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Edited Transcript of MCRB earnings conference call or presentation 8-Mar-18 1:00pm GMT

Thomson Reuters StreetEvents

Q4 2017 Seres Therapeutics Inc Earnings Call

Cambridge Mar 9, 2018 (Thomson StreetEvents) -- Edited Transcript of Seres Therapeutics Inc earnings conference call or presentation Thursday, March 8, 2018 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carlo Tanzi

Seres Therapeutics, Inc. - Head of IR & Corporate Communications

* Eric D. Shaff

Seres Therapeutics, Inc. - COO, CFO & Executive VP

* Roger James Pomerantz

Seres Therapeutics, Inc. - Chairman of the Board, CEO and President

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Conference Call Participants

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* Chris Shibutani

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Dae Gon Ha

Leerink Partners LLC, Research Division - Associate

* Mark Alan Breidenbach

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Terence C. Flynn

Goldman Sachs Group Inc., Research Division - MD

* William Tanner

Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the Seres Therapeutics Conference Call. (Operator Instructions) I would now like to introduce your host for today, Carlo Tanzi, Vice President, Investor Relations and Corporate Communications. Please go ahead.

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Carlo Tanzi, Seres Therapeutics, Inc. - Head of IR & Corporate Communications [2]

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Thank you, Victor. Thank you, and good morning. A press release with the company's fourth quarter and full year 2017 financial results and a business update became available at 7:00 a.m. Eastern Time this morning and can be found on the Investors & Media section of the company's website.

I'd like to remind you that we will be making forward-looking statements relating to the prioritization of our assets, our development plans, the ability of ECOSPOR III to support SER-109 approval, the promise and potential impact of any of our microbiome therapeutics or clinical trial data, our plans to initiate clinical studies of SER-287 and immuno-oncology, the timing and results of any clinical studies and the sufficiency of cash to fund operations. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties, which are discussed under the Risk Factors section of our recent SEC filings. Any forward-looking statements made on today's call represent our views as of today only. We may update these statements in the future, but we disclaim any obligation to do so.

On today's call, I'm joined by Dr. Roger Pomerantz, Seres' President, CEO and Chairman; and Eric Shaff, Chief Operating and Financial Officer.

Before I pass the call to Roger, I'd like to mention that we will be participating in 2 upcoming conferences, including Cowen in Boston on March 18 and Oppenheimer in New York on March 23. We will also be planning to host an R&D Investor Day in New York City in May.

Roger?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [3]

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Thanks, Carlo, and thank you all for joining us. During the past year, Seres has continued to make excellent progress in our efforts to advance our microbiome pipeline. Seres has focused on developing new therapeutics for serious human diseases, where dysbiosis of the gastrointestinal microbiome is thought to play a central role. We believe that microbiome therapeutics have the potential to address multiple disease states, and our R&D efforts target therapeutic areas where compelling preclinical and clinical data indicate that the microbiome is important, such as infectious diseases, metabolic diseases and inflammatory and immune diseases, including immuno-oncology.

Let's begin with a recap of Seres' key accomplishments during the past year, and we will then discuss our plans to maximize Seres' assets in 2018 and beyond. 2017 was a productive year for the company with 3 very important accomplishments. Number one, we launched the Phase III pivotal trial of SER-109 for patients with multiply recurrent C. diff infections. Number two, we reported highly encouraging SER-287 Phase Ib clinical study results in ulcerative colitis. And number three, we initiated a field-leading immuno-oncology-focused microbiome therapeutic program in collaboration with MD Anderson and the Parker Institute for Cancer Immunotherapy, 2 leading institutions in the field.

Now let's begin with SER-109. To remind you, based on encouraging preliminary clinical study results, SER-109 has received both Breakthrough and Orphan Drug Designations in the U.S. for the treatment of multiply recurrent C. diff infection. Early last year, we announced our learnings from a comprehensive analysis following our SER-109 Phase II study. In summary, we determined that SER-109 was biologically active as measured by the engraftment of SER-109 bacterial species in patients' microbiomes. However, we also identified 2 key factors that we believe impacted the outcome of the Phase II study. These were: number one, the use of PCR-based C. diff test, which resulted in a high rate of false-positive diagnoses; and number two, the SER-109 dose used in the Phase II study was suboptimal in some patients for the repair of the microbiome rapidly enough to prevent C. diff recurrence. Fortunately, we were able to rapidly address and readily address both of these issues.

