I was expecting SPRO stock to increase after Tebipenem Hbr(Utebzi) approval from FDA. It seemed to be a no-brainer on paper, GSK handles the marketing after approval and pays milestones and royalties to SPRO. I understand that SPRO quit their other two antibiotic programs, but this one can help people avoid hospital stays to clear up infections previously only treated by IV. Merck intends to begin distribution late in 2026.
I think it has been a little disappointing to see the stock price move DOWN after approval.
Look, I am just an investor with a science degree, I don't claim to know what will happen with this stock, but the market cap last Thursday was 127MM, based on $2.20 share price. It is crazy, but based on initial milestone payments due for sales volumes, It looks like it is undervalued by a factor of 2 1/2 - three times that in sales level bonuses and milestone payments. I am not sure about returns and don't want to do the math to find net present value of future streams, but GSK has around 16% of the company's shares, this from a basic Google search on the initial agreement:
The exclusive license agreement between Spero Therapeutics (**SPRO**) and **GSK** for the oral antibiotic tebipenem HBr (commercialized as **Utebzi**) is structured to transition global commercialization rights to GSK while providing Spero with substantial upfront capital, developmental milestones, and ongoing sales revenue. \[[1](https://www.gsk.com/en-gb/media/press-releases/utebzi-tebipenem-pivoxil-approved-in-the-us-for-adults-with-complicated-urinary-tract-infections-cutis/), [2](https://www.globenewswire.com/news-release/2022/09/22/2520704/0/en/gsk-and-spero-therapeutics-announce-exclusive-license-agreement-for-late-stage-antibiotic-asset-tebipenem-hbr.html)\]
1. Upfront Payments & Equity (2022)
When the agreement was finalized and closed in late 2022, GSK provided Spero with immediate capital to fund the phase III clinical trial: \[[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm), [2](https://www.biospace.com/spero-therapeutics-announces-closing-of-exclusive-license-agreement-with-gsk-for-tebipenem-hbr), [3](https://www.biospace.com/gsk-and-spero-therapeutics-announce-exclusive-license-agreement-for-late-stage-antibiotic-asset-tebipenem-hbr), [4](https://firstwordpharma.com/story/5672810)\]
* **Upfront License Fee:** **$66 million** cash paid to Spero for exclusive rights.
* **Equity Investment:** **$9 million** direct investment. GSK purchased 7,450,000 shares of Spero common stock at approximately $1.21 per share. \[[1](https://us.gsk.com/en-us/media/press-releases/gsk-and-spero-therapeutics-announce-exclusive-licence-agreement-for-tebipenem-hbr-a-late-stage-antibiotic-that-may-treat-complicated-urinary-tract-infections/), [2](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm), [3](https://www.biospace.com/spero-therapeutics-announces-closing-of-exclusive-license-agreement-with-gsk-for-tebipenem-hbr)\]
1. Milestone Payment Structure
The deal outlines up to **$525 million** in total potential milestone payments across three distinct phases of the drug's lifecycle: \[[1](https://www.biospace.com/spero-therapeutics-announces-closing-of-exclusive-license-agreement-with-gsk-for-tebipenem-hbr), [2](https://firstwordpharma.com/story/5765775)\]
|**Phase \[**[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm)**,** [2](https://firstwordpharma.com/story/5765775)**,** [3](https://www.sec.gov/Archives/edgar/data/1701108/000119312526126244/d107475dex991.htm)**,** [4](https://finance.yahoo.com/news/spero-announces-nda-resubmission-tebipenem-130000983.html)**,** [5](https://pharmaphorum.com/news/gsk-will-file-oral-carbapenem-complicated-utis-year)**\]**|**Milestone Description**|**Maximum Payout**|
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|**Development & Regulatory**|Paid out as the Phase 3 trial progressed and regulatory filings were made. Includes a **$25 million** payment triggered by the FDA NDA resubmission.|**$150 million total**|
|**First Commercial Sales**|Triggered upon the first commercial sales of the drug in the United States and Europe.|**$150 million total**|
|**Annual Sales Milestones**|Tiered cash payments triggered as cumulative global net sales cross specific revenue hurdles.|**$225 million total**|
Breakdown of the $225M Sales Milestones:
* **$25 million** when net annual sales exceed $200 million
* **$25 million** when net annual sales exceed $300 million
* **$25 million** when net annual sales exceed $400 million
* **$50 million** when net annual sales exceed $500 million
* **$50 million** when net annual sales exceed $750 million
* **$50 million** when net annual sales exceed $1 billion \[[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm)\]
1. Tiered Royalty Percentages
Spero is entitled to continuous, tiered royalties on net product sales within GSK’s territories: \[[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm), [2](https://firstwordpharma.com/story/5765775)\]
* **Rate Scale:** Ranges from **low-single digits to low-double digits** (the highest tier is unlocked if annual net sales exceed $1 billion).
