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What changed in Spero Therapeutics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Spero Therapeutics, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+535 added−512 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-30)

Top changes in Spero Therapeutics, Inc.'s 2023 10-K

535 paragraphs added · 512 removed · 404 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

220 edited+58 added−38 removed291 unchanged
Biggest changeKey issues include: • Proposals to alter to how Medicare Part B and Part D drugs are priced and roles of the Centers for Medicare and Medicaid services in controlling growth rates, coverage, and access; • Proposals related to the Medicare drug benefit and the role and application of manufacturer and pharmacy rebates; • Proposals to disclosure proprietary information related to price setting, price increases and associated manufacturing and marketing expenses; • Proposals to reduce patent and non-patent exclusivity periods; • State-level policy regarding pricing, access and rebates; and • Coronavirus response policy that affects distribution, pricing and access of related therapeutics and vaccines as well as infrastructure build out In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product candidates that obtain marketing approval.
Biggest changeKey issues include: • Proposals to alter to how Medicare Part B and Part D drugs are priced and roles of the CMS in controlling growth rates, coverage, and access; • Proposals related to the Medicare drug benefit and the role and application of manufacturer and pharmacy rebates; • Proposals to disclosure proprietary information related to price setting, price increases and associated manufacturing and marketing expenses; • Proposals to reduce patent and non-patent exclusivity periods; and • State-level policy regarding pricing, access and rebates.
In a systematic analysis examining the global burden of bacterial resistance published in The Lancet, there were an estimated 4.95 million deaths (95% Uncertainty Interval 3.62–6.57) associated with drug-resistant infections in 2019, of which 1.27 million (0.911–1.71) deaths were directly attributable to drug resistance.
In a systematic analysis examining the global burden of bacterial resistance published in The Lancet, there were an estimated 4.95 million deaths (95% Uncertainty Interval 3.62–6.57) associated with drug-resistant infections in 2019, of which 1.27 (0.911–1.71) million deaths were directly attributable to drug resistance.
In addition to the license grant to SPR206, we granted Everest a 12-month exclusive option to negotiate with us for an exclusive license to develop, manufacture and commercialize SPR741 in the Territory.
In addition to the license grant to SPR206, we granted Everest a 12-month exclusive option to negotiate with us for an exclusive license to develop, manufacture and commercialize SPR741 in the Everest Territory.
In addition, under the Amended Everest License Agreement, we assigned patents in the Territory to Everest, rather than licensing such patents to Everest, and the option related to SPR741 and related provisions have been removed.
In addition, under the Amended Everest License Agreement, we assigned patents in the Everest Territory to Everest, rather than licensing such patents to Everest, and the option related to SPR741 and the related provisions have been removed.
Everest is responsible for all costs related to developing, obtaining regulatory approval of and commercializing SPR206 and Licensed Products in the Territory, and is obligated to use commercially reasonable efforts to develop, manufacture and commercialize Licensed Products, including to achieve certain specified diligence milestones within agreed-upon periods.
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 us and Everest to coordinate and review the development, manufacturing and commercialization plans with respect to Licensed Products in the Territory.
A joint development committee has been established between us and Everest to coordinate and review the development, manufacturing and commercialization plans with respect to Everest Licensed Products in the Everest Territory.
We are responsible for all costs related to developing and obtaining regulatory approval of SPR206 and Licensed Products in the Pfizer Territory, with a focus on the European market, and are obligated to use commercially reasonable efforts, including to achieve certain specified diligence milestones within agreed-upon periods.
We are responsible for all costs related to developing and obtaining regulatory approval of SPR206 and Pfizer Licensed Products in the Pfizer Territory, with a focus on the European market, and are obligated to use commercially reasonable efforts, including to achieve certain specified diligence milestones within agreed-upon periods.
A joint development committee was established between Pfizer and us to coordinate and review the development, manufacturing and commercialization plans with respect to Licensed Products in the Pfizer Territory. Pfizer is responsible for commercializing SPR206 and the Licensed Products in the Pfizer Territory.
A joint development committee was established between Pfizer and us to coordinate and review the development, manufacturing and commercialization plans with respect to Pfizer Licensed Products in the Pfizer Territory. Pfizer is responsible for commercializing SPR206 and the Licensed Products in the Pfizer Territory.
Under these recent amendments to the FDCA, the agency may require a sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial is complete, and such reports will be published on FDA’s website.
Under these recent amendments to the FDCA, the agency may require a sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial is complete, and such reports will be published on the FDA’s website.
Qualified Infectious Disease Product Exclusivity Under the GAIN Act, the FDA may designate a product as a QIDP.
Qualified Infectious Disease Product Exclusivity Under the GAIN Act, the FDA may designate a qualified product as a QIDP.
We obtained a QIDP designation for the oral formulation of tebipenem HBr for cUTI in November 2016 and CABP and DFI in April 2017. We were granted QIDP designation by the FDA for SPR206 in October 2018 for the treatment of cUTI and hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP).
We obtained a QIDP designation for the oral formulation of tebipenem HBr for cUTI in November 2016 and for CABP and DFI in April 2017. We were granted QIDP designation by the FDA for SPR206 in October 2018 for the treatment of cUTI and hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP).
The process required by the FDA before a drug may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with GLPs and other applicable regulations; • submission to the FDA of an IND which must become effective before human clinical trials may begin; • approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with good clinical practices (“GCPs”) to establish the safety and efficacy of the proposed drug product for each indication; • submission to the FDA of an NDA and payment of user fees; • satisfactory completion of an FDA advisory committee review, if applicable; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (“cGMPs”) and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • satisfactory completion of audits of clinical trial sites conducted by FDA to assure compliance with GCPs and the integrity of clinical data; and • FDA review and approval of the NDA.
The process required by the FDA before a drug may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with GLPs and other applicable regulations; • submission to the FDA of an IND which must become effective before human clinical trials may begin; • approval by an independent institutional review board (“IRB”) before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with good clinical practices (“GCPs”) to establish the safety and efficacy of the proposed drug product for each indication; • submission to the FDA of an NDA and payment of user fees; • satisfactory completion of an FDA advisory committee review, if applicable; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (“cGMPs”) and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • satisfactory completion of audits of clinical trial sites conducted by FDA to assure compliance with GCPs and the integrity of clinical data; and • FDA review and approval of the NDA.
The federal government uses these laws, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in connection with the promotion of products for unapproved uses and other allegedly unlawful sales and marketing practices; • The U.S. federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") created new federal, civil and criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or 32 services.
The federal government uses these laws, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in connection with the promotion of products for unapproved uses and other allegedly unlawful sales and marketing practices; • The federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") created new federal, civil and criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Other potential consequences of regulatory non-compliance include, among other things: • restrictions on, or suspensions of, the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • interruption of production processes, including the shutdown of manufacturing facilities or production lines or the imposition of new manufacturing requirements; • fines, warning letters or other enforcement letters or clinical holds on post-approval clinical trials; • mandated modification of promotional materials and labeling and the issuance of corrective information; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; • injunctions or the imposition of civil or criminal penalties; or • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs.
Other potential consequences of regulatory non-compliance include, among other things: • restrictions on, or suspensions of, the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • interruption of production processes, including the shutdown of manufacturing facilities or production lines or the imposition of new manufacturing requirements; • fines, warning letters or other enforcement letters or clinical holds on post-approval clinical trials; • mandated modification of promotional materials and labeling and the issuance of corrective information; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; • injunctions or the imposition of civil or criminal penalties; or 27 • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs.
Pursuant to the terms of the GSK License Agreement, we granted GSK an exclusive royalty-bearing license, with the right to grant sublicenses, under our intellectual property and regulatory documents and a sublicense under certain intellectual property of 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”).
Pursuant to the terms of the GSK License Agreement, we granted GSK an exclusive royalty-bearing license, with the right to grant sublicenses, under our intellectual property and regulatory documents and a sublicense under certain intellectual property of 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 (collectively, the “Meiji Territory”)) (the “GSK Territory”).
Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product; rather, this three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving follow-on applications for drugs containing the original active ingredient.
Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for follow-on versions of the drug as of the date of approval of the original drug product; rather, this three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving follow-on applications for drugs containing the original active ingredient.
In addition to the expedited review benefits for which a QIDP-designated drug candidate may be eligible, such a drug that is approved for the use for which the QIDP designation was granted will receive a five-year extension to any non-patent marketing exclusivity period for which the drug qualified upon approval, such as five-year NCE exclusivity, three-year new clinical data exclusivity, seven-year orphan exclusivity, or six-month pediatric exclusivity.
In addition to the expedited review benefits for which a QIDP-designated drug candidate may be eligible, such a drug that is approved for the use for which the QIDP designation was granted will receive a five-year extension to any non-patent marketing exclusivity period for which the drug qualified upon approval, such as five-year NCE exclusivity, three-year new clinical data 29 exclusivity, seven-year orphan exclusivity, or six-month pediatric exclusivity.
Moreover, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their 30 marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Moreover, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant 20 party from receiving future grant funds from the federal government. The government has recently begun enforcing these registration and results reporting requirements against non-compliant clinical trial sponsors.
Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government. The government has recently begun enforcing these registration and results reporting requirements against non-compliant clinical trial sponsors.
Clinical Trials Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial along with the requirement to ensure that the data and results reported from the clinical trials are credible and accurate.
Clinical Trials Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed 21 consent in writing for their participation in any clinical trial along with the requirement to ensure that the data and results reported from the clinical trials are credible and accurate.
A Type C meeting is any meeting other than a Type A or Type B meeting regarding the development and review of a product, including, for example, meetings to facilitate early consultations on the use of a biomarker as a new surrogate endpoint that has never been previously used as the primary basis for product approval in the proposed context of use.
A Type C meeting is any meeting other than a Type A or Type B meeting regarding the development and review of a product, including, for example, meetings to facilitate early consultations on the 22 use of a biomarker as a new surrogate endpoint that has never been previously used as the primary basis for product approval in the proposed context of use.
Drugs listed in the Orange Book can, in turn, be cited by potential follow-on competitors in support of approval of an ANDA or 505(b)(2) NDA. When an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any patents listed for the reference product in the FDA’s Orange Book.
Drugs listed in the Orange Book can, in turn, be cited by potential follow-on competitors in support of approval of an ANDA or 505(b)(2) NDA. 28 When an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any patents listed for the reference product in the FDA’s Orange Book.
Special FDA Expedited Review The FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include fast track designation, breakthrough therapy designation, QIDP designation, and priority review designation.
FDA Expedited Review Programs The FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include fast track designation, breakthrough therapy designation, QIDP designation, and priority review designation.
Antibiotics that target Gram-negative bacteria must be specifically designed to cross both the inner and outer membranes to enter the bacteria. The outer membrane represents a significant barrier to the entry into the bacteria and is one factor for the reduced potency of many agents used to treat Gram-negative bacterial infections.
Antibiotics that target Gram-negative bacteria must be specifically designed to cross both the inner and outer membranes to enter the bacterial cells. The outer membrane represents a significant barrier to the entry into the bacteria and is one factor for the reduced potency of many agents used to treat Gram-negative bacterial infections.
Update on Phase 2a Clinical Trial On February 5, 2021, we announced that the FDA informed us that a clinical hold had been placed on our Phase 2a clinical trial of SPR720, following our notification to the FDA of our decision to pause dosing in our ongoing Phase 2a clinical trial of SPR720 as a precautionary measure related to events in our ongoing animal toxicology study of SPR720.
On February 5, 2021, we announced that the FDA informed us that a clinical hold had been placed on our Phase 2a clinical trial of SPR720, following our notification to the FDA of our decision to pause dosing in our ongoing Phase 2a clinical trial of SPR720 as a precautionary measure related to events in our ongoing animal toxicology study of SPR720.
The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources. 19 United States Government Regulation In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing regulations.
The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources. United States Government Regulation In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing regulations.
The issued and foreign patents are in a number of jurisdictions including the European Union and its member states, Argentina, Australia, Brazil, Canada, China, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Mexico, New Zealand, the Philippines, 17 Russia, Singapore, South Africa, and Taiwan.
The issued foreign patents are in a number of jurisdictions including the European Union and its member states, Argentina, Australia, Brazil, Canada, China, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Mexico, New Zealand, the Philippines, Russia, Singapore, South Africa, and Taiwan.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • The Physician Payments Sunshine Act, enacted as part of the ACA, among other things, imposes reporting requirements on manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to DHHS information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors and certain advanced non-physician health care practitioners), teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations impose specified requirements relating to the privacy and security of individually identifiable health information that is protected under HIPAA, called “protected health information” or “PHI”.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • The Physician Payments Sunshine Act, enacted as part of the ACA, among other things, imposes reporting requirements on manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare 34 or Medicaid to report, on an annual basis, to CMS information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors and certain advanced non-physician health care practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations impose specified requirements relating to the privacy and security of individually identifiable health information that is protected under HIPAA, called “protected health information” or “PHI”.
