Seres Therapeutics, Inc. Q1 FY2023 Earnings Call

Hello. My name is Chris, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Q1 2023 Seres Therapeutics Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Dr. Carlo Tanzi, Investor Relations, you may begin.

Thank you, and good morning. Our press release for the company's first quarter 2023 financial results and a business update became available at 7.00 AM Eastern Time this morning and can be found in the Investors and News section of the company's website. We will also be reviewing new SER-155 Phase 1b study results and we have posted slides on our corporate website that will accompany our remarks. I'd like to remind you that we'll be making forward-looking statements, including the timing of the commercial launch, the availability of VOWST, the commercial success of VOWST, the timing and results of clinical studies, the timing of additional clinical data, final study results, the ability for microbiome therapeutics to modulate the microbiome and treat or prevent infection, our ability to achieve certain sales targets and the receipt of future milestones and debt tranches, and other statements which are not historical fact. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties, which are discussed under the Risk Factors 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, Seres' President and CEO; David Arkowitz, Chief Financial Officer; Dr. Lisa von Moltke, Chief Medical Officer; and Dr. Matthew Henn, Chief Scientific Officer. Additionally, Dr. Terri Young, Chief Commercial Officer; and Dr. Dave Ege, Chief Technology Officer will also be available to answer your questions. And with that, I'll pass the call to Eric.

Thank you, Carlo, and good morning, everyone. On April 26, we were delighted to announce that the Food and Drug Administration had approved VOWST, formally known as SER-109. VOWST is indicated for the prevention of recurrent C. difficile infections in adults following antibiotic treatment for recurrent CDI. We believe VOWST has the opportunity to transform the management of recurrent C. diff infections and provides a meaningful new therapeutic option for patients. We are very happy with the label we received, which includes all adult patients with recurrent CDI, including those with a first recurrence. The approval of VOWST represents an incredible moment for Seres, and we think it is indicative of the therapeutic potential of this new medical modality. We believe that our microbiome approach could address a range of infectious diseases and other serious indications. This will be highlighted in today's call, as we review our new highly encouraging SER-155 data. We believe that the progress we are making with SER-155 is illustrative of the breadth of potential applications for our microbiome technology. With the approval of VOWST, we are now working to commercialize VOWST alongside our long-term collaborator, Nestlé Health Science. We discussed the recurrent CDI commercial opportunity and the VOWST launch plans recently at our product launch approval call, so we won't reiterate all that information again here. However, I can share a few short real-time updates. The Nestlé customer-facing teams have been trained on the final package insert and core materials to enable them to meet with customers starting last week. The reaction to the clinical profile of VOWST in the field has been extremely positive, and healthcare professionals are eager for product availability, which we expect in June. Our patient services hub went live the day following approval with a first call received on the morning of April 27. The medical and commercial teams across Seres and Nestlé are excited to be attending the Digestive Disease Week in Chicago this week on the heels of VOWST approval with a number of activities planned at that key conference, which Lisa will discuss further in a moment. Finally, our supply and distribution teams across the companies are well prepared for launch and we remain on track to have product available in June. We are thrilled, along with our collaborators at Nestlé, to offer VOWST as a much-needed treatment option for all recurrent C. diff patients, including those with a first recurrence, and to start to hear those stories firsthand from healthcare professionals and patients who have experience with the product. As we commercialize VOWST, we also continue to build our drug supply in collaboration with our long-term contract partner, Recipharm, while enhancing future supply capacity. We believe that we will be able to meet VOWST market demand in all the anticipated uptake scenarios. In late 2021, we entered into a collaboration with Bacthera designed to further scale our drug supply capabilities. This collaboration is proceeding well and our plans remain on track. Our CMC teams are working together in an integrated manner, and we anticipate that Bacthera will be ready to begin producing commercial drug products in 2024 for release in 2025 as the expected number of patients treated with VOWST expands. I'd like to pass the call now over to Lisa.

