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Item 7. Management’s Discussion and Analysis

2026-03-26 compared with 2025-03-27 · 444 added, 462 removed, 934 unchanged (49% 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 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 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 are a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases with high unmet need.

Our clinical-stage product candidate, tebipenem HBr, has completed a second Phase 3 trial, and we believe has the potential to be the first oral carbapenem to treat adult patients with cUTIs, including pyelonephritis, caused by certain microorganisms.

In September 2022, we entered into an exclusive license agreement with GSK for the development, manufacture and commercialization of tebipenem HBr, which includes the transfer of the IND and the NDA ownership to GSK.

In May 2025, we and GSK announced that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr met its primary endpoint and was stopped early for efficacy.

GSK has submitted the data from the trial as part of an NDA Class 2 resubmission for tebipenem HBr to the FDA in December 2025, which has been accepted by the FDA.

GSK reported that the PDUFA date has been set as June 18, 2026.

Following the termination of our earlier stage programs (SPR206 and SPR720), we remain focused on supporting GSK in the FDA approval process pursuant to our obligations under the GSK License Agreement and advancing other corporate activities, including exploring opportunities to grow our portfolio of clinical-stage product candidates.

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.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of tebipenem HBr, or any product candidate we may develop in the future.

As of December 31, 2025, we had an accumulated deficit of $451.1 million, and cash and cash equivalents of $40.3 million.

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 further reductions in spending.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

Based on our current operating plan, we believe that our cash and cash equivalents as of December 31, 2025 will be sufficient to fund our operating expenses and required capital expenditures into 2028.

During this period, we remain focused on supporting GSK in the FDA approval process pursuant to our obligations under our GSK License Agreement and advancing other corporate activities, including exploring opportunities to grow our portfolio of clinical-stage product candidates.

Beyond this point, or in the event we change our current operating plan, we will need additional funding to support our continuing operations.

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

If we are not able to secure adequate additional funding, we will have 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.

If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.

The actions necessary to reduce spending under this plan at a level that mitigates the factors described above are 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.

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

If we obtain regulatory approval for any of our future product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.

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

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

If we fail to raise capital or enter into such agreements as, and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

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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.

Tebipenem HBr

In May 2025, we and GSK announced that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr, an investigational oral treatment for cUTIs, including pyelonephritis, caused by certain microorganisms, met its primary endpoint and the trial was stopped early for efficacy.

The decision followed a recommendation from an IDMC that completed a pre-specified interim analysis of data from 1,690 patients enrolled in the trial.

Following the review of the interim analysis data by the IDMC, it was determined that the Phase 3 PIVOT-PO trial met the primary endpoint of non-inferiority of tebipenem HBr compared to intravenous imipenem-cilastatin in hospitalized adult patients with cUTI, including pyelonephritis, on overall response (composite of clinical cure plus microbiological eradication) at the test-of-cure visit.

The IDMC review did not identify any new safety concerns beyond what has been reported in other studies with tebipenem, with diarrhea and headache as the two most reported adverse events.

In December 2025, GSK resubmitted the NDA for tebipenem HBr to the FDA.

In accordance with the terms of the GSK License Agreement, we became entitled to receive a $25.0 million milestone payment upon the filing of the NDA with the FDA, which we received in February 2026.

Remaining potential payments under the GSK License Agreement, which include milestones and royalties based on commercial launch and achievement of pre-specified sales thresholds, are as follows (in millions):

Contingent Event

Milestone Payment

Total potential commercial milestones based on first commercial sales

First commercial sale of a product in the United States

Second anniversary of first commercial sale of a product in the United States

First commercial sale of a product in two European countries

Total potential sales milestone payments

Net annual sales greater than $200.0

Net annual sales greater than $300.0

Net annual sales greater than $400.0

Net annual sales greater than $500.0

Net annual sales greater than $750.0

Net annual sales greater than $1,000.0

*Under the terms of the GSK License Agreement, the maximum potential milestone amount was revised from $150.0 million after PIVOT-PO was stopped early for efficacy following completion of a pre-specified interim analysis of data from 1,690 patients enrolled in the trial, thereby reducing the overall cost of the trial to us;

the maximum potential milestone payment of $150.0 million was contingent upon the trial continuing to full enrollment, with 2,637 patients enrolled in the trial.

In addition to the milestones described above, GSK is obligated to pay royalties to us on annual net sales of GSK Licensed Products in the GSK Territory.

Such royalties are 1% for annual sales up to $750.0 million each year and range from high single-digit percentages on annual net sales above $750.0 million each year to low double-digit percentages on annual net sales above $1,000.0 million each year.

In March 2025, following a reprioritization of our programs, we announced that we were no longer pursuing a Phase 2 clinical trial for SPR206 and had ceased further development of the program.

On December 31, 2025, we mutually agreed with Pfizer to terminate the Pfizer License Agreement.

Under the terms of the termination agreement, (i) in the event that a product is ever commercialized in the Pfizer Territory by Spero or any successor-in-interest to SPR206, such party will pay Pfizer royalties on the net sales in the Pfizer Territory at the rates set forth in the Pfizer License Agreement and (ii) we are liable to Pfizer for up to $5 million from any future sale, divestiture, license, transfer or partnering of SPR206.

In November 2025, we announced that we ceased development of SPR720 and Vertex subsequently exercised its right to terminate the Vertex Assignment and License Agreement.

Components of Our Results of Operations

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To date, we have not generated any revenue from product sales.

If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales.

We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates.

We may never succeed in obtaining regulatory approval for any of our product candidates.

If our development efforts for any of our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales.

We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

We may never succeed in obtaining regulatory approval for any existing or future product candidates.

Grant Revenue

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.

A portion of our revenue may be derived from payments under any government awards that we may receive in the future.

Collaboration Revenue

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

Collaboration revenue relates to our agreements with Pfizer and GSK.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of any of our product candidates, which include:

• employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;

• expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with contract research organizations (“CROs”);

• expenses incurred in connection with the preclinical and clinical development of any of our product candidates, including under agreements with contract research organizations (“CROs”);

• costs incurred in connection with our government awards;

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.

The successful development and commercialization of our product candidates is highly uncertain.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any existing or future product candidates.

The successful development and commercialization of any of our product candidates is highly uncertain.

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

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• protection of our rights in our intellectual property portfolio;

• launch of commercial sales of our product candidates, if approved, whether alone or in collaboration with others;

• acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;

• launch of commercial sales of any of our product candidates, if approved, whether alone or in collaboration with others;

• acceptance of any of our product candidates, if approved, by patients, the medical community and third-party payors;

• competition with other therapies;

• a continued acceptable safety profile of our product candidates, if approved.

• a continued acceptable safety profile of any of our product candidates, if approved.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

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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.

Impairment Charges

In the third quarter of 2025, we evaluated our real estate leases in light of our new sublease agreements.

As a result of the evaluation, we recorded an impairment charge of $0.6 million associated with the right-of-use asset in the third quarter of 2025.

Restructuring

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.

In October 2024, we implemented a strategic restructuring initiative and corresponding reduction in workforce.

We restructured our operations to reduce costs and reallocate resources in support of the development of tebipenem HBr and other corporate activities.

