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Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-03-13 · 432 added, 461 removed, 964 unchanged (48% of the section changed)

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As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

We are a multi-asset, clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and and diseases caused by MDR bacterial infections with high unmet need.

Our wholly-owned lead product candidate, SPR720, is an oral antimicrobial agent in development for the treatment of NTM pulmonary disease, a rare orphan disease.

We believe that SPR720, if successfully developed and approved, has the potential to be the first approved oral agent for NTM pulmonary disease in treatment-naïve and treatment-experienced and non-refractory patients.

Our partner-directed programs consist of tebipenem HBr and SPR206.

Tebipenem HBr is designed to be the first oral carbapenem-class antibiotic for use to treat cUTIs, including pyelonephritis, caused by certain microorganisms, in adult patients who have limited oral treatment options.

SPR206 is an IV-administered antibiotic that has shown activity in preclinical studies against MDR Gram-negative pathogens, including carbapenem-resistant Enterobacterales, Acinobacter baumannii and Pseudomonas aeruginosa .

We are developing SPR206 to treat MDR Gram-negative bacterial infections in the hospital setting.

We believe that our novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare orphan diseases and life-threatening bacterial infections, in both the community and hospital settings.

Since our inception in 2013, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates.

We are a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases caused by MDR bacterial infections with high unmet need.

Since our inception in 2013, we have focused our efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates.

We do not have any products approved for sale and have not generated any revenue from product sales.

We have experienced net losses and significant cash outflows from cash used in operating activities since our inception through 2022.

We believe that our novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare diseases and life-threatening bacterial infections, in both the community and hospital settings.

Our pipeline consists of mid-to late-stage clinical assets.

Our most advanced clinical stage product candidate, tebipenem HBr, is in Phase 3 development, with the potential to be the first broad-spectrum oral carbapenem to treat adult patients with cUTIs, including pyelonephritis, caused by certain microorganisms.

The other programs in our pipeline are SPR206 and SPR720.

SPR206 is an IV-administered next generation polymyzin product candidate for the treatment of HABP/VABP caused by MDR Gram-negative bacterial infections.

In March 2025, following a reprioritization of our programs, we announced that we are no longer pursuing a planned Phase 2 clinical trial for SPR206.

SPR720 is a product candidate for first-line treatment of NTM pulmonary disease.

In October 2024, we announced that results from a planned interim analysis of our Phase 2a clinical trial for SPR720 demonstrated the oral agent did not meet its primary endpoint and we elected to suspend development of SPR720 in its oral formulation.

We are currently completing analysis of remaining data from all 25 patients dosed in the trial ahead of determining next steps.

We have experienced mostly net losses and significant cash outflows from cash used in operating activities since our inception.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

As of December 31, 2024, we had an accumulated deficit of $459.6 million, and cash and cash equivalents of $52.9 million.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.

Based on our current operating plans, we believe that our cash runway will be sufficient to fund us into late 2025.

During this period, we plan to prioritize advancing SPR720 to key Phase 2 milestones, advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and advancing SPR206 Phase 2 activities contingent on obtaining non-dilutive financing.

We expect to continue to incur significant expenses and operating losses for at least the next year.

Based on our cash and cash equivalents as of December 31, 2024, together with earned and non-contingent development milestone payments from GSK, as well as other non-dilutive funding commitments, we believe that our cash runway will be sufficient to fund our operating expenses and required capital expenditures into the second quarter of 2026.

During this period, we plan to prioritize advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and completing our analysis of the full dataset from the 25 treated patients in the Phase 2a proof-of-concept trial of SPR720.

Beyond this point we will need additional funding, which we expect will primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations or additional grant funding.

If we are not able to secure adequate additional funding, we plan to make reductions in spending.

In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs.

If we are not able to secure adequate additional funding, we plan to make further reductions in spending.

In that event, we may have to delay, scale back, or eliminate some or all of our planned development activities.

The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management’s assessment of our ability to continue as a going concern.

As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Recent Developments

Interim Leadership Changes

In January 2025, the independent directors of our Board of Directors approved the following actions as a matter of corporate governance best practices and to enable the Company to maintain focus on pursuing our business objectives pending resolution of a “Wells Notice” received from the staff of the Boston Regional Office (the “Staff”) of the SEC.

The Wells Notice was regarding the Staff's preliminary determination to recommend a civil enforcement action or administrative proceeding against the Company , its former Chief Executive Officer and Chairman of the Board of Directors, Ankit Mahadevia, M.D.

Mahadevia”), and its former Chief Financial Officer and President and Chief Executive Officer, Satyavrat “Sath” Shukla (“Mr.

Shukla”), relating to certain public disclosures by the Company from March 31, 2022 leading up to the announcement on May 3, 2022 that we had determined to cease commercialization of tebipenem HBr based on feedback from the FDA, and whether our disclosures may have violated the federal securities laws.

• The Board of Directors appointed director Frank Thomas to serve as the Chairman of the Board of Directors, stepping in for Ankit Mahadevia, M.D.

Shukla agreed to a paid administrative leave from his role as President and Chief Executive Officer, pending resolution of the Investigation.

During such leave, Mr.

Shukla remains an employee and continues to serve as a member of the Board of Directors for the duration of his directorship term.

• The Board of Directors appointed Esther Rajavelu, our Chief Financial Officer, Chief Business Officer and Treasurer, to serve as Interim President and Chief Executive Officer during the term of Mr.

Shukla’s administrative leave.

The terms of Ms.

Rajavelu’s existing employment arrangement with the Company have been amended to provide that she will receive additional cash compensation of $20,000 per month while she serves as the Interim President and Chief Executive Officer, in addition to her role as Chief Financial Officer and Chief Business Officer.

Components of Our Results of Operations

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Grant Revenue

We expect a portion of our revenue for the next few years will continue to be derived from payments under our active government awards and any awards that we may enter into in the future.

We expect a portion of our revenue will continue to be derived from payments under our active government awards and any awards that we may receive in the future.

Collaboration Revenue

Collaboration revenue relates to our agreements with Everest, Pfizer and GSK.

Current collaboration revenue relates to our agreements with Pfizer and GSK.

Operating Expenses

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This is due to the numerous risks and uncertainties, including the following:

• successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of the COVID-19 pandemic;

• receipt of marketing approvals from applicable regulatory authorities;

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General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We also anticipate that we will continue to incur accounting, audit, legal, regulatory, compliance, infrastructure and director and officer insurance costs, as well as investor and public relations expenses associated with our continued operation as a public company.

We anticipate that we will continue to incur accounting, audit, legal, regulatory, compliance, infrastructure and director and officer insurance costs, as well as investor and public relations expenses associated with our continued operation as a public company.

Restructuring

In light of our prior decision to suspend commercialization activities for tebipenem HBr and our strategic restructuring, as announced in May 2022, our operating expenses were substantially reduced during the year ended December 31, 2022.

We expect to continue to incur research and development and general and administrative expenses in 2024 to support activities under our subsequently announced GSK License Agreement that closed in November 2022.

In connection with our restructuring, during the year ended December 31, 2022 we incurred approximately $11.6 million of costs in connection with the reduction in workforce related to severance pay and other restructuring costs.

We incurred the majority of the costs associated with our restructuring during the second quarter of 2022.

As of December 31, 2023, all of these costs were paid.

In light of our decision to suspend planned development activities for our oral SPR720 program and our strategic restructuring, we expect that our future expenses relating to development activities with respect to SPR720 will be substantially reduced as we evaluate potential paths forward for SPR720 and implement our restructuring.

In connection with our restructuring, we estimate that we will incur approximately $1.1 million of costs in connection with the reduction in workforce related to severance pay and other related termination benefits of which we incurred $0.9 million during the year ended December 31, 2024 and anticipate the remaining to be incurred in 2025.

We may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reduction.

Most of the costs associated with our workforce reduction were incurred during the quarter ended December 31, 2024.

Other Income (Expense)

Interest Income (Expense)

Interest income (expense) consists of interest expense related to the sale of future royalties and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities.

Interest income (expense) consists of interest income related to the significant financing component related to the GSK License Agreement and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities.

Other Income (Expense), Net

Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as the loss on extinguishment of liability related to the sale of future royalties, the change in the fair value of our derivative liability, realized and unrealized gains and losses from foreign currency-denominated cash balances, vendor payables and receivables related to the Australian research and development tax incentive.

We have not recorded any income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2023, we had federal and state net operating loss carryforwards of $94.7 million and $90.9 million, respectively, which may be available to offset future income tax liabilities.

All federal NOLs can be carried forward indefinitely.

Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as realized and unrealized gains and losses from foreign currency-denominated cash balances and vendor payables.

Except for year ended December 31, 2022, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2024, we had federal and state net operating loss carryforwards ("NOLs") of $165.2 million and $120.6 million, respectively which may be available to offset future income tax liabilities.

$152.0 million of the federal NOLs can be carried forward indefinitely and $13.2 million of the federal NOLs begin to expire in 2034.

The state NOLs begin to expire in 2034 and will expire at various dates through 2044.

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For contracts with government agencies, when we have concluded that we are the principal in conducting the research and development expenses and where the funding arrangement is considered central to our ongoing operations, we classify the recognized funding received as revenue.

Revenue from government grants is recognized as the qualifying expenses related to the contracts are incurred, provided that there is reasonable assurance of recoverability.

Revenue from government grants is recognized as the qualifying expenses related to the contracts are incurred, provided that

there is reasonable assurance of recoverability.

Revenue recognized upon incurring qualifying expenses in advance of receipt of funding is recorded as unbilled receivables, a component of prepaid expenses and other current assets, in the consolidated balance sheet.

We recognize funding received from BARDA, the DoD and the NIAID of the NIH, as revenue, rather than as a reduction of research and development expenses, because we are the principal in conducting the research and development activities and these contracts are central to our ongoing operations.

We recognize funding received from BARDA and the NIAID of the NIH, as revenue, rather than as a reduction of research and development expenses, because we are the principal in conducting the research and development activities and these contracts are central to our ongoing operations.

We recognize revenue only after the qualifying expenses related to the contracts have been incurred, we are reasonably assured that the expenses will be reimbursed and the revenue is collectible.

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Restructuring

We made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including one-time termination benefits and other exit costs accounted for upon the announcement of our restructuring in May 2022.

We made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including one-time termination benefits accounted for upon the announcement of our restructuring in October 2024.

Restructuring charges are reflected in our consolidated statements of income.

Results of Operations

Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of revenues and the satisfaction of liabilities in the normal course of business.

We have incurred recurring cash outflows from operating activities, have an accumulated deficit and need to raise additional capital to fund future operations.

These factors raise substantial doubt about our ability to continue as a going concern.

Comparison of the Years Ended December 31, 2024 and 2023

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General and administrative

Impairment of long-term asset

Restructuring

Impairment of long-term asset

Total operating expenses

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Other income (expense), net

Interest expense related to the sale of future royalties

Loss on extinguishment of liability related to the sale of future royalties

Change in fair value of derivative liability

Total other income (expense), net

Total other income, net

Net income (loss) before income taxes

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NIAID Contract (SPR206)

DoD Agreement (SPR206)

Total revenue

Grant revenue recognized during 2024 and 2023 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The increase in revenue during 2023 was primarily due to an increase of $2.2 million in funding under our BARDA contract for tebipenem HBr and an increase of $0.9 million in qualified expenses incurred under our NIAID award relating to SPR206, partially offset by a decrease funding of $1.0 million under our DoD agreement relating to SPR206.

The increase in revenue during 2024 was primarily due to an increase of $15.8 million in funding under our BARDA contract related to our pivotal Phase 3 clinical trial of tebipenem HBr, partially offset by a decrease of $2.3 million in qualified expenses incurred under our NIAID award relating to SPR206.

Collaboration Revenue - Related Party

During the years ended December 31, 2024 and 2023, collaboration revenue - related party related to revenue recognized under the GSK License Agreement.

During the year ended December 31, 2024, we recognized $27.0 million in collaboration revenue - related party under the GSK License Agreement.

During the year ended December 31, 2023, we recognized $95.8 million in collaboration revenue - related party, of which $21.2 million was recognized upon achievement of the $30.0 million milestone under the GSK License Agreement and $64.7 million upon achievement of the $95.0 million milestone under the GSK License Agreement.

During the year ended December 31, 2022 we recognized collaboration revenue - related party of $46.1 million.

Collaboration Revenue

During the year ended December 31, 2024 we recognized $0.4 million in collaboration revenue related to our agreement with Pfizer.

During the year ended December 31, 2022 we recognized collaboration revenue of $1.8 million related to our agreement with Pfizer and $0.7 million related to milestones earned under our agreement with Everest.

During the year ended December 31, 2023 we recognized $0.9 million in collaboration revenue related to our agreement with Pfizer.

Research and Development Expenses

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Total research and development expenses

Direct costs related to our SPR720 program increased by $10.2 million during 2023 compared to 2022, due to increased clinical activity during the period related to our ongoing Phase 2a clinical trial of SPR720, which we initiated in the fourth quarter of 2022.

We expect to continue to incur direct costs related to SPR720 as we continue to screen and enroll patients and progress clinical activities.

