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Why Seres Therapeutics Inc. Stock Is Tanking Today

What happened

Shares of Seres Therapeutics (NASDAQ: MCRB), a clinical-stage biotech focused on microbiome therapeutics, were down 19% as of 11:25 a.m. EDT on Monday. The decline can be traced to the release of less-than-stellar news from a phase 1 clinical trial.

So what

Seres reported top-line results from a phase 1b study today. This study was evaluating its compound SER-287 as a hopeful treatment for ulcerative colitis. 

Here are the key headlines from the study that management is trying to get investors to focus on:

  • Use of SER-287 resulted in a dose-dependent benefit in clinical remission rates and an improvement in endoscopic scores.
  • There were no clinically significant safety or tolerability findings observed.
  • Management intends to meet with the FDA "as soon as possible" to determine the "most accelerated" path forward.

All of that sounds like good news, but investors appear to be laser-focused on the clinical response rates from the trial. The clinical response rate observed in the group of patients who were treated daily with SER-287 was 43%. That figure was 17 percentage points lower than the placebo group. What's more, the clinical response rate figure was only 29% in the group of patients who used vancomycin and SER 287 weekly. That represents a 31-percentage-point difference when compared to the placebo group.

Image source: Getty Images.

Now what

Seres' CEO Dr. Roger Pomerantz did his best to communicate his bullishness on the study results: "We are extremely pleased with these SER-287 Phase 1b efficacy and safety study results. The clinical data demonstrate the potential for microbiome therapeutics to provide an effective and safer alternative treatment modality for patients suffering from Ulcerative Colitis."

He also stated that the company plans to evaluate SER-287 in treating various forms of ulcerative colitis, as well as Crohn's disease and pediatric inflammatory bowel disease. 

Given the mixed news, what does the future hold for SER-287 and Seres? That question is still very much up in the air. On the one hand, new treatment options for ulcerative colitis are needed, and Seres' approach of reviving a patients' microbial flora activity makes a lot of sense (at least in theory). On the other hand, Seres has a history of disappointing investors with clinical data releases, has been a dreadful market performer since it came public, and is rapidly depleting its cash hoard with each passing month. Those factors make it hard for me to be bullish on this company's future, so I don't consider today's drop to be a buying opportunity.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.