Seres Therapeutics Inc (MCRB) 2024 Q1 法說會逐字稿

(technical difficulty)And I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2024 Seres Therapeutics earnings conference call. (Operator Instructions)

Again, I would now like to turn the call over to Carlo Tanzi, Investor Relation. Please go ahead.

Thank you, and good morning. Our press release for the company's first quarter 2024 financial results and business update became available at 7 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 about the potential for both, the timing and results of our clinical studies, future product candidates and development plans, our ability to generate additional capital, the sufficiency of cash to fund operations and other statements, all of 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 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 with prepared remarks, I'm joined by Eric Shaff, Seres Chief Executive Officer; Dr. Terry Young, Chief Commercial and Strategy Officer; Dr. Lisa Von Moltke, Chief Medical Officer, and Mirella Carroll, Chief Financial Officer. In addition, Dr. Matthew Henn, Chief Scientific Officer will be available to answer.

With that, I'll pass the call to Eric.

Thank you, Carlo, and good morning, everyone. In 2024, Seres has continued executing on our mission of bringing revolutionary microbiome therapeutic options to patients in need. We will provide an update today on the commercial launch of the VOWST, as well as our plans to develop a next wave of life-changing microbiome therapeutic.

We have tremendous optimism in the promise of microbiome therapeutics to provide transformative clinical benefits to patients, including for serious diseases that impact large populations and the potential to impact the growing risk that antimicrobial resistance poses to global public health.

Last year was an historic year for the company, as we obtained FDA approval for VOWST and alongside our collaborator, Nestlé Health Science, we successfully launched VOWST into the marketplace for adults suffering from recurrent C. difficle infection. These events marked major milestones for Seres for the microbiome field in general, and most importantly, for patients who have been waiting for a more effective approach to treat this difficult disease.

We believe that obtaining FDA approval of the first oral microbiome therapeutic provides clear evidence of the company's scientific leadership position in the field. We are proud of the impact that VOWST has had on patients, their families and on the entire recurrent C. difficle community. Today, we have seen demand from an extensive group of health care practitioners for VOWST across the recurrency [that] patient pool and thousands of patients have now been treated with VOWST.

However, we did not see the continued level of growth that we had hoped for in the first quarter as compared to the fourth quarter of 2023. Accelerating demand is a top priority for the Seres Nestlé partnership, and we are optimistic about 2024 growth potential based on the refinements to launch execution Nestlé has recently implemented.

Nestle has been carefully examining launch execution and has implemented refinements as a launch proceeds. During the first quarter and into April, Nestle has retrain their sales teams to educate HCPs about the role that should play in patients early in the current cycle. We believe that we are beginning to see the benefits of these efforts, and we have been encouraged by a recent acceleration in VOWST net sales during March and April.

In both months, net sales were the highest seen to date. In addition, Nestlé has recently increased the number of HCPs on the call list of their GI sales team, which we expect will help further accelerate sales in the near future. We believe that the commercial opportunity for VOWST remains substantial, especially when considering the large underlying patient population with an estimated 156,000 cases of recurrent CDI in the US each year, and given the severity of this life-threatening disease. Terry will provide more detail about the progress of the commercialization efforts and actions taken to accelerate product growth.

Before she does, I'd like to take a moment to summarize our company priorities, beginning with the continued delivery of value to eligible patients and working with Nestle to maximize commercial performance. We were also preparing for the clinical lead out of Cohort 2 in our ongoing SER-155 Phase 1b study in [HSAT] patients share.

SER-155 as a consortia of 16 cultivated bacterial strains in a wholly owned program that could represent an important opportunity for the company and for patients. As we announced in April, we completed enrollment for the placebo-controlled Cohort 2 of this study. Last year, we announced encouraging SER-155 Phase 1b cohort 1 clinical data that showed favorable tolerability, successful drug bacteria engraftment and a substantial reduction in pathogen domination in the gastrointestinal microbiome compared to a reference cohort of patients.

The pending clinical data from Cohort 2 could provide further demonstration of our approach to address an important new patient group. The pending SER-155 data are on track for late Q3 of this year, and we are highly optimistic about the prospects for this readout. Following our strategy, we aim to leverage serious industry leading microbiome capabilities and know-how to advance the development of promising new candidates in our pipeline.