Direct costs related to our tebipenem HBr program decreased by $0.4 million during 2023 compared to 2022 as we progressed clinical and preclinical activities related to our PIVOT-PO Phase 3 trial of tebipenem HBr, which we initiated in the fourth quarter of 2023.

We expect to continue to incur direct costs related to tebipenem HBr as we continue to progress PIVOT-PO.

During the years ended December 31, 2023 and 2022, direct costs related to tebipenem HBr included $0.9 million and $6.6 million paid to Meiji, respectively, as a percentage of certain amounts received from any sublicensees, out of the $7.5 million we were obligated to pay under the Meiji License.

Direct costs related to our SPR206 program decreased by $1.2 million during the year ended December 31, 2023, primarily due to decreased preclinical activity and expenses associated with formulation development, manufacturing process and manufacturing of clinical trial material during the period.

We expect to continue to incur direct costs related to SPR206 as we progress preclinical and clinical activities.

The decrease in personnel-related costs of $5.1 million was primarily due to decreased research and development headcount costs related to our strategic restructuring.

Direct costs related to our tebipenem HBr program increased by $43.8 million during the year ended December 31, 2024, compared to the year ended December 31, 2023, due to increased clinical activities related to our Phase 3 clinical trial of tebipenem HBr, which we initiated in the fourth quarter of 2023.

Direct costs related to our tebipenem HBr program during the year ended December 31, 2024 reflect a $3.6 million reduction to expense related to a purchase of drug substance material by GSK.

Direct costs related to our SPR720 program increased by $3.6 million during the year ended December 31, 2024, compared to the year ended December 31, 2023, due to clinical activity during the period related to our Phase 2a clinical trial of SPR720, which completed enrollment in the second quarter of 2024.

Subsequently, in October 2024, we announced that we would suspend current development activities for SPR720 based on an interim analysis of the Phase 2a proof-of-concept study of SPR720 for the treatment of NTM-PD not meeting its primary endpoint.

Direct costs related to our SPR206 program decreased by $2.7 million during the year ended December 31, 2024, primarily due to decreased preclinical activity.

In light of the suspension of development activities for our SPR720 program and the discontinuation of development of SPR206, we expect that direct research and development costs related to those programs will be reduced in future periods.

The increase in personnel-related costs of $0.3 million was primarily due to increased research and development personnel costs.

Personnel-related costs for the years ended December 31, 2024 and 2023 included share-based compensation expenses of $2.6 million and $2.7 million, respectively.

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Total general and administrative expenses

The decrease in personnel-related costs of $5.1 million was primarily a result of decreased headcount costs in our commercial and general and administrative functions as a result of our strategic restructuring.

The decrease in personnel-related costs of $2.1 million was primarily a result of decreased headcount costs in our general and administrative functions during the period.

Personnel-related costs for the years ended December 31, 2024 and 2023 included share-based compensation expense of $5.2 million and $5.3 million, respectively.

The decrease in professional and consultant fees of $4.0 million was primarily due to decreased commercial operation expenses, offset by legal and consulting expenses incurred during the year ended December 31, 2023.

The increase in professional and consultant fees was primarily due to increased legal and consulting expenses incurred during the year ended December 31, 2024.

Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff.

Restructuring

During the year ended December 31, 2024, we incurred restructuring expenses of $0.9 million related to our strategic restructuring that we announced in October 2024.

Restructuring expenses for the period were primarily comprised of severance and other employee costs.

For further information, refer to Note 9 – Restructuring to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Impairment of Long-Term Asset

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During the year ended December 31, 2023, we recorded $2.6 million of income tax expense primarily related to a change in estimate with respect to the tax treatment of the GSK License Agreement.

Restructuring

During the year ended December 31, 2022, we incurred restructuring expenses of $11.6 million related to our strategic restructuring that we announced in May 2022.

Restructuring expenses for the period were primarily comprised of $8.6 million of severance and other employee costs and $3.0 million of discontinuation costs such as contract termination fees and lease impairment expenses.

For further information, refer to Note 10 – Restructuring to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Other Income (Expense), Net

Other income (expense), net was $3.9 million during 2023, compared to $(4.2) million during 2022.

Other Income, Net

Other income, net was $4.8 million during 2024, compared to $3.9 million during 2023.

Total other income for the year ended December 31, 2024 included $4.7 million of interest income, of which $1.5 million related to the significant financing component recognized under the GSK License Agreement, offset by immaterial fluctuations in unrealized foreign currency.

Total other income for the year ended December 31, 2023 included $3.9 million of interest income, offset by fluctuations in unrealized foreign currency.

Total other expense for the year ended December 31, 2022 included $2.6 million in interest expense related to the sale of future royalties, $3.6 million in loss on extinguishment of liability related to the sale of future royalties and net immaterial changes primarily due to fluctuations in unrealized foreign currency gains, offset by a $0.9 million net change in derivative liability and $1.1 million in interest income.

Liquidity and Capital Resources

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As of December 31, 2024, we had cash and cash equivalents of $52.9 million.

Below is a summary of some of the items impacting our liquidity and capital resources in 2023:

• In July 2023, we received written agreement from the FDA, under a SPA, on the design and size of PIVOT-PO, a pivotal Phase 3 clinical trial of tebipenem HBr in patients with cUTI, including AP.

Under the terms of the GSK License Agreement, we received a $30.0 million development milestone payment during the third quarter of 2023.

• During the year ended December 31, 2023, we sold 144,476 shares of our common stock under the Sales Agreement at an average price of approximately $1.58 per share for aggregate gross proceeds of approximately $0.2 million prior to deducting sales commissions.

The following table summarizes our sources and uses of cash for the years ended December 31, 2024 and 2023:

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Cash used in operating activities

Cash provided by investing activities

Cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash provided by financing activities

Net decrease in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the year ended December 31, 2024 was $23.4 million, primarily resulting from our net loss of $68.6 million, adjusted for net non-cash items of $8.8 million (primarily due to stock-based compensation).

Net cash provided by changes in our operating assets and liabilities was $36.3 million and consisted primarily of a $46.4 million decrease in our related party collaboration receivable, primarily due to the receipt of the first and second installments of the development milestone payments from GSK (see Note 13 - License, Collaboration and Service Agreements), a $26.6 million net decrease in deferred revenue, offset by an increase of $17.1 million in accrued expenses and accounts payable.

Net cash used in operating activities for the year ended December 31, 2023 was $33.0 million, primarily resulting from our net income of $22.8 million, adjusted for net non-cash items of $14.6 million (primarily due to stock-based compensation and asset impairment).

Net cash used by our operating assets and liabilities was $70.4 million and consisted primarily of a $95.7 million increase in our related party collaboration receivable, $29.0 million net increase in deferred revenue and a decrease of $1.7 million in accrued expenses and accounts payable.

Net cash used in operating activities for the year ended December 31, 2022 was $7.7 million, primarily resulting from our net loss of $46.4 million, adjusted for net non-cash items of $16.6 million (primarily stock-based compensation, interest expense associated with the sale of future royalties, loss on extinguishment of liability related to the sale of future royalties, change in the value of derivative liabilities and depreciation and amortization expense).

Net cash provided by changes in our operating assets and liabilities was $22.1 million and consisted primarily of a $21.9 million net increase in deferred revenue, a decrease of $5.9 million in accrued expenses and accounts payable, a $5.2 million decrease in prepaid expenses and other current assets and a $1.5 million net decrease in receivables related to our tax incentive receivables and government awards.

Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to the advancement of our development programs, the timing of vendor invoicing and payments and write-offs during the second quarter of 2022 related to our strategic restructuring.

Changes in deferred revenue are primarily related to the GSK License Agreement and our license agreement with Pfizer.

Changes in collaboration receivable related to the GSK License Agreement.

Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to the advancement of our programs and the timing of vendor invoicing and payments.

Changes in deferred revenue are related to the GSK License Agreement and our license agreement with Pfizer.

Changes in collaboration receivable - related party related to the GSK License Agreement.

Investing Activities

We did not undertake any investing activities during the year ended December 31, 2023.

Net cash provided by investing activities for the year ended December 31, 2022 was $33.8 million, primarily related to the maturities of marketable securities of $60.8 million, offset by purchases of marketable securities of $27.0 million.

We did not undertake any investing activities during either of the years ended December 31, 2024 or 2023.

Financing Activities

We did not undertake any financing activities during the year ended December 31, 2024.

Cash provided by financing activities during the year ended December 31, 2023 was $0.2 million, due to the $0.2 million net sales of common stock under our Sales Agreement.

Net cash used in financing activities for the year ended December 31, 2022 was $29.6 million, consisting primarily of the $54.5 million repayment of our liability related to the sales of future royalties, partially offset by net proceeds of $14.2 million from the sale of common stock under our “at-the-market” offering program Sales Agreement, proceeds of $9.0 million related to our GSK SPA, and proceeds of $0.4 million from the exercise of employee stock options.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance our clinical programs and prepare for possible commercialization of one or more of our product candidates.

In addition, we expect to incur additional costs associated with our continued operation as a public company.

The timing and amount of our operating expenditures will depend largely on:

Our future use of operating cash and capital requirements, and the timing and amount thereof, will depend largely on:

• the timing and costs of our ongoing and planned clinical trials;

• the initiation, progress, timing, costs and results of preclinical studies and clinical trials of our product candidates and potential new product candidates;

• the amount of funding that we receive under government contracts that we have applied for;

• the amount of funding that we receive under government contracts that we have applied for or may apply for in the future;

• the number and characteristics of product candidates that we pursue;

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• the extent to which we in-license or acquire other products and technologies;

• costs associated with litigation and any government investigation.

As of December 31, 2024, we had cash and cash equivalents of $52.9 million.

In accordance with ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements.

Based on our current operating plans, we believe that our cash runway will be sufficient to fund us into late 2025.

Beyond this point we will need additional funding, which primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations, additional grant funding and/or reducing cash expenditures.

Based on the Company’s current operating plan and existing cash and cash equivalents, the Company has determined that there is substantial doubt regarding its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

Based on our cash and cash equivalents as of December 31, 2024, together with earned and non-contingent development milestone payments from GSK, as well as other non-dilutive funding commitments, we believe that our cash runway will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2026.

This timeline is subject to uncertainty as to the timing of future expenditures.

We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations and/or reducing cash expenditures.

If we are not able to secure adequate additional funding, we plan to make reductions in spending.

In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials and research stage programs.

In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials, and research stage.

As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.

We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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Our future funding requirements will depend on and could increase significantly as a result of many factors, including those listed above.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government funding, collaborations, strategic alliances and marketing, distribution or

licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

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If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

There is ongoing volatility in financial markets.

If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, including relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted.

If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, our operations and financial condition could be adversely impacted.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

On February 25, 2025, we received a deficiency letter from the Listing Qualifications Department informing us that we were not in compliance with the continued listing requirements of the Nasdaq Global Select Market because the bid price for our common stock had closed below $1.00 per share for 30 consecutive business days.

We have until August 25, 2025, to regain compliance with the bid price requirement.

If we do not regain compliance with the bid price requirement, our common stock will be subject to delisting.

Any potential delisting of our common stock could have a material adverse effect on the market for, and liquidity and price of, our common stock and would adversely affect our ability to raise capital on terms acceptable to us, or at all.

Contractual Obligations and Commitments

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As of December 31, 2024, we had cash and cash equivalents of $52.9 million, consisting of cash and money market accounts.

The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without

significantly increasing risk.

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates.

The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk.

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S.

Treasury interest rates.

We did not have any assets classified as marketable securities as of December 31, 2024.

As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the United States dollar.

As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the U.S.

Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements.

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Shares and Stockholders’ Equity

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Spero Therapeutics, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of convertible preferred shares and stockholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of stockholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring cash outflows from operating activities, has an accumulated deficit and needs to raise additional capital to fund future operations, which raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations.

Management’s evaluation of the events and conditions and management’s plans to mitigate these matters are also described in Note 1.

Critical Audit Matters

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The Company’s research and development expense for the year ended December 31, 2024 was $96.8 million, a significant portion of which relates to external research and development costs.

Management recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers.

The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers.

This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf, and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs.

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Accumulated deficit

Accumulated other comprehensive income (loss)

Total stockholders' equity

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General and administrative

Impairment of long-term asset

Restructuring

Impairment of long-term asset

Total operating expenses

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Other income (expense), net

Interest expense related to the sale of future royalties

Loss on extinguishment of liability related to the sale of future royalties

Change in fair value of derivative liability

Total other income (expense), net

Total other income, net

Net income (loss) before income taxes

Income tax expense

Net income (loss)

Net income (loss) and comprehensive income (loss)

Net income (loss) per share attributable to common stockholders, basic

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Weighted average common shares outstanding, diluted:

Comprehensive income (loss):

Net income (loss)

Other comprehensive gain (loss):

Unrealized gain on marketable securities

Net unrealized gains (losses) on securities

Total comprehensive income (loss)

The accompanying notes are an integral part of these consolidated financial statements.