* **Adjustments:** Royalties are subject to standard reduction clauses if third-party licenses are required, if a generic version enters the market, or if patent exclusivity expires before the 10th anniversary of the first commercial sale. \[[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm)\]
1. Operational Division of Labor
* **Spero's Role:** Responsible for the operational execution and initial costs of the follow-up Phase 3 trial (the PIVOT-PO study, which successfully finished early for efficacy). \[[1](https://www.sec.gov/Archives/edgar/data/1701108/000119312522248772/d370224d8k.htm), [2](https://finance.yahoo.com/news/spero-announces-nda-resubmission-tebipenem-130000983.html)\]
* **GSK's Role:** Holds exclusive rights to develop and commercialize the drug globally. GSK assumed full responsibility for additional clinical development, regulatory submissions, and all commercial launch and marketing costs. \[[1](https://www.gsk.com/en-gb/media/press-releases/gsk-and-spero-therapeutics-announce-exclusive-licence-agreement-for-tebipenem-hbr-a-late-stage-antibiotic-that-may-treat-complicated-urinary-tract-infections/)\]
* **Excluded Territories:** The agreement covers all global territories *except* Japan and select Asian countries, which are retained by Spero’s long-standing partner, Meiji Seika. \[[1](https://www.gsk.com/en-gb/media/press-releases/gsk-and-spero-therapeutics-announce-exclusive-licence-agreement-for-tebipenem-hbr-a-late-stage-antibiotic-that-may-treat-complicated-urinary-tract-infections/), [2](https://finance.yahoo.com/news/spero-announces-nda-resubmission-tebipenem-130000983.html)\]
Not sure, but think Spero has already gotten first $150 million, so $325 million? in milestones remain in addition to royalties paid out on sales, looked like flat rate of 1% to first $750 million then ascending from $750 million to a max low double digit royalty on sales of over $1 billion.
I got the followning information off of Stock Titan article, showing parts of 10K Spero's annual report?
|**Contingent Event**|**Milestone Payment**| |
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|**Total potential commercial milestones based on first commercial sales**|**$101.0**\*| |
|First commercial sale of a product in the United States| \-|$51.0|
|Second anniversary of first commercial sale of a product in the United States| \-|$25.0|
|First commercial sale of a product in two European countries| \-|$25.0|
|**Total potential sales milestone payments**|**$225.0**| |
|Net annual sales greater than $200.0| \-|$25.0|
|Net annual sales greater than $300.0| \-|$25.0|
|Net annual sales greater than $400.0| \-|$25.0|
|Net annual sales greater than $500.0| \-|$50.0|
|Net annual sales greater than $750.0| \-|$50.0|
|Net annual sales greater than $1,000.0| \-|$50.0|
\*Under the terms of the GSK License Agreement, the maximum potential milestone amount was revised from $150.0 million after PIVOT-PO was stopped early for efficacy following completion of a pre-specified interim analysis of data from 1,690 patients enrolled in the trial, thereby reducing the overall cost of the trial to the Company; the maximum potential milestone payment of $150.0 million was contingent upon the trial continuing to full enrollment, with 2,637 patients enrolled in the trial.
In addition to the milestones described above, GSK is obligated to pay us(Spero Therapeutics) royalties on annual net sales of GSK Licensed Products in the GSK Territory. Such royalties are 1% for annual sales up to $750.0 million each year and range from high single-digit percentages on annual net sales above $750.0 million each year to low double-digit percentages on annual net sales above $1,000.0 million each year.
Even though Spero is a one trick pony, after discontinuing the rest of their pipeline, I would think a buyout would benefit both parties. GSK may be waiting to see how drug sales are going upon the introduction in late 2026 that they project, but a successful launch would only increse the buyout price. I am not making a recommendation, and I have no expertise in this area. Do your own due diligence if you plan on pursuing this stoc
