SPRO - NASDAQ

Good afternoon and welcome to the Spero Therapeutics Full Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the company's formal remarks, we will open 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 announcements on the Spero Therapeutics website at sperotherapeutics.com. At this time, I would like to turn the call over to Michael Wood, Managing Director of LifeSci Advisors. Mr. Wood, 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 business update for the fourth quarter and full year 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 in this conference call contains forward-looking statements based on our current expectations, including statements about the future development and commercialization of Tebipenem HBr, SPR720, SPR206, and the design, initiation, timing, progress and results of the company's preclinical studies and clinical trials and its research and development programs. Management's assessment of the results of such preclinical studies and clinical trials, the company's cash forecast and anticipated expenses, and the sufficiency of its cash resources. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Spero Therapeutics' filings with the SEC, including in the risk factors section of its annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC today. These forward-looking statements speak only as of the date of this conference call, March 13, 2024. And the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the company after the date of this call. Participating today's call are Sath Shukla, Chief Executive Officer; Dr. Kamal Hamed, Chief Medical Officer; and Esther Rajavelu, Chief Financial and Chief Business Officer. With that, I'd like to turn the call over to Spero's CEO, Sath Shukla. Sath, please go ahead now.

Thanks, Michael. And I thank you all for joining us this afternoon. Spero had a very productive 2023 with progress across its portfolio of development-stage assets. SPR720 is now in the latest stages of a proof-of-concept study in NTMPD, and we are looking forward to reporting top-line data, which we expect to do in the second half of this year. The Phase 3 clinical trial for Tebipenem HBr is up and running. We recently received IND clearance for SPR206 for the treatment of patients diagnosed with hospital-acquired or ventilator-associated pneumonia. The company has a strong balance sheet with the financial flexibility to execute on its plans. For me personally, 2023 was a particularly exciting year as I was honored to take on the CEO role and to be provided with the opportunity to lead a world-class team who share a vision to develop innovative therapies to help patients suffering from serious infections and rare orphan diseases. Let me begin with SPR720, which we are developing for nontuberculous mycobacterial pulmonary disease, or NTMPD. We are developing SPR720 to be a first-line oral agent and believe it has exactly the right profile to address the unmet needs in NTMPD. NTMPD is a rare disease, but with a very well-identified patient population of approximately 245,000 diagnosed patients in developed markets. SPR720 is an oral drug with a novel mechanism of action that is not exploited by other SOC agents or those in development for NTMPD. In the data we have seen so far, from completed in vitro and in vivo studies, there has been no evidence of cross-resistance against marketed antibiotics, and SPR720 has demonstrated a low propensity for selection of resistance. We have shown that it has potency against multiple NTM pathogens and data support its potential for efficacy, safety and tolerability, and macrophage penetration. SPR720 has also been granted orphan drug, QIDP and Fast Track designations. The goal of our Phase 2a proof-of-concept clinical trial is to understand SPR720's activity in NTMPD patients and to inform the design of a later stage and longer term trial evaluating SPR720 in combination with current standard of care agents. As a potential first-line oral agent, we believe the commercial opportunity for SPR720 is compelling. Kamal will provide further details on this program in a few minutes. Turning now to our partner programs, let me begin with Tebipenem HBr, which is partnered with GSK. We are developing Tebi as potentially the first oral carbapenem antibiotic for the treatment of complicated urinary tract infections, or CUTI. We were pleased to announce in January of this year that the Phase 3 PIVOT-PO clinical trial is now underway with the first patient, first visit, having occurred in the fourth quarter of 2023. During 2023, Spero received written agreement from the U.S. FDA with a special protocol assessment, or SPA, on the design and size of PIVOT-PO. SPA typically represents a very high level of concordance on the overall protocol design between the FDA and a sponsor. So we believe the regulatory aspect with respect to the design of the program have been de-risked substantially. Moving on to SPR206, which is partnered with Pfizer for European markets. We submitted an IND for a Phase 2 clinical trial in HapMap patients, and recently announced that the IND has been cleared with the FDA. With that, I would now like to hand the call over to Dr. Kamal Hamed, who will provide more details on the clinical programs.

