Spero Therapeutics Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and the notes thereto included appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and the notes thereto included appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Previous wording

pulmonary disease, a rare orphan disease. We believe that SPR720, if successfully developed and approved, has the potential to be the first approved oral agent for NTM pulmonary disease in treatment-naïve and treatment-experienced and non-refractory patients. Our partnered programs consist of tebipenem HBr and SPR206. Tebipenem HBr is designed to be the first oral carbapenem-class antibiotic for use to treat complicated urinary tract infections (“cUTIs”), including pyelonephritis, caused by certain microorganisms, in adult patients who have limited oral treatment options. SPR206 is an IV-administered antibiotic that has shown activity in preclinical studies against MDR Gram-negative pathogens, including carbapenem-resistant Enterobacterales, Acinobacter baumannii and Pseudomonas aeruginosa. We are developing SPR206 to treat MDR Gram-negative bacterial infections in the hospital setting.

Current wording

We are a multi-asset, clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases caused by multi-drug resistant (“MDR”) bacterial infections with high unmet need. Our wholly-owned lead product candidate, SPR720, is an oral agent in development for the first-line treatment of nontuberculous mycobacterial (“NTM”) pulmonary disease, a rare disease. We believe that SPR720, if successfully developed and approved, has the potential to be the first approved oral agent for NTM pulmonary disease in treatment-naïve and treatment-experienced and non-refractory patients. Our partnered programs consist of tebipenem HBr and SPR206. Tebipenem HBr is in development to potentially be the first oral carbapenem to treat complicated urinary tract infections (“cUTIs”), including pyelonephritis, caused by certain microorganisms, in adult patients. SPR206 is an IV-administered antibiotic being developed as an innovative option to treat MDR Gram-negative bacterial infections in the hospital setting.

Previous wording

We believe that our novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare orphan diseases and life-threatening bacterial infections, in both the community and hospital settings. Since our inception in 2013, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.

Current wording

We believe that our novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare diseases and life-threatening bacterial infections, in both the community and hospital settings. Since our inception in 2013, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.

Previous wording

We have experienced net losses and significant cash outflows from cash used in operating activities since our inception through 2022. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of March 31, 2024, we had an accumulated deficit of $403.7 million, and cash and cash equivalents of $82.3 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.

Current wording

We have experienced net losses and significant cash outflows from cash used in operating activities since our inception through 2022. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of June 30, 2024, we had an accumulated deficit of $421.6 million, and cash and cash equivalents of $63.5 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We believe that our existing cash and cash equivalents, together with expected collections from our collaboration receivables – related party, will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.

Previous wording

Based on our cash and cash equivalents as of March 31, 2024, we believe that our cash runway will be sufficient to fund us into late 2025. During this period, we plan to prioritize advancing SPR720 to key Phase 2 milestones, advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and advancing SPR206 Phase 2 activities contingent on obtaining non-dilutive financing. Beyond this point we will need additional funding, which we expect will primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations or additional grant funding. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs.

Current wording

Based on our cash and cash equivalents as of June 30, 2024, we believe that our cash runway will be sufficient to fund our operating expenses and capital expenditure requirements into late 2025. During this period, we plan to prioritize advancing SPR720 to key Phase 2 milestones, advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and advancing SPR206 Phase 2 activities contingent on obtaining non-dilutive financing. Beyond this point we will need additional funding, which we expect will primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations or additional grant funding. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials.

Previous wording

Direct costs related to our SPR206 program decreased by $0.5 million during the three months ended March 31, 2024, primarily due to decreased preclinical activity and decreased expenses associated with formulation development, manufacturing process and manufacturing of clinical trial material during the period. In March 2024, SPR206 was awarded Fast Track designation by the FDA for treatment of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia due to carbapenem-resistant Acinetobacter baumannii-calcoaceticus complex and carbapenem-resistant Pseudomonas aeruginosa.

Current wording

In March 2024, SPR206 was awarded Fast Track designation by the FDA for treatment of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia due to carbapenem-resistant Acinetobacter baumannii-calcoaceticus complex and carbapenem-resistant Pseudomonas aeruginosa.

Previous wording

We expect a portion of our revenue for the next few years will continue to be derived from payments under our active government awards and any awards that we may enter into in the future.

Current wording

We expect a portion of our revenue for the next few years will continue to be derived from payments under our active government awards and any awards that we may receive in the future.

Previous wording

Interest income (expense) during the three months ended March 31, 2024 and 2023 consists of interest expense related to the significant financing component related to the GSK License Agreement and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities.

Current wording

Interest income (expense) during the three and six months ended June 30, 2024 and 2023 consists of interest expense related to the significant financing component related to the GSK License Agreement and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities.

