This is Gavin Clark-Gartner with the Evercore ISI Biotech Research Team, and I'm really happy to be here with Sath Shukla, who is the CEO of Spero Therapeutics. Sath, thanks for joining us.
Thanks for having us, Gavin. Great to be here.
Definitely. All right, so maybe to kick us off, why don't you just give us an overview of Spero and where things stand today?
Absolutely. So, the company, 10 years after its founding, continues to be a leader in the rare and infectious disease space. The mandate has always been to look for areas with high unmet need and potentially strong economic opportunity, and our priorities reflect that mandate. So SPR720, which is our lead asset, is going through enrollment for a phase 2 proof of concept study at this time. That asset is progressing for NTM, that's nontuberculous mycobacterial disease, which is a rare, infectious lung disease with debilitating pulmonary symptoms. So an area of great unmet need, no approved oral therapies there today, only inhaled, and that's only for refractory patients in NTM, for 25% of that population. Very high unmet need, and that, therefore, is a great area for us to progress this asset.
Another asset, tebipenem HBr, is currently en route to starting a phase 3 as an oral carbapenem for complicated urinary tract infections. We are on track to progress that into first patient, first visit by the end of the year. That asset is progressing with support from our partnership with GSK, who are also our lead shareholders. That's going along very well as well. Then finally, SPR206 is our next-generation polymyxin for the treatment of Gram-negative pathogens. That's on track for a phase II IND by the end of this year as well. That asset usually progresses on grant funding and other non-dilutive sources, so that way, we are efficient stewards of capital. Finally, speaking of priorities on capital, the company is well capitalized.
It continues to be well-funded with a disclosed amount of $94 million on our balance sheet as of the last quarter, and that does not include upcoming milestones from our partnership with GSK, which are expected to add up to an additional up to $500 million of funding and milestones, plus royalties as tebipenem progresses. So a lot on the plate for a 50-person company progressing three mid- to late-stage assets, but we feel we are up for it.
Yeah, definitely. Maybe just, give us a quick reminder on tebipenem. So it did receive a complete response letter.
Yeah
... last year. Just remind us the rationale for that and what you're doing differently with this phase 3.
Absolutely. So, as you say, we had worked with the FDA for about four years when we received that complete response letter. The FDA, as is their right, evaluated our data and conducted a separate post hoc analysis for a subset of those patients in the micro- ITT population. So by excluding those patients from the primary analysis on our first Phase 3 trial, we ended up missing the non-inferiority margin criteria for approval. Subsequently to that, we ended up entering into a partnership with GSK to fund the next Phase III, and over the last year, worked with the FDA to work into a special protocol assessment alignment with the FDA to minimize regulatory risk.
We were very pleased to announce that alignment a few months ago, and now we are en route to, as you mentioned, starting our next phase III trial, which is called PIVOT-PO. The differences from the last trial are basically designed to incorporate that FDA feedback and to be very prudent and conservative in running the trial. So among other items, the trial is substantially larger. Our last trial was roughly 1,400 patients. This is north of 2,600 patients, and the expectation is that that set of data in that many patients will give us very clear data signals on whether this is an effective drug. In addition, we changed our competitor to imipenem. In the last trial, it was ertapenem. We made the switch to imipenem with FDA guidance because it has similar- more similar PK profile to tebi.
So that actually makes it a better competitor, and its dosing frequency is also more similar to tebi. So comparatively, we felt that it made a better competitor for this study, and that study is in progress, expected to start hopefully imminently.
Got it. Maybe you can also remind us on the economics for the GSK deal, particularly the costs for the phase 3 and how they're I guess sharing those. And maybe you can also kind of contextualize that within, like, what the costs for the ADAPT-PO trial were.
Absolutely. So, the deal itself with GSK, top line was up to $600 million in milestones, plus royalties that could climb to low double digits if the product is approved and sales hit $1 billion. Of those milestones, the company to date has received $105 million, of which $75 million was upfront last year, including that equity investment that made GSK our leading shareholders.... going forward, up to another $120 million in development milestones are expected through the duration of the trial. So the expectation is that these milestones will keep coming in ahead of the expenses, and the company will be able to progress the trial through those milestones. To your question for comparison, our last trial, which was 1,400 patients, cost roughly $50 million-$60 million to Spero.
