SPRO - NASDAQ

Good afternoon, and welcome to the Spero Therapeutics First Quarter of 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the company’s formal remarks, we will open up the call for questions. 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 announcement on the Spero Therapeutics website at www.sperotherapeutics.com. At this time, I would like to turn the conference over to Mr. Ted Jenkins, Vice President Investor Relations at Spero Therapeutics. Mr. Jenkins, please go ahead.

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 2022. Our press release is available on the Investor page of Spero Therapeutics website. Before we begin, I'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements based on our current expectations; including statements about the potential review status and prospects of approval for tebipenem HBr; potential value of tebipenem HBr if approved and the prospects of partnership and/or other opportunities for the tebipenem HBr program; the plans for the company's ongoing development of SPR720 and SPR206; the design, initiation, timing, progress and results of the company's preclinical studies; and the 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 Annual Report on Form 10-K filed on March 31, 2022. 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 release and call. Participating in today's call are Dr. Ankit Mahadevia, Chief Executive Officer; Dr. David Melnick, Chief Medical Officer; and Sath Shukla, our Chief Financial Officer. And with that I'd like to turn the call over to Dr. Ankit Mahadevia. Please go ahead, Ankit.

Thank you, Ted and thanks to all who have joined us for our earnings call today. As many of you know we recently hosted an update call to discuss our new strategic direction and decision to restructure the company. As difficult as that was we are pleased to be sharing our path forward with you today. To recap our recent news feedback from an FDA late-cycle meeting which took place at the end of April suggested the data from tebipenem HBr new drug application may be insufficient to support approval during this review cycle. This led us to make the extremely difficult decision of having to suspend commercialization activities for tebipenem HBr and reduce our workforce by approximately 75%. While we wait for agency guidance on the path forward for tebipenem HBr, we have shifted our focus and resources to development activities for each program in our pipeline. For those interested in hearing about the specifics behind the FDA's view of the tebipenem HBr NDA, I suggest you listen to the replay of our May 3 conference call, which is available on our website. The primary purpose of today's call is to discuss how Spero is positioned for the future in our efforts to bring nation medicines to patients with unmet need. We have three key objectives to create value which drive our optimism. First, is to achieve key clinical and regulatory milestones in our pipeline within our capital runway. Second, is to clarify and execute on the path forward for tebipenem, including through potential collaborations. And finally is to execute on those milestones employing good stewardship capital and the creative partnerships to build a company which have been a hallmark of our history. Our first objective is to execute on our late-stage pipeline which includes two Phase 2 ready assets beyond tebipenem namely SPR720 and SPR206. This ensures the company's outlook is not tied to any single event and positions us to achieve important clinical and regulatory milestones with a regular cadence. In this endeavor, we are supported by established partnerships with premier organizations, including Pfizer, Everest Medicine, Department of Defense and the National Institute of Allergies and Infectious Disease. These relationships have enabled us to work with some of the world's most established thought leaders in the antibiotic space as well as providing avenues for additional funding. For example, our relationships are allowing us to entirely fund the SPR206 program through Phase 2 from external non-dilutive sources. This in turn has helped us provide us with a cash runway that is expected to take us through multiple potential inflection points, including interim data from SPR720 Phase 2 program in 2023. David will speak more about these deliverables during his portion of the call. Our second objective is to build a path forward for tebipenem. It's important to note that our view of tebipenem HBr's value proposition has not changed. Tebipenem HBr has patent life extending into at least 2038. It's been granted qualified infectious disease product, or QIDP status that confers 10 years of market exclusivity and has a robust clinical data set of support. This data set extends far beyond even the clinical studies carried out by Spero as a granular formulation of tebipenem has been approved and marketed in Japan by our partner Meiji Seika for over 10 years. In total over a dozen studies evaluating tebipenem's efficacy has been conducted, plus a dozen more specifically designed to evaluate tebipenem's pharmacokinetic profile. Many of these studies are summarized in a peer reviewed paper published in drug profile and another our ADAPT-PO study has recently published in the New England Journal of Medicine. Additionally, extensive post-marketing surveillance of tebipenem with nearly four million patients has been conducted in Japan. Thanks to all these data collection efforts we have an extraordinarily thorough understanding of tebipenem's safety and pharmacologic profile. This gives us confidence in tebi's ability to potentially address the pressing unmet needs posed by the increasing prevalence of fluoroquinolone-resistant and ESBL-producing gram-negative bacteria. Other considerations would be potential positive impact of providing these patients with an effective oral treatment, which could deliver substantial value to payers, physicians and patients. We thus remain confident that tebipenem will provide us with an important complementary source of value, as we explore strategic partnerships and other ways to enable its advancement in a capital efficient manner. Though we are no longer preparing for tebipenem's immediate commercialization, we do firmly believe there's a path forward for tebipenem to a potential FDA approval. In 2022, we are focused on gaining clarity on the requirements for tebipenem's ultimate approval to our interactions on this current review cycle and through interactions with the agency after the review cycle. Further, we are focused as we map that path out on working with our existing partners and potential new partners on the path to create value for sterile through tebipenem. Finally, we aim to be good stewards of capital as we deliver on these important value creation points. A major driver of making the difficult decision to halt commercialization without delay was to preserve capital necessary to deliver value for shareholders. We aim to do this as we always have through prudent management of our operations and through the types of creative partnerships and collaborations that have been a part of our history. With that, I'll now hand the call over to David to talk about our development plans for SPR720 and SPR206.

