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What changed in Seres Therapeutics, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Seres Therapeutics, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+754 added−886 removedSource: 10-K (2024-12-31) vs 10-K (2024-03-05)

Top changes in Seres Therapeutics, Inc.'s 2024 10-K

754 paragraphs added · 886 removed · 442 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

114 edited+119 added−152 removed218 unchanged
Biggest changeIn addition, because 340B pricing is determined based on AMP and Medicaid drug rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discounts to increase; and • established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 70% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D. 29 Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.
Biggest changeIn addition, because 340B pricing is determined based on AMP and Medicaid drug rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discounts to increase. 28 Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
Among other things, the ACA: • expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of ‘‘average manufacturer price,’’ or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices; • extended Medicaid drug rebates, previously due only on fee-for-service utilization, to Medicaid managed care utilization, and created an alternate rebate formula for new formulations of certain existing products that is intended to increase the amount of rebates due on those drugs; • expanded the types of entities eligible for the 340B drug discount program that mandates discounts to certain hospitals, community centers and other qualifying providers.
Among other things, the ACA: • expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of ‘‘average manufacturer price,’’ or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices; • extended Medicaid drug rebates, previously due only on fee-for-service utilization, to Medicaid managed care utilization, and created an alternate rebate formula for new formulations of certain existing products that is intended to increase the amount of rebates due on those drugs; and • expanded the types of entities eligible for the 340B drug discount program that mandates discounts to certain hospitals, community centers and other qualifying providers.
In addition, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties for each wrongful act.
In addition, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s 26 selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties for each wrongful act.
To the extent that VOWST or any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.
To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.
Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Outside the United States, ensuring adequate coverage and payment for our products will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries.
Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. 27 Outside the United States, ensuring adequate coverage and payment for our products will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries.
During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the 22 safety, purity and potency of its product.
During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.
Our clinical data from the VOWST (developed as SER-109), SER-301, and SER-155 programs, and microbiome data generated with external collaborators, serve to instruct us on how the introduction of certain keystone microbes have the potential to restructure the microbiome and modulate the metabolic state of the gut to shift it to a non-disease state.
Our clinical data from the VOWST (developed as SER-109), SER-301, SER-155, and other programs, and microbiome data generated with external collaborators, serve to instruct us on how the introduction of certain keystone microbes have the potential to restructure the microbiome and modulate the metabolic state of the gut to shift it to a non-disease state.
We also utilize regulatory exclusivity as well as trade secrets to protect aspects of our business. We plan to continue to expand our intellectual property estate by filing patent applications directed to compositions, methods of treatment, methods of manufacture and methods for patient selection created or identified from our ongoing development of our product candidates.
We also utilize regulatory exclusivity as well as trade secrets to protect aspects of our business. 14 We plan to continue to expand our intellectual property estate by filing patent applications directed to compositions, methods of treatment, methods of manufacture and methods for patient selection created or identified from our ongoing development of our product candidates.
Physicians may prescribe legally available biologics for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use.
Physicians may prescribe legally available biologics for uses that are not described in the product’s labeling and that differ from those tested and approved by the FDA. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use.
Additionally, leveraging all of these data we have curated and continue to build a database that links and associates: (i) functional properties of microbial species/strains, (ii) functional pathways in hosts that can be modulated by the microbiome, (iii) the association of functional pathways to disease, and (iv) the association of existing non-microbiome drugs to the functional pathways.
Additionally, leveraging all of these data we have curated and continue to build a database that links and associates: (i) functional properties of microbial species/strains, (ii) functional pathways in hosts that can be modulated by the microbiome, (iii) the association of functional pathways to disease, and (iv) the 7 association of existing non-microbiome drugs to the functional pathways.
In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, Breakthrough Therapy designation, Priority Review designation and Accelerated Approval do not change the standards for approval but may expedite the development or review process.
In addition, the FDA requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, Breakthrough Therapy designation, Priority Review designation and Accelerated Approval do not change the standards for approval but may expedite the development or review process.
The process required by the FDA before our biologic product candidates may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s good laboratory practice, or GLP, regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the United States may begin; • approval by an institutional review board, or IRB, or ethics committee at each clinical site before a trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice, or GCP, regulations; • preparation and submission to the FDA of a BLA after completion of all pivotal trials; 18 • satisfactory completion of an FDA Advisory Committee review, if applicable; • determination by the FDA within 60 days of its receipt of a BLA to file the application for review; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations, and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and potential inspection of selected clinical investigation sites to assess compliance with GCPs; and • FDA review and approval of the BLA prior to any commercial marketing, sale or shipment of the product.
The process required by the FDA before our biologic product candidates may be marketed in the United States generally involves the following: • completion of certain preclinical laboratory tests and animal studies performed in accordance with the FDA’s good laboratory practice, or GLP, regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the United States may begin; • approval by an institutional review board, or IRB, or ethics committee at each clinical site before a trial is commenced; • performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the product candidate for each proposed indication, conducted in accordance with the FDA’s good clinical practice, or GCP, regulations; • preparation and submission to the FDA of a BLA after completion of all pivotal trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; 16 • determination by the FDA within 60 days of its receipt of a BLA to file the application for review; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations, and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency; • satisfactory completion of potential inspection of selected clinical investigation sites to assess compliance with GCPs; and • FDA review and approval of the BLA prior to any commercial marketing, sale or shipment of the product.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational microbiome therapeutic development platform to prioritize future drug targets and to identify opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational development platform to prioritize future drug targets and to identify opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 23 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law.
The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational microbiome therapeutic development platform to prioritize future drug targets and opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational development platform to prioritize future drug targets and opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
Post-Approval Requirements Approved biologics that are manufactured or distributed in the United States are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product distribution, 21 advertising and promotion and reporting of adverse experiences with the product.
Post-Approval Requirements Approved biologics that are manufactured or distributed in the United States are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product distribution, advertising and promotion and reporting of adverse experiences with the product.
If a CRL is issued, the sponsor must resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval.
If a CRL is issued, the sponsor must resubmit the BLA, addressing all of the deficiencies identified in the 18 letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval.
There also are continuing, annual user fee requirements for products marketed pursuant to approved applications. Any biologics manufactured or distributed pursuant to FDA approvals remain subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences associated with the product.
There also are continuing, annual user fee requirements for products marketed pursuant to approved applications. 19 Any biologics manufactured or distributed pursuant to FDA approvals remain subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences associated with the product.
Our analytics can integrate gene profiling and metabolomics data (the small molecules made by the microbiome) with genomic data (the collection of microbes defined by sequencing) to delineate microbiome biomarkers (the specific species or strains and functional pathways) that contribute to the state of disease or health.
Our analytics can integrate gene profiling and metabolomics data (the small molecules made by the microbiome) with genomic data (the collection of microbes defined by sequencing) to delineate microbiome biomarkers (the specific species or strains and metabolites or functional pathways) that contribute to the state of disease or health.
The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, and has obtained multi-million and multi–billion-dollar 27 settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes.
The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, and has obtained multi-million and multi–billion-dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes.
These in-human insights on how different microbe species and strains and microbe-associated metabolites, genes, or peptides are associated with disease along with how these microbes and metabolites directly or indirectly modulate disease-relevant functional pathways in the host are leveraged in preclinical drug design and development.
These in-human insights on how different microbe species and strains and microbe-associated metabolites, genes, or peptides are associated with disease along with how these microbes and metabolites directly or indirectly modulate disease-relevant functional pathways in the host are leveraged in preclinical drug design, optimization and development.
The key competitive factors affecting the success of VOWST and the product candidates that we develop, if approved, are likely to be their efficacy, safety, convenience, price, the level of competition and the availability of reimbursement from government and other third-party payors.
The key competitive factors affecting the success of the product candidates that we develop, if approved, are likely to be their efficacy, safety, convenience, price, the level of competition and the availability of reimbursement from government and other third-party payors.
Marketing Authorizations In the EU, medicinal products can only be placed on the market after obtaining a marketing authorization, or MA. To obtain regulatory approval of an investigational biological product in the EU, we must submit a MA application, or MAA.
Marketing Authorizations In the EU, medicinal products can only be placed on the market after obtaining a MA. To obtain regulatory approval of an investigational biological product in the EU, we must submit a MA application, or MAA.
A CRL usually describes the specific deficiencies in the BLA identified by the FDA and may require additional clinical data, including additional clinical trials, or other significant and time-consuming requirements related to clinical trials, nonclinical studies or 20 manufacturing.
A CRL usually describes the specific deficiencies in the BLA identified by the FDA and may require additional clinical data, including additional clinical trials, or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing.
We face competition with respect to VOWST and our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing 25 therapies.
The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing 23 therapies.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025).
We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 31
We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 30
As a result, we believe the relatively high productivity of our manufacturing processes relative to the dose level will enable production scales for both clinical and commercial supply to be modest by traditional industry standards for biologics and vaccine manufacturing. 14 We have developed supply chains for producing and testing materials to ensure the availability of future clinical trial supplies.
As a result, we believe the relatively high productivity of our 13 manufacturing processes relative to the dose level will enable production scales for both clinical and commercial supply to be modest by traditional industry standards for biologics and vaccine manufacturing. We have developed supply chains for producing and testing materials to ensure the availability of future clinical trial supplies.
Our development processes are designed to ensure that the raw materials, process technologies and analytical tests we use are scalable and transferable to a cGMP manufacturing environment. These include the following core elements: • Fermentation. We are using microscale screening to optimize culture of the bacterial strains of interest in our current and foreseeable fermentation-based product candidates.
Our development processes are designed to ensure that the raw materials, process technologies and analytical tests we use are scalable and transferable to a cGMP manufacturing environment. These include the following core elements: • Fermentation. We use microscale screening to optimize culture conditions of the bacterial strains of interest in our current and foreseeable fermentation-based product candidates.
These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product labeling. 19 In some cases, the FDA may condition approval of a BLA on the sponsor’s agreement to conduct additional clinical trials to further assess the biologic’s safety and effectiveness after BLA approval.
These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product labeling. 17 In some cases, the FDA may condition approval of a BLA on the sponsor’s agreement to conduct additional clinical trials to further assess the biologic’s safety and effectiveness after BLA approval.
Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. 26 The advertising and promotion of medicinal products is also subject to laws concerning promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices.
Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. 24 The advertising and promotion of medicinal products is also subject to laws concerning promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices.
In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties. 17 Competition The development and commercialization of new drug and biologic products is highly competitive and is characterized by rapid and substantial technological development and product innovations.
In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties. 15 Competition The development and commercialization of new drug and biologic products is highly competitive and is characterized by rapid and substantial technological development and product innovations.
Government Regulation Outside of the United States To market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, manufacturing, commercial sales and distribution of our products.
Government Regulation Outside of the United States To market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, or MA, manufacturing, commercial sales and distribution of our products.
The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational drug to humans. An IND must become effective before human clinical trials may begin.
The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. An IND is a request for allowance from the FDA to administer an investigational drug to humans. An IND must become effective before human clinical trials may begin.
We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology 30 companies, universities, governmental entities and other research institutions, and we believe that our future success will depend in large part on our continued ability to attract and retain highly skilled employees.
We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, and we believe that our future success will depend in 29 large part on our continued ability to attract and retain highly skilled employees.
In October 2023, we were awarded a $500,000 grant from the Crohn’s & Colitis Foundation, or CCF, to leverage our clinical results and biological mechanism insights to functionally characterize subpopulations and to define associated biomarkers for IBD patient selection and stratification of patients where the gastrointestinal microbiome plays an active role in inflammation and could be modified to reduce colitis.
In October 2023, we were awarded a $500,000 grant from the CCF to leverage our clinical results and biological mechanism insights to functionally characterize subpopulations and to define associated biomarkers for IBD patient selection and stratification of patients where the gastrointestinal microbiome plays an active role in inflammation and could be modified to reduce colitis.
