Spero Therapeutics – the fight against the rise of multi-drug resistant superbugs

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The fight against the rise of multi-drug resistant superbugs

Spero Therapeutic  Scientific Investment Thesis

By

Team Scientific

Disclaimer:

Investment returns may go up as well as down according to market conditions beyond our control. Our views are not an invitation to treat, nor are they meant to be relied on. Every due diligence we develop is a document that we use for my own investment purposes. Please use this blog to supplement your own investment decisions, at your own risk, and according to your own criteria.


Investment Strategy:

Investing in biotech/pharma companies is a high risk, high reward venture that puts most common investors at an increased risk when compared to their professional counterpart. Price fluctuation for small-cap stocks is heavily facilitated by short-term market sentiment over trivial factors, which at times can be counter-intuitive.

It is imperative to understand that almost all biotech companies are developed from a pure speculative standpoint: they have no product, very limited data, but they need money to continue to conduct research, thus they will pull every possible method to obtain funding. Some companies will bring on famous biotech leaders to their scientific advisory board to attract investors, gain market attention, and to network their way toward establishing a fund large enough to conduct experimental or clinical studies. Unlike the tech industry, where the product directs a company’s success, the biotech industry will proclaim that an idea has potential for company success. However, investing in an idea is very high risk.

We believe that a strong strategy is to invest with a long-term mindset to help mitigate the short-term risks.  Strong science and strong business practices are two quantitative factors that provide a proper analysis regarding company growth and direction. The former requires specific expertise within the scientific field, and because the general public is more in tune with the company’s business practice, the company will oversell their science to gain market and investor attention.

We will primarily analyze the scientific or clinical data that drives every company, and present to you a dissertation that you can use to help facilitate your decision to invest. Unless otherwise stated, we will not present any news or technical analysis, such as daily chart observations, trend-lines, channel analysis, etc. because these factors are fueled by short-term interests, and ultimately subject to personal and emotional bias.


Background:

 Spero Therapeutics is a clinical stage company developing novel antibiotics to treat life-threatening bacterial infections. 

pipeline
Spero Therapeutic’s Drug pipeline – from form 10-K

Introduction:

In the pre-antibiotic era, 30% of all American deaths were attributed to bacterial infections. The discovery and development of antibiotics, which marked the advent of the American pharmaceutical industry, is widely regarded as a major socioeconomic success of modern medicine and the human condition. Once feared diseases, such as tuberculosis and pneumonia, can now be mitigated with antibiotic treatment. Within the past three decades, however, the evolution of antibiotic resistance has witnessed a devastating progression, pressuring scientists and clinicians to scramble for alternative and paradigm-shifting approaches to treatment. The present alarming prospect of a post-antibiotic era is attributable to a variety of issues, each of which requiring pressing attention. These include the antibiotic-induced evolutionary pressure that accelerates resistance, the disturbingly over-simplistic method for evaluating antibiotic susceptibility, and the lackluster financial motives that diminish the antibiotic development pipeline. 

In 2016, the United States Center for Disease Control and Prevention estimated that over 2 million people are sickened by bacterial infections, which results in 23,000 annual deaths, $20 billion in healthcare costs, and $35 billion in loss of productivity. It is estimated that over 300 million pre-mature deaths, up to $100 trillion loss due to decreased global productivity, and mortality rates to exceed that of cancer, will occur by 2050 if drastic measures against anti-microbial resistance are not undertaken.

Unfortunately, antibiotic discovery and development has become a cumbersome and bureaucratic process that has a very low Net Present Value (NPV) – a metric that pharmaceutical corporations utilize to determine the best avenues of investment at a given time. NPV is a risk-adjusted measure of projected revenue of a drug after accounting for initial development costs and future expenses. Essentially, it is used to determine the likelihood of producing a financial return of investment for any given drug. Antibiotics, in particular, suffer from very low NPV for a variety of reasons, which include but are not limited to: antibiotic regimens have a limited duration of administration, newly developed antibiotics are held in reserve to mitigate the development of drug resistance, the super-saturated antibiotic market, escalated approval requirements, and the lack of clear antibiotic trial guidelines. Such factors pose financial investments in novel antibiotic development too high of a risk with very little potential for profitable reward, thus causing many small and large pharmaceutical companies to curtail their antibiotic research and development divisions.


Perspective:

Given the current diminishing financial market to pursue novel antibiotic development, there are compelling characteristics that make Spero Therapeutics a fine candidate for a scientifically sound investment.