Thanks, Eric. I will begin with VOWST, our FDA approved oral therapy indicated for the prevention of recurrent C. difficile infection in adults following antibiotic treatment for rCDI. VOWST is a consortium of Firmicutes bacteria in their spore form. This therapy is thought to facilitate the restoration of the gut microbiome and thereby reduce the risk of future recurrences of C. difficile infections. Importantly, the indication received is for the broad population of adult recurrent patients. VOWST had a straightforward oral dosing regimen of four capsules once a day for three days following antibiotic treatment and use of a laxative to remove residual antibiotics from the gastrointestinal tract. VOWST is stored in the original packaging and has no refrigeration requirements. The full label is available on VOWST website at vowst.com. The approval of VOWST is supported by two Phase 3 studies; our placebo-controlled ECOSPOR III study demonstrated that approximately 88% of patients did not experience a recurrence at the primary eight-week end point compared to 60% in the group with antibiotics alone. We also evaluated VOWST efficacy over longer periods of time, and we observed durability of response out to 24 weeks. VOWST was well tolerated, and patients administered the drug had no serious treatment-emergent events or deaths that were attributed to study drug. At the time of approval, we provided a more detailed review of the Phase 3 clinical data supporting the VOWST approval, and I would point you to that event for additional information. C. difficile infections create a substantial healthcare burden and have been characterized as an urgent health threat by the Centers for Disease Control and Prevention. Recurrent CDI is a serious disease that often results in hospitalizations and can even lead to death. There are 156,000 recurrences in the United States per year, and at least 20,000 deaths due to C. diff infections. Approximately 50% of all patients with recurrences have a CDI-related hospital readmission. Patients suffer debilitating symptoms such as frequent diarrhea that prevent them from conducting their normal daily activities and these symptoms significantly lower quality of life. We continue to present and publish VOWST results as we work to educate the medical community. At the Digestive Disease Week Annual Meeting currently being held in Chicago, we presented new data from ECOSPOR IV, our Phase 3 open-label single arm study, which found that nearly 95% of individuals who were free of CDI at eight weeks remained free of CDI through week 24. This therapeutic benefit was observed regardless of the number of prior C. difficile infections. These results add to the previous positive data from the randomized placebo-controlled ECOSPOR III Phase 3 study. Our medical affairs team continues to hear excitement from the clinical community as they await drug availability. At the ongoing DDW meeting, there is a broad awareness of the VOWST data published in the New England Journal and JAMA and the strength of that data, as well as a vocal sentiment that treatment of rCDI should now include consideration of microbiome restoration. Moving now to our new SER-155 results, which are included in the presentation posted earlier today. The medical literature supports a strong connection between pathogen domination and lack of diversity in the gastrointestinal tract with respect to infections, Graft versus Host Disease, which is GvHD, and mortality in patients undergoing allogeneic hematopoietic stem cell transplantation, or allo-HSCT. SER-155 is an investigational oral cultivated microbiome therapeutic designed to prevent enteric-derived infections and resulting bloodstream infections, as well as to induce immune tolerance responses to reduce the incidence of GvHD, particularly severe acute GvHD in patients undergoing allo-HSCT. The development of SER-155 is supported by strong exploratory proof-of-concept data from the SER-109 ECOSPOR III Phase 3 study, which we have previously discussed, and shows that SER-109 administration resulted in the decolonization of gut pathogens, including bacteria carrying antibiotic resistance genes. These data have been previously reported at various conferences, as updated in the past. Allo-HSCT patients are at high risk of enteric-derived infections and acute GvHD. These adverse events are frequently seen in the first 100 days following the procedure. This is a period when the patient's microbiomes are highly disrupted from numerous factors, including antibiotic treatments and chemotherapy regimens, and their immune systems are severely compromised. As Matt will discuss, published data in the literature has specifically linked the incidence of pathogen domination in the GI microbiome to the risk of both of these downstream outcomes. The SER-155 Phase 1b study is being run at a number of leading U.S. cancer centers, and includes two cohorts, with Cohort 1 designed to assess safety and drug pharmacology, including the engraftment of drug bacteria in the GI tract. The data available today are based on results from Cohort 1 patients through day 100 post-HSCT. Cohort 1 included 13 subjects who received SER-155 and 11 of those subjects subsequently received an allogeneic stem cell transplant. End patients completed day 100 with one patient who was transplanted discontinuing the study prior to further SER-155 treatment due to complexities in their clinical course, unrelated to study drug administration. Nine subjects had valuable samples from microbiome data analysis. The average age for subjects in Cohort 1 was 60 years old, and most subjects had acute myeloid leukemia, myelodysplastic syndrome, or myeloproliferative neoplasia as their primary disease, and most received reduced intensity conditioning pre-transplant. Most subjects received peripheral blood stem cells from a matched unrelated donor. The majority received a tacrolimus-based regimen for GvHD prophylaxis. Stem cell engraftment was observed in all subjects. SER-155 was well tolerated in this population, with no serious adverse events attributed to study drug. There were no deaths within the first 100 days post-HSCT. Cohort 1 is an open-label cohort focused on determining if this immunocompromised group of vulnerable patients could safely be dosed during HSCT and on evaluating drug pharmacology. Given the relatively small number of patients, it was not designed to assess clinical response endpoints. We look forward to learning more, particularly around the incidence of enteric-derived infections and severe acute GvHD in the ongoing placebo-controlled Cohort 2 portion of the study. I will now pass the call to Matt to discuss the pharmacology results.

