Seres Therapeutics Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 13, 2024

There are 12 speakers on the call.

Operator

Good morning, and welcome to MINC Therapeutics' Second Quarter 2024 Conference Call and Webcast. All participants will be in listen only mode until question and answer session. Please note this event is being recorded. If anyone has any objection, you may now disconnect at this time. I would now like to turn the conference over to Zack Arman from MiX Investor Relations.

Operator

Zack, please go ahead.

Speaker 1

Thank you, operator, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will include forward looking statements, including statements regarding our clinical development, regulatory and commercial plans and timelines, as well as timelines for data release and partnership opportunities, among other updates. These statements are subject to risks and uncertainties and we refer you to our SEC filings available on our website for more details on these risks. Joining me today are Doctor.

Speaker 1

Jen Buell, President and Chief Executive Officer Doctor. Mark Van Dyke, Chief Scientific Officer Doctor. Joy Zhao, Head of CMC and Christine Klaskin, Principal Financial and Accounting Officer. Now, I'd like to turn the call over to Doctor. Buell to highlight our progress on this quarter.

Speaker 2

Thank you, Zach. Good morning and thanks for joining us today. I'm excited to share the strides we've made in the first half of twenty twenty four as we continue to align our achievements with our long term strategic goals. And for those of you new to the story at MINK, our mission is focused on delivering the immune potent potential of invariant natural killer T cells to tackle diseases of the immune system and cancer. Today, I'll be highlighting our latest clinical developments, particularly in our lead programs, AGEN-seven ninety seven.

Speaker 2

These are native unmodified INKT cells and MINK-two fifteen, our armored fast car INKT. Additionally, I'll discuss how we fortified our financial foundation, setting the stage for sustained innovation and growth. We've made substantial progress in streamlining our operations to optimize our financials in this market. In this quarter, we continue to generate critical data from our ongoing clinical programs. We continue to advance our R and D effort and ensure efficient in house manufacturing, all of while appreciating further reductions to our operating burn, now reduced more than 50% from this time last year, mainly from the internalization of key activities.

Speaker 2

These reductions have been a result of the internalization of our efforts and continued external financial support to advance our exciting programs. I'll walk you through these developments and illustrate how we're paving the way for MACE success. We'll begin with our operation operational and financial progress. Our lead program 797 is an allogeneic unmodified INKT cell therapy currently advancing in a Phase 2 trial for second line gastric cancer and acute respiratory disease syndrome or ARVS. On gastric cancer, second line gastric is a challenging condition with a poor prognosis and a high mortality rate.

Speaker 2

Patients undergoing second line therapy for advanced gastric or gastroesophageal junction cancer typically have a median overall survival of only 4 to 10 months, depending on factors such as performance status and treatment regimen. In parallel, 797 is also being evaluated for ARDS. This is a rapidly progressive and life threatening condition with a mortality rate of approximately 40%. Our commitment to addressing these critical unmet medical needs underscores the potential of 797 to provide meaningful therapeutic benefit in both oncology and respiratory care. Let me begin with our program in ARDS.

Speaker 2

This is a rapidly progressive form of respiratory failure with alarmingly high mortality rates. The prevalence of ARDS has been growing, particularly in younger populations, and this is likely exacerbated by the aftermath of the COVID-nineteen pandemic. This condition represents a significant burden on healthcare systems globally given its high incidence and severe outcome. The urgency to address ARDS has been underscored by the most recent announcement from the Biomedical Advanced Research and Development Authority or BARDA, which has committed almost $120,000,000 to a randomized Phase 2 program focused on critical outcomes such as survival and ventilator free days. This substantial investment highlights a critical need for innovative and effective treatment in this challenging disease setting.

Speaker 2

The BARDA program is expected to evaluate 3 therapeutic options, 2 of which are monoclonal antibodies and have already been disclosed with the 3rd agent not yet announced. Our published data from the Phase onetwo trial of 797 demonstrates a 75% survival rate and significant improvement in ventilator free days for patients with ARDS, suggesting that IMKT cells could play a pivotal role in ARDS management. These promising results indicate that 797 can be seamlessly incorporated into standard treatment protocols and provide potential for substantial clinical benefit. At the recent American Thoracic Society or ATS Annual Meeting, We presented additional compelling data. This is from our expanded access program building on our findings from our Phase 1 and 2 clinical trials, showing the clinical efficacy of 797 in a critically ill immune compromised transplant patient with severe COVID-nineteen induced respiratory distress.

