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

I'm just going to read the research disclosure first. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Good afternoon, Eric and Terri. I'm very happy to have you here today. And before we dive in, I would be remiss in terms of a hearty congratulations in terms of product approval, no small feat, and a successful launch, and we'll be hearing a lot about that. But before we dive into VOWST, perhaps you'd like to give a little bit of background in terms of the vision of Seres and bringing oral microbiome therapeutics to the marketplace.

Sure. And before I begin, I just want to thank you, Jessica, and Morgan Stanley, for having us here today. And we think it's a great time to talk about Seres, and talk about the microbiome space. And I think in any new modality, there can be a hope or a vision sometime in the future of serving patients. We're really pleased and proud that we are today serving patients with the first approved oral microbiome therapy in VOWST. And the story began some time ago, almost a decade ago, where the founders of Seres said FMT could provide this, call it, a crude proof of concept that you could potentially interdict into the health of someone's microbiome, and have an impact into a serious disease like recurrent C. diff infection. But the foundries of Seres said, there's just going to be a better way of helping patients, right? If you could take the idea behind FMT and translate it into an approach, which is importantly oral, if you could manufacture drug under GMP conditions, if you could raise the bar scientifically and understand how the organisms that are delivered are interacting with each other, as well as with the host. And if you could study it under rigorous FDA oversight, you could have potentially a real impact on patients and stakeholders. So Seres was founded with that vision of creating revolutionary microbiome therapeutics. And again, we are incredibly proud of the journey that we've taken with VOWST. It was a journey with some twists and turns along the way. But in particular, with patients with recurrent C. diff, stakeholders were waiting for a different type of solution, right? One which was oral, one which could be effective, and one which could be well tolerated. And that's why we think we're making a difference in patients with us today. And we have an aspiration to help patients in a number of different therapeutic categories on a go-forward basis.

Great. Thanks very much for that. So perhaps we'll touch on VOWST now. Approved in April, launched in June. I think it'd be really helpful to touch on the clinical profile of the product. And then we can go to the receptivity in the marketplace.

Sure. Well, as we mentioned, we were approved on April 26, at approximately 5:20 p.m. I know I was waiting in my office for that letter. But we think that VOWST is uniquely positioned to help patients with recurrent C. diff infection. And part of the approval that we had in April included really the best [ case ] label for Seres in terms of recurrent C. diff infection, adults with one or more recurrences of C. diff infection. And we know that if you've had an episode of C. diff and you recur, you're more likely to recur again because there has been what we call a dysbiosis or an injury to the microbiome. And that injury through repetitive antibiotic use can be cumulative, right? So once you have a recurrence, you're kind of tagged as on that pathway of potentially having more and more recurrences. And we had patients in our study that had multiple recurrences of them. It's really difficult, devastating, potentially deadly disease. And the hope is that you can prevent a recurrence, and really that requires antibiotic therapy, but also microbiome restoration to repair and restore the healthy ecosystem of organisms and bacteria, which is, by the way, kind of a novel concept. I think that when the company was started, there was the notion that there was harmful bacteria or neutral bacteria, but not really this idea that bacteria is essential to [indiscernible], and that disruptions to a healthy microbiome could have connections to diseases like C. diff infection. But the regimen for VOWST oral, the profile really is, we think, unique in terms of the efficacy that we saw, approximately 9 out of 10 patients that were treated in the Phase [ III ] study were treated without a recurrence, and the therapy was well tolerated. So as compared to standard of care, which is repetitive use of antibiotics, we think that VOWST has an important role to play, we hope in transforming the standard of care of this therapeutic category.

Okay. Great. And I think, you've talked about the metrics in terms of what you're looking at with respect to the launch. I think that's always helpful to kind of guide rollout from a commercial standpoint. Perhaps you could touch on that.

