UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact name of registrant as specified in its charter) Delaware 27-4326290 (State or other jurisdiction of incorporation or organization) 200 Sidney Street - 4th Floor Cambridge, MA 021 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-37465 Seres Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 27-4326290 (State or other jurisd ...

April 2020 Seres Therapeutics Overview Forward looking statements Some of the statements in this presentation constitute "forward looking statements" under the Private Securities Litigation Reform Act of 1995, including, but not limited to, our development plans, the promise and potential impact of any of our microbiome therapeutics or clinical trial data, the ability of our clinical trials to support approval, the timing of clinical studies, the sufficiency of cash to fund operations, and the potential ben ...

Seres Therapeutics, Inc. (NASDAQ:MCRB) Q1 2020 Earnings Conference Call May 7, 2020 8:30 AM ET Company Participants Carlo Tanzi - VP of IR & Corporate Communications Eric Shaff - President, CEO & Director Lisa von Moltke - EVP & Chief Medical Officer Matthew Henn - EVP & Chief Scientific Officer Conference Call Participants Chris Shibutani - Cowen Melissa Hilton - Goldman Sachs Matthew Biegler - Oppenheimer Gbola Amusa - Chardan John Newman - Canaccord Vernon Bernardino - H.C. Wainwright Roger Song - Jeffer ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR For the transition period from to Commission file number: 001-37465 Seres Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 27-4326290 (State or other jurisdiction of incorporation or organization) 200 Sidney Street - 4th Floor Cambridge, MA 02139 ...

Seres Therapeutics Overview Eric Shaff, President and Chief Executive Officer Cowen Health Care Conference March 2, 2020 Forward looking statements Some of the statements in this presentation constitute "forward looking statements" under the Private Securities Litigation Reform Act of 1995, including, but not limited to, our development plans, the promise and potential impact of any of our microbiome therapeutics or clinical trial data, the ability of our clinical trials to support approval, the timing of c ...

Financial Data and Key Metrics Changes - The company reported a net loss of $70.3 million for Q4 2019, compared to a net loss of $98.9 million for the same period in 2018, indicating a reduction in corporate spending due to refocusing efforts [35] - Cash and cash equivalents at the end of Q4 2019 were approximately $94.8 million, an increase from $83.8 million at the end of Q3 2019 [36] Business Line Data and Key Metrics Changes - SER-109 is in a Phase 3 study (ECOSPOR III) with over 95% enrollment, targeting recurrent C. difficile infection [14][11] - SER-287 is in a Phase 2b study (ECO-RESET) for mild-to-moderate active ulcerative colitis, with a significant 40% remission rate observed in the Phase 1b study [21][20] - SER-301, a next-generation candidate for ulcerative colitis, has initiated clinical development activities, with dosing expected to start later in 2020 [28][29] Market Data and Key Metrics Changes - The company is collaborating with AstraZeneca in immuno-oncology, which includes a $20 million financial support agreement [33] - SER-401 is in a Phase 1b study for metastatic melanoma, with preliminary results expected in the second half of 2020 [31] Company Strategy and Development Direction - The company aims to validate the microbiome therapeutic field through late-stage clinical readouts in 2020 [7] - Focus on developing non-immunosuppressive treatment options for serious diseases like ulcerative colitis [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2020 being a transformative year with significant data readouts expected [7] - The company is taking precautions in response to the coronavirus pandemic but remains confident in its clinical supply and study execution [66] Other Important Information - The company has undergone leadership changes, including the departure of the Chief Medical Officer [38] - The manufacturing process for SER-109 is designed to deactivate pathogens, enhancing patient safety [67] Q&A Session Summary Question: What should investors expect regarding the release format for SER-109 data? - Management indicated that a robust set of clinical endpoints would be provided, but microbiome analysis may not accompany the topline clinical analysis due to blinding constraints [43] Question: Are there plans to begin dosing patients for SER-301 this quarter? - Management confirmed that clinical operations have been initiated and expects to start dosing patients later in 2020 [44] Question: What is the power of the Phase 2b trial for SER-287? - Management did not provide specific guidance on power but expressed excitement about replicating positive results from the Phase 1b study in a larger cohort [49] Question: When is the next scheduled meeting with the FDA regarding SER-109? - Management expects to have an end of Phase 3 meeting following the top line results this year [54] Question: How is recurrence defined in the Phase 3 ECOSPOR study? - Recurrence will be based on both positive C. diff toxin tests and symptomatic presentation, with a focus on using cytotoxin as a key differentiator [60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37465 Seres Therapeutics, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 27-4326290 (State or Other Jurisdiction ...

| --- | --- | --- | --- | |-------|-----------------------------------|-------|-----------------------------| | | | | | | | | | | | | | | | | | | | Seres Therapeutics Overview | | | Stifel 2019 Healthcare Conference | | | | | November 19, 2019 | | | | | | | | | | | | | Forward looking statements | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------| | | | | included herein repres ...

