Spero Therapeutics, Inc. (NASDAQ:SPRO) Q2 2023 Earnings Call Transcript August 10, 2023
Spero Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.23, expectations were $-0.29.
Operator: Good afternoon and welcome to the Spero Therapeutics Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded and a replay will be available. You can find information on the replay and further information related to today’s announcements on the Spero Therapeutics website at www.sperotherapeutics.com. At this time, I would like to turn the call over to Ted Jenkins, Vice President, Investor Relations and Strategic Finance at Spero Therapeutics. Mr. Jenkins, please go ahead.
Ted Jenkins: Thank you, operator and thank you all for participating in today’s conference call. This afternoon, Spero Therapeutics released financial results and provided a pipeline update for the second quarter of 2023. Our press release is available on the Investor page of the Spero Therapeutics website. Before we begin, I’d like to remind you that some of the information presented on this conference call contains forward-looking statements based on our current expectations, including statements about the future development and commercialization at Tebipenem HBr, SPR720, SPR206 and the design, initiation, timing, progress and results of the company’s preclinical studies and clinical trials and its research and development programs.
Management’s assessment of the results of such preclinical studies and clinical trials, the company’s cash forecast and anticipated expenses and the sufficiency of its cash resources. Such forward-looking statements are not a guarantee of performance and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Spero Therapeutics’ filings with the SEC, including in the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC today. These forward-looking statements speak only as of the date of this conference call and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the company after the date of today’s call.
With that, I’d like to turn the call over to Spero’s Chief Executive Officer, Sath Shukla. Please go ahead, Sath.
Sath Shukla: Thanks, Ted and I thank you all for joining us this afternoon. This is my first earnings call since becoming the company’s President and CEO on August 1. I want to say how excited and honored I am to take on this role at a very exciting time for Spero. Each of our three late-stage clinical programs is making excellent progress. I am pleased to be working with such an experienced and talented management team to share a vision to advance our pipeline of differentiated investigational medicines that are designed to address important unmet needs in infectious disease. I believe that together, we have a great opportunity to create value for patients and stakeholders in the company. Joining me on the call today are Dr. Kamal Hamed, our Chief Medical Officer; and Steve Dipalma, our Interim CFO and Treasurer.
Let me begin with Tebipenem HBr, which is partnered with GSK and which we are developing as potentially the first oral carbapenem antibiotic for treatment of complicated urinary tract infections or cUTI. As we have discussed previously, we have been engaged with the FDA to agree on a path forward for this investigational drug. And we were very pleased to announce on July 31 that we received written agreement from the agency under a special protocol assessment, or SPA on the design and size of our planned Phase 3 trial. We see the SPA agreement as a major milestone in the Tebipenem HBr program. As the SPA typically represents a very high level of concussion on the overall protocol design between the FDA and a sponsor, we believe the regulatory aspects with respect to the design of the program have been derisked substantially.
We expect to begin enrollment in PIVOT-PO in the fourth quarter of this year and Kamal just provides further details in a few minutes. Under the terms of our exclusive license agreement with GSK, we are now entitled to receive the first $30 million of up to $150 million of development milestones. This first payment has been invoiced and is expected to be received in the current quarter. In addition to this payment, we are also eligible to receive the following additional milestone royalty payments under the GSK agreement. These comprise of up to $120 million in development milestones as the Phase 3 trial progresses, up to $150 million in potential commercial milestones based on first commercial sales, up to $225 million in potential sales milestones, and low single-digit to low double-digit tier royalties if sales exceed $1 billion, on net product sales of Tebipenem HBr at all territories, except Japan and certain other Asian countries.
Laboratory, Medicine, Health
Photo by National Cancer Institute on Unsplash
In addition to progress on Tebipenem HBr, we continue to move our other assets forward. The Phase 2a proof-of-concept clinical trial for SPR720 continues enrollment with sites open and patients enrolling and being dosed. SPR206, our investigational next-generation polymyxin continues to be on track for a Phase 2 IND in the fourth quarter of this year, funded by grant and other non-dilutive funding. On an organizational note, I want to spend a minute talking about the management changes we announced in June and that came into effect on August 1. On that date, following a 3-year tenure as Spero’s CFO, I took on the role of the company’s President and CEO. My predecessor, Dr. Ankit Mahadevia, who is a Co-Founder of Spero, transitioned to become Chairman of the Board of Directors.
The prior Chairman, Dr. Milind Deshpande is remaining on the Board as an independent director, and another board member, Dr. Patrick Vink was appointed Lead Director. The net result here is that while some members of the executive team and the Board have changed roles, the company has retained all of its officers or directors in these transitions. On behalf of my fellow directors and the management team, I want to thank Ankit for his contributions and leadership in getting Spero to this advanced stage and we all look forward to continuing to work with him in his new role. Separately, we have launched a search for a permanent CFO. Until this process is completed, the Board has appointed Steve Dipalma as Interim CFO and Treasurer, who worked with Spero in the same capacity before I joined the company and who also is an experienced public company CFO.
I would now like to hand the call over to Dr. Kamal Hamed, who will provide more details on the clinical programs.