Thank you, Sath. I will begin with our SPR720 program, which we hope will deliver the first oral, first-line treatment for NTMPD. SPR720 is currently being evaluated in a Phase 2a proof-of-concept clinical trial, and as Sath mentioned, we are looking forward to sharing top-line data, which we expect to do in the second half of this year. NTMPD is a debilitating rare infectious lung disease. There are currently no approved first-line therapies, and the current standard of care is a prolonged combination regimen of antibiotics, including azithromycin, ethambutol, and rifampin. These have serious tolerability issues and limited effectiveness. The unmet need is for a treatment that has better tolerability and effectiveness, fewer drug-drug interactions, as well as shorter treatment duration. We believe that SPR-720 will meet these criteria, and if approved, has the potential to establish a new standard of care in NTMPD. The Phase 2a clinical trial compares SPR720 monotherapy versus placebo. It is designed to enroll up to 35 patients who are either treatment naive or treatment experienced, but do not have treatment refractory disease. We currently have 27 active sites that are screening and enrolling patients. The primary endpoint is microbiological response. Specifically, we are measuring the slope change in sputum bacterial burden from baseline to day 56. Success on this endpoint would make SPR720 the only agent in development we are aware of to demonstrate early bactericidal activity in patients with NTMPD. We believe that the positive result with supportive evidence from the trial secondary endpoints will enable us to move confidently into late stage development. We are working on additional development activities needed to support SPR720's advancement into late stage clinical studies. These include ongoing toxicology work, CMC initiatives, and two Phase 1 clinical studies in healthy volunteers currently underway. The first, to assess intrapulmonary pharmacokinetics of SPR719, the active moiety of the prodrug SPR720 in a bronchoalveolar lavage study. This should give us a better understanding of the extent of drug penetration into the lungs. The second is to evaluate the effect on the pharmacokinetics of SPR720 when co-administered with azithromycin and ethambutol. We expect to have results from these studies in the second half of this year as well. Overall, the ongoing studies are expected to provide us with a robust data set that may inform the registrational path for SPR720 as first line treatment for NTMPD. Now moving on to tebipenem HBr. On January 2, we announced first patient, first visit in PIVOT-PO. The global pivotal Phase 3 clinical trial evaluating tebipenem-HBr in hospitalized adult patients with complicated urinary tract infections, including acute pyelonephritis. Patients are being randomized one-to-one to receive tebipenem-HBr at a dose of 600 milligrams orally every six hours, or Imipenem-cilastin 500 milligrams intravenously every six hours for a total of seven to 10 days. The primary efficacy endpoint is overall response, which is a composite of clinical and microbiological response, at the test of cure visit. The primary analysis for the trial, will be an assessment of non-inferiority in the microbiological intention, to treat population based on a 10% non-inferiority margin. Target enrollment will be approximately 2,648 patients with randomization stratified by age, baseline diagnosis, i.e. cUTI or acute pyelonephritis, and the presence, or absence of urinary tract instrumentation. Enrollment is expected, to be completed in the second half of 2025. Spero is responsible for execution of the Phase 3 clinical trial, and GSK will be responsible for submitting the NDA. If approved, tebipenem-HBr would allow for treatment of cUTI in the outpatient setting. It is well established that patients and physicians generally prefer oral treatments, so we see tebipenem as a potentially new and unique paradigm shift, from the current IV carbapenem standard of care, for how to treat pathogens associated with cUTI. Finally, to our SPR206 program, SPR206 is an investigational next generation polymyxin antibiotic, we are developing to treat multi-drug resistant gram-negative infections. SPR206 is designed, to disrupt the lipopolysaccharides, outer membrane and gram-negative bacteria, while reducing the nephrotoxicity potential of polymyxin. Based on microbiological, and in vivo testing, we believe that SPR206 has the potential to offer a broad spectrum of activity, including against multi-drug resistant and extensively drug resistant strains. It also has potential, for an improved safety profile, of reduced nephrotoxicity, compared to currently available polymyxin. As Sath mentioned, we announced FDA clearance of the IND on February 28. With that, I'll turn the call over to Esther, to review our quarterly financial results.

