Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Seres Therapeutics Fourth Quarter 2023 Earnings Conference Call. Today's conference is being recorded and 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. Thank you. And I will now turn the conference over to Rob Windsor of Investor Relations. You may begin.

Thank you and good morning. Our press release for the company's fourth quarter 2023 financial results became available at 7:00 a.m. Eastern Time this morning and can be found on the Investors and News section of the company's website. I'd like to remind you that we'll be making forward-looking statements, including the availability of cash to fund operations, the potential sales for VOWST including our ability to achieve sales targets and milestones, the timing and results of clinical studies and other statements, which are not historical facts. 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' Chief Executive Officer; Dr. Terri Young, Chief Commercial and Strategy Officer; Dr. Lisa von Moltke, Chief Medical Officer; and David Arkowitz, Chief Financial Officer. In addition to that, Dr. Matthew Henn, Chief Scientific Officer, and Dr. Dave Ege, Chief Technology Officer, will also be available to address questions. With that, I'll pass it over to Eric.

Thank you, Rob, and good morning, everyone. 2023 was a historic year for Seres and an inflection point for our company and for patients. With the approval and launch of VOWST, we brought to market our first-in-class oral microbiome therapeutic for patients with recurrent C. diff infection. We are proud of the impact VOWST is having on patients, their families, and the entire recurrent C. diff community. As we enter 2024, our top priorities remain: first, delivering VOWST to patients and, second, advancing the potential of microbiome therapeutics more broadly, including with our SER-155 Phase 1b readout in Allo-HSCT patients expected in Q3 of this year. Everything we do at Seres has been and always will be driven by a desire to support patients with significant unmet medical needs. It is the hope and resilience of each patient and their families that inspires us and drives us to fulfill our mission. VOWST is a perfect example of this. In VOWST, we have developed an incredible and unique option for patients who battle recurrent C. diff infection. One with a strong efficacy and safety profile as well as a convenient oral route of administration. In a particularly complex disease where historically, innovation has been difficult, today VOWST is changing lives. The US launch of VOWST has exceeded our expectations. In partnership with Nestle Health Science, we are pleased with the broad patient access received thus far with more patients gaining access to VOWST than expected. The hospital team continues its efforts to enhance hospital outflow, which we expect will continue to bear fruit into 2024. We are also seeing continued strong demand from a broad set of healthcare practitioners and across the recurrent C. diff patient pool, including utilization in patients at their first recurrence. Terri will cover our commercial metrics in more detail shortly. I am extremely proud that we achieved over 2,000 VOWST patient starts in 2023 following our launch in June. We continue to see substantial opportunity for growth given the broad label and the robust clinical profile of VOWST, which makes it an ideal choice for so many of the estimated 156,000 cases of recurrent CDI in the US each year. I would like to thank the team at Seres and Nestle for successfully executing our launch strategy together, collaborating with focus and urgency on behalf of our patients and their families. We look forward to seeing continued growth of VOWST utilization in 2024 and expect this positive trend to continue as patient outcomes on VOWST are more broadly recognized. We are excited by the potential of VOWST to become the standard of care for preventing further C. diff occurrences. Building off our strong proof of concept with VOWST, we were excited to announce in December receipt of fast-track designation for the SER-155 program with the Cohort 2 data readout anticipated in the third quarter of this year. We believe positive data from this readout would further validate the potential of our platform and infections, including in indications such as chronic liver disease, cancer neutropenia, solid organ transplant, and AMR infections more broadly in settings of high risk such as intensive care units. Last year, we made the difficult decision to restructure the company and focus on VOWST and SER-155. This was an extremely difficult decision but a necessary one for positioning Seres optimally for the future. David will touch upon this later in the call, but financial discipline is at the forefront of Seres priorities in 2024 and beyond. We will continue to evaluate all options to strengthen our balance sheet. As we do so, we believe we will be well-positioned to create value for our shareholders and deliver our mission for patients now and in the future. Recently, we announced the appointment of Marella Thorell as Executive Vice President and Chief Financial Officer of Seres, following David's retirement. We welcome Marella and look forward to benefiting from her extensive strategy, corporate finance, and operational experience. I would also like to thank David for his leadership and significant contributions over the past three years, and we wish him the very best in retirement. With the continued success of the VOWST launch and the clinical readout from SER-155 later this year, we look forward to 2024 as a year that will further validate Seres' platform and the promise in microbiome therapeutics. I would like to now pass the call over to Terri to cover the significant progress we've made bringing VOWST to patients.

