Spero Therapeutics Earnings 2019-09-30

SPRO 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
CYAD	238	94		0	0	0	0	197			0%
CHMA	237	61	10	0	0	-32	-32	216		-6.7	-53%
UROV	235	76	29	0	0	-109	-108	186		-1.7	-142%
ABEO	234	159	52	-0	0	-76	-71	172	-0%	-2.4	-48%
LCI	231	1,187	853	655	244	-572	-439	860	37%	-2.0	-48%
SPRO	230	122	13	12	0	-39	-39	159	0%	-4.1	-32%
GALT	227	53	1	0	0	-11	-11	175		-16.0	-21%
ATHX	225	53	20	10	0	-47	-47	180	0%	-3.8	-88%
ENOB	222	180	7	0	0	-18	-18	210		-11.7	-10%
REPH	221	162	181	92	43	-59	-15	316	47%	-21.2	-37%

10-Q 1 spro-10q_20190930.htm 10-Q spro-10q_20190930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 001-38266

SPERO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	46-4590683

( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

675 Massachusetts Avenue, 14th Floor Cambridge, Massachusetts	02139

(Address of principal executive offices)	(Zip Code)

(857) 242-1600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	SPRO	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of October 31, 2019, the registrant had 19,128,146 shares of common stock, $0.001 par value per share, outstanding.

Forward-Looking STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

the initiation, timing, design, progress and results of, including interim data from, our preclinical studies and clinical trials, and our research and development programs;

•

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

•

our ability to advance product candidates into, and successfully complete, clinical trials;

•

the timing or likelihood of regulatory filings and approvals;

•

the commercialization of our product candidates, if approved;

•

the pricing, coverage and reimbursement of our product candidates, if approved;

•

the implementation of our business model and strategic plans for our business and product candidates and our Potentiator Platform;

•

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and our Potentiator Platform;

•

our ability to enter into strategic arrangements and/or collaborations and the potential benefits of such arrangements;

•

our estimates regarding expenses, capital requirements and needs for additional financing;

•

our financial performance;

•

developments relating to our competitors and our industry; and

•

other risks and uncertainties, including those listed under Part II, Item 1A. “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

Spero Therapeutics, Inc.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2019 and 2018	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

	PART II – OTHER INFORMATION
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 5.	Other Information	76
Item 6.	Exhibits	76

Signatures		78

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	September 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	45,597		$	34,080
Marketable securities		48,259			81,363
Other receivables		5,013			376
Tax incentive receivable, current		1,425			922
Prepaid expenses and other current assets		3,676			7,478
Total current assets		103,970			124,219
Property and equipment, net		2,519			2,893
Tax incentive receivable		—			233
Operating lease right of use assets		3,944			—
Other assets		2,077			1,661
Total assets	$	112,510		$	129,006

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,524		$	3,603
Accrued expenses and other current liabilities		11,869			8,263
Derivative liabilities		223			223
Deferred rent		—			229
Operating lease liabilities		442			—
Total current liabilities		15,058			12,318
Deferred rent, net of current portion		—			833
Non-current operating lease liabilities		4,162			—
Other long-term liabilities		256			—
Total liabilities		19,476			13,151
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized, 2,720 shares issued and outstanding as of September 30, 2019 and 3,220 shares issued and outstanding as of December 31, 2018		—			—
Common stock, $0.001 par value; 60,000,000 shares authorized as of September 30, 2019 and December 31, 2018;18,663,030 shares issued and outstanding as of September 30, 2019 and 17,205,962 shares issued and outstanding as of December 31, 2018		19			17
Additional paid-in capital		267,083			254,013
Accumulated deficit		(174,441	)		(138,502	)
Accumulated other comprehensive gain (loss)		18			(28	)
Total Spero Therapeutics, Inc. stockholders' equity		92,679			115,500
Non-controlling interests		355			355
Total stockholders' equity		93,034			115,855
Total liabilities and stockholders' equity	$	112,510		$	129,006

The accompanying notes are an integral part of these condensed consolidated financial statements.

