Spero Therapeutics, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, operator, and thank you all for participating in today's conference call. This afternoon, Spero Therapeutics released financial results and provided a business update for the second quarter of 2026. A press release is available on the investor page of the Spero Therapeutics website. Before we begin, I would like to remind you that some of the information presented on this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are based on Spero's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These risks and uncertainties associated with our business and factors that could cause or contribute to such differences are described in Spero's filings with the Securities and Exchange Commission, including in the Risk Factors section of the earnings report on Form 10-Q for the quarter ended June 30, 2026, filed today. Leading the call today are Esther Rajavelu, our President and Chief Executive Officer, and Dr. Debra Jeske Zack, our Chief Medical Officer. There will be a Q&A session following the prepared remarks. I will now turn the call over to Esther to begin.

Thank you, Shai. Good afternoon, everyone, and thank you for joining us on our second quarter earnings and business update call. I will begin with key highlights from the quarter, outline our strategy and priorities going forward, and then review our financial results. In the last 90 days, we had four major milestones. The FDA approved Utebzi, the first and only oral carbapenem for the treatment of complicated urinary tract infections, including pyelonephritis, which we developed with our licensing partner, GSK. We in-licensed SP001 and repositioned the company's pipeline to focus on immune-mediated diseases. We closed $105 million non-dilutive, non-recourse financing, and we hired a Chief Medical Officer. Let me start with the last one by welcoming Dr. Debra Jeske Zack to the Spero team as our CMO. Deb is a board-certified rheumatologist with a PhD in immunology and extensive drug development experience spanning research, clinical development, and medical affairs.

She brings more than 25 years of leadership in developing therapeutics for immune-mediated diseases, most recently as CMO at Exagen, and before that in clinical leadership roles at Amgen, Xencor, and Novartis. She officially joined Spero as CMO on August 3rd to lead our clinical development strategy as we advance SP001 into the clinic. Deb, welcome. We are so glad you are here and look forward to your comments on SP001 later during this call. Let me now turn to the quarter. On June 17th, the FDA approved Utebzi, or tebipenem HBr, for the treatment of complicated urinary tract infections, including pyelonephritis, caused by certain susceptible pathogens in patients who have limited or no alternative oral treatments. It is the first and only oral carbapenem antibiotic approved in the United States. The approval was based on PIVOT-PO, the phase III study we ran under our license agreement with GSK. The study was stopped early for efficacy in May 2025.

GSK holds exclusive commercialization rights worldwide, excluding certain Asian territories where Meiji retains rights. GSK expects Utebzi to be available to U.S. patients in the second half of this year. Following more than a decade of commitment and work by the Spero team to progress this asset through the clinic, Utebzi's approval provided the company an opportunity to pursue other growth prospects in immunological diseases with high unmet medical need. Which brings me to our announcements in July. On July 8th, we announced an exclusive license agreement with Innovent Biologics for SP001, also known as IBI355, for an estimated $1.1 billion in total contingent deal value. Separately, on July 8th, we also announced $105 million non-dilutive, non-recourse royalty financing with affiliates of HealthCare Royalty Partners, a business of KKR. Let me begin with our newly in-licensed asset, SP001.

Our agreement with Innovent provides us with exclusive worldwide rights, excluding Greater China, to develop and commercialize SP001 for all indications. Innovent retains rights in Greater China. SP001 is a third-generation, fully humanized Fc-silent IgG1 monoclonal antibody targeting CD40 ligand. In the clinic, SP001 completed two phase I studies in healthy volunteers, including a single ascending dose and a multiple ascending dose study, as well as a phase I-B multiple ascending dose study in primary Sjögren's disease. Data from the Sjögren's disease trial were presented in a poster at the EULAR Congress in June this year. We intend to advance SP001 in Immunoglobulin G4-related disease, or IgG4-RD, with a phase II trial expected to begin in the second quarter of 2027. In parallel, we will also evaluate additional development opportunities to potentially expand the SP001 value proposition.

Dr. Zack will cover details on the drug, the CD40 ligand mechanism, and our development plan in IgG4-RD. Moving on to our financing. We closed $105 million non-dilutive, non-recourse royalty financing with HealthCare Royalty Partners. The structure of the financing, which is also discussed in our 10-Q filed today and our 8-K filed on July 8th, is as follows. A special purpose subsidiary issued $105 million in senior secured notes. The notes carry a 10% annual interest rate and a nine-year maturity. Principal and interest are payable quarterly and are derived solely from the milestone and royalty payments GSK owes us on Utebzi. After the notes are repaid, Spero retains 35% of additional GSK milestone and royalty proceeds. Let me take a moment to emphasize that the notes are non-recourse to Spero, and our other assets are not exposed to Utebzi launch or sales risks.