Thank you, Eric. I'm pleased to report that along with our collaborators at Nestle Health Science, we continue to make significant progress on our launch priorities in the fourth quarter, building upon earlier momentum observed with the VOWST launch. As you'll recall, our four focus areas are: scaling HCP education efforts; creating a positive customer experience; establishing payer coverage; and optimizing hospital outflow. I'll now provide an update on each of these. Our HCP education efforts emphasize the importance of microbiome restoration and recurrent CDI and the unprecedented efficacy and safety profile of VOWST. We have made significant progress in this area, supported by the promotional efforts of the Nestle field team. As a result, demand continued to grow in the fourth quarter as reported to us by Nestle Health Science. In total, between our June launch and year-end, we received 2,833 completed prescription enrollment forms for VOWST, including 1,322 in the fourth quarter alone. Of the total enrollments last year, 2,015 culminated in new patient starts, including 1,082 in the fourth quarter alone. We received prescription enrollment forms from 1,330 unique prescribers between approval and year-end, nearly doubling the number of prescribers versus what we saw at the end of Q3. Approximately 65% of these prescribers of VOWST were from gastroenterology, with the remainder from other specialties. Of these 1,330 HCPs who prescribe VOWST, 340 of them prescribe VOWST to more than one patient. Although, as expected, the majority of 2023 utilization for VOWST was in the multiply recurrent patient group. We continue to see use in patients with their first recurrence. We expect this to continue to grow over time as HCPs gain experience with an entirely new modality and develop an understanding of the foundational and distinct role that VOWST plays in preventing recurrence. We recently completed a round of market research with HCPs who have used VOWST. Findings from that research support that HCPs remain highly receptive to the profile of VOWST and users have had a positive experience of gaining patient access, supported by the Nestlé field teams and the VOWST VOYAGE patient hub. These encouraging results align with our view that VOWST can become a foundational treatment for recurrent CDI and a highly significant commercial opportunity over time. Providing a positive experience for patients and providers is our second launch priority. Our VOWST VOYAGE hub continued to increase its successful conversion of enrollment to new patient starts in Q4. In terms of free drug utilization, approximately 46% of the 2015 new patient starts in 2023 were dispensed via our free drug programs. In the fourth quarter specifically, that percentage was 44%, down from the 48% we reported for Q3. As a reminder, the use of free drug that we are seeing is mostly due to patient affordability challenges with co-pays or other cost-sharing requirements after the prescription was approved by their insurer. We believe these programs are an important investment to support future demand across the broad rCDI patient population, and the need for these programs is likely to decline as the Inflation Reduction Act provisions, governing Medicare Part D benefit design and specifically patient cost-sharing requirements come into effect over the next year. Our third focus area is engaging payers to ensure access. And to date, we have been pleased with the broad patient access we are seeing, with the vast majority of patients able to gain access to VOWST through their insurer. As of year-end, we had received coverage for VOWST across approximately 80% of commercial and 54% of Medicare Part D lives and estimate that the remaining plans will issue coverage policies in the coming quarters. Through year-end, we saw 54% of our 2015 new patient starts reimbursed through the patient's drug benefit. Our gross to net rate remains modest with minimal discretionary rebates at this stage of the launch. David will say more about our gross to net rates momentarily. In summary, the vast majority of patients who are prescribed VOWST are able to obtain approval for the product, either through the medical exception process prior to a policy being issued, or via the prior authorization or appeals process. As demand for VOWST builds, we will continue to work with prominent payers to ensure that we preserve the broad patient access to VOWST that we are currently observing. Finally, the hospital selling team continues its efforts to enhance hospital outflow, and we believe these efforts will accelerate demand in 2024. As a result of this team's efforts, we are starting to see VOWST added to discharge protocols at some of the large institutions as well as added to inpatient formularies. Scaling these efforts is critical to ensuring structural modifications to how our rCDI patients are discharged. Education of hospital-based HCPs and development of protocols for rCDI that can include VOWST will enable more consistent consideration of VOWST as patients flow from the inpatient to the outpatient setting. These 2023 results since the launch of VOWST in June show the strong start of a significant opportunity to change the treatment paradigm across the entire rCDI patient pool. In fact, our results exceeded our expectations across multiple dimensions. We, along with our collaborators at Nestlé Health Science, will continue our focus on HCP education, customer experience, payer coverage, and hospital outflow and expect to see continued acceleration of demand and progress on our key priorities as we move through 2024. As a result, we have confidence that we will ultimately achieve our goal of VOWST becoming a foundational therapy for our CDI, potentially reaching or surpassing the highest sales-based milestone threshold in the 2021 Nestle co-commercialization agreement of $750 million. I would now like to pass the call over to Lisa to give more details about SER-155 and our ongoing clinical trial.

