Spero Therapeutics, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. 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. Overview 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 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 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 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. 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. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. 78 Recent Developments 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 $101.0* First commercial sale of a product in the United States - $51.0 Second anniversary of first commercial sale of a product in the United States - $25.0 First commercial sale of a product in two European countries - $25.0 Total potential sales milestone payments $225.0 Net annual sales greater than $200.0 - $25.0 Net annual sales greater than $300.0 - $25.0 Net annual sales greater than $400.0 - $25.0 Net annual sales greater than $500.0 - $50.0 Net annual sales greater than $750.0 - $50.0 Net annual sales greater than $1,000.0 - $50.0 *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. SPR206 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. SPR720 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. 79 Components of Our Results of Operations Sales Revenue To date, we have not generated any revenue from product sales. 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 A portion of our revenue may be derived from payments under any government awards that we may receive in the future. Collaboration Revenue 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 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 any of our product candidates, including under agreements with contract research organizations (“CROs”); • costs incurred in connection with our government awards; • the cost of consultants and contract manufacturing organizations (“CMOs”) that manufacture drug products for use in our preclinical studies and clinical trials; • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and • payments made under third-party licensing agreements. We expense research and development costs as incurred. Nonrefundable advance payments we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. License fees and other costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program. License fees and other costs incurred prior to designating a product candidate are included in early-stage research programs. We do not allocate employee costs, costs associated with our preclinical programs or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. 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. 80 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: • successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of any global health, economic or political crises; • receipt of marketing approvals from applicable regulatory authorities; • establishment of arrangements with third-party manufacturers to obtain manufacturing supply; • obtainment and maintenance of patent, trade secret protection and regulatory exclusivity, both in the United States and internationally, including our ability to maintain our license agreement with Meiji with respect to tebipenem HBr; • protection of our rights in our intellectual property portfolio; • 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; and • 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. We may never succeed in obtaining regulatory approval for any of our product candidates. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We 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 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) Interest Income (Expense) Interest income (expense) consists of interest income related to the significant financing component related to the GSK License Agreement and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities. Other Income (Expense), Net Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as realized and unrealized gains and losses from foreign currency-denominated cash balances and vendor payables. 81 Income Taxes 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, 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. 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. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Funding Received from Government Contracts and Collaborations Since our inception, we have been able to obtain partial funding for our research and development activities from government contracts, government tax incentives and collaboration arrangements. The classification within our statement of operations and comprehensive loss of the funding received under these arrangements is subject to management judgment based on the nature of the arrangements we enter into, the source of the funding and whether the funding is considered central to our business operations. Government Contracts 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 recognized upon incurring qualifying expenses in advance of receipt of funding is recorded as unbilled receivables, a component of prepaid expenses and other current assets, in the consolidated balance sheet. We recognize funding received from BARDA and the NIAID of the NIH, as revenue, rather than as a reduction of research and development expenses, because we are the principal in conducting the research and development activities and these contracts are central to our ongoing operations. We recognize revenue only after the qualifying expenses related to the contracts have been incurred, we are reasonably assured that the expenses will be reimbursed and the revenue is collectible. We record revenue recognized upon incurring qualifying expenses in advance of billing as unbilled revenue, which is included in other receivables in our consolidated balance sheet. 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 For collaboration agreements with a third party, to determine the appropriate statement of operations classification of the recognized funding, we first assess whether the collaboration arrangement is within the scope of the accounting guidance for collaboration arrangements. 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 82 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. If the collaborative arrangement does not represent a vendor/customer relationship, we then classify the funding payments received in the statement of operations and comprehensive loss as a reduction of the related expense that is incurred. Revenue Recognition - GSK License Agreement In determining the accounting treatment for the GSK License Agreement, we developed assumptions to determine the stand-alone selling price for each performance obligation in the contract. We developed the estimated standalone selling price for the license using a discounted cash flow model. To develop this model, we applied significant judgment in the determination of the significant assumptions relating to forecasted future revenues, development timelines, the discount rate, and probabilities of technical and regulatory success. We developed the estimated standalone selling price for the research and development services using a discounted cash flow model. 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. When an arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. We assessed our revenue-generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does exist in certain arrangements. The significant financing component is calculated as the difference between the stated value and present value of the milestones payable and is recognized as interest income over the extended payment period. Judgment is used in determining: (1) whether the financing component in a license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to: • vendors in connection with the preclinical development activities; • CMOs in connection with the production of preclinical and clinical trial materials; • CROs in connection with preclinical and clinical studies; and • investigative sites in connection with clinical trials. We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. 