mcrb-10q_20190930.htm

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

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, 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. ☒

As of October 29, 2019, the registrant had 69,993,952 shares of common stock, $0.001 par value per share, outstanding.

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, 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,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	49,296		$	85,820
Investments		34,492			—
Prepaid expenses and other current assets		4,073			6,845
Accounts receivable		1,717			—
Total current assets		89,578			92,665
Property and equipment, net		21,160			26,294
Operating lease assets		11,899			—
Restricted investments		1,400			1,400
Restricted cash		114			113
Total assets	$	124,151		$	120,472
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	4,455		$	6,415
Accrued expenses and other current liabilities		10,522			15,207
Operating lease liabilities		4,335			—
Deferred revenue - related party		21,135			20,419
Deferred revenue		1,790			—
Total current liabilities		42,237			42,041
Operating lease liabilities, net of current portion		16,844			—
Lease incentive obligation, net of current portion		—			6,776
Deferred rent		—			2,216
Deferred revenue, net of current portion - related party		94,215			116,840
Deferred revenue, net of current portion		2,410			—
Other long-term liabilities		664			644
Total liabilities		156,370			168,517
Commitments and contingencies (Note 12)
Stockholders’ deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2019 and December 31, 2018; no shares issued and outstanding at September 30, 2019 and December 31, 2018		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2019 and December 31, 2018; 69,993,952 and 40,936,735 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		70			41
Additional paid-in capital		408,575			341,284
Accumulated other comprehensive income		7			—
Accumulated deficit		(440,871	)		(389,370	)
Total stockholders’ deficit		(32,219	)		(48,045	)
Total liabilities and stockholders’ deficit	$	124,151		$	120,472

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue:
Collaboration revenue - related party	$	4,840		$	8,684		$	21,909		$	16,721
Grant revenue		85			371			791			917
Collaboration revenue		2,106			—			4,183			—
Total revenue		7,031			9,055			26,883			17,638
Operating expenses:
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		—			—			1,492			—
Total operating expenses		24,214			31,266			79,567			96,251
Loss from operations		(17,183	)		(22,211	)		(52,684	)		(78,613	)
Other income (expense):
Interest income (expense), net		335			262			744			958
Other income		439			—			439			—
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
Net loss		(16,409	)		(21,949	)		(51,501	)		(77,655	)
Other comprehensive income:
Unrealized gain on investments, net of tax of $0	$	7		$	20		$	7		$	137
Total other comprehensive income		7			20			7			137
Comprehensive loss	$	(16,402	)	$	(21,929	)	$	(51,494	)	$	(77,518	)

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

	Common Stock					Additional						Accumulated Other			Total Stockholders’
	Shares			Par Value		Paid-in Capital			Accumulated Deficit			Comprehensive Loss			Equity (Deficit)
Balance at December 31, 2017		40,571,015		$	40	$	324,376		$	(263,571	)	$	(146	)	$	60,699
Issuance of common stock upon exercise of stock options		48,053			—		32			—			—			32
Issuance of common stock upon vesting of RSUs, net of tax withholdings		51,500			—		—			—			—			—
Repurchase of common stock for employee tax withholdings		(17,900	)		—		(197	)		—			—			(197	)
Stock-based compensation expense		—			—		4,236			—			—			4,236
Unrealized gain on investments		—			—		—			—			40			40
Adoption of new revenue standard (ASC 606)		—			—		—			(26,857	)		—			(26,857	)
Net loss		—			—		—			(27,919	)		—			(27,919	)
Balance at March 31, 2018		40,652,668		$	40	$	328,447		$	(318,347	)	$	(106	)	$	10,034
Issuance of common stock upon exercise of stock options		92,013			—		64			—			—			64
Issuance of common stock upon vesting of RSUs, net of tax withholdings		10,000			—		27			—			—			27
Stock-based compensation expense		—			—		4,334			—			—			4,334
Unrealized gain on investments		—			—		—			—			77			77
Net loss		—			—		—			(27,787	)		—			(27,787	)
Balance at June 30, 2018		40,754,681		$	40	$	332,872		$	(346,134	)	$	(29	)	$	(13,251	)
Issuance of common stock upon exercise of stock options		56,442			—		40			—			—			40
Issuance of common stock under ESPP plan		33,332			—		257			—			—			257
Stock-based compensation expense		—			—		4,317			—			—			4,317
Unrealized gain on investments		—			—		—			—			21			21
Net loss		—			—		—			(21,949	)		—			(21,949	)
Balance at September 30, 2018		40,844,455		$	40	$	337,486		$	(368,083	)	$	(8	)	$	(30,565	)

