr. Hansen They are building a dedicated facility for Seres in their flagship site in Switzerland. So following this agreement, combined with our existing relationship with Recipharm, we look forward to partnering with Bacthera to expand upon our existing production capacity, which we expect will be well suited to support our launch and ensure that eligible patients can receive this potential new treatment option going forward. So incredibly excited about the opportunity that we have with SER-109, continuing to make progress through the BLA cycle, looking forward to the PDUFA of April 26. And after an incredible journey, just excited about changing patients' lives with SER-109. So as I mentioned towards the beginning of the presentation, one of the themes that you will also hear from us this year is the idea of harnessing our R&D engine to maximize our opportunity in addressing unmet need. And when I say harnessing, what I mean is we know that the microbiome has an extraordinary breadth of potential application. But as a company, we also think about focus, right? Focus on not only where we've had success, but where we've had really an incredible data result with SER-109 and an opportunity. And the opportunity to explore adjacencies from C. diff or from SER-109 where, as I said before, we bring capabilities and insights and tools and ultimately, a proven mechanism to help patients, we believe, with a high probability of success. So we have been and we'll continue to be pointing our research engine into areas where we can leverage these factors to help patients and support the company. So just for background, Seres' Board has built really a leading research engine and platform capabilities that allow us to delineate at high resolution, the mechanism of action, the PK/PD, what we term or the engraftment of our drugs. And importantly, to learn from our clinical studies and apply those learnings to future development efforts and applications. So we feel we've made incredible progress in preclinical models, but the best way of actually testing what works in the human microbiome is in the human microbiome. So as an example of this, on the left, we're showing that treatment with SER-109 can lead to a significant onboarding of bacteria in our drug, leading to a restructuring of a patient's GI microbiome. This restructuring is also associated with shifting the functional metabolic landscape of the GI tract. Now why is this important? If you look on the right side of the slide, we're also showing that treatment with SER-109 can also reduce the total abundance of other pathogenic bacteria and notably, other pathogens that are associated with antibiotic resistance. So we're building upon the success of SER-109 by constructing candidates to prevent other infections. And our platform allows us at high resolution to deconvolute or disentangle the bacterial landscape and the mechanism of our drugs and apply those learnings into new diseases. Now further to that, we think that antimicrobial resistance really is a major health care threat resulting in mortality and significant increases in health care costs. With the urgent threat of the pandemic, we've seen really remarkable innovation, of course, in the area of vaccines and therapeutics. While this threat, the AMR threat continues to accelerate, it has been said the kind of the silent pandemic, I think it's actually becoming less silent over time, there's been more focus on it. But there actually has been limited innovation to prevent these types of infections. And the mechanisms that SER-109 uses to prevent recurrent C. diff infections actually have the promise to prevent a broader spectrum of infections. Now these are particularly important and relevant and needed in patient populations at greater risk. So think of hospitalized patients, people with suppressed or compromised immune systems, people with chronic diseases that may struggle to fight off infections. And based on our oral formulation, we think we have an advantage of bringing potential therapies to patient populations broadly in areas of need. So let's talk about 155. And as I noted in the prior slide, allogeneic stem cell recipients face major risks from infections. They can have highly disrupted microbiomes. And data connects these disruptions to increase mortality due to bloodstream infections in GvHD. So we have data that suggests that a decreased presence of commensal bacterial species can be associated with positive outcomes. So leveraging data from our partners, our clinical studies, our preclinical assays, we've designed SER-155 to target multiple disease relevant pathways, including 2 of particular importance. One is the direct decolonization of VRE and CRE. And the second is the prevention of translocation of VRE and CRE from the gut that can result in bloodstream infections. We think that leveraging both of these pathways is actually reasonably unique, and we're excited about this early study. As I said before, we cleared -- we had a positive result from a preplanned DSMB at the end of last year, and we expect to release early safety and engraftment data in 2023 -- early 2023. Now if you think about infection, we start with SER-109. We've got the Phase Ib study for 155 to assess safety and engraftment of the bacteria and also to understand if there are signals of reduced bloodstream infections in GvHD. We think that 155 is just one of many opportunities in infection, as I outlined here on this slide. And as I mentioned before, we conducted an R&D Day to highlight our strategy. I would encourage you to review the scientific foundation of our excitement in the space, the unmet need in the space, the commercial opportunity and, of course, additional detail in our research efforts. Now again, as we think about 2023, we think that Seres is an incredibly strong position to extend our leadership in microbiome therapeutics. 2022 was a highly progressive, important substantive year for us and for our patients. The BLA was complete. It was submitted, the potential to be a first-in-class microbiome therapeutic with a considerable opportunity to outpatients. We build upon the success of 109 with 155. The balance sheet is in a strong position, cash of approximately $233 million as of the end of September. And I would remind you that we are eligible for a $125 million milestone from Nestle upon the approval of launch of SER-109. But I started this presentation by talking about the what if question that was asked so many years ago. And I would say that the team and I continue to ask those questions, right? And a big one for us is what if SER-109 is really just the beginning of the story, right? What if the ability to help patients through microbiome therapeutics starts with C. diff infection, but by no means ends with C. diff infection? I think you will hear from us going forward progress. As we think about the launch of SER-109 proving to the world that microbiome therapeutics are here now and the ability to leverage into other areas to help patients in need. So again, I want to thank JPMorgan for having us here today. The team and I are thrilled to answer your questions. We've got Dave Ege, our Head of Manufacturing; Terri, our Chief Commercial Strategy Officer; David, our Chief Financial Officer; and Matt, our CSO. So thanks again, and happy to take questions.

