Seres Therapeutics, Inc. Q4 FY2023 earnings call

Key Points

• 2023 was historic for Seres with the approval and launch of VOWST, an oral microbiome therapeutic for recurrent C. diff infection. Over 2,000 VOWST patient starts in 2023 following launch in June.
• Terri Young discussed VOWST launch priorities: scaling HCP education efforts (received 2,833 completed prescription enrollment forms, 2015 new patient starts in 2023), creating positive customer experience (VOWST VOYAGE hub conversion), establishing payer coverage (80% commercial and 54% Medicare Part D lives covered), and optimizing hospital outflow.
• Lisa von Moltke provided details on SER-155, a cultivated microbiome therapeutic candidate in Phase 1b Cohort 2, expected Q3 2024 data, targeting prevention of enteric infections and graft-versus-host disease in Allo-HSCT patients.
• Restructuring in 2023 to focus on VOWST and SER-155, aiming for $75M-$85M annual cash savings in 2024.

The main product segment is VOWST. In the fourth quarter of 2023, VOWST net sales were $10.4 million. Seres' share of the VOWST loss in the fourth quarter was $10.3 million. Nestle purchased approximately $9 million of VOWST supply from Seres in the fourth quarter, and Seres received approximately $17 million in payments from Nestle related to prior quarter purchases. The total VOWST loss in the fourth quarter was $20.5 million, with Seres' share being $10.3 million.

Forward-Looking Statements

• Expect continued growth of VOWST utilization in 2024, with potential to reach the $750 million sales milestone in the Nestle co-commercialization agreement.
• SER-155 Cohort 2 data expected in Q3 2024; positive data would validate the platform and microbiome therapeutics potential.
• Focus on cash management, runway, investments, supporting VOWST launch, SER-155 readout, and balance sheet augmentation.

Q: Can you speak to the main drivers of what looks to be about a $170 million spend in 2024?

A: David Arkowitz said about half relates to R&D, with a big chunk for ramping up the Bacthera manufacturing facility. Eric Shaff added priorities are supporting VOWST launch, driving SER-155 readout, and supporting the company.

Q: Any chance that some of the batches at Bacthera can be used commercially?

A: Dave Ege said the PPQ batches for validation are anticipated to be salable and go into commercial supply.

Q: How should we think about the sales trajectory in 2024 for VOWST and percent of free drug?

A: Terri Young said 2024 is about continued growth, breadth, and depth of prescribing. Free drug utilization rates were mid-40s in 2023, expected to decline as payer policies are issued.

Q: How should we be thinking about the decision tree for SER-155 when data is reported in Q3?

A: Lisa von Moltke said they'd look to choose a particular route based on data, likely focused and accelerated. David Arkowitz discussed the Oaktree debt facility with tranches based on sales milestones.

Q: To what extent is current headcount constraining marketing for VOWST?

A: Eric Shaff said headcount reductions constrained R&D but not marketing investment for VOWST, as it works with Nestle under contractual parameters.