Spero Therapeutics, Inc. (SPRO) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Spero Therapeutics Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the company’s formal remarks, we will open the call up for questions. Please be advised that this call is being recorded and a replay will be available. You can find information on the replay and further information related to today's announcement on the Spero Therapeutics website at www.sperotherapeutics.com. At this time, I'd like to turn the call over to Ted Jenkins, Vice President, Head of Investor Relations at Spero Therapeutics. Mr. Jenkins, please go ahead.

Thank you, operator, and thank you all for participating in today's conference call. This afternoon Spero Therapeutics released financial results and provided a pipeline update for the third quarter of 2021. Our press release is available on the Investors page of the Spero Therapeutics website. Before we begin, I'd like to remind you that some of the information contained in the news release and on this conference call contain forward-looking statements based on our current expectations, including statements about the potential approval of tebipenem HBr by the FDA; the timing of the launch of tebipenem HBr, future commercialization, the potential number of patients who could be treated by tebipenem HBr, and market demand for tebipenem HBr generally; also, expected broad access across payer channels for tebipenem HBr; the expected pricing of tebipenem HBr and the anticipated shift in treating patients from intravenous to oral administration. Further, the plans for the company's ongoing development of SPR720; statements about the future development and commercialization of SPR206, and the potential receipt of milestone payments as well as royalties on potential future sales of SPR206; the design initiation timing, progress and result of the company's pre-clinical studies and clinical trials and its research and development programs; management's assessment of the results of such pre-clinical studies and clinical trials; the impact of the COVID-19 pandemic on the company's business, and operations; and the company's cash forecast and anticipated expenses; the sufficiency of its cash resources and the availability of additional non-dilutive funding from governmental agencies, beyond any initial funded awards. And such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Spero Therapeutics' filings with the SEC, included in the Risk Factors section of our quarterly report on Form 10-Q filed today. These forward-looking statements speak only as of the date of this conference call, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the company after the date of today's release and call. Participating in today's call are Dr. Ankit Mahadevia, Chief Executive Officer; Dr. David Melnick, Chief Medical Officer; Cristina Larkin, Chief Operating Officer; Sath Shukla, our Chief Financial Officer. With that, I'd like to turn the call over to Dr. Ankit Mahadevia. Please go ahead, Ankit.