Following our SER-109 Phase II study analyses, we met with the FDA to discuss our detailed findings and our plans for further development of SER-109. The FDA discussions were highly productive, and we were very pleased to have obtained alignment on the design of a new study. This new study, termed ECOSPOR III, was designated as a Phase III trial, and the FDA indicated that with compelling results, this study may serve as a single pivotal study supporting SER-109 approval.

ECOSPOR III is a randomized placebo-controlled study in 320 patients with multiply recurrent C. diff infection. The design of the ECOSPOR III incorporates our key learnings from our prior development efforts. We have increased the dose of SER-109 approximately 10-fold as compared to the Phase II. In addition, we have incorporated the more accurate C. diff toxin test as opposed to a PCR-based assay for both patient selection and in-study diagnosis to reduce false positives.

We initiated ECORSPOR III last summer, and we have continued to make progress adding clinical sites in the U.S. and now in Canada and enrolling further patients. The execution of ECORSPOR III remains a top priority for the company.

Now moving to SER-287. SER-287 is a orally administered, biologically sourced drug candidate comprised of commensal bacterial species that reside in the healthy human gastrointestinal tract. Our advanced manufacturing processes isolates and purifies the bacterial spore fraction from human donor material, removing both inert materials and potentially infectious agents in that process. These hardy bacterial spores are metabolically inactive until they reach the ideal germination conditions of the colon, where they transform back into physiologically active and replicating bacteria.

Multiple published randomized placebo-controlled clinical studies support our microbiome development efforts in ulcerative colitis, which have demonstrated that the modulation of the microbiome of ulcerative colitis patients via repetitive fecal microbiota transplants, or FMTs, can result in clinical efficacy.

These studies provide compelling proof-of-concept data supporting our microbiome approach. Mechanistically, our aim with SER-287 is to replace proinflammatory bacterial species that may be elevated in patients with ulcerative colitis with nonpathogenic species found in healthy individuals, and thus alter immunological tone in the gut leading to a decrease in inflammation.

In late 2017, we were very pleased to obtain highly encouraging results from our SER-287 Phase Ib study in patients with ulcerative colitis. These results were also presented last month at the 2018 European Crohn's and Colitis Organization Congress in Vienna. Detailed study results may be found in our most recent corporate presentation.

The SER-287 Ib study was a randomized double-blinded, placebo-controlled multi-regimen trial in 58 subjects with active mild-to-moderate ulcerative colitis, despite use of currently available therapies. Study subjects were assigned to 1 of the 3 SER-287's treatment arms or a placebo arm. This SER-287 arms in this induction study included a daily dosing arm with vancomycin pretreatment, a weekly dosing arm with vancomycin pretreatment and a weekly dosing arm without vancomycin pretreatment. We included vancomycin pretreatment to diminish existing gastrointestinal bacterial species in the inflamed colon, and thereby open an ecological niche to enable more robust engraftment of SER-287 bacterial species.

Indeed, our microbiome analyses of Phase Ib study subjects demonstrated that vancomycin pretreatment followed by SER-287 did result in rapid and in robust engraftment of SER-287 bacterial species. Most importantly, vancomycin pretreatment followed by SER-287 resulted in highly compelling clinical efficacy. In a prespecified method missing data counted as failure, 40% or 6 of 15 patients reached clinical remission as compared to 0%, 0 of 11 in the placebo group. Even in this rather modestly sized study, this result was statistically significant with a p-value of 0.024. In addition to the clinical remission endpoint, we also saw compelling treatment effects based on endoscopic measures.

Moreover, study data demonstrated a dose-dependent response in remission, endoscopic measures and microbiome engraftment with the most meaningful impact observed in patients administered vancomycin pretreatment followed by daily treatment with SER-287 for 8 weeks. We believe that dose-dependent response and consistent data across multiple measures provides additional support for the specific and potent biological effects of SER-287.

We also observed very interesting and important data regarding the duration of SER-287 engraftment. Robust SER-287 engraftment was demonstrated in patients observed at the 4-week post dosing time point. Interestingly, all patients administered 287 who reached clinical remission during the study period remained free of UC flares in follow-ups to 26 weeks after the last dose of SER-287. In subsequent 287 development efforts, we plan to further investigate the potential for microbiome therapy to result in a longer term reset of the microbiome and the potential for corresponding long-term efficacy even after the drug is no longer administered unlike many other small and large molecules now used to treat ulcerative colitis.

The SER-287 safety and tolerability profile observed in the Phase Ib study was very favorable. Phase Ib resulted -- results demonstrated no imbalance in adverse events in SER-287-treated subjects as compared to the placebo arm and there were no drug-related serious adverse events. The favorable SER-287 safety profile observed was consistent with our expectations based on the natural commensal bacteria comprising this therapeutic candidate.

