MCRB - NASDAQ

Good day, everyone, and thank you for standing by. My name is RG, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2025 Seres Therapeutics Results and Business Updates. [Operator Instructions] Thank you. I would now like to turn the call over to Dr. Carlo Tanzi of Investor Relations. Please go ahead.

Thank you, and good morning. Today, before market opened, we issued a press release with our third quarter 2025 financial results and business updates available on the Investors and News section of our website. We've also posted an updated corporate presentation. Before we begin, I'd like to remind everyone that we will be making forward-looking statements, including statements around the results of our current or planned clinical trials, studies and data readouts, our product candidates and their potential benefits, development plans and potential commercial opportunities, interactions with and feedback from the FDA, our ability to secure an R&D or other partnership and/or generate or obtain additional capital, financing or other resources, our planned strategic focus and operating plans, cost reduction actions and anticipated benefits and cash runway, the timing of any of the foregoing and other statements which are not historical facts. Actual results may differ materially due to various risks and uncertainties and other important factors described under Risk Factors in our recent SEC filings. We undertake no obligation to update these statements, except as required by law. On today's call with prepared remarks are Marella Thorell, our Co-Chief Executive Officer and Chief Financial Officer; and Dr. Matthew Henn, our Chief Scientific Officer. Additional members of the management team, including Tom DesRosier, Co-CEO and Chief Legal Officer; Terri Young, Chief Commercial and Strategy Officer; and Dr. Dennis Walling, SVP of Clinical Development, will be available during the Q&A portion of the call. And with that, I'll turn the call over to Marella.

Thank you, Carlo, and good morning, everyone. We made good progress during the quarter. Our immediate priority remains advancing SER-155, our lead investigational, oral, live biotherapeutic for the prevention of bloodstream infections, or BSIs, in adults undergoing allo-HSCT into a Phase II study. We believe that results in this study, if positive, could represent a very meaningful value creation event for the company. SER-155 represents a first-in-class mechanistically differentiated approach to address infections, including bloodstream and antimicrobial resistant infections, which are among the causes of mortality in medically compromised patients. In the Phase Ib study, treatment with SER-155 led to an impressive 77% relative risk reduction in bacterial bloodstream infections, along with decreased antibiotic exposure and febrile neutropenia. The therapy is designed to decolonize gastrointestinal pathogens, improve epithelial barrier integrity and restore immune balance, addressing root causes to prevent BSIs and therefore, reduce antibiotic use, antimicrobial resistance and often severe or fatal outcomes. Based on our analysis of the commercial opportunity, we believe that SER-155 could transform how allo-HSCT patients are managed and result in meaningfully improved patient outcomes. In September, we obtained further constructive feedback from the FDA on the SER-155 allo-HSCT program, which has received Breakthrough Therapy designation Phase II protocol. Based on the feedback received, we are pleased to have alignment on multiple key study parameters, including study size, dosing regimen, primary efficacy endpoint and the interim analysis plan. We do not believe there are any gating items to commencing the study from a protocol standpoint and are incorporating FDA feedback into the protocol. Notably, given the planned study design and our experience in this therapeutic area, we expect to be able to efficiently generate Phase II data in allo-HSCT patients, and we estimate that we will obtain meaningful placebo-controlled clinical results from a planned interim analysis within 12 months of study initiation with commencement being funding dependent. Beyond the initial allo-HSCT indication, we see significant expansion potential across other medically vulnerable populations, including autologous-HSCT patients, cancer patients with neutropenia, CAR-T therapy recipients and other medically compromised patients such as those in the ICU who face similar infection risks and unmet needs. Collectively, these represent a multibillion-dollar commercial opportunity in patients facing high unmet need and where there has been limited therapeutic innovation. As Matt will discuss, we also have an ongoing investigator-sponsored study at Memorial Sloan Kettering Cancer Center, evaluating SER-155 in an indication beyond infection that is of high interest, and we look forward to obtaining initial clinical results in early 2026 that may highlight the potential of SER-155 in immune-related negative clinical outcomes. While we advance SER-155 Phase II study start-up activities, we continue our efforts to seek capital in order to initiate the study and support our broader portfolio of product candidates with applications in inflammatory diseases. Advancing SER-155 is our top priority, and we continue to strive to obtain the resources needed to move the program forward. During the quarter, we also implemented targeted cost reduction measures, including a workforce reduction of approximately 25% to extend our cash runway and focus resources on core development priorities. We believe that the cost reduction actions, the resultant operating runway extension will provide us with additional opportunities to advance our strategic priorities. With that, I'll turn it over to Matt.