Scientific Analysis

1ST AREA OF FOCUS

SPR994 – FDA-designated as a qualified infectious disease product (QIPD) for a novel oral carbapenem antibiotic

“Our lead product candidate, SPR994, is designed to be a broad-spectrum oral carbapenem for use in adults to treat MDR Gram-negative infections. Currently, there are no commercially available oral carbapenems for use in adults, and we believe SPR994 has the potential to address this unmet need”. – SEC Form 10K

Antibiotics are categorized by class. The carbapenem class of antibiotics, which falls under the β-lactam antibiotic umbrella category, is a commonly used class of antibiotics to treat multiple types of bacterial infections by inhibiting the synthesis of the peptidoglycan layer of bacterial cell walls. It is used to treat otorhinolaryngological infection, otitis media and bacterial pneumonia.

Currently, however, carbapenem antibiotics are administered by parenteral injection (intravenous, intramuscular, etc.). This unfortunate method of administration poses many limitations and challenges that could be addressed by developing a drug that could be administered orally:

  1. Multiple dosing regimens
  2. Multiple visits to the hospital
  3. Patient incurs high treatment  costs 
  4. Patient is at increased risk of nosocomial (hospital-acquired) infections

Tebipenem-pivoxil is an oral carbapenem prodrug that was launched in Japan in 2009, marketed as OrapenemTM. The drug was in fact initially developed by Pfizer and then licensed to a Japanese pharmaceutical company, Meiji Seika. In 2017, the product was then licensed to Spero therapeutics for worldwide development and commercialization and was designated by the FDA as a qualified infectious disease product for complicated urinary tract infections, diabetic foot infections, and community-acquired bacterial pneumonia. Spero obtained certain “know-how” and data to assist in the success of clinical development.

OrapenemTM was a huge market success given the relatively inexpensive cost to the patient and the financial return on investment for investors. Unfortunately, OrapenemTM is marketed only in Japan for pediatric otitis media, sinusitis, and pneumonia. No oral carbapenems are currently marketed for use in adult patients.

Spero994 presents a fine solution to this market inefficiency – a novel oral formulation of Orapenem that will be applicable on a global scale

Due to the fact that SPR994 is to be administered orally, investigators must take into consideration the bio-availability of the drug.  In other words, the ability of the drug to be absorbed by the intestine into the bloodstream, and penetrate into the site of infection at a high enough concentration to exert its therapeutic effects.

SPR994 shows linear pharmacokinetics, indicating that the concentration achieved in the body is proportional to its oral dose, and penetrates into the site of infection at efficacious levels to reduce bacterial burden.

Key experimental study assessing pharmacokinetic relationship to reduced bacterial burden:

Characterization of SPR994, an Orally Available Carbapenem, with Activity Comparable to Intravenously Administered Carbapenems

Take a close look at the following data:

spr994figure
Neutropenic murine thigh infection model to assess the activity of SPR994 after oral administration of SPR994. Bacterial burden (colony-forming-units) enumerated

This data suggests that an oral dose of SPR994 at 10, 30, and 100 mg/kg demonstrates penetration of the drug into the infected thigh at a concentration capable of reducing bacterial burden to levels on par with FDA-approved antibiotics, Meropenem and Tigecycline, which are administered intravenously or subcutaneously, respectively.

There is a caveat to this murine model: the investigators had to induce neutropenia (low neutrophil count) to make sure that the influx of neutrophils to the site of infection does not interfere with the activity of SPR994. This limitation has been accounted for in multiple presentations (see below), where authors utilized various infection models to assure for proper representation of the drugs activity.

Investigators have demonstrated efficacy of SPR994 in multiple murine models of infection. Oral administration of SPR994 showed significant reduction in bacterial burden in the lung and urinary tract of infected mice, with efficacy levels on par with widely prescribed antibiotics, such as Meropenem and Tigecycline. See below posters for more detail regarding in vivo efficacy in mutliple murine infection models, which demonstrate pharmacokinetic correlation to reduced bacterial burden:

Poster Presentations:

Question to consider: What about murine survival and toxicity models in the context of an infection?

One might argue the fact that Orapenem is already marketed and approved to treat the pediatric population, which should circumvent the need for investigators to demonstrate that SPR994 improves mortality at a similar rate to that of Orapenem, especially since SPR994 is essentially an extended release formulation of Orapenem. That said, we still find that demonstrating this to be true in a murine survival and tolerability infection model would bolster the therapeutic efficacy and similarity to Orapenem. For example, in murine infection models comparing Orapenem to SPR994, investigators should demonstrate that not only are mice surviving at a comparable rate between the two drugs, but their inflammatory cytokine levels or urinary tissue pathological profile is similar as well. It’s possible that the novel formulation of Orapenem (aka SPR994) could produce  the active drug at a rate that changes its off-target effects.

