SERES THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, such as statements regarding our plans, objectives, expectations, intentions and projections, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the ''Risk Factors'' section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.
Overview
We are a microbiome therapeutics company developing a novel class of live biotherapeutic drugs, which are consortia of microbes designed to treat disease by modulating the microbiome to treat or reduce disease by repairing the function of a disease susceptible microbiome to a non-disease state. We have an advanced drug pipeline with late-stage clinical assets that are formulated for oral delivery and a differentiated microbiome therapeutics drug discovery and development platform including good manufacturing practices, or GMP, manufacturing capabilities for this novel drug modality.
Our highest priority is preparing a biologics license application, or BLA, for
submission to the
We are also designing microbiome therapeutics to decolonize pathogens and modulate host function to reduce and prevent infections. We believe that the scientific and clinical data from our SER-109 program validate this novel approach, which we refer to as Infection Protection. We believe the Infection Protection approach may be replicable across different bacterial pathogens to develop microbiome therapeutics with the potential to protect a range of medically compromised patients from infections. We are evaluating SER-155 in a Phase 1b study in patients receiving allogeneic hematopoietic stem cell transplantation, or allo-HSCT, to reduce incidence of gastrointestinal infections, bloodstream infections and graft-versus-host disease, or GvHD. We are also evaluating additional preclinical stage programs to reduce incidence of infections in indications such as cancer neutropenia, solid organ transplant, and reduce antimicrobial resistant infections more broadly.
We continue our research activities in ulcerative colitis, or UC, including
evaluating the potential to utilize biomarker-based patient selection and
stratification for future studies. We have completed preliminary analysis of
data from the first cohort of the SER-301 Phase 1b study, which included 15
subjects. Evaluation of the first cohort data by an independent Data Safety
Monitoring Board indicated that it would be safe to proceed to the
placebo-controlled second cohort. While efficacy was not a defined endpoint in
the first cohort, evaluation of clinical outcome data collected as part of the
study indicated that no subjects in the first cohort achieved clinical remission
as defined by the FDA using the Three-Component Modified
In addition, we continue to evaluate opportunities to advance our technology in modulating host immunity to have an impact on and treat diseases such as cancer and various autoimmune diseases.
Since our inception in
Many of our product candidates are still in preclinical development or
early-stage discovery. Our ability to generate product revenue sufficient to
achieve profitability will depend heavily on the successful development and
eventual commercialization of one or more of our product candidates. Since our
inception, we have incurred significant operating losses. Our net loss was
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sufficient to fund our operating expenses, capital expenditure requirements and debt service obligations for at least the next 12-months from issuance of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
While we plan to focus our investment on our highest priority clinical programs in the near-term, our expenses may increase substantially in connection with our ongoing and planned activities, particularly as we:
•
complete the clinical development, seek regulatory approval, and prepare for commercialization of SER-109 for patients with recurrent CDI;
•
continue the clinical development of SER-155 to reduce incidences of gastrointestinal infections, bloodstream infections and GvHD in patients receiving allo-HSCT;
•
continue translational research activities, informed by the SER-287 Phase 2b and SER-301 Phase 1b study data, to evaluate the potential to utilize biomarker-based patient selection and stratification in future clinical development efforts;
•
make strategic investments in our research discovery and development platforms and capabilities, including identifying candidates for additional disease indications;
•
make strategic investments in manufacturing capabilities;
•
maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property;
•
potentially establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;
•
perform our obligations under our agreements with our collaborators;
•
seek to obtain regulatory approvals for our product candidates; and
•
experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to continue to incur additional costs associated with operating as a public company.
As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies' stock have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
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SER-109
SER-109 is an oral microbiome therapeutic candidate consisting of a consortium
of purified Firmicutes spores. The SER-109 manufacturing purification process is
designed to remove unwanted microbes in an effort to reduce the risk of pathogen
transmission beyond donor screening alone. SER-109 is designed to reduce
recurrent CDI in patients with a history of CDI by modulating the microbiome to
a state that resists C. difficile germination and growth. SER-109, if approved,
is designed to treat individuals with recurrent CDI, a patient population which
includes approximately 170,000 cases per year in
The Phase 3 ECOSPOR III study was a multicenter, randomized, placebo-controlled study that enrolled 182 patients with multiply recurrent CDI. All patients who entered ECOSPOR III must have tested positive for C. difficile toxin. This inclusion criterion was implemented in an effort to ensure enrollment of only patients with active infection rather than simple colonization. The study was designed to evaluate patients for 24 weeks, with the primary endpoint comparing the C. difficile recurrence rate in subjects who received SER-109 verses placebo at up to eight weeks after dosing.
