Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Important factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Summary Risk Factors” and Part I and Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations for the years ended December 31, 2021 and 2020, including a year-to-year comparison between 2021 and 2020, is presented below. For a discussion regarding our financial condition and results of operations for the year ended December 31, 2019, including a year-to-year comparison between 2020 and 2019, refer to Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 2, 2021.

Overview

We are a microbiome therapeutics company developing a novel class of live biotherapeutic drugs, which are consortia of microbes designed to treat disease by modulating the microbiome to treat or reduce disease by repairing the function of a disease susceptible microbiome to a non-disease state. We have an advanced drug pipeline with late-stage clinical assets that are formulated for oral delivery and a differentiated microbiome therapeutics drug discovery and development platform including good manufacturing practices, or GMP, manufacturing capabilities for this novel drug modality.

Our highest priority is preparing a biologics license application, or BLA, for submission to the U.S. Food and Drug Administration, or FDA, and preparing for potential commercialization of SER-109, an investigational oral microbiome therapeutic in development for recurrent Clostridioides difficile infection, or CDI. We intend to seek agreement with the FDA to begin a rolling BLA submission for SER-109 in the first half of 2022 and to finalize the submission with data from the safety database in mid-2022. SER-109 has obtained Breakthrough Therapy designation, and as a result, we expect priority review by the FDA.

We are also designing microbiome therapeutics to decolonize pathogens and modulate host function to reduce and prevent infections. We believe that the scientific and clinical data from our SER-109 program validate this novel approach, which we refer to as infection protection. We believe the infection protection approach may be replicable across different bacterial pathogens to develop microbiome therapeutics with the potential to protect a range of medically compromised patients from infections. We are evaluating SER-155 in a Phase 1b study in patients receiving allogeneic hematopoietic stem cell transplantation, or allo-HSCT, to reduce incidences of gastrointestinal infections, bloodstream infections and graft-versus-host disease, or GvHD. We are also evaluating additional preclinical stage programs in indications such as cancer neutropenia, solid organ transplant, and antimicrobial resistant infections more broadly.

We continue to focus our resources on evaluating SER-301 in a Phase 1b study in patients with mild-to-moderate ulcerative colitis, or UC, and on analyzing additional biomarker data from our Phase 2b study evaluating SER-287 in patients with mild-to-moderate UC. In July 2021, we announced topline results from the SER-287 Phase 2b study, which did not meet its primary endpoint of improving clinical remission rates compared to placebo. Following the data readout, in December 2021, we completed preliminary microbiome drug pharmacology analyses that demonstrated the successful engraftment of SER-287 bacterial species. However, unlike the Phase 1b study, anticipated changes in disease-relevant metabolites post-administration with SER-287 in the Phase 2b study were not observed. In addition, we have completed preliminary analysis of data from the first cohort of the SER-301 Phase 1b study, which included 15 subjects. Evaluation of the first cohort data by an independent Data Safety Monitoring Board indicated that it would be safe to proceed to the placebo-controlled second cohort. While efficacy was not a defined endpoint in the first cohort, evaluation of clinical outcome data collected as part of the study indicated that no subjects in the first cohort achieved clinical remission as defined by the FDA using the Three-Component Modified Mayo Score after 10 weeks of treatment, though there were improvements in one or more individual components (endoscopic, stool frequency and rectal bleeding subscores) in some patients. Strains in SER-301 were observed to engraft in subjects across the trial period, and based on the assessment of metabolomic data, SER-301 demonstrated pharmacological properties consistent with its design and led to baseline-dependent modulation of the metabolic landscape in the gastrointestinal tract of patients treated. We continue to conduct analyses of data from our SER-287 and SER-301 UC clinical stage programs to inform next steps for further development.

In addition, we continue to evaluate opportunities to advance our technology in modulating host immunity to have an impact on and treat diseases such as cancer and various autoimmune diseases.

Since our inception in October 2010, we have devoted substantially all of our resources to developing our programs, platforms, and technologies, building our intellectual property portfolio, developing our supply chain, business planning, raising capital and providing general and administrative support for these operations.

Many of our product candidates are still in preclinical development or early-stage discovery. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one

or more of our product candidates. Since our inception, we have incurred significant operating losses. Our net loss was $65.6 million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $614.4 million and cash, cash equivalents and short- and long-term investments totaling $291.2 million. Based on our current plans and forecasted expenses, we believe that our existing cash, cash equivalents and investments as of December 31, 2021 and proceeds, net of facility fees and expenses, of $27.6 million received in February 2022 in connection with the Second Amendment, will enable us to fund our operating expenses, debt service obligations and capital expenditure requirements for at least the next 12-months from issuance of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

While we plan to focus our investment on our highest priority clinical programs in the near-term, our expenses may increase substantially in connection with our ongoing and planned activities, particularly as we:

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complete the clinical development, seek regulatory approval, and prepare for commercialization of SER-109 for patients with recurrent CDI;

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re-evaluate the clinical development of SER-287 for the treatment of UC in light of the Phase 2b clinical study results and in conjunction with the additional microbiome biomarker data;

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continue the clinical development of SER-301 for the treatment of UC;

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continue the clinical development of SER-155 to address gastrointestinal infections, bacteremia and graft-versus-host disease;

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make strategic investments in our research discovery and development platforms and capabilities, including identifying candidates for additional disease indications;

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make strategic investments in manufacturing capabilities;

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maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property;

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potentially establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;

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perform our obligations under our agreements with our collaborators;

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seek to obtain regulatory approvals for our product candidates; and

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experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to continue to incur additional costs associated with operating as a public company.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

Impact of the COVID-19 Pandemic

We are monitoring the ongoing impacts of the COVID-19 pandemic and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address it. The spread of COVID-19 has caused us to modify our business practices, including implementing a work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, and other business partners in light of COVID-19. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration and severity of the pandemic, the impact of variants, travel restrictions and social distancing recommendations and regulations in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness and uptake of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease. See “Risk Factors—Risks Related to Our Operations—The COVID-19 pandemic has adversely impacted and could continue to adversely impact, our business, including our

preclinical studies and clinical trials, results of operations and financial condition” in Part I, Item 1A of this Annual Report on Form 10-K.

SER-109

SER-109 is an oral microbiome therapeutic candidate consisting of a consortium of purified Firmicutes spores. The SER-109 manufacturing purification process is designed to remove unwanted microbes in an effort to reduce the risk of pathogen transmission beyond donor screening alone. SER-109 is designed to reduce recurrent CDI in patients with a history of CDI by modulating the microbiome to a state that resists C. difficile germination and growth. SER-109, if approved, is designed to treat individuals with recurrent CDI, a patient population which includes approximately 170,000 cases per year in the United States.

The Phase 3 ECOSPOR III study was a multicenter, randomized, placebo-controlled study that enrolled 182 patients with multiply recurrent CDI. All patients who entered ECOSPOR III must have tested positive for C. difficile toxin. This inclusion criterion was implemented in an effort to ensure enrollment of only patients with active infection rather than simple colonization. The study was designed to evaluate patients for 24 weeks, with the primary endpoint comparing the C. difficile recurrence rate in subjects who received SER-109 verses placebo at up to eight weeks after dosing.

Previously reported topline data demonstrated that the study achieved its primary endpoint where SER-109 was superior to placebo in reducing CDI recurrence at eight weeks, reflecting a sustained clinical response rate of approximately 88% at eight weeks post-treatment. SER-109 resulted in a 27% absolute reduction of recurrence of CDI compared to placebo at eight weeks post-treatment, which is a relative risk reduction of 68%. The number-needed-to treat was 3.6. The rate of recurrence at 12 weeks in the SER-109 arm was 18.0%, compared to a rate of 46.2% in the placebo arm, representing an absolute risk reduction of 28% (relative risk 0.40; 95% CI 0.24-0.65; p <0.001 and p< 0.002 for the test sequence), and thereby consistent with the results seen at eight weeks. Results across stratifications of age and antibiotics remained similar. The study’s efficacy results related to the primary endpoint from all analyses exceeded the statistical threshold previously provided in consultation with the FDA that could allow this single clinical study to fulfill efficacy requirements for a BLA. The efficacy remained durable through 24 weeks of follow-up, as SER-109 was observed to significantly reduced recurrence rates compared to placebo over 24 weeks, 21.3% vs. 47.3%, respectively. In January 2022, these data were published in the New England Journal of Medicine (N Engl J Med 2022;386(3):220-229).

We believe the SER-109 safety results across completed studies have been favorable, with an adverse event profile comparable to placebo. In September 2021, we achieved target enrollment of 300 subjects with the ECOSPOR IV open-label study. The target enrollment of a minimum of 300 subjects for the SER-109 safety database was reached in conjunction with a prior completed Phase 3 study, ECOSPOR III. Seres is required by the FDA to demonstrate safety of SER-109 in at least 300 subjects who have received the dose to be commercialized, consistent with standard FDA guidance, with a 24-week follow-up period, to support a BLA submission. The ECOSPOR IV open-label study includes patients with recurrent CDI, including individuals with a first recurrence of CDI. We intend to seek agreement with the FDA to begin a rolling BLA submission for SER-109 in the first half of 2022 and finalize the submission with data from the safety database in mid-2022. SER-109 has obtained Breakthrough Therapy designation, and as a result, we expect priority review by the FDA.

In November 2021, we initiated a SER-109 expanded access program across the United States. The program is designed to enable eligible adults with recurrent CDI to obtain access to SER-109 prior to a potential FDA product approval.

SER-155

SER-155, an oral microbiome therapeutic candidate consisting of a consortium of cultivated bacteria, is designed to decrease infection and translocation of antibiotic resistant bacteria in the gastrointestinal tract and modulate host immune responses to decrease GvHD. The rationale for this program is based in part on published clinical evidence from our collaborators at Memorial Sloan Kettering Cancer Center showing that allo-HSCT patients with decreased diversity of commensal microbes are significantly more likely to die due to infection and/or lethal GvHD. SER-155 was designed using our reverse translational discovery platform to reduce incidences of gastrointestinal infections, bloodstream infections and GvHD in patients receiving allo-HSCT. The SER-155 Phase 1b study is designed to include approximately 70 patients in both an open-label and a randomized, double-blind, placebo-controlled cohort that will evaluate safety and tolerability before and after HSCT. Additionally, the engraftment of SER-155 bacteria (a measure of pharmacokinetics) and the efficacy of SER-155 in preventing infections and GvHD will be evaluated. In November 2021, we enrolled the first patient in the SER-155 Phase 1b study.

SER-287

SER-287, an oral microbiome therapeutic candidate consisting of a consortium of purified Firmicutes spores, is designed to restore a healthy gastrointestinal microbiome in individuals with UC. There are over 700,000 UC patients in the United States and fewer than one-third of patients on current therapies achieve remission. Approved treatments are often inadequate to control disease activity and are often associated with significant side effects, including immunosuppression. SER-287 has been granted Fast Track Designation by the FDA for the induction and maintenance of clinical remission in adult subjects with active mild-to-moderate UC. SER-287 has been designated an Orphan Drug for pediatric UC by the FDA.

