Seres Therapeutics, Inc. Q1 FY2022 Earnings Call

Welcome to Seres Therapeutics First Quarter 2022 Financial Results Conference Call. All participants are in a listen-only mode [Operator Instructions]. I'd now like to turn the conference over to Dr. Carlo Tanzi, Head of Investor Relations. Please go ahead.

Thank you, and good morning. Our press release with the company’s first quarter 2022 financial results and a business update became available at 7:00 AM Eastern Time this morning, and can be found on the new Investors and News sections of the company’s website. I would like to remind you that we will be making forward-looking statements, including potential approval of SER-109 and its status as a first-in-class therapeutic, the timing of a BLA filing, potential product launch, market for SER-109, our development opportunities, and the ultimate safety and efficacy data for our product. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties, which are discussed under the Risk Factor section of our recent SEC filings. Any forward-looking statements made on today’s call represent our views as of today only. We may update these statements in the future, but we disclaim any obligation to do so. On today’s call with prepared remarks, I’m joined by Eric Shaff, President and Chief Executive Officer; Dr. Lisa von Moltke, Chief Medical Officer; Dr. Matthew Henn, Chief Scientific Officer; and David Arkowitz, Chief Financial Officer. During the Q&A portion of the call, we will also be joined by Dr. Terri Young, Chief Commercial and Strategy Officer; and Dr. David Ege, Chief Technology Officer. And with that, I’ll pass the call to Eric.

Thank you, Carlo, and good morning, everyone. We entered 2022 excited about the opportunity for Seres to bring the first microbiome therapeutic to patients. Throughout the first quarter and in recent weeks, Seres continued to make steady progress across our microbiome therapeutics pipeline. At the center of these advances is our SER-109 program, where we expect to complete a BLA filing in the middle of this year in support of a potential commercial launch in the first half of next year. We believe that SER-109 has the potential to become the first-ever FDA-approved microbiome therapeutic, a landmark for this emerging class of medicines. Having SER-109 FDA approval would fundamentally transform the treatment of recurrent C. diff infection and possibly provide patients with a far superior treatment option than what is available today. You will recall, our Phase III SER-109 results demonstrated a dramatic reduction in the proportion of recurrences among patients experiencing a further occurrence, demonstrating clear superiority versus antibiotics alone. The Phase III data surpassed statistical thresholds communicated by the FDA, and we expect a single clinical study to fulfill the efficacy requirements supporting a BLA filing. The FDA also communicated that our BLA filing should include a safety database of at least 300 subjects receiving a Phase III dose, with a 24-week follow-up. Our SER-109 open label study is nearing completion, and we look forward to meaningful clinical results later this quarter. These results will include both safety and efficacy data across a broad group of recurrent CDI patients. As we prepare for the SER-109 BLA filing, we are also continuing to administer SER-109 via an expanded access program. This program enables eligible adults with recurrent C. diff infection, including those with the first recurrence, to obtain access to SER-109 ahead of a potential FDA product approval. The approval and launch of SER-109 would represent a significant advance for patients living with recurrent CDI, for Seres, and for the microbiome field in general. We are making excellent progress preparing for a successful commercial launch, which we are expecting in the first half of 2023. Our organization, working closely with our collaborator, Aimmune Therapeutics and Nestle Health Science Company, continues to focus on commercial preparedness activities, including market education efforts directed towards payers and healthcare practitioners. The further we advance this work, the more encouraged we are about the opportunity to transform the recurrent CDI market and the potential to help patients with SER-109. This opportunity is significant, with approximately 170,000 cases of recurrent CDI in the US per year. Sadly, CDI results in over 20,000 deaths per year, and recurrent CDI patients do not have adequate treatment options available today. Some patients are being treated with regimens and procedures that are not FDA-approved, including microbiome transplantation and extended courses of antibiotics, which can exacerbate harm to the microbiome. Moreover, overuse of antibiotics is a driver of antibiotic resistance, a global public health threat. Pending approval, we expect that SER-109 has the potential to address the entire recurrent CDI patient group suffering from this disease. We believe that SER-109 represents a substantial commercial opportunity for Seres. As we have previously shared, the annual cost of a patient with recurrent C. diff has been estimated to result in approximately $34,000 in annual direct healthcare expenses, which does not include the substantial indirect costs associated with this disease. We believe that with a highly attractive SER-109 profile and the tremendous level of unmet need, this could translate into significant value for patients, payers, and the company. Based on our discussions with healthcare practitioners, there is an eagerness for new, safe, effective, and FDA-approved treatment options. We believe SER-109 could provide an important new therapeutic option for recurrent C. diff infection, and we are working with urgency to bring our therapeutic candidate forward to the market as quickly as possible. In anticipation of launch, we are also making progress expanding our commercial scale production of SER-109, to prepare for anticipated market demand. Last year, we announced a collaboration with Bacthera, a global leader in biopharmaceutical product manufacturing. This agreement increases our longer-term SER-109 product supply, adding to our existing manufacturing capabilities. Bacthera is building a dedicated facility for commercial manufacturing in its new microbiome center of excellence, a manufacturing site dedicated to the production of live biotherapeutic products. We believe that our efforts to pioneer the manufacture and scale-up of our microbiome therapeutics have further strengthened our leadership position. Beyond the clear benefit observed in the SER-109 Phase III study, we also believe that our data provides important proof-of-concept for the potential of microbiome therapeutics in infection protection more broadly. Bacterial infections remain a major health problem, causing significant morbidity and mortality in several medically vulnerable populations, and we believe that infection protection represents a tremendous strategic opportunity for Seres. Earlier this year, we held an investor event where we detailed our infection protection strategy. We continued to make progress on this front with SER-155, as well as additional pre-clinical stage programs, and we look forward to providing progress updates. I'd like to now pass the call over to Lisa to discuss our clinical initiatives in more detail.

