Welcome to the Spruce Biosciences Investor Call [Operator Instructions]. Please note, this conference call is being recorded. I'll now turn the floor over to Samir Gharib, President and CFO of Spruce Biosciences. Samir, the floor is yours.

Thank you, operator. And thank you all for joining us this morning. With me on today's call are Dr. Javier Szwarcberg, Chief Executive Officer; and Dr. Kirk Ways, Chief Medical Officer. This morning, Spruce issued a news release announcing its new corporate strategy and the acquisition of Tralesinidase Alfa for the treatment of Sanfilippo Syndrome Type B or MPS IIIB. Please note that certain information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Spruce management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Spruce's press release issued today ad the company's SEC filings, including its annual report on Form 10-K filed today. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, April 15, 2025. Spruce undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Finally, during today's Q&A session, we ask that you please direct all questions to Javier and he will process Spruce management and elaborate as appropriate. Now I'd like to turn the call over to Javier. Javier?

Thank you, Samir. Today, we unveil our new corporate strategy, including a new pipeline focused on the developing and commercializing of first-in-class therapy for a neurological disorder with a significant unmet medical need. In connection with our new strategy, we also announced today that Spruce has acquired Tralesinidase Alfa Enzyme Replacement Therapy or TA-ERT for the treatment of MPS IIIB. We we anticipate making a BLA submission in the first half of 2026. The focus of today's call is on TA-ERT for MPS IIIB. Our other programs will be discussed at a later time. Historically, Spruce's efforts have been primarily directed towards the development of Tralesinidase for CAH. And although we executed the program well, the product failed to achieve its primary efficacy measures in clinical studies and we discontinued this development for CAH in December of 2024. Following that decision, we initiated a strategic review process. In the course of the review, the company evaluated a number of strategic options and identified and successfully acquired Tralesinidase Alfa, an enzyme replacement therapy for MPS IIIB, a devastating pediatric neurodegenerative disease that is ultimately fatal. MPS IIIB is a rare, inherited autosomal recessive disease caused by a deficiency in the activity of NAGLU or an N-acetylglucosaminidase, a lysosomal enzyme required for the degradation of the ammunoglycan heparan sulfate and the MPS IIIB specific nonreducing end of heparan sulfate. In the absence of NAGLU enzyme activity, heparan sulfate accumulates in many tissues and organs, particularly in CNS. Over time, MPS IIIB results in irreversible neurodegeneration and that is why early treatment is so critical. TA-ERT is a fusion protein comprised of recombinant human NAGLU and a truncated human IGF-2 connected via an amino acid linker. This structure is believed to enable adequate penetration into cells in lysosomes. TA-ERT is intended as an…

Thanks, Javier. As Javier mentioned, MPS Type IIIB is an autosomal recessive disorder. The incidence is about 100,000 and 200,000 live births. The disease is due to a deficiency of a single enzyme and this enzyme breaks down the compound heparan sulfate and with that the enzyme heparan sulfate accumulates in cells, which ultimately kills neurons in the brain and impairs the renal development, leading to neurodegeneration and an early death in these children. And the figure you see here, the black perpendicular line represents a child's normal development progression as they age. The blue line represents children with MPS Type IIIB. Children start to fall off the development curve as early as one year old and they peak in their development at about two to three years of age. After that, they regress. They lose the ability to communicate. They lose the ability to feed themselves or to be fed and ultimately have to be fed with feeding tubes. They lose the ability to ambulate and become bedridden and they die usually by the mid-teens. This is a terrible disease for the patients as well as for the families and there are no treatments available. There was a Type C meeting with FDA in March of last year, three key things came out of that meeting. One, the FDA reiterated that MPS Type IIIB specific nonreducing end of heparan sulfate can be used as a biomarker that may reasonably predict clinical benefit and as the primary endpoint for the BLA accelerated approval submission. So that's really key. The FDA also said that the clinical and nonclinical programs that have been done are sufficient for BLA filing. We don't have to do any more studies outside of the confirmatory trial. And importantly, they agreed on the design of a Phase…