The FDA has taken the position that a CRL is not final agency action making the determination subject to judicial review. 23 An approval letter, on the other hand, authorizes commercial marketing of the product with specific prescribing information for specific indications.
The FDA has taken the position that a CRL is not final agency action making the determination subject to judicial review. An approval letter, on the other hand, authorizes commercial marketing of the product with specific prescribing information for specific indications.
We may seek to acquire other product candidates for other underserved, debilitating orphan infectious diseases. • In partnership with GSK, advance tebipenem HBr through completion of proposed Phase 3 clinical trial and advise and consult with GSK through the regulatory approval process.
We may seek to acquire other product candidates for other underserved, debilitating orphan infectious diseases. • In partnership with GSK, advance tebipenem HBr through completion of the Phase 3 clinical trial and advise and consult with GSK through the regulatory approval process.
The aim of this Directive is to ensure that pricing and reimbursement mechanisms established in the EU Member States are transparent and objective, do not hinder the free movement of and trade in medicinal products in the EU, and do not hinder, prevent or distort competition on the market.
The aim of this Directive is to ensure that pricing and reimbursement mechanisms established in the EU Member States are transparent and objective, do not hinder the free movement of and trade in medicinal products in the EU, and do not hinder, 33 prevent or distort competition on the market.
The cGMP regulations include requirements relating to the organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, 25 holding and distribution, laboratory controls, records and reports and returned or salvaged products.
The cGMP regulations include requirements relating to the organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products.
As such, current UTI treatment guidelines published by the Infectious Diseases Society of America identify fluoroquinolones as an appropriate empirical therapy option. This recommendation, however, is contingent on local resistance rates being less than 10%.
As such, current UTI treatment guidelines published by the Infectious Diseases Society of America identify fluoroquinolones as an appropriate empirical therapy option. This recommendation is contingent on local resistance rates being less than 10%.
A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution.
A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB must review and approve the plan for any clinical trial before it commences at that institution.
More than one product candidate may receive an orphan drug designation for the same indication, and the same product candidate can be designated for more than one qualified orphan indication. The benefits of orphan drug designation include research 28 and development tax credits and exemption from FDA prescription drug user fees.
More than one product candidate may receive an orphan drug designation for the same indication, and the same product candidate can be designated for more than one qualified orphan indication. The benefits of orphan drug designation include research and development tax credits and exemption from FDA prescription drug user fees.
In a nationwide cohort study, the total median 30-day post index all-cause total healthcare costs for cUTI care ranged from $1,531 for patients initially identified in the 7 outpatient setting to $13,028 for patients initially identified in the inpatient setting.
In a nationwide cohort study, the total median 30-day post index all-cause total healthcare costs for cUTI care ranged from $1,531 for patients initially identified in the outpatient setting to $13,028 for patients initially identified in the inpatient setting.
The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications.
The FDA will not approve the product 23 unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications.
Finally, the FDA may designate a product for priority review if it is a drug or biologic that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness.
Finally, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness.
Russian, Eurasian Patent Office and Ukrainian Patents Due to the war in Ukraine and sanctions between the United States and Russia, patents and patent applications in Russia, the Eurasian Patent Office ("EAPO") and Ukraine currently have an uncertain fate.
Russian and Eurasian Patent Office and Ukrainian Patents 19 Due to the war in Ukraine and sanctions between the United States and Russia, patents and patent applications in Russia, the Eurasian Patent Office ("EAPO") and Ukraine currently have an uncertain fate.
Certain modifications to the product, including changes in indications or manufacturing processes or facilities, may require the applicant to develop additional data or conduct additional preclinical studies and clinical trials to support the submission to FDA. There also are continuing, annual user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data.
Certain modifications to the product, including changes in indications or manufacturing processes or facilities, may require the applicant to develop additional data or conduct additional nonclinical studies and clinical trials to support the submission to FDA. There also are continuing, annual user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data.
Recent studies have found that Gram-negative bacteria in certain patient types, such as those with sepsis and interstitial lung disease (“ILD”), are associated with higher mortality and increased intensive care unit (“ICU”) admission, while only limited therapeutic options are available. 3 Antibiotics are evaluated according to several criteria, including: • Spectrum .
Recent studies have found that Gram-negative bacteria in certain patient types, such as those with sepsis and interstitial lung disease (“ILD”), are associated with higher mortality and increased intensive care unit (“ICU”) admission, with only limited therapeutic options available. Antibiotics are evaluated according to several criteria, including: • Spectrum .
In particular, E.coli non-susceptibility to fluoroquinolones, trimethoprim/sulfamethoxazole, and oral cephalosporins range from 25% to 36%, based on isolates collected from both nosocomial, or hospital-acquired, and community-acquired infections. Co-resistance further compounds the issue of antibiotic resistance, for instance more than 40% of E.coli isolates with trimethoprim/sulfamethoxazole resistance were co-resistant to levofloxacin.
In particular, Escherichia coli (“ E. coli ”) non-susceptibility to fluoroquinolones, trimethoprim/sulfamethoxazole, and oral cephalosporins range from 25% to 36%, based on isolates collected from both nosocomial, or hospital-acquired, and community-acquired infections. Co-resistance further compounds the issue of antibiotic resistance, for instance more than 40% of E. coli isolates with trimethoprim/sulfamethoxazole resistance were co-resistant to levofloxacin.
The awards are subject to termination for convenience at any time by the granting government agency, and the granting government agency is not obligated to 16 provide funding to us beyond the base period amounts from Congressionally approved annual appropriations. These awards are structured in the following manner: • BARDA award to support the further clinical development of tebipenem HBr.
The awards are subject to termination 17 for convenience at any time by the granting government agency, and the granting government agency is not obligated to provide funding to us beyond the base period amounts from Congressionally approved annual appropriations. These awards are structured in the following manner: • BARDA award to support the further clinical development of tebipenem HBr.
The doses selected for the Phase 2a trial of SPR720 were supported by PK/PD analyses, as well as data from the Phase 1 clinical trial of SPR720, which evaluated the safety, tolerability and PK of orally administered SPR720 at single doses ranging from 100 mg to 2000 mg and repeat total daily doses ranging from 500 mg to 1500 mg for up to 7 to 14 days.
Completed Clinical Trials The doses selected for the Phase 2a trial of SPR720 were supported by PK/PD analyses, as well as data from the Phase 1 clinical trial of SPR720, which evaluated the safety, tolerability and PK of orally administered SPR720 at single doses ranging from 100 mg to 2000 mg and repeat total daily doses ranging from 500 mg to 1500 mg for up to 7 to 14 days.
While such funding would be for the purpose of developing tebipenem HBr in these areas, we will not receive any funds directly from DTRA. • NIAID funding for SPR206. The NIAID contract for SPR206 awarded in 2016 provides for total development funding of up to $6.5 million over a base period and three option periods.
While such funding would be for the purpose of developing tebipenem HBr in these areas, we will not receive any funds directly from DTRA. • NIAID funding for SPR206. A NIAID contract for SPR206 awarded in 2016 provided for total development funding of up to $6.5 million over a base period and three option periods.
The funding covered the costs of select Phase 1 pharmacology studies, a 28-day GLP NHP toxicology study, and microbiological surveillance studies that would be required for a potential NDA submission with the FDA for SPR206. As of December 31, 2022, all activities under this award were completed and this award was closed out.
The funding covered the costs of select Phase 1 pharmacology studies, a 28-day GLP NHP toxicology study, and microbiological surveillance studies that would be required for a potential NDA submission with the FDA for SPR206. As of December 31, 2023, all activities under this award were completed and this award was closed out.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources.
We 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. 15 In January 2021, we 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.
We 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. 16 On January 15, 2021, we 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.
Tebipenem HBr Key Attributes Tebipenem HBr is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use in adults to treat cUTIs, including pyelonephritis. Unlike other carbapenems on the U.S. market, which are only available as IV-administered infusions, tebipenem HBr is an orally administered tablet.
Tebipenem HBr Key Attributes Tebipenem HBr is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use in adults to treat cUTI, including pyelonephritis. Unlike other carbapenems on the U.S. market, which are only available as IV-administered infusions, tebipenem HBr is an orally administered tablet.
While drugs such as trimethoprim/sulfamethoxazole (Bactrim/Septra) and fluoroquinolones (levofloxacin, ciprofloxacin) have been the primary oral options for treatment of UTIs caused by Gram-negative organisms, nearly 30% to 35% of UTIs are resistant, which has led to increased use of IV-administered therapeutics such as carbapenems.
While drugs such as trimethoprim/sulfamethoxazole and fluoroquinolones (levofloxacin, ciprofloxacin) have been the primary oral options for treatment of UTIs caused by Gram-negative organisms, nearly 30% to 35% of UTIs are resistant, which has led to increased use of IV-administered therapeutics such as carbapenems.
This harmonized submission process is 29 mandatory for new CTA submissions as of February 1, 2023. For ongoing clinical trials, if a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation became applicable, the Clinical Trials Regulation will at that time begin to apply to the clinical trial.
This harmonized submission process became mandatory for new CTA submissions as of February 1, 2023. For ongoing clinical trials, if a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation became applicable, the Clinical Trials Regulation will at that time begin to apply to the clinical trial.
SPR720 Agreements Gates MRI Collaboration 12 In June 2019, we entered into a collaboration with the Bill and Melinda Gates Medical Research Institute (the “Gates MRI”), a nonprofit research institution wholly owned by the Bill and Melinda Gates Foundation, to develop SPR720 for the treatment of lung infections caused by Mycobacterium TB .
SPR720 Agreements Gates MRI Collaboration In June 2019, we entered into a collaboration with the Bill and Melinda Gates Medical Research Institute (the “Gates MRI”), a nonprofit research institution wholly owned by the Bill and Melinda Gates Foundation, to develop SPR720 for the treatment of lung 13 infections caused by Mycobacterium TB .
We and our collaboration partners retain exclusive rights to commercialize tebipenem HBr throughout the world, except in Japan, Bangladesh, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam, where Meiji will have exclusive rights to commercialize tebipenem HBr.
We and our collaboration partners, including GSK, retain exclusive rights to commercialize tebipenem HBr throughout the world, except in Japan, Bangladesh, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam, where Meiji will have exclusive rights to commercialize tebipenem HBr.
We believe tebipenem HBr is well positioned to meet an unmet need for an oral therapy for patients with cUTI infections, including pyelonephritis, caused by certain microorganisms. Physicians may prescribe tebipenem HBr, if approved, to treat MDR cUTIs and patients prescribed tebipenem HBr may avoid hospitalization.
We believe tebipenem HBr is well positioned to meet an unmet need for an oral therapy for patients with cUTI, including pyelonephritis, caused by certain microorganisms. Physicians may prescribe tebipenem HBr, if approved, to treat MDR cUTI and patients prescribed tebipenem HBr may avoid hospitalization.
We also agreed to pay royalties of a low single-digit percentage based on net sales of products licensed under the agreement. In addition, Spero Cantab issued equity interest in Spero Cantab and entered into a subscription agreement and shareholders agreement with PBB.
We also agreed to pay royalties of a low single-digit percentage based on net sales of products licensed under the agreement. In addition, Spero Cantab issued equity interest in Spero Cantab and entered into a subscription agreement and stockholders agreement with PBB.
The Amended Everest License Agreement modified the dates and values of certain milestone events related to the 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 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.
Given the observed activity of tebipenem HBr against a broad spectrum of bacterial pathogens, healthcare providers may prescribe tebipenem HBr, if approved, for use in the following uses, if approved therefor: • Community setting: Treating cUTIs acquired in the community setting without the need for patient hospitalization. • Hospital setting: Transitioning appropriate patients hospitalized for cUTIs to an appropriate oral therapy as they are discharged from the hospital.
Given the observed activity of tebipenem HBr against a broad spectrum of 8 bacterial pathogens, healthcare providers may prescribe tebipenem HBr, if approved, for use in the following uses, if approved therefor: • Community setting: Treating cUTI acquired in the community setting without the need for patient hospitalization. • Hospital setting: Transitioning appropriate patients hospitalized for cUTI to an appropriate oral therapy as they are discharged from the hospital.
In general, state Medicaid programs are required to cover drugs and biologicals of manufacturers that have entered into a Medicaid Drug Rebate Agreement, although such drugs and biologicals may be subject to prior authorization or other utilization controls.
In general, state Medicaid programs are required to cover drugs of manufacturers that have entered into a Medicaid Drug Rebate Agreement, although such drugs may be subject to prior authorization or other utilization controls.
Acceptance of NDAs Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information 21 and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the product candidate for one or more indications.