Previously reported topline data demonstrated that the study achieved its
primary endpoint where SER-109 was superior to placebo in reducing CDI
recurrence at eight weeks, reflecting a sustained clinical response rate of
approximately 88% at eight weeks post-treatment. SER-109 resulted in a 27%
absolute reduction of recurrence of CDI compared to placebo at eight weeks
post-treatment, which is a relative risk reduction of 68%. The number-needed-to
treat was 3.6. The rate of recurrence at 12 weeks in the SER-109 arm was 18.0%,
compared to a rate of 46.2% in the placebo arm, representing an absolute risk
reduction of 28% (relative risk 0.40; 95% CI 0.24-0.65; p <0.001 and p< 0.002
for the test sequence), and thereby consistent with the results seen at eight
weeks. Results across stratifications of age and antibiotics remained similar.
The study's efficacy results related to the primary endpoint from all analyses
exceeded the statistical threshold previously provided in consultation with the
FDA that could allow this single clinical study to fulfill efficacy requirements
for a BLA. The efficacy remained durable through 24 weeks of follow-up, as
SER-109 was observed to significantly reduced recurrence rates compared to
placebo over 24 weeks, 21.3% vs. 47.3%, respectively. In
We believe the SER-109 safety results across completed studies have been
favorable, with an adverse event profile comparable to placebo. In
In
SER-155
SER-155, an oral microbiome therapeutic candidate consisting of a consortium of
cultivated bacteria, is designed to decrease infection and translocation of
antibiotic resistant bacteria in the gastrointestinal tract and modulate host
immune responses to decrease GvHD. The rationale for this program is based in
part on published clinical evidence from our collaborators at
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SER-301
SER-301 is an oral microbiome therapeutics candidate comprised of a consortium of cultivated bacteria for the treatment of mild-to-moderate UC. SER-301 is a consortium of cultivated bacteria designed using our reverse translational discovery platform that incorporates analysis of microbiome biomarkers from human clinical data and preclinical assessments using human cell-based assays and in vitro/ex vivo and in vivo disease models. The design of SER-301 incorporates insights obtained from the SER-287 Phase 1b clinical and microbiome results, as well as from our clinical portfolio more broadly, and additional functional data from preclinical assessments, in an effort to optimize desired pharmacological properties.
SER-301 is designed to reduce induction of pro-inflammatory activity, improve epithelial barrier integrity and TNF-? driven inflammation in intestinal epithelial cells, or IECs, and modulate UC-relevant anti-inflammatory, innate and adaptive immune pathways. SER-301 is being produced by our advanced fermentation, formulation and delivery platforms. It includes strains delivered in spore form, as well as strains fermented in non-spore (vegetative) form and delivered using enterically-protected technology designed to release in the colon.
The SER-301 Phase 1b study was designed to include approximately 65 subjects
with mild-to-moderate UC distributed across two cohorts. We have completed
preliminary analysis of data from the first cohort of the SER-301 Phase 1b
study, which included 15 subjects. Evaluation of the first cohort data by an
independent Data Safety Monitoring Board indicated that it would be safe to
proceed to the placebo-controlled second cohort. While efficacy was not a
defined endpoint in the first cohort, evaluation of clinical outcome data
collected as part of the study indicated that no subjects in the first cohort
achieved clinical remission as defined by the FDA using the Three-Component
Modified
Based on the assessment of metabolomic data, SER-301 demonstrated pharmacological properties consistent with its design and led to baseline-dependent modulation of the metabolic landscape in the gastrointestinal tract of patients treated; changes were observed in short-chain and medium-chain fatty acids, tryptophan-derived metabolites, bile acids, and other microbe-associated metabolites, as well as host metabolites associated with a non-disease state. These SER-301 metabolomic results were encouraging compared with the results observed in the SER-287 Phase 2b study, in which the metabolic changes were not observed in general across subjects administered with SER-287. Additionally, changes in disease-relevant metabolites in SER-301 were observed to be greater in a definable subpopulation of patients.