83 Share-Based Compensation We issue stock-based awards to employees and directors in the form of stock options and restricted stock units. We measure and recognize compensation expense for our stock-based awards granted to our employees and directors based on the estimated grant date fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 (“ASC 718”), Compensation—Stock Compensation. We determine the fair value of restricted stock units based on the fair value of our common stock. We measure all share-based options granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model, and we recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options and performance-based awards, the risk-free interest rate for a period that approximates the expected term of our common stock options and performance-based awards, and our expected dividend yield. We have also granted certain awards with performance-based criteria. Restructuring We made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including one-time termination benefits accounted for upon the announcement of our restructuring in October 2024. Restructuring charges are reflected in our consolidated statements of income. Results of Operations Comparison of the Years Ended December 31, 2025 and 2024 The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 $ Change Revenues: Grant revenue $ 7,183 $ 20,581 $ (13,398 ) Collaboration revenue - related party 47,033 27,025 20,008 Collaboration revenue 12,586 371 12,215 Total revenues 66,802 47,977 18,825 Operating expenses: Research and development 38,467 96,757 (58,290 ) General and administrative 21,176 23,704 (2,528 ) Restructuring 258 877 (619 ) Impairment of long-term asset 587 — 587 Total operating expenses 60,488 121,338 (60,850 ) Income (loss) from operations 6,314 (73,361 ) 79,675 Other income: Interest income 2,512 4,735 (2,223 ) Other income (expense), net 7 60 (53 ) Total other income, net 2,519 4,795 (2,276 ) Net income (loss) before income taxes 8,833 (68,566 ) 77,399 Income tax expense (261 ) — (261 ) Net income (loss) $ 8,572 $ (68,566 ) $ 77,138 84 Grant Revenue (in thousands): Year Ended December 31, 2025 2024 $ Change BARDA Contract (Tebipenem HBr) $ 7,154 $ 20,200 $ (13,046 ) NIAID Contract (SPR206) 29 381 (352 ) Total revenue $ 7,183 $ 20,581 $ (13,398 ) 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. Collaboration Revenue 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 (in thousands): Year Ended December 31, 2025 2024 $ Change Direct research and development expenses by program: Tebipenem HBr $ 22,562 $ 60,502 $ (37,940 ) SPR720 985 16,626 (15,641 ) SPR206 49 570 (521 ) Unallocated expenses: Personnel related (including share-based compensation) 9,631 14,111 (4,480 ) Facility related and other 5,240 4,948 292 Total research and development expenses $ 38,467 $ 96,757 $ (58,290 ) 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. 85 Facility-related and other costs primarily reflect costs related to supporting our research and development staff. General and Administrative Expenses (in thousands): Year Ended December 31, 2025 2024 $ Change Personnel related (including share-based compensation) $ 11,792 $ 13,188 $ (1,396 ) Professional and consultant fees 7,435 8,198 (763 ) Facility related and other 1,949 2,318 (369 ) Total general and administrative expenses $ 21,176 $ 23,704 $ (2,528 ) 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 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 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, 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 $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, 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 Since our inception, we have incurred significant operating losses. We have recognized revenue to date from funding arrangements with the DoD, NIAID, CARB-X and BARDA, the GSK License Agreement and our license agreements with Everest and Pfizer. 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 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. 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. 86 Cash Flows 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, 2025 2024 Cash used in operating activities $ (12,624 ) $ (23,444 ) Net decrease in cash and cash equivalents $ (12,624 ) $ (23,444 ) Operating Activities 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 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 share-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 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. Changes in deferred revenue are related to the GSK License Agreement and our license agreement with Pfizer. Changes in collaboration receivable - related party related to the GSK License Agreement. Investing Activities We did not undertake any investing activities during either of the years ended December 31, 2025 or 2024. Financing Activities 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 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 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; • the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements; 87 • the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property related claims; • the costs of operating as a public company; • the extent to which we in-license or acquire other products and technologies; and • costs associated with litigation and any government investigation. As of December 31, 2025, we had cash and cash equivalents of $40.3 million. In accordance with ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements. Based on our current operating 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 programs. 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 have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including those listed above. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government funding, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, our operations and financial condition could be adversely impacted. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations and Commitments 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 Total Less Than 1 Year 1 to 3 Years 4 to 5 Years More than 5 Years (in thousands) Operating lease commitments (1) $ 3,112 $ 1,956 $ 1,156 $ — $ — Total $ 3,112 $ 1,956 $ 1,156 $ — $ — (1) Reflects payments due for our lease of office space under an operating lease agreement that expires in 2027. 88 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. We have not included any contingent payment obligations, such as milestones or royalties, in the table above as the amount, timing and likelihood of such payments are not known. 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, 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. These contracts are cancelable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments are not included in the table of contractual obligations and commitments above. Recently Adopted Accounting Pronouncements Please refer to Note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our business. Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. As of December 31, 2025, we had cash and cash equivalents of $40.3 million, consisting of cash and money market accounts. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. Treasury interest rates. We did not have any assets classified as marketable securities as of December 31, 2025. As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the U.S. dollar. Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements. 89 Item 8. Financial Statement s and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 91 Consolidated Balance Sheets 93 Consolidated Statements of Operations and Comprehensive Income (Loss) 94 Consolidated Statements of Stockholders’ Equity 95 Consolidated Statements of Cash Flows 96 Notes to Consolidated Financial Statements 97 90 Report of Independent Regis tered Public Accounting Firm To the Board of Directors and Stockholders of Spero Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Spero Therapeutics, Inc. 