Seres Therapeutics - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 delivered net income from continuing operations of $8.20M, driven by a $27.22M gain on the VOWST sale installment; operating loss was $22.48M as the company remains pre-revenue aside from $0.35M in grant revenue.
• EPS (diluted, continuing ops) was $0.94, a strong beat versus Wall Street consensus of $0.425; revenue of $0.35M fell well below the $5.88M consensus as Seres has minimal revenue while transitioning; consensus values retrieved from S&P Global*.
• Constructive FDA feedback aligned key Phase 2 SER-155 study parameters (size ~248, dosing, primary endpoint, interim analysis in ~12 months); commencement is funding-dependent, with cost actions and a ~25% headcount reduction extending cash runway to Q2 2026.
• Strategic update highlights: CARB-X awarded up to $3.6M to support a liquid formulation; an investigator-sponsored SER-155 study in immune checkpoint inhibitor-related enterocolitis (irEC) continues enrolling with initial results expected early 2026.

What Went Well and What Went Wrong

What Went Well

• “We obtained further constructive feedback from the FDA… alignment on multiple key study parameters… and the interim analysis plan.” Management expects meaningful Phase 2 interim results within 12 months of study initiation.
• The CARB-X grant (up to $3.6M) supports a SER-155 liquid formulation to broaden patient access (ICU, pediatric, elderly), underscoring global recognition of antimicrobial resistance priorities.
• Q3 profitability (continuing ops) driven by VOWST installment payment; R&D and G&A declined YoY due to program completion and lower personnel/platform costs, demonstrating discipline on operating expenses.

What Went Wrong

• Revenue remains minimal ($0.35M grant), with the model reliant on financing and partnership to launch Phase 2 SER-155; commencement remains explicitly funding-dependent.
• The quarter’s positive EPS was non-operational, largely stemming from VOWST sale accounting; core operations posted a $22.48M loss, highlighting dependence on non-recurring gains.
• Persistent capital needs and a challenging biotech environment; management did not guide to specific capital amounts and declined to comment on market rumors, which may prolong uncertainty for Phase 2 start.

Transcript

Operator (participant)

Good day, everyone, and thank you for standing by. My name is RG, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2025 Seres Therapeutics results and business updates. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press * followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press * again. Thank you. I would now like to turn the call over to Dr. Carlo Tanzi of Investor Relations. Please go ahead.

Carlo Tanzi (Head of Investor Relations)

Thank you and good morning. Today, before market open, we issued a press release with our third-quarter 2025 financial results and business updates available on the Investors in News section of our website. We have also posted an updated corporate presentation. Before we begin, I would like to remind everyone that we will be making forward-looking statements, including statements around the results of our current or planned clinical trials, studies, and data readouts, our product candidates and their potential benefits, development plans and potential commercial opportunities, interactions with and feedback from the FDA, our ability to secure an R&D or other partnership and/or generate or obtain additional capital, financing, or other resources, our planned strategic focus and operating plans, cost reduction actions and anticipated benefits and cash runway, the timing of any of the foregoing, and other statements which are not historical facts.

Actual results may differ materially due to various risks and uncertainties and other important factors described under risk factors in our recent SEC filings. We undertake no obligation to update these statements except as required by law. On today's call, with prepared remarks, are Marella Thorell, our Co-Chief Executive Officer and Chief Financial Officer, and Dr. Matthew Henn, our Chief Scientific Officer. Additional members of the management team, including Tom DeRosier, Co-CEO and Chief Legal Officer, Terri Young, Chief Commercial and Strategy Officer, and Dr. Dennis Walling, our SVP of Clinical Development, will be available during the Q&A portion of the call. I'll turn the call over to Marella.

Marella Thorell (Co-CEO, and CFO)

Thank you, Carlo, and good morning, everyone. We made good progress during the quarter. Our immediate priority remains advancing SER-155, our lead investigational oral live biotherapeutic for the prevention of bloodstream infections, or BSIs, in adults undergoing allo-HSCT, into a phase two study. We believe that results in this study, if positive, could represent a very meaningful value creation event for the company. SER-155 represents a first-in-class, mechanistically differentiated approach to address infections, including bloodstream and antimicrobial-resistant infections, which are among the causes of mortality in medically compromised patients. In the phase one B study, treatment with SER-155 led to an impressive 77% relative risk reduction in bacterial bloodstream infections, along with decreased antibiotic exposure and febrile neutropenia.

