Spruce Biosciences, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 13, 2024. Spruce is a clinical-stage biopharmaceutical company whose sole product candidate is tildacerfont, being developed primarily for congenital adrenal hyperplasia (CAH). It has no approved products and has generated no product sales; reported revenue is collaboration revenue from Kaken’s Japan license.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Collaboration revenue | $2.0 million | $2.0 million; up $38,000 |
| Research and development expense | $10.3 million | $11.7 million; down $1.4 million |
| General and administrative expense | $4.3 million | $3.5 million; up $0.9 million |
| Total operating expenses | $14.6 million | $15.2 million |
| Operating loss | $12.6 million | $13.2 million |
| Net loss | $11.6 million; $0.28 per share | $12.8 million; $0.40 per share |
| Cash used in operations | $15.0 million | $11.8 million |
| Cash and cash equivalents | $81.2 million at March 31 | $96.3 million at December 31, 2023 |
| Total assets / stockholders’ equity | $87.5 million / $66.6 million | $103.9 million / $76.5 million at December 31, 2023 |
| Term loan | $3.0 million principal; 9.0% stated rate | $3.4 million principal at December 31, 2023 |
There are no product-sales margins to assess. Interest and other income was $1.1 million, up from $0.5 million, primarily reflecting higher yields on money-market funds. Operating cash use rose despite lower net loss, with management citing cash payments for clinical development, personnel and professional services. Cash and restricted cash decreased $15.2 million during the quarter. The loan matures January 1, 2026; scheduled future principal and interest payments totaled $3.2 million at quarter-end. The loan is secured by substantially all assets other than intellectual property, and the company reported compliance with covenants.
Material changes and business developments
- CAHmelia-203: March topline results did not meet the primary endpoint. In 96 adults with highly elevated baseline androstenedione (A4), 200 mg once daily produced a placebo-adjusted A4 reduction of 2.6% at week 12, with a non-significant result. Medication and glucocorticoid compliance was low; the company terminated the study.
- CAHmelia-204: Enrollment was completed in a separate 100-adult Phase 2b trial focused on patients taking supraphysiologic glucocorticoids. Topline results were anticipated in Q3 2024.
- CAHptain-205: In a 30-child Phase 2 study, 22 of 30 participants met the endpoint of A4 or glucocorticoid reduction at 12 weeks. The company said activity was less consistent than expected, without a clear dose response; preliminary analysis suggested faster drug clearance in children. Additional dose-ranging interim results were anticipated in Q3 2024.
- Operating costs and runway: Management said R&D expense was expected to decrease following CAHmelia-203’s termination. The company also disclosed a workforce reduction of approximately 21% and other cost measures, which it said extended cash runway through the end of 2025. Separately, it stated that March 31 cash was expected to fund operations and debt obligations for at least 12 months after financial-statement issuance.
- Q1 R&D expense fell mainly with lower clinical-development and manufacturing costs as enrollment in adult trials was completed; G&A rose primarily from professional services and stock-based compensation. The share count outstanding was 41,154,799 as of May 9, 2024.
Outlook, risks and contingencies
Management expects continued operating losses and negative operating cash flows and says substantial additional financing will be needed. Potential sources include equity, debt, collaborations or out-licensing; financing may be unavailable or may dilute shareholders, add restrictive covenants, or require licensing rights on unfavorable terms. The reported runway depends on the company’s operating assumptions and planned cost reductions.
The near-term outlook is materially dependent on CAHmelia-204 and further pediatric dose-ranging results. If results are positive, Spruce plans to consult the FDA and foreign regulators on a registrational program. The European Medicines Agency’s Pediatric Committee issued an opinion agreeing with the proposed pediatric investigation plan, including a waiver for children under one year; this is not marketing approval.
Other key risks include reliance on a single clinical-stage candidate; trial efficacy, safety, enrollment and regulatory uncertainty; dependence on third-party clinical and manufacturing providers, including single-source suppliers; and competition. Tildacerfont was generally well tolerated in the cited studies, with no treatment-related serious adverse events reported, but this does not establish efficacy or future safety. The company also cited macroeconomic, geopolitical and banking-system risks and exposure from cash deposits exceeding federally insured limits.
After quarter-end, Spruce received a Nasdaq notice dated April 26, 2024 because its closing bid price had been below $1.00 for 30 consecutive business days. The notice provided an initial compliance period through July 30, 2024; the filing also describes a possible extension, subject to Nasdaq requirements. Failure to regain compliance could lead to delisting. The company reported no material legal proceedings and stated that disclosure controls were effective.
Most important facts for investors to verify
- Final and complete CAHmelia-204 results and whether they support progression to registrational studies.
- Additional CAHptain-205 dose-ranging data, dose selection and whether pediatric activity becomes more consistent.
- Cash burn, actual execution of cost reductions, and the assumptions underlying the stated runway through the end of 2025.
- Availability and terms of additional financing, including potential dilution from the 12,687,000 outstanding warrants and other equity awards.
- Nasdaq bid-price compliance status and any subsequent listing determination.
- Remaining loan payments and covenant status, as well as progress under the Kaken license and any milestone receipts; the filing does not report Q1 milestone revenue.