	Common Stock				Additional					Accumulated Other		Total
	Shares		Par Value		Paid-in Capital		Accumulated Deficit			Comprehensive Income		Stockholders’ Deficit
Balance at December 31, 2018		40,936,735	$	41	$	341,284	$	(389,370	)	$	—	$	(48,045	)
Issuance of common stock upon exercise of stock options		38,125		—		120		—			—		120
Issuance of common stock upon vesting of RSUs, net of tax withholdings		73,500		—		153		—			—		153
Issuance of common stock under ESPP plan		46,472		—		207		—			—		207
Stock-based compensation expense		—		—		2,065		—			—		2,065
Net loss		—		—		—		(24,333	)		—		(24,333	)
Balance at March 31, 2019		41,094,832	$	41	$	343,829	$	(413,703	)	$	—	$	(69,833	)
Issuance of common stock from public offering, net of commissions, underwriting discounts and offering costs		28,818,578		29		60,498		—			—		60,527
Stock-based compensation expense		—		—		2,097		—			—		2,097
Net loss		—		—		—		(10,759	)		—		(10,759	)
Balance at June 30, 2019		69,913,410	$	70	$	406,424	$	(424,462	)	$	—	$	(17,968	)
Issuance of common stock upon exercise of stock options		52,000		—		25		—			—		25
Issuance of common stock under ESPP plan		28,542		—		89		—			—		89
Stock-based compensation expense		—		—		2,037		—			—		2,037
Unrealized gain on investments		—		—		—		—			7		7
Net loss		—		—		—		(16,409	)		—		(16,409	)
Balance at September 30, 2019		69,993,952	$	70	$	408,575	$	(440,871	)	$	7	$	(32,219	)

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

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(51,501	)	$	(77,655	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		6,199			12,887
Depreciation and amortization expense		5,803			5,869
Non-cash operating lease cost		1,683			—
Accretion of discount on investments		(87	)		(199	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		2,772			(1,461	)
Accounts receivable		(1,717	)		—
Deferred revenue		(17,709	)		(16,328	)
Accounts payable		(1,857	)		106
Operating lease liabilities		(3,164	)		—
Accrued expenses and other current and long-term liabilities		(2,895	)		1,261
Net cash (used in) operating activities		(62,473	)		(75,520	)
Cash flows from investing activities:
Purchases of property and equipment		(772	)		(2,133	)
Purchases of investments		(34,407	)		(21,832	)
Sales and maturities of investments		8			118,887
Net cash (used in) provided by investing activities		(35,171	)		94,922
Cash flows from financing activities:
Proceeds from public offering of common stock, net of commissions, underwriting discounts and offering costs		60,527			—
Proceeds from exercise of stock options		145			136
Proceeds from issuance of common stock and restricted common stock		153			26
Payments of employee tax obligations related to vesting of restricted stock units		—			(196	)
Issuance of common stock under ESPP plan		296			257
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 beginning of period		85,933			37,601
Cash, cash equivalents and restricted cash at end of period	$	49,410		$	57,226
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued expenses	$	54		$	242
Reduction of right-of-use assets and lease liability from operating lease modifications or reassessments		154			—

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 treat disease by restoring the function of a dysbiotic microbiome. The Company is developing SER-287 to treat ulcerative colitis (“UC”), a form of inflammatory bowel disease (“IBD”). SER-109 is designed to reduce recurrences of Clostridium difficile, or C. difficile infection (“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, which, if approved by the U.S. Food and Drug Administration (“FDA”), could be a first-in-field oral microbiome drug. In addition, using its microbiome therapeutics platform, the Company is developing product candidates to treat diseases where the microbiome is implicated, including SER-301, a rationally designed, fermented IBD candidate, and SER-401, a microbiome therapeutic candidate for use with checkpoint inhibitors in patients with metastatic melanoma. Supporting the Company’s research and development efforts are its deep capabilities related to microbiome therapeutic drug discovery, manufacturing, quality, and clinical development. The Company believes that these capabilities provide it with important competitive advantages related to the advancement of this novel treatment modality.