Thank you, Kirk. Today, Spruce reported financial results for the year ended December 31, 2024. As of December 31, 2024, Spruce had cash and cash equivalents of $38.8 million. The company expects its cash runway to fund its current operating plan through the end of 2025, which solely reflects ongoing development of TA-ERT. As our partner, HMNC is fully financing the Phase II [indiscernible] study, which is a Phase II proof-of-concept trial for the use of Tildacerfont as a treatment to improve depressive symptoms in patients with major depressive disorder, no resources are currently being allocated to that program. As of December 31, 2024, 42.2 million shares of common stock are outstanding and 60.7 million common shares are outstanding on a fully diluted basis. For our full 2024 financial results, I would refer you to our 2024 annual report on Form 10-K filed with the SEC this morning. Now in connection with our acquisition of TA-ERT, we assumed the exclusive worldwide license to that and other enzyme replacement therapy products from BioMarin Pharmaceutical. As we progress development of TA-ERT, we are obligated to pay BioMarin up to an aggregate of $22.5 million upon the achievement of certain developmental and regulatory milestones and up to $100 million upon the achievement of certain sales milestones. In addition, we are required to pay to BioMarin tiered royalties on annual worldwide net sales ranging from the high single digit to low teens during the applicable royalty term subject to certain customary reductions in force. Now moving on to the commercial opportunity for TA-ERT. There is a clear blueprint of how to market and commercialize ultra rare drugs based on approved drugs for other MPS diseases, which are listed on the table on this slide. Epidemiology is usually inaccurate and underrepresents how common these conditions…

Thank you, Samir. We consider it an honor and a privilege of being able to partner with the entire MPS IIIB community and through innovation, open a new chapter in the treatment of MPS IIIB with a possible life changing medicine. I recognize the potentially transformative impact of Tralesinidase Alfa and having a strong sense of urgency to deliver on our commitment to patients and families who suffer with MPS IIIB. Across the landscape, this is an incredibly important and exciting time for patients and families affected by neuropathic MPSs and making progress in a therapeutic area that is underserved requires doing things differently and in partnership. We have a clear purpose and that is to ensure access and to transform the lives of patients and families that we serve. That is our true north. Looking ahead, we're eager to pursue accelerated approval of Tralesinidase Alfa and file the BLA in the first half of 2026. Around that time, we plan to initiate a confirmatory study and enable expanded access program to ensure that patients have access to therapy. In conclusion, I would like to extend our gratitude to the patient and caregiver advocates clinicians and industry leaders who have contributed to the TA-ERT program. With no FDA approved treatment currently available, TA-ERT has a potential to be groundbreaking advancement for patients and families impacted by MPS IIIB. I also want to express my gratitude to all employees for their contributions and tireless dedication to advancing our mission of bringing forward new and innovative therapies for MPS IIIB and other neurological disorders. Operator, we may now open the line for questions.

[Operator Instructions] Our first question comes from Joe Schwartz with Leerink Partners.

I guess my first question is, I was wondering about your read on the depth of the buy-in for accelerated approval pathway at CBER currently. What additional work did you do beyond the March 24 meeting? Obviously, given everything that's going on, a lot of us are wondering how sacred anything is at the FDA. And so to that end, I was wondering if you could give us your read on the accelerated approval pathway, the realistic likelihood of that currently? And then I have a follow-up.

So let me give you a little bit of the historical perspective here. So the prior sponsor of the drug tried to approach the FDA multiple times. And for a number of years, the FDA was resistant to accepting a surrogate endpoint for accelerated approval. It wasn't just the prior sponsor. It was also other companies doing work in the neuropathic MPS space, including Ultragenyx, REGENXBIO, Orchard, JCR, Denali and a few others. And it wasn't until the FDA, along with academia, patients, patient groups in the industry got together under the roof of the Reagan-Udall Foundation in February of 2024. At that time, the surrogacy of heparan sulfate was endorsed and accepted by the RUF -- through the RUF workshop and that resulted in the FDA's becoming more amenable and more willing to use heparan separate sulfide as a viable surrogate. Following that meeting, companies like Ultragenyx have actually submitted a BLA under CBER in December, the FDA filed the application in February and they're expecting an approval PDUFA date on August 18th. Denali has also -- and that's based on heparan sulfate as a surrogate for accelerated approval. Denali has initiated the rolling submission for MPS II or Hunter syndrome on April 2nd. So they will be fully filed. I think they guided to sometime in May under also accelerated approval. So there's a precedent, there's a regulatory precedent. The FDA is honoring their prior commitments. We have not reengaged with the FDA since we acquired the asset. To confirm our review division is under CDER, same division that is SIMGroup or SIMGroup of FDA that's regulating the Denali filing as well. Ultragenyx is under CBER, Denali is under CDER. We are under CDER as well given our route of administration. So we have confidence. I mean, we have no reason to believe that the FDA will not honor the prior agreements made with the prior sponsor.