During the years ended December 31, 2025 and 2024, we recognized $0.3 million and $0.9 million, respectively, in expense related to the restructuring.

We do not expect to incur any further charges related to this restructuring.

Other Income (Expense)

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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.

As of December 31, 2025, we had United States federal, state and foreign net operating loss carryforwards ("NOLs") of $226.1 million, $184.8 million and $4.7 million, respectively.

$212.8 million of the 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 2035 and will expire at various dates through 2045.

In addition, as of December 31, 2024, we had foreign net operating loss carryforwards of $4.6 million, which may be available to offset future income tax liabilities and do not expire.

As of December 31, 2024, we also had federal and state research and development tax credit carryforwards of $6.2 million and $2.1 million, respectively, which begin to expire in 2036 and 2033, respectively.

The foreign NOLs do not expire.

As of December 31, 2025, we also had federal and state research and development tax credit carryforwards of $6.7 million and $1.7 million, respectively, and federal orphan drug tax credit carryforwards of $3.1 million, which may be available to offset future income tax liabilities.

The federal and state research and development tax credits begin to expire in 2035 and the federal orphan drug credits begin to expire in 2044.

We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

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Government Contracts

We generate revenue from government contracts that reimburse us for certain allowable costs for funded projects.

We have generated revenue from government contracts that reimburse us for certain allowable costs for funded projects.

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.

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The related costs incurred by us are included in research and development expense in our consolidated statements of operations and comprehensive loss.

In March 2025, we announced that we ceased development of SPR206 and in April 2025, NIAID communicated to us that it had terminated the contract for convenience effective immediately.

We do not anticipate receiving any additional funding under the BARDA contract.

Collaboration Agreements

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If it is, we evaluate the collaborative arrangement for proper classification in the statement of operations based on the nature of the underlying activity and we assess the payments to and from the collaborative partner.

If the payments to and from the collaborative partner are not within the scope of other authoritative accounting guidance, we base the statement of operations classification for the payments received on a reasonable, rational analogy to authoritative accounting guidance, applied in a consistent manner.

If the payments to and

from the collaborative partner are not within the scope of other authoritative accounting guidance, we base the statement of operations classification for the payments received on a reasonable, rational analogy to authoritative accounting guidance, applied in a consistent manner.

Conversely, if the collaboration arrangement is not within the scope of accounting guidance for collaboration arrangements, we assess whether the collaboration arrangement represents a vendor/customer relationship.

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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, 2025 and 2024

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:

The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31,

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Income (loss) from operations

Other income (expense):

Other income:

Interest income

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Net income (loss)

Grant Revenue

Grant Revenue (in thousands):

Year Ended December 31,

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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 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.

Grant revenue recognized during the years ended December 31, 2025 and 2024 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.

The decrease in grant revenue during 2025 was primarily due to a decrease of $13.0 million in funding under our BARDA contract related to the conclusion of the Phase 3 clinical trial of tebipenem HBr, and a decrease of $0.4 million in qualified expenses incurred under our NIAID award relating to SPR206 as we ceased development of SPR206 and the NIAID award was terminated in April 2025.

Collaboration Revenue - Related Party

During the years ended December 31, 2025 and 2024, collaboration revenue - related party related to revenue recognized under the GSK License Agreement.

During the year ended December 31, 2025, we recognized $47.0 million in collaboration revenue - related party under the GSK License Agreement, of which $25.0 million was recognized upon GSK's filing of an NDA for tebipenem HBr with the FDA in December 2025, one of the milestones under the agreement.

We received payment in February 2026.

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.

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, 2025 we recognized $12.6 million in collaboration revenue related to our agreement with Pfizer, all of which was recognized upon termination of our agreement with Pfizer in December 2025.

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

Research and Development Expenses

Research and Development Expenses (in thousands):

Year Ended December 31,

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Total research and development expenses

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.

Direct costs related to our tebipenem HBr program decreased by $37.9 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, due to decreased clinical activities related to our Phase 3 clinical trial of tebipenem HBr, which met its primary endpoint and was stopped early for efficacy during the first half of 2025.

In December 2025, GSK resubmitted the NDA for tebipenem HBr to the FDA.

Direct costs related to our tebipenem HBr program during the years ended December 31, 2025 and 2024, reflect a $0.5 million and $3.6 million reduction to expense related to a purchase of drug substance material by GSK, respectively.

Direct costs related to our SPR720 program decreased by $15.6 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, due to decreased clinical activity during the period and the cessation of development on the program announced in November 2025.

Direct costs related to our SPR206 program decreased by $0.5 million during the year ended December 31, 2025, primarily due to decreased preclinical activity and the cessation of development of the program announced in March 2025.

The decrease in personnel-related costs of $4.5 million was primarily a result of decreased headcount costs in our research and development functions between the periods.

Personnel-related costs for the years ended December 31, 2025 and 2024 included share-based compensation expenses of $1.7 million and $2.6 million, respectively.

Facility-related and other costs primarily reflect costs related to supporting our research and development staff.

General and Administrative Expenses

General and Administrative Expenses (in thousands):

Year Ended December 31,

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Total general and administrative expenses

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.

The decrease in personnel-related costs of $1.4 million was primarily a result of decreased headcount costs in our general and administrative functions between the periods.

Personnel-related costs for the years ended December 31, 2025 and 2024 included share-based compensation expense of $2.6 million and $5.2 million, respectively.

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

The decrease in professional and consultant fees was primarily due to decreased legal and consulting expenses incurred during the year ended December 31, 2025.

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

In 2023, we concluded that we have no future use for the Savior facility (further described in Note 13 – License, Collaboration and Service Agreements to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K).

As such, we fully impaired this long-term asset and recorded an impairment expense of $5.3 million on the consolidated statement of operations during the year ended December 31, 2023.

During the years ended December 31, 2025 and 2024, we incurred restructuring expenses of $0.3 million and $0.9 million, respectively, related to our strategic restructuring that we announced in October 2024.

Restructuring expenses for both periods were primarily comprised of severance and other employee costs.

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

Impairment Charges

In September 2025 as a result of our review of our space needs and our existing lease agreements, we concluded that we had an impairment of our right of use asset (further described in Note 5 to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K).

Charges related to our right of use asset were $0.6 million for the year ended December 31, 2025, compared to no charges for the year ended December 31, 2024.

Income Tax Expense

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.

During the year ended December 31, 2025, we recorded $0.3 million of income tax expense primarily to reserve any exposure related to our Massachusetts income tax return for the year ended December 31, 2022, which is under examination by the Massachusetts Department of Revenue.

Other Income, Net

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

Other income, net was $2.5 million during the year ended December 31, 2025, compared to $4.8 million during the year ended December 31, 2024.

Total other income for the year ended December 31, 2025 included $2.5 million of interest income, of which $0.9 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 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.

Liquidity and Capital Resources

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We have not yet commercialized any of our product candidates and we may not generate revenue from sales of any product candidates.

To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings.

To date, we have funded our operations with payments received under license and collaboration agreements and government contracts and from the proceeds of multiple common stock offerings.

As of December 31, 2025, we had cash and cash equivalents of $40.3 million.