Yes. So I'll start at the -- Terri obviously can provide the deeper, and usually better color. But we were really pleased with the first period of launch for VOWST. We've reported our first number of weeks in our Q2 earnings announcement. But I'll just note that we were very happy with a number of different items that we saw, and it's early. But most importantly, the breadth and depth of underlying demand we felt was really healthy and a really good start. So we saw VOWST being prescribed by a variety of different prescribers. We saw prescriptions being written across the therapeutics category, including first recurrence. And it really, we believe, is a great starting point that sets us up for success going forward, but I'll ask Terri to comment further.

Sure. Well, I think, first and foremost, you -- we weren't surprised by these results. We were highly encouraged by them. But remember, we had the Phase III data for 3 years prior to approval. And so the amount of work that we were able to do to really understand what the unmet need was, how physicians would behave, how the payer and reimbursement environment would flow for us. I felt like we had a really, really deep understanding of that, along with our collaborators at Nestle, even before approval. But you just -- at approval, you just hold your breath and hope it's all true, right? And so we were not surprised but highly encouraged by these results. And it is playing out as we thought that it would. The breadth and the depth of demand is really, really encouraging, multiple specialties. We've said that 70% of prescribers were gastroenterology, 30% were other, which you could view as an indicator of the effectiveness of the hospital selling team because they're calling on prescribers and infectious disease, hospitals, and so on and so forth. So really nice breadth in terms of specialty. And Eric referenced the patient type breadth that we saw. And additionally, we're also seeing depth early on in the launch phase. So we saw, of the 420 unique prescribers that -- sorry, 480 unique prescribers, we saw 78 of those writing for more than 1 patient in their practice. So we're very excited about these results.

Great. Terri, you mentioned Nestle as your partner. Maybe you can touch on the relationship that Seres has and the infrastructure that's been put in place in terms of marketing.

Absolutely. So the co-commercialization agreement that we signed in '21 was really a build upon a pre-existing 2016 agreement that we have with Nestle, that was mostly focused on European rights or ex U.S. rights, if you will. So they have been a collaborator of ours for some time. That said, to really determine -- and this was really a business question for us, determine whether we should go at it alone and launch VOWST on our own, versus partner with someone. We ran a very robust and highly competitive process. And that really was the business question. Do we do it on our own, or do we choose a collaborator, and who is the best collaborator, if that's the case. And Nestle really brought a lot to the table. Not only did we know them, and complexity of having multiple partners for an asset globally is quite complicated. So there was that issue. But Nestle was already in the gastroenterology space, with 150 sales representatives, other customer-facing teams, back-end infrastructure that's associated with an oral retail product. So they really had all of the expertise and the infrastructure to help us drive efficiencies through the launch. And they were uniquely able to bring that to the table in addition to being a known entity for us. So we feel like the launch is going really well. It's not just because of our efforts at Seres. It's because of their efforts as well, and we have a strong partnership.

I would say, any new company that's forging the path in a new space, the aspiration is really to be fully integrated as a company. And I think, that's true for us, too. As I think about the Amgens and Genentech or Genzymes of the world, controlling every aspect of discovery and development, and ultimately commercialization was important in bringing therapies to patients. And as I said, we feel that way, too. As we thought about the idea of building our own infrastructure, basically having it sit idle until we switched on an approval, the idea of working with someone else made a lot of sense. And -- but I will say that, as it relates to working with other companies, we'll continue to assess the way in which some of brand's capabilities to us that serves patients, and that kind of dictates how we make those decisions.

Great. I think you touched on what's available, or maybe what's not available for resistant C. diff patients. But I think, maybe stepping back in terms of the market opportunity, how you're shifting the treatment paradigm would be helpful.

Sure. Well, as we think about the recurrent C. diff patient population, we estimate that there's approximately 156,000 cases in the U.S. each year of recurrent C. diff more globally. And we think that there are inadequate solution today for patients in this space. What physicians and patients have been waiting for, as I said before, is something which is oral and effective and well tolerated. And as a result, we think that the opportunity to help patients with VOWST is somewhat unique, but maybe I can ask Terri to comment further.