Thank you, Lisa. The gastrointestinal microbiome plays an important role in preventing pathogen infection, including that of pathogens that can harbor antimicrobial resistance, or AMR. The gastrointestinal microbiome has the potential to transform how we protect people from these microbial infections and address other disease complications more broadly through various functional mechanisms. In the context of allo-HSCT, antibiotics as well as other treatment regimens can reduce beneficial microbes from downstream negative impacts that notably can include domination in the GI by enteric pathogens, which frequently harbor antibiotic resistance. Domination is a state in which a single type of bacteria is unusually abundant in the GI. As shown in the SER-155 Phase 1b day 100 slides released this morning on Slide 9, data revealed in 2020 in research supported in part by Seres reported that gastrointestinal bacterial domination events are common across patients undergoing HSCT with events being observed in a majority of patients across four large transplant centers. This study and additional published research from Memorial Sloan Kettering Cancer Center that are noted on Slide 10 have shown that the GI domination by pathogens can be statistically significantly linked to reduced overall survival post-transplant and are significantly associated with increases in life-threatening bloodstream infections and risk for acute Graft versus Host Disease. SER-155 was designed to target the problem of bacterial pathogen domination in the GI of HSCT patients by preventing colonization and reducing the abundance in the GI of ESKAPE pathogens of clinical concern, specifically Enterobacteriaceae that may have carbapenem resistance, also known as CRE, and Enterococcaceae that often have vancomycin resistance, commonly known as VRE, and further to reduce the potential downstream consequences of overgrowth by these and other potentially harmful bacteria. The 16 strains in SER-155 were selected using Seres' MbTx platform that can elucidate disease-associated biomarkers and targets and drug mechanisms of action, pharmacokinetics, and pharmacodynamics at high resolution. The design of SER-155 incorporates insights from observational data from our partners at Memorial Sloan Kettering and also from the University of Cologne to identify both bacterial taxa and functional signatures that were depleted post-transplant and associated with reduced risk of bloodstream infections and GvHD. We also incorporated clinical data from trials Seres has conducted to date to understand which species had a higher probability to engraft in the GI tract broadly across patients and that have strong associations with modulation of various disease-relevant pathways. Lastly, leveraging our extensive strain library, we screened consortia that were combinations of over 140 strains of bacteria that represented nearly 100 different bacterial species. This included species not previously described in the literature and screening multiple strains for many species to select strains that optimally exhibited functional properties that prevent the growth of VRE and CRE, promote epithelial barrier integrity, and modulate immune pathways relevant to Graft versus Host Disease in vivo. In the patients evaluated in Cohort 1, SER-155 showed pharmacological activity consistent with its design. Bacteria in the SER-155 consortia engrafted into the GI microbiome with the magnitude and kinetics consistent with expectations from prior clinical results from other Seres microbiome therapeutics, indicating the well-tolerated safety profile observed in these highly immunocompromised HSCT patients was in the context of drug bacteria present in the patients' GI. As reported on Slide 11, strikingly, the cumulative incidence of domination by ESKAPE pathogens in the GI in the bacterial families Enterococcaceae, Enterobacteriaceae, Streptococcaceae, and Staphylococcaceae was rare, with only a single domination event occurring in a single patient's GI through days 30 post-traumatic stem cell transplantation. These results are in sharp contrast to the cumulative incidence observed in the reference HSCT population cohort at Memorial Sloan Kettering, where the cumulative incidence of these same ESKAPE pathogens was 64% compared to the 11% observed in SER-155 Cohort 1. It is notable that we observed only one additional subject with domination events across the Cohort 1 patients through day 100 post-HSCT. All domination events were transient, which was not the case in previously published results. These initial results from Cohort 1 confirm that SER-155 was well tolerated and pharmacologically active in Cohort 1 patients, and we look forward to obtaining additional biomarker measures of microbiome and host immune response later this year from these patients. We believe that the favorable GI domination data we have observed to date from Cohort 1 provides clear mechanistic support for SER-155. These early results are highly encouraging and increase our confidence in achieving meaningful clinical responses. As reported earlier this year, the Safety Data Monitoring Board approved the advancement of Cohort 2, as no predefined stopping rules were met, and Cohort 2 is actively enrolling. Cohort 2 targets 60 patients and enables the evaluation of safety and drug pharmacology in the context of a randomized, double-blind, placebo comparator arm. Data from Cohort 2 will further extend data from a broad set of translational biomarkers to further elucidate the mechanisms of action of SER-155 from biomarkers of clinical and mechanistic activity, and to obtain important insights, such as the impact of SER-155 on the incidence of gastrointestinal infections, resulting bloodstream infections, Graft versus Host Disease, and other clinical outcomes. These data will inform both the SER-155 programs specifically and additional opportunities in infection and immunomodulation more broadly. SER-155 has the potential to address significant unmet needs in patients undergoing stem cell transplant. Seres believes that the medical benefit and commercial potential for SER-155 may be substantial. As noted on Slide 14, approximately 9,000 individuals per year receive allo-HSCT in the U.S., with nearly 30,000 in the U.S. and EU combined. Infections and Graft versus Host Disease are estimated to result in nearly half of all mortality associated with allo-HSCT according to the Center for International Blood and Marrow Transplant Research database. Complications are frequent and costly, with substantial additional costs associated with complications due to infections and Graft versus Host Disease. With that, I'll now turn the call to David to provide an overview of our financials.