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

In February 2026, we received a $25.0 million milestone payment under the GSK agreement, which we were entitled to receive upon GSK’s filing of an NDA for tebipenem HBr with the FDA.

The following table summarizes our sources and uses of cash for the years ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31,

Cash used in operating activities

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, 2025 was $12.6 million, primarily resulting from our net income of $8.6 million, adjusted for net non-cash items of $6.0 million (primarily due to share-based compensation).

Net cash provided by changes in our operating assets and liabilities was $27.2 million and consisted primarily of a $24.0 million decrease in our related party collaboration receivable, primarily due to the receipt of the third and fourth installments of the development milestone payments from GSK, offset by the addition of the milestone for submission of an NDA for tebipenem HBr (see Note 13 to the consolidated financial statements), a $34.7 million net decrease in deferred revenue, and a net decrease of $18.8 million in accrued expenses and accounts payable.

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 to the consolidated financial statements), a $26.6 million net decrease in deferred revenue, offset by an increase of $17.1 million in accrued expenses and accounts payable.

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.

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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.

We did not undertake any financing activities during either of the years ended December 31, 2025 or 2024.

Funding Requirements

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 or may apply for in the future;

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

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

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

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

• the outcome, timing and costs of seeking regulatory approvals;

• the costs of commercialization activities for our product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

• the costs of commercialization activities for our future product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

• the terms and timing of any future collaborations, licensing or other arrangements that we may establish;

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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 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.

Based on our current operating plan, we believe that our cash and cash equivalents as of December 31, 2025 will enable us to fund our operating expenses and required capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report and into 2028.

This timeline is uncertain and subject to change as we explore opportunities to grow our pipeline.

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.

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

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

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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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

The following table summarizes our contractual obligations as of December 31, 2024 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

The following table summarizes our contractual obligations as of December 31, 2025 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

Payments Due by Period

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(1) Reflects payments due for our lease of office space under an operating lease agreement that expires in 2027.

In the third quarter of 2025, we entered into agreements to sublease a portion of our office space through the remainder of our lease agreement that expires in 2027.

As further described below, under various licensing and related agreements with third parties, we have agreed to make milestone payments and pay royalties to third parties.

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Under our license agreement with Meiji, we are obligated (i) to make future milestone payments of up to $1.0 million upon the achievement of specified clinical and regulatory milestones for tebipenem HBr and (ii) 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.

Under an agreement we entered into with PBB, we are obligated to make milestone payments of up to $5.8 million upon the achievement of specified clinical milestones and a payment of £5.0 million ($6.3 million as of December 31, 2024) upon the achievement of a specified commercial milestone for SPR206.

In addition, we have agreed to pay to PBB 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.

Under our agreement with Vertex, we are obligated to make future milestone payments of up to $80.2 million upon the achievement of specified clinical, regulatory and commercial milestones related to SPR720 and to pay to 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.

Under an agreement we entered into with PBB, Cantab Anti-Infectives Ltd.

and New Pharma License Holdings Limited, we are obligated to make milestone payments of up to $5.8 million upon the achievement of specified clinical milestones and a payment of £5.0 million ($6.7 million as of December 31, 2025) upon the achievement of a specified commercial milestone for SPR206.

In addition, we have agreed to pay PBB 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.

In March 2025, we notified the parties to the Cantab Agreement of our decision to cease development of SPR206 and as such we will not be liable for any milestones or royalties under the agreement.

We enter into contracts in the normal course of business with CROs, CMOs and other third parties for clinical trials, preclinical research studies and testing, manufacturing and other services.

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

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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, 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”).

and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive income (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, 2025 and 2024, 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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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing external research and development costs on a sample basis, by obtaining and inspecting source documentation such as the underlying contract research organization and contract manufacturing organization agreements, purchase orders, invoices received, and information received from certain third-party service providers, where applicable.

These procedures included, among others, testing external research and development costs on a sample basis, by obtaining and inspecting source documentation such as the underlying contract research organization agreements, purchase orders, invoices received, and information received from certain third-party service providers, where applicable.

/s/ PricewaterhouseCoopers LLP

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Total current assets

Property and equipment, net

Operating lease right-of-use assets

Collaboration receivable, non-current - related party

Liabilities and Stockholders' Equity

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SPERO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPER ATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPER ATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

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General and administrative

Impairment charges

Restructuring

Impairment of long-term asset

Total operating expenses

Income (loss) from operations

Other income (expense):

Other income:

Interest income

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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

Balances at December 31, 2024

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

Issuance of common stock upon the vesting of restricted stock units

Share-based compensation expense

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Net cash used in operating activities

Cash flows from financing activities:

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

Net cash provided by financing activities

Net decrease in cash and cash equivalents

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Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information

Cash paid for income taxes

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

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Nature of the Business and Basis of Presentation

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 .

On June 30, 2017 , through a series of transactions, Spero Therapeutics, LLC merged with and into Spero Therapeutics, Inc.

(formerly known as Spero OpCo, Inc.), a Delaware corporation.

The Company is subject to risks and uncertainties common to companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, risks of failure or unsatisfactory results of nonclinical studies and clinical trials, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates and the ability to secure additional capital to fund operations.

The Company is a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases with high unmet need.

In September 2022, the Company entered into an exclusive licensing agreement with GSK for tebipenem HBr which includes transfer of IND and NDA ownership to GSK.

In May 2025, the Company and GSK announced that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr met its primary endpoint and was stopped early for efficacy.

GSK submitted the data from the trial as part of a New Drug Application (“NDA”) Class 2 resubmission to the FDA in December 2025, and it has been accepted by the FDA.

GSK reported that the Prescription Drug User Fee Act (“PDUFA”) date has been set as June 18, 2026.

In March 2025, following a reprioritization of its programs, the Company announced that it was no longer pursuing a Phase 2 clinical trial for SPR206 and the Company has ceased further development of the program.

Additionally, in November 2025, the Company announced that it ceased development of SPR720, a product candidate for first-line treatment of nontuberculous mycobacterial (“NTM”) pulmonary disease (“NTM-PD”).

Following the termination of its earlier stage programs, the Company remains focused on completing its obligations under the GSK License Agreement and advancing other corporate activities, including exploring opportunities to grow the Company's portfolio of clinical-stage product candidates.

The Company is subject to risks and uncertainties common to companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, risks of failure or unsatisfactory results of nonclinical studies and clinical trials, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates, the ability to in-license or acquire other products or new technologies, and the ability to secure additional capital to fund operations.

The Company’s product candidates will require additional preclinical and clinical testing and regulatory approval prior to commercialization.

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All intercompany accounts and transactions have been eliminated in consolidation.

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 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.

To date, the Company has funded its operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings.

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

During the years ended December 31, 2025 and 2024 , the Company had net income of $ 8.6 million and a net loss of $ 68.6 million, respectively.

In addition, as of December 31, 2025 , the Company had an accumulated deficit of $ 451.1 million.

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

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.

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.

As of the issuance date of these annual consolidated financial statements, based on its current operating plans, the Company expects that its 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 currently expects that it will require additional funding to fund the development of any future product candidate(s) through regulatory approval 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 sources.

If the Company's access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, the Company's 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 affect its business prospects or its ability to continue operations.

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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Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

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

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

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

Concentrations of Credit Risk and of Significant Suppliers

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents.