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. External Research and Development Costs As described in Note 2 to the consolidated financial statements, research and development costs are expensed as incurred. The Company’s research and development expense for the year ended December 31, 2025 was $38.5 million, a significant portion of which relates to external research and development costs. The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf, and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs. The principal consideration for our determination that performing procedures relating to external research and development costs is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s external research and development costs. 91 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 agreements, purchase orders, invoices received, and information received from certain third-party service providers, where applicable. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 26, 2026 We have served as the Company’s auditor since 2016. 92 SPERO THERAPEUTICS, INC. CONSOLIDATED B ALANCE SHEETS (In thousands, except unit, share and per share amounts) December 31, December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 40,265 $ 52,889 Collaboration receivable, current - related party 25,359 49,391 Other receivables 28 3,085 Prepaid expenses and other current assets 1,634 1,911 Total current assets 67,286 107,276 Operating lease right-of-use assets 1,480 3,114 Other assets 153 153 Total assets $ 68,919 $ 110,543 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 693 $ 7,306 Accrued expenses and other current liabilities 5,578 17,724 Operating lease liabilities 1,956 1,746 Income taxes payable 383 174 Deferred revenue, current — 368 Deferred revenue, current - related party 258 21,756 Total current liabilities 8,868 49,074 Non-current operating lease liabilities 939 2,551 Deferred revenue, non-current — 12,219 Deferred revenue, non-current - related party — 576 Other long-term liabilities 91 — Total liabilities 9,898 64,420 Commitments and contingencies (Note 11) Stockholders' equity: Preferred stock, $ 0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2025 and 2024 — — Common stock, $ 0.001 par value; 120,000,000 shares authorized as of December 31, 2025 and 2024; 56,414,657 shares issued and outstanding as of December 31, 2025 and 54,593,527 shares issued and outstanding as of December 31, 2024 56 55 Additional paid-in capital 510,031 505,706 Accumulated deficit ( 451,066 ) ( 459,638 ) Total stockholders' equity 59,021 46,123 Total liabilities and stockholders' equity $ 68,919 $ 110,543 The accompanying notes are an integral part of these consolidated financial statements. 93 SPERO THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPER ATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except share and per share data) Year Ended December 31, 2025 2024 Revenues: Grant revenue $ 7,183 $ 20,581 Collaboration revenue - related party 47,033 27,025 Collaboration revenue 12,586 371 Total revenues 66,802 47,977 Operating expenses: Research and development 38,467 96,757 General and administrative 21,176 23,704 Impairment charges 587 — Restructuring 258 877 Total operating expenses 60,488 121,338 Income (loss) from operations 6,314 ( 73,361 ) Other income: Interest income 2,512 4,735 Other income (expense), net 7 60 Total other income, net 2,519 4,795 Net income (loss) before income taxes 8,833 ( 68,566 ) Income tax expense ( 261 ) — Net income (loss) and comprehensive income (loss) $ 8,572 $ ( 68,566 ) Net income (loss) per share attributable to common stockholders, basic $ 0.15 $ ( 1.27 ) Net income (loss) per share attributable to common stockholders, diluted $ 0.15 $ ( 1.27 ) Weighted average common shares outstanding, basic: 56,020,363 54,037,917 Weighted average common shares outstanding, diluted: 59,039,225 54,037,917 The accompanying notes are an integral part of these consolidated financial statements. 94 SPERO THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQ UITY (In thousands, except unit and share amounts) Additional Total Common Stock Paid-in Accumulated Stockholders' Shares Par Value Capital Deficit Equity Balances at December 31, 2023 52,999,680 $ 53 $ 497,913 $ ( 391,072 ) $ 106,894 Issuance of common stock upon the vesting of restricted stock units and performance stock units 1,593,847 2 — — 2 Share-based compensation expense — — 7,793 — 7,793 Net loss — — — ( 68,566 ) ( 68,566 ) Balances at December 31, 2024 54,593,527 $ 55 $ 505,706 $ ( 459,638 ) $ 46,123 Issuance of common stock upon the vesting of restricted stock units 1,821,130 1 — — 1 Share-based compensation expense — — 4,325 — 4,325 Net income — — — 8,572 8,572 Balances at December 31, 2025 56,414,657 $ 56 $ 510,031 $ ( 451,066 ) $ 59,021 The accompanying notes are an integral part of these consolidated financial statements. 95 SPERO THERAPEUTICS, INC. CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ 8,572 $ ( 68,566 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization — 2 Non-cash lease cost 1,048 1,043 Impairment of assets 587 — Share-based compensation 4,325 7,793 Changes in operating assets and liabilities: Collaboration receivable, current and non-current - related party 24,032 46,351 Other receivables 3,057 ( 1,540 ) Prepaid expenses and other current assets 277 2,267 Other assets — 282 Accounts payable ( 6,613 ) 5,928 Accrued expenses and other current liabilities ( 12,146 ) 11,167 Deferred revenue ( 12,587 ) ( 370 ) Deferred revenue - related party ( 22,074 ) ( 26,255 ) Other long-term liabilities 91 ( 87 ) Operating lease liabilities ( 1,402 ) ( 1,246 ) Income taxes payable 209 ( 213 ) Net cash used in operating activities ( 12,624 ) ( 23,444 ) Net decrease in cash and cash equivalents ( 12,624 ) ( 23,444 ) Cash and cash equivalents at beginning of period 52,889 76,333 Cash and cash equivalents at end of period $ 40,265 $ 52,889 The accompanying notes are an integral part of these consolidated financial statements. 96 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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 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. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The accompanying consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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. 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. 97 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the accrual for clinical trial costs and other research and development expenses and the valuation of share-based awards. There may be changes to those estimates in future periods. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions. Segment Information 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 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 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. 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. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and money market instruments. Leases 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 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. Options to renew a lease are not included in the Company’s initial lease term assessment unless there is reasonable certainty that the Company will renew. The Company monitors its plans to renew its material leases on a quarterly basis. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate (“IBR”), which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, and in a similar economic environment. 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. 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 Other assets consist of long-term prepayments and deposits. 98 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Impairment of Long-Lived Assets Long-lived assets consist of operating lease right-of-use assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. 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. Fair Value Measurements Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The Company’s cash equivalents are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. Revenue Recognition – Collaboration Revenue The Company has entered into licensing agreements that are evaluated under Accounting Standards Codification, Topic 606 (“Topic 606”), Revenue from Contracts with Customers, through which the Company licenses certain of its product candidates’ rights to a third party. Terms of these arrangements include various payment types, typically including one or more of the following: upfront license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services; and/or royalties on net sales of licensed products. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations under the agreement; (iii) determine the transaction price, including constraint on variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) determine how the revenue will be recognized for each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer. Once a contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The exercise of a material right may be accounted for as a contract modification or as a continuation of the contract for accounting purposes. 99 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. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct in the evaluation of a collaboration arrangement subject to Topic 606, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. 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. 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. The SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. In certain circumstances, the Company may apply the residual method to determine the SSP of a good or service if the standalone selling price is considered highly variable or uncertain. The Company validates the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations. If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. When an arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. The Company assessed its revenue-generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component exists in certain arrangements. The significant financing component is calculated as the difference between the stated value and present value of the milestones payable and is recognized as interest income over the extended payment period. Judgment is used in determining: (1) whether the financing component in a license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component. 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. 100 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. In determining the accounting treatment for these arrangements, the Company develops assumptions to determine the stand-alone selling price for each performance obligation in the contract. The Company develops the estimated standalone selling price for the license using a discounted cash flow model. To develop this model, the Company applies significant judgment in the determination of the significant assumptions relating to forecasted future revenues, development timelines, the discount rate, and probabilities of technical and regulatory success. The Company develops the estimated standalone selling price for the research and development services using a discounted cash flow model. 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. Government Tax Incentives For available government tax incentives that the Company may earn without regard to the existence of taxable income and that require the Company to forego tax deductions or the use of future tax credits and net operating loss carryforwards, the Company classifies the funding recognized as a reduction of the related qualifying research and development expenses incurred. Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel salaries, share-based compensation and benefits, allocated facilities costs, depreciation, manufacturing expenses, costs related to the Company’s government contract and grant arrangements, and external costs of outside vendors engaged to conduct preclinical development activities, clinical trials as well as the cost of licensing technology. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed . External Research and Development Costs and Accruals The Company has entered into various research and development contracts with clinical research organizations and other companies both inside and outside of the United States. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf, and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs. There may be instances in which payments made to these vendors exceed the level of service provided and will result in a prepayment of the expense. The Company records accruals for estimated ongoing research and clinical trial costs based on the services received and efforts expended pursuant to multiple contracts with these vendors. When evaluating the adequacy of the accrued liabilities, the Company analyzes the progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs . Restructuring 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). Patent Costs 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. 101 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Compensation The Company issues stock-based awards to employees and directors in the form of stock options and restricted stock units. The Company measures and recognizes compensation expense for its stock-based awards granted to its employees and directors based on the estimated grant date fair value in accordance with ASC 718, Compensation—Stock Compensation, and determines the fair value of restricted stock units based on the fair value of its common stock. The Company measures all share-based options granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. 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. 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, 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 When the Company issues shares that meet the definition of participating securities, the Company follows the two-class method when computing net income (loss) per share. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Net income (loss) per share attributable to common stockholders is calculated based on net income (loss) attributable to the Company. Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. 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 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. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 % likelihood of being realized upon ultimate settlement. 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. 102 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 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. 103 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 3. Fair Value Measurements and Marketable Securities 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: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ — $ 39,672 $ — $ 39,672 Total cash equivalents — 39,672 — 39,672 Fair Value Measurements at December 31, 2024 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ — $ 52,258 $ — $ 52,258 Total cash equivalents — 52,258 — 52,258 Excluded from the tables above is cash of $ 0.6 million and $ 0.6 million as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024 , there were no transfers between Level 1, Level 2 and Level 3 categories. 4. 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. 5. Leases Operating Leases The Company has entered into, and subsequently amended, an operating lease agreement with respect to its corporate headquarters located at 675 Massachusetts Avenue, Cambridge, Massachusetts where the Company leases approximately 23,400 square feet of office space. The Company's lease extends through July 2027 . 104 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): Operating lease expense Statement of Operations Location December 31, 2025 December 31, 2024 Fixed operating lease expense Research and development expense $ 723 $ 757 General and administrative expense 668 757 Variable operating lease expense Research and development expense ( 86 ) 35 General and administrative expense ( 80 ) 35 Total operating lease expense $ 1,225 $ 1,584 Supplemental cash flow information related to the Company’s operating leases for the years ended December 31, 2025 and 2024, was as follows (in thousands): December 31, 2025 December 31, 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,746 $ 1,718 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 Classification December 31, 2025 December 31, 2024 Assets Operating Operating lease right-of-use assets $ 1,480 $ 3,114 Total leased assets $ 1,480 $ 3,114 Liabilities Current Operating Operating lease liabilities $ 1,956 $ 1,746 Non-Current Operating Non-current operating lease liabilities 939 2,551 Total lease liabilities $ 2,895 $ 4,297 Weighted average remaining lease term (in years) 1.6 2.6 Weighted average discount rate 9.8 % 9.8 % The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2025 (in thousands): Years Ending December 31, 2026 $ 1,956 2027 1,156 Total future minimum lease payments 3,112 Less imputed interest ( 217 ) Total operating lease liabilities $ 2,895 105 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): December 31, 2025 December 31, 2024 Accrued payroll and related expenses $ 3,060 $ 5,456 Accrued external research and development expenses 1,741 9,493 Accrued professional fees 644 2,199 Accrued restructuring expenses — 456 Accrued other 133 120 Total accrued expenses and other current liabilities $ 5,578 $ 17,724 7. Equity Common Stock “At-the-Market” Offering 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 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. 