mcrb-10q_20170930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a small reporting company)

Small reporting company

Emerging growth company

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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, 2017, the registrant had 40,530,139 shares of common stock, $0.001 par value per share, outstanding.

This Quarterly Report on Form 10-Q 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, 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 Quarterly 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 Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward looking statements are subject to numerous risks, including, without limitation, the following:

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.

	September 30,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	46,025		$	54,539
Investments		125,274			138,704
Prepaid expenses and other current assets		5,346			5,126
Total current assets		176,645			198,369
Property and equipment, net		33,724			36,125
Long-term investments		—			36,752
Restricted cash		1,513			1,400
Total assets	$	211,882		$	272,646
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,380		$	7,587
Accrued expenses and other current liabilities		9,594			10,812
Deferred revenue - related party		12,058			12,058
Total current liabilities		27,032			30,457
Lease incentive obligation, net of current portion		9,424			10,730
Deferred rent		2,202			2,072
Deferred revenue, net of current portion - related party		87,712			96,756
Total liabilities		126,370			140,015
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2017 and December 31, 2016; no shares issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2017 and December 31, 2016; 40,512,639 and 40,355,753 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		40			40
Additional paid-in capital		320,189			306,931
Accumulated other comprehensive loss		(99	)		(149	)
Accumulated deficit		(234,618	)		(174,191	)
Total stockholders’ equity		85,512			132,631
Total liabilities and stockholders’ equity	$	211,882		$	272,646

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Collaboration revenue - related party	$	23,015		$	13,015		$	29,044		$	18,730
Total revenue		23,015			13,015			29,044			18,730
Operating expenses:
Research and development expenses		22,210			24,143			65,413			61,733
General and administrative expenses		8,119			7,967			25,251			24,163
Total operating expenses		30,329			32,110			90,664			85,896
Loss from operations		(7,314	)		(19,095	)		(61,620	)		(67,166	)
Other income (expense):
Interest income		502			719			1,892			1,483
Other income (expense)		(123	)		(312	)		(699	)		(620	)
Total other income, net		379			407			1,193			863
Net loss	$	(6,935	)	$	(18,688	)	$	(60,427	)	$	(66,303	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.17	)	$	(0.46	)	$	(1.49	)	$	(1.67	)
Weighted average common shares outstanding, basic and diluted		40,494,049			40,235,623			40,419,522			39,676,085
Other comprehensive (loss) income:
Unrealized (loss) gain on investments, net of tax of $0	$	77		$	(150	)	$	50		$	(97	)
Total other comprehensive (loss) income		77			(150	)		50			(97	)
Comprehensive loss	$	(6,858	)	$	(18,838	)	$	(60,377	)	$	(66,400	)

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

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(60,427	)	$	(66,303	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		13,150			12,865
Depreciation and amortization expense		5,356			2,511
Non-cash interest expense		3			2
Accretion of discount on investments		(166	)		(317	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(220	)		(2,527	)
Deferred revenue		(9,044	)		111,545
Accounts payable		(2,502	)		84
Accrued expenses and other current liabilities		(1,065	)		6,866
Net cash provided by (used in) operating activities		(54,915	)		64,726
Cash flows from investing activities:
Purchases of property and equipment		(3,991	)		(15,805	)
Purchases of investments		(75,728	)		(245,728	)
Sales and maturities of investments		126,125			176,230
Changes in restricted cash		(113	)		117
Net cash provided by (used in) investing activities		46,293			(85,186	)
Cash flows from financing activities:
Proceeds from exercise of stock options and common stock warrants		108			2,138
Net cash provided by financing activities		108			2,138
Net decrease in cash and cash equivalents		(8,514	)		(18,322	)
Cash and cash equivalents at beginning of period		54,539			73,933
Cash and cash equivalents at end of period	$	46,025		$	55,611
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1		$	109
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued expenses	$	453		$	4,484

