Earnings call transcript: Spero Therapeutics Q4 2024 misses EPS forecast

Spero Therapeutics Inc reported its financial results for the fourth quarter of 2024, revealing a diluted net loss per share of $0.38, which was slightly below the forecast of $0.36. The company’s revenue for the quarter stood at $15 million, significantly exceeding the forecast of $4.5 million. Following the earnings release, Spero’s stock price fell by 1.48% to $0.89 in regular trading and declined further by 4.39% in after-hours trading. According to InvestingPro, the company maintains a "GREAT" overall financial health score of 3.19 out of 5, and analysis suggests the stock is currently undervalued.

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Key Takeaways

• Spero Therapeutics reported a higher-than-expected revenue of $15 million for Q4 2024.
• The company’s net loss per share was slightly worse than anticipated.
• Stock price dropped by 1.48% during regular trading and an additional 4.39% after hours.
• Spero’s cash runway extended to Q2 2026 due to a GSK milestone payment.
• Development of SPR-720 was discontinued due to safety concerns.

Company Performance

Spero Therapeutics experienced a challenging quarter with a net loss of $20.7 million. The revenue for Q4 2024 dropped significantly from $73.5 million in the same quarter the previous year. Despite this, the company managed to secure its financial position by extending its cash runway to Q2 2026 through a $47.5 million milestone payment from its partnership with GSK. The company maintains a strong current ratio of 2.68 and holds more cash than debt on its balance sheet, with a debt-to-equity ratio of just 0.07.

Financial Highlights

• Revenue: $15 million in Q4 2024, down from $73.5 million in Q4 2023.
• Full-year 2024 revenue: $48 million, a decrease from $103.8 million in 2023.
• Net loss for Q4 2024: $20.7 million.
• Cash and cash equivalents: $52.9 million as of December 31, 2024.

Earnings vs. Forecast

Spero Therapeutics’ earnings per share of -$0.38 fell short of the forecasted -$0.36, marking a slight miss. However, the revenue significantly surpassed expectations, coming in at $15 million compared to the $4.5 million forecast. Despite the revenue beat, the earnings miss and overall financial performance seem to have influenced the negative market reaction.

Market Reaction

The stock price of Spero Therapeutics decreased by 1.48% during regular trading hours, closing at $0.89. In aftermarket trading, the stock fell further by 4.39% to $0.822. This decline reflects investor concerns over the earnings miss and the discontinuation of the SPR-720 program, despite the positive news of the extended cash runway. However, InvestingPro data shows the stock has demonstrated significant strength recently, with a 14.45% return over the past week, though it remains 52% below its 52-week high of $1.81.

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Outlook & Guidance

Looking ahead, Spero Therapeutics is focused on advancing its lead candidate, Tebipenem HBR, with an interim analysis of the Phase III PIVOT PO trial expected in Q2 2025. The company is also exploring potential milestone payments from GSK, contingent on the successful submission of a new drug application for Tebipenem HBR.

Executive Commentary

• Esther Rajavelu, CEO: "Our top priority for this year is the continued advancement of the tebipenem program."
• Tim Kloitzer, COO: "If approved, we believe temipenem HBR has potential to reduce length of hospitalization."
• Esther Rajavelu, CFO: "We estimate our existing cash... will be sufficient to fund our operating expenses... into Q2 2026."

Risks and Challenges

• Discontinuation of SPR-720 due to safety concerns could impact future revenue streams.
• Increased R&D expenses, rising to $97 million, may strain financial resources.
• Competitive pressures in the antibiotic market could affect Spero’s market position.
• Dependence on milestone payments from GSK introduces uncertainty in cash flow.
• Market volatility and investor sentiment could further impact stock performance.

Q&A

During the earnings call, analysts inquired about the potential unblinding of the Tebipenem HBR trial, which depends on interim analysis results. The company also discussed exploring subgroup analyses for Tebipenem HBR and considering reformulation strategies for the SPR-720 program.

Full transcript - Spero Therapeutics Inc (SPRO) Q4 2024:

Conference Operator: Good afternoon, and welcome to the Spirit Therapeutics Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. At this time, all participants are in listen only mode. Following the company’s formal remarks, we will open up 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 announcement on the Spira Therapeutics website at www.spiotherapeutics.com.

At this time, I would like to turn the call over to Shay Biren, Senior Director, Investor Relations. Mr. Biren, please go ahead.

Shay Biren, Senior Director, Investor Relations, Spero Therapeutics: Thank you, operator, and thank you all for participating in today’s conference call. This afternoon, Sparo Therapeutics released financial results and provided a business update for the fourth quarter and full year 2024. The press release is available on the Investor page of the Sparrow 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.

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 Spiro Therapeutics’ filings with the SEC, including in the Risk Factors section of its earnings report on Form 10 K for the year ended 12/31/2024, filed with the SEC today. Joining me on the call today are Esther Rajavelu, our Interim Chief Executive Officer and Chief Financial Officer and Tim Kloitzer, SPERA’s Chief Operating Officer. There will be a Q and A session following the prepared remarks. I will now turn the call over to Esther to begin.