Thanks, Eric. I'll begin with our SER-109 open label study. This fully-enrolled study includes over 260 individuals with recurrent CDI, who have been administered SER-109. The study enrolled patients with a clinical profile consistent with those commonly evaluated, diagnosed, and treated in clinical practice, including over 25% of enrolled subjects experiencing a first recurrence of CDI. Furthermore, the study allowed for initial CDI diagnosis to be made with either toxin or PCR, reflecting variability in local medical practices. However, we continue to use confirmatory toxin testing on all suspected recurrences to ensure data quality and trial rigor. We anticipate the pending data will reaffirm the highly favorable safety profile observed in our Phase III study. In addition, we expect to obtain supportive efficacy results in this open-label setting, including in individuals who have experienced only a first recurrence of the disease. We look forward to reporting SER-109 open label study results later this quarter. We also made progress preparing for the SER-109 BLA filing. I am pleased to announce that we recently received feedback from the FDA, where the agency agreed with our proposed ruling BLA submission plan. Our interactions with the FDA continue to be constructive, and we expect to begin the BLA filing process in the coming weeks. We anticipate filing completion for the full BLA package, including the required 24-week safety database in mid-2022. Now I'll remind you that SER-109 has obtained breakthrough therapy designation. As a result, we expect to receive priority review from the FDA, resulting in an expedited review timeline, including a two-month BLA acceptance period followed by a six-month review period. We therefore anticipate an approval decision in the first half of 2023.

