Spero Therapeutics, Inc. (SPRO) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to Spero Therapeutics First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Ashley Robinson of Investor Relations. Ashley Robinson: Thanks Joe and thank you all for participating in today's conference call. Earlier today, Spero Therapeutics released financial results and provided a pipeline update for the first quarter of 2020. If you have not yet seen the press release, it is available on the Investors' page of the Spero Therapeutics' website. Ankit Mahadevia: Thank you, Ashley and thanks to all listening for joining us to discuss our first quarter financial results and our corporate highlights. As we continue to progress through 2021, a major focus for Spero is the advancement of tebipenem HBr towards an NDA filing and the execution of our corporate strategy as we work to transition to a commercial organization. David Melnick: Thank you, Ankit. It's a great pleasure to share our pipeline updates today. I'll begin with our lead candidate tebipenem HBr, an oral tebipenem, that's advancing towards an NDA filing that is expected in the second half of the year. This NDA will be supported by the positive Phase 3 data from the ADAPT-PO trial. Cristina Larkin: Thank you, David, and good afternoon everyone. Our commercial market access and medical affairs teams have been working hard to prepare for our anticipated launch. And we feel that we are well positioned for success based on the large market opportunity, our focused commercialization strategy and the clinical and economic benefits that tebipenem HBr can provide to both patients and payers for cUTI and acute pyelonephritis. We believe that tebipenem HBr addresses the largest opportunity in the antibiotic market today. In fact, there are approximately two million patients in the US that we believe that are excellent targets for tebipenem HBr if it's approved. Now, our strategy is focused on the community setting and the hospital discharge setting. The community effort initially will focus on urology to keep patients out of the hospital, who have failed previous oral antibiotic therapy or that are resistant to current oral therapy for cUTI. And in the hospital discharge market, our focus will be to help patients get out of the hospital sooner by giving health care providers the ability to discharge patients with cUTI an oral option that has demonstrated noninferiority to the IV ertapenem. Now this value story of potentially avoiding a hospitalization or reducing a hospital stay has resonated with our health care providers and payers in our conversations today. Now, in regards to our strategy to reach these patients, we believe that a specially driven launch focused on urologists and IDs will allow us to capture a significant portion of this very large addressable market that I just discussed. Now the strategy is supported by research showing that this target patient population is typically seen by specialists and tends to be concentrated, allowing us to have a very focused launch. Now as part of this research to inform our commercial efforts, we have interacted more than 200 health care providers and payers, covering about 85% of the payer lives to better understand how tebipenem HBr will fit into the cUTI treatment paradigm. And the feedback that we've received based on these interactions has indicated that if tebipenem HBr is approved, that there's strong interest in these health care providers to use it in both the community and the hospital discharge setting. And payers, has indicated a strong willingness to cover tebipenem. And health care providers and payers indicate the potential for value-based pricing. Now, this is due in large part because of the strong Phase III data, showing that tebipenem HBr can deliver value to all of our relevant stakeholders including patients and health care providers and payers. Now looking forward, we plan to take a phased approach to building out our commercial team. We started with hiring key leadership almost two years ago in our marketing, market access and medical affairs to set our strategy. And over the last year, each of them have added individuals with deep expertise in launching new products in the antibiotics to further build out their organizations. And one group I want to highlight is our medical liaison team that David and Ankit both mentioned and this has been deployed for over a year and they've been out speaking to our key opinion leaders to help build out this early advocacy development. And lastly, our sales force. These will be the last to be deployed and we anticipate that we will wait until we are closer to our approval before we'll start filling out this part of the organization. Now we have a very exciting time ahead of us and we believe that we are well positioned for success. Now, with all of this, I'm going to turn the call over to Sath, who will provide you with a financial update. Sath? Sath Shukla: Thank you, Cristina and good afternoon everyone. I'd now like to turn your attention to our overview of Spero's financial results for the quarter ended March 31, 2021. Total revenue for the first quarter of 2021 was $7.3 million, compared with revenues of $1.7 million in the first quarter of 2020. Total revenue for the first quarter of 2021 was higher than the same period in 2020, due to grant revenue received through the BARDA contract for tebipenem HBr. As a reminder, we currently have total committed nondilutive funding from BARDA of approximately $44 million, inclusive of $10 million in funding from the Defense Threat Reduction Agency or DTRA. We have accounted for $27.7 million of committed funding from BARDA as of the end of March 31 and beyond the current commitment there is a second option of $12.7 million that remains exercisable by BARDA. Research and development expenses for the first quarter of 2021, were $18.4 million, compared to $20.4 million of R&D expenses for the same period in 2020. This year-over-year decrease was primarily due to winding down of Phase III activities for tebipenem HBr, offset in part by investment to support