Speaker 2

Following a single administration of 7,977 similar to the dosing in our clinical trial. This patient experienced a rapid reduction in inflammatory cytokines leading to successful excavation and rapid discharge from the hospital. With nearly 600,000 individuals in the United States being

Speaker 3

evaluated in an ongoing Phase 1b study and we are looking forward to obtaining important clinical data next month in the placebo controlled Cohort 2. We anticipate this readout will extend the positive results observed in Cohort 1 and further highlight the potential for our novel therapeutic approach, expanding our prior clinical successes. Seres is also developing another proprietary live biotherapeutic composition, SER-one hundred and forty seven, to improve clinical outcomes in patients with metabolic disease, including those with chronic liver disease and those at high risk of bacterial infections. Matt will discuss this program shortly. I'll now pass to Lisa to discuss SER-one hundred and fifty five in more detail.

Speaker 4

Thank you, Eric. SER-one hundred and fifty five is a live biotherapeutic that was specifically designed to target the unmet medical needs of gastrointestinal derived infections, including bloodstream infections, as well as infection associated negative clinical outcomes such as fever during periods of neutropenia. SER-one hundred and fifty five is being evaluated in a Phase Ib study in patients undergoing ALLO HSCT following a diagnosis of AML or other hematologic malignancy. As a result of the extensive exposure to antibiotics and the effects of HSCT conditioning regimens, these patients often develop a disrupted gastrointestinal microbiome, resulting in functional deficiencies that often lead to pathogen overgrowth and domination in the GI tract. These disruptions, coupled with diminished integrity of the GI epithelial barrier, are associated with significantly increased risks of bloodstream infections, graft versus host disease and mortality.

Speaker 4

Last year, we reported promising Phase Ib cohort 1 clinical data with SER-one hundred and fifty five being well tolerated in highly immunocompromised allo HSCT patients. In this open label cohort SER-one hundred and fifty five was administered to 13 subjects with 11 continuing to transplant. Our data indicated that of the subjects administered SER-one hundred and fifty five, only a single patient had enteric pathogen domination within 30 days following stem cell transplant. This event was transient and the resulting incidence of domination in Cohort 1 was markedly lower than the incidence observed in a large reference cohort. These data provide strong mechanistic evidence supporting the clinical intent of SER-one hundred and fifty five to prevent GI pathogen domination and related bloodstream infections.

Speaker 4

Next month, we will obtain data from Study Cohort 2, which incorporates a randomized, double blinded, placebo controlled design and enrolled 45 subjects. I'd like to review several of the specific study endpoints that we will be evaluating. From a safety perspective, we would like to see continued evidence indicating that SER-one hundred and fifty five is well tolerated. It is important to note that our biotherapeutics candidates are derived from bacteria isolated from the GI tract of healthy humans and only include bacterial strains that have not been associated with infection. As a result, 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.

Speaker 4

From an efficacy perspective, we will be assessing the ability of SER-one hundred and fifty five to decrease the incidence of GI derived bloodstream infections within the first 31 100 days following HSCP, a period associated with a high rate of complications. We will also evaluate if SER-one hundred and fifty five administration results in decreased rates of fever during neutropenia and subsequent rates of antibiotic initiation. In addition, we will examine if SER-one hundred and fifty five is associated with a reduced incidence of acute graft versus host disease. However, given recent changes in standard treatment practices, we expect the overall rate of GvHD to be low during the study assessment period. The Cohort 2 results and our subsequent discussions with FDA will inform next steps, but we expect our next study to be global and that there could be an opportunity for it to be a single pivotal study.

Speaker 4

We believe positive data from the Cohort 2 readout would further validate the promise of our live biotherapeutics modality to address serious infection and infection related negative clinical outcomes in medically vulnerable populations, including cancer patients with neutropenia, solid organ transplant recipients and individuals with chronic liver disease. Assuming supportive Cohort 2 data, we have already begun to plan further development steps for SER-one hundred and fifty five, including a potential global registrational study in ALLO HSCT and potentially also initiation of development in other medically vulnerable groups with high rates of bacterial infections. I'll now pass the call to Matt to discuss the pharmacology data that we will be collecting in the SER-one hundred and fifty five study.

