On Monday, H.C. Wainwright adjusted its outlook on Spero Therapeutics (NASDAQ:SPRO), lowering the price target to $5 from the previous $7 while maintaining a Buy rating on the stock. This revision follows Spero Therapeutics' announcement last week regarding the interim results of their Phase 2a proof-of-concept study for SPR720, a treatment for nontuberculous mycobacterial pulmonary disease (NTM-PD).
The study's interim analysis revealed that SPR720 did not meet its primary endpoint. Although there was evidence of antimicrobial activity, there wasn't a significant enough difference from the placebo to continue. Additionally, safety concerns arose with subjects who received a 1,000mg oral dose once daily, including reversible Grade 3 hepatotoxicity in three cases.
In response to these findings, Spero Therapeutics decided to suspend the current development program for SPR720. The company plans to assess alternative pathways for the drug as it continues to analyze the remaining data. Concurrently, Spero will implement a restructuring plan, including a workforce reduction of about 39%, to focus resources on developing other products such as tebipenem HBr and SPR206, as well as exploring potential strategic initiatives.
Spero Therapeutics reported closing the third quarter of 2024 with an unaudited cash position of $76.3 million. The company estimates that its financial resources, combined with earned and non-contingent development milestone payments, as well as other non-dilutive funding commitments, should sustain its operating expenses and capital expenditures into mid-2026.
Following the outcome of the SPR720 trial, H.C. Wainwright has removed this candidate from its valuation assessment, which led to the reduction in the price target. Despite this setback, the firm has reiterated its Buy rating for Spero Therapeutics, reflecting a continued positive outlook on the company's stock.
In other recent news, Spero Therapeutics has experienced a series of developments. The company announced the suspension of its SPR720 program after an interim analysis revealed the drug did not meet the primary endpoint in a Phase 2a study. Responding to this, Spero is undergoing a significant restructuring, including a workforce reduction of about 39%, expected to extend the company's cash runway into mid-2026.
Despite this setback, the company continues to advance other programs, including tebipenem HBr, which is in a global Phase 3 clinical trial. Spero has also planned a Phase 2 clinical trial for SPR206, contingent on continued non-dilutive funding.
Financially, Spero Therapeutics reported a rise in Q2 2024 revenue to $10.2 million, but also a net loss of $17.9 million. The company maintains a strong cash position with $63.5 million in cash and cash equivalents.
H.C. Wainwright reaffirmed a Buy rating on Spero Therapeutics, following the publication of their Phase 1 trial data. Lastly, the company announced some executive changes, including the departure of their Chief Medical Officer and the appointment of Dr. John Pottage as interim clinical lead.
InvestingPro Insights
In light of Spero Therapeutics' recent challenges, InvestingPro data offers additional context to the company's financial situation. Despite the setback with SPR720, SPRO's balance sheet shows resilience, with the company holding more cash than debt. This aligns with the company's statement about having sufficient resources to fund operations into mid-2026.
However, the market has reacted negatively to recent developments, with InvestingPro data showing a 8.53% decline in stock price over the past week. This reaction is consistent with the news of the suspended SPR720 program and planned workforce reduction.
InvestingPro Tips highlight that analysts anticipate a sales decline in the current year, which may reflect the impact of the SPR720 setback on near-term revenue projections. On a positive note, the company is trading at a low revenue valuation multiple, which could present an opportunity for investors who believe in Spero's remaining pipeline.
For those seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for SPRO, providing a deeper understanding of the company's financial health and market position.
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