Spruce Biosciences, Inc. (NASDAQ:SPRB) Q1 2023 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights several concerns: missed EPS expectations, financial constraints, and regulatory risks. Although there is optimism about FDA approval pathways and potential market size, the lack of a shareholder return plan and financial uncertainty weigh heavily. The Q&A session did not alleviate concerns, as management's responses were vague about financial planning and patient identification. Given these factors, the sentiment leans negative, with a likely stock price decline of -2% to -8% over the next two weeks.
Key Financial Performance
Reported EPS $-0.57 EPS, down from $-0.21 year-over-year due to higher operational costs and ongoing development expenses.
Cash and cash equivalents $38.8 million as of December 31, 2024, reflecting a decrease due to funding ongoing development of TA-ERT.
Shares outstanding 42.2 million shares of common stock outstanding, with 60.7 million on a fully diluted basis, reflecting an increase in shares due to financing activities.
Milestone payments to BioMarin Up to $22.5 million upon achievement of certain developmental and regulatory milestones, and up to $100 million upon achievement of certain sales milestones, reflecting the acquisition of TA-ERT.
Royalty payments to BioMarin Tiered royalties on annual worldwide net sales ranging from high single digits to low teens, reflecting the ongoing partnership and commercialization strategy.
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Operating Highlights
New Product Acquisition: Spruce has acquired Tralesinidase Alfa (TA-ERT) for the treatment of MPS IIIB, a rare pediatric neurodegenerative disease.
BLA Submission Timeline: Spruce anticipates making a BLA submission for TA-ERT in the first half of 2026.
FDA Designations: TA-ERT has received fast track designation, rare pediatric disease designation, and orphan drug designation in the US and EU.
Market Expansion: Spruce plans to commercialize TA-ERT throughout developed markets including North America, the EU, UK, and other international markets.
Patient Population: There are approximately 3,000 MPS patients in the US, with an estimated 135 prevalent cases of MPS IIIB potentially addressable with TA-ERT.
Cash Position: As of December 31, 2024, Spruce had cash and cash equivalents of $38.8 million, expected to fund operations through the end of 2025.
Development Obligations: Spruce is obligated to pay BioMarin up to $22.5 million upon achieving certain developmental milestones and up to $100 million upon achieving sales milestones.
Corporate Strategy Shift: Spruce unveiled a new corporate strategy focused on developing first-in-class therapies for neurological disorders, moving away from previous efforts in CAH.
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Risk or Challenges
Earnings Expectations: Spruce Biosciences missed earnings expectations with a reported EPS of $-0.57, compared to expectations of $-0.21.
Regulatory Risks: The company is pursuing a Biologics License Application (BLA) submission for TA-ERT, which is subject to FDA approval. There are inherent risks in meeting regulatory requirements and timelines.
Developmental Milestones: Spruce is obligated to pay BioMarin up to $22.5 million upon achieving certain developmental and regulatory milestones, which poses financial risks if these milestones are not met.
Financial Constraints: The previous sponsor of TA-ERT discontinued the study due to financial constraints, highlighting potential funding challenges for Spruce.
Market Risks: The commercial success of TA-ERT depends on effective patient identification and market access, which may be influenced by competition and market dynamics.
Clinical Trial Risks: The Phase 3 confirmatory trial must be initiated prior to potential accelerated approval, introducing risks related to trial design, patient enrollment, and outcomes.
Supply Chain Challenges: The company may face supply chain challenges in the production and distribution of TA-ERT, particularly given the specialized nature of the therapy.
Economic Factors: Economic conditions may impact funding availability and the overall market environment for rare disease therapies.
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Guidance & Outlook
Corporate Strategy: Spruce unveiled a new corporate strategy focused on developing and commercializing first-in-class therapy for neurological disorders with significant unmet medical needs.
Acquisition of TA-ERT: Spruce acquired Tralesinidase Alfa (TA-ERT) for the treatment of MPS IIIB, a pediatric neurodegenerative disease.
