Good afternoon, and welcome to the Spero Therapeutics Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the company’s formal remarks, we will open up the call 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 would like to turn the call over to Ted Jenkins, Vice President, Investor Relations and Strategic Finance 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 second quarter of 2022. Our press release is available on the Investor 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 contains forward-looking statements based on our current expectations; including statements about the potential review, status and prospects of approval for tebipenem HBr and the timing thereof; potential value of tebipenem HBr if approved and the prospects of partnership or other opportunities for the tebipenem HBr program; the plans for the company's ongoing development of SPR720 and SPR206; the design, initiation, timing, progress and the results of the company's preclinical studies and the clinical trials and its research and development programs; management's assessment of the results of such preclinical studies and clinical trials; the company's cash forecast and anticipated expenses and the sufficiency of its cash resources. 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 including in the Risk Factors section of our annual report on Form 10-K -- excuse me 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 on today's call are Dr. Ankit Mahadevia, Chief Executive Officer; Sath Shukla Chief Financial Officer; and Dr. David Melnick, Consultant and Senior Clinical Advisor. With that, I'd like to turn the call over to Dr. Ankit Mahadevia. Please go ahead, Ankit.

Thank you, Ted and good afternoon to everyone listening to our call today. Those who have followed Spero over the past few months know about the company's decision during the second quarter to restructure and pursue a new strategic direction with SPR720 as our lead asset and tebipenem HBr and SPR206 as our designated partnership-directed programs. We made this decision promptly following our FDA late-cycle meeting during which the agency suggested the data from Spero's new drug application seeking approval for tebipenem HBr for the treatment of complicated urinary tract infections would likely be insufficient to support approval during the first review cycle. A subsequent complete response letter confirmed that this was the FDA's view, while also indicating additional clinical study would be required to support an approval. While ceasing tebipenem's commercial activities and restructuring was difficult, our swift decision to do so almost immediately after the late-cycle meeting set us on a path that leaves us well-positioned for future growth. We have strong data that clearly differentiates our three clinical-stage assets, cash runway that takes us through key clinical milestones and world-class partners to help us advance these assets. We have made progress this quarter against our core objectives to foster this growth. First we continue to progress toward key clinical and regulatory milestones in our pipeline within our capital runway and David will speak further about our progress on both SPR720 and 206. Second, we have requested and completed a Type A meeting with the FDA to gain further insights as to the pathway forward towards a potential regulatory approval for tebipenem HBr. We believe the meeting was constructive, and we expect to receive written minutes during the third quarter of 2022. Finally, we continue to employ good stewardship of capital and continue to seek kinds of creative…

Thank you very much, Ankit. As you may recall SPR720 is an orphan drug designated oral agent that is being developed for nontuberculosis mycobacterial pulmonary disease or NTM-PD. NTM-PD is estimated to affect approximately 95,000 patients in the US and a total of approximately 245,000 patients across the US, Europe and Japan. Due to the limitations of the current treatment regimens there is a substantial gap in the therapeutic paradigm for NTM-PD patients most of whom have underlying lung disease, a compromised immune system or are of advanced age. These limitations stem from the suboptimal efficacy and the tolerability and/or toxicity issues associated with the off-label antibiotic combinations that are currently employed for treatment. This creates a poor risk-benefit profile that discourages physicians and patients from beginning pharmacotherapy early in disease and to pause until the disease is at an advanced stage. Even with the current treatments, which are generally given continuously for one to two years many patients eventually progress to late-stage refractory pulmonary disease. This is often accompanied by permanent lung damage and disabling symptoms that can negatively impact a patient's ability to carry out daily activities such as shopping or walking. Looking at the current therapeutic paradigm for NTM-PRODUCT, one can conclude that there is a clear unmet need for effective and well-tolerated treatment for patients who are early in their disease journey namely those who are treatment naive or treatment inexperienced. Despite this, most agents currently in development focus on treatment-refractory patients who may already have irreversible lung injury. In contrast, the goal of our SPR720 program remains to develop a treatment for early-stage patients that can prevent progression to refractory disease, which we believe will lead to significant improvements in clinical outcomes and quality of life. The next step on our path is to achieve…