Thank you, Kamal, and good afternoon or evening to all of you joining us on the call today. Spero is well capitalized with $76.3 million in cash and cash equivalents, as of December 31, 2023. As Sath mentioned, in December, upon dosing of the first patient in the Phase 3 PIVOT-PO clinical trial, Spero qualified for $95 million in development milestones from GSK. It is payable in four equal installments during 2024 and 2025, beginning with the first tranche of $23.8 million that we received in the first quarter of 2024. We estimate that our cash and cash equivalents, together with other non-dilutive funding commitments, will be sufficient to fund our operating expenses, and capital expenditure requirements into late 2025. Now, moving on to summarize our GAAP financials. Total revenue for the fourth quarter of 2023 was $73.5 million, compared with total revenue of $47.4 million for the fourth quarter of 2022. Total revenue for the year ended December 31, 2023 was $103.8 million, compared to $53.5 million for the year ended December 31, 2022. The revenue increase for the year ended December 31, 2023 was primarily due to $96.7 million of collaboration revenue recognized related to our agreements with GSK and Pfizer during '23. Research and development expenses for the fourth quarter of '23 were $16.6 million compared to $15.1 million of R&D expenses for the same period in '22. Research and development expenses for the year ended December 31, '23 were $51.4 million compared to $47.6 million for the year ended December 31, '22. The increases in research and development expenses were primarily due to increased clinical activity during the period related to our ongoing Phase 2a clinical trial of SPR720. G&A expenses for the fourth quarter of '23 were $6.4 million compared to $6.5 million of G&A expenses for the same period in '22. This year-over-year decrease was primarily due to changes in personnel related costs offset partially by increased professional and consulting fees during the period. G&A expenses for the year ended December 31, '23 were $25.6 million compared to $36.5 million for the year ended December 31, '22. Primarily as a result of decreases in both personnel costs and professional and consulting fees. Spero reported net income of $51.2 million for the fourth quarter of '23 and a full year net income of $22.8 million for the year ended December 31, '23. For diluted earnings per share of $0.96 and $0.43 respectively. This compares with the net income in the fourth quarter of '22 of $26.8 million or $0.55 of diluted earnings per share of common stock. And a net loss for the full year ended December 31, '22 of $46.4 million or $1.23 loss per share of common stock. For further details on our financial, please refer to our 10-K filed with the SEC today. With that, we will now open the call for questions. Operator?

[Operator Instructions] Our first question is from Ritu Baral with TD Cowen. Please proceed with your question.

Hi guys. Thanks for taking the question. Just a couple from me, but one of them of course is a little complicated and may have a few parts. One simple one, how is enrollment in 720 going, especially with the halt of enrollment in a competitive program? And my second question also has to do with 720. Specifically, I'm interested to know more about the 719 lavage study in healthy volunteers. Talking to KOLs, one of the concerns around oral NTM compound is access to the site of NTM infection, especially when a patient has catheter disease. How do you guys think of perfusion and access through the biofilm and sort of just location and activity of the site of infection? Thanks.

Ritu, thanks for the question. For your first item on enrollment, we have said in the past that sites have been open, all 27 of them, and they continue to dose patients. And they are continuing to work towards our guidance of top line data in the second half of this year. For your second question, I'll pass it on to Kamal.

Yes, hello, Ritu, and thank you for the question. In terms of access of the drug to the site of infection, of course, these patients also have pulmonary hygiene as part of the management of this disease. And this also applies to inhaled therapy because inhaled therapy may have problem with distributing to the site of infection. However, we have demonstrated in the hollow fiber infection model, as well as in non-human primate in monkeys, but we have not disclosed these data in non-human primates, lung penetration. And of course, we look forward to having lung penetration data in humans from the Phase 1 bronchoalveolar Lavage study that you have cited.