Thank you, Ankit. Let me start with an overview of SPR720, our novel oral antibiotic candidate that is being developed as therapy for nontuberculous mycobacterial-pulmonary disease, or NTM-PD. Estimates indicate that there are approximately 130,000 NTM patients across the U.S. and Europe. The bacteria causing NTM-PD are commonly found in soil and water. So the majority of individuals will not become infected when exposed to these bacteria those who have underlying lung disease, a weakened immune system, or are of advanced age, or more susceptible. This disease has orphan status, which supports SPR720's orphan drug designation from the FDA. For those who do become infected, care will typically begin with Bronchial hygiene an exercise program and educational routines. Unfortunately, in the absence of effective antibiotic treatment, many of these patients will develop progressive lung disease due to chronic influenza infection and inflammation. Early intervention before serious lung injury has occurred may prevent or delay disabling symptoms caused by the infection. Unfortunately, the risk benefit profiles of the existing treatment regimens for these patients support. These regimens typically involve off-label combinations of three or more antibiotics that are often associated with tolerability and toxicity issues that limit the ability of patients to remain on treatment. These issues are heightened when you realize that current therapy is generally administered on a continuous basis for one to two years and frequently does not prevent patients from progressing to treatment refractory infection and end stage lung disease. As a result, these patients have chronic debilitating symptoms that can affect their ability to perform daily activities, including traveling, shopping or even walking. There's just an urgent need for improvement to the current standard of care, both in terms of efficacy and tolerability. Given the irreversible nature of the anatomical damage caused by this chronic lung inflammation, we are developing SPR720, to treat those patients who are treatment naive or treatment in experience. At present, the poor tolerability of the standard of care treatment regimens for NTM-PD, often causes patients and their physicians to delay intervention, until the onset of disabling symptoms related to lung tissue injury. The introduction of well-tolerated oral agents would potentially support earlier intervention, with the goal of decreasing bacterial burden and thus progressive lung damage. By intervening at this early stage, and with SPR720's novel mechanism of action targeting bacterial DNA replication, our objective is to prevent the progression to refractory disease and permanent lung damage that comes with it. We believe this is the best strategy to improve patient outcomes and quality of life, particularly when compared to the agents that are designed only for those with late-stage, treatment refractory disease. Our efforts here is supported by a strong data set, that demonstrates SPR720's potential to provide NTM-pulmonary disease patients, with a convenient and well-tolerated oral therapy. Preclinical studies have demonstrated its potent activity, against the most prevalent NTM species both as monotherapy and in combination with other antibiotics. In Phase 1 single and multiple ascending dose studies, SPR720 was shown to be well tolerated at doses that achieved exposures above the predictive therapeutic levels. We are now working to initiate a dose-ranging placebo-controlled Phase 2 monotherapy study, designed to evaluate SPR720's ability, to drive an early microbiologic response in NTM-PD patients as monotherapy. We expect the trial to begin later this year and to report interim and top line data in 2023 and 2024, respectively. A demonstration of SPR720's, single agent activity would be a significant derisking event for this program. It is important as antimicrobial activity, is the driver of an antibiotic's ability to improve patient outcomes. This data, along with the safety PK and patient-centered clinical outcomes we will measure, will set the stage for the molecule's long-term development as a component of an effective and well-tolerated oral combination regimen. I'll conclude my portion of today's call, with a brief discussion of SPR206, our novel intravenously administered polymyxin antibiotic candidate, that we were advancing towards a Phase 2 cross-indication resistant pathogen study, with the support of multiple partners including Pfizer, Everest Medicines, the Department of Defense and NIAID. This study will enroll patients with complicated urinary tract infections and hospital-acquired and ventilator-associated bacterial pneumonia, as well as, blood stream infections. We believe SPR206 is differentiated from other polymyxins, given its potentially enhanced activity against extensively drug-resistant gram-negative pathogens, but importantly, by an improved safety profile, highlighted by SPR206's lack of nephrotoxicity over 14 days of treatment, in the multiple ascending dose clinical study. Associated nephrotoxicity is a major shortcoming, of the polymyxins currently in use. These are usually prescribed as part of combination antibiotic regimens, to patients with serious drug-resistant infections including those caused by multidrug-resistant acinetobacter, carbapenem-resistant pseudomonas and carbapenemase producing enterobacteriales. Our goal is to provide an alternative to these older polymyxins in this treatment paradigm, thus improving the risk benefit profile for patients. We have developed compelling preclinical and clinical data, that support our efforts to move towards this goal. These data were discussed on our update call a few weeks ago, and include in vitro results and the results of animal infection models, showing SPR206 enhanced efficacy compared to traditional antibiotics when directed against these extensively drug-resistant gram-negative pathogens. They also include data from Phase 1 trials that had demonstrated the favorable tolerability profile of SPR206 and the lack of nephrotoxicity of the agent have predicted therapeutic dose levels. We announced the results of one of these trials just this past quarter, the bronchoalveolar lavage study, which showed SPR206 to be well tolerated with lung exposures that remained above the minimum inhibitory concentration of the target pathogens for the entire duration of the anticipated eight-hour dosing interval. Informed by these data as well as by the results of our recently completed renal impairment study, we are now working to finalize the design of our Phase 2 cross-indication resistant pathogen study. We have a pre-IND meeting with the FDA scheduled for later this quarter to discuss these efforts, and we expect to initiate the study in the second quarter of 2023. I'll now pass things over to our CFO, Sath Shukla for a discussion of our recent financial results and cash position. Sath?