Thank you, Ted, and thanks to all for joining us today to discuss our third quarter financial results and our corporate highlights. Spero's primary focus remains on preparing for an anticipated tebipenem HBr commercial launch in the second half of 2022. And I'm pleased to say that, over the past months, we've achieved key milestones to advance our efforts towards this important goal. Chief among these milestones was our recent submission of an NDA package, seeking approval for tebipenem HBr tablets for the treatment of complicated urinary tract infections, including pyelonephritis caused by susceptible microorganisms. A key part of this NDA package is the positive data set from our Phase III ADAPT-PO clinical trial. These data showed that, ADAPT-PO met its primary endpoint by demonstrating within an all-oral regimen of tebipenem HBr, was non-inferior to an all-IV regimen of ertapenem for the treatment of complicated urinary tract infection or cUTI and acute pyelonephritis or AP. Previous FDA interactions and written communications support our efforts to advance tebipenem HBr towards commercialization. They indicate the positive results from single well-controlled pivotal trials such as ADAPT-PO, could be sufficient to support the approval of an NDA for tebipenem HBr in the treatment of cUTI, including pyelonephritis. Further, through a pre-NDA meeting, the FDA also previously endorsed the structure in the form of our recent NDA submission. The agency indicated that, the data set and CMC plan that are now included in the package meet FDA submission standards. Given our submission date of 27 October, we anticipate that, if FDA's initial two-month review during this filing period is successful, the formal NDA review clock will start at the end of the year with a PDUFA date six months from that point or in mid-2022. In addition to supporting our NDA submission, another key goal of the ADAPT-PO trial was to provide physicians with the confidence needed to prescribe oral tebipenem HBr to cUTI patients who would otherwise receive IV therapy. We therefore designed ADAPT-PO as the first ever head-to-head comparison of an all-oral versus an all-IV regimen in cUTI. Thanks to this rigorous design, we believe we have achieved our goal as data show that tebipenem HBr can provide the convenience of an oral therapy without making compromises on clinical response safety or tolerability. If approved, tebipenem HBr would become the only oral carbapenem available for cUTI patients. It has the potential to deliver value to patients, health care providers and payers. This value includes avoidance of IV therapy, reduction or elimination of hospital stays and better health care resource utilization overall. We are encouraged by the response to date to the potential of tebipenem HBr. Our clinician colleagues have been supportive of the value proposition and payers have expressed their willingness to cover tebipenem HBr. This bodes well for the over two million cUTI patients, who could benefit from an oral carbapenem therapeutic. In preparation for commercial launch, we recently made some key hires that have added important experience and depth to our leadership team. These hires include the addition of Jimmy Brady, as our Chief Human Resources Officer. Jimmy most recently worked in the same position at UniQure and he has over 30 years of Senior Human Resources Leadership experience within the life science space. He's been deeply involved in guiding companies through their transition to commercial organizations. And we believe his expertise will serve us well as we continue to build our team in preparation for an anticipated tebipenem launch in the second half of next year. In addition to Jimmy, we further strengthened our leadership team by adding David Musselman, as Senior Vice President Sales and Market Access. We believe David's talent and expertise will be invaluable to our commercial prospects. He's worked in the pharmaceutical and biotech space for over 23 years and has extensive experience in urology and in launching drugs. He most recently served as Vice President of Specialty Sales at EuroVan, where he was responsible for building and executing on their first product launch. David also spent 13 years at Astellas, where he was the area Vice President, responsible for leading a team of 275 sales professionals. We're thrilled to have him on board and we believe, he is well positioned for success in this new role. Along with these additions to our leadership team, we also appointed Kathleen Tregoning to our Board of Directors. Kathleen is currently the Chief Corporate Affairs Officer at Cerevel Therapeutics and previously worked in the senior capacity at Sanofi Biogen and as a professional staff member for multiple committees in the United States Congress. She is extensive executive and public policy experience, as well as a deep understanding of external engagement strategies in the global payer environment. I'd like to now provide some updates on the 720 clinical program. As a reminder, SPR720 advanced into a Phase IIa clinical trial in patients with nontubercular microbacterial disease or NTM at the end of last year. The initiation of this trial was supported by positive data from Phase I single and multiple ascending dose trials, as well as nonclinical toxicology studies in nonhuman primates and rodents. Within these studies, multiple subjects in LD volunteers were dosed and no severe or serious adverse events were ever observed. As the Phase IIa trial was being conducted, however, we were also simultaneously engaged in an additional longer-term toxicology study in nonhuman primates. Surprisingly and in contrast to the positive Phase I SAD/MAD human experience, unexplained nonhuman mortalities occurred. This led us to pause the Phase IIa clinical trial and promptly notify FDA of these findings. We then subsequently received a clinical hold letter in which the FDA requested additional information from the nonhuman primate study, including the study report. We completed the nonhuman primate toxicology study in the third quarter and have finalized the study report and in-line with previous guidance we initiated engagement with FDA on the data in the fourth quarter. As we've discussed, the SPR720 data that we've seen to date, supports the hypothesis that the observed mortalities were not drug related, but rather study in species specific. This gives us confidence that there is a path forward for the SPR720 clinical program. This all said, the FDA's view of the data will be an important driver of our act. We will complete and review our interactions with FDA on the data this quarter and provide an update on the program thereafter. I would now like to briefly highlight our non-dilutive revenue interest financing agreement executed during the quarter with Healthcare Royalty Partners worth up to $125 million. This agreement preserves our financial flexibility and further derisks tebipenem HBr's anticipated launch by providing $50 million upfront, $50 million upon approval of tebipenem HBr in cUTI, and $25 million upon completion of a pre-specified commercial set of milestones and mutual agreement with Healthcare Royalty Partners. Additionally, we believe this agreement provides an important external validation for our commercial prospects and development pipeline given Healthcare Royalty Partners' extensive due diligence process and successful track record. In exchange for their investment, Healthcare Royalty Partners will receive a tiered royalty on applicable revenue generated by Spero. This royalty will begin in the low double-digits decreased to the low single-digits upon completion of certain annual revenue thresholds and phase out completely once the aggregate amount paid to Healthcare Royalty Partners is 2.5 times, the total investment amount funded. We believe these are favorable transaction terms that will preserve our financial flexibility and upside as we move towards tebipenem HBr's anticipated launch and work to advance SPR720 and SPR206 through clinical development. Lastly, before I hand it off to David, I'd like to recognize the hard work of our employees, our partners and our investigators, which allowed us to have a successful quarter amongst the ever-evolving circumstances of the COVID-19 pandemic. Thanks to their efforts, we have not seen any material impact from the pandemic this year. What the pandemic has done, however, is highlight the value of replacing IV therapies that are often administered in a hospital setting with an at-home oral option. We believe that tebipenem HBr if approved could provide such an option and enable a shift in care to the outpatient setting. This would provide value to patients, health care providers and payers alike as it would reduce patient exposure to COVID-19 and other secondary infections. Hospitals will also see a financial benefit and free up capacity for the seriously ill patients with no viable alternatives to hospitalization. I will now hand it over to David to provide a more detailed update on our clinical progress and our pipeline.

Thank you Ankit. It's my pleasure to -- pipeline updates with you today. I'd like to start. I'd like to start by first thanking all those who made the recent tebipenem HBr NDA filing possible with strong emphasis on the patients who participated in our clinical trials. This is a landmark achievement for Spero. And we look forward to working closely with the FDA throughout the review process. Alongside of our regulatory efforts, we also continue to work with external partners to ramp up our CMC capabilities ahead of tebipenem's expected launch in the second half of 2022. These partners notably include Majiseka [ph] whose experienced manufacturing and oral granular formulation of tebipenem over the last decade will be invaluable as we move forward toward commercialization. We are also continuing our work to educate the clinical community on the utility of tebipenem HBr and the potential benefits it could provide to health care providers, payers and patients. A peer-reviewed manuscript reporting the ADAPT-PO trial results has been provisionally accepted and we expect publication in the first quarter of 2022. Spero also attended IDWeek at the IDWeek conference in late September with 23 poster presentations, showcasing in-vitro and in-vivo studies of tebipenem HBr and highlighting the additional research on the epidemiology and management of complicated urinary tract infections. Beyond cUTI, ADAPT-PO data have also generated strong external interest from the medical community on the use of tebipenem HBr to treat other infections. For example, tebipenem HBr is being evaluated in the MARINA-4 trial, which is being conducted by the antibacterial resistance leadership group and has sponsored by the National Institute of Allergy and Infectious diseases. As a reminder, this trial is designed to compare early transition to oral tebipenem with continued intravenous carbapenem therapy in patients with bloodstream infections caused by ESBL-positive bacteria. We anticipate that patients will start dosing in this study during 2022. We have also successfully completed the BARDA-funded Phase 1 bronchoalveolar lavage trial, assessing the lung penetration of tebipenem HBr and we anticipate presenting these data at an upcoming medical meeting. These studies are part of a broader umbrella of building partnerships with our clinical colleagues. As part of this, our Medical Affairs team has interacted with over 500 infectious diseases physicians and urologists to date. Shifting gears, I will now speak briefly on SPR720 our oral drug candidate in development for the treatment of NTM infections. Since Ankit already spoke about the events that led to the program's clinical hold, I'll just emphasize a few additional points now, rather than repeating what you just went over. First, the observed mortalities in the nonhuman primate study that led to the hold did not correlate with either the dose nor with the duration of SPR720 drug exposure. Further, adult nonhuman primates are known to be very challenging to dose which adds a level of complexity to the analysis. Finally, the findings from this nonhuman primate study are contrary to what we have seen in prior pre-clinical and clinical studies of SPR720. While we aren't going to disclose the specific findings from the nonhuman primate study until the FDA has given us their written feedback on the data. I will once again emphasize that based on all of the results we have seen to date, we remain confident that there is a path forward for the SPR720 clinical program. These data continue to support the hypothesis that the observed mortalities were not related to an off-target pharmacologic effect, but rather were specific either to the oral garage dosing method. And I'll again reiterate a point, I've made several times in the past which is that our previously announced decision to discrete fully [Indiscernible] was not I repeat not indicative of our opinion regarding the ultimate success of the SPR720 program. Rather, it was a strategic decision thus to a point costs from the trial while it's on hold and that may facilitate potential future adjustments to the Phase 2 clinical trial design. Looking ahead, we recently completed the full study report as requested by the FDA. When our FDA interactions and our internal review will complete, we will provide the market with an update on the SPR720 program. I'll now move on to discuss SPR206, our intravenously administered next-generation polymyxin product candidate. SPR206 is designed to act directly on the gram-negative bacterial infections through its interactions with the bacterial outer membrane. SPR206 has demonstrated potent broad spectrum activity against gram-negative bacteria including extensively drug-resistant variants. Through SPR206's clinical development, we hope to provide patients suffering from serious drug-resistant infections such as drug-resistant Acinetobacter, drug-resistant pseudomonas and carbapenemase producing enterobacteriaceae with a safer alternative compared to the current standard of care. Today patients with these infections are prescribed a drug combination that generally includes a carbapenem or beta lactamases inhibitor antibiotics along with polymyxin B or colistin despite these older polymyxins being associated with considerable nephrotoxicity in many patients. In contrast, data from our Phase 1 trial of SPR206 show a lack of nephrotoxicity at or above the predicted therapeutic dose. This clearly differentiates SPR206 compared to colistin and other polymyxin antibiotics and supports the hypothesis that SPR206 could replace colistin in the currently prescribed regimens and provide an alternative option for patients with significantly reduced risk of kidney injury. This would address a crucial unmet need as the CDC's antibiotic resistance threats report estimates 8,500 drug-resistant acinetobacter cases and 32,600 drug-resistant pseudomonas infections in the United States each year. Looking ahead, we continue to advance SPR's 206 clinical development with the support of several highly regarded partners including Pfizer, Everest Medicines, the Department of Defense and the National Institute of Allergy and Infectious Diseases. We have completed dosing in our Phase I bronchoalveolar lavage clinical study, which assesses the penetration of SPR206 into the pulmonary compartment and which remains on track for release data in early 2022. Given that many of our target patients for SPR206 suffer from lung infections. We believe that these data could represent a key inflection point for this program. In parallel, our ongoing Phase I renal impairment study of SPR206 is also progressing as planned. Data from this study, which will guide dosing in the many patients with multi-drug-resistant infections that have reduced kidney function and are also expected by early 2022. With that I will now turn the call over to our Chief Operating Officer, Cristina Larkin, who will provide you with a review of the market opportunity for our pipeline products and detail our strategy for the launch of tebipenem HBr.