Overall, we were very pleased with the positive SER-287 Phase Ib study results. And we look forward to pursuing continued development of this therapeutic candidate. The level of efficacy observed in our Phase Ib compares quite favorably to currently marketed UC therapeutics as well as in late-stage clinical -- those in late-stage clinical studies. We also believe that SER-287 safety profile may be an important positive attribute as compared to other available treatment options for UC. And of note, the FDA has awarded SER-287 Orphan Drug Designation for pediatric inflammatory bowel disease.

We have been making excellent progress in working to initiate the next SER-287 clinical study. Ulcerative colitis and the broader area of inflammatory bowel disease represent an enormous therapeutic opportunity, but this is also a complex and crowded area for development. And we want to ensure that we are extremely diligent in developing our plans for SER-287.

We've been fortunate to have Dr. Sherry Weigand, an experienced GI clinical scientist, recently join the Seres' clinical team as Vice President. Sherry has deep previous involvement in late-stage development of UC therapeutic candidates, and her expertise will be extremely helpful as we finalize the next steps for SER-287. Over the coming months, we plan to obtain further feedback from the FDA and field-leading experts on the optimal path forward. Our plan remains to initiate a next SER-287 ulcerative colitis clinical study in mid-2018.

We look forward to providing additional updates on this important program in the coming months.

Seres recently obtained preliminary clinical and microbiome results from the SER-262 Phase Ib first-in-human, dose-escalating clinical study in patients with primary C. diff infection. SER-262 is the first rationally designed fermented microbiome therapeutic ever evaluated in patients. We have obtained clinical data from 7 of the 8 planned dose escalation patient cohorts. Each cohort contained -- included 10 patients receiving SER-262 add 2 patients receiving a placebo. All patients received antibiotics to treat the initial C. diff infection before entering this trial.

Regarding SER-262 safety, there were no drug-related serious adverse events reported. It is important to note that we now have results from 4 microbiome clinical studies, including SER-109, SER-287 and now SER-262 and the available data suggests that our natural commensal bacterial-based microbiome therapeutic approach has a favorable safety and tolerability profile as compared to other classes of pharmaceutical approaches to treat human disease. Moreover, we expect the safety profile of microbiome therapeutics to be beneficial in working with regulatory agencies and in expediting further development paths.

Based on the first 7 patient cohorts in the SER-262 study, no relevant differences in the relative risk of recurrence rates were observed in the patients administered 262 as compared to placebo. However, this first-in-human Phase Ib study was not powered to detect a statistically significant difference in recurrence rates. A small group of placebo-treated patients were included in the study, and in this group, no recurrences were observed.

Of note though, a quite low C. diff recurrence rate was observed in patients treated with vancomycin and SER-262 as compared to those treated with metronidazole and 262, 4% versus 31%, respectively.

This difference was highly statistically significant with a p-value of 0.0049. The medical literature suggests a recurrence rate of about 25% in patients treated solely with vancomycin for primary C. diff infection.

Our data suggests that treatment with vancomycin followed by SER-262 results in a more robust and kinetically more rapid engraftment, and thus may lead to corresponding clinical efficacy. This new and interesting finding will be further evaluated to inform future development efforts.

Preliminary SER-262 microbiome analyses have also been conducted on the first 5 lowest dose cohorts to assess drug pharmacokinetics. Our microbiome data demonstrated the engraftment of a majority of SER-262 derived strains in the microbiomes of patients receiving SER-262 in this trial. It is important to note that this is the first time fermented commensal strains of bacteria have ever been demonstrated to engraft in humans. In patients where SER-262 engraftment was demonstrated, broader microbiome restructuring changes were also observed, indicating that a limited number of engrafting strains may cause more global changes to the human microbiome.

As previously mentioned, we have also observed interesting microbiome profile differences based on the antibiotics that were used to treat each patient's C. diff infection, with vancomycin leading to both more rapid and more robust engraftment of SER-262 bacterial strains as compared to metronidazole. More detailed microbiome and metabolomic analyses remain ongoing. These proprietary and unique human data will be highly informative for the future development of SER-262 and other rationally designed microbiome therapeutic candidates including, but not limited to, SER-301 for inflammatory bowel disease, IBD, and SER-155 for hematopoietic stem cell transplants.

Transitioning now to our immuno-oncology-focused efforts, another high priority area where Seres made substantial progress during the past year. In short, our objective with immuno-oncology microbiome therapeutics is to modify the human microbiome to meaningfully increase the proportion of patients who respond to checkpoint inhibitors, which is currently only about 1/3. Multiple published studies provide preclinical and clinical evidence demonstrating that the composition of bacteria in the gastrointestinal microbiome impacts the immunological response to checkpoint inhibitor therapy.