Thank you, Terri. As a reminder, SER-155 is a cultivated microbiome therapeutic candidate that is designed to prevent enteric infections, including those that may harbor antibiotic resistance, and to reduce the incidence of graft-versus-host disease in patients undergoing hematopoietic stem cell transplantation. The peer-reviewed literature supports a strong connection between a disrupted GI microbiome and pathogen domination in the GI tract with the endpoint of infection, graft-versus-host disease, and mortality in patients undergoing Allo-HSCT. Last year, we reported promising Phase 1b Cohort 1 clinical data with SER-155 being well tolerated in highly immunocompromised HSCT patients. Our data indicated that only a single patient had enteric pathogen domination within 30 days following stem cell transplant, which was a markedly lower incidence than that observed in a large reference cohort of patients. Enrollment is ongoing in Cohort 2, which incorporates a randomized, double-blinded, placebo-controlled design to further evaluate safety and engraftment as well as clinical outcomes. This portion of the study will enroll approximately 50 subjects administered either SER-155 or placebo at a 1:1 ratio. And we anticipate obtaining Cohort 2 study data in Q3 of this year. In addition to continued evaluation of the safety profile and drug pharmacology, outcomes assessed will be the ability of SER-155 to decrease rates of pathogen domination, Grade 3 or 4 acute GVHD, and the incidence of GI and related bloodstream infections. We also will assess the ability of SER-155 to decrease rates of fever during neutropenia and the initiation of attendant antibiotic therapy. We believe positive data from this readout would further validate the promise of this novel therapeutic modality in addressing serious infections in medically vulnerable populations including patients with chronic liver disease, cancer neutropenia, and solid organ transplant. We also believe that this approach could impact the problem of antimicrobial resistance more broadly in settings of high risk such as intensive care units. These additional opportunities have the potential to extend the utility of SER-155 and our preclinical stage pipeline and to establish a new approach in protecting immunocompromised patients from life-threatening infections and related clinical events. With that, I'll turn the call over to David for an update on financials.

