10-Q
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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 June 30, 2023

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.)

611 Gateway Boulevard, Suite 740

South San Francisco, California

94080

(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 August 10, 2023, the registrant had 40,710,692 shares of common stock, $0.0001 par value per share, outstanding.

 

i


 

 

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

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

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

 

 


 

 

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 (“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 (“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 and geopolitical conditions could adversely affect our business, financial condition or results of operations.
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.
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.

 


 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SPRUCE BIOSCIENCES, INC.

CONDENSED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

97,482

 

 

$

24,487

 

Short-term investments

 

 

23,041

 

 

 

54,590

 

Prepaid expenses

 

 

3,400

 

 

 

3,320

 

Other current assets

 

 

206

 

 

 

1,211

 

Total current assets

 

 

124,129

 

 

 

83,608

 

Right-of-use assets

 

 

1,297

 

 

 

1,400

 

Other assets

 

 

536

 

 

 

640

 

Total assets

 

$

125,962

 

 

$

85,648

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

945

 

 

$

1,426

 

Accrued expenses and other current liabilities

 

 

12,107

 

 

 

9,399

 

Term loan, current portion

 

 

1,622

 

 

 

1,622

 

Deferred revenue, current portion

 

 

8,060

 

 

 

 

Total current liabilities

 

 

22,734

 

 

 

12,447

 

Lease liabilities, net of current portion

 

 

1,147

 

 

 

1,261

 

Term loan, net of current portion

 

 

2,507

 

 

 

3,293

 

Deferred revenue, net of current portion

 

 

2,811

 

 

 

 

Other liabilities

 

 

202

 

 

 

161

 

Total liabilities

 

 

29,401

 

 

 

17,162

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized and
   
no shares issued or outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized as of
   June 30, 2023 and December 31, 2022;
40,710,692 and 23,601,004 shares
   issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

4

 

 

 

3

 

Additional paid-in capital

 

 

271,540

 

 

 

218,354

 

Accumulated other comprehensive loss

 

 

(55

)

 

 

(558

)

Accumulated deficit

 

 

(174,928

)

 

 

(149,313

)

Total stockholders’ equity

 

 

96,561

 

 

 

68,486

 

Total liabilities and stockholders’ equity

 

$

125,962

 

 

$

85,648

 

 

See accompanying notes to the condensed financial statements.

1


 

 

SPRUCE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Collaboration revenue

 

$

2,165

 

 

$

 

 

$

4,129

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,126

 

 

 

9,060

 

 

 

24,838

 

 

 

17,568

 

General and administrative

 

 

3,011

 

 

 

2,822

 

 

 

6,462

 

 

 

6,048

 

Total operating expenses

 

 

16,137

 

 

 

11,882

 

 

 

31,300

 

 

 

23,616

 

Loss from operations

 

 

(13,972

)

 

 

(11,882

)

 

 

(27,171

)

 

 

(23,616

)

Interest expense

 

 

(127

)

 

 

(94

)

 

 

(258

)

 

 

(181

)

Interest and other income, net

 

 

1,275

 

 

 

104

 

 

 

1,814

 

 

 

162

 

Net loss

 

 

(12,824

)

 

 

(11,872

)

 

 

(25,615

)

 

 

(23,635

)

Other comprehensive gain (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available for sale securities

 

 

133

 

 

 

(152

)

 

 

503

 

 

 

(661

)

Total comprehensive loss

 

$

(12,691

)

 

$

(12,024

)

 

$

(25,112

)

 

$

(24,296

)

Net loss per share, basic and diluted

 

$

(0.32

)

 

$

(0.51

)

 

$

(0.71

)

 

$

(1.01

)

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

 

 

40,547,925

 

 

 

23,493,613

 

 

 

36,247,931

 

 

 

23,492,960

 

 

See accompanying notes to the condensed financial statements.

2


 

 

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 March 31, 2023

 

 

39,746,116

 

 

$

4

 

 

$

270,285

 

 

$

(188

)

 

$

(162,104

)

 

$

107,997

 

Exercise of pre-funded warrants

 

 

800,000

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Issuance of common stock related to employee stock purchase plan

 

 

102,984

 

 

 

 

 

 

99

 

 

 

 

 

 

 

 

 

99

 

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

 

 

61,592

 

 

 

 

 

 

(71

)

 

 

 

 

 

 

 

 

(71

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,219

 

 

 

 

 

 

 

 

 

1,219

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

133

 

 

 

 

 

 

133

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,824

)

 

 

(12,824

)

Balance as of June 30, 2023

 

 

40,710,692

 

 

$

4

 

 

$

271,540

 

 

$

(55

)

 

$

(174,928

)

 

$

96,561

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2023

 

 

23,601,004

 

 

$

3

 

 

$

218,354

 

 

$

(558

)

 

$

(149,313

)

 

$

68,486

 

Exercise of pre-funded warrants

 

 

800,000

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Issuance of common stock related to employee stock purchase plan

 

 

102,984

 

 

 

 

 

 

99

 

 

 

 

 

 

 

 

 

99

 

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

 

 

90,704

 

 

 

 

 

 

(94

)

 

 

 

 

 

 

 

 

(94

)

Issuance of common stock and warrants, net of offering costs of $2,721

 

 

16,116,000

 

 

 

1

 

 

 

50,894

 

 

 

 

 

 

 

 

 

50,895

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,279

 

 

 

 

 

 

 

 

 

2,279

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

503

 

 

 

 

 

 

503

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,615

)

 

 

(25,615

)

Balance as of June 30, 2023

 

 

40,710,692

 

 

$

4

 

 

$

271,540

 

 

$

(55

)

 

$

(174,928

)

 

$

96,561

 

See accompanying notes to the condensed financial statements.

 

3


 

 

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 March 31, 2022

 

 

23,492,873

 

 

$

3

 

 

$

215,828

 

 

$

(693

)

 

$

(114,895

)

 

$

100,243

 

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

 

 

 

 

 

 

 

 

905

 

 

 

 

 

 

 

 

 

905

 

Unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

(152

)

 

 

 

 

 

(152

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,872

)

 

 

(11,872

)

Balance as of June 30, 2022

 

 

23,560,250

 

 

$

3

 

 

$

216,731

 

 

$

(845

)

 

$

(126,768

)

 

$

89,121

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2022

 

 

23,491,881

 

 

$

3

 

 

$

214,685

 

 

$

(184

)

 

$

(103,133

)

 

$

111,371

 

Exercise of common 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

 

 

 

 

 

 

 

 

2,046

 

 

 

 

 

 

 

 

 

2,046

 

Unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

(661

)

 

 

 

 

 

(661

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,635

)

 

 

(23,635

)

Balance as of June 30, 2022

 

 

23,560,250

 

 

$

3

 

 

$

216,731

 

 

$

(845

)

 

$

(126,768

)

 

$

89,121

 

See accompanying notes to the condensed financial statements.

4


 

 

SPRUCE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(25,615

)

 

$

(23,635

)

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

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,279

 

 

 

2,046

 

Depreciation and amortization

 

 

37

 

 

 

27

 

Net amortization (accretion) of premium/discount on available-for-sale securities

 

 

(432

)

 

 

108

 

Non-cash lease expense

 

 

114

 

 

 

166

 

Loss on disposal of property and equipment

 

 

2

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

709

 

 

 

(285

)

Other assets

 

 

145

 

 

 

27

 

Accounts payable

 

 

(481

)

 

 

(1,378

)

Accrued expenses and other current liabilities

 

 

2,656

 

 

 

1,688

 

Deferred revenue

 

 

10,871