Good day, ladies and gentlemen. And welcome to Second Quarter 2019 Seres Therapeutics Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded.

I would like to introduce your host for today's conference Mr. Carlo Tanzi, Vice President, Investor Relations. Sir, please go ahead..

Thank you, and good morning. Our press release with the company's second quarter 2019 financial results and a business update became available at 7:00 a.m. Eastern Time this morning and can be found on the Investors and Media section of the company's website.

I'd like to remind you that we'll be making forward-looking statements relating to the timing, enrollment and results of our clinical studies, regulatory matters, study designs, our development plans, our potential competitive advantages, the promise and potential impact of any of our microbiome therapeutics or clinical trial data and the sufficiency of our cash and cash equivalents to fund operations.

Actual results may differ materially. Additionally these statements are subject to certain risks and uncertainties, which are discussed under the Risk Factors section of our recent SEC filings. Any forward-looking statements made on today's call represent our views as of today only.

We may update these statements in the future, but we disclaim any obligation to do so. On today's call, I'm joined by Eric Shaff, Seres' President and CEO; and Dr Kevin Horgan, our Chief Medical Officer; Dr. Matt Henn, our Chief Scientific Officer is also joining by phone and available for the Q&A portion of this earnings call.

And with that, I'll pass the call to Eric..

Thanks, Carlo and good morning everyone. On our last quarterly conference call, we outlined a number of important changes at the company, since I became CEO and we presented a more in-depth review of the pipeline. We will keep today's call shorter as we now have our strategy clearly defined.

Our mission is to develop microbiome-based therapeutics for serious diseases. This is a new treatment modality that we believe holds tremendous promise and we are focused on the execution of our prioritized programs. These are our SER-287 Phase IIb study in ulcerative colitis. Our SER-109 Phase III study in recurrent C.

diff infection, our work in immuno-oncology including our ongoing SER-401 Phase Ib study in metastatic melanoma as well as our collaboration with our partners at AstraZeneca. And finally, our preclinical next-generation fermented microbiome therapeutic candidate SER-301 for ulcerative colitis.

Supporting our R&D efforts are Seres deep capabilities related to microbiome therapeutic drug discovery, manufacturing and clinical development. We believe that these capabilities provide Seres with an important competitive advantages related to the advancement of this novel treatment modality.

We expect 2020 to be an exciting and data-rich year for Seres, with important milestones including our two late-stage programs beginning with SER-109 study results in early 2020. We expect data from our SER-287 study in the third quarter of 2020 and also from our SER-401 metastatic melanoma study in the second half of 2020.

I will now turn the call over to Kevin, to provide a more detailed review of our clinical programs..

Thank you, Eric. Before discussing, our clinical development programs, I would like to address the FDA safety alert related to FICO Microbiota Transplantation or FMT issued in June. This is related to FMT and serious adverse reactions including a patient death that resulted from the transmission of multidrug-resistant organisms.

Importantly, this FDA alert does not apply to Seres as our drug candidates are fundamentally different than the unapproved FMT used in medical practice.

Our drug candidates comprised of highly purified consortia of spore-based commensal bacteria are being evaluated in controlled clinical studies conducted under an IND with rigorous safety monitoring and reporting procedures.

Seres Therapeutic candidates are manufactured under GMP conditions and quality controlled using stringent standards to ensure product quality and consistency. We have been in contact with our clinical sites to ensure that they fully understand the differences between FMT and other fecal bacterial preparations and Seres drug candidates.

Now, turning to our development programs, I'll begin with SER-287, which is in a Phase IIb study in patients with mild to moderate active ulcerative colitis. SER-287 is an orally administered donor-derived living drug candidate comprised commensal bacterial spores derived from the healthy human gastrointestinal tract.

Our objective with SER-287 is to develop a first-in-class microbiome therapeutic that modulates the microbiome as a trigger and amplifier of inflammation. We believe this drug candidate has the potential to result in significant improvements in patient outcomes and may provide a novel non-immunosuppressive treatment option for this serious disease.

A prior completed SER-287 Phase Ib proof-of-concept study demonstrated a statistically significant difference in the clinical remission rate between patients treated with vancomycin followed by daily SER-287 for eight weeks compared to the placebo group. In that study, we observed a 40% remission rate with SER-287 versus 0% for placebo.