(Note: the ability to perfrom murine survival studies depends on where the studies are conducted (EU, US, or Asia)

SPR994 – an extended release formulation for complicated urinary tract infections (cUTIs)

Currently, fluoroquinolones are the most frequently selected antibiotics for empirical urinary tract infections. Though the use fluoroquinolones to treat cUTI’s is recommended by the Infectious Diseases Society of America, it is however contingent on local resistance rates being less than 10%, and does not take into consideration the growing resistance to fluoroquinolones (note the rise in resistance levels from early 2000’s to 2014), or the FDA issuance of increasing adverse effects associated with fluoroquinolone, which may outweigh the therapeutic benefits associated with such therapy. 

fluoroquinolone
JPM Conference 2019

Given the above data, Spero Therapeutics aims to replace oral fluoroquinolone therapy with SPR994 based on its efficacy and safety profile:

  • SPR994 MIC against E.coli = 0.03ug/mL
  • Levofloxacin (fluoroquinolone) MIC against E.coli = >4 ug/mL

(MIC = Minimum Inhibitory Concentration)

Clinical Studies

SPR994 (NCT03395249) went through a Phase 1 study in  January 10, 2018 and was completed in August 28, 2018. 

“This is a double-blind, placebo-controlled, ascending dose, multi-cohort trial. The study will be conducted in 2 parts: a single ascending dose (SAD) part, followed by a multiple ascending dose (MAD) part. In SAD, all subjects will receive 1 dose of SPR994 (100, 300, 600 or 900 mg) or placebo, except for subjects enrolled in food effect cohorts in which subjects will receive one dose following a 10 hour fast and a second dose in the fed state following a minimum 5 days washout period. There is a single, optional, open-label control cohort that may enroll, in which all 8 subjects will receive Orapenem® (tebipenem pivoxil fine granules). In MAD, subjects will receive multiple doses of SPR994 (300 or 600 mg) or placebo for 14 consecutive days at either BID or TID dosing. In both parts, cohorts will be exposed to increasing doses of SPR994 with various extended release formulations.”

Picture1.png
SPR994 Phase 1: high urine and plasma exposures relative to MIC90 – JPM Conference 2019
Note to consider –  The method used to determine the MIC90 of bacteria is done in vitro, which does not correlate to a true MIC value in vivo.  For example, the concentration that inhibits 90% of Klebsiella isolates was determined to be 0.06ug/mL in a test tube, not in the infected patient. Given this, it’s possible that the SPR994 concentrations found in the urine, or in the plasma, could very well be sub-therapeutic. ***This note however, can be accounted for in the murine studies demonstrating efficacy of SPR994 in UTI experimental models

Phase 1 conclusion:

“No serious adverse events were reported in the Phase 1 clinical trial. Oral administration of SPR994 was well tolerated at all doses tested within the trial, and the Phase 1 results are consistent with available clinical and post-marketing data for Orapenem® and other approved intravenous (IV) carbapenem antibiotics.” – from 9.27.2018 News Release

The significant Phase 1 clinical data coupled with the nonclinical experimental studies, gave precedent for initiation of Phase 3 (ADAPT-PO) clinical trial for the treatment of cUTI.

Meiji Phase 2 Clinical cUTI Trial

When Spero liensed the rights for development of SPR994 from Meiji, they obtained certain “know-how” rights and data to assists in the success of clinical development, this includes the phase 2 data that was already previously conducted in Japan using Tebipenem ( Tebipenem, Orapenem, and SPR994 are the same active drug, but differ in formulation) and the significant results allowed Spero to bypass Phase 2 study in the US in order to conduct Phase 3.