The Company maintains most of its cash and cash equivalents at one accredited financial institution.

The Company maintains most of its cash and cash equivalents at two accredited financial institutions.

The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs.

In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs.

These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

As of December 31, 2025 and 2024 , the Company had no off-balance sheet risks, including but not limited to, foreign exchange contracts, option contracts, or other hedging arrangements.

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

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation and amortization expense are recognized using the straight-line method over the estimated useful life of each asset as follows:

Estimated Useful Life

Laboratory equipment

Computer software and equipment

Office furniture and equipment

Manufacturing equipment

Leasehold improvements

Shorter of life of lease or 5 years

Costs for capital assets not yet placed into service are capitalized as construction in progress and are depreciated in accordance with the above guidelines once placed into service.

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations.

Expenditures for repairs and maintenance are charged to expense as incurred.

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

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.

Leases with a term greater than one year are recognized on the balance sheets as right-of-use assets and short-term and long-term lease liabilities, as applicable.

The Company has elected not to recognize on the balance sheets leases with terms of one year or less.

The Company has elected not to recognize on the balance sheet leases with terms of one year or less.

As of December 31, 2025 and 2024, the Company had no short-term leases with terms of one year or less.

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Since the Company does not have any debt and has not been rated by any major credit rating agency, the Company’s IBR was estimated by developing a synthetic credit rating for the Company.

The Company has elected to account for lease and non-lease components together as a single lease component.

During the third quarter of 2025, the Company identified changes in business circumstance resulting in the need for an impairment analysis.

The analysis resulted in the identification of multiple lease components, while historically the Company had elected to account for the lease and non-lease components together as a single lease component (see Note 4).

Other assets consist of long-term prepayments and deposits.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-Lived Assets

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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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The exercise of a material right may be accounted for as a contract modification or as a continuation of the contract for accounting purposes.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract.

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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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For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

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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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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 October 2024.

Th e 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 October 2024 (see Note 9).

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.

Amounts incurred are classified as general and administrative expenses.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

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The Company records the expense for awards with service-based conditions using the straight-line method over the requisite service period, net of any actual forfeitures.

If the service condition is not met or not expected to be met, any compensation expense previously recognized to date associated with the awards will be reversed.

The Company has also granted certain awards subject to performance-based vesting eligibility and a subsequent partial time-based vesting schedule.

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.

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.

For the years ended December 31, 2025 and 2024 , there were no components of other comprehensive income (loss), and therefore comprehensive loss is the same as net income (loss).

Net Income (Loss) per Share

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Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized.

The Company accounts for un certainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized.

First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.

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The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

On December 22, 2017, the Tax Cuts and Jobs Act (“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 15 years for research conducted abroad.

Recently Issued and Adopted Accounting Pronouncements

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 4, 2025, t he One Big Beautiful Bill Act (“OBBBA”) was signed into law.

Under the OBBBA provisions, effective with tax years beginning on or after January 1, 2025, taxpayers can expense qualified domestic research and development expenditures, including all direct, indirect, overhead and software development costs.

Taxpayers are still required to capitalize and amortize these costs over fifteen years if conducted outside the United States.

The Company evaluated OBBBA to determine its impact on the Company's consolidated financial statements and determined there is no material impact.

Recently Issued 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 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.

In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities , to establish guidance on the recognition, measurement, and presentation of government grants received by business entities.

The new guidance leverages the principles in the accounting framework for government assistance in IFRS, specifically IAS 20, Accounting for Government Grants and Disclosure of Government Assistance;

makes certain targeted improvements;

and modifies certain of the existing disclosure requirements in ASC 832, Government Assistance.

The new guidance is effective for public business entities in annual periods beginning after December 15, 2028 (including interim periods within) and one year later for all other entities, with early adoption permitted in any period for which financial statements have not yet been issued.

The guidance can be applied on a modified prospective basis, a modified retrospective basis, or a full retrospective basis.

The Company is evaluating ASU 2025-10 to determine its impact on the Company's consolidated financial statements but does not expect there will be a material impact.

In September 2025, the FASB issued ASU 2025-07, Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract .

The new guidance will reduce the number of contracts (or embedded features within instruments) that are accounted for as derivatives under ASC 815, Derivatives and Hedging.

The ASU adds a new scope exception to the derivatives guidance for underlying based on the operations or activities specific to one of the parties to the contract.

The ASU also clarifies that share-based noncash consideration received from a customer as consideration for the transfer of goods or services in a revenue contract is subject to the revenue guidance and not the financial instruments guidance unless and until the company’s right to receive or retain the share-based noncash consideration is “unconditional,” as defined in the ASU.

This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

The Company is evaluating ASU 2025-07 to determine its impact on the Company's consolidated financial statements but does not expect there will be a material impact.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets .

The ASU relates to estimating credit losses under CECL for current accounts receivable and current contract assets arising from revenue transactions accounted for under ASC 606, Revenue from Contracts with Customers, including those acquired in a transaction accounted for under ASC 805, Business Combinations.

The ASU does not apply to other types of accounts receivable and loans.

For all entities, the ASU provides a practical expedient to assume that current conditions as of the balance sheet date will persist through the reasonable and supportable forecast period for eligible assets.

Entities will still be required to adjust historical data used in the estimation to reflect current conditions.

In addition, entities other than public business entities can also make an accounting policy election to consider subsequent collections of balances received after the balance sheet date through a date selected by the entity.

This policy election is available only if the entity elects the practical expedient.

The date selected must be when or before financial statements are available to be issued.

Under this accounting policy election, no credit loss would be recorded on balances that have been collected through subsequent receipts.

Remaining uncollected amounts would be evaluated for credit losses using the practical expedient.

This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

The Company is evaluating ASU 2025-05 to determine its impact on the Company's consolidated financial statements but does not expect there will be a material impact.

In November 2024, the FASB issued ASU 2024-03, “ Disaggregation of Income Statement Expenses ”, to provide disaggregated disclosures of specific expense categories underlying all relevant income statement expense line items on an annual and interim basis.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The effective date for the standard is for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is evaluating ASU 2024-03 to determine its impact on the Company's consolidated financial statements but does not expect there will be a material impact.

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 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 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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

ASU 2023-09 requires public companies to annually (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).

ASU 2023-09 is effective for the annual reporting periods in fiscal years beginning after December 15, 2024.

See Note 10, Income Taxes, for further information on the Company's adoption of ASU 2023-09 for its 2025 annual reporting.

Fair Value Measurements and Marketable Securities

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis (in thousands):

Fair Value Measurements at December 31, 2025 Using:

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During the years ended December 31, 2025 and 2024 , there were no transfers between Level 1, Level 2 and Level 3 categories.

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Leasehold improvements

Manufacturing equipment

Computer software and equipment

Office furniture and equipment

Accumulated depreciation and amortization

Total property and equipment, net

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

Long-lived Assets and Right-of-use Asset Impairment

During the third quarter of 2025, the Company evaluated its real estate leases in light of the sublease agreements entered into in September 2025.

This change in the use of the Cambridge, Massachusetts office space led management to test the recoverability of the carrying amount of the asset group related to the sublease.