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

Seres Therapeutics, Inc. (the “Company”) was incorporated under the laws of the State of Delaware in October 2010 under the name Newco LS21, Inc. In October 2011, the Company changed its name to Seres Health, Inc., and in May 2015, the Company changed its name to Seres Therapeutics, Inc. The Company is a microbiome therapeutics platform company developing a novel class of biological drugs, which are designed to restore health by repairing the function of a dysbiotic microbiome. The Company’s lead product candidate, SER-109, is designed to prevent further recurrences of Clostridium difficile infection (“CDI”), a debilitating infection of the colon, and, if approved by the U.S. Food and Drug Administration (“FDA”), could be a first-in-field oral microbiome drug. The Company’s second product candidate, SER-287, is being developed to treat inflammatory bowel disease (“IBD”) including ulcerative colitis (“UC”). In addition, using its microbiome therapeutics platform, the Company is developing product candidates to treat diseases where the microbiome is implicated, including SER-262, a synthetic product candidate, to prevent an initial recurrence of primary CDI, SER-301, a synthetic inflammatory bowel disease product candidate, and SER-155, a synthetic product candidate to prevent infections and improve gastrointestinal barrier function (including the consequences of graft versus host disease) in patients following allogeneic hematopoietic stem cell transplants or solid organ transplants. The Company is also using its microbiome therapeutics platform to conduct research on metabolic diseases, such as non-alcoholic steatohepatitis (NASH); inflammatory diseases, such as Crohn’s disease; rare liver disorders such as primary sclerosing cholangitis (PSC); and immuno-oncology treatments.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows and had an accumulated deficit of $234,618 and $174,191 as of September 30, 2017 and December 31, 2016, respectively. The Company expects that its cash, cash equivalents and investments at September 30, 2017 of $171,299 will enable it to fund its operating expense and capital expenditure requirements through 2018. The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

The accompanying unaudited consolidated financial statements as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2016 included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on March 16, 2017.

The unaudited interim financial statements have been prepared on the same basis as the audited consolidated financial statements. The condensed consolidated balance sheet at December 31, 2016 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of September 30, 2017 and consolidated results of operations for the three and nine months ended September 30, 2017 and its cash flows for the nine months ended September 30, 2017 and 2016. Such adjustments are of a normal and recurring nature. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2017.

The significant accounting policies and estimates used in preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2016, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2017.

During the three and nine months ended September 30, 2017, the Company recorded revenue in connection with its collaboration agreement. See Note 9, “Collaboration Revenue,” for additional information.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants and unvested restricted stock.

The restricted stock units granted by the Company entitle the holder of such awards to dividends declared or paid by the board of directors, regardless of whether such awards are unvested, as if such shares were outstanding common shares at the time of the dividend. However, the unvested restricted stock awards are not entitled to share in the residual net assets (deficit) of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies how a company identifies promised goods or services and clarifies whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. In December 2016 the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which amends certain narrow aspects of the guidance issued in ASU 2014-09 including guidance related to the disclosure of remaining performance obligations and prior-period performance obligations, as well as other amendments to the guidance on loan guarantee fees, contract costs, refund liabilities, advertising costs and the clarification of certain examples. ASU 2016-08, ASU 2016-10 and ASU 2016-12 have the same effective dates and transition requirements as ASU 2014-09, all of which collectively are herein referred to as “ASC 606.”

The Company plans to adopt ASC 606 using the modified retrospective transition method, which will result in an adjustment to accumulated deficit in its consolidated balance sheet as of the January 1, 2018 effective date for the cumulative effect of applying the standard. As the adoption method does not result in a recast of the prior year consolidated financial statements, ASC 606 requires the Company to provide additional disclosures during the year of adoption of the amount by which each financial statement line item is affected by adoption of the new standard and explanations of the reasons for significant changes.

The Company is currently evaluating the impact of the adoption of ASC 606 on its consolidated financial statements. While its assessment is preliminary, the Company expects the adoption will change the pattern and timing of revenue recognition of amounts from its collaboration agreement with NHS. Under ASC 606, the Company will recognize revenue using the cost-to-cost method which best depicts the transfer of control to the customer. In contrast, under existing revenue recognition standard, the Company is recognizing revenue on a straight-line basis over the estimated period of performance. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue will be recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. The estimate of the Company’s measure of progress and estimate of transaction price will be updated at each reporting date, as a change in estimate, and will require judgement. The amount of consideration allocated to satisfied performance obligations, based on the Company’s measure of progress will be recognized immediately on a cumulative catch-up basis, resulting in an adjustment to revenue in the period of change. The amount related to the unsatisfied portion will be recognized as that portion is satisfied over time. The Company is in process with calculating the revenue recognition impact under the cost-to-cost method, and the amounts that will be recognized upon adoption on January 1, 2018.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019, with early adoption permitted. The Company is in the process of evaluating the impact of this new guidance.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new standard addresses specific cash flow issues with the objective of reducing existing diversity in practice. The new standard will be effective for the Company on January 1, 2018. The Company is in the process of evaluating the impact of this new guidance.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash. The new standard requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The new standard will be effective for the Company on January 1, 2018. The Company is in the process of evaluating the impact of this new guidance.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The new standard will be effective for the Company on January 1, 2018. The Company is in the process of evaluating the impact of this new guidance.