We believe these programs have the potential to protect millions of medically vulnerable individuals, such as those with chronic liver disease, cancer neutropenia or who have received solid organ transplants from life threatening infections. We recognize that it is critically important to ensure that Seres has the resources required to execute on these initiatives. We are working with urgency to evaluate various options to support our promising pipeline with additional capital.

With that, I'll now pass the call over to Terry.

Thank you, Eric. Although meaningful progress was made across the VOWST launch priorities during the first quarter, as Eric shared just now we did not see the growth we had hoped for across the entirety of the period. In February, based on analysis of blocks execution, Nestle identified a number of opportunities for refinement and retrain the sales teams to reinforce a focus on the earlier use of VOWST.

As a result, we saw that net sales in March and April trended much higher than those in January and February. In April, Nestlé also significantly increased the number of HCPs on the GI sales teams call list, and we believe this will drive meaningful acceleration in the months to come.

I'll move now to the details around Q1 results as provided to us by Nestle Health Science. In the first quarter, we observed continued growth of enrollments, while new patient starts remained at a similar level to that observed in Q4 of last year. In total, between, the June 2023 launch in the end of the first quarter 4,239 completed prescription enrollment forms were received for VOWST, including 1,411 in the first quarter alone.

Of total enrollments, 3,096 [culminated]in new patient starts, including 1,083 in the first quarter. We continue to observe new prescribers of VOWST with 609 prescribers added in the first quarter. Since approval, prescription enrollment forms were received from a total of 1,939 unique prescribers. In terms of specialty mix, approximately 65% of those prescribers in Q1 were from gastroenterology with the remainder from other specialties.

Of the 1,939 HCPs who have prescribed VOWST, 604 of them prescribed VOWST to more than one patient in their practice. Although as expected, the majority of utilization from VOWST to date continues to be in the multiply recurrent patient group. We do continue to see used in patients with their first recurrence.

Moving now to the four focus areas for the launch. I will first discuss HCP education. The initial launch focus of Nestle field sales teams was on educating a select group of high prescribers about the benefits of VOWST. As a result of those efforts, many of these high volume prescribers have tried VOWST and are adopting it in their routine practice.

However, in the RCDI market, even the highest prescribers delimited number of patients annually. This creates the need to rapidly expand education efforts to a broader HCP audience in order to accelerate growth. In April, Nestle proposed refinement of their call list significantly expand the number of HCPs covered by their sales team.

This expanded list implemented in April will also be used to inform targeted digital promotion to HCP. At launch, early uptake in the multiply recurrent segment was pronounced providing much initial success for the sales team. But we know that in order to accelerate adoption, penetration of the earlier patient segment is a must. Patients with first and second recurrence represent a significant proportion of the RCDI patient opportunity.

Nestlé held its national sales meeting at the end of February. And during the meeting, we saw the significant training provided to the sales teams in support of sourcing patients from the early recurrent patient pool. Providing a positive experience for patients and providers is the second launch priority. Last year, the Nestlé team made significant progress, converting patient enrollment to new patient starts, meeting and then exceeding benchmarks for specialty products..

The sales teams supported this key priority by working closely with HCPs, their office staff and the best VOWST hub. In their efforts to provide a positive customer experience, in some cases, the sales representatives were having in-depth conversations directly with HCPs regarding the patient enrollment process at the expense of time spent on why that should be used early and often to prevent for future recurrences.

Nestle recently increased the staff of a separate field reimbursement team and enhance the remit of this team to proactively educate and support HCP office staff on the patient enrollment process. These changes will empower their representatives to focus on the robust profile VOWST first and foremost, [meeting] conversations about enrollment forms and how to start a patient for the HCPs office staff and the field reimbursement team.

Finally, in late Q1, the patient enrollment process was simplified to reduce the amount of required information and to move to an entirely new digital format. We believe these refinements were necessary to accelerate trial and adoption across the entire RCVI patient pool. The VOWST patient assistance programs continue to support a positive HCP and patient experience.

