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, 2021

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 of incorporation or organization)	(I.R.S. Employer Identification No.)
200 Sidney Street - 4th Floor Cambridge, MA	02139
(Address of principal executive offices)	(Zip Code)

(617) 945-9626

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	MCRB	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2021, the registrant had 91,847,137 shares of common stock, $0.001 par value per share, outstanding.

Seres Therapeutics, Inc.

INDEX

	Page
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)	5
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	5
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020	6
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020	7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3. Defaults Upon Senior Securities	80
Item 4. Mine Safety Disclosures	80
Item 5. Other Information	80
Item 6. Exhibits	81
SIGNATURES	82

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, manufacturing activities and related timing, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the sections in this report titled “Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

TRADEMARKS, SERVICE MARKS AND TRADENAMES

We have proprietary rights to trademarks used in this Quarterly Report, which are important to our business and many of which are registered under applicable intellectual property laws. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Quarterly Report are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. This Quarterly Report contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this Quarterly Report are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

We are a development-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

We will need additional funding in order to complete development of our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

Other than SER-109 and SER-287, we are early in our development efforts and may not be successful in our efforts to use our microbiome therapeutics platform to build a pipeline of product candidates and develop marketable drugs.

3

Our product candidates are based on microbiome therapeutics, which is an unproven approach to therapeutic intervention.

Clinical drug development involves a risky, lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Delays or difficulties in the enrollment of patients in clinical trials, could result in our receipt of necessary regulatory approvals being delayed or prevented.

If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or our collaborators will not be able to commercialize our product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired. Additionally, failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.

Our collaboration and license agreements with Société des Produits Nestlé S.A. and NHSc Pharma Partners (collectively, Nestlé) are important to our business. If we or Nestlé fail to adequately perform under these agreements, or if we or Nestlé terminate the agreements, the development and commercialization of our CDI and IBD product candidates, including SER-109, SER-287, and SER-301, would be delayed or terminated and our business would be adversely affected.

We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We rely on third parties for certain aspects of the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or that such quantities may not be available at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community necessary for commercial success.

We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

If we are unable to adequately protect our proprietary technology or obtain and maintain issued patents that are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

The COVID-19 pandemic caused by the novel strain of coronavirus has adversely impacted and could continue to adversely impact, our business, including our preclinical studies and clinical trials, results of operations and financial condition.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We may expand our operational capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We will continue to incur costs as a result of being a public company, and our management will continue to devote substantial time to compliance initiatives and corporate governance practices.

4

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)

	September 30,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	227,460		$	116,049
Short term investments		119,927			137,567
Prepaid expenses and other current assets		10,174			5,774
Accounts receivable		1,250			9,387
Total current assets		358,811			268,777
Property and equipment, net		17,355			13,897
Operating lease assets		11,588			9,041
Restricted investments		2,150			1,400
Long term investments		5,788			49,825
Other non-current assets		601			—
Total assets	$	396,293		$	342,940
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,623		$	4,018
Accrued expenses and other current liabilities (1)		48,900			14,226
Operating lease liabilities		6,099			5,115
Short term portion of note payable, net of discount		9,345			454
Deferred revenue - related party		21,624			22,602
Total current liabilities		94,591			46,415
Long term portion of note payable, net of discount		16,117			24,639
Operating lease liabilities, net of current portion		12,231			10,561
Deferred revenue, net of current portion - related party		89,413			85,572
Other long-term liabilities (2)		8,203			1,003
Total liabilities		220,555			168,190
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding at September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2021 and December 31, 2020; 91,841,974 and 91,459,239 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		92			91
Additional paid-in capital		739,988			723,482
Accumulated other comprehensive income (loss)		11			(47	)
Accumulated deficit		(564,353	)		(548,776	)
Total stockholders’ equity		175,738			174,750
Total liabilities and stockholders’ equity	$	396,293		$	342,940

[1] Includes related party amounts of $26,734 and $0 at September 30, 2021 and December 31, 2020, respectively (see Note 10)

