Q2 2024 Spero Therapeutics Inc Earnings Call

Participants

Shai Biran; Investor Relations; Spero Therapeutics Inc

Satyavrat Shukla; President, Chief Executive Officer, Director; Spero Therapeutics Inc

Esther Rajavelu; Chief Financial Officer and Chief Business Officer; Spero Therapeutics Inc

Louise Chen; Analyst; Cantor Fitzgerald

Gavin Clark-Gartner; Analyst; Evercore ISI

Ritu Baral; Analyst; TD Cowen

Ram Selvaraju; Analyst; H.C. Wainwright & Co., LLC

Presentation

Operator

Good afternoon, and welcome to the Spero Therapeutics second-quarter 2024 financial results conference call. (Operator Instructions) 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 www.sperotherapeutics.com.
At this time, I would like to turn the call over to Shai Biran, Senior Director, Investor Relations. Mr. Biran, please go ahead.

Shai Biran

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 second quarter of 2024. The press releases available on the investor page of the Spero Therapeutics’ website.
Before we begin, I would like to remind you that some of the information presented on this conference call contains forward-looking statements under the securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our actual clinical programs, future results, progress, timing, performances or achievements to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties associated with our business and 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 earnings and earnings report on Form 10-Q for the quarter ended June 30, 2024 filed with the SEC today.
We also ask that you reference the cautionary statements are forward-looking statements included with the slide presentation accompanying this conference call. Participating in today’s call are Sath Shukla, Chief Executive Officer; and Esther Rajavelu, Chief Financial Officer and Chief Business Officer. Sath Shukla will begin the discussion. Please go ahead, sir.