“Meiji and Global Pharma conducted two exploratory, dose-ranging Phase 2 clinical trials of tebipenem in patients with cUTI including patients with acute pyelonephritis. These trials were conducted in Japan between 2001 and 2004. Study L-084 04 (report date 2003), a multicenter open-label study to evaluate the efficacy (clinical and microbiological) and safety (adverse events and laboratory tests) of tebipenem at doses of 100 mg administered three times daily, or TID, (Group A), 150 mg administered BID (Group B), and 150 mg administered TID (Group C), for seven days in patients with cUTI. There were 51 adult patients, aged 20-74 years inclusive, enrolled with 40 being evaluable for efficacy (14 in Group A; 17 in Group B; 9 in Group C). Study ME1211 (report date 2004), a multicenter, open-label study to evaluate efficacy (early and late assessments) and safety (adverse events and laboratory tests) of tebipenem at doses of 250 mg administered BID (500 mg Group) and 300 mg administered TID (900 mg Group) for seven days in patients with cUTI. There were 37 adult patients, aged 20 to 74 years inclusive, enrolled with all being evaluable for efficacy (19 in 500-mg Group; 18 in 900-mg Group)” – Form 10K

Note: The design for Phase 2 trial in Japan differs from what is recommended in the FDA guidance for clincal trials in patients with cUTI. The results shown below, however, support the plan for Spero to develop SPR994 against cUTI in a Phase 3 study:
Picture2
SPR994 Phase 2 data (blue) conducted by Meiji Pharma vs. contemporary studies (green) -JPM conference 2019

Phase 2 conclusion:

  • Doses from 300mg to 900mg lowered UTI infection via pathogen eradication
  • Response rates were in similarity to other clinical studies performed with Orapenem

Pivotal Phase 3 Clinical cUTI Trial

Breaking news (February 2019): “With the FDA’s acceptance of our IND application for SPR994, we are excited to continue our Phase 3 initiation efforts, including opening clinical trial sites for enrollment in the U.S.,” said Ankit Mahadevia, M.D., Chief Executive Officer of Spero Therapeutics. 

The phase 3 study will be designed as a “double-blind, double-dummy trial to compare oral SPR994 with an existing standard of care intravenous (IV) antibiotic, ertapenem, in approximately 1,200 patients randomized 1:1 in each arm.  The primary endpoint of the pivotal trial will be the combined clinical and microbiological response at the test of cure with a 10% non-inferiority margin versus IV ertapenem“. 

Furthermore, the investigators intend to submit to the FDA an NDA to expand SPR994 to treat  cUTI with  acute pyelonephritis.  If results come back positive, may further support marketing applications in other global regions that are not just limited to cUTI.

Key experimental and clinical data to support SPR994 Phase 3 potential success against cUTIs

1. The drug was already deemed safe as evaluated in Japan’s phase 3 trial (though the formulation may be different, the active ingredient between Orapenem and SPR994 is the same). “A total of 3,547 cases were enrolled into the study, and the analysis was conducted using 3,540 cases for which it was possible to recover the questionnaires. Of these 3,540 cases, a total of 3,331 cases were used in the safety analysis, 2,844 cases were used in the efficacy analysis, 2,769 cases were used in the clinical efficacy analysis, and 461 cases were used in the bacteriological efficacy analysis. The incidence of adverse drug reactions was 9.97% (332/3,331 cases), and the primary adverse drug reactions were “gastrointestinal disorders” such as diarrhea, which occurred in 317 cases (9.52%). “Diarrhea” occurred in 313 cases (316 instances). All of these events were non-serious, and 94.9% (297/313 cases) showed recovery or remission.”

2. Enterobacteriaceae (Gram-negative bacteria) is the leading infecting isolate in cUTI’s. In order to demonstrate efficacy in Phase 3 trials, its obvious that SPR994 needs to demonstrate the ability to inhibit/kill various strains of Enterobacteriaceae at greater potency than standard-of-care antibiotics.

Picture1
SPR994 activity shows potent activity against both antibiotic susceptible and antibiotic-resistant strains of E.coli (a leading infecting isolate in cUTI

3. SPR994 has demonstrated potency against β-lactamase (ESBL) producing Gram- negative bacteria. β-lactamase (ESBL) is a bacteria-derived enzyme that inactivates certain antibiotics by proteolysis. This enzyme poses many therapeutic challenges, and contributes to complicated pharmacological intervention against urinary tract infections.

The ability for SPR994 to demonstrate potent activity against such enzyme-expressing bacterial isolates further supports the hypothesis of developing SPR994 as a mono-therapeutic option against cUTI. Generally, combination therapy is typically required to treat enzyme-expressing strains that are refractory to monotherapy.

4. SPR994 is essentially an analog of Orapenem, but with similar pharmacokinetic and therapeutic profile than its intravenous counterpart antibiotics (see above figure). However, in order to treat cUTI’s, investigators need to demonstrate that SPR994 penetrates into the urinary bladder, not the thigh, to clear the infecting isolate. Clinical studies have been done with Orapenem, which serves as preliminary data demonstrating that this is indeed possible with SPR994. Results from a single-ascending Orapenem dose study in human patients are shown in the graph below.

