Spruce Biosciences, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; financial statements are unaudited. Spruce is a clinical-stage biopharmaceutical company with no approved products or product revenue. Its lead and only product candidate is tildacerfont, being developed for classic congenital adrenal hyperplasia (CAH) and a subset of polycystic ovary syndrome (PCOS).
Key financial results
| Metric | Q1 2021 | Q1 2020 / comparator |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $6.7 million | $4.6 million |
| General and administrative expense | $3.1 million | $0.5 million |
| Total operating expenses | $9.8 million | $5.1 million |
| Net loss | $9.9 million | $5.2 million |
| Net loss per share, basic and diluted | $0.42 | $6.76 |
| Net cash used in operating activities | $8.8 million | $6.0 million |
At March 31, 2021, cash and cash equivalents were $148.6 million, restricted cash was $0.2 million, and total assets were $154.0 million. The company reported an accumulated deficit of $70.7 million and stockholders’ equity of $140.7 million. No product gross margin was reported because Spruce had no product sales; operating and profit margins are not meaningful for this pre-revenue business.
Term-loan debt was $5.0 million principal, or $4.8 million net of unamortized discount and issuance costs. Total liabilities were $13.3 million. Q1 financing cash flow was $0.3 million: $5.0 million of new debt proceeds largely funded repayment of the previous loan, with $0.1 million from stock-option exercises. Cash, cash equivalents, and restricted cash declined $8.5 million during the quarter.
Changes versus the prior comparable period
- Net loss increased by $4.7 million year over year. R&D expense rose $2.1 million, mainly from clinical development, manufacturing, and personnel costs as development advanced.
- G&A expense increased $2.6 million, primarily from personnel costs, public-company legal and professional fees, and directors’ and officers’ insurance.
- Operating cash use increased by $2.8 million. The prior-year quarter included $43.7 million of preferred-stock financing; Q1 2021 did not include comparable equity financing.
- Cash and cash equivalents decreased from $157.2 million at December 31, 2020 to $148.6 million at March 31, 2021.
Outlook, clinical progress, and key risks
- Management believes March 31 cash will fund planned operations for at least 12 months, but expects continued losses, negative operating cash flows, and a need for substantial additional financing. Actual cash runway may differ from this estimate.
- Topline results were anticipated in the first half of 2022 for CAHmelia-203, a Phase 2b trial in adults with poorly controlled classic CAH, and in the second half of 2022 for CAHmelia-204, a Phase 2b trial focused on glucocorticoid reduction in adults with well-controlled CAH.
- Management planned to initiate pediatric CAH development in the second half of 2021 and, subject to IND clearance, a Phase 2 PCOS trial in the second half of 2021. It planned to file the PCOS IND in the first half of 2021.
- Management reported that 171 subjects had received tildacerfont across seven trials, with no drug-related serious adverse events reported. Earlier Phase 2a data in poorly controlled adults showed approximately 80% reductions in key hormone indicators; these findings do not establish later-stage efficacy. The filing also describes one mild liver-enzyme event at a 1,000 mg dose that resolved without intervention.
- The FDA or other regulators may require additional trials, potentially including Phase 3 trials, before approval; timing and scope were not ascertainable. Trial enrollment, interpretation of endpoints, safety, manufacturing, and COVID-19-related disruptions remain material uncertainties. The company also cited a hydrocortisone supply shortage and increased Phase 2b trial costs from remote and home-health measures.
- In March 2021, Spruce amended its Silicon Valley Bank loan agreement: total commitments increased to up to $30 million, including a first tranche of up to $20 million and a milestone-conditioned second tranche of up to $10 million. The loan matures January 1, 2026; outstanding debt was $5 million at quarter-end. The debt is secured by substantially all assets other than intellectual property, subject to agreement terms, and includes covenants and potential prepayment and end-of-term charges.
- Spruce reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls and procedures. It noted continued financing needs and possible dilution or restrictive debt terms if it raises capital.
Important facts for investors to verify
- Whether CAHmelia-203 and CAHmelia-204 meet enrollment, safety, and efficacy objectives and deliver results on the stated timelines.
- Whether regulators consider the Phase 2b evidence and safety database sufficient, or require additional or Phase 3 trials.
- Cash burn, actual runway, and financing needs as trial costs and development plans evolve.
- Availability and conditions of the amended loan tranches, covenant compliance, and potential repayment costs.
- Clinical supply continuity, including hydrocortisone, and the effect of COVID-19 or other disruptions on trial conduct and data quality.
- Whether proposed pediatric and PCOS programs proceed as planned and whether the estimated target populations and commercial opportunity are supported.