Accordingly, the Company reviewed certain of its right-of-use assets and other lease related assets under the sublease asset group for impairment in accordance with ASC 360 “Property, Plant, and Equipment”.

As of September 30, 2025, the carrying amount of the asset group exceeded the Company’s anticipated undiscounted value of the sublease income over the sublease term.

As a result of the evaluation, the Company recorded an impairment charge of $ 0.6 million associated with the right-of-use asset in the third quarter of 2025.

The asset group was written down to its estimated fair value calculated using a discounted cash flow method (income approach).

The fair value of the asset group was determined by utilizing projected cash flows from the sublease, discounted by a risk-adjusted discount rates of 11.4 % that reflects the level of risk associated with receiving future cash flows.

The inputs utilized in the analyses were classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, “Fair Value Measurement”.

Refer to Note 9, Commitments and Contingencies, for further information about the sublease.

The remaining carrying value of the operating lease right-of-use asset of $ 1.5 million will be amortized on a straight-line basis over the remaining lease term of 1.6 years.

Operating Leases

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The Company's lease extends through July 2027 .

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2025 and 2024, the components of operating lease expense were as follows (in thousands):

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Operating cash flows from operating leases

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):

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 leases as of December 31, 2025 and 2024 (in thousands, except for the weighted average remaining lease term and the weighted average discount rate):

Lease Assets and Liabilities

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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, 2025 (in thousands):

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Total operating lease liabilities

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses and Other Current Liabilities

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Total accrued expenses and other current liabilities

Convertible Preferred Stock

Series A, Series B, Series C, and Series D Convertible 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 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 (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.

GSK License and Share Purchase Agreements

Concurrently with the execution of the GSK License Agreement, on September 21, 2022 (the "GSK Effective Date”), the Company entered into a stock purchase agreement (the "GSK SPA”) with Glaxo Group Limited ("GGL”), an affiliate of GSK, which closed on November 7, 2022 (the "GSK Closing Date”), and pursuant to which GGL purchased on the GSK Closing Date 7,450,000 shares (the "GSK Shares”) of the Company’s common stock at a purchase price of approximately $ 1.20 per share, which represented a discount on the closing price of the Company's common stock on November 4, 2022, for an aggregate purchase price of $ 9.0 million.

The GSK SPA contains certain standstill, lock-up and registration rights provisions.

Upon closing, the Company recorded the fair market value of the shares issued in stockholders’ equity in its condensed consolidated balance sheets.

The fair market value of 7,450,000 GSK Shares issued under the GSK SPA was $ 10.3 million.

The GSK Shares were valued using an option pricing valuation model as the shares are subject to certain holding period restrictions.

The Company accounted for the associated discount of $ 1.3 million as a freestanding equity-linked instrument under ASC 815.

The discount was allocated as consideration for the GSK License Agreement and evaluated under ASC 606.

The discount was determined not to be constrained and was included in the calculation of the total transaction price related to the GSK License Agreement as of the GSK Effective Date of the transaction.

Refer to Note 14 for further discussion.

The GSK Shares were issued and sold without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.

Refer to Note 14 for further discussion.

Under the Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”), 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.

During the years ended December 31, 2025 and 2024 , and through the issuance date of these consolidated financial statements, the Company did no t sell any shares of its common stock under the Sales Agreement.

Share-Based Compensation

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The shares of common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2017 Plan will be added back to the shares of common stock available for issuance under the 2017 Plan.

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 Compensation Committee of the Company’s Board of Directors.

Subsequently, the Company’s stockholders approved amendments to the 2017 Plan, to increase the total number of shares reserved for issuance under the 2017 Plan from 1,785,416 to 18,188,627 and made certain other amendments to the plan.

As of December 31, 2025 , there were 7,587,662 shares remaining available to be issued under the 2017 Plan, as amended.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The amendments provided for the following:

(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 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

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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 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 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 thereunder by 500,000 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.

Subsequently, the Board of Directors approved amendments to the 2019 Inducement Plan to increase the number of shares of common stock authorized for issuance from 331,500 to 3,156,500 shares.

As of December 31, 2025 , there were 1,203,612 shares remaining available to be issued under the 2019 Inducement Plan, as amended.

The Equity Plans

The following table summarizes stock option activity under the Equity Plans (excluding RSUs) during the year ended December 31, 2025:

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Outstanding as of December 31, 2025

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.

As of December 31, 2025 , a total of 21,345,127 shares of common stock have been authorized and reserved for issuance under the Equity Plans and 8,791,274 shares of common stock 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

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.

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.

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.

Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of stock option awards granted to employees and directors were as follows, presented on a weighted average basis:

There were no options granted during the year ended December 31, 2025.

For the year ended December 31, 2024, the assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of stock option awards granted to employees and directors were as follows, presented on a weighted average basis:

Year Ended December 31,

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Expected dividend yield

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

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock option activity under the Equity Plans (excluding RSUs) for the year ended December 31, 2025:

Number of Shares

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Exercisable at December 31, 2025

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2024 was $ 1.12 per share.

No stock options were granted during the year ended December 31, 2025.

The weighted average grant-date fair value of awards granted during the year ended December 31, 2024 was $ 1.12 per share.

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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.

As of December 31, 2025 , total unrecognized compensation cost related to unvested stock option grants was less than $ 0.1 million.

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

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As of December 31, 2025 , there was approximately $ 4.6 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of approximately 2.4 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.

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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, as applicable.

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 (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 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

Weighted Average Grant Date Fair Value

Outstanding as of December 31, 2023

Vested and released

Forfeited or cancelled

Outstanding as of December 31, 2024

Share-Based Compensation Expense

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General and administrative expenses

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring

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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:

As of December 31, 2025, the Company recognized $ 1.1 million in expense related to the October 29, 2024 restructuring and does not expect to incur any further charges related to this restructuring.

Year Ended December 31, 2025

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Total restructuring charges

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

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2024

Research and development

General and administrative

Severance and other employee costs

Total restructuring charges

The restructuring charge was included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets as of December 31, 2025.

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

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

As of December 31, 2025

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Balance as of December 31, 2025

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

Non-Executive Retention Awards

In connection with the 2024 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.

Subject to remaining actively employed and in good standing with the Company, aggregate retention awards of $ 4.4 million were approved to 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 contained 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 were recognized over the employee service period from October 29, 2024 through the third quarter of 2025.

In May 2025, retention awards of $ 2.2 million were paid to non-executive employees due to the achievement of the first clinical execution milestone.

In October 2025, retention awards of $ 2.2 million were paid to non-executive employees due to the achievement of the second clinical execution milestone.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Executive Retention Awards

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.

On November 8, 2024, the Compensation Committee of the Board of Directors approved a retention program for the Company’s executive team, which included the then-current Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Human Resources Officer.

The purpose of the program was to help ensure that the Company retained members of its executive team who were considered critical to the development of tebipenem HBr in its PIVOT-PO, global Phase 3 clinical trial of tebipenem HBr in patients with cUTI.

The retention program provided these members of the executive team with the opportunity to earn a cash bonus in an amount equaling 75 % of the aggregate of their then-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, the retention bonus was payable in three equal installments based on each of three milestones, with the first and second installments payable upon the achievement of two separate clinical execution milestones.