Thank you, Lisa, and good morning. Beyond SER-109, our most advanced program in infection protection is SER-155, which we are developing for individuals receiving allogeneic stem cell transplant. This program represents an additional clinical effort targeting gastrointestinal-seeded infections. The patients targeted by SER-155 are at very high risk of serious infections, as well as graft-versus-host disease, and we believe that SER-155 has the potential to address both issues. We are currently conducting a Phase 1b trial to assess safety and engraftment of bacteria in SER-155, alongside our partners at Memorial Sloan Kettering and the University of Chicago. The subjects in this study will be undergoing treatment for hematologic malignancies, such as leukemia. Based on historical data, we expect that over 50% of these patients will experience infection or graft versus host disease. If SER-155 is able to reduce the incidence of either of these conditions, we believe we could meaningfully improve health outcomes for these patients. The study is designed with two cohorts. The first open-label cohort, including 10 subjects, is designed to assess safety and engraftment of bacteria in SER-155. We are pleased to announce that the SER-155 Data and Safety Monitoring Committee recently met as part of a planned data review, and after evaluating preliminary safety data, recommended continuation with cohort one enrollment. This provides important support for a likely favorable safety profile of our novel therapeutics for immunocompromised patient populations. Following that first cohort, we plan to enroll a second cohort, including 60 patients in a randomized double-blinded design to further evaluate safety and engraftment, as well as efficacy. Efficacy will be measured by assessing the rates of bloodstream infections and graft versus host disease. Ideally, we would see reduced incidence of bloodstream infections and/or acute gvHD associated with SER-155 administration. The study will help inform future clinical efforts and the outcomes we should target with future studies. Furthermore, positive results in preventing graft versus host disease would support not only pursuing outcomes in future trials but also exploring next steps forward in our immune modulation pipeline more broadly. Notably, the study is designed to capture a rich data set of translational biomarkers for the assessment of host immune modulation. Looking ahead to pipeline expansion, we have a talented R&D team and an advanced research engine in place. As we highlighted in our investor event in January, we believe that both our clinical and preclinical data provide strong evidence supporting the potential for microbiome therapeutics in infection protection. We see the promise to reduce the abundance of targeted pathogens, decrease the potential for patient-to-patient pathogen transmission, strengthen the epithelial barrier to further reduce the likelihood of bloodstream infections, and further modulate immune responses to tackle medical complications, such as graft versus host disease. Beyond SER-155, we've also initiated additional clinical programs targeting infection, including evaluating opportunities to combat infections in patients receiving autologous HSCT. We are designing bacterial consortia to deploy in settings such as cancer neutropenia and solid organ transplant, as well as combating the slow pandemic of antimicrobial-resistant infections more broadly. AMR is a significant public health threat and we believe microbiome therapeutics can be a transformative technology to address this challenge. We are driving towards initiating an additional clinical development program in 2023 and progressing additional programs into the clinic over the next few years. I will close by mentioning our ongoing work in ulcerative colitis. Available data from our prior development efforts suggest that there may be an opportunity to utilize biomarker-based patient selection and stratification for future studies in this indication. We continue to conduct research activities to inform potential further development activities, and we intend to provide further updates as we refine our future development plans in IBD. With that, I'll now turn the call to David to provide an overview of our financials.

Thanks, Matt. The details of our quarterly financials are included in the press release issued this morning. Seres ended the first quarter of 2022 with approximately $248 million in cash, cash equivalents, and marketable securities. This compares with a cash position of $291 million at the end of 2021. With respect to our operating expenses and efforts over the near term, we continue to focus on a number of critical SER-109 related activities, which include preparing and filing the BLA submission, continuing to ramp up manufacturing operations for commercial supply, including expanding our longer-term SER-109 product supply through our Bacthera collaboration and, in conjunction with Aimmune, continuing and accelerating launch readiness activities. In addition, we continue to invest to advance and expand our pipeline with a focus on infection protection opportunities and further build upon and enhance our platforms and capabilities. As a result of these high priority and value-generating activities, we expect our expenses to increase in the coming quarters as we approach a potential commercial launch, but at a moderating rate of growth, as we have already expanded our capabilities across much of the organization. In summary, the company is well-resourced to prepare for SER-109 commercialization, drive our ongoing development and preclinical programs, while also deploying resources to continue to advance our research platforms where we believe we have differentiated proprietary and sustainable advantages.