In July 2021, we announced topline results from the Phase 2b study evaluating SER-287 in patients with mild-to-moderate UC. The study did not meet its primary endpoint of improving clinical remission rates compared to placebo. The primary objective of the induction portion of the Phase 2b study was to evaluate the safety and efficacy of SER-287, after 10 weeks of induction dosing (following vancomycin pre-conditioning) in achieving clinical remission in participants with mild-to-moderate UC. The trial was a randomized, placebo controlled, double blind, parallel group multicenter study which enrolled 203 UC patients at approximately 100 sites throughout the U.S. and Canada. Dosing was explored in two SER-287 cohorts (full induction dose and step-down induction dose) versus placebo and patients were randomized according to a 1:1:1 ratio. Clinical remission was analyzed and defined by a 3-component modified Mayo Score. No statistically significant differences were observed in absolute clinical remission rates between the three treatment arms (10.3% for the full induction dose, n=68 and 10.6% for the step-down induction dose, n=66 versus 11.6% for placebo, n=69). There were also no statistically significant differences observed across the three treatment groups for endoscopic improvement, endoscopic remission or symptomatic remission.

Both dosing regimens of SER-287 were generally well tolerated. Treatment emergent adverse events, or AEs, were observed in 67.6%, 46.2% and 50.7% of subjects in the induction dose, step-down dose (both of which included six days of oral vancomycin preconditioning) and placebo treatment arms, respectively. The majority of observed AEs were mild or moderate in severity. The most commonly observed AEs were UC, diarrhea, nausea and abdominal distension. Four participants on active treatment reported serious treatment emergent adverse events (worsening UC, colonic dysplasia, congestive heart failure with decreased hemoglobin, and appendicitis), as did one on placebo (worsening UC).

Given the lack of a clinical efficacy signal identified in the Phase 2b study, we have closed the open label and maintenance portions of the study.

In December 2021, we completed preliminary microbiome drug pharmacology analyses from the Phase 2b study that demonstrated the successful engraftment of SER-287 bacterial species. Based on the SER-287 Phase 2b microbiome data analyses, engraftment of SER-287 bacteria, measured as the median number of bacteria observed across patients post treatment, was statistically significant in patients receiving SER-287 versus placebo (p ≤ 0.001 at all timepoints). The magnitude and kinetics of engraftment were comparable to our Phase 1b study. However, unlike the Phase 1b study, anticipated changes in disease-relevant metabolites post-administration with SER-287 in the Phase 2b study were not observed. Analysis of the genomic and metabolomic data characterizing the microbiome of SER-287 study participants at baseline and post dosing suggest potential biomarkers for inclusion of targeted patient subpopulations in future development efforts.

We continue to conduct analyses of data from our SER-287 and SER-301 UC clinical stage programs to inform next steps for further development.

SER-301

SER-301 is an oral microbiome therapeutics candidate comprised of a consortium of cultivated bacteria for the treatment of mild-to-moderate UC. SER-301 is a consortium of cultivated bacteria designed using our reverse translational discovery platform that incorporates analysis of microbiome biomarkers from human clinical data and preclinical assessments using human cell-based assays and in vitro/ex vivo and in vivo disease models. The design of SER-301 incorporates insights obtained from the SER-287 Phase 1b clinical and microbiome results, as well as from our clinical portfolio more broadly, and additional functional data from preclinical assessments, in an effort to optimize desired pharmacological properties.

SER-301 is designed to reduce induction of pro-inflammatory activity, improve epithelial barrier integrity and TNF-α driven inflammation in intestinal epithelial cells, or IECs, and modulate UC-relevant anti-inflammatory, innate and adaptive immune pathways. SER-301 is being produced by our advanced fermentation, formulation and delivery platforms. It includes strains delivered in spore form, as well as strains fermented in non-spore (vegetative) form and delivered using enterically-protected technology designed to release in the colon.

The SER-301 Phase 1b study is being conducted in Australia and New Zealand in subjects with mild-to-moderate UC and is designed to include approximately 65 patients distributed across two cohorts. In November 2020 we enrolled the first patient in the SER-301 Phase 1b study. As a result of enrolling the first patient in the clinical study, we received a $10.0 million milestone payment under our collaboration and license agreement, or the 2016 License Agreement, with Société des Produits Nestlé S.A., or, together with NHSc Pharma Partners, Nestlé, successor in interest to Nestec, Ltd.

We have completed preliminary analysis of data from the first cohort of the SER-301 Phase 1b study, which included 15 subjects. Evaluation of the first cohort data by an independent Data Safety Monitoring Board indicated that it would be safe to proceed to the placebo-controlled second cohort. While efficacy was not a defined endpoint in the first cohort, evaluation of clinical outcome data collected as part of the study indicated that no subjects in the first cohort achieved clinical remission as defined by the FDA using the Three-Component Modified Mayo Score after 10 weeks of treatment, though there were improvements in one or more individual components (endoscopic, stool frequency and rectal bleeding subscores) in some patients. Strains in SER-301 were observed to engraft in subjects across the trial period with the number of engrafting strains exceeding expectations at multiple sampling time points. A dual formulation was evaluated in the first cohort and the extent of engraftment across subjects was correlated with whether

bacteria were formulated as bacterial spores versus vegetative strains; the former demonstrating stronger engraftment across all patients.

Based on the assessment of metabolomic data, SER-301 demonstrated pharmacological properties consistent with its design and led to baseline-dependent modulation of the metabolic landscape in the gastrointestinal tract of patients treated; changes were observed in short-chain and medium-chain fatty acids, tryptophan-derived metabolites, bile acids, and other microbe-associated metabolites, as well as host metabolites associated with a non-disease state. These SER-301 metabolomic results were encouraging compared with the results observed in the SER-287 Phase 2b study, in which the metabolic changes were not observed in general across subjects administered with SER-287. Additionally, changes in disease-relevant metabolites in SER-301 were observed to be greater in a definable subpopulation of patients.

The degree of metabolic changes observed following SER-301 administration appeared to be dependent on the baseline metabolic profile of the study subjects, providing support for the potential for microbiome therapeutics to be developed in biomarker-identified UC patient subpopulations.

We continue to conduct analyses of data from our SER-287 and SER-301 UC clinical stage programs to inform next steps for further development.

SER-401

In March 2021, we announced that we, in collaboration with study partners, The Parker Institute for Cancer Immunotherapy and The University of Texas MD Anderson Cancer Center, voluntarily discontinued further enrollment of our study evaluating the safety and drug activity of SER-401 or fecal microbiota transplant, or FMT, in combination with nivolumab in patients with metastatic melanoma.

A preliminary analysis of results from 10 subjects who received either SER-401 or placebo in combination with nivolumab indicated that SER-401 was safe and well-tolerated. There were no patients enrolled in the FMT portion of the study. Subjects currently enrolled in the study will complete the study protocol. Given challenges in enrollment due to the COVID-19 pandemic, subsequent anticipated time to study completion, and progress in our preclinical oncology pipeline, we have decided to deprioritize further development of SER-401. We will continue to advance our research and development efforts in cancer, applying learnings from the SER-401 trial.

Intellectual Property

Patent Portfolio

We have an extensive patent portfolio directed to rationally designed ecologies of spores and microbes. The portfolio includes both company-owned patents and applications, and those that we have rights to as licensee. For example, our portfolio includes an option to license foundational intellectual property related to the use of bacteria in combination with checkpoint inhibitors from MD Anderson. The patents and applications included in our portfolio cover both composition of matter and methods (e.g., method of treating). Our intellectual property rights related to SER-109 (C. difficile) and SER-287 (ulcerative colitis) extend through 2034. We plan on continuing to broaden our patent portfolio. Currently, we have 24 active patent application families, which includes 21 nationalized applications and three pending at the PCT stage. To date, we have obtained 18 issued U.S. patents and one U.S. patent application that has been allowed.

Regulatory Exclusivity

If we obtain marketing approval for any of our product candidates, we expect to receive marketing exclusivity against biosimilar products. For a new biological composition approved by the FDA, a 12-year period of exclusivity in the United States may be obtained. In Europe, the European Medicines Agency awards 10 years of exclusivity for new molecular entities.

Financial Operations Overview

Revenue

To date we have not generated any revenues from the sale of products. Our revenues have been derived primarily from our agreements with our collaborators. See “—Liquidity and Capital Resources.”

Operating Expenses

Our operating expenses since inception have consisted primarily of research and development activities and general and administrative costs.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, which include:

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expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, pre-clinical activities and clinical trials on our behalf as well as contract manufacturing organizations that manufacture drug products for use in our pre-clinical and clinical trials;

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salaries, benefits and other related costs, including stock-based compensation expense, for personnel in our research and development functions;

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costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

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the cost of laboratory supplies and acquiring, developing and manufacturing pre-clinical study and clinical trial materials;

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costs related to compliance with regulatory requirements; and

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facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Our primary focus of research and development since inception has been on our microbiome therapeutics platform and the subsequent development of our product candidates. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, CROs in connection with our pre-clinical studies and clinical trials, lab supplies and consumables, and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under development and, as such, are classified as costs of our microbiome therapeutics platform research, along with external costs directly related to our microbiome therapeutics platform.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase in the foreseeable future as we complete clinical development, seek regulatory approval, and prepare for commercialization of SER-109, re-evaluate the clinical development of SER-287, continue to discover and develop additional product candidates, including SER-301 and SER-155 and pursue later stages of clinical development of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate, commercial, and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our headcount to support the potential growth in our research and development activities and the potential commercialization of our product candidates, and as we conduct pre-launch activities to prepare for commercialization of SER-109. We also may continue to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and the requirements of the Securities and Exchange Commission, director and officer insurance costs and investor and public relations costs.

Collaboration (Profit) Loss Sharing - related party

Collaboration (profit) loss sharing – related party includes 50% sharing of the profit or loss related to the pre-launch activities and commercialization activities associated with the license agreement that we entered into with NHSc Pharma Partners (Nestle) in July 2021 as discussed in Note 12 to our consolidated financial statements.

Other (Expense) Income, Net

Interest (Expense) Income, Net

Interest income consists of interest earned on our cash, cash equivalents and investments.

Interest expense consists of interest incurred under our loan and security agreement with Hercules.

Other (Expense) Income

Other (expense) income primarily consists of amortization of premiums on investments, offset by sublease income.