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Satyavrat Shukla

Thank you, Shai. Good afternoon, everyone, and thank you for joining our conference call today. I am pleased to provide an update on the ongoing progress across our portfolio of clinical stage assets.
Before that, I would like to note a change in our executive leadership team with the departure of our Chief Medical Officer, Dr. Kamal Hamed. On behalf of the Board, management and all of our employees, we thank Dr. Hamed for his many contributions to Spero and wish him every success for the future. We are pleased to announce that Dr. John Pottage, a distinguished industry veteran in our field and a member of Spero’s Board for the last six years, will help oversee and provide strategic guidance for our clinical programs during this transitionary period while we continue the search for our next Chief Medical Officer.
Moving to our clinical pipeline. Let me begin with SPR720, which we are developing as a first-line oral agent for nontuberculous mycobacterial pulmonary disease, or NTMPD. NTMPD has an estimated patient population of 245,000 patients in the US, EU, and Japan, with approximately 95,000 of those patients in the US. There is currently no approved first-line therapy for these patients.
The current guidelines recommend off-label TV drugs, which have a history of lack of efficacy as well as serious tolerability issues. SPR720 has a novel mechanism of action that is different from other standard of care agents, as well as those in development for NTMPD. Spero has conducted extensive in vitro and in vivo studies, which have shown no evidence of cross resistance against marketed antibiotics as well as a low propensity for selection of resistance. Further, we have demonstrated SPR720 to be potent against multiple NTM pathogens.
Overall, we believe the preclinical data supports SPR720’s potential for therapeutic benefit. In Q4, we expect to share a comprehensive data set from our ongoing and recently completed clinical studies. This is anticipated to include data from the Phase 2A proof-of-concept study in treatment-naive and treatment-experienced non-refractory patients.
We will also report data from two supported Phase 1 studies in healthy volunteers. One of which assesses SPR720 exposure in lung as monotherapy, and the second of which assesses exposure in plasma when co-administered with standard-of-care agents azithromycin and ethambutol. The Phase 2A clinical trial compares two doses of SPR720, 500 mgs and 1,000 mgs, administered as monotherapy versus placebo in patients with NTMPD due to M-avium complex, or MAC.
We have enrolled a total of 25 patients, including those treatment-naive and treatment-experienced patients who do not have treatment refractory disease. It is our hope that the data from this study further indicate that SPR720 as a monotherapy can decrease the NTM bacteria load over the treatment course of 56 days. To analyze this early bactericidal activity, we are measuring changes in bacterial loads in patients’ distribution, including the rate of change in long-term colony forming units per millimeter, which is our primary endpoint in this study.
We are also looking at the rate of change in time to positivity, which is a key secondary endpoint in the study. A clear numerical difference in these measures between the treated arm and placebo could indicate that SPR720 has a potential therapeutic effect in patients with NTMPD. We anticipate that success on these endpoints would also make SPR720 the only oral agent in development that we are aware of to demonstrate early bactericidal activity in patients with NTMPD due to MAC and which enable us to move confidentially into late-stage development.
Ultimately, we believe that SPR720 could be used as part of combination treatment regimens. And if the ongoing strategy confirms our expectations that the drug has monotherapy activity, we anticipate the future registration-enabling studies to be designed to include standard-of-care agents.
Complementing the Phase 2A data, as previously mentioned, we will also share data from two Phase 1 studies in healthy volunteers. The first study used a bronchoalveolar lavage, or BAL, to examine intrapulmonary pharmacokinetics of SPR719, the active moiety of the prodrug SPR720. We expect to share PK measures showing the extent of exposures in the lungs, that is the site of infection.
The second strategy evaluates changes in plasma PK when an SPR720 is co-administered with azithromycin and ethambutol. We anticipate this data to be informative than selecting doses in future combination studies.
Lastly, we recently completed an in vitro resistant study of SPR719 in combination with standard-of-care agents and anticipate sharing these data at IDWeek in October. The team is excited about this upcoming data readout in Q4. These studies are expected to provide us with a robust data set that we will use to determine the registrational path for SPR720 as first-line oral treatment for NTMPD.
Turning now to tebipenem HBr, which we are developing as the first potential oral carbapenem antibiotic for the treatment of complicated urinary tract infections, or cUTI. Enrollment in our ongoing Phase 3 global PIVOT-PO clinical trial is on track, and we are pleased with the progress made since the beginning of the year. Our goal remains to complete enrollment in the second half of 2025.
Patients are randomized 1-to-1 in this pivotal Phase 3 clinical trial to receive tebipenem HBr 600 mgs orally every six hours or imipenem cilastatin 500 mgs intravenously every six, for a total of 7 to 10 days. Target enrollment is approximately 2,648 patients.
The primary efficacy endpoint is overall response, which is a composite of clinical and microbiological response and the test-of-cure visit. The primary analysis for the trial will be an assessment of non-inferiority in the microbiological intent-to-treat population based on a 10% non-inferiority margin. As a reminder, tebipenem HBr is partnered with GSK. We are responsible for the execution of the ongoing Phase 3 trial, and GSK is responsible for ex-US development and worldwide commercialization, excluding search and rights in Asian territories held by another partner, Meiji Seika.
cUTI infections are a leading cause of hospitalization in the US. The incidence is estimated to be over 3 million cases per year, which translates into a significant version on the healthcare system. Tebipenem HBr is, to our knowledge, the only oral carbapenem in development. If approved, it could address the need for an oral carbopenem in patients with complicated urinary tract infections caused by multidrug-resistant uropathogens, potentially eliminating the need for hospitalization or reducing length of stay with transition from intravenous to oral carbopenem therapy.
Finally, wrapping up with SPR206. SPR206 an innovative, investigational, intravenously administered direct-acting polymyxin partnered with Pfizer for European markets. We announced that in the first quarter of this year, the FDA cleared the IND to advance SPR206 into a Phase 2 clinical trial in patients with hospital-acquired or ventilator-associated bacterial pneumonia and that the FDA also awarded SPR206 fast-track designation. As a reminder, we plan to initiate a Phase 2 study contingent on availability of non-dilutive funding.
With that, I’ll turn the call over to Esther to review our quarterly financial results.