Thank you, David. We have an exciting year ahead. As we continue to mature from an R&D focused organization to a commercial entity. This process is already underway, and we have several key inflection points along this pathway, including near-term SER-109 open label study data, the filing of our complete BLA submission, assignment to a timely PDUFA date given our breakthrough therapy status, and continued progress with our pre-launch activities alongside Aimmune. In tandem, we remain focused on advancing the other important infection protection programs in our pipeline. Additionally, our R&D engine continues to evaluate other opportunities for our core technologies, as Matt discussed, that will maintain our microbiome leadership position. We look forward to keeping you appraised of our progress in the months ahead. With that, operator, we'll open up the call to questions.

[Operator Instructions] The first comes from Mark Breidenbach from Oppenheimer.

Just kind of a couple that are all related to the open label extension trial. First and foremost, you mentioned that the FDA is looking for a 300 patient safety database. And then I think Lisa said 260 patients were treated with SER-109 in the open label extension. Maybe just comment on the discrepancies: is 260 close enough to 300? And kind of a second question is whether the results are going to be stratified by diagnosis methodology, PCR versus toxin test, to confirm C. difficile? And then, maybe one final part of the question is on the 25% of patients who had a single recurrent C. diff versus multiply recurrent C. diff. Is that enough of a population to potentially support a label that's inclusive of first-time recurrence? So kind of a three-part question, but thanks for telling me what you can.

So let me take that one and clear up any confusion, and I'll ask Lisa to take the next two. But let me just provide a little bit of context in history. So as a reminder, when we had the Phase III readout with what were outstanding results, we announced then that the FDA had set a bar, a statistical threshold for us to demonstrate a single pivotal study. We not only met that bar, but we far exceeded it. However, the FDA was looking for at least 300 subjects on what was the successful Phase III dose. At the time, we had, I think, the number was 105, Lisa can correct me if that's wrong. But we had roughly a third of those 300 subjects that were either in the active arm of the Phase III or a handful of subjects that had rolled from the Phase into our open label study. So we had roughly a third. And basically, what we did is we designed the open label study to fulfill the residual, to fulfill that two-thirds or roughly 200 subjects that the FDA was looking for to support BLA from a safety perspective. So that was the basis of fulfilling that safety database that has been a critical path item for us on submitting the BLA. We were really pleased with the momentum that we saw in enrollments throughout the course of the open label, which we think is suggestive of the fact, and this is even before the New England Journal article came out, of the fact that the profile of the drug is really gaining traction. So hopefully, that answers the question of the 300. With the 100 that was in the Phase III plus the 260 that is added from the open label, we are well in advance. We think it will be at least 300, which the FDA was looking for. And then maybe I can ask Lisa to talk about stratifying by methodology and then our thoughts on the first occurrence and how the agency might look at that.

It really is in the process of stratification since we -- the patients were being randomized and balanced, but we'll be able to look at PCR versus toxin. I think it's worth saying that a lot of these things are actually algorithms, so PCR plus a GvH or toxin plus a GvH, so it's not as simple as that. But this is just how patients are diagnosed in the community. And then with regard to your question on the 25%, I think it's important to remember that we've always said that one very important factor in obtaining a broader label is the pathophysiology of the disease. And by guidance, you can see that the agency has the ability to broaden a label based on the underlying pathophysiology of the disease compared to an expected outcome compared to how the trial was specifically run. So I think the 25% of the data in 013 will be something that they'll look at. I think it will be very interesting in support of the data, but I think it's going to be a couple of factors. And again, as I primarily said, the fact that the field really sees C. diff as primary versus everything else. Once you get into the first recurrence, I mean, the reason you're recurring is you've got a microbiome injury, and you can look back at some of the papers in the field and you can see vanco rates of recurrence really into the 30%. So it's already a problem at first recurrence.

Our next question comes from Peyton Bohnsack from Cowen.

This is Peyton on for Joe, and thanks for taking our questions. Kind of maybe just to follow up on the question that was asked earlier. Is there a specific group of patients that you would think would be like early adopters of this therapy? And then kind of with your medical affairs feedback, do you believe that patients would use this in first line or do you expect this to change over time as physicians get more comfortable with the therapy? And then I have a follow-up.