Thank you, David. As of March 31, 2022, the company had approximately $122 million in cash, cash equivalents and marketable securities. Given the cost savings expected from our restructuring and the cessation of tebipenem HBr commercial activities, we believe our existing cash, cash equivalents and marketable securities together with other non-dilutive funding commitments will be sufficient to fund our planned operating expenses and capital expenditures through late 2023. This cash from the forecast includes the assumption that the amounts under the company's revenue interest financing agreement with Healthcare Royalty Partners will be in repayment. I should also note that this estimated run rate does not account for any potential proceeds that may be received from a future sale or license of the tebipenem-HBr program. Importantly, we expect our anticipated cash runway to take us through key clinical milestones for both SPR720 and SPR206. Before providing the rest of our first quarter financial results, I'll note that these obviously reflect a period of time prior to our decision to restructure. We, therefore, expect our total spend to decrease substantially in the quarters ahead. Total revenues for the first quarter of 2022 were $2.1 million compared to the revenues of $7.3 million in the first quarter of 2021. The revenue decrease was primarily due to a decrease in qualified expenses incurred under the BARDA contract for tebipenem HBr and a decrease in funding under the NIAID agreement related to SPR206, partially offset by an increase under the DoD agreement relating to SPR206 and an increase in collaboration revenues related to the Pfizer agreement. Research and development expenses for the first quarter of 2022 was $17 million, compared with $18.4 million of research and development expenses for the same period in 2021. This year-over-year decrease was primarily due to the completion of significant activities to support the NDA for tebipenem HBr. The Phase 2 clinical hold for SPR720 offset by direct costs related to the SPR206 program and an increase in personnel-related costs. General and administrative expenses for the first quarter of 2022 of $15.3 million were higher than the $8.3 million reported in the same period in 2021, primarily due to an increase in headcount in our commercial, general and administrative functions. We reported a net loss for the first quarter ended March 31, 2022 of $32.8 million or $1.01 per common share compared to a net loss of $19.4 million or $0.66 per common share reported for the same period in 2021. For further details on our financials, please refer to our 10-Q filed with the SEC today. We would now like to open the call for questions. Operator?