Sure. Well, I think of the opportunity being driven by -- really by 3 dynamics. And we already talked about the clinical profile of the product, and the amazing efficacy that VOWST brings to patients. And the reason for that is because it's a product that addresses the root cause of the disease. Eric mentioned the disruptive microbiome. If you're a recurrent C. diff patient, by definition, you're recurrent because you have that injury to the microbiome. So antibiotics can't solve for that. And in fact, you can see that in the results of our clinical trial, standard of care, which is antibiotics alone, versus antibiotics plus VOWST. So very strong clinical profile. Second piece is unmet need. I was really struck when I first came, joined Seres and started speaking to physicians and patients by how emotional this disease is for them and how horrible an experience this is for patients. And when I ask physicians, what is your -- what is the #1 unmet need in the category? They say, preventing it from coming back? I don't want it to come back. Patients say the same thing to us, right? And then when I ask them, okay, well, what's your #1 treatment goal? Preventing it from coming back. So that should tell you everything. I mean, what they are trying to do, they are unable to achieve because it's an unmet need. Their goal and unmet need are the same, which is remarkable. And then the third piece is, these patients are very, very costly to the health care system. So we think that VOWST for the entire recurrent C. diff pool, and preventing these recurrences early on so that you're offsetting all of those downstream recurrences, we have a very strong value proposition. So all of those are the kind of foundational to the substantial commercial opportunity that we think we have here, and encouraging early results that we're seeing.

And just maybe to add on to that. When Terri and I speak with KOLs and [ NACPs ], and we ask, what's the greatest unmet need? We also ask them, who's the patient that you're thinking about when you're thinking about using VOWST? And what's remarkable is, the first reaction is the same. [ NACP ] says, well, I've got someone in mind. What's interesting is the next piece is actually usually fairly different. It might be a 50-year-old that cares for a parent. And they just can't afford to have this devastating disease. Or it might be a 75-year-old who has some sort of comorbidity, a heart condition. And physicians are concerned about the frailty of being in the hospital. So the breadth of potential application within this pool has been remarkable to us, and the anecdotal feedback that we've gotten since we've launched, and we're pretty encouraged by it.

That's really interesting. So maybe thinking about patient access, and there's this inpatient, outpatient dynamic. I think that would be helpful to touch on.

Sure. Well, we are focused at launch on the largest lowest hanging fruit opportunity, which we estimate is roughly 70% of the total patient pool that would be treated with VOWST in the outpatient setting. Now within that group, there is a segment that I refer to as pure outpatient, where they're being diagnosed and fully treated in the physician's office in the outpatient setting. Then there's what I call, the hospital-to-home segment, where these patients, for whatever reason, maybe they have complicating underlying health issues. They're driven into the inpatient setting initially whereby antibiotics are started. And within a few days, their symptoms markedly improve. So as you can imagine, [ they're ] kicked out of the hospital pretty quickly. And that's exactly the segment that caused us to hire and deploy a hospital selling team out of Nestle. So that team has been profiling the hospital since Q1 of this year. And then at approval, were of course, deployed to promote VOWST within the hospital setting and also to infectious disease physicians. And really with the goal to get the outflow business, the hospital-to-home segment, setting up discharge protocols, and making sure that we are -- I think of it as paving the on ramp to the interstate before the traffic comes. And that's really what that team is doing to allow for consistent flow of patients and the opportunity for those patients when they get a discharge [indiscernible] for VOWST, they're all -- sorry, vancomycin are also getting VOWST at the same time.

Great. Excellent. Any questions on VOWST from the audience? Okay. Well, great. Well, obviously, Seres is not just the one product company, you've been working on a platform for over a decade. Maybe next, to talk about 155, the background with respect to the profile of that product, you've got some preliminary data, and what to expect in the future.

