Spero Therapeutics, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a quarterly filing. Dollar amounts below are in U.S. dollars.
Business context
Spero is a clinical-stage biopharmaceutical company developing treatments for bacterial infections, including drug-resistant infections, and rare diseases. It has no approved products and generated no product-sales revenue. Its principal programs are SPR720 for NTM pulmonary disease, tebipenem HBr for complicated urinary tract infections (cUTI), and SPR206 for drug-resistant Gram-negative infections.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $53.5 million | $18.3 million |
| Grant revenue | $4.9 million | $15.2 million |
| Collaboration revenue | $48.6 million | $3.1 million |
| Research and development expense | $47.6 million | $64.5 million |
| General and administrative expense | $36.5 million | $41.7 million |
| Restructuring expense | $11.6 million | None |
| Operating loss | $42.2 million | $88.0 million |
| Net loss | $46.4 million | $89.8 million |
| Net loss per share, basic and diluted | $1.23 | $2.91 |
| Cash used in operating activities | $7.7 million | $64.3 million |
Collaboration revenue included $46.1 million related to GSK, largely from recognizing the tebipenem license transfer, plus $1.8 million from Pfizer and $0.7 million of Everest milestones. Revenue is not product revenue, and operating or gross margins on product sales are not applicable because Spero has no marketed products.
At year-end, cash and cash equivalents were $109.1 million, down from $112.6 million; marketable securities were zero, compared with $33.8 million in 2021. Total assets were $124.8 million, total liabilities $48.9 million, and stockholders’ equity $75.9 million. The $48.4 million liability associated with the sale of future royalties was repaid and extinguished in 2022; no such liability remained at year-end. No conventional borrowing balance is identified in the balance sheet. Operating lease commitments totaled $8.3 million.
Management said existing cash was expected to fund operations for at least 12 months from issuance of the financial statements and, under current plans, beyond 2024. Additional funding will be needed beyond that point; management may seek financing, partnerships or grants, or reduce spending. Cash-flow improvement should be viewed alongside the GSK upfront payment, deferred revenue and other working-capital movements.
Material changes and significant developments
- Revenue increased by $35.3 million year over year, driven principally by the GSK tebipenem license. The $66.0 million upfront payment was allocated between a license performance obligation and future research and development services; $45.7 million was recognized for the license and $0.4 million for services in 2022, with the balance recorded as deferred revenue.
- Operating loss narrowed by $45.8 million. R&D and G&A expenses declined after program reductions and restructuring, partly offset by $11.6 million of restructuring charges and other costs.
- Operating cash use fell to $7.7 million from $64.3 million. Financing cash flow was negative $29.6 million, primarily reflecting the $54.5 million repayment to terminate the royalty financing, partially offset by stock-sale proceeds.
- In May 2022, Spero announced a restructuring that reduced headcount from 146 employees at December 31, 2021 to 41 by the end of the second quarter of 2022. Charges included approximately $8.6 million of employee costs and $3.0 million of other discontinuation costs.
- GSK received an exclusive tebipenem license outside territories retained by Meiji. Spero received $66.0 million upfront and is eligible for up to $525.0 million in development, commercial and sales milestones, plus tiered royalties. GSK also purchased $9.0 million of Spero common stock. Spero is responsible for the next Phase 3 trial and its costs; GSK is responsible for specified further development and commercialization costs.
- Common shares outstanding rose to 52.5 million at year-end from 32.4 million a year earlier, reflecting ATM sales, the GSK share purchase and conversions of preferred stock. Spero sold 5.96 million shares through its ATM program for approximately $14.7 million gross proceeds.
Programs, outlook and risks
- Tebipenem HBr: The FDA issued a Complete Response Letter in June 2022, finding the ADAPT-PO Phase 3 trial insufficient to support approval and requiring an additional clinical study. Following an August Type A meeting, the FDA indicated that one additional positive Phase 3 trial, with confirmatory nonclinical evidence, could support a limited-use indication. Spero planned to seek a Special Protocol Assessment in the first half of 2023. The filing’s timeline is internally inconsistent: it also says the NDA was accepted in late December 2022 while describing the June 2022 CRL and a June 27, 2022 PDUFA date. Investors should verify the actual regulatory chronology and current status.
- SPR720: The FDA lifted a clinical hold in January 2022 after review of toxicology findings. Spero reopened sites for a new Phase 2a trial in November 2022, expected to enroll up to 35 patients with 56 days of treatment. Management expected topline data in the first half of 2024. The program had previously been paused after animal toxicology findings.
- SPR206: Spero reported positive topline results from a Phase 1 lung-penetration study and completed a renal-impairment study. It expected to submit an IND for a Phase 2 trial in the fourth quarter of 2023. Pfizer paid a $5.0 million regulatory milestone in 2022; other future milestones and royalties are contingent.
- Key risks include clinical or regulatory failure, the cost and execution of the required tebipenem Phase 3 study, dependence on partners and contract manufacturers, uncertain government-award funding, future financing needs, competition, reimbursement and adoption risks, and potential safety findings. Spero also disclosed consolidated securities class-action litigation concerning alleged statements about tebipenem’s FDA prospects; the company denies wrongdoing and could not estimate a loss range.
Most important facts for investors to verify
- The correct status and chronology of tebipenem’s NDA, CRL, PDUFA date, required Phase 3 trial and planned FDA interactions.
- The scope, budget, funding source and timing of the follow-up tebipenem Phase 3 trial, including Spero’s cash obligations and GSK’s milestone obligations.
- Whether the SPR720 Phase 2a trial is enrolling and whether the expected data timing remains achievable, considering its prior clinical hold and toxicology history.
- SPR206’s planned IND and Phase 2 timing, and the conditions attached to government funding and partner milestone payments.
- The assumptions behind management’s stated cash runway beyond 2024, including expected trial spending, deferred collaboration revenue and potential need for additional capital or dilution.
- Developments in the securities litigation and any resulting costs, insurance coverage or disclosures.