Spruce Biosciences, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing, signed March 18, 2024, also reports material clinical and restructuring developments from March 2024; these are subsequent events, not FY2023 operating results.
Business context and financial performance
Spruce is a clinical-stage biopharmaceutical company developing tildacerfont, its sole product candidate, for rare endocrine disorders, primarily classic congenital adrenal hyperplasia (CAH). It has no approved products and has generated no product-sale revenue. FY2023 collaboration revenue came from its Japan licensing agreement with Kaken.
| Metric | FY2023 | FY2022 |
|---|---|---|
| Collaboration revenue | $10.1 million | None |
| Research and development expense | $49.4 million | $35.2 million |
| General and administrative expense | $12.7 million | $12.1 million |
| Operating loss | $52.0 million | $47.3 million |
| Net loss | $47.9 million | $46.2 million |
| Net loss per share, basic and diluted | $1.24 | $1.96 |
| Net cash used in operating activities | $33.3 million | $41.7 million |
Revenue was recognized from the $15.0 million Kaken upfront payment; $4.9 million remained deferred at year-end. No product gross margin is reported because Spruce had no product sales. R&D expense rose $14.2 million, primarily with expanded clinical development and higher personnel costs. Net loss widened $1.7 million despite the collaboration revenue, partly offset by higher interest income. Loss per share improved mainly alongside a larger weighted-average share count.
Cash, liquidity, debt, and capital
- At December 31, 2023, cash and cash equivalents were $96.3 million; there were no short-term investments, versus $54.6 million at year-end 2022. Total current assets were $102.2 million and current liabilities $24.5 million.
- Total assets were $103.9 million, total liabilities $27.4 million, and stockholders’ equity $76.5 million. Accumulated deficit was $197.2 million.
- Operating cash use declined by $8.4 million year over year, in part due to the Kaken payment. Investing cash inflow of $55.8 million primarily reflected maturities of investments; financing cash inflow of $49.1 million primarily reflected the February 2023 private placement.
- Term-loan principal outstanding was $3.4 million ($3.3 million carrying value); scheduled principal and interest payments totaled $3.7 million, with maturity in January 2026. The loan bears variable interest, stated at 9.0% at year-end, and is secured by substantially all assets except intellectual property.
- The company raised $53.6 million gross in a February 2023 private placement. Year-end common shares outstanding were 41.0 million, up from 23.6 million; 12.687 million additional shares were issuable under outstanding warrants. Further equity financing could dilute shareholders.
Material changes, outlook, risks, and unusual items
- Adult CAH trial setback: In March 2024, CAHmelia-203 failed its primary endpoint. At 200 mg once daily, the placebo-adjusted A4 reduction was 2.6% and statistically non-significant. Only about half of participants reported at least 80% compliance with study drug and glucocorticoid therapy. Spruce decided to terminate the study.
- Other clinical programs: CAHmelia-204 enrolled 100 adults, many with A4 near or below the upper limit of normal and high glucocorticoid use; its primary endpoint is change in daily glucocorticoid dose at week 24. Topline results were anticipated in Q3 2024. In pediatric CAHptain-205, 22 of 30 children met the endpoint of A4 or glucocorticoid reduction at week 12, but activity was less consistent than expected and lacked a clear dose response. Preliminary analysis suggests faster drug clearance in children; further dose-ranging results were anticipated in Q4 2024. These topline data were reported after FY2023 and remain subject to full analysis.
- Additional indication: In PCOS, interim POWER data from 20 of 27 participants suggested target engagement and possible DHEAS reduction. The company planned to present final data at a future medical conference; no definitive efficacy conclusion is provided.
- Runway and restructuring: The filing’s year-end liquidity assessment said cash would fund operations and debt obligations for at least 12 months after issuance of the financial statements. Separately, following the March 2024 termination decision, Spruce announced a workforce reduction of approximately 21% and estimated about $0.4 million in related cash charges. Management said the cost measures extended runway through the end of 2025. That estimate depends on operating assumptions and is not assured.
- Commercial and funding risk: Continued losses and operating cash use are expected; additional financing will be needed to develop tildacerfont and pursue commercialization. The company has no sales organization. Success depends on further clinical results, regulatory agreement and approval, manufacturing, reimbursement, and funding. Competitors include Neurocrine, which reported positive topline results from Phase 3 CAH studies.
- Licensing and other obligations: Kaken holds Japan rights and may owe up to approximately $65 million in development, regulatory, and commercial milestones plus royalties, subject to conditions. Lilly’s license includes up to $23 million in potential milestones and tiered royalties on future sales. No material legal proceedings were reported. The independent auditor issued an unqualified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting, with no auditor attestation required.
Important facts for investors to verify
- CAHmelia-204 topline results and whether glucocorticoid reduction is clinically meaningful and statistically supported.
- Further pediatric dose-ranging results, exposure data, consistency of response, and the dose Spruce ultimately selects.
- Updated cash runway and actual spending after the CAHmelia-203 termination and workforce reduction; the stated end-2025 runway is a management estimate.
- Potential dilution from the 12.687 million outstanding warrants, as well as future financing needs and financing terms.
- Kaken milestone and royalty terms, Lilly obligations, and the practical strength and duration of tildacerfont’s patent protection.
- Whether final POWER results support development in PCOS, and whether clinical and regulatory plans for CAH remain viable after the adult-trial failure.