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: Thank you, Shay. Good afternoon, everyone, and thank you for joining our full year twenty twenty four earnings and business update call. Spero Therapeutics is a clinical stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and multi drug resistant bacterial infections with high unmet medical need. Our most advanced clinical stage product candidate, cabepenem HVR is in a Phase three trial with the potential to be the first broad spectrum oral carbapenem to treat adult patients with complicated urinary tract infections, including acute pyelonephritis. These are patients who have limited or no alternative treatment options and would otherwise likely be treated with an IV carbapenem.

SPARROW is co developing tebipenem HBR with our partner GSK. Today, we announced that a pre specified interim analysis in the Phase III PIVOTPO clinical trial is expected to be completed in the second quarter of twenty twenty five. Our top priority for this year is the continued advancement of the tebipenem program, which if approved has the potential to fundamentally change the treatment paradigm for complicated UTI by offering patients and prescribers a convenient oral treatment option. Next, on to SPR-seven twenty, our novel Chyrase B inhibitor that was in a Phase IIa proof of concept study as an oral treatment for nontuberculous mycobacterial pulmonary disease or NTMPD. The trial was randomized, double blind, placebo controlled and enrolled 25 treatment naive or treatment experienced patients with non refractory NTM pulmonary disease caused by Mycobacterium avium complex or MAC infections.

The primary endpoint of the study was change in bacterial load in sputum samples from baseline to the end of the fifty six day treatment period. Key secondary endpoints included assessments of safety and tolerability, clinical response, PK and certain other measures. Enrollment concluded in July 2024. In October 2024, we completed a planned interim analysis, which included 16 patients who had completed dosing and post dose follow-up visits. Results from the interim analysis showed that the study did not meet its primary endpoint.

While there was some evidence of antimicrobial activity, the treated arm did not show sufficient separation from placebo. In addition, we saw potential dose limiting safety signals, including three cases of reversible Grade three hepatotoxicity in the high dose cohort dosed at one thousand milligrams once daily. We are completing assessment of the full data set of all 25 patients dosed in the trial and plan to determine next steps for the program once that is complete. Lastly, on our pipeline, following a thorough review and reprioritization, we made the decision to discontinue development of SPR206, an IV administered next gen polymyxin antibiotic that cleared an IND in 2024 for a Phase two trial in hospital acquired and ventilator associated bacterial pneumonia. To date, we have made good progress on the Phase three trial for our lead asset, tebipenem HVR, and we look forward to completing the prespecified interim analysis next quarter and with our partner GSK share an update on next steps for the program.

As a reminder, following completion of the tevipenem HBR Phase three trial, GSK is expected to assume responsibility for regulatory and commercialization efforts And if these are successfully pursued, Spero could qualify for about $400,000,000 in contingent milestones, including $25,000,000 when GSK submits an NDA and subsequent milestones based on commercialization and sales ramp. With that, I’ll turn the call over to Tim.

Tim Kloitzer, Chief Operating Officer, Spero Therapeutics: Thank you, Esther. I’ll begin with tepipenem HPR the opportunity for this product to address the unmet need and complicated UTI. There are an estimated three point four million episodes of complicated UTIs reported annually in The U. S. And they are a leading cause of hospitalizations.

Complicated infections, as a reminder, are those that occur in patients who have a structural or functional abnormality of the urinary tract or those requiring catheterization. There can also be comorbidities such as kidney stones or kidney infections. Complicated UTIs are also more likely to be caused by multidrug resistant or MDR pathogens. If inadequately treated, these can recur frequently or progress to more severe conditions. The current standard of care for many MDR gram negative infections, including complicated UTIs is treatment with carbapenems.

However, carbapenems are currently only available as intravenous formulations, so they require inpatient admission or outpatient IV therapy and this adds to the complexity of treatment. The lack of an effective well tolerated oral alternative for MDR complicated UTIs means that patients are often subjected to prolonged IV antibiotic use. If approved, we believe temipenem HBR has a potential to reduce length of hospitalization for patients who transition from intravenous to oral carbapenem therapy. The ongoing Phase three trial of PIVOT PO designed to support regulatory approval is a global randomized double blind, double dummy clinical trial comparing tebipinum HPR to IV imipinum silistatin in hospitalized adult patients with complicated UTIs including acute pyelonephritis. Patients are being randomized one to one to receive either tebipinum at a dose of six hundred milligrams orally every six hours or IV amipinum silvastatin given as five hundred milligrams every six hours for a total of seven to ten days.

The primary efficacy endpoint is overall response, which is a composite of clinical cure and microbiological eradication. This is assessed at the test of cure visit. The primary analysis will assess non inferiority in the microbiological intent to treat population using a ten percent margin. Briefly on SPR-seven 20, our decision to spin the oral development program in NTM pulmonary disease followed a preplanned interim analysis based on 16 patients in the Phase 2a proof of concept trial. We are now in the process of completing analysis of the remaining data from all 25 patients that were dosed in the trial and plan to determine next steps for this program thereafter.

