SEC Filing | Spruce Biosciences

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

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


☐	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.

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

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.

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.

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

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.

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