Thank you, Marella. Seres continues to execute its R&D strategy with efficiency and discipline with a focus on expanding the reach of SER-155 and building on key clinical insights to advance our broader biotherapeutic pipeline. Our recent successes in clinical translation and leveraging external collaborations as well as securing non-dilutive funding allows us to evaluate important new opportunities for SER-155 in additional patient populations. We are thrilled to have recently announced that Seres has received a non-dilutive award from the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator or CARB-X, of up to $3.6 million. This award represents the second CARB-X grant to Seres and will support the development of an oral liquid formulation of SER-155, which is intended to expand future access to this biotherapeutic in medically vulnerable patients who cannot easily swallow capsules, including patients in intensive care units and some pediatric and elderly patients. Furthermore, we believe that this CARB-X award underscores the global recognition of the potential of our biotherapeutic approach to address antimicrobial resistance, a major global public health issue and a top strategic priority for CARB-X. Additionally, at the recent IDWeek conference, Seres presented new post-hoc analyses from our SER-155 Phase Ib study in allo-HSCT, which provided deeper insights into bloodstream infection patterns, antimicrobial resistance and clinical outcomes across treatment groups. These data further support SER-155's differentiated mechanism and its potential to reduce serious infections in patients with limited therapeutic options. Also notably, our collaboration with Memorial Sloan Kettering Cancer Center on an investigator-sponsored trial initiated by a clinician evaluating SER-155 in patients with immune checkpoint inhibitor-related enterocolitis, or irEC, continues to progress, and the study is currently enrolling subjects. irEC is among the most frequent and severe immune-related adverse events in recipients of immune checkpoint inhibitor therapy and can be observed in up to 50% of patients with rates varying based on cancer drug and treatment regimen. Immune checkpoint inhibitors can cause a wide range of immune-related adverse events with links to T cell biology and epithelial barrier inflammation, biological functions shown in our preclinical studies and clinical pharmacology data to be positively impacted by SER-155. irEC can be a serious condition characterized by diarrhea, abdominal pain, cramping, dehydration and blood in the stool and may progress to more serious complications such as bowel perforation, toxic megacolon or death. Management of irEC includes corticosteroids and other immune-suppressive drugs and can require withholding immune checkpoint treatment. We expect data will be available from this study early next year. We also continue to explore potential R&D partnerships to advance the development of our investigational live biotherapeutics in inflammatory and immune diseases, including ulcerative colitis and Crohn's disease. These represent large patient populations with a continued need for new mechanisms of action, in particular, therapies that can target epithelial barrier-driven inflammation and that are not immunosuppressive. Clinical and preclinical data generated through support from the Crohn's & Colitis Foundation support the potential use of our biotherapeutics to address these unmet medical needs and provide a new approach to treat these conditions, either as a monotherapy or combination therapy. We continue to advance our novel biotherapeutics using highly focused data-driven approach and look forward to continuing collaboration with our clinical and academic partners to bring important new therapies to patients in need.

Thank you, Matt. I'll now turn to the third quarter financial results. As a reminder, Seres has classified all historical operating results for the VOWST business within discontinued operations in the consolidated statement of operations for the comparative periods presented, and there was no ongoing activity in this quarter related to the discontinued operations. Seres reported net income from continuing operations of $8.2 million in Q3 2025 as compared to a net loss from continuing operations of $51 million in the third quarter of 2024. The results this quarter are comprised of a $22.5 million loss from operations, offset by a $27.2 million gain on the sale of VOWST, resulting primarily from the $25 million installment payment received as expected from Nestlé during the third quarter. R&D expenses for this quarter were $12.6 million compared to $16.5 million in the third quarter of 2024, reflecting lower personnel and related costs, a decrease in platform investments and a reduction in clinical expenses resulting from the completion of the SER-155 Phase Ib study. G&A expenses were $9.5 million in the quarter compared to $12.7 million in Q3 2024, driven primarily by lower personnel and related expenses, including IT-related expenses. As of September 30, 2025, Seres had $47.6 million in cash and cash equivalents. Based on the company's current cash position, remaining VOWST transaction-related obligations and current operating plans, we expect to fund operations through the second quarter of 2026. To summarize, we are disciplined in managing our expenses and continue to work towards securing additional capital to support development activities. In early 2026, we expect to obtain additional SER-155 clinical results, which could highlight therapeutic opportunities in a new patient population. We have also made progress advancing SER-155 preparation activities to conduct a robust Phase II study, commencement of which is funding dependent. Based on the design of the Phase II study and the scope of the opportunity, we believe that positive study results, if achieved, could lead to tremendous value creation. Operator, you may now open the call for questions. Thank you.