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Grant revenue	$	4,471		$	658		$	10,471		$	2,274
Collaboration revenue		172			—			4,046			—
Total revenues		4,643			658			14,517			2,274

Operating expenses:
Research and development		18,495			8,459			40,047			24,758
General and administrative		4,133			3,134			11,803			9,238
Total operating expenses		22,628			11,593			51,850			33,996
Loss from operations		(17,985	)		(10,935	)		(37,333	)		(31,722	)
Other income (expense):
Interest income and other income (expense), net		268			472			1,394			659
Total other income (expense), net		268			472			1,394			659
Net loss	$	(17,717	)	$	(10,463	)	$	(35,939	)	$	(31,063	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.95	)	$	(0.60	)	$	(2.01	)	$	(2.01	)

Weighted average common shares outstanding, basic and diluted:		18,659,079			17,471,462			17,859,829			15,417,087

Comprehensive loss:
Net loss		(17,717	)		(10,463	)		(35,939	)		(31,063	)
Other comprehensive gain (loss):
Unrealized gain (loss) on marketable securities		12			(8	)		40			(23	)
Reclassification adjustment for gains included in net loss		—			—			6			—
Net unrealized gains (losses) on securities		12			(8	)		46			(23	)
Total comprehensive loss	$	(17,705	)	$	(10,471	)	$	(35,893	)	$	(31,086	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(35,939	)	$	(31,063	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		861			270
Loss on disposal of fixed assets		—			248
Share-based compensation		2,847			1,980
Realized (gain) loss on investments		(1	)		—
Unrealized foreign currency transaction (gain) loss		164			237
Accretion of discount on marketable securities		(663	)		(346	)
Changes in operating assets and liabilities:
Other receivables		(4,637	)		679
Prepaid expenses and other current assets		3,802			706
Tax incentive receivables		(319	)		980
Other assets		(432	)		—
Accounts payable		(1,041	)		(2,088	)
Accrued expenses and other current liabilities		2,749			2,372
Deferred rent		—			(91	)
Other long-term liabilities		(44	)		—
Net cash used in operating activities		(32,653	)		(26,116	)
Cash flows from investing activities:
Purchases of marketable securities		(76,523	)		(104,421	)
Proceeds from maturities of marketable securities		110,337			14,000
Purchases of property and equipment		(185	)		(22	)
Net cash provided by (used in) investing activities		33,629			(90,443	)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of commissions		10,289			70,500
Payment of offering costs		(158	)		(996	)
Proceeds from stock option exercises		410			197
Net cash provided by financing activities		10,541			69,701
Net increase (decrease) in cash and cash equivalents		11,517			(46,858	)
Cash, cash equivalents and restricted cash at beginning of period		34,080			87,338
Cash, cash equivalents and restricted cash at end of period	$	45,597		$	40,480

Supplemental disclosure of non-cash investing and financing activities:
Offering costs included in accounts payable and accrued expenses	$	—		$	246

The accompanying notes are an integral part of these condensed consolidated financial statements.

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)


																Accumulated
	Series A and B															Other			Spero
	Convertible									Additional						Comprehensive			Therapeutics, Inc.			Non-		Total
	Preferred Stock					Common Stock				Paid-in			Accumulated			Income			Stockholders'			controlling		Stockholders'
	Shares			Par Value		Shares		Par Value		Capital			Deficit			(Loss)			Equity			Interests		Equity
Balances at June 30, 2019		2,720		$	—		18,650,375	$	19	$	266,013		$	(156,724	)	$	6		$	109,314		$	355	$	109,669
Issuance of common stock upon the exercise of stock options		—			—		8,704		—		51			—			—			51			—		51
Issuance of common stock, net of issuance costs		—			—		3,951		—		38			—			—			38			—		38
Share-based compensation expense		—			—		—		—		981			—			—			981			—		981
Unrealized gain on available-for-sale securities		—			—		—		—		—			—			12			12			—		12
Net loss		—			—		—		—		—			(17,717	)		—			(17,717	)		—		(17,717	)
Balances at September 30, 2019		2,720		$	—		18,663,030	$	19	$	267,083		$	(174,441	)	$	18		$	92,679		$	355	$	93,034

