Spero Therapeutics, Inc. — Q2 2023 Form 10-Q
Business context and reporting period. Spero is a clinical-stage biopharmaceutical company developing treatments for bacterial infections and rare diseases. This unaudited report covers the quarter and six months ended June 30, 2023. The company had no approved products and generated no product-sales revenue.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $2.7 | $2.0 | $4.8 | $4.1 |
| Research and development | $9.5 | $8.2 | $18.5 | $25.1 |
| General and administrative | $6.1 | $8.1 | $13.4 | $23.4 |
| Operating loss | $(12.9) | $(26.1) | $(27.1) | $(56.3) |
| Net loss | $(11.9) | $(28.7) | $(25.2) | $(61.5) |
| Net loss per share, basic and diluted | $(0.23) | $(0.87) | $(0.48) | $(1.88) |
- Revenue consists of government grant reimbursements and collaboration revenue, not product sales. No conventional product gross margin is reported.
- Six-month operating cash use was $31.4 million, versus $51.3 million in 2022. Cash and cash equivalents were $77.7 million at June 30, 2023, down from $109.1 million at year-end 2022.
- Current assets were $88.3 million and current liabilities $17.3 million at June 30, 2023. The company reported no marketable securities and no conventional borrowings; operating lease liabilities totaled $6.1 million. The liability from the prior sale of future royalties had been repaid in 2022.
- Accumulated deficit was $439.1 million. Deferred revenue totaled $31.0 million, primarily related to GSK and Pfizer arrangements.
Material changes versus the prior comparable periods
- Q2 net loss narrowed by $16.8 million year over year; the six-month loss narrowed by $36.3 million. Lower reported losses reflect reduced operating expenses following the 2022 restructuring and, for the six-month comparison, the absence of 2022 royalty-financing interest and extinguishment charges. These improvements do not represent product-sales profitability.
- For the first half, R&D fell $6.7 million, mainly from lower tebipenem HBr activity and reduced personnel costs after restructuring, partly offset by increased SPR720 spending. Q2 R&D rose $1.3 million year over year, principally with greater SPR720 clinical activity.
- First-half G&A fell $9.9 million, primarily from reduced headcount, commercial-operation and facility costs after restructuring. The company recorded no restructuring charges in 2023; Q2 and first-half 2022 included $11.8 million of charges.
- First-half grant revenue increased $0.3 million, with higher NIAID funding partly offset by the conclusion of the DoD award. Collaboration revenue increased $0.4 million.
- Higher interest income partly supported 2023 results: $1.9 million for the first half, compared with $0.2 million in 2022.
Outlook, management commentary and key risks
- Management expected June 30 cash, together with the $30 million GSK development milestone triggered by the subsequent FDA agreement, to fund operations into the second half of 2025. The milestone followed the July 31, 2023 FDA Special Protocol Assessment (SPA) agreement on the design and size of the pivotal PIVOT-PO Phase 3 trial. The SPA and milestone do not guarantee trial success or FDA approval.
- Spero planned to prioritize SPR720 and SPR206 toward Phase 2 milestones and tebipenem HBr Phase 3 activities. SPR720 Phase 2a enrollment continued, with topline data expected in the second half of 2024; management described the tebipenem HBr Phase 3 trial as anticipated to start in Q4 2023.
- The company expects continued operating losses and will need additional funding beyond its stated runway. Financing may require equity dilution, debt, collaborations, grants or spending reductions; unavailable or unfavorable funding could delay, reduce or end development programs.
- Key risks include clinical and regulatory uncertainty, including the possibility that FDA requirements or trial results differ from expectations; reliance on a small number of third-party manufacturers and suppliers; potential supply-chain disruption; and dependence on government awards and partner decisions for funding and milestone payments.
- Two consolidated putative securities class actions concerning statements about tebipenem HBr’s NDA remain pending. Spero denies wrongdoing, intends to defend the case and said it cannot estimate a loss range.
- Subsequent to quarter-end, NIAID committed $0.8 million through August 2024 under an exercised option. Through August 7, Spero also sold 144,476 shares under its ATM program for approximately $0.2 million gross.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level as of June 30, 2023; no material change in internal control over financial reporting was reported for the quarter.
Most important facts for investors to verify
- Whether PIVOT-PO began on schedule, enrolls as planned, and produces results meeting the SPA-based endpoint and FDA requirements.
- Receipt and timing of the $30 million GSK milestone, and the assumptions underlying the stated runway into the second half of 2025.
- SPR720 Phase 2a enrollment and expected second-half 2024 data, as well as progress and funding for SPR206.
- Quarterly cash burn, future financing needs, dilution from equity issuance, and availability of government-award funding.
- Developments in the securities litigation, manufacturing and supply continuity, and any changes to clinical or regulatory timelines.