8. Share-Based Compensation The Company maintains two equity compensation plans, the 2017 Stock Incentive Plan, as amended (the “2017 Plan”) and the 2019 Inducement Equity Incentive Plan, as amended (the “2019 Inducement Plan”, and together with the 2017 Plan, the “Equity Plans”), which provide for the grant of stock-based awards to its directors, officers, consultants and other employees. The Equity Plans provide for the grant of non-qualified and incentive stock options, as well as restricted stock units (“RSUs”), restricted stock and other stock-based awards. 2017 Stock Incentive Plan On June 28, 2017, the Company’s stockholders approved the 2017 Plan. The 2017 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock grants and stock-based awards. The 2017 Plan is administered by the Board of Directors, or at the discretion of the Board of Directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100 % of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years . The number of shares initially reserved for issuance under the 2017 Plan was 1,785,416 shares of common stock. 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. 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. 106 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2019 Equity Incentive Plan On March 11, 2019, the Company adopted the 2019 Inducement Plan to reserve 331,500 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with Spero within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2017 Plan. 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: 2017 Plan 2019 Inducement Plan Total Number of Stock Options Outstanding as of December 31, 2024 2,558,586 256,264 2,814,850 Forfeited or cancelled ( 202,320 ) ( 212,097 ) ( 414,417 ) Outstanding as of December 31, 2025 2,356,266 44,167 2,400,433 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 The fair value of stock options is estimated using the Black-Scholes option-pricing model. The Company does not have sufficient company-specific historical and implied volatility information and it therefore estimates its expected share volatility based on the historical volatility of a set of publicly traded peer companies. The Company has estimated the expected term of the Company’s stock option awards utilizing the “simplified” method for awards that qualify as “plain-vanilla.” The risk-free interest rate is determined by reference to the U.S. 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. 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, 2024 Risk-free interest rate 3.8 % Expected term (in years) 5.5 Expected volatility 90.2 % Expected dividend yield 0.0 % 107 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 Weighted Average Exercise Price Weighted Average Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2024 2,814,850 $ 10.71 4.45 $ 0 Forfeited or cancelled ( 414,417 ) 14.96 Outstanding as of December 31, 2025 2,400,433 $ 9.98 3.62 $ 58 Outstanding as of December 31, 2025 - vested and expected to vest 2,400,433 $ 9.98 3.62 $ 58 Exercisable at December 31, 2025 2,388,377 $ 9.97 3.62 $ 58 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. No stock options were exercised during both the years ended December 31, 2025 and 2024. The Company satisfies stock option exercises with newly issued shares of its common stock. 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. Restricted Stock Units The following table summarizes RSU activity under the Equity Plans (excluding performance-based RSUs) during the year ended December 31, 2025: Number of RSU Shares Weighted Average Grant Date Fair Value Outstanding as of December 31, 2024 6,038,732 $ 1.97 Granted 4,042,047 0.91 Vested and released ( 1,821,130 ) 2.29 Forfeited or cancelled ( 2,822,875 ) 1.48 Outstanding as of December 31, 2025 5,436,774 $ 1.33 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. The fair value of the RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date. Each RSU represents the right to receive one share of the Company’s common stock, upon vesting. Other than RSUs granted as retention awards, the RSUs vest in four equal annual installments, subject to the individual’s continued service to the Company through the applicable vesting date, and are subject to the terms and conditions of the Company’s form of RSU agreement under the 2017 Plan and 2019 Inducement Plan, as applicable. Share-Based Compensation Expense The Company recorded share-based compensation expense, for both RSUs and stock options in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands): Year Ended December 31, 2025 2024 Research and development expenses $ 1,704 $ 2,605 General and administrative expenses 2,621 5,188 Total $ 4,325 $ 7,793 108 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Restructuring On October 29, 2024, the Company implemented a strategic restructuring initiative and corresponding reduction in workforce. The Company restructured its operations to reduce costs and reallocate resources in support of the development of tebipenem HBr and other corporate activities. 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. 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, 2025 (in thousands): Year Ended December 31, 2025 Research and development General and administrative Total Severance and other employee costs $ 190 $ 68 $ 258 Total restructuring charges $ 190 $ 68 $ 258 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 (in thousands): Year Ended December 31, 2024 Research and development General and administrative Total Severance and other employee costs $ 660 $ 217 $ 877 Total restructuring charges $ 660 $ 217 $ 877 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 (in thousands): As of December 31, 2025 Balance as of December 31, 2024 $ 456 Charge to expense 258 Payments made ( 714 ) Balance as of December 31, 2025 $ — 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 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. 109 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 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. 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. 10. Income Taxes The Company’s provision for income taxes is comprised of the following for the periods ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 Current: Federal $ — $ — State 261 — Foreign — — 261 — Provision for income taxes $ 261 $ — The domestic and foreign components of income (loss) before income taxes were as follows (in thousands): Year Ended December 31, 2025 2024 Domestic $ 8,833 $ ( 68,566 ) Foreign - - Income (loss) before income taxes $ 8,833 $ ( 68,566 ) 110 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, 2025 U.S. Federal statutory income tax rate $ 1,855 21.0 % State and local income taxes, net of federal income tax effect* 261 3.0 % Tax credits Research and development tax credits ( 480 ) ( 5.4 ) % Orphan drug tax credit 485 5.5 % Changes in valuation allowances ( 3,042 ) ( 34.4 ) % Nontaxable or nondeductible items Stock compensation 1,194 13.5 % Other adjustments ( 12 ) ( 0.2 ) % Effective income tax rate $ 261 3.0 % *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, 2024 U.S. Federal statutory income tax rate ( 21.0 ) Federal tax credits ( 4.3 ) State taxes, net of federal benefit 1.6 Nondeductible stock compensation 0.8 Other ( 1.0 ) Increase in deferred tax asset valuation allowance 21.0 Deferred true-up 2.9 Effective income tax rate — % Temporary differences that give rise to significant deferred tax assets (liabilities) as of December 31, 2025 and 2024 consisted of the following (in thousands): December 31, 2025 2024 Deferred tax assets Net operating loss carryforwards $ 60,314 $ 43,310 Deferred revenue 26,229 41,745 Research and development and orphan drug tax credit carryforwards 11,153 10,952 Capitalized research and development expenses 17,563 21,149 Lease liability 760 1,126 Other 3,400 4,791 Total gross deferred tax assets 119,419 123,073 Valuation allowance ( 119,031 ) ( 122,257 ) Total deferred tax assets 388 816 Deferred tax liabilities Right of use assets ( 388 ) ( 816 ) Total gross deferred tax liabilities ( 388 ) ( 816 ) Total net deferred tax assets $ — $ — 111 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. $ 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. The foreign NOLs do not expire. 