Speaker 5

Thank you, Lisa. SER-one hundred and fifty five is a consortium of 16 bacterial strains that was rationally designed and optimized based on the functional properties of the individual strains as well as clinical insights from across Seres portfolio of clinical studies. This biotherapeutic is designed to prevent and reduce pathogen colonization, abundance and overgrowth in the GI tract and to promote epithelial barrier to reduce the likelihood of harmful bacteria translating from the GI to the bloodstream. Additionally, there are bacteria included in SER-one hundred and fifty five to modulate immune pathways to induce immune tolerance with the potential to impact GvHD. In cohort 2 of the SER-one hundred and fifty five ALLO HSCT trial, we will evaluate a number of pharmacology parameters including the kinetics and magnitude of drug species engraftment, meaning the outgrowth of bacteria in SER-one hundred and fifty five in the gastrointestinal tract and the abundance and overgrowth of harmful bacteria, including those that can harbor anti microbial resistance in the GI.

Speaker 5

In addition, we will be evaluating changes in the GI microbiome and associated functions and a collection of host biomarkers to evaluate mechanisms of pathogen decolonization, epithelial barrier function and additionally modulation of both local and systemic immune pathways that can induce immune tolerance. Cohort 2 pharmacology data and endpoints will be examined in the context of the placebo control and the reference control cohort. The pending pharmacology data could provide additional support for clinical outcomes observed. In addition, these data will be important as we consider further development plans for SER-one hundred and fifty five in targeting the prevention of infection in additional patient populations as well as GI related immune diseases. In addition to SER-one hundred and fifty five, we are developing SER-one hundred and forty 7 for compromised patients living with metabolic diseases.

Speaker 5

SER-one hundred and forty seven is an oral live biotherapeutic product candidate consisting of a consortium of cultivated bacteria designed to prevent gut seeded infections and associated downstream infections and spontaneous bacterial peritonitis or SVP in chronic liver disease. In the advanced stages of chronic liver disease known as decompensated cirrhosis patients can exhibit gastrointestinal microbiome disruption and associated functional deficiencies. This combined with the frequent contact with the healthcare system can drive increased susceptibility to bacterial infections and other negative clinical outcomes such as hospitalization. SER-one hundred and forty seven 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. These strains were selected based on clinical insights and extensive preclinical in vitro and disease model screening of individual strains and lead consortia.

Speaker 5

Our cultivated biotherapeutics are manufactured from single strain isolates through fermentation methods that allow for efficient scalable processes. As with SER-one hundred and fifty five, we believe that SER-one hundred and forty seven could represent another opportunity for Seres and we anticipate IND readiness in the second half of twenty twenty five. I'll now pass the call to Teri to provide further context around our pipeline strategy.

Speaker 6

Thank you, Matt. To summarize our general path forward, we believe our approach has demonstrated unique clinical success with Faust in preventing frequent serious and expensive infection and we plan to build upon this success in additional medically vulnerable patients. Our next step in this journey is to substantiate a highly attractive profile for SER-one hundred and fifty five in terms of safety and efficacy fifty five as Lisa and Matt both therapeutic adjacencies for SER-one hundred and fifty five as Lisa and Matt both outlined. Each adjacent patient population under consideration is significant in population is comprised of approximately 30,000 population is comprised of approximately 30,000 patients annually across the U. S.

Speaker 6

And EU. Expansion across other hematologic malignancies would bring an additional 23,000 patients annually to the SER-one hundred and fifty eight patient pool from auto HSTP and another 190,000 from hematologic cancer patients with high neutropenia rates. For example, AML, multiple myeloma and non Hodgkin's lymphoma. These patients are mainly treated at large centers across the developed world and therefore we would benefit from an efficient commercial model designed to reach a concentrated set of HCP. We are also considering expansion into other transplants with the potential to avoid infections in the 65,000 patients across the U.

Speaker 6

S. And EU each year to receive solid organ transplants, like kidney and liver. Our next program SER-one hundred and forty seven provides the opportunity to prevent infections in chronic liver disease patients, another large patient. We also believe our approach can make a difference for patients beyond activity against infection by addressing immune modulation. This would enable us to pursue additional highly prevalent conditions such as inflammatory bowel disease.

