Title

Presentation

Seres Therapeutics, Inc. misses on earnings expectations. Reported EPS is $0.36 EPS, expectations were $0.55.

Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Seres Therapeutics’s Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Dr. Carlo Tanzi, Head of Investor Relations. Please go ahead.

Carlo Tanzi: Thank you, and good morning. Our press release for the Company’s second quarter 2023 financial results, and the business update became available at 7.00 AM Eastern Time this morning, and can be found on the investors’ news section of the company’s website. I’d like to remind you that we will be making forward-looking statements, including the commercial success of the house, the timing and results of clinical studies, the ability for microbiome therapeutics to modulate the microbiome and treat or prevent infection, our ability to achieve sales targets and the receipt of future milestones and debt tranches, and other statements which are not historical fact. Actual results may differ materially. Additionally, these statements are subject to certain risks and uncertainties which are discussed under the risk-pecker section of our recent SEC filings.

Any forward-looking statements made on today’s call, or represent our views as of today only. We may update these statements in the future, but we disclaim any obligations to do so. On today’s call, with prepared remarks, I’m joined by Eric Shaff, Seres’ President and CEO; Dr. Lisa von Moltke, Chief Medical Officer; and Dr. Terri Young, Chief Commercial Officer; and David Arkowitz, Chief Financial Officer, in addition Dr. Matthew Henn, Chief Scientific Officer, will also be available to answer your questions. With that, I’ll have to call to Eric.

Eric Shaff: Thank you, Carlos, and good morning, everyone. This has been a monumental period for Seres. Indeed, based on the progress we have made developing a microbiome therapeutics as a new medical category, Seres was recently nominated as a member of the Time100 Most Influential Companies for 2023 within the Pioneer’s category. We are proud of the recognition, but more importantly, we are glad to now be making a positive difference in patient’s lives with the recent approval of our first microbiome therapeutics. On April 26, we were thrilled to announce that the FDA approved VOWST indicated for the prevention of recurrent C difficile infections in adults following the antibiotic treatment for recurrence CDI. We believe VOWST has the opportunity to transform how patients with recurrence C diff infections are managed, providing a new meaningful therapeutic option for patients facing this disease.

In addition, we were very happy with the label that we received, which includes all adult patients with recurrence CDI, including those with the first recurrence. We are now working to commercialize VOWST alongside our collaborator, Nestle Health Science. VOWST has been available since early June, and we are pleased to report that preliminary update has been highly encouraging with healthy product demand coming from a broad set of healthier practitioners and across the recurrence CDI patient pool, including in patients with their first recurrence. Terri will provide more detail on launch progress shortly. The successful commercialization of VOWST is our top corporate priority, and the clear focus of our organization. Over time, we expect that VOWST will provide tremendous benefit to patients, and in turn, we anticipate this therapeutic will represent an important financial driver to Seres.

As we commercialize VOWST, we continue to expand our drug supply and collaboration with our manufacturing partner, Recipharm, to enhance feature supply capacity. Furthermore, our collaboration with Bacthera also continues to move forward, and we anticipate that Bacthera will begin to produce commercial drug product next year for release in 2025, as the VOWST market continues to expand. While executing the VOWST launch, we also made meaningful progress with our earlier stage pipeline. In May, we reported highly promising Phase 1B Cohort 1 clinical data from our SER-155 program. This cultivated microbiome therapeutic candidate is designed to prevent infections and/or GvHD in patients undergoing HSCT. Initial data may support our therapeutic objectives of reducing serious enteric infections, result in bloodstream infections, and GvHD in this medically vulnerable patient population.

The SER-155 study continues to enroll, and we anticipate top lines clinical results from the placebo controlled portion of the study encompassing Phase 2 – I’m sorry, Cohort 2 in May 2024. I would like to pass the call now over to Lisa.

Lisa von Moltke: Thanks, Eric. I’ll begin with VOWST, a product consisting of a consortium of firmicutes bacteria in their spore form. This therapy is designed to facilitate restoration of the GI microbiome and thereby reduce the risk of future recurrences of C difficile infections. Importantly, the indication we received with the FDA approval is for the broad population of adult recurrent patients. VOWST has a straightforward old-dosing regimen of four capsules once a day for three days following antibiotic treatment and use of a laxative to remove residual antibiotic from the GI tract. VOWST is stored in the original packaging and has no refrigeration requirements. The full label is available on VOWST website at vowst.com.