Our products in development are predominantly oral dosage forms containing live bacteria, hence purification is typically less complex than for parenteral biologics such as monoclonal antibodies that must separate highly similar components from the culturing process. Separation of viable microbes from soluble fermentation broth components is typically much simpler by comparison. • Formulation.
Our products in development are predominantly oral dosage forms containing spores and/or live bacteria, hence purification is typically less complex than for parenteral biologics such as monoclonal antibodies that must separate highly similar components from the culturing process. Separation of viable microbes from soluble fermentation broth components is typically much simpler by comparison. • Formulation.
We use a reverse translational discovery platform that incorporates analysis of microbiome biomarkers from human clinical data and preclinical assessments using human cell-based assays and in vitro/ex vivo and in vivo disease models.
We use a reverse translational discovery platform that incorporates analysis of microbiome biomarkers from human clinical data and preclinical assessments using human cell-based assays and in vitro/ex vivo and in vivo functional screening and disease models.
The process for doing this depends, among other things, on the nature of the medicinal product. 24 Centralized procedure —Under the centralized procedure, following the opining of the EMA’s CHMP the European Commission issues a single MA valid throughout the EU.
The process for doing this depends, among other things, on the nature of the medicinal product. 22 Centralized procedure —Under the centralized procedure, following the opining of the EMA’s CHMP the European Commission issues a single MA valid throughout the EU.
Moreover, alternative therapy is needed for patients with UC who experience frequent flares, are intolerant to the aminosalicylate class of medication, or where there are safety concerns relating to the use of immunomodulator or steroid therapy. Current therapeutic approaches in IBD do not address the potential role of microbiome disruption in causing or aggravating disease in IBD.
Moreover, alternative therapy is needed for patients with UC who experience frequent flares, are intolerant to the aminosalicylate class of medication, or where there are safety concerns relating to the use of immunomodulator or steroid therapy. Current therapeutic approaches in IBD do not address the potential role of microbiome functional disruptions in causing or aggravating disease in IBD.
Data from the SER-109 ECOSPOR III and ECOSPOR IV Phase 3 trial published in the New England Journal of Medicine (Feuerstadt et al., 2022) and Journal of the American Medical Association (Sims et al., 2023) suggest that microbiome therapeutics have the potential to restructure the gut microbiome and shift the gut metabolic landscape.
Data from the SER-109 ECOSPOR III and ECOSPOR IV Phase 3 trial published in the New England Journal of Medicine (Feuerstadt et al., 2022) and Journal of the American Medical Association (Sims et al., 2023) suggest that live biotherapeutics have the potential to restructure the gut microbiome and shift the gut metabolic landscape.
We believe that the combination of experience, proprietary data and proprietary know-how related to the microbiome, the functional properties of microbial species and strains, microbe-host interactions, the cultivation of microbial strains, and microbiome-specific functional screens and analytics provides us a competitive advantage in the design and development of microbiome therapeutics.
We believe that the combination of experience, proprietary data and proprietary know-how related to the microbiome, the functional properties of microbial species and strains, microbe-host interactions, the cultivation of microbial strains, and microbiome-specific functional screens and analytics provides us a competitive advantage in the design and development of live biotherapeutics.
Our patent portfolio includes issued U.S. patents and patent applications in various stages of prosecution, including ex-U.S. international counterparts. We believe that issued claims will provide protection for our microbiome therapeutic candidates. Patent Term The base term of a U.S. patent is 20 years from the filing date of the earliest-filed non-provisional, patent application from which the patent claims priority.
Our patent portfolio includes issued U.S. patents and patent applications in various stages of prosecution, including ex-U.S. international counterparts. We believe that issued claims will provide protection for our live biotherapeutic candidates. Patent Term The base term of a U.S. patent is 20 years from the filing date of the earliest-filed non-provisional, patent application from which the patent claims priority.
This platform incorporates high-resolution analysis of human clinical data to identify microbiome biomarkers associated with disease and non-disease states; preclinical screening using human cell-based assays and in vitro/ex vivo and in vivo disease models customized for microbiome therapeutics; and microbiological capabilities and a strain library that spans broad biological and functional breadth.
This platform incorporates high-resolution analysis of human clinical data to identify microbiome biomarkers associated with disease and non-disease states; preclinical screening using human cell-based assays and in vitro/ex vivo 5 and in vivo disease models customized for live biotherapeutics; and microbiological capabilities and a strain library that spans broad biological and functional breadth.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in IBD and programmatic objectives that are supported through a partnership with CCF.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in IBD with programmatic objectives supported through a partnership with the CCF.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, especially for any competitor developing a microbiome therapeutic which will likely share our same regulatory approval requirements.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, especially for any competitor developing a live biotherapeutic which will likely share our same regulatory approval requirements.
Microbiome therapeutic manufacturing requires capabilities that are distinct from other biologic drugs. We have made strategic investments in manufacturing capabilities to help ensure that we maintain control of our know-how and also because we believe these capabilities will be necessary and highly advantageous for the development of future microbiome therapeutic candidates.
Live biotherapeutic manufacturing requires capabilities that are distinct from other biologic drugs. We have made strategic investments in manufacturing capabilities to help ensure that we maintain control of our know-how and also because we believe these capabilities will be necessary and highly advantageous for the development of future live biotherapeutic candidates.
Taken together, we believe our platform, spanning drug discovery, preclinical translation, and novel manufacturing and quality control approaches, has enabled a field leading pipeline across a range of therapeutics areas. Disease Overview and Our Product Pipeline We believe our microbiome therapeutic product and product candidates represent a novel approach with potential application across a broad range of human diseases.
Taken together, we believe our platform, spanning drug discovery, preclinical translation, and novel manufacturing and quality control approaches, has enabled a field leading pipeline across a range of therapeutics areas. Disease Overview and Our Product Pipeline We believe our live biotherapeutic product candidates represent a novel approach with potential application across a broad range of human diseases.
After the FDA evaluates a BLA and conducts any inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter, or CRL. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.
After the FDA evaluates a BLA and conducts any required inspections of clinical trial sites or manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter, or CRL. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.
Our animal models include conventional mice, germ-free mice, and “humanized avatar” mice that possess only bacteria derived from humans; these models were developed to minimize confounding variables presented by model organism microbes.
Our animal models include conventional mice, germ-free mice, and “microbiome humanized avatar” mice that possess only bacteria derived from humans; these models were developed to minimize confounding variables presented by model organism microbes.
We have established proprietary, curated, reference databases and algorithms that: (i) integrate high-resolution genomic, metagenomic, metabolomic, and transcriptomic data sets, and data from in vitro and human cell-based assays, and in vitro/ex vivo and in vivo disease models, and (ii) enable us to track changes in the microbiome at the level of microbial species and individual strains and associate these changes with changes in the metabolic state of the gut and host physiology.
We have established proprietary, curated, reference databases and algorithms that: (i) integrate high-resolution genomic, metagenomic, metabolomic, and transcriptomic data sets, as well as data from in vitro and human cell-based functional screening assays, and in vitro/ex vivo and in vivo disease models, and (ii) enable us to track changes in the microbiome at the level of microbial species and individual strains and associate these changes with changes in the metabolic state of the gut and host physiology at the level of specific functional pathways.
Led by Eric Shaff, our President and Chief Executive Officer, our experienced management team possesses core capabilities and know-how in microbiome therapeutics, drug development, commercialization, chemistry, manufacturing and controls, or CMC, public company management and finance. Our Strategy Our goal is to remain the leading biopharmaceutical company developing and commercializing microbiome therapeutics to address significant unmet medical needs.
Led by Eric Shaff, our President and Chief Executive Officer, our experienced management team possesses core capabilities and know-how in live biotherapeutics, drug development, commercialization, chemistry, manufacturing and controls, or CMC, public company management and finance. Our Strategy Our goal is to remain the leading biopharmaceutical company developing live biotherapeutics to address significant unmet medical needs.
We have assembled a world class group of scientists, clinicians, directors and investors, who have established our leadership in the field of microbiome therapeutics. We were co-founded by Drs. Noubar Afeyan, David Berry and Geoffrey von Maltzahn of Flagship Pioneering.
We have assembled a world class group of scientists, clinicians, directors and investors, who have established our leadership in the field of live biotherapeutics. We were co-founded by Drs. Noubar Afeyan, David Berry and Geoffrey von Maltzahn of Flagship Pioneering.
Specifically, we utilize clinical data sets combined with advanced data sciences and microbiome analytics to identify microbiome signatures of disease at the resolution of specific species and strains, metabolites, or genes that are associated with disease states. These microbiome biomarkers are associated with host signatures and biomarkers of disease to identify drug targets for our microbiome therapeutics.
Specifically, we utilize clinical data sets combined with advanced data sciences and customized, proprietary microbiome analytics to identify microbiome signatures of disease at the resolution of specific species and strains, metabolites, or genes that are associated with disease states. These microbiome biomarkers are associated with host signatures and biomarkers of disease to identify drug targets for our live biotherapeutics.
Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of existing periods of regulatory exclusivity protection or patent terms, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
This six-month exclusivity, which runs from the end of existing periods of regulatory exclusivity protection or patent terms, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
Our microbiome therapeutic candidates are combinations of bacteria and can be administered by a number of methods and by different routes. Where possible, our product formulation development is focused on oral delivery for patient convenience.
Our live biotherapeutic candidates are combinations of bacteria and can be administered by a number of methods and by different routes. Where possible, our product formulation development is focused on oral delivery for patient convenience.
Our Microbiome Therapeutics Platform We have developed the leading reverse translational microbiome therapeutics platform and knowledge base which we believe enables us to apply our capabilities to efficiently identify, manufacture and develop novel microbiome therapeutics for serious human diseases.
Our Live Biotherapeutics Platform We have developed the leading reverse translational biotherapeutics platform and knowledge base which we believe enables us to apply our capabilities to efficiently identify, manufacture and develop novel live biotherapeutics for serious human diseases.
We also seek to understand how these microbes improve the health of barrier cells in the gut and how they may impact immune responses.
We also seek to understand how these microbes improve the health of epithelial barrier cells in the gut and how they may modulate immune responses.
A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical trials, and pharmacovigilance plans and risk-management programs. Advice is not legally binding with regard to any future marketing authorization application of the product concerned.
Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical trials, and pharmacovigilance plans and risk-management programs. Advice is not legally binding with regard to any future marketing authorization application of the product concerned.
Our platform enables us to build upon our existing and growing clinical experience to rationally design treatments for acute and complex chronic diseases. We intend to leverage this advantage to develop additional innovative microbiome therapeutics. • Developing manufacturing capabilities sufficient to support commercialization of any approved microbiome therapeutic candidates.
Our platform enables us to build upon our existing and growing clinical experience to rationally design treatments for acute and complex chronic diseases. We intend to leverage this advantage to develop additional innovative live biotherapeutics. • Developing manufacturing capabilities sufficient to support commercialization of any approved live biotherapeutic candidates.
We are aware of a number of large pharmaceutical and biotechnology companies, as well as smaller, early-stage companies, that are pursuing the development of products, including microbiome therapeutics, and disease indications we are targeting.
We are aware of a number of large pharmaceutical and biotechnology companies, as well as smaller, early-stage companies, that are pursuing the development of products, including live biotherapeutics, and disease indications we are targeting.
A new international recognition framework has been in place from January 1, 2024, whereby the MHRA will have regard to decisions on the approval of MAs made by the EMA and certain other regulators when determining an application for a new GB MA.
In addition, an international recognition framework, or IRP, has been in place since January 1, 2024, whereby the MHRA will have regard to decisions on the approval of MAs made by the EMA and certain other regulators when determining an application for a new UK MA.
We are addressing quality control requirements for our microbiome therapeutic candidates using proprietary microbiological, chemical, biochemical, and molecular sequence-based testing schemes.
We are addressing quality control requirements for our live biotherapeutic candidates using proprietary microbiological, chemical, biochemical, and molecular sequence-based testing schemes.
SER-155 was designed using our reverse translational microbiome therapeutics development platform and the rationale for this program is based in part on published clinical evidence from our collaborators at Memorial Sloan Kettering Cancer Center showing that allo-HSCT patients with decreased diversity of commensal microbes and pathogen domination in the gastrointestinal tract were significantly more likely to die due to infection and/or lethal GvHD (Peled et al., 2020).
The rationale for this program is based in part on published clinical evidence from our collaborators at Memorial Sloan Kettering Cancer Center showing that allo-HSCT patients with decreased diversity of commensal microbes and pathogen domination in the gastrointestinal tract were significantly more likely to die due to infection and/or lethal GvHD (Peled et al., 2020).
Specifically, we start with data sets from healthy subjects and subjects with disease, or being treated for a disease, to delineate at high-resolution the profile of the microbiome (composition and function) and the physiological state of subjects to identify specific microbiome and host signatures that associate with disease or the onset of disease.
Specifically, to identify specific microbiome and host signatures that associate with disease or the onset of disease, we utilize data sets from healthy subjects and subjects with disease, or being treated for a disease, to delineate at high-resolution the microbial composition and functional profiles of the microbiome and the physiological state of subjects.
Our discovery process begins with human data derived from clinical trials and cohort studies, which we use as a basis for target identification and the design of our microbiome therapeutic candidates.
Our discovery process begins with human data derived from clinical trials and cohort studies, which we use as a data input for target identification and the design of our live biotherapeutic candidates.
Based on these results, we continue to advance research and development activities supported by partnerships to evaluate the potential to utilize biomarker-based patient selection and stratification in future clinical development efforts in IBD.
Based on these results, we continue to advance research and development activities supported by partnerships to evaluate the potential to utilize biomarker-based patient selection and stratification in future clinical development efforts in IBD, and to further optimize our live biotherapeutic lead candidates.
While the EU Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials.
The CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal and database. 21 While the EU Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials.
We have built and deploy a reverse translational platform and knowledge base for the discovery and development of microbiome therapeutics, and maintain extensive proprietary know-how that may be used to support future research and development efforts.
We have built and deploy a reverse translational platform and knowledge base, which we call our MbTx Platform, for the discovery and development of live biotherapeutics, and maintain extensive proprietary know-how that may be used to support future research and development efforts.
Additional data show that SER-109 rapidly reduced the abundance of bacteria associated with common antibiotic resistance genes, or ARGs, and reduced ARG abundance in the gut (Straub et al., 2023). Collectively, we believe these data suggest the potential for microbiome therapeutics to restore colonization resistance and ultimately to reduce infections and antimicrobial resistance.
Additional data show that SER-109 rapidly reduced the abundance of bacteria associated with common antibiotic resistance genes, or ARGs, and reduced ARG abundance in the gut (Straub et al., 2023). Collectively, we believe these data suggest the potential for live biotherapeutics to prevent the colonization and overgrowth of pathogens that can establish in the gut and ultimately to reduce infections.
Study data from cohort 1 suggest that SER-155 administration results in significantly lower incidence rates of gastrointestinal dominations with pathogens of clinical concern, such as Enterococcaceae, Enterobacteriaceae, Streptococcaceae , and Staphylococcaceae .
We believe the available study data from Cohort 1 suggest that SER-155 administration results has the potential to significantly lower incidence rates of gastrointestinal dominations with pathogens of clinical concern, such as Enterococcaceae , Enterobacteriaceae , Streptococcaceae , and Staphylococcaceae .
The EU laws that have been transposed into United Kingdom, or UK, law through secondary legislation remain applicable in Great Britain. However, new legislation such as the CTR or in relation to orphan medicines is not applicable in Great Britain.
The EU laws that have been transposed into UK law through secondary legislation remain applicable in the UK. However, new legislation such as the CTR is not applicable in Great Britain.
Further, we have established de novo analytics for pharmacokinetic and pharmacodynamic assessments of microbiome therapeutics.
Further, we have established de novo analytics for pharmacokinetic and pharmacodynamic assessments of live biotherapeutics.
Violations of any of such laws or any other governmental regulations that apply to drug manufacturers may result in significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, exclusion from participation in federal and state healthcare programs, reporting obligations and integrity oversight, and imprisonment. 28 Coverage and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval.
Violations of any of such laws or any other governmental regulations that apply to drug manufacturers may result in significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, exclusion from participation in federal and state healthcare programs, reporting obligations and integrity oversight, and imprisonment.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented.
We believe the Infection Protection approach may be replicable across different bacterial pathogens to develop microbiome therapeutics with the potential to protect a range of medically compromised patients from infections, including pathogens that harbor antimicrobial resistance, or AMR.
We believe this approach may be replicable across different bacterial pathogens to develop live biotherapeutics with the potential to protect a range of medically compromised patients from infections, including pathogens that harbor AMR.
This continually growing database can be mined to inform drug design and disease area and patient population prioritization. 7 Our proprietary strain library of bacterial isolates from healthy donors and patients enables us to translate microbiome biomarker insights into defined consortia of bacteria.
This continually growing database is structured to be efficiently mined using graphDB, machine learning and artificial intelligence algorithms to inform drug targets, drug design and optimization, and disease area and patient population prioritization. Our proprietary strain library of bacterial isolates from healthy donors and patients enables us to translate microbiome biomarker insights into defined consortia of bacteria.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in irritable bowel disease, or IBD, and programmatic objectives that are supported through a partnership with the Crohn’s and Colitis Foundation, or CCF.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in IBD with programmatic objectives supported through a partnership with CCF.
Our bioprocess and manufacturing personnel are focused on creating a platform of manufacturing expertise that will set the stage for further advances in the emerging field of microbiome therapeutics.
Our bioprocess and manufacturing personnel are focused on creating a platform of manufacturing expertise that will set the stage for further advances in the emerging field of live biotherapeutics. • Leveraging our regulatory success in a novel drug modality. Live biotherapeutics are a novel drug modality.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong the provisions of the ACA of importance to VOWST and our other potential product candidates are the following: • establishment of a new pathway for approval of lower-cost biosimilars to compete with biologic products, such as those we are developing or commercializing; 51 • an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; • a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices; • extension of manufacturers’ Medicaid rebate liability; • expansion of eligibility criteria for Medicaid programs; • expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research.
Biggest changeIn the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the ACA, is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. 50 Among the provisions of the ACA of importance to our other potential product candidates are the following: • establishment of a new pathway for approval of lower-cost biosimilars to compete with biologic products, such as those we are developing or commercializing; • an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; • extension of manufacturers’ Medicaid rebate liability; • expansion of eligibility criteria for Medicaid programs; • expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research.
We rely on third parties for certain aspects of the manufacture of our product and product candidates, and we expect to continue to do so for the foreseeable future.
We rely on third parties for certain aspects of the manufacture of our product candidates, and we expect to continue to do so for the foreseeable future.
We rely on third-party manufacturers, which entails additional risks, including: 43 • failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance; • failure of third-party manufacturers to perform the manufacturing process adequately; • breach of supply agreements by the third-party manufacturers; • failure to supply components, intermediates, services, or product according to our specifications; • failure to supply components, intermediates, services, or product according to our schedule or at all; • misappropriation or disclosure of our proprietary information, including our trade secrets and know-how; and • termination or nonrenewal of agreements by third-party manufacturers at times that are costly or inconvenient for us.
We rely on third-party manufacturers, which entails additional risks, including: • failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance; • failure of third-party manufacturers to perform the manufacturing process adequately; • breach of supply agreements by the third-party manufacturers; • failure to supply components, intermediates, services, or product according to our specifications; 43 • failure to supply components, intermediates, services, or product according to our schedule or at all; • misappropriation or disclosure of our proprietary information, including our trade secrets and know-how; and • termination or nonrenewal of agreements by third-party manufacturers at times that are costly or inconvenient for us.
Our relationships and any collaborators' relationships with customers, physicians and third-party payors are and will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us or our collaborators to criminal sanctions, civil penalties, exclusion from governmental healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.
Our relationships and any collaborators' relationships with customers, physicians and third-party payors are and will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us or any collaborators to criminal sanctions, civil penalties, exclusion from governmental healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.
Any action against us or our collaborators for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Any action against us or any collaborators for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results. We have obtained licenses and options to obtain licenses from third parties and may obtain additional licenses and options in the future.
Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results. We have obtained licenses from third parties and may obtain additional licenses and options in the future.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: • inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; • regulatory authorities or institutional review boards or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • failures or delays in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; 35 • clinical trials of our product candidates may demonstrate undesirable side effects or produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks; • regulatory authorities or institutional review boards or ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • the cost of clinical trials of our product candidates may be greater than we anticipate; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; • regulatory authorities may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and • regarding trials managed by any current or future collaborators, our collaborators may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but potentially suboptimal for us.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: • inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; • regulatory authorities or institutional review boards or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • failures or delays in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • clinical trials of our product candidates may demonstrate undesirable side effects or produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks; • regulatory authorities or institutional review boards or ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • the cost of clinical trials of our product candidates may be greater than we anticipate; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; 36 • regulatory authorities may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and • regarding trials managed by any current or future collaborators, our collaborators may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but potentially suboptimal for us.
In addition, intellectual property litigation or claims could force us to do one or more of the following: • cease developing, selling or otherwise commercializing VOWST or our product candidates; • pay substantial damages for past use of the asserted intellectual property; • obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and • in the case of trademark claims, redesign, or rename, some or all of our product candidates or other brands to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.
In addition, intellectual property litigation or claims could force us to do one or more of the following: • cease developing, selling or otherwise commercializing our product candidates; • pay substantial damages for past use of the asserted intellectual property; • obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and • in the case of trademark claims, redesign, or rename, some or all of our product candidates or other brands to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.
Regardless of merit or eventual outcome, liability claims may result in: • regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions; • decreased demand for any product candidates or products; • injury to our reputation and significant negative media attention; • withdrawal of clinical trial participants; • significant costs to defend the related litigation; • substantial monetary awards to trial participants or patients; • loss of revenue; • reduced resources of our management to pursue our business strategy; and • the inability to commercialize any products that we develop.
Regardless of merit or eventual outcome, liability claims may result in: • regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions; • decreased demand for product candidates or products, if any; • injury to our reputation and significant negative media attention; • withdrawal of clinical trial participants; • significant costs to defend the related litigation; • substantial monetary awards to trial participants or patients; • loss of revenue; • reduced resources of our management to pursue our business strategy; and • the inability to commercialize products that we develop, if any.
The success of our product and product candidates will depend on several factors, including the following: • completion of preclinical studies and clinical trials with positive results; • receipt of marketing approvals from applicable regulatory authorities; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • making arrangements with third-party manufacturers for, or establishing our own, commercial manufacturing capabilities; • launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; • entering into new collaborations throughout the development process as appropriate, from preclinical studies through to commercialization; • acceptance of our products and our product candidates, if and when approved, by patients, the medical community and third-party payors; • effectively competing with other therapies; • obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our products, if approved; • protecting our rights in our intellectual property portfolio; • operating without infringing or violating the valid and enforceable patents or other intellectual property of third parties; 34 • maintaining a continued acceptable safety profile of our products following approval; and • maintaining and growing an organization of scientists and business people who can develop and commercialize our products and technology.
The success of our product candidates will depend on several factors, including the following: • completion of preclinical studies and clinical trials with positive results; • receipt of marketing approvals from applicable regulatory authorities; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • making arrangements with third-party manufacturers for, or establishing our own, commercial manufacturing capabilities; • launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; • entering into new collaborations throughout the development process as appropriate, from preclinical studies through to commercialization; • acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors; • effectively competing with other therapies; • obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our product candidates, if approved; • protecting our rights in our intellectual property portfolio; • operating without infringing or violating the valid and enforceable patents or other intellectual property of third parties; • maintaining a continued acceptable safety profile of our product candidates, if approved, following approval; and • maintaining and growing an organization of scientists and business people who can develop and commercialize our product candidates and technology.
Patient enrollment is also affected by other factors including: 37 • the severity of the disease under investigation; • the patient eligibility criteria for the study in question; • the perceived risks and benefits of the product candidate under study; • the availability of other treatments for the disease under investigation; • the existence of competing clinical trials; • the efforts to facilitate timely enrollment in clinical trials; • our payments for conducting clinical trials; • the patient referral practices of physicians; • the burden, or perceived burden, of the clinical study; • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
Patient enrollment is also affected by other factors including: • the severity of the disease under investigation; • the patient eligibility criteria for the study in question; • the perceived risks and benefits of the product candidate under study; • the availability of other treatments for the disease under investigation; • the existence of competing clinical trials; • the efforts to facilitate timely enrollment in clinical trials; • our payments for conducting clinical trials; • the patient referral practices of physicians; • the burden, or perceived burden, of the clinical study; • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
Restrictions under applicable federal and state healthcare laws and regulations include the following: • the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program, such as Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the False Claims Act, imposes, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the 50 federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
Restrictions under applicable federal and state healthcare laws and regulations include the following: • the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment 49 may be made under a federal healthcare program, such as Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the False Claims Act, imposes, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act or collectively, CCPA, requires certain businesses that process personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information; and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.
For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act or collectively, the CCPA, requires covered businesses that process personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information; and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.
We will remain a smaller reporting company until the fiscal year following the determination that both (i) the value of our voting and non-voting common shares held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter and (ii) our annual revenues are more than $100 million during the most recently completed fiscal year and the value of our voting and non‑voting common shares held by non-affiliates is $700 million or more as measured on the last business day of our second fiscal quarter.
We will remain a smaller reporting company until the fiscal year following the determination that both (i) the value of our voting and non-voting common shares held by non-affiliates is more than $250.0 million measured on the last business day of our second fiscal quarter and (ii) our annual revenues are more than $100.0 million during the most recently completed fiscal year and the value of our voting and non voting common shares held by non-affiliates is $700.0 million or more as measured on the last business day of our second fiscal quarter.
In addition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts. Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
In addition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts. 55 Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
In the United States, the FDA may designate a drug or biologic as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a disease or condition that affects fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.
In the United States, the FDA may designate a drug or biologic as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a disease or condition that affects fewer than 200,000 individuals in the United States, or a patient population 41 greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.
If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign VOWST or our product candidates. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our product candidates. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
The incurrence of indebtedness could 33 result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. The process of obtaining marketing approvals, both in the United States and abroad, is expensive, risky and may take many years.
Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. 39 The process of obtaining marketing approvals, both in the United States and abroad, is expensive, risky and may take many years.
Our and our collaborators' current and future arrangements with third-party payors, physicians and customers expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may restrict the business or financial arrangements and relationships through which we market, sell and distribute VOWST and any other products for which we may in the future obtain marketing approval.
Our and any collaborators' current and future arrangements with third-party payors, physicians and customers expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may restrict the business or financial arrangements and relationships through which we market, sell and distribute any other products for which we may in the future obtain marketing approval.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. 56 Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products or product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.
For example, recruiting and training a sales force is expensive and time-consuming and could delay the launch of any approved product. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.
The FDA and other regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we or our collaborators are found to have improperly promoted off-label uses of approved products, including VOWST or any of our product candidates that may be approved in the future, we may become subject to significant liability.
The FDA and other regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we or any collaborators are found to have improperly promoted off-label uses of approved products, including any of our product candidates that may be approved in the future, we may become subject to significant liability.
Moreover, other parties have developed technologies that may be related or competitive to our approach and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming similar methods or by claiming subject matter that could dominate our patent position or cover one or more of our products or product candidates.
Moreover, other parties have developed technologies that may be related or competitive to our approach and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming similar methods or by claiming subject matter that could dominate our patent position or cover one or more of our product candidates.
In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing VOWST or our product candidates or force us to cease some of our business operations, which could materially harm our business.
In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.
For these purposes, an ownership change generally occurs where the aggregate change in stock ownership of one or more stockholders or groups of stockholders owning at least 5% of a corporation’s 64 stock exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
For these purposes, an ownership change generally occurs where the aggregate change in stock ownership of one or more stockholders or groups of stockholders owning at least 5% of a corporation’s stock exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.
If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering VOWST or one of our product candidates, the defendant could counterclaim that the patent covering VOWST or our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.
If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.
In the ordinary course of our business, we collect and store sensitive data, including personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or our employees, customers and other third-parties. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data centers.
In the ordinary course of our business, we collect and store sensitive data, including personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or our employees and other third parties. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data centers.
We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results. We have in the past been subject to securities class action litigation and may be subject to similar or other litigation in the future, which may harm our business.
We cannot predict the number, timing or size of future joint ventures or acquisitions or dispositions, or the effect that any such transactions might have on our operating results. We have in the past been subject to securities class action litigation and may be subject to similar or other litigation in the future, which may harm our business.
This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
This risk extends to the third-party vendors and subcontractors we use to 60 manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that VOWST, our product candidates, or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization.
The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our product candidates, or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization.
For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents 59 may provide limited or no benefit.
For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
There can be no assurance that our product candidates, if they are approved for sale in the United States or in other countries, will be considered medically necessary for a specific indication or cost-effective, or that coverage or an adequate level of reimbursement will be available.
There can be no assurance that our product candidates, if they are approved for sale in the United States or in other 46 countries, will be considered medically necessary for a specific indication or cost-effective, or that coverage or an adequate level of reimbursement will be available.
Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates.
Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates.
The FDA and other regulatory authorities strictly regulate the promotional claims that may be made about prescription products, such as VOWST and our product candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory authorities as reflected in the product’s approved labeling.
The FDA and other regulatory authorities strictly regulate the promotional claims that may be made about prescription products, such as our product candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory authorities as reflected in the product’s approved labeling.
In addition, we are aware of third-party patent families that include issued and allowed patents, including in the United States, including claims that, if valid and enforceable, could be construed to cover VOWST, some of our product candidates or their methods of use.
In addition, we are aware of third-party patent families that include issued and allowed patents, including in the United States, including claims that, if valid and enforceable, could be construed to cover some of our product candidates or their methods of use.
If we or our collaborators do not successfully develop and commercialize our products or product candidates we will not be able to obtain product revenue or collaboration profit in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.
If we or our collaborators do not successfully develop and commercialize our product candidates we will not be able to obtain product revenue or collaboration profit in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.
VOWST and any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to the continual requirements of and review by the FDA and other regulatory authorities.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to the continual requirements of and review by the FDA and other regulatory authorities.
In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business. We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business. 57 We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
To our knowledge, VOWST is the first oral product based on this approach to receive FDA approval. We cannot be certain that our approach will lead to the development of additional approvable or marketable products or that we will be able to manufacture at commercial scale.
To our knowledge, VOWST is the first oral product based on this approach to receive FDA approval. We cannot be certain that our approach 35 will lead to the development of additional approvable or marketable products or that we will be able to manufacture at commercial scale.
Moreover, the removal or threat of removal of such an accelerated assessment may create uncertainty or delay in the clinical development of our product candidates and threaten the commercialization prospects of our products and product candidates, if approved. Such an occurrence could materially impact our business, financial condition and results of operations.
Moreover, the removal or threat of removal of such an accelerated assessment may create uncertainty or delay in the clinical development of our product candidates and threaten the commercialization prospects of our product candidates, if approved. Such an occurrence could materially impact our business, financial condition and results of operations.
We are aware of several pending patent applications containing one or more claims that could be construed to cover VOWST, some of our product candidates or technology, should those claims issue in their original form or in the form presently being pursued.
We are aware of several pending patent applications containing one or more claims that could be construed to cover some of our product candidates or technology, should those claims issue in their original form or in the form presently being pursued.
If we were to challenge the validity of an issued U.S. patent in court, such as an issued U.S. patent of potential relevance to some of VOWST, our product candidates or methods of use, we would need to overcome a statutory presumption of validity that attaches to every U.S. patent.
If we were to challenge the validity of an issued U.S. patent in court, such as an issued U.S. patent of potential relevance to some of our product candidates or methods of use, we would need to overcome a statutory presumption of validity that attaches to every U.S. patent.
If we are found or believe there is a risk we may be found, to infringe a third party’s intellectual property rights, we could be required or may choose to obtain a license from such third party to continue developing and marketing VOWST, our product candidates and technology.
If we are found or believe there is a risk we may be found, to infringe a third party’s intellectual property rights, we could be required or may choose to obtain a license from such third party to continue developing and marketing our product candidates and technology.
In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of VOWST or our product candidates, or we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities.
In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of our product candidates, or we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities.
Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs and tax credit carryforwards to offset future taxable income and income taxes.
Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs and tax credit carryforwards to offset future taxable income and income taxes.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or our collaborators will not be able to commercialize our product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or any collaborators will not be able to commercialize our product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to VOWST, our product candidates and technology, including interference or derivation proceedings before the USPTO and similar bodies in other countries.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technology, including interference or derivation proceedings before the USPTO and similar bodies in other countries.
Failure to keep up with evolving laws, regulations, trends and stakeholder expectations relating to environmental, social and governance, or ESG, practices or reporting could adversely impact our reputation, share price and access to and cost of capital or otherwise adversely impact our business.
Failure to keep up with evolving and conflicting laws, regulations, trends and stakeholder expectations relating to environmental, social and governance, or ESG, practices or reporting could adversely impact our reputation, share price and access to and cost of capital or otherwise adversely impact our business.
Even if we are able to commercialize VOWST or any of our product candidates, if approved, the products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, any of which would harm our business.
Even if we are able to commercialize any of our product candidates, if approved, the products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, any of which would harm our business.
Any failure to gain access to these limited manufacturing facilities could severely impact the clinical development, marketing approval and commercialization of our product candidates. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval.
Any failure to gain access to these limited manufacturing facilities could severely impact the clinical development, marketing approval and potential future commercialization of our product candidates. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval.
We cannot be sure whether additional legislative changes will be enacted, or whether the FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of 52 our product candidates, if any, may be.
We cannot be sure whether additional legislative changes will be enacted, or whether the FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.
We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology, VOWST or our product candidates.
We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology or our product candidates.
Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, VOWST or our product candidates or the use of VOWST or our product candidates.
Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies or our product candidates or the use of our product candidates.
For example, these persons, if they choose to act 65 together, would significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.
For example, these persons, if they choose to act together, would significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.
We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.
We also make assumptions, 38 estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of VOWST and any product candidates for which we obtain marketing approval.
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025).
Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product candidates and would materially adversely impact our business and prospects.
Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent potential commercialization of our product candidates and would materially adversely impact our business and prospects.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our products and product candidates and affect the prices we may obtain.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or products could delay, prevent or impair our development and commercialization efforts.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or products could delay, prevent or impair our development and potential future commercialization efforts.
For these and other reasons, the issuance, scope, validity, enforceability and commercial value of our patent rights are subject to a level of uncertainty. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.
For these and other reasons, the issuance, scope, validity, enforceability and commercial value of our patent rights are subject to a level of uncertainty. Our pending and future patent applications may not result in patents being issued which protect our technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.
In addition, if a regulatory authority, we or our collaborators later discover previously unknown problems with our products, such as adverse events of unanticipated severity or frequency, problems with manufacturers or manufacturing processes, or failure to comply with regulatory requirements, the regulatory authority may impose restrictions on the products or us and our collaborators, including requiring withdrawal of the product from the market.
In addition, if a regulatory authority, we or any collaborators later discover previously unknown problems with our product candidates, such as adverse events of unanticipated severity or frequency, problems with manufacturers or manufacturing processes, or failure to comply with regulatory requirements, the regulatory authority may impose restrictions on the products or us and any collaborators, including requiring withdrawal of the product from the market.