In addition, our SER-287 ulcerative colitis clinical data provides supportive clinical evidence proving that modulation of the microbiome may have an important immunological impact. Late last year, we announced a key collaboration with the MD Anderson Cancer Center and the Parker Institute for Cancer Immunotherapy to rapidly advance our immuno-oncology programs. Specifically, through this collaboration, we plan to initiate a randomized placebo-controlled trial examining the impact of microbiome therapy on patients' responses to checkpoint inhibitors. Together with our collaborators, we made substantial progress designing a planned clinical trial. We anticipate evaluating 60 patients with advanced metastatic melanoma, where all individuals will be treated with an approved checkpoint inhibitor. Study arms will include adjunctive therapy with either placebo, a microbiome candidate derived from a complete responder to checkpoint inhibitor therapy or a spore-based microbiome candidate derived from a healthy donor. The study will evaluate safety and tolerability as well as preliminary efficacy as measured by immunological and clinical response.

We expect the microbiome and clinical data obtained from this study to provide highly valuable information that will be used to design subsequent immuno-oncology-focused product compositions and study designs. We have already had initial dialogues with the FDA. Together with our collaborators, we plan to finalize the study design and initiate this trial later this year.

I'll now pass the call to Eric, who will review our recent financial performance.

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Eric D. Shaff, Seres Therapeutics, Inc. - COO, CFO & Executive VP [4]

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Thanks, Roger, and good morning, everyone. Seres reported a net loss of $89.4 million for the full year of 2017 as compared to a net loss of $91.6 million for the prior year. The company had a net loss of $29 million for the fourth quarter of 2017 as compared to a net loss of $25.3 million for the same period in 2016.

The fourth quarter net loss of was driven primarily by clinical and development expenses, personnel expenses and ongoing development of the company's microbiome therapeutics platform. The fourth quarter net loss figure was inclusive of $3.1 million in recognized revenue associated with the company's collaboration with Nestlé Health Science.

Research and development expenses for the fourth quarter were $24 million as compared to $20.3 million for the same period in 2016. The R&D expense was primarily related to Seres' microbiome therapeutics platform, the clinical development of SER-109, SER-262 and SER-287 as well as the company's immuno-oncology preclinical program.

General and administrative expenses for the fourth quarter were $8.8 million as compared to $8.5 million for the same period in the prior year. G&A expenses were primarily due to headcount, professional fees and facility costs.

The decrease in our cash, cash equivalents and investments balance during the quarter was $21.3 million. Seres ended the fourth quarter with approximately $150 million in cash, cash equivalents and investments.

We have revised and extended our projection regarding cash balance -- cash guidance. Cash resources are expected to fund operating expenses and capital expenditure requirements, excluding cash inflows or outflows from future business development activities or potential incoming milestone payments through Q1 2019. Seres is eligible to receive a substantial milestone payment that is not considered in the financial guidance update associated with the planned initiation of the next SER-287 clinical study.

I'll now pass the call back over to Roger.

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [5]

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Thanks, Eric. As we conclude our remarks, I would like to spend just a few minutes discussing Seres' R&D efforts and our plan to maximize the value of our pipeline during 2018 and beyond. Since Seres was founded over 5 years ago, substantial progress has been made in the emerging field of microbiome therapeutics. Our company has directly led the opening and initial progress of this new field in medicine. The science -- the scientific evidence supporting the role that the microbiome has on human health continues to grow, and there is now compelling biological and increasingly clinical data linking the microbiome with many serious human diseases. Our clinical data have demonstrated for the first time that the modulation of the human microbiome can impact the chronic inflammatory condition, ulcerative colitis. We are still in the early stages of discovering the full role and therapeutic potential of the human microbiome. We remain absolutely convinced that in the coming years as the maturation of the microbiome field continues, we will see additional compelling clinical microbiome therapeutic data in many other serious human diseases as well.

Seres has had a longer term strategic goal to extend our leadership position in those aspects of microbiome drug development to best position the company to capitalize on these advances in the field. Seres now has world-class capabilities that include proprietary expertise related to computational biology, microbiology, preclinical modeling of bacterial compositions and a microbiome drug manufacturing. Seres has also accumulated significant intellectual property as well as specialized know-how, ranging from highly technical drug development approaches to regulatory policy. We expect our differentiated capabilities to continue to benefit the company as microbiome science further grows and matures.

