SPRB

Business Context and Reporting Period

Company: Spruce Biosciences, Inc. (SPRB)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Spruce is a late-stage biopharmaceutical company focused on developing therapies for neurological disorders. Its primary asset is tralesinidase alfa enzyme replacement therapy (TA-ERT) for Mucopolysaccharidosis Type IIIB (MPS IIIB). The company has no approved products and has not generated product revenue. It operates as a single segment and is classified as a non-accelerated filer and smaller reporting company.

Key Financial Metrics

Liquidity: As of December 31, 2025, the company held $48.9 million in cash. On January 7, 2026, it entered into a loan agreement with Avenue Capital for up to $50.0 million, with $15.0 million funded immediately. Management states that current cash plus the initial loan tranche is insufficient to fund operations for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern.

Material Changes vs. Prior Period

• Revenue Decline: Collaboration revenue dropped to zero in 2025 compared to $4.9 million in 2024, as the performance obligation under the Kaken Pharmaceutical agreement was fully satisfied in the prior year.
• Expense Reduction: Total operating expenses decreased by $24.5 million. Research and Development (R&D) expenses fell by $26.9 million, primarily due to the discontinuation of the tildacerfont CAH development program ($14.0 million) and reduced costs for the TA-ERT program following the Allievex bankruptcy proceedings. This was partially offset by a $5.7 million acquisition cost for the SPR202 asset from HBM Alpha Therapeutics.
• Workforce Reduction: In April 2025, the company reduced its workforce by 55% to prioritize TA-ERT development, incurring $0.9 million in severance costs.
• Stock Structure: The company executed a 1-for-75 reverse stock split in August 2025 to regain compliance with Nasdaq listing requirements after a temporary suspension.
• Warrant Liability: A $3.5 million loss was recorded in 2025 due to the change in fair value of pre-funded warrants issued to HBM Alpha Therapeutics, which were fully exercised by year-end.

Guidance, Outlook, Risks, and Unusual Items

Outlook and Milestones

• TA-ERT (MPS IIIB): The company intends to submit a Biologics License Application (BLA) for accelerated approval in the fourth quarter of 2026. A confirmatory Phase 3 trial must be initiated prior to approval. Commercial launch is targeted for mid-2027 if approved.
• Other Pipeline: The tildacerfont program for Major Depressive Disorder (MDD) was discontinued in Q1 2026 following a serious adverse event (liver enzyme elevation). The SPR202 program for Congenital Adrenal Hyperplasia (CAH) is in pre-clinical/early clinical stages.

Material Risks

• Going Concern: Substantial doubt exists regarding the ability to continue operations without additional financing. The company must raise capital through equity, debt, or strategic partnerships.
• Regulatory Uncertainty: Accelerated approval for TA-ERT relies on the FDA accepting CSF HS-NRE as a surrogate endpoint. Rejection would require additional clinical trials, delaying commercialization.
• Intellectual Property Litigation: Neurocrine Biosciences initiated proceedings to invalidate European Patent 3,784,233. In February 2026, the UK Patents Court ordered Spruce to pay an interim $1.2 million in legal costs. Spruce accrued $1.9 million for this contingency as of year-end.
• Debt Covenants: The new Avenue Capital loan is secured by substantially all assets, including intellectual property, and contains restrictive covenants limiting additional indebtedness and fundamental changes.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $48.9 million cash balance plus the $15.0 million loan tranche against the projected burn rate for 2026, given the "substantial doubt" disclosure.
• BLA Submission Timeline: Monitor the company's ability to meet the Q4 2026 BLA submission target for TA-ERT, which is contingent on manufacturing process performance qualification (PPQ) batches.
• Patent Litigation Status: Track the outcome of the Neurocrine patent invalidation proceedings and the potential impact of the $1.9 million accrual on future cash flows.
• Financing Terms: Review the specific milestones required to unlock the remaining $35.0 million of the Avenue Capital loan facility and the terms of the warrant issued to the lender.
• Stock Liquidity: Assess the impact of the reverse stock split and recent trading suspension on the ability to raise future equity capital.