Income Taxes

Since our inception in 2010, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2021, we had federal and state net operating loss carryforwards of $402.5 million and $394.1 million, respectively, both of which begin to expire in 2035. As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $43.7 million and $11.9 million, respectively, which begin to expire in 2031 and 2028, respectively. The federal research and development tax credits include an orphan drug credit carryforward of $23.7 million.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles, or GAAP, in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

Revenue Recognition

We recognize revenue in accordance with the guidance under ASC 606, Revenue from Contracts with Customers. ASC 606 applies to all contracts with customers, except those contracts that are within the scope of other guidance, such as leases, insurance, and financial instruments. We enter into agreements that are within the scope of ASC 606, under which we license certain of our product candidates and perform research and development services in connection with such arrangements. The terms of these arrangements typically include payment of one or more of the following: nonrefundable up-front fees, reimbursement of research and development costs, development, clinical, regulatory and commercial sales milestone payments, and royalties on net sales of licensed products. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.When determining the timing and extent of revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

(i)

identify the contract(s) with a customer;

(ii)

identify the performance obligation(s) in the contract;

(iii)

determine the transaction price;

(iv)

allocate the transaction price to the performance obligation(s) in the contract; and

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services transferred to our customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in our arrangements typically consist of a license to our intellectual property and/or research and development services. We may provide options to additional items in such arrangements, which are accounted for as separate contracts when our customer elects to exercise such options, unless the option provides a material right to our customer. Performance obligations are promises in a contract to transfer a distinct good or service to our customer that (i) our customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meets the requirements of a performance obligation.

We determine transaction price based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, we estimate the probability and extent of consideration we expect to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. We then consider any constraints on the variable consideration and include in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

We then allocate the transaction price to each performance obligation based on the relative standalone selling price and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to our customer and the performance obligation is satisfied. For performance obligations which consist of licenses and

other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

We record amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from our customer prior to transferring goods or services to our customer under the terms of a contract, a contract liability is recorded for deferred revenue.

We do not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by our customer and the transfer of the promised goods or services to our customer will be one year or less. Incremental costs of obtaining a contract are expensed as and when incurred if the expected period over which we would have amortized the asset is one year or less, or the amount is immaterial.

Collaboration Revenue

Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. We evaluate the promised goods or services to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, we consider the stage of development of the underlying intellectual property, the capabilities and expertise of our customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, we must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

When we conclude that a contract should be accounted for as a combined performance obligation and recognized over time, we must then determine the period over which revenue should be recognized and the method by which to measure revenue. We generally recognize revenue using a cost-based input method.

Licenses of Intellectual Property

If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue allocated to the license when the license is transferred to our customer and our customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue associated with the bundled performance obligation. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of progress and related revenue recognition.

Milestone Payments

At the inception of each arrangement that includes developmental and regulatory milestone payments, we evaluate whether the achievement of each milestone specifically relates to our efforts to satisfy a performance obligation or transfer a distinct good or service within a performance obligation. If the achievement of a milestone is considered a direct result of our efforts to satisfy a performance obligation or transfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocated to that distinct good or service, otherwise it will be allocated to all performance obligations of the arrangement based on the initial allocation.

We evaluate each milestone to determine when and how much of the milestone to include in the transaction price. We first estimate the amount of the milestone payment that we could receive using either the expected value or the most likely amount approach. We primarily use the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, we consider whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). We update the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

Royalties

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any revenue related to sales-based royalties or milestone payments based on the level of sales.

Manufacturing Supply Services

For arrangements that include a promise of supply of clinical or commercial product, we determine if the supply is a promise in the contract or a future obligation at our customer’s option. If determined to be a promise at inception of the contract, we evaluate the promise to determine whether it is a separate performance obligation or a component of a bundled performance obligation. If determined to be an option, we determine if the option provides a material right to our customer and if so, account for the option as a separate performance obligation. If determined to be an option but not a material right, we account for the option as a separate contract when our customer elects to exercise the option.

Application of the above guidance requires significant judgment and requires us to make determinations based on the facts and circumstances under each arrangement.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

•

CROs in connection with performing research services on our behalf and clinical trials;

•

investigative sites or other providers in connection with clinical trials;

•

vendors in connection with preclinical and clinical development activities; and

•

vendors related to product manufacturing, development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020.

Year EndedDecember 31,

(in thousands)

Revenue:

Operating expenses:

Collaboration (profit) loss sharing - related party (1,732 ) — (1,732 )

Other (expense) income:

Total other (expense) income, net (1,085 ) (997 ) (88 )

Revenue

Total revenue was $144.9 million and $33.2 million for the years ended December 31, 2021 and 2020, respectively. The increase in total revenue of $111.7 million is primarily driven by an increase in related party collaboration revenue due to the recognition of revenue for the license we granted to Nestlé under the 2021 License Agreement and related transfer of control of the license. The increase in related party collaboration revenue was partially offset by a decrease of $17.2 million in collaboration revenue associated with our Research Agreement with MedImmune, a wholly owned subsidiary of AstraZeneca Inc. The decrease in collaboration revenue in fiscal 2021 was due to AstraZeneca’s election to terminate the Research Agreement in December 2020. As the Research Agreement was terminated in December 2020, no collaboration revenue was recognized in fiscal 2021.

Research and Development Expenses

Year EndedDecember 31,

(in thousands)

Research and development expenses were $141.9 million for the year ended December 31, 2021, compared to $90.6 million for the year ended December 31, 2020. The increase of $51.3 million was due primarily to the following:

•

an increase of $9.0 million in research expenses related to our microbiome therapeutics platform due primarily to an increase of $3.6 million in external consulting expenses and $5.6 million in facilities costs, lab supplies, and consumables;

•

an increase of $25.6 million in expenses related to our SER-109 program, due primarily to an increase of $6.4 million in clinical trial expenses, an increase of $6.8 million in facilities costs, lab supplies, and consumables, an increase of $8.7 million in external consulting expenses and an increase of $3.1 million in contract manufacturing costs;

•

a decrease of $6.5 million in expenses of our SER-287 program primarily driven by a decrease of $4.8 million in clinical trial expenses and $1.5 million in facilities costs, lab supplies, and consumables;

•

a decrease of $0.4 million in expenses of our early stage programs primarily driven by a decrease in external consulting expenses, partially offset by an increase in clinical trial expenses.

•

an increase in personnel-related costs of $23.6 million primarily due to an increase of $18.2 million in salaries, payroll taxes and employee benefit expenses and a $5.4 million increase in stock-based compensation expense as a result of increased headcount; and

We expect that our research and development expenses will increase in the foreseeable future as we advance the clinical development of SER-109, SER-301, and SER-155, re-evaluate the clinical development of SER-287 in light of clinical study results and in conjunction with the additional microbiome biomarker data, and continue to discover and develop additional product candidates and pursue later stages of clinical development of our product candidates.

General and Administrative Expenses

Year EndedDecember 31,

(in thousands)

General and administrative expenses were $69.3 million for the year ended December 31, 2021, compared to $30.8 million for the year ended December 31, 2020. The increase of $38.5 million was primarily due to the following:

•

an increase in personnel-related costs of $12.9 million primarily due to an increase of $6.1 million in salaries, payroll taxes and employee benefit expenses, and a $6.0 million increase in stock-based compensation expense; and

•

an increase in professional fees of $20.0 million primarily due to a $15.7 million increase in professional service and consulting fees and pre-launch commercial expenses and a $2.4 million increase in recruiting fees.

•

an increase in facility-related and other costs of $5.7 million due primarily to increases in IT-related expenses of $3.7 million and lab and office supplies of $2.1 million.

Collaboration (Profit) Loss Sharing - related party

Collaboration (profit) loss sharing – related party was $1.7 million of income to us for the year ended December 31, 2021. There was no collaboration (profit) loss sharing for the year ended December 31, 2020. For the year ended December 31, 2021 we incurred $5.6 million of pre-launch expenses which we recorded within research and development expense or general and administrative expense based on the nature of the underlying expense. Our collaborative partner incurred $2.0 million of pre-launch expenses for the year ended December 31, 2021. Therefore, the $1.7 million of income recorded represents the sharing of 50% of the pre-launch expenses and represents income to us because we performed more of the pre-launch activities than our collaborative partner.

Other (Expense) Income, Net

Other (expense) income, net was $1.1 million of expense for the year ended December 31, 2021 and $1.0 million of income for the year ended December 31, 2020.

Liquidity and Capital Resources

Since our inception, we have generated revenue only from collaborations and have incurred recurring net losses. We anticipate that we will continue to incur losses for at least the next several years. Our research and development and general and administrative expenses may continue to increase and, as a result, we will need additional capital to fund our operations, which we may obtain from additional financings, public offerings, research funding, additional collaborations, contract and grant revenue or other sources.

In August 2020, we completed an underwritten public offering in which we sold 10,500,000 shares of our common stock at a public offering price of $21.50 per share. In addition, we granted the underwriters a 30-day option to purchase up to an additional 1,575,000 shares of its common stock at the public offering price, less underwriting discounts and commissions, which the underwriters exercised in full. We received aggregate net proceeds from the offering of approximately $243.7 million after deducting underwriting discounts and commissions and offering expenses payable by us.

In August 2020, we entered into a Securities Purchase Agreement with Nestlé for the sale of 959,002 shares of our common stock at a purchase price of $20.855 per share (the “concurrent placement”). We received aggregate net proceeds from the concurrent placement of approximately $19.9 million after deducting offering expenses payable by us.

In November 2019, we entered into a common stock sales agreement, or the 2019 Sales Agreement, with Cowen to sell shares of our common stock with aggregate gross sales proceeds of up to $25.0 million, from time to time, through an "at the market" equity offering program, or ATM, under which Cowen acts as sales agent. In March 2020, in connection with filing an updated registration statement on Form S-3 (File No. 333-237033), we entered into a new common stock sales agreement, or the 2020 Sales Agreement, with Cowen on substantially the same terms as the 2019 Sales Agreement and terminated the 2019 Sales Agreement. In May 2021, we entered into a new common stock sales agreement, or the 2021 Sales Agreement, with Cowen to sell shares of our common stock with aggregate gross sales proceeds of up to $150.0 million, from time to time, through an ATM under which Cowen acts as sales agent, and terminated the 2020 Sales Agreement. During the year ended December 31, 2020, we sold approximately 5.8 million shares of common stock under the 2019 Sales Agreement and the 2020 Sales Agreement, as applicable, at an average price of approximately $4.40 per share, raising aggregate net proceeds of approximately $24.8 million after deducting an aggregate commission of approximately 3%. During the year ended December 31, 2021, we did not sell any shares of common stock under the 2020 Sales Agreement or the 2021 Sales Agreement.

