Spruce Biosciences, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. The audited filing was signed March 16, 2023. Spruce is a clinical-stage biopharmaceutical company developing tildacerfont for rare endocrine disorders; it had no approved products and generated no product revenue.
Financial results and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $35.2 million | $30.7 million |
| General and administrative expense | $12.1 million | $11.4 million |
| Total operating expenses | $47.3 million | $42.1 million |
| Net loss | $46.2 million | $42.3 million |
| Net loss per share, basic and diluted | $1.96 | $1.81 |
| Cash, cash equivalents and investments at year-end | $79.1 million | $121.4 million |
| Net cash used in operating activities | $41.7 million | $35.9 million |
Gross profit and operating margins are not meaningful because the company had no product sales. Accumulated deficit was $149.3 million at year-end 2022, up from $103.1 million a year earlier. Total assets were $85.6 million, total liabilities $17.2 million, and stockholders’ equity $68.5 million.
At December 31, 2022, the company had $5.0 million of term-loan principal outstanding, with a stated interest rate of 8.0%. Scheduled future principal and interest totaled $5.6 million; the loan matures in January 2026 and is secured by substantially all assets other than intellectual property. The company also reported a $1.4 million operating lease liability.
Changes versus 2021 and unusual items
- Net loss increased by $3.9 million, while operating expenses rose by $5.2 million. R&D expense increased $4.5 million, mainly from clinical development and personnel; G&A expense increased $0.7 million.
- Operating cash use increased $5.8 million, primarily reflecting higher clinical-development, personnel and professional-services payments.
- Interest and other income, net increased to $1.5 million from $0.1 million. This included a $0.75 million gain on termination of the prior Daly City office lease, as well as higher investment yields.
- Year-end cash, cash equivalents and investments fell by $42.3 million from 2021. The company reported an unrealized loss of $0.4 million on available-for-sale securities in 2022.
Pipeline, outlook and key risks
- Adult classic CAH: Phase 2b CAHmelia-203 evaluates tildacerfont in adults with highly elevated androstenedione (A4); topline results were anticipated in the second half of 2023. CAHmelia-204 evaluates glucocorticoid reduction in adults with normal or near-normal A4 on supraphysiologic steroid doses; results were anticipated in the second half of 2024. Management planned regulatory discussions after positive results, but regulators may require additional studies, including Phase 3 trials.
- Pediatric CAH: Phase 2 CAHptain was underway in children ages 2–17; adolescent-cohort results were anticipated in the second half of 2023. The EMA pediatric committee endorsed a plan for ages 1 to under 18 and waived study requirements for children under 1.
- PCOS: Phase 2 P.O.W.E.R. evaluates tildacerfont in a subgroup of females with elevated adrenal androgens; topline results were anticipated in the first half of 2023. These milestones are forward-looking expectations in the filing, not reported outcomes.
- Prior clinical evidence: In a small, open-label 12-week Phase 2a study, patients with highly elevated adrenal hormones had mean maximum reductions of about 80% in ACTH, 17-OHP and A4; 60% normalized ACTH and 40% normalized A4 during month three. More than 200 subjects had received tildacerfont across eight completed trials, with no drug-related serious adverse events reported. These early findings do not establish efficacy in later trials.
- Financing and Japan license: After year-end, Spruce completed a February 2023 private placement for gross proceeds of $53.6 million, before expenses, issuing 16.116 million common shares, 0.8 million pre-funded warrants and 12.687 million warrants. A January 2023 agreement licensed Japan rights to Kaken and provides for a $15.0 million upfront payment, up to approximately $65.0 million in milestones, and sales-based royalties. Management said year-end resources plus the placement and expected Kaken payment could fund operations into the first half of 2025; this is a forecast dependent on assumptions and spending.
- Funding and execution risks: The company expects significant future losses and will need additional capital. Trial enrollment and costs were affected by COVID-19-related delays; management also cited inflation, geopolitical uncertainty, potential banking disruption and dependence on third-party clinical and manufacturing providers. Spruce relies on a single-source manufacturer for drug substance and another for drug product.
- Safety, competition and intellectual property: A Phase 2a participant receiving 1,000 mg daily had elevated liver enzymes that resolved without intervention; the proposed adult dose was lower. Neurocrine was pursuing a competing CRF1 antagonist in Phase 3. Tildacerfont’s licensed composition-of-matter patents are expected to expire in 2027 absent extensions; the company also depends on its Lilly license and owes potential milestones and royalties.
- SVB and controls: Spruce disclosed potential exposure to Silicon Valley Bank before authorities announced that depositors would have access to their funds. Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not attest to internal-control effectiveness because of the company’s filing-status exemptions.
Most important facts for investors to verify
- Whether CAHmelia-203, CAHmelia-204, CAHptain and P.O.W.E.R. delivered results consistent with the stated timelines and whether regulators consider the adult program sufficient for registration.
- The actual receipt and availability of the $53.6 million placement proceeds and $15.0 million Kaken upfront payment, and updated cash runway, burn rate and debt payments.
- The effect of the placement and warrants on fully diluted shares, ownership dilution and future financing needs.
- Whether clinical findings are confirmed in controlled trials, including longer-term safety, glucocorticoid reduction and liver-enzyme monitoring.
- The status of manufacturing capacity, clinical-trial enrollment, the Lilly license and patent protection, including potential patent-term extensions.