10-Q
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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ____________

Commission File Number: 001-39594

 

 

Spruce Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

81-2154263

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2001 Junipero Serra Boulevard, Suite 640

Daly City, California

94014

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (415) 655-4168

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

SPRB

 

Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 4, 2022, the registrant had 23,560,250 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

Table of Contents

 

Summary of Risks Associated With Our Business

 

 

Page

 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Financial Statements

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations and Comprehensive Loss

2

 

Condensed Statements of Stockholders’ Equity

3

 

Condensed Statements of Cash Flows

5

 

Notes to the Unaudited Condensed Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

75

Item 3.

Defaults Upon Senior Securities

75

Item 4.

Mine Safety Disclosures

75

Item 5.

Other Information

75

Item 6.

Exhibits

76

 

Signatures

77

 

 


Table of Contents

 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

We face risks and uncertainties associated with our business, many of which are beyond our control. Some of the material risks associated with our business include the following:

We have a limited operating history, have incurred significant net losses since our inception, and anticipate that we will continue to incur significant net losses for the foreseeable future. We expect these losses to increase as we continue our clinical development of, and seek regulatory approvals for, tildacerfont and any future product candidates.
We will need substantial additional financing to develop tildacerfont and any future product candidates and implement our operating plans. If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We currently depend entirely on the success of tildacerfont, which is our only product candidate. If we are unable to advance tildacerfont in clinical development, obtain regulatory approval, and ultimately commercialize tildacerfont, or experience significant delays in doing so, our business will be materially harmed.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Our clinical trials may fail to adequately demonstrate the safety and efficacy of tildacerfont, which could prevent or delay regulatory approval and commercialization.
Any delays in the commencement or completion, or termination or suspension, of our clinical trials could result in increased costs to us, delay or limit our ability to generate revenue, and adversely affect our commercial prospects.
The U.S. Food and Drug Administration, or FDA, and comparable foreign regulatory authorities may require us to initiate one or more additional clinical trials for tildacerfont in adult patients with classic congenital adrenal hyperplasia, or CAH, including a Phase 3 clinical trial or trials. The estimated timing or scope of any such future clinical trials is not currently ascertainable. Even if regulatory approvals are obtained, we may never be able to successfully commercialize tildacerfont.
Preclinical and clinical drug development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of tildacerfont and any future product candidates.
Unfavorable U.S. and global economic conditions could adversely affect our business, financial condition or results of operations.
Our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, as well as the business or operations of our manufacturers, clinical research organizations, or CROs, or other third parties with whom we conduct business.
Tildacerfont is, and any future product candidates will be, subject to extensive regulation and compliance obligations, which are costly and time-consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize tildacerfont and any future product candidates.
If the market opportunities for tildacerfont and any future product candidates are smaller than we believe they are, our future revenue may be adversely affected, and our business may suffer.
We may not be successful in our efforts to expand our pipeline by identifying additional indications and formulations for which to investigate tildacerfont in the future. We may expend our limited resources to pursue a particular indication or formulation for tildacerfont and fail to capitalize on product candidates, indications, or formulations that may be more profitable or for which there is a greater likelihood of success.
We currently have no marketing and sales organization and have yet to commercialize a product. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell tildacerfont and any future product candidates, we may not be able to generate product revenues.
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize tildacerfont.

 


Table of Contents

 

If we are unable to obtain and maintain sufficient intellectual property protection for tildacerfont, any future product candidates, and other proprietary technologies we develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize tildacerfont, if approved, and any future product candidates, and other proprietary technologies if approved, may be adversely affected.

 


Table of Contents

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SPRUCE BIOSCIENCES, INC.

CONDENSED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,649

 

 

$

42,748

 

Short-term investments

 

 

68,751

 

 

 

46,221

 

Prepaid expenses and other current assets

 

 

2,786

 

 

 

2,926

 

Total current assets

 

 

93,186

 

 

 

91,895

 

Restricted cash

 

 

216

 

 

 

216

 

Operating lease right-of-use assets

 

 

1,229

 

 

 

1,479

 

Long-term investments

 

 

 

 

 

32,459

 

Other assets

 

 

667

 

 

 

437

 

Total assets

 

$

95,298

 

 

$

126,486

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,181

 

 

$

2,823

 

Term loan, current portion

 

 

1,216

 

 

 

 

Accrued expenses and other current liabilities

 

 

8,604

 

 

 

6,048

 

Total current liabilities

 

 

12,001

 

 

 

8,871

 

Term loan, net of current portion

 

 

3,685

 

 

 

4,878

 

Operating lease liability, net of current portion

 

 

998

 

 

 

1,293

 

Other liabilities

 

 

139

 

 

 

73

 

Total liabilities

 

 

16,823

 

 

 

15,115

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized
   and
no shares issued or outstanding as of September 30, 2022 and
   December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value, 200,000,000 shares authorized as
   of September 30, 2022 and December 31, 2021;
23,560,250 and
   
23,491,881 shares issued and outstanding as of September 30, 2022
   and December 31, 2021, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

217,514

 

 

 

214,685

 

Accumulated other comprehensive loss

 

 

(873

)

 

 

(184

)

Accumulated deficit

 

 

(138,169

)

 

 

(103,133

)

Total stockholders’ equity

 

 

78,475

 

 

 

111,371

 

Total liabilities and stockholders’ equity

 

$

95,298

 

 

$

126,486

 

 

See accompanying notes to the condensed financial statements.