So we feel that these additional incremental $120 million, even with almost doubling the size of that trial, they'll be sufficient to fund it. If the product is approved, then on first patient sales, on commercialization, where GSK have set a target goal of 2026, Spero could be eligible to receive up to another $150 million on that first sale. And I say up to, because this is a global partnership, and so there is a U.S. and an ex-U.S. component of it. And then another $225 million in sales-related milestones based on the project's sales, if approved, reaching sales benchmarks. So if sales go to $200 million, Spero receives $25 million. As the sales go higher, the sales milestones drop off after capping out at $225 million.
The royalties that start off at low single digits would then climb to low double digits as sales exceed $1 billion. So again, it's a great partnership, not only for the financial reasons, which have really de-risked the profile of the assets and enabled us to share in the upside with GSK if the product is approved. Also GSK have proven themselves to be very capable and supportive partners over the last year, and so it's been a great outcome for all.
Yeah, that's great. So your current cash runway guidance into the second half of 2025-
That's good.
-that obviously excludes the potential milestone for first sale of tebi.
Yeah.
You can just remind us which activities are and are not included within that current guidance?
Yeah, great question. Thanks for asking. So, right now, it includes all the phase 2a proof of concept for SPR720, and it is a, it is almost independent of the milestones coming in for GSK because the milestones would fund the expenses. So, I, with or without those milestones, and therefore, with or without those expenses, the guidance to the second half of 2025 holds. It, does not, assume that we will be funding through company cash progression of the phase 2 for SPR206, because then, as I mentioned earlier, for that, we always seek out grant and government and partnership funding, and so, that, those, those funding are expected to come from external sources.
Got it. That's clear. Well, that's probably a good transition into 720 then. But you can reframe, 'cause this was a license from Vertex.
Okay.
while ago, so why did they ultimately out-license this? And just remind us of the mechanism of action for this.
Certainly. So, Vertex actually out-licensed it, interestingly, when I was at Vertex. We out-licensed it back then because, in the mid-teens, Vertex was laser-focused on building the cystic fibrosis franchise. So many non-CF assets, we sought out funding partnerships with promising companies to progress those assets, and interestingly, Spero at that time took on what is today SPR720. The MOA, so SPR720 is a phosphate ester prodrug for SPR719, which is the active moiety. And SPR719 is a gyrase inhibitor. So it basically targets bacterial DNA replication. And so it's a novel MOA that fortunately, in that class, hasn't had resistance built up to it or cross-resistance with other treatments in that space. So that's how SPR720 functions itself.
The development was funded and worked through with a very targeted structural design to bring it to the stage it is today.
Got it. And one thing you're doing uniquely with this asset is going right into frontline treatment.
That's good.
The plan. So what is the reason to do that? And maybe you can also frame as we're thinking about frontline treatment, is there any other way we should select patients for frontline treatment, whether that's looking at macrolide susceptibility or higher risk disease, like fibrocavitary disease, and how you're approaching those considerations?
Yeah. So, we targeted first line as the area of focus, going back to the unmet need, Gavin, because in first line right now, there's no approved therapies, and that's 75% of these patients. Also, by the time they get to refractory disease, which is where there is an approved therapy, and that's Insmed's ARIKAYCE, which is an inhaled therapy. By that point, lung damage is so severe that the opportunity for early intervention has passed. And so going back to where that highest unmet need was, it made sense for us to look into first line at that moment in time, and that's what the phase 2a trial is looking at right now. Now, with that said, SPR720 could potentially also be applied for refractory patients, but that would be further down the line.
In terms of what other aspects of patients or patient qualifications that we would look to, because it's a novel MOA, therefore, as I mentioned earlier, the area of the risk of cross-resistance is relatively lower. And so, you know, could it be used with macrolides or azithromycin? It is a possibility as we start looking for patients, and also as we start thinking about the next stage of development, which is where a lot of these questions will become much more relevant.
Got it. So thinking about the primary endpoint in the second half of next year-
That's good.
It's slope reduction in sputum CFU, essentially a bacterial load reduction-
That's good.
in the lungs. How should we think about what is a good outcome here?
Yeah. So, in very general terms, the actual slope of that reduction, if it's negative and if it's favorable to placebo, those are big paid outcomes for a proof of concept trial. In addition to that, we will also be looking at secondary outcomes, which include continued safety and tolerability, PK, and then also some quality of life assessments, because for approval, patient-reported outcomes will be the primary endpoints per FDA guidance. So historically, what we have seen with SPR720 is we have seen in vitro data and in vivo data that showed us that it kills bugs. We have also run SAD/MAD studies that showed a favorable tolerability profile in healthy volunteers. And now the question is, for this trial, to your point, does it kill bugs in patients?