SPERO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQ UITY

(In thousands, except unit and share amounts)

Series A, B, C and D

Convertible Preferred Stock

Other Comprehensive

Stockholders'

Income (Loss)

Balances at December 31, 2022

Issuance of common stock upon the exercise of stock options

Issuance of common stock upon the vesting of restricted stock units and performance stock units

Issuance of common stock, net of issuance costs

Issuance of common stock under GSK Share Purchase Agreement, net of discount of $ 1.3 million

Conversion of convertible preferred stock to common stock

Share-based compensation expense

Unrealized gain on available-for-sale securities

Net income (loss)

Balances at December 31, 2023

Issuance of common stock upon the exercise of stock options

Issuance of common stock upon the vesting of restricted stock units and performance stock units

Issuance of common stock, net of issuance costs

Share-based compensation expense

Unrealized gain on available-for-sale securities

Net income (loss)

Balances at December 31, 2024

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Share-based compensation

Unrealized foreign currency transaction (gain) loss

Accretion of premium (discount) on marketable securities

Change in fair value of derivative liabilities

Non-cash interest expense associated with the sale of future royalties

Loss on extinguishment of liability related to the sale of future royalties

Changes in operating assets and liabilities:

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Accrued expenses and other current liabilities

Deferred revenue, current and non-current

Deferred revenue

Deferred revenue - related party

Other long-term liabilities

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Net cash used in operating activities

Cash flows from investing activities:

Purchases of marketable securities

Proceeds from maturities of marketable securities

Net cash provided by investing activities

Cash flows from financing activities:

Repayment of liability related to the sale of future royalties

Proceeds from the issuance of common stock, net of issuance costs

Proceeds from the issuance of common stock related to the GSK Share Purchase Agreement

Proceeds from stock option exercises

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Nature of the Business and Basis of Presentation

Spero Therapeutics, Inc., together with its consolidated subsidiaries (the “Company” or “Spero”), is a multi-asset, clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases caused by multi-drug resistant (“MDR”) bacterial infections with high unmet need.

The Company's wholly-owned lead product candidate, SPR720, is an oral antimicrobial agent in development for the treatment of nontuberculous mycobacterial (“NTM”) pulmonary disease, a rare orphan disease.

The Company's partnership-directed programs consist of SPR206 and tebipenem HBr.

SPR206 is an IV-administered antibiotic being developed as an innovative option to treat MDR Gram-negative bacterial infections in the hospital setting.

Tebipenem HBr is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use to treat complicated urinary tract infections (“cUTIs”) including pyelonephritis, caused by certain microorganisms, in adult patients who have limited oral treatment options.

The Company is a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases caused by multi-drug resistant (“MDR”) bacterial infections with high unmet need.

Since the Company’s inception in 2013, it has focused its efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for its product candidates.

The Company does not have any products approved for sale and has not generated any revenue from product sales.

The Company believes that its novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare diseases and life-threatening bacterial infections, in both the community and hospital settings.

The Company’s pipeline consists of mid- to late-stage clinical assets.

The Company’s most advanced clinical stage product candidate, tebipenem HBr, is in Phase 3 development, with the potential to be the first broad-spectrum oral carbapenem to treat adult patients with complicated urinary tract infections (“cUTIs”), including pyelonephritis, caused by certain microorganisms.

The other programs in our pipeline are SPR206 and SPR720.

SPR206 is an i ntravenously (“IV”) administered next generation polymyxin product candidate, for the treatment of hospital-acquired and ventilator-associated bacterial pneumonia (“HABP/VABP”) caused by MDR Gram-negative bacterial infections.

In March 2025, following a reprioritization of its programs, the Company announced that it is no longer pursuing a planned Phase 2 clinical study for SPR206.

SPR720 is a product candidate for first-line treatment of nontuberculous mycobacterial (“NTM”) pulmonary disease.

In October 2024, the Company announced that results from a planned interim analysis of its Phase 2a clinical trial for SPR720 demonstrated the oral agent did not meet its primary endpoint, and the Company elected to suspend development of SPR720 in its oral formulation.

The Company is currently completing analysis of the remaining data from all 25 patients dosed in the trial ahead of determining next steps.

The Company was formed as Spero Therapeutics, LLC in December 2013 under the laws of the State of Delaware .

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Since inception, the Company has funded its operations with proceeds from sales of preferred units (including bridge units, which converted into preferred units), payments received in connection with its collaboration and licensing agreements, funding from government contracts and through the sale of the Company’s common and preferred stock.

The Company has incurred recurring losses since inception through 2022.

During the years ended December 31, 2023 and 2022, the Company had net income of $ 22.8 million and net loss of $ 46.4 million, respectively.

The Company has incurred recurring cash outflows from operating activities and losses in most years since its inception.

During the years ended December 31, 2024 and 2023, the Company had net loss of $( 68.6 ) million and net income of $ 22.8 million, respectively.

In addition, as of December 31, 2024, the Company had an accumulated deficit of $ 459.6 million.

The Company expects to continue to generate operating losses for the foreseeable future.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

As of the issuance date of these annual consolidated financial statements, the Company expects its current operating plan, existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of these annual consolidated financial statements.

The Company will require additional funding to fund the development of its product candidates through regulatory approval and commercialization, and to support its continued operations.

The Company may seek additional funding through public or private financings, debt financing, collaboration agreements, government grants or other avenues.

There is no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, and it could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could materially adversely affect its business prospects or its ability to continue operations.

On February 25, 2025, the Company received a deficiency letter from the Listing Qualifications Department informing it that it was not in compliance with the continued listing requirements of the Nasdaq Global Select Market because the bid price for its common stock had closed below $1.00 per share for 30 consecutive business days.

The Company has until August 25, 2025 to regain compliance with the bid price requirement.

If the Company does not regain compliance with the bid price requirement, its common stock will be subject to delisting.

Any potential delisting of the Company’s common stock could have a material adverse effect on the market for, and liquidity and price of, the Company’s common stock and would adversely affect the Company's ability to raise capital on terms acceptable to the Company, or at all.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205- 40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

The Company will require additional funding to fund the development of its product candidates through regulatory approval and to support its continued operations.

The Company will seek additional funding through public or private financings, debt financing, collaboration agreements, government grants or other venues.

If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, our operations and financial condition could be adversely impacted.

There is no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, and it could be forced to delay, reduce or eliminate some or all of its research and development programs, or product portfolio expansion efforts, which could materially adversely affect its business prospects or its ability to continue operations.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Summary of Significant Accounting Policies

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the accrual for clinical trial costs and other

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

research and development expenses and the valuation of share-based awards.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the accrual for clinical trial costs and other research and development expenses and the valuation of share-based awards.

There may be changes to those estimates in future periods.

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Cash and cash equivalents include cash held in banks and money market instruments.

Marketable Securities

Marketable securities consist of investments in corporate obligations with original maturities greater than 90 days.

The Company considers its portfolio of investments to be available-for-sale.

Accordingly, these investments are recorded at fair value, which is based on quoted market prices.

Investments with maturities beyond one year are generally classified as short term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

Realized gains and losses and declines in value are included as a component of other income (expense), net based on the specific identification method.

Any credit impairments are recorded through an allowance account.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

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The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

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Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment and operating lease right-of-use assets.

Long-lived assets consist of operating lease right-of-use assets.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

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The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

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Revenue Recognition – Collaboration Revenue

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has entered into licensing agreements that are evaluated under Accounting Standards Codification, Topic 606 (“Topic 606”), Revenue from Contracts with Customers, through which the Company licenses certain of its product candidates’ rights to a third party.

23 unchanged sentences

If a promised good or service is not distinct, the Company is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis.

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Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method.

4 unchanged sentences

When an arrangement contains payment terms that are extended beyond one year, a significant financing component may exist.

The Company assessed its revenue-generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does exist in certain arrangements.

The significant financing component is calculated as the difference between the stated value and present value of the milestones payable and is recognized as interest income over the extended payment period.

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The assumptions to develop the estimated standalone selling price for the related research and development services include estimates of costs to be incurred to fulfill its obligations associated with the performance of the research and development services, plus a reasonable margin.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Government Tax Incentives

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SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf, and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs.

There may be instances in which payments made to these vendors exceed the level of service provided and will result in a prepayment of the expense.

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Restructuring

The Company made estimates and judgments regarding the amount and timing of its restructuring expense and liability, including one-time termination benefits and other exit costs accounted for upon the announcement of the restructuring in May 2022.

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

8 unchanged sentences

The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss), as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

There were no changes during the year ended December 31, 2023.

For the year ended December 31, 2022, these changes related to unrealized gains and losses on the Company’s available-for-sale marketable securities.

There were no reclassifications out of comprehensive loss for the years ended December 31, 2023 and 2022.

For the years ended December 31, 2024 and 2023 , there were no components of other comprehensive income (loss), and therefore comprehensive loss is the same as net loss.

Net Income (Loss) per Share

The Company follows the two-class method when computing net income (loss) per share, as the Company has issued shares that meet the definition of participating securities.

When the Company issues shares that meet the definition of participating securities, the Company follows the two-class method when computing net income (loss) per share.

The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Net income (loss) per share attributable to common stockholders is calculated based on net income (loss) attributable to Spero Therapeutics, Inc.

Net income (loss) per share attributable to common stockholders is calculated based on net income (loss) attributable to the Company.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

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Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

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Taxpayers are now required to capitalize and amortize these costs over five years for research conducted within the United States or 15 years for research conducted abroad.

Derivative Liability

In connection with certain transactions, the Company identified certain embedded derivatives, which were recorded as liabilities on the Company’s consolidated balance sheet and were remeasured to fair value at each reporting date until the derivative was settled.

Changes in the fair value of the derivative liabilities were recognized as other income (expense) in the consolidated statement of operations and comprehensive loss.

Recently Issued and Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.

Unless otherwise noted, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its condensed consolidated financial statements and disclosures.

On March 6, 2024, the SEC approved a rule that will require registrants to provide certain climate-related information in their registration statements and annual reports.

The rule requires information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition.

The required information about climate-related risks also includes disclosure of a registrant's greenhouse gas emissions.

In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements.

The Company is evaluating the potential impact of this rule on the consolidated financial statements and related disclosures.

In December 2023, the FASB ASU 2023-09, Improvements to Income Tax Disclosures.

Unless otherwise noted, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements and disclosures.

In November 2024, the FASB issued an amendment to the accounting guidance on income statement presentation to require disclosure, in the notes to the financial statements, of disaggregated information about certain costs and expenses, including purchases of inventory, employee compensation, and depreciation and amortization included in each relevant expense caption within continuing operations.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures.

This ASU is related to the disclosure of rate reconciliation and income taxes paid.

This guidance becomes effective for annual periods beginning after December 15, 2024 with early adoption permitted and should be applied on a prospective basis.

The Company does not expect this standard to have a material impact on its consolidated financial statements, but it will require increased disclosures within the notes to the consolidated financial statements.

This guidance became effective for annual periods beginning after December 15, 2024.

This standard does not have a material impact on the Company's consolidated financial statements, but it requires increased disclosures within the notes to the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures.

This ASU is related to reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This guidance becomes effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted and should be applied on a retrospective basis.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The ASU also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires specific disclosures for equity securities subject to contractual sale restrictions.

The amendments in ASU 2022-03 are effective for fiscal years beginning after December 15, 2023.

The Company early adopted this standard during the fourth quarter of 2022 and it did not have a material impact on its consolidated financial statements and related disclosures.

This guidance became effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and is applied on a retrospective basis.

Retrospective application is required, and early adoption is permitted.

The Company adopted this guidance for the year ended December 31, 2024 and applied the guidance retrospectively for all periods presented.

Fair Value Measurements and Marketable Securities

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During the years ended December 31, 2024 and 2023, there were no transfers between Level 1, Level 2 and Level 3 categories.

Embedded Derivative

Liability related to change of control

In connection with the termination of the Revenue Interest Financing Agreement (“Revenue Interest Agreement”) with HealthCare Royalty Management, LLC (“HCR”), the Company recorded a derivative liability on its condensed consolidated balance sheet because of an embedded feature that represented a conditional obligation to pay HCR an additional cash amount upon a change of control.

The Company remeasured the derivative liability to fair value at each reporting date until it expired on December 31, 2022, and at that time the fair value of the derivative liability was reduced to zero.

The Company valued the change of control provision under the Revenue Interest Termination Agreement, dated June 7, 2022, by and between the Company and HCR, using a series of Black-Scholes-Merton option pricing models.

The assumptions used in the valuation model include (1) the Company's estimates of the probability of a change of control event occurring prior to or as of December 31, 2022, (2) the Company's common stock closing stock price as of June 7, 2022, (3) the Company's fully-diluted number of shares of common stock outstanding as of June 7, 2022, (4) volatility, (5) risk-free rate, and (6) the Company's credit-risk-adjusted discount rate.

Liability related to the sale of future royalties

During the year ended December 31, 2021, in connection with the liability related to the sale of future royalties, the Company recorded a derivative liability on its consolidated balance sheet at inception of its Revenue Interest Agreement because there were embedded instruments that represented a conditional obligation to pay HCR the final payment.

The Revenue Interest Agreement was terminated on June 7, 2022, and as such, the fair value of this derivative liability was reduced to zero .

The fair value for the liability related to the sale of future royalties at the time of the initial transaction was based on the Company's current estimates of future royalties expected to be paid to HCR over the remaining patent life of the product, which were considered Level 3 inputs.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, Net

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Total property and equipment, net

Depreciation and amortization expense related to property and equipment was $ 0.4 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively.

