SPERO THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with the unaudited financial information and
the notes thereto included appearing elsewhere in this Quarterly Report on Form
10-Q, and the audited financial information and the notes thereto included in
our Annual Report on Form 10-K for the year ended
Overview
We are a multi-asset, clinical-stage biopharmaceutical company focused on
identifying, developing and commercializing novel treatments for bacterial
infections, including MDR bacterial infections, and rare diseases. Our product
candidate tebipenem HBr is designed to be the first broad-spectrum oral
carbapenem-class antibiotic for use to treat certain bacterial infections that
cause complicated urinary tract infections ("cUTIs"), including pyelonephritis,
caused by certain microorganisms, in adult patients who have limited oral
treatment options. Treatment with effective orally administrable antibiotics may
prevent hospitalizations for serious infections and enable earlier and
cost-effective treatment of patients after hospitalization. On
We are developing SPR720, a novel oral antibiotic designed for the treatment of a rare, orphan disease caused by non-tuberculous mycobacterial pulmonary infections ("NTM"). In addition, we are developing an IV-administered product candidate, SPR206, to treat MDR Gram-negative infections in the hospital. We believe that our novel product candidates, if successfully developed and approved, would have meaningful patient impacts and significant commercial applications for the treatment of bacterial infections, including MDR infections, in both the community and hospital settings. Since our inception in 2013, we have focused substantially all of our efforts and financial resources on organizing and staffing our company, business planning, raising capital, acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.
We have experienced net losses and significant cash outflows from cash used in
operating activities since our inception. 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. As of
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funding and/or reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs. The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management's assessment of our ability to continue as a going concern. As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, we expect to incur additional costs associated with our continued operation as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, government funding arrangements, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Recent Developments SPR720 Program Updates
We are finalizing the design of a planned Phase 2 clinical trial of SPR720, our investigational oral antimicrobial agent being developed as a treatment for nontuberculous mycobacterial-pulmonary disease (NTM-PD). The trial is expected to enroll approximately 35 treatment naïve or treatment inexperienced NTM-PD patients across four cohorts. Cohorts will include a blinded placebo cohort, blinded SPR720 cohorts receiving 500 or 1000 mg of study drug daily, and an open-label SPR720 cohort receiving 1000 mg of study drug daily. The primary endpoint of the trial will evaluate changes in bacterial load in sputum samples from baseline to the end of the trial's 56-day treatment period. Key secondary endpoints will include assessments of clinical response, quality of life, study drug pharmacokinetics, and safety and tolerability.
We expect the SPR720 Phase 2 trial to begin in the fourth quarter of 2022, with interim data expected in mid-2023 and topline data expected in 2024. The Phase 2 trial is supported by preclinical studies demonstrating SPR720's potent activity against a range of NTM species as well as Phase 1 clinical trial results that showed it to be well tolerated at exposures above predicted therapeutic levels.
SPR206 Program Updates
Following a productive pre-IND meeting with the FDA, we are planning a Phase 2, cross-indication resistant pathogen clinical trial of SPR206, a novel investigational IV-administered next generation polymyxin antibiotic being developed to treat MDR Gram-negative bacterial infections. The planned trial is designed to enroll patients with cUTI, hospital-acquired and ventilator-associated bacterial pneumonia (HABP/VABP), and bloodstream infections (BSI). It is supported by preclinical data as well as the results of multiple Phase 1 trials. These Phase 1 clinical trials have demonstrated SPR206's lack of nephrotoxicity at predicted therapeutic dose levels and its ability to continuously achieve mean lung epithelial lining fluid exposures above its MIC (minimum inhibitory concentration) for targeted gram-negative pathogens, when administered three times daily at 100 mg. We expect to initiate the planned Phase 2 trial of SPR206 in the third quarter of 2023.
In
Tebipenem HBr Program Updates
Type A Meeting for Tebipenem HBr
On
Complete Response Letter for Tebipenem HBr New Drug Application
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On
Restructuring
On
In connection with the foregoing, on
Components of our Results of Operations
Sales Revenue
To date, we have not generated any revenue from product sales. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
Grant Revenue
To date, the majority of our revenue has been derived from government awards. We expect that our revenue for the next few years will be derived primarily from payments under our government awards that we have currently entered into and that we may enter into in the future.
Collaboration Revenue
Collaboration revenue relates to our agreements with Everest and Pfizer.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
•
employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;
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expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with contract research organizations ("CROs");
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costs incurred in connection with our government awards;
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the cost of consultants and contract manufacturing organizations ("CMOs") that manufacture drug products for use in our preclinical studies and clinical trials;
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facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and
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payments made under third-party licensing agreements.
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In
We expense research and development costs as incurred. Nonrefundable advance payments we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.
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 consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. License fees and other costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program. License fees and other costs incurred prior to designating a product candidate are included in early stage research programs. We do not allocate employee costs, costs associated with our preclinical programs or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
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.