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 2035 and the federal orphan drug credits begin to expire in 2044. Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 % over a three-year period. If the Company experiences a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. 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 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 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): December 31, 2025 2024 Valuation allowance as of beginning of year $ ( 122,257 ) $ ( 107,878 ) Decreases (increases) recorded to income tax provision 3,226 ( 14,379 ) Valuation allowance as of end of year $ ( 119,031 ) $ ( 122,257 ) The Company has no t recorded any amounts for unrecognized tax benefits as of December 31, 2025 or 2024. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2025 or 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statement of operations and comprehensive loss. 112 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company had filed separate U.S. income tax returns return for each of its subsidiaries prior to its reorganization in 2015. The Company now files U.S. income tax returns as a U.S. consolidated group. In Massachusetts, the Company files income tax returns as a combined group except for its Massachusetts Securities Corporation subsidiary, which is a separate income tax filing. The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities remains open for tax years 2022 and forward. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state authorities to the extent utilized in a future period. 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. 11. Commitments and Contingencies As a public biotechnology company, the Company operates in a regulated environment, and from time to time, is party to various legal proceedings and receives regulatory inquiries arising in the ordinary course of business. The costs and outcome of litigation, regulatory, investigatory or other proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to the Company and could have a material adverse effect on the Company’s results of operations or financial condition. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations. If a matter is both probable to result in a material liability and the amount of loss can be reasonably estimated, the Company accrues the estimated loss. Disclosure is provided when a loss is considered probable, but the loss is not reasonably estimable and when a material loss is reasonably possible but not probable. If such a loss is not probable or cannot be reasonably estimated, a liability is not recorded. As of December 31, 2025 and 2024, no material accruals have been recorded for potential contingencies related to these matters. License Agreements The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 13). Operating Leases 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 In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board of Directors and its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. 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. 113 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Legal Proceedings Securities Class Action Lawsuits and Derivative Actions Two putative class action lawsuits were filed against the Company and certain of its current and former officers in the United States District Court for the Eastern District of New York, one captioned Richard S. Germond v. Spero Therapeutics, Inc., Ankit Mahadevia, and Satyavrat Shukla, Case No. 1:22-cv-03125, filed on May 26, 2022, and the other captioned Kashif Memon v. Spero Therapeutics, Inc., Ankit Mahadevia, and Satyavrat Shukla Case No. 1:22-cv-04154, filed on July 15, 2022. The parties moved to consolidate the two complaints on July 22, 2022, which were ordered consolidated on August 5, 2022 (“Consolidated Putative Class Action”). 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 NDA for tebipenem HBr in an effort to lead investors to believe that the drug would receive approval from the FDA. Plaintiffs seek unspecified damages, interest, attorneys’ fees, and other costs. The Company filed a fully-briefed Motion to Dismiss on June 21, 2023. By Order entered on September 30, 2024, the Motion to Dismiss was granted, dismissing the Amended Complaint in its entirety. The Court ordered the case to be closed by Memorandum and Order entered on October 28, 2024. A stockholder derivative action was filed against the Company, as nominal defendant, and certain of the Company's current and former officers in the United States District Court for the District of Delaware, captioned Marti v. Mahadevia, et al., Case. No. 1:23-cv-01133-RGA (the “First Derivative Complaint”), on October 11, 2023. The plaintiffs both purport to be current stockholders, and the allegations are primarily the same as those made in the Consolidated Putative Class Action. The First Derivative Complaint was transferred to the Eastern District of New York on November 13, 2023. A second stockholder derivative action was filed against the Company, as nominal defendant, and certain of its current and former officers in the Supreme Court of the State of New York, Kings County, captioned Heil v. Mahadevia, et al., Case. No. 505153/2024 (the “Second Derivative Complaint”), on February 21, 2024. The Second Derivative Complaint makes primarily the same allegations as the First Derivative Complaint, and the Consolidated Putative Class Action. The plaintiffs in both derivative suits agreed to a stay pending decision on the class action, subject to court approval. By Order entered on September 30, 2024, the motion to stay the First Derivative Complaint was denied as moot due to the dismissal of the Consolidated Putative Class Action. On March 20, 2025, the Second Derivative Complaint was voluntarily dismissed by the plaintiff. SEC Investigation and Wells Notice 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. (“Dr. 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, 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 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. Dr. 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. 5310. 114 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. 12. Government Contracts BARDA In July 2018, the Company was awarded a contract from Biomedical Advanced Research and Development Authority (“BARDA”) of up to $ 44.2 million to develop tebipenem HBr for the treatment of cUTI caused by antibiotic resistant Gram-negative bacteria and for assessment against biodefense pathogens. The 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. 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. The Company does not anticipate receiving the remaining funding from BARDA. NIAID In May 2021, the Company was awarded a five-year contract from the U.S. National Institute of Allergy and Infectious Diseases (“NIAID”) under the Agency’s Omnibus Broad Agency Announcement No. HHS-NIH-NIAID-BAA2020-1 award mechanism to support further development of SPR206. 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. 