Depreciation and amortization expense related to property and equipment was less than $ 0.1 million and $ 0.4 million for the years ended December 31, 2024 and 2023, respectively.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

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Operating cash flows from operating leases

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the lease balances within the consolidated balance sheet, weighted average remaining lease term, and the weighted average discount rates related to the Company’s operating and finance leases as of December 31, 2024 and 2023 (in thousands, except for the weighted average remaining lease term and the weighted average discount rate):

4 unchanged sentences

Operating lease right-of-use assets

Property and equipment, net

Total leased assets

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Weighted average discount rate

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2024 (in thousands):

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Total Accrued expenses and other current liabilities

Convertible Preferred Shares

Convertible Preferred Stock

Series A, Series B, Series C, and Series D Convertible Preferred Stock

The Company has designated 2,220 of the 10,000,000 authorized shares of preferred stock as Series A Preferred Stock, 1,000 of the 10,000,000 authorized shares of preferred stock as Series B Preferred Stock, 3,333 of the 10,000,000 authorized shares of preferred stock as Series C Preferred Stock, and 3,215,000 of the 10,000,000 authorized shares of preferred stock as Series D Preferred Stock.

As of December 31, 2023, all of the Company's shares of preferred stock have been converted to common stock.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Each share of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock was convertible into 1,000 shares of common stock at any time at the option of the holder, provided that the holder was prohibited from converting the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99 % of the total number of shares of common stock then issued and outstanding, subject to certain exceptions.

The shares of Series D Preferred Stock were convertible on a one-to-one basis into shares of common stock at any time at the option of the holder, provided that the holder was prohibited from converting the Series D Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99 % of the total number of shares of common stock then issued and outstanding, subject to certain exceptions .

Shares of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock generally had no voting rights, except as required by law and except that the consent of holders of a majority of the then outstanding Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock was required to amend the terms of the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock, respectively.

As such, the Company classified the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock within permanent equity in its consolidated balance sheet.

In February 2021, a holder of the Company’s Series B Preferred Stock elected to convert 62 shares of Series B Preferred Stock into 62,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series B Preferred Stock.

In addition, a holder of the Company’s Series C Preferred Stock elected to convert 73 shares of Series C Preferred Stock into 73,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series C Preferred Stock.

In June 2022, a holder of the Company’s Series B Preferred Stock elected to convert 938 shares of Series B Preferred Stock into 938,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series B Preferred Stock.

In addition, a holder of the Company’s Series D Preferred Stock elected to convert 942,000 shares of Series D Preferred Stock into 942,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series D Preferred Stock.

In September 2022, a holder of the Company’s Series C Preferred Stock elected to convert the remaining 2,214 shares of Series C Preferred Stock into 2,214,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series C Preferred Stock.

In addition, a holder of the Company’s Series D Preferred Stock elected to convert the remaining 2,273,000 shares of Series D Preferred Stock into 2,273,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series D Preferred Stock.

The Company previously designated 2,220 of the 10,000,000 authorized shares of preferred stock as Series A Preferred Stock, 1,000 of the 10,000,000 authorized shares of preferred stock as Series B Preferred Stock, 3,333 of the 10,000,000 authorized shares of preferred stock as Series C Preferred Stock, and 3,215,000 of the 10,000,000 authorized shares of preferred stock as Series D Preferred Stock.

As of December 31, 2024, all of the Company's shares of preferred stock have been converted to common stock.

“At-the-Market” Offering

On March 11, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

On March 11, 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”) and filed a universal shelf registration statement on Form S-3 (Registration No.

333-254170), which became effective on March 29, 2021, and pursuant to which the Company registered for sale up to $ 300.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that the Company may determine, including up to $ 75.0 million of its common stock available for issuance pursuant to the “at-the-market” offering program Sales Agreement.

The Form S-3 will expire on March 29, 2024.

Under the Sales Agreement, Cantor may sell shares of the Company’s common stock by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, subject to the terms of the Sales Agreement.

During year ended December 31, 2023, the Company sold 144,476 shares of its common stock under the Sales Agreement at an average price of approximately $ 1.58 per share for aggregate gross proceeds of approximately $ 0.2 million prior to deducting sales commissions.

During year ended December 31, 2022 the Company sold 5,963,294 shares of its common stock under the Sales Agreement at an average price of approximately $ 2.46 per share for aggregate gross proceeds of approximately $ 14.7 million prior to deducting sales commissions.

333-254170), which became effective on March 29, 2021 (the “2021 Form S-3”), and pursuant to which the Company registered for sale up to $ 300.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that the Company could determine, including up to $ 75.0 million of its common stock available for issuance pursuant to the “at-the-market” offering program under the Sales Agreement.

The 2021 Form S-3 expired on March 29, 2024.

The Company filed a new universal shelf registration statement on Form S-3 with the SEC on March 15, 2024, which became effective on March 22, 2024, and pursuant to which the Company registered for sale up to $ 300.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that the Company may determine, including up to $ 75.0 million of its common stock available for issuance pursuant to the Sales Agreement.

Under the Sales Agreement, Cantor may sell shares of the Company’s common stock by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), subject to the terms of the Sales Agreement.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2024, the Company did no t sell any shares of its common stock under the Sales Agreement.

During the year ended December 31, 2023, the Company sold 144,476 shares of its common stock under the Sales Agreement at an average price of approximately $ 1.58 per share for aggregate gross proceeds of approximately $ 0.2 million prior to deducting sales commissions.

Subsequent to December 31, 2024, the Company did not sell any shares of its common stock under the Sales Agreement.

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Share-Based Compensation

The Company maintains two equity compensation plans, the 2017 Stock Incentive Plan, as amended (the “2017 Plan”) and the 2019 Inducement Equity Incentive Plan, as amended (the “2019 Inducement Plan”, and together with the 2017 Plan, the “Equity Plans”), which provide for the grant of stock-based awards to its directors, officers, consultants and other employees.

The Equity Plans provide for the grant of non-qualified and incentive stock options, as well as restricted stock units (“RSUs”), restricted stock and other stock-based awards.

2017 Stock Incentive Plan

On June 28, 2017, the Company’s stockholders approved the 2017 Stock Incentive Plan (the “2017 Plan”).

On June 28, 2017, the Company’s stockholders approved the 2017 Plan.

The 2017 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock grants and stock-based awards.

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On October 18, 2017, the Company’s stockholders approved an amendment to the 2017 Plan, which became effective upon the completion of the Company’s initial public offering, to increase the total number of shares reserved for issuance under the 2017 Plan from 1,785,416 to 2,696,401 .

Additionally, the number of shares of common stock that may be issued under the 2017 Plan would be automatically increased on each January 1, beginning with the fiscal year ending December 31, 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the lowest of (i) 607,324 shares of common stock, (ii) 4 % of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors or compensation committee.

Additionally, the number of shares of common stock that may be issued under the 2017 Plan would be automatically increased on each January 1, beginning with the fiscal year ending December 31, 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the lowest of (i) 607,324 shares of common stock, (ii) 4 % of the outstanding shares of common stock on such date and (iii) an amount determined by the Compensation Committee of the Company’s Board of Directors.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 17, 2021, the Company's stockholders approved amendments to the 2017 Plan.

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(i) increased the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 3,170,254 shares, (ii) removed the “evergreen” provision historically included in the 2017 Plan, and (iii) made certain other amendments.

In September 2022, the Company's stockholders approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 2,000,000 shares.

On October 5, 2023, the Company's stockholders approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance under the 2017 Plan by 2,500,000 shares.

In September 2022, the Company's stockholders approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 2,000,000 shares.

On October 5, 2023, the Company's stockholders approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 2,500,000 shares.

On May 29, 2024, the stockholders of the Company approved an amendment to the 2017 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 3,000,000 shares.

As of December 31, 2024 , there were 5,707,847 shares remaining available to be issued under the 2017 Plan, as amended.

2019 Equity Incentive Plan

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 11, 2019, the Company adopted the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”) to reserve 331,500 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with Spero within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

On March 11, 2019, the Company adopted the 2019 Inducement Plan to reserve 331,500 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with Spero within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2017 Plan.

In June 2020, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance under the 2019 Inducement Plan by 700,000 shares.

In December 2022, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance under the 2019 Inducement Plan by 875,000 shares.

In July 2023, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance by 250,000 shares and in November 2023, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance by 500,000 shares.

In June 2020, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance thereunder by 700,000 shares.

In December 2022, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance thereunder by 875,000 shares.

In March 2024, the Board of Directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance thereunder by 500,000 shares.

As of December 31, 2024 , there were 888,182 shares remaining available to be issued under the 2019 Inducement Plan, as amended.

The following table summarizes stock option activity for all of our plans during 2023:

The following table summarizes stock option activity under the Equity Plans (excluding RSUs) during the year ended December 31, 2024:

2019 Inducement Plan

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Outstanding as of December 31, 2024

As of December 31, 2023 , a total of 14,845,127 shares have been authorized and reserved for issuance under all equity plans and 5,239,058 shares were available for future issuance under such plans.

As of December 31, 2024 , a total of 18,345,127 shares have been authorized and reserved for issuance under the Equity Plans and 6,596,029 shares were available for future issuance under such plans.

Stock Option Valuation

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The Company does not have sufficient company-specific historical and implied volatility information and it therefore estimates its expected share volatility based on the historical volatility of a set of publicly traded peer companies.

The Company has estimated the expected term of the Company’s stock option awards utilizing the “simplified” method for awards that qualify as “plain-vanilla.” The risk-free interest rate is determined by reference to the U.S.

The Company has estimated the expected term of the Company’s

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

stock option awards utilizing the “simplified” method for awards that qualify as “plain-vanilla.” The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

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Expected dividend yield

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2023:

The following table summarizes details regarding stock options granted under the Equity Plans (excluding RSUs) for the year ended December 31, 2024:

Number of Shares

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The weighted average grant-date fair value of awards granted during the year ended December 31, 2023 was $ 1.29 per share.

No stock options were exercised during the year ended December 31, 2023.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2022 was approximately $ 0.1 million.

No stock options were exercised during both the years ended December 31, 2024 and 2023.

The Company satisfies stock option exercises with newly issued shares of its common stock.

As of December 31, 2024 , total unrecognized compensation cost related to unvested stock option grants was approximately $ 1.1 million.

This amount is expected to be recognized over a weighted average period of approximately 1.59 years.

This amount is expected to be recognized over a weighted average period of less than one year.

Restricted Stock Units

The Company granted 4,907,199 restricted stock units (“RSUs”) to employees during the year ended December 31, 2023.

The following table summarizes RSU activity under all equity plans (excluding performance-based RSUs) during the year months ended December 31, 2023:

The following table summarizes RSU activity under the Equity Plans (excluding performance-based RSUs) during the year ended December 31, 2024:

Weighted Average Grant Date Fair Value

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As of December 31, 2024, there was approximately $ 8.5 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of approximately 2.5 years.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date.

Each RSU represents the right to receive one share of the Company’s common stock, $ 0.001 par value per share, upon vesting.

Other than RSUs granted as retention awards, the RSUs vest in four equal annual installments, subject to the individual’s continued service to the Company through the applicable vesting date, and are subject to the terms and conditions of the Company’s form of RSU agreement under the 2017 Plan and 2019 Inducement Plan.

Each RSU represents the right to receive one share of the Company’s common stock, upon vesting.

Performance-Based Awards

In September 2022, the Company approved an award of 140,000 performance-based stock units as part of an executive inducement grant ("Inducement PSUs").

In September 2022, the Company approved an award of 140,000 performance-based stock units as part of an executive inducement grant (the “Inducement PSUs”).

The Inducement PSUs were awarded based on certain performance criteria relating to pipeline execution, business development, and financial stewardship.

As these performance criteria were deemed to be achieved by May 31, 2023, 70,001 of the Inducement PSUs vested in September 2023 and the remaining 69,999 of the Inducement PSUs will vest

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in September 2024.

The Company recognized $ 0.1 million of expense associated with the Inducement PSUs during the year ended December 31, 2023.

The following table summarizes Inducement PSU activity under all equity plans during the year ended December 31, 2023:

As these performance criteria were deemed to be achieved by May 31, 2023, 70,001 of the Inducement PSUs vested in September 2023 and the remaining 69,999 of the Inducement PSUs vested in September 2024 upon fulfillment of the service condition.

The following table summarizes Inducement PSU activity under the Equity Plans during the year ended December 31, 2024:

Number of Performance Based Option Shares

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General and administrative expenses

Liability Related to the Sale of Future Royalties

On September 29, 2021, the Company entered into a Revenue Interest Agreement with certain entities managed by HCR, pursuant to which the Company sold to HCR the right to receive certain royalty payments from the Company for a purchase price of up to $ 125.0 million.

The Company evaluated the terms of the Revenue Interest Agreement and concluded that the features of the investment amount were similar to those of a debt instrument.

The Company received gross proceeds of $ 50.0 million from HCR at an initial funding on October 19, 2021.

As such, the Company accounted for this transaction as long-term debt as of December 31, 2021.

The Company was entitled to receive an additional $ 50.0 million upon U.S.

Food and Drug Administration (“FDA”) approval of tebipenem HBr on or before December 31, 2022, and an additional $ 25.0 million subject to the mutual agreement of the Company and HCR and if the Company met certain minimum tebipenem HBr product sales thresholds in the United States within 12 months from commercial launch.