Acceptance of NDAs Assuming successful completion of the required clinical testing, the results of the nonclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the product candidate for one or more indications.
SPR720 has shown potent activity against most common NTM infection species, such as M. avium , M. abscessus and M. kansasii . As shown in the exhibit below, SPR720 showed pulmonary activity against M. avium ATCC 700898 in a murine chronic infection model.
Preclinical Findings SPR720 has shown potent activity against most common NTM infection species, such as M. avium , M. abscessus and M. kansasii . As shown in the exhibit below, SPR720 showed pulmonary activity against M. avium ATCC 700898 in a murine chronic infection model.
Data from this Phase 1 trial was presented at ID Week 2020 with the conclusion that SPR720 is generally well-tolerated with predicted therapeutic exposures attainable with a 500 – 1,000 mg once daily oral dose, supporting further development of SPR720 in NTM pulmonary disease.
Data from this Phase 1 trial was presented at ID Week 2020 with the conclusion that SPR720 is generally well-tolerated with predicted therapeutic exposures attainable with a 500 mg to 1000 mg once daily oral dose, supporting further development of SPR720 in NTM pulmonary disease.
SPR206: IV-administered product candidate being developed as an innovative option to treat multi-drug resistant (MDR) Gram-negative bacterial infections in the hospital setting. SPR206 is an IV-administered product candidate being developed as an innovative option to treat MDR Gram-negative bacterial infections in the hospital setting.
SPR206: IV-administered product candidate being developed as an innovative option to treat multi-drug resistant (MDR) Gram-negative bacterial infections in the hospital setting. Disease Overview SPR206 is an IV-administered product candidate being developed as an innovative option to treat MDR Gram-negative bacterial infections in the hospital setting.
In exchange for the acquisition of NPLH, we paid PBB upfront consideration in the amount of $0.3 million and also agreed to make milestone payments of up to $5.8 million upon the achievement of specified clinical and regulatory milestones and a payment of £5.0 million ($6.0 million as of December 31, 2022) upon the achievement of a specified commercial milestone.
In exchange for the acquisition of NPLH, we paid PBB upfront consideration in the amount of $0.3 million and also agreed to make milestone payments of up to $5.8 million upon the achievement of specified clinical and regulatory milestones and a payment of £5.0 million ($6.4 million as of December 31, 2023) upon the achievement of a specified commercial milestone.
During Phase 1 clinical trials, sufficient information about the investigational drug’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
During Phase 1 clinical trials, sufficient information about the investigational drug’s PK and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
In May 2019, the contract was modified to include additional funding of approximately $2.5 million for tebipenem HBr, increasing the amount of initial committed funding from $15.7 million to approximately $18.2 million. In January 2020, BARDA exercised its first option under the contract, committing $15.9 million for tebipenem HBr through November 2021.
In May 2019, the contract was modified to include additional funding of approximately $2.5 million for tebipenem HBr, increasing the amount of initial committed funding from $15.7 million to approximately $18.2 million. In January 2020, BARDA exercised its first option under the contract, committing $15.9 million for tebipenem HBr.
The BARDA award provides total reimbursement to us of up to $59.7 million for qualified expenses for tebipenem HBr development. The award initially committed funding of $15.7 million over a three-year base period from July 2018 to June 30, 2021 for cUTI development activities.
The BARDA award provides total reimbursement to us of up to $60.3 million for qualified expenses for tebipenem HBr development. The award initially committed funding of $15.7 million over a three-year base period from July 2018 to June 30, 2021 for cUTI development activities.
In February 2019, we were granted QIDP designation for SPR720 capsule for oral use for the treatment of lung infections caused by nontuberculous mycobacteria and for the treatment of lung infections caused by Mycobacterium tuberculosis .
In February 2019, we were granted QIDP designation for SPR720 capsule for oral use for the treatment of lung infections caused by nontuberculous mycobacteria and for the treatment of lung infections caused by Mycobacterium TB .
The award initially committed funding of $2.1 million over a two-year base period from May 2021 to January 2023 for non-clinical, regulatory, and CMC activities. In December 2022, NIAID extended period of performance for the base period until August 16, 2023.
The award initially committed funding of $2.1 million over a two-year base period from May 2021 to January 2023 for nonclinical, regulatory, and CMC activities. In December 2022, NIAID extended period of performance for the base period until August 16, 2023.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including, but not limited to, Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
A significant majority of cUTIs are caused by a group of MDR Gram-negative bacteria called Enterobacterales, against which tebipenem HBr has demonstrated antibacterial activity.
A significant majority of cUTI are caused by a group of MDR Gram-negative bacteria called Enterobacterales, against which tebipenem HBr has demonstrated antibacterial activity.
In exchange, GSK received an exclusive license to develop and commercialize tebipenem pivoxil and tebipenem pivoxil HBr in all territories, except Japan, and certain other Asian countries, territories which will be retained by our partner Meiji Seika Pharma Co. Ltd. (“Meiji”).
In exchange, GSK received an exclusive license to develop and commercialize tebipenem pivoxil and tebipenem pivoxil HBr in all territories, except Japan, and certain other Asian countries, territories which are retained by our partner Meiji Seika Pharma Co. Ltd. (“Meiji”).
Concurrent with the GSK License Agreement, an affiliate of GSK purchased 7,450,000 shares of our common stock at a purchase price of approximately $1.20805 per share for an aggregate purchase price of $9.0 million. Under the License Agreement, Spero is responsible for the execution and costs of the follow-up Phase 3 clinical trial of tebipenem HBr.
Concurrent with the GSK License Agreement, an affiliate of GSK purchased 7,450,000 shares of our common stock at a purchase price of approximately $1.20805 per share for an aggregate purchase price of $9.0 million. Under the License Agreement, we are responsible for the execution and costs of the follow-up Phase 3 clinical trial of tebipenem HBr.
Data from SPR206 in vitro and in vivo good laboratory practice (“GLP”) safety pharmacology and absorption, distribution, metabolism, and excretion (“ADME”) studies and 14-day, two-species GLP toxicology studies provide support for an acceptable safety profile, which led to SPR206’s designation as a clinical candidate and the initiation of Phase 1 clinical trial in December 2018.
Data from SPR206 in vitro and in vivo GLP safety pharmacology and absorption, distribution, metabolism, and excretion (“ADME”) studies and 14-day, two-species GLP toxicology studies provide support for an acceptable safety profile, which led to SPR206’s designation as a clinical candidate and the initiation of Phase 1 clinical trial in December 2018.
To date, funding for the base period and the first two option periods, totaled $5.9 million before the contract was closed out in June 2021. In May 2021, a new NIAID contract was awarded for SPR206 providing total development funding of up to $23.4 million, of which $6.2 million has been committed.
To date, funding for the base period and the first two option periods, totaled $5.9 million before the contract was closed out in June 2021. In May 2021, a new NIAID contract was awarded for SPR206 providing total development funding of up to $23.4 million, of which $7.1 million has been committed.
In December 2020, we initiated a Phase 2a dose-ranging clinical trial (SPR720-201) of SPR720 in patients with nontuberculous mycobacterial pulmonary disease following the acceptance of our investigational new drug (“IND”) application for SPR720 in August 2020.
In December 2020, we initiated a Phase 2a dose-ranging clinical trial (SPR720-201) of SPR720 in patients with NTM pulmonary disease following the acceptance of our investigational new drug (“IND”) application for SPR720 in August 2020.
Of these employees, 18 employees were primarily engaged in research and development activities, and 17 provide administrative, business and operations support. All of these employees were based in the United States. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our employee relations to be good.
Of these employees, 30 employees were primarily engaged in research and development activities, and 16 provide administrative, business and operations support. All of these employees were based in the United States. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our employee relations to be good.
Potency is commonly expressed as the minimum inhibitory concentration (“MIC”) in µg/mL, which is the lowest concentration at which the drug inhibits growth of the bacteria. Antibiotics with lower MICs are considered to be more potent. • Resistance . Antibiotic resistance refers to the inability of an antibiotic to effectively control bacterial growth.
Potency is commonly expressed as the minimum inhibitory concentration (“MIC”) in µg/mL or mg/L, which is the lowest 3 concentration at which the drug inhibits growth of the bacteria. Antibiotics with lower MICs are considered to be more potent. • Resistance . Antibiotic resistance refers to the inability of an antibiotic to effectively control bacterial growth.
Pfizer License and Share Purchase Agreements On June 30, 2021, we entered into a License Agreement (the “Pfizer License Agreement”) and a Share Purchase Agreement (the “Pfizer Purchase Agreement”) with Pfizer.
Pfizer License and Share Purchase Agreements On June 30, 2021, we entered into a License Agreement (the “Pfizer License Agreement”) and a Share Purchase Agreement (the “Pfizer Purchase Agreement”) with Pfizer, Inc. (“Pfizer”).
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and third parties who acquire PHI unlawfully, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions; and • Analogous state laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws which require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug and therapeutic biologics manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information; state and local laws which require the registration of pharmaceutical sales representatives; and state laws and non-United States laws and regulations that govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and third parties who acquire PHI unlawfully, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions; • State and federal consumer protection laws, including the Federal Trade Commission Act, govern the collection, use, disclosure and protection of health and other personal information and could apply to our operations and the operations of our collaborators; and • Analogous state laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws which require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug and therapeutic biologics manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information; state and local laws which require the registration of pharmaceutical sales representatives; and state laws and non-United States laws and regulations that govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: Phase 1 : The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: Phase 1 : The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, ADME and, if possible, to gain an early indication of its effectiveness.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; 62 • the federal False Claims Act imposes criminal and civil penalties, which can be enforced by private citizens through civil whistleblower and qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or for making any false statements relating to healthcare matters; as in the case of the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, also imposes obligations on certain covered entities as well as their business associates that perform services involving the use or disclosure of protected health information, including mandatory contractual terms, with respect to safeguarding the privacy and security of protected health information, and requires notification to affected individuals and regulatory authorities of certain breaches of security of protected health information; • the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • the federal transparency or “sunshine” requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the "ACA") requires manufacturers of drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to the United States Department of Health and Human Services ("DHHS"), information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors and certain advanced non-physician health care practitioners), teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to implement compliance programs and to track and report gifts, compensation and other remuneration provided to physicians, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information.
Biggest changeIn addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; • the federal False Claims Act imposes criminal and civil penalties, which can be enforced by private citizens through civil whistleblower and qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • HIPAA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or for making any false statements relating to healthcare matters; as in the case of the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate the statute in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, also imposes obligations on certain covered entities as well as their business associates that perform services involving the use or disclosure of protected health information, including mandatory contractual terms, with respect to safeguarding the privacy and security of protected health information, and requires notification to affected individuals and regulatory authorities of certain breaches of security of protected health information; • the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • the federal Physician Payments Sunshine Act requires manufacturers of drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to the DHHS, information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors and certain advanced non-physician health care practitioners), teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; 64 • state and federal consumer protection laws, including the Federal Trade Commission Act, govern the collection, use, disclosure and protection of health and other personal information and could apply to our operations and the operations of our collaborators; and • analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to implement compliance programs and to track and report gifts, compensation and other remuneration provided to physicians, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information.
We intend to use collaborators to assist with the commercialization of any of our product candidates, including the GSK License Agreement with GSK for the development and commercialization of tebipenem HBr.
We intend to use collaborators to assist with the commercialization of any of our product candidates, including the GSK License Agreement for the development and commercialization of tebipenem HBr.
Even if we are able to obtain approval for commercialization of a product candidate in a foreign country, we will be subject to additional risks related to international business operations, including: • potentially reduced protection for intellectual property rights; • the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • workforce uncertainty in countries where labor unrest is more common than in the United States; 66 • production shortages resulting from any events affecting a product candidate and/or finished drug product supply or manufacturing capabilities abroad; • business interruptions resulting from geo-political actions, including war and terrorism, health epidemics or natural disasters, including earthquakes, hurricanes, typhoons, floods and fires; and • failure to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act.
Even if we are able to obtain approval for commercialization of a product candidate in a foreign country, we will be subject to additional risks related to international business operations, including: • potentially reduced protection for intellectual property rights; • the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting a product candidate and/or finished drug product supply or manufacturing capabilities abroad; • business interruptions resulting from geo-political actions, including war and terrorism, health epidemics or natural disasters, including earthquakes, hurricanes, typhoons, floods and fires; and • failure to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act.