Kamal Hamed: Thank you, Sath. I am also very pleased that we now have an SPA agreement for the Tebipenem pivotal Phase 3 trial, PIVOT-PO and would like to thank our colleagues at GSK as well as the FDA for their engagement and support. PIVOT-PO is designed as a global randomized double-blind trial that will compare oral tebipenem with intravenous imipenem in hospitalized adult patients with cUTI, including acute pyelonephritis. The primary efficacy endpoint will be overall response based on a composite of clinical cure plus microbiological eradication at the test of cure visit. The primary analysis will be an assessment of non-inferiority in the microbiological intention to treat population based on a 10% margin, which is consistent with FDA guidance for non-inferiority studies in this patient population.
The FDA has indicated that positive and persuasive results from PIVOT-PO along with previously completed studies could be sufficient to support approval of tebipenem as a treatment for cUTI, including pyelonephritis for a limited use indication. As Sath mentioned, we plan to initiate enrollment in the fourth quarter of this year and will provide more details, including target patient numbers, secondary endpoints and other relevant information around that point or as the study gets posted to clinicaltrials.gov. Turning now to our SPR720 program which aims to deliver the first novel first-line oral treatment for non-tuberculous mycobacterial pulmonary disease or NTMPD. SPR720 is currently being evaluated in a Phase 2a proof-of-concept trial. The primary endpoint is slow change in sputum bacterial burden from baseline.
We believe pairing a positive result on this endpoint with supportive evidence from the trial secondary endpoints will enable us to derisk the program and move confidently into late-stage development in which we intend to evaluate SPR720 as part of a combination regimen. The current standard of care for NTMPD is prolonged combination therapy, including drugs traditionally used for tuberculosis and that have limited effectiveness and full tolerability. Given the limitations of these regimens, we believe our program has the potential to address a clear unmet need. We are currently engaged in a number of additional development activities needed to support SPR720’s advancement towards late-stage clinical studies. As noted on our last earnings call, these activities include ongoing toxicology work, CMC initiatives, engagement with the FDA and efforts to expand the SPR720 development program into Japan where NTMPD has sharply increased prevalence compared to other territories.
We have also initiated two Phase 1 clinical studies. The first set intrapulmonary for microkinetic was SPR719, the active loyalty of the prodrug SPR720 and a bronchoalveolar Lavage or BAL study and the second, to evaluate the effect on the pharmacokinetics of SPR720, azithromycin and ethambutol when co-administered in healthy volunteers. In addition, we continue to execute on the steps needed to develop and validate a relevant patient reported outcome instrument for NTM-PD. This is to ensure that the primary efficacy end point within our future clinical studies is in line with the FDA’s published guidance on developing drugs for this indication. The trial is expected to enroll up to 35 participants what are the treatment naive or treatment experience but do not have treatment of refractory disease.
We now have approximately 25 active sites that are currently screening or enrolling patients. We are actively engaging with all study sites to ensure that they have the necessary resources. We have also partnered with a third-party CRO specialized in rare diseases to support study sites and with the lead NTM patient advocacy group, NTMir, and we have launched a new Facebook page for patients and physician videos on our main website as a means of providing further education to our NTM patient constituents. With all of that, we are generally satisfied with the level of interest and enrollment However, based on the multitude of complexities, based on newly diagnosed patients with NTM-PD, we believe it is appropriate that we recently updated our guidance with respect to the timing of top line results from this Phase 2a trial, which we now expect to announce in the second half of 2024.
Finally, a brief update on our SPR206 program. SPR206 is an investigational next-generation for mix in antibiotic with the potential for an improved safety profile impaired to count the available polymyxins. Being developed to treat multidrug-resistant gram-negative infections. We are currently working to advance SPR206 into a Phase 2 trial in patients with hospital-acquired or ventilator-associated bacterial pneumonia. We remain on track to submit an IND application in the fourth quarter of this year. With that, I’ll turn the call over to Steve to review our quarterly financial results. Steve?
Steve Dipalma: Thank you, Kamal, and good evening to all of you joining us on the call. Spero is well capitalized and in a strong financial position with $77.7 million in cash and cash equivalents as of June 30, 2023. Based on our cash and cash equivalents as of June 30, 2023, and inclusive of the $30 million development milestone payment to be received from GSK pursuant to our exclusive license agreement, we believe that our cash runway will be sufficient to fund us into the second half of 2025. We reported total second quarter revenues of $2.7 million in the second quarter of 2023 compared with revenues of $2 million in the second quarter of 2022. Revenue was approximately $700,000 higher year-over-year due to revenue recognition associated with the GSK transaction.
Research and development expenses for the second quarter of 2023 were $9.5 million compared with $8.2 million of research and development expenses for the same period in 2022. This $1.3 million year-over-year increase was primarily due to higher direct costs related to the SPR720 program, as well as higher direct costs related to the Tebipenem HBr and SPR206 6 programs. These increases were offset by lower R&D head count expenses associated with the strategic restructuring announced in May 2022. General and administrative expenses for the second quarter of 2023 of $6.1 million were lower than the $8.1 million reported in the same period in 2022 primarily as a result of decreased professional and consulting fees due to decreased commercial operation expenses and a decrease in facility related and other costs.
We reported a net loss for the second quarter of 2023 of $11.9 million or $0.23 per basic and diluted share of common stock compared to a net loss of $28.7 million or $0.87 per basic and diluted share of common stock reported for the same period in 2022. For further details on Spero’s financials, including results for the 6-month period ended June 30, 2023, I would refer you to Spero’s quarterly report on Form 10-Q filed with the SEC today. We will now open the call for questions. Operator?