Previous wording

Grant revenue recognized during the three months ended March 31, 2024 and 2023 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards. The increase in grant revenue during the three months ended March 31, 2024 was primarily due to an increase of $4.4 million in qualified expenses incurred under our Biomedical Advanced Research and Development Authority (“BARDA”) contract for tebipenem HBr, partially offset by a decrease of $0.7 million under our U.S. National Institute of Allergy and Infectious Diseases (“NIAID”) agreement relating to SPR206.

Current wording

Grant revenue recognized during the three months ended June 30, 2024 and 2023 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards. The increase in grant revenue during the three months ended June 30, 2024 was primarily due to an increase of $3.1 million in qualified expenses incurred under our Biomedical Advanced Research and Development Authority (“BARDA”) contract for tebipenem HBr, partially offset by a decrease of $0.8 million under our U.S. National Institute of Allergy and Infectious Diseases (“NIAID”) agreement relating to SPR206.

Previous wording

During the three months ended March 31, 2024, we recognized $4.1 million in collaboration revenue related to our agreement with GSK and $0.1 million in collaboration revenue related to our agreement with Pfizer. During the three months ended March 31, 2023, we recognized $0.5 in collaboration revenue related to our agreement with GSK and $0.2 million in collaboration revenue related to our agreement with Pfizer.

Current wording

During the three months ended June 30, 2024, we recognized $5.9 million in collaboration revenue related to our agreement with GSK and $0.1 million in collaboration revenue related to our agreement with Pfizer. During the three months ended June 30, 2023, we recognized $0.5 million in collaboration revenue related to our agreement with GSK and $0.3 million in collaboration revenue related to our agreement with Pfizer.

Previous wording

Direct costs related to our SPR720 program increased by $2.6 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due to increased clinical activity during the period related to our ongoing Phase 2a clinical trial of SPR720. We expect to continue to incur direct costs related to SPR720 as we continue to screen and enroll patients and progress clinical activities.

Current wording

Direct costs related to our SPR720 program increased by $3.5 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due to increased clinical activity during the period related to our Phase 2a clinical trial of SPR720, which completed enrollment in the second quarter of 2024. We expect to continue to incur direct costs related to SPR720 as we progress clinical activities.

Previous wording

Direct costs related to our tebipenem HBr program increased by $6.1 million during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to continued clinical activities related to our pivotal Phase 3 trial of tebipenem HBr, which we initiated in the fourth quarter of 2023.

Current wording

Direct costs related to our tebipenem HBr program increased by $12.0 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, due to continued clinical activities related to our pivotal Phase 3 clinical trial of tebipenem HBr, which we initiated in the fourth quarter of 2023. Direct costs related to our tebipenem HBr program during the three months ended June 30, 2024 reflect a $1.6 million reduction to expense related to a repurchase of drug substance material by GSK.

Previous wording

The decrease in personnel-related costs of $0.2 million was primarily a result of decreased research and development headcount costs. Personnel-related costs for the three months ended March 31, 2024 and 2023 included share-based compensation expense of $0.7 million and $0.8 million, respectively.

Current wording

The decrease in personnel-related costs of $0.3 million was primarily a result of decreased research and development headcount costs. Personnel-related costs during the three months ended June 30, 2023 included retention bonus payments in connection with our restructuring in May 2022. Personnel-related costs for the three months ended June 30, 2024 and 2023 included share-based compensation expense of $0.7 million and $0.6 million, respectively.

Previous wording

The decrease in personnel-related costs of $1.2 million was primarily a result of decreased headcount costs in our general and administrative functions during the period. Personnel-related costs during the three months ended March 31, 2023 included retention bonus payments related to our restructuring in May 2022. Personnel-related costs for the three months ended March 31, 2024 and 2023 included share-based compensation expense of $1.3 million and $1.4 million, respectively.

Current wording

The decrease in personnel-related costs of $0.8 million was primarily a result of decreased headcount costs in our general and administrative functions during the period. Personnel-related costs during the three months ended June 30, 2023 included retention bonus payments in connection with our restructuring in May 2022. Personnel-related costs for the three months ended June 30, 2024 and 2023 included share-based compensation expense of $1.4 million and $1.3 million, respectively.

Previous wording

The decrease in professional and consultant fees of $0.1 million was primarily due to varying legal and consulting expenses incurred in the three months ended March 31, 2024.

Current wording

The increase in professional and consultant fees of $0.1 million was primarily due to varying legal and consulting expenses incurred in the three months ended June 30, 2024.

Previous wording

Other income (expense), net was $1.3 million for the three months ended March 31, 2024, compared to $1.0 million for the three months ended March 31, 2023. Total other income for the three months ended March 31, 2024 included $1.3 million of interest income, of which $0.4 million related to the significant financing component recognized under the GSK License Agreement, offset by immaterial fluctuations in unrealized foreign currency. Total other income for the three months ended March 31, 2023 included $1.0 million of interest income, offset by immaterial changes primarily due to fluctuations in unrealized foreign currency.