The market price for our common stock may be influenced by many factors, including: • the success of existing or new competitive products or technologies; • the timing of clinical trials of our product candidates; • results of clinical trials of any of our product candidates; • failure or discontinuation of any of our development programs; • results of clinical trials of product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • the perception of the pharmaceutical and biotechnology industry by the public, legislatures, regulators and the investment community; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our product candidates or clinical development programs; • the results of our efforts to develop, in-license or acquire additional product candidates or products; • actual or anticipated changes in estimates as to financial results or development timelines; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders or other stockholders; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions; and • the other factors described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including: • the success of existing or new competitive products or technologies; • the timing of clinical trials of our product candidates; • results of clinical trials of any of our product candidates; • failure or discontinuation of any of our development programs; • results of clinical trials of product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • the perception of the pharmaceutical and biotechnology industry by the public, legislatures, regulators and the investment community; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our product candidates or clinical development programs; • the results of our efforts to develop, in-license or acquire additional product candidates or products; • actual or anticipated changes in estimates as to financial results or development timelines; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders or other stockholders; 68 • variations in our financial results or those of companies that are perceived to be similar to us; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions; and • the other factors described in this “Risk Factors” section.
In addition, if any product fails to comply with applicable regulatory requirements, a regulatory agency may: • issue warning letters, untitled letters or impose holds on clinical trials if any are still on-going; • mandate modifications to promotional materials or require provision of corrective information to healthcare practitioners; • impose restrictions on the product or its manufacturers or manufacturing processes; • impose restrictions on the labeling or marketing of the product; • impose restrictions on product distribution or use; • require post-marketing studies or clinical trials; • require withdrawal of the product from the market; • refuse to approve pending applications or supplements to approved applications that we submit; • require recall of the product; • require entry into a consent decree, which can include imposition of various fines (including restitution or disgorgement of profits or revenue), reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; • suspend or withdraw marketing approvals; • refuse to permit the import or export of the product; • seize or detain supplies of the product; or • issue injunctions or impose civil or criminal penalties.
In addition, if any product fails to comply with applicable regulatory requirements, a regulatory agency may: • issue warning letters, untitled letters or impose holds on clinical trials if any are still on-going; • mandate modifications to promotional materials or require provision of corrective information to healthcare practitioners; • impose restrictions on the product or its manufacturers or manufacturing processes; • impose restrictions on the labeling or marketing of the product; • impose restrictions on product distribution or use; • require post-marketing studies or clinical trials; • require withdrawal of the product from the market; • refuse to approve pending applications or supplements to approved applications that we submit; • require recall of the product; 63 • require entry into a consent decree, which can include imposition of various fines (including restitution or disgorgement of profits or revenue), reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; • suspend or withdraw marketing approvals; • refuse to permit the import or export of the product; • seize or detain supplies of the product; or • issue injunctions or impose civil or criminal penalties.
We cannot make assurances that any clinical trials that we may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. 35 We may encounter unforeseen events prior to, during, or as a result of, clinical trials that could delay or prevent us from obtaining regulatory approval for any of our product candidates, including: • the FDA or other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • we may be delayed in or fail to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials of our product candidates may produce unfavorable or inconclusive results; • we may decide, or regulators may cause us, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or we may fail to recruit suitable patients to participate in clinical trials; • our third-party contractors, including those manufacturing our product candidates or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • the FDA or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • regulators or institutional review boards may require that we or our investigators suspend or terminate clinical trials of our product candidates for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate; • the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for clinical and commercial supplies; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
We cannot make assurances that any clinical trials that we may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. 37 We may encounter unforeseen events prior to, during, or as a result of, clinical trials that could delay or prevent us from obtaining regulatory approval for any of our product candidates, including: • the FDA or other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • we may be delayed in or fail to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials of our product candidates may produce unfavorable or inconclusive results; • we may decide, or regulators may cause us, to conduct additional clinical trials or abandon product development programs; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or we may fail to recruit suitable patients to participate in clinical trials; • our third-party contractors, including those manufacturing our product candidates or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • the FDA or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • regulators or institutional review boards may require that we or our investigators suspend or terminate clinical trials of our product candidates for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate; • the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for clinical and commercial supplies; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Collaborations involving our product candidates may pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may not be able to develop, manufacture, market and sell our product candidates and use our intellectual property without infringing or misappropriating the intellectual property and other proprietary rights of third parties; 48 • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
Collaborations involving our product candidates may pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may not be able to develop, manufacture, market and sell our product candidates and use our intellectual property without infringing or misappropriating the intellectual property and other proprietary rights of third parties; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and 50 • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
These risks include the ability of the United States government to unilaterally: • audit and object to our government contract-related costs and fees, and require us to reimburse all such costs and fees; • suspend or prevent us for a set period of time from receiving new contracts or extending our existing contracts based on violations or suspected violations of laws or regulations; 53 • cancel, terminate or suspend our contracts based on violations or suspected violations of laws or regulations; • terminate our contracts if in the government’s interest, including if funds become unavailable to the applicable governmental agency; • reduce the scope and value of our contract; and • change certain terms and conditions in our contract.
These risks include the ability of the United States government to unilaterally: • audit and object to our government contract-related costs and fees, and require us to reimburse all such costs and fees; • suspend or prevent us for a set period of time from receiving new contracts or extending our existing contracts based on violations or suspected violations of laws or regulations; • cancel, terminate or suspend our contracts based on violations or suspected violations of laws or regulations; • terminate our contracts if in the government’s interest, including if funds become unavailable to the applicable governmental agency; • reduce the scope and value of our contract; and • change certain terms and conditions in our contract.
Failure by any of our 51 manufacturers to comply with applicable cGMPs or other regulatory requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and have a material adverse effect on our business, financial condition and results of operations.
Failure by any of our manufacturers to comply with applicable cGMPs or other regulatory requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and have a material adverse effect on our business, financial condition and results of operations.
In addition, because some of our manufacturers have manufacturing facilities in Taiwan, their ability to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis is subject to a number of additional risks and uncertainties, including political, social and economic instability and factors that could impact the shipment of supplies.
In addition, because some of our manufacturers have manufacturing facilities in Taiwan, their ability to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis is subject to a number of additional risks and 52 uncertainties, including political, social and economic instability and factors that could impact the shipment of supplies.
The FDA may also require us to conduct additional nonclinical studies or clinical trials for our product candidates either prior to or post-approval, and it may otherwise object to elements of our clinical development program. 58 An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and efficacy for each desired indication.
The FDA may also require us to conduct additional nonclinical studies or clinical trials for our product candidates either prior to or post-approval, and it may otherwise object to elements of our clinical development program. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and efficacy for each desired indication.
This is because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and comparable foreign regulatory authorities despite having progressed through preclinical studies and early-stage clinical trials. Analyses of preliminary or interim data from our clinical studies are not necessarily predictive of analyses of final data.
This is because product candidates in later-stage 39 clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and comparable foreign regulatory authorities despite having progressed through preclinical studies and early-stage clinical trials. Analyses of preliminary or interim data from our clinical studies are not necessarily predictive of analyses of final data.
If such an event occurs after such product candidates are approved, a number of potentially significant negative consequences may result, including: • regulatory authorities may withdraw or limit their approval of such product; • we may decide to or be required to recall a product or change the way such product is administered to patients; • regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or impose distribution or use restrictions; • regulatory authorities may require one or more post-market studies to monitor the safety and efficacy of the product; • we may be required to implement a REMS, including the creation of a medication guide outlining the risks of such side effects for distribution to patients; • we could be sued and held liable for harm caused to patients exposed to or taking our product candidates; • our product may become less competitive; and • our reputation may suffer.
If such an event occurs after such product candidates are approved, a number of potentially significant negative consequences may result, including: • regulatory authorities may withdraw or limit their approval of such product; • we may decide to or be required to recall a product or change the way such product is administered to patients; • regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or impose use restrictions; • regulatory authorities may require one or more post-market studies to monitor the safety and efficacy of the product; • we may be required to implement a REMS, which may include the creation of a medication guide outlining the risks of such side effects for distribution to patients or restrictions on distribution; • we could be sued and held liable for harm caused to patients exposed to or taking our product candidates; • our product may become less competitive; and • our reputation may suffer.
Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products. 47 We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.
Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products. We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.
We will need to continue to dedicate internal resources, continue to engage outside consultants and follow a detailed work plan to continue to assess and document the adequacy of internal control over financial reporting, continue to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting.
We will need to continue to dedicate internal resources, continue to engage outside consultants and follow a detailed work plan to continue to assess and document the adequacy of internal control over financial reporting, continue to improve 70 control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting.
If we are required to conduct additional clinical trials or other testing of any of our product candidates beyond the trials and testing that we contemplate, if we are unable to successfully complete clinical trials or other testing of our product candidates, if the results of these trials or tests are unfavorable or are only modestly favorable or if there are safety concerns associated with any of our product candidates, we may: • incur additional unplanned costs; • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; • be subject to additional post-marketing testing or other requirements; or • be required to remove the product from the market after obtaining marketing approval. 36 Our failure to successfully initiate and complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.
If we are required to conduct additional clinical trials or other testing of any of our product candidates beyond the trials and testing that we contemplate, if we are unable to successfully complete clinical trials or other testing of our product candidates, if the results of these trials or tests are unfavorable or are only modestly favorable or if there are safety concerns associated with any of our product candidates, we may: • incur additional unplanned costs; • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; • be subject to additional post-marketing testing or other requirements; or • be required to remove the product from the market after obtaining marketing approval. 38 Our failure to successfully initiate and complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates. We face substantial competition from other pharmaceutical and biotechnology companies and our operating results may suffer if we fail to compete effectively.
If we or our collaborators do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates. We face substantial competition from other pharmaceutical and biotechnology companies and our operating results may suffer if we fail to compete effectively.
For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could result in delays in our development and regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Such a loss could also expose us to regulatory enforcement, civil liability and reputational damage.
For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could 45 result in delays in our development and regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Such a loss could also expose us to regulatory enforcement, civil liability and reputational damage.
The FDA and regulatory authorities in other jurisdictions also require us to comply with standards, commonly referred to as good clinical practices ("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 and regulatory authorities in other jurisdictions also require us to comply with standards, commonly referred to as good clinical practices 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 may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and 61 other risk minimization tools.
The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
Our expenses could increase if we are required by the FDA, or any comparable foreign regulatory authority to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates. We expect that we will need substantial additional funding.
Our expenses could increase if we are required by 47 the FDA, or any comparable foreign regulatory authority to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates. We expect that we will need substantial additional funding.
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.
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 48 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.
There have been several United States Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
There have been several United States Congressional inquiries and proposed bills designed to, among other things, bring 65 more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
Similarly, if we assert trademark infringement 57 claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
In addition, we rely on 67 consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
If our competitors obtain marketing approval from the FDA or comparable foreign regulatory authorities for their product candidates more rapidly than us, it could result in our competitors establishing a strong market position before we are able to enter the market. 40 There are several IV-administered products marketed for the treatment of infections resistant to first-line therapy for Gram-negative infections, including ceftazidime-avibactam ("Avycaz") from Allergan plc and Pfizer Inc., ceftolozane-tazobactam ("Zerbaxa") from Merck & Co., imipenem/cilastatin and relebactam ("Recarbrio") from Merck & Co., plazomicin ("Zemdri") from Cipla Therapeutics, Inc., cefiderocol ("Fetroja") from Shionogi & Co.
If our competitors obtain marketing approval from the FDA or comparable foreign regulatory authorities for their product candidates more rapidly than us, it could result in our competitors establishing a strong market position before we are able to enter the market. 42 There are several IV-administered products marketed for the treatment of infections resistant to first-line therapy for Gram-negative infections, including ceftazidime-avibactam ("Avycaz") from Allergan plc and Pfizer Inc., ceftolozane-tazobactam ("Zerbaxa") from Merck & Co., imipenem/cilastatin and relebactam ("Recarbrio") from Merck & Co., plazomicin ("Zemdri") from Cipla Therapeutics, Inc., cefiderocol ("Fetroja") from Shionogi & Co.
In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease. Laws and regulations affecting government contracts make it more expensive and difficult for us to successfully conduct our business.
In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease. 55 Laws and regulations affecting government contracts make it more expensive and difficult for us to successfully conduct our business.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are 58 successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.
Our prior losses, combined with 45 expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.
Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our business and competitive position could be harmed. 57 We have registered trademarks and pending trademark applications. Failure to enforce our registered marks or secure registration of our pending trademark applications could adversely affect our business.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our business and competitive position could be harmed. We have registered trademarks and pending trademark applications. Failure to enforce our registered marks or secure registration of our pending trademark applications could adversely affect our business.
Future product candidates may also receive marketing exclusivity under the FDCA after approval that may similarly be subject to challenge or uncertainty. If we or our partners are unable to obtain marketing approval in international jurisdictions, we will not be able to market our product candidates abroad.
Future product candidates may also receive marketing exclusivity under the FDCA after approval that may similarly be subject to challenge or uncertainty. 62 If we or our partners are unable to obtain marketing approval in international jurisdictions, we will not be able to market our product candidates abroad.
