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Spero (SPRO) Skyrockets 168% on Licensing Deal With GSK

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Shares of Spero Therapeutics (SPRO - Free Report) surged 168% after it announced an exclusive license agreement with GSK (GSK - Free Report) for its experimental antibiotic candidate, tebipenem HBr.

Tebipenem HBr is being developed to treat complicated urinary tract infection (“cUTI”), including pyelonephritis, caused by specific microorganisms in adult patients with limited treatment options.

Per the terms of the agreement, Spero will receive an upfront payment of $66 million from GSK to grant the latter exclusive development and commercialization rights to the medicine. GSK will have the right to market the drug in all territories except Japan and certain other Asian countries. While Spero will be responsible for the follow-up late-stage study evaluating tebipenem HBr, GSK will be responsible for additional clinical development on the candidate and bear the costs for regulatory submissions and commercialization activities. In addition, GSK will also invest $9 million in Spero’s common stock. However, GSK will not hold more than a 20% equity stake in SPRO.

Spero does not have any marketed drugs in its portfolio. A partnership with a pharma giant like GSK, which has huge cash resources and industry expertise and a global commercial presence, will help SPRO fund its other pipeline candidates currently undergoing clinical development. Following the deal with GSK, Spero expects that its current cash runway will be sufficient to fund its operations beyond 2024.

Spero will also be eligible to receive potential milestone payments from GSK. The company will also be eligible to receive tiered royalties on net product sales if the candidate is approved.

In the year so far, shares of Spero Therapeutics have plunged 86.3% compared with the industry’s 26.8% fall.

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In June, Spero received a complete response letter (CRL) from the FDA for an NDA seeking approval for tebipenem HBr to treat adult patients with certain bacterial microorganisms that cause cUTI, including pyelonephritis. In the CRL, the regulatory body concluded that the data from the phase III ADAPT-PO study was insufficient to support approval during the prior review cycle.

This month, Spero announced that it achieved common ground with the FDA on the regulatory path forward for tebipenem HBr in cUTI. The regulatory body indicated that positive results from a single additional phase III study, supported by confirmatory nonclinical evidence of efficacy, could be sufficient to back the approval of tebipenem HBr for treating cUTI, including pyelonephritis for a limited use indication.

SPRO also reached alignment with the FDA on key components of the proposed pivotal phase III study design. Management intends to start this study next year.

The successful development of the candidate will be a significant boost for a clinical-stage biopharmaceutical company like SPRO. If approved, tebipenem HBr will be the first oral carbapenem antibiotic in the United States.

The meeting was also conducted to discuss the steps required to resubmit the new drug application (NDA) for tebipenem HBr to treat cUTI, including pyelonephritis.

While tebipenem HBr is Spero’s most advanced pipeline candidate, the company is also evaluating other pipeline candidates. SPRO is also developing SPR720 as a novel oral therapy product candidate for treating a rare, orphan pulmonary disease caused by non-tuberculous mycobacterial infections.

The company has an IV-administered next-generation polymyxin product candidate, SPR206, in its pipeline being developed to treat multi-drug resistant Gram-negative infections in the hospital setting.

The development of SPR206 is supported by funding from the National Institute of Allergy and Infectious Diseases. Spero also has a license agreement with Pfizer (PFE - Free Report) for the same.

Pfizer previously announced a $40-million equity investment in Spero. Per the terms, Pfizer has the right to develop, manufacture and commercialize SPR206 in ex-U.S. and ex-Asia territories. In lieu, Spero is eligible to receive up to $80 million in development and sales milestone payments and high single-digit to low double-digit royalties on net sales of SPR206 in these territories.

In July, SPRO achieved a regulatory milestone under its license agreement with Pfizer, which will earn it a $5-million milestone payment expected in the third quarter of 2022.


Zacks Rank & Stock to Consider

Spero Therapeutics currently carries a Zacks Rank #2 (Buy).A better-ranked stock in the overall healthcare sector is Morphic (MORF - Free Report) , which sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for Morphic’s 2022 loss per share have narrowed from $3.38 to $1.80. Loss estimates for 2023 have narrowed from $3.91 to $3.62 during the same period. Shares of Morphic have lost 43.3% in the year-to-date period.

Earnings of Morphic beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 48.29%, on average. In the last reported quarter, MORF delivered an earnings surprise of 183.95%.

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