The remaining installment was payable upon the achievement of the stockholder value added milestone, related to stock price appreciation or financial stewardship milestone by no later than the fourth quarter of 2026.

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

Expenses related to the achievement of each of the two clinical milestones were recognized over the employee service period from October 29, 2024 through the third quarter of 2025.

Expenses related to the achievement of the Company's stock price appreciation or financial stewardship milestone were fully recognized during the quarter ended June 30, 2025.

The total retention payments aggregate to $ 1.2 million, adjusted for terminations, of which (i) $ 0.4 million was paid to executives in May 2025 upon achievement of the first clinical milestone, (ii) $ 0.4 million was paid to executives in October 2025 upon achievement of the second clinical milestone, and (iii) $ 0.4 million was paid to executives in November 2025 upon achievement of the stockholder value added milestone.

The Company’s provision for income taxes is comprised of the following for the periods ended December 31, 2025 and 2024 (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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Income (loss) before income taxes

A reconciliation of the U.S.

federal statutory income tax rate to the Company’s effective income tax rate is as follows:

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The difference between the income tax provision at the U.S.

federal statutory rate and the recorded provision is primarily due to the valuation allowance recorded on all deferred tax assets.

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % statutory U.S.

federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

Year Ended December 31,

Federal statutory income tax rate

State and local income taxes, net of federal income tax effect*

Research and development tax credits

Orphan drug tax credit

Changes in valuation allowances

Nontaxable or nondeductible items

Stock compensation

Other adjustments

Effective income tax rate

*Massachusetts accounts for the majority (greater than 50%) of the tax effect in this category.

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % statutory U.S.

federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

Year Ended December 31,

Federal statutory income tax rate

Federal tax credits

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Nondeductible stock compensation

Other nondeductible items

Reduction in tax attributes

Increase in deferred tax asset valuation allowance

1 unchanged sentence

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):

Temporary differences that give rise to significant deferred tax assets (liabilities) as of December 31, 2025 and 2024 consisted of the following (in thousands):

Deferred tax assets

Net operating loss carryforwards

2 unchanged sentences

Capitalized research and development expenses

Total deferred tax assets

Lease liability

Total gross deferred tax assets

Valuation allowance

Net deferred tax assets

Total deferred tax assets

Deferred tax liabilities

Right of use assets

Total gross deferred tax liabilities

Total net deferred tax assets

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2025, the Company did not have any material cash payments or refunds for income taxes.

As of December 31, 2025, the company had United States federal, state and foreign net operating loss carryforwards ("NOLs") of $ 226.1 million, $ 184.8 million and $ 4.7 million, respectively.

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

$ 212.8 million of the 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 2035 and will expire at various dates through 2045.

1 unchanged sentence

As of December 31, 2025, the Company also had federal and state research and development tax credit carryforwards of $ 6.7 million and $ 1.7 million, respectively, and federal orphan drug tax credit carryforwards of $ 3.1 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.

The federal and state research and development tax credits begin to expire in 2035 and the federal orphan drug credits begin to expire in 2044.

Utilization of the U.S.

4 unchanged sentences

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 we 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 it 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 our ability to utilize remaining tax attributes.

The Company has not conducted a full study of its research and development credit carryforwards since 2023.

A 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 will be presented as an uncertain tax position.

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

Thus, there would be no impact to the balance sheet or statement of operations at this time, if an adjustment were required.

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

Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets.

Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023.

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, 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):

Accordingly, a full valuation allowance has been recorded at December 31, 2025 and December 31, 2024, respectively.

Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2025 primarily relates to the increase in pre-tax income and the impact of stock compensation cancellations.

Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2024 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

Increases recorded to income tax provision

Decreases (increases) recorded to income tax provision

Valuation allowance as of end of year

4 unchanged sentences

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.

6 unchanged sentences

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.

As of December 31, 2025, the Company’s Massachusetts income tax return for the year ended December 31, 2022 is under examination by the Massachusetts Department of Revenue.

The Company has reserved any exposure related to this audit in its 2025 financial statements.

Commitments and Contingencies

10 unchanged sentences

The Company has entered into an operating lease agreement with respect to its corporate headquarters located at 675 Massachusetts Avenue, Cambridge, Massachusetts (see Note 5).

In September 2025, the Company entered into sublease agreements for a portion of its lease through the remainder of its lease term.

The Company recorded sublease income as a reduction of lease expense, in an amount of $ 0.2 million for the year ended December 31, 2025.

Indemnification Agreements

2 unchanged sentences

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

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 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/or officers of the Company at the time of the initiation of the Investigation and Wells Notice, 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.

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, 2025 or December 31, 2024.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

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

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Spero 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 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.

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 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.

14 unchanged sentences

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.

However, there is no assurance that the Company will be successful in its defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of these actions.

Moreover, the Company is unable to predict the outcomes or reasonably estimate a range of possible loss at this time.

Additional lawsuits against the Company and certain of its officers or directors may be filed in the future.

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

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.

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.

On January 9, 2025, the Company responded to a “Wells Notice” from the staff of the Boston Regional Office (the “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 former member of the Board of Directors, Ankit Mahadevia, M.D.

Mahadevia”), and its former Chief Financial Officer, 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 FDA, and whether the Company’s disclosures may have violated the federal securities laws (the “Investigation”).

On January 16, 2026, acting pursuant to an offer of settlement submitted by 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.

Shukla, the SEC issued an order instituting cease-and-desist proceedings, making findings, and imposing a cease-and-desist order pursuant to Section 8A of the 1933 Act, directing 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.

Shukla to cease and desist from committing or causing any violations of Section 17(a)(2) of the 1933 Act, 15 U.S.C.

§ 77q(a)(2) (the “SEC Order”).

In the SEC Order, the SEC made findings that, from March 31, 2022 to May 3, 2022, Dr.

Mahadevia and Mr.

Shukla, violated Section 17(a)(2) of 1933 Act, which provides that it is unlawful for any person, in the offer or sale of a security, to “obtain money or property by means of any untrue statement of material fact” or a material omission necessary to make statements made not misleading.

A violation of this provision does not require scienter and may rest on a finding of negligence.

Mahadevia and Mr.

Shukla consented to entry of the SEC Order without admitting or denying the findings contained therein, except as to jurisdiction.

On January 20, 2026, the Company received a letter (the “Letter”) from the SEC advising the Company that the SEC has concluded its investigation into the Company and that, based on the information as of the date of the Letter, the SEC does not intend to recommend an enforcement action against the Company at this time.

The Letter was provided under the guidelines set out in the final paragraph of Securities Act Release No.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company and Mr.

Shukla mutually decided to separate, and Mr.

Shukla also resigned from the Board of Directors, in each case effective as of May 2, 2025.

On January 30, 2026, Dr.

Mahadevia resigned from the Board of Directors, including from his service on the Development Committee of the Board and from all officer and director positions he then held with any and all subsidiaries of the Company, effective as of January 30, 2026.

On January 31, 2026, the Company entered into a consulting agreement with Dr.

Mahadevia, through which he will be available to provide consulting services to the Company, as may be requested from time to time by management.

Government Contracts

1 unchanged sentence

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.