We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate, if approved, or could substantially increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our business and results of operations. 38 Even if a product candidate does obtain regulatory approval, it may never achieve the market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community that is necessary for commercial success and the market opportunity may be smaller than we estimate.
We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate, if approved, or could substantially increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our business and results of operations. 40 Even if a product candidate does obtain regulatory approval, it may never achieve the market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community that is necessary for commercial success and the market opportunity may be smaller than we estimate.
The time required to obtain approval, if any, by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities.
The time required to obtain approval, if any, by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of 59 the regulatory authorities.
Even after an orphan drug is approved, the FDA can subsequently approve a competing drug for the same condition for several reasons, including, if the FDA concludes that the later drug is safer or more effective or makes a major 60 contribution to patient care.
Even after an orphan drug is approved, the FDA can subsequently approve a competing drug for the same condition for several reasons, including, if the FDA concludes that the later drug is safer or more effective or makes a major contribution to patient care.
Moreover, holders of a substantial number of shares of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in 69 registration statements that we may file for ourselves or other stockholders.
Moreover, holders of a substantial number of shares of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
Regardless of the merits or eventual outcome, liability claims may result in: • reduced resources for our management to pursue our business strategy; • decreased demand for our product candidates or products that we may develop; • injury to our reputation and significant negative media attention; 42 • withdrawal of clinical trial participants; • initiation of investigations by regulators; • product recalls, withdrawals or labeling, marketing or promotional restrictions; • significant costs to defend resulting litigation; • substantial monetary awards to trial participants or patients; • loss of revenue; and • the inability to commercialize any products that we may develop.
Regardless of the merits or eventual outcome, liability claims may result in: • reduced resources for our management to pursue our business strategy; • decreased demand for our product candidates or products that we may develop; • injury to our reputation and significant negative media attention; 44 • withdrawal of clinical trial participants; • initiation of investigations by regulators; • product recalls, withdrawals or labeling, marketing or promotional restrictions; • significant costs to defend resulting litigation; • substantial monetary awards to trial participants or patients; • loss of revenue; and • the inability to commercialize any products that we may develop.
For example, over the last several years, the United States 65 government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
For example, over the last several years, the United States government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any approved products used on an outpatient basis that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. 41 We cannot predict whether bacteria may develop resistance to our product candidates, if approved, which could affect their revenue potential.
An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any approved products used on an outpatient basis that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. 43 We cannot predict whether bacteria may develop resistance to our product candidates, if approved, which could affect their revenue potential.
If we elect to fund and undertake development or 49 commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.
If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.
The third parties with whom we contract for execution of our GLP studies and our clinical trials play a significant role in the conduct of these studies and trials and the subsequent collection and analysis of data.
The third parties 51 with whom we contract for execution of our GLP studies and our clinical trials play a significant role in the conduct of these studies and trials and the subsequent collection and analysis of data.
The degree of market acceptance of any product candidate for which we receive approval depends on a number of factors, including: • the efficacy and safety of the product candidate as demonstrated in clinical trials; • relative convenience and ease of administration; • the clinical indications for which the product candidate is approved; • the potential and perceived advantages and disadvantages of the product candidates, including cost and clinical benefit relative to alternative treatments; • the willingness of physicians to prescribe the product and of the target patient population to try new therapies; • the willingness of hospital pharmacy directors to purchase the product for their formularies; • acceptance by physicians, patients, operators of hospitals and treatment facilities and parties responsible for coverage and reimbursement of the product; • the availability of coverage and adequate reimbursement by third-party payors and government authorities; • the effectiveness of our sales and marketing efforts; • the strength of marketing and distribution support; • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved risk evaluation and mitigation strategy; • whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections; • the approval of other new products for the same indications; • the timing of market introduction of the approved product as well as competitive products; • adverse publicity about the product or favorable publicity about competitive products; • the emergence of bacterial resistance to the product; and • the rate at which resistance to other drugs in the target infections grows.
The degree of market acceptance of any product candidate for which we receive approval depends on a number of factors, including: • the efficacy and safety of the product candidate as demonstrated in clinical trials; • relative convenience and ease of administration; • the clinical indications for which the product candidate is approved; • the potential and perceived advantages and disadvantages of the product candidates, including cost and clinical benefit relative to alternative treatments; • the willingness of physicians to prescribe the product and of the target patient population to try new therapies; • the willingness of hospital pharmacy directors to purchase the product for their formularies; • acceptance by physicians, patients, operators of hospitals and treatment facilities and parties responsible for coverage and reimbursement of the product; • the availability of coverage and adequate reimbursement by third-party payors and government authorities; • the effectiveness of our sales and marketing efforts; • the strength of marketing and distribution support; • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved REMS; • whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections; • the approval of other new products for the same indications; • the timing of market introduction of the approved product as well as competitive products; • adverse publicity about the product or favorable publicity about competitive products; • the emergence of bacterial resistance to the product; and • the rate at which resistance to other drugs in the target infections grows.
We are a party to agreements with Meiji and GSK for tebipenem HBr, Vertex Pharmaceuticals for SPR720 and Everest Medicines and PBB Distributions Limited for SPR206, and we may enter into additional agreements, including license agreements, with other parties in the future that impose diligence, development and commercialization timelines, milestone payments, royalties, insurance and other obligations on us.
We are a party to agreements with Meiji and GSK for tebipenem HBr, Vertex Pharmaceuticals for SPR720 and Pfizer, Everest and PBB Distributions Limited for SPR206, and we may enter into additional agreements, including license agreements, with other parties in the future that impose diligence, development and commercialization timelines, milestone payments, royalties, insurance and other obligations on us.
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. 39 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 any of our product candidates if such product candidates are approved.
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. 41 If we or our collaborators 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 any of our product candidates if such product candidates are approved.
In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers ("PBMs") and other members of the health care and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area.
In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate PBMs and other members of the health care and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area.
In the United States, the pharmaceutical industry has been a particular focus of 63 these efforts and has been significantly affected by major legislative initiatives.
In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
If any of the events described in the following risk factors and the risks described elsewhere in this Annual Report on Form 10-K actually occurs, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected, and the trading price of our securities could decline.
If any of the events described in the following risk factors and the risks described elsewhere in this Annual Report on Form 10-K actually occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected, and the trading price of our securities could decline.
An ANDA relies on the preclinical and clinical testing conducted for a previously approved reference listed drug ("RLD"), and must demonstrate to the FDA that the generic drug product is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug and also that it is “bioequivalent” to the RLD.
An ANDA relies on the preclinical and clinical testing conducted for a previously approved RLD, and must demonstrate to the FDA that the generic drug product is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug and also that it is “bioequivalent” to the RLD.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
Legislative and regulatory proposals also have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects. 59 A fast track designation may not actually lead to a faster development or regulatory review or approval process.
Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects. 60 A fast track designation may not actually lead to a faster development or regulatory review or approval process.
We and certain of our executive officers have been named as defendants in two initiated lawsuits, which were ordered consolidated, that could result in substantial costs and divert management’s attention.
We and certain of our current and former executive officers have been named as defendants in two initiated lawsuits, which were ordered consolidated, that could result in substantial costs and divert management’s attention.
We have registered our trademarks for our name and logo in the United States and other countries and have a number of pending trademark applications in the United States and other countries. As of December 31, 2022, we have two registered United States trademarks, 23 registered foreign trademarks, and no pending foreign trademark applications.
We have registered our trademarks for our name and logo in the United States and other countries and have a number of pending trademark applications in the United States and other countries. As of December 31, 2023, we have two registered United States trademarks, 23 registered foreign trademarks, and no pending foreign trademark applications.
We filed a universal shelf registration statement on Form S-3 (Registration No. 333-254170) with the SEC on March 11, 2021, which was declared effective on March 29, 2021 and pursuant to which we registered for sale up to $300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $75.0 million of our common stock available for issuance pursuant to the Sales Agreement that we entered into with Cantor Fitzgerald & Co.
We filed a universal shelf registration statement on Form S-3 (Registration No. 333-254170) with the SEC on March 11, 2021, which was declared effective on March 29, 2021, and pursuant to which we registered for sale up to $300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $75.0 million of our common stock available for issuance pursuant to the Controlled Equity Offering Sales Agreement (“Sales Agreement”) that we entered into with Cantor Fitzgerald & Co.
Despite the implementation of security measures, our internal computer systems and those of our contract research organizations and other contractors and consultants are vulnerable to damage or disruption from hacking, computer viruses, software bugs, unauthorized access, natural disasters, terrorism, war, and telecommunication, equipment and electrical failures.
Despite the implementation of security measures, our internal computer systems and those of our contract research organizations and other contractors and consultants are vulnerable to damage or disruption from hacking, computer viruses, malware, including ransomware, software bugs, unauthorized access, natural disasters, terrorism, war, and telecommunication, equipment and electrical failures.
We, and certain of our executive officers, were named as defendants in two purported class action lawsuits that generally allege that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the New Drug Application for tebipenem HBr in an effort to lead investors to believe that the drug would receive approval from the FDA.
We, and certain of our executive officers, were named as defendants in two purported class action lawsuits that generally allege that we and certain of our current and former officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 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.
In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions. Our internal computer systems, or those of our contract research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs, and could subject us to liability.
In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions. Our internal computer systems, or those of our contract research organizations or other contractors or consultants, may fail or suffer cybersecurity incidents, which could result in a material disruption of our product development programs, and could subject us to liability.
If we are unable to establish a sales force and marketing and distribution capabilities, our operating results may be adversely affected.
If we or our collaborators are unable to establish a sales force and marketing and distribution capabilities, our operating results may be adversely affected.
In addition to creating the 505(b)(2) NDA pathway, the Hatch-Waxman Amendments to the FDCA authorized the FDA to approve generic drugs that are the same as drugs previously approved for marketing under the NDA provisions of the statute pursuant to abbreviated new drug applications ("ANDAs").
In addition to creating the 505(b)(2) NDA pathway, the Hatch-Waxman Amendments to the FDCA authorized the FDA to approve generic drugs that are the same as drugs previously approved for marketing under the NDA provisions of the statute pursuant to ANDAs.
Remaining potential payments are milestone based, and are (i) approximately $150.0 million in payments for the achievement of development milestones, (ii) up to $150.0 million in commercial milestone payments, (iii) up to $225.0 million in sales milestone payments, and (iv) tiered low single-digit to low double-digit royalties on net sales of GSK Licensed Products in the GSK Territory.
Remaining potential payments are milestone based and are (i) approximately $25.0 million in payments for the achievement of development milestones, (ii) up to $150.0 million in commercial milestone payments, (iii) up to $225.0 million in sales milestone payments, and (iv) tiered low single-digit to low double-digit royalties (if sales exceed $1.0 billion) tiered on net sales of GSK Licensed Products in the GSK Territory.
We will be responsible for the execution and costs of the follow-up Phase 3 clinical trial of tebipenem HBr. GSK will be responsible for the execution and costs of additional further development, including Phase 3 regulatory filing and commercialization activities for tebipenem HBr in the balance of the GSK Territory outside of the United States.
We are 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 additional further development, including Phase 3 regulatory filing and commercialization activities for tebipenem HBr in the balance of the GSK Territory outside of the United States.
To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or 43 inappropriate disclosure or theft of confidential or proprietary information, in addition to incurring liability, the further development of our product candidates could be delayed or our competitive position could be compromised.
To the extent that any disruption or cybersecurity incident results in a loss of or damage to our data or applications, or inappropriate disclosure or theft of confidential or proprietary information, in addition to incurring liability, the further development of our product candidates could be delayed or our competitive position could be compromised.
United States government agencies such as the Department of Health and Human Services (the "DHHS") and the Defense Contract Audit Agency (the "DCAA") routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.
United States government agencies such as the DHHS and the Defense Contract Audit Agency (the "DCAA") routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.
If any of our other product candidates are associated with serious or unexpected adverse events or undesirable side effects, the FDA, the IRBs at the institutions in which our studies are conducted, or a DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications.
If any of our other product candidates are associated with serious or unexpected adverse events or undesirable side effects, the FDA, the IRBs responsible for overseeing our studies, or a DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications.
While we have not, to our knowledge, experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations or the operations of those third parties with which we contract, it could result in a material disruption of our programs and our business operations.
While we have not, to our knowledge, experienced any significant system failure, accident or material cybersecurity incident to date, if such an event were to occur and cause interruptions in our operations or the operations of those third parties with which we contract, it could result in a material disruption of our programs and our business operations, as well as our financial condition.
We could qualify as a SRC if the market value of our common stock held by non-affiliates is below $250.0 million (or $700.0 million if our annual revenue is less than $100.0 million) as of June 30 in any given year.