On June 7, 2022, the Company entered into a Revenue Interest Termination Agreement (the “Termination Agreement”) with HCR and HCR Collateral Management, LLC, as collateral agent for HCR under the Revenue Interest Agreement, pursuant to which the parties mutually agreed to terminate the Revenue Interest Agreement between the parties, and certain other related ancillary agreements, arrangements or understandings under or contemplated by the Revenue Interest Agreement and Security Agreement between the Company and HCR.

The Company was released from all of its obligations and the rights to any future revenues and collateral reverted back to the Company in return for a cash payment of $ 54.5 million and a potential additional cash amount contingent upon the occurrence of a change of control event.

The Company recognized a loss on the extinguishment of $ 3.6 million, as reported on the associated condensed consolidated statement of operations and comprehensive loss.

If a change of control event had occurred on or prior to December 31, 2022, the Company would have been obligated to pay to HCR an additional amount within 15 days following the consummation of such change of control transaction, calculated based on the fully-diluted equity value of the Company.

The rights to this contingent payment expired on December 31, 2022.

Restructuring

On May 3, 2022, the Company implemented a strategic restructuring initiative and corresponding reduction in workforce.

The restructuring initiative and corresponding reduction in workforce was designed to reduce costs and reallocate resources towards the

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s clinical development programs for SPR720 and SPR206, while maintaining key personnel needed to help preserve the value of the Company’s tebipenem HBr program.

The restructuring reduced the Company’s workforce from 146 full-time employees as of December 31, 2021 to 41 full-time employees following the restructuring.

The Company did no t recognize any restructuring charges during the year ended December 31, 2023.

On October 29, 2024, the Company implemented a strategic restructuring initiative and corresponding reduction in workforce.

The Company restructured its operations to reduce costs and reallocate resources in support of the development of tebipenem HBr and other corporate activities.

The restructuring reduced the Company’s workforce by 27 % from the headcount as of September 30, 2024.

The following tables summarize the restructuring related charges by line item within the Company’s consolidated statements of operations where they were recorded during the year ended December 31, 2024:

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Total restructuring charges

The restructuring charge was included in accrued expenses and other current liabilities in the Company’s condensed consolidated balance sheet.

As of December 31, 2023, the Company had no remaining amounts in accrued expenses related to restructuring costs on its condensed consolidated balance sheet.

The Company did no t recognize any restructuring charges during the year ended December 31, 2023.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The restructuring charge was included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets as of December 31, 2024.

Activity for the period is summarized as follows (amounts in thousands):

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Payments made

Write-offs and impairments

Balance as of December 31, 2024

The estimated charges that the Company expects to incur as a result of the restructuring are subject to several assumptions, and actual results may differ materially from these estimates.

Retention Awards

In June 2022, upon recommendation of the Company's Compensation Committee, the Board of Directors approved retention awards for employees of the Company.

Subject to remaining actively employed with the Company through May 31, 2023, the aggregate retention awards included (i) a cash bonus of $ 1.1 million, which was paid on November 30, 2022 and $ 0.2 million as fully vested RSU grants of the same value which were issued on November 30, 2022 and (ii) a cash bonus of $ 4.0 million, which was paid in June 2023.

These amounts were accrued as services were performed through May 31, 2023.

In connection with the restructuring, on October 29, 2024, the Board of Directors approved retention awards for non-executive employees of the Company.

Subject to remaining actively employed and in good standing with the Company, aggregate retention awards of $ 4.4 million will be paid as a cash bonus with one half payable upon the achievement of each of two clinical execution milestones related to facilitating the clinical progress of the PIVOT-PO trial for tebipenem HBr.

The awards contain certain clawback provisions in the event an employee voluntarily terminates his or her employment prior to the achievement of the second clinical execution milestone.

Expenses related to these retention awards are being recognized over the employee service period from October 29, 2024 to the fourth quarter of 2025.

Executive Retention Awards

On July 1, 2022, upon recommendation of the Company's Compensation Committee, the Board of Directors approved a cash and RSU retention award to certain members of the Company's executive leadership team.

Subject to those certain members of the Company's executive leadership team remaining actively employed with the Company through May 31, 2023, they were to receive an aggregate of:

(i) a cash bonus equal to $ 0.9 million, which was paid on November 30, 2022 and (ii) if certain performance criteria were achieved by May 31, 2023, a number of fully vested RSUs to be issued having a value of $ 1.7 million based on the common stock price at such time, subject to the discretion of the Board of Directors or the Compensation Committee to be paid in cash or a combination of cash and stock.

The executive retention awards were eligible for vesting based on the achievement of certain performance criteria by May 31, 2023 relating to pipeline execution, business development, and financial stewardship.

The Compensation Committee deemed that the performance criteria were achieved, and the Company paid the executive retention awards in cash in June 2023.

These expenses related to awards were accrued as services were incurred through May 31, 2023.

The Company recorded $ 2.6 million of income tax expense during the year ended December 31, 2023, primarily related to a change in estimate with respect to the tax treatment of the GSK License Agreement, which resulted in taxable income and the utilization of $ 235.9 million of U.S.

federal net operating losses and $ 7.1 million of U.S.

federal R&D tax credits in its 2022 U.S.

federal tax return.

On November 8, 2024, the Compensation Committee of the Board of Directors approved a retention program for the Company’s executive leadership team (“ELT”), which consists of four executive officers, including the Chief Executive Officer, Chief Financial and Chief Business Officer, Chief Operating Officer and Chief Human Resources Officer.

The purpose of the program is to ensure that the Company retains ELT members who are considered critical to the development of tebipenem HBr in its ongoing PIVOT-PO, global Phase 3 clinical trial of tebipenem HBr in patients with cUTI.

The retention program provides these ELT members with the opportunity to earn a cash bonus in an amount equaling 75 % of the aggregate of their current base salary plus target annual bonus upon achievement of certain performance milestones related to facilitating the progress of PIVOT-PO and certain goals related to the Company’s stock price appreciation or financial stewardship.

Specifically, one-third of the retention payout is payable upon the achievement of each of two clinical execution milestones.

The remaining one-third is payable upon the achievement of the stock price appreciation or financial stewardship milestone by no later than the fourth quarter of 2026.

If fully achieved, the total retention payments would aggregate to $ 2.1 million.

The program contains certain clawback provisions in the event an executive voluntarily terminates his or her employment prior to the achievement of the second clinical execution milestone.

The program also provides for full payment in the event of certain change in control transactions.

If the Company terminates an executive’s employment, prior to the end of the performance period, other than for cause, then such executive will be entitled to payment of the clinical execution milestone payments.

In the event that the Company’s collaboration partner materially alters the PIVOT-PO work plan with the effect of preventing or indefinitely delaying the achievement of the clinical execution milestones, then the clinical execution milestone payments will be accelerated and paid in full.

Expenses related to the achievement of each of the two clinical milestones are being recognized over the employee service period from October 29, 2024 to the fourth quarter of 2025.

Expenses related to the achievement of the Company's stock price appreciation or financial stewardship milestone will be recognized over an employee service period starting when achievement is deemed probable but not later than the fourth quarter of 2026.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2023 and 2022, the Company recorded no income tax benefits for the net operating income (losses) incurred in each year or interim period due to its uncertainty of realizing a benefit from those items.

The Company’s provision for income taxes is comprised of the following for the periods ended December 31, 2024 and 2023 (in thousands):

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Provision for income taxes

The Company recorded $ 2.6 million of income tax expense in 2023 related to a change in estimate with respect to the tax treatment of the GSK License Agreement, which resulted in taxable income and the utilization of $ 236.5 million of U.S.

federal net operating losses and $ 6.9 million of U.S.

federal research and development tax credits on its amended 2022 U.S.

federal tax return.

During the years ended December 31, 2024 and 2023, the Company recorded no income tax benefits for the net operating income (losses) incurred in each year or interim period due to its uncertainty of realizing a benefit from those items.

The domestic and foreign components of income (loss) before income taxes were as follows (in thousands):

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Federal statutory income tax rate

Federal and state research and development tax credit

Federal tax credits

State taxes, net of federal benefit

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Increase in deferred tax asset valuation allowance

Deferred true-up

Effective income tax rate

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net deferred tax assets as of December 31, 2024 and 2023 consisted of the following (in thousands):

1 unchanged sentence

Deferred revenue

Research and development tax credit carryforwards

Capitalized research and development expenses, net

Research and development and orphan drug tax credit carryforwards

Capitalized research and development expenses

Total deferred tax assets

1 unchanged sentence

Net deferred tax assets

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the Company had U.S.

federal, state and foreign net operating loss carryforwards of $ 94.7 million, $ 90.9 million and $ 4.6 million respectively.

All federal NOLs can be carried forward indefinitely.

As of December 31, 2024, the company had United States federal, state and foreign net operating loss carryforwards ("NOLs") of $ 165.2 million, $ 120.6 million and $ 4.6 million, respectively.

$ 152 million federal NOLs can be carried forward indefinitely and $ 13.2 million of NOLs begin to expire in 2034.

The state NOLs begin to expire in 2034 and will expire at various dates through 2044.

The foreign NOLs do not expire.

As of December 31, 2023 , the Company also had federal and state research and development tax credit carryforwards of $ 6.0 million and $ 2.1 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2033 and 2028 , respectively.

As of December 31, 2024, the Company also had federal and state research and development tax credit carryforwards of $ 6.2 million and $ 2.1 million respectively, and federal orphan drug tax credit carryforwards of $ 2.9 million, which may be available to offset future income tax liabilities.

The federal and state research and development tax credits begin to expire in 2036 and 2033 , respectively, and the federal orphan drug credits begin to expire in 2044.

Utilization of the U.S.

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Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company recently completed a Section 382 study and concluded that the Company underwent several ownership changes as defined by the Code, the last of which occurred during the year ended December 31, 2018.

The Company recently completed a Section 382 study and concluded that we underwent several ownership changes as defined by the Code, the last of which occurred during the year ended December 31, 2018.

Any carryforwards that will expire prior to utilization were removed from deferred tax assets, with a corresponding reduction of the valuation allowance.

Future ownership changes may limit the Company's ability to utilize remaining tax attributes.

Future ownership changes may limit our ability to utilize remaining tax attributes.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

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Management reevaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023 and 2022 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards, and were as follows (in thousands):

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards partially offset by a reduction in deferred revenue, and were as follows (in thousands):

Valuation allowance as of beginning of year

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As of December 31, 2024 or 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statement of operations and comprehensive loss.

The Company has not, as yet, conducted a study of its research and development credit carryforwards.

This study may result in an adjustment to the Company’s research and development credit carryforwards;

however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position.

A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company conducted a study of its research and development (R&D) credit carryforwards for the years 2016 to 2023.

We have updated the carryforwards for the result of the study and the changes were not material.

The Company had filed separate U.S.

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In Massachusetts, the Company files income tax returns as a combined group except for its Massachusetts Securities Corporation subsidiary, which is a separate income tax filing.

The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities remains open for all years since 2019.

The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities remains open for tax years 2021 and forward.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state authorities to the extent utilized in a future period.

No federal or state tax audits are currently in process.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), was signed into law in the United States in March 2020.

The CARES Act adjusted a number of provisions of the tax code, including the calculation and eligibility of certain deductions and the treatment of net operating losses and tax credits.

The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision for the year ended December 31, 2023, or to the Company’s net deferred tax assets as of December 31, 2023.

On December 22, 2017, the TCJA was signed into law.

Under the TCJA provisions, effective with tax years beginning on or after January 1, 2022, taxpayers can no longer immediately expense qualified research and development expenditures, including all direct, indirect, overhead and software development costs.

Taxpayers are now required to capitalize and amortize these costs over five years for research conducted within the United States or fifteen years for research conducted abroad.

Commitments and Contingencies

2 unchanged sentences

In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations.

If a matter is both probable to result in a material liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible material loss or range of loss.

If such loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.

If a matter is both probable to result in a material liability and the amount of loss can be reasonably estimated, the Company accrues the estimated loss.

Disclosure is provided when a loss is considered probable, but the loss is not reasonably estimable and when a material loss is reasonably possible but not probable.

If such a loss is not probable or cannot be reasonably estimated, a liability is not recorded.

As of December 31, 2024 and 2023, no material accruals have been recorded for potential contingencies related to these matters.

5 unchanged sentences

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers.

In addition, the Company has entered into indemnification agreements with members of its Board of Directors and its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not aware of any claims under indemnification arrangements that will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2023 or 2022.

The process surrounding the Investigation and the Wells Notice (both as defined below) has resulted in legal expenses and certain liabilities for the Company and the named individuals, and each of the named individuals, as directors and officers of the Company, are entitled to indemnification for certain costs associated with the Investigation and the Wells Notice.

The Company maintains a general liability insurance policy that covers certain expenses and liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers (the “D&O Insurance”), however, the total expenses and liabilities in connection with the Investigation and the Wells Notice and the amount that will be covered by such D&O Insurance is unknown at this time.

Legal Proceedings

Two putative class action lawsuits were filed against the Company and certain of its current and former executive officers in the United States District Court for the Eastern District of New York, one captioned Richard S.