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above. The Company’s investments in certificates of deposit are carried at amortized cost, which approximates fair value. Certain cash equivalents or investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The carrying values of the Company’s accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities.

The following table presents information about the Company’s assets as of September 30, 2017 and December 31, 2016 that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (note there were no liabilities measured at fair value on a recurring basis in either of the periods presented):

	Fair Value Measurements as of September 30, 2017 Using:
	Level 1		Level 2		Level 3		Not Subject to Leveling ⁽¹⁾		Total
Assets:
Cash Equivalents	$	—	$	3,000	$	—	$	11,237	$	14,237
Investments:
Commercial Paper	$	—	$	9,737	$	—	$	—	$	9,737
Certificates of Deposit		—		10,142		—		—		10,142
Corporate Bonds		—		70,923		—		—		70,923
Government Securities		—		24,952		—		—		24,952
Treasury Bonds		—		9,520		—		—		9,520
	$	—	$	128,274	$	—	$	11,237	$	139,511
⁽¹⁾ Certain cash equivalents and investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

	Fair Value Measurements as of December 31, 2016 Using:
	Level 1		Level 2		Level 3		Not Subject to Leveling ⁽¹⁾		Total
Assets:
Cash Equivalents	$	—	$	4,740	$	—	$	1,567	$	6,307
Repurchase Agreements		—		7,000		—		—		7,000
Investments:
Commercial Paper	$	—	$	19,689	$	—	$	—	$	19,689
Certificates of Deposit		—		10,629						10,629
Corporate Bonds		—		94,609		—		—		94,609
Government Securities		—		33,466		—		—		33,466
Treasury Bonds		—		17,063		—		—		17,063
	$	—	$	187,196	$	—	$	1,567	$	188,763
⁽¹⁾ Certain cash equivalents and investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

As of September 30, 2017, the Company’s cash equivalents, which were invested in money market funds and corporate bonds with original maturities of less than 90 days from the date of purchase, were valued based on Level 2 inputs.

As of December 31, 2016, the Company’s cash equivalents consisted of money market funds, corporate bonds, certificates of deposit, and repurchase agreements with original maturities of less than 90 days from the date of purchase and were valued based on Level 2 inputs. Repurchase agreements are agreements with banks to repurchase notes that are collateralized by U.S. government securities. All repurchase agreements have overnight maturities.

The fair value of the Company’s investments, which consisted of commercial paper, certificates of deposit, corporate bonds, government securities and treasury bonds as of September 30, 2017 and December 31, 2016 were determined using Level 2 inputs. During the three and nine months ended September 30, 2017 and 2016 there were no transfers between Level 1, Level 2 and Level 3.

As of September 30, 2017 and December 31, 2016, the fair value of available-for-sale investments by type of security was as follows:

	September 30, 2017
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Investments:
Commercial Paper	$	9,738	$	—	$	(1	)	$	9,737
Certificates of Deposit		10,142		—		—			10,142
Corporate Bonds		70,967		1		(45	)		70,923
Government Securities		24,995		—		(43	)		24,952
Treasury Bonds		9,529		—		(9	)		9,520
	$	125,371	$	1	$	(98	)	$	125,274

	December 31, 2016
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Investments:
Commercial Paper	$	19,631	$	58	$	—		$	19,689
Certificates of Deposit		10,629		—		—			10,629
Corporate Bonds		94,764		—		(155	)		94,609
Government Securities		33,513		—		(47	)		33,466
Treasury Bonds		17,066		1		(4	)		17,063
	$	175,603	$	59	$	(206	)	$	175,456

Investments with original maturities of less than 90 days are included in cash and cash equivalents on the consolidated balance sheets and are not included in the table above. Investments with maturities of less than 12 months are considered current and those investments with maturities greater than 12 months are considered non-current.