As a result of the company's strong technical capabilities, Seres' drug discovery engine has been very active. And the company now has a broad array of programs in its pipeline. These include early and late clinical stage assets as well as several in preclinical stages, including therapeutic candidates in infectious, metabolic and immune diseases, including immuno-oncology. Each of these programs are valuable with compelling preclinical and clinical supportive data. However, we are realistic in knowing that as a modestly-sized company, we cannot effectively advance all pipeline candidates at the same pace. Therefore, strategically, it is important that the company allocate its resources towards the most logical approach in advancing our pipeline and creating value for our patients and our shareholders.

Our near-term focus during 2018 will be on our highest priority clinical programs. These are: number one, SER-287 for ulcerative colitis; number two, SER-109 for recurrent C. diff infection; and three, SER-201 (sic) [SER-401], our immuno-oncology program. We will concentrate on rapidly, but safely achieving meaningful value inflection points in each of these programs. We look forward to 2018 being another eventful and productive year. We expect multiple important milestones, including the initiation of the next stage SER-287 ulcerative colitis clinical study, continued SER-109 Phase III study execution and also the initiation of a first ever clinical trial evaluating adjunctive microbiome therapy in cancer patients being treated with checkpoint inhibitors.

Thank you, again, for your continued interest in Seres. And we look forward to keeping you updated on our progress during the coming year.

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Carlo Tanzi, Seres Therapeutics, Inc. - Head of IR & Corporate Communications [6]

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Operator, let's open up the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Chris Shibutani of Cowen and Co.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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For Seres-262, could you just help us understand what it is that you feel will become the most important next step? It seems as if from an efficacy standpoint, it wasn't powered to demonstrate, but perhaps you could comment at all whether you are seeing any kind of trend? And also it seems that the placebo group was fairly modestly sized, but also made it difficult to make some conclusions on efficacy. Just trying to understand how confident you are on dosing? And it also seems as if you are not emphasizing this program as your top 3 priorities going forward. Just help us frame 262's status, and how you're really interpreting the data what you learned?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [3]

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Yes. Sure, Chris. I just want to take a moment. I have to congratulate your kids on the medals in the Olympics. We all watched it here and well done. Now getting to SER-262. One thing I would not do is say that this is -- this program is not being highlighted. Remember we haven't finished the program yet. We don't have data on the last cohort and a lot of microbiome. We found that this is an interesting drug. And as you pointed out, I've seen a lot of Phase Ib trials -- I used to be the Chair of the Merck early development committee. And a most of -- it's very rare to have one that's power to show real statistical significance, but we did this so that we could have learnings in a lot of areas that include efficacy, that include engraftment and that includes safety. Remember the FDA -- no one has ever done this before and the safety that we've shown, again, in this climbing cohort study is very important as we, and maybe in the future other companies, move the rationally designed fermented drugs to the market. Now let's talk about efficacy, though, in what we did learn. And I'm going to put on my infectious disease physician hat. The data that came out when you looked at 262 with vancomycin versus metronidazole is not something that you can find in the ID literature, where it always goes from 25% to 30%, vanco is around 25% depending on whether you have sick and old patients where there is higher recurrence. When we saw 4% versus 31%, that was highly interesting to us. It is clearly not dispositive because the placebo cohort was modestly sized as it usually is, but this gives us a hint of interest that we have not seen in the literature, and with the engraftment that we've seen which, again, correlates with that. I would put that as an interesting point because the robustness and the speed the kinetics of engraftment in vanco patients versus metronidazole does cosegregate with the low recurrence rates with vanco. I don't want to get ahead of my skis because in a Ib, the placebo for a trial like this, where the literature says it's about 25%, is not powered to do that. But I can tell you that was surprising and interesting data. And we're going to continue to look at that and decide how we evaluate this drug and whether to move it to a larger study. But we brought this forward now because we had meaningful data from meaningful number of cohorts, and the story here is interesting to us.