The therapy is designed to decolonize gastrointestinal pathogens, improve epithelial barrier integrity, and restore immune balance, addressing root causes to prevent BSIs and therefore reduce antibiotic use, antimicrobial resistance, and often severe or fatal outcomes. Based on our analysis of the commercial opportunity, we believe that SER-155 could transform how allo-HSCT patients are managed and result in meaningfully improved patient outcomes. In September, we obtained further constructive feedback from the FDA on the SER-155 allo-HSCT program, which has received Breakthrough Therapy Designation. Phase two protocol. Based on the feedback received, we are pleased to have alignment on multiple key study parameters, including study size, dosing regimen, primary efficacy endpoint, and the interim analysis plan. We do not believe there are any gating items to commencing the study from a protocol standpoint and are incorporating FDA feedback into the protocol.

Notably, given the planned study design and our experience in this therapeutic area, we expect to be able to efficiently generate phase two data in allo-HSCT patients, and we estimate that we will obtain meaningful placebo-controlled clinical results from a planned interim analysis within 12 months of study initiation, with commencement being funding-dependent. Beyond the initial allo-HSCT indication, we see significant expansion potential across other medically vulnerable populations, including autologous HSCT patients, cancer patients with neutropenia, CAR-T therapy recipients, and other medically compromised patients, such as those in the ICU, who face similar infection risks and unmet needs. Collectively, these represent a multi-billion dollar commercial opportunity in patients facing high unmet need and where there has been limited therapeutic innovation.

As Matt will discuss, we also have an ongoing investigator-sponsored study at Memorial Sloan Kettering Cancer Center evaluating SER-155 in an indication beyond infection that is of high interest, and we look forward to obtaining initial clinical results in early 2026 that may highlight the potential of SER-155 in immune-related negative clinical outcomes. While we advance SER-155 phase two study startup activities, we continue our efforts to seek capital in order to initiate the study and support our broader portfolio of product candidates with applications in inflammatory diseases. Advancing SER-155 is our top priority, and we continue to strive to obtain the resources needed to move the program forward. During the quarter, we also implemented targeted cost reduction measures, including a workforce reduction of approximately 25%, to extend our cash runway and focus resources on core development priorities.

We believe that the cost reduction actions, the resultant operating runway extension, will provide us with additional opportunities to advance our strategic priorities. With that, I'll turn it over to Matt.

Matthew Henn (Chief Scientific Officer)

Thank you, Marella. Seres continues to execute its R&D strategy with efficiency and discipline, with a focus on expanding the reach of SER-155 and building on key clinical insights to advance our broader biotherapeutic pipeline. Our recent successes in clinical translation and leveraging external collaborations, as well as securing non-dilutive funding, allow us to evaluate important new opportunities for SER-155 in additional patient populations. We are thrilled to have recently announced that Seres has received a non-dilutive award from the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, of up to $3.6 million. This award represents the second CARB-X grant to Seres and will support the development of an oral liquid formulation of SER-155, which is intended to expand future access to this biotherapeutic in medically vulnerable patients who cannot easily swallow capsules, including patients in intensive care units and some pediatric and elderly patients.

Furthermore, we believe that this CARB-X award underscores the global recognition of the potential of our biotherapeutic approach to address antimicrobial resistance, a major global public health issue, and a top strategic priority for CARB-X. Additionally, at the recent ID Week conference, Seres presented new post-hoc analyses from our SER-155 phase one B study in allo-HSCT, which provided deeper insights into bloodstream infection patterns, antimicrobial resistance, and clinical outcomes across treatment groups. These data further support SER-155's differentiated mechanism and its potential to reduce serious infections in patients with limited therapeutic options. Also notably, our collaboration with Memorial Sloan Kettering Cancer Center on an investigator-sponsored trial initiated by a clinician evaluating SER-155 in patients with immune checkpoint inhibitor-related enterocolitis, or IREC, continues to progress, and the study is currently enrolling subjects. IREC is among the most.