As of December 31, 2021, we had cash, cash equivalents and short- and long-term investments totaling $291.2 million and an accumulated deficit of $614.4 million. Based on our current plans and forecasted expenses, we believe that our cash, cash equivalents and investments as of December 31, 2021 and proceeds, net of facility fees and expenses, of $27.6 million received in February 2022 in connection with the Second Amendment, will enable us to fund our operating expenses, debt service obligations and capital expenditures for at least the next 12-months from issuance of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Collaboration and Manufacturing Agreements

License Agreement with Société des Produits Nestlé S.A. (Nestlé)

In January 2016, we entered into the 2016 License Agreement with Société des Produits Nestlé S.A., or, together with NHSc Pharma Partners, Nestlé, for the development and commercialization of certain of our product candidates in development for the treatment and management of CDI and IBD, including UC and Crohn’s disease. In exchange for the license, Nestlé agreed to pay us an upfront cash payment of $120.0 million, which we received in February 2016. Nestlé has also agreed to pay us tiered royalties, at percentages ranging from the high single digits to high teens, of net sales of certain products based on our microbiome technology that are being developed for the treatment of CDI and IBD, including SER-109, SER-262, SER-287 and SER-301, or collectively, the 2016 Collaboration Products, in markets outside of the United States and Canada, or the 2016 Licensed Territory. We are eligible to receive up to $285.0 million in development milestone payments, $375.0 million in regulatory payments and up to an aggregate of $1.1 billion for the achievement of certain commercial milestones related to the sales of 2016 Collaboration Products. The full potential value of the up-front payment and milestone payments payable by Nestlé is over $1.9 billion, assuming all products receive regulatory approval and are successfully commercialized. In September 2016, we received a $10.0 million milestone payment associated with the initiation of the Phase 1b clinical study for SER-262 in CDI. In June 2017, we initiated a Phase 3 clinical study of SER-109 (ECOSPOR III) in patients with multiply recurrent CDI. In July 2017, we received $20.0 million based on the achievement of this milestone under the 2016 License Agreement. In November 2018, we executed a letter agreement with Nestlé, or the Letter Agreement, modifying certain terms of the 2016 License Agreement. Under the Letter Agreement, Nestlé agreed to pay us the $20.0 million Phase 3 milestone payment upon commencement of the Phase 2b study for SER-287. In December 2018, we received $40.0 million in milestone payments in connection with the commencement of the Phase 2b study for SER-287. In August 2020, we received $10.0 million from Nestlé in connection with the initiation of the Phase 1b SER-301 study. To date, we have received $80.0 million in development milestones under the 2016 License Agreement with Nestlé.

For the development of 2016 Collaboration Products for IBD under a global development plan, we agreed to pay the costs of clinical trials of such products up to and including Phase 2 clinical trials, and 67% of the costs for Phase 3 and other clinical trials of such products, with Nestlé bearing the remaining 33% of such costs. The Letter Agreement also provides scenarios under which Nestlé’s reimbursement to us for certain Phase 3 development costs would be reduced or delayed depending on the outcomes of the SER-287 Phase 2b study. For other clinical development of 2016 Collaboration Products for IBD, we agreed to pay the costs of such activities to support approval in the United States and Canada, and Nestlé agreed to bear the cost of such activities to support approval of 2016 Collaboration Products in the 2016 Licensed Territory.

With respect to development of 2016 Collaboration Products for CDI under a global development plan, we agreed to pay all costs of Phase 2 clinical trials for SER-109 and for Phase 3 clinical trials for SER-109. We agreed to bear all costs of conducting any Phase 1 or Phase 2 clinical trials under a global development plan for 2016 Collaboration Products other than SER-109 for CDI. We agreed to pay 67% and Nestlé agreed to pay 33% of other costs of Phase 3 clinical trials conducted for 2016 Collaboration Products other than SER-109 for CDI under a global development plan. For other clinical development of 2016 Collaboration Products for CDI, we agreed to pay costs of such development activities to support approval in the United States and Canada, and Nestlé agreed to bear the cost of such activities to support approval of 2016 Collaboration Products in the 2016 Licensed Territory.

The 2016 License Agreement continues in effect until terminated by either party on the following bases: (i) Nestlé may terminate the 2016 License Agreement in the event of serious safety issues related to any of the 2016 Collaboration Products; (ii) we may terminate the 2016 License Agreement if Nestlé challenges the validity or enforceability of any of our licensed patents; and (iii) either party may terminate the 2016 License Agreement in the event of the other party’s uncured material breach or insolvency. Upon termination of the 2016 License Agreement, all licenses granted to Nestlé by us will terminate, and all rights in and to the 2016 Collaboration Products in the 2016 Licensed Territory will revert to us. If we commit a material breach of the 2016 License Agreement, Nestlé may elect not to terminate the 2016 License Agreement but instead apply specified adjustments to its payment obligations and other terms and conditions of the 2016 License Agreement.

License Agreement with NHSc Pharma Partners (Nestlé)

On July 1, 2021, we entered into a License Agreement, or the 2021 License Agreement, with NHSc Pharma Partners, or, together with Société des Produits Nestlé S.A., Nestlé. Pursuant to the 2021 License Agreement, we granted to Nestlé, under certain of our patent rights and know how, a co-exclusive, sublicensable (under certain circumstances) license to develop, commercialize and conduct medical affairs activities for (i) therapeutic products based on our microbiome technology (including our SER-109 product candidate) that are developed by us or on our behalf for the treatment of CDI and recurrent CDI, as well as any other indications pursued for the products upon mutual agreement of the parties, or the 2021 Field, in the United States and Canada, or the 2021 Licensed Territory, and (ii) our SER-109 product candidate and any improvements and modifications thereto developed pursuant to the terms of the 2021 License Agreement, or the 2021 Collaboration Products, for any indications in the 2021 Licensed Territory.

The 2021 License Agreement sets forth the parties’ respective obligations for development, regulatory, commercialization, medical affairs, and manufacturing and supply activities for the 2021 Collaboration Products with respect to the 2021 Field and the 2021 Licensed Territory. Pursuant to the 2021 License Agreement, we are responsible for, and will use commercially reasonable efforts in, conducting development of SER-109 in the 2021 Field in the United States until first regulatory approval for SER-109 is obtained in the 2021 Field in the United States and in accordance with a development and regulatory activity plan, at our cost, subject to certain exceptions specified in the 2021 License Agreement. We are also responsible for all regulatory affairs related to 2021 Collaboration Products in the 2021 Field in the 2021 Licensed Territory, at its cost, except that expenses incurred for regulatory activities approved by a joint steering committee pursuant to a life cycle management plan for 2021 Collaboration Products are shared equally between the parties. We will be solely responsible for manufacturing and supplying 2021 Collaboration Products for development in the 2021 Field in the 2021 Licensed Territory.

Nestlé has the sole right to commercialize the 2021 Collaboration Products in the 2021 Licensed Territory in accordance with a commercialization plan, subject to our right to elect to provide up to a specified percentage of all promotional details for a certain target audience. Each party will use commercially reasonable efforts to commercialize the 2021 Collaboration Products in the 2021 Licensed Territory in accordance with the commercialization plan. Both parties will perform medical affairs activities for 2021 Collaboration Products in the 2021 Licensed Territory in accordance with a medical affairs plan. We will be solely responsible for the manufacturing and supply of 2021 Collaboration Products for commercialization under a supply agreement that will be entered into between the parties. We will be responsible for commercialization and medical affairs activities costs incurred by the parties until first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory and in accordance with a pre-launch plan, up to a specified cap. Following first commercial sale of the first 2021 Collaboration Product, we will be entitled to a royalty in an amount equal to approximately 50% of the commercial profits.

In exchange for the grant of the licenses under the 2021 License Agreement, Nestlé agreed to pay us a non-refundable, non-creditable and non-cancellable upfront payment of $175.0 million, which was received in July 2021. Nestlé also agreed to pay us an additional $125.0 million due upon FDA approval of SER-109, $10.0 million upon Canadian regulatory approval of SER-109, and sales target milestones payments totaling up to $225.0 million.

The 2021 License Agreement continues in effect until all development and commercialization activities for all 2021 Collaboration Products in the 2021 Licensed Territory have permanently ceased. The 2021 License Agreement may be terminated by either party upon sixty days’ written notice for the other party’s material breach that remains uncured during such sixty-day period, or immediately upon written notice for the other party’s insolvency. Nestlé may also terminate the 2021 License Agreement at-will (i) with twelve months’ prior written notice, effective only on or after the third anniversary of first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory, (ii) if first commercial sale of the first 2021 Collaboration Product in the 2021 Licensed Territory has not occurred by the fifth anniversary of the effective date of the 2021 License Agreement, with one hundred eighty days’ prior written notice, which must be provided during a specified period set forth in the 2021 License Agreement, or (iii) if regulatory approval for SER-109 is not granted after submission by us of a filing seeking first regulatory approval as set forth in the development and regulatory activity plan, and the parties fail to agree on further development of SER-109 in accordance with the terms of the 2021 License Agreement, with one hundred eighty days’ prior written notice, which must be provided within a specified period set forth in the 2021 License Agreement. We may also terminate the 2021 License Agreement immediately upon written notice if Nestlé challenges any licensed patent in the 2021 Licensed Territory.

Upon termination of the 2021 License Agreement, all licenses granted to Nestlé by us will terminate. If we commit a material breach of the 2021 License Agreement, Nestlé may elect not to terminate the 2021 License Agreement but instead apply specified adjustments to the payment terms and other terms and conditions of the 2021 License Agreement. The 2021 License Agreement contains customary representations and warranties by the parties, intellectual property provisions including ownership, patent prosecution, enforcement and defense, certain indemnification rights in favor of each party, and customary confidentiality provisions and limitations of liability.

Bacthera Long Term Manufacturing Agreement

In November 2021, we entered into a Long Term Manufacturing Agreement, or the Bacthera Agreement with BacThera AG, or Bacthera, a joint venture between Chr. Hansen and a Lonza Group affiliate. The Bacthera Agreement governs the general terms under which Bacthera, or one of its affiliates, will (i) construct a dedicated full-scale production suite for us at Bacthera’s Microbiome Center of Excellence in Visp, Switzerland, which is currently under construction; and (ii) provide manufacturing services to us for our SER-109 product and, if agreed by the parties, SER-287 product.

Under the terms of the Bacthera Agreement, we agreed to pay Bacthera a total of at least 240 million CHF (or approximately $262 million) for the initial term of the agreement, inclusive of the construction fees and annual operating fees. The construction fees are payable upon the achievement of certain milestones related to the construction of the dedicated manufacturing suite. The annual operating fee includes the cost of a baseline annual batch production volume. We have also agreed to pay certain other ancillary fees and a per-batch fee in excess of the baseline batches. These fees are subject to adjustment during construction for certain items outside of Bacthera’s control and annually against an agreed index. We will supply the active pharmaceutical ingredients to Bacthera to enable it to perform the services and pay for certain other raw materials and manufacturing components, which will be acquired by Bacthera.

The Bacthera Agreement has an initial term that continues until the tenth anniversary of the earlier of (a) successful completion of construction and demonstration of Bacthera’s readiness for commercial production or (b) the commencement of manufacturing. The initial term is subject to renewals, which could extend the term to 16 years, and additional three-year terms thereafter. Each party has the ability to terminate the Bacthera Agreement upon the occurrence of certain customary conditions. We may also terminate the Bacthera Agreement for convenience after a defined period. In the event of a termination, we have certain financial obligations that would apply, and Bacthera has agreed to grant a license to Bacthera-developed manufacturing know how, if any, and provide technical assistance to us, so that we could transfer the manufacturing operations to ourselves or a third party. The Bacthera Agreement also contains representations, warranties and indemnity obligations as well as limitations of liability that are customary for agreements of this type.