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Operator [4]

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And our next question comes from the line of Bill Tanner from Cantor Fitzgerald.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [5]

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I just had a quick question on 262, but I wanted to ask a more thought-provoking question perhaps on 401. So on 262, Roger, I think you mentioned that there were no recurrences in the placebo, and, again, appreciating the fact that this is a small study, but just harkening back to the experience with 109 and the diagnosis of active disease. I'm wondering how you are pondering addressing that to make sure you're getting the right people in the study?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [6]

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Yes. We're pretty sure -- that's fool us once, shame on me, fool us twice -- anyway, we've made this study after the 109 came forward based on cytotoxin, so that we're very convinced that when we see recurrences, they are recurrences here. So it's a great question, and I'm glad I was able to get that out, I should have mentioned it earlier. The other thing I would just point out, which I didn't have a chance to mention in Chris' question is, again, when you look at the vanco and the metronidazole difference, that's very compelling. But I didn't get to state something else, and that is, it's not just engraftment as I mentioned briefly, and I want to just talk about that for a second. It's the global restructuring of the microbiome that we hoped we would see, but didn't know we would see with such a small amount of organisms. Remember, there are only 12 in SER-262, and to engraft is one thing. To lead to a restructuring globally of the microbiome when it does engraft and to lead to this restructuring that allows augmentation, meaning other organisms coming in, a lot like we saw with SER-109 with 50 strains is a huge learning and something, again, that was hoped for, but until now not proven.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [7]

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Okay. That's helpful. Then as it relates to 401 and, again, I mean, obviously this is a very, very early stage program, but as you're thinking about down the road endpoints, I mean, would you contemplate that it might be an improve -- if you're talking about that with checkpoint inhibitors -- an improvement in the response that's already seen with the checkpoint inhibitor along with what they're approved for? And then, secondly, there are myriad indications for some of these and would the contemplation be that you might show beneficial effect of microbiome modulation with a couple of the indications and then maybe the FDA would consider extrapolating that experience to the rest. I was just trying to think about ultimately what the labeling would look like?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [8]

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Yes. All I would to say to start is, I might remove one of the very, very, very early programs. I would point out that we expect it with the FDA's approval to be in patients this year. And I think the rapidity of that is based not only on Seres, but on this great collaboration. The partners helped us accelerate it. But to your point, there are -- even though we've called it immuno-oncology, we are not talking about CAR T, we're talking about checkpoint inhibitors. And there is only 2 checkpoint inhibitors, at least PD-1s that are approved. We haven't said which one we'll use, but you can make some guesses. We do believe that you would start in the best studied of the oncological problems, metastatic melanoma first, and try to turn some higher number than 1/3 of President Carter-like patients that have had somewhat Lazarus effects with this drug to a higher level. That is what our goal is here. But early on, we want to see things that would suggest that the goal is obtainable in a large study. That includes, do we change T regulatory cell tone? Do we have infiltration of active T-cells into the tumor? Do you see some tumor regression? That's the other reason metastatic melanoma, although a horrible disease, is good for this initial study. It's not only been the best studied with checkpoint inhibitors, but it's on the skin. You can take biopsies, you can look for the T-cells, you can judge easily regression. And that's the other thing that makes it important. But certainly, if you'd see something there, you would not stop there. Obviously, there are other immunoresponsive tumors. In my time at Merck with KEYTRUDA, we learned about what it could do with non-small cell of the lung, renal cell carcinoma, I'm naming some of the classic immunologically affected tumors. We would look at those down the road, but you see why we'd start with metastatic melanoma.

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William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [9]

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And if I could sneak one last one in, Roger, just as it relates to, I guess, manipulating the microbiome. I'm guessing this is going to have to be done empirically, but you've got clearly a different patient subset or characteristics than you might have for UC or for C. diff and...

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [10]

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You're asking a great question, and thank you for that. Remember though, we are partnered with Jennifer Wargo as well at MD Anderson. And so we know a little bit about the different signatures that may be important, not just in animal models. We have the animal models ourselves here at Seres for immuno-oncology work in the microbiome, and we'll bring some of that interesting work out probably in later in the spring. But we also have the work with Jennifer Wargo. So we have now human hints of how to design a future drug. We may use a biologically sourced one in the first one. But again, we think that animal models are helpful, but the real data in human microbiomes is in humans.

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Operator [11]

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And our next question comes from the line of Joseph Schwartz with from Partners.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [12]

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Roger, actually this is Dae Gon dialing in for Joe. So I had a couple of questions on 262 and then 287 as well. So just getting a little more granular in the 262, can you maybe provide us a little more color on what you saw on the patient baselines? Were there any imbalances between the placebo and untreated cohorts? And when you've already conducted the first 5 cohort microbiome analyses, I was just wondering did you see any dose-dependent engraftments? And what kind of variabilities did you see? Were there any particular like Firmicutes, for example, that stood out across all of your microbiome analyses or were they variable in an all sense. What can you provide in terms of commenting on that?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [13]