Following those initial clinical results, we obtained additional microbiome metabolite and transcriptomic data sets that provided mechanistic insights that help explain and support the observed clinical therapeutic activity.

Microbiome biomarkers identified as associated with treatment and clinical remission are consistent with recently published data from the human microbiome project. Importantly the safety profile for SER-287 was highly favorable with no imbalance in adverse events seen in patients administered SER-287 compared to placebo.

Supported by these compelling data we subsequently initiated the ongoing SER-287 Phase IIb ECO-RESET study. Based on written FDA feedback, we expect that this study could serve as one of two pivotal studies to support product registration.

More recently, we were also pleased to have obtained feedback from the European Medicines' Agency Committee on Human Medicinal Products CHMP who also indicated that ECO-RESET could serve as one of two registrational studies to support the European regulatory marketing application.

The SER-287 ECO-RESET study is a randomized placebo-controlled three arm induction trial that will enroll approximately 201 patients with active mild to moderate ulcerative colitis who have failed prior therapy.

In the first of three arms, patients receive vancomycin pretreatment followed by 10 weeks of the same daily regimen used in the arm of the Phase Ib trial that showed the highest clinical remission rate.

In the second arm, patients also receive vancomycin pretreatment followed by two weeks of the same SER-287 daily regimen as in the first arm, followed by eight weeks of a lower dose. In the prior Phase Ib trial, engraftment of SER-287 was seen to plateau after two weeks of SER-287 administration.

So this arm evaluates a regimen based on our mechanistic learnings from that study. In the third arm, patients received only placebo for both pretreatment and during the treatment period. We continue to execute enrollment of this study at over 90 sites across the U.S. and Canada.

To help ensure that we stay on track with our enrollment projections, we recently engaged with WCG ThreeWire. This is a well-known clinical trial specialty services company that provides enrollment assistance at clinical sites to accelerate enrollment. We continue to expect top-line data in the third quarter of 2020.

I'll now turn to the SER-109 ECOSPOR III Phase III study. SER-109 is designed to restore the health and diversity of the microbiome, resulting in pathogen resistance to reduce the rate of C. diff infection recurrence.

ECOSPOR III is a randomized placebo-controlled study where all patients are treated with standard-of-care antibiotics to address the qualifying acute C. diff infection and subjects then receive either SER-109 or placebo. The primary endpoint compares the C.

diff recurrence rate in subjects who receive SER-109 versus placebo up to eight weeks after dosing. As we have disclosed previously, we have modified the ECOSPOR III to reduce the study size to 188 patients to accelerate the timing to top-line clinical readouts, while maintaining statistical power.

We continue to make steady progress with the study in the face of widespread continued use of FMT to treat C. diff infection and we expect to report top-line SER-109 data in early 2020. Moving to our SER-401 program.

SER-401 is an oral donor-derived microbiome therapeutic candidate based on the bacterial signature similar to that observed in the gastrointestinal microbiome of responders to checkpoint inhibitor immunotherapy.

In collaboration with the Parker Institute for Cancer Immunotherapy and the MD Anderson Cancer Center, we are currently enrolling a randomized placebo-controlled SER-401 study. This Phase Ib study will enroll 30 patients with metastatic melanoma with all patients receiving nivolumab, an FDA-approved anti PD-1 therapy.

Patients are randomized at a 2:1 ratio to either SER-401 or placebo. The study will evaluate safety and also evaluate tumor biopsies and various clinical immunologic and biomarkers of response. We expect to obtain SER-401 Phase Ib study preliminary results in the second half of 2020.

We also continue to advance our preclinical development of SER-301, a next-generation rationally designed fermented microbiome therapeutic candidate for the treatment of ulcerative colitis.

The design of SER-301 incorporates insights on microbiome biomarkers and microbial mediated functional pathways associated with clinical remission and endoscopic improvement from our SER-287 Phase Ib study. We expect to file an IND application and initiate clinical development for SER-301 in early 2020. I'll now pass the call back to Eric..

Thanks, Kevin. I'll provide a brief overview of our financials and I will note that additional data is included in the press release we issued this morning. Seres reported a net loss of $10.8 million for the second quarter of 2019, as compared to a net loss of $27.8 million for the same period in 2018.

The second quarter net loss was driven primarily by clinical and development expenses, personnel expenses and ongoing development of the company's microbiome therapeutics platform.