Thank you, David. As of June 30, 2022, Spero had approximately $45.4 million in cash, cash equivalents, and marketable securities. Given the cost savings achieved as expected from our restructuring and the cessation of tebipenem HBr's commercial activities, we believe our existing cash, cash equivalents, and marketable securities together with other non-dilutive funding commitments will be sufficient to fund our planned operating expenses and capital expenditures pursuant to the priorities of our strategic refocusing into late 2023. We believe that this anticipated runway, which does not account for any new potential business development for any of our assets, will take us through key clinical milestones including interim Phase 2 data readouts for SPR720 and the initiation of a Phase 2 trial of SPR206 in Q3 2023. Before detailing the rest of our Q2 financial results, I'll remind all listening that the decision to restructure our operations was made halfway into the second quarter. We therefore expect our total spend to further decrease in the quarters ahead compared to Q2. Total revenues for the second quarter of 2022 were $2 million compared with revenues of $5 million in the second quarter of 2021. The revenue decrease was primarily due to a $1.2 million decrease in qualified expenses incurred under our BARDA contract for tebipenem HBr, a $D1 million decrease in funding under our DoD agreement relating to SPR206 and a decrease in collaboration revenues related to our Pfizer license agreement, offset by an increase of $0.3 million under our NIAID agreement related to SPR206. Research and development expenses for the second quarter of 2022 were $8.2 million compared with $14.5 million of R&D expenses for the same period in 2021. This year-over-year decrease was primarily due to reduced program activity for tebipenem HBr, as a result of our strategic restructuring announced in May 2022 as well as reduced costs associated with our SPR720 and SPR206 programs and a decrease in research and development headcount costs after our restructuring. General and administrative expenses for the second quarter of 2022 of $8.1 million were lower than the $9.2 million reported for the same period in 2021, primarily a result of a decrease in headcount in our commercial general and administrative functions due to our strategic restructuring as well as a decrease in professional and consultant fees. Restructuring expenses of $11.8 million were incurred during the quarter. These expenses were primarily comprised of $8.7 million of severance and other employee costs and $2.6 million of discontinuation costs, such as contract termination fees and $0.6 million of lease impairment expenses. We reported a net loss for the second quarter ended June 30, 2022 of $28.7 million or $0.87 per common share, compared to a net loss of $18.6 million or $0.63 per common share reported for the same period in 2021. For further details on our financials, please refer to our quarterly reports on Form 10-Q filed with the SEC today. We will now open the call for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Ritu Baral with Cowen. Please proceed with your question.

Good afternoon, guys. Thanks for the detail on the 720 Phase 2. I wanted to ask about that slope -- I'm sorry bacterial burden reduction slope endpoint analysis. What slope do you think -- what negative slope do you think that you would need to achieve to be suggestive of improvements in outcomes? I know you mentioned that there have been studies associating slope with outcomes. What are you looking for? And then what will we get with the interim data that you mentioned in mid-2023? Is that the slope data alone or could there be clinical end points on that? Thanks.

Hi, Ritu. Thanks a lot for the question. Yeah. And so to dive into that EBA slope phenomenon, it's a trial paradigm that's been used for years in other mycobacterial diseases like TB. And the benefit is that in a focused study you can get a lot of information about how a single agent is doing to affect the bacterial burden in a patient. And it's been tied to approved drugs in the mycobacterial space as well. And so to that effect, you've seen drugs like bedaquiline and pretomanid and others that have shown really what we're looking for is relative to placebo a negative slope. So in other words, relative to placebo, we're seeing in a consistent basis a reduction in the bacterial burden in the patient over time. And in the EBA paradigm, when you do that that's consistent with an agent being additive to an overall treatment regimen and what's been used in those paradigms to advance a drug to pivotal combination studies. So that's the first point. And to your second point of the interim analysis, note two things. One is that we'll see the natural history data in NTM including with clarithromycin shows that when you have an intervention that's effective on the bugs, you will see reduction in bacterial burden earlier in a patient's treatment life cycle. The clinical outcomes typically come a little bit later. And so what we're -- what the interim will show us is the bacterial -- the EBA slope phenomenon for the subset of patients that we've enrolled and have gone through the study. We won't commit at this time to whether we'll be able to see clinical outputs in those patients. But certainly we'll see the quantitative effect of what 720 is doing.

Got it. And then, what are the most important clinical outcomes or clinical endpoints that are part of this study? Thank you, again.

So that I'll pass to David in terms of the clinical outcomes that we're looking for.

I’m sorry. I was on mute. This is an important question because FDA has made it clear that they're quite interested in clinical outcomes. We will be piloting four separate PRO-type scales in the Phase I study, looking for an early signal of which may be most helpful. There is a bronchiectasis type scale which has been amended to account for NTM. Severity of symptoms scales change from baseline scale. So there are four separate clinical measures that had been built into this Phase I protocol. Again, two months of therapy will we see clinical change? Hard to tell. We certainly would expect to see changes in sputum bacterial load over that period of time.