	September 30, 2017			December 31, 2016
Laboratory equipment	$	12,544		$	10,711
Computer equipment		2,555			1,335
Furniture and office equipment		1,033			1,010
Leasehold improvements		27,896			27,807
Construction in progress		232			442
		44,260			41,305
Less: Accumulated depreciation and amortization		(10,536	)		(5,180	)
	$	33,724		$	36,125

Depreciation and amortization expense was $1,866, $5,356, $1,251, and $2,511 for the three and nine months ended September 30, 2017 and 2016, respectively.

On July 1, 2015, in connection with the closing of the Company’s initial public offering of its common stock (the “IPO”), the Company effected its Restated Certificate of Incorporation, which authorizes the Company to issue 10,000,000 shares of preferred stock, $0.001 par value per share.

The following table summarizes the Company’s stock option activity since December 31, 2016:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)
Outstanding as of December 31, 2016		5,069,133		$	14.36		8.26	$	16,736
Granted		1,696,000			10.19
Exercised		(156,886	)		0.69
Forfeited		(474,651	)		20.66
Outstanding as of September 30, 2017		6,133,596		$	13.07		7.92	$	36,791
Options exercisable as of September 30, 2017		2,973,186		$	11.32		7.14	$	22,602

The weighted average grant-date fair value of stock options granted during the three and nine months ended September 30, 2017 and 2016 was $8.43, $7.06, $12.45, and $18.93 per share, respectively.

The Company has granted restricted stock units with time-based vesting conditions. The table below summarizes the Company’s restricted stock activity for the nine months ended September 30, 2017:

The Company recorded stock-based compensation expense related to stock options and restricted stock units in the following expense categories of its condensed consolidated statements of operations and comprehensive loss:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development expenses	$	2,158	$	2,334	$	6,124	$	7,416
General and administrative expenses		2,211		1,910		7,026		5,449
	$	4,369	$	4,244	$	13,150	$	12,865

In January 2016, the Company entered into the Collaboration and License Agreement (“License Agreement”) with Nestec Ltd. (“NHS”), an affiliate of Nestlé Health Science US Holdings, Inc., a significant stockholder of the Company, for the development and commercialization of certain product candidates in development for the treatment and management of CDI and IBD, including UC and Crohn’s disease. The License Agreement will support the development of the Company’s portfolio of products for CDI and IBD in markets outside of the United States and Canada (the “Licensed Territory”). The Company has retained full commercial rights to its entire portfolio of product candidates with respect to the United States and Canada.

Under the License Agreement, the Company granted to NHS an exclusive, royalty-bearing license to develop and commercialize, in the Licensed Territory, certain products based on its microbiome technology that are being developed for the treatment of CDI and IBD, including SER-109, SER-262, SER-287 and SER-301 (collectively, the “NHS Collaboration Products”). The License Agreement sets forth the Company’s and NHS’ respective obligations for development, commercialization, regulatory and manufacturing and supply activities for the NHS Collaboration Products with respect to the licensed fields and the Licensed Territory.

In exchange for the license, NHS agreed to pay the Company an upfront cash payment of $120,000, which the Company received in February 2016. NHS also agreed to pay the Company tiered royalties, at percentages ranging from the high single digits to high teens, of net sales of NHS Collaboration Products in the Licensed Territory. The Company is eligible to receive up to $285,000 in development milestone payments, $375,000 in regulatory payments and up to an aggregate of $1,125,000 for the achievement of certain commercial milestones related to the sales of NHS Collaboration Products.

At the inception of the License Agreement, the Company identified the following deliverables: (i) a license to develop and commercialize the NHS Collaboration Products in the Licensed Territory, (ii) obligation to perform research and development services, (iii) participation on a joint steering committee, and (iv) manufacturing services to provide clinical supply to complete future clinical trials. The Company also identified a contingent deliverable, the obligation to perform manufacturing services to provide commercial supply if commercialization occurs, which is contingent upon regulatory approval. This contingent deliverable has been excluded from the initial allocation and will be treated as a separate unit of accounting when and if delivered.

The Company concluded that none of the four deliverables identified at the inception of the License Agreement has standalone value from the other undelivered elements. Accordingly, all deliverables represent a single unit of accounting.

All consideration received relating to the four identified deliverables that comprise the single unit of accounting will be recognized over the period of performance. The period of performance will be through the completion of development services for the NHS Collaboration Products which has been estimated to be ten years. The Company will periodically review and, if necessary, revise the estimated development period.

