Shares of small-cap biopharma company Spero Therapeutics (NASDAQ:SPRO) are up 15.3% as of midday Thursday after announcing a new product partnership with Pfizer (NYSE:PFE), in addition to a major equity investment by the same pharmaceutical icon. Namely, Pfizer is now a licensee of Spero’s drug-resistant infection treatment SPR206, as well as an owner of about $40 million worth of Spero Therapeutics. That’s nearly a 10th of the small company.
The move is a somewhat risky one on Pfizer’s part. Spero is not yet generating any product revenue, and SPR206 is only in the midst of phase 1 trials as a treatment for multidrug-resistant (or MDR), Gram-negative infections. The company’s most-developed project is a treatment for urinary tract infections called Tebipenem HBr. It’s only recently completed phase 3 trials, though, and has yet to be submitted to regulators for final approval.
The need for new ways of fighting bacterial infections is tremendous, though, as older drugs are less and less effective. Bacteria evolve and adapt, too, as a means of working around previously effective therapies. The World Health Organization deems antibiotic resistance as one of today’s most significant threats to human health.
While $40 million is a significant sum to Spero Therapeutics, given its $478 million market cap, it’s not a particularly large sum to Pfizer. If for some reason SPR206 isn’t approved, the pharmaceutical giant is no worse off.
Pfizer’s interest in a controlling stake in a small biopharma name like Spero is telling all the same, though, as is its specific licensing interest in such an early-stage drug. Thursday’s surge might well be met with some profit taking, but investors should see this development in a bigger-picture context: The tie-up serves as a vote of confidence in Spero and its pipeline.
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