And then I guess in terms of the financing plan here, what are your latest thoughts given the limited financial resources and the market environment? Can you give us some insight into how you plan to actually be able to advance this development plan from a financial perspective?

I'll pass it on to Samir. Clearly something that is top of mind for us, but Samir will expand further.

So as we mentioned in the release, we have current cash resources that will extend our current operating plan and fund that plan through the end of this year. And clearly, between now and then, we will need to tap into additional resources to advance the program beyond that date. And I'd say amidst the backdrop of, as you sure can appreciate, a very volatile market environment. I think the one thing that stands out in particular with this asset is the fact that it's highly derisked. I mean we have guidance from the FDA that charts a path to an accelerated approval. We have very strong clinical data against the biomarker, which would serve as a basis for approval. And we think that this asset fits the profile of the types of investment opportunities that investors are currently looking for in a volatile market with a high degree of unpredictability. And so from that standpoint, we have a great deal of confidence that we'll be able to advance this program ourselves and tap into those additional resources as we need to do so.

Your next question comes from Gregory Renza with RBC Capital.

It's [Anish] on for Greg. Congrats on the refresh, and thanks for sharing the updates. Just a couple from us. First, if you could walk us down the funnel of these MPS Type IIIB patients starting from the top of the TAM down to how many patients may actually be able to take the enzyme replacement therapy, what are the filters here in terms of biomarker screening assets, eligible patients, et cetera. And I have a follow-up.

So to walk you down through the funnel. So based on claims database, there are about 3.3k patients with MPS in the US. Of those 1,000 of those are MPSs that affect pediatric patients of those 1,000 about 300 patients have MPS III. Now that's as far as the claims database goes because there are no codes that actually separates MPS IIIA, IIIB, IIIC and IIID. So based on overall global prevalence, MPS IIIB is anywhere between 25% and 40%. So we believe that the prevalent patient population in the US is about 165 patients, 135 patients, rather. We believe that we will be able to address about 50% of those and perhaps more. If you look at the distribution of patients based on claims, about a third of the patients with MPS III are under the age of 10 and we think we can have a penetration of about 85% and we'll have a penetration of about 30% in older patients. Given that the indication for this drug and frankly, when you look at other labels for other MPS drugs tends to be very general for the treatment of MPS IIIB to reduce heparan sulfate, and we think that we actually check both boxes. Patients will be diagnosed through either enzymatic or molecular diagnostic measures or testings and we know the drug has a very profound effect on heparan sulfate. So ultimately, at the end of the day, there's going to be -- the decision on whether to treat and to maintain a patient on treatment will be based on neurocognitive stabilization or improvement but also on other functions like Kirk was alluding to earlier in the call, on whether patients can ambulate, on whether patients can perform social skills, can they toilet themselves, can they eat by themselves, can they have a more engaging live and those -- that decision will be based on whether parents and caregivers and physicians see tangible benefit.

And then I guess just as we think about -- just kind of a follow-on to the previous financing question. As you think about spend, it looks like for the fourth quarter, R&D spend ticked up quite a bit from the third quarter. Maybe if you could just comment on the cadence over 2025, I know the focus is on TA-ERT, but if you could give some granularity there.

So I'll ask Samir to answer that question. Before I do that, let me add something more to your prior question. The response I gave you touches on the prevalent patient population but a very important piece here that Samir touched towards the end of his talk was there is an incidence patient population that occurs year-over-year. And we believe the incidence of MPS IIIB is about 100,000, 200,000 lives that will result in about 18 new patients per year. And those patients that are diagnosed early are likely to benefit to therapy the most. And that becomes a patient pool that is treated for a much longer time because their cognition, their brain function becomes more preserved and those people have -- could have, I wouldn't say normal, but near normal life expectancy. So we're projecting for them to be able to live longer 20, 30, perhaps 40 years if the drug is tolerated and they do well. So I'll pause here and I'll pass it over to Samir to address your financial question.

So you referenced sort of the uptick from Q3 to Q4 of last year. Just as a reminder, that largely reflects the spend of -- on the legacy program for tildacerfont for the treatment of CAH. Obviously, those programs have now been wound down. So on a go forward basis, which reflects our continued development -- ongoing development of TA-ERT, I would guide you to for this year roughly $10 million a quarter of spend. And as we enter the next fiscal year, probably an uptick to $15 million a quarter again, reflective of the BLA enabling activities but also the uptick in terms of the commercial build required to launch the product successfully. Hopefully, that addresses your question.