T hrough a number of contract modifications and the exercise of additional contract options by BARDA, the committed funding was increased to $ 65.6 million as of December 31, 2025, and the period of performance extended through October 31, 2026.

During the years ended December 31, 2025 and 2024, the Company recognized $ 7.2 million and $ 20.2 million of grant revenue under the BARDA agreement, respectively.

As of December 31, 2025 , of the $ 65.6 million of committed funding, the Company has cumulatively recognized $ 65.1 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.

The Company does not anticipate receiving the remaining funding from BARDA.

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

1 unchanged sentence

HHS-NIH-NIAID-BAA2020-1 award mechanism to support further development of SPR206.

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

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.

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

The Company was to 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, 2025 , $ 10.5 million of funding had bee n committed under this award and the Company has cumulatively recognized $ 5.3 million of grant revenue under the NIAID agreement.

The Company recognized less than $ 0.1 million and $ 0.4 million of grant revenue under this agreement during the years ended December 31, 2025 and 2024, respectively.

In March 2025, following a reprioritization of its programs, the Company announced that it ceased development of SPR206 and on April 4, 2025, NIAID communicated that it had terminated the contract for convenience effective immediately.

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.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Tebipenem HBr Agreements

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.

On November 7, 2022, the Company closed the transactions contemplated by the License Agreement (the “GSK License Agreement”), with GlaxoSmithKline Intellectual Property (No.

3) Limited (“GSK”), 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,

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”).

(“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 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.

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 GSK Licensed Products.

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.

1 unchanged sentence

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 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)

GSK’s submission of a new drug application with the FDA for tebipenem HBr

Total potential commercial milestone payments based on first sale (US/EU)

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

The Company received the first installment payment for such development milestone in the first quarter of 2024, the second installment payment in the third quarter of 2024, the third installment payment in the first quarter of 2025 and received the final development milestone installment payment in the third quarter of 2025.

In May 2025, the Company announced that the PIVOT-PO Phase 3 trial met its primary endpoint and was stopped early for efficacy after a review of data from a pre-specified interim analysis of data from 1,690 patients enrolled in the trial.

In December 2025, GSK resubmitted the NDA for tebipenem HBr to the FDA.

The Company became entitled to receive a $ 25.0 million milestone payment upon the filing of the NDA with the FDA, which the Company received in February 2026.

Contingent Event

Milestone Payment

Total potential commercial milestones based on first commercial sales

First commercial sale of a product in the United States

Second anniversary of first commercial sale of a product in the United States

First commercial sale of a product in two European countries

Total potential sales milestone payments

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

Net annual sales greater than $ 200.0

Net annual sales greater than $ 300.0

Net annual sales greater than $ 400.0

Net annual sales greater than $ 500.0

Net annual sales greater than $ 750.0

Net annual sales greater than $ 1,000.0

* Under the terms of the GSK License Agreement, the maximum potential milestone amount was revised from $ 150.0 million after PIVOT-PO was stopped early for efficacy following completion of a pre-specified interim analysis of data from 1,690 patients enrolled in the trial, thereby reducing the overall cost of the trial to the Company;

the maximum potential milestone payment of $ 150.0 million was contingent upon the trial continuing to full enrollment, with 2,637 patients enrolled in the trial.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to the milestones described above, GSK is obligated to pay royalties to the Company on annual net sales of GSK Licensed Products in the GSK Territory.

Such royalties are 1 % for annual sales up to $ 750.0 million each year and range from high single-digit percentages on annual net sales above $ 750.0 million each year to low double-digit percentages on annual net sales above $ 1,000.0 million each year.

Amendments to the GSK License Agreement

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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.

The Company received the first milestone payment under Amendment 2 of $ 1.2 million in August 2024, the second milestone payment of $ 1.3 million in October 2024 and the third milestone payment of $ 0.7 million in February 2025.

Since the PIVOT-PO trial was stopped early for efficacy, the fourth milestone of $ 1.1 million will not be achieved.

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.

In October 2024, the Company entered into Amendment 4 to the GSK License Agreement, under which the Company received 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 received the remaining payment of $ 0.4 million in February 2026.

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

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.

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

GSK is 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.

Additionally, the Company was 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.

4 unchanged sentences

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 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 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 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.

1 unchanged sentence

In support of certain of its rights to indemnification, GSK also has certain rights to suspend payments otherwise owed to the Company, as well as the right to offset payments otherwise owed to the Company against certain indemnifiable claims.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Analysis and Revenue Recognition

13 unchanged sentences

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.

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.

2 unchanged sentences

Of this $ 30.0 million milestone, $ 21.2 million was recognized upon achievement of the milestone and the remaining $ 8.6 million 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 is entitled to receive the $ 95.0 million milestone payment in four equal semiannual installments under the GSK License Agreement.

The Company was entitled to receive the $ 95.0 million milestone payment in four equal semiannual installments under the GSK License Agreement.

This milestone was accounted for as variable consideration under ASC 606 and was added to the transaction price in the fourth quarter of 2023.

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

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

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 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.

Given the uncertain nature of these payments, the Company determined they were fully constrained as of December 31, 2024 and not included in the transaction price.

The Company can also earn sales-based royalties.

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

The Company could 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.

The remaining $ 1.1 million milestone is not probable of being achieved as the PIVOT-PO trial ended early for efficacy.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 were added to the transaction price in the fourth quarter of 2024 and will be recognized over time as services are delivered.

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 are recognized over time as services are delivered.

In relation to the May 2025 announcement that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr met its primary endpoint and has stopped early for efficacy, the Company updated the estimated costs to complete its performance obligations under the GSK License Agreement and updated the timeline for completion of performance obligations resulting in the recognition of additional revenue as a cumulative catch-up in the second quarter of 2025.

In December 2025, GSK resubmitted the NDA Class 2 resubmission for tebipenem HBr to the FDA, which has been accepted by the FDA.

GSK reported that the PDUFA date has been set as June 18, 2026.

T he Company received the $ 25.0 million milestone payment in February 2026.

In total and inclusive of the above, the Company recognized $ 47.0 million and $ 27.0 million during the years ended December 31, 2025 and 2024, 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.

The remaining transaction price balance of approximately $ 0.3 million from the GSK License Agreement allocated to the research and development services performance obligation is recorded as deferred revenue – related party in the consolidated balance sheets.

As of December 31, 2025, the research and development services related to the performance obligations are expected to be recognized as costs are incurred in 2026.

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, 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

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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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 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 and paid the remaining $ 0.9 million in the fourth quarter of 2023.

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, which the Company fully paid by the fourth quarter of 2023.

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 Company is obligated to make future milestone payments of $ 1.0 million upon receipt of NDA approval from the FDA for tebipenem HBr, and to pay royalties, on a product-by-product and country-by-country basis, of 1% of 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.

Pursuant to the terms of the agreement, in addition to each party’s right to terminate the agreement upon the other party’s material breach (if not cured within a specified period after receipt of notice) or insolvency, the Company also has unilateral termination rights (i) in the event that the Company abandons the development and commercialization of tebipenem HBr for efficacy, safety, legal or business reasons, and (ii) under certain circumstances arising out of the head license with a global pharmaceutical company.