Thanks, Matt. The details of our first quarter financials are included in the press release issued this morning, so I won't reiterate all the figures here. Seres ended the first quarter of 2023 with approximately $107 million in cash, cash equivalents, and marketable securities. With the FDA approval of VOWST in April, we are due to receive a $125 million milestone payment from Nestlé. In addition, as we previously announced in late April, we entered into a $250 million secured debt facility with Oaktree. We received $110 million in funding at closing, with three additional tranches available in the future, including $90 million in two tranches of $45 million each available upon the achievement of certain VOWST sales targets, and an additional $50 million will be available at Oaktree's discretion to facilitate potential future business development activities. Of the $110 million received at closing, approximately $53 million retired outstanding debt. After deducting fees and expenses, the net proceeds to us were approximately $50 million. As a result, our pro forma cash balance at the end of the first quarter was approximately $282 million, which includes the VOWST approval milestone and net proceeds from our debt financing with Oaktree. Once VOWST is launched, we will be sharing equally with Nestlé in the commercial profits and losses. In addition, per the co-commercialization agreement with Nestlé, we have the opportunity to earn sales target milestones totaling up to $225 million. We are responsible for supplying VOWST inventory to Nestlé, and we have been building commercial supply in anticipation of launch. In the near term, we expect to receive payments from Nestlé related to their purchase of the inventory that we have already produced, and in the future, we expect a steady pattern of inventory purchases by Nestlé to meet market demand. From an accounting perspective, we expect that our 50% share of VOWST operating income or loss will be recognized in our P&L in the operating expense section as collaboration profit or loss sharing related party. VOWST operating income or loss will be determined based on VOWST net sales, cost of goods sold, and sales and marketing expenses. In addition, with the approval of VOWST, going forward, the commercial manufacturing costs will no longer be recognized as R&D expenses in our P&L, but instead will be capitalized and recognized on our balance sheet as inventory. Because the commercial manufacturing costs will now be capitalized, we expect that our total R&D expenses will decline going forward. For additional context, our first quarter 2023 financial results reflected $44 million of total R&D expenses, of which approximately $16 million or 36% was VOWST commercial manufacturing costs. Furthermore, during future quarterly financial updates, we plan to provide key launch metrics to enable a better understanding of VOWST commercialization progress. Regarding our efforts and resources over the remainder of 2023, we are prioritizing the VOWST commercial launch and the continued production of commercial supply. In addition, we continue to expand our longer-term VOWST product supply capacity through our bacteria collaboration. And in parallel, we are appropriately resourcing the expansion of our pipeline with a focus on infection protection opportunities. As we've expanded our capabilities across much of our organization in support of VOWST approval and launch, we are very much focused on driving operational efficiencies, and we are continuing to pursue opportunities to optimize our cost structure. In summary, the company continues to be well positioned to effectively commercialize VOWST with our partner, Nestlé, and to drive our ongoing development and preclinical programs. I will now turn the call back to Eric.

