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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, 2023

or

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 November 6, 2023, the registrant had 52,999,317 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;
the regulatory path forward for tebipenem HBr and the potential approval of tebipenem HBr by the U.S. Food and Drug Administration (“FDA”);
the potential receipt of milestone payments and royalties on future sales under our License Agreement (the “GSK License Agreement”) with GlaxoSmithKline Intellectual Property (No. 3) Limited (“GSK”), and the potential receipt of milestone payments under our other various license and collaboration agreements;
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 future development and 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;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;
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.

i


 

Risk Factor Summary

We are providing the following summary of the risk factors contained in this Quarterly Report on Form 10-Q to enhance the readability and accessibility of our risk factor disclosures. We encourage you to carefully review the full risk factors contained in this Quarterly Report on Form 10-Q in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:

Our ability to realize the value of tebipenem HBr depends on us obtaining FDA approval. Even if such approval is obtained, the timeline of, and any requirements imposed as part of, such approval may impact the attractiveness of eventual commercialization of tebipenem HBr through our partnership with GSK.
Analyses of preliminary or interim data from our clinical studies that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Serious adverse events or undesirable side effects or other unexpected properties of any of our product candidates may be identified during development or after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval.
Even if a product candidate does obtain regulatory approval, it may never achieve the market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community that is necessary for commercial success and the market opportunity may be smaller than we estimate.
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing any of our product candidates if such product candidates are approved.
We face substantial competition from other pharmaceutical and biotechnology companies and our operating results may suffer if we fail to compete effectively.
We have not generated any revenue from the sale of our products, have a history of losses and expect to incur substantial future losses.
We expect that we will need substantial additional funding. If we are unable to raise capital when needed, or do not receive payment under our government awards, we could be forced to delay, reduce or eliminate our product development programs.
We and certain of our executive officers have been named as defendants in two initiated lawsuits, which were ordered consolidated, that could result in substantial costs and divert management’s attention.
We may not achieve the milestones triggering payments to us in our license and collaboration agreements with third parties. We contract with third parties for the manufacture of preclinical and clinical supplies of our product candidates and expect to continue to do so in connection with any future commercialization and for any future clinical trials and commercialization of our other product candidates and potential product candidates. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
Our use of government funding for certain of our programs adds complexity to our research and commercialization efforts with respect to those programs and may impose requirements that increase the costs of commercialization and production of product candidates developed under those government-funded programs.
If we are unable to obtain and maintain sufficient patent protection for our technology or our product candidates, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.
We have registered trademarks and pending trademark applications. Failure to enforce our registered marks or secure registration of our pending trademark applications could adversely affect our business.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.

 

ii


 

Spero Therapeutics, Inc.

Table of Contents

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

Item 1.

 

Financial Statements (Unaudited)

4

 

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

4

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022

5

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

6

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

 

Controls and Procedures

39

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

40

Item 1A.

 

Risk Factors

40

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

76

Item 3.

 

Defaults Upon Senior Securities

76

Item 4.

 

Mine Safety Disclosures

76

Item 5.

 

Other Information

76

Item 6.

 

Exhibits

78

 

 

 

 

Signatures

79

 

 

 

iii


 

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,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

93,825

 

 

$

109,107

 

Other receivables

 

 

2,989

 

 

 

1,084

 

Prepaid expenses and other current assets

 

 

5,408

 

 

 

3,379

 

Total current assets

 

 

102,222

 

 

 

113,570

 

Property and equipment, net

 

 

41

 

 

 

368

 

Operating lease right of use assets

 

 

4,404

 

 

 

5,124

 

Other assets

 

 

434

 

 

 

5,740

 

Total assets

 

$

107,101

 

 

$

124,802

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

1,103

 

 

 

617

 

Accrued expenses and other current liabilities

 

 

6,563

 

 

 

8,973

 

Operating lease liabilities

 

 

1,711

 

 

