NEW YORK (The Deal) -- Seres Therapeutics (MCRB) continues to trade at a significant premium to its debut price after popping more than 40% on the Nasdaq in its first day of trading.

The company is attracting investors looking to get a piece of a company that could be the first to bring a pharmaceutical based on microbiology to market.

Seres Therapeutics is perhaps farthest along in developing a pill-based treatment to treat Clostridium difficile, or C. Diff, a stomach and colon disease.

The pill would replace the only treatment for C. Diff., a fecal microbiota transplant, which allows doctors to replace good bacteria that have been killed by diseases in patients with healthy bacteria from a donor.

But Seres Therapeutics, which had received $68.5 million in funding before Nestlé, isn't the only drugmaker attracting investments from big companies. Other food makers and agricultural and chemical companies such as DuPont (DD) have either made or are likely to make investments.

For example, on April 22, DuPont announced intentions to acquire microbiome discovery firm Taxon Biosciences. Founded in 2000, Taxon uses genomics, bioinformatics and microbiology to develop microbial-based products for agriculture.

"It is a really important time for the industry and the pharmaceutical industry has really sat up and noticed," said Peter DiLaura, chief executive of Second Genome, a company in Phase 1 trials with a microbiome-based treatment with help from Janssen Pharmaceuticals -- the biotechnology unit of Johnson & Johnson (JNJ) -- along with Pfizer (PFE) and the Mayo Clinic Cancer Center.

He said that seeks to develop therapeutics based on the slight modification of the microbiome that could allow for the treatment of a wider variety of diseases beyond C. Diff.

Instead of replacing an entire set of bacteria with another, as with a fecal transplant, companies are either adding bacteria as treatment or using conventional small molecule drugs to block the interactions between gut microbes and stomach tissues.


In January, Johnson & Johnson, again through its Janssen Pharmaceuticals division, agreed to team up with Boston's Vedanta Biosciences to develop microbiome-related treatments. The companies agreed to a deal that includes an undisclosed upfront fee and as much as $241 million for access to Vedanta's proprietary mix of bacteria that could be a treatment for Crohn's disease and ulcerative colitis.

Food companies have also recognized the potential market by selling probiotics, which introduce new bacteria into the gut to promote good health. And French food giant Groupe Danone (DANOY) has followed Nestlé's path and invested in the microbiome.

Minnetonka, Minn., food giant Cargill, Atlanta-based Coca-Cola (KO) and Minneapolis' General Mills (GIS) are also expected to wade into the microbiome waters, according to industry watchers.

"The microbiome doesn't have a traditional home right now," said Jim Knighton, president of AvidBiotics, a South San Francisco-based company that has received backing from DuPont for its quest to develop treatments for cancer as well as food safety mechanisms using the microbiome. "Big science is at the table but other large industries are taking notice."

Seres Therapeutics' lead drug SER-109 has been designated a breakthrough therapy by the Food and Drug Administration but isn't on the market, and there is still no such approved treatment that targets the microbiome outside of Greek yogurt and a fecal transplant. If the company and others like it succeed in producing a viable treatment, the floodgates could open for more investment and eventual mergers and acquisitions.

"I think over the course of the last two years there has really been investment in R&D, and some investments are being made internally. Over the next 18-24 as more products get through clinical trials there is going to be some more external M&A investments that companies can plug into their R&D," DiLaura said.

"In this industry right now, you aren't doing it for immediate accretive value, but once companies start to get products to market or close to it that will change," said Knighton, who founded AvidBiotics alongside former Genentech research and development executive David Martin and UCLA professor Jeffery Miller.

"There will be M&A. If people think you have IP and it is going to be important in the future there are going to be companies looking to buy," Knighton said.

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