Agreement with AstraZeneca

In March 2019, we entered into the Research Agreement with MedImmune, a wholly owned subsidiary of AstraZeneca. Pursuant to the Research Agreement, we and AstraZeneca agreed to conduct certain pre-clinical and development activities and may conduct certain clinical research with the goal of advancing the mechanistic understanding of the microbiome in augmenting the efficacy of cancer immunotherapy, including potential synergy with AstraZeneca compounds in accordance with a mutually agreed research plan. Pursuant to the Research Agreement, we agreed not to conduct research or development of any microbiome products specifically designed by us during the term of the Research Agreement for the treatment of cancer with or on behalf of any third party without the prior approval of the joint steering committee for the Research Agreement until at least three years after the effective date of the Research Agreement.

AstraZeneca agreed to bear all costs of conducting its activities under the research plan and to reimburse us for certain costs incurred under the research plan. Additionally, AstraZeneca agreed to pay to us a total of $20.0 million in three equal installments, the first of which we received in April 2019, the second of which we received in December 2019, and the third of which we received in January 2021. Such payments are payable even if the Research Agreement is terminated in accordance with its terms, unless the Research Agreement is terminated by AstraZeneca for our uncured material breach.

We also granted AstraZeneca an exclusive option to negotiate exclusive license rights to certain of our technologies and assets. If AstraZeneca exercises this option, we have agreed to enter into good faith negotiations with them for terms and conditions of such license agreement for a specified time period.

In December 2020, we received written notice from AstraZeneca that they elected to terminate the Research Agreement by and in accordance with its terms. The termination of the Research Agreement was effective on April 2, 2021.

Indebtedness

Loan and Security Agreement with Hercules

In October 2019, we entered into a loan and security agreement with Hercules, pursuant to which a term loan in an aggregate principal amount of up to $50.0 million, or the Original Credit Facility, was available to us in three tranches, subject to certain terms and conditions. We received the first tranche of $25.0 million upon signing the agreement on October 29, 2019. We did not meet the milestone requirements for the second tranche under the Original Credit Facility, and as such, the additional second tranche amount of up to $12.5 million is not available for us to borrow. We elected not to borrow the third tranche of $12.5 million, which was available upon Hercules’ approval until June 30, 2021. Commitments of Hercules to lend to us under the Original Credit Facility are subject to amendments made pursuant to the Second Amendment, as defined below. See “Amendment to Loan and Security Agreement with Hercules” below.

Advances under the Original Credit Facility bore interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 4.40%, and (ii) 9.65%. Following an interest-only period of 24 months, principal payments were due in 24 equal monthly installments commencing December 1, 2021 and ending November 1, 2023. We paid Hercules a commitment fee of $0.4 million at the closing. The interest rate, interest-only period and prepayments under the Original Credit Facility are subject to amendments made pursuant to the Second Amendment. See “Amendment to Loan and Security Agreement with Hercules” below.

The Original Credit Facility is secured by substantially all of our assets, other than our intellectual property. We have agreed to not pledge or secure our intellectual property to others.

The Original Credit Facility includes affirmative and negative covenants applicable to us. The affirmative covenants include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports and maintain insurance coverage. The negative covenants include, among others, restrictions on our transferring collateral, making changes to the nature of our business, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, engaging in transactions with affiliates, creating liens and selling assets, in each case subject to certain exceptions, including, among others, the ability for us to issue up to $150.0 million in convertible notes and entering into exclusive outbound licenses for our intellectual property. Certain covenants under the Original Credit Facility were amended by the Second Amendment. See “Amendment to Loan and Security Agreement with Hercules” below.

The Original Credit Facility also includes events of default, the occurrence and continuance of which provide Hercules with the right to demand immediate repayment of all principal and unpaid interest, and to exercise remedies against us and the collateral. These events of default include, among other things and subject to customary exceptions: (i) insolvency, liquidation, bankruptcy or similar events; (ii) failure to pay any debts due under the loan and security agreement with Hercules or other loan documents on a timely basis; (iii) failure to observe certain covenants under the loan and security agreement with Hercules; (v) occurrence of a material adverse effect; (vi) material misrepresentation by us; (vii) occurrence of any default under any other agreement involving material indebtedness; and (viii) certain material money judgments.

On April 16, 2020, we entered into an amendment to the loan and security agreement with Hercules (the “First Amendment”), permitting us to enter into a promissory note under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Stability Act. On April 17, 2020 we issued a Promissory Note to Bank of America, NA, pursuant to which we received loan proceeds of $2.9 million (the “Loan”), however, based on updated guidance related to this program, we decided to repay the full amount of the Loan, and repaid the Loan on May 4, 2020.

As of December 31, 2021 and December 31, 2020, the outstanding principal under the Original Credit Facility was $24.1 million and $25.0 million, respectively. For a further description of the Original Credit Facility, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Amendment to Loan and Security Agreement with Hercules

Effective as of February 24, 2022 (the “Effective Date”), we entered into a Second Amendment to the Original Credit Facility (as amended by the First Amendment) pursuant to which term loans in an aggregate principal amount of up to $100.0 million (the “New Credit Facility”) have become available to us in five tranches including the first tranche under the Original Credit Facility, subject to certain terms and conditions.

been advanced to us and are outstanding as of the Effective Date. The fourth tranche in an aggregate principal amount of $25.0 million is available upon satisfaction of certain conditions, including the approval by the U.S. Food and Drug Administration of a biologics license application in respect of SER-109 (the “Regulatory Approval Milestone”) by no later than December 15, 2023. The fifth tranche in an aggregate principal amount of up to $25.0 million is available through the Amortization Date (as defined below) upon satisfaction of certain conditions, including the Lenders’ investment committee approval.

All advances outstanding under the New Credit Facility will bear interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 6.40%, and (ii) 9.65%. For all advances outstanding under the New Credit Facility, we will make interest only payments through December 31, 2023, extendable to December 31, 2024 upon satisfaction of certain conditions (such applicable date, the “Amortization Date”). The principal balance and interest of the advances will be repaid in equal monthly installments after the Amortization Date and continuing through October 1, 2024, extendable to October 1, 2025, upon satisfaction of certain conditions (such applicable date, the “Maturity Date”).

We may prepay advances under the New Credit Facility, in whole or in part, at any time subject to a prepayment charge equal to: (a) 2.0% of amounts so prepaid, if such prepayment occurs during the first year following the Effective Date; (b) 1.5% of the amount so prepaid, if such prepayment occurs during the second year following the Effective Date, and (c) 1.0% of the amount so prepaid, if such prepayment occurs during the third year following the Effective Date.

We will pay an end of term charge of 4.85% of the aggregate amount of the advances made under the Old Credit Facility on the earliest date of (i) November 1, 2023; (ii) the date that we prepay all of the outstanding principal in full, or (iii) the date the loan payments are accelerated due to an event of default. We will pay an additional end of term charge of 1.75% of the aggregate amount of the advances under the New Credit Facility (including the first tranche of $25.0 million) on the earliest date of (i) the Maturity Date; (ii) the date that we prepay all of the outstanding principal in full, or (iii) the date the loan payments are accelerated due to an event of default.

Other terms of the New Credit Facility remain generally identical to those under the Old Credit Facility, with certain covenants amended by the Second Amendment to provide us with additional operational flexibility, including the ability for us to issue up to $350.0 million in convertible notes. The New Credit Facility includes a conditional liquidity covenant commencing on June 15, 2023, which ceases to apply if certain conditions including the Regulatory Approval Milestone are satisfied.

Cash Flows

The following table summarizes our sources and uses of cash, cash equivalents and restricted cash for the years ended December 31, 2021 and 2020.

Year Ended December 31,

(in thousands)

Cash provided by (used in) operating activities $ 6,688 $ (93,610 )

Cash provided by (used in) investing activities $ 64,088 $ (158,891 )

Cash provided by financing activities $ 1,178 $ 303,424

Net increase in cash, cash equivalents and restricted cash $ 71,954 $ 50,923

Operating Activities

During the year ended December 31, 2021, net cash provided by operating activities was $6.7 million, primarily due to changes in our operating assets and liabilities of $41.5 million and non-cash charges of $30.7 million, partially offset by a net loss of $65.6 million. Non-cash charges consisted primarily of $20.2 million of stock-based compensation expense, $3.3 million related to the amortization of right-of-use assets, $5.9 million of depreciation, and $2.5 million of net amortization of premiums related to our investments, partially offset by collaboration profit sharing of $1.7 million related to the license and collaboration agreement with Nestlé. Changes in our operating assets and liabilities during the year ended December 31, 2021 primarily consisted of a $43.0 million increase in accrued expenses and other liabilities, a $9.4 million increase in accounts payable and a $9.4 million decrease in accounts receivable, partially offset by a $12.3 million increase in prepaid expenses and other current and non-current assets, a $4.4 million decrease in deferred revenue and a $3.6 million decrease in operating lease liabilities. The increase in accrued expenses and other current and long-term liabilities was primarily due to the liability established for pre-launch activities in conjunction with the 2021 License Agreement with Nestlé. The decrease in deferred revenue is due to recognition of revenue during the year, partially offset by an increase of $8.2 million, which represents the portion of the transaction price for the 2021 License Agreement allocated to the research and development services. The decrease in operating lease liabilities was due to the cash payment of lease obligations.

During the year ended December 31, 2020, operating activities used $93.6 million of cash, primarily due to a net loss of $89.1 million and by cash used in changes in our operating assets and liabilities of $23.2 million and partially offset by non-cash charges of $18.7 million. Net cash used in changes in our operating assets and liabilities during the year ended December 31, 2020 primarily consisted of a $11.6 million decrease in deferred revenue, a $4.5 million decrease in operating lease liabilities, a $1.2 million decrease in accounts payable, a $7.6 million increase in accounts receivable, a $2.2 million increase in prepaid expenses and other current

assets, and offset by a $3.8 million decrease in accrued expenses and other liabilities. The decrease in deferred revenue is due to recognition of revenue during the year and partially offset by $10.0 million associated with the increase in the transaction price for the 2016 License Agreement for the initiation of the Phase 1b study for SER-301. The decrease in operating lease liabilities was due to the cash payment of lease obligations.

Investing Activities

During the year ended December 31, 2021, net cash provided by investing activities was $64.1 million, primarily due to maturities of investments of $169.6 million, partially offset by purchases of investments of $96.0 million and purchases of property and equipment of $9.6 million.

During the year ended December 31, 2020, investing activities used $158.9 million of cash, consisting of purchases of investments of $218.3 million, and purchases of property and equipment of $0.6 million; these amounts were partially offset by sales and maturities of investments of $60.0 million.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $1.2 million. This was a result of $1.3 million from the exercise of stock options and $0.8 million from the issuance of common stock under the ESPP plan, partially offset by $0.9 million of principal payments relating to our term loan.

During the year ended December 31, 2020, net cash provided by financing activities was $303.4 million. This was a result of $243.7 million from proceeds from public offering of common stock, net of costs, $19.9 million of proceeds from the Securities Purchase Agreement, $24.8 million of proceeds from the at market equity offering, net of commissions, and $14.4 million from the exercise of stock options.