the NDA filing for tebipenem HBr. We expect our R&D expenses in 2021 to be consistent relative to 2020. I will note that some of the research and development expenses we expect to incur in 2021, include costs related with the expected tebipenem HBr NDA submission and medical affairs strategy, as well as personnel-related spend to support the pipeline. General and administrative expenses for the first quarter of 2021 of $8.3 million were higher than the $4.1 million reported in the same period in 2020, primarily due to increased professional expenses and personnel costs to support the company's pre-commercial efforts. We expect G&A expenses to increase in 2021 relative to 2020, as we build commercial capabilities and the infrastructure to support the expansion ahead of a potential tebipenem HBr commercial launch in 2022. We reported a net loss for the first quarter ended March 31, 2021 of $19.4 million, or $0.66 per common share, compared to a net loss of $23.3 million or $1.22 per common share reported for the same period in 2020. As of March 31 2021, we had cash, cash equivalents and marketable securities of $115.7 million. We believe that our existing cash, cash equivalents and marketable securities together with our non-dilutive funding commitments will be sufficient to fund operations into the second quarter of 2022 including the submission of the NDA for tebipenem HBr. 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? Operator: Thank you. At this time, we will be conducting a question-and-answer session. Our first question is from Ritu Baral of Cowen. Please proceed. Ritu Baral: Hi guys. Thanks for taking the question. Good afternoon First question, I guess in your pre-NDA meeting, did any either review issues or potential review issues arise? Other - were there any surprises I guess from your expectations going in or from your questions asked of the agency? And then I have a follow-up. Ankit Mahadevia: Yeah. Thanks Ritu for the question. Good to hear from you. In short Ritu, there were no surprises from the pre-NDA discussion. And I reiterate the most important takeaways, which is one on the basis of that meeting we're on track to submit the NDAs per our guidance in the second half of the year. And that the FDA endorsed the structure and form of our planned submission and also the data set and the CMC plan that we've communicated publicly before. So we're pleased with the outcome of that meeting. Ritu Baral: Got it. And then I guess this is much more of an existential question. But has, I guess has COVID quarantines, social distancing norms et cetera, et cetera has that changed patterns of resistance in the community as far as you can tell such that it might impact your commercial strategy for tebipenem or have rates of fluoroquinolone resistance or other key resistance patterns pretty much stayed the same? Ankit Mahadevia: Yeah. Thanks for the forward-looking question Ritu. The short answer is, no the continued march of fluoroquinolone and extended spectrum beta-lactam resistance continues to pace. We continue to monitor this both -- monitor this both by reviewing public surveillance data as well as doing our own surveillance work under a study called STEWARD. And both of those point to the fact that we continue to have high and increasing levels of resistance to existing oral therapies. And I'd add on as well to keep in mind that the pandemic has accelerated the trend of identifying patients that are most appropriate to see outside of institutional care settings like hospitals and skilled nursing facilities. And so the pandemic has been an accelerant to the understanding that there's a need for good to oral options for these patients. Ritu Baral: Got it. I'm going to squeeze one last question in there. Just a clarification, you had mentioned that there may be -- moving to 720 and clarification of the unexplained mortality in the nonhuman primate. You had mentioned that there could be dosing-specific issues along with potential species specific issues. By dosing, are you just particularly referring to the trauma that goes along with oral gavage? Is that like were you talking about dosing methodology rather than like dosing time or level? Ankit Mahadevia: Yeah Ritu that's consistent with what we've said in prior public discussions about this. The method of administration to these adult primates can be problematic. Ritu Baral: Yeah, great. Thanks for taking all the questions. Appreciate it. Ankit Mahadevia: Thank you. Operator: Thank you. Our next question is from Louise Chen of Cantor Fitzgerald. Please proceed. Louise Chen: Hi. Congratulations on all the progress this quarter, and thanks for taking my question. So my first question was, what do you think has driven an increasing interest by large pharma companies in anti-infectives and antifungals? We've seen some notable collaborations with large pharma and then recently saw Pfizer acquire Amplyx. So just curious on your thoughts there and what you're seeing on your side? Second question is how are you going to manage through the resource constraints around COVID that the FDA has experienced? Have you in your interactions with the FDA had any delays in your process forward with your NDA submission? And then last question I had is, how will you ensure that Spero will not face the same challenges that other antibiotic companies have faced in their launch? Thank you. Ankit Mahadevia: Thanks Louise. Thank you for the questions. We'll take them in order. So number one is as it relates to the large pharma partnering landscape. And yes we've observed the same trend as well that we're seeing large pharma starting to invest and invest heavily in innovative medicines in our field. There are two drivers of this. One is that the pandemic has been a broad societal reminder of the need for new options for infection. Secondly, several big pharmas have built a portfolio or building a portfolio around the traction they've gained around either COVID-19 therapeutics or vaccines. And finally for the right programs and we've built our pipeline, it makes -- business opportunities to both address