Peyton, could you ask the first question again? I didn't hear -- is there a group of patients that what, could you mind repeat that, please?

Is there a specific group of patients that you would see as early adopters of this therapy?

So maybe I can start and then ask Lisa or Terri to comment. But I think Lisa just answered in the prior question that the field looks at primary recurrence vs primary C. diff and then recurrent C. diff. We feel strongly that SER-109, given the profile, the safety, and the efficacy, is appropriate for all recurrent C. diff patients. And I invite Lisa or Terri to comment further.

No, I completely agree. And with regard to early adopters I’ll turn it to Terri.

I think it's important to understand kind of how this disease operates for patients and physicians to really appreciate that question. Patients describe this as a very acute, frightening, isolating, and debilitating condition, and that's upon primary occurrence. The first time it comes back, the patient becomes very frustrated and fearful. They know that vancomycin or the antibiotic that they were administered didn't work the way that it's supposed to. They turn up in the physician's office with a very different demeanor than they did the first time. Physicians have had a similar experience. It's a bit of, 'Oh God, the disease is back,' and physicians refer to this disease as the bane of their existence because it keeps coming back. This is the number one unmet need in the category—the prevention of recurrences. It's the number one unmet need despite the availability of treatments today. You can see what SER-109 brings to the table versus standard of care antibiotics in our pivotal results. So we expect across the recurrent patient population that we would have adoption; we believe we can help all 170,000 of the annual cases in the US once approved.

We've also seen some programs just kind of switching over to manufacturing really quick. We've seen some programs keep a clinical hold after requirements for additional screening protocols for pathogens. Kind of in your discussions with the FDA, have they mentioned or asked for anything for additional pathogen screening with SER-109 manufacturing?

Peyton, maybe I can start, and I'll ask Dave Ege who's with us to comment further. I mean, we said for a long time, maybe even before the Phase 3 readout that we felt that our process was differentiated versus the others we were taking. We don't rely only on donor screening. We think that donor screening is inherently reactive. You can screen for the things that you know about, but you can't screen for things that you don't know about, which unfortunately, in the last couple of years included SARS-CoV-2. And the FDA actually put out a warning a year ago in March around the potential transmission of SARS-CoV-2 and through fecal transplant. We do think that our process is differentiated. And maybe I can ask Dave to comment further on the question.

The direct answer to your question is no, they didn't contact us about that. However, because we have breakthrough status, we’ve been in ongoing conversations with the FDA over the whole development cycle. We had previously shared with them what Eric alluded to, both our donor screening paradigm as well as our manufacturing process details, whereby we inactivate pathogens as part of that process. So it's an inherent element of our process from the very beginning that safety is foundational to how we manufacture our products. So we feel very confident as we move this BLA forward.

Our next question comes from John Newman from Canaccord.

So I had a question on SER-155, which you are studying in transplant. Wondered if you could remind us what types of flexibility you have built into the study in terms of testing different levels of dosing, if you can do that? And then also just curious what you hope to learn from this study upon completion. I've seen some of the secondary endpoints or some of the typical things that people look at, acute graft versus host disease. I think you are also filing patients for survival. But just curious as to what you are most interested in learning about as you take this program forward beyond Phase I.

Really excited about 155, thrilled that you are asking about it. Two questions: dosing and what are we hoping to learn. Maybe I'll ask Lisa to comment first and then perhaps Matt on the scientific side of things.

We haven't been very specific at all yet on dosing other than to say that we’re dosing it in a very intentional way throughout the course of the transplant process. With regard to what we are hoping to get from the study, it's important to remember that this is, first and foremost, a safety study. This is a very compromised patient population. It's important for us to confirm what we expect, which is that this will be a safe therapy in those patients. But obviously, we want to see the data, and we will be looking at engraftment as well. Along with that, we will be paying close attention to the incidents of infection of any kind, whether it's bloodstream infections, localized infections, neutropenic fever, or graft-versus-host. There are a number of different endpoints that we can look at; if any of those hit, that's an interesting signal for us. Unfortunately for the patients, the rate of some of these incidents is so high that even in a relatively small Phase I study, we expect that there will be enough occurrences that we'll be able to see a signal if it's there.