 

1,690

 

Income taxes payable

 

 

2,211

 

 

 

 

Deferred revenue, current

 

 

13,873

 

 

 

10,369

 

Total current liabilities

 

 

25,461

 

 

 

21,649

 

Non-current operating lease liabilities

 

 

4,120

 

 

 

4,957

 

Deferred revenue, non-current

 

 

23,753

 

 

 

22,166

 

Other long-term liabilities

 

 

62

 

 

 

96

 

Total liabilities

 

 

53,396

 

 

 

48,868

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value; 120,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 52,999,317 shares issued and outstanding as of September 30, 2023 and 52,456,195 shares issued and outstanding as of December 31, 2022

 

 

53

 

 

 

52

 

Additional paid-in capital

 

 

495,915

 

 

 

489,760

 

Accumulated deficit

 

 

(442,263

)

 

 

(413,878

)

Accumulated other comprehensive gain (loss)

 

 

 

 

 

 

Total stockholders' equity

 

 

53,705

 

 

 

75,934

 

Total liabilities and stockholders' equity

 

$

107,101

 

 

$

124,802

 

 

 

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

4


 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Grant revenue

 

$

2,091

 

 

$

924

 

 

$

5,349

 

 

$

3,843

 

Collaboration revenue

 

 

23,382

 

 

 

1,082

 

 

 

24,910

 

 

 

2,225

 

Total revenues

 

 

25,473

 

 

 

2,006

 

 

 

30,259

 

 

 

6,068

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

16,393

 

 

 

7,360

 

 

 

34,883

 

 

 

32,504

 

General and administrative

 

 

5,708

 

 

 

6,632

 

 

 

19,121

 

 

 

29,988

 

Impairment of long-term asset

 

 

5,306

 

 

 

 

 

 

5,306

 

 

 

 

Restructuring

 

 

 

 

 

(152

)

 

 

 

 

 

11,697

 

Total operating expenses

 

 

27,407

 

 

 

13,840

 

 

 

59,310

 

 

 

74,189

 

Loss from operations

 

 

(1,934

)

 

 

(11,834

)

 

 

(29,051

)

 

 

(68,121

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

950

 

 

 

208

 

 

 

2,894

 

 

 

391

 

Other income (expense), net

 

 

(10

)

 

 

(23

)

 

 

(17

)

 

 

(46

)

Interest expense related to the sale of future royalties

 

 

 

 

 

 

 

 

 

 

 

(2,605

)

Loss on extinguishment of liability related to the sale of future royalties

 

 

 

 

 

 

 

 

 

 

 

(3,581

)

Change in fair value of derivative liability

 

 

 

 

 

(26

)

 

 

 

 

 

776

 

Total other income (expense), net

 

 

940

 

 

 

159

 

 

 

2,877

 

 

 

(5,065

)

Net loss before income taxes

 

 

(994

)

 

 

(11,675

)

 

 

(26,174

)

 

 

(73,186

)

Income tax expense

 

 

(2,211

)

 

 

 

 

 

(2,211

)

 

 

 

Net loss

 

$

(3,205

)

 

$

(11,675

)

 

$

(28,385

)

 

$

(73,186

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.06

)

 

$

(0.33

)

 

$

(0.54

)

 

$

(2.16

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted:

 

 

52,710,280

 

 

 

35,882,076

 

 

 

52,603,709

 

 

 

33,834,198

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(3,205

)

 

 

(11,675

)

 

 

(28,385

)

 

 

(73,186

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

 

 

 

 

 

 

2

 

Net unrealized gains (losses) on securities

 

 

 

 

 

 

 

 

 

 

 

2

 

Total comprehensive loss

 

$

(3,205

)

 

$

(11,675

)

 

$

(28,385

)

 

$

(73,184

)

 

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

5


 

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(28,385

)

 

$

(73,186

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

329

 

 

 

740

 

Non-cash lease cost

 