To briefly recap, the VOWST’s approval was supported by remarkable clinical data from two Phase 3 studies. Our placebo controlled equals four 4/3 study demonstrated that approximately 88% of patients did not experience a recurrence at the primary eight-week end point compared to 60% in the group with antibiotics alone. We also observed durability of response out to 24 weeks. VOWST was well-tolerated and patients administered the drug had no serious adverse events or deaths that were attributed to study drug. Recurrent CDI is a serious disease that often results in hospitalization and can even lead to death. There are an estimated 156,000 recurrences in the United States per year and at least 20,000 deaths due to C diff infections. Patients suffered debilitating symptoms such as frequent diarrhea, which prevents them from conducting their normal daily activities, and these symptoms significantly lower quality of life.

We, along with our Nestle Health Science colleagues, continue to present and publish VOWST’s clinical results to educate the medical community about recurrent CDI and VOWST. We provided support for a continuing medical education event at the American College of Physicians Annual Congress in April, and we participated in the digestive disease week annual meeting in May. Interest in VOWST at the conference was extremely high and during KOL engagement we continue to observe significant levels of enthusiasm about the potential to use VOWST to stop the cycle of recurrence of CDI in eligible patients. Moving now to our new SER-155 results, which we previously discussed in detail. The medical literature supports a strong connection between pathogen domination and lack of diversity in the GI tract with the endpoints of infection, graft versus host disease, and mortality in patients undergoing allo-HSCT.

SER-155 is an oral, investigational, cultivated microbiome therapeutic designed to prevent enteric derived infections and resulting bloodstream infections, as well as to induce immune tolerance responses to reduce the incidence of GvHD, and particularly severe acute GvHD in patients undergoing allo-HSCT. The development of SER-155 is supported by strong exploratory proof-of-concept data from the SER-109 ECOSPOR III study, which showed that SER-109 administration resulted in the decolonization of gut pathogens beyond C Difficile, including bacteria carrying antibiotic resistance genes. These data have been previously reported at various conferences. Allo-HSCT patients are at high risk of enteric derived infection and acute GvHD. These adverse events are frequently seen in the first 100 days following the procedure.

This is a period when the patient’s microbiome are highly disrupted for numerous factors, including antibiotic treatments and chemotherapy regiments, and their immune systems are severely compromised. In May, we announced initial safety and pharmacology data from Study Cohort 1. Based on these data, a favorable tolerability profile was observed with no serious adverse events attributed to SER-155 administration. Pharmacology data showed that bacteria in the SER-155 consortia ingrafted, populating the GI microbiome, with a magnitude and kinetic profile consistent with expectations based on prior clinical results from other Seres microbiome therapeutics. Importantly, we observed that the cumulative incidence of domination with bacterial escape pathogens was rare, and observed a substantially lower incidence rates than observed in a reference population of allo-HSCT patients.

These are specific pathogens known to be associated with the risk of enteric driven bloodstream infections and other downstream consequences such as GvHD in patients receiving allo-HSCT. Enrollment is ongoing in Cohort 2, which incorporates a randomized double-blind placebo-controlled design to further evaluate safety and engraftment, as well as clinical outcomes. This portion of the study will enroll approximately 60 subjects administered either SER-155 or placebo at a 1:1 ratio, and we anticipate obtaining Cohort 2 study data in mid-20-24. And with that, I’ll now turn the call to Terri.

Terri Young: Thank you, Lisa. I’m pleased to report that along with our collaborators at Nestle Health Science, we are making great progress in the early days of the VOWST launch. As Eric mentioned, we are highly encouraged by the magnitude and breadth of HCP demand that we have seen. This demand is consistent with our understanding of the enormous need for better options to present our CDI and the enthusiastic reception that the profile as VOWST has received since the release of our first Phase 3 data nearly three years ago. The performance we’ve observed also confirms that our commercial strategy, knowledge-based, and launch execution are setting us up for success. We’ve been very focused on four areas during the early launch period.

Scaling our HCP education efforts, creating a positive customer experience, establishing payer coverage, and optimizing hospital outflow. First, I’ll describe our HCP education efforts. Immediately after FDA approval of the VOWST, the Nestle customer facing field teams were quickly trained and deployed. The field sales teams have been promoting VOWST and generating HCP demand since May 2nd, several weeks before product became commercially available in early June. As a reminder, the two Nestle field sales teams are comprised of 150 gastroenterology representatives and a 20-person hospital and infectious disease focused filling teams. We were also fortunate to have the DDW conference that we saw referenced earlier in midnight right on the heels of approval.