And in the first quarter, we observed that 44% of new patient starts were dispensed by the VOWST patient assistance program. This level is consistent with that observed in Q4 of last year. As a reminder, dispensing drug at no cost to the patient is primarily triggered by patient affordability challenges with co-pays or other cost sharing requirement imposed by the patient's health plan once the prescription is approved.

We believe these programs are important investment to support future demand across the broad RCDI patient population. We also believe that the need for these programs is likely to decline as the inflation Reduction Act provisions governing Medicare Part D benefit design and specifically capping patient cost-sharing requirements come into effect over the next year.

The third focus area for the launch is engaging payers to ensure access and we continue to be pleased with the broad patient access we are seeing. In Q1, like in Q4, we saw 56% of new patient starts reimbursed through the patient's drug benefit. Our gross-to-net rate remains modest with minimal discretionary rebates. [Morellable] provide more context around the gross-to-net rates for VOWST on this.

By the end of Q1, (technical difficulty) approximately 83% of commercial and 55% of Medicare Part D live. At this point in the launch, the larger plans in PBMs have issued policies for VOWST and the remainder smaller plans have decided to simply extend the new-to-market block phase versus exert effort to construct a policy.

In summary, sorry, when an (inaudible) office staff work with the VOWST voice hub to navigate the approval process, we continue to see the VOWST majority of patients gain access to VOWST through their insurer. Finally, the hospital selling team continues its efforts to educate hospital outflow regarding hospital outflow, and we believe these efforts will accelerate demand this year.

Education of hospital-based HCPs and development protocols for our CDI that include VOWST will enable more consistent consideration of VOWST as patients flow from the inpatient to the outpatient setting. As the launches progress, Nestle has refined execution with this team as well prioritizing institutions, where significant progress is well underway, make VOWST available broadly to their patient.

Nestle is also scaling a pilot program from last year, which would allow certain hospitals to be considered for inclusion in the VOWST distribution network. Thus, we expect some further net sales growth, independent of the enrollments and new patient starts reported to Nestle and then to Seres by the core specialty pharmacies.

To wrap up my remarks, I'll remind you that in 2023, we saw that early and substantial uptake in VOWST leading to financial performance for the year that exceeded both our expectations and those of Nestlé. We believe these results reflect three important factors. First, the extensive pre-commercialization work conducted that remains foundational to future success.

Second, a simple effective launch strategy that remains in place. And third, focused execution during the early period by the Nestle sales team. We believe that we have the path forward to reach the full potential of VOWST and our Nestle colleagues have proven that they can focus to drive results as they did early in the launch. With the recent refinements and refocusing of launch execution, we expect acceleration of performance, and in fact, early results in March and April demonstrate this.

I would now like to pass the call over to Lisa to get more details about the SER-155 program.

Thank you, Terry. As a reminder, SER-155 is a consortium of bacterial strains cultivated from clonal master cell bank. This therapeutic candidate is designed to prevent GI infection, including those from antibiotic resistant organisms and to reduce bloodstream infections by promoting epithelial barrier integrity. SER-155 was also intended to modulate immune pathways with the potential to induce immune tolerance, both locally and systemically.

SER-155 is being evaluated in an ongoing Phase 1b study in patients who have undergone Allo-HSCT, following a diagnosis of AML or other hematologic malignancy. as a result of extensive exposure to antibiotics and the effects of HSCT conditioning regimens, These patients experience a highly disrupted GI microbiome, which is linked to pathogen overgrowth and domination in the GI tract.

This domination has been shown to be significantly associated with increased risks of bloodstream infection graft versus host disease and mortality. Last year, we reported promising Phase 1b cohort 1 clinical data with SER-155 being well tolerated in highly immunocompromised Allo-HSCT patients. In this open-label cohort SER-155 was administered to 13 subjects and we had a valuable microbiome data from 9 subjects.

Our data indicated that of the subjects administered 155 only a single patient had enteric pathogen domination within 30 days following stem cell transplant. This domination event was transient and the resulting incidence of domination in cohort 1 was markedly lower and the incidence observed in a large reference cohort of patients.

