Spruce Biosciences(US:SPRB)2025-05-06 20:10PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Financial Statements The company reports a Q1 2025 net loss of $14.0 million and declining cash reserves, raising substantial doubt about its ability to continue as a going concern Condensed Balance Sheet Data (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,615 | $38,753 | | Total current assets | $30,576 | $44,206 | | Total assets | $31,649 | $45,209 | | Total current liabilities | $15,666 | $15,246 | | Total liabilities | $16,325 | $16,388 | | Total stockholders' equity | $15,324 | $28,821 | | Accumulated deficit | $(264,309) | $(250,268) | Condensed Statements of Operations (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Collaboration revenue | $0 | $2,002 | | Research and development | $10,837 | $10,317 | | General and administrative | $3,655 | $4,318 | | Loss from operations | $(14,492) | $(12,633) | | Net loss | $(14,041) | $(11,625) | | Net loss per share | $(0.32) | $(0.28) | - The company's cash and cash equivalents of $25.6 million as of March 31, 2025, are insufficient to fund planned operations for the next 12 months, raising substantial doubt about its ability to continue as a going concern24 - On April 21, 2025, the company approved a 55% workforce reduction to prioritize the development of tralesinidase alfa, expecting to incur approximately $0.9 million in related charges9798 - On April 22, 2025, the company received a delisting notice from Nasdaq and its common stock began trading on the OTC Pink Marketplace on April 29, 20255101 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to tralesinidase alfa, an increased Q1 net loss, and reiterates going concern doubts due to insufficient cash - The company has shifted its focus from tildacerfont to the development of tralesinidase alfa ("TA-ERT") for neurological disorders with significant unmet medical need109110 Results of Operations Comparison (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $0 | $2,002 | $(2,002) | | Research and development | $10,837 | $10,317 | $520 | | General and administrative | $3,655 | $4,318 | $(663) | | Net loss | $(14,041) | $(11,625) | $(2,416) | - R&D expenses increased by $0.5 million, primarily due to a $5.7 million cost for acquiring SPR202, offset by a $3.4 million decrease in clinical activities for the discontinued tildacerfont CAH program and a $1.5 million decrease in personnel costs136 - The company's cash and cash equivalents as of March 31, 2025, are insufficient to fund operations and debt obligations for at least 12 months, raising substantial doubt about its ability to continue as a going concern142218 Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,727) | $(14,958) | | Net cash used in financing activities | $(411) | $(227) | | Net decrease in cash | $(13,138) | $(15,185) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, though management believes the potential impact on financial statements is not material - The company's primary market risk is interest rate risk on its cash equivalents and variable-rate term loan, but a hypothetical 1% change is not expected to have a material effect162163 - Foreign currency exchange risk and inflation are not believed to have had a significant impact on the company's results of operations164165 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter, with no material changes - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective166 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls167 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings but acknowledges that litigation can arise in the ordinary course of business - As of the filing date, the company is not a party to any material legal proceedings170 Item 1A. Risk Factors The company outlines significant risks including Nasdaq delisting, ongoing financial losses, going concern doubts, and reliance on third parties Risks Related to Ownership of Our Common Stock Stockholder risks include reduced liquidity from Nasdaq delisting, high price volatility, and no anticipated dividends - The company's common stock was delisted from Nasdaq on April 29, 2025, and now trades on the OTC market, which could adversely affect liquidity and stock price173175176 - The stock price is highly volatile, with a closing price range from $0.07 to $0.43 between January 1, 2025, and May 1, 2025179 - The company has never paid dividends and does not anticipate doing so, with the Loan Agreement also prohibiting such payments without lender consent184 Risks Related to Our Business and Industry The company faces fundamental business risks from its history of losses, insufficient capital, and uncertainty in clinical development and competition - The company has a history of significant net losses, reporting a loss of $14.0 million for Q1 2025 and an accumulated deficit of $264.3 million as of March 31, 2025211 - There is substantial doubt about the company's ability to continue as a going concern, as its cash of $25.6 million is insufficient to fund operations for the next twelve months218 - The company intends to seek accelerated approval for TA-ERT for MPSIIIB based on a biomarker, but this pathway is not guaranteed and requires a confirmatory Phase 3 trial225230 - The company faces significant competition from other biopharmaceutical companies with greater financial and technical resources234 - Patient enrollment for clinical trials is challenging, especially for rare diseases like MPS-IIIB, which has an estimated U.S. population of less than 200 patients241 Risks Related to Our Reliance on Third Parties The company's operations are highly dependent on third parties for intellectual property, clinical trials, and single-source manufacturing - The company is dependent on intellectual property licensed from Eli Lilly, BioMarin, HBM, and Twist, and termination of these licenses could halt product development373 - The company relies on third-party CROs to conduct its clinical trials and is responsible for ensuring their compliance with GCPs, with failures potentially delaying development375 - The company relies completely on third-party manufacturers, including single-source suppliers for drug substance and product, for its clinical supplies380381 Risks Related to Our Intellectual Property Success depends on obtaining and defending patents, a complex and uncertain process, with risks of infringement claims and challenges to existing IP - The company's ability to commercialize its products depends on obtaining and maintaining sufficient patent protection, a highly uncertain and complex process387388389 - The company may not be able to protect its intellectual property rights throughout the world, as patent laws and enforcement vary significantly by country415 - The company may be subject to third-party claims of patent infringement, which could result in costly litigation and block commercialization of its product candidates430432 - The company is currently a party to post-grant reviews and opposition proceedings challenging the validity of its patents, which could result in the loss of exclusivity449 - The company relies on trade secrets and confidentiality agreements, but these may not provide adequate protection against unauthorized disclosure454 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's Loan Agreement with Silicon Valley Bank prohibits the payment of cash dividends without prior written consent - The company is prohibited from paying cash dividends without the prior written consent of Silicon Valley Bank, as per the terms of its Loan Agreement462 Item 3. Defaults Upon Senior Securities The company reports that this item is not applicable - Not Applicable463 Item 4. Mine Safety Disclosures The company reports that this item is not applicable - Not Applicable464 Item 5. Other Information The company reports no other information for disclosure under this item - None465 Item 6. Exhibits This section lists exhibits filed with the report, including corporate governance documents, agreements, and officer certifications