Speaker 6

We remain excited about the breadth of opportunities in front of us and it's worth reminding everyone that a key outcome of the valves asset sale to Nestle is that we will have full ownership of our entire next generation of pipeline candidates, providing strategic optionality as we move forward and positioning us to drive value for our key stakeholders. Our pipeline prioritization has been informed by our knowledge of where microbiome disruption has been implicated in disease, thereby leaving patients vulnerable to serious and expensive infection. We are also strong we also strongly consider diseases with high unmet need, where product with an attractive profile would bring a strong value proposition affording us pricing flexibility. In addition, as we develop our future plans, we will carefully consider the required development path for all indications under evaluation to ensure that we can demonstrate clinical proof of concept at modest cost and in a timely manner. In summary, 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 feasibility time and costs.

Speaker 6

The SER-one hundred and fifty five clinical results that we received next month will be a key input to our path forward and will allow us to refine our plan. We look forward to communicating more about our strategic path forward once we obtain and fully consider this important data set. Now I'll turn the call over to Marella to share our financial results.

Speaker 7

Thanks, Terry, and good morning, everyone. I'd like to discuss our financial results for the Q2, starting with VAUST. As a reminder, Seres does not recognize VAUST net sales in its financial statements, but instead, under the terms of our prior agreements with Nestle, we share equally the product's commercial profits and losses and we record our share in the collaboration profit and loss sharing related party line. VAUST profits and losses are determined based upon VAUST's net sales, cost of goods sold and sales and marketing expenses. Net sales of VAALST for the 2nd quarter were $14,400,000 reflecting an approximately 43% growth over the Q1 of this year.

Speaker 7

As discussed in our Q1 update, Nestle refined their call strategy and increased call points to broaden their prescriber reach. We remain confident in the potential of VAUST and Nestle continues to refine their launch execution to respond to market dynamics as they work to expand the business. Research and development expenses for the 2nd quarter were $17,900,000 down from $46,800,000 for the same period in 2023. The year over year decrease in R and D expenses was primarily driven by VAUST's commercial manufacturing costs no longer being recognized in the Series P and L, but instead being capitalized and recognized on our balance sheet. In addition, reductions in headcount and other expenses from the restructuring announced at the end of 2023 contributed to lower expenses.

Speaker 7

General and administrative expenses for the Q2 were $16,100,000 reduced from $28,100,000 for the same period in 2023, again reflecting lower headcount following the restructuring as well as lower professional fees and other cost reduction efforts. We reported a net loss of $32,900,000 for the Q2 of 2024 as compared to net income of 46.6 $1,000,000 for the same period in 2023. The change being a result of a $125,000,000 milestone payment received from Nestle in the Q2 of 2023 upon the FDA approval of VAUST, along with other operating expense reductions noted between the periods. More than 1 third of our employee base is expected to move to Nestle Health Science as part of the VAUST asset sale. Seres will be a more focused and streamlined organization upon the sale and we will continue to manage expenses prudently.

Speaker 7

As a result, our cash burn will decline following the close of the transaction. Turning to our cash position. As of June 30, 2024, we had $71,200,000 in cash and cash equivalents. This does not include the cash infusion expected as part of the VAUS asset sale, which we expect to close within 90 days of the August 5 signing. We expect that the capital obtained through the VAAST asset sale, if completed, to allow us to extend our cash runway, enabling Seres to meaningfully advance its pipeline.

Speaker 7

Based on our current cash, future operating plans and the capital expected to be received at transaction close, plus the installment payments expected in 2025 and accounting for the ongoing transaction related obligations, we anticipate a cash runway into the Q4 of 2025. I'll now pass the call back to Eric.

Speaker 3

Thank you, Marilla. And before we move forward, I'll just note that we have been made aware that there may be a technical issue with folks being able to access the call or at least the first part of the call from our website. So following the completion of this call, we will ensure that the full transcript from our remarks is posted and available to everybody. Okay, moving forward. Seres will pursue a focused corporate strategy where we will apply our experience with live biotherapeutics to improve patient outcomes in a variety of medically vulnerable patient populations.

Speaker 3

As discussed, our immediate strategy is focused on reducing the risk of bacterial infections in high risk populations. In the future, we also believe that our biotherapeutics could be developed to address other large commercial opportunities, including the treatment of autoimmune diseases such as inflammatory bowel disease. As you've heard today, we are very excited to obtain the SER-one hundred and fifty five clinical data in ALLO HSCT in September. These data have the potential to highlight the tremendous opportunity we see in SER-one hundred and fifty five. If we are successful, the medical and commercial opportunities for SER-one hundred and fifty five could be very meaningful.