Thank you, David. This is an exciting period for Seres as we have received approval for VOWST, the first ever orally administered microbiome therapeutic, and we will soon begin to commercialize this product. We are also very excited about the progress we are making with SER-155 with the new data we have shared today. We are hopeful that the mechanistic data that we have seen in Cohort 1 will translate into meaningful clinical results, and we are looking forward to Cohort 2 data next year. We also look forward to providing additional information about the progress we are making advancing other development candidates over the course of this year. I'd like to close by thanking the talented and dedicated Seres team for their hard work. It is this team that is responsible for the approval of VOWST and for the progress that we have made advancing new therapeutic candidates to patients in need. With that, we will conclude our remarks and open the call up to questions.

Thank you. Our first question is from Mark Breidenbach with Oppenheimer. Your line is open.

Hi. Good morning, guys. Thanks for taking our question and congrats on the quarter. First one for me is kind of on the Cohort 2 that you're enrolling for SER-155. I guess I'm wondering if you're taking any steps to standardize GvHD prophylaxis and graft source type and conditioning regimen across the different clinical sites that are involved in the trial. Obviously, those things can have a substantial impact on things like incidence of GvHD and infection rate. And second, I'm curious if you can comment on the three deaths that occurred after day 100. What were the causes of those deaths? Was it like viral infections or underlying malignancy? Any information you can provide there would be really helpful. And the last question for me is just on VOWST. And now that you have the FDA approval in hand, can you comment on any new plans for approaching European regulators following the FDA approval? Thanks for taking our questions.

Mark, thanks very much. Good morning. Let me ask Lisa to comment on your first two questions regarding standardization, variability, and patient deaths. Then I'll talk about Europe.

Yes. So we're not actively specifying what people need to have to be able to come into the trial. But as you could see from just our results that we are in terms of enrolling, we are getting what is a pretty typical population. And we are seeing consistency in most of the patients in terms of the kinds of grafts, the kinds of prophylaxis they're getting, both in terms of GvHD and even anti-infectives. So we feel pretty good about the fact that we'll be able, with particularly the placebo arm, to be able to pick out signals in spite of the fact that these patients do have complicated regimens, no question. And then the other question was on the deaths, correct? Yes. So these patients had things related to their disease progression. In one case, it was hospice care for just end stage. Another case it was disease relapse within an infection result. And then a third case, it was actually an aspiration pneumonia in the setting of disease progression.

And then, Mark, regarding the European plans for VOWST, I would say we feel we are as adept as anyone at managing multiple initiatives. On the other hand, with Nestlé, our focus has really been on completing the FDA approval of VOWST and our resources and energy have been devoted toward that alongside this first cohort of SER-155. But we're obviously incredibly encouraged by both of those meaningful events for the company. We will consider next steps with Nestlé as we think about the opportunity in Europe. I think we had mentioned beforehand that our base case was that we expected to run another study. We will be in conversations with Nestlé regarding the timing and approach to that.

Okay. Thanks so much, and congrats again.

The next question is from Joseph Thome with Cowen. Your line is open.

Good morning. Congrats on the data update, and thank you for taking our questions. Maybe the first one just in terms of this ESKAPE pathogen domination, what do you think about potential events after this? How important are transient cases versus kind of long-term consistent ESKAPE pathogen domination? I know you mentioned the patients that did have SER-155 treatment; the pathogen domination was transient. Just kind of any additional color on that? And in terms of risk, could these two patients have any predisposing factors that would have led to this transient pathogen domination versus the other patient? Thanks.

Joe, good morning. Thanks for the question. Let me ask Matt to start, and maybe Lisa to comment afterwards.

Yes, Joe, good morning. With respect to the ESKAPE pathogen domination being transient versus long-term and potential additional risk, there are certainly advantages in this patient population to not have durable pathogen domination. Keep in mind these are highly immunocompromised patients, particularly post-HSCT. While they have neutropenia, they are at high risk of infection. So the more domination events that you have and the longer they are, the greater the risk of those bacteria crossing the barrier and becoming a bloodstream infection and a further downstream complication. So transient domination is significant in this context.