PART I – FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the company's unaudited financial position, operational results, equity changes, and cash flows [Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets detail the company's assets, liabilities, and stockholders' deficit at specific points in time Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 | Metric | Sep 30, 2019 (in thousands) | Dec 31, 2018 (in thousands) | Change (2019 vs 2018) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $49,296 | $85,820 | $(36,524) | | Investments | $34,492 | $0 | $34,492 | | Prepaid expenses and other current assets | $4,073 | $6,845 | $(2,772) | | Accounts receivable | $1,717 | $0 | $1,717 | | Total current assets | $89,578 | $92,665 | $(3,087) | | Property and equipment, net | $21,160 | $26,294 | $(5,134) | | Operating lease assets | $11,899 | $0 | $11,899 | | Restricted investments | $1,400 | $1,400 | $0 | | Restricted cash | $114 | $113 | $1 | | Total assets | $124,151 | $120,472 | $3,679 | | Accounts payable | $4,455 | $6,415 | $(1,960) | | Accrued expenses and other current liabilities | $10,522 | $15,207 | $(4,685) | | Operating lease liabilities | $4,335 | $0 | $4,335 | | Deferred revenue - related party (current) | $21,135 | $20,419 | $716 | | Deferred revenue (current) | $1,790 | $0 | $1,790 | | Total current liabilities | $42,237 | $42,041 | $196 | | Operating lease liabilities, net of current portion | $16,844 | $0 | $16,844 | | Lease incentive obligation, net of current portion | $0 | $6,776 | $(6,776) | | Deferred rent | $0 | $2,216 | $(2,216) | | Deferred revenue, net of current portion - related party | $94,215 | $116,840 | $(22,625) | | Deferred revenue, net of current portion | $2,410 | $0 | $2,410 | | Other long-term liabilities | $664 | $644 | $20 | | Total liabilities | $156,370 | $168,517 | $(12,147) | | Common stock | $70 | $41 | $29 | | Additional paid-in capital | $408,575 | $341,284 | $67,291 | | Accumulated other comprehensive income | $7 | $0 | $7 | | Accumulated deficit | $(440,871) | $(389,370) | $(51,501) | | Total stockholders' deficit | $(32,219) | $(48,045) | $15,826 | | Total liabilities and stockholders' deficit | $124,151 | $120,472 | $3,679 | [Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) These statements outline revenues, expenses, and the resulting net and comprehensive loss for the reported periods Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 | Metric (in thousands) | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue - related party | $4,840 | $8,684 | $21,909 | $16,721 | | Grant revenue | $85 | $371 | $791 | $917 | | Collaboration revenue | $2,106 | $0 | $4,183 | $0 | | Total revenue | $7,031 | $9,055 | $26,883 | $17,638 | | Research and development expenses | $18,317 | $23,675 | $59,109 | $71,188 | | General and administrative expenses | $5,897 | $7,591 | $18,966 | $25,063 | | Restructuring expenses | $0 | $0 | $1,492 | $0 | | Total operating expenses | $24,214 | $31,266 | $79,567 | $96,251 | | Loss from operations | $(17,183) | $(22,211) | $(52,684) | $(78,613) | | Interest income (expense), net | $335 | $262 | $744 | $958 | | Other income | $439 | $0 | $439 | $0 | | Total other income (expense), net | $774 | $262 | $1,183 | $958 | | Net loss | $(16,409) | $(21,949) | $(51,501) | $(77,655) | | Net loss per share attributable to common stockholders, basic and diluted | $(0.23) | $(0.54) | $(0.99) | $(1.91) | | Weighted average common shares outstanding, basic and diluted | 69,944,068 | 40,806,413 | 52,143,492 | 40,699,422 | | Unrealized gain on investments, net of tax of $0 | $7 | $20 | $7 | $137 | | Comprehensive loss | $(16,402) | $(21,929) | $(51,494) | $(77,518) | [Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the three and nine months ended September 30, 2019 and 2018](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders%27%20Equity%20(Deficit)) This statement tracks changes in stockholders' deficit resulting from stock issuance and net loss - Total stockholders' deficit improved from **$(48,045) thousand** at December 31, 2018, to **$(32,219) thousand** at September 30, 2019[19](index=19&type=chunk) - Issuance of common stock from a public offering, net of commissions, underwriting discounts, and offering costs, contributed **$60,527 thousand** during the nine months ended September 30, 2019[19](index=19&type=chunk) - Accumulated deficit increased from **$(389,370) thousand** at December 31, 2018, to **$(440,871) thousand** at September 30, 2019, primarily due to net losses incurred[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 | Metric (in thousands) | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash (used in) operating activities | $(62,473) | $(75,520) | | Net cash (used in) provided by investing activities | $(35,171) | $94,922 | | Net cash provided by (used in) financing activities | $61,121 | $223 | | Net increase (decrease) in cash and cash equivalents | $(36,523) | $19,625 | | Cash, cash equivalents and restricted cash at end of period | $49,410 | $57,226 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures and explanations for the figures presented in the financial statements [Note 1. Nature of the Business and Basis of Presentation](index=9&type=section&id=Note%201.%20Nature%20of%20the%20Business%20and%20Basis%20of%20Presentation) Seres Therapeutics is a clinical-stage microbiome company developing biological drugs and facing ongoing operating losses - Seres Therapeutics, Inc is a microbiome therapeutics platform company developing a novel class of biological drugs designed to treat disease by restoring the function of a dysbiotic microbiome[25](index=25&type=chunk) - Key product candidates include **SER-287** for ulcerative colitis (UC), **SER-109** for recurrent Clostridium difficile infection (CDI), **SER-301** for inflammatory bowel disease (IBD), and **SER-401** for metastatic melanoma[25](index=25&type=chunk) - In February 2019, the company implemented corporate changes to focus resources on advancing clinical-stage therapeutic candidates and **reduced headcount by approximately 30%**[28](index=28&type=chunk) - Completed an underwritten public offering in June 2019, generating approximately **$55,976 thousand in net proceeds**[29](index=29&type=chunk) - Reported an **accumulated deficit of $440,871 thousand** as of September 30, 2019, and expects continued operating losses and negative cash flows[30](index=30&type=chunk) - Cash, cash equivalents, and investments of **$83,788 thousand** as of September 30, 2019, are expected to fund operations for at least the next 12 months, but additional capital will be needed beyond that point[30](index=30&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, including estimates and the adoption of new lease standards (ASC 842) - Significant estimates and assumptions in financial statements include revenue recognition and the accrual of research and development expenses[35](index=35&type=chunk) - Basic and diluted net loss per share are the same in periods of net loss because potential common shares are anti-dilutive[36](index=36&type=chunk)[37](index=37&type=chunk) - Adopted new lease accounting guidance **(Topic 842)** on January 1, 2019, using a modified retrospective transition approach without restatement of prior periods[41](index=41&type=chunk)[42](index=42&type=chunk) - Upon adoption of ASC 842, recognized an operating lease asset of approximately **$13,737 thousand** and a corresponding operating lease liability of approximately **$24,497 thousand**[42](index=42&type=chunk) - The adoption of the new leasing standards **did not have any impact** on the company's condensed consolidated statements of operations and comprehensive loss[42](index=42&type=chunk) [Note 3. Fair Value Measurements](index=13&type=section&id=Note%203.