Full Press Release Details
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID 238) | F-2 |
| Consolidated Balance Sheets as of December 31, 2023 and 2022 | F-4 |
| Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022 | F-5 |
| Consolidated Statements of Stockholders' (Deficit) Equity as of December 31, 2023 and 2022 | F-6 |
| Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 | F-7 |
| Notes to Consolidated Financial Statements | F-8 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Seres Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Seres Therapeutics, Inc. and its subsidiaries (the "Company") as of December 31,
2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of stockholders' (deficit) equity and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has incurred losses and negative cash flows from operations since its inception and needs to raise additional capital to fund future operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
Recognition of Collaboration (Profit) Loss Sharing - License Agreement with NHSc Rx License GmbH (Nestl )
As described in Note 15 to the consolidated financial statements, the Company recognizes collaboration (profit) loss sharing - related party
arising from a license agreement with Nestl , which totaled $0.7 million for the year ended December 31, 2023. Under the 2021 License Agreement with Nestl , beginning with the first commercial sale of VOWST, which occurred in June 2023, net sales
of VOWST are recorded by Nestl . The Company records its share of the profits or losses from the sales of VOWST, including commercial and medical affairs expenses incurred by the Company, on a net basis, as collaboration (profit) loss sharing -
related party. The collaboration (profit) loss sharing - related party line item also includes the Company's profit on the transfer of VOWST inventory to Nestl , which represents the excess of the supply price paid by Nestl over the Company's cost
to manufacture VOWST, subject to a supply price cap applicable to product manufactured prior to commercial launch.
The principal consideration for our determination that performing procedures relating to the recognition of collaboration (profit) loss sharing
arising from the license agreement with Nestl is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company's recognition of collaboration (profit) loss sharing.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included, among others (i) evaluating management's collaboration (profit) loss sharing accounting policy; (ii) testing the completeness and accuracy of certain data used to calculate the
collaboration (profit) loss sharing by sending a confirmation and obtaining and inspecting source documents provided by Nestl ; (iii) recalculating the Company's share of the profit or losses from the sales of VOWST; and (iv) recalculating the
Company's profit on transfer of VOWST inventory to Nestl and obtaining and inspecting source documents, such as invoices and evidence of payment.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
We have served as the Company's auditor since 2014.
SERES THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 127,965 | $ | 163,030 | ||||
| Short term investments | - | 18,311 | ||||||
| Collaboration receivable - related party | 8,674 | - | ||||||
| Inventories | 29,647 | - | ||||||
| Prepaid expenses and other current assets | 9,124 | 13,423 | ||||||
| Total current assets | 175,410 | 194,764 | ||||||
| Property and equipment, net | 22,457 | 22,985 | ||||||
| Operating lease assets | 109,793 | 110,984 | ||||||
| Restricted cash | 8,185 | 8,185 | ||||||
| Restricted investments | 1,401 | 1,401 | ||||||
| Other non-current assets (1) | 41,354 | 10,465 | ||||||
| Total assets | $ | 358,600 | $ | 348,784 | ||||
| Liabilities and Stockholder's Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,641 | $ | 17,440 | ||||
| Accrued expenses and other current liabilities (2) | 80,611 | 59,840 | ||||||
| Operating lease liabilities | 6,677 | 3,601 | ||||||
| Short term portion of note payable, net of discount | - | 456 | ||||||
| Deferred income - related party | 7,730 | - | ||||||
| Deferred revenue - related party | - | 4,259 | ||||||
| Total current liabilities | 98,659 | 85,596 | ||||||
| Long term portion of note payable, net of discount | 101,544 | 50,591 | ||||||
| Operating lease liabilities, net of current portion | 105,715 | 107,942 | ||||||
| Deferred revenue, net of current portion - related party | 95,364 | 92,430 | ||||||
| Warrant liability | 546 | - | ||||||
| Other long-term liabilities | 1,628 | 1,442 | ||||||
| Total liabilities | 403,456 | 338,001 | ||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders' (deficit) equity: | ||||||||
| Preferred stock, $ 0.001 par value; 10,000,000 shares authorized at December 31, 2023 and 2022; no shares issued and outstanding at December 31, 2023 and 2022 | - | - | ||||||
| Common stock, $ 0.001 par value; 240,000,000 and 200,000,000 shares authorized at December 31, 2023 and 2022, respectively; 135,041,467 and 125,222,273 shares issued and outstanding at December 31, 2023 and 2022, respectively | 135 | 125 | ||||||
| Additional paid-in capital | 933,244 | 875,181 | ||||||
| Accumulated other comprehensive loss | - | ( 12 | ) | |||||
| Accumulated deficit | ( 978,235 | ) | ( 864,511 | ) | ||||
| Total stockholders' (deficit) equity | ( 44,856 | ) | 10,783 | |||||
| Total liabilities and stockholders' equity | $ | 358,600 | $ | 348,784 |
[1] Includes $38,877 and $8,828 as of December 31, 2023 and December 31, 2022, respectively, of milestones related to the construction of the Company's dedicated manufacturing
suite at BacThera AG, or Bacthera (see Note 16, Commitments and Contingencies). Such amounts will form part of the right-of-use asset upon lease commencement.