Thank you, David and good afternoon, everyone. As we move closer to tebipenem HBr's potential commercialization, we continue to focus on being launch ready including building out our launch team. And as Ankit mentioned, we recently hired David Musselman as SVP of Sales and Market Access. David has experience in building field-facing teams, has been through multiple launches and has extensive experience in the urology space. Now David and the other commercial leaders are focused on three pillars that will launch readiness, which includes our field force deployment, our market access strategy and execution and our branded and unbranded HCP marketing campaign. In fact, we've already deployed our disease awareness campaign, which is our first initiative in our digital first plan. Now this includes an unbranded website, which is cutievolution.com. Now the site is an important tool to educate health care providers on the burden of cUTI and the resistance trends to currently available oral treatment options for cUTI. Now as we look ahead, we continue to prepare for a specialty-driven launch focused on urologists and infectious disease physicians. Now this strategy will allow us to capture a significant portion of the approximately 2 million cUTI patients in the US that we believe are appropriate for the treatment of tebipenem HBr if approved. Now there's a substantial opportunity in both the community and the hospital discharge market to convey a clear and compelling story to tebipenem's potential, clinical and economic benefits. Now in the community setting, tebipenem could potentially keep patients who have failed previous oral antibiotics or who are resistant to current oral cUTI therapy out of the hospital. And in the hospital discharge setting, tebipenem could give healthcare providers the ability to discharge cUTI patient center, highlighting the clinical and economic advantages of switching to oral therapy. Now the impact of cUTI in either setting can have a meaningful impact for both the patient and their family. Now this was highlighted recently when it was reported that former President, Bill Clinton was hospitalized with a complication associated with the urinary tract infection. Now President Clinton's experience highlights the example of the millions of patients that are impacted by cUTI annually. And the important role antibiotics can play in helping patients get back home and back to their families. And this has become especially important in a COVID-19 environment. We're avoiding the hospital or getting hump sooner from the hospital is a priority for everyone, especially the patients. Now this is why we continue to be so excited about tebipenem HBr's potential to keep patients out of the hospital or get them home sooner and has a tremendous opportunity to deliver value to all of our relevant stakeholders including healthcare providers, payers and most importantly, our patients. We believe we are poised for an exciting time ahead and look forward to continuing our efforts to plan for tebipenem's much anticipated potential approval and the commercial launch. Now with that, I'll turn the call over to Sath, who'll provide you with a financial update.