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Well, absolutely. I can help you with some of that. I mean, obviously, full data will be done when the trial is done. But like in Ibs, we have data for each cohort. And this was a meaningful time, I think, for us to start the conversation and bring the preliminary data out. To those points, there were no real imbalances. And it's important that the numbers they got, both either metronidazole and vancomycin, were about the same. The major confounding variable that could not be known at the beginning of the trial was the difference that we saw with vancomycin and 262 and metronidazole and 262. That was a statistically significant unknown, we are not making a huge deal out of that because we want to see it in a -- it would have to be in a much larger placebo stat sig trial. But when you see that, it is a major reason why you can see a difference in these treatment groups. And we find it highly interesting that it correlates the difference, as I said before, with what we saw with both the kinetics of engraftment and the restructuring and robustness of engraftment. That is probably for me the take-home message from this small trial. And I'll tell you I'm surprised by it. Again, I don't want to go too far because you have to have a large placebo group to show this. Primary C. diff does not have the recurrence rate of multiply recurrent. We knew when we went into this, we knew that we had to design this to take a look and we found something. That's what Ibs are supposed to do. We didn't -- we not only were able to show safety and PK/PD, which for us is engraftment and restructuring the microbiome and -- but we were also able to show this interesting finding that will be taken into account with any development in this field again.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [14]

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So just harkening back to 109. One of the key learnings was the dose dependent efficacy which...

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [15]

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Yes. I'm sorry, I didn't answer that. I forgot that point. I apologize. So yes, there was a dose dependence. Here, remember, it's a very different drug. This is synthetically made. The spores are different. We're not going to -- sort of proprietary of how the difference in engraftment takes place with synthetics and biologics. But here, what we found was that there was engraftment and restructuring even at quite low levels. We'll have more data as we complete it. But I will give you that and that, again, shows that this is different than biologically sourced. And even at 12, we had variable engraftment, but engraftment at all levels. And we'll have more data when we can put it altogether.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [16]

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Okay. Look forward to seeing that. So moving on to 287. You said, you've been in constant dialogue and now you're planning on your next clinical study in mid-2018. So I guess, going back to the points you've made about clinical remission and clinical response, just trying to get a sense of have you met with the FDA to discuss those finer points? I understand that the August draft guidance from 2016 does point out clinical response, but have they kind of substantiated that in your interactions since your data read out?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [17]

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Yes, I don't like to talk about what the FDA is saying as we're negotiating with them. But so let me talk about what KOLs are saying, which is they understand that it's different. They applaud the fact that the FDA is no longer using response, making the field more objective. We've had great dialogues with the FDA, and we expect to be able to bring in not-too-distant future a very cogent, clean trial. I can tell you as well besides the KOLs, we're getting a lot of interest from -- incoming interest from large pharma, obviously, in UC, where there has been a lot of drugs that have not done well, not only those that are marketed, but those that are in development. And remission rates, our is a small trial, but we like our data in comparison.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [18]

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Absolutely. One last question, if I may. On the point about the 26-week post-treatment when you've had 0 out of 11 patients experiencing a flare up, did you conduct a microbiome analysis on that to see if the sustained microbiome can be seen?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [19]

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We did. And we actually reported a little on that, if at a month, there is no change in the microbiome engraftment, we don't know -- we weren't able to recruit the patients at the 6-month mark, we will try to do that in the next trial. But at a month after dosing, there was no regression. And that's an important point. And it sort of hit me at one point is that we're used to seeing maintenance because with a monoclonal or a small molecule, when you stop it, with a T1/2, it's gone. But with a microbiome drug, it's a live drug. And it keeps living if you're -- as well -- at least at what we've shown at a month. If that is sustained, that might help us think about reorganizing how the field looks at giving maintenance. Again, I don't want to get too far ahead of my skis, it's only 11 patients, but with no flares and with that hypothesis, that empirical hypothesis, that may hold true for the microbiome drugs as opposed to small and large molecules. Again, an interesting set of data.

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Operator [20]

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And our next question comes from the line of Terence Flynn of Goldman Sachs.

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Terence C. Flynn, Goldman Sachs Group Inc., Research Division - MD [21]

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Maybe first just on 109, the Phase III, just was wondering if you can give us any update on where enrollments stands? And any more sense of the time lines and when we might see data there? And then my second question is for 287. You mentioned the milestone payment for starting the next trial is not included in guidance. Can you tell us if the size of the milestone payment would differ if it's a Phase II versus a Phase III trial?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [22]

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Why don't we let Eric answer the financial one and then I'll go to the 109.

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Eric D. Shaff, Seres Therapeutics, Inc. - COO, CFO & Executive VP [23]

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Yes. So Terence, the answer is yes. That's one of the reasons that we haven't provided specificity on what that milestone is. So as we get closer and as our discussions continue, I think we'll provide more guidance later in the year.

