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10-K
SERES THERAPEUTICS, INC. filed this Form 10-K on 03/16/2017
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We initiated a Phase 1b clinical trial of SER-287 in December 2015 and expect results from this study in the second half of 2017. We initiated a Phase 1b clinical study of SER-262 in July 2016 and expect results from this study in the second half of 2017.

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

 

continue the clinical development of SER-109, our lead product candidate; based on feedback received from the FDA, we plan to initiate a new Phase 2 SER-109 clinical study;

 

continue the clinical development of SER-262 to be used following antibiotic treatment of primary CDI to prevent an initial recurrence of CDI;

 

continue the clinical development of SER-287 for the treatment of UC;

 

conduct research and continue pre-clinical development of additional Ecobiotic® microbiome therapeutics, including SER-155 to improve clinical outcomes following allo-HSCT due to infections and GvHD and SER-301, our synthetic IBD product candidate;

 

make strategic investments in manufacturing capabilities, including potentially planning and building a small-scale commercial manufacturing facility;

 

maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property;

 

begin to build the infrastructure necessary to support potential commercialization of our product candidates; and

 

seek to obtain regulatory approvals for our product candidates.

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 will support 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 substantial 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 payments in 2016 associated with the planned initiation of a Phase 1b study for SER-262 in CDI. The full potential value of the up-front 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.”

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