[2] Includes related party amounts of $28,053 and $34,770 at December 31, 2023 and December 31, 2022, respectively (see Note 18)
The accompanying notes are an integral part of these consolidated financial statements.
SERES THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue: | ||||||||
| Collaboration revenue - related party | $ | 126,325 | $ | 7,128 | ||||
| Total revenue | 126,325 | 7,128 | ||||||
| Operating expenses: | ||||||||
| Research and development expenses | $ | 145,860 | $ | 172,920 | ||||
| General and administrative expenses | 87,744 | 79,694 | ||||||
| Collaboration (profit) loss sharing - related party | 704 | 1,004 | ||||||
| Total operating expenses | 234,308 | 253,618 | ||||||
| Loss from operations | ( 107,983 | ) | ( 246,490 | ) | ||||
| Other (expense) income: | ||||||||
| Interest income | 7,301 | 3,058 | ||||||
| Interest expense | ( 13,176 | ) | ( 6,020 | ) | ||||
| Other income (expense) | 134 | ( 705 | ) | |||||
| Total other (expense) income, net | ( 5,741 | ) | ( 3,667 | ) | ||||
| Net loss | $ | ( 113,724 | ) | $ | ( 250,157 | ) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | ( 0.89 | ) | $ | ( 2.31 | ) | ||
| Weighted average common shares outstanding, basic and diluted | 128,003,294 | 108,077,043 | ||||||
| Other comprehensive income (loss): | ||||||||
| Unrealized gain (loss) on investments, net of tax of $ 0 | 10 | 49 | ||||||
| Currency translation adjustment | 2 | ( 1 | ) | |||||
| Total other comprehensive income (loss) | 12 | 48 | ||||||
| Comprehensive loss | $ | ( 113,712 | ) | $ | ( 250,109 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
SERES THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(In thousands, except share data)
| Accumulated | Total | |||||||||||||||||||||||
| Common Stock | Additional | Other | Stockholders | |||||||||||||||||||||
| Par | Paid-in | Comprehensive | Accumulated | (Deficit) | ||||||||||||||||||||
| Shares | Value | Capital | Loss (Income) | Deficit | Equity | |||||||||||||||||||
| Balance at December 31, 2021 | 91,889,418 | 92 | 745,829 | ( 60 | ) | ( 614,354 | ) | 131,507 | ||||||||||||||||
| Issuance of common stock upon exercise of stock options | 326,864 | - | 966 | - | - | 966 | ||||||||||||||||||
| Issuance of common stock upon vesting of RSUs and PSUs, net of tax withholdings | 282,401 | - | - | - | - | - | ||||||||||||||||||
| Issuance of common stock under ESPP | 322,560 | - | 1,769 | - | - | 1,769 | ||||||||||||||||||
| Issuance of common stock net of issuance costs of $ 3,279 | 31,746,030 | 32 | 96,689 | - | - | 96,721 | ||||||||||||||||||
| Issuance of common stock from at the market equity offering, net of issuance costs of $ 310 | 655,000 | 1 | 4,446 | - | - | 4,447 | ||||||||||||||||||
| Stock-based compensation expense | - | - | 25,482 | - | - | 25,482 | ||||||||||||||||||
| Other comprehensive income | - | - | - | 48 | - | 48 | ||||||||||||||||||
| Net loss | - | - | - | - | ( 250,157 | ) | ( 250,157 | ) | ||||||||||||||||
| Balance at December 31, 2022 | 125,222,273 | 125 | 875,181 | ( 12 | ) | ( 864,511 | ) | 10,783 | ||||||||||||||||
| Issuance of common stock upon exercise of stock options | 260,640 | - | 877 | - | - | 877 | ||||||||||||||||||
| Issuance of common stock upon vesting of RSUs and PSUs, net of tax withholdings | 1,244,663 | 1 | ( 1 | ) | - | - | - | |||||||||||||||||
| Issuance of common stock under ESPP | 602,692 | 2 | 2,149 | - | - | 2,151 | ||||||||||||||||||
| Issuance of common stock from at the market equity offering, net of issuance costs of $ 772 | 7,711,199 | 7 | 18,152 | - | - | 18,159 | ||||||||||||||||||