We could continue to qualify as a SRC and non-accelerated filer if the market value of our common stock held by non-affiliates is below $75.0 million (or $700.0 million if our annual revenue is less than $100.0 million) as of June 30 in any given year.
We have broad discretion in the use of our cash reserves and may not use them effectively. Our management has broad discretion in the application of our cash reserves and could spend these funds in ways that do not improve our results of operations or enhance the value of our common stock.
Our management has broad discretion in the application of our cash reserves and could spend these funds in ways that do not improve our results of operations or enhance the value of our common stock.
We are highly dependent on the development, regulatory, commercialization and business development expertise of Ankit Mahadevia, M.D., our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical team.
We are highly dependent on the development, regulatory, commercialization and business development expertise of Satyavrat Shukla, our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical team.
Certain of our activities have been funded, and may in the future be funded, by the United States government, including through our contracts with BARDA.
Provisions in our United States government contracts, including our contracts with BARDA, may affect our intellectual property rights. Certain of our activities have been funded, and may in the future be funded, by the United States government, including through our contracts with BARDA.
Under current United States federal tax legislation, although the treatment of NOLs arising in tax years beginning on or before December 31, 2017 has generally not changed, NOLs arising in tax years beginning after December 31, 2017 may be used to offset only 80% of taxable income.
Future ownership changes may limit our ability to utilize remaining tax attributes. Under current United States federal tax legislation, although the treatment of NOLs arising in tax years beginning on or before December 31, 2017 has generally not changed, NOLs arising in tax years beginning after December 31, 2017 may be used to offset only 80% of taxable income.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the institutional review boards (“IRBs”) of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board (“DSMB”) if any, for such trial or by the FDA or other regulatory authorities.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the institutional review boards (“IRBs”) responsible for overseeing such trials, by the Data Safety Monitoring Board (“DSMB”) if any, for such trial or by the FDA or other regulatory authorities.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our current operating plans, we believe that our cash runway will be sufficient to fund us beyond 2024.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our current operating plans, we believe that our cash runway will be sufficient to fund us beyond 2024.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.
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 $46.4 million during the year ended December 31, 2022.
We have not generated any revenue from the sale of our products and have incurred losses in each year since our inception in 2013 through 2022. Our net income was $22.8 million during the year ended December 31, 2023.
If a natural disaster, health epidemic, such as COVID-19, or other events beyond our control occurred that prevented us from using all or a significant portion of our office, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult for us to continue our business for a substantial period of time. 44 The COVID-19 pandemic has and could continue to adversely impact our business, including our preclinical studies and clinical trials.
If a natural disaster, health epidemic or other events beyond our control occurred that prevented us from using all or a significant portion of our office, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult for us to continue our business for a substantial period of time.
In addition, our amended and restated certificate of incorporation, as amended, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, as amended, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
This could discourage, delay or prevent someone from acquiring us or merging with us, whether or not it is desired by, or beneficial to, our stockholders. 71 In addition, our Amended and Restated Certificate of Incorporation, as amended, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our Amended and Restated Certificate of Incorporation, as amended, or our Amended and Restated Bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid and/or unenforceable.
Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid and/or unenforceable.
Significant 64 efforts to change the PBM industry as it currently exists in the U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including biopharmaceutical developers like us.
Significant efforts to change the PBM industry as it currently exists in the U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including biopharmaceutical developers like us. Further, in August 2022, President Biden signed into the law the IRA.
In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. The time required to obtain approval from regulatory authorities in other countries may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval.
The time required to obtain approval from regulatory authorities in other countries may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval.
Our employees, independent contractors, principal investigators, contract research organizations, consultants or vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements. We are exposed to the risk that our employees, independent contractors, principal investigators, contract research organizations, consultants or vendors may engage in fraudulent or other illegal activity.
We are exposed to the risk that our employees, independent contractors, principal investigators, contract research organizations, consultants or vendors may engage in fraudulent or other illegal activity.
Patent and Trademark Office. Intellectual property disputes arise in a number of areas including with respect to patents, use of other proprietary rights and the contractual terms of license arrangements. Third parties may assert claims against us based on existing or future intellectual property rights.
Intellectual property disputes arise in a number of areas including with respect to patents, use of other proprietary rights and the contractual terms of license arrangements. Third parties may assert claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance.
We can issue and have issued shares of preferred stock, which may adversely affect the rights of holders of our common stock. Our amended and restated certificate of incorporation, as amended, authorizes us to issue up to 10,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors.
Our Amended and Restated Certificate of Incorporation, as amended, authorizes us to issue up to 10,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties. Our headquarters are located in Cambridge, Massachusetts, where we lease approximately 23,400 square feet of office space. Our lease extends through July 2027. We believe that our existing facilities will be sufficient to meet our current needs.
Biggest changeItem 2. Properties. Our headquarters are located in Cambridge, Massachusetts, where we lease approximately 23,400 square feet of office space. Our lease extends through July 2027. We believe that our existing facilities will be sufficient to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSaad withdrew his opposition on August 15, 2022, and Mr. Memon was appointed lead plaintiff on September 19, 2022. The complaint purports to be brought on behalf of stockholders who purchased our common stock from May 6, 2021 through May 2, 2022 (Mr. Memon’s complaint alleged a six-month longer class period than the complaint originally filed by Mr. Germond).
Biggest changeThe 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.
However, there is no assurance that we will be successful in our defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of this action. Moreover, we are unable to predict the outcomes or reasonably estimate a range of possible loss at this time.
However, there is no assurance that we will be successful in our defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of these actions. Moreover, we are unable to predict the outcomes or reasonably estimate a range of possible loss at this time.
The complaint generally alleges that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the New Drug Application for tebipenem HBr in an effort to lead investors to believe that the drug would receive approval from the FDA.
The Amended Complaint generally alleges that we and certain of our current and former officers violated Sections 10(b) and/or 20(a) of 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.
Additional lawsuits against the Company and certain of its officers or director may be filed in the future. If additional similar complaints are filed, absent new or different allegations that are material, the Company will not necessarily announce such additional filings. Item 4. Mine Saf ety Disclosures. Not applicable. 71 PART II
Additional lawsuits against us and certain of our officers or directors may be filed in the future. If additional similar complaints are filed, absent new or different allegations that are material, we will not necessarily announce such additional filings. Item 4. Mine Saf ety Disclosures. Not applicable. 74 PART II
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. Both Mr. Memon and stockholder Nabil Saad filed motions for appointment of lead plaintiff/lead counsel on July 25, 2022. Mr.
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”).
Removed
The complaint seeks unspecified damages, interest, attorneys’ fees, and other costs. Mr. Memon filed an amended complaint on December 5, 2022. The amended complaint generally alleges the same arguments provided in the original complaint. We notified the Court of our intention to file a motion to dismiss the amended complaint in its entirety.
Added
Plaintiffs seek unspecified damages, interest, attorneys’ fees, and other costs. We filed a fully-briefed Motion to Dismiss on June 21, 2023. The Court has not yet ruled on the Motion. A stockholder derivative action was filed against us, as nominal defendant, and certain of our officers in the United States District Court for the District of Delaware, captioned Marti v.
Removed
The Court held a conference on February 22, 2023 and set a date of March 31, 2023 for us to file a motion to dismiss. We deny any allegations of wrongdoing and intend to vigorously defend against this lawsuit.
Added
Mahadevia, et al., Case. No. 1:23-cv-01133-RGA (the “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.
Added
The Derivative Complaint was transferred to the Eastern District of New York on November 13, 2023, and stayed by party agreement pending outcome of the Motion to Dismiss the class action on November 20, 2023.
Added
A second stockholder derivative action was filed against us, as nominal defendant, and certain of our 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.
Added
The Second Derivative Complaint makes primarily the same allegations as the First Derivative Complaint, and the Consolidated Putative Class Action We deny any allegations of wrongdoing and intend to vigorously defend against these lawsuits.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that time, there was no public market for our common stock. Holders of Record As of March 1, 2023, we had approximately eight stockholders of record of our common stock.
Biggest changePrior to that time, there was no public market for our common stock. Holders of Record As of March 8, 2024, we had approximately eight stockholders of record of our common stock.
Additionally, our ability to pay dividends on our capital stock could be limited by terms and covenants of any future indebtedness. Purchases of Equity Securities by the Issuer None. Item 6. [ Reserved] 72
Additionally, our ability to pay dividends on our capital stock could be limited by terms and covenants of any future indebtedness. Purchases of Equity Securities by the Issuer None. Item 6. [ Reserved] 75

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 $ Change Revenues: Grant revenue $ 4,930 $ 15,186 $ (10,256 ) Collaboration revenue 48,579 3,070 45,509 Total revenues 53,509 18,256 35,253 Operating expenses: Research and development 47,593 64,526 (16,933 ) General and administrative 36,483 41,701 (5,218 ) Restructuring 11,630 — 11,630 Total operating expenses 95,706 106,227 (10,521 ) Loss from operations (42,197 ) (87,971 ) 45,774 Other income (expense): Interest income 1,106 346 760 Other income (expense), net (55 ) (395 ) 340 Interest expense related to the sale of future royalties (2,605 ) (1,940 ) (665 ) Loss on extinguishment of liability related to the sale of future royalties (3,581 ) - (3,581 ) Change in fair value of derivative liability 917 204 713 Total other income (expense), net (4,218 ) (1,785 ) (2,433 ) Net loss $ (46,415 ) $ (89,756 ) $ 43,341 Grant Revenue Year Ended December 31, 2022 2021 $ Change BARDA Contract (Tebipenem HBr) $ 2,178 $ 9,909 $ (7,731 ) NIAID Contract (SPR206) 1,736 808 928 DoD Agreement (SPR206) 1,016 4,469 (3,453 ) Total revenue $ 4,930 $ 15,186 $ (10,256 ) Grant revenue recognized during 2022 and 2021 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 $ Change Revenues: Grant revenue $ 7,046 $ 4,930 $ 2,116 Collaboration revenue - related party 95,802 46,076 49,726 Collaboration revenue 933 2,503 (1,570 ) Total revenues 103,781 53,509 50,272 Operating expenses: Research and development 51,440 47,593 3,847 General and administrative 25,554 36,483 (10,929 ) Impairment of long-term asset 5,306 — 5,306 Restructuring — 11,630 (11,630 ) Total operating expenses 82,300 95,706 (13,406 ) Income (loss) from operations 21,481 (42,197 ) 63,678 Other income (expense): Interest income 3,937 1,106 2,831 Other income (expense), net (14 ) (55 ) 41 Interest expense related to the sale of future royalties — (2,605 ) 2,605 Loss on extinguishment of liability related to the sale of future royalties — (3,581 ) 3,581 Change in fair value of derivative liability — 917 (917 ) Total other income (expense), net 3,923 (4,218 ) 8,141 Net income (loss) before income taxes 25,404 (46,415 ) 71,819 Income tax expense (2,598 ) — (2,598 ) Net income (loss) $ 22,806 $ (46,415 ) $ 69,221 81 Grant Revenue Year Ended December 31, 2023 2022 $ Change BARDA Contract (Tebipenem HBr) $ 4,361 $ 2,178 $ 2,183 NIAID Contract (SPR206) 2,685 1,736 949 DoD Agreement (SPR206) — 1,016 (1,016 ) Total revenue $ 7,046 $ 4,930 $ 2,116 Grant revenue recognized during 2023 and 2022 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards.
This is due to the numerous risks and uncertainties, including the following: • successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of the COVID-19 pandemic; • receipt of marketing approvals from applicable regulatory authorities; • 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 our product candidates, if approved, whether alone or in collaboration with others; • acceptance of our product candidates, if approved, by patients, the medical community and third-party payors; • competition with other therapies; and • a continued acceptable safety profile of tebipenem HBr and our other product candidates, if approved.
This is due to the numerous risks and uncertainties, including the following: • successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of the COVID-19 pandemic; • receipt of marketing approvals from applicable regulatory authorities; • 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 our product candidates, if approved, whether alone or in collaboration with others; • acceptance of our product candidates, if approved, by patients, the medical community and third-party payors; • competition with other therapies; and • a continued acceptable safety profile of our product candidates, if approved.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $29.6 million, consisting primarily of the $54.5 million repayment of our liability related to the sales of future royalties, partially offset by net proceeds of $14.2 million from the sale of common stock under our “at-the-market” offering program Sales Agreement, proceeds of $9.0 million related to our GSK SPA, and proceeds of $0.4 million from the exercise of employee stock options.
Net cash used in financing activities for the year ended December 31, 2022 was $29.6 million, consisting primarily of the $54.5 million repayment of our liability related to the sales of future royalties, partially offset by net proceeds of $14.2 million from the sale of common stock under our “at-the-market” offering program Sales Agreement, proceeds of $9.0 million related to our GSK SPA, and proceeds of $0.4 million from the exercise of employee stock options.
