Spero Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; balance-sheet figures are as of March 31, 2021, compared with December 31, 2020. Spero is a clinical-stage biopharmaceutical company developing treatments for drug-resistant bacterial infections and rare diseases. It had no approved products and no product-sale revenue.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Grant revenue | $7.30 | $1.53 |
| Collaboration revenue | $0 | $0.17 |
| Total revenue | $7.30 | $1.70 |
| Research and development expense | $18.40 | $20.44 |
| General and administrative expense | $8.30 | $4.09 |
| Operating loss | $(19.40) | $(22.82) |
| Net loss | $(19.42) | $(23.26) |
| Basic and diluted loss per share | $(0.66) | $(1.22) |
| Net cash used in operating activities | $(15.48) | $(23.33) |
- At quarter-end, cash and cash equivalents were $77.04 million and marketable securities were $38.63 million, totaling $115.68 million. Cash and cash equivalents declined $8.17 million during the quarter.
- Total assets were $143.44 million; total liabilities were $24.59 million, including $7.64 million of operating lease liabilities. The filing reports no debt balance; it states that the company has no debt.
- Operating cash outflow was partly offset by $3.00 million of net marketable-security maturities and purchases and $4.31 million of financing cash inflow, primarily from at-the-market stock sales.
- Gross margin is not meaningful for this development-stage company: it reported no product sales or cost of product revenue. Revenue largely reflects reimbursement under government awards.
Material changes and developments
- Total revenue increased $5.60 million year over year, mainly from higher BARDA reimbursement for tebipenem HBr and higher DoD funding for SPR206.
- R&D expense decreased $2.03 million. Tebipenem HBr program costs fell $5.19 million, primarily after significant Phase 3 activities were completed; SPR720 and Potentiator-program costs rose.
- G&A expense increased $4.21 million, reflecting higher headcount, professional and consulting fees, and commercial-readiness spending for tebipenem HBr.
- Net loss narrowed by $3.84 million year over year. Weighted-average common shares increased to 29.41 million from 19.56 million; the prior-year loss per share also reflected a $0.55 million deemed dividend associated with Series C preferred stock.
- In Q1, Spero sold 257,185 shares through its prior ATM agreement for approximately $4.4 million gross proceeds. A new shelf registration effective March 29, 2021 permits offerings of up to $300 million in securities, including up to $75 million through a new ATM program.
Outlook, commentary, and principal risks
- After a March 25, 2021 pre-NDA meeting, management reported consensus with FDA that the package described could be reviewed, subject to FDA review of the complete submission. Spero anticipated filing the tebipenem HBr NDA in the second half of 2021.
- Management estimated existing cash, cash equivalents, marketable securities, and committed non-dilutive funding would cover operating and capital needs into Q2 2022, including through the planned NDA submission. However, management concluded that substantial doubt exists about the company’s ability to continue as a going concern and said additional funding is needed. The runway estimate is subject to spending and funding uncertainty.
- Potential funding sources include equity or debt offerings, collaborations, and grants; failure to obtain adequate funding could require delaying, reducing, or eliminating development or commercialization activities. The new shelf and ATM create financing capacity but do not assure proceeds and may dilute shareholders.
- The FDA placed the SPR720 Phase 2a trial on clinical hold after mortalities of inconclusive causality in a non-human-primate toxicology study. Spero discontinued the trial while assessing FDA requests and a possible future development path. No serious adverse events had been observed in human study participants; a concurrent rat study was reported to be proceeding without issue.
- For SPR206, Spero planned a Phase 1 lung-penetration study and a renal-impairment study in Q2 2021. Everest’s amended license agreement changed milestone terms: potential milestones fell from up to $59.5 million to up to $38.0 million, with $2.0 million received to date; Everest is responsible for development costs in its territory.
- Other key risks include dependence on tebipenem HBr and successful FDA review, reliance on third-party manufacturers and clinical vendors, government-award conditions and options, clinical and regulatory uncertainty, competition, reimbursement and pricing, intellectual-property protection, and potential COVID-19-related disruption. Spero reported that COVID-19 had affected clinical and development timelines but had not materially affected liquidity or caused asset impairment to date.
- No material legal proceedings or material off-balance-sheet arrangements were reported. Disclosure controls and procedures were deemed effective as of March 31, 2021.
Important facts for investors to verify
- Whether the tebipenem HBr NDA was submitted on the anticipated timetable and whether FDA accepts and reviews the application, including any manufacturing-inspection requirements.
- Cash use, government-award receipts and BARDA option funding against the stated runway into Q2 2022; the filing itself identifies substantial doubt about going concern.
- SPR720 toxicology findings, FDA feedback, and whether a revised development plan or additional studies are required.
- Progress, costs, and results of planned SPR206 studies, and Everest’s development progress and any milestone or royalty receipts.
- Actual ATM or other financing proceeds, potential dilution, and the terms of any future capital raise.
- Whether clinical, supply-chain, regulatory, or COVID-19 disruptions alter development timelines or spending assumptions.