Frequent and severe immune-related adverse events in recipients of immune checkpoint inhibitor therapy can be observed in up to 50% of patients, with rates varying based on cancer drug and treatment regimen. Immune checkpoint inhibitors can cause a wide range of immune-related adverse events with links to T cell biology and epithelial barrier inflammation. Biological functions shown in our preclinical studies and clinical pharmacology data to be positively impacted by SER-155. IREC can be a serious condition characterized by diarrhea, abdominal pain, cramping, dehydration, and blood in the stool, and may progress to more serious complications such as bowel perforation, toxic megacolon, or death. Management of IREC includes corticosteroids and other immune suppressive drugs and can require withholding immune checkpoint treatment. We expect data will be available from this study early next year.

We also continue to explore potential R&D partnerships to advance the development of our investigational live biotherapeutics in inflammatory and immune diseases, including ulcerative colitis and Crohn's disease. These represent large patient populations with a continued need for new mechanisms of action, in particular, therapies that can target epithelial barrier-driven inflammation and that are not immunosuppressive. Clinical and preclinical data generated through support from the Crohn's and Colitis Foundation support the potential use of our biotherapeutics to address these unmet medical needs and provide a new approach to treat these conditions, either as a monotherapy or combination therapy. We continue to advance our novel biotherapeutics using a highly focused, data-driven approach and look forward to continuing collaboration with our clinical and academic partners to bring important new therapies to patients in need.

Marella Thorell (Co-CEO, and CFO)

Thank you, Matt. I'll now turn to the third quarter financial results. As a reminder, Seres has classified all historical operating results for the VAST business within discontinued operations in the consolidated statement of operations for the comparative periods presented, and there was no ongoing activity in this quarter related to the discontinued operations. Seres reported net income from continuing operations of $8.2 million in Q3 2025, as compared to a net loss from continuing operations of $51 million in the third quarter of 2024. The results this quarter are comprised of a $22.5 million loss from operations, offset by a $27.2 million gain on the sale of VAST, resulting primarily from the $25 million installment payment received, as expected, from Nestlé during the third quarter.

R&D expenses for this quarter were $12.6 million compared to $16.5 million in the third quarter of 2024, reflecting lower personnel and related costs, a decrease in platform investments, and a reduction in clinical expenses resulting from the completion of the SER-155 phase one B study. G&A expenses were $9.5 million in the quarter compared to $12.7 million in Q3 2024, driven primarily by lower personnel and related expenses, including IT-related expenses. As of September 30, 2025, Seres Therapeutics had $47.6 million in cash and cash equivalents. Based on the company's current cash position, remaining VAST transaction-related obligations, and current operating plans, we expect to fund operations through the second quarter of 2026. To summarize, we are disciplined in managing our expenses and continue to work towards securing additional capital to support development activities.

In early 2026, we expect to obtain additional SER-155 clinical results, which could highlight therapeutic opportunities in a new patient population. We have also made progress advancing SER-155 preparation activities to conduct a robust phase two study, commencement of which is funding-dependent. Based on the design of the phase two study and the scope of the opportunity, we believe that positive study results, if achieved, could lead to tremendous value creation. Operator, you may now open the call for questions. Thank you.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jan Neumann of Canaccord. Please go ahead.

John Newman (Managing Director and Senior Equity Research Analyst)

Hi, there. Good morning. Thanks for taking my question. You know, we have some really interesting commentary on this IST at Memorial Sloan Kettering Cancer Center for immune checkpoint inhibitor-related enterocolitis. I wonder if you could just talk to us a little bit more about. Anything you can tell us regarding the study design. Also how you view the commercial opportunity there.

Marella Thorell (Co-CEO, and CFO)

Sure. John, thank you for the question. We're very excited about the study as well. Memorial Sloan Kettering Cancer Center initiated this study, and we're pleased to be looking at one of what could be potentially many different applications for SER-155. As you know, there's a significant unmet need in this patient population, and so we're eager for the results as well. To elaborate a little bit more on the design of the study, I'd like to turn it over to Dennis, and he can share a little bit about the significant impact to patients who are on ICI of the IREC side effect. Dennis?

