DEFA14A: Seres Therapeutics to Sell VOWST Business to Nestl for Up to $335 Million Plus Royalties

Seres Therapeutics has entered into an agreement to sell its VOWST microbiome therapeutic business to Socit des Produits Nestl S.A. for an upfront payment of $100 million and potential milestone payments totaling up to $335 million.

Summary

• Seres Therapeutics has agreed to sell its VOWST microbiome therapeutic business to Socit des Produits Nestl S.A. (SPN) for a total consideration that could reach $335 million plus royalties.
• The deal includes an upfront cash payment of $100 million, less certain deductions, plus a $60 million prepaid milestone.
• Seres will also receive $50 million on January 15, 2025, and $25 million on July 1, 2025, contingent on material compliance with a Transition Services Agreement.
• Future milestone payments of $125 million and $150 million are tied to achieving worldwide annual net sales of $400 million and $750 million, respectively.
• Seres and SPN will share 50/50 in the net profit or net loss from VOWST sales in the United States and Canada until December 31, 2025.
• SPN will purchase 14,285,715 shares of Seres' common stock at $1.05 per share, totaling $15 million.
• The transaction is subject to Seres stockholder approval and other customary conditions, with an expected closing date no later than February 6, 2025.
• Following the closing, Seres will focus on advancing SER-155 and other wholly-owned cultivated live biotherapeutic candidates.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the sale provides immediate capital, it also means Seres is divesting a key asset. The future milestone payments offer upside, but are not guaranteed.

Positives

• The sale provides Seres with significant upfront capital and potential future milestone payments.
• Seres will continue to be listed on the Nasdaq Global Select Market under the ticker symbol MCRB.
• The transaction allows Seres to focus on advancing its other biotherapeutic candidates, such as SER-155.
• Nestl's investment provides additional capital to Seres.

Negatives

• Seres is selling its VOWST business, which may impact future revenue streams.
• The deal is subject to stockholder approval and customary closing conditions, creating some uncertainty.
• Seres will share profits/losses from VOWST sales with Nestl until the end of 2025, limiting potential gains.

Risks

• The transaction is subject to stockholder approval, which may not be obtained.
• The closing is subject to customary conditions, which may not be satisfied.
• Seres may not receive the conditional portions of the Transaction Consideration, including the Installment Payments and the Milestone Payments.
• There is uncertainty regarding the quantum of Seres' 50% share of the net profit/net loss during the profit sharing period.
• The use of proceeds from the proposed transaction may not be effective.

Future Outlook

Following Closing, Seres expects to focus on advancing SER-155 and Seres other wholly-owned cultivated live biotherapeutic candidates to improve patient outcomes for medically vulnerable patient populations with potential to address large commercial opportunities.

Management Comments

• The Purchase Agreement has been unanimously approved by the Board.

Industry Context

This announcement reflects a growing interest in microbiome-based therapeutics and Nestl's strategic expansion in this area.

Comparison to Industry Standards

• Comparable companies in the microbiome therapeutics space include 4D pharma, Finch Therapeutics, and Vedanta Biosciences.
• Deal valuations in this sector vary widely depending on the stage of development, clinical data, and market potential of the assets involved.
• The Seres-Nestl deal is structured with a significant portion of the consideration tied to future sales milestones, which is a common practice in the biopharmaceutical industry to align incentives and mitigate risk.

Stakeholder Impact

• Shareholders will receive value through the sale and potential milestone payments.
• Employees related to the VOWST business may be impacted by the transition to Nestl.
• Patients will continue to have access to VOWST through Nestl.
• Suppliers and partners will transition their relationships to Nestl.

Next Steps

• Seres will seek stockholder approval for the transaction.
• The parties will work to satisfy customary closing conditions.
• Seres will focus on advancing SER-155 and other biotherapeutic candidates.
• The parties will enter into a Transition Services Agreement to ensure a smooth transfer of the VOWST business.

Key Dates

Keywords

VOWST, Seres Therapeutics, Nestl, Asset Purchase Agreement, Microbiome, Therapeutic, Milestone Payments, Acquisition