Spero Therapeutics, Inc. — 2020 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2020. Spero is a clinical-stage biopharmaceutical company with no approved products and no product-sale revenue. Its lead candidate is oral antibiotic tebipenem HBr; its other principal programs are SPR720 for NTM pulmonary disease and IV antibiotic candidate SPR206 for resistant infections.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $9.3 million | $18.1 million |
| Research and development expense | $67.0 million | $65.8 million |
| General and administrative expense | $21.4 million | $15.6 million |
| Operating loss | $79.1 million | $63.2 million |
| Net loss | $78.3 million | $60.9 million |
| Net loss per share, basic and diluted | $3.52 | $3.35 |
| Cash used in operating activities | $85.9 million | $50.0 million |
Amounts are in U.S. dollars. Grant and collaboration revenue, rather than product sales, comprised reported revenue. The company reported no product gross margin. At year-end, cash and cash equivalents were $85.2 million and marketable securities were $41.7 million, or $126.9 million combined. Current assets were $139.1 million versus current liabilities of $14.3 million. Total liabilities were $21.4 million, primarily lease-related; the filing does not identify outstanding financial debt.
Material changes versus 2019
- Revenue fell $8.8 million, mainly as BARDA grant revenue declined and Everest collaboration revenue dropped from $4.7 million to $0.3 million.
- Operating expenses increased $7.1 million. Higher personnel and general and administrative costs outweighed lower direct costs for tebipenem HBr and the potentiator programs.
- Net loss widened by $17.4 million and operating cash use increased by $35.9 million.
- Financing activities provided $130.9 million, including proceeds from the rights offering, public offering, at-the-market sales and option exercises. Common shares outstanding rose from 19.2 million to 29.3 million; additional convertible preferred shares were also outstanding.
Outlook, management commentary and risks
- Tebipenem HBr: The Phase 3 ADAPT-PO trial met its primary non-inferiority objective versus IV ertapenem. Overall response at test of cure was 58.8% versus 61.6%; management planned to submit an NDA in the second half of 2021. The company cautioned that FDA review and approval were not assured.
- SPR720: In February 2021, the FDA placed the Phase 2a trial on clinical hold after mortalities of inconclusive treatment causality in an ongoing non-human-primate toxicology study. Spero discontinued the trial while reviewing findings with the FDA; no serious adverse events had been observed in human study participants.
- SPR206: Management planned Phase 1 lung-penetration and renal-impairment studies in 2021. The company discontinued SPR741 development in January 2020.
- Liquidity and going concern: Management estimated existing cash, securities and committed non-dilutive funding would support operations into the second quarter of 2022, including the planned tebipenem NDA submission. However, management and the auditor stated that substantial doubt exists about the company’s ability to continue as a going concern. Additional funding may be needed; spending reductions or financing could delay programs and dilute shareholders.
- Funding and commercialization risks: Government awards can be terminated or depend on options and appropriations. Spero relies on third-party manufacturers and research organizations, has no established commercial sales infrastructure, and faces regulatory, clinical, reimbursement, competition, intellectual-property and COVID-19-related risks.
- In March 2021, the company entered a new at-the-market sales agreement allowing up to $75 million of common-stock sales, subject to the related registration statement.
Key facts for investors to verify
- FDA feedback, NDA filing status and subsequent regulatory decisions for tebipenem HBr.
- Results of the SPR720 toxicology review, FDA requirements and any revised development plan.
- Actual cash burn, government-award receipts and financing needs relative to the stated Q2 2022 runway.
- Potential dilution from at-the-market sales, preferred-stock conversions, options and future capital raises.
- Manufacturing readiness, supply continuity and commercial launch plans, including expected costs and reimbursement assumptions.