																Accumulated
	Series A and B															Other			Spero
	Convertible									Additional						Comprehensive			Therapeutics, Inc.			Non-		Total
	Preferred Stock					Common Stock				Paid-in			Accumulated			Income			Stockholders'			controlling		Stockholders'
	Shares			Par Value		Shares		Par Value		Capital			Deficit			(Loss)			Equity			Interests		Equity
Balances at December 31, 2018		3,220		$	—		17,205,962	$	17	$	254,013		$	(138,502	)	$	(28	)	$	115,500		$	355	$	115,855
Issuance of common stock upon the exercise of stock options		—			—		62,072		—		410			—			—			410			—		410
Issuance of common stock, net of issuance costs		—			—		894,996		1		9,814			—			—			9,815			—		9,815
Conversion of convertible preferred stock to common stock		(500	)		—		500,000		1		(1	)		—			—			—			—		—
Share-based compensation expense		—			—		—		—		2,847			—			—			2,847			—		2,847
Unrealized gain on available-for-sale securities		—			—		—		—		—			—			46			46			—		46
Net loss		—			—		—		—		—			(35,939	)		—			(35,939	)		—		(35,939	)
Balances at September 30, 2019		2,720		$	—		18,663,030	$	19	$	267,083		$	(174,441	)	$	18		$	92,679		$	355	$	93,034

Accumulated

Series A and B

Other

Spero

Convertible

Additional

Comprehensive

Therapeutics, Inc.

Non-

Total

Preferred Stock

Common Stock

Paid-in

Accumulated

Income

Stockholders'

controlling

Stockholders'

Par Value

Capital

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	19	$230

10-Q	2019-11-04	Quarter: 2019-09-30
10-Q	2019-08-08	Quarter: 2019-06-30
10-Q	2019-05-09	Quarter: 2019-03-31
10-K	2019-03-14	Annual: 2018-12-31
10-Q	2018-11-08	Quarter: 2018-09-30
S-1	2018-07-09	Public Filing
10-Q	2018-08-09	Quarter: 2018-06-30
10-Q	2018-05-10	Quarter: 2018-03-31
10-K	2018-04-02	Annual: 2017-12-31
10-Q	2017-12-14	Quarter: 2017-09-30

8-K	2019-12-16	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-12-05	Regulation FD, Exhibits
8-K	2019-11-04	Earnings, Exhibits
8-K	2019-10-03	Regulation FD, Exhibits
8-K	2019-09-04	Officers
8-K	2019-08-08	Earnings, Exhibits
8-K	2019-06-12	Enter Agreement, Exhibits
8-K	2019-06-05	Shareholder Vote
8-K	2019-05-09	Earnings, Exhibits
8-K	2019-04-18	Officers
8-K	2019-03-19	Officers, Exhibits
8-K	2019-03-14	Earnings, Exhibits
8-K	2019-01-04	Enter Agreement, Other Events, Exhibits
8-K	2018-11-15	Enter Agreement, Sale of Shares, Shareholder Rights, Amend Bylaw, Exhibits
8-K	2018-11-13	Regulation FD, Other Events, Exhibits
8-K	2018-11-08	Earnings, Exhibits
8-K	2018-09-27	Regulation FD, Exhibits
8-K	2018-08-14	Officers, Exhibits
8-K	2018-08-09	Earnings, Exhibits
8-K	2018-07-17	Amend Bylaw, Exhibits
8-K	2018-07-16	Other Events, Exhibits
8-K	2018-07-09	Regulation FD, Exhibits
8-K	2018-07-09	Earnings, Other Events, Exhibits
8-K	2018-06-05	Shareholder Vote
8-K	2018-05-10	Earnings, Exhibits
8-K	2018-04-02	Earnings, Exhibits
8-K	2018-02-01	Officers, Exhibits
8-K	2018-01-17	Enter Agreement, Off-BS Arrangement, Exhibits

EX-31.1	spro-ex311_9.htm
EX-31.2	spro-ex312_10.htm
EX-32.1	spro-ex321_8.htm
EX-32.2	spro-ex322_6.htm