Thanks, Lisa, and good morning. I'd like to discuss our financial performance for the fourth quarter, starting with VOWST. Let me first remind everyone that Seres has not recognized VOWST net sales in its financial statements, but instead, we share equally with Nestle the commercial profits and losses, and we record our share in collaboration, profit and loss sharing related party. VOWST profits and losses are determined based on VOWST net sales, cost of goods sold, and sales and marketing expenses. Consistent with our prerelease in January, net sales of VOWST for the fourth quarter were $10.4 million and based on 673 units of VOWST sold during the period to specialty pharmacies and distributors. The net sales reflect estimated gross to net reductions of approximately 11%. We estimate that at the end of last year, there was approximately two weeks of VOWST inventory in the channel at specialty pharmacies. Seres supplies VOWST inventory to Nestle, and we received payments from Nestle related to their VOWST supply purchases to meet market demand. During the fourth quarter, Nestle purchased approximately $9 million of valve supply from us, and we received approximately $17 million in payments from Nestle related to prior quarter purchases. The total VOWST loss in the fourth quarter was $20.5 million, and our share of that was $10.3 million. The fourth quarter VOWST collaboration expenses, meaning COGS and sales and marketing expenses for VOWST increased from the prior quarter. This increase was due to higher COGS given the variability of manufacturing costs for VOWST produced prior to approval, as well as some prior period adjustments and higher sales and marketing expenses due to increased free goods and the initiation and ramp-up of some key marketing activities. For the fourth quarter, we also recognized as collaboration profit or loss sharing related party approximately $14 million of profit on the transfer of VOWST inventory to Nestle. This profit represents the supply price to Nestle, net of the cost of the inventory for the units sold and free goods distributed by Nestle during the quarter. Because the vast majority of this vast inventory was manufactured prior to approval, its cost was largely previously expensed, and therefore, the inventory value is very low, resulting in the profit on the transfer of the VOWST inventory that is close to its supply price. Over time, as the VOWST pre-approval inventory is consumed, the magnitude of this profit component from the transfer of inventory will diminish. Research and development expenses for the fourth quarter of 2023 were $26.8 million, reduced from $46.2 million for the same period in 2022. The year-over-year decrease in R&D expense is primarily driven by VOWST commercial manufacturing costs no longer being recognized in the Seres P&L following the product approval in April 2023, instead capitalized and recognized on our balance sheet. General and administrative expenses for the fourth quarter of 2023 were $17.2 million, reduced from $22.4 million from the same period in 2022. As you know, in November of last year, we announced a significant corporate restructuring, which is expected to achieve $75 million to $85 million in annual cash savings in 2024. The restructuring was substantially implemented around year-end last year. As a result, R&D and G&A expenses for the fourth quarter were minimally impacted by the restructuring as the reduced spend related to the restructuring started in earnest at the beginning of this year. We ended 2023 with $128 million in cash, cash equivalents, and investments. Additionally, we have received net proceeds of approximately $18.5 million from the sale of common stock under our at-the-market equity or ATM program thus far this year. We anticipate that our cash balance in conjunction with the anticipated savings from the restructuring and assuming continued quarter-over-quarter revenue growth of VOWST, the expected receipt of the $45 million Tranche B under our existing term loan facility with Oaktree will support our operations into the fourth quarter of 2024. Thank you, and I'll now turn the call back to Eric.

Thank you, David, and thank you again for all your contributions to Seres. We wish you well in your retirement. Before opening the call up to Q&A, I would like to express how proud I am of the team at Seres and the team at Nestle for bringing a first-in-class oral therapy to the market. 2023 was truly a trailblazer year for Seres as well as for microbiome therapeutics. As we look forward into 2024, I'm excited about the continued success of VOWST, as well as the possibilities with SER-155. With that, we will conclude our remarks and open the line up to questions.

And we'll take our first question from Jeff Jones with Oppenheimer. Your line is open.

Thank you. Can you hear me?

Yes, we can, Jeff. Good morning.

Great. Thanks, Eric. I guess can you speak to the main drivers of what looks to be about a $170 million spend in 2024? I know we've spoken to your second manufacturing site in the past? And then any discussions you might be having with Nestle regarding the now about 10 months runway?

Yeah. Maybe I can ask David to start on the parameters of investment and then I can take the second question on our partners.