Funding Requirements

Our expenses may increase substantially in connection with our ongoing and planned activities related to our pipeline products, which are in clinical development, and our follow-on therapeutic candidates and other programs. In addition, we expect to continue to incur additional costs associated with operating as a public company. We anticipate that our expenses will increase substantially if and as we:

•

complete the clinical development and prepare for commercialization of SER-109 for patients with recurrent CDI;

•

re-evaluate the clinical development of SER-287 for the treatment of UC in light of the Phase 2b clinical study results and in conjunction with the additional microbiome biomarker data;

•

continue the clinical development of SER-301 for the treatment of UC;

•

conduct research and initiate clinical development of SER-155 for the prevention of mortality due to GvHD in patients receiving allo-HSCT;

•

make strategic investments in manufacturing capabilities;

•

make strategic investments in our research discovery and development platforms and capabilities;

•

maintain and augment our intellectual property portfolio and opportunistically acquire complementary intellectual property;

•

potentially establish a sales and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;

•

perform our obligations under our agreements with our collaborators;

•

seek to obtain regulatory approvals for our product candidates; and

•

experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

Because of the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

•

the impact of the COVID-19 pandemic;

•

the progress and results of our clinical studies and pre-clinical development;

•

the cost of manufacturing clinical supplies of our product candidates;

•

the costs, timing and outcome of regulatory review of our product candidates and research activities;

•

the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•

the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

•

the effect of competing technological and market developments; and

•

the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. Additionally, market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our shareholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our shareholders’ rights as common stockholders. Our loan and security agreement with Hercules currently includes, and any additional debt financing and preferred equity financing, if available, may involve agreements that include, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Additional debt or preferred equity financing may also require the issuance of warrants, which could potentially dilute our shareholders’ ownership interest.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, in addition to our existing collaboration agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

As noted above, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Annual Report on Form 10-K as this continues to evolve globally. See “Impact of the COVID-19 Pandemic” above and “Risk Factors—Risks Related to Our Operations—The COVID-19 pandemic has adversely impacted and could continue to adversely impact, our business, including our preclinical studies and clinical trials, results of operations and financial condition” in Part I, Item 1A of this Annual Report on Form 10-K for a further discussion of the possible impact of the COVID-19 pandemic on our business.

As discussed in Note 1 of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K we have the responsibility to evaluate whether conditions or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year after the date the financial statements are issued. We expect our cash, cash equivalents and short- and long-term investments at December 31, 2021 of $291.2 million, and proceeds, net of facility fees and expenses, of $27.6 million received in February 2022 in connection with the Second Amendment, will be sufficient to fund our operating expenses, debt service obligations and capital expenditure requirements for at least the next 12-months from issuance of the financial statements.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations at December 31, 2021 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

Payments Due by Period

Total Less Than1 Year 2 - 3 Years 4 - 5 Years More Than5 Years

(in thousands)

(1)

Amounts in the table reflect payments due under our operating lease agreements that expire between May 2021 and December 2031.

(2)

Amounts in the table reflect payments due for our term loan under an arrangement with Hercules for $25,000. The amounts in the table above reflect interest-only payments through December 1, 2021 with payments on principal beginning thereafter. For purposes of the table above, interest payments were calculated using an annual interest rate of 9.65%, which was the interest rate in effect as of December 31, 2021. Additionally, the table above includes a payment due upon maturity of the loan of $1,213. See Note 9 and Note 18 of the consolidated financial statements for further discussion of the Hercules term loan.

(3)

Amounts in the table reflect fixed amounts due under our long-term manufacturing agreement with Bacthera, inclusive of construction fees and annual operating fees.

We enter into contracts in the normal course of business with CROs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Recently Issued and Adopted Accounting Pronouncements

For a discussion of recent accounting standards see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Fluctuation Risk

We are exposed to market risk related to changes in interest rates.

As of December 31, 2021, our cash and cash equivalents consisted of cash and money market accounts. Our interest income is sensitive to changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

As of December 31, 2021, we had outstanding borrowings under the Original Credit Facility. We accrue interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 4.40%, and (ii) 9.65%. An immediate 10% change in the Prime Rate would not have a material impact on our debt‐related obligations, financial position or results of operations

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer has concluded that as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included in this Annual Report on Form 10-K on page F-1.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Effective as of February 24, 2022 (the “Effective Date”), we entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”), with the lenders party thereto (the “Lenders”), and Hercules Capital, Inc., in its capacity as the administrative agent and the collateral agent for the Lenders, which amended a loan and security agreement dated October 29, 2019 (as amended from time to time prior to the Effective Date, the “Original Credit Facility”). Under the Original Credit Facility, term loans in an aggregate principal amount of up to $50.0 million were available to us, of which $25.0 million (the “first tranche”) has been advanced to us and approximately $22.1 million were outstanding immediately prior to the Effective Date. Pursuant to the Second Amendment, term loans in an aggregate principal amount of up to $100.0 million (the “New Credit Facility”) have become available to us in five tranches including the first tranche, subject to certain terms and conditions.

The first tranche in an aggregate principal amount of $25.0 million is outstanding as of the Effective Date, after taking into account reborrowing by us on the Effective Date of a previously-repaid principal amount of approximately $2.9 million. The second tranche in an aggregate principal amount of $12.5 million and the third tranche in an aggregate principal amount of $12.5 million have been advanced to us and are outstanding as of the Effective Date. The fourth tranche in an aggregate principal amount of $25.0 million is available upon satisfaction of certain conditions, including the approval by the U.S. Food and Drug Administration of a biologics license application in respect of SER-109 (the “Regulatory Approval Milestone”) by no later than December 15, 2023. The fifth tranche in an aggregate principal amount of up to $25.0 million is available through the Amortization Date (as defined below) upon satisfaction of certain conditions, including the Lenders’ investment committee approval.

The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Second Amendment, a copy of which is filed as Exhibit 10.19 to this Annual Report on Form 10-K and is incorporated herein by reference.

Item 9C. Disclosure Regarding Jurisdictions That Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Director Biographical Information

Name Age Position

Dennis A. Ausiello, M.D. (3) 76 Director

Grégory Behar (3) 52 Director

Stephen Berenson (3) 61 Chairman of the Board of Directors

Paul R. Biondi (2) 52 Director

Willard H. Dere, M.D. (1) 68 Director

Kurt C. Graves (2) 54 Director

Richard N. Kender (1)(2) 66 Director

Eric D. Shaff 46 President, Chief Executive Officer and Director

Meryl S. Zausner (1)(2) 65 Director

(1)

Member of the audit committee.

(2)

Member of the compensation and talent committee.

(3)

Member of the nominating and corporate governance committee.

Dennis A. Ausiello, M.D. has served as a member of our board of directors since April 2015. Dr. Ausiello has served as the Jackson Distinguished Professor of Clinical Medicine at Harvard Medical School and Director, Emeritus of Harvard Medical School’s M.D./Ph.D. Program since 1996, Chair of Medicine, Emeritus, and Director of the Center for Assessment Technology and Continuous Health (CATCH) at Massachusetts General Hospital, which he co-founded, since 2012, and Physician-in-Chief Emeritus at Massachusetts General Hospital since 2013. From 1996 to April 2013, Dr. Ausiello served as the Chief of Medicine at Massachusetts General Hospital. Dr. Ausiello is a member of the Institute of Medicine of the National Academy of Sciences and a fellow of the American Academy of Arts and Sciences. Dr. Ausiello has served on the board of directors of Alnylam Pharmaceuticals since April 2012 and previously served on the board of directors of Pfizer Inc. from 2006 to 2020, where he currently serves on the advisory board since 2019. Dr. Ausiello also serves on the boards of directors of numerous privately held companies. Dr. Ausiello received a B.A. in Biochemistry from Harvard College and an M.D. from the University of Pennsylvania. We believe that Dr. Ausiello is qualified to serve on our board of directors because of his extensive experience as a physician and as a director of pharmaceutical companies.

Grégory Behar has served as a member of our board of directors since December 2014. Mr. Behar has served as Chief Executive Officer of Nestlé Health Science, a business unit of Société des Produits Nestlé S.A., a health sciences company, since July 2014. From August 2011 to May 2014, Mr. Behar was President and Chief Executive Officer of Boehringer Ingelheim Pharmaceuticals Inc. (USA), a pharmaceutical company. From 2010 to July 2011, Mr. Behar was Corporate Vice President Region NECAR (North European Union, Canada and Australasia) for Boehringer-Ingelheim GmbH, a pharmaceutical company. Mr. Behar has served on the boards of directors of Nestlé Health Science since July 2014, Axcella Health, Inc. since February 2016 and Sonova AG since April 2021 and previously served on the board of directors of Aimmune Therapeutics, Inc. from November 2016 until its acquisition in October 2020. Mr. Behar received his B.S. in Mechanical Engineering from the University of California, Los Angeles, an M.S. in Mechanical Engineering and Manufacturing from EPFL in Switzerland and an M.B.A. from INSEAD in France. We believe that Mr. Behar is qualified to serve on our board of directors because of his extensive business experience in the health sciences and pharmaceutical industries.

Stephen Berenson has served as Chairman of our board of directors since December 2019 and as a member of our board of directors since August 2019. Mr. Berenson has been a Managing Partner at Flagship Pioneering, a life sciences innovation firm which conceives, creates, resources and develops first-in-category life sciences companies, since June 2017. Prior to Flagship, Mr. Berenson spent 33 years in various roles as an investment banker at J.P. Morgan, most recently serving in the role of Vice Chairman of Investment Banking from 2005 to April 2017, where he focused on providing high-touch strategic advice and complex transaction execution to leading companies across all industries globally. He was co-founder of J.P. Morgan’s Global Strategic Advisory Council and co-founder of the firm’s Board Initiative. Mr. Berenson has served as chairman of the board of directors of Cellarity since July 2021, and has served on the boards of directors of Moderna, Inc. since October 2017 and Repertoire Immune Medicines, a privately held company, since May 2021. Mr. Berenson received an S.B. in Mathematics from the Massachusetts Institute of Technology. We believe that Mr. Berenson is qualified to serve on our board of directors because of his extensive experience working with rapidly-growing companies across various industries.

Paul R. Biondi has served as a member of our board of directors since March 2020. Mr. Biondi is an Executive Partner and President of Pioneering Medicines at Flagship Pioneering, roles he has held since November 2019. Mr. Biondi joined Flagship Pioneering following a seventeen-year tenure at Bristol-Myers Squibb, or BMS, a pharmaceutical company, where he was most recently the

Senior Vice President of Strategy and Business Development from October 2015 to November 2019. Prior to serving in the role of Senior Vice President of Strategy, from 2002 to 2015, Mr. Biondi held a series of other leadership roles within BMS’ Research and Development organization overseeing strategy, portfolio and project management, as well as clinical and business operations. Mr. Biondi holds a bachelor’s degree from Dartmouth College and an M.B.A. from the J.L. Kellogg School of Management at Northwestern University. We believe that Mr. Biondi is qualified to serve on our board of directors because of his extensive experience in biopharmaceutical strategy and corporate development.