If we are unable to raise additional funds through equity or debt 82 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.
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.
We measure all share-based options granted to employees and directors based on the fair value on the date of grant 77 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.
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.
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.
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 85 licensing arrangements.
To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. Share-Based Compensation We issue stock-based awards to employees and directors in the form of stock options and restricted stock units.
To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. 80 Share-Based Compensation We issue stock-based awards to employees and directors in the form of stock options and restricted stock units.
License fees and other costs incurred after a product candidate has been designated and that are directly related to the 74 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.
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.
Restructuring In light of our decision to suspend commercialization activities for tebipenem HBr and our strategic restructuring as announced in May 2022, our operating expenses were substantially reduced during the year ended December 31, 2022.
Restructuring In light of our prior decision to suspend commercialization activities for tebipenem HBr and our strategic restructuring, as announced in May 2022, our operating expenses were substantially reduced during the year ended December 31, 2022.
If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. 73 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.
If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. 76 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.
The related costs incurred by us are included in research and development expense in our consolidated statements of operations and comprehensive loss. 76 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.
The related costs incurred by us are included in research and development expense in our consolidated statements of operations and comprehensive loss. 79 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.
We expect to continue to incur research and development and general and administrative expenses in 2023 to support activities under our subsequently announced GSK License Agreement that closed in November 2022.
We expect to continue to incur research and development and general and administrative expenses in 2024 to support activities under our subsequently announced GSK License Agreement that closed in November 2022.
Under an agreement we entered into with PBB, we are obligated to make milestone payments of up to $5.8 million upon the achievement of specified clinical milestones and a payment of £5.0 million ($6.0 million as of December 31, 2022) upon the achievement of a specified commercial milestone for SPR206.
Under an agreement we entered into with PBB, we are obligated to make milestone payments of up to $5.8 million upon the achievement of specified clinical milestones and a payment of £5.0 million ($6.4 million as of December 31, 2023) upon the achievement of a specified commercial milestone for SPR206.
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.
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.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our current operating plans, we believe that our cash runway will be sufficient to fund us beyond 2024.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our current operating plans, we believe that our cash runway will be sufficient to fund us into late 2025.
Grant Revenue We expect that a portion of our revenue for the next few years will continue to be derived from payments under our government awards that we have currently entered into and that we may enter into in the future. Collaboration Revenue Collaboration revenue relates to our agreements with Everest, Pfizer and GSK.
Grant Revenue We expect a portion of our revenue for the next few years will continue to be derived from payments under our active government awards and any awards that we may enter into in the future. Collaboration Revenue Collaboration revenue relates to our agreements with Everest, Pfizer and GSK.
To develop this model, we applied significant judgement in the determination of the significant assumptions relating to forecasted future revenues, development time lines, 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.
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.
Beyond this point we will need additional funding, which primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations, additional grant funding and/or reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make reductions in spending.
Beyond this point we will need additional funding, which we expect will primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations or additional grant funding. If we are not able to secure adequate additional funding, we plan to make reductions in spending.
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. The COVID-19 pandemic has resulted in ongoing volatility in financial markets.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. There is ongoing volatility in financial markets.
Contractual Obligations and Commitments The following table summarizes our contractual obligations as of December 31, 2022 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: 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) 8,266 1,690 5,420 1,156 — Total $ 8,266 $ 1,690 $ 5,420 $ 1,156 $ — (1) Reflects payments due for our lease of office space under an operating lease agreement that expires in 2027.
Contractual Obligations and Commitments The following table summarizes our contractual obligations as of December 31, 2023 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: 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) 6,576 1,718 4,858 1,156 — Total $ 6,576 $ 1,718 $ 4,858 $ 1,156 $ — (1) Reflects payments due for our lease of office space under an operating lease agreement that expires in 2027.
As of December 31, 2022, we also had federal and state research and development tax credit carryforwards of $11.5 million and $2.8 million, respectively, which begin to expire in 2033 and 2028, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.
As of December 31, 2023, we also had federal and state research and development tax credit carryforwards of $6.0 million and $2.1 million, respectively, which begin to expire in 2033 and 2028, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.
To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and mostly from the proceeds of multiple common stock offerings. As of December 31, 2022, we had cash and cash equivalents of $109.1 million.
To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings. As of December 31, 2023, we had cash and cash equivalents of $76.3 million.
Restructuring We made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including one-time termination benefits and other exit costs accounted for upon the announcement of our restructuring in May 2022. Restructuring charges are reflected in our consolidated statements of income.
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 and other exit costs accounted for upon the announcement of our restructuring in May 2022. Restructuring charges are reflected in our consolidated statements of income.
During the year ended December 31, 2022, direct costs related to tebipenem HBr included $6.6 million paid to Meiji, as a percentage of certain amounts received from any sublicensees, out of the $7.5 million we are obligated to pay under the Meiji License.
During the years ended December 31, 2023 and 2022, direct costs related to tebipenem HBr included $0.9 million and $6.6 million paid to Meiji, respectively, as a percentage of certain amounts received from any sublicensees, out of the $7.5 million we were obligated to pay under the Meiji License.
Total other expense for the year ended December 31, 2022 included $2.6 million in interest expense related to the sale of future royalties, $3.6 million in loss on extinguishment of liability related to the sale of future royalties and net immaterial changes primarily due to fluctuations in unrealized foreign currency gains, offset by a $0.9 million net change in derivative liability and $1.1 million in interest income.
Total other expense for the year ended December 31, 2022 included $2.6 million in interest expense related to the sale of future royalties, $3.6 million in loss on extinguishment of liability related to the sale of future royalties and net immaterial changes primarily due to fluctuations in unrealized foreign currency gains, offset by a $0.9 million net change in derivative liability and $1.1 million in interest income. 83 Liquidity and Capital Resources Since our inception, we have incurred significant operating losses.
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 and our license agreements with Everest, Pfizer and GSK. We have not yet commercialized any of our product candidates and we may not generate revenue from sales of any product candidates.
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.
Personnel-related costs for the years ended December 31, 2022 and 2021 included share-based compensation expense of $5.4 million and $5.3 million, respectively. The decrease in professional and consultant fees of $3.8 million was primarily due to decreased commercial operation expenses related to our strategic restructuring, partially offset by legal expenses.
Personnel-related costs for the years ended December 31, 2023 and 2022 included share-based compensation expense of $5.3 million and $5.4 million, respectively. The decrease in professional and consultant fees of $4.0 million was primarily due to decreased commercial operation expenses, offset by legal and consulting expenses incurred during the year ended December 31, 2023.
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, (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 and (iii) to pay to Meiji a low double-digit percentage of any sublicense fees received by us up to $7.5 million, of which we paid $6.6 million in the fourth quarter of 2022.
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.
The decrease in personnel-related costs of $3.7 million was primarily due to decreased research and development headcount costs related to our strategic restructuring. Personnel-related costs for the years ended December 31, 2022 and 2021 included share-based compensation expenses of $3.7 million and $4.2 million, respectively. Facility-related and other costs primarily reflect costs related to supporting our research and development staff.
Personnel-related costs for the years ended December 31, 2023 and 2022 included share-based compensation expenses of $2.7 million and $3.7 million, respectively. 82 Facility-related and other costs primarily reflect costs related to supporting our research and development staff.
Overview We are a multi-asset, clinical-stage biopharmaceutical company focused on identifying, developing and commercializing novel treatments for bacterial infections, including MDR bacterial infections, and rare diseases. Our lead product candidate, SPR720, is an oral antimicrobial agent in development for the treatment of NTM pulmonary disease, a rare orphan disease, where treatment failure is common, and no approved therapies exist.
Overview We are a multi-asset, clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and and diseases caused by MDR bacterial infections with high unmet need. Our wholly-owned lead product candidate, SPR720, is an oral antimicrobial agent in development for the treatment of NTM pulmonary disease, a rare orphan disease.
The state NOLs begin to expire in 2033 and will expire at various dates through 2039. In addition, as of December 31, 2022, we had foreign net operating loss carryforwards of $4.6 million, which may be available to offset future income tax liabilities and do not expire.
In addition, as of December 31, 2023, we had foreign net operating loss carryforwards of $4.6 million, which may be available to offset future income tax liabilities and do not expire.
General and Administrative Expenses Year Ended December 31, 2022 2021 $ Change Personnel related (including share-based compensation) $ 20,433 $ 22,241 $ (1,808 ) Professional and consultant fees 12,140 15,933 (3,793 ) Facility related and other 3,910 3,527 383 Total general and administrative expenses $ 36,483 $ 41,701 $ (5,218 ) The decrease in personnel-related costs of $1.8 million was primarily a result of decreased headcount costs in our commercial and general and administrative functions as a result of our strategic restructuring.
General and Administrative Expenses Year Ended December 31, 2023 2022 $ Change Personnel related (including share-based compensation) $ 15,324 $ 20,433 $ (5,109 ) Professional and consultant fees 8,151 12,140 (3,989 ) Facility related and other 2,079 3,910 (1,831 ) Total general and administrative expenses $ 25,554 $ 36,483 $ (10,929 ) The decrease in personnel-related costs of $5.1 million was primarily a result of decreased headcount costs in our commercial and general and administrative functions as a result of our strategic restructuring.
Direct costs related to our SPR206 program decreased by $1.8 million during the year ended December 31, 2022, primarily due to decreased clinical activity during the period. We expect to continue to incur direct costs related to SPR206 as we progress preclinical and clinical activities.
Direct costs related to our SPR206 program decreased by $1.2 million during the year ended December 31, 2023, primarily due to decreased preclinical activity and expenses associated with formulation development, manufacturing process and manufacturing of clinical trial material during the period. We expect to continue to incur direct costs related to SPR206 as we progress preclinical and clinical activities.
As of December 31, 2022, we had federal and state net operating loss carryforwards of $291.9 million and $282.9 million, respectively, which may be available to offset future income tax liabilities. The federal NOLs of $73.0 million will expire at various dates from 2033 to 2037 and approximately $218.9 million can be carried forward indefinitely.
As of December 31, 2023, we had federal and state net operating loss carryforwards of $94.7 million and $90.9 million, respectively, which may be available to offset future income tax liabilities. All federal NOLs can be carried forward indefinitely. The state NOLs begin to expire in 2033 and will expire at various dates through 2043.
Since our inception in 2013, we have focused substantially all of our efforts and financial resources on organizing and staffing our company, business planning, raising capital, acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates.
Since our inception in 2013, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.
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.
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 expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report. Based on our current operating plans, we believe that our cash runway will be sufficient to fund us into late 2025.
Changes in deferred revenue are primarily related to our license agreement with GSK. Investing Activities Net cash provided by investing activities for the year ended December 31, 2022 was $33.8 million, primarily related to the maturities of marketable securities of $60.8 million, offset by purchases of marketable securities of $27.0 million.
Net cash provided by investing activities for the year ended December 31, 2022 was $33.8 million, primarily related to the maturities of marketable securities of $60.8 million, offset by purchases of marketable securities of $27.0 million. 84 Financing Activities Cash provided by financing activities during the year ended December 31, 2023 was $0.2 million, due to the $0.2 million net sales of common stock under our Sales Agreement.
As of December 31, 2022, we had cash and cash equivalents of $109.1 million.
As of December 31, 2023, we had cash and cash equivalents of $76.3 million.
Research and Development Expenses Year Ended December 31, 2022 2021 $ Change Direct research and development expenses by program: SPR720 $ 2,793 $ 2,156 $ 637 Tebipenem HBr 17,064 28,882 (11,818 ) SPR206 4,424 6,249 (1,825 ) Unallocated expenses: Personnel related (including share-based compensation) 18,918 22,667 (3,749 ) Facility related and other 4,394 4,572 (178 ) Total research and development expenses $ 47,593 $ 64,526 $ (16,933 ) Direct costs related to our SPR720 program increased by $0.6 million during 2022 compared to 2021, due to increased clinical and preclinical activity during the period related to our Phase 2a clinical trial of SPR720, which we initiated in the fourth quarter of 2022.
Research and Development Expenses Year Ended December 31, 2023 2022 $ Change Direct research and development expenses by program: SPR720 $ 13,031 $ 2,793 $ 10,238 Tebipenem HBr 16,695 17,064 (369 ) SPR206 3,240 4,424 (1,184 ) Unallocated expenses: Personnel related (including share-based compensation) 13,788 18,918 (5,130 ) Facility related and other 4,686 4,394 292 Total research and development expenses $ 51,440 $ 47,593 $ 3,847 Direct costs related to our SPR720 program increased by $10.2 million during 2023 compared to 2022, due to increased clinical activity during the period related to our ongoing Phase 2a clinical trial of SPR720, which we initiated in the fourth quarter of 2022.