| Issuance of warrants | - | - | 2,785 | - | - | 2,785 | ||||||||||||||||||
| Stock-based compensation expense | - | - | 34,101 | - | - | 34,101 | ||||||||||||||||||
| Other comprehensive income | - | - | - | 12 | - | 12 | ||||||||||||||||||
| Net loss | - | - | - | - | ( 113,724 | ) | ( 113,724 | ) | ||||||||||||||||
| Balance at December 31, 2023 | 135,041,467 | $ | 135 | $ | 933,244 | $ | - | $ | ( 978,235 | ) | $ | ( 44,856 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
SERES THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( 113,724 | ) | $ | ( 250,157 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Stock-based compensation expense | 34,101 | 25,482 | ||||||
| Depreciation and amortization expense | 6,243 | 6,629 | ||||||
| Non-cash operating lease cost | 8,871 | 5,224 | ||||||
| Amortization of premiums on investments | ( 236 | ) | 688 | |||||
| Amortization of debt issuance costs | 1,139 | 705 | ||||||
| Loss on extinguishment of debt | 1,625 | - | ||||||
| Change in fair value of warrant liabilities | ( 1,554 | ) | - | |||||
| Collaboration (profit) loss sharing - related party | 5,158 | 1,004 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current and non-current assets | ( 29,124 | ) | ( 12,599 | ) | ||||
| Collaboration receivable - related party | ( 8,674 | ) | - | |||||
| Inventories | ( 29,647 | ) | - | |||||
| Deferred income - related party | 7,730 | - | ||||||
| Deferred revenue - related party | ( 1,325 | ) | ( 7,128 | ) | ||||
| Accounts payable | ( 11,578 | ) | 2,203 | |||||
| Operating lease liabilities | ( 2,197 | ) | ( 4,203 | ) | ||||
| Accrued expenses and other current and long-term liabilities (3) | 15,838 | 3,336 | ||||||
| Net cash (used in) provided by operating activities | ( 117,354 | ) | ( 228,816 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( 7,975 | ) | ( 9,821 | ) | ||||
| Purchases of investments | ( 4,426 | ) | ( 48,221 | ) | ||||
| Sales and maturities of investments | 22,983 | 140,470 | ||||||
| Net cash provided by investing activities | 10,582 | 82,428 | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of issuance costs | - | 96,721 | ||||||
| Proceeds from at the market equity offering, net of issuance costs | 18,159 | 4,447 | ||||||
| Proceeds from exercise of stock options | 877 | 966 | ||||||
| Issuance of common stock under ESPP | 2,151 | 1,769 | ||||||
| Proceeds from issuance of debt, net of issuance costs | 103,378 | 27,606 | ||||||
| Repayment of notes payable | ( 52,860 | ) | ( 1,907 | ) | ||||
| Net cash provided by financing activities | 71,705 | 129,602 | ||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( 35,067 | ) | ( 16,786 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2 | ( 1 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of year | 171,215 | 188,002 | ||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 136,150 | $ | 171,215 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 12,547 | $ | 4,926 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Property and equipment purchases included in accounts payable and accrued expenses | $ | 16 | $ | 2,276 | ||||
| Lease liability arising from obtaining right-of-use assets | $ | 3,046 | $ | 91,412 | ||||
| Prepaid rent reclassified to right-of-use assets | $ | 4,634 | $ | 6,822 | ||||
| Recognition of warrant liabilities | $ | 2,100 | $ | - | ||||
| Warrants issued related to Term Loan and recorded as debt discount (Note 9) | $ | 2,785 | $ | - |
[3] Includes related party amounts of $(6,717) and
$3,087 at December 31, 2023 and 2022, respectively (see Note 18)
The accompanying notes are an integral part of these consolidated financial statements.