We had a significant presence at that key gastroenterology conference, including a highly attended product theater and a large, well-manned booth. The reaction to the profile of VOWST continues to be enthusiastic and positive. HCP is consistently mentioned the impressive efficacy and encouraged to finally have a scalable, highly effective option that meets their number one on that meeting in our CDI, preventing recurrence. As a result of our education efforts, we observed the following magnitude and breadth of HCP demand as reported to us by Nestle Health Science. Early demand is broad across HCPs in patients, which is something we are very pleased to see. And importantly, we are seeing use across the recurrent patient pool, including demand in patients experiencing their first recurrence.

The HCPs are choosing these patients as their very first patient for VOWST, is highly encouraging, and you may recall that this is the largest patient pool within recurrent CDI. We are seeing utilization across a broad HCP audience and received prescription enrollment firms from over 480 unique prescribers as of July 27, with approximately 70% from gastroenterology and a remains are from other specialties. There is also a group of VOWST prescribers who are not on the field team’s call list, which is an indicator of the high-end umet need and strong awareness in the provider and patient communities. Finally, of the more than 400 HCPs that have prescribed VOWST, 78 have prescribed VOWST to multiple patients in their practice. This early depth of prescribing is a very positive sign given the moderate CDI patient volume, which typically exists at the individual HCP level.

The second area focus is providing a positive experience for patients and providers. Our VOWST voyage hub is a critical component of our commercial effort, and provides a robust high-class experience, including treatment and financial support. The VOWST voyage team has been diligently working to convert patient enrollment into a new patient start. As with any new branded product during the early launch period, where payer policies are not in place, the prescriber must navigate the medical exception process. Our team is highly skilled at supporting providers and patients that they seek approvals for VOWST, but in the event that it takes longer than the treatment window for VOWST to allow, we offer a free drug option for eligible patients. This is one of several financial assistance programs we are providing in this early launch phase, and we are seeing expected utilization of our patient assistance programs.

For example, approximately 43% of the 282 new patient starts were dispensed via our free drug programs. Our third focus area is engaging payers to build coverage so that each patient who can benefit from VOWST has access as quickly and efficiently as possible. The Nestle Payer Field Team continues payer engagement, building on the extensive pre-approval information exchange efforts executed during the year prior to approval. The team is making progress and is prioritizing the most important stakeholders, including the three largest PBMs, to reinforce the compelling value proposition for VOWST. We expect to see coverage policies issued as we move through the second half of this year. During the early launch period, we are seeing approximately 57% of our 282 new patient starts reimbursed through the patient’s drug benefit.

Finally, the hospital selling team continues its efforts to enhance hospital outflow and we believe these efforts will begin to bear fruit later this year into 2024. On a related note, last week CMS issued their final rules for inpatient reimbursement for 2024. Included in this was the approval of a new technology add on payment or in-tap for VOWST when used for patient’s treated in the inpatient setting. The result of this is that hospitals will receive extra payment for any Medicare patients treated with VOWST in the inpatient setting next year. We are pleased that VOWST have received this additional payment from CMS. CMS notes in its final rule that the agency considers VOWST to be a substantial clinical improvement over existing technologies and that they see the importance of the technology in restoring the gut microbiome.

We know that the proportion of patients who have received VOWST in the inpatient setting is smaller than our outpatient opportunity and we do not expect that the in-tap will result in a significant number of additional VOWST patients in the near term. However, for these patients who are undoubtedly among the sickest. We are pleased that CMS has addressed the financial barrier for a hospital that chooses to use the therapy that Medicare has recognized as a substantial clinical improvement. We believe that over time the in-tap approval could result in an additional inpatient utilization. In summary, we are highly encouraged by these early results. We, along with our collaborators at Nestle Health Science, will continue our focus on HCP education, customer experience, payer coverage, and hospital outflow, and we expect to see continued acceleration of demand, progress on the payer front, and optimization of the provider and patient experience as we move through the coming quarters.

Now, I’ll turn the call over to David to cover our financials for the quarter.

