Seres Therapeutics: Microbiome Pioneer

06/12/2017 2:54 am EST

Focus: HEALTHCARE

Tom Bishop

Founder, BI Research

Seres Therapeutics (MCRB) is a leading pioneer in microbiome therapeutics developing a novel class of biological drugs, notes small cap expert Tom Bishop, editor of BI Research.

These drugs are designed to treat disease by restoring the function of a disbiotic (dysfunctional) micro-biome (the balance of healthy bacteria and other microorganisms that dwell in the gut and other places which ironically play a very important role in keeping a person healthy).

When the microbiome gets out of balance you can develop things like irritable bowel disease, colitis, Crohn’s or clostridium difficile (c. diff. or CDI).

Nestle Health Science is collaborating with Seres on this in exchange for the rights outside of North America via an upfront payment of $120 million with additional milestone payments of up to $1.9 billionpossible plusroyalty payments on all future sales.

Seres is also collaborating with Memorial Sloane Kettering, the University of Pennsylvania and St. Joseph’s on other applications. Experts in the field from no less than Johnson & Johnson believe this science could also work on diabetes, cancer and autoimmune diseases.

Seres had a healthy $202 million in the bank as of 3/31 after burning through $28 million in Q1. It reported a loss of $25.5 million after reflecting $3 million in revenue recognized from its collaboration with Nestle Health.

R&D expense was $20 million due to expenses related to the microbiome programs, both clinical (SER-109, SER-262 and SER-287) and preclinical. Seres is working to initiate a new SER-109 trial now that it believes it knows what went wrong with the first trial.

Called ECOSPOR III, the study will enroll 320 patients with half getting SER-109 (at a dosage 10-fold higher than the prior study, administered over a 3 day period) and half getting a placebo. The study is expected to be initiated in mid-2017, with success evaluated at 8 weeks and 24 weeks.

Phase 1b studies for SER-287 (ulcerative colitis) and SER- 262 (primaryC. difficile) are both on track to wrap up in the second half of this year. Note there are 700,000 people with ulcerative colitis and 700,000 with Crohn’s and only about 30% respond to current therapies.

So we have a couple horses in this race, but for now the stock has been rather listless. I remain a believer in this pioneering technology. Remember Seres is the first to conduct trials in this field. The shares are a Speculative Buy.

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