%20Fair%20Value%20Measurements) This note details the fair value hierarchy for financial assets, primarily Level 1 and Level 2 investments - Financial assets and liabilities are classified into a three-level fair value hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[45](index=45&type=chunk)[48](index=48&type=chunk) - As of December 31, 2018, money market funds (Level 1) totaled **$39,982 thousand**[47](index=47&type=chunk) Fair Value Measurements as of September 30, 2019 (in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Money market funds | $24,134 | $— | $— | $24,134 | | Commercial paper | $— | $23,415 | $— | $23,415 | | Corporate bonds | $— | $15,029 | $— | $15,029 | | Government securities | $— | $545 | $— | $545 | | Treasury bonds | $— | $998 | $— | $998 | | **Total** | **$24,134** | **$39,987** | **$—** | **$64,121** | [Note 4. Investments](index=14&type=section&id=Note%204.%20Investments) This note details the company's available-for-sale investments, which totaled $34,492 thousand as of September 30, 2019 - Investments with original maturities of less than 90 days are included in cash and cash equivalents[49](index=49&type=chunk) Available-for-Sale Investments as of September 30, 2019 (in thousands) | Investment Type | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | | :--- | :--- | :--- | :--- | :--- | | Commercial paper | $17,920 | $— | $— | $17,920 | | Corporate bonds | $15,023 | $6 | $— | $15,029 | | Government securities | $545 | $— | $— | $545 | | Treasury bonds | $997 | $1 | $— | $998 | | **Total** | **$34,485** | **$7** | **$—** | **$34,492** | [Note 5. Property and Equipment, Net](index=14&type=section&id=Note%205.%20Property%20and%20Equipment%2C%20Net) Property and equipment, net, decreased to $21,160 thousand due to accumulated depreciation - Depreciation and amortization expense was **$1,876 thousand** for the three months ended September 30, 2019, and **$5,803 thousand** for the nine months ended September 30, 2019[50](index=50&type=chunk) Property and Equipment, Net (in thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Laboratory equipment | $15,078 | $14,695 | | Computer equipment | $2,874 | $2,864 | | Furniture and office equipment | $1,033 | $1,033 | | Leasehold improvements | $27,977 | $27,977 | | Construction in progress | $140 | $26 | | Less: Accumulated depreciation and amortization | $(25,942) | $(20,301) | | **Total Property and equipment, net** | **$21,160** | **$26,294** | [Note 6. Accrued Expenses and Other Current Liabilities](index=14&type=section&id=Note%206.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses decreased to $10,522 thousand, driven by lower development and payroll costs Accrued Expenses and Other Current Liabilities (in thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Development and manufacturing costs | $5,537 | $7,046 | | Payroll and payroll-related costs | $3,564 | $5,020 | | Facility and other | $1,421 | $3,141 | | **Total** | **$10,522** | **$15,207** | [Note 7. Stockholders' Deficit Common Stock](index=15&type=section&id=Note%207.%20Stockholders%27%20Deficit%20Common%20Stock) This note details changes in stock options, restricted stock units, and stock-based compensation expense [Stock Options](index=15&type=section&id=Stock%20Options) - Weighted average grant-date fair value of stock options granted was **$2.12 per share** for the three months ended September 30, 2019, and **$5.67 per share** for the nine months ended September 30, 2019[52](index=52&type=chunk) - Granted **1.1 million performance-based stock options** during the nine months ended September 30, 2019, which were not exercisable as performance targets were not deemed probable of achievement[53](index=53&type=chunk) Stock Option Activity (in thousands, except share and per share data) | Metric | Number of Shares | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding as of Dec 31, 2018 | 7,561,719 | $12.26 | | Granted | 2,346,350 | $5.90 | | Exercised | (90,125) | $1.61 | | Forfeited | (1,559,913) | $12.69 | | **Outstanding as of Sep 30, 2019** | **8,258,031** | **$10.49** | | Options exercisable as of Sep 30, 2019 | 4,641,642 | $12.49 | [Restricted Stock Units](index=15&type=section&id=Restricted%20Stock%20Units) Restricted Stock Unit Activity (in thousands, except share data) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | | Unvested restricted stock units as of Dec 31, 2018 | 226,900 | $9.64 | | Granted | 15,000 | $2.29 | | Forfeited | (22,500) | $8.77 | | Vested | (73,500) | $9.98 | | **Unvested restricted stock units as of Sep 30, 2019** | **145,900** | **$8.85** | [Stock-based Compensation Expense](index=15&type=section&id=Stock-based%20Compensation%20Expense) Stock-based Compensation Expense (in thousands) | Expense Category | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | $1,033 | $2,246 | $3,574 | $6,436 | | General and administrative expenses | $1,004 | $2,071 | $2,625 | $6,451 | | **Total** | **$2,037** | **$4,317** | **$6,199** | **$12,887** | [Employee Stock Purchase Plan](index=16&type=section&id=Employee%20Stock%20Purchase%20Plan) - The ESPP allows eligible employees to contribute up to 15% of earnings to purchase common stock at **85% of the lesser of the fair market value** at the start or end of the six-month offering period[56](index=56&type=chunk) - As of September 30, 2019, **1.8 million shares** were reserved and available for issuance under the ESPP[57](index=57&type=chunk) [Note 8. Collaboration Revenue](index=16&type=section&id=Note%208.%20Collaboration%20Revenue) This note details revenue from collaboration agreements, primarily with Nestec Ltd and AstraZeneca [NHS Collaboration Agreement](index=16&type=section&id=NHS%20Collaboration%20Agreement) - Entered into a collaboration and license agreement with Nestec Ltd (NHS) in January 2016 for development and commercialization of CDI and IBD product candidates outside the United States and Canada[58](index=58&type=chunk)[59](index=59&type=chunk) - Received an upfront cash payment of **$120,000 thousand** in February 2016[60](index=60&type=chunk) - Eligible to receive up to **$285,000 thousand** in development milestone payments, **$375,000 thousand** in regulatory payments, and **$1,125,000 thousand** for commercial milestones, plus tiered royalties[60](index=60&type=chunk) - Received **$40,000 thousand** in milestone payments in December 2018 following the initiation of the SER-287 Phase 2b study[61](index=61&type=chunk) - Recognized **$4,840 thousand** (Q3 2019) and **$21,909 thousand** (9 months 2019) in Collaboration revenue – related party[66](index=66&type=chunk) - Deferred revenue related to the NHS License Agreement was **$115,350 thousand** as of September 30, 2019[67](index=67&type=chunk) [AstraZeneca Research Collaboration and Option Agreement](index=17&type=section&id=AstraZeneca%20Research%20Collaboration%20and%20Option%20Agreement) - Entered into a Research Collaboration and Option Agreement with AstraZeneca in March 2019 to advance understanding of the microbiome in augmenting cancer immunotherapy[68](index=68&type=chunk) - AstraZeneca will pay **$20,000 thousand** in three equal installments, with the first received in April 2019 and subsequent payments due in January 2020 and January 2021[69](index=69&type=chunk) - Granted AstraZeneca an exclusive option to negotiate a worldwide, sublicensable exclusive license for Microbiome Oncology Products[71](index=71&type=chunk) - Recognized **$2,106 thousand** (Q3 2019) and **$4,183 thousand** (9 months 2019) in collaboration revenue under the Research Agreement[77](index=77&type=chunk) - Deferred revenue associated with the Research Agreement was **$4,200 thousand** as of September 30, 2019[78](index=78&type=chunk) [Contract Balances from Contracts with Customers](index=20&type=section&id=Contract%20Balances%20from%20Contracts%20with%20Customers) - Revenue recognized in the period from amounts included in the contract liability at the beginning of the period was **$6,081 thousand** for the three months ended September 30, 2019, and **$21,909 thousand** for the nine months ended September 30, 2019[79](index=79&type=chunk) Contract Liabilities (Deferred Revenue) (in thousands) | Category | Balance as of Dec 31, 2018 | Additions | Deductions | Balance as of Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Deferred revenue - related party | $137,259 | $— | $(21,909) | $115,350 | | Deferred revenue | $— | $8,383 | $(4,183) | $4,200 | [Note 9. Leases](index=20&type=section&id=Note%209.