Speaker 3

Beyond SER-one hundred and fifty five, we are developing SER-one hundred and forty seven for medically compromised patients with metabolic diseases, opening additional substantial opportunity. We've already shown that our therapeutic approach can yield highly efficacious and well tolerated medicine that can change lives. We have the capabilities and with our recently announced transaction, we expect to have the capital to support the development of additional transformative new therapies for medically vulnerable patients. Operator, with that, let's now open the call up to questions.

Speaker 8

Thank you. We will now begin the question and answer Your first question comes from the line of Tess Romero with JPMorgan. Your line is open.

Speaker 9

Good morning, team. Thanks for taking our questions. So the first one from us is really around the if you can possibly quantify for us what signal or signals you are specifically for in Cohort 2 for SER-one hundred and fifty five around these key secondary endpoints that you've talked about today? And then zooming ahead a little bit, can you provide a framework for how we should think about what a potential pivotal study might look like if Cohort 2 is successful. I was just trying to get at kind of how de risked that trial design might be on the backside of Cohort 2?

Speaker 9

And also how fast do you think you could get that pivotal study up and running? Thanks so much.

Speaker 3

Tess, good morning and thanks again for the questions. Let me start and maybe I'll pass it over to Lisa. I think we lost a little bit of audio at the end there, but I think I heard most of the questions. The first question was around, how do we think about quantifying signal in an endpoint, I assume, on the efficacy side in this upcoming readout. 2nd question was how quickly can we get to a next study?

Speaker 3

And if it were pivotal, what does it kind of look smell feel like in terms of time, cost and so forth? So if I didn't butcher your questions, Tess, maybe I can start and then Lisa can go from there. And I would start by just saying and reminding folks that we this is a Phase Ib study. So the primary endpoints are, of course, safety and the pharmacology that I think you mentioned. We do have the benefit of having a placebo arm, roughly 25 patients per cohort.

Speaker 3

So we are looking to see signals. And as always, our studies tend to be pretty data rich. So maybe I can pass it to Lisa to talk about the parameters of the study and perhaps your questions about where we go with positive data.

Speaker 4

Yes, Tess. Good morning. We have not been specific about the actual deltas that we're looking for, but I think we can go through the endpoints. And starting with something like neutropenia and fever where rates are very, very high, we have a chance to be able to see a very meaningful decrement, just because it's so prevalent. Something like bloodstream infections, which are, less frequent, we still think we would be able to see a meaningful difference, but obviously the delta would not be the same.

Speaker 4

Same thing for GI infection, same thing for acute GVHD. With regard to the infectious endpoints, the other thing we're looking for is consistency, right? We're wanting to see that if we see a change in neutropenia and fever, we're also seeing a change in antibiotic starts, as well as BSIs. So the consistency of that picture as well as then looking at the pathogen abundance data, which mechanistically we believe would underlie those findings will really be important. So it's the individual endpoints, yes, but it's also the consistency of the picture that we see that paints the idea that we're doing what we want to do.

Speaker 3

And then the next question was around how do we think about a registration study?

Speaker 4

Yes. And I think what we would want is a study that builds on our experience with Voust in that when you have a meaningful clinical delta, you can run an efficiently sized trial and that's what we'd be looking for. We have some idea of the kind of safety database that the agency wants. So we would be using that experience to build a pivotal study, you could imagine, on the same scale as the VAUST pivotal study, as well as expecting a safety database requirement of about 300 total.

Speaker 9

Really helpful. Thanks for taking our questions and sorry about my audio.

Speaker 3

No problem. Thanks for the questions, Seth.

Speaker 8

Next question comes from the line of Ted Tenthoff with Piper Sandler. Your line is open.

Speaker 10

Great. Thank you for taking my question and looking forward to the date in September. Kind of looking forward a little bit as you were walking through the profile, I was thinking, would it make sense for 155 in CAR T therapy and could it help with some of the challenges in terms of CRS and CVHT that's seen especially with some of the new allogeneic therapies that are coming down the pipe. Just a thought I had, I'm wondering what's your view of that opportunity is? Thank you.

Speaker 3

Yes, Ted, great question. Let me hand it to Alisa.

Speaker 4

Yes. We absolutely think there could be applicability in CAR T both on from the infectious complications as well as the immunologic issues that you've just outlined. And I think that's the beauty of this trial which is the ongoing trial, which is that we believe mechanistically it applies to CAR T as well as auto transplants and other indications where there's chemotherapy.

