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Today we do a ‘deep dive’ on a small developmental firm outside of Boston. It has an intriguing and evolving pipeline. Should it be in your biotech portfolio? We take a look at the investment case around this antibiotic concern in the paragraphs below and attempt to answer that question for our readers.
Seres Therapeutics (MCRB) is a Cambridge, Massachusetts based clinical-stage biopharmaceutical company founded in 2010. The company debuted on the public markets in mid-2015 and currently has a market capitalization just north of $325 million and the stock trades for just over $8.00 a share.
The company is focused on providing solutions for the profound problem of antibiotic resistance and healthcare-associated infections. Seres Therapeutics is creating a new class of medicines using live bacteria to treat diseases resulting from functional deficiencies in the microbiome, a condition known as dysbiosis. The goal of the company is to radically improve the lives of patients around the world by utilizing their microbiome therapeutics. The microbiome is an area of great interest and for good reason. We know that the trillions of bacteria that inhabit our bodies play a significant role in everything from regulation of one’s immune system to the resistance to pathogens. The massive diversity and complexity of healthy individuals can increase the difficulty of finding appropriate targets, but the company thinks that research like that presented in Nature and Science shows that there are key functional properties of microbial ecologies that can define states of health and states of disease. The company’s lead product candidate is SER-109, which is an investigational oral microbiome therapeutic for the prevention of Clostridium difficile infection in adults with multiply recurrent CDI.
Ser-109 is an investigational oral microbiome therapeutic for the prevention of Clostridium difficile infection in adults with multiply recurrent CDI. SER-109 is an orally administered capsule that could potentially repair the underlying cause of recurrent CDI, dysbiosis, which is a disrupted state of the microbiome. SER-109 is actually an ecology of bacterial spores enriched and purified from healthy, screened human donors. The FDA has awarded the company’s SER-109 with both Breakthrough Designation and Orphan Drug status. According to the Centers for Disease Control, CDI is one of the top three most urgent antibiotic-resistant bacterial threats in the United States. Approximately, 29,000 Americans die each year from the infection, and it’s the leading cause of hospital-acquired infections in the United States.
The company has successfully completed a Phase 1b and has completed a Phase 2 trial called ECOSPOR. The Phase 2 trial was a failure that surprised management. Management appears to be confident that they know what contributed to the poor results, but only stated that they think its such factors as inaccurate diagnosis of C. difficile recurrent infection, and potentially suboptimal dosing. However, Seres and the FDA reached an agreement on key design elements of a new trial following a positive Type B meeting. The new trial, sometimes referred to as a Phase 2 pivotal, is a Phase 3 trial called ECOSPOR III. The study is expected to enroll approximately 320 patients with multiply recurrent C. difficile infection and will evaluate the efficacy and safety of the drug. The company initiated the trial back in June of 2017, which also triggered a $20 million milestone payment from Nestlé Health Science. Per the latest conference call, the trial is still in the process of enrollment. The company says that based on the feedback from the FDA that this trial could be enough to support the first ever approval of a microbiome therapeutic. However, the results will have to be very compelling.
SER-287 is a biologically sourced, oral formulation containing a variety of live bacterial spores. The drug is being developed for ulcerative colitis and other forms of inflammatory bowel disease. Inflammatory bowel disease results in the inflammation of the colon and affects approximately 700,000 individuals in the United States alone. Essentially, the company’s goal with SER-287 is to replace proinflammatory bacterial species that are often higher in patients with UC with appropriate bacterial species found in healthy individuals. Back in October, the company announced positive top-line results from their Phase 1b trial of SER-287 in patients with UC. ER-287 microbiome treatment resulted in a dose-dependent benefit in clinical remission rates, an improvement in endoscopic scores, and no clinically significant safety or tolerability findings were witnessed. Overall, 6 out of 15 patients reached clinical remission as compared to 0%, 0 of 11 patients in the placebo group. The company has been in on-going discussions with the FDA about the Phase 1b results and initial plans for the next trial. The company is still finalizing plans but believes that they will initiate the next trial in the middle of this year.
Analyst Commentary and Balance Sheet:
Seres Therapeutics ended the first quarter with cash and cash equivalents of $47.1 million, compared to $36 million of cash as of December 31, 2017**.**Research and development expenses were $23.5 million for the 3 months ended March 31,2018, compared to $20.1 million for the comparable period in 2017. General and administrative expenses were $8.8 million for the 3 months ended March 31,2017, compared to $8.7 million for the comparable period in 2017. Overall, the company had a net loss of $28.2 million for Q1 of 2018.
Analysts are sanguine about Seres prospects given the stock currently carries a $18.00 a share median analyst price taget. Last week Oppenheimer assigned a buy rating and set a price target of $18 a share. The analyst over at Oppenheimer is positive on the potential of the microbiome and views the company as progressing nicely, “Seres showcased results from its Phase 1b trial of SER-287 and presented metagenomic and metabolomic data to support its proposed MOA. Management outlined the design of a Phase 2b trial of SER-287, slated to begin enrolling UC patients in 3Q18. On the I/O front, Dr. Jennifer Wargo, Seres’ collaborator from MD Anderson, outlined plans to move SER-401 into the clinic later this year.”
The company has an intriguing pipeline and is targeting a potentially lucrative niche that needs addressing. That said, Seres only has one candidate remotely close to potential commercialization and has had a few trial disappointments so far as a public company. Seres will probably have to do at least one and possibly multiple capital raises to get to that point. In this space, we prefer Paratek Pharmaceuticals (PRTK) which has the potential of two new drug approvals in the antibiotic space by the end of this year. Paratek is one of the members of The Busted IPO Forum model portfolio. That service is currently providing 14 day free trials which can be triggered risk-free by clicking here.
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