This could reduce the ultimate demand for VOWST or our product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
This could reduce the ultimate demand for our product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects. 51 Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
If a prolonged government shutdown occurs, or if global health concerns continue to delay or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If a prolonged government shutdown occurs, or if renewed global health concerns delay or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Compliance with our obligations or the exercise by the government or other funder of its rights, may limit certain opportunities or otherwise have an adverse effect on our business. 53 Our patent portfolio currently includes 21 active patent application families (which includes exclusive licenses to certain IP from Memorial Sloan Kettering Cancer Center).
Compliance with our obligations or the exercise by the government or other funder of its rights, may limit certain opportunities or otherwise have an adverse effect on our business. 52 Our patent portfolio currently includes 21 active patent application families (which includes exclusive licenses to certain IP from Memorial Sloan Kettering Cancer Center).
Even if identified, we may be unable to 61 adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. We and certain of our service providers are from time to time subject to cyberattacks and security incidents.
Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. We and certain of our service providers are from time to time subject to cyberattacks and security attempts or incidents.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and similar regulatory authorities outside the United States.
Our product candidates and the activities associated with their development and potential future commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and similar regulatory authorities outside the United States.
The degree of market acceptance of VOWST or any of our product candidates, if approved, will depend on a number of factors, including: • their efficacy, safety and other potential advantages compared to alternative treatments; • the clinical indications for which such products are approved; • our ability to offer them for sale at competitive prices; • their convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the strength of marketing and distribution support; • the availability of third-party coverage and adequate reimbursement for our product candidates; • the prevalence and severity of their side effects and their overall safety profiles; • any restrictions on the use of our products together with other medications; • interactions of our products with other medicines patients are taking; and • the ability of patients to take our products.
The degree of market acceptance of any of our product candidates, if approved, will depend on a number of factors, including: • their efficacy, safety and other potential advantages compared to alternative treatments; • the clinical indications for which such products are approved; • our ability to offer them for sale at competitive prices; • their convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; 44 • the strength of marketing and distribution support; • the availability of third-party coverage and adequate reimbursement for our product candidates; • the prevalence and severity of their side effects and their overall safety profiles; • any restrictions on the use of our products, if and when approved, together with other medications; • interactions of our products, if and when approved, with other medicines patients are taking; and • the ability of patients to take our products, if and when approved.
This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates on a timely basis or at all, or that such quantities will be available at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates on a timely basis or at all, or that such quantities will be available at an acceptable cost or quality, which could delay, prevent or impair our development or potential future commercialization efforts.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. Also, the anticipated benefit of any acquisition may not materialize.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. Also, the anticipated benefit of any acquisition or disposition may not materialize.
This may be costly, and our investment would be lost if we or our collaborators cannot retain or reposition sales and marketing personnel.
This may be costly, and our investment would be lost if we or any collaborators cannot retain or reposition sales and marketing personnel.
If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize VOWST or any product candidate for which we obtain marketing approval, and the royalties resulting from the sales of those products may also be adversely impacted.
If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval, and potential royalties resulting from the sales of those products may also be adversely impacted.
VOWST and any product candidate for which we obtain marketing approval will remain subject to significant post-marketing regulatory requirements and oversight.
Any product candidate for which we obtain marketing approval will remain subject to significant post-marketing regulatory requirements and oversight.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell VOWST and our product candidates, if approved, and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries.
Our commercial success depends upon our ability, and the ability of any collaborators, to develop, manufacture, market and sell our product candidates, if approved, and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. 68 Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. 69 Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting.
Doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us to obtain and maintain regulatory approvals for the use of our products in various countries; 60 • additional potentially relevant third-party patent rights; • complexities and difficulties in obtaining protection and enforcing our intellectual property; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; • limits in our ability to penetrate international markets; • global macroeconomic conditions, including a continued increase in inflation rates or interest rates, labor shortages, supply chain shortages, disruptions and instability in the banking industry and other parts of the financial services sector, or other economic, political or legal uncertainties or adverse developments; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; • terrorism and/or political instability, unrest and wars, such as the conflicts involving Ukraine and Russia or Israel and its surrounding regions, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; • natural disasters (including as a result of climate change), which could cause significant damage to the infrastructure upon which our business operations rely, and the timing, nature or severity of which we may be unable to prepare for; • economic instability, outbreak of disease or epidemics such as the COVID-19 pandemic, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, including tariffs, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us to obtain and maintain regulatory approvals for the use of our product candidates in various countries; • additional potentially relevant third-party patent rights; • complexities and difficulties in obtaining protection and enforcing our intellectual property; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; • limits in our ability to penetrate international markets; • global macroeconomic conditions, including a continued increase in inflation rates or interest rates, labor shortages, supply chain shortages, disruptions and instability in the banking industry and other parts of the financial services sector, or other economic, political or legal uncertainties or adverse developments; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations; • terrorism and/or political instability, unrest and wars, such as the conflicts involving Ukraine and Russia or Israel and its surrounding regions, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; • natural disasters (including as a result of severe weather events, climate change or otherwise), which could cause significant damage to the infrastructure upon which our business operations rely, and the timing, nature or severity of which we may be unable to prepare for; • economic instability, outbreak of disease or epidemics, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
The FDA or the applicable foreign regulatory authority may also approve our product candidates for a more limited indication and/or a narrower patient population than we originally request, and the FDA, or applicable foreign regulatory authority, may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates.
The FDA or the applicable foreign regulatory authority may also approve our product candidates for a more limited indication and/or a narrower patient population than we originally request, and the FDA, or applicable foreign regulatory authority, may not approve the labeling that we believe is necessary or desirable for the successful potential future commercialization of our product candidates.
These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.
These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur management team and IT Information Security Group supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other 70 information obtained from public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Biggest changeThe IT Information Security Group undertakes table-top business disruption, disaster recovery and related response strategies, and plans on a periodic basis, and aims to review, and if appropriate update, applicable policies and procedures annually. 71 Our management team and IT Information Security Group takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our CIO has over three decades of IT experience in life sciences organizations. Her cybersecurity work includes the development and implementation of cybersecurity policies, platforms, and robust end-user training curriculums. Our CIO and IT Information Security Group work together to monitor and report cybersecurity trends and threats to management.
Our CIO has over three decades of IT experience in life sciences organizations. Her cybersecurity work includes the development and implementation of cybersecurity policies, platforms, and robust end-user training curriculums. Our CIO and IT Information Security Group work together to monitor and r eport cybersecurity trends and threats to management .
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, incident response personnel, and senior management; • a security incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers, suppliers, and vendors who have access to our critical systems and information.
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers , where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, incident response personnel, and senior management; • a security incident response plan that includes procedures for responding to cybersecurity incidents; • a third-party risk management process for service providers based on our assessment of their criticality to our operations and respective risk profile, suppliers, and vendors who have access to our critical systems and information; and • cybersecurity insurance to cover us for costs and expenses we may incur due to a cybersecurity incident.
Additionally, we work with an external IT partner and external cybersecurity counsel to assess, identify, and manage risks from cybersecurity threats. The IT Information Security Group undertakes table-top business disruption, disaster recovery and related response strategies, and plans on a periodic basis, and aims to review, and if appropriate update, applicable policies and procedures annually.
Additionally, we work with an external IT partner and external cybersecurity counsel to assess, identify, and manage risks from cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeClinical Manufacturing We currently conduct part of our manufacturing operations in our leased facilities in Cambridge, Massachusetts, which contain manufacturing facilities for clinical products. We believe our current laboratory facilities and contract relationships are sufficient to meet our current bioprocess development and manufacturing needs.
Biggest changeClinical Manufacturing We currently conduct our manufacturing operations in our leased facilities in Cambridge, Massachusetts, where we conduct process development, scale-up activities, the manufacture of active components for our biotherapeutic candidates, and quality control testing. We believe our current laboratory facilities and contract relationships are sufficient to meet our current bioprocess development and manufacturing needs.
Mine Saf ety Disclosures Not applicable. 71 PART II
Mine Saf ety Disclosures Not applicable. 72 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” Recent Sales of Unregistered Securities We did not make any sales of unregistered securities during the quarter ended December 31, 2023.
Biggest changeSee “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” Recent Sales of Unregistered Securities Other than as previously reported in a Current Report on Form 8-K, we did not make any sales of unregistered securities during the quarter ended December 31, 2024.
Holders As of March 1, 2024, there were approximately nine holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Holders As of March 1, 2025, there were approximately eleven holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers There were no repurchases of shares of common stock made during the quarter ended December 31, 2023. Item 6. [Reserved ] 72
Purchases of Equity Securities by the Issuer or Affiliated Purchasers There were no repurchases of shares of common stock made during the quarter ended December 31, 2024. Item 6. [Reserved ] 73

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease of $27.1 million was due primarily to the following: • a decrease in personnel-related costs of $4.7 million, primarily due to a decrease of $13.3 million resulting from the capitalization of certain labor costs into inventory beginning with the commercialization of VOWST, and a decrease of $2.0 million resulting from the receipt of payroll tax credits, partially offset by an increase of $2.5 million in salaries, bonus, and employee benefits expenses, a $5.9 million increase in stock-based compensation expense, which was primarily as a result of options and awards with performance conditions that were achieved during the year following the FDA approval of VOWST, and a $2.2 million increase in employee post-termination benefits due to the Restructuring Plan (see Note 13, Restructuring , to our audited consolidated financial statements included elsewhere in this Annual Report); • a decrease of $30.8 million in expenses related to our VOWST program, primarily due to a decrease in clinical trial costs of $12.6 million, and a decrease of $12.0 million in lab supplies and consumables and facility-related costs, as we have capitalized certain of these costs into inventory in conjunction with the commercialization of VOWST.
Biggest changeThe decrease of $53.0 million was due primarily to the following: • a decrease in personnel-related costs of $36.6 million, primarily due to a decrease of $28.7 million in salaries, bonus, and employee benefits expenses as a result of the restructuring plan implemented in 2023, and a decrease of $8.3 million in stock-based compensation expense, which was primarily as a result of options and awards with performance conditions that were achieved during the three months ended June 30, 2023 (with no comparable performance options vesting in 2024), partially offset by an increase of $0.4 million in payroll taxes primarily related to tax credits we received during the three months ended March 31, 2023; • a decrease of $14.3 million in expenses related to our live biotherapeutics platforms and research and development operations which includes a decrease of $4.2 million primarily due to a $3.6 million reduction in the use of contractors and a decrease in employee travel and expense costs following the implementation of the restructuring plan, a decrease of $2.8 million in lab supplies and consumables, a decrease in consulting expenses of $2.6 million, a decrease of $2.4 million in facilities and depreciation primarily relating to the expense of not renewing the option to lease certain manufacturing 84 space with Flagship Pioneering during the three months ended June 30, 2023, and a decrease of $1.8 million in clinical trial, analytical and other manufacturing costs; • a decrease of $1.0 million in expenses related to our SER-155 program primarily due to a decrease of $0.5 million in analytical testing costs and a decrease of $0.5 million in lab supplies and consumables associated with the completion of the SER-155 Phase 1b study; and • a decrease of $1.1 million in expenses related to our early stage programs due to the decreased investment associated with the restructuring plan.
Non-cash charges consisted of $34.1 million of stock-based compensation expense, loss sharing under the 2021 License Agreement with Nestlé of $5.2 million, $8.9 million related to the amortization of right-of-use assets, $6.2 million of depreciation, $0.9 million of net amortization of premiums related to our investments and amortization of debt issuance costs, and $1.6 million of loss from the extinguishment of the Hercules Credit Facility.
Non-cash charges consisted of $34.1 million of stock-based compensation expense, loss sharing under the 2021 License Agreement with Nestlé of $5.2 million, $8.9 million related to the amortization of right-of-use assets, $6.2 million of depreciation, $0.9 million of net amortization of premiums related to our investments and amortization of debt issuance costs, and $1.6 million of loss from the extinguishment of the credit facility with Hercules.