Speaker 5

Ted, one additional point too, which is you've noticed for a long time that we've been really focusing on that core mechanisms and biologies, both around the ability to prevent pathogens from colonizing and then decolonize as well as the epi barrier and inducing immune tolerance. And I think something that's really important in the context of our technologies. We're bringing a novel approach forward that's not immunosuppressive. And I think that's particularly important in many of these different patient populations where we see challenges such as infections and other immune responses.

Speaker 4

So and Ted, just one more thing. There was a recent meta analysis that came out in Nature Medicine that actually looked at the kinds of problems that CAR T patients have that actually cause mortality. And the surprise in that paper was that infections are still an amazingly important issue and that more than 50% of the deaths are being attributed not to ICANS or to other things that are a bit more exotic, but to just infections. So there's still a lot of work to be done on just that kind of fundamental issue.

Speaker 10

Great. Thank you for that additional color. Looking forward to the data and excited to hear more about the new 147 program.

Speaker 3

Thanks Ted. Thanks for the question.

Speaker 8

Next question comes from the line of Peyton Bonsak with TD Cowen. Your line is open.

Speaker 11

Good morning. Hi, this is Peyton on for Joe and thanks for taking our questions. I guess a real quick one on SER-one hundred and fifty five pivotal design. I know that you mentioned it was going to most likely be a global trial. Could you talk about whether or not there are data sets for kind of the pathogen domination?

Speaker 11

Because I know that the reference data set that you guys tend to use is from MSKCC and whether or not you think that there'd be any difference in the types and amount of pathogens for globally? And then I have a follow-up.

Speaker 3

Sure. Peyton, thanks for the question and maybe I'll ask Matt to comment. I mean, but before he does, just to make sure that we're level setting, right? One of the, really interesting aspects of this study is the first cohort for those that might not be aware, where we had we looked at pathogen domination in comparison, as Peyton mentioned, versus a reference cohort that we had established with the partnership of FSK. And we saw some really interesting initial early signals around lower pathogen incidence domination incidence than we might have thought based on that reference cohort, including one out of, I think, it was 11 subjects and it was actually a transitory event.

Speaker 3

So that's one of the reasons that we're so excited about this upcoming second cohort, particularly with the placebo control, but maybe Matt can comment further in your question.

Speaker 5

Yes. So there is global data around pathogen abundance and I would point you to a New England Journal of Medicine article that was published and obviously we'd be happy to share that. But there was work conducted there across major transplant centers globally, including Asian as well as European centers and other centers in the U. S. Seres actually help support some of that work and the data are consistent across the globe.

Speaker 5

The reason we use the reference cohort data set that we've developed with MSK is because we've put a lot of energy and time into collection of that. And so it's a very, very high quality data set that we feel highly reflects what those rates look like. But those trends are observed in the global data sets as well.

Speaker 3

And then do you have a

Speaker 11

follow-up, Yes, I did. So I guess kind of could you go into any additional details about if when the ACE-1B cohort data, placebo controlled case data is positive. What are the next steps with the agency? What still needs to be required for actually initiating these studies? Do you have the back screen put together?

Speaker 3

Yes. I get the easy answer and then I can hand it to Lisa. The easy answer of course is it depends what the data shows, right? We always follow the data and that has been our experience including with what was then 109, now VAUS, we were thrilled with the results then and but of course, we followed the data, including our discussions with the agency. But maybe Elyse can comment a little bit more specifically around what the process looks

Speaker 4

like. Yes. We would be going to them to actually discuss the data in the next study as well as for designations around orphan drug and breakthrough. And obviously, we can't do too much until we actually get the data and then start to construct the argument. But you can imagine we've given all of that a lot of thought.

Speaker 4

And clearly on the breakthrough side and orphan drug, we've done that before. So we feel that that's a fairly straightforward kind of request coming from our experience.

Speaker 11

Great. That's extremely helpful. Thanks for taking our questions.

Speaker 3

Thanks for the questions,

Speaker 5

Payton.

Speaker 8

And last question comes from the line of Jeff Jones with Oppenheimer. Your line is open.

Speaker 2

Hi, this is Fang Yi for Jeff. We have a quick couple of questions. First, can you share how you think of the pipeline post evolved? Like what the criteria you're using to decide when programs to bring back online? And what drive you to select 147 as the first program to bring back?

Speaker 2

We have some to follow-up.