The decrease in revenue during 2022 was primarily due to a decrease of $7.7 million in funding under our BARDA contract for tebipenem HBr, a decrease of $3.5 million in funding under our DoD agreement relating to SPR206, partially offset by an increase of $0.9 million in qualified expenses incurred under our NIAID award relating to SPR206. 78 Collaboration Revenue During the year ended December 31, 2022 we recognized collaboration revenue of $46.1 million related to our agreement with GSK, $1.8 million related to our agreement with Pfizer, and $0.7 million related to milestones earned under our agreement with Everest.
The increase in revenue during 2023 was primarily due to an increase of $2.2 million in funding under our BARDA contract for tebipenem HBr and an increase of $0.9 million in qualified expenses incurred under our NIAID award relating to SPR206, partially offset by a decrease funding of $1.0 million under our DoD agreement relating to SPR206.
Net cash used in operating activities for the year ended December 31, 2021 was $64.3 million, primarily resulting from our net loss of $89.8 million, adjusted for net non-cash items of $12.5 million (primarily stock-based compensation, interest expense associated with the sale of future royalties and depreciation and amortization expense).
Net cash used in operating activities for the year ended December 31, 2022 was $7.7 million, primarily resulting from our net loss of $46.4 million, adjusted for net non-cash items of $16.6 million (primarily stock-based compensation, interest expense associated with the sale of future royalties, loss on extinguishment of liability related to the sale of future royalties, change in the value of derivative liabilities and depreciation and amortization expense).
During the year ended December 31, 2021 we recognized collaboration revenue of $1.8 million related to our agreement with Pfizer consisting primarily of the delivery of the license for SPR206 in ex-U.S. and ex-Asia territories and $1.3 million related to milestones earned under our agreement with Everest.
During the year ended December 31, 2022 we recognized collaboration revenue of $1.8 million related to our agreement with Pfizer and $0.7 million related to milestones earned under our agreement with Everest.
Tebipenem HBr is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use to treat certain bacterial infections that cause cUTIs, including pyelonephritis, caused by certain microorganisms, in adult patients who have limited oral treatment options. SPR206 is an IV-administered agent being developed as an innovative option to treat MDR Gram-negative bacterial infections in the hospital setting.
Tebipenem HBr is designed to be the first oral carbapenem-class antibiotic for use to treat cUTIs, including pyelonephritis, caused by certain microorganisms, in adult patients who have limited oral treatment options. SPR206 is an IV-administered antibiotic that has shown activity in preclinical studies against MDR Gram-negative pathogens, including carbapenem-resistant Enterobacterales, Acinobacter baumannii and Pseudomonas aeruginosa .
At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain.
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. 77 At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.
Income Taxes Since our inception, 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.
Other Income (Expense), Net Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as the loss on extinguishment of liability related to the sale of future royalties, the change in the fair value of our derivative liability, realized and unrealized gains and losses from foreign currency-denominated cash balances, vendor payables and receivables related to the Australian research and development tax incentive. 78 Income Taxes 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.
In connection with the GSK License Agreement, an affiliate of GSK purchased 7,450,000 shares of the Company’s common stock at a purchase price of approximately $1.20805 per share for an aggregate purchase price of $9.0 million. • During the year ended December 31, 2022, we sold 5,963,294 shares of our common stock under the Sales Agreement at an average price of approximately $2.46 per share for aggregate gross proceeds of approximately $14.7 million prior to deducting sales commissions.
Under the terms of the GSK License Agreement, we received a $30.0 million development milestone payment during the third quarter of 2023. • During the year ended December 31, 2023, we sold 144,476 shares of our common stock under the Sales Agreement at an average price of approximately $1.58 per share for aggregate gross proceeds of approximately $0.2 million prior to deducting sales commissions.
We believe that SPR720, if successfully developed and approved, has the potential to be the first approved oral agent for NTM pulmonary infection. Our partnership-directed programs consist of tebipenem HBr and SPR206, which through our business development efforts, each have partnership relationships supporting their ongoing development.
We believe that SPR720, if successfully developed and approved, has the potential to be the first approved oral agent for NTM pulmonary disease in treatment-naïve and treatment-experienced and non-refractory patients. Our partner-directed programs consist of tebipenem HBr and SPR206.
Restructuring expenses for the period were primarily comprised of $8.6 million of severance and other employee costs and $3.0 million of discontinuation costs such as contract termination fees and lease impairment expenses. For further information, refer to Note 10 – Restructuring to the Financial Statements.
Restructuring During the year ended December 31, 2022, we incurred restructuring expenses of $11.6 million related to our strategic restructuring that we announced in May 2022. Restructuring expenses for the period were primarily comprised of $8.6 million of severance and other employee costs and $3.0 million of discontinuation costs such as contract termination fees and lease impairment expenses.
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.
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.
Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of December 31, 2022, we had an accumulated deficit of $413.9 million, and cash and cash equivalents of $109.1 million.
We have experienced net losses and significant cash outflows from cash used in operating activities since our inception through 2022. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.
Net cash provided by changes in our operating assets and liabilities was $12.9 million and consisted primarily of a $10.6 million net increase in deferred revenue, an increase of $2.1 million in accrued expenses and accounts payable, a $2.8 million increase in prepaid expenses and other current assets and a $3.8 million net decrease in receivables related to our tax incentive receivables and government awards and a $0.3 million net increase in other assets.
Net cash used by our operating assets and liabilities was $70.4 million and consisted primarily of a $95.7 million increase in our related party collaboration receivable, $29.0 million net increase in deferred revenue and a decrease of $1.7 million in accrued expenses and accounts payable.
The period of performance for this new option extends through December 31, 2025 and does not change the total amount of committed funding or potential contract value. 80 Cash Flows The following table summarizes our sources and uses of cash for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Cash used in operating activities $ (7,731 ) $ (64,347 ) Cash provided by investing activities 33,807 7,672 Cash provided by (used in) financing activities (29,553 ) 84,050 Net increase (decrease) in cash and cash equivalents $ (3,477 ) $ 27,375 Operating Activities Net cash used in operating activities for the year ended December 31, 2022 was $7.7 million, primarily resulting from our net loss of $46.4 million, adjusted for net non-cash items of $16.6 million (primarily stock-based compensation, interest expense associated with the sale of future royalties, loss on extinguishment of liability related to the sale of future royalties, change in the value of derivative liabilities and depreciation and amortization expense).
Cash Flows The following table summarizes our sources and uses of cash for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Cash used in operating activities $ (32,995 ) $ (7,731 ) Cash provided by investing activities — 33,807 Cash provided by (used in) financing activities 221 (29,553 ) Net increase (decrease) in cash and cash equivalents $ (32,774 ) $ (3,477 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $33.0 million, primarily resulting from our net income of $22.8 million, adjusted for net non-cash items of $14.6 million (primarily due to stock-based compensation and asset impairment).
In addition, we expect to incur additional costs associated with our continued operation as a public company.
Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we advance our clinical programs and prepare for possible commercialization of one or more of our product candidates. In addition, we expect to incur additional costs associated with our continued operation as a public company.
Other Income (Expense) Interest Income (Expense) Interest income (expense) consists of interest expense related to the sale of future royalties and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities that we held during the years ended December 31, 2022 and 2021. 75 Other Income (Expense), Net Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as the loss on extinguishment of liability related to the sale of future royalties, the change in the fair value of our derivative liability, realized and unrealized gains and losses from foreign currency-denominated cash balances, vendor payables and receivables from the Australian research and development tax incentive.
As of December 31, 2023, all of these costs were paid. Other Income (Expense) Interest Income (Expense) Interest income (expense) consists of interest expense related to the sale of future royalties and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities.
We believe that our novel product candidates, if successfully developed and approved, would have meaningful patient impacts and significant commercial applications for the treatment of bacterial infections, including MDR infections, in both the community and hospital settings.
We are developing SPR206 to treat MDR Gram-negative bacterial infections in the hospital setting. We believe that our novel product candidates, if successfully developed and approved, could provide meaningful benefits to patients suffering from serious rare orphan diseases and life-threatening bacterial infections, in both the community and hospital settings.
We expect to continue to incur direct costs related to SPR720 as we progress preclinical and clinical activities. During the year ended December 31, 2022, we did not record a reduction to direct costs related to our SPR720 program related to activities funded by Gates MRI.
We expect to continue to incur direct costs related to SPR720 as we continue to screen and enroll patients and progress clinical activities.
Below is a summary of some of the items impacting our liquidity and capital resources in 2022: • On May 3, 2022, we implemented a strategic restructuring initiative and corresponding reduction in workforce.
Below is a summary of some of the items impacting our liquidity and capital resources in 2023: • In July 2023, we received written agreement from the FDA, under a SPA, on the design and size of PIVOT-PO, a pivotal Phase 3 clinical trial of tebipenem HBr in patients with cUTI, including AP.
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We do not have any products approved for sale and have not generated any revenue from product sales. We have experienced net losses and significant cash outflows from cash used in operating activities since our inception.
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As of December 31, 2023, we had an accumulated deficit of $391.1 million, and cash and cash equivalents of $76.3 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
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Based on our current operating plans, we believe that our cash runway will be sufficient to fund us beyond 2024. During this period, our strategic refocusing prioritizes advancing SPR720 and SPR206 to key Phase 2 milestones.
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During this period, we plan to prioritize advancing SPR720 to key Phase 2 milestones, advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and advancing SPR206 Phase 2 activities contingent on obtaining non-dilutive financing.
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We have recorded research and development expenses conducted by our Australian subsidiary net of a 43.5% research and development tax incentive we expect to receive for qualified expenses from the Australian government. In June 2019, we entered into a collaboration with Gates MRI to develop SPR720 for the treatment of lung infections caused by Mtb.
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The successful development and commercialization of our product candidates is highly uncertain.
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In furtherance of the Gates MRI’s charitable purposes, we also granted the Gates MRI a no cost, exclusive license to develop, manufacture and commercialize SPR720 for the treatment of TB in low- and middle- income countries.
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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.
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Gates MRI will conduct and fund preclinical and clinical studies for the development of SPR720 against TB and fund certain agreed upon collaborative research activities performed by us.
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Collaboration Revenue - Related Party During the years ended December 31, 2023 and 2022, collaboration revenue - related party related to revenue recognized under the GSK License Agreement.
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Due to our assessment that we do not have a vendor/customer relationship with the Gates MRI, we recognize the funding received under the agreement as a reduction to the research and development expenses as the related expenses are incurred. We expense research and development costs as incurred.
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During the year ended December 31, 2023, we recognized $95.8 million in collaboration revenue - related party, of which $21.2 million was recognized upon achievement of the $30.0 million milestone under the GSK License Agreement and $64.7 million upon achievement of the $95.0 million milestone under the GSK License Agreement.
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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
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During the year ended December 31, 2022 we recognized collaboration revenue - related party of $46.1 million. Collaboration Revenue During the year ended December 31, 2023 we recognized $0.9 million in collaboration revenue related to our agreement with Pfizer.
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In 2022, the Company granted certain awards with performance-based criteria. Certain performance-based awards are recorded as an accrued liability on the Company's condensed consolidated balance sheet and accrued over time as achievement of performance metrics become probable.
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Direct costs related to our tebipenem HBr program decreased by $0.4 million during 2023 compared to 2022 as we progressed clinical and preclinical activities related to our PIVOT-PO Phase 3 trial of tebipenem HBr, which we initiated in the fourth quarter of 2023.
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During the year ended December 31, 2021, direct costs related to our SPR720 program reflected a $1.5 million reduction to expense related to activities funded by Gates MRI.
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We expect to continue to incur direct costs related to tebipenem HBr as we continue to progress PIVOT-PO.
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Direct costs related to our tebipenem HBr program decreased by $11.8 million during 2022 compared to 2021 primarily due to the reduced program activity as a result of our strategic restructuring announced in May 2022 and further described in Note 10 – Restructuring to the Financial Statements.
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The decrease in personnel-related costs of $5.1 million was primarily due to decreased research and development headcount costs related to our strategic restructuring.
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Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff. 79 Restructuring During the year ended December 31, 2022, we incurred restructuring expenses of $11.6 million related to our strategic restructuring that we announced in May 2022.
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Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff. Impairment of Long-Term Asset In 2023, we concluded that we have no future use for the Savior facility (further described in Note 14 – License, Collaboration and Service Agreements to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitati ve Disclosures About Market Risk. As of December 31, 2022, we had cash and cash equivalents of $109.1 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.
Biggest changeItem 7A. Quantitative and Qualitati ve Disclosures About Market Risk. As of December 31, 2023, we had cash and cash equivalents of $76.3 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 86 significantly increasing risk.
As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the United States dollar. Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements. 83
As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the United States dollar. Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements. 87
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates. We did not have any assets classified as marketable securities as of December 31, 2022.
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates. We did not have any assets classified as marketable securities as of December 31, 2023.

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