The degree of metabolic changes observed following SER-301 administration appeared to be dependent on the baseline metabolic profile of the study subjects, providing support for the potential for microbiome therapeutics to be developed in biomarker-identified UC patient subpopulations.
In
Intellectual Property
Patent Portfolio
We have an extensive patent portfolio directed to rationally designed ecologies
of spores and microbes. The portfolio includes both company-owned patents and
applications, and those that we have rights to as licensee. For example, our
portfolio includes an option to license foundational intellectual property
related to the use of bacteria in combination with checkpoint inhibitors from MD
Anderson. The patents and applications included in our portfolio cover both
composition of matter and methods (e.g., method of treating). Our intellectual
property rights related to SER-109 (C. difficile) and SER-287 (ulcerative
colitis) extend through 2034. We plan on continuing to broaden our patent
portfolio. Currently, we have 24 active patent application families, which
includes 21 nationalized applications and three pending at the PCT stage. To
date, we have obtained 18 issued
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Regulatory Exclusivity
If we obtain marketing approval for any of our product candidates, we expect to
receive marketing exclusivity against biosimilar products. For a new biological
composition approved by the FDA, a 12-year period of exclusivity in
Financial Operations Overview
Revenue
To date we have not generated any revenues from the sale of products. Our revenues have been derived primarily from our agreements with our collaborators. See "-Liquidity and Capital Resources."
Operating Expenses
Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, which include:
•
expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations that manufacture drug products for use in our preclinical and clinical trials;
•
salaries, benefits and other related costs, including stock-based compensation expense, for personnel in our research and development functions;
•
costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
•
the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
•
costs related to compliance with regulatory requirements; and
•
facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.
Our primary focus of research and development since inception has been on our microbiome therapeutics platform and the subsequent development of our product candidates. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, CROs in connection with our preclinical studies and clinical trials, lab supplies and consumables, and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under development.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase in the foreseeable future as we complete clinical development, scale up manufacturing operations, seek regulatory approval, and prepare for commercialization of SER-109, continue conducting analyses of data from our UC clinical stage programs to inform next steps for further development, continue to discover and develop additional product candidates, including SER-155 and pursue later stages of clinical development of our product candidates.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate, commercial, and business development and administrative functions. General and administrative expenses also include professional service fees for marketing and market access activities in preparation for the commercial launch of SER-109; legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect that our general and administrative expenses will increase in the
future as we increase our headcount to support the potential growth in our
research and development activities and the potential commercialization of our
product candidates, and as we conduct pre-launch activities to prepare for
commercialization of SER-109. We also may continue to incur increased expenses
associated with being a public company, including increased costs of accounting,
audit, legal, regulatory and tax-related services associated with maintaining
compliance with exchange listing rules and the requirements of the
Collaboration (Profit) Loss Sharing - related party
Collaboration (profit) loss sharing - related party includes 50% sharing of the
profit or loss related to the pre-launch activities and commercialization
activities associated with the license agreement that we entered into with
Other Income (Expense), Net
Interest Income
Interest income consists of interest earned on our cash, cash equivalents and investments.
Interest Expense
Interest expense consists of interest incurred under our loan and security agreement with Hercules.
Other (Expense) Income
Other (expense) income primarily consists of amortization of premiums on investments and sublease income.