David Arkowitz: Thank you, Terri. The details of our second quarter financials are included in the press release issue this morning, so I won’t reiterate all the figures here. Seres reported net income of $46.6 million for the second quarter of 2023 as compared with a net loss of $64.7 million for the same period in 2022. The net income in the second quarter of 2023 is primarily due to the $125 million milestone received from Nestle upon FDA approval of VOWST. VOWST net sales for the partial commercialization period during the second quarter was $1.6 million and based on 105 units of VOWST sold during the period. The net sales reflect estimated gross to net reductions of 15%, primarily due to returns reserve, prompt payment, discounts, and patient copay assistance.

This gross to net reduction is an estimate based on certain assumptions and limited information will be refined over time, as additional information becomes available. As Terri mentioned, we are actively engaged with the three largest PBMs and as a result, the second quarter gross to net reductions do not reflect any discretionary payer contracting. Once VOWST became commercially available in early June, we started sharing equally with Nestle in the commercial profits and losses. VOWST profits and losses are determined based on VOWST net sales, cost of goods sold and sales and marketing expenses. The total VOWST loss in the second quarter, in other words, from when VOWST became available in early June 30 was $4.3 million, and our share of that was $2.1 million.

This amount, our share of the VOWST loss for the second quarter is included in our P&L in the operating expense section as collaboration, profit and loss sharing related party. We are responsible for supplying VOWST inventory to Nestle. We built up sufficient levels of supply and in anticipation of launch and we are continuing to produce VOWST in support of the launch. In the near-term, we expect to receive payments from Nestle related to their VOWST supply purchases and in the future we expect a steady pattern of purchases by Nestle to meet market demand. For example, during the second quarter, Nestle purchased $7.6 million of VOWST supply from us and we received the payment related to this purchase in the third quarter. As of the end of the second quarter, we estimate that there was less than two weeks of VOWST inventory in the channel at the special pharmacies based on forward demand, which is typical for this stage of the launch.

Following the approval of VOWST, commercial manufacturing costs will no longer be recognized as R&D expenses in our P&L, but instead we will be capitalized and recognized on our balance sheet as inventory. Because the commercial manufacturing costs are now being capitalized, we expect that our total R&D expenses will decline going forward. For additional context, our second quarter, 2023 financial results, reflected total R&D expenses of $47 million of which approximately $11 million was VOWST, commercial manufacturing costs, incurred prior to FDA approval. Seres ended the second quarter of 2023 with $229.5 million in cash, cash equivalents and investments as compared with $181.3 million at the end of 2022. In June, we received $125 million in milestone payments from Nestle, associated with the FDA approval of VOWST.

In April, we announced that we had entered into a new 250 million senior secured debt facility provided by Oaktree. We drew the first launch of 110 million at closing, and after retiring our previously outstanding debt and deducting fees and expenses, the net proceeds to us were approximately $50 million. This debt facility has three additional tranches available, which are comprised of two tranches of 45 million each based upon the achievement of certain applicable VOWST sales targets and an additional 50 million will be available to us at Oaktree’s discretion to support potential future business development activities. We remain highly disciplined with our cash deployment, and we are prioritizing the successful commercial launch of VOWST, and the development of SER-155.

Examples of actions taken in areas that we are pursuing to reduced cost and drive efficiencies include, we closed one of our three donor collection facilities supporting VOWST manufacturing, thereby reducing costs without impacting our ability to meet anticipated market demand. This closure was enabled by VOWST three-year shelf life, as well as operational efficiencies related to the production process. Also, our centralized donor screening lab opened in the second quarter, allowing us to enforce donor medical testing, which is expected to result in future cost savings. We are also actively consolidating office space, and seeking to reduce our footprint, which enables us to be more efficient and save costs. And, as we are allocating our resources in order to generate the greatest returns, we have reduced our head count from the beginning of the year, in part driven by the closure of our donor collection facility that I just mentioned.

These are just some of the actions we are taking in areas we are exploring, we are committed to further reducing costs and will share additional updates with you. Now turn the call back to Eric.

Eric Shaff: Thank you, David. This is an exciting period for Seres, as we are now commercializing VOWST, the first ever FDA-approved orally administered microbiome therapeutic. The launch is in its early days, and we are very pleased with the initial commercial results. Since attaining the Phase 3 ECOSPOR III data in 2020, we believed that we have the opportunity to help transform how individuals with recurrent CDI are managed, and we are pleased to see the early signs of this transformation occurring in the medical community. Over time, we are optimistic that VOWST uptake will continue to accelerate, and we expect it over time, this product will become an important financial driver for Seres. We are also very excited about the progress we are making with SER-155 and the data we have shared during the quarter.

