Spero Therapeutics(SPRO) - 2019 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and management's analysis for the first quarter of 2019 Item 1. Financial Statements Provides unaudited condensed consolidated financial statements for Q1 2019, including balance sheets, statements of operations, cash flows, and detailed accounting notes Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and equity, as of March 31, 2019, and December 31, 2018 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $49,395 | $34,080 | | Marketable securities | $56,997 | $81,363 | | Total current assets | $115,702 | $124,219 | | Total assets | $124,650 | $129,006 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $6,618 | $12,318 | | Total liabilities | $11,321 | $13,151 | | Total stockholders' equity | $113,329 | $115,855 | - The company adopted new lease accounting standards (ASC 842) effective January 1, 2019, resulting in the recognition of operating lease right-of-use assets of $4.4 million and operating lease liabilities of $5.0 million as of March 31, 2019[14][54] Condensed Consolidated Statements of Operations and Comprehensive Loss Presents the company's revenues, expenses, and net loss for the three months ended March 31, 2019, compared to the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Grant revenue | $3,911 | $1,153 | | Collaboration revenue | $3,807 | $0 | | Total revenues | $7,718 | $1,153 | | Research and development | $9,526 | $8,925 | | General and administrative | $3,888 | $3,044 | | Total operating expenses | $13,414 | $11,969 | | Loss from operations | $(5,696) | $(10,816) | | Net loss | $(5,072) | $(10,644) | | Net loss per share | $(0.29) | $(0.74) | - The significant increase in total revenues was driven by $3.8 million from a new collaboration agreement and a $2.8 million year-over-year increase in grant revenue[15] Condensed Consolidated Statements of Cash Flows Outlines the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2019 Statement of Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,924) | $(11,961) | | Net cash provided by (used in) investing activities | $24,671 | $(22,825) | | Net cash provided by financing activities | $1,568 | $0 | | Net increase (decrease) in cash | $15,315 | $(34,786) | - The positive cash flow from investing activities in Q1 2019 was primarily due to $50.6 million in proceeds from maturities of marketable securities, compared to net purchases in the prior year period[18] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, significant transactions, and financial position supporting the consolidated financial statements - The company is a clinical-stage biopharmaceutical company focused on developing novel treatments for multi-drug resistant (MDR) bacterial infections. Its lead product candidates include SPR994, SPR720, SPR206, and SPR741[22] - Management has concluded that the company's existing cash, cash equivalents, and marketable securities are sufficient to fund operations for at least 12 months from the financial statement issuance date of May 9, 2019[25] - In January 2019, the company entered into a license agreement with Everest Medicines for SPR206, receiving a $3.0 million upfront payment and recognizing $3.8 million in related revenue during the first quarter of 2019[105][106][111] - The company recognized $3.6 million in revenue in Q1 2019 from its contract with the Biomedical Advanced Research and Development Authority (BARDA) to develop SPR994[88] Management's Discussion and Analysis of Financial Condition and Results of Operations Offers management's perspective on the company's financial performance, liquidity, and capital resources, including recent business developments - The company initiated its pivotal Phase 3 clinical trial (ADAPT-PO) for SPR994 in April 2019 for complicated urinary tract infections (cUTI) after receiving FDA acceptance of its IND application[130] - In March 2019, the FDA granted Fast Track Designation for SPR994 for the treatment of cUTI and acute pyelonephritis, which facilitates development and expedites review[131] R&D Expenses by Program (in thousands) | Program | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | SPR994 | $3,708 | $2,352 | | SPR720 | $1,064 | $364 | | Potentiator Platform (SPR206 & SPR741) | $1,236 | $3,441 | | Total R&D Expenses | $9,526 | $8,925 | - As of March 31, 2019, the company had $106.4 million in cash, cash equivalents, and marketable securities, which is expected to fund operations and capital requirements into the second half of 2020[129][164] Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to market risks, primarily interest rate sensitivity and foreign currency exchange rate fluctuations - The company's primary market risk is interest rate sensitivity. A hypothetical 50 basis point increase in interest rates would result in an approximate $0.1 million decline in the fair value of its interest-sensitive marketable securities[194] - The company faces foreign currency exchange risk from research expenses in the Euro, British Pound, and Australian dollar, but fluctuations have not had a material impact on financial statements to date[194] Controls and Procedures Details management's evaluation of the company's disclosure controls and internal control over financial reporting as of March 31, 2019 - Based on an evaluation as of March 31, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[195] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls. Controls were implemented to adopt the new leasing standard[196] PART II – OTHER INFORMATION Contains additional information not included in the financial statements, such as risk factors, equity sales, and exhibits Risk Factors Identifies significant risks that could materially impact the company's business, financial condition, and operational results - The company has a history of net losses and anticipates continued significant losses for the foreseeable future, requiring substantial additional funding to avoid delays or reductions in its development programs[200][203] - The company is heavily dependent on the success of its lead product candidate, SPR994, and any failure or significant delay in its development, approval, or commercialization would materially harm the business[216] - The company relies on third parties for conducting all preclinical studies and clinical trials, as well as for manufacturing, which creates risks related to performance, compliance, and supply chain continuity[290][294] - The company's success depends on obtaining and maintaining sufficient patent protection. The patent position for biopharmaceutical companies is highly uncertain, and the company may become involved in costly intellectual property litigation[315][316][321] Unregistered Sales of Equity Securities and Use of Proceeds Reports on the company's unregistered sales of equity securities and the utilization of proceeds from its Initial Public Offering - As of March 31, 2019, the company had utilized approximately $71.2 million from the net proceeds of its November 2017 Initial Public Offering (IPO)[384][385] Exhibits Lists all documents and certifications filed as exhibits to the Form 10-Q, including Sarbanes-Oxley Act compliance - The exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, along with XBRL Instance and Taxonomy documents[386] Signatures Confirms the official signing and dating of the Form 10-Q by the company's principal executive and financial officers - The Form 10-Q was duly signed on May 9, 2019, by Ankit Mahadevia, M.D. (President and CEO) and Joel Sendek (CFO and Treasurer)[390]