This transaction further strengthened our balance sheet and provided non-dilutive capital as we embark on an immunology-focused strategy. By unlocking immediate value from a portion of future Utebzi milestone and royalty streams, we are well-positioned to execute on the clinical development for SP001. Following the transaction, we updated our cash runway guidance into the second half of 2029. Spero was founded with the strategy of in-licensing promising clinical stage assets and with an experienced and focused team advancing those programs through clinical development to commercialization. Following these transactions, we believe we continue to be well-positioned to execute on our business strategy. I will now turn the call over to Deb to provide an overview of SP001 CD40 ligand as a target and our development plan for IgG4-RD.

Thank you, Esther. I am thrilled to join the Spero team as CMO, and I look forward to working together to bring this important candidate to patients. I will begin today with an overview of the asset, SP001. Then I will share our preliminary development plans for IgG4-RD, subject to future discussions with the FDA. SP001 is a third-generation, fully humanized Fc-silent IgG1 monoclonal antibody targeting CD40 ligand. Let me explain why this target and this molecule are attractive opportunities for clinical development. CD40 ligand is an upstream immune activation signal. It sits at the interface of adaptive and innate immunity, orchestrating the interactions between T cell, B cell, and antigen-presenting cells. Blocking CD40 ligand interrupts a critical activation signal. Patients with immune-mediated diseases could experience meaningfully different therapeutic benefits by inhibiting CD40 ligand because we would be modulating the conversation between immune cells before they become pathogenic.

The biology of this pathway has been well-studied for over two decades, and therapeutic targeting has been clinically validated. T cells talk to B cells and macrophages using the same molecule, the CD40 ligand, which serves as a go signal. The antigen-presenting cell, which is the immune system's alarm, gets the signal and acts to release more inflammatory cytokines, survive longer, and continue to support the T cells. The B cell gets the signal and acts to proliferate, switch antibody class, and produce more antibodies, including IgG4. We believe this mechanism has the potential to modulate multiple components of the disease process simultaneously, which is why this target could be attractive across multiple autoimmune indications and not just one. We will advance SP001 first in IgG4-related disease, with a phase II trial expected to begin in the second quarter of 2027.

IgG4-related disease is a serious chronic fibroinflammatory disease that can affect nearly every organ system, including the pancreas, kidneys, salivary and tear glands, the aorta, lungs, even the lining of the brain. Patients are typically 50 to 70 years old. Over time, that inflammation causes scarring and fibrosis, and if left undertreated, it can progress to organ failure. A successful treatment should aim to reduce flares and treat the underlying course of disease. There are an estimated 20,000 to 40,000 diagnosed patients in the U.S., and we believe diagnosis rates should increase as a disease-specific diagnostic code was just implemented 2 and a half years ago in October of 2023. Treatment guidelines are being revised, which we believe will broaden the addressable market. IgG4-RD is defined by B-cells and the antibodies they make. But B-cells don't act alone in this disease.

The disease burden can also be attributed to T-cells and macrophages, along with the B-cells, all creating inflammatory and pro-fibrotic signals. Targeting CD40 ligand, which sits upstream of all of these, could theoretically turn down several sources of pathology at once, including antibody production, antigen presentation, and potentially fibrotic signals. Currently, diagnosed patients are monitored until the disease flares, and at that point, one of a few off-label options, such as steroids with or without disease-modifying antirheumatic drugs, are used to control the flare for most patients. If the flare remains uncontrolled, patients often progress to B-cell depleters such as off-label rituximab and the recently approved Uplizna. The result is that these patients continue on a cycle of remission and relapse as the depleted B-cells repopulate over time, and there's no option at the present time for durable long-term disease control for these patients.

The current development landscape for IgG4-RD, where all the other biologic agents either deplete or inhibit B-cells only, leaves room for an additional mechanism to enter development. We believe that CD40 ligand inhibition may offer a differentiated approach relative to therapies that target B-cells alone by disrupting the pathologic interaction between T-cells and the B-cells that contribute to disease activity. We believe it is important to target the BT cell co-stimulation process in IgG4-RD because it can potentially help to stop the fibroinflammatory process from worsening while also controlling flares more consistently. Our planned phase II trial is aimed at establishing proof of concept in IgG4-RD. We anticipate running an open-label trial with six-monthly dosing in two dosing arms, enrolling up to 15 patients in each arm. I will now turn the call back to Esther to review the quarterly financials.