Yes. And then, regarding the clinical course, again, we have small numbers, but it is interesting that these two individuals had complexities in their clinical course that could be related. I think we'll learn a lot more when we get bigger numbers.

Perfect. That's helpful. And then maybe one on VOWST. I guess going forward when you start having product availability and sales, how granular do you expect you're going to be in terms of here's VOWST sales, here's how much we're spending on those efforts, and here's our profit? Or is it going to be more like here's a profit or loss from the quarter? I guess how much can you share on that point going forward?

Yes, Joe. I think Terri has talked in the past about the types of questions that we'll be thinking about from a metrics perspective. Maybe I can ask David to comment on your question regarding the financials.

Yes, thanks, Joe. We're looking forward to providing some combination of operational and financial metrics that will help investors and analysts better understand our progress as it relates to VOWST commercialization. We'll share those at the next earnings call.

Okay. Perfect. Thank you very much.

Thanks for the questions, Joe.

The next question is from Tessa Romero with JPMorgan. Your line is open.

Hi. Good morning, everyone. Thank you for taking our questions. I'd like to ask about VOWST. Given that we recently received approval, what initial feedback have you gathered from the market regarding the product's pricing? Additionally, could you provide more clarity on how physicians will be able to access the product through a medical exception process before payer reviews are completed? Thank you.

Thanks for the questions. I'm going to invite Terri to comment. I'll just preempt the answer a little bit to say that as we had announced the price the morning after approval, we certainly had been doing a great deal of work prior to that announcement in really considering and establishing the price that, for us, combines the key metrics of value and innovation and access. But maybe I can ask Terri to comment further on the first and second question.

Sure. Thanks for the question, Tessa. The reactions have been very much like the responses we received pre-launch, although for many key opinion leaders and healthcare professionals on a much larger scale, because we were quite fortunate to have the DDW Congress in Chicago right on the heels of our approval. We've had quite a high number of interactions with key opinion leaders and healthcare professionals. There is high interest and excitement regarding the availability of VOWST. The feedback specifically on the price from our key opinion leaders has been that it's in the range of what was expected, which tells you again that all the work and all the diligence that we did to evaluate the many considerations factoring into that very important decision for patients and shareholders was spot on. From payers, it's very early days, of course. My expectation is the feedback will be very much in line with the feedback we've received pre-launch and pre-approval. Regarding the medical exception process, what I can tell you is that this is not unique to VOWST. All products upon approval are subject to market blocks across the different health plans and PBMs until the product can be evaluated and a coverage decision can be made. So during that period of time, physicians must go through a process not too dissimilar from a prior authorization process. That’s why we established such a robust hub capability in our VOWST Voyage patient support services. We are confident that we'll be able to support patients and physicians as they navigate this process prior to coverage decisions being made. Does that help?

Very helpful. And can you give us a little bit of a sense of if you think the medical exception process will be more commonplace in the first 6 to 12 months here, or just trying to get a sense of how much scope you think there will be there?

Absolutely. Well, that process remains in place until the coverage decision is made. As I mentioned before, we deployed them over a year ago for pre-approval interactions with payers as they are permitted to do. Part of that deployment's goal was to determine exactly what the payer coverage process is and what the timing is so that that team could be ready to get in the queue immediately post-approval to obtain those coverage decisions sooner rather than later. But until those coverage decisions are made, the medical exception process remains in place.

Okay. Thanks so much for taking our questions.

You're welcome, Tessa.

Thanks for the questions.

The next question is from John Newman with Canaccord Genuity. Your line is open.

Hi, team. Good morning, and thanks for taking my questions. I had a question on SER-155, really, really interesting program here. Just curious if kind of longer term when we're thinking about the key outcomes, potential endpoints for the study later on, should we be thinking more about reduction in serious infections or should we be thinking more about the reduction of GvHD or maybe both of those things? Just kind of curious as to how you think about where and how SER-155 can have the greatest benefit for transplant patients?

John, thanks for the question and good morning. I'll have the quick answer, which is yes. But I'll ask Lisa to expand a little bit more.