And if it does, then it would be the first novel oral therapy potentially to show early activity against these pathogens in the NTM disease cycle. That we feel will be a great outcome for a phase 2a. Then, of course, as we transition into the future steps, whether it's a phase 2b, three pivotal, then we will need to transition from the microbiological eradication, which we feel is a good well correlated with hopefully PROs, for a PRO instrument that we will align with the FDA.
That makes sense. So, I mean, something I've always wondered is, as we're looking at the frontline setting-
Mm-hmm
... especially when you're likely adding on top of standard of care, which is more or less effective to certain degrees, how does the bacterial load reduction, how does that correlate into clinical outcomes? I mean, the Insmed case data lately is probably our best example of that, showing the correlation.
Indeed. I think that's frankly a great outcome for the for patients, obviously, but also, for the NTM disease space in general. To your point, as we have seen activity for SPR720 against these pathogens, we feel that we expect that there will be a strong correlation between that eradication and PROs. So Insmed's experience, even as an inhaled therapy, as it has cast greater scientific scrutiny on that correlation and has also, to some extent, clarified the regulatory pathway bit further, given FDA guidance. We feel that these are great outcomes for the space, and then as a potentially oral therapy, we feel that we'll be able to benefit from the experience that Insmed is going through at this moment in time.
Yeah. As part of this phase II, you're also doing a PK sub-study on some of the patients.
That's right.
Yeah. What, what is the design of that, and what exactly are you looking to learn from that?
Yeah, there's actually two studies. So one is, as you said, a PK/PD study. And the other one is actually a, another PK study that is combining, SPR720 with azithromycin and ethambutol. And the expectation, indeed, is that these, these studies, in combination with the efficacy study that we'll see from 2a, will give us a much clearer, analysis of the path ahead. So next year, as all of these studies read out, we expect to be able to work with the FDA and then give guidance externally to what the path to approval would look like.
Do you have any base case or goal that you're willing to share at this point? I know it's still a little bit early, but, you know, you kind of alluded to a phase 2b/3, which is presumably an adaptive design. Like, my read on that is maybe you're doing the phase 2b to lock down the dose in combination with the other... with standard of care before going into phase 3. Is there kind of a, any path where it could be a single trial, or any guidance on also number of patients and timelines, any of that?
Well, as you say, it's just a little too early to speculate on the path forward, potentially as a single trial, but certainly, this is an area of such unmet need that could be a potential objective we would work with the FDA on. For standard of care inclusion or in general, as we just talked about, we are running a phase I trial with combinations. And, we have in 2020, for IDW eek, we disclosed some past data in vivo studies of SPR720 with current SOC. And so while the design of the next trial is just a little too early to talk through today, certainly the expectation is that the future will have some versions of combo therapies, which has two benefits.
One is that in a space where multi-drug-resistant infections are often top of mind for people, then that combo therapy is almost a requirement today. And the second one is that that also means that the progression of multiple agents in the space could potentially all yield great benefits for patients and for the companies progressing them, if the future is indeed combo for that entire disease spectrum.
Got it. Maybe in our last couple minutes here, we can touch on 206 quickly. Just remind us the current status of this program, and also sometimes I even forget that Pfizer partnered this one-
That's right.
-outside the U.S. Maybe you can remind us the rationale for that.
Absolutely. So SPR206 is our next-generation polymyxin. Basically, it's designed for treatment of Gram-negative infections, where currently, for really severe infections, the standard of care is usually a carbapenem and/or a beta-lactam beta-lactamase inhibitor, and a polymyxin. The polymyxins currently, the way they work is that they actually affect the cell membrane of the bacterial cell, losing it to making it lose cohesion and essentially dying. The issue with current-generation polymyxins is that in addition to killing the bacterial cells, they also often kill kidney cells for the patients. So SPR206, to date, as it goes into its Phase II IND, expected by the end of this year, it has shown a really clean profile with no nephrotoxicity. That's the great value proposition for it. Pfizer did indeed come into the company.
They came in via an equity investment, and they are also one of our leading shareholders. This goes to Pfizer's mandate to continue to develop medicines in also areas of great unmet need, and bring their scientific and strategic expertise to bear. But they also get the upside, we believe, of our other assets as well by being equity shareholders in the company. For SPR206, they hold development and commercial rights to areas outside the U.S. and certain Asian territories. But again, by their ownership in the company, they do get visibility into appropriately for all of our assets.
Yeah, that sounds great. Awesome. I'm gonna cut us off there. We're just a couple of minutes over, but really appreciate the time, Sath, and thanks, everyone, for joining.
It's been a pleasure. Thanks for having us, Gevin. Bye.