%20Leases) This note details the company's operating lease arrangements and the impact of adopting ASC 842 - Entered into a sublease agreement in July 2019 with a related party for a portion of its office and laboratory space[81](index=81&type=chunk)[102](index=102&type=chunk) - Sublease income was **$439 thousand** for both the three and nine months ended September 30, 2019[84](index=84&type=chunk)[102](index=102&type=chunk) - As of September 30, 2019, the weighted average remaining lease term was **4.12 years**, and the weighted average incremental borrowing rate was **11%**[86](index=86&type=chunk) Operating Lease Balances as of September 30, 2019 (in thousands) | Category | Amount | | :--- | :--- | | Operating lease assets | $11,899 | | Operating lease liabilities (current) | $4,335 | | Operating lease liabilities, net of current portion | $16,844 | | **Total operating lease liabilities** | **$21,179** | Lease Costs (in thousands) | Category | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Operating lease costs | $1,148 | $3,456 | | Short-term lease costs | $330 | $1,547 | | Variable lease costs | $716 | $2,302 | | Sublease income | $(439) | $(439) | | **Total lease costs** | **$1,755** | **$6,866** | [Note 10. Restructuring](index=22&type=section&id=Note%2010.%20Restructuring) A February 2019 restructuring led to a 30% headcount reduction and $1,492 thousand in charges - In February 2019, the company implemented corporate changes to focus resources on advancing clinical-stage therapeutic candidates, leading to a **reduction in headcount by approximately 30%**[90](index=90&type=chunk) - Recorded **$1,492 thousand** in restructuring charges related to severance and other termination benefits during the nine months ended September 30, 2019[91](index=91&type=chunk) - As of September 30, 2019, the remaining restructuring liability included in accrued expenses and other current liabilities was **$391 thousand**[92](index=92&type=chunk) [Note 11. Income Taxes](index=22&type=section&id=Note%2011.%20Income%20Taxes) No income taxes were provided due to a history of net losses and a full valuation allowance - No income taxes were provided for the three and nine months ended September 30, 2019 and 2018[93](index=93&type=chunk) - A **full valuation allowance** has been established against deferred tax assets due to the company's history of cumulative net losses and uncertainty of realizing future tax benefits[94](index=94&type=chunk) [Note 12. Commitments and Contingencies](index=23&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) The company has commitments for operating leases and provides indemnification agreements in the ordinary course of business - Commitments are associated with the company's lease portfolio (refer to Note 9)[96](index=96&type=chunk) - Provides indemnification of varying scope and terms to vendors, lessors, business partners, directors, and officers; the maximum potential amount of future payments is often unlimited[97](index=97&type=chunk) - **No material costs** have been incurred as a result of indemnifications to date, and no liabilities were accrued for legal contingencies as of September 30, 2019 or December 31, 2018[97](index=97&type=chunk)[100](index=100&type=chunk) [Note 13. Related Party Transactions](index=23&type=section&id=Note%2013.%20Related%20Party%20Transactions) This note details transactions with related parties, including collaboration revenue from Nestec Ltd and sublease income - Recognized **$4,840 thousand** (Q3 2019) and **$21,909 thousand** (9 months 2019) in collaboration revenue from Nestec Ltd (NHS), a related party[101](index=101&type=chunk) - Deferred revenue related to the NHS License Agreement was **$115,350 thousand** as of September 30, 2019[101](index=101&type=chunk) - Entered into a sublease agreement in July 2019 with Flagship Pioneering, a significant stockholder, and recorded **$439 thousand** in other income during the three and nine months ended September 30, 2019[102](index=102&type=chunk) [Note 14. Subsequent Events](index=24&type=section&id=Note%2014.%20Subsequent%20Events) In October 2019, the company secured a Term Loan Facility of up to $50,000 thousand - In October 2019, the company entered into a loan and security agreement with Hercules Capital, Inc for a Term Loan Facility of up to **$50,000 thousand**[103](index=103&type=chunk) - Received the first tranche of **$25,000 thousand** (net $24,575 thousand after closing costs) at the closing on October 29, 2019[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and strategic actions amid ongoing losses [Overview](index=25&type=section&id=Overview) Management discusses the company's focus on microbiome therapeutics, recent strategic actions, and financial status - Seres Therapeutics is a microbiome therapeutics platform company developing a novel class of biological drugs designed to treat disease by restoring the function of a dysbiotic microbiome[106](index=106&type=chunk) - Reported a **net loss of $51.5 million** for the nine months ended September 30, 2019, and an **accumulated deficit of $440.9 million** as of September 30, 2019[108](index=108&type=chunk) - In February 2019, implemented corporate changes to focus resources on advancing clinical-stage therapeutic candidates (SER-287, SER-109, SER-401, SER-301) and **reduced headcount by approximately 30%**[109](index=109&type=chunk) - Completed an underwritten public offering in June 2019, raising approximately **$60.6 million in net proceeds**[111](index=111&type=chunk) - Entered into a loan and security agreement with Hercules Capital, Inc in October 2019 for a **$50.0 million Term Loan Facility**, with $24.6 million received at closing[112](index=112&type=chunk) [Product Candidates](index=26&type=section&id=Product%20Candidates) The company is advancing several clinical-stage microbiome therapeutic candidates for various diseases [SER-287](index=26&type=section&id=SER-287) - SER-287 is an oral, donor-derived microbiome therapeutic candidate designed to normalize the gastrointestinal microbiome of individuals with ulcerative colitis (UC)[113](index=113&type=chunk) - A three-arm placebo-controlled **Phase 2b clinical trial** for SER-287 in approximately 201 patients with mild-to-moderate UC commenced in December 2018, with top-line data expected in the second half of 2020[113](index=113&type=chunk) - SER-287 has been granted **Fast Track Designation** by the FDA for the induction and maintenance of clinical remission in adult subjects with active mild-to-moderate UC[114](index=114&type=chunk) [SER-109](index=26&type=section&id=SER-109) - SER-109 is an oral, donor-derived microbiome therapeutic candidate designed to restore the dysbiotic gastrointestinal microbiome of patients with recurrent Clostridium difficile infection (CDI)[116](index=116&type=chunk) - SER-109 has been granted **Breakthrough Therapy Designation** and **Orphan