I’ll now turn the call back to Esther to review the financials.

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: Thank you, Tim. I’ll now walk you through our fourth quarter and full year financials. As of 12/31/2024, Sparrow had cash and cash equivalents of $52,900,000 We estimate that our existing cash and cash equivalents together with the remaining $47,500,000 in earned and non contingent development milestone from GSK will be sufficient to fund our operating expenses and capital expenditures into Q2 twenty twenty six. Total revenue for the fourth quarter of twenty twenty four was $15,000,000 compared with total revenue of $73,500,000 for the fourth quarter of twenty twenty three. Total revenue for the year ended 12/31/2024 was $48,000,000 compared to $103,800,000 for the year ended 12/31/2023.

The revenue decrease compared with the prior year period was primarily due to a decrease in collaboration revenue from our agreements with GSK and Pfizer. R and D expenses for the fourth quarter of twenty twenty four were $28,800,000 compared to $16,600,000 for the same period in 2023. R and D expenses for the year ended 12/31/2024, were $97,000,000 compared to $51,400,000 for the year ended 12/31/2023. The increase in R and D expenses year over year was primarily due to increased clinical trial activity related to the Phase III PIVOT PO trial for tepipenem HBR. G and A expenses for the fourth quarter of twenty twenty four were $7,100,000 compared to 6,400,000 for the same period in 2023.

This year over year increase was primarily due to increased consulting and professional fees in the last quarter of the year. G and A expenses for the year ended 12/31/2024, were $23,700,000 compared to $25,600,000 for the year ended 12/31/2023, with lower full year 2024 expenses primarily due to decreases in personnel related costs. The company reported a net loss of $20,700,000 for the fourth quarter and net loss of $68,400,000 for the year ended 12/31/2024. Diluted net loss per share was $0.38 and $1.27 for these periods respectively. We reported a net income of $51,200,000 for the fourth quarter of twenty twenty three and net income of $22,800,000 for the year ended 12/31/2023, respectively.

Net income per share was $0.96 and $0.43 for these periods, respectively. For further details on our financials, please refer to our 10 K filed with the SEC today. With that, we will now open the call for questions. Operator?

Conference Operator: Thank you. We will now begin the question and answer session. First question comes from Gavin Clark Gardner with Evercore ISI. Please go ahead.

Gavin Clark Gardner, Analyst, Evercore ISI: Hey, thanks for taking the questions. I had a few on the tebepenem interim analysis. Maybe first, does the trial get unblinded if the interim is successful?

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: If the interim is successful, yes, the interim process is going to be managed by an independent data monitoring committee. And if their recommendation is that we stop the trial or stop enrollment, the management team will be unblinded at that time.

Gavin Clark Gardner, Analyst, Evercore ISI: Got it. So if it does get unblinded early, I guess what I’m wondering is, even if the trial is positive early on, on the ITT population, is there any reason to keep running the trial longer in order to narrow some of the error bars for some of the subgroup analyses, like specifically in the ESBL positive population?

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: Yes. We can’t speculate on that at the moment given we’re blinded and just preparing for the interim analysis. So we’ll hopefully be able to respond to that once we’ve gotten the recommendation from the IDMC.

Gavin Clark Gardner, Analyst, Evercore ISI: Got it. What’s the alpha spend on the interim?

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: We’ll be spending a small amount of alpha for the pre specified IA, but since this is a pre specified interim, we’ve accounted for that alpha spend and determining the overall sample size for the study.

Gavin Clark Gardner, Analyst, Evercore ISI: Got it. And just my last quick question. Any comments you can make on the bar for success for the interim and when in the trial it’s actually conducted?

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: So basically, I mean, there are three scenarios that are likely, right? So either the trial meets the primary endpoint with this pre specified interim, which is the 10% non inferiority margin and we stop the trial or it fails or we stop the trial for futility or lastly, we continue enrolling.

Shay Biren, Senior Director, Investor Relations, Spero Therapeutics: Got it.

Gavin Clark Gardner, Analyst, Evercore ISI: That’s helpful. Thanks.

Conference Operator: The next question comes from Ritu Barag with TD Cowen. Please go ahead.

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: Hi guys. Thanks for taking my question. This is Athena Chin on for Ritu Baral. I have a question on 07/20. As you see it now, what are the potential paths forward for 07/20?

And when can we expect an update? Thank you. Sure. Hey there. The first step is to complete the data analysis of the full 25 patients dosed in the trial.

Once we have the full picture on the data, we’ll be in a better position to decide on the best path forward for the program, which may include a reformulation strategy. We have determined that an oral path for MPNPD is unlikely given the dose limiting grade three talks at the one thousand mg dose, even though they were reversible once the drug was stopped. So step number one, complete the data analysis on the full 25 patients and then determine next steps. Understood. Thank you.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.

Esther Rajavelu, Interim Chief Executive Officer and Chief Financial Officer, Spero Therapeutics: Thank you. We have a very excited setup for the year end, and we’re looking forward to completing the interim analysis and providing you an update in the second quarter. Thank you for listening.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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