Do you feel that the data may be, or the access may be different with patients that have cavitary MAC versus, I guess, less large cavitary disease? Is that a consideration for oral therapy?

No, that's certainly a good question. And honestly, this applies to both oral as well as inhaled forms of therapy. So typically speaking, in clinical trials to-date, patients with large cavities, i.e. cavitary disease, with cavitary size larger than two centimeters have been excluded from their clinical trials. Because these patients would require much longer treatment duration one, and they may also require surgical treatment besides the medical treatment. So this is a challenge for both oral as well as inhaled forms of therapy. And these patients are excluded again for these reasons. But the data that we have so far certainly suggests that the drug penetrates, to where it needs to get, i.e. the lungs. And of course, we expect to have data from the bronchoalveolar lavage in the second half of this year, only to corroborate what we know from the hollow fiber in vitro data, as well as the non-human primate data.

Great. Thanks for taking all the questions. I'll hop back in the queue.

Thank you. Our next question is from Louise Chen with Cantor. Please proceed with your question.

Hi. Congratulations on the progress this quarter, and thank you for taking my questions here. So first question I had for you was given, some of the recent developments in the space. I think one of your competitors reported some data. Has your thoughts on the market opportunity for SPR720 changed at all? And if it's approved, where do you expect it, to fit in the treatment paradigm, as the space gets a little bit more crowded with development assets? And then the second question I had for you, was on the market opportunity for SPR206. Do you actually plan to move this forward? And if so, you know, what are the next steps here? Thank you.

Thanks for asking, Louise, and great to hear from you. I'll take the first half of your first question and then defer to Kamal on the second half of your first question. And I can pick up the 206 question as well. For recent developments, our information is the same as your information. So, we can't really comment on what actually has been the case, you know, for another player in the space. But for the size of the market, we haven't actually seen them as competitors per se, because as you know, we were in first line, which is a different market - size than refractory, which is where they were progressing their assets. So, what we used to say before, some of these recent data was that we were very excited about the size of the market. And what we say about these recent developments, is that we continue to be very excited about the size of the market. What we have communicated internally, and externally in light of these recent developments, is that our program is potentially the first oral therapy out there, certainly in first line patients, is going to be under greater evaluation and scrutiny, arguably, than ever before. And that's a great challenge and an opportunity for the organization as we progress this forward. Just on that SBR720 question, if you wouldn't mind rephrasing the second part of your question and I'll pass it on to Kamal.

The, oh, sorry, the 206 question, the one about the market…

No, you had another question about 720, right? On the, where it fits in the line of treatment, I believe.

Yes, that is correct. Yes, if you were to get it approved.

Okay, no, thank you. Thank you, Louise. So, I mean, the recent news is certainly unfortunate for patients, because patients need newer combination agents that have better tolerability and effectiveness. But having said that, we are targeting a different patient population, than the patient population that's targeted, by the other ongoing trial, with oral therapy. So, we aim to develop 720, as Sath said, as a first-line therapy for treatment naive patients or treatment experience patients with non-refractive disease. And as we know, this patient segment comprises the majority of patients, about 75% of the patient population. And I should note that 720 demonstrated, potent activity against MAC, low propensity for selection of resistance in an in vitro resistance development study. We've also proceeded with a Phase 2a study, which is the ongoing clinical trial at this time, with the aim to assess the biological effect of SPR720, before we combine it with standard care agents and later stage, Phase 2b/3 program.

Okay. And anything on the market opportunity for 206?

Yes, maybe I'll take that, Louise. I think 206 presents an interesting opportunity for patients, because there is a high degree of unmet need in that patient population. However, we've always commented that we would continue developing that program contingent on non-dilutive sources of funding. As you know, we have a - partnership with Pfizer for European markets and with Everest for China. And we also collaborate with government agencies to obtain funding. So we're looking at, any and all of those sources, for continued funding for that program.

Thank you.

Thank you. There are no further questions at this time. I would like to hand the call back to Mr. Shukla for any closing comments.

Well, I'd just like to thank everyone for dialing in today and have a wonderful day.