UTIPK
Single-ascending Orapenem dose study in Phase 1 clinical trial generated by Meiji Pharma (Japan)

Agreements

Meiji agreement:  Spero entered into an exclusive license agreement with Meiji Seika Pharma Co., Ltd. to obtain know-how, data and regulatory documents that will support the development of SPR994. Spero will retain exclusive rights to global commercialization of SPR994, except in Japan, Bangladesh, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam (these locations are regulated by Meiju Seika). In addition to this, Spero has paid Meiji a one-time fee of $0.6 million and will pay Meiji future clinical and regulatory milestonepayments, as well as percentages of certain amounts received from sublicenses. In total, Spero will provide Meiju with ~$10 million in payments.

Financing 

  1. SPR994 was awarded  $15.7 million from the Biomedical Advanced Research and Development Authority (BARDA), with the potential for up to an additional $28.5 million over 5 years (The balance of the award is subject to BARDA exercising two options. totaling a total of approximately $45 million)
  2. An inter-agency collaboration has allowed the U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) to pursue additional studies under the direction of Spero Therapeutics
  3. The collaborative study has also allowed the Defense Threat Reduction Agency (DTRA) will provide support of up to $10.0 million to cover the cost of certain nonclinical biodefense studies contemplated by the collaboration

SPR994 Conclusion

SPR994 is a novel formulation of Orapenem, and demonstrates greater pharmacokinetic and therapeutic profile. The mere fact that SPR994 is essentially a greater and more efficacious form of an already approved product (Orapenem), qualifies SPR994 as a low-risk scientific investment – especially given the fact that Spero maintains global commercialization rights. To this end, SPR994 will expand its market to new disease indications, thereby increasing potential revenue. Key advantages to SPR994 (from SEC form 10-K):

  1. Potential to be the first oral carbapenem in adults
  2. Favorable safety, efficacy and tolerability profile suggested by clinical studies of tebipenem in Japanese populations
  3. Broad specturm activity against both gram negative and gram-positive bacteria with potency profile consistent with certain IV-administered carbapenems
  4. Potential to enable IV-to-oral transition of antibiotic treatment to assist with reduction in hospital stays and/or eliminate the need for hospitalization.

For the investor – you understand that SPR994 will provide a low-risk scientific investment for the following reasons:

  • SPR994 is already approved in Japan (Orapenem). Thus, SPR994  will be developed for global widespread use with greater broad-spectrum profile (targeting a greater number of bacterial species).
  • SPR994 will replace intravenous carbapenem therapy given its oral formulation thus increasing its exposure to a greater number of patients (patients would much rather choose the oral route, as opposed to the risks, costs, and invasiveness of the intravenous route)
  • SPR994 addresses the growing resistance and toxicity associated with oral fluoroquinolone therapy

For the patient – you understand that SPR994 may be an alternative form of treatment for your infection:

  • You don’t want to return to the hospital for multiple doses of intravenous therapy given the risk of additional hospital-acquired infections, which are more likely to be multi-drug resistant
  • The cost of intravenous therapy is far higher than the oral formulation, but the efficacy of the drug is the same is the same
  • Your quality life is dramatically improved

Next Generation Potentiator Platform: SPR741 and SPR206

2ND AREA OF FOCUS

Potentiator – the ability for a compound to increase the activity of standard of care treatment (also known as: synergy). In this particular case, Spero Therapeutics has 2 compounds that demonstrate the ability to increase the activity of widely prescribed antibiotics.

Colistin (polymixin) is an old drug that  although is incredibly efficacious, is also incredibly toxic. Severe side effects of colistin include, but are not limited to the following: blood in stool and urine, severe difficulty breathing, and confusion. Given its toxic nature, its clinical use has been limited and is now considered to be a last-resort antibiotic (if the patient fails to clear their infection with common antibiotics, colistin is the last line of defense clinicians can use to treat their patients). 

Despite its toxic nature, the dramatic rise of antibiotic resistance over the years has increased the clinical use of colistin. The toxic nature of the drug  no longer outweigh the benefits. Unfortunately, the selective pressure of resistance against commonly used antibiotics  would suggest that it is merely a matter of time before a colistin-resistant bacterial pathogen has formed. 

