SEC Filing | Spruce Biosciences

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10-Q

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


☐	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.

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.

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.

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.

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.

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.

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			—
Other liabilities		(82	)		(131	)
Net cash used in operating activities		(9,797	)		(21,367	)
Cash flows from investing activities
Purchases of investments		(11,881	)		(12,978	)
Purchases of property and equipment		—			(6	)
Proceeds from maturities of investments		44,365			39,000
Net cash provided by investing activities		32,484