I would say that approximately half of the $170 million spend relates to research and development. A significant portion of that R&D expenditure is focused on ramping up our upcoming manufacturing facility in Bacthera, which involves tech transfer and working towards the approval of that facility. This is a major factor in our spending. It's important to note that in 2024, we will be operating both Bacthera and our existing contract manufacturing organization concurrently. As we move into 2025, we will transition to primarily one contract manufacturing organization, so you will see a decrease in some of that spending. Additionally, we have general and administrative expenses associated with being a public company, as well as our portion of the profit and loss from the VOWST collaboration.

Maybe I can just add, Jeff, to the second part of the question. In general, we are highly focused on cash, on runway, on investments and ways in which we can continue to support the company. And certainly, you saw at the end of last year, action from us with the restructuring, 41% reduction in headcount. We estimate between $75 million to $85 million reduction in 2024 spend. So our three priorities for this year are, one, supporting the launch of VOWST. Two, driving towards a SER-155 readout. And three, supporting the company, both through augmenting the balance sheet, reducing spend, and looking actively at ways in which we can continue to support our operations. I would say from our partners' perspective, I think we both are pleased with the launch to date. We know that VOWST is important to Nestle. We know that there's real synergy between Zenpep and VOWST, and I won't go further than that. But obviously, we care deeply about supporting the company, and we're actively working to try to put ourselves in the best position to serve patients in the long term.

Just one quick follow-up on that and the work at Bacthera, which involves manufacturing batches. Any chance that some of those batches can be used commercially? And so that spend there actually goes to saleable product?

Yes, I can comment on Bacthera, but maybe we've got Dave here who can comment on the specific question around the batches.

Hi, good morning. Yes, the simple answer is that is correct. Like it's anticipated that the PPQ batches for validation will be salable and ultimately would go into commercial supply.

And I would just add, we continue to make progress with Bacthera in supporting continued augmentation of our capacity. And we're working with them as well to think about ways in which we can continue to support both companies and our relationship moving forward.

Great. Appreciate it. I’ll jump back into the queue, guys.

Thanks, Jeff.

We will take our next question from John Newman with Canaccord. Your line is open.

Hi guys, good morning. Great progress about the hard work on the VOWST launch, very good. Obviously, appreciating that you are currently very focused on commercialization, excuse me, of VOWST, as well as the current SER-155 Phase 1b study, I'm just curious where do you see future opportunities for the drug technology itself?

Good morning, John, and thank you for your question. I'll begin by addressing your inquiry and then invite Matt to add his insights. Our main priorities for 2024 include the VOWST launch, the 155 study, and ensuring the financial health of the company. We are committed to a disciplined allocation of capital towards these priorities, and maintaining focus is crucial for us in the near term. However, we are also excited about the potential opportunities that could arise from positive results in the 155 study. Now, I'll hand it over to Matt for further comments.

Yes, John. Considering the potential Eric mentioned, over the past decade, there has been a significant surge in research revealing the substantial role of the microbiome in both health and disease. Importantly, we've gained a lot of understanding about the mechanisms involved. This is particularly relevant in the gastrointestinal tract, which is the focus of Seres. Our current research and projects highlight various aspects including infections, activating both the adaptive and immune systems, general metabolism, and data that supports the gut-brain connection. I envision the development of microbiome therapeutics as analogous to gene therapy—it's still early, but the scientific foundation is solid and the potential is vast, though the translation process takes time. Success requires creating platforms that unravel the scientific and mechanistic aspects while also expanding our pipeline. Seres has indeed built such a platform and is pursuing this strategic pipeline. We can take projects from early-stage discovery all the way through to the manufacturing of these therapeutics. We have the capability to analyze very detailed interactions at the microbiome level, enabling us to target specific pathways. Our portfolio strategy is gradually expanding. For instance, VOWST serves as a strong proof of concept for addressing gut infections, while our SER-155 program builds on that knowledge to target a wider range of pathogens and to utilize critical insights gained from preclinical and clinical studies regarding infection prevention and strategies to induce immune tolerance in the gastrointestinal tract. We are also examining the epithelial barrier and its effects. All of this is encompassed within the 155 program. As mentioned in today's call, we see this as just the starting point for broader applications, particularly among medically compromised patients dealing with disrupted microbiomes, including those at risk for cancer, neutropenia, solid organ transplants, chronic liver disease, and the broader issue of antimicrobial resistance in the ICU. We see extensive potential here and are eager to move forward, focusing right now on VOWST and our 155 program.

