Spero Therapeutics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Amounts are in U.S. dollars; financial statement figures below are in millions unless noted. The filing was signed March 31, 2022 and includes subsequent developments through that date.
Business context
Spero is a clinical-stage biopharmaceutical company developing treatments for drug-resistant bacterial infections and rare diseases. It had no approved products and generated no product-sales revenue. Its lead candidate, oral antibiotic tebipenem HBr, was under FDA review for complicated urinary tract infections (cUTI), including pyelonephritis. Its other principal candidates were SPR720 for NTM pulmonary disease and IV SPR206 for drug-resistant Gram-negative infections.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Grant revenue | $15.2 | $9.1 | +$6.1 |
| Collaboration revenue | $3.1 | $0.3 | +$2.8 |
| Total revenue | $18.3 | $9.3 | +$8.9 |
| Research and development expense | $64.5 | $67.0 | −$2.5 |
| General and administrative expense | $41.7 | $21.4 | +$20.3 |
| Operating loss | $(88.0) | $(79.1) | Loss increased $8.9 |
| Net loss | $(89.8) | $(78.3) | Loss increased $11.5 |
| Basic and diluted loss per share | $(2.91) | $(3.52) | Improved; weighted-average shares rose to 30.9m from 22.4m |
| Cash used in operations | $(64.3) | $(85.9) | Burn decreased $21.5 |
Revenue came from government awards and collaborations, not product sales. The increase in grant revenue mainly reflected DoD funding for SPR206 and BARDA funding for tebipenem HBr. Collaboration revenue included recognition associated with Pfizer’s SPR206 license and milestones under the Everest agreement. R&D expense declined as the pivotal tebipenem trial wound down, while SPR206 spending increased. G&A rose with added personnel and costs supporting potential tebipenem commercialization. The filing does not present product gross margins; with no product sales, commercial margins are not yet meaningful.
At year-end, cash and cash equivalents were $112.6, marketable securities $33.8, and combined cash, equivalents and marketable securities $146.4. Total assets were $171.1; current assets $157.9; current liabilities $18.7; total liabilities $82.8; and stockholders’ equity $88.3. The balance sheet included a $48.4 liability related to the sale of future royalties and an $0.8 derivative liability. The company reported no product debt other than the royalty financing arrangement; operating lease liabilities totaled $7.3.
Financing cash flow was $84.1, primarily from $49.8 net proceeds from the HCR royalty transaction, $27.5 net proceeds associated with Pfizer’s share purchase, and $7.8 from at-the-market stock sales. Investing cash flow was $7.7, mainly reflecting net maturities of marketable securities.
Material changes and developments
- Tebipenem HBr: The FDA accepted the NDA for substantive review in January 2022 and granted Priority Review, with a June 27, 2022 target action date. In late March 2022, the FDA identified deficiencies that prevented labeling and post-marketing discussions at that time, while stating this was not a final decision. Spero planned to work with the agency and continued preparing for a possible second-half 2022 launch.
- Clinical evidence: In the ADAPT-PO Phase 3 trial, tebipenem was statistically non-inferior to IV ertapenem on the primary overall-response endpoint at test of cure: 58.8% versus 61.6%; treatment difference −3.3% (95% CI −9.7 to 3.2), using a −12.5% non-inferiority margin. Clinical cure rates at test of cure exceeded 93% in both groups. The filing notes the trial relied on a single pivotal Phase 3 study and, in part, exploratory Japanese Phase 2 data with design differences from FDA guidance.
- SPR720: The FDA lifted the Phase 2 clinical hold in January 2022 after review of the nonhuman-primate toxicology findings. A Phase 2 restart was expected in the second half of 2022. The hold followed animal-study mortalities with inconclusive causality.
- SPR206: Phase 1 bronchoalveolar-lavage and renal-impairment studies completed in 2021. Topline lung-penetration results announced in February 2022 showed mean ELF-to-plasma concentration ratio of 0.264 and lung concentrations above target-pathogen MICs during the eight-hour dosing interval.
- Funding and dilution: Pfizer purchased 2.36m common shares for $40.0m in 2021 and received an ex-U.S., ex-Asia SPR206 license. Spero also sold 475,469 shares through its at-the-market program for approximately $8.1m gross. After year-end through March 25, 2022, it sold another 344,205 shares for approximately $3.7m gross.
Outlook, risks and contingencies
Management estimated that year-end liquidity, committed BARDA funding and other non-dilutive commitments would fund operations into the second half of 2023, taking account of the $50m initial HCR proceeds and a potential additional $50m payment upon timely FDA approval of tebipenem HBr. Excluding both HCR amounts, management estimated runway into the fourth quarter of 2022. The approval-linked payment was conditional, and the filing cautioned that forecasts depend on uncertain assumptions.
The auditor expressed substantial doubt about Spero’s ability to continue as a going concern, and management reached the same conclusion. The company has recurring losses, an accumulated deficit of $367.5m, no product revenue and expects substantial future losses and additional financing needs. If funding is unavailable, it may delay, scale back or eliminate development or commercialization activities.
Under the HCR agreement, Spero received $50m gross and may receive $50m upon timely tebipenem approval and a further $25m subject to mutual agreement and sales conditions. In return, HCR is entitled to tiered royalties on specified product and licensee revenues, subject to a cap, and holds a first-priority lien on specified tebipenem assets and future receipts. If tebipenem is not approved by December 31, 2022, Spero must repay the initial $50m plus a 13.5% annual return. The agreement also includes minimum-payment provisions and accelerated repayment triggers.
Key risks include the unresolved FDA deficiencies and uncertainty around the NDA outcome or timing; reliance on one pivotal tebipenem trial and supportive foreign data; potential safety or efficacy issues; commercialization, reimbursement and market-acceptance challenges; dependence on third-party manufacturers and CROs; competition and antibiotic resistance; and exposure to COVID-19, supply-chain and funding disruptions. Government awards may be terminated and are subject to conditions. No material legal proceedings were reported.
Most important facts for investors to verify
- FDA follow-up on the tebipenem NDA deficiencies, any impact on the June 27, 2022 action date, and the ultimate approval decision and label.
- Whether the conditional HCR approval payment is received, the exact royalty, minimum-payment and default obligations, and the effect of the lien and cash sweep on future liquidity.
- Actual cash burn and runway relative to management’s projections, including the status and availability of BARDA and other award funding.
- Whether SPR720 restarts as planned and whether toxicology findings affect its dose, protocol or development outlook.
- Further SPR206 clinical and nonclinical results, including renal-dose recommendations and progress toward patient trials.
- Potential dilution from future equity issuance and conversion of outstanding preferred stock, options and other awards.