The Company will recognize revenue utilizing a time-based proportional performance model where revenue related to each payment is recognized over the ten-year performance period. As of September 30, 2017, the only consideration that is fixed and determinable is the non-refundable upfront payment of $120,000 and $580 for the reimbursement of development services since the inception of the arrangement. For additional consideration that could be received for research and development services and/or manufacturing services for clinical supply, the Company will recognize a cumulative catch-up for the amount of time that has elapsed and spread the unrecognized portion over the remaining performance period.

Development and regulatory milestones that involve substantial effort on the Company’s part and the achievement of which are not considered probable at the inception of the License Agreement are considered substantive milestones, and will be recognized in their entirety in the period in which the milestone is achieved, assuming all other revenue recognition criteria are met. All commercial milestones will be recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.

During the year ended December 31, 2016, the Company received $10,000 from NHS in connection with the initiation of the Phase 1b study for SER-262 in CDI. The Company recognizes revenue associated with substantive milestones in accordance with FASB ASC Topic 605-28, Revenue Recognition-Milestone Method. The $10,000 was recognized in full as related party collaboration revenue during the year ended December 31, 2016.

During the three months ended September 30, 2017, the Company received $20,000 from NHS in connection with the initiation of the Phase 3 study for SER-109. The Company recognizes revenue associated with substantive milestones in accordance with FASB ASC Topic 605-28, Revenue Recognition-Milestone Method. The $20,000 was recognized in full as related party collaboration revenue during the three months ended September 30 2017.

Royalties will be recorded as revenue in the period they are earned assuming all other revenue recognition criteria are met.

During the three and nine months ended September 30, 2017 and 2016, the Company recognized $23,015, $29,044, $13,015, and $18,730, respectively, of related party revenue (see Note 12 “Related Party Transactions”) associated with the License Agreement. As of September 30, 2017, there was $99,770 of deferred revenue related to the License Agreement, which is classified as current or non-current in the consolidated balance sheets based on the Company’s estimate of revenue that will be recognized within the next twelve months. All costs associated with the License Agreement are recorded in research and development expense in the condensed consolidated statements of operations and comprehensive loss.

The Company did not provide for any income taxes for the nine-month period ended September 30, 2017 or 2016.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its U.S. net deferred tax assets. As required by the provisions of ASC 740, Income Taxes, management has determined that it is more-likely-than-not that the Company will not utilize the benefits of federal and state U.S. net deferred tax assets for financial reporting purposes. Accordingly, the net deferred tax assets are subject to a valuation allowance at September 30, 2017 and December 31, 2016.

As of September 30, 2017 and December 31, 2016, the Company had no accrued interest or tax penalties recorded. The Company files income tax returns in the U.S. and various state jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2012. However, to the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated my still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent it is utilized in a future period. There are no currently ongoing or pending examinations in any jurisdictions.

On November 11, 2015, the Company entered into a non-cancelable property lease with BMR-Sidney Research Campus LLC (“BMR”) for 83,396 square feet of office, laboratory and pilot manufacturing space at 200 Sidney Street, Cambridge, Massachusetts. The lease term commenced in March 2016 and ends in November 2023. The Company has the option to extend the lease twice, each for a five-year period. The Company moved its corporate headquarters to this location in April 2016. BMR has contributed a total of $12,509 toward the cost of tenant improvements. BMR’s contributions toward the cost of tenant improvements is recorded as a lease incentive obligation on the Company’s consolidated balance sheet. The lease incentive obligation is amortized to the Company’s consolidated statement of operations as reductions to rent expense over the lease term. As of September 30, 2017, the Company has recorded a lease incentive obligation of $10,754. During the nine months ended September 30, 2017, we amortized $1,326 of this lease incentive obligation as a reduction to rent expense.

During the three and nine months ended September 30, 2017 and 2016, the Company recognized $1,100, $3,345, $1,406, and $2,587 respectively, of rental expense related to office and laboratory space.

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of September 30, 2017 or December 31, 2016.

The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been incurred and that the Company can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made.

In addition, in accordance with the relevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, the Company will provide disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, the Company will provide disclosure to that effect. The Company expenses legal costs as they are incurred.