BLA Submission: Anticipated BLA submission for TA-ERT in the first half of 2026.
FDA Alignment: Achieved alignment with the FDA on key design elements for the Phase 3 confirmatory trial and the use of a specific biomarker for accelerated approval.
Fast Track Designation: TA-ERT has received fast track designation, rare pediatric disease designation, and orphan drug designation in the US and EU.
Commercial Strategy: Plans to build a specialized commercial organization to support the launch of TA-ERT, focusing on patient identification and support.
Cash Runway: Spruce expects its cash runway to fund operations through the end of 2025.
Development Milestones: Spruce is obligated to pay BioMarin up to $22.5 million upon achieving certain developmental and regulatory milestones.
Sales Milestones: Spruce is obligated to pay BioMarin up to $100 million upon achieving certain sales milestones.
Market Potential: Estimates approximately 135 prevalent cases of MPS IIIB in the US, with at least half potentially addressable with TA-ERT therapy.
Commercial Organization Size: Plans to establish a commercial team of 5 to 10 people to effectively launch TA-ERT in the US.
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Shareholder Return Plan
Shareholder Return Plan: Spruce Biosciences has not announced any share buyback program or dividend program during this earnings call.
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Key Q&A
Q:What is your read on the depth of the buy-in for accelerated approval pathway at CBER currently?
A:The FDA has become more amenable to using heparan sulfate as a viable surrogate endpoint for accelerated approval, following a workshop in February 2024. There is a regulatory precedent with other companies like Ultragenyx and Denali having submitted applications under this pathway.
Q:What are your latest thoughts on the financing plan given the limited financial resources?
A:We have current cash resources that will fund our plan through the end of this year, but we will need to tap into additional resources to advance the program beyond that.
Q:Can you walk us down the funnel of MPS Type IIIB patients and how many may actually be able to take the enzyme replacement therapy?
A:There are about 3.3k patients with MPS in the US, with an estimated 135 patients having MPS IIIB. We believe we can address about 50% of those patients.
Q:Can you talk about the confirmatory trial and what the FDA has said about the surrogate heparan sulfate endpoint?
A:The confirmatory trial will involve 14 patients and will compare the treatment with standard care. The FDA has agreed on the study design and the primary outcome will be a neurocognitive measure.
Q:What level of spend is required to get through the period from current cash runway to BLA submission?
A:We would need roughly incremental capital of $60 million to get to a potential approval for TA-ERT, with about half of that needed for the BLA submission.
Q:How might the introduction of another product candidate influence your pricing determination?
A:Pricing will be influenced by the meaningful benefit our compound provides, and we will benchmark against similar products in the market.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the exact number of identified patients in the US who may have been on TA-ERT and are still potential candidates for treatment. They also did not provide specific details on the financial implications of the confirmatory study.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BLA
FDA
NAGLU
Phase
Study
TA ERT
Type IIIB
ability
age
approval
axis
baseline
brain
case
center
child
cognition
designation
development
disease patient
drug
end
enzyme
family
launch
line
matter
patient study
plot
program
statement
study patient
sulfate level
therapy
today
treatment
trial
type
volume
week
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SPRB Transcript
Spruce Biosciences, Inc. (NASDAQ:SPRB) Q1 2023 Earnings Call Transcript
Unknown4-17
The earnings call highlights several concerns: missed EPS expectations, financial constraints, and regulatory risks. Although there is optimism about FDA approval pathways and potential market size, the lack of a shareholder return plan and financial uncertainty weigh heavily. The Q&A session did not alleviate concerns, as management's responses were vague about financial planning and patient identification. Given these factors, the sentiment leans negative, with a likely stock price decline of -2% to -8% over the next two weeks.
Spruce Biosciences, Inc. (SPRB) Corporate Update Conference Call (Transcript)
Neutral4-15
SPRB Report
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