Thank you, sir. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] The first question comes from Louise Chen of Cantor.

Hi. Thank you for taking my questions here. So my first question is have you started having these partnership discussions that you have been talking about? And could we see something this year as more of a 2023 event? And then, is adding additional products to your pipeline on the table? How do you think about that? And the last question that was a hard question, but how should we think about OpEx for the remainder of 2020? Any guidelines you could provide would be very helpful? Thank you.

Yeah. I appreciate the questions, Louise. So I'll answer the first two and give the last one to Sath. So on the first question, we're always prosecuting partnership discussions across the portfolio. Those discussions will continue. We have a few key steps as we continue those partnership discussions. One is to progress those discussions. Second is to continue our discussions with the agency both on this review cycle and after the review cycle to continue to build clarity on the right path forward for tebipenem. Both the continuing discussions and that information from the FDA during this calendar year will give us a strong sense of whether there's a right deal for us to do and we'll look ahead to that. In terms of adding additional programs, our first step is to really focus on those first three objectives as a first step. And as a reminder, number one that's executing on delivering key milestones. Second is finding the right path forward for tebi and third is being good stewards of Cook Capital. As we think about additional programs or the like we've always looked at collaborative partnerships that might build value for shareholders and once we've made sure that we can execute on our key objectives and that we're looking at what's right for shareholders, we may consider those downstream. And on the final question, Sath, I'll pass it to you for any further guidance we can give on OpEx.

Thanks, Louise. Thanks, Ankit. So Louise, while we haven't given quarter-by-quarter or annual guidance, what I can direct you to is our current cash number of $122 million which obviously was at the end of Q1. Our Q2 burn will be reasonably similar to Q1 because of the restructuring costs that also included severance to our impacted colleagues. And then you can back out the Healthcare Royalty Partners tranche that we referred to in our script that will leave you with an estimated cash amount that would be roughly spread out basically between the end of Q2 and the end of 2023 -- late 2023. So it will be reasonably flat from that you can certainly back into our expected OpEx that we anticipate going for the rest of this year.

Thank you.

The next question comes from Ram Selvaraju of H.C. Wainwright.

Thanks so much for taking my questions. Just wanted to get some clarity on whether you think there's any potential read through to the tebipenem situation from the way in which the FDA has chosen to handle sulopenem. And if not why not what are the most notable differences in your view regarding the situation vis-a-vis tebipenem versus sulopenem? Secondly, if you can comment on where you expect the overall market to trend in the context of the tebipenem commercial opportunity. And if we should be thinking about this as a long-term durable opportunity that is unlikely to change meaningfully in the course of the coming months, regardless of how long it may take for tebipenem to ultimately make it to the market in the US? And then lastly if you could maybe just give us some thoughts on what you anticipate to be the logistical hurdles if any to sort of restart commercial preparations from wherever it is you might wind up in the context of what you know right now regarding the FDA stance on tebipenem. Thanks.

Great, Ron. Thank you, so much for the questions. I'll take the second one first, which is that we believe that the long-term prospects for tebipenem are bright and unchanged. Remember that this is a program with a long patent life to 2038, a large addressable market of patients in need who are resisting oral options that resistance rate continues to increase year-over-year. And the other thing that we've liked about tebipenem is that, it is a program that doesn't have any branded or late-stage development competition. So we think that there's a very long life here and why we're continuing to clarify the path forward and you see that we can move it ahead with the right collaborative partnerships. The second point that I'd make is to your question about any comparison we could make to other agents. Specifically sulopenem there are a different indication with a different trial design. Remember that sulopenem was seeking approval for uncomplicated UTI, whereas tebipenem is focused on complicated UTI and the trial designs were different as well. So it's kind of difficult to really make extrapolations there. And to your final point about logistical hurdles, like we've said before our decision two weeks ago was to cease investing in those types of activities that would bring tebipenem to patients assuming a late June approval in terms of patent life in terms of drug supply and in terms of the understanding of the marketplace that all still exists. And whether that's with a partner or downstream otherwise, we would see an opportunity to regain that as well as execute on the pipeline.

Thank you.

The next question comes from Kevin DeGeeter of Oppenheimer.

Hey guys. Thanks for taking the questions. I really appreciate it. Maybe just a couple from us all on 720. How should we think about potential duration of dosing for the planned study, in terms of study population is this, all comers all species or only MAC patients. I guess I'm a little curious about kind of access to triplet therapy for these patients. I mean is there sort of a crossover or are these patients not eligible for kind of current standard of care maybe triple therapy? Any thoughts on those three would be great. Thanks so much.

Thanks so much, Kevin. So to your first question, you're right that one of the key considerations we've been engaging the agency on is whether in light of the three-month tox study we've completed, we can dose longer for the 28 days we were planning. And we're pleased to say that the agency is open to longer dosing. As we continue our interactions with the agency and our CROs, we'll say more as we get closer to the clinical start date about the exact protocol, but we can confirm that we have the latitude to dose for longer that has a couple of advantages as it relates to the coming clinical readout next year. Number one is, it allows a faster study because longer dosing reduces signal to noise and can reduce the number of patients we need to get a signal. Number two is longer dosing allows for higher fidelity both on the micro endpoint which is critical to show that the drug is active, but also some of the clinical correlates that will be important downstream. So we're happy about that and how that translates to the ultimate final protocol we'll deliver more on that as the as we get closer to the start date. And to your second point, as a reminder, we continue to focus on treatment emergent MAC or first-line MAC patients. Why? Because number one there are patients who still have intact lung function and we can actually make a clinical benefit for them. Second it's the largest market space within the NTM arena. And third to your point given that they're early in their disease trajectory they will be able to after the trial was completed have access to triplet standard of care generic therapy should they need it.

Great. Thanks for taking my questions.

The next question comes from Esther Hong for Berenberg.

Good afternoon. This is Elaine Kim, on for Esther. Thank you for taking our questions. I wanted to ask as SPR206 will be tested, in cUTI hospital-acquired and ventilator-associated bacterial pneumonia and bloodstream infections. Is there a lead indication or an indication that you think SPR206 would most benefit? Thank you.

Yeah. Thanks, Elaine. I appreciate it. And you're right that SPR206 has broad applicability wherever resistant pathogens may be, the diseases we're trying to incorporate in that Phase 2 are where the resistant pathogens live, looking ahead to the pivotal component of the study, we see unmet need across all of those although, pneumonia is a really important one that I might flag just for two reasons. One is, that they happen to have a higher prevalence of the resistant pathogens where 206 is useful. Second is, that a large number of patients with these resistant pathogens tend to be incubated. COVID has shown us that in particular. And it's an important patient population for us to learn about.

Thank you. A quick follow-up question, do you receive any additional feedback or communications with the FDA since the last update a few weeks ago? And if not, when do you expect to hear from them again? Thank you.

Yeah. Thanks, Elaine. And I believe you're referring -- we have ongoing discussions across all of our late-stage medicines. I believe you're referring to, tebipenem. We continue to have ongoing dialogue during the review cycle for tebipenem. And as we get more definitive feedback either prior to our PDUFA date or after a decision, we'll be sure to announce that publicly.

Thank you.

Thank you. And that concludes our question-and-answer session. I will now turn the call back over to Dr. Mahadevia. Please go ahead.

Thank you, operator and thanks to everyone who listened to today's update. We look forward to moving ahead with our new key objectives. Wish you all a nice evening.