On September 28, 2016, a purported stockholder of the Company filed a putative class action lawsuit in the U.S. District Court for the District of Massachusetts against the Company entitled Mariusz Mazurek v. Seres Therapeutics, Inc., et.al. On February 12, 2017, the Company received an amended complaint and on March 30, 2017, the Company filed a motion to dismiss. A hearing on the motion to dismiss was held on August 9, 2017. A decision by the court on the motion to dismiss is expected by early 2018. The lawsuit alleges violations of Sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as amended, by making allegedly false and misleading statements and omissions about the Company’s clinical trials for its product candidate SER-109 in the Company’s public disclosures between June 25, 2015 and July 29, 2016. The lawsuit seeks, among other things, damages in connection with the Company’s allegedly inflated stock price between June 25, 2015 and July 29, 2016 as a result of those allegedly false and misleading statements, as well as interest, attorneys’ fees and costs. The Company can make no assurances as to the time or resources that will need to be devoted to this lawsuit or its final outcome, or the impact, if any, of this lawsuit or any proceedings on its business, financial condition, results of operations and cash flows. While the Company is vigorously defending against all claims asserted, this litigation could result in substantial costs to the Company and a diversion of the Company’s management’s attention and resources, which could harm its business. In addition, the uncertainty of the pending lawsuit or potential filing of additional lawsuits could lead to more volatility and a reduction in the Company’s stock price. Given the early stage of the litigation, at this time the Company is unable to reasonably estimate possible losses or form a judgment that an unfavorable outcome is either probable or remote. It is not currently possible to assess whether or not the outcome of these proceedings may have a material adverse effect on the Company.

In October 2010, the Company entered into a services agreement with Flagship Ventures Management, Inc., an affiliate of one of its stockholders, Flagship Venture Funds (and now known as Flagship Pioneering), to provide general and administrative services to the Company, including the employer portions of employee health and dental benefit plans for Seres Therapeutics employees and consulting services. The Company made payments under the agreement of $17 during the nine months ended September 30, 2016. There were no payments made during the three and nine months ended September 30, 2017 and the three months ended September 30, 2016. There were no amounts due to Flagship Ventures Management, Inc. related to the services agreement as of September 30, 2017 or December 31, 2016.

As described in Note 9, in January 2016 the Company entered into a License Agreement with NHS for the development and commercialization of certain product candidates in development for the treatment and management of CDI and IBD, including UC and Crohn’s disease. NHS is a related party since NHS is an affiliate of Nestlé Health Science, one of the Company’s significant stockholders. During the three and nine months ended September 30, 2017 and 2016, the Company recognized $23,015, $29,044, $13,015, and $18,730 of related party revenue associated with the License Agreement. As of September 30, 2017, there was $99,770 of deferred revenue related to the License Agreement, which is classified as current or non-current in the consolidated balance sheets. The Company has made no payments to NHS during the three and nine months ended September 30, 2017. There is $297 due from NHS as of September 30, 2017 for the reimbursement of development costs, which is classified as other current assets in the Company’s consolidated balance sheet.

In October, 2017 the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator ("CARB-X”), an international public-private partnership focused on advancing new antimicrobial products to address the threat of antibiotic resistance, selected the Company to receive up to $2,461 in research funding for SER-155, with potential for an additional $3,119 upon the completion of milestones. In connection with this funding, the Company entered into a cost reimbursement Sub-Award Agreement (the “Sub-award Agreement”) with the Trustees of Boston University, the administrator of the program. The Company expects to begin incurring reimbursable expenses under the Sub-Award Agreement in November 2017.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the ‘‘Risk Factors’’ section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

We are a microbiome therapeutics platform company developing a novel class of biological drugs, which are designed to treat disease by restoring the function of a dysbiotic microbiome. Our lead product candidate, SER-109, is designed to reduce recurrences of Clostridium difficile, or C. difficile, infection, or CDI, a debilitating infection of the colon, in patients who have received antibiotic therapy for recurrent CDI by treating the dysbiosis of the colonic microbiome and, if approved by the U.S. Food and Drug Administration, or FDA, could be a first-in-field oral microbiome drug. Our second product candidate, SER-287, is being developed to treat inflammatory bowel disease, or IBD, including ulcerative colitis, or UC. In addition, using our microbiome therapeutics platform, we are developing product candidates to treat diseases where the microbiome is implicated, including SER-262, a synthetic product candidate, to reduce recurrence of CDI in patients who have received antibiotic therapy for an initial or primary CDI, SER-301, a synthetic IBD candidate, and SER-155, a synthetic product candidate to prevent infections and improve gastrointestinal barrier function (including the consequences of graft versus host disease) in patients following allogeneic hematopoietic stem cell transplants or solid organ transplants. We are also using our microbiome therapeutics platform to conduct research on metabolic diseases, such as non-alcoholic steatohepatitis (NASH); inflammatory diseases, such as Crohn’s disease; rare liver disorders such as primary sclerosing cholangitis (PSC); and immuno-oncology treatments.