an important value proposition clinically for patients, but also economically for differentiated medicines. And so we've noticed that interest. As it relates to your second question around resource constraints and the impact of the pandemic on FDA, we have not seen that within our collaborative discussions with the agency to date as we look ahead, the FDA continues to be extremely collaborative with us both in our direct interactions as well as recent guidance they've issued on what options they have to be able to continue to meet the needs of patients through the pandemic. I'd also note that they've also released data recently that notes for example that out of 13,500 requests for authorization that they have been reviewing over the past March 2020 to March 2021, 68 of those had some COVID related resource impact. And so, I think both covered by the collaborative relationship that we have, and the guidance of the agency as well as the kind of the focused magnitude of this particular issue. And finally, the fact that we have a leg up and a head start in that the medicine that we've been developing has been on the market in Japan for 10 years, gives us a lot of confidence about the path forward. Now to your third question about, why tebipenem is such a differentiated program in the marketplace. I'll hand that one to Cristina. Cristina Larkin: Yeah. I think, one of the most important things and we've talked about this in the beginning that. One, I think going to market is that you don't want to compete with generics. And I think you know the one key differentiating feature here is that, we're going after a market for where, we're not looking to compete with generic agents and where these patients are ultimately leading where they are either on the verge of hospitalization or are going to an IV therapy. And that's this opportunity to avoid a hospitalization which offers a clinical and economic advantage or to get patients out of the hospital where there's a strong economic and clinical reason to do that. And I do think that's a key value proposition that we're offering. That doesn't exist today. And I think that's one of the major advantages. I think the second is, is that, the reimbursement model for this antibiotic is going to be different than the other antibiotics that we've seen launch over the last decade, where the primary reimbursement model for a drug like tebi will be outside of the laws of the hospital, even that a hospital discharge patient that we just referenced, will be a patient for where the primary payer will be outside as well as of the hospital. So those are some of the key drivers, I think importantly, that we talk about that will be major differences in other launches that we've seen. Louise Chen: Thank you very much. Operator: Thank you. Our next question is from Kevin DeGeeter of Oppenheimer. Please proceed. Kevin DeGeeter: Hey Great. Thanks for taking my questions, and yeah, congrats on all the progress. I guess, really, maybe two questions for me. On 720, I think David mentioned, that there's ongoing rat study. Can you just provide us some context as to when that is anticipated to wrap-up? And any context as to whether, FDA suggested that they would want to see some of that data while making a decision on, how to address the clinical hold around 720? And then, just as we think about, the financial guidance and specifically cash-burn, how should we think about, impact of potential tebipenem pre-launch inventory build, and another kind of pre-launch working capital. Is that sort of factored into 2021 sort of R&D spend, or should we think of any pre-launch inventory abilities being more of a 2022, spend item? Thanks. Ankit Mahadevia: Hi. Thanks Kevin. Thanks for the questions. On your first question about, what will need to have a substantive dialogue with the agency, I'll reiterate, what David mentioned which is that by the third quarter, we expect to have everything we need to have a substantive dialogue about the program with the agency. As it relates to your second question, I'll pass it to Sath, to talk about our financials. Sath Shukla: Yeah. Thanks, Kevin for the question. Our expectation is most of the inventory build will start much like the larger part of commercial spend, in 2022. 2021 will be laying the groundwork in every facet from personnel to supply. But the majority of that spend will be deferred to a little later again. Kevin DeGeeter: Great. Thanks for taking my questions. Operator: Thank you. Our next question is from Esther Hong of Berenberg. Please proceed. Esther Hong: Hi. Thanks for taking my questions and congratulations on everything. So on, SPR720 what would an alternate animal tox will look like? Would you use a different animal species of age or non -- I guess, what would it look like? And then, on -- just in general, on tebipenem HBr, the patent state. I know that you were recently granted a new patent. Can you remind us of the patent state for tebipenem? Thanks. Ankit Mahadevia: Thanks. Thanks, Esther for the questions. On your first question, I guess, it's not -- our objective is that, we'll have exactly what we need to have the substantive discussion with the agency by third quarter. We haven't said anything in our public remarks nor do we have an expectation, that we need any alternate studies, beyond the one that we've guided to publicly already. As it relates to your second question, I'll ask -- I'll hand it to Cristina to talk about our patent state. Cristina Larkin: Sure. So we -- as you recall, and its good memory, we were granted a patent on our crystalline salt form that was issued in January of this year. And that does take us out to 2038. You may recall as well, that we were granted QIDP and that gives us a guarantee of 10 years of exclusivity as well. So those are two areas of patent protection as well. We do also have a patent pending as well, around our formulation patent and that would actually carry us out to 2037. So that's an additional area of added protection for us as well, when issued. So hopefully that will give you some ideas around both, the regulatory protection. And