Great. Thank you.

Thanks for the question, John.

And we will take our next question from Tess Romero with JPMorgan. Your line is open.

Hello, good morning guys. Thanks so much for taking our question. So how should we think about the sales trajectory in 2024 for VOWST? And specifically, what is the right way to forecast percent of free drug over the course of 2024, given the patient affordability challenges you cited? And then second question is, can you clarify what you mean by the strengthened promotional campaigns and expanded reach of digital promotion by Nestle and what this means with respect to expected pull-through to the launch?

Yeah, Tess, thanks for the questions, and good morning. Let me invite Terri to comment on both questions. I would just start by saying Terri spent most of last week with the Nestle commercial group and leadership. So I think it's a good time to ask that question and provide some visibility as to how we look at 2024 and the trends that are important.

Yeah. So in 2024, we're obviously, as with any launch, looking for continued growth, breadth, and depth of prescribing specifically, right? We're seeing good access. We seek to preserve that. So it's really about HCP trial and adoption in 2024. And I'll touch on free drug last. Digital promotion is actually a key tactic that it's important for a brand to leverage after you've educated your top prescribers and KOLs. So we've spent, with Nestle, the first months after the launch making sure that we had deep conversations, and deep education efforts with the top prescribers, activating the high-volume prescribers. And from there, we're really seeking to enhance breadth of trial. And so you can do that leveraging the sales force that we have, but we really aim to go broader than that. And that's the role of digital promotions. So you tend to scale that anywhere from four to six months after approval and launch. And so that's what we've done. So we had a new campaign that launched and was rolled out to the representatives in October of last year, right around IDWeek, and that campaign was significantly scaled digitally to HCPs. We also scaled patient promotion. You typically do that six months after a launch because you don't want to send activating your patients into a physician and have the patient be the first source of awareness about a new product. So we want to make sure that physicians are aware of the new product before we turn patients on and send them in. So all of that is in the rearview mirror now, and it's about those campaigns delivering the additional breadth of prescribing and subsequent depth that we would expect because we know once physicians try VOWST, they're having a good experience and they're willing to try it on additional patients in their practice, and we're seeing that in the results. So we're very happy about scaling that promotion and look forward to the additional growth that we'll get this year as a result of it. Switching to free drug. I mentioned that we saw the rate come down in Q4 from Q3, right? But we've got three quarters now in sort of the mid-40s. So in terms of forecasting, those are the data points that we have. I think we've got 46, 48, and 44 in the three different quarters in 2023. We have said and I have said that we expect the utilization of these programs to go down; the voucher program will go down as we get policies on board. So you could imagine we might see some declines this year as payer policies are issued for the majority of the population. But specifically in 2025, with the IRA provisions going into effect, the patient assistance program, the more traditional path that we have that's income qualified in Medicare Part D patients, that's where we're seeing the majority of the utilization; that should really decline in 2025. So that's sort of the data points that we have and the knowledge that we have around patient assistance. Thanks for the question.

Thank you.

And we will take our next question from Peyton Bohnsack with TD Cowen. Your line is open.

Hey, good morning guys and thanks for taking our question. I guess to kind of build up on the previous question, talking about launch trajectory. I was wondering if you could give us a little more detail about the potential penetration in the first rCDI population. And are there any specific strategies that you guys can do to kind of build further into that population? Or is it just mostly a position education effort? And then I have a follow up.