Changes in our operating assets and liabilities during the year ended December 31, 2023 primarily consisted of a $29.1 million increase in prepaid expenses and other current and non-current assets, an increase in inventories of $29.6 million and an increase in collaboration receivable - related party of $8.7 million, as a result of the commencement of our commercial operations since the FDA approval of VOWST in April 2023, an $11.6 million decrease in accounts payable, a $1.3 million decrease in deferred revenue and a $2.2 million decrease in operating lease liabilities, partially offset by a $15.8 million increase in accrued 89 expenses and other liabilities and an increase in deferred income - related party of $7.7 million.
Changes in our operating assets and liabilities during the year ended December 31, 2023 primarily consisted of a $29.1 million increase in prepaid expenses and other current and non-current assets, an increase in inventories of $29.6 million and an increase in collaboration receivable - related party of $8.7 million, as a result of the commencement of our commercial operations since the FDA approval of VOWST in April 2023, an $11.6 million decrease in accounts payable, a $1.3 million decrease in deferred revenue and a $2.2 million decrease in operating lease liabilities, partially offset by a $15.8 million increase in accrued expenses and other liabilities and an increase in deferred income - related party of $7.7 million.
In May 2021, we entered into a Sales Agreement, or the 2021 Sales Agreement, with Cowen and Company, LLC, or Cowen, to sell shares of our common stock with aggregate gross sales proceeds of up to $150.0 million, from time to time, through an "at-the-market" equity offering program under which Cowen acts as sales agent.
In May 2021, we entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, to sell shares of our common stock with aggregate gross sales proceeds of up to $150.0 million, from time to time, through an 86 "at-the-market" equity offering program under which Cowen acts as sales agent.
During the year ended December 31, 2023, we sold 7,711,199 shares of common stock under the 2021 Sales Agreement, at an average price of approximately $2.46 per share, raising aggregate net proceeds of approximately $18.2 million after deducting an aggregate commission of approximately 3% and other issuance costs.
During the year ended December 31, 2023, we sold 7,711,199 shares of common stock under the Sales Agreement, at an average price of approximately $2.46 per share, raising aggregate net proceeds of approximately $18.2 million after deducting an aggregate commission of approximately 3% and other issuance costs.
Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $71.7 million, consisting of $103.4 million in proceeds from the issuance of the Oaktree Term Loan, offset by $52.9 million for the repayment of the Hercules Credit Facility.
During the year ended December 31, 2023, net cash provided by financing activities was $71.7 million, consisting of $103.4 million in proceeds from the issuance of the Oaktree Term Loan, offset by $52.9 million for the repayment of the credit facility with Hercules.
We expect to incur losses for the foreseeable future and may never achieve or maintain profitability. ” In addition, if we obtain marketing approval for any more of our product candidates, we expect to incur costs related to product manufacturing and commercialization, including marketing, sales and distribution.
We expect to incur losses for the foreseeable future and may never achieve or maintain profitability. ” In addition, if we obtain marketing approval for any of our product candidates, we expect to incur costs related to product manufacturing and commercialization, including marketing, sales and distribution.
General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting 81 services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We also believe the available study data from cohort 1 suggest that SER-155 administration results in significantly lower incidence rates of gastrointestinal dominations with pathogens of clinical concern, such as Enterococcaceae, Enterobacteriaceae, Streptococcaceae, and Staphylococcaceae .
We believe the available study data from Cohort 1 suggest that SER-155 administration results in significantly lower incidence rates of gastrointestinal dominations with pathogens of clinical concern, such as Enterococcaceae , Enterobacteriaceae , Streptococcaceae , and Staphylococcaceae .
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of collaborations with third parties, public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
If we are unable to raise additional funds through equity, debt financings, or collaborations. When needed, we may be required to delay, limit, reduce or terminate our product development programs or any potential future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational microbiome therapeutic development platform to prioritize future drug targets and to identify opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
In addition, we continue to leverage microbiome pharmacokinetic and pharmacodynamic data from across our clinical and preclinical portfolios, using our reverse translational 74 development platform to prioritize future drug targets and to identify opportunities for combination therapies across various indications, including inflammatory and immune diseases, cancer, and metabolic diseases.
Our Hercules Loan Agreement included and our Oaktree Term Loan includes, and any additional debt financing and preferred equity financing, if available, may involve agreements that include, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Our Hercules Loan and Security Agreement and Oaktree Term Loan included and any additional debt financing and preferred equity financing, if available, may involve agreements that include, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Accordingly, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, are issued.
Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern for 12 months from the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, are issued.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, our shareholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our shareholders’ rights as common stockholders.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights as common stockholders.
Data from the SER-109 ECOSPOR III and ECOSPOR IV Phase 3 trial published in the New England Journal of Medicine (Feuerstadt et al., 2022) and Journal of the American Medical Association (Sims et al., 2023) suggest that microbiome therapeutics have the potential to restructure the gut microbiome and shift the gut metabolic landscape.
Data from the SER-109 ECOSPOR III and ECOSPOR IV Phase 3 trial published in the New England Journal of Medicine (Feuerstadt et al., 2022) and Journal of the American Medical Association (Sims et al., 2023) suggest that live biotherapeutics have the potential to restructure the gut microbiome and shift the gut metabolic landscape.
See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital— We are a commercial-stage company and have incurred significant losses since our inception.
See “Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital— We are a clinical-stage company and have incurred significant losses since our inception.
Oaktree Credit Agreement On April 27, 2023, or the Oaktree Closing Date, we entered into the Oaktree Credit Agreement, among the Company, the subsidiary guarantors from time to time party thereto, the Oaktree Lenders, and the Agent.
Indebtedness Oaktree Credit Agreement On April 27, 2023 (the "Oaktree Closing Date"), we entered into the Oaktree Credit Agreement, among the Company, the subsidiary guarantors from time to time party thereto, the Oaktree Lenders, and the Agent.
As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital or secure a partnership as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
This platform incorporates high-resolution analysis of human clinical data to identify microbiome biomarkers associated with disease and non-disease states; preclinical screening using human cell-based assays and in vitro/ex vivo and in vivo disease models 73 customized for microbiome therapeutics; and microbiological capabilities and a strain library that spans broad biological and functional breadth.
This platform incorporates high-resolution analysis of human clinical data to identify microbiome biomarkers associated with disease and non-disease states; preclinical screening using human cell-based assays and in vitro/ex vivo and in vivo disease models customized for live biotherapeutics; and microbiological capabilities and a strain library that spans broad biological and functional breadth.
As such, the primary purpose of the Share Increase Amendment is to provide us with greater flexibility with respect to managing our common stock in connection with such corporate purposes as may, from time to time, be considered advisable by our Board.
As such, the primary purpose of the Share Increase Amendment was to provide us with greater flexibility with respect to managing our common stock in connection with such corporate purposes as may, from time to time, be considered advisable by our board of directors.
To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses. Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022.
To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses. 83 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023.
Additional debt or preferred equity financing may also require the issuance of warrants, which could potentially dilute our shareholders’ ownership interest.
Additional debt or preferred equity financing may also require the issuance of warrants, which could potentially dilute our stockholders’ ownership interest.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in irritable bowel disease, or IBD, and programmatic objectives that are supported through a partnership with the Crohn’s and Colitis Foundation, or CCF.
Additional efforts in the early-stage portfolio are focused on the SER-301 program in inflammatory bowel disease, or IBD, with programmatic objectives supported through a partnership with the Crohn’s and Colitis Foundation, or CCF.
Our primary focus of research and development since inception has been on our reverse translational microbiome therapeutics platform and the subsequent development of our product candidates.
Our primary focus of research and development since inception has been on our reverse translational platform and the subsequent development of our product candidates.
On the Oaktree Closing Date, we issued to the Oaktree Lenders of such Tranche A Loan warrants to purchase 647,589 shares (subject to certain adjustments) of our common stock, or the Warrant, at an exercise price per share of $6.69. The Tranche A Warrant is immediately exercisable and the exercise period expires on April 26, 2030.
On the Oaktree Closing Date, we issued to the Lenders warrants to purchase 647,589 shares (subject to certain adjustments) of our common stock (the "Tranche A Warrant"), at an exercise price per share of $6.69. The Tranche A Warrant was immediately exercisable and the exercise period expires on April 26, 2030.
Since our inception in October 2010, we have devoted substantially all of our resources to developing our programs, platforms, and technologies, building our intellectual property portfolio, developing our supply chain, business planning, raising capital and providing general and administrative support for these operations. Other than VOWST, our product candidates are still in preclinical development or early-stage discovery.
Since our inception in October 2010, we have devoted substantially all of our resources to developing our programs, platforms, and technologies, building our intellectual property portfolio, developing our supply chain, business planning, raising capital and providing general and administrative support for these operations. Our product candidates are in early-stage clinical or preclinical development.
Upon the funding of each of the Tranche B Loan and the Tranche C Loan, we are required to issue to the Oaktree Lenders of the Oaktree Term Loan warrants to purchase 264,922 shares (subject to certain adjustments) of the Company’s common stock on each such funding date at an exercise price equal to the trailing volume weighted average price of the Company’s common stock for the 30 trading days prior to the funding date for each tranche, or the Tranche B Warrant, and the Tranche C Warrant, respectively, and together the Additional Warrants.
Upon the funding of each of the Tranche B Loan and the Tranche C Loan, we were required to issue to the Lenders warrants to purchase 264,922 shares (subject to certain adjustments) of our common stock on each such funding date at an exercise price equal to the trailing volume weighted average price of our common stock for the 30 trading days prior to the funding date for each tranche (the "Tranche B Warrant" and the "Tranche C Warrant", respectively, and together the "Additional Warrants").
SER-155 was designed using our reverse translational microbiome therapeutics development platform and the rationale for this program is based in part on published clinical evidence from our collaborators at Memorial Sloan Kettering Cancer Center showing that allo-HSCT patients with decreased diversity of commensal microbes and pathogen domination in the gastrointestinal tract were significantly more likely to die due to infection and/or lethal GvHD (Peled et al., 2020).
The rationale for this program is based in part on published clinical evidence from our collaborators at Memorial Sloan Kettering Cancer Center showing that allo-HSCT patients with decreased diversity of commensal microbes and pathogen domination in the gastrointestinal tract were significantly more likely to die due to infection and/or lethal GvHD (Peled et al., 2020).
As of December 31, 2023, we also had federal and state research and development tax credit carryforwards of $45.1 million and $7.7 million, respectively, net of uncertain tax position reserves, which begin to expire in 2031 and 2028, respectively. The federal research and development tax credits include an orphan drug credit carryforward of $25.9 million.
As of December 31, 2024, we also had federal and state research and development 82 tax credit carryforwards of $46.5 million and $8.1 million, respectively, net of uncertain tax position reserves, which begin to expire in 2031 and 2028, respectively. The federal research and development tax credits include an orphan drug credit carryforward of $25.9 million.
Borrowings under the Oaktree Term Loan bear interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (subject to a 2.500% floor and a 5.000% cap), plus an applicable margin of 7.875%, payable quarterly in arrears.
The Oaktree Term Loan had a maturity date of April 27, 2029. Borrowings under the Oaktree Term Loan bore interest at a rate per annum equal to the three-month term Secured Overnight Financing Rate (subject to a 2.500% floor and a 5.000% cap), plus an applicable margin of 7.875%, payable quarterly in arrears.
The decrease in operating lease liabilities was due to the cash payment of lease obligations. Investing Activities During the year ended December 31, 2023, net cash provided by investing activities was $10.6 million, primarily due to maturities of investments of $23.0 million, partially offset by purchases of investments of $4.4 million and purchases of property and equipment of $8.0 million.
During the year ended December 31, 2023, net cash provided by investing activities was $10.6 million, primarily due to maturities of investments of $23.0 million, partially offset by purchases of investments of $4.4 million and purchases of property and equipment of $8.0 million.
In performing this analysis, we excluded certain elements of our operating plan that cannot be considered probable of occurring. Under the 74 applicable accounting standards, the receipt of potential funding from future equity issuances cannot be considered probable, as these events are outside our control.