 

720

 

 

 

446

 

Impairment of assets

 

 

5,306

 

 

 

635

 

Share-based compensation

 

 

5,935

 

 

 

6,626

 

Unrealized foreign currency transaction (gain) loss

 

 

 

 

 

8

 

Accretion of discount on marketable securities

 

 

 

 

 

13

 

Change in fair value of derivative liabilities

 

 

 

 

 

(776

)

Non-cash interest expense associated with the sale of future royalties

 

 

 

 

 

2,605

 

Loss on extinguishment of liability related to the sale of future royalties

 

 

 

 

 

3,581

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Other receivables

 

 

(1,905

)

 

 

1,678

 

Prepaid expenses and other current assets

 

 

(2,029

)

 

 

7,133

 

Other assets

 

 

 

 

 

(2

)

Accounts payable

 

 

486

 

 

 

1,483

 

Accrued expenses and other current liabilities

 

 

(2,410

)

 

 

(6,257

)

Deferred revenue, current and non-current

 

 

5,091

 

 

 

3,525

 

Other long-term liabilities

 

 

(35

)

 

 

(31

)

Operating lease liability

 

 

(816

)

 

 

(434

)

Income taxes

 

 

2,211

 

 

 

 

Net cash used in operating activities

 

 

(15,502

)

 

 

(52,213

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(26,970

)

Proceeds from maturities of marketable securities

 

 

 

 

 

60,777

 

Net cash provided by (used in) investing activities

 

 

 

 

 

33,807

 

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of liability related to the sale of future royalties

 

 

 

 

 

(54,485

)

Proceeds from the issuance of common stock, net of issuance costs

 

 

220

 

 

 

10,334

 

Proceeds from stock option exercises

 

 

 

 

 

419

 

Net cash provided by financing activities

 

 

220

 

 

 

(43,732

)

Net decrease in cash and cash equivalents:

 

 

(15,282

)

 

 

(62,138

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

109,107

 

 

 

112,584

 

Cash, cash equivalents and restricted cash at end of period

 

$

93,825

 

 

$

50,446

 

 

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

 

6


 

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

Series A, B, C and D

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Spero Therapeutics, Inc.

 

 

Convertible Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2023

 

 

 

 

 

 

 

52,571,813

 

 

 

53

 

 

 

493,787

 

 

 

(439,058

)

 

 

 

 

 

54,782

 

Issuance of common stock upon the exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon the vesting of restricted stock units and performance stock units

 

 

 

 

 

 

 

283,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

144,476

 

 

 

 

 

 

220

 

 

 

 

 

 

 

 

 

220

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

1,908

 

 

 

 

 

 

 

 

 

1,908

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,205

)

 

 

 

 

 

(3,205

)

Balances at September 30, 2023

 

 

 

 

 

 

 

52,999,317

 

 

 

53

 

 

 

495,915

 

 

 

(442,263

)

 

 

 

 

 

53,705

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A, B, C and D

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Spero Therapeutics, Inc.

 

 

Convertible Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at December 31, 2022

 

 

 

 

 

 

 

52,456,195

 

 

 

52

 

 

 

489,760

 

 

 

(413,878

)

 

 

 

 

 

75,934

 

Issuance of common stock upon the exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon the vesting of restricted stock units and performance stock units

 

 

 

 

 

 

 

398,646

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

144,476

 

 

 

 

 

 

220

 

 

 

 

 

 

 

 

 

220

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

5,935

 

 

 

 

 

 

 

 

 

5,935

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,385

)

 

 

 

 

 

(28,385

)

Balances at September 30, 2023

 

 

 

 

 

 

 

52,999,317

 

 

 

53

 

 

 

495,915

 

 

 

(442,263

)

 

 

 

 

 

53,705

 

 

 

 

7


 

 

 

Series A, B, C and D

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Spero Therapeutics, Inc.

 

 

Convertible Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'