Q1 2023 Spero Therapeutics Inc Earnings Call
Participants
Ankit Mahadevia; Co-Founder, President, CEO & Director; Spero Therapeutics, Inc.
Kamal Hamed; Chief Medical Officer; Spero Therapeutics, Inc.
Satyavrat Shukla; CFO & Treasurer; Spero Therapeutics, Inc.
Ted Jenkins; VP & Head of IR; Spero Therapeutics, Inc.
Boobalan Pachaiyappan; Equity Research Associate; H.C. Wainwright & Co, LLC, Research Division
Gavin Clark-Gartner; Analyst; Evercore ISI Institutional Equities, Research Division
Louise Alesandra Chen; Senior Research Analyst & MD; Cantor Fitzgerald & Co., Research Division
Ritu Subhalaksmi Baral; MD & Senior Biotechnology Analyst; TD Cowen, Research Division
Presentation
Operator
Good afternoon, and welcome to the Spero Therapeutics First 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 first 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 of SPR720, SPR206 and tebipenem HBr; 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 March 31, 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 Chief Executive Officer, Dr. Ankit Mahadevia. Please go ahead, Ankit.
Ankit Mahadevia
Thanks, Ted, and thanks to all who are listening. We continue to make strong progress across each of our 3 late-stage clinical programs last quarter and believe we have the key components in place to sustainably create value through the advancement of our pipeline. These components include an experienced and talented management team premier partners across our industry and government, a strong balance sheet and differentiated investigational medicines designed to address clear medical needs and indications with strong commercial prospects.
We outlined our clinical programs in detail only 6 weeks ago on our last earnings call. Given this, we will keep our prepared remarks today brief. After the prepared remarks, we'll move on to a Q&A session with myself are Chief Financial Officer, Sath Shukla; and our Chief Medical Officer, Dr. Kamal Hamed.
Let me start by discussing our lead SPR720 program, which aims to deliver the first novel oral treatment for nontuberculous mycobacterial disease, or NTMPD for short, serving first-line patients. I'm pleased to report that the program continues to advance according to plan.
Our Phase II proof of concept trial is enrolling with more than 15 active sites currently and top line data anticipated in the first half of 2024. A key goal of the trial is to show SPR720 driving an early microbiological response as a stand-alone agent versus placebo with the primary endpoint, evaluating changes in bacterial load and sputum samples from baseline.
We believe pairing a positive result on this primary endpoint with supportive evidence and learning from the trial secondary endpoints will enable us to substantially derisk the program and move confidently to late-stage development. In late-stage development, we plan to evaluate SPR720 as part of a combination regimen.
Given the limitations of the off-label combinations that are currently standard of care in first-line NTMPD, we believe our program has the potential to address a clear unmet need. Alongside the progress of our Phase II trial, we remain on track with the entire SPR720 program as we perform additional development activity needed to support 720's advancement towards pivotal late-stage studies.
As noted on our last earnings call, these activities include ongoing toxicology work, CMC and quality initiatives, engagement with FDA and efforts to expand the 720 development program into Japan where NTMPD has a sharply increased prevalence relative to other territories. In addition, we continue to execute on the steps needed to develop and validate relevant patient-reported outcomes for NTMPD. This is to ensure that our primary efficacy end points within our future clinical studies are conducted in line with the FDA's published guidance on developing drugs for this indication.
Next, I'll speak briefly about tebipenem HBr, which is partnered with GSK and being developed as potentially the first oral carbapenem antibiotic for the treatment of complicated urinary tract infections or cUTI. We remain engaged with the FDA regarding a special -- potential special protocol assessment agreement for a planned Phase III trial. Per a type A meeting with the FDA conducted last year, positive results from this planned trial, together with confirmatory nonclinical evidence of efficacy could be sufficient to support tebipenem HBR's approval.
We would like to thank the FDA for its constructive engagement and expect to provide an update on the status of the special protocol assessment agreement by midyear 2023. At that time, we also intend to outline the details of the planned Phase III trial design and the specific regulatory and development activities that may trigger milestones from our GSK agreement.
To conclude my section of today's call, I'll very briefly touch on SPR206, which is an investigational next-generation polymyxin antibiotic being developed to treat multidrug-resistant gram-negative infections. Efforts to advance SPR206 into a Phase III trial in participants with hospital-acquired or ventilator-associated bacterial pneumonia are proceeding in line with prior guidance with submission of an IND application expected in the fourth quarter of the year.
I'll remind those listening that the planned Phase II trial will be funded entirely by external undilutive sources highlighting the capital-efficient approach being employed to advance our pipeline.
With that, I'll turn over the call to Sath to review our quarterly financial results. Sath?