In performing this analysis, we excluded certain elements of our operating plan that cannot be considered probable of occurring. Under the applicable accounting standards, the receipt of contingent payments from the Transaction and any future equity issuances cannot be considered probable, as these events are outside our control.
Our research and development and general and administrative expenses may continue to increase and, as a result, we will need additional capital to fund our operations, which we may obtain from additional financings, public offerings, research funding, additional collaborations, contract and grant revenue or other sources. 84 On February 22, 2024, our board of directors adopted a resolution to amend the Restated Certificate of Incorporation, subject to stockholder approval at our annual meeting of stockholders to be held in 2024, by increasing the number of authorized shares of our common stock from 240,000,000 shares to 360,000,000 shares, or the Share Increase Amendment.
We will need additional capital to fund our operations, which include our research and development and general and administrative expenses, which we may obtain from additional financings, public offerings, research funding, additional collaborations, contract and grant revenue or other sources. 85 On February 22, 2024, our board of directors adopted a resolution to amend the Restated Certificate of Incorporation, subject to stockholder approval, to increase the number of authorized shares of our common stock from 240,000,000 shares to 360,000,000 shares, or the Share Increase Amendment.
We will need to generate significant revenue to achieve profitability, and we may never do so. As of December 31, 2023, we had cash and cash equivalents totaling $128.0 million.
We will need to generate significant revenue to achieve profitability, and we may never do so. As of December 31, 2024, we had cash and cash equivalents totaling $30.8 million.
We have built and deploy a reverse translational platform and knowledge base for the discovery and development of microbiome therapeutics, and maintain extensive proprietary know-how that may be used to support future research and development efforts.
We have built and deploy a reverse translational platform and knowledge base, which we call our MbTx Platform, for the discovery and development of live biotherapeutics, and maintain extensive proprietary know-how that may be used to support future research and development efforts.
Additional data show that SER-109 rapidly reduced the abundance of bacteria associated with common antibiotic resistance genes, or ARGs, and reduced ARG abundance in the gut (Straub et al., 2023). Collectively, we believe these data suggest the potential for microbiome therapeutics to restore colonization resistance and ultimately to reduce infections and antimicrobial resistance.
Additional data show that SER-109 rapidly reduced the abundance of bacteria associated with common antibiotic resistance genes, or ARGs, and reduced ARG abundance in the gut (Straub et al., 2023). Collectively, we believe these data suggest the potential for live biotherapeutics to prevent the colonization and overgrowth of pathogens that can establish in the gut and ultimately to reduce infections.
We may also continue to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing rules and the requirements of the Securities and Exchange Commission, director and officer insurance costs and investor and public relations costs.
General and administrative expenses may increase in the future as we continue to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing rules and the requirements of the SEC, director and officer insurance costs and investor and public relations costs.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing 89 approval for our current or future product candidates and achieve product sales.
Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates.
Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events.
Under applicable accounting standards, we have the responsibility to evaluate whether conditions or events raise substantial doubt about our ability to meet our future financial obligations as they become due within 12 months after the date the consolidated financial statements are issued.
We expect that our operating losses and negative cash flows will continue for the foreseeable future. Under applicable accounting standards, we have the responsibility to evaluate whether conditions or events raise substantial doubt about our ability to meet our future financial obligations as they become due within 12 months after the date the consolidated financial statements are issued.
This platform and knowledge base enables both identification of specific microbes and microbial metabolites/peptides that are associated with disease and the design of therapeutic consortia of bacteria optimized for specific pharmacological properties. In addition, we own a valuable intellectual property estate related to the development and manufacture of microbiome therapeutics.
This platform and knowledge base enables identification of specific microbes, microbial genes, and microbial metabolites/peptides associated with disease and the design of therapeutic consortia of bacteria for specific pharmacological properties to restructure the gut microbiome and modulate functional pathways associated with disease. In addition, we own a valuable intellectual property estate related to the development and manufacture of live biotherapeutics.
As of December 31, 2023, we had federal and state net operating loss carryforwards of $527.1 million and $504.2 million, respectively, both of which begin to expire in 2035.
As of December 31, 2024, we had federal and state net operating loss carryforwards of $580.1 million and $543.6 million, respectively, both of which begin to expire in 2035.
See Collaboration (Profit) Loss Sharing - related party below, and also “–Liquidity and Capital Resources.” Operating Expenses Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs. 77 Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, which include: • expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations that manufacture drug products for use in our preclinical and clinical trials; • salaries, benefits and other related costs, including stock-based compensation expense, for personnel in our research and development functions; • costs of outside consultants, including their fees, stock-based compensation and related travel expenses; • the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; • costs related to compliance with regulatory requirements; and • facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates and other obligations, which include: • expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations that manufacture drug products for use in our preclinical and clinical trials; • salaries, benefits and other related costs, including stock-based compensation expense, for personnel in our research and development functions; • costs of outside consultants, including their fees, stock-based compensation and related travel expenses; • the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; • costs related to compliance with regulatory requirements; • facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs; and • labor and passthrough costs, reimbursable by Nestlé, incurred in performing duties under the TSA.
We believe the Infection Protection approach may be replicable across different bacterial pathogens to develop microbiome therapeutics with the potential to protect a range of medically compromised patients from infections, including pathogens that harbor antimicrobial resistance, or AMR.
We believe this approach may be replicable across different bacterial pathogens to develop live biotherapeutics with the potential to protect a range of medically compromised patients from infections, including pathogens that harbor AMR.
We also received $0.9 million from the issuance of common stock associated with the exercise of stock options, and $2.2 million in connection with the issuance of common stock under our 2015 Employee Stock Purchase Plan, or ESPP.
We also received $0.9 million from the issuance of common stock associated with the exercise of stock options, and $2.2 million in connection with the issuance of common stock under our 2015 Employee Stock Purchase Plan, or ESPP. Funding Requirements Our expenses may increase in connection with our ongoing clinical development activities and research and development activities.
Our board of directors believes it is in the best interests of us and our stockholders to increase our authorized shares of common stock in order to have additional shares available for use as our board of directors deems appropriate or necessary.
Our board of directors recommended that our stockholders approve the Share Increase Amendment because they believed it was in the best interests of us and our stockholders to increase our authorized shares of common stock in order to have additional shares available for use as our board of directors deems appropriate or necessary.
Such arrangements include those related to our lease commitments, long-term debt, and long-term manufacturing agreements. Lease Commitments Our lease commitments reflect payments due under our operating lease agreements for our corporate headquarters, office and laboratory space, and donor collection facilities, that expire between November 2028 and April 2033.
Lease Commitments Our lease commitments reflect payments due under our operating lease agreements for our corporate headquarters, office and laboratory space, and donor collection facilities, that expire between November 2028 and April 2033.
Cohort 1 was designed to assess safety and drug pharmacology including the engraftment of drug bacteria in the gastrointestinal tract. Cohort 1 included 13 subjects who received any dosing of the SER-155 regimen, with 11 of these subjects subsequently receiving an allo-HSCT. Nine subjects had evaluable samples for microbiome data analysis.
Cohort 1 was designed to assess safety and drug pharmacology, specifically the drug strain engraftment in the gastrointestinal tract. Cohort 1 included 13 subjects who received any dosing of the SER-155 regimen, with 11 subjects subsequently receiving an allo-HSCT.
Between December 31, 2023 and February 29, 2024, we sold 15,366,630 shares of common stock under the 2021 Sales Agreement, at an average price of approximately $1.23 per share, raising aggregate net proceeds of approximately $18.5 million after deducting an aggregate commission of approximately 3% and other issuance costs.
Between December 31, 2024 and January 31, 2025, we sold 1,096,134 shares of common stock under the 2021 Sales Agreement, at an average price of approximately $0.93 per share, raising aggregate net proceeds of approximately $1 million after deducting an aggregate commission of approximately 3% and other issuance costs.
Interest Expense Interest expense consists of interest incurred under our loan and security agreement with Hercules Capital, Inc. and Oaktree, including the accretion of the discount on our Oaktree Term Loan.
Interest Expense Interest expense consists of interest incurred under our loan and security agreement, or the Hercules Loan and Security Agreement, with Hercules Capital, Inc., or Hercules.
During the year ended December 31, 2022, net cash used in operating activities was $228.8 million, primarily due to a net loss of $250.2 million and changes in our operating assets and liabilities of $18.4 million, partially offset by non-cash charges of $39.7 million.
During the year ended December 31, 2023, net cash used in operating activities was $117.4 million, primarily due to a net loss of $113.7 million and changes in our operating assets and liabilities of $59.0 million, partially offset by non-cash charges of $55.3 million.
Our future capital requirements will depend on many factors, including: • the impact of the Restructuring Plan, including its anticipated benefits; • the impact of continued increase in inflation rates or interest rates; • the progress and results of our clinical studies and preclinical development; • the cost of manufacturing our product candidates; • the costs, timing and outcome of regulatory review of our product candidates and research activities; • the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; • the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; • the effect of competing technological and market developments; and • the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
Our future capital requirements will depend on many factors, including: • the total amount of the Second Installment Payment and Milestone Payments we may receive from the Transaction, and the amounts payable or due under the Profit Sharing Payments; • the cost of manufacturing our product candidates; • the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product candidates; • the costs, timing and outcome of regulatory review of our product candidates and research activities; • the costs, timing and revenue, if any, of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; • the effect of competing technological and market developments; and • the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
During the year ended December 31, 2022, we sold 655,000 shares of common stock under the 2021 Sales Agreement, at an average price of approximately $7.26 per share, raising aggregate net proceeds of approximately $4.4 million after deducting an aggregate commission of approximately 3%.
During the year ended December 31, 2024, we sold 20,617,028 shares of common stock under the Sales Agreement, at an average price of approximately $1.18 per share, raising aggregate net proceeds of approximately $23.5 million after deducting an aggregate commission of approximately 3%.
As of December 31, 2023, our contractual commitments for our leases were $177.4 million, of which $19.9 million is expected to be paid within one year, and $157.5 million will be paid over the remaining term of such leases. Our lease commitments also include $0.8 million for leases that had not yet commenced as of December 31, 2023.
As of December 31, 2024, our contractual commitments for our leases were $137.9 million, of which $19.4 million is expected to be paid within one year, and $118.4 million will be paid over the remaining term of such leases. We do not have any commitment for leases that had not yet commenced as of December 31, 2024.
In December 2023, we received Fast Track Designation for SER-155 to reduce the risk of infection and GvHD in allo-HSCT patients.
In December 2023, we received Fast Track Designation for SER-155 to reduce the risk of infection and GvHD in allo-HSCT patients. SER-155 Phase 1b Study SER-155 has been evaluated in a Phase 1b study in patients undergoing allo-HSCT. The SER-155 Phase 1b study included two cohorts.
Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives. Adequate additional funds may not be available to us on acceptable terms, or at all.
In addition, our product candidates, if approved, may not achieve commercial success. Additionally, part of our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
We are obligated to pay the Oaktree Lenders an exit fee equal to 1.50% of the aggregate amount of the Oaktree Term Loan funded, such exit fee to be due and payable upon the earliest to occur of (1) the Oaktree Maturity Date, (2) the acceleration of the outstanding Oaktree Term Loan, and (3) the prepayment of the outstanding Oaktree Term Loan.
We were obligated to pay the Lenders an exit fee equal to 1.50% of the aggregate amount of the Oaktree Term Loan funded, such exit fee was due and paid upon the prepayment of the outstanding Oaktree Term Loan.
We believe these initial SER-155 Phase 1b study results provide encouraging evidence to support further development of SER-155 to potentially reduce enteric-derived infections, resulting bloodstream infections, and GvHD in individuals undergoing allo-HSCT for cancers and other serious conditions.
We further believe the resulting Cohort 2 data, together with the Cohort 1 SER-155 Phase 1b study results provide encouraging evidence to support further development of SER-155 to potentially reduce GI associated bloodstream and AMR infections as well as increase immune tolerance in individuals undergoing allo-HSCT for cancers and other serious conditions.