Last month, we reported that enrollment was complete for cohort 2 of the study, which incorporates a randomized, double-blinded placebo-controlled design. This portion of the study enrolled 45 subjects. We anticipate obtaining Cohort 2 study data in late Q3 of this year. In addition to continued evaluation of the safety profile and drug pharmacology, we will assess the ability of SER-155 to decrease rates of pathogen domination, the incidence of GI and related bloodstream infections and the incidence of acute graft versus host disease.

We will also assess the ability of SER-155 to decrease rate of fever during neutropenia and the initiation of attendant antibiotic therapy. We believe positive data from this readout would further validate the promise of this novel therapeutic modality in addressing serious infections in medically vulnerable populations, including potentially patients with chronic liver disease, cancer neutropenia and solid organ transplant.

We also believe that this approach could reduce the use of antibiotics by reducing events of infection or suspected infection that require antibiotic initiation. A reduction in antibiotic use could impact the problem of antimicrobial resistance more broadly. This could be especially important in settings with high rates of antibiotic use and resistant, such as intensive care units.

These additional opportunities could extend the clinical utility of SeER-155 and our preclinical stage program, while establishing a fundamentally new approach to protect substantial numbers of medically vulnerable patients from life-threatening infections.

With that, I'll turn the call to Mirella.

Thanks, Lisa, and good morning. I'd like to discuss our financial performance for the first quarter, starting with VOWST. To remind you, Seres does not recognize VOWST net sales in its financial statements. But instead we share equally with Nestle, the commercial profits and losses and we record our share in collaboration, profit and loss sharing related party.

VOWST profits and losses are determined based on VOWST net sales, cost of goods sold and sales and marketing expenses. Net sales of VOWST for the first quarter were $10.1 million and based on 642 units of VOWST sold during the period to specialty pharmacies and distributors. The net sales reflected estimated gross to net reductions of approximately 15%.

This is slightly higher than the previous quarter, due primarily to an increase in co-pay assistance. We estimate that at the end of the quarter there were approximately two weeks of VOWST inventory in the channel at specialty pharmacies, consistent with the levels at the end of last year. Seres supplies VOWST inventory to Nestlé, and we receive payments from Nestlé related to their VOWST supply purchases to meet market demand.

During the first quarter, Nestle purchased approximately $7.4 million of VOWST supply from the company, and we received approximately$8.7 million in payments from Nestle related to prior quarter purchases. The total VOWST loss in the first quarter was $14.3 million and our share of that was $7.1 million. The first quarter, VOWST collaboration expenses, meaning COGS and sales and marketing expenses per VOWST decreased from the prior quarter.

This decrease was due to prior period adjustments or charges recognized in the fourth quarter and lower external costs in the first quarter of this year. For the first quarter, we also recognized as collaboration profit or loss sharing related party, approximately $4.7 million of profit on the transfer of VOWST inventory to Nestle. Profit (technical difficulty) supply price to Nestle, net of the cost of inventory for the units sold and free goods distributed by Nestle during the quarter.

Research and development expenses for the first quarter were $21.7 million, reduced from $44 million for the same period in 2023. The year-over-year decrease in R&D expenses is primarily driven by VOWST commercial manufacturing costs, no longer being recognized in the Seres P&L, following the product approval in April 2023, but instead capitalized and recognized on our balance sheet.

In addition, reductions in headcount and other expenses contributed to decreased expenses, following the implementation of the restructuring plan in the fourth quarter of last year and the focus of our resources on the SER-155 program.

General and administrative expenses for the first quarter were $15.5 million, reduced from $22.5 million from the same period in 2023, again, reflecting lower headcount following the restructuring actions and other cost reduction efforts. In May, we received a notice of default and reservation of rights letter from our lender, Oaktree.

Stating that an event of default had occurred due to our nonpayment of a milestone due to Bacthera under our manufacturing agreement with Bacthera. We advised Oaktree that no event of default has occurred because, we believe the milestone has not yet been met and also we're also in constructive discussions with Bacthera regarding the steps necessary to achieve the milestone.