We are hopeful that the initial data that we have seen will translate into meaningful clinical results, and we are looking forward to providing a robust clinical data set from Cohort 2 next year. Before I close, I’d like to touch upon the momentum that we continue to observe within the scientific and medical communities regarding the microbiome and its relationship to Seres infectious diseases. Last year, the NIH hosted a workshop on the topic to advance research into the medical significance of GI pathogen abundance. That the upcoming IDEA [ph] conference, a symposium is being held on the establishment of pathogen decolonization as a surrogate for infection risk. The validation of this link would be highly valuable to the Seres and supportive of our microbiome development efforts.

We have previously discussed our own clinical results, linking GI microbiome health with a risk of CDI recurrence, and we are confident that over time, the state of the microbiome will be more clearly linked with the risk of other series infections. Importantly, this would have positive development, regulatory and commercial implications that could be highly advantageous to our platform and our ability to develop and market new surrogate. This is a topic of great interest to our company and we look forward to discussing these concepts in depth in the future. With that, I will conclude our remarks and open the line for questions.

Operator: Thank you. The floor is now open for your questions. [Operator Instructions] Your first question comes from the line of Joseph Thome with TD Cowen. Your line is open.

Joseph Thome: Hi there. Good morning. Congratulations to the launch and thank you for taking my questions. Maybe the first one, can you talk a little bit more on maybe the current timing between the prescription enrollment form and a new patient start. Maybe ask another way, you know, kind of what proportion of those prescription enrollment forms are in the press release. Do you expect will turn into new patients start, I think over the next kind of quarter here, especially as it relates to the treatment window that VOWST allows? And then, it’s great that you’re seeing interest across the refractory recurrent feeder environment. Are you seeing kind of equal ease in getting the therapy to patients regardless to kind of where they are in there and actually been joining? Thank you.

Eric Shaff: Joseph, good morning and thanks for the questions. I’m going to ask Terri to comment on the timing or evolution script. And then the second is just access across different recurrence.

Terri Young: Sure. So I would start by saying that the vast majority of patients that are seeking access to VOWST today and going through the medical exception process are coming through. So, we’re being successful in the vast majority of those cases. It’s important to note, when you look at the enrollment forms versus the new patient starts, that we see new demand for new patients building over time, right? So a lot of the enrollment forms that we’re getting are more recent versus from May for example. So the hub has been very, very busy, as I mentioned in my prepared remarks. Turning those enrollment forms into new patients starts. But the demand has been building over time as you would expect with any launch. So I would expect as we move forward, we’ll be accelerating the transition or the conversion of enrollment forms to new patients start, as you would expect.

So we feel like we’re being very successful early on and this speaks to the investment that we made in selecting right partners in terms of hub provider, but also specialty pharmacies, and making sure that we provided invested in a very high touch robust patient experience. So we’re seeing this take off for us now early on in the launch, and we would expect that to continue over time. With respect to where the patient is in their recurrence journey, whether they’re first or second or third. Really, the determinant for us in terms of how we are fulfilling the physician demand is where they are in the antibiotic prescription. Right? We are deploying our selling teams and making sure that we educate providers that they need to write VOWST s that the same time as the antibiotic to provide the maximum time and the treatment window to fill the prescription.

So we do feel like those education efforts are paying off, but it will continue to take time. So that’s the reason why we put forward the voucher program as one of our patient assistance programs. At such a point in time where the patient is reaching the antibiotic regimen, and we haven’t been able to get VOWST through the medical exception process, it will trigger the offering of free drug. So we feel like we have the right tools in place and the right support and assistance in place to ensure that we are continuing to translate our physician demand into new patients starts. Anything you want to add, Eric?

Eric Shaff: No. I think I guess Joe for me, to Terri’s points, we’re seeing the demand, which I think it’s first and foremost. We would hope to see and we are seeing the pull-through including first of all in patients. So overall, very encouraging.

Joseph Thome: Perfect. And then, maybe just one quick follow-up on a more of the financial component. I guess as it relates to closing one of those three donor facilities and then opening that central screening facility, I guess. What sort of scale should we expect on cost savings from that? Is that more of a Q4 kind of savings in the 2024? How should we think about that? Thank you.