At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following:
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successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of the COVID-19 pandemic;
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receipt of marketing approvals from applicable regulatory authorities;
•
establishment of arrangements with third-party manufacturers to obtain manufacturing supply;
•
obtainment and maintenance of patent, trade secret protection and regulatory
exclusivity, both in
•
protection of our rights in our intellectual property portfolio;
•
launch of commercial sales of our product candidates, if approved, whether alone or in collaboration with others;
•
acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
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competition with other therapies; and
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a continued acceptable safety profile of our product candidates, if approved.
A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.
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Restructuring
In light of our decision to suspend current commercialization activities for
tebipenem HBr and our strategic restructuring, we expect that our future
expected operating expenses will be substantially reduced. We currently expect
our research and development and general and administrative expenses to be lower
for the remainder of 2022 as we progress through our discussions with the FDA
regarding the NDA for tebipenem HBr and operate pursuant to our restructuring.
In connection with our restructuring, we incurred approximately
Other Income (Expense) Interest Income (Expense)
Interest income (expense) consists of interest expense related to the sale of
future royalties and interest earned on our cash equivalents, which are
primarily invested in money market accounts, as well as interest earned on our
investments in marketable securities that we held during the three and six
months ended
Other Income (Expense), Net
Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as the loss on extinguishment of liability related to the sale of future royalties, the change in the fair value of our derivative liability, realized and unrealized gains and losses from foreign currency-denominated cash balances, vendor payables and receivables from the Australian research and development tax incentive.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in
During the six months ended
Restructuring
We have made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including current and future period termination benefits and other exit costs to be incurred when related actions take place. Restructuring charges are reflected in our consolidated statements of income. Actual results may differ from these estimates.
Results of Operations
Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of revenues and the satisfaction of liabilities in the normal course of business. We have incurred losses from the inception of our operations. These factors raise substantial doubt about our ability to continue as a going concern.
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Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30,
2022 2021 $ Change
Revenues:
Grant revenue $ 1,097 $ 3,042 $ (1,945 )
Collaboration revenue 896 2,106 (1,210 )
Total revenues 1,993 5,148 (3,155 )
Operating expenses:
Research and development 8,173 14,461 (6,288 )
General and administrative 8,051 9,229 (1,178 )
Restructuring 11,849 - 11,849
Total operating expenses 28,073 23,690 4,383
Loss from operations (26,080 ) (18,542 ) (7,538 )
Other income (expense):
Interest income 111 82 29
Other income (expense), net (10 ) (112 ) 102
Interest expense related to the sale
of future royalties (117 ) - (117 )
Loss on extinguishment of liability
related to the sale of future
royalties (3,581 ) - (3,581 )
Change in fair value of derivative
liability 995 - 995
Total other income (expense), net (2,602 ) (30 ) (2,572 )
Net loss $ (28,682 ) $ (18,572 ) $ (10,110 )
Grant Revenue
Three Months Ended June 30,
2022 2021 $ Change
BARDA Contract (tebipenem HBr) $ 653
370 43 327
DoD Agreement (Potentiator product
candidate) 74 1,110 (1,036 )
Total grant revenue $ 1,097 $ 3,042 $ (1,945 ) Grant revenue recognized during the three months ended
Collaboration Revenue
During the three months ended
Research and Development Expenses
Three Months Ended June 30,
2022 2021 $ Change
Direct research and development
expenses by program:
Tebipenem HBr $ 2,174 $ 6,403 $ (4,229 )
SPR720 249 682 (433 )
Potentiator product candidate
(SPR206) 854 1,275 (421 )
Unallocated expenses:
Personnel related (including
share-based compensation) 3,885 5,019 (1,134 )
Facility related and other 1,011 1,082 (71 )
Total research and development
expenses $ 8,173 $ 14,461 $ (6,288 )
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Direct costs related to our tebipenem HBr program decreased by
Direct costs related to our SPR720 program decreased by
Direct costs related to our SPR206 program decreased by
The decrease in personnel-related costs of
Facility-related and other costs primarily reflect costs related to supporting our research and development staff.
General and Administrative Expenses
Three Months Ended June 30,
2022 2021 $ Change
Personnel related (including
share-based compensation) $ 3,852 $ 4,719 $ (867 )
Professional and consultant fees 2,884 3,838 (954 )
Facility related and other 1,315 672 643
Total general and administrative
expenses $ 8,051 $ 9,229 $ (1,178 ) The decrease in personnel-related costs of
The decrease in professional and consultant fees of
Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff.