Turning to our cash position. As of March 31, 2024, we had $111.2 million in cash and cash equivalents as compared with $128 million at the end of 2023. Based on our various operating plans, we anticipate these resources will support our operations through obtaining this SER-155 Cohort 2 data and into the fourth quarter of this year.

Company's operating plans may include drawing down the $45 million [tranche B] under the company's existing senior secured debt facility with Oaktree. If the net sales and other conditions are met. as well as alternate plans, if the necessary conditions are not met. Our operating plans may include selling shares under the company's ATM, implementing additional cost reduction initiatives and other measures. Importantly, as Eric mentioned, activities are underway to strengthen the company's balance sheet to support our pipeline and drive value.

Thank you. I will now turn the call back to Eric.

Thank you, Marella. Seres has continued to execute with the ongoing commercialization at VOWST, as well as driving our additional promise in microbiome therapeutic candidates forward in clinical development. We are particularly excited about the upcoming SER-155 data readout later this year as an important potential value driver for the company.

We look forward to keeping you updated on our progress during 2024. And as we evaluate options to support the company. Without, we have clearly demonstrated the potential for microbiome therapeutics. We believe that many more opportunities lie ahead and that Seres has the potential to bring additional transformative new therapies to patients in need.

With that, operator will conclude our prepared remarks and open up the line for questions.

Thank you. We will now begin the question and answer session. (Operator Instructions)

Ed Tenthoff, Piper Sandler.

Great. Thank you, and thank you for the update. I was wondering whether or not you could remind us, if there was any price changes for VOWST this year, and if you can what's occurring gross prices? And I appreciate all the color on the adjustments being made by Nestle. Can you remind us how many reps in total are detailing VOWST? Thank you.

Yes, Ed, good morning and thank you for the questions. So, maybe I'll take the first, and the second, I'll ask Terry to comment on the pricing and any other comments on the sales force. So, there's approximately 150 reps on the GI side, as well as 20 reps that are devoted towards the hospital and really being the quarterbacks of how that's helping patients navigate through the hospital infrastructure.

But maybe Terry comment further on that, as well as the last question.

Sure, and thanks for the questions, Ed. With respect to the Nestle representatives, I would highlight the fact that based on the refinements that Nestle implemented. They have increased the call list specifically for the GI sales team that carries both of them happen VOWST, and they haven't increased the size of the sales team.

So, I think this gives us all a message on the importance of this launch and accelerating performance for both companies or particularly Nestlé and that they are allocating additional representatives' time and effort away from (inaudible). So, we're very pleased with the digging under the hood that they've done in refinements of the execution of the field sales team and and it really speaks to the importance of this launch to their company, the fact that they are allocating resources in this manner.

With respect to price change, price increases taken on December 31st of last year, it was a 6% increase. So, that brings us to a whack of $18,550 for the product. Thanks for the question.

Thank you and I really. Yes, super helpful and I really appreciate the color on the focus of the reps. Thank you.

Thanks for the question, Ed.

John Newman, Canaccord Genuity.

Hi, guys. Thank you for the update and thanks for taking my question. So, wondering, if you could talk to us on SER-155 about the efficacy endpoints, looking at some really interesting and important outcomes here, I think following transplant. And just wondering what do you think will be particularly interesting here for investors to focus on the data readout late 3Q? Thanks.

John, good morning and thank you for the question. So, maybe I'll start and I'll ask Lisa to comment and then Matt, after Lisa. I'll just start by reminding everyone. This is a 1b study. So, primarily, we're looking at engraftment and safety. But we are very excited about this study.

We think it's representative of where the technology is going. And not only are we excited about the potential to help patients within this specific indication, but what it unlocks for us as we mentioned in our prepared remarks. But with that, maybe I can turn it over to Lisa for your question.

Sure, hi, John, yes, just as you noted, there's a number of endpoints in this study that would be, could be great positive outcomes for patients, but we are going to be paying particular attention to the ability of 155 to decrease incidence of neutropenia and fever, as well as bloodstream infections. And that's because the ability of 155 to decrease pathogen domination and infectious events, including things that might be further downstream like antibiotic starts and more time in the hospital would be applicable, not just to HSCT patients, but to broader patient groups, some of which we mentioned in our prepared remarks.