Sure. Well, I would say that as a company, we believe deeply in the breadth of potential application of our technology. And we know that the microbiome can be incredibly important to human health broadly. So we are believers in the opportunity to deploy our technology in metabolic disease or inflammatory disease. We are absolutely believers in the [ depth, breadth ] access. However, as a company, we've also chosen to focus, and to step deliberately into more and more complex areas of therapeutic intervention. Everyone said that C. diff was the, "easy one" and we know from our path, there was nothing easy about C. diff. C. diff was incredibly complicated, and the gut continues to be a complex organism in some ways. So for us, the next step after VOWST is really our SER-155 program, which is currently at a [ Ib ] study, looking at patients with infection and GvHD. And the hope, really, behind SER-155 is to think about helping patients along two dimensions. The first is, the idea of preventing colonization or over growth of 2 particular pathogens, VRE and CRE that are associated with infections. The other is the idea of enhancing and protecting gut barrier integrity to prevent translocation of these pathogens into the bloodstream, right? So it's an interesting paradigm where I think either of these or especially both of these factors could be helpful in how we're intervening to help patients. We're currently in a Ib study. We recently finished the first cohort of that Ib study. And we announced data earlier this year where it's really encouraging. Early, small number of patients. But as we looked at the microbiome analysis, we saw that, in comparison to a reference cohort that we've been working with Memorial Sloan Kettering, you would envision that this patient group that we studied would have a significant number of pathogen overgrowth events. Approximately 60% according to this reference database. We saw one of it, kind of a small number of patients. But really interesting. And I think importantly, our KOLs are telling us that they're finding it interesting. So we're currently enrolling in the second cohort of this Ib study. It's a placebo-controlled cohort. There are 230 patient arms. And we're looking to see what will come from that second cohort. I think, if we replicate some of the data that we saw in this first cohort, that will be really interesting. We also -- on Ib study, so it's not powered for efficacy. But it will be interesting to see if we see signals of reducing infection or more severe forms of GvHD relative to this pathogen data set that we have from the lb cohort.

How long do you have to follow the patients in terms of looking at the GvHD?

So we look for approximately 100 days.

Okay. Fantastic. And I think we should expect that data in the mid '24 time period?

We do. So we're enrolling patients now. And we expect to see that second cohort in the middle of next year.

Okay. And I think you've talked about the fact that, again, there's a lot of lessons learned from VOWST. I mean, are there specific aspects, whether it's manufacturing or other things that you're doing with respect to SER-155, or you can talk broadly -- more broadly. Perhaps some aspect of how you've been able to leverage and think about clinical development.

Sure. I think it's a great question. I think about that question both in terms of today and tomorrow. And starting with today, there were data that we took from the VOWST clinical studies that informed our progression in SER-155, and specifically, the idea of outcompeting pathogens and preventing these colonization events. There are lessons, there's capabilities, there's insights that we have taken directly from those clinical studies. And by the way, there's only so far you can go in studying the microbiome outside of humans. The best way of looking at the human microbiome is in humans. So we have the fortune of having a tremendous amount of clinical data that was really the catalyst behind our exploration in [ 2155 ] with these patients. I would say longer term, I think one of the more underappreciated aspects of where we've gone, it's just the fact that we've got a system in place in a totally new modality where we can reproducibly create a drug. So specifically, the release specs that we have, in partnership with the FDA around VOWST, suggests to us that we know, as we think about a consortium of bacteria that we can make a drug with the purity, the potency in a reproducible manner. And I think that in a new modality, that's a wildly underappreciated aspect of moving forward and progressing both CMC, quality and ensuring that we've got the capabilities to reproducibly make drug.

Okay. And maybe just circling back on the cohort to data. What would success look like from your perspective?

Yes. I think it's -- for us, we've already seen some elements of progress. and the idea that we're delivering high dose bacteria to a particularly vulnerable patient population, right? So this is a different patient population than what we've looked at with C. diff. So continuing to ensure that we can do that in a safe manner, I think that's one element where, if we continue to see what we saw in the phase, in the first cohort, that will be a win. I think if we see continued trends towards not having the type of pathogen overgrowth that we would normally see in the reference cohort, especially with the placebo arm that you can compare across, that would be a win. And I think that, again, we will see signals or we may see signals of clinical impact in terms of reduction of infection or more severe forms of GvHD. And again, as compared to different reference cohorts, as well as the placebo arm, that could be a win, too. So that's what we're thinking about.

And post that data, what would the next step for that program be?