I think a couple of important additional points: One, as a reminder, our drugs are designed to target multiple different therapeutic pathways. One thing that we find attractive about the 155 program is that, given the unmet need in this population, success both in either reducing the incidence of bloodstream infections or reducing the incidence of graft-versus-host disease, combined as well as independently, would be meaningful for these patients. In addition, we've designed this study to be very translationally rich, as we often do, because as you know, we deploy a reverse translational strategy and have a platform to really be able to leverage those insights that we get out of human datasets, combining that with learnings on the three clinical side and the tools and capabilities we have there to really understand how the microbes are specifically interacting with each other and with the host. Something very exciting about this program is the insights that we will get in terms of both our ability to impact gut-seeded infections and do so in a novel way, as well as around host immune modulation, which will be meaningful. Lastly, this is a highly immunocompromised patient population. This is the sickest patients. We just had a DSMC that gave us the green light to continue dosing patients. If that safety profile is maintained, I think it really opens up how we can think about deploying this transformative technology in other medically immunocompromised patient populations. When you think about the number of patients that are compromised, and one of the leading causes medically of mortality in many of these patient populations, are infections that often are gut seeded. You can think about cancer neutropenia, cirrhosis, and ICU patients—huge opportunity.

Next question comes from Chris Howerton from Jeffries.

I think one question that I've been curious about is that obviously as we've seen different healthcare utilizations over the course of the pandemic, wondering if there are any changes in the rates of recurrent C. diff infections that we've been observing epidemiologically. And if so, would there be any expectations of lasting effects of that? As a second question, I just wanted to help understand what the capital needs of the company might be to develop the pipeline further? Obviously, given the fact that you have a robust partnership for this program.

Maybe I'll ask Lisa to comment on the first. We are active in our efforts, which I think will provide some perspective on that. Then maybe I can ask David to comment on how we look at capital, especially on the front end of the pipeline.

I think early on in the pandemic, there was some suggestion that perhaps rates were dropping as people were staying away from medical care in general and medical institutions. However, it quickly returned to normal, both with regard to reports that we're seeing in terms of papers and just physician feedback as people are returning to their more typical medical encounters.

David, do you want to comment on the capital question?

As we've discussed, we ended the quarter with $248 million in cash. Look, we've got a lot of value-generating opportunities ahead of us in the near term, and we are ensuring that we're investing appropriately to achieve those. For example, upon SER-109 approval, we will receive a $125 million milestone payment from Nestle. Once SER-109 is approved, we are sharing the profits 50/50 with Nestle, which provides a future cash flow to us. We've got up to $225 million in sales-related milestones, which we believe are very achievable. We think we've got plenty of opportunities to add to our balance sheet and continue to grow and fund the company in that manner.

The only thing I'll add maybe to David's comment is just—I think 155 is an interesting illustration for us where at a time when we were really constrained as a company and resources, with grit and creativity and partnership, we were able to move that program forward to the point where now we're in the clinic. The capital requirements for some of these early stage investments tend to be more efficient than the later stage investments. So we do think there's an opportunity to continue planting seeds and having them grow into what we think is an exciting opportunity in infection protection.

And maybe just as a point of clarification, perhaps to you, David, would be as we anticipate an approval and commercial launch for SER-109? Will there be any significant capital investments by Seres to support that launch or activity?

So we are sharing in the expenses. There’s nothing really out of the ordinary other than sharing in the expenses as it relates to the commercialization of SER-109.

I think maybe it's worth just reminding some of the parameters around the deal: $125 million upon approval and just the 50/50 split.

So as I mentioned, $125 million upon approval; once SER-109 is commercialized, we are splitting the profits. We're splitting the expenses 50/50. We are responsible for manufacturing SER-109, which goes into the whole equation, the cost sharing equation. As we talked about before, this transaction, this deal with Nestle is a tremendous way to leverage the capabilities that they bring to the table, leverage our knowledge and expertise, and capabilities. But also, I think it's financially very attractive and ensures that we are not in a position where we're having to make massive investments to launch a product on our own. We think this is tremendously efficient and effective.