Income Taxes
Since our inception in 2010, we have not recorded any
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in
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Results of Operations
Comparison of Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
March 31,
2022 2021 Change
(in thousands)
Revenue:
Collaboration revenue - related party $ 1,493 $ 4,648 $ (3,155 )
Grant revenue - 1,070 (1,070 )
Total revenue 1,493 5,718 (4,225 )
Operating expenses:
Research and development 39,649 29,303 10,346
General and administrative 18,571 11,741 6,830
Collaboration (profit) loss sharing - related
party (976 ) - (976 )
Total operating expenses 57,244 41,044 16,200
Loss from operations (55,751 ) (35,326 ) (20,425 )
Other (expense) income:
Interest income 384 966 (582 )
Interest expense (912 ) (696 ) (216 )
Other expense (345 ) (409 ) 64
Total other (expense) income, net (873 ) (139 ) (734 )
Net loss $ (56,624 ) $ (35,465 ) $ (21,159 )
Revenue
Total revenue was
Research and Development Expenses
Three Months Ended
March 31,
2022 2021 Change
(in thousands)
Microbiome therapeutics platforms $ 7,958 $ 7,632 $ 326
SER-109 11,750 7,726 4,024
SER-287 - 2,937 (2,937 )
Early stage programs 1,763 837 926
Total direct research and development
expenses 21,471 19,132 2,339
Personnel-related (including stock-based
compensation) 18,178 10,171 8,007
Total research and development expenses
Research and development expenses were
•
an increase in personnel-related costs of
•
an increase of
•
a decrease of
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•
an increase of
•
an increase of
General and Administrative Expenses
Three Months Ended
March 31,
2022 2021 Change
(in thousands)
Personnel related (including stock-based
compensation) $ 7,326 $ 4,220 $ 3,106
Professional fees 8,265 5,535 2,730
Facility-related and other 2,980 1,986 994
Total general and administrative expenses
General and administrative expenses were
•
an increase in personnel related costs of
•
an increase in professional fees of
•
an increase in facility-related and other costs of
Collaboration (Profit) Loss Sharing - related party
Collaboration (profit) loss sharing - related party was
Other (Expense) Income, Net
Other (expense) income, net for the three months ended
Liquidity and Capital Resources
Since our inception, we have generated revenue only from collaborations and have incurred recurring net losses. We anticipate that we will continue to incur losses for at least the next several years. Our research and development and general and administrative expenses may continue to increase and, as a result, we will need additional capital to fund our operations, which we may obtain from additional financings, public offerings, research funding, additional collaborations, contract and grant revenue or other sources.
In
As of
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Collaboration and Manufacturing Agreements
License Agreement with Société des Produits Nestlé S.A. (Nestlé)
In
For the development of 2016 Collaboration Products for IBD under a global
development plan, we agreed to pay the costs of clinical trials of such products
up to and including Phase 2 clinical trials, and 67% of the costs for Phase 3
and other clinical trials of such products, with Nestlé bearing the remaining
33% of such costs. The Letter Agreement also provides scenarios under which
Nestlé's reimbursement to us for certain Phase 3 development costs would be
reduced or delayed depending on the outcomes of the SER-287 Phase 2b study. For
other clinical development of 2016 Collaboration Products for IBD, we agreed to
pay the costs of such activities to support approval in
With respect to development of 2016 Collaboration Products for CDI under a
global development plan, we agreed to pay all costs of Phase 2 clinical trials
for SER-109 and for Phase 3 clinical trials for SER-109. We agreed to bear all
costs of conducting any Phase 1 or Phase 2 clinical trials under a global
development plan for 2016 Collaboration Products other than SER-109 for CDI. We
agreed to pay 67% and Nestlé agreed to pay 33% of other costs of Phase 3
clinical trials conducted for 2016 Collaboration Products other than SER-109 for
CDI under a global development plan. For other clinical development of 2016
Collaboration Products for CDI, we agreed to pay costs of such development
activities to support approval in
The 2016 License Agreement continues in effect until terminated by either party on the following bases: (i) Nestlé may terminate the 2016 License Agreement in the event of serious safety issues related to any of the 2016 Collaboration Products; (ii) we may terminate the 2016 License Agreement if Nestlé challenges the validity or enforceability of any of our licensed patents; and (iii) either party may terminate the 2016 License Agreement in the event of the other party's uncured material breach or insolvency. Upon termination of the 2016 License Agreement, all licenses granted to Nestlé by us will terminate, and all rights in and to the 2016 Collaboration Products in the 2016 Licensed Territory will revert to us. If we commit a material breach of the 2016 License Agreement, Nestlé may elect not to terminate the 2016 License Agreement but instead apply specified adjustments to its payment obligations and other terms and conditions of the 2016 License Agreement.