Well, thanks very much, Eric. I'll start us off with a few questions, and we'll go to the floor for any further questions. There'll be a mic going around. So firstly, can you provide a little more detail on the 109 commercial opportunity and also the commercial readiness?

Sure. This is an area where there have been [ an adequate ] solutions in the space. And it's somewhat ironic that the standard of care for treating patients has been antibiotics. And antibiotics can -- is very -- could be very effective in killing all organisms. But following antibiotic therapy, there is what we call a race to repair. So either a patient will repair or reconstitute their microbiome or C. diff will infiltrate and which can lead to a recurrent. So physicians have to this point been incredibly limited as to what tools they have at their disposal to treat patients. And we know that once you're in their current patient segment, the time to recurrence could be very short. So if a patient recurs, they know that they're in this fork of the road, they're going the wrong way. So maybe I can ask Terri to comment further on our preparations and capitalizing on this opportunity in serving patients.

Sure. Well, to build on the opportunity commentary, Eric, you mentioned the tools that physicians have. And I think about tools to do what, right? That's where the unmet need lies in the category. And it's the tool that they're lacking is the tool to make this infection stay away. They have a tool to make it go away. They don't have a tool to make it stay away. So that is the #1 unmet need in the category. And SER-109 with the results that Eric walked you guys through just now in terms of our efficacy, safety and oral administration meets this unmet need in a unique way, in an enormous magnitude. And so you have the almost 90% efficacy rate and then the durability out through 6 months. So we feel like we really hit the sweet spot of the unmet need in the category. And once approved, we are absolutely an appropriate foundational therapy for all 156,000 cases in the U.S. that we estimate will occur this year. With respect to commercial readiness, we have been getting ready for launch since I joined the company 2.5 years ago, and even before that. Even on the back of the ECOSPOR III data receipt in 2020, we stood up and scaled our medical affairs teams. We put in place an MSL team in the field, medical science liaison team to call on KOLs in large academic centers. One of the real, real advantages of our partnerships with Nestle is that we can leverage capabilities that they have in place that are fully operational today to support their in-line products, proven capabilities. We don't have to build this from scratch. We don't have to hire new people. These people are in place now, including the 150 sales representatives that are calling on gastroenterology offices. So I feel like we are absolutely on track and on plan with our launch readiness and with proven talent on the Nestle side.

Got it. Maybe you can comment further on your manufacturing approach and your supply capacity?