Dennis Walling (SVP of Clinical Development)

Yes. Thank you, Marella. IREC is one of the most frequent and severe immune-related adverse events that patients experience in immune checkpoint inhibitor therapy. Up to 50% of patients, with rates varying depending on the cancer treatment and regimen used, can experience IREC. IREC can be a very serious condition, as Matt previously described, characterized by symptoms including diarrhea and abdominal pain, cramping, dehydration, blood in the stool, and can progress to more serious complications such as bowel perforation, toxic megacolon, or even death. The patients who experience IREC are treated with corticosteroids and other immunosuppressive drugs and also have to withhold their immune checkpoint inhibitor therapy. The impact of this condition is significant and affects a significant number of patients undergoing this type of treatment. This is the importance of why the study was originally designed and set up by the collaborator at Memorial Sloan Kettering Cancer Center.

The study is a small, phase I open-label study. The readout from this study is expected to occur in early 2026 and will be comprised primarily of safety data, drug pharmacology data, and diarrhea symptom response data. Following these patients through approximately six weeks on the study. For those who have received the SER-155 for IREC, our hope is that we could see an impact on the diarrhea symptoms, and certainly patients who would have improvement in their diarrhea symptoms without needing additional immunosuppressive therapy medications would be a very meaningful finding. That type of a clinical outcome paired with the safety data and the drug pharmacology mechanistic data would be extraordinarily useful for us to help us plan and inform for any future development clinical development opportunities in this new indication.

Terri Young (Chief Commercial, and Strategy Officer)

Great.

John Newman (Managing Director and Senior Equity Research Analyst)

Great. Thank you.

Marella Thorell (Co-CEO, and CFO)

Thank you, Dennis. John, I just want to spend a minute to ask Carrie to comment on the second aspect of your question regarding the commercial opportunity.

Terri Young (Chief Commercial, and Strategy Officer)

Thanks, Marella. Good morning, John. Thanks again for the question. As Dennis outlined, this is a very common side effect of a very commonly used class of medications across many tumor types in oncology, perhaps best evidenced by the Keytruda sales last year of almost $30 billion and growing at 18% versus 2023. These are highly used agents, growing, will continue to grow, particularly as biosimilars become available in the class. In terms of the patient impact, just double-clicking a little bit on what Dennis said, it is not uncommon for patients to have to either pause or discontinue their cancer treatment altogether to go down this detour of addressing the enterocolitis. It frequently drives them into the hospital. It is also a key limitation on physicians' choice of using combination therapies, which may be highly effective for treating the different tumors they are trying to address.

There's this nervousness or anxiety about using combination therapy or even increasing the dose to address the cancer. We feel like we have a big problem here and a very nice solution to address it. We're very eager to get the data.

John Newman (Managing Director and Senior Equity Research Analyst)

Thanks.

Marella Thorell (Co-CEO, and CFO)

Thanks, Terri.

Operator (participant)

Your next question comes from the line of Joseph Thom of TD Cowen. Please go ahead.

Joseph Thom (Analyst)

Good morning, and thank you for taking my questions. Maybe just a couple on the potential partnership deals. Can you talk a little bit about how much capital you would need to get to that initial SER-155 data within the 12 months of study initiation? And then I guess secondly, anything that you can do to kind of convey confidence that you'll be able to achieve something within the next six months within your targeted cash runway? And then maybe last, if you're able to comment, there obviously was a report during the quarter that Nestlé made a takeout offer. Are you able to comment on if that was authentic and maybe why that wasn't an appropriate choice at that time? Thank you.

Marella Thorell (Co-CEO, and CFO)

Great. Good morning, Joe, and thank you for the question. First of all, just to talk a little bit about the design of the phase two study. Importantly, that interim analysis 12 months after the study start will allow us a capital-efficient and timely recovery of data. We are pleased to get feedback from the FDA that they were in alignment with that approach. As to the specific capital needs, we have not guided on that, other than to say that the timing of that and the way that we have designed the study, we do feel that we will get meaningful safety and efficacy data given the patient count in this study at that IA point. We continue to make obtaining a partnership or another source of capital as our highest priority for SER-155, our lead candidate. We are continuing to have interactions and.

Looking at a variety of different sources from which that capital could be obtained. While we can't comment on any specifics as to status, it remains our most important priority. With respect to your last question, we just make it a practice not to comment on rumors, Joe, so I can't comment specifically on that.

Operator (participant)

All right, sir. Thank you.

Marella Thorell (Co-CEO, and CFO)

Thank you.

Operator (participant)

That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to the management for closing remarks. Please go ahead.

Marella Thorell (Co-CEO, and CFO)

Thank you. Thanks, everyone, for joining us this morning, and have a great day.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.