Yes. I think both acute GvHD and enteric-derived infections are going to be where we're going to be focusing. As you heard us talk today about the first 100 days and we could probably even narrow that in a little closer to the actual HSCT procedure window, that's the time period when patients' microbiomes have really been assaulted by not only anti-infectives but certainly their chemotherapeutic regimens as well. We’re really going to be looking there for infections that occur in the GI tract, particularly those that then launch bloodstream infections from the intestine. With regard to GvHD, we will be looking to see if we actually see a reduction in severe cases and the number of cases that are steroid-refractory. It’s important to emphasize that infection and GvHD are important causes of death within the entire transplant journey. So we won't cast such a wide net in terms of endpoints that it becomes too diffuse to understand. Of course, we will register safety data, but regarding mechanism, it's enteric-derived bacterial infections, particularly those caused by organisms that Matt talked about, and reduction in the severity of acute GvHD.

Okay, great. Thank you.

Yes.

Thanks for the question, John.

The next question is from Chris Shibutani with Goldman Sachs. Your line is open.

Hi. This is Stephen on for Chris. Thanks for taking our questions. I had a question on SER-155. I believe it was stated that one of the three patients that died had an infection. I was wondering if you could speak to the other patients that received a transplant, if any of those had infections or Graft versus Host Disease, and what you would expect over that vital course in terms of what percent would be anticipated to have any of those events. I believe there was a comment during David's section in the prepared remarks about a focus on driving operational efficiencies and optimizing the cost structure. Just curious if you can elaborate there in terms of what steps you're planning on taking. Thank you.

Yes, Stephen, good morning. Maybe I can ask Lisa to comment on the first and then I'll take the second with David and Dave.

Yes. So as we stated in our prepared remarks, this is a really small number for trying to tease out clinical events. We, of course, have some internal benchmarking numbers, but it's really critical to have a placebo-controlled arm, which we anticipate will be very reflective of the arm that's getting treatment because, as somebody else has already mentioned, there are other variables. We expect that they will be evenly distributed across both arms. We'll be able to get a much better sense of what we're seeing once we have that data set all put together. So I think that's — and again, we've been looking at our data with the key opinion leaders in this area, and we remain quite excited about the fact that we're seeing this lack of domination, given that the adjacency between domination and clinical sequelae is pretty well established. There’s a very deep literature. But each time we review the data, we are reminded with such small numbers, it's really perilous to start looking at clinical events. We're heeding that advice and sticking with our top-line messaging. I'll also add that we want to preserve our ability to present and publish this information when we can compile it as a cohesive data set with Cohort 2.

Regarding the second question, Stephen, to turn on the efficiency side, David in his prepared remarks talked about some of the structural changes post-approval, including what had been the build of inventory, which flowed through the R&D line, which will not be the case going forward. We have scaled up and put the pieces in place to support VOWST. There are aspects of where we believe there are efficiencies that we can drive. One example that I'll ask Dave to comment on is the shelf life based on the stability of the product.

Yes, sure. We were really pleased that the FDA gave us good shelf life, multi-year shelf life for our drug intermediates, as well as a three-year shelf life for the final product. This gives us a lot of flexibility regarding where we can build and maintain inventory along our supply chain and better manage our production in that way.

I'll just add that, Stephen. We're looking at a variety of opportunities. For example, we outsource certain donor medical testing. Those are activities that we're looking to bring in-house that will generate some meaningful savings. We're also taking a close look at our office facilities and looking to rationalize those. So those are just a couple of examples, but we are very much focused on this.

Okay. Thank you all for the color. That's very helpful.

Thanks for the questions.

The next question is from Keay Nakae with Chardan. Your line is open.

Yes. A couple of questions about SER-155 and the engraftment you observed. First question, is the degree of engraftment consistent across the different component species included in the product? And then in the case where you did have domination, is the amount of engraftment lower than in the other patients? I guess what I'm trying to understand is if there is some threshold of engraftment that needs to be achieved in order to provide protection. Thanks.

Thanks for the question. Let me ask Matt to comment.

Sure. Thanks, Keay, for those questions. The engraftment results confirmed our drug formulation and were as expected. I think that’s a very important observation. We saw the majority of strains engrafted across the various different patients, which was also an important observation. The engraftment patterns were absolutely consistent with what we would have expected based on our prior trial results. You asked whether in the case where we saw domination events, whether engraftment was less. Great question. Part of what gives us confidence in the pharmacological activity of this drug is that where we saw the domination event was a patient where we saw the weakest engraftment signature.

Thanks for the questions, Keay.

We have no further questions at this time. I'll turn it back over to management for any closing remarks.

So thanks to everyone for joining us this morning. We look forward to updating you on our progress. Hope that you have a great day and a great week. We'll talk soon. Thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.