Yes. Let me start by saying, I think I made the comment during the presentation that manufacturing tends to be unappreciated. We've been investing in capabilities for over a decade because they simply didn't exist. When the company was founded and we talked about bringing spores into a manufacturing biopharma network, usually, people want to get spores as far away from their plants as seemingly possible. So by necessity, we built over the period of a decade, a great deal of know-how, which we think is proprietary to Seres and really sets us up for success in the long term. But maybe I can ask David to comment further.

Sure. I maybe make 2 key points. One about the product that's differentiating from others in the field, and that is that our product is highly purified Firmicutes spores as was highlighted by Eric in the presentation. So we have both that and specific inactivation processes in our manufacturing process that ensure the safety and efficacy of our drug. As far as commercial readiness for manufacturing, we have a combination of in-house assets and our manufacturing partners that Eric talked about. These are the same assets, the same staff and capital equipment that we used for Phase III, we did not have to scale to get to launch. And then, again, as Eric mentioned, we're growing that through the partnership with Bacthera to meet the upside demand that we see in the coming years. So we feel really, really good about where we are for launch in terms of launch supplies and meeting the demand that Terri and the Nestle team are going after.

Great. Maybe switching to 155. Can you talk a little bit about what you're thinking about the overall market opportunity there?

Sure. Maybe I can ask Terri to comment and maybe Matt as well.

Sure. So with 155 and our infection protection franchise because on our final slide, Eric did reference additional candidates that we may be bringing into the clinic. So this could be an entire franchise. But this is a franchise that's really built on the success that we've seen with 109. With 109, we've determined and proven that we can go after microbiome restoration with a goal of preventing bacterial bad actors and containing bacterial bad actors in the gut and preventing them from causing damage and causing infection. So with 155, the goal in the trial is to prove that we can do that yet again in a medically compromised, highly vulnerable patient population, in this case, stem cell transplant recipients. We estimate there are about 9,000 of these procedures annually in the U.S. And this, again, is just the next step into our infection protection vertical. There are other medically compromised, highly vulnerable populations that we plan to go after, cirrhosis patients, patients -- other patients receiving transplants. So this is an interesting way for us to help patients. And we think that the approach that we're taking is uniquely -- just can uniquely meet the unmet need across many disease states.

And maybe my final question. What data do you plan to report with your 155 readout in early 2023? Or what do you like to see?

Yes. So it's a Ib study. We talked about clearing the DSMB at the end of last year. Maybe I can ask Matt to talk about what we are looking for. And as we progress in our clinical studies, of course, there's the clinical results, but there's also the microbiome analysis that we think provides a rich data set that we use across our platform, and maybe Matt can comment further on that.

Sure. So Seres from its inception has been a data-driven company. And as Eric noted in his presentation, we've been really building a research engine at the company to look at high resolution into how changes in the microbiome impact different microbes and how they interact with human cells and tissues, and we continue to build on that. What we have with 155 and the strong proof of concept coming out of SER-109 is strong knowledge about how bacteria and our drugs can both inhibit and decolonize particular pathogens in the gastrointestinal tract and the mechanisms by which they do that as well as importantly, we've designed these drugs to be able to look at the epithelial barrier and protect the epithelium and restore epithelial damage, which is often the case in these patients who have a highly disruptive microbiome. And so as a result of that, we have the potential to bring novel mechanisms to a major public health threat. That, as Terri pointed out earlier and Eric talked about, applies to a very broad swath of patient populations. As an example, in Allo-HSCT patients keep in mind, we have about 20% mortality in that patient population due to the onset of bloodstream infections. And we've got a drug that can both decrease the pathogens in the gastrointestinal tract as well as prevent translocation events into the gut. The data that we will be looking at coming out of Cohort 1 is looking at pathogen reduction and incidence of bloodstream infections and of course, safety profile of the drug, which, as Eric noted, based on our Data Safety and Monitoring Committee, we had a favorable profile to date.

Great. And maybe I'll open it up to the floor now. Mic is coming around. We have one question over there.