13. License, Collaboration and Service Agreements The Company has certain obligations under license agreements with third parties that include annual maintenance fees and payments that are contingent upon achieving various development, regulatory and commercial milestones. Pursuant to these license agreements, the Company is required to make milestone payments if certain development, regulatory and commercial milestones are achieved, and may have certain additional research funding obligations. 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. 115 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 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. Ltd. (“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 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. Under the terms of the GSK License Agreement, the Company received a $ 30.0 million development milestone payment during the third quarter of 2023. In December 2023, the Company commenced enrollment in PIVOT-PO with its first patient, first visit. Under the terms of the GSK License Agreement, the Company 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. 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 $ 101.0 * First commercial sale of a product in the United States - $ 51.0 Second anniversary of first commercial sale of a product in the United States - $ 25.0 First commercial sale of a product in two European countries - $ 25.0 Total potential sales milestone payments $ 225.0 Net annual sales greater than $ 200.0 - $ 25.0 Net annual sales greater than $ 300.0 - $ 25.0 Net annual sales greater than $ 400.0 - $ 25.0 Net annual sales greater than $ 500.0 - $ 50.0 Net annual sales greater than $ 750.0 - $ 50.0 Net annual sales greater than $ 1,000.0 - $ 50.0 * 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. 116 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 In July 2023, the Company entered into Amendment 1 to the GSK License Agreement, which updated the timeframe for technology transfer in the GSK License Agreement. In December 2023, the Company entered into Amendment 2 to the GSK License Agreement, which added a country to the locations for PIVOT-PO enrollment. Under the terms of Amendment 2, the Company may receive up to an additional $ 4.3 million in milestones based on activities in such country. The Company received the first milestone payment under Amendment 2 of $ 1.2 million in August 2024, 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 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 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. Unless earlier terminated due to certain material breaches of the GSK License Agreement or by GSK for convenience, or otherwise, the GSK License Agreement will expire on a jurisdiction-by-jurisdiction and GSK Licensed Product-by-GSK Licensed Product basis on the latest to occur of (i) loss of patent exclusivity, (ii) loss of regulatory exclusivity or (iii) ten years following the date of the first commercial sale of such licensed product in such country (the “GSK Royalty Term”). During the GSK Royalty Term, the Company has agreed not to develop, manufacture or commercialize any oral carbapenem for any indication or any oral antibiotic for cUTI; this restriction does not apply to any third party which acquires control of the Company after the date of the GSK License Agreement if certain conditions are met. The Company has the right to terminate the GSK License Agreement upon a material breach by, or bankruptcy of, GSK. GSK has the right to terminate the GSK License Agreement at any time upon a specified number of days’ notice or upon a material breach by, or bankruptcy of, the Company. In addition, in the event that GSK has the right to terminate the GSK License Agreement due to a 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. The GSK License Agreement contains representations and warranties, other covenants, indemnification provisions and other terms and conditions customary for transactions of the type contemplated by the GSK License Agreement. 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. 117 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting Analysis and Revenue Recognition The Company determined that GSK is a customer and that the GSK License Agreement is within the scope of ASC 606 as licensing intellectual property and performing ongoing research and development services are ordinary activities that are ongoing and central to the Company’s operations. Accordingly, in determining the appropriate amount of revenue to be recognized, the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measured the transaction price, including the constraint on variable consideration; (iv) allocated the transaction price to the identified performance obligations in proportion to their standalone selling prices (“SSP”); and (v) recognized revenue when each performance obligation was deemed to be satisfied. Based on that evaluation, the Company identified two performance obligations, related to the license and to research and development services. The Company developed the estimated SSP for the license using a discounted cash flow model. In developing this estimate, the Company applied significant judgment in the determination of the significant assumptions relating to forecasted future cash flows, the discount rate, and the probability of success. The SSP for the research and development services was estimated based on the Company’s estimate of costs to be incurred to fulfill its obligations associated with the performance of the research and development services, plus a reasonable margin. At contract inception, the total transaction price was $ 64.7 million, which included the initial payment of $ 66.0 million in the fourth quarter of 2022 and the discount of $ 1.3 million related to the stock purchase agreement (“GSK SPA”) with Glaxo Group Limited, an affiliate of G SK (see Note 7) . At contract inception, $ 45.7 million of the initial $ 64.7 million was allocated to the license transfer performance obligation, which was fully satisfied and recognized as revenue upon delivery of the license. The remaining $ 19.0 million was allocated to the research and development services obligation and is being recognized over time as services are delivered, estimated to be over a three-year period. The Company recognized revenue for the license performance obligation at a point in time, that is upon transfer of the license to GSK. Control of the license was transferred on September 21, 2022 (the “GSK Effective Date”) and GSK could begin to use and benefit from the license at the GSK Effective Date. The $ 30.0 million milestone payment received by the Company under the GSK License Agreement was accounted for as variable consideration under ASC 606 and was added to the transaction price in the third quarter of 2023. 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 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 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 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 . The remaining $ 1.1 million milestone is not probable of being achieved as the PIVOT-PO trial ended early for efficacy. 118 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 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 $ 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 the carbapenem chemical compound having the generic name, tebipenem pivoxil 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. The payment was recorded as research and development expense in the statement of operations and comprehensive loss for the year ended December 31, 2017. The Company paid Meiji approximately $ 1.6 million during the fourth quarter of 2018 related to fixed assets which will be used in manufacturing related activities at Meiji. This equipment has been capitalized as property and equipment in the consolidated balance sheets as of December 31, 2024. In October 2021, the Company paid a $ 1.0 million milestone payment to Meiji upon submission of 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, 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 $ 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. SPR720 Agreements Vertex License Agreement 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 119 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Cantab License Agreement In June 2016, the Company entered into a stock purchase agreement (the “Cantab Agreement”) with Pro Bono Bio PLC, a corporation organized under the laws of England, and its affiliates, including PBB Distributions Limited (“PBB”), Cantab Anti-Infectives Ltd. and New Pharma License Holdings Limited. Under the Cantab Agreement, the Company is obligated to make future milestone payments of up to $ 5.8 million upon the achievement of specified clinical and regulatory milestones and a payment of £ 5.0 million ( $ 6.7 million as of December 31, 2025) upon the achievement of a specified commercial milestone. 