Thank you Cristina and good afternoon everyone. I'd now like to turn your attention to our overview of Spero's financial results for the quarter ended September 30, 2021. Total revenues for the third quarter of 2021 were $3.1 million, compared with revenues of $4 million in the third quarter of 2020. The revenue decrease was primarily due to a decrease in qualified expenses incurred under the BARDA contract for tebipenem HBr, partially offset by an increase in funding under our DoD agreement relating to SPR206 Research and development expenses for the third quarter of 2021 were $14.4 million, compared to $17.7 million for the same period in 2020. This year-over-year decrease was primarily due to the completion of significant activities in the Phase 3 clinical trial for tebipenem HBr and decreased spending associated with the clinical hold on the Phase 2a clinical trial for SPR720, offset partially by increased clinical study costs for SPR206 and an increase in personnel costs associated with additional research and development headcount. As we have stated earlier in the year, we expect our full-year R&D expenses in 2021 to be consistent relative to 2020. I will note that we expect fourth quarter R&D expenses to be more like our first quarter as opposed to the lower spend in Q2 and Q3, as we ramp up CMC activities and implementation of our medical affairs strategy to support a potential launch of tebipenem HBr in 2022. General and administrative expenses for the third quarter of 2021 of $11.2 million were higher than the $5.3 million reported for the same period in 2020, primarily due to an increase in headcount in our commercial, general and administrative functions, as well as an increase in professional and consulting fees, to support potential commercialization of tebipenem HBr. Consistent with prior quarters this year, we expect G& A expenses to continue to increase in the fourth quarter, as we build commercial capabilities and the infrastructure to support the expansion ahead of a potential tebipenem HBr commercial launch in 2022. We reported a net loss for the third quarter ended September 30, 2021 of $22.5 million, or $0.70 per common share, compared to a net loss of $18.9 million, or $0.86 per common share reported for the same period in 2020. As of September 30, 2021, we had cash, cash equivalents and marketable securities of $123.4 million. Based on current projections, Spero believes that this existing cash, cash equivalent and marketable securities, together with committed funding from its BARDA contract and other non-dilutive funding commitments to be sufficient to fund its operating expenses and capital expenditure requirements into the fourth quarter of 2022. This forecast does not include either the $50 million in upfront proceeds from the HealthCare Royalty Partners revenue interest financing agreement nor the additional $50 million milestone payment for potential approval of tebipenem HBr in 2022. These additional measures of liquidity if approval for tebipenem is achieved in 2022, should provide Spero with sufficient funding into the second half of 2022. For further details on our financials, please refer to our 10-Q filed with the SEC today. We would now like to open the call up for questions. Operator?