Note: A single colistin-resistant bacterial pathogen can share their resistance genes to a pathogen of different species by ways of horizontal gene transfer. Thus, the use of colistin is clinically limited to prevent such spread in resistance

SPR741 and SPR206 are analogs of colistin. Essentially, investigators modified colistin in such a way to be used as adjunctive therapy with commonly prescribed antibiotics: 

colistin 741 206
Chemical structures of Spero compounds 741 and 206 compared to Colistin. SPR741 lacks two cationic diaminobutyryl residues from the linear portion of the peptide, reducing the net positive cationic charge of the molecule to +3, whereas SPR206 has a cyclic peptide portion identical to that of polymyxin B, but in the linear portion of the peptide, it carries a threonyl-d-serinyl residue  and has no cationic charge.

SPR741 – A non-antibacterial colistin derivative that potentiates commonly prescribed antibiotics

Potentiation of Antibiotic Activity by a Novel Cationic Peptide: Potency and Spectrum of Activity of SPR741

Investigators demonstrate the ability for Spero741 to  reduce the MIC (the lower the antibiotics MIC, the greater its ability to inhibit or kill bacteria) of a large panel of antibiotics. “The fold reduction in the MIC of each of the 35 antibiotics (grouped by class between broken lines) is displayed at each of three concentrations of SPR741: 2 μg/ml (white bars), 4 μg/ml (gray bars), and 8 μg/ml (black bars) (A) or 4 μg/ml (white bars), 8 μg/ml (gray bars), and 16 μg/ml (black bars) (B and C).”

potentiator.png
SPR741 potentiates the activities of antibiotics against (A) E. coli, (B) K. pneumoniae, and (C) A. baumannii

Furthermore, investigators demonstrate the ability for SPR741 to increase the activity of piperacillin-tazobactam (TZP) and ceftazidime (CAZ), two standard antibiotics used to treat a global set of ESBL producing (antibiotic-resistant) gram negative bacteria. 

esbl741activity
Potency of Piperacillin-Tazobactam and Ceftazidime with and without SPR741

SPR206 – A  potent antibacterial colistin derivative that potentiates commonly prescribed antibiotics and is active as a monotherapeutic agent.

Unlike SPR741, SPR206 shows antibacterial activity that rivals meropenem and amikacin against MDR Enterobacteriaceaae, carbapenem-resistant P. aeruginosa, and carbapenem-resistant A. baumanii:

SPR206mono
Susceptibility of SPR206 vs common antibiotics against MDR gram negative pathogens

SPR206 is effective at reducing bacterial burden in a murine lung infection model:

SPR206lung

Activity of SPR206 vs colistin (PMB-polymixin B) and Tigecycline (TIG)

Clinical Studies: SPR741 and SPR206

SPR741 (NCT03376529) went through a Phase 1 trial in a single-center, multi-arm, open-label, randomized study to evaluate drug-drug interactions, PK safety/tolerability, when combined with common antibiotics,  such as ceftazidime, piperacillin/tazobactam, and aztreonam in healthy volunteers.  Volunteers will be administered a single dose of SPR741 alone, or in combination with a single partner antibiotics. The study began in November 2017 and was completed in December 2017.

SPR741 Phase 1 trial demonstrated profound safety and efficacy

SPR206 (NCT03792308) started a Phase 1 trial in December of 2018 and anticipates top-line data in the second half of 2019.

“This Phase 1 First in Human study is designed to assess the safety, tolerability, and pharmacokinetics of single and multiple intravenous doses of SPR206 when administered to healthy adult volunteers. This is a randomized, double-blind, placebo controlled, ascending dose, multi-cohort trial. A total of 108 healthy volunteers will be enrolled in 13 cohorts. The study will be conducted in two phases: A single ascending dose (SAD) phase, followed by a multiple ascending dose (MAD) phase. In SAD, participants will receive one dose of SPR206 or placebo. In MAD, participants will receive multiple doses of SPR206 or placebo for 14 consecutive days. In both parts, sequential cohorts will be exposed to increasing doses of SPR206.”

Spero intends to deprioritize one of their potentiator candidates for further clinical development after receiving Phase 1b clinical data for SPR206. They will choose one of either two drugs that demonstrates optimal financial resourcefulness. Their decision to proceeed with either drug, depending on the clinical results, demonstrates a conservative and rational approach to maintaining proper financial health.

Key question you should consider: if SPR741 and SPR206 are colistin analogs, why don’t investigators simply compare the efficacy of their compounds to colistin alone? Why are they marketing SPR206 as a potentiator when it demonstrates antibacterial activity as a monotherapy? (see conclusion)

Agreements

Cantab agreements: “Spero agrees to pay upfront consideration in the amount of $0.3 million and also agreed to pay a total of up to $5.8 million upon the achievement of specified clinical and regulatory milestones and to pay £5.0 million ($6.7 million as of December 31, 2017) upon the achievement of a specified commercial milestone. We also agreed to pay royalties based on net sales of products licensed under the agreement.”