Restructuring
During the three months ended
Other Income (Expense), Net
Other expense, net was
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Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30,
2022 2021 $ Change
Revenues:
Grant revenue $ 2,919 $ 10,342 $ (7,423 )
Collaboration revenue 1,143 2,106 (963 )
Total revenues 4,062 12,448 (8,386 )
Operating expenses:
Research and development 25,144 32,865 (7,721 )
General and administrative 23,356 17,528 5,828
Restructuring 11,849 - 11,849
Total operating expenses 60,349 50,393 9,956
Loss from operations (56,287 ) (37,945 ) (18,342 )
Other income (expense):
Interest income 183 180 3
Other income (expense), net (23 ) (230 ) 207
Interest expense related to the
sale of future royalties (2,605 ) - (2,605 )
Loss on extinguishment of
liability related to the sale of
future royalties (3,581 ) - (3,581 )
Change in fair value of derivative
liability 802 - 802
Total other income (expense), net (5,224 ) (50 ) (5,174 )
Net loss $ (61,511 ) $ (37,995 ) $ (23,516 )
Grant Revenue
Six Months Ended June 30,
2022 2021 $ Change
BARDA Contract (SPR994) $ 1,328 $ 8,185 $ (6,857 )
NIAID Contract (SPR206) 623 402 221
DoD Agreement (Potentiator product
candidates) 968 1,755 (787 )
Total revenue $ 2,919 $ 10,342 $ (7,423 ) Grant revenue recognized during the six months ended
Collaboration Revenue
During the six months ended
Research and Development Expenses
Six Months Ended June 30,
2022 2021 $ Change
Direct research and development
expenses by program:
Tebipenem HBr $ 8,418 $ 16,518 $ (8,100 )
SPR720 334 1,925 (1,591 )
Potentiator product candidates
(SPR206 and SPR741) 2,774 2,365 409
Unallocated expenses:
Personnel related (including
share-based compensation) 11,398 9,771 1,627
Facility related and other 2,220 2,286 (66 )
Total research and development
expenses $ 25,144 $ 32,865 $ (7,721 )
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Direct costs related to our tebipenem HBr program decreased by
Direct costs related to our SPR720 program decreased by
Direct costs related to our SPR206 program increased by
The increase in personnel-related costs of
Facility-related and other costs primarily reflect costs related to supporting our research and development staff.
General and Administrative Expenses
Six Months Ended June 30,
2022 2021 $ Change
Personnel related (including
share-based compensation) $ 12,295 $ 9,148 $ 3,147
Professional and consultant fees 8,532 6,950 1,582
Facility related and other 2,529 1,430 1,099
Total general and administrative
expenses $ 23,356 $ 17,528 $ 5,828 The increase in personnel-related costs of
The increase in professional and consultant fees of
Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff.
Restructuring
During the six months ended
Other Income (Expense), Net
Other expense, net was
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have
recognized limited revenue to date from funding arrangements with the
On
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Agreement, Cantor may sell shares of our common stock by any method permitted by
law deemed to be an "at the market" offering as defined in Rule 415 of the
Securities Act, subject to the terms of the Sales Agreement. Our universal shelf
registration statement on Form S-3 (Registration No. 333-254170) became
effective on
During the six months ended
The COVID-19 pandemic has resulted in ongoing volatility in financial markets. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted.
Cash Flows
The following table summarizes our sources and uses of cash for the six months
ended
Six Months Ended June 30,
2022 2021
Cash used in operating activities $ (51,256 ) $ (32,046 )
Cash provided by investing activities 33,936 13,922
Cash provided by financing activities (49,863 ) 4,477
Net increase in cash and cash equivalents
Operating Activities
Net cash used in operating activities for the six months ended
Net cash used in operating activities for the six months ended
Changes in accounts payable, accrued expenses and other current liabilities, and prepaid expenses and other current assets in all periods were generally due to the advancement of our development programs, the timing of vendor invoicing and payments and write-offs during the second quarter of 2022 related to our strategic restructuring.
Investing Activities
Cash provided by investing activities during the six months ended
Cash provided by investing activities during the six months ended
Financing Activities
Cash used by financing activities during the six months ended
Cash provided by financing activities during the six months ended
Funding Requirements
Our future use of operating cash and capital requirements, and the timing and amount thereof, will depend largely on:
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•
the timing and costs of our ongoing and planned clinical trials;
•
the initiation, progress, timing, costs and results of preclinical studies and clinical trials of our product candidates and potential new product candidates;
•
the amount of funding that we receive under government contracts that we have applied for;
•
the number and characteristics of product candidates that we pursue;
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the outcome, timing and costs of seeking regulatory approvals;
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the costs of commercialization activities for our product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;
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the terms and timing of any future collaborations, licensing or other arrangements that we may establish;
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the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property related claims;
•
the costs of operating as a public company; and
•
the extent to which we in-license or acquire other products and technologies.
As of
This timeline is subject to uncertainty as to the timing of future expenditures. We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations, additional grant funding and/or reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs. The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management's assessment of our ability to continue as a going concern. As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.
Our consolidated financial statements as of
We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including those listed above.
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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government funding, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. 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 acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, 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. The COVID-19 pandemic has resulted in ongoing volatility in financial markets. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, including relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
During the three months ended
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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