DEFA14A: Seres Therapeutics to Sell VOWST Assets to Nestle, Focus on Pipeline Development

Seres Therapeutics announces the sale of its VOWST assets to Nestle Health Science for $155 million upfront, plus future payments, to focus on advancing its pipeline of live biotherapeutics.

Summary

• Seres Therapeutics announced an agreement to sell its VOWST assets to Nestle Health Science for $155 million upfront, plus future payments.
• The transaction is expected to close within 90 days, pending stockholder approval.
• The sale will allow Seres to retire its existing debt facility and focus on developing its pipeline of wholly-owned live biotherapeutics.
• Seres' lead program, SER-155, is being evaluated in a Phase Ib study, with clinical data expected next month.
• SER-155 is designed to prevent gastrointestinal-derived infections, including bloodstream infections, in immunocompromised patients.
• Seres is also developing SER-147 for patients with metabolic diseases and chronic liver disease, with IND readiness anticipated in the second half of 2025.
• Second quarter VOWST net sales were $14.4 million, reflecting approximately 43% growth over the first quarter.
• Seres reported a net loss of $32.9 million for the second quarter of 2024, compared to net income of $46.6 million for the same period in 2023.
• As of June 30, 2024, Seres had $71.2 million in cash and cash equivalents.
• The company expects its cash runway to extend into the fourth quarter of 2025, based on current cash, future operating plans, and the expected capital from the VOWST asset sale.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the strategic shift towards pipeline development and the expected capital infusion from the VOWST asset sale. However, the company is still operating at a loss and faces risks associated with clinical trials and competition.

Positives

• The VOWST asset sale provides a significant capital infusion to Seres, strengthening its balance sheet.
• The sale allows Seres to focus on its core competency of developing live biotherapeutics.
• SER-155 has shown promising early data in preventing gastrointestinal pathogen domination.
• SER-147 represents another opportunity for Seres to address unmet medical needs in patients with metabolic diseases and chronic liver disease.
• Nestle's continued refinement of the VOWST launch execution is expected to expand the business.
• The company expects its cash runway to extend into the fourth quarter of 2025.

Negatives

• Seres reported a net loss of $32.9 million for the second quarter of 2024.
• The company is reliant on Nestle's execution of the VOWST launch to generate profits.
• The company's future success is dependent on the successful development and commercialization of its pipeline candidates.

Risks

• The VOWST asset sale is subject to stockholder approval and may not be completed.
• Clinical trials for SER-155 and SER-147 may not be successful.
• Seres may face competition from other companies developing therapies for similar indications.
• The company may need to raise additional capital in the future.
• The company is reliant on third parties to conduct its clinical trials and manufacture its product candidates.

Future Outlook

Seres will focus on advancing its pipeline of live biotherapeutics, with a near-term focus on reducing the risk of bacterial infections in high-risk populations and a longer-term focus on autoimmune diseases such as inflammatory bowel disease. The company expects to obtain SER-155 clinical data in allo-HSCT in September and is developing SER-147 for medically compromised patients with metabolic diseases.

Management Comments

• Eric Shaff: 'We are proud to have developed VOWST as the first-ever FDA-approved oral live microbiome therapy.'
• Eric Shaff: 'We believe that the capabilities, know-how and core intellectual property that we have developed over the last decade and our underlying technology platforms position Seres to continue to successfully advance new biotherapeutics.'
• Lisa von Moltke: 'We have reason to believe that the safety profile associated with our biotherapeutics will continue to be favorable as we have observed in our prior clinical studies.'
• Matthew Henn: 'SER-147 was designed and optimized using our reverse translational [MBTX] platform, enabling the data-driven selection of a unique set of bacterial strains with the desired functional properties.'
• Teresa Young: 'We will continue to utilize a rigorous and data-driven approach to develop our pipeline strategy, which considers the strength of scientific rationale and commercial potential along with clinical development capability, time and cost.'
• Marella Thorell: 'We expect that the capital of team through the VOWST asset sale, if completed, to allow us to extend our cash runway enabling Seres to meaningfully advance its pipeline.'

Industry Context

The announcement reflects a growing trend in the pharmaceutical industry towards specialization and focus on core competencies. Seres' decision to sell its commercial assets and concentrate on its pipeline development aligns with this trend, as it allows the company to leverage its expertise in live biotherapeutics and address unmet medical needs in specific patient populations. The microbiome therapeutics field is rapidly evolving, and Seres' approach of rationally designing and optimizing bacterial consortia positions it as a key player in this space.

Comparison to Industry Standards

• Seres' VOWST is the first FDA-approved oral live microbiome therapy, setting a new standard in the treatment of recurrent C. difficile infections.
• The company's approach to developing live biotherapeutics, which involves rationally designing and optimizing bacterial consortia, is similar to that of other companies in the field, such as Finch Therapeutics and Vedanta Biosciences.
• However, Seres' focus on cultivated biotherapeutics, which are manufactured from single-strain isolates through fermentation methods, distinguishes it from companies that rely on fecal microbiota transplantation (FMT) or other less controlled methods.
• The company's pipeline of product candidates, including SER-155 and SER-147, targets specific patient populations with high unmet medical needs, such as immunocompromised patients and those with chronic liver disease, which aligns with the industry trend towards precision medicine.
• The company's collaboration with Nestle Health Science for the commercialization of VOWST is similar to other partnerships in the pharmaceutical industry, where smaller companies leverage the resources and expertise of larger companies to bring their products to market.

Related Party Transactions

• The document discusses the collaboration profit and loss sharing related party line with Nestle.

Stakeholder Impact

• Shareholders will benefit from the increased focus on pipeline development and the potential for future value creation.
• Employees will be impacted by the restructuring and the transfer of some employees to Nestle Health Science.
• Patients will benefit from the development of new therapies for serious diseases.
• Nestle Health Science will benefit from the acquisition of the VOWST assets and the potential for future revenue growth.

Next Steps

• Obtain stockholder approval for the VOWST asset sale to Nestle Health Science.
• Close the VOWST asset sale transaction within 90 days.
• Obtain clinical data from the Phase Ib study of SER-155 in September.
• Discuss the SER-155 data with the FDA and determine next steps for development.
• Potentially initiate a global registrational study for SER-155 in allo-HSCT.
• Potentially initiate development of SER-155 in other medically vulnerable groups.
• Continue development of SER-147, with IND readiness anticipated in the second half of 2025.
• Refine pipeline strategy based on SER-155 clinical results.

Key Dates

Keywords

Seres Therapeutics, VOWST, Nestle Health Science, Live Biotherapeutics, SER-155, SER-147, Microbiome, Infection Prevention, Allo-HSCT, Metabolic Disease, Clinical Trials, Asset Sale