Seres Therapeutics has entered into an agreement with Nestle Health Science for the development and commercialization outside of the United States and Canada for its product candidates in development for Clostridium difficile infection (CDI) and inflammatory bowel disease (IBD), including ulcerative colitis and Crohn's disease. The agreement will support the expansion of Seres' portfolio in markets outside of the United States and Canada and provide substantial financial support for Seres' ongoing research and development. Seres retains full commercial rights to its entire portfolio of product candidates in the United States and Canada, where the company plans to build its own commercial organization.

Under the agreement, Seres granted Nestle Health Science commercial rights in global markets outside of the United States and Canada to SER-109 and SER-262 for CDI, and SER-287 and SER-301 for IBD. The U.S. Food and Drug Administration (FDA) has granted SER-109 Orphan Drug, as well as Breakthrough Therapy, designations. In exchange for commercial rights, Nestle Health Science agreed to provide Seres with an upfront payment of $120 million in cash and a series of contingent payments for development and sales milestones and tiered royalties on sales ranging from the high single digits percentages up to the high teens for all products.

Nestle Health Science agreed to contribute to certain development efforts, including 33% of expenses for potential global Phase 3 studies for SER-287, SER-301 and SER-262. The full potential value of the up-front payment, milestones and royalties payable by Nestle Health Science is over $1.9 billion, assuming all products receive regulatory approval and are successfully commercialized. Seres expects to receive a total of $30 million in milestone payments in 2016 associated with the planned initiation of a Phase 1b study for SER-262 in primary CDI and the anticipated start of the Phase 3 trial for SER-109 in recurrent CDI.

The upfront payment to be received under the agreement is expected to help fund the late-stage development of Seres' lead programs, and drive the continued growth of Seres' pipeline in a variety of conditions where addressing the microbiome could be an effective clinical strategy.