Great. Thanks.

Our next question comes from the line of Louise Chen with Cantor. Please proceed with your question.

Hi. Thank you for taking my questions here. So I had a few for you. First one, I wanted to ask you is, where are you with your partnership discussions with tebipenem and a potential partner? When do you think we might hear something? Would it be as early as this year? And then what kind of partner ideally are you looking for? And then, on SPR206 how do you view this opportunity to you? And what gives you confidence that you'll establish proof-of-concept here when you start the studies? And why not start the studies sooner? Thank you.

Thanks, Louise, for the great questions. And so, as we noted on the call, tebipenem has a lot of great attributes going for it: patent life until 2038, full clinical and commercial supply and a very large addressable patient need. And so, shouldn't be a surprise to you that we've been engaging in constructive dialogs with partners throughout the journey of tebipenem. Of course, we're not going to be able to give you any explicit guidance as to how or when we'll potentially consummate any of those discussions. And in terms of the ideal partners we're looking for we're certainly looking for a partner that shares our conviction in the program, has the same conviction in terms of delivering tebipenem to patients as efficiently as possible and ideally has the type of resources to enable us to move tebipenem expeditiously towards approval. So that's always been our criterion and we'll continue to prosecute that. Maybe shifting gears to your question on SPR206. Yes, 206 has been quite an asset for us. Number one, it meets a need for patients that's not addressed by current standard of care and that is for patients that are resistant to the current medications we have when they have highly-resistant infections. Further as David had mentioned, it's fully financed for us beyond a major inflection point which is excellent. And what gives us confidence about its ability to do something positive for patients, is all the data we've built up to date. And for those that are interested it's in the corporate presentation. Number one we can kill bugs that other standard-of-care agents can't; number two is we see that in the right in vivo models; and then number three, when you take the doses that seem to make those effects happen and put them into people, we see a safe and well-tolerated drug. And that's really the cascade of data that's gotten us excited and our partners excited. And in terms of the timing of the study, as you heard from our other medicines, we're always trying to move things as expeditiously as we can. In this case, we've made the conscious decision to use outside funding to advance 206 to be good stewards of our resources. That means that certain things like the CMC needed for clinical supply happen in serial rather than parallel and that's really the long pole in the tent. So as we -- the funding becomes available, we'll get underway and we'll go from there.

Thank you.

Our next question comes from the line of Ram Selvaraju with H. C. Wainwright. Please proceed with your question.

Hi. This is Boobalan dialing in for Ram Selvaraju, and thanks for taking our questions. So a couple of questions from us. With respect to SPR720 Phase 2 trial design, so you stated that you will enroll 35 patients. So given the small sample size, are you concerned about the variability of treatment response?

Yes. So thanks for the question. I'll note that the EBA paradigm, lets us be more efficient with patients, because realize that although that's the number of patients we'll be taking data points in terms of a patient's microbiological trajectory six times, right? And so as you think about the number of observations overall that design allows you to get a lot more out of the study size that you have. And so we believe that that will give us a good ability to think about a tight data set. That's number one. Number two is that the quantitative culture methods we're using to assess bacterial burden continue to evolve in precision and speed. And that allows us to get a fairly tight measure of where a patient is as well.

Okay. Thanks for the clarity With respect to 720 again, so has the clinical hold history with 720 made anyone nervous about the prospects for the drug going forward, or the issue has been put to bed with the lifting of the clinical hold by the FDA and the fact that this is a monkey study issue and not a human safety problem?

Yes. Thanks for the question. I think you answered part of the question, which is that as we did our investigations on the hold it was clear that what we saw in large non-human primates was an artifact of the way we dose those primates and not related to the drug itself. And in submitting those data FDA agreed with us. They lifted the hold. The protocol you see to date is consistent with their lifting of the hold and the lack of restrictions that we have on the study. And so we've been hard at work engaging our key sites and investigators and people are excited about the trial and are making preparations to help us execute on it.

I'd just add that FDA based on the results of that study has approved an extension in the duration of this Phase 2 study from 28 days to 56 days. So they're actually quite comfortable with the safety readout at this point.

Great. One final question from me. So you mentioned about nondilutive funding for 206. Do you intend to explore a similar mechanism for 720 down the road?

Yes. I'll let Sath answer that question.

Yes. Just historically we have looked for non-dilutive funding across all our programs. So certainly, it's something we will continue to look opportunistically and see if it makes sense.

Okay. Thanks for taking my questions.

Thank you.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thank you operator, and thanks to everyone that's listening. We look forward to our company's continued advancement, and I wish everyone a nice evening.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.