Thank you. [Operator Instructions] We'll now take our first question from Ritu Baral of Cowen. Your line is open. Please go ahead.

Good afternoon guys. Thanks for taking the question. I have two important ones and then I'll hop back in the queue. One can you give us a little more detail on the CMC inspection status of the Japanese plant that will be the primary source of commercial material. Is that currently GMP-certified and recently expected, or do you anticipate some flexibility surrounding inspections just given the pandemic? And then I have a question on current resistant rates. Go ahead. I'll ask it later.

Yes. Great. Thanks for the question. Hi Ritu.

Hi.

Yes. So, we've been building the CMC supply chain with our partner Meiji Seika for several years. And as a reminder Meiji Seika has been producing tebipenem HBr for its own uses for commercial sale for nearly a decade. And so we have a lot of confidence in the standards at which that plant has developed. And as we step back and think about the impact of the pandemic and the FDA put out a publication earlier this year noting that a very small minority I think 60-some or so out of many thousands of applications were impacted by inspection-related delays during the heart of the pandemic. They then followed up with a publication talking about their ability to use data requests, video review, and other ways to complement their ability to have in-person inspections which we do know they have resumed overseas as well. So, we have a lot of confidence in Meiji. They've been manufacturing to a high standard for many years and we believe that as the pandemic has moved on the FDA has also used all the tools available to be able to navigate the inspection work ahead of them.

Got it. And then I guess resistance rates especially for -- existence rate -- resistance rates. Can you talk about where those stand currently? Have they been affected at all by pandemic restrictions or hospital capital policies processes, et cetera has the pandemic impacted those rates for better or worse at all?

Thanks for the question. It's -- the resistance rates to fluoroquinolones is something we've tracked for some years both using external sources like JMI, but also our own surveillance efforts to a program called Steward. And what we've noticed is that those resistance rates have continued to increase year-over-year and that's continued unabated relative to the pandemic. And so kind of the same fundamentals where we've seen a lot of fluoroquinolone usage currently in years past leading to resistance that's now being exchanged amongst those bacteria continues. And the pandemic has certainly made the case that we should be treating more patients outside of the hospital. It hasn't impacted the fundamental microbiological problem that's causing all of this and that continues to increase.

Great. Thanks so much. I'll hop back in queue.

Thank you. We'll now take our next question from Louise. Your line is open, please go ahead.

Hi, thanks for taking my questions here. So, first question I have for you is how are you thinking about manufacturing for tebipenem here? Can you give us the latest update? And how much product will you have at launch? And then in terms of the market opportunity for SPR206, can you elaborate more on that? And what you think the peak sales potential could be for that product? Thank you.

Louise, I think we're having some technical difficulties. Do you mind restating the question?

Yes sure. Okay. So, my questions for you were first of all can you give us an update on the manufacturing for tebipenem and how much product you're going to have at launch? And then what is the market opportunity for the SPR206 product? And how should we think about peak sales potential here?

Yes. Thanks for the question. Can you hear me now?

Yes.

Great. Okay. So the manufacturing, as we had mentioned the -- we have been working with Meiji Seika our partner since we began developing tebipenem. Meiji Seika has been manufacturing tebipenem for commercial sale for nearly a decade. And in partnership with them we have our supply chain setup with them. And we're confident in their abilities moving forward and their ability to manufacture tebipenem to continue manufacturing tebipenem at a high-scale. In terms of how much product we'll have on hand it's certainly our intention to have sufficient product in excess of what we're thinking about for our launch trajectory. And as we get closer to launch we'll be guiding in further detail about what those expectations are. And as it relates to the final question about the market opportunity for 206 we are excited about the program. And I'll pass it over to Cristina to comment further about the potential we see in the program.