Securities Class Action Lawsuits and Derivative Actions

Two putative class action lawsuits were filed against the Company and certain of its current and former officers in the United States District Court for the Eastern District of New York, one captioned Richard S.

Spero Therapeutics, Inc., Ankit Mahadevia, and Satyavrat Shukla, Case No.

1:22-cv-03125, filed on May 26, 2022, and the other captioned Kashif Memon v.

Spero Therapeutics, Inc., Ankit Mahadevia, and Satyavrat Shukla Case No.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Therapeutics, Inc., Ankit Mahadevia, and Satyavrat Shukla Case No.

1:22-cv-04154, filed on July 15, 2022.

1 unchanged sentence

The parties filed an Amended Complaint on December 5, 2022, purported to be brought on behalf of stockholders who purchased our common stock from September 8, 2020 through May 2, 2022.

The Amended Complaint generally alleges that the Company and certain of its officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the New

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Drug Application (“NDA”) for tebipenem HBr in an effort to lead investors to believe that the drug would receive approval from the FDA.

The Amended Complaint generally alleges that the Company and certain of its current and former officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the New Drug Application (“NDA”) for tebipenem HBr in an effort to lead investors to believe that the drug would receive approval from the FDA.

Plaintiffs seek unspecified damages, interest, attorneys’ fees, and other costs.

The Company filed a fully-briefed Motion to Dismiss on June 21, 2023.

The Court has not yet ruled on the Motion.

A stockholder derivative action was filed against the Company, as nominal defendant, and certain of the Company's officers in the United States District Court for the District of Delaware, captioned Marti v.

By Order entered on September 30, 2024, the Motion to Dismiss was granted, dismissing the Amended Complaint in its entirety.

The Court ordered the case to be closed by Memorandum and Order entered on October 28, 2024.

A stockholder derivative action was filed against the Company, as nominal defendant, and certain of the Company's current and former officers in the United States District Court for the District of Delaware, captioned Marti v.

Mahadevia, et al., Case.

1:23-cv-01133-RGA (the “Derivative Complaint”), on October 11, 2023.

1:23-cv-01133-RGA (the “First Derivative Complaint”), on October 11, 2023.

The plaintiffs both purport to be current stockholders, and the allegations are primarily the same as those made in the Consolidated Putative Class Action.

The Derivative Complaint was transferred to the Eastern District of New York on November 13, 2023, and stayed by party agreement pending outcome of the Motion to Dismiss the class action on November 20, 2023.

A second stockholder derivative action was filed against the Company, as nominal defendant, and certain of its officers in the Supreme Court of the State of New York, Kings County, captioned Heil v.

The First Derivative Complaint was transferred to the Eastern District of New York on November 13, 2023.

A second stockholder derivative action was filed against the Company, as nominal defendant, and certain of its current and former officers in the Supreme Court of the State of New York, Kings County, captioned Heil v.

Mahadevia, et al., Case.

1 unchanged sentence

The Second Derivative Complaint makes primarily the same allegations as the First Derivative Complaint, and the Consolidated Putative Class Action.

The plaintiffs in both derivative suits agreed to a stay pending decision on the class action, subject to court approval.

By Order entered on September 30, 2024, the motion to stay the First Derivative Complaint was denied as moot due to the dismissal of the Consolidated Putative Class Action.

On March 20, 2025, the Second Derivative Complaint was voluntarily dismissed by the plaintiff.

The Company denies any allegations of wrongdoing and intends to vigorously defend against these lawsuits.

3 unchanged sentences

If additional similar complaints are filed, absent new or different allegations that are material, the Company will not necessarily announce such additional filings.

Government Contracts

In July 2018, the Company was awarded a contract from Biomedical Advanced Research and Development Authority (“BARDA”) of up to $ 44.2 million to develop tebipenem HBr for the treatment of cUTI caused by antibiotic resistant Gram-negative bacteria and for assessment against biodefense pathogens.

The award committed initial funding of $ 15.7 million over a three-year base period from July 1, 2018 to June 30, 2021 for cUTI development activities.

In May 2019, the contract was modified to include additional funding of approximately $ 2.5 million for the development of tebipenem HBr, increasing the amount of the initial committed funding from $ 15.7 million to approximately $ 18.2 million and increasing the overall potential award to $ 46.8 million.

In January 2020, BARDA exercised its first contract option for additional committed funding of $ 15.9 million and extended the period of performance through November 1, 2021.

BARDA subsequently committed additional funding of $ 0.6 million, increasing the total committed funding for the base period and first contract option to $ 34.7 million and extended the period of performance for this first contract option through December 31, 2025.

On January 19, 2022, the Company announced that BARDA exercised a third option under the contract.

The new option increased the total amount of committed funding by $ 12.9 million to approximately $ 47.6 million, increasing the total potential contract value to $ 60.3 million.

On September 30, 2022, remaining funding from the $ 12.9 million option was reallocated to a new option to support upcoming clinical trials.

The period of performance for this new option extends through December 31, 2025 and does not change the total amount of committed funding or potential contract value.

As of December 31, 2023, the balance of the award was subject to BARDA exercising a second option which would entail funding of $ 12.7 million and is exercisable by BARDA subject to, among other things, satisfactory progress and results from the biodefense studies described below.

As part of an inter-agency collaboration between BARDA and the Defense Threat Reduction Agency (“DTRA”), a series of studies to assess the efficacy of tebipenem HBr in the treatment of infections caused by biodefense threats such as anthrax, plague and melioidosis will be conducted under the direction of Spero.

DTRA provides up to $ 10.0 million, in addition to the total potential award from BARDA, to cover the cost of the nonclinical biodefense aspects of the collaborative program for tebipenem HBr.

Together, BARDA and DTRA may provide up to $ 69.7 million in total funding for the clinical development and biodefense

SEC Investigation and Wells Notice

On January 9, 2025, the Company responded to a “Wells Notice” from the staff of the Boston Regional Office (“Staff”) of the SEC regarding its preliminary determination to recommend a civil enforcement action or administrative proceeding against the Company, its former Chief Executive Officer and Chairman of the Board of Directors, Ankit Mahadevia, M.D.

Mahadevia”), and its former Chief Financial Officer and President and Chief Executive Officer, Satyavrat “Sath” Shukla (“Mr.

Shukla”), relating to certain public disclosures by the Company from March 31, 2022 leading up to the Company’s announcement on May 3, 2022 that it had determined to cease commercialization of tebipenem HBr based on feedback from the U.S.

Food and Drug Administration, and whether the Company’s disclosures may have violated the federal securities laws (the “Investigation”).

Specifically, the contemplated civil enforcement action, if approved by the SEC Commissioners, could include allegations that the Company violated Section 17(a) of the Securities Act and Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, and 13a-1 thereunder;

and could allege against Dr.

Mahadevia and Mr.

Shukla violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 13a-14 thereunder.

The Company, Dr.

Mahadevia and Mr.

Shukla continue to cooperate with the SEC, they have engaged in further dialogue with the staff and maintain that the Company’s disclosures were appropriate.

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law, but is a preliminary determination by the Staff to recommend to the SEC Commissioners that a civil enforcement action or administrative proceeding be brought against the recipients.

It provides the recipients the opportunity to address in a non-public forum the issues raised by the Staff before a recommendation is made to the SEC regarding an enforcement action.

If the SEC were to authorize an action against the Company and/or any of the identified individuals, it may seek an injunction or cease-and-desist order against future violations of provisions of the federal securities laws, the imposition of civil monetary penalties, disgorgement or other equitable relief.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assessment of tebipenem HBr, of which $ 12.7 million is subject to the exercise of options by BARDA and the Company's achievement of specified milestones.

During the years ended December 31, 2023 and 2022, the Company recognized $ 4.4 million and $ 2.2 million of revenue under this agreement, respectively.

Government Contracts

The original award committed initial funding of $ 15.7 million over a three-year base period from July 1, 2018 to June 30, 2021 for cUTI development activities.

As of December 31, 2024, through a number of contract modifications and the exercise of additional contract options by BARDA, including an additional contract modification of $ 11.7 million executed in July 2024, the committed funding increased to $ 59.3 million and the period of performance extended through December 31, 2025.

During the years ended December 31, 2024 and 2023, the Company recognized $ 20.2 million and $ 4.4 million of grant revenue under the BARDA agreement, respectively.

As of December 31, 2024, of the $ 59.3 million of committed funding, the Company has cumulatively recognized $ 56.7 million of grant revenue under the BARDA agreement.

Biodefense Study Option

As of December 31, 2024, uncommitted funding of $ 12.7 million is outstanding under the award.

This uncommitted funding is exercisable by BARDA, subject to the availability of funding as well as progress and results from biodefense studies, if initiated, as part of an inter-agency collaboration between BARDA and the Defense Threat Reduction Agency.

In May 2021, the Company was awarded a five-year contract from the U.S.

2 unchanged sentences

Funding will be used to offset certain expenses related to manufacturing, clinical, non-clinical and regulatory activities.

The Company can receive up to $ 23.5 million over a base period and six option periods.

As of December 31, 2023, funding for the base period totaling $ 2.3 million, funding for Option 1 of $ 4.0 million and funding for Option 3 of $ 0.8 million has been committed.

The Company recognized $ 2.7 million and $ 1.7 million under this agreement during the years ended December 31, 2023 and 2022, respectively.

Department of Defense

On July 1, 2019, the Company received a $ 5.9 million award from the U.S.

Department of Defense (“DoD”) Congressionally Directed Medical Research Programs (“CDMRP”) Joint Warfighter Medical Research Program.

The funding supported the further clinical development of SPR206.

The award committed non-dilutive funding of $ 5.9 million over a four-year period to cover the costs of select Phase 1 pharmacology studies, a 28-day good laboratory practice non-human primate toxicology study, and microbiological surveillance studies that would be required for a potential NDA submission with the FDA for SPR206.

During the year ended December 31, 2022, all activities under this award were completed and this award was closed out.

The Company did no t recognize revenue under this agreement during the year ended December 31, 2023 and recognized $ 1.0 million in revenue under this agreement during the year ended December 31, 2022.

The Company can receive up to $ 27.0 million over a base period and six option periods, including an additional contract modification of $ 3.4 million executed in August 2024 for SPR206 Phase 2 start up activities under Option 1 of the NIAID agreement.

As of December 31, 2024, $ 10.5 million of funding has been committed under this award.

The Company recognized $ 0.4 million and $ 2.7 million of grant revenue under this agreement during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, of the $ 10.5 million of committed funding, the Company has cumulatively recognized $ 5.3 million of grant revenue under the NIAD agreement.

License, Collaboration and Service Agreements

2 unchanged sentences

Also, pursuant to the terms of each of these license agreements, when and if commercial sales of a product commence, the Company will pay royalties to its licensors on net sales of the respective products.

SPR720 Agreements

Gates MRI Collaboration Agreement

In June 2019, the Company entered into a collaboration with the Bill and Melinda Gates Research Institute (the “Gates MRI”) to develop SPR720 for the treatment of lung infections caused by Mycobacterium tuberculosis.

In furtherance of the Gates MRI’s charitable purposes, the Company also granted to Gates MRI a no-cost, exclusive license to develop, manufacture and commercialize SPR720 for the treatment of tuberculosis (“TB”) in low- and middle- income countries.

The Gates MRI is responsible for formulating and funding its own research plan for the development of SPR720 for TB.

As such, Gates MRI will conduct and fund preclinical and clinical studies for the development of SPR720 against TB.

In addition, Gates MRI and the Company will jointly design and manage certain collaborative research activities, which the Company will perform and which will be funded by the Gates MRI.

Due to the cost-funded nature of the payments and the Company’s assessment that it does not have a vendor/customer relationship with the Gates MRI, the Company will recognize the funding received under the agreement as a reduction to the research and development expenses incurred, as the related expenses are incurred.

As of December 31, 2023, the Gates MRI completed its preliminary development plans for SPR720 and no further development work is planned, thus the relationship was concluded in the fourth quarter of 2023.

In the fourth quarter of 2023, the Company agreed to buy back certain materials from Gates MRI for $ 0.7 million, which was recorded within research and development expenses.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Vertex License Agreement

In May 2016, the Company entered into an agreement with Vertex Pharmaceuticals Incorporated (“Vertex”) whereby Vertex granted the Company certain know-how and a sublicense to research, develop, manufacture and sell products for a proprietary compound, as well as a transfer of materials.

In exchange for the know-how, sublicense and materials, the Company paid Vertex an upfront, one-time, nonrefundable, non-creditable fee of $ 0.5 million, which was recognized as research and development expense.

As part of the agreement, the Company is obligated to make future milestone payments of up to $ 80.2 million upon the achievement of specified clinical, regulatory and commercial milestones and to pay Vertex tiered royalties, on a product-by-product and country-by-country basis, of a mid-single-digit to low double-digit percentage based on net sales of products licensed under the agreement.

During the years ended December 31, 2023 and 2022, the Company did no t record any research and development expense under this agreement and the next milestone under this agreement is not accrued because it is not yet probable.

The agreement continues in effect until the expiration of all payment obligations thereunder, with royalty payment obligations continuing on a product-by-product and country-by-country basis until the later of ten years after the first commercial sale of such product in such country or the date of expiration in such country of the last to expire applicable patent.