The lower level of cash used in the second quarter, relative to recent quarters, was the result of cost-cutting corporate changes and the focusing of our pipeline implemented earlier this year.

We remain sensitive to the deployment of corporate resources and we expect that the lower expense levels incurred this quarter will be a proxy for subsequent quarters leading up to the clinical readouts expected next year. Seres ended the second quarter with approximately $102.2 million in cash and cash equivalents.

This cash balance includes $60.6 million in net proceeds obtained in a public equity offering completed in June, as well as the receipt of the first of three $6.7 million annual installment payments due under the terms of our collaboration with AstraZeneca.

Based on our current operating plan, cash resources are expected to fund operating expenses and capital expenditure requirements, excluding net cash flows from future business development activities or potential incoming milestone payments into the first quarter of 2021.

Importantly, with our recent capital raise, we now expect to have sufficient resources to reach the multiple significant value inflection events anticipated in the coming year. Both new and existing investors participated in our public offering and we were pleased to have had the continued support of Flagship Pioneering through a new investment fund.

We are very happy to have Flagship's continued engagement. And as we announced this morning, I am delighted to welcome Stephen Berenson, Managing Director at Flagship to Seres' Board. As I mentioned at the beginning of the call, we are in a period now focused on clinical execution.

Our team is working extremely hard to enroll our SER-109, SER-287 and SER-401 studies as quickly as possible and we look forward to 2020 being an exciting year with multiple meaningful company milestones expected, including our two late-stage programs SER-287 and SER-109.

The microbiome field has long sought definitive clinical data that could truly validate this emerging area of medicine. We believe that next year could be a landmark period for the microbiome. As I conclude, I'd like to voice our appreciation to the patients involved in our clinical studies, our employees and our investors for your continued support.

Operator, let's open the line now for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Chris Shibutani with Cowen. Your line is open. Please go ahead..

Thanks very much. Good morning guys. During the last quarter I think as you described the FDA had the safety alert related to the problems that they saw with FMT.

As you're enrolling patients into the SER-109 ECOSPOR III trial, what are you observing out there? And is there a possibility that that observation of safety with FMT has helped you at all in terms of your ability to enroll? And then related to that on SER-109, can you give us a sense for what your yield is like with selecting patients who are appropriate for this study? Obviously, at a given center they may think that they have potential candidates through the processes that you've gone through, you've been more specific with your diagnostic tools, looking specifically for the toxin.

Roughly what's the kind of yields for maybe every 10 patients that gets proposed to be part of the trial end up being genuinely qualified based upon your toxin assay? Thanks..

Good morning, Chris. And thanks for the question. I'm going to ask Kevin to comment on both parts of your question. I will say for the first part, we do think that the FMT event was significant for the space -- will be significant for the space.

I will caution you that it still is fairly recent in time in terms of seeing the impact of it into our accruals, but let me ask Kevin to speak on both the first the 109 piece as well as the yield question..

Yeah, Chris. So we -- and this is obviously something that we've been looking at closely, and I think it's fair to say that we haven't been able to at this point to see any discernible effect in terms of enrollment at this point. But it's -- as we reflected on that, we think it's too early to make a conclusive determination about that.

And then with regard to the second question, what we're -- I mean, the best kind of single data point that we have is that of the patients that undergo screening in the study approximately one-third of those patients turn out to be toxin negative and are therefore not eligible.

So I think that's -- the key message here is that that's really enhanced our confidence in our approach that it's the right approach to get the patients who are most likely to benefit from our novel intervention..

And is there anything that the FDA is doing in follow-up to that notification to the practicing community? Are you anticipating that perhaps there'd be any discussions, any guideline changes, what is the sequel to that news that came across a couple of months back?.

Yeah. I think that's a distinct possibility and that remains to be seen. I know that it has amplified kind of the discussions within the FDA about how to approach this -- the overall landscape of this complicated situation..

Yeah, Chris, I would just add to that, obviously, we don't speak for the FDA, but what we are doing is we are in contact with our clinical sites. And we are in dialogue with them as it relates to the event.

And why we believe that if you're a patient – if you're a physician, it makes sense to think about an approach like we're taking as opposed to some of the other approaches out there..