Eric Shaff: Yes. Maybe David can comment.

Eric Shaff: Joe, I mean, as far as the donor facility, there’s both a component of the facility itself, we will seek to sublet the space. There’s approximately, I think it’s 18 FTEs. The savings will be more of a 2024 item. We may see some pieces of it at the end of 2023. But keep in mind, there’ll be a period cost savings as well as efficiency that will eventually roll through into COGS, and maybe David can comment further and include in on the ClearLab [ph].

David Arkowitz: Yes, that’s exactly right. I’d look for savings to be realized in 2024 going forward. And I think also, as it relates to donor testing, there’s a ramp up there as our volume’s increased. So I think one would start seeing that in 2024 and beyond.

Joseph Thome: Perfect. Thank you very much.

Eric Shaff: Thanks for the question, Joe.

Operator: Our next question comes from the line of Edward Tenthoff with Piper Sandler. Your line is open.

Edward Tenthoff: Great. Thank you very much and congrats on a strong start with VOWST, really exciting and obviously important product. So a couple of questions if I may. Firstly, just kind of housekeeping question and maybe a little bit early. But with the cash on hand, are you able or did you and provide guidance in terms of what kind of runway that is? What’s milestone in the new at that? And then as it comes to gross to net, do you anticipate that 15% to go up or down? Or what do you think we should be expecting in terms of price? Again, my congrats on the launch.

Eric Shaff: Yes. Thank you. Good morning and thanks for the questions. I’ll ask David to comment on the runway and Terri to comment on gross to net? Or maybe David and Terri, I think the answer of the second one is yes, we do expect to go up. But they can provide better perspective or more full perspective. So David, on the cash.

David Arkowitz: Yes, thanks Ed. So as we discussed, we ended the quarter with approximately $230 million in cash, cash on investments. We have not provided runway guidance. I would just say, we are focused on as we talked about opportunities to reduce our spend going forward, as well as we think there’s tremendous opportunities to generate value as it relates to the VOWST launch and progress there. On the on gross to net, as we talked about, second quarter gross to net was 15%. We’re not providing projections at this juncture. And as we indicated, the gross to net in the second quarter is not included any discretionary pay or contracts at this point in time. So let me turn it over to Terri for additional color.

Terri Young: Sure. So you know, some points to understand what’s in the 15% and what’s not. So this is comprised of what it takes for us to get product to patient, right, and through the channels. So specialty pharmacy distributors, so on and so forth. And it also contains estimates for a copy assistance program, as well as mandatory rebates, Medicaid and government programs, so on and so forth. So what it does not contain is David shared is discretionary rebates. discretionary rebating is one tool that we have to ensure that we have broad patient access. But I would also kind of counter that by so balanced it by saying that that’s has an incredibly robust value proposition. Supported by its clinical profile, but also by the fact that these patients are incredibly expensive.

And if you use those early on in the treatment paradigm and we are seeing you there, you can achieve significant cost offset. So we’re going to be very judicious and thoughtful regarding how we leverage discretionary rebating moving forward. And as we do move forward through the following quarters and have more color to share, we will do that.

Edward Tenthoff: Thanks.

Eric Shaff: Thanks Ed.

Operator: Next question comes from the line of Tessa Romero with JPMorgan. Your line is open.

Tessa Romero: Great. Thanks so much for taking our question. Hi, Eric and team. So for the three largest PDMs, are you able to give us a sense of cadence, of the expected decisions here based on the cycles? On the call you noted that 43% of your 282 new patient starts or dispense by a free drug program. Just trying to get a sense of how you expect this to trend in the next couple of quarters here? And then second question for me is, can you give us a sense of what the new patient starts are looking like months to months qualitatively. Any trend you’d point out between June and July? Thanks so much.

Eric Shaff: Tessa, good morning and thank you for the questions. I’m going to ask Terri to comment on both, the PDMs cadence over time and then kind of anecdotally what are we seeing and maybe I’ll add some comments on the end.

Terri Young: Sure. Good morning Tes. With respect to the PDM cadence, those conversations are actively in progress I would say. And really begin even pre-launch, right, with the pre-approval information exchange we made sure the payer were covering those very, very important customers and ensuring that they understood the data and where we thought VOWST was best utilized and value proposition. So they’re really going in now to reinforce those historical conversations that they had and spend time with the clinical teams. And then you typically enter this phase of additional discussions, less negotiations and that’s really still to come. So we see that these conversations playing out over the rest of the year and I look forward to sharing more as we have more to share.