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, or maintained, that any product candidates 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.

In February 2019, the Company implemented corporate changes to focus its resources on advancing its clinical-stage therapeutic candidates. As a result, the Company is concentrating on completing the SER-287 Phase 2b study in mild-to-moderate UC, obtaining results from the ongoing SER-109 Phase 3 study for recurrent CDI, advancing the SER-401 Phase 1b study, in collaboration with the Parker Institute for Cancer Immunotherapy and MD Anderson Cancer Center, to evaluate augmenting checkpoint inhibitor response in patients with metastatic melanoma, and advancing SER-301 into clinical development. In connection with the prioritization of these therapeutic candidates, the Company made changes to its management team and reduced headcount by approximately 30 percent.

On June 18, 2019, the Company completed an underwritten public offering, in which the Company sold 26,666,667 shares of its common stock at a price to the public of $2.25 per share. The aggregate net proceeds received by the Company from the offering were approximately $55,976, after deducting underwriting discounts and commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 2,666,666 shares of common stock at the public offering price, less underwriting discounts and commissions. On June 21, 2019, the Company sold an additional 2,151,911 shares of its common stock at a price to the public of $2.25 per share. The aggregate net proceeds received by the Company were approximately $4,551, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The Company has experienced negative cash flows and had an accumulated deficit of $440,871 and $389,370 as of September 30, 2019 and December 31, 2018, respectively. For the nine months ended September 30, 2019, the Company incurred a loss of $51,501 and used $62,473 of cash in operations. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. The Company expects that its cash, cash equivalents and investments at September 30, 2019 of $83,788 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

The Company is eligible to receive contingent milestone payments under its license and collaboration agreement with Nestec Ltd. (“NHS”), an affiliate of Nestlé Health Science US Holdings, Inc. (“Nestlé Health Science”), a significant stockholder of the Company, if certain development milestones are achieved. However, these milestones are uncertain and there is no assurance that the Company will receive any of them. Until such time, if ever, as the Company can generate substantial product revenue, the Company will finance its cash needs through a combination of public or private equity offerings, debt financings, governmental funding, collaborations, strategic partnerships, or marketing, distribution or licensing arrangements with third parties. The Company may not be able to obtain funding on acceptable terms, or at all. If the Company is unable to raise additional funds as and when needed, it would have a negative impact on the Company’s financial condition, which may require the Company to delay, reduce or eliminate certain research and development activities and reduce or eliminate discretionary operating expenses, which could constrain the Company’s ability to pursue its business strategies.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 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 unaudited condensed 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, 2018 included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on March 6, 2019 (the “Annual Report”).

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited consolidated financial statements. The condensed consolidated balance sheet at December 31, 2018 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, results of operations, and cash flows for the periods presented. Such adjustments are of a normal and recurring nature. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2019.

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, 2018, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2019 except for the adoption of the new lease accounting standard discussed in Note 9, Leases.

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 revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition and the accrual of research and development expenses. 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 unvested restricted stock.

The restricted stock units granted by the Company entitle the holder of such awards to ordinary cash dividends paid to substantially all holders of the Company’s common stock, as if such shares were outstanding common shares at the time of the dividend. The dividends are paid in cash or shares of common stock when the applicable restricted stock unit vests. However, the unvested restricted stock units 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:

The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses an incremental borrowing rate that the Company would expect to incur for a fully collateralized loan over a similar term under similar economic conditions to determine the present value of the lease payments. The lease payments used to determine the Company’s operating lease assets may include lease incentives and stated rent increases and are recognized in the Company’s operating lease assets in the Company’s condensed consolidated balance sheets. Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Variable lease payments are recognized as the associated obligation is incurred.