License Agreement with
On
The 2021 License Agreement sets forth the parties' respective obligations for development, regulatory, commercialization, medical affairs, and manufacturing and supply activities for the 2021 Collaboration Products with respect to the 2021 Field and the 2021 Licensed Territory. Pursuant to the 2021 License Agreement, we are responsible for, and will use commercially reasonable
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efforts in, conducting development of SER-109 in the 2021 Field in
Nestlé has the sole right to commercialize the 2021 Collaboration Products in the 2021 Licensed Territory in accordance with a commercialization plan, subject to our right to elect to provide up to a specified percentage of all promotional details for a certain target audience. Each party will use commercially reasonable efforts to commercialize the 2021 Collaboration Products in the 2021 Licensed Territory in accordance with the commercialization plan. Both parties will perform medical affairs activities for 2021 Collaboration Products in the 2021 Licensed Territory in accordance with a medical affairs plan. We will be solely responsible for the manufacturing and supply of 2021 Collaboration Products for commercialization under a supply agreement that will be entered into between the parties. We are responsible for commercialization and medical affairs activities costs incurred by the parties until first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory and in accordance with a pre-launch plan, up to a specified cap. Following first commercial sale of the first 2021 Collaboration Product, we will be entitled to a royalty in an amount equal to approximately 50% of the commercial profits.
In exchange for the grant of the licenses under the 2021 License Agreement,
Nestlé agreed to pay us a non-refundable, non-creditable and non-cancellable
upfront payment of
The 2021 License Agreement continues in effect until all development and commercialization activities for all 2021 Collaboration Products in the 2021 Licensed Territory have permanently ceased. The 2021 License Agreement may be terminated by either party upon sixty days' written notice for the other party's material breach that remains uncured during such sixty-day period, or immediately upon written notice for the other party's insolvency. Nestlé may also terminate the 2021 License Agreement at-will (i) with twelve months' prior written notice, effective only on or after the third anniversary of first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory, (ii) if first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory has not occurred by the fifth anniversary of the effective date of the 2021 License Agreement, with one hundred eighty days' prior written notice, which must be provided during a specified period set forth in the 2021 License Agreement, or (iii) if regulatory approval for SER-109 is not granted after submission by us of a filing seeking first regulatory approval as set forth in the development and regulatory activity plan, and the parties fail to agree on further development of SER-109 in accordance with the terms of the 2021 License Agreement, with one hundred eighty days' prior written notice, which must be provided within a specified period set forth in the 2021 License Agreement. We may also terminate the 2021 License Agreement immediately upon written notice if Nestlé challenges any licensed patent in the 2021 Licensed Territory.
Upon termination of the 2021 License Agreement, all licenses granted to Nestlé by us will terminate. If we commit a material breach of the 2021 License Agreement, Nestlé may elect not to terminate the 2021 License Agreement but instead apply specified adjustments to the payment terms and other terms and conditions of the 2021 License Agreement. The 2021 License Agreement contains customary representations and warranties by the parties, intellectual property provisions including ownership, patent prosecution, enforcement and defense, certain indemnification rights in favor of each party, and customary confidentiality provisions and limitations of liability.
Long Term Manufacturing Agreement with Bacthera
In
Under the terms of the Bacthera Agreement, we agreed to pay Bacthera a total of
at least
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The Bacthera Agreement has an initial term that continues until the tenth anniversary of the earlier of (a) successful completion of construction and demonstration of Bacthera's readiness for commercial production or (b) the commencement of manufacturing. The initial term is subject to renewals, which could extend the term to 16 years, and additional three-year terms thereafter. Each party has the ability to terminate the Bacthera Agreement upon the occurrence of certain customary conditions. We may also terminate the Bacthera Agreement for convenience after a defined period. In the event of a termination, we have certain financial obligations that would apply, and Bacthera has agreed to grant a license to Bacthera-developed manufacturing know how, if any, and provide technical assistance to us, so that we could transfer the manufacturing operations to ourselves or a third party. The Bacthera Agreement also contains representations, warranties and indemnity obligations as well as limitations of liability that are customary for agreements of this type.
Indebtedness
Loan and Security Agreement with Hercules
In
The Original Credit Facility also includes events of default, the occurrence and continuance of which provide Hercules with the right to demand immediate repayment of all principal and unpaid interest, and to exercise remedies against us and the collateral. These events of default include, among other things and subject to customary exceptions: (i) insolvency, liquidation, bankruptcy or similar events; (ii) failure to pay any debts due under the loan and security agreement with Hercules or other loan documents on a timely basis; (iii) failure to observe certain covenants under the loan and security agreement with Hercules; (v) occurrence of a material adverse effect; (vi) material misrepresentation by us; (vii) occurrence of any default under any other agreement involving material indebtedness; and (viii) certain material money judgments.