Free drug you asked about. The free drug utilization is in line with the estimates that we had pre-approval. So we’re pretty pleased about that. This is an important tool for us to provide a positive patient and provider experience very early on and we feel like that will pay dividends to us later on with respect to demand. What I’ll also tell you though, they’re really two important components to the free drug program. One is about your program which is triggered when a patient exceeds the treatment window when we’re trying to navigate the medical exception process with them. So this is something we anticipate, it’s a program really we anticipate working itself out of a job if you will to a large extent. The payer policies are issued and the prior authorization processes become more automatic.

They’ll become quicker and patients shouldn’t need to leverage that program as much as they might today. The second element of free drug is a more traditional income qualification pack and we are seeing utilization of that program largely by Medicare patients today and we always knew that Medicare patients would have affordability challenges until the IRA takes effect. But in 2025, when the cost sharing provisions and benefit design changes for Part D is mandated by the Inflation Reduction Act, we would anticipate this being another program that we see decline. So hopefully that color helps.

Eric Shaff: And maybe I’ll just add. On top in general, it’s early. So we’re certainly cognizant of the fact that it’s early, but we saw strong demand. We saw it across HCP, HCP specialties. We saw it across recurrent CDI, patient profiles, including first occurrence. So while early, we’re really encourage with what we’ve seen and we’re excited to continue executing on launch definitely.

Terri Young: And we did see to your final question growth month-on-month as you would expect. So we are seeing growth as we move through the months and the period.

Tessa Romero: Okay. Thanks so much for taking all the questions.

Eric Shaff: Thanks for the question, Tes.

Operator: Next question comes from the line of [Jeff Tarns] with Oppenheimer.

Unidentified Analyst: Thank you very much and congratulations on a great quarter. With respect to VOWST sales, can you comment on the how much about $1.6 million in 2Q or attributable to inventory build or channel stocking versus new patient starts? And the second question, can you provide any additional color to understand the profit share reported versus revenue and how you see that trending moving forward? Thank you.

Eric Shaff: Yes, Jeff, good morning and thank you for the questions. Maybe David and I can handle those two. On the first, there’s an initial purchase of inventory from Nestle. But in terms of build or inventory build , I think David in his prepared remarks had a comment on how much was in the channel, which was not that much. But beyond that, maybe I can just comment that David can take a further. We didn’t expect to see, we don’t think we have seen warehousing of patients, right. This is not a chronic disease. This isn’t an acute disease. And the breadth of prescribers that we have seen, I think, suggest to us that whereas we did hear a couple of anecdotes of some of the physicians that we know well that had a number of patients on like tapper and they’ve been waiting for the moment that VOWST would be available and switch some of those patients.

That was really the minority of what we saw in this first period of VOWST. So I don’t think that there’s a inventory that’s really pushing this number. And maybe David can comment further on the second question as well.

David Arkowitz: Yes. Thanks. Thanks Eric. Yes, as we reported, second quarter sales, $1.6 million, it was comprised of 105 VOWST units. Our estimation is at that point in time, that represented less than two weeks of inventory in the channel like a specialty pharmacies. So there is not a whole lot of channel inventory. And that would be our expectation going forward as well. I think your second question was about VOWST sales versus the profit and loss sharing. So what we reported the $1.6 million, those are the net sales of VOWST for the second quarter. That then generated a net loss of $4.3 million, which is shared 50-50 between Nestle and Seres. So our books reflect that $2.1 million, the 50% of that $4.3 million. How that’s going to change over time as VOWST sales increase, we are driving with, with our collaborate, Nestle towards generating profitability as it relates to the VOWST’s P&L.

We think we think that’s very much achievable. And if you think about the sales and marketing expenses, we have the — we are fortunate to leverage Nestle’s infrastructure and capabilities and believe that we can commercialize VOWST in a very cost efficient manner.

Unidentified Analyst: Great. Thank you guys for taking the questions.

Eric Shaff: Thanks for the question Jeff.

Operator: [Operator Instructions] There are no further questions at this time. I would like to turn the call back over to the management team.

Eric Shaff: You operator and thanks you all for joining us this morning. We look forward to updating you on our progress soon. Have a great week. Thanks very much.

Operator: Ladies and gentlemen, this operator has included. You may now disconnect.