Spruce Biosciences, Inc. — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; the supplied filing text does not provide separate fourth-quarter results. Spruce is a clinical-stage biopharmaceutical company developing tildacerfont for rare endocrine disorders. It had no approved products and generated no product revenue.
Financial performance and position
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue in either year. |
| Research and development expense | $23.9 million | $10.8 million | Up $13.0 million, reflecting clinical development, manufacturing, preclinical and personnel costs. |
| General and administrative expense | $5.6 million | $2.3 million | Up $3.3 million, principally public-company professional costs, personnel and insurance. |
| Total operating expenses / operating loss | $29.4 million | $13.1 million | Operating expenses increased $16.3 million. |
| Net loss | $29.5 million | $13.1 million | Loss widened $16.5 million; net loss per share was $4.93 versus $17.12, with weighted-average shares increasing substantially after the IPO. |
| Operating cash flow | $(27.5) million | $(12.6) million | Cash use increased with operating activity. |
| Investing cash flow | $(0.1) million | Less than $(0.1) million | Primarily property and equipment purchases. |
| Financing cash flow | $181.0 million | $12.4 million | Primarily IPO and Series B preferred-stock proceeds in 2020. |
- At year-end, cash and cash equivalents were $157.2 million, restricted cash was $0.2 million, total assets were $162.9 million, total liabilities were $13.5 million, and stockholders’ equity was $149.4 million. Accumulated deficit was $60.8 million.
- The October 2020 IPO raised $103.5 million gross and $93.4 million net. Together with Series B preferred-stock proceeds, it drove the increase in cash.
- Year-end term-loan principal was $4.5 million; the balance-sheet carrying amount, net of discount and issuance costs, was $4.5 million. Operating lease liability was $1.9 million. Contractual obligations disclosed at year-end totaled $6.8 million, comprising lease and debt obligations.
- No gross margin or operating margin is meaningful because the company had no product revenue. Interest expense was $0.3 million; other income was $0.2 million. No income tax expense was recorded, and deferred tax assets were fully reserved.
Material changes versus 2019
- Net loss more than doubled as research and development spending increased to advance tildacerfont and prepare for larger clinical programs.
- The company completed its IPO in October 2020, converted all redeemable convertible preferred stock into common stock, and ended the year with substantially greater cash and equity.
- Headcount was 17 at year-end (11 in research and development, six in general and administration). The company began a new office lease in September 2020.
- Management reported that a material weakness in financial reporting controls identified in prior periods was remediated by December 31, 2020. Disclosure controls were judged effective, but the auditor did not provide an internal-control attestation.
Outlook, management commentary and key risks
- Management said year-end cash was expected to fund operations for at least 12 months under its then-current plan, while emphasizing that substantial additional financing would be needed for development and potential commercialization. Continued losses and negative operating cash flow are expected.
- Clinical milestones then anticipated: topline results from Phase 2b CAHmelia-203 in the first half of 2022 and CAHmelia-204 in the second half of 2022. The company planned to initiate a pediatric classic CAH Phase 2 program in the second half of 2021, and planned an IND filing for a PCOS subpopulation in the first half of 2021, subject to regulatory clearance. These are forward-looking expectations, not guarantees.
- Tildacerfont is the company’s only product candidate. The Phase 2b studies were intended to assess hormone reduction in adults with poor disease control and glucocorticoid reduction in adults with good disease control. The filing cautions that regulators could require additional trials, including Phase 3 trials, and that trial results may not predict approval or commercial success.
- Earlier Phase 2a data were small and included post-hoc patient subgroup analyses. The company reported approximately 80% mean reductions in key hormones among poorly controlled patients in the 12-week study, but these results require confirmation in ongoing controlled trials. Across 171 subjects in seven trials, no drug-related serious adverse events were reported.
- Notable safety/development considerations include a roughly twofold increase in dexamethasone levels associated with CYP3A4 interaction, leading the company to exclude dexamethasone-treated patients from efficacy analyses; and one transient liver-related event at 1,000 mg daily, with ALT five to nine times the upper limit of normal. The filing says no liver-enzyme elevations above three times the upper limit were observed at daily doses of 600 mg or below.
- COVID-19 could disrupt enrollment, site operations, supply and regulatory timelines. Remote/home-health trial procedures increased Phase 2b trial costs, and the company reported a hydrocortisone supply shortage that could affect trials if prolonged.
- The March 2021 loan amendment, a subsequent event after year-end, expanded SVB’s commitment to as much as $30 million: up to $20 million in a first tranche and $10 million in a second tranche subject to milestones. The amendment extended maturity to January 1, 2026 and provided interest-only periods. Borrowing the second tranche would increase the stated minimum interest rate and end-of-term payment; obligations are secured by substantially all assets other than intellectual property, subject to the agreement.
- Other significant risks include reliance on Lilly-licensed intellectual property and third-party, single-source manufacturers; competition; uncertain market size, reimbursement and pricing; potential dilution or unfavorable financing terms; and patent, regulatory and data-protection risks. Lilly may receive up to $23 million in development and sales milestones plus tiered royalties if products are commercialized.
Most important facts for investors to verify
- Whether CAHmelia-203 and CAHmelia-204 meet their endpoints, and whether FDA/EMA agree the data and safety database support registration or require additional trials.
- Actual cash burn and runway versus the company’s stated minimum 12-month estimate, including the cost and timing of clinical programs and any additional financing.
- Clinical safety and efficacy details, particularly confirmation of the post-hoc Phase 2a findings, steroid-reduction results, CYP3A4 interactions and liver monitoring.
- Availability and terms of any borrowing under the amended SVB facility, including milestone conditions, interest, end-of-term fees, covenants and collateral exposure.
- Progress on pediatric CAH and the planned PCOS program, and the validity of the estimated patient populations and commercial opportunity.
- Manufacturing continuity, hydrocortisone availability, intellectual-property coverage and obligations to Lilly, and the company’s ability to establish commercial and reimbursement capabilities if approved.