Sure. Pete, why don't I give the first one to Terri.

Sure. We're definitely focusing on increasing utilization in the earlier lines of therapy for rCDI. There are several strategies for achieving this. One approach is to expand our reach, which I discussed in detail with Tess earlier. Digital promotion is an effective way to connect more deeply with prescribers, even within primary care, where many initial recurrent patients receive treatment. Expanding awareness and promotion is crucial, as it should help increase usage in this population. Our primary prescribers are already choosing VOWST for these patients. As they recognize its effectiveness and ease of use, they are likely to broaden their prescribing. They've expressed intentions to do so before the launch, and we're witnessing this trend in the repeat prescribing patterns from 2023. Our sales representatives at Nestle are actively encouraging physicians to initiate the product earlier, driven by the impressive outcomes they've observed in their initial patients. It's a combination of tactics, but we're highly committed to this strategy with Nestle this year.

Positive experience could have a cascading effect, and that's...

Great. And I guess you kind of actually touched on my second question, which was are you really seeing a lot of these first rCDI patients that you have not been treated? Are these largely coming from GIs or your targeted group of high prescribers? Or are these single people that are maybe not as high prescribing or primary care providers or infectious disease specialists? Any additional details you can provide on that would be much appreciated.

Yeah, it's actually been one of the most interesting aspects of the launch and one way that the launch has exceeded our expectations is the breadth of use that we're seeing. Across physicians, across physicians the field representatives are calling on, also physicians that they're not. And we're seeing within the physician user pool a large variety of where physicians are choosing to use it first. So we're not really seeing a pattern, interestingly, which I think is highly encouraging for the launch. Every physician is basically choosing the patient that they think is at risk based on the patient that happens to be in front of them and their office at the moment, and we are seeing the utilization in first recurrence as well as in multiply recurrent. So we feel good about the patterns that we are seeing and that there is not a pattern other than the doctors choosing a high-risk patient, irrespective of the number of recurrences.

Great. Thanks for the additional color. Thank you for the additional color and for letting me ask a follow-up.

Thanks, Peyton. Thanks for the question.

And we will take our next question from Chris Shibutani with Goldman Sachs. Your line is open.

Great. Good morning. I wanted to ask about SER-155 and how we should be thinking about the decision tree that you'll have when the data is reported in the third quarter, in particular, when you think about kind of scale and the budget that would be required to further advance in the event of positive data, how are you thinking about your capacity to fund this? Is this something where you're currently contemplating potential partnerships? And then secondly, I think you have access to a tranche of a loan from Oaktree. Can you help us understand any of the mechanics that would be involved so that we can understand how that might be a lever to also help support financing of continued success with SER-155 if positive data comes in the third quarter. Thank you.

Good morning, Chris, and thank you for your two questions. I would like to invite Lisa to share her insights on our expectations for the 155 readout. Regarding resourcing, we mentioned during last year's restructuring that we would advance 155 to the clinical readout, along with the necessary clinical and microbiome analysis. We are also securing additional investment for the readout itself. Therefore, we anticipate that 155 will be able to stand independently. If successful, we believe there are various ways to support it and potentially bring in more resources to the company. However, if it doesn't succeed, we will not pursue it without adequate funding. I’ll turn it over to Lisa for her comments, and then David and I can address your question about Oaktree.

This study gives us the opportunity to explore various paths based on the results. We could focus on acute GvHD or on the infection aspect, where we believe there are several endpoints that could guide us. We will likely select one specific route, either the infection side or the acute GvHD side, and aim for a targeted and expedited process. If we achieve the results we anticipate, we do not foresee this becoming an extensive, resource-intensive trial.

Yes. So we will follow the data and the resourcing piece we hit, I would just also mention as a reminder that we did receive Fast Track Designation. So we think that how we interact with the agency and thinking about the next study that Lisa mentioned, I think should be augmented as well. Maybe I can ask David to comment on the Oaktree question; I might add a couple of comments on top.