So, in that way, 155 could offer a whole new therapeutic approach to reducing infections. There is a very large number of patients. So, we're very excited to see the results on that.

And then, Matt, maybe a comment just on--

Sure, John, and again, from a pharmacology standpoint, the thing we're most focused on is the type of data we reported in the first cohort, which is that pathogen combination and the incidence of that across different patient populations. Remember, we saw very promising results there, where we saw substantially lower rate of these incidence events than we did in the reference control cohort will be looking to see that type of data, again compared to the control cohort, but also importantly in the context of the placebo control.

These are the types of data we used along with the safety profile of the drug from the first cohort to get fast-track designation from the FDA on this program. So, we'll be looking to see those types of data play out in the second cohort.

Thank you.

Thanks for the question, John.

Tes Romerro, JPMorgan.

Hi, good morning. Thanks so much for taking our question. So, a big picture one from us. Can you provide your latest thinking around how we should think about the launch trajectory here over the next few quarters for about. You talked about how net sales were roughly flattish quarter-over-quarter.

But how does that kind of play into your degree of confidence in being able to meet this net sales requirement in order to draw down on that Oaktree Tranche by the end of 3Q. Really what I'm trying to get at guidance, you talked about a number of refinements that Terry has making a launch strategy, but how quickly do those refinements actually translate to an acceleration of the launch here? Thanks so much.

Yes, Tes, good morning, and thank you for the questions. Maybe I'll start and then I'll hand it over to Terry for her comments. But I guess I'll begin where you ended your question, which is how quickly may we see an acceleration. And I think the short answer is that we have begun to see it, including in March and April. So, as it relates to the milestone, we would need to see growth from the March and April numbers in order to put us in a position to earn it. On the other hand, we think that growth is achievable.

And maybe I'll ask Terry to comment and I can add some comments at the end.

Sure, thanks for the question, Tes. It's actually, it's a really important new launch and point to make. We don't believe that we have the long strategy. Our strategy has been set since prior to the launch and agreed with Nestlé. We believe we have an execution issue on a number of fronts. And domestically, having obviously had the customer facing teams deployed from their company, they are closest to those teams, they are closest to the customer.

And as you could see in my core here in my prepared remarks, they've done a remarkable job of really getting under the hood of execution and where there are some areas that we can refine and improve working with their sales teams and I saw that pulled through at their February sales meeting in terms of really focusing them the representatives on making the case for earlier use VOWST and getting them out of the (inaudible) with their HCPs on logistics and allowing a field reimbursement team to take the helm and take the baton on that with the office staff that we have the conversations now and the places where they belong, those executional refinements are critical.

And we're seeing the results, not only in net sales, but also in some of the other metrics like enrollments and new patient starts. So, April, for example, was an all-time high for patient enrollment and net sales all-time high for March and April. And on new patient starts as well all-time highs in March and April versus previous months.

So, we're really pleased with the turning of the tide here, and we would expect that acceleration to continue over the coming quarters. The most important refinement that happened in April is the revision of the call list and the expansion of that call list to include additional high volume or high-potential HCPs. So, we're very optimistic about the potential for the product, both in the long term, but also in the short term here based on the changes that Nestle is making.

Yes, I might just add one more comment, which is, Tes, your question is kind of two dimensions to it. One is the underlying commercial opportunity. The other was the mild, the next trenche debt . What I would say is that, while we do think that the conditions of reaching the threshold to qualify for the debt are possible. We are not building our financial strategy around the next tranche of debt as the solution.

So, as we mentioned in our prepared remarks, we have urgency in considering and acting on different alternatives that we have ahead of us to support the company in both this year and into the future. And certainly those include options that wouldn't require the next tranche of debt as the primary financing vehicle for the company.

Thanks so much for taking our question.

Thanks, Tes.

Jeff Jones, Oppenheimer.

Good morning, guys, and thanks for taking the question on. Can you speak to any cost modifications as a result and the revised sales strategy and efforts coming from Nestle? And any visibility on where do you see sales needing to be to reach a breakeven here?