Your next question comes from Jon Wolleben with JMP.

Can you talk a little bit about the confirmatory trial, what is FDA said about the surrogate heparan sulfate endpoint and what clinical endpoint you need to look at? And what are your thoughts about starting that trial, patient numbers? Any details on that confirmatory would be helpful.

So as you know, as part of an accelerated approval, typically, it comes with the need to confirm the clinical meaningfulness of a surrogate endpoint. And so the prior sponsor had agreed on the key elements for the confirmatory trial. Ii will be a 14 patient trial who have -- it will be 1:1 randomization with seven patients on each of the arms. There will be a active treatment arm, which will be Tralesinidase Alfa. There will be a comparer arm that's going to be standard of care, which is, in essence, palliative medicine, blending will be done as best possible. And there will be a rescue criteria in the protocol that will include some type of decline, which will prompt rescue with Tralesinidase Alfa treatment. There's currently agreement with -- there was agreement between the prior sponsor and the FDA on that study design. We intend to approach the FDA and perhaps offer an alternative to the current protocol in terms of rescue criteria and try to optimize some of the elements of that study, I think that is going to be very, very important for us to engage with the FDA and gain clarity. We intend to initiate the trial while we're under review and that's frankly accepted by the FDA, there is recent guidance for rare diseases actually. You also asked me about the primary outcome. So the FDA has wanted a neurocognitive outcome and that's going to be the BSID, the Bayleys questionnaire cognitive raw score as a primary outcome for the study. It is the same outcome required for Ultragenyx' trial, a similar outcome required for the Denali program. Denali used a combination of heparan sulfate at week 24 and the Vineland questionnaire at week 96, I believe.

And one more, if I may. Looking at the curve you guys had, I think, on Slide 8 for the heparan sulfate levels. When we look at the end, when we get down to six patients for about five years out, is that patients still earlier in the study at the earlier follow-up period or the people drop off and then how many patients are on TA-ERT today?

It's a combination but for the most part due to financial considerations, the prior response ended up discontinuing the program. So not very many patients were able to roll into the 401 study, didn't have -- really have the opportunity to roll into the 401 study being to a 240-week duration follow-on study to 201. And what was the last part of your question, Jon? [Technical Difficulty] how many people on drug. So the prior sponsor discontinued all patients on drug in October of 2023 due to financial consideration. So at the moment, we have -- we only have two patients at a site in Germany receiving ongoing treatment but that's not under the auspices of a trial rather on a compassionate use basis.

Can you tell us how many identified patients you have in the US?

Those are the numbers that I quoted before of about…

Well, not the prevalence of actual patients that may have been on TA-ERT that are still potential candidates for treatment…

We haven't gone down and map out those issues yet, Jon. With all the activity that we do, I just want to highlight that it is foundational for successful rare disease launches, the one goes out and maps out the eligible patient opportunity as well as offer eligible patients access through an early access program prior to commercial launch. And we have -- we intend to have a very similar effort in the EU4 countries as well as the UK through new patient self programs or other type of programs there that we assemble that using different names.

Your next question comes from Leland Gershell with Oppenheimer.

And thanks for this update and great to see this asset in your hands after having seen its progression at prior companies. Just a question from us, Javier and team. With respect to the capital needs for your plans going forward in the kind of two parts, right, you have to do inventory build for the presumptive commercial launch and then also Spruce would have to fund the confirmatory study. Just wondering given that, that study would run several years and obviously extend much past when you could be approved and launched Tralesinidase. Would the company be willing to start that study even if capital remains limited i.e., you may not have enough capital to complete it with perhaps another financing round just given the capital markets we're in, obviously, the environment is very challenging.

Let me start with some elements of your question, and then I'll pass it on to Samir. I mean, we were lucky to be able to have a meaningful inventory of drug substance. Our drug manufacturer company or vendor is Samsung Biologics in South Korea. With that drug substance we'll be manufacturing drug product and developing registrational badges and putting those on stability to support the six month stability required for the BLA. In parallel, we'll be making new drug substance and making new drug product and developing PPQ batches in the required workloads to be able to launch the compound. So I just wanted to provide you some context in the context of CMC. But I'll pass it on to Samir, perhaps you can address, Samir, the capital spend related to CMC and the confirmatory trial and how do we think about that?