Northern Licensing Agreements: “Spero was given an exclusive, perpetual, irrevocable, worldwide license to develop and commercialize certain licensed compounds [ie. SPR741] under certain Northern patents, patent applications and know-how in consideration for one or more near-term milestone payments up to an aggregate of $2.5 million based on either clinical milestones or the completion of our IPO, which event occurred and which amount was paid in November 2017, and in consideration for up to an aggregate of $4.5 million upon receipt of marketing approval of SPR741 or other compounds licensed from Northern which, in either case, is approved to be co-administered with a different antibiotic agent

Financing

  1. A single two-year $1.5 million award was agreed upon through the U.S. Department of Defense (Spero is eligible for the full funding from DoD and there are no options to be exercised at a later date)
  2. A grant of $1.5 million over a 12-month period was awarded through CARB-X, a public-private partnership funded by BARDA within the U.S. Department of Health and Human Services. Agreement of at least one partner compound (SPR741) to completed in Phase 1 trials.

SPR741 and SPR206 Conclusion

SPR741 and SPR206 are considered to be colistin analogs. Developing an analog of colistin that exhibits less toxicity but greater efficacy would be of huge benefit to patients. One might speculate that: because SPR741 and SPR206 are colistin analogs, the potentially approved drugs will replace colistin therapy. 

This couldn’t be further from the more practical scenario: Spero therapeutics is positioning both compounds to be potentiators of commonly prescribed antibiotics, as opposed to replacing colistin therapy. If you think in terms of business and marketing strategy, and more importantly in terms of patient quality of life, you will find that pairing SPR741 and SPR206 as adjunctive therapy is the best strategic approach towards increasing shareholder value while putting the patient first:

1. For the investor – you need a return on your money. However, you understand that the market for developing novel antibiotics is diminishing, exemplified by the fact that big pharma has slowly been pulling out of the infectious disease space. How will you receive a greater return of investment if you so choose to invest in drugs that potentiate approved antibiotics?

  • Physicians will be more favorable of reducing the risk of recurrent infections by treating the patient with potentiator drugs alongside widely prescribed antibiotics, which is more likely to be used than colistin.  For example*, if Spero741 or Spero206 approve to be potentiators of the antibiotic Vancomycin, then theoretically every time Vancomycin is prescribed, so will Spero741 or Spero206. This strategic approach to market Spero741 and Spero206 as potentiators increases market and investor attractiveness.

2. For the patient – you’ve just been diagnosed with an infection of the blood. The infecting isolate is MRSA*, and you’ve been placed on vancomycin (standard of care) therapy. With today’s statistics, MRSA blood infection has a mortality rate that is approximately 30% (This statistic includes patients on vancomycin therapy). In other words, vancomycin has an approximate 30% treatment failure rate. Thus, a minimum of 30% of patients suffering from MRSA blood infection will eventually require colistin (last-resort treatment) therapy due to the initial vancomycin treatment failure. 

  • Assuming that Spero741 and 206 are FDA approved, they will have demonstrated significant improvement of vancomycin therapy, reducing the risk of vancomycin failure, thus significantly improving your chances of survival, reduces your hospitalization stay, and reduces the risk of recurrent infections. Additionally, this ultimately prevents the patient from having to utilize last-resort therapy, which also reduces the risk of developing colistin-resistant bacterial pathogens.

(*SPR741 and SPR206 are designed to target MDR gram negatives, we are using MRSA, a gram-positive organism, for the sake of an easy-to-understand example given the available clinical data regarding MRSA bacteremia mortality):


Next Generation Potentiator Platform: SPR720

3RD AREA OF FOCUS

The first oral antibiotic designed to treat pulmonary non-tuberculosis Mycobacterium (NTM)

Mycobacterium are environmental pathogens that can typically be found in water and soil. Though  most healthy and immune competent individuals can easily clear the infection, elderly patients, patients with compromised immune systems, or patients with an underlying respiratory disorder have an increasingly high incidence of pulmonary non-tuberculosis mycobacteria infections, thus putting them at increased risk of mortality. Currently, treatment options for such infections are frequently combination therapy (higher association of adverse events).

Non-tuberculosis mycobacterium infections is considered an orphan disease – rare diseases that affect less than 200,000 people nationwide.  Pre-clinical studies have demonstrated potency for SPR720 against MDR Mycobacterium abscessus.