Since our inception in October 2010, we have devoted substantially all of our resources to developing SER-109, SER-287 and SER-262, researching our pre-clinical candidates SER-155 and SER-301, building our intellectual property portfolio, developing our supply chain, business planning, raising capital and providing general and administrative support for these operations.

All of our product candidates other than SER-109, SER-262 and SER-287 are still in pre-clinical or research development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Since our inception, we have incurred significant operating losses. Our net loss was $60.4 million for the nine months ended September 30, 2017. As of September 30, 2017, we had an accumulated deficit of $234.6 million.

On July 29, 2016, we announced the interim eight-week results from our SER-109 Phase 2 clinical study, a randomized, double-blind, placebo controlled Phase 2 clinical study conducted in 89 subjects to evaluate the safety, tolerability and efficacy of SER-109 in adults with recurrent CDI. In that study, 44% of subjects (26 of 59) who received SER-109 experienced a recurrence at the eight week endpoint compared to 53% of subjects (16 of 30) who received placebo, a result that was not statically significant. SER-109 was generally safe and well-tolerated in our Phase 1b clinical study of SER-109 and in the Phase 2 clinical study. The most common adverse events for SER-109 and placebo, respectively, were diarrhea (25% vs. 14%), abdominal pain (22% vs. 14%), flatulence (12% vs. 3%), and nausea (10% vs. 10%). No drug-related serious adverse events were observed.

In order to understand the difference in outcome between Phase 1b/2 and Phase 2 clinical studies, we conducted an analysis of the available clinical, microbiome and chemistry, manufacturing and control data. This root-cause investigation looked at the clinical trial population, study conduct, and diagnostic testing used for study inclusion and endpoint analysis, assessed clinical specimens for genomic and metabolomic biomarkers that might give insight into SER-109 efficacy and potency, reviewed manufacturing procedures and processes, performed retrospective analysis using high-resolution whole metagenomics sequencing of Phase 1b/2 clinical study stool samples, and reviewed analytical methods that may have differed between the Phase 1b/2 and Phase 2 clinical studies. We identified specific factors that we believe contributed to the Phase 2 clinical study results, including issues related to both the accurate diagnosis of C. difficile recurrent infection, and potential suboptimal dosing of certain subjects in the trial. In June 2017 we initiated a Phase 3 clinical study of SER-109 in approximately 320 patients with multiply recurrent C. difficile infection. Study participants will be randomized 1:1 between SER-109 and placebo. Diagnosis of C. difficile infection for both study entry and for endpoint analysis will be confirmed by C. difficile cytotoxin assay, compared to the Phase 2 clinical study, where most patients were diagnosed by PCR. Patients in the SER-109 arm will receive a total SER-109 dose, administered over three days, approximately 10-fold higher than the dose used in the Phase 2 clinical study. The new study will evaluate patients for 24 weeks and the primary endpoint will compare the C. difficile recurrence rate in subjects who receive SER-109 verses placebo at up to eight weeks after dosing.

On October 2, 2017, we announced positive topline results from our Phase 1b clinical trial of SER-287 in patients with UC. The SER-287 Phase 1b study, a randomized, double-blinded, placebo-controlled, multiple-dose, induction study enrolled patients with active mild-to-moderate UC, with Mayo scores of 4 to 10. The study enrolled 58 patients at 20 sites across the United States. Study subjects exhibited pre-study disease activity despite use of current therapies in a majority of subjects, which included 5-amino-salacylic acid, low dose corticosteroids, or immunomodulatory therapy.

Diverse analyses of microbiome data of patients in this trial, a primary endpoint, are expected to be completed in the coming months. Three SER-287 drug product lots, based on human donor material obtained from three separate individuals, were used in the Phase 1b study. Microbiome analyses will also be conducted to determine whether there are any observable differences in the drivers of response across the drug product lots.

An evaluation of SER-287 safety and tolerability was a primary study endpoint. Study results demonstrated no imbalance in adverse events in SER-287-treated patients as compared to patients treated with placebo. There were no drug related serious adverse events.