Further, Vertex has the right to terminate the agreement if provided with notification from the Company of intent to cease all development or if no material development or commercialization efforts occur for one year .

Tebipenem HBr Agreements

GSK License and Share Purchase Agreement

GSK License Agreement

On November 7, 2022, the Company closed the transactions contemplated by the GSK License Agreement, which was entered into on September 21, 2022.

Pursuant to the terms of the GSK License Agreement, the Company granted GSK an exclusive royalty-bearing license, with the right to grant sublicenses, under the Company’s intellectual property and regulatory documents and a sublicense under certain intellectual property of Meiji Seika Pharma Co.

(“Meiji”) and Meiji’s regulatory documents to develop, manufacture and commercialize tebipenem pivoxil and tebipenem HBr and products that contain tebipenem pivoxil and tebipenem HBr (the “GSK Licensed Products”) in all territories, except certain Asian countries previously licensed to Meiji (Japan, Bangladesh, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam (the “Meiji Territory”)) (the “GSK Territory”).

If the Company's license with Meiji is terminated, or if Meiji forfeits or loses its rights to develop, manufacture and commercialize tebipenem HBr and products that contain tebipenem HBr in any countries in the Meiji Territory, then GSK will have an exclusive first right to negotiate with Spero to add any such countries to the GSK Territory.

Under the terms of the GSK License Agreement, the Company received an upfront payment of $ 66.0 million for GSK to secure rights to the medicine.

In July 2023, the Company received written agreement from the FDA, under a SPA, on the design and size of PIVOT-PO, a pivotal Phase 3 clinical trial of tebipenem HBr in patients with cUTI, including acute pyelonephritis.

(“Meiji”) and Meiji’s regulatory documents to develop,

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

manufacture and commercialize tebipenem pivoxil and tebipenem HBr and products that contain tebipenem pivoxil and tebipenem HBr (the “GSK Licensed Products”) in all territories, except certain Asian countries previously licensed to Meiji (Japan, Bangladesh, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam (the “Meiji Territory”)) (the “GSK Territory”).

If the Company’s license with Meiji is terminated, or if Meiji forfeits or loses its rights to develop, manufacture and commercialize tebipenem HBr and products that contain tebipenem HBr in any countries in the Meiji Territory, then GSK will have an exclusive first right to negotiate with the Company to add any such countries to the GSK Territory.

Under the terms of the GSK License Agreement, in November 2022, the Company received an upfront payment of $ 66.0 million for GSK to secure rights to the medicine.

In July 2023, the Company received written agreement from the FDA, under a special protocol assessment (“SPA”), on the design and size of PIVOT-PO, a pivotal Phase 3 clinical trial of tebipenem HBr in patients with cUTI, including acute pyelonephritis.

Under the terms of the GSK License Agreement, the Company received a $ 30.0 million development milestone payment during the third quarter of 2023.

In December 2023, the Company commenced enrollment in PIVOT-PO with its first patient, first visit.

Under the terms of the GSK License Agreement, the Company will be entitled to receive a $ 95.0 million development milestone that is payable in four equal semiannual installments.

In February 2024, the Company received the first installment payment of $ 23.8 million for such development milestone.

Remaining potential payments are milestone and royalty based, and are as follows (in millions):

Under the terms of the GSK License Agreement, the Company is entitled to receive a $ 95.0 million development milestone that is payable in four equal semiannual installments.

The Company received the first installment payment of $ 23.8 million for such development milestone in February 2024, the second installment payment of $ 23.8 million in August 2024 and the third installment payment in February 2025.

The Company expects to receive the final payment of $ 23.8 million in the third quarter of 2025.

Remaining potential payments under the GSK License Agreement are milestone and royalty based, and are as follows (in millions):

Milestone payments (up to)

3 unchanged sentences

Low-single digit to low-double digit (if sales exceed $ 1.0 billion) tiered royalties on net product sales

Amendments to the GSK License Agreement

In July 2023, the Company entered into Amendment 1 to the GSK License Agreement, which updated the timeframe for technology transfer in the GSK License Agreement.

In December 2023, the Company entered into Amendment 2 to the GSK License Agreement, which added a country to the locations for PIVOT-PO enrollment.

Under the terms of Amendment 2, the Company may receive up to an additional $ 4.3 million in milestones based on activities in such country.

The Company received the first milestone payment under Amendment 2 of $ 1.2 million in August 2024 and received the second milestone payment of $ 1.3 million in October 2024.

The third milestone was achieved in December 2024 and payment of the $ 0.7 million milestone was received in February 2025.

In March 2024, the Company entered into Amendment 3 to the GSK License Agreement, which assigns its rights to Product Trademarks (as defined in Amendment 3 to the GSK License Agreement) to GSK.

In October 2024, the Company entered into Amendment 4 to the GSK License Agreement, under which the Company will receive an additional $ 0.8 million upon completion of activities related to an additional Phase 1 clinical study.

The Company received $ 0.4 million of the milestone in January 2025 and anticipates receipt of the remaining milestone in the second quarter of 2025.

Royalties are subject to reduction in the event of third-party licenses, entry of a generic product or expiration of patent and regulatory exclusivity prior to the tenth anniversary of the first commercial sale of a GSK Licensed Product in a particular country.

The Company is responsible for the execution and costs of the follow-up Phase 3 clinical trial of tebipenem HBr.

GSK will be responsible for the execution and costs of any additional further development, including additional Phase 3 regulatory filing and

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In July 2023, the Company entered into Amendment 1 to the GSK License Agreement, which updated the technology transfer terms of the GSK License Agreement.

In December 2023, the Company entered into Amendment 2 to the GSK License Agreement, which added a country to the locations for PIVOT-PO.

Under the terms of Amendment 2, the Company may receive up to an additional $ 4.3 million in tranched milestones based on activities in such country.

The Company will be responsible for the execution and costs of the follow-up Phase 3 clinical trial of tebipenem HBr.

GSK will be responsible for the execution and costs of any additional further development, including additional Phase 3 regulatory filing and commercialization activities for tebipenem HBr in the GSK Territory.

The Company will also be responsible for providing and paying for the clinical supply of tebipenem HBr while GSK will be responsible for the costs of the commercial supply of tebipenem HBr.

commercialization activities for tebipenem HBr in the GSK Territory.

The Company is also responsible for providing and paying for the clinical supply of tebipenem HBr while GSK will be responsible for the costs of the commercial supply of tebipenem HBr.

A joint development committee has been established between GSK and the Company to coordinate and review development activities for tebipenem HBr in the United States.

1 unchanged sentence

During the GSK Royalty Term, the Company has agreed not to develop, manufacture or commercialize any oral carbapenem for any indication or any oral antibiotic for cUTI;

this restriction does not apply to any third party which acquires control of Spero after the date of the GSK License Agreement if certain conditions are met.

this restriction does not apply to any third party which acquires control of the Company after the date of the GSK License Agreement if certain conditions are met.

The Company has the right to terminate the GSK License Agreement upon a material breach by, or bankruptcy of, GSK.

GSK has the right to terminate the GSK License Agreement at any time upon a specified number of days’ notice or upon a material breach by, or bankruptcy of, the Company.

In addition, in the event that GSK has the right to terminate the GSK License Agreement due to a breach by the Company, GSK may elect not to terminate the GSK License Agreement and in lieu thereof may assume the responsibility and expense of development of tebipenem HBr in the United States, in which event GSK’s obligation to make further development payments to the Company would cease, and/or to reduce all subsequent commercial and sales milestone payments and royalty payments otherwise due by GSK to the Company under the GSK License Agreement by 50 %.

In addition, in the event that GSK has the right to terminate the GSK License Agreement due to a material breach by the Company, GSK may elect not to terminate the GSK License Agreement and in lieu thereof may assume the responsibility and expense of development of tebipenem HBr in the United States, in which event GSK’s obligation to make further development payments to the Company (including unpaid installments of any earned milestone payments) would cease, and/or to reduce all subsequent commercial and sales milestone payments and royalty payments otherwise due by GSK to the Company under the GSK License Agreement by 50 %.

In the case of a Change of Control of Spero, GSK similarly may, in lieu of terminating the GSK License Agreement, assume responsibility and expense of development of tebipenem HBr in the United States and no development milestones would be payable to the Company, as described above.

The GSK License Agreement contains representations and warranties, other covenants, indemnification provisions and other terms and conditions customary for transactions of the type contemplated by the GSK License Agreement.

12 unchanged sentences

The SSP for the research and development services was estimated based on the Company’s estimate of costs to be incurred to fulfill its obligations associated with the performance of the research and development services, plus a reasonable margin.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result of the purchase of the GSK Shares, GSK has become a related party of the Company.

At contract inception, the total transaction price was $ 64.7 million, which included the initial payment of $ 66.0 million in the fourth quarter of 2022 and the discount of $ 1.3 million related to the GSK SPA (see Note 7).

At contract inception, $ 45.7 million of the initial $ 64.7 million was allocated to the license transfer performance obligation, which was fully satisfied and recognized as revenue upon delivery of the license.

The remaining $ 19.0 million was allocated to the research and development services obligation and is being recognized over time as services are delivered, estimated to be over a three-year period.

The Company recognized revenue for the license performance obligation at a point in time, which is upon transfer of the license to GSK.

Control of the license was transferred on the GSK Effective Date and GSK could begin to use and benefit from the license at the GSK Effective Date.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized revenue for the license performance obligation at a point in time, that is upon transfer of the license to GSK.

Control of the license was transferred on September 21, 2022 (the “GSK Effective Date”) and GSK could begin to use and benefit from the license at the GSK Effective Date.

The $ 30.0 million milestone payment received by the Company under the GSK License Agreement was accounted for as variable consideration under ASC 606 and was added to the transaction price in the third quarter of 2023.

3 unchanged sentences

The Company determined that a significant financing component of $ 2.5 million exists related to extended payments terms granted to GSK.

The Company will present the effects of the financing component separately from collaboration revenue - related party as a component of interest income in its consolidated statement of operations.

Of this $ 95.0 million milestone, $ 64.7 million was recognized upon achievement of the milestone and the remaining amount was allocated to the research and development services performance obligation and will be recognized over time as the services are delivered, on a cumulative catch-up basis.

The Company presents the effects of the financing component separately from collaboration revenue – related party as a component of interest income in its consolidated statement of operations.

Of the $ 95.0 million milestone, $ 64.7 million was recognized upon achievement of the milestone in the fourth quarter of 2023, and the remaining amount after the $ 2.5 million significant financing component was allocated to the research and development services performance obligation and will be recognized over time as the services are delivered, on a cumulative catch-up basis.

The milestone installment payments are classified as collaboration receivable – related party on the Company’s consolidated balance sheet as of December 31, 2024.

The Company invoiced the first installment payment of $ 23.8 million during the fourth quarter of 2023 and received the milestone installment payment in the first quarter of 2024.

The Company received the first installment payment of $ 23.8 million during the first quarter of 2024, received the second installment payment of $ 23.8 million in the third quarter of 2024 and received the third installment payment of $ 23.8 million in the first quarter of 2025.

The final payment of $ 23.8 million is due in the third quarter of 2025.

The potential future development milestone payments from the GSK License Agreement will be accounted for as variable consideration under ASC 606.

1 unchanged sentence

The Company can also earn sales-based royalties.

Pursuant to Amendment 2 to the GSK License Agreement, the Company allocated $ 3.2 million of the total potential additional milestones of $ 4.3 million to the research and development services obligation, as those development milestones were considered probable of achievement.

These potential milestones were accounted for as variable consideration under ASC 606 and were added to the transaction price in the fourth quarter of 2023 and will be recognized over time as services are delivered.

When and if the remaining $ 1.1 million milestone is deemed probable of being achieved, it will be added to the transaction price and will be recognized over time as services are delivered.

Pursuant to Amendment 4 to the GSK License Agreement, the Company allocated $ 0.8 million of the total potential additional milestones to the research and development services obligation, as those development milestones were considered probable of achievement.

These potential milestones were accounted for as variable consideration under ASC 606 and was added to the transaction price in the fourth quarter of 2023 and will be recognized over time as services are delivered.

In total and inclusive of the above, the Company recognized $ 95.8 million during the year ended December 31, 2023 related to the performance obligations, which was recorded as collaboration revenue - related party on its consolidated statement of operations.

The Company recognized $ 46.1 million during the year ended December 31, 2022 related to the GSK License Agreement, which included $ 45.7 million recognized upfront upon the license and know-how transfer and $ 0.4 million related to the research and development service obligation.

The remaining transaction price balance of approximately $ 48.6 million from the GSK License Agreement allocated to the research and development services performance obligation has been recorded as deferred revenue - related party in the condensed consolidated balance sheets.

As of December 31, 2023, the research and development services related to the second performance obligation were expected to be recognized as costs are incurred over the project development timeframe.

These potential milestones were accounted for as variable consideration under ASC 606 and were added to the transaction price in the fourth quarter of 2024 and will be recognized over time as services are delivered.

In total and inclusive of the above, the Company recognized $ 27.0 million and $ 95.8 million during the years ended December 31, 2024 and 2023, respectively, related to the performance obligations, which were recorded as collaboration revenue – related party on its consolidated statement of operations .