Restructuring costs are comprised of severance costs related to workforce reductions. The Company recognizes restructuring charges when the liability is incurred. Employee termination benefits are accrued at the date management has committed to a plan of termination and employees have been notified of their termination dates and expected severance payments.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), (“Topic 842”), which establishes principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The most notable change is lessees recognizing an asset and liability on their balance sheet for operating leases. In 2018, the FASB issued ASU 2018-01, and ASU 2018-11, which collectively adds two practical expedients, provides a second modified retrospective transition method which does not require retrospective adjustment of prior periods, and provides certain narrow scope improvements to the new lease guidance. ASU 2016-02 and the amending ASUs are effective for the Company for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted.

The Company adopted the new guidance as of January 1, 2019 using the modified retrospective transition approach with no restatement of prior periods or cumulative adjustment to accumulated deficit. Upon adoption, the Company elected the package of transition practical expedients, which allowed the Company to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also made an accounting policy election not to recognize leases with an initial term of 12 months or less within its condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in its condensed consolidated statements of operations and comprehensive loss over the lease term. Upon adoption of the new leasing standards, the Company recognized an operating lease asset of approximately $13,737 and a corresponding operating lease liability of approximately $24,497, which are included in the Company’s condensed consolidated balance sheet. The adoption of the new leasing standards did not have any impact on the Company’s condensed consolidated statements of operations and comprehensive loss. The impact to the Condensed Consolidated Balance Sheets for the opening balances is as follows (in thousands):

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718)” (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. This ASU is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company adopted the ASU effective January 1, 2019, the impact of adoption of this standard was immaterial to the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of its adoption of ASU 2018-13 on its condensed consolidated financial statements.

In November 2018 the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative arrangements as follows:

This standard will be effective on January 1, 2020; however, early adoption is permitted. A retrospective transition approach is required for either all contracts or only for contracts that are not completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial position and results of operations.

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 money market funds represent open-ended mutual funds with published daily net asset values at which investors can freely subscribe to or redeem from the funds and is classified as Level 1 in the fair value hierarchy. The carrying values of the Company’s cash, accounts receivable, other current assets, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities. During the nine months ended September 30, 2019, there were no transfers between Level 1 and Level 2 financial assets.

The following table presents information about the Company’s assets as of September 30, 2019 and December 31, 2018 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 as of September 30, 2019 or December 31, 2018):

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)

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

		Page

PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)		4
Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018		4
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018		5
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2019 and 2018		6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018		8
Notes to Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		37
Item 4. Controls and Procedures		37

PART II – OTHER INFORMATION		38
Item 1. Legal Proceedings		38
Item 1A. Risk Factors		38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		70
Item 3. Defaults Upon Senior Securities		70
Item 4. Mine Safety Disclosures		70
Item 5. Other Information		70
Item 6. Exhibits		71

SIGNATURES		72

	Three and Nine Months Ended September 30,
	2019		2018
Stock options to purchase common stock		8,258,031		7,444,040
Unvested restricted stock units		145,900		289,908
Shares issuable under ESPP		13,171		44
Total common stock equivalents		8,417,102		7,733,992

	Fair Value Measurements as of September 30, 2019 Using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	24,134	$	—	$	—	$	24,134
Commercial paper		—	$	5,495		—		5,495
Investments:
Commercial paper	$	—	$	17,920	$	—	$	17,920
Corporate bonds		—		15,029

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

	December 31, 2018		Impact of adoption of ASC 842			January 1, 2019
Operating lease assets	$	—	$	13,737		$	13,737
Accrued expenses and other current liabilities		15,207		(1,768	)		13,439
Operating lease liabilities		—		4,285			4,285
Lease incentive obligation, net of current portion		6,776		(6,776	)		—
Deferred rent		2,216		(2,216	)		—
Operating lease liabilities, net of current portion		—		20,212			20,212