Spero Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Spero is a clinical-stage biopharmaceutical company with no approved products and no product-sale revenue. Its programs include SPR720 for nontuberculous mycobacterial pulmonary disease, SPR206 for drug-resistant infections, and tebipenem HBr for complicated urinary tract infections.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Total revenue | $2.1 | $2.1 |
| Grant revenue | $1.3 | $1.8 |
| Collaboration revenue | $0.7 | $0.2 |
| Research and development expense | $9.0 | $17.0 |
| General and administrative expense | $7.3 | $15.3 |
| Operating loss | $(14.2) | $(30.2) |
| Net loss | $(13.3) | $(32.8) |
| Net loss per share, basic and diluted | $(0.25) | $(1.01) |
| Cash used in operating activities | $(12.9) | $(28.2) |
- Operating and net loss margins were approximately -687% and -641%, respectively, based on reported revenue. The company remains loss-making and has an accumulated deficit of $427.1 million.
- Cash and cash equivalents were $96.3 million at March 31, down from $109.1 million at December 31, 2022. Management stated that cash should fund operations and capital expenditures for at least 12 months from issuance of the statements and, under its current plan, beyond 2024.
- Current assets were $101.7 million and current liabilities $23.0 million. Total liabilities were $47.7 million, including $31.8 million of deferred revenue and $6.4 million of operating lease liabilities. The balance sheet reports no borrowings.
- No investing or financing cash flows occurred in Q1 2023. The company had no marketable securities at quarter-end; cash equivalents included $38.6 million in money-market funds.
Material changes versus Q1 2022
- Revenue was unchanged overall: lower grant revenue was offset by higher collaboration revenue, including $0.5 million recognized under the GSK agreement.
- Operating expenses fell by $16.0 million, with R&D down $8.0 million and G&A down $8.0 million. The company attributed much of the reduction to its May 2022 restructuring and lower program activity. SPR720 direct costs rose $1.7 million as clinical and preclinical work increased; tebipenem HBr and SPR206 direct costs declined.
- Net loss improved by $19.6 million. In addition to reduced operating expenses, Q1 2023 included higher interest income and no royalty-sale interest expense or derivative-liability loss recorded in Q1 2022.
- Operating cash use declined by $15.4 million year over year. Weighted-average shares increased to 52.5 million from 32.6 million, affecting per-share comparability.
Outlook, risks and notable items
- Management plans to prioritize advancing SPR720 and SPR206 to key Phase 2 milestones and to continue follow-up Phase 3 development activities for tebipenem HBr. No specific milestone dates or financial guidance were provided.
- Under its GSK license, Spero received a $66.0 million upfront payment in 2022 and may receive development, commercial and sales milestones and tiered royalties. Spero is responsible for the follow-up Phase 3 trial and clinical supply; GSK is responsible for subsequent development, regulatory filing and commercialization activities as described in the agreement. Potential milestone payments were fully constrained from revenue recognition at March 31, 2023.
- The company says additional funding will be needed beyond its projected cash runway. Financing may require equity or debt issuance, new collaborations, grants or spending reductions; failure to obtain funding could force delays, reductions or discontinuation of programs.
- A consolidated securities class action alleges misleading statements concerning tebipenem HBr’s NDA and FDA prospects. Spero denies wrongdoing, intends to defend the case and says it cannot predict the outcome or reasonably estimate a possible loss.
- Other significant risks include clinical and regulatory failure, reliance on a small number of third-party manufacturers, government-award funding and option uncertainty, competitive and reimbursement pressures, and potential trial or supply-chain disruption. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, design and results of the tebipenem HBr follow-up Phase 3 trial, and the FDA’s requirements and regulatory path.
- SPR720 and SPR206 clinical progress, timelines, safety findings and funding needs.
- Actual cash burn versus management’s stated runway beyond 2024, and the availability and terms of additional financing.
- Whether BARDA options and other government funding are exercised and received, and whether GSK or other partners achieve payment-triggering milestones.
- Developments and any financial exposure related to the securities litigation.