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 On January 4, 2019, the Company, through its wholly owned subsidiary New Pharma License Holdings Limited (“NPLH”), entered into a license agreement (the “Original Everest License Agreement”), with Everest Medicines II Limited (“Everest”). Under the terms of the Original Everest License Agreement, the Company granted Everest an exclusive license to develop, manufacture and commercialize SPR206 or products that contain SPR206 (the “Everest Licensed Products”), in Greater China (which includes Mainland China, Hong Kong and Macau), South Korea and certain Southeast Asian countries (the “Everest Territory”). The Company retained development, manufacturing and commercialization rights with respect to SPR206 and Everest Licensed Products in the rest of the world and also retained the right to develop or manufacture SPR206 and Everest Licensed Products in the Everest Territory for use outside the Everest Territory. 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. The Amended Everest License Agreement modifies the dates and values of certain milestone events related to development and commercialization of SPR206. Everest will now be making more significant investments in the development of SPR206 beyond what was contemplated at the time of the Original Everest License Agreement. The Original Everest License Agreement provided that the Company could receive up to $ 59.5 million upon achievement of certain milestones. The Amended Everest License Agreement provides that the Company may receive up to $ 38.0 million upon achievement of certain milestones, of which $ 2.0 million has been received to date. In addition, under the Amended Everest License Agreement, the Company assigned patents in the Everest Territory to Everest, and the option related to SPR741 and the related provisions have been removed. Under the terms of the Amended Everest License Agreement, the Company is also entitled to receive high single-digit to low double-digit royalties on net sales, if any, of Everest Licensed Products in the Everest Territory following regulatory approval of SPR206. Everest has the right to sublicense to affiliates and third parties in the Everest Territory. 120 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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. 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 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 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. Under the Pfizer Purchase Agreement, the fair market value of the 2,362,348 shares of the Company’s common stock issued to Pfizer was determined to be $ 27.5 million, which was valued using an option pricing valuation model as the shares are subject to certain holding period restrictions. The Company accounted for the associated premium of $ 12.5 million as a freestanding equity-linked instrument under ASC 815. The premium was allocated as consideration for the Pfizer License Agreement and evaluated under ASC 606. 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. 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 The Company determined that Pfizer is a customer and that the Pfizer License Agreement is within the scope of ASC 606 as licensing intellectual property and performing ongoing research and development services are ordinary activities that are ongoing and central to the Company’s operations. Accordingly, in determining the appropriate amount of revenue to be recognized, the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measured the transaction price, including the constraint on variable consideration; (iv) allocated the transaction price to the identified performance obligations in proportion to their SSP; and (v) recognized revenue when each performance obligation was deemed to be satisfied. Based on that evaluation, the Company identified two performance obligations, license and know-how transfer and research and development services related to upcoming milestones. The Company determined that the supply agreement is a customer option and not a material right, as the pricing to Pfizer is not at a significant discount. Furthermore, Pfizer has the right to use third parties to manufacture the compound, or to manufacture the compound itself. 121 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 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 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 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. 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. 14. 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 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. The Company has determined that its Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM reviews the Company’s financial information on a consolidated basis for the purpose of allocating resources and assessing financial performance. The measure of segment assets is reported on the balance sheet as total consolidated assets. All the Company’s tangible assets are held in the United States. 122 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accounting policies for the operating segment are consistent with the Company’s policies for the consolidated financial statements. The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated profit or loss, as reported on the consolidated statements of operations and comprehensive loss. This is reviewed against budgeted expectations to assess segment performance and allocate resources. The Company's reportable segment net revenues, significant segment expenses and consolidated profit (loss) for the years ended December 31, 2025 and 2024, consisted of the following (in thousands): Year Ended December 31, 2025 2024 Revenues: Grant revenue $ 7,183 $ 20,581 Collaboration revenue - related party 47,033 27,025 Collaboration revenue 12,586 371 Total revenues 66,802 47,977 Less: Tebipenem HBr 22,562 60,502 SPR720 985 16,626 SPR206 49 570 Research and development personnel related (including share-based compensation) 9,631 14,111 Facility related and other, research and development 5,240 4,948 General and administrative personnel related (including share-based compensation) 11,792 13,188 Professional and consultant fees 7,435 8,198 Facility related and other, general and administrative 1,949 2,318 Other segment items* 838 817 Interest income ( 2,512 ) ( 4,735 ) Income tax expense 261 - Consolidated profit (loss) $ 8,572 $ ( 68,566 ) * Other segment items include restructuring charges (see Note 9), impairment of long-term asset and other income, net. 15. Net Income (Loss) per Share Basic and diluted net income (loss) per share attributable to common stockholders of the Company was calculated as follows (in thousands, except share and per share amounts): Year Ended December 31, 2025 2024 Numerator: Net income (loss) $ 8,572 $ ( 68,566 ) Denominator: Basic weighted average common shares outstanding 56,020,363 54,037,917 Effect of dilutive securities 3,018,862 — Diluted weighted-average common shares outstanding 59,039,225 54,037,917 Net income (loss) per share, basic $ 0.15 $ ( 1.27 ) Net income (loss) per share, diluted $ 0.15 $ ( 1.27 ) 123 SPERO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Year Ended December 31, 2025 2024 Options to purchase common stock 2,530,535 2,814,850 Unvested RSUs 195,029 6,038,732 Total 2,725,564 8,853,582 16. 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 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 $ 0.2 million and $ 0.3 million during the years ended December 31, 2025 and 2024 , respectively. 124 Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure. None.