Drug Designation** for the treatment of recurrent CDI[116](index=116&type=chunk) - The ongoing ECOSPOR III **Phase 3 study** for recurrent CDI has been revised, reducing the target enrollment from 320 to **188 patients** to expedite clinical results, with top-line data expected in mid-2020[117](index=117&type=chunk)[118](index=118&type=chunk) [SER-401](index=27&type=section&id=SER-401) - SER-401 is an oral microbiome therapeutic candidate for use with checkpoint inhibitors in patients with metastatic melanoma[119](index=119&type=chunk) - A **Phase 1b clinical study** with MD Anderson and PICI initiated in March 2019, with preliminary results expected in the second half of 2020[119](index=119&type=chunk) [SER-301](index=27&type=section&id=SER-301) - SER-301 is a preclinical-stage, rationally-designed, fermented microbiome therapeutic candidate for ulcerative colitis (UC)[120](index=120&type=chunk) - Clinical development of SER-301 is expected to initiate in early 2020[120](index=120&type=chunk) - The company is entitled to receive a **$10.0 million milestone payment** under its collaboration with Nestec Ltd upon initiation of the SER-301 Phase 1 study[120](index=120&type=chunk) [Intellectual Property](index=27&type=section&id=Intellectual%20Property) The company maintains an extensive patent portfolio and relies on regulatory exclusivities for its product candidates [Patent Portfolio](index=27&type=section&id=Patent%20Portfolio) - The company has an extensive patent portfolio directed to rationally designed ecologies of spores and microbes, covering both composition of matter and methods of treatment[124](index=124&type=chunk) - Intellectual property rights related to SER-109 (C difficile) and SER-287 (ulcerative colitis) **extend through 2033**[124](index=124&type=chunk) - Currently holds **15 active patent application families** (including 8 nationalized and 1 pending US provisional applications) and **13 issued U.S. patents**[124](index=124&type=chunk) [Regulatory Exclusivity](index=28&type=section&id=Regulatory%20Exclusivity) - If marketing approval is obtained for any product candidates, the company expects to receive **12 years of marketing exclusivity** in the United States for new biological compositions[125](index=125&type=chunk) - In Europe, the European Medicines Agency awards **10 years of exclusivity** for new molecular entities[125](index=125&type=chunk) [Financial Operations Overview](index=28&type=section&id=Financial%20Operations%20Overview) The company's revenue is from collaborations, while operating expenses are primarily for R&D and G&A [Revenue](index=28&type=section&id=Revenue_F) - To date, the company has not generated any revenues from the sale of products; revenues have been derived primarily from collaboration agreements[127](index=127&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses_F) - Operating expenses since inception have consisted primarily of research and development activities and general and administrative costs[127](index=127&type=chunk) [Research and Development Expenses](index=28&type=section&id=Research%20and%20Development%20Expenses_F) - Research and development costs are expensed as incurred and include costs for third-party contractors (CROs, CMOs), personnel, consultants, laboratory supplies, and regulatory compliance[128](index=128&type=chunk) - Direct research and development expenses are tracked on a program-by-program basis, while employee-related and other indirect costs are classified as microbiome therapeutics platform research[129](index=129&type=chunk) - Expects research and development expenses to **continue to increase** in the foreseeable future as clinical development of SER-287, SER-109, SER-401, and SER-301 advances[132](index=132&type=chunk) [General and Administrative Expenses](index=29&type=section&id=General%20and%20Administrative%20Expenses_F) - General and administrative expenses primarily consist of salaries, stock-based compensation, legal fees, professional fees, insurance, travel, and facility-related expenses[133](index=133&type=chunk) - General and administrative expenses may increase in the future to support growth in research and development activities and potential commercialization, as well as costs associated with being a public company[134](index=134&type=chunk) [Restructuring](index=29&type=section&id=Restructuring_F) - In February 2019, the company implemented corporate changes to focus resources on advancing clinical-stage therapeutic candidates, leading to a **reduction in headcount by approximately 30%**[135](index=135&type=chunk) [Other Income (Expense), Net](index=29&type=section&id=Other%20Income%20(Expense)%2C%20Net_F) - Other income (expense), net, consists of interest earned on cash, cash equivalents, and investments, and sublease income[136](index=136&type=chunk) [Income Taxes](index=29&type=section&id=Income%20Taxes_F) - No U.S federal or state income tax benefits have been recorded since inception due to uncertainty of realizing a benefit from net losses and research and development tax credits[137](index=137&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statements require estimates, particularly for revenue recognition and R&D expenses, with no material policy changes - Condensed consolidated financial statements are prepared in accordance with GAAP, requiring estimates and judgments, particularly for revenue recognition and the accrual of research and development expenses[140](index=140&type=chunk) - **No material changes** to significant accounting policies occurred during the nine months ended September 30, 2019, except for the adoption of the new lease accounting standard discussed in Note 9[140](index=140&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section compares financial performance for the three and nine months ended September 30, 2019 and 2018 [Comparison of Three Months Ended September 30, 2019 and 2018](index=30&type=section&id=Comparison%20of%20Three%20Months%20Ended%20September%2030%2C%202019%20and%202018) Net loss improved to $(16.4) million in Q3 2019, driven by lower R&D and G&A expenses - Total revenue decreased by **$2.0 million (22.4%)** in Q3 2019, primarily due to a cumulative catch-up adjustment in Q3 2018 related to a $20.0 million milestone[143](index=143&type=chunk) - Research and development expenses decreased by **$5.4 million (22.6%)** in Q3 2019, mainly due to a $4.7 million decrease in microbiome therapeutics platform expenses and a $1.6 million decrease in SER-109 program expenses, partially offset by a $1.5 million increase in SER-287 program expenses[145](index=145&type=chunk) - General and administrative expenses decreased by **$1.7 million (22.3%)** in Q3 2019, primarily due to a $1.7 million decrease in personnel-related costs[146](index=146&type=chunk) Results of Operations (Three Months Ended September 30, in thousands) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $7,031 | $9,055 | $(2,024) | | Research and development | $18,317 | $23,675 | $(5,358) | | General and administrative | $5,897 | $7,591 | $(1,694) | | Total operating expenses | $24,214 | $31,266 | $(7,052) | | Loss from operations | $(17,183) | $(22,211) | $5,028 | | Net loss | $(16,409) | $(21,949) | $5,540 | [Comparison of Nine Months Ended September 30, 2019 and 2018](index=32&type=section&id=Comparison%20of%20Nine%20Months%20Ended%20September%2030%2C%202019%20and%202018) Net loss improved to $(51.5) million for the nine-month period, driven by higher revenue and lower operating expenses - Total revenue increased by **$9.2 million (52.4%)** for the nine months ended September 30, 2019, primarily due to a $6.8 million cumulative catch-up adjustment from the SER-109 Phase 3 trial modification and $4.2 million