Great. Thanks, Eric. So when we established the debt facility with Oaktree now almost a year ago, we set it up in a way that it would provide access to capital for us, not just initially, but also as the company grew and as the company evolved. There's actually two $45 million tranches that are available to us. Tranche B, which is based on six-month trailing VOWST sales of at least $35 million. And then tranche C, which is based on 12-month trailing sales of at least $120 million.

And I would just reiterate again, Chris, that as we think about those potential sources of capital, I kind of think about that exclusive of 155. I think that 155 will stand on its own with positive results. But we think about the Oaktree somewhat differently.

Great. And if I could just ask a follow-up on 155 amongst the different paths. Is there one that scientifically you think you have the highest probability of success, or at least you have a hypothesis that would be the case? And then is there one that may be from a regulatory progress standpoint might be a shorter duration and more focused concise efficient from a cost standpoint path. I ask those two questions in that way because, hopefully, they're related, but may not be the same. And again, looking for your perspective.

No, it's a great question. Maybe I'll ask Matt to start, and I suggest we begin with the first cohort data that we saw, which is really encouraging to us. Then maybe Lisa can share her thoughts on her perspective as well as the regulatory landscape.

Yeah, right. So Chris, as a reminder, SER-155 is really designed to target two specific areas. One is the domination of pathogens and the incidence of that in the gastrointestinal tract, particularly of Enterococcus and a couple of Enterobacteriaceae species that are particularly problematic in this patient population. And the second is to improve immune tolerance in the gastrointestinal tract to have an impact on graft-versus-host disease, particularly in the GI where it's most prominent in these particular patients. There is a strong literature and a deep literature that connects in particular the disruption of the microbiome and that increased incidence in pathogen domination. To these various downstream clinical sequela that we're looking at, including enteric infections, associated bloodstream infections, and in particularly more severe forms of graft-versus-host disease. So we believe actually both endpoints in terms of thinking about infections and the various ways we're looking at that as well as graft-versus-host disease are very well founded, and we've substantial preclinical and clinical data that supports that our drugs can have an impact there. And I think most significantly is the cohort 1 data that we released last year, where we saw a substantial reduction in that incidence of pathogen domination in the gastrointestinal tract relative to control court. Remember, we saw a single patient having one of these pathogen overgrowth events where we would have expected that to be of substantially higher in the order of about 60-plus percent of patients having such. So with that, I'll turn it over to Lisa.

Both areas, GvHD and infection protection, are generating significant interest from both the medical community and regulators. We now have guidance from the FDA regarding GvHD, which helps us understand their expectations. On the infection protection side, there are several programs from the agency aimed at encouraging development in this area. This is closely related to our results in the C. diff area, and we can envision various endpoints, ranging from high-frequency events like neutropenia and fever to specific infections in the gastrointestinal tract. Aligning these endpoints would create a compelling narrative, and the agency has previously mentioned the strength of having primary and secondary endpoints that correlate.

Great. Appreciate the additional thoughts.

Thanks for the question, Chris.

And we will take our final question from Keay Nakae with Chardan. Your line is open.

Yes, thank you. After implementing the headcount reduction late last year, to what extent do you feel that the current headcount and operating plan might be limiting your marketing efforts for VOWST?

Yeah, good morning, and thanks for the question. I would say that our headcount reductions constrained a number of things, in particular, on the R&D side of our portfolio. But from a marketing investment, we work with Nestle, we have contractual parameters by which the budget is set and executed against. So we don't believe the headcount reduction has an impact on the investment to support the VOWST launch.

Okay. Thanks.

Sure.

And ladies and gentlemen, there are no further questions at this time. So I will now turn the call back to Mr. Eric Shaff for closing remarks.

Thank you, and thanks to everyone for joining us this morning. We look forward to keeping you updated on our progress. Hope you have a great morning, great day, and a great week. We'll talk soon. Thank you.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.