Savior Service Agreement

In November 2018, the Company entered into a service agreement with Savior Lifetec Corporation (“Savior”) to perform technology transfer, process development, analytical method development and testing and formulation development for tebipenem HBr.

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 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.

In the third quarter of 2023, the Company concluded that it had no future use for the Savior facility and in October 2023, the Company terminated the service agreement.

As such, the Company fully impaired this long-term asset and recorded an impairment expense of $ 5.3 million on its consolidated statement of operations during the year ended December 31, 2023.

SPR720 Agreements

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 May 2016, the Company entered into an agreement with Vertex Pharmaceuticals Incorporated (“Vertex”) (the “Vertex Assignment and License Agreement”) 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, 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

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 .

net sales of products licensed under the agreement.

During the years ended December 31, 2025 and 2024 , 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.

In November 2025, the Company announced that it ceased development of SPR720 and Vertex contemporaneously terminated the license granted under the Vertex Assignment and License Agreement.

SPR206 Agreements

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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 ( $ 6.7 million as of December 31, 2025) upon the achievement of a specified commercial milestone.

In addition, the Company agreed to pay to PBB 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.

During both the years ended December 31, 2024 and 2023, the Company did no t record any research and development expense related to the achievement of regulatory milestones for SPR206, as no milestones were met or are probable of being met as of the balance sheet date.

In addition, the Company agreed to pay PBB 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 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.

During both the years ended December 31, 2025 and 2024, the Company did not record any research and development expense related to the achievement of regulatory milestones for SPR206, as no milestones were met or were probable of being met as of the balance sheet date.

In March 2025, the Company notified the parties to the Cantab Agreement of its decision to cease development of SPR206 and as such the Company does not expect to incur any milestones or royalties under the agreement.

Everest Medicines License Agreement

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In addition to the license grant with respect to SPR206, the Company, through its wholly owned subsidiary, Spero Potentiator, Inc., a Delaware corporation, granted Everest a 12 -month exclusive option to negotiate with it for an exclusive license to develop, manufacture and commercialize SPR741 in the Everest Territory.

Under the terms of the Original Everest License Agreement, the Company received an upfront payment of $ 3.0 million that was recognized in the first quarter of 2019, comprised of a $ 2.0 million payment to license SPR206 and $ 1.0 million for the exclusive option to negotiate a license to develop SPR741.

The Company also received a milestone payment of $ 2.0 million in the fourth quarter of 2020 upon completion and delivery of the results of a clinical study.

On January 15, 2021, the Company entered into an amended and restated license agreement (“the Amended Everest License Agreement”) with Everest and Spero Potentiator, Inc., which amended and restated in its entirety the Original Everest License Agreement.

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Everest has the right to sublicense to affiliates and third parties in the Everest Territory.

Everest is responsible for all costs related to developing, obtaining regulatory approval of and commercializing SPR206 and Everest Licensed Products in the Everest Territory, and is obligated to use commercially reasonable efforts to develop, manufacture and commercialize Everest Licensed Products, including to achieve certain specified diligence milestones within agreed-upon periods.

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.

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

During both the years ended December 31, 2025 and 2024, the Company did not recognize revenue under this agreement.

In March 2025, the Company notified Everest of its decision to cease development of SPR206.

As of December 31, 2025 , remaining future milestone payments of $ 34.0 million are fully constrained, and would be recognized when and if achievement of those milestones becomes probable.

Pfizer License and Share Purchase Agreements

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

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

(“Pfizer”) entered into a License Agreement (the “Pfizer License Agreement”) and a Share Purchase Agreement (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”) globally with some territorial exceptions (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 Singapore, Malaysian Federation, Kingdom of Thailand, the Republic of Indonesia, Socialist Republic of Vietnam and the Republic of the Philippines).

The Pfizer Territory excludes the United States and the Everest Territory.

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.

Achievement of these payments cannot be guaranteed.

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.

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.

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The premium was determined not to be constrained and was included in the calculation of the total transaction price related to the Pfizer License Agreement as of June 30, 2021.

The Company is responsible for all costs related to developing and obtaining regulatory approval of SPR206 and Pfizer Licensed Products in the Pfizer Territory, with a focus on the European market, and is obligated to use commercially reasonable efforts, including to achieve certain specified diligence milestones within agreed-upon periods.

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

Pfizer is responsible for commercializing SPR206 and the Pfizer Licensed Products in the Pfizer Territory.

Unless earlier terminated due to certain material breaches of the contract or by Pfizer’s convenience, or otherwise, the Pfizer License Agreement will expire on a jurisdiction-by-jurisdiction and licensed product-by-licensed product basis after ten years from the effective date.

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

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 31, 2025, the Company mutually agreed with Pfizer to terminate the Pfizer License Agreement.

Under the terms of the termination agreement, (i) in the event that a product is ever commercialized in the Pfizer Territory by the Company or any successor-in-interest to SPR206, such party will pay Pfizer royalties on the net sales in the Pfizer Territory at the rates set forth in the Pfizer License Agreement and (ii) the Company is liable to Pfizer for up to $ 5 million from any future sale, divestiture, license, transfer or partnering of SPR206.

Accounting Analysis and Revenue Recognition

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Furthermore, Pfizer has the right to use third parties to manufacture the compound, or to manufacture the compound itself.

SPERO THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At contract inception, $ 1.4 million of the then transaction price of $ 12.5 million was allocated to the license and know-how transfer performance obligations, which was fully satisfied and recognized as revenue upon delivery of the license.

The additional $ 11.1 million was allocated to the research and development services obligation and is being recognized over time as services are delivered.

The additional $ 11.1 million was allocated to the research and development services obligation and was being recognized over time as services are delivered.

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 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.

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

Given the uncertain nature of these payments, the Company determined they were fully constrained as of December 31, 2024 and not included in the transaction price.

The Company can also earn sales-based royalties.

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

The Company could also earn sales-based royalties.

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

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

On December 31, 2025, the Company mutually agreed with Pfizer to terminate the Pfizer License Agreement.

As a result of the termination of the Pfizer License Agreement, all rights and obligations of each party ceased.

As no future performance research and development obligations existed as of the Pfizer License Agreement termination date, the remaining deferred revenue balance of $ 12.6 million was recognized as revenue.

In total, and inclusive of the above, the Company recognized $ 12.6 million and $ 0.4 million of revenue from the contract during the years ended December 31, 2025 and 2024, respectively.

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.

Under the terms of the termination agreement, the Company is liable to Pfizer for up to $ 5 million from any future sale, divestiture, license, transfer or partnering of SPR206.

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’s singular focus is on identifying and developing novel treatments for rare diseases and diseases with high unmet need.

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

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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.

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

SPERO THERAPEUTICS, INC.

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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:

The Company's reportable segment net revenues, significant segment expenses and consolidated profit (loss) for the years ended December 31, 2025 and 2024, consisted of the following (in thousands):

Year Ended December 31,

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Options to purchase common stock

Unvested RSUs and PSUs

Unvested RSUs

Retirement Plan

The Company has a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”).

The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis.

The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax or post-tax basis.

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 during both the years ended December 31, 2024 and 2023, respectively.

The Company made matching contributions to the 401(k) Plan of $ 0.2 million and $ 0.3 million during the years ended December 31, 2025 and 2024 , 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