And then finally, as far as you believe that current ECOSPOR III could be a single trial that it might enable submission for an approval on the safety end of it, do you have confirmation that the data that you'll be accumulating from that study should be sufficient in the FDA's eyes? I noticed on the slide there's freight and additional safety data, or do you feel like this study would be sufficient in and of itself in terms of at least the number of patient's exposures that type of thing? Thank you..

Yeah, Chris I think we went through this in some detail in our last earnings call. I would say that, we don't have anything new to report again just for background this is a breakthrough orphan designated program. If we find ourselves with a positive clinical results we will be very happy to engage with the FDA to define that right path forward.

We think that there are a number of different avenues to fulfill a residual safety department if one is required open-label exposure, I'd say a Phase IV commitment and potentially others.

So we don't have anything new to report on that end, but of course, we will look forward to concluding the study with what we expect will be a positive result and go from there..

Great. Thanks for sharing the comments and good luck for the continued progress. Thank you..

Thanks, Chris..

Thank you. And our next question comes from the line of Chris Howerton with Jeffries. Your line is open. Please go ahead..

Hey, good morning, guys. This is Saeed [ph] in for Chris. Thanks for taking the question here.

My first question is related to 287 it's kind of related to the previous question just asked but in terms of the trial acting as a potential pivotal what really – what would it really take for that to be designated as a pivotal by both the FDA and EMA? Is there a certain amount of clinical significance or statistical significance that would give you confidence that it can serve as a pivotal?.

Thanks for the question. Saeed, let me ask Kevin to comment on that – on that comment..

Yeah, I'll echo what the FDA is kind of standard response is it will be a review issue to the data, so it will be the strength of the data.

And in meeting the primary endpoints obviously, and then the totality of the data that we will present, and I think in that context that's why we are feeling confident because of the data that we got from our albeit small Ib study, but it was the totality of the data that we really feel is convincing.

But with the objective endpoints the centralized and the Scott blinded endoscopic reads and the various clinical endpoints which aligned very elegantly with the microbiome data, the metabolite data and the transcriptomic data that we got.

So we think that the study will be positive and it will present a really compelling data set to support being a pivotal study..

Great. Thank you. So my next question is related to SER-301 and the $10 million milestone payment that you're entitled to.

I was just curious as to what exactly would trigger that? Is that – with an IND filing, or the dosing of the first that or something else perhaps? Just some more color there would be very helpful?.

Yes Saeed, this is Eric. We've not provided that type of specificity in terms of the contract language in the past and I think, we won't do that in the future, except to say that with the work that we're doing and with initiating clinical development for the program, we expect to receive that $10 million.

Our partners -- and Nestlé have been terrific partners for us including their support of the company from a financial perspective, the milestones that they've provided to us in the past has provided a really important financing for our clinical progress and we're excited about our SER-301 program and happy to move forward with it..

Perfect. Again my last question kind of a clarification question here.

I believe you said that the $102 million in cash that you had, was that inclusive of the $60 million raise or not inclusive of $60 million raise?.

It was inclusive of the $60 million raise..

Okay.

So then, can you -- is there a way that you could probably put a sense around sort of the operating expenses going forward? I mean at a $24 million to $25 million run rate that -- I mean it's going to be lower like you said, is there any way that you could put a sense around what OpEx could look like over the next couple of quarters?.

Well, I think Saeed, if you look at our Q2 numbers, you're seeing a fairly significant decrease over our Q1 run rate and prior and what we said and what I said in my prepared remarks was that the Q2 run rate was likely to be indicative -- more indicative of our run rate up to our clinical readouts in 2020 than what our historical numbers suggest.

As you may remember, we -- in February of this year announced a streamlining of our corporate costs and a focusing of our portfolio on our four highest priority programs.

And because those changes were made during or in the first quarter, you're really seeing the run rate effect of those changes be implemented in the second quarter and reflected in our second quarter numbers.

So, I think you're seeing -- if you see a way, the one part of the one-time items, our burn is more indicative of what you should expect going forward versus what you've seen in the past..

Got you. Thank you guys for the questions -- taking questions and good luck on the progress..

Thank you..

Thank you. And I'm showing no further questions. And I would like to turn the conference back over to the company for any further remarks..

Thanks operator and thank you for your continued interest in Seres Therapeutics. And we look forward to keeping you appraised of our progress. I will note that we will be attending the Canaccord Conference tomorrow. So, we look forward to seeing many of you there. Have a great morning and have a great week..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day..