The remaining transaction price balance of approximately $ 22.3 million from the GSK License Agreement allocated to the research and development services performance obligation has been recorded as deferred revenue – related party in the consolidated balance sheets.

As of December 31, 2024, the research and development services related to the performance obligations are expected to be recognized as costs are incurred over the project development timeframe.

Meiji License Agreement

In June 2017, the Company entered into agreements with Meiji, whereby Meiji granted to the Company a license under certain patents, know-how and regulatory documentation to research, develop, manufacture and sell products containing a proprietary compound in the licensed territory.

In exchange for the license, the Company paid Meiji an upfront, one-time, nonrefundable,

In exchange for the license, the Company paid Meiji an upfront, one-time, nonrefundable, non-creditable fee of $ 0.6 million, which was recognized as research and development expense.

In October 2017, the Company paid a $ 1.0 million milestone payment to Meiji upon the enrollment of the first patient in the Company’s Phase 1 clinical trial of tebipenem HBr.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

non-creditable fee of $ 0.6 million, which was recognized as research and development expense.

In October 2017, the Company paid a $ 1.0 million milestone payment to Meiji upon the enrollment of the first patient in the Company’s Phase 1 clinical trial of tebipenem HBr.

The payment was recorded as research and development expense in the statement of operations and comprehensive loss for the year ended December 31, 2017.

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This equipment has been capitalized as property and equipment in the consolidated balance sheets as of December 31, 2024.

In October 2021 , the Company paid a $ 1.0 million milestone payment to Meiji upon submission of a NDA to the FDA for tebipenem HBr.

As part of the agreement, the Company is obligated to make future milestone payments of up to $ 1.0 million as of December 31, 2023 upon the achievement of specified regulatory milestones, to pay royalties, on a product-by-product and country-by-country basis, of a low single-digit percentage based on net sales of products licensed under the agreement.

The Company was obligated to pay Meiji a low double-digit percentage of any sublicense fees received by the Company up to a maximum amount of $ 7.5 million, of which the Company paid $ 6.6 million during the year ended December 31, 2022.

Subsequent to receipt of the $ 30.0 million milestone payment from GSK in the third quarter of 2023, the Company paid the remaining $ 0.9 million in the fourth quarter of 2023.

In October 2021 , the Company paid a $ 1.0 million milestone payment to Meiji upon submission of an NDA to the FDA for tebipenem HBr.

The Company recorded these amounts as research and development expenses in the Company’s consolidated statement of operations.

The Company is obligated to make future milestone payments of up to $ 1.0 million upon the achievement of specified regulatory milestones and to pay royalties, on a product-by-product and country-by-country basis, of a low single-digit percentage based on net sales of products licensed under the agreement.

The agreement continues in effect until the expiration of all payment obligations thereunder (including royalty payments and licensee revenue) on a product-by-product and country-by-country basis, unless earlier terminated by the parties.

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Per the terms of the agreement, the Company paid Savior a non-refundable supervision fee of approximately $ 2.0 million to manage the buildout of a commercial manufacturing facility.

The supervision fee was classified as a prepaid asset on the Company’s condensed consolidated balance sheets and was fully amortized as of December 31, 2021.

The supervision fee was classified as a prepaid asset on the Company’s consolidated balance sheets and was fully amortized as of December 31, 2021.

The Company paid Savior an additional $ 5.3 million for facility build out costs between 2019 and 2021.

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SPR720 Agreements

Vertex License Agreement

During the years ended December 31, 2024 and 2023, the Company did no t record any research and development expense under this agreement and the next milestone under this agreement is not accrued because it is not yet probable.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SPR206 Agreements

Cantab License Agreement

In June 2016, the Company entered into a stock purchase agreement (the “Cantab Agreement”) with Pro Bono Bio PLC, a corporation organized under the laws of England, and its affiliates, including PBB Distributions Limited (“PBB”), Cantab Anti-Infectives Ltd.

and New Pharma License Holdings Limited.

Under the Cantab Agreement, the Company is obligated to make future milestone payments of up to $ 5.8 million upon the achievement of specified clinical and regulatory milestones and a payment of £ 5.0 million ( $ 6.3 million as of December 31, 2024 ) upon the achievement of a specified commercial milestone.

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The Cantab Agreement continues indefinitely, with royalty payment obligations thereunder continuing on a product-by-product and country-by-country basis until the later of ten years after the first commercial sale of such product in such country or the expiration in such country of the last to expire valid claim of any of the applicable patents.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Everest Medicines License Agreement

On January 4, 2019, the Company, through its wholly owned subsidiary New Pharma License Holdings Limited (“NPLH”), entered into a license agreement (the “Original Everest License Agreement”), with Everest.

Under the terms of the Original Everest License Agreement, the Company granted Everest an exclusive license to develop, manufacture and commercialize SPR206 or products that contain SPR206 (the “Everest Licensed Products”), in Greater China (which includes Mainland China, Hong Kong and Macau), South Korea and certain Southeast Asian countries (the “Everest Territory”).

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A joint development committee has been established between the Company and Everest to coordinate and review the development, manufacturing and commercialization plans with respect to Everest Licensed Products in the Everest Territory.

Unless earlier terminated due to certain material breaches of the contract, or otherwise, the Amended Everest License Agreement will expire on a jurisdiction-by-jurisdiction and Licensed Product-by-Licensed Product basis upon the latest to occur of expiration of the last valid claim under a licensed patent in such jurisdiction, the expiration of regulatory exclusivity in such jurisdiction or ten years after the first commercial sale of such Licensed Product in such jurisdiction.

The Amended Everest License Agreement may be terminated in its entirety by Everest upon 90 or 180 days ’ prior written notice, depending on the stage of development of the initial Licensed Product.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unless earlier terminated due to certain material breaches of the contract, or otherwise, the Amended Everest License Agreement will expire on a jurisdiction-by-jurisdiction and Everest Licensed Product-by-Everest Licensed Product basis upon the latest to occur of expiration of the last valid claim under a licensed patent in such jurisdiction, the expiration of regulatory exclusivity in such jurisdiction or ten years after the first commercial sale of such Everest Licensed Product in such jurisdiction.

The Amended Everest License Agreement may be terminated in its entirety by Everest upon 90 or 180 days’ prior written notice, depending on the stage of development of the initial Everest Licensed Product.

To date, all performance obligations under the contract were fully satisfied.

As of December 31, 2024 remaining future milestone payments of $ 34.0 million are fully constrained, and will be recognized when and if achievement of those milestones becomes probable.

During the year ended December 31, 2023 , the Company did no t recognize revenue under this agreement.

During the year ended December 31, 2022, the Company recognized approximately $ 0.7 million of revenue under this agreement related to certain milestone achievements.

During both the years ended December 31, 2024 and 2023, the Company did no t recognize revenue under this agreement.

Pfizer License and Share Purchase Agreements

On June 30, 2021, the Company and Pfizer entered into the Pfizer License Agreement and the Pfizer Purchase Agreement.

Under the terms of the Pfizer License Agreement, the Company granted Pfizer an exclusive royalty-bearing license to develop, manufacture and commercialize SPR206 or products that contain SPR206 (the “Pfizer Licensed Products”) in the Pfizer Territory.

The Pfizer Territory excludes the United States and the Asian markets previously licensed to Everest, those being the People’s Republic of China, including Hainan Island, the Hong Kong Special Administrative Region of the People’s Republic of China, and the Macau Special Administrative Region of the People’s Republic of China, Taiwan, the Republic of Korea (South Korea), the Republic of

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Singapore, Malaysian Federation, Kingdom of Thailand, the Republic of Indonesia, Socialist Republic of Vietnam and the Republic of the Philippines).

Under the terms of the Pfizer Purchase Agreement, Pfizer purchased 2,362,348 shares of the Company’s common stock at a price of $ 16.93 per share for a total investment of $ 40.0 million.

On June 30, 2021, the Company and Pfizer Inc.

(“Pfizer”) entered into the Pfizer License Agreement and the Pfizer Purchase Agreement.

In connection with the Pfizer Purchase Agreement , Pfizer purchased 2,362,348 shares of the Company’s common stock at a price of $ 16.93 per share for a total investment of $ 40.0 million.

The Company received no other upfront payments but is eligible to receive up to $ 80.0 million in development and sales milestones, and may also receive high single-digit to low double-digit royalties on net sales of SPR206 in the Pfizer Territory.

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The Company and Pfizer agree that upon Pfizer’s request, the parties will negotiate in good faith regarding procuring a clinical or commercial supply of the compound.

The fair market value of 2,362,348 shares of the Company's common stock issued to Pfizer under the Pfizer Purchase Agreement was determined to be $ 27.5 million.

The common stock issued under the Pfizer Purchase Agreement were valued using an option pricing valuation model as the shares are subject to certain holding period restrictions.

Under the Pfizer Purchase Agreement, the fair market value of the 2,362,348 shares of the Company’s common stock issued to Pfizer was determined to be $ 27.5 million, which was valued using an option pricing valuation model as the shares are subject to certain holding period restrictions.

The Company accounted for the associated premium of $ 12.5 million as a freestanding equity-linked instrument under ASC 815.

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The Pfizer License Agreement will automatically renew for an additional ten-year term unless terminated.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Analysis and Revenue Recognition

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In the third quarter of 2022, upon the completion of a milestone related to regulatory engagement for SPR206, Pfizer communicated its approval that the milestone was achieved, and the Company received $ 5.0 million under the Pfizer License Agreement, which the Company accounted for as variable consideration under ASC 606 and was added to the transaction price in the third quarter of 2022.

Of this $ 5.0 million milestone, $ 0.9 million was recognized during the third quarter of 2022 and the remaining $ 4.1 million was allocated to the research and development services performance obligation and will be recognized over time as the services are delivered.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Of this $ 5.0 million milestone, $ 0.9 million was recognized during the third quarter of 2022 and the remaining $ 4.1 million was allocated to the research and development services performance obligation and is recognized over time as the services are delivered.

The potential license maintenance fees and development milestone payments from the Pfizer License Agreement will be accounted for as variable consideration under ASC 606.

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In total, and inclusive of the above, the Company recognized $ 0.4 million and $ 0.9 million of revenue from the contract during the years ended December 31, 2024 and 2023, respectively.

The remaining transaction price balance of approximately $ 13.0 million from the Pfizer Purchase Agreement allocated to the research and development services performance obligation has been recorded as deferred revenue in the condensed consolidated balance sheets.

The remaining transaction price balance of approximately $ 12.6 million from the Pfizer Purchase Agreement allocated to the research and development services performance obligation has been recorded as deferred revenue in the consolidated balance sheets.

As of December 31, 2024 , the research and development services related to the second performance obligation are expected to be recognized as costs are incurred over the project development timeframe.

Segment Information

The Company manages its operations as a single operating segment for the purpose of assessing performance and making operating decisions, resulting in a single reportable segment.

The Company’s singular focus is on identifying and developing novel treatments for bacterial infections, including MDR bacterial infections, and rare diseases.

The Company earns revenue from collaboration agreements with third parties and grant revenue in connection with various government awards.

The Company has determined that its Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer.

The CODM reviews the Company’s financial information on a consolidated basis for the purpose of allocating resources and assessing financial performance.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

All of the Company’s tangible assets are held in the United States.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting policies for the operating segment are consistent with the Company’s policies for the Consolidated Financial Statements.

The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated profit or loss, as reported on the consolidated statements of operations and comprehensive loss.

This is reviewed against budgeted expectations to assess segment performance and allocate resources.

The Company's reportable segment net revenues, significant segment expenses and consolidated profit (loss) for the years ended December 31, 2024 and 2023, consisted of the following:

Year Ended December 31,

Grant Revenue

Collaboration revenue - related party

Collaboration revenue

Total revenues

Tebipenem HBr

Research and development personnel related (including share-based compensation)

Facility related and other, research and development

General and administrative personnel related (including share-based compensation)

Professional and consultant fees

Facility related and other, general and administrative

Other segment items*

Interest income

Income tax expense

Consolidated profit (loss)

* Other segment items include restructuring charges (see Note 9), impairment of long-term asset and other income, net.

Net Income (Loss) per Share

Basic and diluted net income (loss) per share attributable to common stockholders of Spero Therapeutics, Inc.

was calculated as follows (in thousands, except share and per share amounts):

Basic and diluted net income (loss) per share attributable to common stockholders of the Company was calculated as follows (in thousands, except share and per share amounts):

Year Ended December 31,

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Net income (loss) per share, diluted

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

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As currently established, the Company is not required to make any contributions to the 401(k) Plan.

The Company made matching contributions to the 401(k) Plan of $ 0.3 million and $ 0.4 million during the years ended December 31, 2023 and 2022, respectively.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

On March 6, 2024, the board of directors approved an amendment to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance thereunder by 500,000 shares.

The 2019 Inducement Plan was adopted without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4).

The 2019 Inducement Plan provides for the grant of equity-based awards, including options, restricted and unrestricted stock awards, and other stock-based awards, and its terms are substantially similar to the 2017 Plan, but with such other terms and conditions intended to comply with the Nasdaq inducement award exception.

The 2019 Inducement Plan was previously amended in June 2020, December 2022, July 2023 and November 2023.

The Company made matching contributions to the 401(k) Plan of $ 0.3 million during both the years ended December 31, 2024 and 2023, respectively.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis