Spero proves a canny dealmaker – again

Many young biopharma groups have more success on the dealmaking front than they do actually developing drugs. Spero is a case in point. Clinical mishaps with its lead antibiotic had beaten the group’s market cap down to a miniscule $29m, yet it still managed to extract a $66m up-front fee from GSK for that same project.

The antibiotics space rarely sees sums of this size change hands, making yesterday’s transaction even more noteworthy. Evaluate Vantage took a look for similar deals, and Spero’s tie-up last year with Pfizer, over an earlier candidate, also ranks highly.  

The list below is a selection of collaborations struck over novel, clinical-stage antibiotics over the last 10 years. The vast majority of business development that happens in this field are regional deals over established or already approved products.

Acquisitions are also few and far between, particularly those of companies at the pre-commercialisation stage. In the last five years the biggest takeover was probably La Jolla’s acquisition of Tetraphase in 2020, for $43m up front; the target was Xerava, a novel tetracycline which had won FDA approval a couple of years previously. 

Looking further back finds Merck & Co’s $9.5bn takeout of Cubist, though that is more famous for proving overvalued a mere 24 hours after being announced, thanks to the loss of a patent lawsuit. Another notable deal was Astrazeneca’s 2016 sale of certain antibiotic assets to Pfizer, though both of these transactions were largely struck over approved products.

All of this makes the Spero-GSK transaction more remarkable, even before considering that the small developer was in a terrible negotiating position. In May the FDA told the company that another phase 3 trial of tebipenem HBr was required for approval, prompting Spero to slash its workforce to conserve cash and switch its focus to earlier stage assets.

Spero can now afford to run that new study, which it plans to start next year. GSK will foot the bill for any additional clinical work and regulatory submissions; the pharma giant now has global rights outside of Japan and certain other Asian countries.

An outline of milestone payments provided by the partners also makes for interesting reading, as this level of disclosure is not typically seen in these announcements. Delivery of the phase 3 programme – which presumably means success – nets Spero $150m. A further $150m comes on first commercial sales in the US or Europe.

GSK also spent $9m on an equity stake, paying $1.21 per share, substantially less than Pfizer did last year. As part of a deal over an early-stage polymyxin candidate, SPR206, Pfizer paid $16.93 per share.

Spero’s latest annual report shows that Pfizer owns a 7.2% stake in the company and that GSK already owns a 5.3% stake. This results from historical investments made by SR One, GSK’s former venture arm, which was one of the original backers of Spero.

One further intriguing aspect of this deal is why GSK did not just buy Spero, which despite almost tripling in value on the deal is still only worth $77m. The answer presumably lies in the history of dealmaking in this space: buyers tend to get interested only when a product is over the finish line. 

The antibiotic arena is notoriously tricky, of course, with potent agents held back and rarely used, making pricing a minefield to negotiate. Maybe a buyout of Spero will eventually emerge. But its big pharma partners seem happy to keep it at arms length for now.