Esther Rajavelu

Thank you, Sath, and good afternoon to all of you joining us on the call. I’ll begin with our cash guidance first and then summarize our GAAP financials. Spero ended the second quarter with $63.5 million in cash and cash equivalents. In addition to the cash on our balance sheet, we anticipate three remaining tranches of development milestone payments from GSK in the approximate amount of $24 million every six months.
As a reminder, upon initiation of the Phase 3 PIVOT-PO clinical trial, Spero qualified for $95 million in development milestones from GSK, which are payable in four equal installments over two years. The second tranche of approximately $24 million is payable in the third quarter of this year.
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 second quarter of 2024 was $10.2 million compared with total revenue of $2.7 million for the second quarter of 2023. The revenue increase for the second quarter of ’24 was primarily due to an increase in collaboration revenue related to our agreement with GSK and an increase in grant revenue related to our BARDA contract, both for tebipenem HBr. These were partially offset by a decrease under our NIAID agreement relating to SPR206 and collaboration revenue related to our agreement with Pfizer for SPR206.
Research and development expenses for the second quarter of 2024 were $23.7 million compared to $9.5 million for the same period in ’23. The increase in research and development expenses year over year was primarily due to higher direct costs related to the pivotal Phase 3 trial for tebipenem HBr and the Phase 2A clinical trial for SPR720, partially offset by lower direct costs related to SPR206.
G&A expenses for the second quarter of 2024 were $5.5 million compared to $6.1 million for the same period in ’23. This year-over-year decrease was primarily due to a decrease in G&A personnel-related costs, partially offset by increases in professional and consulting.
Spero reported a net loss of $17.9 million, or $0.33 per share of common stock, basic and diluted, for the second quarter ended June 30, 2024. This compares with a net loss of $11.9 million, or $0.23 per share of common stock for the comparable period in 2023. For further details on our financials, please refer to our 10-Q filed with the SEC today.
We will now open the call for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Louise Chen, Cantor Fitzgerald.

Louise Chen

Hi. Congratulations on all the progress and thanks for taking my questions here. So I have two quick questions for you.
First one, I wanted to ask you what’s the significance of the IDWeek data that you’re going to present and what we think we should learn from all of this? And then second question is just on Kamal departure. You didn’t give a lot of details here, but obviously, ahead of the data, people are wondering what happened here. So any color you give would be great. Thank you.

Satyavrat Shukla

Hey, Louise. Thanks for the questions and great to hear from you. I’ll answer your questions in reverse order. Kamal’s departure, obviously, is an event for the company, but it has nothing to do with the data or the programs. That we can share with you. Like the rest of you, we are looking forward to the unblinding and reporting of the top-line data for SBR720 in 4Q, and then, of course, for tebipenem next year, where our enrollment continues on track and is expected to be completed in the second half of next year.
Moving to your first question for IDWeek, we are particularly excited about presenting resistance data. So one of the value propositions for SPR720, as you know, is that with that novel MOA, the data we have seen to date has shown a low propensity for resistance and no evidence of cross resistance. So for IDWeek in particular, that will be a dataset we will build on.

Louise Chen

Thank you.

Operator

Gavin Clark-Gartner, Evercore ISI.

Gavin Clark-Gartner

Hey, guys. Thanks for taking my question. I just had one. So I appreciate that you’re doing the PK substudy, which includes BALs. But for both of the doses that you’re testing in your Phase 2A, over a given day, roughly what duration of MIC90 coverage do you believe that 720 has at both of the doses and specifically at the site of infection? Thanks.

Satyavrat Shukla

Thanks for the question, Gavin. I’ll have to look back on what we have disclosed on that question and perhaps come back to you, but I do not believe that we have disclosed that data just yet. Obviously, that data will be part of what we report out. But for today, I’m not sure I can elaborate on it to the degree you ask.

Gavin Clark-Gartner

Great. We look forward to seeing more. Thanks.

Satyavrat Shukla

Thanks, Gavin.

Operator

Ritu Baral, TD Cowen.

Ritu Baral

Good afternoon, everyone. Thanks for taking the questions. So I wanted to make sure that I heard you correctly. You said that the 25 patients enrolled were — I’m sorry if I get this wrong, were the 25 patients were all treatment-naive or did you have treatment-experienced patients in there? And, well, I’ll let you answer that before my follow-up.

Satyavrat Shukla

Sure. So we’ve always said that this trial which have treatment-naive and non-refractory treatment-experienced patients, Ritu. And that is the expectation for those 25 patients. Did that answer your question?

Ritu Baral

Yeah. Can you speak to the mix that you ended up with final enrollment and how it might impact both the primary and secondary endpoint expectations? And then I have a follow-up.

Satyavrat Shukla

Unfortunately, right now, we can’t, Ritu, because most of those data are blinded to us. So even the mix of treatment-naive and treatment-experienced patients is not something we have disclosed just yet.

Ritu Baral

Got it. I wanted to also ask about the secondary endpoint of time to positivity. Can you elaborate on that? I think previous drugs have discussed time to sputum negativity. Can you go into a little detail on what time to positivity is and what sort of a meaningful timepoint in that end point?

Satyavrat Shukla

Yeah. So I think for context, for both the primary endpoint, which is the reduction in the log10 CFU per milliliter as well as time for positivity, these are metrics that are well established and covered in TB, for example. But in NTM, of course, this being a relatively new therapeutic space, there is limited academic and medical literature that creates cutoffs, for example.
But the way time to positivity works is that it’s basically the daily prolongation of time to positivity. So it measures the time growth. In this process, the liquid media are inoculated with a sputum sample. And then when that reaches a pre-defined signal for the evidence of bacterial growth, that can indicate the efficacy of the treatment in question.
So really, the longer that time to positivity, the better it is. In TB, this measure is well established. For us, it’s always been a key secondary endpoint. But within TB, there’s usually a high degree of correlation between what we have characterized as a primary endpoint, the log reduction, and the time to positivity. So what we hope is that as we report both of these out they will show a activity of the drug on microbial reduction.

Ritu Baral

Thank you for the question.

Operator

Ram Selvaraju, HC Wainwright.

Ram Selvaraju

Hi. Thanks very much for taking my questions and congrats on all the progress. Wanted to ask about the tebipenem Phase 3 program. And if you could give us an additional granularity regarding the total number of clinical sites that are currently involved and what factors you expect to impact enrollment either positively or negatively with respect to being able to get to that enrollment completion timeline target that you disclosed in today’s press release. Thank you.

Satyavrat Shukla

Sure. Thanks, Ram, for the question. We haven’t given a precise number yet, but if you were to assume somewhere in the triple digits, it’s a global study for multiple countries, you would be in the ballpark. It’s a larger trial than the last one, as you know, and as we mentioned on the call, on track for enrollment.
To date, we have not seen headwinds like the one we saw for ADAPT, where COVID, of among other features, was a districting factor for us. So at this moment in time, we continue to hold to our expectation of that completion of enrollment in the second half of next year. And as you know, our partners at GSK are also setting out their timelines for an NDA submission that is also conduit for that timeframe. So the bottom line for tebi is on track, and we are excited to see the data.

Ram Selvaraju

Okay. And then just two technical questions regarding 720. First is, can you just give us a brief description of the manner in which the pro-drug 720 is converted into the active moiety 719? And secondly, if you can comment on what additional combinations or permutations, if any, you might want to look at to assess in terms of variability in plasma PK beyond azithromycin and ethambutol in the context of use of 720. Thanks.

Satyavrat Shukla

Sure. For the first question, Ram, we’ll dig into the publications we have and send them to you. What we have stated in calls is that 720 has a very rapid conversion to its active moiety. But on the granularity, we’ll just have to forward to you what we have published, so we can ensure that after the call.
For your second question right now, so azithromycin serves as a macrolide. And so with a macrolide under discussion, we feel that, that is an appropriate measure to evaluate co-administration bid along with the ethambutol.
But as the landscape for NTM evolves, obviously, we will be open to evaluation of what makes sense as we enter later-stage development. For today, as a oral therapy, right now, the only one in development, as you know, in first line, those are the oral therapies that make the most sense to us. But certainly, after we see the data and in discussions with the FDA, we will be evaluating all the optionality that would make sense in progressing the asset.

Ram Selvaraju

Thank you very much.

Satyavrat Shukla

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now hand the conference over to Sat Shukla for his closing comments.

Satyavrat Shukla

Thank you, everyone, for dialing in. We look forward to updating you as we progress our pipeline. Have a great day.

Operator

Thank you. The conference of Spero Therapeutics has now concluded. Thank you for your participation. You may now disconnect your lines.