What changed in this filing

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Item 1A. Risk Factors

2020-11-05 compared with 2020-08-06 · 29 added, 38 removed, 1132 unchanged (6% of the section changed)

31 unchanged sentences

We have not generated any revenue from the sale of our products and have incurred losses in each year since our inception in 2013.

Our net loss was $40.8 million and $18.2 million for the six months ended June 30, 2020 and 2019, respectively.

Our net loss was $59.7 million and $35.9 million for the nine months ended September 30, 2020 and 2019, respectively.

All of our product candidates are in development, none have been approved for sale and we may never have a product candidate approved for commercialization.

In accordance with Accounting Standards Update, or 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 plans, we believe that our existing cash, cash equivalents and marketable securities, together with the committed funding from our existing BARDA contract and other non-dilutive funding commitments, will not be sufficient to fund our operating expenses and capital expenditure requirements, as currently planned, for more than one year beyond the filing date of this Quarterly Report on Form 10-Q.

Specifically, we believe these funds will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2021.

Because these funds will not be sufficient to fund our operations as currently planned for more than one year beyond the filing date of this Quarterly Report on Form 10-Q, we have determined that there is substantial doubt regarding our ability to continue as a going concern.

Our consolidated financial statements as of December 31, 2019 were prepared under the assumption that we will continue as a going concern for the next twelve months.

As a result, the opinion from our independent registered public accounting firm with respect to our annual financial statements contains an explanatory paragraph about such substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue.

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

The substantial doubt about our ability to continue as a going concern may adversely affect our stock price and our ability to raise capital.

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

Based on our current plans, we believe that our existing cash, cash equivalents and marketable securities, together with the committed funding from our existing BARDA contract and other non-dilutive funding commitments, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2022, through the approval process for tebipenem HBr.

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

We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, potentially new collaborations, additional grant funding 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, research stage programs and commercial activities.

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

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

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

25 unchanged sentences

Our failure to raise capital as and when needed would have a negative effect on our financial condition and our ability to pursue our business strategy.

We believe that our existing cash, cash equivalents and marketable securities, together with the committed funding from our existing BARDA contract and other non-dilutive funding commitments, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2021.

Our cash forecasts are based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

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

As of June 30, 2020, our non-dilutive sources of funding consisted of an award from BARDA for tebipenem HBr, an award from NIAID under its Small Business Innovation Research program or SBIR, for our SPR720 program, an award from NIAID for SPR206, an award from the DoD that provides partial funding for the development of our Potentiator Platform product candidates and an award from the DoD Congressionally Directed Medical Research Programs, or CDMRP, Joint Warfighter Medical Research Program for SPR206.

As of September 30, 2020 , our non-dilutive sources of funding consisted of an award from BARDA for tebipenem HBr, an award from NIAID under its Small Business Innovation Research program or SBIR, for our SPR720 program, an award from NIAID for SPR206, an award from the DoD that provide s partial funding for the development of our Potentiator Platform product candidates and an award from the DoD Congressionally Directed Medical Research Programs, or CDMRP , Joint Warfighter Medical Research Program for SPR206.

The BARDA award provides total reimbursement to us of $46.8 million for qualified expenses for tebipenem HBr development over a five-year period through November 2021.

29 unchanged sentences

On March 5, 2020, we closed our previously announced rights offering issuing 1,046,249 shares of common stock and 2,287 shares of Series C Preferred Stock raising net proceeds of approximately $29.5 million.

On September 15, 2020, at the closing of our underwritten public offering, we issued a total of 4,785,000 shares of common stock and 3,215,000 shares of Series D Preferred Stock , raising net proceeds of approximately $74.

In addition, pursuant to the Underwriting Agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to 1,200,000 additional shares of our common stock.

On October 1, 2020, we issued and sold all 1,200,000 shares of common stock at the price of $10.00 per share pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of approximately $11.2 million after deducting underwriting discounts and commissions.

We may seek to raise additional capital at any time.

To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our then existing stockholders may be materially diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our stockholders.

incurring additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct our business.

In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely affect our ability to conduct our business.

In addition, securing additional financing would require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

65 unchanged sentences

Notwithstanding any promising results in early nonclinical studies or clinical trials, we cannot be certain that we will not face similar setbacks.

For example, although

tebipenem HBr is a new formulation of the active pharmaceutical ingredient tebipenem that exhibited a favorable safety and efficacy profile during clinical trials conducted by Meiji and a global pharmaceutical company, which we refer to as Global Pharma, in Japan, we may nonetheless fail to achieve success in our clinical trials.

