Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and results of operations together with Item 6 “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A. Risk Factors.
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. SER-287 is being developed to treat ulcerative colitis, or UC. 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. In addition, using our microbiome therapeutics platform, we are developing product candidates to treat diseases where the microbiome is implicated, including SER-301, a rationally designed, fermented inflammatory bowel disease, or IBD, candidate, and SER-401, a microbiome therapeutic candidate for use with checkpoint inhibitors, or CPIs, in patients with metastatic melanoma. We continue to evaluate microbiome pharmacokinetic and pharmacodynamic data from the SER-262 Phase 1b study and other completed clinical trials, in addition to insights gained from research efforts with our other rationally designed Ecobiotic microbiome therapeutic candidates, in order to determine next steps in the development of both SER-262 to treat an initial recurrence of CDI, and SER-155 to modulate the microbiome and dysbioses in patients following allogeneic hematopoietic stem cell transplants. We are also using our microbiome therapeutics platform to conduct research on various indications, including: infectious diseases, metabolic diseases, and inflammatory and immune diseases, including immuno-oncology.
Since our inception in October 2010, we have devoted substantially all of our resources to developing our programs, 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-287, SER-109, SER-262 and SER-401 are still in preclinical development or early stage discovery. 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 $98.9 million for the twelve months ended December 31, 2018. As of December 31, 2018, we had an accumulated deficit of $389.4 million and cash and cash equivalents totaling $85.8 million. Based on our current plans and forecasted expenses, we believe that our existing cash and cash equivalents as of December 31, 2018, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2019, raising a substantial doubt regarding our ability to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. As further discussed in “—Liquidity and Capital Resources” below, these factors raise substantial doubt about our ability to continue as a going concern.
On October 2, 2017, we announced positive topline results from our Phase 1b clinical trial of SER-287 in patients with UC who were failing current therapies. The SER-287 Phase 1b study, a randomized, double-blinded, placebo-controlled, multiple-dose, induction study enrolled 58 patients at 20 sites across the United States with active mild-to-moderate UC, with Total Modified Mayo scores of 4 to 10. 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. Evaluation of SER-287 safety and tolerability was a primary study endpoint and study results showed no drug-related serious adverse events and no imbalance in adverse events in SER-287-treated patients as compared to patients treated with placebo.
Analyses of study patients’ microbiome data, a co-primary study endpoint of the trial, demonstrated that SER-287 induced dose-dependent engraftment of SER-287-derived bacterial species into the colonic microbiome of the patients treated with SER-287. Patients administered vancomycin pre-treatment followed by daily administration of SER-287 had the highest level of SER-287 engraftment, which was statistically significant. This patient cohort corresponded with the study arm where the most significant clinical benefits were observed, including clinical remission and endoscopic improvement. Differences in the composition of the microbiome post treatment were also associated with clinical remission. Bacterial engraftment signatures were durable throughout the dosing period of the trial and were also observed at four weeks post administration of the final SER-287 dose. The pharmacologic impact of the SER-287 engraftment was supported by metabolomic and transcriptomic data. Analysis of metabolites and gene expression signatures associated with inflammation and immune modulation, were observed to be correlated with remission in SER-287 treated subjects.