Business context and reporting period
Spruce Biosciences, Inc. is a clinical-stage biopharmaceutical company developing therapies for rare endocrine disorders. This Form 10-K reports on the fiscal year ended December 31, 2021, with 2020 as the comparable period. The company had no approved products and generated no product revenue. Its business depended on tildacerfont, its sole product candidate.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $30.7 million | $23.9 million |
| General and administrative expense | $11.4 million | $5.6 million |
| Total operating expenses | $42.1 million | $29.4 million |
| Net loss | $42.3 million | $29.5 million |
| Net loss per share, basic and diluted | $1.81 | $4.93 |
| Cash used in operating activities | $35.9 million | $27.5 million |
Margins are not meaningful because the company had no revenue. Cash, cash equivalents and investments totaled $121.4 million at year-end, versus $157.2 million in cash, cash equivalents and restricted cash at December 31, 2020; the 2021 balance included $78.7 million of investments. Total assets were $126.5 million and stockholders’ equity was $111.4 million. Term-loan principal was $5.0 million ($4.9 million net of discount and issuance costs); lease liabilities totaled $1.7 million. Management expected available cash, cash equivalents and investments to fund operations for at least 12 months from year-end, but cautioned that actual needs could be higher. No dividend was declared.
Material changes versus the prior comparable period
- Net loss increased by $12.8 million, while operating expenses rose $12.7 million. R&D growth reflected greater clinical activity and personnel costs; G&A growth reflected personnel, higher directors’ and officers’ insurance premiums, and public-company costs.
- Operating cash use increased by $8.4 million. Investing cash use was $79.2 million, primarily purchases of available-for-sale securities, while 2020 financing cash inflows included the IPO and preferred-stock issuance. Thus, the sharp decline in cash on hand partly reflects investment purchases, not solely operating burn.
- Stock-based compensation increased to $4.0 million from $0.8 million. Accumulated deficit reached $103.1 million.
Outlook, commentary, risks and unusual items
- Clinical program: CAHmelia-203, a Phase 2b trial in adults with poorly controlled classic CAH, had topline results projected for the second half of 2023. CAHmelia-204, studying glucocorticoid reduction in adults with better disease control, had topline results projected for the second half of 2024. Pediatric CAH cohort 1 safety results and PCOS trial topline results were projected for the first half of 2023. These are management’s forward-looking estimates, not reported outcomes.
- Earlier Phase 2a results included approximately 80% reductions in disease-driving hormones among poorly controlled adult patients, without changing glucocorticoid doses. These findings were from small studies and do not establish efficacy in later trials. Tildacerfont had been given to more than 200 subjects across eight trials, with no drug-related serious adverse events reported in the filing. One patient at the highest tested dose had transient liver-enzyme elevations; the event resolved without intervention.
- Management said COVID-19 had delayed enrollment and site activation, increased trial costs, and led to protocol changes including remote visits. The filing also noted hydrocortisone supply concerns. Trial timing, costs and completion remain uncertain.
- The company anticipated continuing significant losses and needing substantial additional financing. In February 2022, after year-end, it established a shelf registration for up to $200 million and an at-the-market program of up to $21 million, which could dilute shareholders if used.
- The $5 million Silicon Valley Bank term loan matures January 1, 2026, is secured by substantially all assets other than intellectual property, and includes restrictive covenants and an end-of-term payment. Up to $10 million of additional borrowing was available through December 31, 2022, subject to milestones and other conditions.
- Spruce licenses tildacerfont-related rights from Eli Lilly. The agreement includes up to $23 million in development and sales milestones and tiered royalties on sales. The company relies on third parties for clinical trials and manufacturing, including single-source suppliers.
- In November 2021, CEO Richard King retired and resigned; Javier Szwarcberg became CEO in 2022. After year-end, CMO Rosh Dias resigned in March 2022 and Ralph Charlton was appointed effective March 28, 2022.
- Management reported disclosure controls and internal control over financial reporting effective at December 31, 2021. The auditor issued an unqualified opinion on the financial statements but did not attest to internal-control effectiveness, as the company was exempt.
Most important facts for investors to verify
- Whether the adult, pediatric and PCOS trials met their enrollment, timing, safety and efficacy objectives, and whether regulators require additional or Phase 3 trials.
- Whether the stated cash runway remains adequate after updated trial spending, and whether the company raises capital through the shelf or ATM program.
- Current cash, investment liquidity and operating cash burn; debt covenants, repayment terms and any conditions on the undrawn loan tranche.
- Manufacturing continuity, hydrocortisone availability, and the company’s dependence on CROs and single-source suppliers.
- The durability and scope of licensed intellectual-property protection, Lilly milestone and royalty obligations, and competitive developments in CAH.
- Whether management changes affect execution, and how future stock-based awards and any equity financing affect share dilution.