from the AstraZeneca Research Agreement[150](index=150&type=chunk) - Research and development expenses decreased by **$12.1 million (17.0%)** for the nine months ended September 30, 2019, mainly due to decreases in microbiome therapeutics platform ($7.2 million), SER-109 program ($7.7 million), and SER-262 program ($2.2 million) expenses, partially offset by a $4.9 million increase in SER-287 program expenses[151](index=151&type=chunk)[152](index=152&type=chunk) - General and administrative expenses decreased by **$6.1 million (24.3%)** for the nine months ended September 30, 2019, primarily due to a $4.9 million decrease in personnel-related costs[153](index=153&type=chunk) - Restructuring charges of **$1.5 million** were recorded during the nine months ended September 30, 2019[154](index=154&type=chunk) Results of Operations (Nine Months Ended September 30, in thousands) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $26,883 | $17,638 | $9,245 | | Research and development | $59,109 | $71,188 | $(12,079) | | General and administrative | $18,966 | $25,063 | $(6,097) | | Restructuring expenses | $1,492 | $0 | $1,492 | | Total operating expenses | $79,567 | $96,251 | $(16,684) | | Loss from operations | $(52,684) | $(78,613) | $25,929 | | Net loss | $(51,501) | $(77,655) | $26,154 | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity was enhanced by a public offering and a new loan facility, funding operations into Q2 2021 [Collaboration Agreements](index=34&type=section&id=Collaboration%20Agreements_L) - Under the NHS License Agreement, the company received a **$120.0 million** upfront payment in 2016 and is eligible for up to **$285.0 million** in development, **$375.0 million** in regulatory, and **$1.1 billion** in commercial milestones, plus tiered royalties[162](index=162&type=chunk) - Under the AstraZeneca Research Agreement, AstraZeneca will pay **$20.0 million** in three equal installments, with the first received in April 2019 and the remaining two due in January 2020 and January 2021[166](index=166&type=chunk) [Loan and Security Agreement with Hercules](index=35&type=section&id=Loan%20and%20Security%20Agreement%20with%20Hercules) - Entered into a loan and security agreement with Hercules Capital, Inc in October 2019 for a Term Loan Facility of up to **$50.0 million**, available in three tranches[168](index=168&type=chunk) - Received the first tranche of **$25.0 million** (net $24.6 million after closing costs) on October 29, 2019[168](index=168&type=chunk) - Advances bear interest at the greater of **Prime Rate + 4.40% or 9.65%**, with interest-only payments through December 1, 2021 (extendable to June 1, 2022 upon milestones)[169](index=169&type=chunk) - The Term Loan Facility is secured by substantially all of the company's assets, **excluding intellectual property**[170](index=170&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows_L) - Net cash used in operating activities decreased by **$13.0 million**, from $(75.5) million in 2018 to **$(62.5) million** in 2019, primarily due to a lower net loss[174](index=174&type=chunk)[175](index=175&type=chunk) - Net cash used in investing activities was **$(35.2) million** in 2019, compared to **$94.9 million** provided in 2018, mainly due to purchases of investments in 2019 versus sales and maturities of investments in 2018[176](index=176&type=chunk)[177](index=177&type=chunk) - Net cash provided by financing activities significantly increased to **$61.1 million** in 2019 from $0.2 million in 2018, driven by proceeds from the public offering of common stock[178](index=178&type=chunk)[179](index=179&type=chunk) Cash Flow Summary (Nine Months Ended September 30, in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Cash (used in) operating activities | $(62,473) | $(75,520) | | Cash provided by (used in) investing activities | $(35,171) | $94,922 | | Cash provided by (used in) financing activities | $61,121 | $223 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(36,523) | $19,625 | [Funding Requirements](index=36&type=section&id=Funding%20Requirements) - Based on current plans, cash, cash equivalents, investments as of September 30, 2019, and the $25.0 million drawn from the Term Loan Facility are expected to fund operating expenses and capital expenditure requirements **into the second quarter of 2021**[161](index=161&type=chunk) - Anticipates **substantial increases in expenses** for ongoing clinical development (SER-287, SER-109, SER-401, SER-301), manufacturing, potential commercialization, and public company operations[180](index=180&type=chunk) - Will need **additional financing**, which may involve equity or convertible debt securities (diluting shareholders), debt financing (imposing restrictive covenants), or collaborations (relinquishing rights)[182](index=182&type=chunk)[183](index=183&type=chunk) [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) - Material changes to contractual obligations and commitments since the Annual Report include a sublease agreement (Note 9) and the loan and security agreement with Hercules[184](index=184&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) As of September 30, 2019, the company did not have any off-balance sheet arrangements - As of September 30, 2019, the company did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest income sensitivity, which is not considered material - The company's primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S interest rates[186](index=186&type=chunk) - Due to the short-term nature of the instruments in its portfolio, an immediate **10% change in market interest rates would not have a material impact** on the fair market value of its investment portfolio or on its financial position or results of operations[186](index=186&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2019 - Management concluded that disclosure controls and procedures were **effective** at the reasonable assurance level as of September 30, 2019[188](index=188&type=chunk) - **No change** in internal control over financial reporting occurred during the three months ended September 30, 2019, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[189](index=189&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in an ongoing European patent opposition proceeding with The University of Tokyo - On April 25, 2017, the company filed a notice of opposition to European Patent No 2 575 835 B1, granted to The University of Tokyo, requesting its revocation[192](index=192&type=chunk) - The Opposition Division required The University of Tokyo to narrow the scope of the patent claims, and **both The University of Tokyo and Seres Therapeutics have appealed** certain aspects of this decision[192](index=192&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's stock involves significant risks across its finances, product development, and operations [Risks Related to Our Financial Position and Need for Additional Capital](index=39&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company has a history of significant losses and requires substantial additional capital to fund future operations - The company has incurred significant operating losses since inception, with a **net loss of $51.5 million** for the nine months ended September 30, 2019, and an **accumulated deficit of $440.9 million**[195](index=195&type=chunk) - Expects to continue incurring significant expenses and operating losses for the foreseeable future, requiring **substantial additional funding** to complete product development and commercialization[195](index=195&type=chunk)[199](index=199&type=chunk) - Inability to raise capital when needed or on attractive terms could force **delays, reductions, or elimination** of research