Satyavrat Shukla
Thank you, Ankit. And good evening to all joining us on the call. It's my pleasure to report that Spero remains well capitalized and in a strong financial position with $96.3 million in cash and cash equivalents as of March 31, 2023. Based on our current operating plan, we believe our cash and cash equivalents together with other nondilutive funding commitments, will be sufficient to fund our operating expenses and capital expenditure requirements beyond 2024.
Turning our attention to our remaining financial results. Total revenues for the first quarter of 2023 were $2.1 million compared with revenues of $2.1 million in the first quarter of 2022. Although total revenues for the year-over-year comparisons are the same, grant revenue was approximately $493,000 lower for 2023, while collaboration revenue was $493,000 higher due to recognition of revenue related to the GSK transaction.
Research and development expenses for the first quarter of 2023 were $9 million compared with $17 million of research and development expenses for the same period in 2022. This year-over-year decrease was primarily due to lower direct costs related to the tebipenem HBr program, decreased clinical activity related to the SPR206 program and decreased R&D headcount associated with the strategic restructuring announced in May 2022.
General and administrative expenses for the first quarter of 2023 of $7.3 million were lower than the $15.3 million reported in the same period in 2022, primarily as a result of decreased personnel-related costs associated with a reduction in headcount in commercial, general and administrative function arising from the May 2022 strategic restructuring and a decrease in professional and consulting fees.
Federal reported a net loss for the first quarter ended March 31, 2023, of $13.3 million or $0.25 per share of common stock compared to a net loss of $32.8 million or $1.01 per share of common stock reported for the same period in 2022. For further details on our financials, please refer to our 10-Q filed with the SEC today.
We will now open the call for the Q&A. Operator?
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from Louise Chen of Cantor.
Louise Alesandra Chen
Congratulations on all the progress this quarter. So I wanted to ask you about SPR720, what you think the competitive advantages are of your products? And what gives you confidence in a positive readout? And then second question I wanted to ask you if you could provide this again on some upcoming potentially positive inflection points where you could receive payments from GSK, that would be helpful.
Ankit Mahadevia
Great. Louise, I can start with the SPR720 landscape, and then Sath can cover the inflection points that come from our GSK collaboration. So in terms of why we're excited about SPR720, remember that when we think about patients with NTM, there's 2 types.
First is the 75% of patients that we aim to serve first with 720 that are early in their disease journey. These patients typically fail the therapies that they're on 75% of the time. And in fact, when they're diagnosed, half of them choose not to go on therapy at all. So 720 provides an opportunity.
One, it's oral where current approved therapies for NTM patients or not. Second is that our Phase I data as well as our tox data to date suggests it's a well-tolerated drug, and that has the potential to be a preferred option for these patients. And then finally, in our in vivo and in vitro models show we've demonstrated that 720 has the potency to address a large range of NTM pathogens, which is what these patients need.
And I'll pass it to Sath to answer your question about GSK inflection points.
Satyavrat Shukla
Yes, Louise. So as we get into the SPA process and then expect to report that out in the middle of the year, along with details on the trial design, we'll be able to give you much greater clarity on the milestones from GSK. But I would just lay the groundwork by reiterating that we expect the $150 million in development milestones to come through as you put in our external communication through the duration of the Phase III and the estimation process.
So if you were to assume that we expect to get milestones to jump start the trial, and those will be more than sufficient to initiate the trial on its rollout and then milestones coming in between to continue progression of that trial over the period of that trial, you would be accurate.
But for these specific breakdowns at this moment in time, I would guide you to, again, that $150 million top line figure, but with the expectation that it will be spread through the trial period, they'll pay for the trial, and we'll be able to give you more details on it in the upcoming months.
Operator
Our next question comes from Ritu Baral of TD Cowen.
Ritu Subhalaksmi Baral
I'd love to ask about the secondary endpoint on your 720 ongoing Phase II trial. Can you review for us what you think the most important secondary engines are? And specifically, how they might feed into what you're thinking about for the pivotal endpoint, especially given the additional, I wouldn't call it, clarity, but the additional information on Arikayce may be approaching its frontline PRO primary end point.
Ankit Mahadevia
Ritu, I'll pass that one to Kamal to address.
Kamal Hamed
Yes. So just as a reminder, I mean, this is a Phase IIa proof-of-concept study. The primary objective of the study is to demonstrate the activity of SPR720. So secondary objectives include safety, tolerability PK. And again, first things first, this is studied to demonstrate the activity of SPR720.
And while we, in parallel, continue to develop our PRO for -- to be used in the Phase IIb/III program. We are exploring some domains of well-established PRO instruments in the proof-of-concept study, the ongoing Phase IIa study. So we are exploring these as secondary or expertly objectives and certainties would help inform the PRO development besides the specific PRO development work, which has started with a PRO content validation study.
Ankit Mahadevia
And one thing I'd add there was some recent data that came out from Kevin Winthrop's group as well as Chuck Daley's group that spoke to the fidelity of some of these measures, such as the Qual B in terms of measuring patient benefit. They were running a trial looking at generic standard of care agents.