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [24]

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And I'm going to just add one medical scientific point to that. Remember, as we talk to the FDA and it obviously affects the milestone payment. One of the things as I said in my little discourse here is that we now have like 300 patients that have seen drugs with no serious AEs tied to them. One of the reasons that we go slow in development is, obviously, primum non nocere, first, do no harm. If we can show that this is -- and I think we're showing it now -- is a safer modality. That's why, as I said in my little discourse, we may be able to move the needle in the speed of developing drugs for patients who are waiting without putting at risk patients on trials. Then I'll get to 109, Terence, now, I didn't forget it. Obviously, we've opened up Canadian sites. We're continuing to enroll. We are -- stay tuned. We haven't said anything yet because we still have changes in the slope of the curve, but enrollment goes on, and we may have some more to say in the spring.

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Operator [25]

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And our next question is from the line of Mark Breidenbach of Oppenheimer.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [26]

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A couple of questions on 262 and maybe one on 401 as well. It sounds like maybe the inclusion of 2 different antibiotics in the Phase Ib trial is [confounding] the signal or a signal that might be hiding in there. And I'm just wondering, first of all, why fidaxomicin is also not included as an option in this trial? And is it safe to assume going forward that will be limited to vancomycin?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [27]

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Yes, so let's talk about that. Remember this is primary C. diff. They are good questions. Let me clarify, so everything is pretty clear. Primary C. diff, you used to treat it only with metronidazole. Vancomycin has been added to guidelines and has been moved up in the last few years. Fidaxomicin is almost not used because of its price and because of a number of other reasons in primary, it's mainly for the first, second and third recurrences. This was not -- this isn't a confounding variable though, just vanco and metronidazole. I believe that, and we believe that, this is one of the most interesting parts of this study and quite informative because when you see a recurrence rate of 3% -- and we didn't decide on this, this is what the -- you have to let the investigators use what's standard of care, and vanco or metronidazole are standard of care out there. And many people think they're about the same in primary C. diff. What we have is data now, it's early, it's small. We don't have the -- a large enough trial for stat sig in comparing to placebo. But the statistical significance between vanco and 262 and metro and 262 was statistically significant, and I think was interesting. So rather than a confounding variable, we think that this is very important learning and informative. And again, we've seen even in the newest guidelines of IDSA, vancomycin has sort of been moved up in the place even in primary C. diff. With its use in 262 and the effects that are cosegregating with this effect in the microbiome, which I think I like to have various datasets, especially when something is in a Ib trial and it's usually not powered for placebo, we think that, that is something, as I've said before, interesting and not known before and something that we're going to use as we move forward in finishing this trial and determining path forward.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [28]

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Okay. That's helpful. And you had mentioned that you are seeing a dose dependency in engraftments, at least, in these early cohorts. I was just wondering if the multi-dose cohorts -- it sounds like we have maybe some early data from at least a couple of those multi-dose cohorts, if that seems to be making a difference or not?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [29]

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Again, remember when you see 262 microbiome, dose-dependent signal is more prominent in vanco patients. Again, you have to separate these because you had faster and better engraftment with vanco throughout the doses, even at the lowest doses. So this is -- again, it's not confounding. It's something that supports the fact that there seems to have been in this small trial, and the statistics there do say so that there was a real difference in vanco as compared to metronidazole, and you saw it even when you looked at the microbiome and microbiome dose dependency.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [30]

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Okay. Fair enough. Just a final question on 401. You had mentioned that the study arms from the MD Anderson trial. I just wanted to confirm, so it's placebo, it's an FMT effectively from a PD-1 responder, and it's a spore-based product that's all been generated -- that's from the same donor?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [31]

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Yes. The only difference I have to make there is that we have not used the term FMT. The second, which we have not defined yet because we want to get through the FDA in specificity. But it's just -- all we said there is that it's a microbiome drug from a normal patient, of a normal human, not a patient that was a responder to checkpoint inhibitors.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [32]

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Okay. Got it. So these will be coming -- the 2 treatment arms will be coming from different donors though?

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Roger James Pomerantz, Seres Therapeutics, Inc. - Chairman of the Board, CEO and President [33]

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Yes, one will be one that responded well to checkpoint inhibitors, one will be one that doesn't have metastatic melanoma and has no underlying illnesses.

As I've been told, there are no further questions. I thank you for continued interest in the microbiome and in Seres Therapeutics. We look forward to sharing our continued progress with you throughout the year. And I will now end today's call. Thank you all.

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Operator [34]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.