Yes, Jeff, maybe I can start and then I can hand it to Marella there. As you know, we instituted and executed upon a significant restructuring in November of last year, and certainly we're on target for those actions. We are highly focused on reaching the 155 results, as well as putting the company in a position to be successful in the longer term.

So, what Marella had mentioned in her prepared remarks is, we certainly expect to get there. There are different ways in which we can get there. I don't think that we can be specific in terms of too far in terms of the types of alternatives that we're considering. But certainly you should know that we are active in considering those options now, and we expect to report back to you shortly, but maybe Marella can kind of further.

Yes, agreed. We are being mindful and proactive in making sure that we are continually looking for opportunities to save and those that make sense that don't compromise our clinical development plans and equally don't compromise our ability and Nestle's visibility in collaboration to grow the VOWST sales.

So, we are in lockstep with them about the need to support its event to deliver the growth. And we have a good mechanism in our joint steering committee to make those decisions thoughtfully, and we'll continue to support that.

Thanks. One follow-up question on manufacturing. When do you expect the majority of that investment in the (inaudible) facility to be completed triggering the milestone? And when would you have visibility to whether you can use those validation batches for saleable goods?

Yes, I guess let me answer this way, Jeff, which is, we had embarked upon the Bacthera project, we had designed it. We had work collaboratively to support it based on a number of factors. One is the quality of their team. Two is the quality of the facility and the campus. Three is, of course, the capacity that it would add. Four is the efficiency that we expect to accrue into the reduced cost of manufacturing through automation and (inaudible).

All of those factors continue to be critical for us and for our partners at Nestlé. So, we're making great progress with Bacthera, and we do expect that the milestones that we talked about in our filings will be hit shortly. And we continue to work collaboratively with them to bring VOWST patients.

So, I do think that we will continue to work with them with urgency like everything else. I think it's to our shareholders benefits and it's to our patient's benefits. So, I think we continue to view them as a critical partner, and we'll work together to bring those validation batches to patients as quickly as we can.

Great. Thanks guys.

Thanks for the questions.

Keay Nakae, Chardan.

Hi, thanks, couple of questions. One, you did see a sequential increase in inventory on the balance sheet. Can you talk about that and separate from that in terms of the capitalized product once you went commercial, when will you exhaust that?

Sure, let me ask Marella to answer the first and then second.

Yes. So, we are thoughtfully building up inventory in anticipation of the transition to Bacthera. And so, we're going to continue again to do that as it makes sense.

And then I don't think, we've provided guidance on when the capitalized inventory would fall through, except to say that we're working collaboratively with Nestlé to ensure that we're utilizing the assets and the capabilities and capacity that we have to try to ensure that we don't leave patients [short]. But also continue to build the capacity that we think we will need over time to support patients and what we expect will continue to be a growing top line.

Okay. And then just a strategy question. As it pertains to 155, given the strength of your balance sheet currently and given that VOWST, let's say, the bird in the hand. How likely are you to partner out 155 opportunities?

Yes, I think you probably can anticipate the answer is that we can't provide specifics. What I will say is that, we are actively considering options across a number of different dimensions. It always strikes me that non-dilutive capital sometimes doesn't mean what people think whatever you're giving rights or evaluate and then that is in some sense dilutive.

But we are focused on short term cash and the need to support the company and to support other programs that we think could help patients. So, we think about really holistically a short term, long term, what it enables for today, what it supports for tomorrow and those are obviously discussions and decisions that have multiple dimensions to them.

We've done it before in a meaningful way when we thought it was right and helpful to shareholders and we'll consider it again, but I can't specifically comment on 155, except to say, yes, we're really excited about this readout. I think that the data from the first cohort was impressive and interesting to us. It was to our stakeholders and our KOLs. And the ability to help what does a different patient population with our technology and what it could potentially open up for us is just incredibly exciting to us. So, I think you can imagine we're excited about these results.

Okay, thank you.

Thanks for the question.

That concludes our Q&A session. I will now turn the conference back over to management for closing remarks.

So, thank you, everybody, for your time this morning. We appreciate it and we look forward to keeping you updated as we go. So, thanks, and have a great week.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, you may now disconnect.