On
Effective as of
The first tranche in an aggregate principal amount of
All advances outstanding under the New Credit Facility bear interest at a rate
equal to the greater of either (i) the Prime Rate (as reported in The Wall
Street Journal) plus 6.40%, and (ii) 9.65%. For all advances outstanding under
the New Credit Facility, we will make interest only payments through
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certain conditions (such applicable date, the "Maturity Date").
We may prepay advances under the New Credit Facility, in whole or in part, at any time subject to a prepayment charge equal to: (a) 2.0% of amounts so prepaid, if such prepayment occurs during the first year following the Effective Date; (b) 1.5% of the amount so prepaid, if such prepayment occurs during the second year following the Effective Date, and (c) 1.0% of the amount so prepaid, if such prepayment occurs during the third year following the Effective Date.
We will pay an end of term charge of 4.85% of the aggregate amount of the
advances made under the Old Credit Facility on the earliest date of (i)
Other terms of the New Credit Facility remain generally identical to those under
the Old Credit Facility, with certain covenants amended by the Second Amendment
to provide us with additional operational flexibility, including the ability for
us to issue up to
The New Credit Facility is secured by substantially all of our assets, other than our intellectual property. We have agreed to not pledge or secure our intellectual property to others.
As of
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three Months Ended March 31,
2022 2021
(in thousands)
Cash used in operating activities $ (66,445 ) $ (29,496 )
Cash provided by (used in) investing activities 12,972 (20,738 )
Cash provided by financing activities 26,848 764
Net decrease in cash, cash equivalents and
restricted cash $ (26,625 ) $ (49,470 )
Operating Activities
During the three months ended
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During the three months ended
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
During the three months ended
Funding Requirements
Our expenses may increase substantially in connection with our ongoing clinical development activities and our research and development activities. In addition, we expect to continue to incur additional costs associated with operating as a public company. We anticipate that our expenses will increase substantially if and as we:
•
complete the clinical development, seek regulatory approval, and prepare for commercialization of SER-109 for patients with recurrent CDI;
•
continue the clinical development of SER-155 to reduce incidences of gastrointestinal infections, bloodstream infections and GvHD in patients receiving allo-HSCT;
•
continue translational research activities, informed by the SER-287 Phase 2b and SER-301 Phase 1b study data, to evaluate the potential to utilize biomarker-based patient selection and stratification in future clinical development efforts;
•
make strategic investments in our research discovery and development platforms and capabilities, including identifying candidates for additional disease indications;
•
make strategic investments in manufacturing capabilities;
•
maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property;
•
potentially establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;
•
perform our obligations under our agreements with our collaborators;
•
seek to obtain regulatory approvals for our product candidates; and
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•
experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
Because of the numerous risks and uncertainties associated with the development of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:
•
the impact of the COVID-19 pandemic;
•
the progress and results of our clinical studies and preclinical development;
•
the cost of manufacturing clinical supplies of our product candidates;
•
the costs, timing and outcome of regulatory review of our product candidates and research activities;
•
the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
•
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
•
the effect of competing technological and market developments; and
•
the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. Additionally, market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our shareholders' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our shareholders' rights as common stockholders. Our loan and security agreement with Hercules currently includes, and any additional debt financing and preferred equity financing, if available, may involve agreements that include, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Additional debt or preferred equity financing may also require the issuance of warrants, which could potentially dilute our shareholders' ownership interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, in addition to our existing collaboration agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
As noted above, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report as this continues to evolve globally. See "Impact of the COVID-19 pandemic" above and "Risk Factors-Risks Related to Our Operations-The COVID-19 pandemic has adversely impacted and could continue to adversely impact, our business, including our preclinical studies and clinical trials, results of operations and financial condition" in Part II, Item 1A of this Quarterly Report for a further discussion of the possible impact of the COVID-19 pandemic on our business.
Contractual Obligations and Commitments
The disclosure of our contractual obligations and commitments was included in our Annual Report. There have been no material changes from the contractual commitments and obligations previously disclosed in our Annual Report.
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