Our next question comes from Chris Shibutani from Goldman Sachs.

This is CJ on for Chris. Thanks for the updates this morning. I wanted to ask a few more questions around sort of the regulatory and commercialization process for 109. I know we haven't seen this nearly as much as historically, but do you have any anticipation for the FDA requiring an adcom approval for the regulatory component? And then on the commercialization side, can you provide any more details on the preparations that are ongoing, any feedback from your payer discussions to date? Or give us your thoughts on kind of the expected size of your commercial piece of the organization?

I'll start with the adcom question, or maybe I'll ask Lisa to comment. The short answer is yes, we would expect that an adcom would happen. But maybe Lisa can comment and then ask Terri to comment on the commercial prep side.

Novel therapy first-in-class, we absolutely are planning for an adcom.

Then Terri, do you want to comment on the commercial prep question?

We obviously scaled those on the back of the receipt of the Phase III data in 2020, but I'll focus on a couple of areas where we've really amplified our efforts this year. One is around educating healthcare providers. We're doing a lot of work there to ensure that physicians understand the role that restoring function of the microbiome plays in preventing future recurrences of C. diff. As I mentioned earlier, that's the number one unmet need in the category. So there's a lot of disease education and, in fact, our disease education campaign just won the nationally prestigious Manny Award, which we were very excited about for best professional web campaign. So I'm quite proud of the team across Seres and Aimmune for that. We're also engaging broadly with our payer audience. This is a great example of one of the benefits of our co-commercialization agreement with Nestle; the Aimmune division of Nestle already has an existing payer field team that is covering their inline products. So I'm able to deploy that field team early in the pre-launch process to educate payers around the disease, but also we’re able to educate them about the robust profile of SER-109. We are hearing feedback from that engagement process with the field team that really mirrors the early research we did with payers. From previous discussions, that research resulted in a very high clinical value rating from payers, akin to somewhat recently approved and commercialized hepatitis C products. So we are hearing great feedback from healthcare providers and payers. You asked about our commercial structure; we will be deploying the field team at Aimmune and to calls on gastroenterology today. We are building upon that to cover the highest-prescribing infectious disease physicians as well. Obviously, we are building an in-house commercial organization across those companies.

Just wanted to get a little bit more detail. You already alluded to the milestone you received with the BLA filing. But you did have some collaboration revenue from a related party in the first quarter. Just wondering if you could perhaps describe a little bit about what other expectations you may have as far as revenue from the collaboration into 2022?

Maybe I'll ask David just to provide a reminder on the structure of the deal with Nestle and maybe just a review on the milestone, which I think is pretty straightforward.

The related party revenue that you saw in the first quarter relates to the two agreements we have with Nestle. The 2016 agreement we have with Nestle pertains to C. diff and ulcerative colitis, ex-North America. It is the recognition of deferred revenue over time. In there, there's a small piece of deferred revenue related to our co-commercialization agreement that we executed with Nestle in the middle of last year. We recognized that over time as well. So that roughly $1.5 million in revenue is the addition of these two deferred revenue recognition streams, with variability based on accounting of that, around $4 million to $5 million a quarter. That will continue over the subsequent quarters. Then as we bring in milestones and co-commercialization revenue, once SER-109 is approved, we will see additional revenue.

And as a follow-up that's related to the line item in your balance sheet, as far as the deferred revenue in the liability section…

This concludes our question and answer session. I would now like to turn the conference back over to management for any closing remarks.

Thank you, operator, and thanks to everyone for tuning in this morning. We are extremely excited about this next period in the company's evolution. We think there are exciting milestones ahead, and we continue to get closer to fulfilling our mission of serving patients with microbiome therapeutics. So have a great week, and we will be in touch soon. Thanks very much.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.