and development programs or commercialization efforts[199](index=199&type=chunk)[202](index=202&type=chunk) - Future financing efforts may **dilute stockholders**, result in increased fixed payment obligations, or require relinquishing rights to technologies or product candidates[201](index=201&type=chunk) [Risks Related to the Discovery, Development and Regulatory Approval of Our Product Candidates](index=41&type=section&id=Risks%20Related%20to%20the%20Discovery%2C%20Development%20and%20Regulatory%20Approval%20of%20Our%20Product%20Candidates) The company's microbiome therapeutics approach is unproven, and clinical development is risky, lengthy, and expensive - Microbiome therapeutics is an **unproven approach**; the company has not, nor to its knowledge has any other company, received regulatory approval or manufactured on a commercial scale a therapeutic based on this approach[207](index=207&type=chunk) - Clinical drug development is a **risky, lengthy, and expensive process** with an uncertain outcome, and the risk of failure is high at any stage of testing[209](index=209&type=chunk) - Delays or difficulties in patient enrollment in clinical trials could **delay or prevent regulatory approvals** and increase development costs[214](index=214&type=chunk)[217](index=217&type=chunk) - The reduction in trial size for the SER-109 Phase 3 study may necessitate **additional confirmatory evidence** of efficacy or patient exposure for safety to gain approval[218](index=218&type=chunk) - Obtaining marketing approvals is expensive, risky, and may take many years, with potential for **delays, limited indications, or denial** by regulatory authorities[219](index=219&type=chunk)[221](index=221&type=chunk) - Fast Track and Breakthrough Therapy designations **do not guarantee a faster development**, regulatory review, or approval process, nor do they increase the likelihood of marketing approval[226](index=226&type=chunk)[228](index=228&type=chunk) - Orphan drug exclusivity **may not effectively protect a product from competition**, as different drugs can be approved for the same condition or the same drug can be approved if clinically superior[232](index=232&type=chunk) [Risks Related to our Dependence on Third Parties and Manufacturing](index=47&type=section&id=Risks%20Related%20to%20our%20Dependence%20on%20Third%20Parties%20and%20Manufacturing) The company relies heavily on third parties for clinical trials, manufacturing, and commercialization - The Collaboration and License Agreement with NHS is critical; failure by either party to perform or termination could **delay or terminate development and commercialization** of CDI and IBD product candidates outside the US and Canada[236](index=236&type=chunk)[238](index=238&type=chunk) - Reliance on third parties (CROs, medical institutions, clinical investigators) to conduct clinical trials **reduces control** and poses risks of unsatisfactory performance, missed deadlines, or non-compliance with regulatory requirements[239](index=239&type=chunk)[241](index=241&type=chunk) - Reliance on third parties for manufacturing product candidates increases the risk of **insufficient quantities, unacceptable cost, or quality issues**, which could delay, prevent, or impair development or commercialization efforts[243](index=243&type=chunk) - Third-party manufacturers may not comply with cGMP regulations, leading to **sanctions, clinical holds, or delays in approval**[244](index=244&type=chunk) - The company has **no experience manufacturing product candidates at commercial scale** and may face challenges in developing adequate facilities and staffing[246](index=246&type=chunk)[247](index=247&type=chunk) - Some product candidates require donor material, and the company may not be able to collect **sufficient quantities for commercial-scale manufacturing**[249](index=249&type=chunk) [Risks Related to Commercialization of Our Product Candidates and Other Legal Matters](index=49&type=section&id=Risks%20Related%20to%20Commercialization%20of%20Our%20Product%20Candidates%20and%20Other%20Legal%20Matters) The company faces challenges in market acceptance, competition, and complex healthcare regulations - Even if approved, product candidates may **fail to achieve sufficient market acceptance** by physicians, patients, and third-party payors due to competition (e.g., FMT for CDI), efficacy, safety, or pricing[251](index=251&type=chunk) - The company has **limited sales and marketing infrastructure** and no experience in commercializing pharmaceutical products, posing risks in establishing effective capabilities or securing favorable third-party agreements[252](index=252&type=chunk)[254](index=254&type=chunk) - Faces **substantial competition** from major pharmaceutical, specialty pharmaceutical, and biotechnology companies, as well as academic institutions, some with significantly greater resources[255](index=255&type=chunk)[256](index=256&type=chunk) - Commercial opportunity could be reduced or eliminated if competitors develop and commercialize **more effective, safer, convenient, or less expensive products**, or obtain regulatory approval more rapidly[258](index=258&type=chunk) - Subject to **unfavorable pricing regulations** and third-party coverage and reimbursement policies, which could harm business and limit revenue generation[259](index=259&type=chunk)[260](index=260&type=chunk) - **Product liability lawsuits** could result in substantial liabilities, regulatory investigations, product recalls, reputational damage, and limit commercialization[263](index=263&type=chunk) - May face competition from **biosimilars**, potentially shortening exclusivity periods and materially adversely impacting future commercial prospects[266](index=266&type=chunk)[267](index=267&type=chunk) - Failure to obtain marketing approval in **international jurisdictions** would prevent product candidates from being marketed abroad[269](index=269&type=chunk) - Approved products are subject to **post-marketing restrictions**, withdrawal from the market, and penalties for non-compliance with regulatory requirements[270](index=270&type=chunk)[273](index=273&type=chunk) - Relationships with customers, physicians, and third-party payors are subject to **anti-kickback, fraud and abuse, and other healthcare laws**, risking criminal sanctions, civil penalties, and exclusion from government programs[278](index=278&type=chunk)[281](index=281&type=chunk) - Recently enacted and future legislation (e.g., ACA) and governmental scrutiny over pricing could **increase costs, delay approvals, and affect the prices obtainable** for products[282](index=282&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) [Risks Related to Our Intellectual Property](index=57&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Success depends on obtaining and maintaining intellectual property protection, which is expensive and uncertain - The company's success depends on its ability to obtain and maintain patent and other intellectual property protection, which is an **expensive, time-consuming, and inherently uncertain process**[292](index=292&type=chunk)[293](index=293&type=chunk) - The patent portfolio is at a **very early stage**, and there is no assurance that pending patent applications will mature into issued patents or provide sufficient scope to protect product candidates or prevent competition[296](index=296&type=chunk)[298](index=298&type=chunk) - The company may be subject to **third-party challenges** (e.g., opposition, reexamination, inter partes review) to its patent rights, which could reduce the scope of, or invalidate, its patents[299](index=299&type=chunk) - The patent position of biotechnology and pharmaceutical companies is **highly uncertain** and