then, also, I think the additional IP protection that carries us out to an extension of 2038, both, in what's been branded and what's pending. Esther Hong: Okay, great. Thanks. Operator: Thank you. Our next question is from Ram Selvaraju of H.C. Wainwright. Please proceed. Ram Selvaraju: Hi. Thanks very much for taking my questions. Just a couple of quick ones here. With respect to SPR206, I was wondering if you could just elaborate on -- once you have the next round of clinical data and conducting the clinical studies that are going to be yielding information in early 2022. If you can just kind of clarify what you expect to be the time frame between the release of those data sets and the initiation of the next round of clinical development, assuming of course that the agent advances to the next stage after these initial studies report out? Thank you. Ankit Mahadevia: Yes. Thanks, Ram, for the question. We are -- I'm glad you asked about 206. We continue to see an unmet need for patients that have multi-drug resistant infections. COVID also highlights the need for better antibiotics for patients that are ventilated. These patients get broad spectrum antibiotics. They often have resistance co-infections and we need better options for these ventilated patients, because they often die of bacterial infections as much as they die of what they brought come into the hospital in the first place. And just as a reminder those, Phase 1 studies are important, because they guide us on how to best -- how 206 can be best used to help those patients, in particular, the bronchoalveolar lavage study which will help us see how well 206 gets into lungs, which will be important for the ventilated patients who make up a lot of that patient population. In terms of what's next, what we can say is that, it will be a study in patients with infection to show what 206 can do. We have some data to collect, both from the renal study and the BAL study, which David mentioned, I think before we could be more definitive on the timing of a study start, because the Phase 1 studies will inform the design and the design will inform the timing. Ram Selvaraju: Okay. And with 720, assuming that there isn't anything specific to linked to the drug in the non-human primate toxicology study report. First of all, do you have a sense of how long it might take the agency to review that study report, if they are going to be reviewing any other meaningful dataset, clinical or otherwise, in the context of assessing when it will be appropriate to lift or maintain the clinical hold on 720? And then lastly, assuming that the study report looks clean and that the FDA concurs that it is clean, what would in fact be the next logical clinical development step for 720? Would it be effectively restarting of another Phase 2a trial that follows exactly the same design as the original Phase 2a trial or something else? Thank you. Ankit Mahadevia: Yes, Ram, thanks for the question. As it relates to the time line of their response, they have a mandated note to give us a formal response to our interaction 30 days after we have that interaction. So we know that we'll know that at least. In terms of the overall time line of what it will take for their analysis and review and a decision on a restart of a study, that's something that we'll need to have the discussion with the agency as we send them the data. But we know that their history with us thus far has been a collaborative stance and timely responsiveness to our requests. And so, we would expect that that would continue. As it relates to the nature of the study, again, that's dependent on the discussion with FDA. When we kind of -- when David and I both noted that, based on the data to date, we see a specie-specific and dosing-specific explanation that's supported by the data. If the FDA does agree with that, I think that that would be supportive of the type of study that we have already discussed publicly to show what 720 can do as a single agent to drive down disease burden and NTM patients. But again I would caveat that we need to finalize our analysis, as well as have the discussion with the agency to finalize that, but we can certainly comment on what we've seen in the data to date. Ram Selvaraju: Okay. And just one very quick one, regarding tebipenem. Can you give us a sense of when you anticipate being able to disclose the proposed U.S. trade name, where in the process that might occur, between finalizing the NDA submission and actual approval of the drug? Thank you. Ankit Mahadevia: That one, I'll hand to Cristina to address. Cristina Larkin: Sure. Thanks. So there's obviously a couple of different components that one is the trademark component and the other is the FDA acceptance of the name. And so I would tell you that we're in the works of all of that and we will publicly disclose some of that data to be disclosed later -- at a later date. Ram Selvaraju: Thank you. Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session and this will conclude today's conference. Thank you for your participation and have a great day.SPRO Ratings Summary
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Oppenheimer Downgraded Spero Therapeutics to Perform From Outperform, Shares Down 4.67%.
Oppenheimer downgraded Spero Therapeutics, Inc. (NASDAQ:SPRO) to perform from outperform, providing the following key point for that decision:
(1) Stock trades near prior $20 price target
(2) unfavorable upside/downside from Revenue Interest Financing (RIF) into NDA review and commercial launch of Tebipenem,
(3) expectation for RIF financing covenants to complicate business development (relative to issuing equity or bank debt) including a potential sale of SPRO.
While the analysts acknowledge all companies should be managed for long-term value creation, with delay in SPR720 due to clinical hold and the prospect of 3–5 years of commercial organization only selling one product (Tebipenem), they view the company as likely to be either an acquirer of assets or seller of the company over the next 36 months.
Shares of Spero Therapeutics closed 4.67% lower on Friday.