For example, although tebipenem HBr is a new formulation of the active pharmaceutical ingredient tebipenem that exhibited a favorable safety and efficacy profile during clinical trials conducted by Meiji and a global pharmaceutical company, which we refer to as Global Pharma, in Japan, we may nonetheless fail to achieve success in our clinical trials.

Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval for our product candidates.

136 unchanged sentences

Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates.

If we do not accurately evaluate the commercial potential or target market

for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing tebipenem HBr or any other product candidate if such product candidate is approved.

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Although we rely on these third parties to conduct our GLP-compliant nonclinical studies and clinical trials, we remain responsible for ensuring that each of our nonclinical studies and clinical trials are conducted in accordance with applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

trials to assure that data and reported results are accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

The FDA and regulatory authorities in other jurisdictions also require us to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting, monitoring, recording and reporting the results of clinical trials to assure that data and reported results are accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

The FDA enforces these GCPs through periodic inspections of trial sponsors, principal investigators, clinical trial sites and institutional review boards.

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government funding, the government obtains certain rights in any resulting patents, including the right to a nonexclusive license authorizing the government to use the invention and rights that may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights.

The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S.

The government

can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S.

government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S.

67 unchanged sentences

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are

found to have willfully infringed a patent.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.

169 unchanged sentences

Provisions of ACA may negatively affect our future revenues.

For example, the ACA requires, among other things, that annual fees be paid by manufacturers for certain branded prescription drugs, that manufacturers participate in a discount program for certain outpatient drugs under Medicare Part D, and that manufacturers provide increased rebates under the Medicaid Drug Rebate Program for outpatient drugs dispensed to

Medicaid recipients.

The ACA also addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for line extensions and expands oversight and support for the federal government’s comparative effectiveness research of services and products.

34 unchanged sentences

Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials or creating fraudulent data in our preclinical studies or clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such

laws or regulations.

Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred.

104 unchanged sentences

In November 2018, we entered into an exchange agreement with BVF to exchange 1,000,000 shares of our common stock previously held by BVF for 1,000 shares of our Series B Convertible Preferred Stock, or Series B Preferred Stock, each share of which is convertible into 1,000 shares of our common stock, subject to certain ownership restrictions.

In June 2019, BVF converted 500 shares of Series A Convertible Preferred Stock into 500,000 shares of our common stock pursuant to BVF’s rights under the certificate of designation for such Series A Convertible Preferred Stock.

In connection with our rights offering, which we launched in February 2020 and closed in early March 2020, we issued 2,287 shares of our Series C Convertible Preferred Stock to BVF.

In June 2019, BVF converted 500 shares of Series A Preferred Stock into 500,000 shares of our common stock pursuant to BVF’s rights under the certificate of designation for such Series A Preferred Stock.

In connection with our rights offering, which we launched in February 2020 and closed in early March 2020, we issued 2,287 shares of our Series C Preferred Stock to BVF.

In September 2020, in connection with our underwritten public offering, we issued 3,215,000 shares of our Series D Preferred Stock to BVF.

If BVF or any other future holders of our shares of preferred stock convert their shares into common stock, existing holders of our common stock will experience dilution.

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(iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years;

or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC which means the first day of the year following the first year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of June 30th.

For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

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Our executive officers, directors and principal stockholders maintain the ability to control all matters submitted to stockholders for approval.

As of June 30, 2020, our executive officers and directors, combined with our stockholders who as of such date owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 46% of our capital stock.

As of September 30, 2020, our executive officers and directors, combined with our stockholders who as of such date owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 51% of our capital stock.

As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs.

34 unchanged sentences

Form or Schedule

2019 Inducement Equity Incentive Plan, as amended

Form of Stock Option Agreement under the 2019 Inducement Equity Incentive Plan, as amended

Amended and Restated Employment Agreement, dated April 22, 2020, by and between the Registrant and Thomas Parr Jr., Ph.D .

Third Amendment to Lease Agreement, dated May 4, 2020, by and between the Registrant and U.S.

REIF Central Plaza Massachusetts, LLC

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13 unchanged sentences

SPERO THERAPEUTICS, INC.

August 6, 2020

November 5, 2020

/s/ Ankit Mahadevia, M.D.

2 unchanged sentences

(Principal Executive Officer)

August 6, 2020

November 5, 2020

/s/ Stephen J.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors