SPRO - NASDAQ

Good afternoon, and welcome to the Spero Therapeutics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following the company’s formal remarks, we will open up the call for questions. [Operator Instructions] Please be advised that this call is being recorded, and 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 call over to Ted Jenkins, Vice President, Investor Relations and Strategic Finance 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 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, 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 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’s Chief Executive Officer, Dr. Ankit Mahadevia. Please go ahead, Ankit.

Thanks, Ted, and thanks to all who are listening. We continue to make strong progress across each of our three 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 six 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, our Chief financial Officer, Sath Shukla, and our Chief Medical Officer, Dr. Kamal Hamed. Let me start by discussing our lead seven – SPR720 program, which aims to deliver the first novel oral treatment for non-tuberculous mycobacterial disease or NTM-PD for short serving first line patients. I’m pleased to report that the program continues to advance according to plan. Our Phase 2 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 standalone 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 de-risk 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 a standard of care in first line NTM-PD, we believe our program has the potential to address a clear unmet need. Alongside the progress of our Phase 2 trial, we remain on track with the entire SPR720 program as we perform additional development activities 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 in quality initiatives, engagement with FDA, and efforts to expand the 720 development program into Japan, where NTM-PD 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 NTM-PD. This is to ensure that our primary efficacy endpoints 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 remained engaged with the FDA regarding a special – potential Special Protocol Assessment agreement for a planned Phase 3 trial. For a Type A Meeting with the FDA conducted last year, positive results from this planned trial together with confirmatory non-clinical 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 mid-year 2023. At that time, we also intend to outline the details of the planned Phase 3 trials 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 multi-drug resistant gram-negative infections. Efforts to advance SPR206 into a Phase 3 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 2 trial will be funded entirely by external non-dilutive 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?

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 equivalence as of March 31, 2023. Based on our current operating plan, we believe our cash and cash equivalents together with other non-dilutive 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 cost 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 consultant fees. Spero 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 SCC today. We will now open the call for the Q&A. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Louise Chen of Cantor. Please go ahead.

Hi, congratulations on all the progress this quarter, and thanks for taking my questions. So I wanted to ask you about SPR720, what you think the competitive advantages are of your product and what gives you confidence in a positive readout. And then second question I wanted to ask you is, if you could remind us again of some upcoming potentially positive inflection points where you could receive payment from GSK, that would be helpful. Thank you.

Great. Thanks, Louise for the questions. 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 two types. First is the 75% of patients that we aim to serve first with SPR720 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 SPR720 provides an opportunity. One, it’s oral or current approved therapies for NTM patients or not. Second is that our Phase 1 data as well as our tox data to date suggest 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 SPR720 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.

Yes. Thanks for asking, 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 3 and the NDA submission process. So if you were to assume that we expect to get milestones to jumpstart 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 the 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’ll be spread through the trial period, we’ll pay for the trial, and we’ll be able to give you more details on it in the upcoming months.

Thank you.

Our next question comes from Ritu Baral of TD Cowen. Please go ahead.

Good afternoon, guys. Thanks for taking the question. I wanted to ask about the secondary endpoint on your SPR720 ongoing Phase 2 trial. Can you review for us what you think the most important secondary end points 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 how ARIKAYCE may be approaching its frontline PRO primary endpoint. Thanks.

Thanks for the question, Ritu. I’ll pass that one to Kamal to address.

Yes. Thank you, Ankit. Thanks, Ritu, for the question. So just as a reminder, I mean, this is a Phase 2a 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 study to demonstrate the activity of SPR720. And while we in parallel continue to develop our PRO for to be used in the Phase 2b/3 program, we are exploring some domains of well established PRO instruments in the proof-of-concept study, the ongoing Phase 2a study. So we are exploring this as secondary or exploratory objectives, and certainly these would help inform the PRO development besides the specific PRO development work, which has started with the PRO content validation study.

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 three month or later timeframe. 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.

No, absolutely.

That’s really helpful. Go ahead, sorry.

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 three months time point, and these differences between treatment and no treatment were well sustained at month six. So some of these domains again are being considered in our PRO development and are being explored in the Phase 2a study. But again, it’s a smaller study with the main objective being to demonstrate the activity of SPR720.

Got it. And if you think forward, Ankit, you mentioned the QUAL-B as a respiratory domain PRO scale. Are you guys also thinking about adding a fatigue scale, like the PROMIS as well? Do you think that’s sort of a – as a complimentary element to what FDA wants to see?

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 sign symptoms, those three 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, PROMIS scale will be used and we are also exploring assessment of fatigue even in the ongoing Phase 2a study.

Very helpful. Thanks for taking all the questions.

Our next question comes from Gavin Clark-Gartner of Evercore ISI. Please go ahead.

Hey, good afternoon. Could you just help us think through the frontline ARIKAYCE data coming next quarter? Specifically I’m wondering how you see the read through to 720 development plan and whether that may influence your decision to pursue a frontline or refractory subsequent trial. Thanks.

Yes. Thanks, Gavin for the question. Yes, 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 two 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 that that 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 to the best that we understand, they’ll be looking at variants of the QUAL-B in the PROMIS, and it was nice to see Griffith at all data around the QUAL-B will be looking to see how the full complement potentially stands up. I will say two 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 2a, but also in the context of other clinical work that we aim to do ahead of starting pivotal studies.

Yes. That makes sense. Thanks.

[Operator Instructions] Our next question comes from Boobalan Pachaiyappan of H.C. Wainwright. Please go ahead.

Hi, this is Boobalan dialing in for Ram Selvaraju and thanks for taking our questions. So firstly, with respect to 720, can you provide any additional color with respect to enrollment progress and when you’d expect this to be completed?

Yes. To answer the first question, we reiterate our guidance that we’re on track for trial data, first half 2024, and you can refer to our prior comments in terms of the progress of site openings, but we won’t go deeper than that.

All right. Clear. And then with respect to tebipenem HBr agreement, are there any details of the pivotal Phase 3 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?

Yes. Big picture, Boobalan. Thanks for the question. We – as we’ve stated before that 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 Sath mentioned, we’ll disclose the details of the milestones that are due to us at GSK.

Okay. And then maybe one final question. Has Pfizer indicated any interest in expanding geographic rights to 206, maybe in the context of your existing partnership? Maybe, if so, under what terms?

Well, and I’ll 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 you know, and as and when we think about the U.S. rights for 206, we’ll explore that more.

All right. Thanks for taking our questions and congrats on the progress.

Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Dr. Ankit Mahadevia for closing remarks.

Thanks, operator. We appreciated 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.