Thanks Ankit. And we've not really guided to what those peak year sales numbers look like. But I think as David highlighted what you see is an important contribution to these highly resistant strains that we see in the hospital setting for Acinetobacter, Pseudomonas and even though as carbapenem-resistant Enterobacteriaceae. And as you look across that spectrum of both what the CBC reports, but also looking at other reported data through other hospital-related infection data you'll see that this is a quite broad opportunity. I think it's important to put into perspective that we continue much like we see the growing resistance of what we're seeing around the community setting is resistance in the hospital continues to grow as well. So we see it as a great opportunity. We've not really guided to any peak year or sales numbers as of yet for 206.

Thank you.

Thank you. We'll now take our next question from Ram of H.C. Wainwright. Your line is open. Please go ahead.

Thank you so much for taking my questions. Firstly on the commercial front with tebipenem, can you give us some additional color on how you're seeing the overall market access picture evolving in the context of the potential launch? And in particular if you've seen any notable evolution in your thinking in the overall environment that you anticipate from the perspective of gross to net? Thank you.

Thanks Ram for the question. Christina, I'll hand that to you to cover for Ram.

Great. Thanks Ram for the question. We've actually done quite a bit of market access work to date speaking both on the payer side and also through some fairly extensive market research. I think a couple of important findings, is that we're getting a really great reception on the behalf of our payers. They do see the value the ability to prevent a hospitalization or in many terms those patients who are currently in the walls of the hospital are often being sent to post-acute care centers or home infusion. And all of those are obviously very costly things for the payer. And so they do see the value. I think that's an important part of it. We have sort of guided to the fact that we do think that we will get broad coverage around the compound. We've heard very positive feedback so far from our payers, because of that value story and the trial that we conducted which was against IV, which I think is a really important part of what we've been sharing. I think the second part is you asked about gross to net. We've not guided to what that looks like. What I would say is that it may go back to as you look at the payer mix in general, as you think about that. And I think as we've stated in previous calls too that we see the payer mix being about 50-50 split between both government and commercial pay. So that's the best I could guide you right now on gross to net.

No that's helpful. Also as an adjunct to that I was wondering if you can provide us with any additional information regarding the commercialization of tebipenem in Japan by Meiji Seika. And if that has any new read-through for you folks as you look towards the potential launch in the U.S.?

Yeah Ram thanks for the question. Just as a reminder tebipenem is marketed in Japan for pediatric respiratory infections. It's a decision they've made based on the resistance environment that exists in Japan today and the existence in their own portfolio of another cUTI medication. So for those reasons over the years tebipenem is an important part of Meiji’s portfolio. But we don't see much read-through to the adult cUTI market in the U.S. just given the different indications that they're going after.

Okay. And then lastly with respect to 720. I was just wondering if you now have kind of an updated time line with which you anticipate the drug might return to active clinical development? And if you could just walk us again through what the gating items might be there?

Yes. Ram thanks for that question as well. As we mentioned on the call, the first step was completing the tox study which we did in the third quarter. The second step which we're in the middle of now has been engaging FDA in submission and discussion of the data having a discussion with them, receiving their written comments and then reviewing them to apply them to what future protocol we may institute with their feedback. So we're in the middle of all that right now. And as we go through that we will have an update for you. And after that we'll have more granularity to share about the timing of when we might be able to get back online.

Thank you.

We'll now take our next question from Esther of Berenberg. Your line is open. Please go ahead.

Hi, thanks for taking my questions. Congratulations on the submission of the NDA. Just wanted to ask on SPR206 the BAL study. I wanted to get your expectations and then additional details on what those results might mean for next steps? Thanks.