In the following figure, investigators demonstrate the dose-dependent ability for SPR720 to reduce the burden of NTM in the lung, at what seems to be at a significantly greater magnitude than that of Amikacin.

spr720
SPR720 shows dose responsive efficacy against MDR M. abscessus strains – from JPM Conference 2019
There are currently no FDA-approved drugs to treat NTM infection, forcing clinicians to scramble for alternative, and most likely combinatorial, forms of treatment.

Along with the in vitro and in vivo experimental studies, the company has also performed a 28-day GLP toxicity studies in rats and non-human primates (data in progress), and shareholders should assume to hear about such studies upon study completion.

SPR720 Clinical Studies

Spero intends to initiate a Phase 1 clinical SAD/MAD  trial in healthy volunteers during the first half of 2019

Financing and Agreements

SPR720 was initially a drug that was produced by Vertex Pharmaceuticals, which was later assigned patent rights, along with certain “know-how” right and data to Spero therapeutics.

Vertex agreements: “In exchange for the assigned patents [from Vertex], we paid Vertex an upfront, one-time, non-refundable, non-creditable fee of $0.5 million, which was recognized as research and development expense, and we also agreed to pay Vertex future clinical, regulatory and commercial milestones up to $81.1 million in the aggregate and a royalty on the net sales of licensed products ranging from mid-single digits to low double digits. The agreement continues in effect until the expiration of all payment obligations thereunder, with royalty payment obligations continuing on a product-by-product and country-by-country basis until the later of ten years after the first commercial sale of such product in such country or the date of expiration in such country of the last to expire applicable patent. Further, Vertex has the right to terminate the agreement if provided with notification from us of our intent to cease all development or if no material development or commercialization efforts occur for a period of 12 consecutive months.”

Government awards

  1. Spero received an award from the U.S. National Institute of Allergy and Infectious Diseases (NIAID) to conduct additional preclinical studies of SPR720. The award is structured as a 12-month $0.6 million base period, which has already been committed, and a $0.4 million option period. In February 2018 NIAID exercised the $0.4 million 12-month option period.

SPR720 Conclusion

There simply isn’t enough evidence that would currently suggest that SPR720 plays a significant factor in company business or scientific evaluation. The reason scientifically, would be due to the limited clinical data. Nonetheless, the experimental studies suggest that SPR720 is indeed efficacious in murine models of infection.   The reason from a business approach, is simply due to the observation that SPR720 adds “flavor” to the company, but isn’t a drastic game changer. Regardless of the above conclusion, Spero has positioned SPR720 in such a way that increases shareholder value, while still putting the patient first:

1. For the investorafter your analysis you understand that the main driver of the companies value is not SPR720, but rather SPR994. However, SPR720 does situate the company into a more compelling and attractive investment given the ability to target a disease that currently has no FDA approved method of treatment. There are some key limitations to SPR720:

  • SPR720 having been licensed from Vertex pharmaceuticals, suggests that the drug was an initial project of Vertex, but was later discarded or halted for any number of reasons. Those reasons could put more risk on Spero than necessary. 
  • Given that NTM is an orphan disease affecting no more than 200,000 patients nationwide, puts a drastic limitation on generating increasing sources of revenue from SPR720 sales (assuming approval)
  • How will the company enroll clinical studies with the disease population being relatively minuscule?

2. For the patient –there are currently, no FDA approved method of treating your infection. SPR720 provides an option for therapeutic treatment, thereby preventing therapeutically-refractory patients better quality of life.


Conclusive thesis

Is Spero Therapeutics a scientifically sound investment?

SPR994 is the lead product candidate that is the most valuable portion of the company, which will/should drive the overall success of the company. SPR994 is not only already positioned for clinical success, but the chess pieces are in play for a grand return on investment should SPR994 become FDA approved. In addition to this, the potentiator program (SPR741, SPR206, and SPR741) is also a critically valuable asset to Spero as it is not only positioned for clinical  success, but it demonstrates integrity to patient value by aiming to prevent patients from having to resort to last-line therapy.  The demand for novel antibiotics is incredibly high, and Spero has  positioned their drugs in strategic manners that is backed scientifically and clinically.

Given the accumulative scientific analysis, we find Spero Therapeutics to be a scientifically sound long-term investment of a minimum of 5 years. They present themselves as leaders in a very niche market and scientific field, and they strategically provide optimal value for shareholders, and the patients they are aiming to treat.

 

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