[Operator Instructions] Your first question comes from the line of John Newman of Canaccord.

You have some really interesting commentary on this IST at Sloan Kettering for immune checkpoint-related enterocolitis. I wonder if you could just talk to us a little bit more about anything you can tell us regarding the study design and also how you view the commercial opportunity there?

Sure. John, thank you for the question. We're very excited about the study as well. MSK initiated this study, and we're pleased to be looking at one of what could be potentially many different applications for SER-155. As you know, there is a significant unmet need in this patient population, and so we're eager for the results as well. To elaborate a little bit more on the design of the study, I'd like to turn it over to Dennis, and he can share a little bit about the significant impact to patients who are on ICI of the irEC side effect. Dennis?

Yes. Thank you, Marella. irEC is one of the most frequent and severe immune-related adverse events that patients experience in immune checkpoint inhibitor therapy. Up to 60% of patients with rates varying depending on the cancer treatment and regimen used can experience irEC. irEC can be a very serious condition, as Matt previously described, characterized by symptoms, including diarrhea and abdominal pain, cramping, dehydration, blood in the stool and can progress to more serious complications such as bowel perforation, toxic megacolon or even death. And the patients who experience irEC are treated with corticosteroids and other immunosuppressive drugs and also have to withhold their immune checkpoint inhibitor therapy. So the impact of this condition is significant and affects a significant number of patients undergoing this type of treatment. So this is the importance of why the study was originally designed and set up by the collaborator at MSK. The study is a small Phase I open-label study. The readout from this study is expected to occur in early 2026 and will be comprised primarily of safety data, drug pharmacology data and diarrhea symptom response data, following these patients through approximately 6 weeks on the study for those who have received SER-155 for irEC. Our hope is that we could see an impact on the diarrhea symptoms. And certainly, patients who would have improvement in the diarrhea symptoms without needing additional immunosuppressive therapy medications would be a very meaningful finding. So that type of a clinical outcome paired with the safety data and the drug pharmacology mechanistic data would be extraordinarily useful for us to help us plan and inform for any future development -- clinical development opportunities in this new indication.

John, I just want to spend a minute to ask Terri to comment on the second aspect of your question regarding the commercial opportunity.

Thanks, Marella. John, thanks again for the question. As Dennis outlined, and this is a very common side effect of a very commonly used class of medications across many tumor types in oncology, perhaps best evidenced by KEYTRUDA net sales last year of almost $30 billion and growing at 18% versus 2023. So these are highly used agents growing, will continue to grow, particularly as biosimilars become available in the class. In terms of the patient impact, just double-clicking a little bit on what Dennis said, it's not uncommon for patients to have to either pause or discontinue their cancer treatment altogether to go down this detour of addressing the enterocolitis. It frequently drives them into the hospital. It's also a key limitation on physicians' choice of using combination therapies, which may be highly effective for treating the different tumors they're trying to address. But there's this nervousness or anxiety about using combination therapy or even increasing the dose to address the cancer. So we feel like we have a big problem here and a very nice solution to address it. We're very eager to get the data.

Your next question comes from the line of Joseph Thome of TD Cowen.

Maybe just a couple on the potential partnership deals. Can you talk a little bit about how much capital you would need to get to that initial SER-155 data within the 12 months of study initiation? And then I guess, secondly, anything that you can do to kind of convey confidence that you'll be able to achieve something within the next 6 months within your targeted cash runway? And then maybe last, if you're able to comment, there obviously was a report during the quarter that Nestlé made a takeout offer. Are you able to comment on if that was authentic and maybe why that wasn't an appropriate choice at that time?

Great. Joe, thank you for the question. So first of all, just to talk a little bit about the design of the Phase II study. Importantly, that interim analysis 12 months after the study start will allow us a capital-efficient and timely recovery of data, and we are pleased to get feedback from the FDA that they were in alignment with that approach. As to the specific capital needs, we haven't guided on that other than to say that the timing of that and the way that we've designed the study, we do feel that we'll get meaningful safety and efficacy data given the patient count in this study at that IA point. We continue to make obtaining a partnership or another source of capital as our highest priority for SER-155, our lead candidate. So we are continuing to have interactions and looking at a variety of different sources from which that capital could be obtained. So while we can't comment on any specifics as to status, it remains our most important priority. With respect to your last question, we just make it a practice not to comment on rumors, Joe, so I can't comment specifically on that.

That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to the management for closing remarks. Please go ahead.

Thank you. Thanks, everyone, for joining us this morning, and have a great day.