So as we think about -- I will just address your question just from a prioritization standpoint, and that prioritization initiative will be primarily directed towards the BLA submission. We have some work to do with respect to manufacturing a drug product campaign and accumulating stability data from that campaign. As both Javier and Kirk highlighted, we have all the clinical and nonclinical data we need for that submission but we'll spend the money to get the required CMC data. As we move forward, obviously, the spend will then be directed towards pre-commercial activities. And to your question on the confirmatory study, from a timing standpoint, the requirement there will be prior to a potential accelerated approval. So we're not really discussing here any near term spend. And now we haven't done formal costing yet. But I would just point you to the fact that the number of patients in the study including roughly 14, 15 patients. And as you think about spend over, call it, a five or six year period, inclusive of enrollment time lines, you're really thinking about 20 million to 30 million over that six year period and so we don't expect this to be really a drag on resources over the long term. And so hopefully, that will address the question, at least from a capital need perspective.

Your next question comes from Ram Selvaraju with H.C. Wainwright.

So with respect to the sort of path forward from here, can you just clarify what level of spend would be required simply to get through the period from where your current cash runway ends and the actual submission of the BLA as well as the period of BLA review according to the accelerated approval time frame? And then secondly, with respect to the commercial perspective, I was just wondering if you could comment on two things briefly. Firstly, perspectives on eligibility for a priority review voucher. How has that changed, how might that change in the future? Because under normal circumstances, one would imagine that a project like this would be PRV eligible. And also, if you can comment on whether pricing perspective might, in any way, be influenced by the near term market introduction of another product candidate. For example, you mentioned UX111 during your prepared remarks. I was just wondering whether whatever pricing gets set for that product, if it gets approved by the PDUFA date in August, would have any implications on how you approach pricing determination for this candidate as and when it gets to the market.

Let me start addressing the latter part of your question first, and then I'll pass it on to Samir to cover some of the financials. So obviously -- I'll start with the PRV and then cover pricing and Samir will do the financials. So I mean, obviously, getting the PRV would be really important for us. The VRV regulation with the PRV reauthorization hasn't really happened as of now. So given that the product has received rare pediatric disease designation, we are under the current framework, which expires on September 30, 2026. We obviously would thrive and we'll do our very best to be able to fit that time line and are working very closely with our CMC vendor to be able to accomplish that. That will inject further cash into the company, which can be used towards performing life cycle management efforts in the context of our CMC activities, meaning scaling up 2,000, 5,000 liters bioreactors, potentially, but also changing the formulation to lyophilized formulation, for example, to simplify some of the call chain required to administer the product as well as injecting cash into other aspects of our pipeline. I think to your point, it is expected that the PRVs will get reauthorized. There is strong impetus from both chambers of Congress as well as the FDA and the patient community to get that deal go through. But at this stage, we're still operating under the September 30th deadline for the program. From a pricing point of view, the compound would convey very meaningful benefit to patients that are suffering for a neurodegenerative fatal disease. So we think that is going to be commanding high price, very similar to other MPSs. Exactly where we land is still yet to be determined. Ultragenyx' drug is a gene therapy. So in theory will be a one and done deal for the patients that would qualify. So I'm not sure that it's going to be the perfect analog. Denali's drug could potentially be a good analog to benchmark the gains. It's a drug that addresses more effectively a neuropathic piece of MPS II, and I think that that's going to be likely priced at a premium to ELAPRASE. Sarepta's drug Zolgensma has a WACC price of approximately $750,000 typically paid without discounts by payers. It's a very bad disease. It's also administered intrathecally into the central nervous system every few weeks initially. That's typically not been a drug that has been heavily negotiated either in the US or Europe. So that could provide a meaningful anchor for our drug. I'll pause here and pass it on to Samir to discuss some of the financial questions that you all had.

Ram, I think you had asked about capital needs but also in relation to some key inflections points and milestones. So as we mentioned in the release today, we had -- we ended 2024 with $38.8 million in cash and cash equivalents. We would need roughly incremental capital, call it, 60 million to get to a potential approval for TA-ERT and, call it, roughly half of that number of incremental capital would be needed to get to the actual BLA submission.

At this time, there are no further questions in queue. Ladies and gentlemen, thank you for your participation. This concludes the Spruce Biosciences investor call. You may now disconnect your lines at this time. Have a wonderful rest of your day.