SERES THERAPEUTICS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(amounts in thousands,
except share and per share data)
Therapeutics, Inc. (the "Company") was incorporated under the laws of the State of Delaware in October 2010 under the name Newco LS21, Inc. In October 2011, the Company changed its name to Seres Health, Inc., and in May 2015, the Company changed its name to Seres
Therapeutics, Inc. The Company is a commercial-stage microbiome therapeutics company focused on the development and commercialization of a novel class of biological drugs, which are designed to treat disease by modulating the microbiome to restore
health by repairing the function of a disrupted microbiome to a non-disease state.
Company's product, VOWST (fecal microbiota spores, live brkp), formerly called SER-109, was approved by the U.S. Food and Drug Administration ("FDA") on April 26, 2023 and is the first and only orally administered microbiome therapeutic. VOWST is
indicated to prevent the recurrence of Clostridioides difficile infection ("CDI") in patients 18 or older following antibacterial treatment for recurrent CDI. The Company launched VOWST in the United States with its collaborator, Nestl
Health Science ("Nestl "), in June 2023.
upon VOWST, the Company is progressing the Phase 1b clinical trial of SER-155, a microbiome therapeutic candidate consisting of a 16-strain consortium of cultivated bacteria designed to prevent enteric-derived infections and resulting bloodstream
infections, as well as induce immune tolerance responses to reduce the incidence of graft-versus-host disease ("GvHD") in patients undergoing allogeneic hematopoietic stem cell transplantation ("allo-HSCT"). Gastrointestinal microbiome data from
the first 100 days of SER-155 Phase 1b open-label study cohort 1 showed the successful engraftment of SER-155 bacterial strains, and a substantial reduction in the cumulative incidence of pathogen domination as compared to a reference cohort of
patients, a biomarker associated with the risk of serious enteric infections and resulting bloodstream infections, as well as GvHD. The tolerability profile observed was favorable, with no serious adverse events attributed to SER-155
administration. Enrollment in the placebo-controlled cohort 2 portion of the study is ongoing, and the cohort 2 data readout is anticipated in the third quarter of 2024.
Company has built and deploys a reverse translational platform and knowledge base for the discovery and development of microbiome therapeutics, and maintains extensive proprietary know-how that may be used to support future research and development
efforts. This platform incorporates high-resolution analysis of human clinical data to identify microbiome biomarkers associated with disease and non-disease states; preclinical screening using human cell-based assays and in vitro/ex vivo and in
vivo disease models customized for microbiome therapeutics; and microbiological capabilities and a strain library that spans broad biological and functional breadth to both identify specific microbes and microbial metabolites that are associated
with disease and to design consortia of bacteria with specific pharmacological properties. In addition, the Company owns a valuable intellectual property estate related to the development and manufacture of microbiome therapeutics.
On October 29, 2023, the
Company's Board of Directors approved a restructuring plan to prioritize the commercialization of VOWST and the completion of the SER-155 Phase 1b study, while significantly reducing costs and supporting longer-term business sustainability (the
"Restructuring Plan"). The Restructuring Plan included (i) a reduction of the Company's workforce by approximately 41% across the
organization, resulting in the elimination of approximately 160 positions; (ii) significantly scaling back all non-partnered research
and development activities other than the completion of the SER-155 Phase 1b study; and (iii) reducing general and administrative expenses, including consolidating office space. For additional information on the Restructuring Plan, see Note 13, Restructuring.
Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations
and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to
commercialization. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and
accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the
normal course of business. As of December 31, 2023, the Company had an accumulated deficit of $978,235 and cash and cash equivalents of $127,965.
The Company's primary focus in
recent months has been and will continue to be supporting commercialization, including the manufacture of VOWST, and the completion of the SER-155 Phase 1b study, which requires capital and resources. Other than VOWST, the Company's product
candidates are in development, and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to potential commercialization. There can be no assurance