Willard H. Dere, M.D. has served as a member our board of directors since July 2017. Dr. Dere has been Professor of Internal Medicine, B. Lue and Hope S. Bettilyon Presidential Endowed Chair in Internal Medicine for Diabetes Research, and Co-Director of the Clinical and Translational Science Institute at the University of Utah Health Sciences Center since November 2014 and Associate Vice President for Research since September 2019. Prior to his professorship, from 2003 until his retirement in October 2014, Dr. Dere held multiple roles at Amgen, Inc., including Head of Global Development, and both corporate and international Chief Medical Officer, and led development of programs in various therapeutic areas. Dr. Dere serves on the boards of directors of several companies, including BioMarin Pharmaceutical, Inc. since July 2016, Radius Health since November 2014, and Mersana Therapeutics, Inc. since March 2018. He also serves on the boards of directors of privately held companies. From October 2016 to December 2017, he served on the board of directors of Ocera Therapeutics. Dr. Dere received his B.A. in History and Zoology and M.D. from the University of California, Davis, completed his internal medicine residency training at the University of Utah, and his postdoctoral training in endocrinology and metabolism at the University of California, San Francisco. We believe Dr. Dere is qualified to serve on our board of directors due to his extensive academic experience and his knowledge of the biotechnology industry.

Kurt C. Graves has served as a member of our board of directors since November 2015. Mr. Graves has served as the Executive Chairman of i20 Therapeutics, Inc., a biotechnology company, since August 2021. Mr. Graves was previously the Chairman, President and Chief Executive Officer of Intarcia Therapeutics, Inc., a biotechnology company, from September 2010 to December 2020 and on its board of directors from August 2010 to December 2020. Previously, he served as Executive Vice President, Chief Commercial Officer and Head of Strategic Development at Vertex Pharmaceuticals Inc., or Vertex, from July 2007 to October 2009. Prior to joining Vertex, Mr. Graves held various leadership positions at Novartis Pharmaceuticals Corporation, or Novartis Corp., from 1999 to June 2007, including the Global General Medicines Business Unit Head and Chief Marketing Officer for the pharmaceuticals division of Novartis Corp. from September 2003 to June 2007. He served on the boards directors of Radius Health, Inc. from May 2011 to March 2020, and Achillion Pharmaceuticals, Inc. from June 2012 to January 2020. Mr. Graves received a B.S. in Biology from Hillsdale College. We believe Mr. Graves is qualified to serve as a member of our board of directors because of his extensive experience in the life sciences industry, membership on various boards of directors and his leadership and management experience.

Richard N. Kender has served as a member of our board of directors since October 2014. From October 1978 to September 2013, Mr. Kender held positions in a variety of corporate areas at Merck & Co., Inc., or Merck, a pharmaceutical company, most recently serving as Senior Vice President of Business Development and Corporate Licensing. Mr. Kender has served on the boards of directors of Poxel S.A. since March 2015, Bicycle Therapeutics PLC since July 2019, and ReViral Ltd, a privately held company, since November 2019. He previously served on the boards of directors of INC Research Holdings, Inc. between December 2014 and August 2017 and Abide Therapeutics, Inc., a privately held company, between December 2015 and May 2019. Mr. Kender received a B.S. in Accounting from Villanova University and an M.B.A. from Fairleigh Dickinson University. We believe Mr. Kender is qualified to serve on our board of directors because of his finance experience and knowledge of the biotechnology industry.

Eric D. Shaff has served as our President and Chief Executive Officer and a member of our board of directors since January 2019. Previously, he served as our Chief Operating and Financial Officer and Executive Vice President from January 2018 until January 2019 and as our Chief Financial Officer from November 2014 until January 2019. From January 2012 to November 2014, Mr. Shaff was Vice President of Corporate Finance for Momenta Pharmaceuticals, or Momenta, a biotechnology company, where he helped manage Momenta’s accounting, finance, planning, and procurement functions, as well as contributing to Momenta’s investor relations efforts. Prior to Momenta, Mr. Shaff held a number of corporate development and finance positions with Genzyme Corporation, a biotechnology company, most recently as Vice President of Finance/Controller for the Personalized Genetic Health division. Mr. Shaff has served on the board of directors of Sigilon Therapeutics, Inc. since November 2017. Mr. Shaff received his B.A. from the University of Pennsylvania and his M.B.A. from Cornell University. We believe Mr. Shaff is qualified to serve on our board of directors because of his extensive business and finance experience and his knowledge of the biotechnology industry.

Meryl Zausner has served as a member of our board of directors since August 2018. Ms. Zausner worked for Novartis Pharmaceuticals, Inc., or Novartis, a pharmaceutical company, from 1988 until her retirement in 2017, most recently serving as Chief Financial and Administrative Officer and a member of the Pharmaceutical Executive Committee and Global Finance Leadership Team of Novartis in the United States. At Novartis, she helped launch the Oncology Business Unit, as well as the company’s shared services organization. Prior to serving as Chief Financial and Administrative Officer, Ms. Zausner was a member of the Novartis Global Oncology leadership team, where she contributed to the development and commercialization of therapies, including Gleevec® (imatinib). Ms. Zausner has served on the board of directors of Goldfinch Bio, Inc., a privately held company, since February 2021, and she previously served on the boards of directors of the Multiple Myeloma Research Foundation from September 2009 to June 2021 and Neon Therapeutics, Inc. from December 2017 to May 2020. Ms. Zausner received a B.S. in Accounting and Economics from the University at Albany, SUNY. We believe Ms. Zausner is qualified to serve on our board of directors because of her finance and leadership experience and knowledge of the pharmaceutical industry.

Information about our Executive Officers

Name Age Position

Eric D. Shaff 46 President, Chief Executive Officer and Director

Paula Cloghessy 50 Executive Vice President and Chief People Officer

Thomas J. DesRosier 67 Executive Vice President and Chief Legal Officer

David S. Ege, Ph.D. 47 Executive Vice President and Chief Technology Officer

Matthew Henn, Ph.D. 47 Executive Vice President and Chief Scientific Officer

Lisa von Moltke, M.D. 63 Executive Vice President and Chief Medical Officer

Information concerning Eric D. Shaff, our President and Chief Executive Officer, may be found above in the section entitled “Director Biographical Information.”

David Arkowitz has served as our Executive Vice President, Chief Financial Officer and Head of Business Development since June 2021. Previously, he served as the Chief Financial Officer of Flexion Therapeutics, Inc., a biotechnology company that was acquired by Pacira Biosciences, from May 2018 to May 2021. From September 2013 to May 2018, Mr. Arkowitz served as Chief Operating Officer and Chief Financial Officer at Visterra, Inc., a biotechnology company that was acquired by Otsuka Pharmaceutical Co. He also previously served as Chief Financial Officer at each of Mascoma Corporation, AMAG Pharmaceuticals Inc., and Idenix Pharmaceuticals LLC and held additional leadership positions within each company. Preceding his tenure at Idenix, Mr. Arkowitz spent more than 13 years at Merck & Co., Inc. where he held roles of increasing responsibility, including Vice President and Controller of the U.S. operations, Controller of the global research and development division, and the Chief Financial Officer of Merck’s Canadian subsidiary. Mr. Arkowitz has served on the boards of directors of F-star Therapeutics, Inc. since November 2020 and Yumanity Therapeutics, Inc. since December 2020 and previously served on the boards of directors of Spring Bank Pharmaceuticals, Inc. from January 2014 to November 2020 and Proteostasis Therapeutics, Inc. from March 2019 to December 2020. He obtained his B.A. in mathematics at Brandeis University and his M.B.A. in finance at Columbia University Business School.

Paula Cloghessy has served as our Executive Vice President and Chief People Officer since February 2022. Previously, Ms. Cloghessy served in roles of increasing seniority at Translate Bio, Inc., or Translate Bio, a biotechnology company acquired by Sanofi S.A., or Sanofi, a global biopharmaceutical company, from 2016 to December 2021, culminating in her role as Chief People Officer. In these roles, Ms. Cloghessy was responsible for leading human resources and organizational development and performance. Prior to Translate Bio, Ms. Cloghessy held senior roles at Joule Unlimited Technologies, Inc. and Interleukin Genetics, Inc. Ms. Cloghessy received her B.A. in Psychology from University of Massachusetts, Boston.

Thomas J. DesRosier has served as our Chief Legal Officer, Executive Vice President, and Secretary since May 2016. Previously, he served as Executive Vice President, Chief Legal and Administrative Officer and Secretary of ARIAD Pharmaceuticals, Inc., a biopharmaceutical company, from 2015 to 2016, Executive Vice President, Chief Legal and Administrative Officer and Secretary of Cubist Pharmaceuticals, Inc., or Cubist, a biopharmaceutical company, from 2014 to 2015 and Senior Vice President, Chief Legal Officer and Secretary of Cubist from 2013 to 2014. Before that, Mr. DesRosier served as Senior Vice President, General Counsel North America of Sanofi from 2011 to 2013. From 1999 to 2011, Mr. DesRosier held leadership roles of increasing seniority within the legal group of Genzyme Corporation, a biotechnology company, culminating in his role as Senior Vice President, Chief Legal Officer. Mr. DesRosier has served as a member of the board of directors of Avanir Pharmaceuticals, a privately held company and wholly-owned subsidiary of Otsuka Pharmaceutical Company, Ltd., since June 2017. Mr. DesRosier earned a B.A. in Chemistry from the University of Vermont and a J.D. from Wake Forest University School of Law.

David S. Ege, Ph.D. has served as our Executive Vice President and Chief Technology Officer since October 2020. Previously, Dr. Ege served in a variety of technical and leadership roles in R&D and manufacturing at Merck from November 2003 to October 2020, most recently as global lead for digital strategy in Merck’s Manufacturing Division from June 2019 to October 2020. From April 2015 to June 2019, Dr. Ege served as Executive Director of Vaccines & Biologics Manufacturing at Merck’s plant in Elkton, Virginia, where he led bulk manufacturing operations for Gardasil®, Gardasil9® and Cancidas®. He has contributed to the successful first-in-class licensure and launch of cervical cancer vaccines, Gardasil® (2006) and Gardasil9® (2014), and a breakthrough cancer immunotherapy, Keytruda® (2014). He graduated summa cum laude from Princeton with a B.S.E. in chemical engineering and earned his Ph.D. in chemical engineering from the University of Pennsylvania.