Our expenses may increase substantially in connection with our ongoing and planned activities, particularly as we:

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to continue to incur additional costs associated with operating as a public company.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

In January 2016, we entered into a Collaboration and License Agreement, or the License Agreement, with Nestec Ltd., or NHS, for the development and commercialization of certain of our product candidates in development for the treatment and management of CDI and IBD, including UC and Crohn’s disease. The License Agreement supports the development of our portfolio of products for CDI and IBD in markets outside of the United States and Canada, or the Licensed Territory, and is expected to provide financial support for our ongoing research and development. We have retained full commercial rights to our entire portfolio of product candidates with respect to the United States and Canada, where we plan to build our own commercial organization.

Under the License Agreement, we granted to NHS an exclusive, royalty-bearing license to develop and commercialize, in the Licensed Territory, certain products based on our microbiome technology that are being developed for the treatment of CDI and IBD, including SER-109, SER-262, SER-287 and SER-301, or, collectively, the NHS Collaboration Products. We also granted to NHS a non-exclusive license to export, develop and make NHS Collaboration Products in the licensed fields worldwide solely for commercialization in the licensed fields and in the Licensed Territory.

In exchange for the license, NHS made an upfront cash payment of $120 million to us in February 2016. NHS has also agreed to pay us tiered royalties, at percentages ranging from the high single digits to high teens, of net sales of NHS Collaboration Products in the Licensed Territory. Additionally, NHS has agreed to pay us up to $660 million for the achievement of certain development and regulatory milestones and up to an aggregate of $1.125 billion for the achievement of certain commercial milestones related to the sales of NHS Collaboration Products. We received a $10.0 million milestone payment in 2016 associated with the planned initiation of a Phase 1b study for SER-262 in CDI. In June 2017, we initiated a Phase 3 clinical study of SER-109 (ECOSPOR III) in patients with multiply recurrent CDI. In July 2017, we recorded revenue of $20.0 million based on the achievement of this milestone under the License Agreement. The full potential value of the upfront payment and milestone payments payable by NHS is over $1.9 billion, assuming all products receive regulatory approval and are successfully commercialized. NHS is also obligated to pay some of the costs related to our clinical trials. See “—Liquidity and Capital Resources.”

We expect that our existing cash, cash equivalents and investments, will enable us to fund our operating expenses and capital expenditure requirements through 2018. See “—Liquidity and Capital Resources.”

To date we have not generated any revenues from the sale of products. Our revenues from collaborations have been derived from the License Agreement.

Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs.

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, which include:

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. All costs associated with the License Agreement are recorded in research and development expense in the consolidated statements of operations and comprehensive loss.

Our primary focus of research and development since inception has been on our microbiome therapeutics platform and the subsequent development of SER-109, SER-262, SER-287, SER-301 and SER-155. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, CROs in connection with our pre-clinical studies and clinical trials, lab supplies and consumables, and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under development and, as such, are classified as costs of our microbiome therapeutics platform research, along with external costs directly related to our microbiome therapeutics platform.

The table below summarizes our research and development expenses incurred on our platform and by product development program for those that have begun clinical development.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)
Microbiome therapeutics platform	$	14,504	$	14,435	$	46,150	$	35,458
SER-109		5,105		7,024		11,806		19,682
SER-262		1,226		1,663		3,727		3,780
SER-287

Delaware		27-4326290
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Sidney Street - 4^th Floor Cambridge, MA		02139
(Address of principal executive offices)		(Zip Code)

		Page

PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)		4
Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016		4
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016		5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 4. Controls and Procedures		28

PART II – OTHER INFORMATION
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		60
Item 3. Defaults Upon Senior Securities		60
Item 4. Mine Safety Disclosures		60
Item 5. Other Information		60
Item 6. Exhibits		61

SIGNATURES		62

	Three and Nine Months Ended September 30,
	2017		2016
Stock options to purchase common stock		6,133,596		5,165,729
Unvested restricted stock units		401,900		—
		6,535,496		5,165,729

	September 30, 2017		December 31, 2016
Development and manufacturing costs	$	2,987	$	3,350
Payroll and payroll-related costs		3,302		3,698
Professional fees		490		448
Facility and other		2,815		3,316
	$	9,594	$	10,812

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested restricted stock units as of December 31, 2016		115,500		$	9.78
Granted		332,500		$	10.08
Forfeited		(46,100	)	$	9.93
Vested		—		$	—
Unvested restricted stock units as of September 30, 2017		401,900		$	10.01