1


Table of Contents

 

SPRUCE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

8,791

 

 

$

8,607

 

 

$

26,359

 

 

$

24,440

 

General and administrative

 

 

2,766

 

 

 

2,793

 

 

 

8,814

 

 

 

8,491

 

Total operating expenses

 

 

11,557

 

 

 

11,400

 

 

 

35,173

 

 

 

32,931

 

Loss from operations

 

 

(11,557

)

 

 

(11,400

)

 

 

(35,173

)

 

 

(32,931

)

Interest expense

 

 

(110

)

 

 

(88

)

 

 

(291

)

 

 

(257

)

Interest and other income, net

 

 

266

 

 

 

41

 

 

 

428

 

 

 

80

 

Net loss

 

$

(11,401

)

 

$

(11,447

)

 

$

(35,036

)

 

$

(33,108

)

Unrealized (loss) gain on available for sale securities

 

 

(28

)

 

 

13

 

 

 

(689

)

 

 

(16

)

Comprehensive loss

 

$

(11,429

)

 

$

(11,434

)

 

$

(35,725

)

 

$

(33,124

)

Net loss per share, basic and diluted

 

$

(0.48

)

 

$

(0.49

)

 

$

(1.49

)

 

$

(1.42

)

Weighted-average shares of common stock outstanding,
   basic and diluted

 

 

23,560,250

 

 

 

23,367,140

 

 

 

23,515,651

 

 

 

23,330,399

 

 

See accompanying notes to the condensed financial statements.

2


Table of Contents

 

SPRUCE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of June 30, 2022

 

 

23,560,250

 

 

$

3

 

 

$

216,731

 

 

$

(845

)

 

$

(126,768

)

 

$

89,121

 

Stock-based compensation

 

 

 

 

 

 

 

 

783

 

 

 

 

 

 

 

 

 

783

 

Unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,401

)

 

 

(11,401

)

Balance as of September 30, 2022

 

 

23,560,250

 

 

$

3

 

 

$

217,514

 

 

$

(873

)

 

$

(138,169

)

 

$

78,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

23,491,881

 

 

$

3

 

 

$

214,685

 

 

$

(184

)

 

$

(103,133

)

 

$

111,371

 

Exercise of stock options

 

 

992

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock related to
   employee stock purchase plan

 

 

25,545

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

38

 

Issuance of common stock related to
   vesting of restricted stock units,
   net of tax withholdings

 

 

41,832

 

 

 

 

 

 

(40

)

 

 

 

 

 

 

 

 

(40

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,829

 

 

 

 

 

 

 

 

 

2,829

 

Unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

(689

)

 

 

 

 

 

(689

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,036

)

 

 

(35,036

)

Balance as of September 30, 2022

 

 

23,560,250

 

 

$

3

 

 

$

217,514

 

 

$

(873

)

 

$

(138,169

)

 

$

78,475

 

 

 

 

 

3


Table of Contents

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of June 30, 2021

 

 

23,370,070

 

 

$

3

 

 

$

212,634

 

 

$

(29

)

 

$

(82,502

)

 

$

130,106

 

Exercise of stock options

 

 

9,817

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,031

 

 

 

 

 

 

 

 

 

1,031

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,447

)

 

 

(11,447

)

Balance as of September 30, 2021

 

 

23,379,887

 

 

$

3

 

 

$

213,682

 

 

$

(16

)

 

$

(93,949

)

 

$

119,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

23,260,399

 

 

$

2

 

 

$

210,266

 

 

$

 

 

$

(60,841

)

 

$

149,427

 

Exercise of stock options

 

 

109,361

 

 

 

1

 

 

 

159

 

 

 

 

 

 

 

 

 

160

 

Issuance of common stock related to
   employee stock purchase plan

 

 

10,127

 

 

 

 

 

 

96

 

 

 

 

 

 

 

 

 

96

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,161

 

 

 

 

 

 

 

 

 

3,161

 

Unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,108

)

 

 

(33,108

)

Balance as of September 30, 2021

 

 

23,379,887

 

 

$

3

 

 

$

213,682

 

 

$

(16

)

 

$

(93,949

)

 

$

119,720

 

 

See accompanying notes to the condensed financial statements.

4


Table of Contents

 

SPRUCE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(35,036

)

 

$

(33,108

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,829

 

 

 

3,161

 

Depreciation and amortization

 

 

50

 

 

 

48

 

Amortization of premium on investments

 

 

109

 

 

 

60

 

Non-cash lease expense

 

 

250

 

 

 

233

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

140

 

 

 

1,738

 

Other assets

 

 

78

 

 

 

131

 

Accounts payable and accrued expenses

 

 

1,864

 

 

 

1,753

 

Other liabilities

 

 

(229

)

 

 

(94

)

Net cash used in operating activities

 

 

(29,945

)

 

 

(26,078

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(8

)

 

 

(87

)

Purchases of investments

 

 

(33,869

)

 

 

(73,098

)

Proceeds from maturities of investments

 

 

43,000

 

 

 

 

Net cash provided by (used in) investing activities

 

 

9,123

 

 

 

(73,185

)

Financing activities

 

 

 

 

 

 

Payment of deferred offering costs

 

 

(277

)

 

 

 

Proceeds from exercise of stock options

 

 

2

 

 

 

160

 

Proceeds from issuance of common stock related to employee stock purchase plan

 

 

38

 

 

 

96

 

Tax withholding payments on restricted stock units

 

 

(40

)

 

 

 

Proceeds from issuance of term loan, net of issuance costs of $10

 

 

 

 

 

4,990

 

Repayment of term loan

 

 

 

 

 

(4,770

)

Net cash (used in) provided by financing activities

 

 

(277

)

 

 

476

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(21,099

)

 

 

(98,787

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

42,964

 

 

 

157,366

 

Cash, cash equivalents, and restricted cash at end of period

 

$

21,865

 

 

$

58,579