Matthew Henn, Ph.D. has served as our Executive Vice President and Chief Scientific Officer since February 2019. Since joining our company at its launch in June 2012, he has held positions of increasing seniority, most recently as Executive Vice President, Head of Discovery and Microbiome R&D from January 2018 to February 2019, and previously as Senior Vice President, Head of Discovery and Bioinformatics from June 2012 to January 2018. Prior to joining our company, he was the Director of Viral Genomics and Assistant Director of the Genome Sequencing Center for Infectious Diseases at the Broad Institute of the Massachusetts Institute of

Technology and Harvard. He currently serves on the scientific advisory boards of the Forsyth Institute and Growcentia, Inc., an agricultural microbiome company. Dr. Henn earned his B.S. in Ecology and Evolutionary Sciences from the University of New Hampshire and his Ph.D. in Ecosystem Sciences from the University of California at Berkeley, where he was a NASA Earth Systems Sciences Fellow, and trained as a NSF Postdoctoral Fellow in Microbiology at Duke University.

Lisa von Moltke, M.D. has served as our Executive Vice President and Chief Medical Officer since March 2020. Previously, Dr. von Moltke worked for Alkermes, Inc., a pharmaceutical company, from June 2015 to December 2019, where she served in roles of increasing seniority, culminating as Senior Vice President and Head of Clinical Development. Beginning in June 2015, Dr. Moltke served as VP Clinical Pharmacology, DMPK and Bioanalytics, was promoted to Head of Clinical Development in November 2015, and became SVP in June 2018. Prior to joining Alkermes, Dr. von Moltke served as Vice President Clinical Pharmacology at Sanofi/Genzyme Corporation, a biotechnology company, from 2009 to 2015 and was US Head Clinical & Exploratory Pharmacology Sciences (CEP) and Early Development. Starting in 2014 she was Head CEP for Japan and China regions. From 2006 to 2009, Dr. von Moltke was Head, Translational Medicine for the Takeda Oncology Company, a biopharmaceutical company, in Cambridge, MA. She has served as President of the American College of Clinical Pharmacology, and as the Editor-in-Chief of The Journal of Clinical Pharmacology. Dr. von Moltke earned a B.A. degree at Wellesley College and her M.D. from Michigan State University, College of Human Medicine.

Teresa L. Young, Ph.D. has served as our Executive Vice President, Chief Commercial and Strategy Officer since June 2020. Previously, Dr. Young served as Vice President, Global Commercial Strategy at Sage Therapeutics from March 2018 to June 2020, where she led development of Sage’s global commercial capabilities, including global marketing, insights and analytics and new product planning. Prior to that, she held commercial leadership roles of increasing responsibility at Bristol-Myers Squibb from November 2010 to March 2018, culminating in her role as Vice President and General Manager, Cardiovascular, in which she led the global ELIQUIS® business to become the company’s largest product by revenue. Earlier in her career, Dr. Young held marketing and sales roles at GlaxoSmithKline from June 1993 to November 2010, where she catalyzed growth for the company’s Urology, Diabetes and NeuroHealth organizations. Dr. Young is a member of the Women in Bio and Healthcare Businesswomen’s Association and served on the Advisory Board of the Healthcare Businesswomen’s Association. Dr. Young received her B.S. in pharmacy and her Ph.D. in healthcare marketing from the University of South Carolina.

Code of Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available on our website at www.serestherapeutics.com in the “Investors and News” section under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified in the preceding sentence. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K.

Other

The remainder of the information required to be disclosed by this item will be contained in the Proxy Statement for our Annual Meeting of Stockholders scheduled to be held on June 22, 2022 and is incorporated herein by reference.

Item 11. Executive Compensation

The information required to be disclosed by this item will be contained in the Proxy Statement for our Annual Meeting of Stockholders scheduled to be held on June 22, 2022 and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

100

PART IV

Item 15. Exhibits and Financial Statements Schedules

(a)(1) Financial Statements.

See the “Index to Consolidated Financial Statements” on page F-1 below for the list of financial statements filed as part of this report.

(a)(2) Financial Statement Schedules.

All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth below beginning on page F-1.

(a)(3) Exhibits.

The following is a list of all exhibits filed as a part of this Annual Report on Form 10-K.

Incorporated by Reference Filed/

101

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *

32.1 Section 1350 Certification of Chief Executive Officer **

32.2 Section 1350 Certification of Chief Financial Officer **

101.SCH Inline XBRL Taxonomy Extension Schema Document *

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *

102

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document *

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document *

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *

* Filed herewith.

** Furnished herewith.

# Indicates management contract or compensatory plan.

^ Confidential treatment has been granted with respect to redacted portions of this exhibit. Redacted portions of this exhibit have been filed separately with the SEC.

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10)(iv). Such omitted information is both (i) not material and (ii) the type that the Registrant treats as private or confidential.

Item 16. Form 10-K Summary

None.

103

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SERES THERAPEUTICS, INC.

Date: March 1, 2022 By: /s/ Eric D. Shaff

Eric D. Shaff

President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Eric D. Shaff President, Chief Executive Officer March 1, 2022

Eric D. Shaff and Director

(Principal Executive Officer)

David Arkowitz (Principal Financial and Accounting Officer)

/s/ Stephen Berenson Chairman of the Board March 1, 2022

Stephen Berenson

/s/ Dennis A. Ausiello Director March 1, 2022

Dennis A. Ausiello, M.D.

/s/ Paul R. Biondi Director March 1, 2022

Paul R. Biondi

/s/ Willard H. Dere Director March 1, 2022

Willard H. Dere, M.D.

/s/ Grégory Behar Director March 1, 2022

Grégory Behar

/s/ Kurt C. Graves Director March 1, 2022

Kurt C. Graves

/s/ Richard N. Kender Director March 1, 2022

Richard N. Kender

/s/ Meryl S. Zausner Director March 1, 2022

Meryl S. Zausner

104

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) F-2

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4

Notes to Consolidated Financial Statements F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Seres Therapeutics, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Seres Therapeutics, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations. Management’s evaluation of the events and conditions and management’s plans to mitigate these matters are also described in Note 1.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-2

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Collaboration and License Agreement with Société des Produits Nestlé S.A. (Nestlé) Recognized Under an Input Method

As described in Notes 2 and 12 to the consolidated financial statements, the Company recognizes revenue arising from a collaboration and license agreement with Nestlé, which totaled $10.4 million for the year ended December 31, 2021. The promised goods and services represent one combined performance obligation and the entire transaction price was allocated to that single combined performance obligation. When management concludes that a contract should be accounted for as a combined performance obligation and recognized over-time, management must then determine the period over which revenue should be recognized and the method by which to measure revenue. Management generally recognizes revenue using a cost-based input method, which measures the extent of progress towards completion based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the performance obligation. Due to the nature of the work required to be performed to satisfy the performance obligation, management’s estimation of costs expected is complex and requires significant judgment.

The principal considerations for our determination that performing procedures relating to revenue recognition for the collaboration and license agreement with Nestlé recognized under an input method is a critical audit matter are the significant judgment by management when determining the total estimated costs expected upon satisfying the performance obligation, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures to evaluate the total estimated costs expected upon satisfying the performance obligation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue arising from the collaboration and license agreement with Nestlé, including controls over the total estimated costs expected upon satisfying the performance obligation. These procedures also included, among others, evaluating and testing management’s process for determining the total estimated costs expected upon satisfying the performance obligation, which included testing actual costs incurred and evaluating the reasonableness of estimated costs to satisfy the performance obligation. Evaluating the reasonableness of estimated costs to satisfy the performance obligation involved assessing management’s ability to reasonably estimate costs to satisfy the performance obligation by (i) evaluating the appropriateness of changes to management’s estimates of total costs to satisfy the performance obligation; (ii) performing a comparison of management’s prior period cost estimates to actual costs incurred; and (iii) evaluating whether the cost estimates used by management were reasonable considering consistency with industry and company-specific data.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 1, 2022

We have served as the Company’s auditor since 2014.

F-3

SERES THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 12,922 5,774

Accounts receivable — 9,387

Restricted cash 8,000 —

Other non-current assets 5,189 —

Liabilities and Stockholder's Equity

Current liabilities:

Accrued expenses and other current liabilities (1) 45,094 14,226

Short term portion of note payable, net of discount — 454

Long term portion of note payable, net of discount 24,643 24,639

Operating lease liabilities, net of current portion 17,958 10,561

Deferred revenue, net of current portion - related party 86,998 85,572

Commitments and contingencies (Note 14)

Stockholders’ equity:

Accumulated other comprehensive loss (60 ) (47 )

Total liabilities and stockholders’ equity $ 354,859 $ 342,940

[1]Includes related party amounts of $21,098 and $0 at December 31, 2021 and December 31, 2020, respectively (see Note 12)

[2]Includes related party amounts of $10,585 and $0 at December 31, 2021 and December 31, 2020, respectively (see Note 12)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SERES THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Year Ended December 31,

Revenue:

Operating expenses:

Collaboration (profit) loss sharing - related party (1,732 ) — —

Restructuring expenses — — 1,492

Other (expense) income:

Other comprehensive loss:

Unrealized loss on investments, net of tax of $0 (12 ) (47 ) —

Currency translation adjustment (1 ) — —

Total other comprehensive loss (13 ) (47 ) —

The accompanying notes are an integral part of these consolidated financial statements.

F-5

SERES THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Accumulated Total

Common Stock Additional Other Stockholders

Par Paid-in Comprehensive Accumulated Equity

Shares Value Capital Loss Deficit (Deficit)

Issuance of common stock upon exercise of stock options 90,125 — 145 — — 145

Issuance of common stock under ESPP plan 75,014 — 296 — — 296

Stock-based compensation expense — — 8,344 — — 8,344

Issuance of common stock under ESPP plan 155,293 — 462 — — 462

Stock-based compensation expense — — 8,824 — — 8,824

Other comprehensive loss — — — (47 ) — (47 )

Issuance of common stock under ESPP plan 100,417 — 827 — — 827

Stock-based compensation expense — — 20,222 — — 20,222

Other comprehensive loss — — — (13 ) — (13 )

The accompanying notes are an integral part of these consolidated financial statements.

F-6

SERES THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

Amortization of debt issuance costs 498 446 281

Loss on disposal of property and equipment — — 103

Collaboration (profit) loss sharing - related party (1,732 ) — —

Changes in operating assets and liabilities:

Net cash provided by (used in) operating activities 6,688 (93,610 ) (76,520 )

Cash flows from investing activities:

Purchases of property and equipment (9,566 ) (591 ) (1,002 )

Cash flows from financing activities:

Proceeds from issuance of note payable — — 25,000

Proceeds from at the market equity offering, net of commissions — 24,773 512

Payments of debt issuance costs — — (425 )

Proceeds from issuance of common stock and restricted common stock — 120 176

Issuance of common stock under ESPP plan 827 462 296

Repayment of notes payable (948 ) — —

Supplemental disclosure of cash flow information:

Supplemental disclosure of non-cash investing and financing activities:

Lease liability arising from obtaining right-of-use assets 12,442 — 154

MCRB US Equity

MCRB · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Jurisdictions That Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statements Schedules

Item 16. Form 10-K Summary

MCRB US Equity☆

MCRB · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Jurisdictions That Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statements Schedules

Item 16. Form 10-K Summary

MCRB US Equity