We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
These estimates and judgments, in and of themselves, could materially impact the consolidated financial statements and disclosures based on varying assumptions. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies.
Financial Operations Overview Revenue To date we have not generated any revenues from the sale of products. Our revenues have been derived primarily from our agreements with our collaborators.
Financial Operations Overview Revenue To date we have not generated any revenues from the sale of products. Our revenues have been derived primarily from our agreements with our collaborators. See “–Liquidity and Capital Resources.” Operating Expenses Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs.
Changes in our operating assets and liabilities during the year ended December 31, 2022 primarily consisted of a $12.6 million increase in prepaid expenses and other current and non-current assets, a $7.1 million decrease in deferred revenue and a $4.2 million decrease in operating lease liabilities, partially offset by a $3.3 million increase in accrued expenses and other liabilities and a $2.2 million increase in accounts payable.
Changes in our operating assets and liabilities during the year ended December 31, 2024 consisted of a $1.0 million decrease in prepaid expenses and other current and non-current assets, a decrease in inventories of $33.8 million in connection with the sale of VOWST Business to SPN, a $2.9 million decrease in accounts payable, a decrease in deferred income - related party of $4.1 million, a decrease in collaboration receivable - related party of $8.7 million, a decrease in operating lease liabilities of $6.3 million, and a $10.2 million decrease in accrued expenses and other liabilities, partially offset by an increase in accrued liabilities due to SPN - related party of $15.7 million and an increase in accounts receivable due from SPN - related party of $2.1 million.
Additionally, market volatility resulting from macroeconomic conditions, the COVID-19 pandemic, or other factors could also adversely impact our ability to access capital as and when needed.
Adequate additional funds may not be available to us on acceptable terms, or at all. Additionally, market volatility resulting from macroeconomic conditions, or other factors could also adversely impact our ability to access capital as and when needed.
Infection Protection and SER-155 We believe that the scientific and clinical data from our SER-109 program validate our novel approach of using microbiome therapeutics to decolonize pathogens, resulting in reduced rate of infections in medically compromised patients.
All such employees have transferred to SPN as of December 31, 2024. 77 Infection Risk Reduction We believe that the scientific and clinical data from our SER-109 program validate our novel approach of using live biotherapeutics to decolonize pathogens and improve epithelial barrier integrity, resulting in reduced rate of infections in medically compromised patients.
The ability to obtain sufficient additional equity or debt financing with terms favorable or acceptable to us cannot be considered probable, as these events are outside of our control. Based on our currently available cash resources, we will require additional funding prior to the end of 2024.
The ability to obtain the Second Installment Payment and sufficient additional equity, collaborations or other financing with terms favorable or acceptable to us cannot be considered probable, as these events are outside of our control.
Recently Issued and Adopted Accounting Pronouncements For a discussion of recent accounting standards see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report. 92
These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. Recently Issued and Adopted Accounting Pronouncements 90 For a discussion of recent accounting standards see Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements included in this report.
We anticipate an overall decrease in research and development expenses beginning in 2024, as we expect the Restructuring Plan to significantly reduce research and development activities other than the completion of the SER-155 Phase 1b study.
We anticipate an overall decrease in research and development expenses in 2025 as compared to 2024, following the sale of VOWST Business, completion of the Phase 1b study of SER-155 in allo-HSCT, development activities other than the completion of the SER-155 Phase 1b study, and costs associated with preparing for the next study of SER-155 in allo-HSCT.
Year Ended December 31, 2023 2022 (in thousands) Cash used in operating activities $ (117,354 ) $ (228,816 ) Cash provided by investing activities $ 10,582 $ 82,428 Cash provided by financing activities $ 71,705 $ 129,602 Net decrease in cash, cash equivalents and restricted cash $ (35,067 ) $ (16,786 ) Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $117.4 million, primarily due to a net loss of $113.7 million and changes in our operating assets and liabilities of $59.0 million, partially offset by non-cash charges of $55.3 million.
Year Ended December 31, 2024 2023 (in thousands) Cash used in operating activities $ (148,609 ) $ (117,354 ) Cash provided by investing activities $ 142,293 $ 10,582 Cash (used in) provided by financing activities $ (90,372 ) $ 71,705 Net decrease in cash, cash equivalents and restricted cash $ (96,688 ) $ (35,067 ) Operating Activities During the year ended December 31, 2024, net cash used in operating activities was $148.6 million, primarily due to a net income of $0.1 million and non-cash income of $83.2 million, reduced by changes in our operating assets and liabilities of $65.5 million.
A discussion regarding our financial condition and results of operations for the years ended December 31, 2023 and 2022, including a year-to-year comparison between 2023 and 2022, is presented below.
A discussion regarding our financial condition and results of operations for the years ended December 31, 2024 and 2023, including a year-to-year comparison between 2024 and 2023, is presented below. Overview We are a clinical-stage company focused on improving patient outcomes in medically vulnerable populations through novel live biotherapeutics.
Accordingly, management has concluded that these circumstances raise substantial doubt about our ability to continue as a going concern. Contractual Obligations and Commitments We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.
Contractual Obligations and Commitments We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to our lease commitments.
Funding Requirements Our expenses may increase substantially in connection with our ongoing clinical development activities and our research and development activities. In addition, we expect to continue to incur additional costs associated with operating as a public company.
In addition, we expect to continue to incur additional costs associated with operating as a public company.
We anticipate that our expenses will increase substantially if and as we: • advance commercialization of VOWST; • continue the clinical development of SER-155 to reduce incidences of gastrointestinal infections, bloodstream infections and GvHD in patients receiving allo-HSCT; • continue evaluating preclinical stage programs to reduce incidence of infection, in indications such as cancer neutropenia, chronic liver disease, solid organ transplant, and antimicrobial resistant infections more broadly; • continue translational research activities, informed by the SER-287 Phase 2b and SER-301 Phase 1b study data, to evaluate the potential to utilize biomarker-based patient selection and stratification in future clinical development efforts; • make strategic investments in our research discovery and development platforms and capabilities to advance our priority programs; 90 • make strategic investments in manufacturing capabilities; • maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property; • potentially establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval; • perform our obligations under our agreements with our collaborators; • seek to obtain regulatory approvals for our product candidates; and • experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
We anticipate that our future expenses will increase if and as we: • continue the clinical development of SER-155 in patients undergoing allo-HSCT and for other medically vulnerable populations; • perform our obligations under the TSA; • make strategic investments in manufacturing capabilities; • maintain and augment our extensive proprietary live biotherapeutic drug development know-how that may be used to support future research and development efforts, including our intellectual property portfolio and intellectual property that we may opportunistically acquire; • establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any other products for which we may obtain regulatory approval; • perform our obligations under any agreements with collaborators; • seek to obtain regulatory approvals for our product candidates; and • experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
Our highest priority is the commercialization of VOWST in the United States, the first orally administered microbiome therapeutic approved by the FDA. We launched VOWST in the United States with our collaborator, Nestlé Health Science, or Nestlé, in June 2023.
We launched VOWST in the United States with our then collaborator, Nestlé Health Science, in June 2023.
If certain VOWST net sales targets are met, the applicable margin will be reduced from 7.875% to 7.50% through the Oaktree Maturity Date. We are required to make quarterly interest-only payments on the Oaktree Term Loan for the first three years after the Oaktree Closing Date.
We were required to make quarterly interest-only payments on the Oaktree Term Loan for the first three years after the Oaktree Closing Date.
For a further description of the Hercules Credit Facility, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
For a further description of the Oaktree Term Loan, see Note 9, Notes Payable , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 87 Cash Flows The following table summarizes our sources and uses of cash, cash equivalents and restricted cash for the years ended December 31, 2024 and 2023.
As of December 31, 2023, we had cash and cash equivalents totaling $128.0 million and an accumulated deficit of $978.2 million. For the year ended December 31, 2023, we incurred a net loss of $113.7 million, and used cash in operations of $117.4 million. We expect that our operating losses and negative cash flows will continue for the foreseeable future.
As of December 31, 2024, we had cash and cash equivalents totaling $30.8 million and an accumulated deficit of $978.1 million. For the year ended December 31, 2024, we incurred a net loss from continuing operations of $125.8 million, and used cash in operations of $148.6 million.
Our ability to generate collaboration profit or product revenue sufficient to achieve profitability will depend heavily on the commercial success of VOWST, as well as the successful development and eventual commercialization of one or more of our product candidates. Since our inception, we have incurred significant operating losses.
Our ability to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Since our inception, we have incurred significant operating losses. Our net loss from continuing operations was $125.8 million, $190.1 million, and $183.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The Oaktree Credit Agreement establishes a term loan facility of $250.0 million, consisting of (i) $110.0 million, or the Tranche A Loan, funded on the Closing Date, (ii) $45.0 million, or the Tranche B Loan, that the Company may borrow subject to certain conditions, (iii) $45.0 million, or the Tranche C Loan, that the Company may borrow subject to certain conditions, and (iv) $50.0 million, or the Tranche D Loan, available in Oaktree’s sole discretion.
The Oaktree Credit Agreement established a term loan facility of $250.0 million (the "Oaktree Term Loan"), consisting of (i) $110.0 million, or the Tranche A Loan, funded on the Oaktree Closing Date.
We believe this Infection Protection approach may be replicable in protecting a range of medically compromised patients from infections seeded by the gut microbiome and resulting downstream clinical sequelae. We believe this approach may also enable us to reduce antimicrobial resistant infections, which the World Health Organization declared as a top ten global public health threat facing humanity.
We believe this approach may also enable us to reduce antimicrobial resistant infections, or AMR, which the World Health Organization declared as a top ten global public health threat facing humanity, and with estimates that yearly deaths may reach 10 million by 2050, putting mortality due to AMR on par with deaths due to cancer.
We may voluntarily prepay the outstanding Oaktree Term Loan, subject to a customary make-whole for the first two years following the Oaktree Closing Date plus 4.0% of the principal amount of the Oaktree Term Loan prepaid, and thereafter a prepayment premium equal to (i) 4.0% of the principal amount of the Oaktree Term Loan prepaid, if prepaid after the second anniversary of the Oaktree Closing Date through and including the third anniversary of the Oaktree Closing Date, (ii) 2.0% of the principal amount of the Oaktree Term Loan if prepaid after the third anniversary of the Oaktree Closing Date through and including the fourth anniversary of the Oaktree Closing Date, (iii) 1.0% of the principal amount of the Oaktree Term Loan if prepaid after the fourth anniversary of the Oaktree Closing Date through 88 and including the fifth anniversary of the Oaktree Closing Date, with no prepayment premium due after the fifth anniversary of the Oaktree Closing Date through the Oaktree Maturity Date.
Such prepayment was subject to a customary make-whole for the first two years following the Oaktree Closing Date plus 4.0% of the principal amount of the Oaktree Term Loan prepaid.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−2 removed0 unchanged
Biggest changeHowever, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations. As of December 31, 2023, we had outstanding borrowings under the Oaktree Term Loan.
Biggest changeHowever, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.
Item 7A. Quantitative and Qu alitative Disclosures about Market Risk Interest Rate Fluctuation Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2023, our cash and cash equivalents consisted of cash and money market accounts. Our interest income is sensitive to changes in the general level of U.S. interest rates.
Item 7A. Quantitative and Qu alitative Disclosures about Market Risk Interest Rate Fluctuation Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2024, our cash and cash equivalents consisted of cash and money market accounts. Our interest income is sensitive to changes in the general level of U.S. interest rates.
Removed
Borrowings under the Oaktree Term Loan bear interest at a rate per annum equal to three-month term Secured Overnight Financing Rate (subject to a 2.500% floor and a 5.000% cap), plus an applicable margin of 7.875%, payable quarterly in arrears.
Removed
An immediate 10% change in the Secured Overnight Financing Rate would not have a material impact on our debt‑related obligations, financial position or results of operations.

Other MCRB 10-K year-over-year comparisons