Current wording

Other income (expense), net was $1.2 million for the three months ended June 30, 2024, compared to $1.0 million for the three months ended June 30, 2023. Total other income for the three months ended June 30, 2024 included $1.2 million of interest income, of which $0.4 million related to the significant financing component recognized under the GSK License Agreement, offset by immaterial fluctuations in unrealized foreign currency. Total other income for the three months ended June 30, 2023 included $1.0 million of interest income, offset by changes primarily due to fluctuations in unrealized foreign currency.

Previous wording

Since our inception, we have incurred significant operating losses. We have recognized revenue to date from funding arrangements with the United States Department of Defense (“DoD”), NIAID, CARB-X and BARDA, the GSK License Agreement and our license agreements with Everest and Pfizer. We have not yet commercialized any of our product candidates and we may not generate revenue from sales of any product candidates. To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings. As of March 31, 2024, we had cash and cash equivalents of $82.3 million.

Current wording

Since our inception, we have incurred significant operating losses. We have recognized revenue to date from funding arrangements with the United States Department of Defense (“DoD”), NIAID, CARB-X and BARDA, the GSK License Agreement and our license agreements with Everest and Pfizer. We have not yet commercialized any of our product candidates and we may not generate revenue from sales of any product candidates. To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings. As of June 30, 2024, we had cash and cash equivalents of $63.5 million.

Previous wording

During the three months ended March 31, 2024 and year-to-date, we did not sell any shares of our common stock under the Sales Agreement.

Current wording

During the three and six months ended June 30, 2024 and year-to-date, we did not sell any shares of our common stock under the Sales Agreement.

Previous wording

The following table summarizes our sources and uses of cash for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash provided by changes in operating activities for the three months ended March 31, 2024 was $5.9 million, primarily resulting from our net loss of $12.7 million, adjusted for a net decrease in non-cash items of $2.3 million (primarily stock-based compensation). Net cash provided by changes in our operating assets and liabilities was $16.3 million and consisted primarily of a $23.3 million decrease in our related party collaboration receivable, due to the receipt of the first installment payment from GSK (see Note 9 - License, Collaboration and Service Agreements), a $4.2 million increase in deferred revenue, a $3.5 million net increase in receivables, a $1.7 million increase in accounts payable and a decrease of $1.2 million in accrued expenses.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $(12.8) million, primarily resulting from our net loss of $30.5 million, adjusted for a net decrease in non-cash items of $4.7 million (primarily stock-based compensation). Net cash provided by changes in our operating assets and liabilities was $13.1 million and consisted primarily of a $21.4 million decrease in our related party collaboration receivable, primarily due to the receipt of the first installment payment from GSK (see Note 9 - License, Collaboration and Service Agreements), a $10.2 million decrease in deferred revenue, a $3.2 million net increase in receivables, a $3.5 million increase in accrued expenses, a $1.3 million increase in accounts payable and a $1.0 million decrease in prepaid expenses.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $12.9 million, primarily resulting from our net loss of $13.3 million, adjusted for a net decrease in non-cash items of $2.5 million (primarily stock-based compensation). Net cash used due to changes in our operating assets and liabilities was $2.1 million and consisted primarily of a $0.8 million net increase in receivables, a $0.2 million increase in prepaid expenses and other current assets, a decrease of $0.1 million in accrued expenses and a $0.7 million decrease in deferred revenue.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was $31.4 million, primarily resulting from our net loss of $25.2 million, adjusted for net decrease in non-cash items of $4.7 million (primarily stock-based compensation). Net cash used due to changes in our operating assets and liabilities was $11.0 million and consisted primarily of a $5.2 million increase in prepaid expenses and other current assets, a $1.0 million net increase in receivables, a decrease of $3.4 million in accrued expenses and a $1.5 million decrease in deferred revenue.

Previous wording

We did not undertake any investing activities during both the three months ended March 31, 2024 and 2023.

Current wording

We did not undertake any investing activities during the six months ended June 30, 2024 or 2023.

Previous wording

We did not undertake any financing activities during both the three months ended March 31, 2024 and 2023.

Current wording

We did not undertake any financing activities during the six months ended June 30, 2024 or 2023.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $82.3 million. In accordance with ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our cash and cash equivalents as of March 31, 2024, we believe that our cash runway will be sufficient to fund us into late 2025.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $63.5 million. In accordance with ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements. We believe that our existing cash and cash equivalents, together with expected collections from our collaboration receivables – related party, will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our cash and cash equivalents as of June 30, 2024, we believe that our cash runway will be sufficient to fund us into late 2025.

Previous wording

During the three months ended March 31, 2024, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

During the three and six months ended June 30, 2024, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and