involves complex legal and factual questions, making the ability to obtain, maintain, and enforce patents uncertain[300](index=300&type=chunk) - Inability to protect the confidentiality of **trade secrets and know-how** could harm the company's business and competitive position[303](index=303&type=chunk) - Changes in U.S patent law (e.g., Leahy-Smith America Invents Act) and Supreme Court rulings (e.g., on patent eligibility of natural products) have **increased uncertainties and costs** surrounding patent prosecution and enforcement[304](index=304&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) - Third parties may initiate legal proceedings alleging **infringement of their intellectual property rights**, which could lead to costly litigation, the need to obtain licenses, or cessation of commercializing infringing technology[310](index=310&type=chunk)[313](index=313&type=chunk) - Issued patents covering product candidates could be found **invalid or unenforceable** or interpreted narrowly if challenged in court, leading to a loss of patent protection[316](index=316&type=chunk) - Failure to comply with procedural requirements for patent maintenance (e.g., fee payments, document submissions) could result in **abandonment or lapse of patent rights**[318](index=318&type=chunk) - The company may be subject to claims challenging the **inventorship or ownership** of its patents and other intellectual property, or claims of misappropriation of third-party intellectual property[319](index=319&type=chunk)[321](index=321&type=chunk) - The company will not seek to protect its intellectual property rights in all jurisdictions, and enforcement may be **inadequate in countries where protection is sought**, allowing competitors to use its technologies[325](index=325&type=chunk)[327](index=327&type=chunk) [Risks Related to Our Operations](index=64&type=section&id=Risks%20Related%20to%20Our%20Operations) The company's new strategy, reliance on key personnel, and public company status present operational risks - The new corporate strategy and restructuring implemented in February 2019 **may not be successful**, potentially leading to unexpected risks, costs, or an inability to effectively retain management or personnel[330](index=330&type=chunk)[332](index=332&type=chunk) - Future success depends on the ability to **retain key executives** and to attract, retain, and motivate qualified scientific, clinical, manufacturing, and sales and marketing personnel[333](index=333&type=chunk)[334](index=334&type=chunk) - Expansion of operational capabilities may lead to **difficulties in managing growth**, diverting management and business development resources, and disrupting operations[335](index=335&type=chunk) - As a public company, the company incurs **significant legal, accounting, and other expenses**, and management devotes substantial time to compliance initiatives and corporate governance practices[336](index=336&type=chunk)[337](index=337&type=chunk) - Operating internationally involves various risks, including conflicting laws, regulatory requirements, intellectual property enforcement challenges, and financial risks[338](index=338&type=chunk) - **Information technology and other system failures** could disrupt business operations, delay development programs, and lead to data loss or security breaches[340](index=340&type=chunk) - Acquisitions or joint ventures could **disrupt business, cause dilution to stockholders**, and expose the company to unanticipated liabilities and integration difficulties[341](index=341&type=chunk) - The company has been subject to **securities class action litigation** in the past and may face similar or other litigation in the future, resulting in substantial costs and diversion of management's attention[344](index=344&type=chunk) - Failure to comply with **environmental, health, and safety laws** and regulations could result in fines, penalties, or significant costs[345](index=345&type=chunk)[347](index=347&type=chunk) - Comprehensive tax reform bills could adversely affect the company's business and financial condition, and its ability to use **net operating loss carryforwards** may be subject to limitations[348](index=348&type=chunk)[349](index=349&type=chunk) - The terms of the Hercules credit facility place **restrictions on operating and financial flexibility**, and a default could significantly harm the business and prospects[350](index=350&type=chunk)[351](index=351&type=chunk) [Risks Related to Our Common Stock](index=71&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's common stock price is highly volatile, and insiders hold significant voting power - The price of the company's common stock is likely to be **volatile and fluctuate substantially** due to various factors, including clinical trial results, regulatory developments, and financial performance[354](index=354&type=chunk) - Executive officers, directors, and principal stockholders, collectively holding approximately **62% of outstanding voting stock**, have the ability to control or significantly influence matters submitted to stockholders, potentially delaying or preventing a change in control[355](index=355&type=chunk)[356](index=356&type=chunk) - A significant portion of total outstanding shares are eligible to be sold into the market, which could cause the **market price of the common stock to drop significantly**[357](index=357&type=chunk) - As an "emerging growth company" and "smaller reporting company," the company benefits from **reduced disclosure requirements**, which may make its common stock less attractive to some investors and potentially lead to a less active trading market or reduced stock price[358](index=358&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - Provisions in the restated certificate of incorporation and amended and restated bylaws, along with Delaware law, could **make an acquisition of the company more difficult** and may prevent attempts by stockholders to replace or remove current management[363](index=363&type=chunk)[364](index=364&type=chunk) - The company **does not anticipate paying any cash dividends** on its capital stock in the foreseeable future, making capital appreciation the sole source of gain for stockholders[365](index=365&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[366](index=366&type=chunk) [Item 3. Defaults Upon Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[367](index=367&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures to report for the period - None[368](index=368&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) There was no other information to report for the period - None[369](index=369&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate and contractual documents - Includes Restated Certificate of Incorporation, Amended and Restated Bylaws, and Amended and Restated Investors' Rights Agreement[371](index=371&type=chunk) - Filed Employment Agreement with Marcus Chapman and Loan and Security Agreement with Hercules Capital, Inc[371](index=371&type=chunk) - Filed Sublease Agreement dated July 1, 2019, by and between the Registrant and Flagship VL56, Inc and Flagship VL58, Inc[371](index=371&type=chunk) - Includes Rule 13a-14(a)/15d-14(a) Certifications and Section 1350 Certifications from the Chief Executive Officer and Principal Financial and Accounting Officer[371](index=371&type=chunk) [SIGNATURES](index=76&type=section&id=SIGNATURES) The report was duly signed by the company's authorized officer on November 5, 2019 - The report was signed on **November 5, 2019**[375](index=375&type=chunk) - Signed by **Marcus Chapman**, Vice President, Finance and Principal Financial and Accounting Officer of Seres Therapeutics, Inc[375](index=375&type=chunk)