And that was nice data for us to validate that some of the measures we're looking at can be relevant in that 3-month or a later time frame. And so it sort of puts into frame some additional validation that the measures we're looking at are going to be relevant as we build them into a PRO.
Kamal Hamed
No, absolutely. No. I mean, this will be part of the validation study, as Ankit mentioned. And again, as Ankit said, at these -- there were differences at the 3-month time point, and these differences between treatment and no treatment were well sustained at month 6. So some of these domains, again, are being considered in our PRO development and are being explored in the Phase IIa study. But again, it's a smaller study with the main objective being to demonstrate the activity of SPR720.
Ritu Subhalaksmi Baral
Got it. And if you think forward, Ankit, you mentioned Spero B is a respiratory domain PRO scale. Are you guys also thinking about adding a fatigue scale like the promise as well? Do you think that's sort of a as a complementary element to what FDA wants to see.
Kamal Hamed
That's correct, Ritu. I mean if when patients were patients and clinicians alike when they were surveyed in terms of what's important in terms of feel and function since symptoms. So 3 things stand out. cough, shortness of breath and the third one is fatigue.
And to your point, absolutely fatigue will be an important domain that will be assessed in the studies. As a matter of fact, promise scale will be used. And we're also exploring assessment of fatigue even in the ongoing Phase IIa study.
Operator
Our next question comes from Gavin Clark-Gartner of Evercore ISI.
Gavin Clark-Gartner
Could you just help us think through the frontline Arikayce data coming next quarter? Specifically, I'm wondering how you see the read through the 720 development plan and whether that may influence your decision to pursue a frontline or refractory subsequent trial?
Ankit Mahadevia
Kevin, we'll start with perhaps the last component first, which is that we see frontline treatment as the highest unmet need in NTM, and that's for 2 reasons. One is just from a numbers perspective, there are more frontline NTM patients that have no approved therapies than there are refractory.
Second, as well, if you look at how patients behave there, half of them choose not to be treated, not because they're not symptomatic but because the agents that exist do not work for them.
And finally, as we think about the pathophysiology of the disease, if we're trying to measure feel and function type of endpoints, it's physiologically more relevant for patients who can recover that lung function relative to those who have chronic inflammatory lung damage. So we think the first-line treatment is an important place for 720 to go, although it does have the microbiological potential for refractory.
Now turning to the Insmed data that's coming the best that we understand they'll be looking at variance of the Qual B and the promise. And it was nice to see Griffith at all data around the Qual B. We'll be looking to see how the full complement potentially stands up. I will say 2 things. One is that Arikayce is a different drug.
And number two, there's no guarantees on how fulsome the disclosures from our colleagues will be. And so we'll take what we can get, and we'll certainly incorporate that into our learnings as we do our own PRO development work within the context of the Phase IIa, but also in the context of other clinical work that we aim to do ahead of starting pivotal studies.
Operator
(Operator Instructions) Our next question comes from Boobalan Pachaiyappan of H.C. Wainright.
Boobalan Pachaiyappan
This is Boobalan dialing in for Ram or Raju. So firstly, with respect to 720, can you provide any additional color with respect to enrollment progress and when you would expect this to be completed?
Ankit Mahadevia
Yes. To answer the first question, we reiterate our guidance that we're on track for trial data first half and you can refer to our prior comments in terms of the progress of site openings, but we won't go deeper than that.
Boobalan Pachaiyappan
All right, clear. And then with respect to tebipenem as the agreement, are there any details of the pivotal Phase III protocol that you can disclose at this time? Maybe on a high level, some of the maybe notable differences within this protocol and the one that you used in ADAPT-PO trial.
Ankit Mahadevia
Yes, big picture, Boobalan. We -- as we've stated before, the sequence will be that we'll be working to receive the SPA agreement, then we'll disclose details of the trial as well with that, as Sat mentioned, we'll disclose the details of the milestones that are due to us at GSK.
Boobalan Pachaiyappan
Okay. And then maybe one final question. As Pfizer indicated any interest in expanding geographic rights to 206, maybe in the context of your existing partnership? Maybe if so, under what terms?
Ankit Mahadevia
Well, and I'd say that we've enjoyed our collaboration with Pfizer and benefited from their expertise and perspective. We look forward to continuing that partnership and certainly if and as and when we think about the U.S. rights for 206, we'll explore that more.
Operator
This concludes the question-and-answer session. I would like to turn the conference back over to Dr. Ankit Mahadevia for closing remarks.
Ankit Mahadevia
Thanks, operator. We appreciate the opportunity to provide an update on our recent progress, and we look forward to the continued advancement of all of our programs. Thanks to all listening for your participation today. Have a great evening.
Operator
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