Speaker 3

Yes. So I thanks for the question. I think question was around how do we decide to prioritize our programs perhaps in what we expect will be the closing of the message transaction and our ability to focus more on the pipeline. And so I think there's some element of our process that Teri mentioned in her prepared remarks as we think about unmet need, as we think about where our technology has a, call it, an unfair advantage relative to other approaches. And there's a lot of excitement that we have in terms of our technology based on our experience with ZELFT.

Speaker 3

This is a disease where companies have for many years tried to innovate and has had limited success. We were successful in developing a therapeutic, which is highly efficacious, well tolerated in oral. And we think that that's really a precedent that we can take forward into adjacencies and SER-one hundred and fifty five is the next step for us, which is one of the reasons we're so excited about the upcoming readout. Yes, 147, maybe I can ask Matt to talk about mechanistically why that's next on the list. But certainly, in our opinion, if we are successful with 155, it really opens up adjacencies where we can move, we think, quickly with 155, with 147.

Speaker 3

And based on the cultivated side of our manufacturing platform where we have a backbone of bacterial strains that we utilize as part of our therapeutics and then can switch out additional strains based on what we're hoping to do functionally, we think we've got the opportunity to move quickly. So maybe I can ask Matt to comment further.

Speaker 5

Yes. So I mean Seres as a company has always been data driven, and that's at the heart of how we make our decisions, whether it be the scientific data, the clinical data or the commercial data. And that's what we put into play as we think about prioritizing the various diseases. We are highly focused as a company in settings of medically compromised patients where we know there's a highly disrupted microbiome in the gastrointestinal tract, which leads to functional deficiencies that are linked to various different disease outcomes. And what we've done at the company is done a lot of work to understand which of those functional pathways we can successfully target with our drugs and actually modulate.

Speaker 5

And that information is based on both preclinical and clinical data. And so when we looked across the spectrum of diseases, we saw real opportunities, where basically the peer reviewed literature had strong support for a microbiome connection. We've been able to confirm those kinds of results and we're moving those forward. So chronic liver disease is an example of that where we think there's a really nice lineup with basically what we believe our technology can do. We see a path clinically and we see a meaningful commercial opportunity.

Speaker 3

Last thing I'll just say is that with our ability to move quickly, we also bring a mindset of focus. We are deploying our capital and our resources in areas where we think there's the greatest opportunity for return. And that, of course, is the idea behind the 155 readout and hopefully what happens after that. So that is our approach.

Speaker 2

Great. Thank you. Very helpful. And for fifty-fifty profit loss sharing, whilst continues well past the deal closing through Q4 2020 5, as you mentioned. We know that, that one has turned profitable this quarter.

Speaker 2

So can you speak to whether this anticipated to continue or if the profit this quarter was associated with any onetime like the band?

Speaker 3

Yes. Maybe I can ask Morella to comment on the parameters of this past quarter and maybe what we expect going forward.

Speaker 7

Yes. Thank you for the question. Excuse me. The profit this quarter was a combination of 2 things. Number 1 was the overall collaboration loss for the enterprise of Vauxt, which is the net sales less the COGS, less the marketing expenses incurred by Nestle and that was a loss for the period.

Speaker 7

The component that put us into the component that put us into a profit was the profit that we recognized on the transfer of inventory to Nestle when they sell that on to a 3rd party. Going forward, that second component, profit on inventory after the deal closes, will no longer be an element. The manufacturing operations will transfer over to Nestle. We're providing some support through a transition services period, but we will no longer recognize profit. So that element will be gone from the results.

Speaker 7

So it will really just be a matter of the product profit and loss that we will absorb. In the proxy, which we plan to publish in the coming days, we will include an estimate for what that collaboration profit or loss will be for the period in which we'll continue to share. And then as of closing, in the closing balance sheet, we will record a liability for an estimate of what that profit or loss sharing for the period will be, and we'll adjust that each quarter. So you should think about the collaboration loss going forward in comparison to that one piece, that $6,600,000 loss component of this quarter's results.

Speaker 8

Very helpful. Thank you so much. Thanks for taking our questions.

Speaker 3

Thanks for the question.

Speaker 8

There are no further questions at this time. I turn the call back over to the management for closing remarks.

Speaker 3

Thank you, operator, and thanks to everyone for joining us this morning. We appreciate your time, and we look forward to keeping you updated as we go. Thanks very much, and have a great week.

Speaker 8

This concludes today's conference call. You may now disconnect.

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