[2] Includes related party amounts of $7,075 and $0 at September 30, 2021 and December 31, 2020, respectively (see Note 10)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue:
Collaboration revenue - related party	$	126,725		$	80		$	136,636		$	10,728
Grant revenue		—			1,337			1,070			2,907
Collaboration revenue		—			—			—			2,016
Total revenue		126,725			1,417			137,706			15,651
Operating expenses:
Research and development expenses		39,882			23,861			105,139			65,703
General and administrative expenses		19,563			7,551			48,755			20,180
Collaboration (profit) loss sharing - related party		(1,127	)		—			(1,127	)		—
Total operating expenses		58,318			31,412			152,767			85,883
Income (Loss) from operations		68,407			(29,995	)		(15,061	)		(70,232	)
Other (expense) income:
Interest income		590			100			2,385			333
Interest expense		(744	)		(730	)		(2,172	)		(2,165	)
Other (expense) income		(35	)		345			(729	)		1,189
Total other (expense) income, net		(189	)		(285	)		(516	)		(643	)
Net income (loss)	$	68,218		$	(30,280	)	$	(15,577	)	$	(70,875	)
Net income (loss) per share attributable to common stockholders, basic	$	0.74		$	(0.36	)	$	(0.17	)	$	(0.93	)
Net income (loss) per share attributable to common stockholders, diluted	$	0.72		$	(0.36	)	$	(0.17	)	$	(0.93	)
Weighted average common shares outstanding, basic		91,757,614			83,531,617			91,649,035			75,914,361
Weighted average common shares outstanding, diluted		94,953,117			83,531,617			91,649,035			75,914,361
Net income (loss)		68,218			(30,280	)		(15,577	)		(70,875	)
Other comprehensive income (loss):
Unrealized gain (loss) on investments, net of tax of $0		(1	)		1			58			2
Total other comprehensive income (loss)		(1	)		1			58			2
Comprehensive income (loss)	$	68,217		$	(30,279	)	$	(15,519	)	$	(70,873	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

SERES THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited, in thousands, except share data)

	Common Stock				Additional					Accumulated Other			Total Stockholders’
	Shares		Par Value		Paid-in Capital		Accumulated Deficit			Comprehensive Income (Loss)			Equity (Deficit)
Balance at December 31, 2019		70,143,252	$	70	$	411,255	$	(459,649	)	$	—		$	(48,324	)
Issuance of common stock from at the market equity offering		1,230,531		1		4,177					—			4,178
Issuance of common stock upon exercise of stock options		110,967		1		59		—			—			60
Issuance of common stock upon vesting of RSUs, net of tax withholdings		110,000		—		120		—			—			120
Issuance of common stock under ESPP		76,317		—		249		—			—			249
Stock-based compensation expense		—		—		1,959		—			—			1,959
Unrealized loss on investments		—		—		—		—			(10	)		(10	)
Net loss		—		—		—		(19,881	)		—			(19,881	)
Balance at March 31, 2020		71,671,067		72		417,819		(479,530	)		(10	)		(61,649	)
Issuance of common stock from at the market equity offering		3,430,453		3		14,845		—			—			14,848
Issuance of common stock upon exercise of stock options		30,314		—		15		—						15
Stock-based compensation expense		—		—		1,914		—			—			1,914
Unrealized gain on investments		—		—		—		—			11			11
Net loss		—		—		—		(20,714	)		—			(20,714	)
Balance at June 30, 2020		75,131,834		75		434,593		(500,244	)		1			(65,575	)
Issuance of common stock from public offering, net of commissions, underwriting discounts and offering costs		12,075,000		12		243,736		—			—			243,748
Issuance of common stock from Securities Purchase Agreement, net of offering costs - related party		959,002		1		19,899		—			—			19,900
Issuance of common stock from at the market equity offering		1,126,697		1		5,745		—			—			5,746
Issuance of common stock upon exercise of stock options		1,828,027		2		12,048		—			—			12,050
Issuance of common stock upon vesting of RSUs, net of tax withholdings		15,000		—		—		—			—			—
Issuance of common stock under ESPP plan		78,976		—		213		—			—			213
Stock-based compensation expense		—		—		2,249		—			—			2,249
Unrealized gain on investments		—		—		—		—			1			1
Net loss		—		—		—		(30,280	)		—			(30,280	)
Balance at September 30, 2020		91,214,536	$	91	$	718,483	$	(530,524	)	$	2		$	188,052

7

	Common Stock				Additional					Accumulated Other			Total Stockholders’
	Shares		Par Value		Paid-in Capital		Accumulated Deficit			Comprehensive Income (Loss)			Equity
Balance at December 31, 2020		91,459,239	$	91	$	723,482	$	(548,776	)	$	(47	)	$	174,750
Issuance of common stock upon exercise of stock options		104,184		1		371		—			—			372
Issuance of common stock upon vesting of RSUs, net of tax withholdings		650		—		—		—			—			—
Issuance of common stock under ESPP		24,191		—		392		—			—			392
Stock-based compensation expense		—		—		3,624		—			—			3,624
Unrealized gain on investments		—		—		—		—			32			32
Net loss		—		—		—		(35,465	)		—			(35,465	)
Balance at March 31, 2021		91,588,264		92		727,869		(584,241	)		(15	)		143,705
Issuance of common stock upon exercise of stock options		125,546		—		586		—			—			586
Stock-based compensation expense		—		—		5,078		—			—			5,078
Unrealized gain on investments		—		—		—		—			27			27
Net loss		—		—		—		(48,330	)		—			(48,330	)
Balance at June 30, 2021		91,713,810		92		733,533		(632,571	)		12			101,066
Issuance of common stock upon exercise of stock options		51,938		—		174		—			—			174
Issuance of common stock under ESPP plan		76,226		—		435		—			—