Yes. Thanks for the question on 206, Esther. We're also excited about that SPR720 and tebipenem. The important part of the BAL study is that, it helps us understand how 206 gets into lung tissue. And as David mentioned, why that's important is because we have many patients that we're trying to help with 206 that happened to have lung infections or in other words those pathogens that 206 is best suited to often end up in patients' lungs. And so, the idea of being able to show that 206 can get into lungs in the right concentration is an important inflection point for 206. And so what to expect is that, it will be -- we'll be looking at the lung penetration and we'll be making a determination of how that can impact the outcome of patients with lung infections.

Thank you.

[Operator Instructions] We'll move on to our next question coming from Bret [ph] of BTIG. Your line is open. Please go ahead.

Yes, thank you for taking the question. I greatly appreciate it. With regard -- you obviously have your -- excuse me you obviously have your hands full with tebipenem with regard to complicated UTI. But as you think about additional indications beyond complicated UTI could you give us a sense of the timetable for your consideration you prosecution of those indications? Thanks so much.

Yes. Thanks so much for the question. We absolutely note the utility of tebipenem outside of cUTI. Just as an example, we went head-to-head against ertapenem. And there are many uses of ertapenem outside of cUTI. And so what we are doing now as David had mentioned on the call is, we're taking a step-wise approach to exploring that. We had mentioned that we completed dosing of our bronchoalveolar study. That's the first step to seeing what tebipenem can do to help patients with lung infections. As another example, is looking at what tebipenem can do in bloodstream infections as David had mentioned with our work with ARLG. We're also taking a step-wise approach to other indications. For example, we will be exploring the skin -- the effect of tebipenem in its penetration into skin and soft tissue, which is a precursor to how we think about tebipenem's utility in mixed wound infections like diabetic foot infections. And then finally, out of looking to partner with our colleagues in urology, we've been looking at the impact of tebipenem in prostatitis as an example and how tebipenem can penetrate prostate tissues as a first step towards that prostatitis indication. So putting that all together we're taking the first step in terms of exploring how tebipenem can get into tissues that drive relevant infections. And the second step in partnership with our clinician colleagues is to then prioritize those and think about future indication-based studies.

Thank you for that. Look forward to the additional work.

Thank you. We'll now take our next question again from Ritu of Cowen. Your line is open. Please go ahead.

You guys mentioned a few of the additional I guess Phase IIb studies that you're conducting and presenting at medical meetings. Maybe you could give us more color on, which should either Spero sponsored ones or maybe investigator-sponsored tebipenem studies? Do you think what might be most useful for the commercial effort, which ones and when might we see them? Thank you.

Yes, Ritu thanks for the question. I think it's a great opportunity to build off of the prior question. We think that all of those use cases so for example, lung infections for tebipenem as explained by the BAL study, wound infections as we'll start to explore with the skin and soft tissue PK study, prostate infections that our urologists suggest as we'll look through the prostate penetration study are all good examples of commercially relevant applications where there are patients that we can help outside of tebipenem. The other important one that we note is bacteremia, which will be explored by our colleagues and partners at ARLG. In terms of timing, David mentioned kind of the first bolus of data, which is around the BAL study. And our intention with all of these studies will be to use the cadence of medical meetings upcoming whether that's ID meetings or urology meetings to begin to showcase that data. And so as these studies complete, as we did with the BAL study, we will communicate their completion. And as the right medical meetings come up we will be putting that into the literature to help our colleagues that are beginning to learn how to best use tebipenem.

Got it. Thanks for taking the follow-up.

[Operator Instructions] It appears there are no further questions at this time. I'm handing it back over to you for any additional or closing remarks. Thank you.

Thank you, operator and I appreciate everyone's time for joining us today. It's been a very productive quarter and we look forward to the continued advancement of our pipeline and we'll keep everyone updated along the way. Thanks very much.

Thank you ladies and gentlemen. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.