Great question. So we're focused now on ensuring that we can get to the finish line of the study. But there's ways in which we're thinking about and talking with the FDA and the CDC around ways in which we can move quickly in this space. And endpoint, including pathogen abundance reductions, these are the types of things that we're exploring right now.

Great. Any questions on SER-155? Okay. I think you mentioned that you're about to -- could be tomorrow, announce a new product candidate. Maybe talk about indications or areas that are of focus, and what that would portend.

Sure. Maybe I'll start and then I'll ask Terri to talk about unmet need. But for us, we think there's a progression from VOWST and recurrent C. diff infection, to SER-155, with patients with infections and GvHD. If we continue to have traction within the infection paradigm, we think that unlocks a number of different opportunities. So think about cancer neutropenia, think about cirrhosis, ICU patients. We think that AMR is a tremendous global issue, which is becoming more and more acute. And the idea of antibiotic resistance, certainly, is within our sights, where we think our technology could potentially help patients. So maybe Terri can talk about the opportunity, and then we'll talk about how we progress.

Sure. I think the common thread, in terms of the opportunity for all of these sort of near adjacencies to VOWST and recurrent C. diff, is you have a medically vulnerable population. Let's just talk about SER-155 in the stem cell transplant patients. And these are patients who are fighting with their physicians for their lives, and trying to beat cancer. And roughly, half -- sometimes, more than half, depending on the estimate you pull from literature, they're taken completely off track by infections and in case of 155, GvHD as well. And so this is a horrible outcome for patients. And we think that we have a modality here where we can pick the right bacteria for the disease. We've figured out how to make them engraft. So in a way, it's almost like doing a transplant in the microbiome, in a way. We figured out how to make it, and how to scale it, and how to study it. And so this is just the beginning for us. Stem cell transplant is just one. You can imagine going into patients who are suffering from cirrhosis as well who also are victims, in many cases, to life-threatening infections that take them off their treatment path. Cancer neutropenia, Eric mentioned. So there are a number of different ways that we can go, depending on what we see with 155 and GvHD actually opens up potentially a category of immune modulation as well. So we might learn something there that enables us to go further -- a little bit further afield to some of the more immune-mediated microbiome-related diseases. So a lot of potential, and we'll follow the data and the science like we have.

Great. And is that, I mean, based on, again, all the work that you've been doing, once you announce a product candidate, is that a fairly short time to the clinic? Or how do you think about that?

Well, I think a couple of thoughts. One is, it can be. We've worked closely, we have a post-collaboration between our Discovery and Development group, as well as our manufacturing group. And deciding which are the bacteria that comprise the consortia that we think can help patients is only one step. And of course, manufacturing the drug is another. Again, I feel that in a brand new modality, manufacturing is one of those underappreciated capabilities where if you don't have it within the walls of the company, it's not commoditized, not so easy to find. So we've been working at this for 10 years. In some sense, because the founders of Seres said, we think that manufacturing is a strategic capability, also because it was a necessity. So when we were starting out, if you were looking to manufacture drug candidates using backfill spores, the conventional biopharma manufacturing expertise, which we want spores as far away from our plans as possible. So I think, as a result of that, there's capabilities that we have, which are really unique, and as I said before, are powerful. So we have our process. We think about the discovery of the consortia. We think about the clinical path, we think about the manufacturing, we, of course, pulled in the commercial potential, and it's a system, it's a process, and it's worked well so far. I will say, on the other side of it, we continue to be really focused and disciplined as to where we're allocating our resources. Particularly in a tough environment. We're focused on the breadth of our potential technology, and we really have aspirations to help patients broadly. But we're also focused on the nearest term returns. And that first is VOWST, and next is 155.

Great. Well, we've got less than a minute. Any final words for the group here?

No, I think that for us, I'll maybe conclude, or we'll conclude where we started which is, there was a hope to serve patients when the company was founded 10 years ago. And we are incredibly grateful and privileged to be in a position to serve patients with VOWST. And we think that this is just the beginning of a new field for the microbiome. And we're pleased to be at the front of it.

Fantastic. Okay. Well, thank you very much.

Thank you, Jessica.