Spruce Biosciences (SPRB) intends to raise $75 million in an IPO of its common stock, according to an S-1 registration statement.

Daly City, California-based Spruce was founded to advance its tildacerfont product for the treatment of various forms of endocrine disorders, including adult classic congenital adrenal hyperplasia [CAH].

Management is headed by Chief Executive Officer Richard King, who has been with the firm since May 2019 and was previously Chief Operating Officer of Adamas Pharmaceuticals.

Below is a brief overview video of CAH:

Source: HealthSketch

The firm's primary product is tildacerfont, a non-steroidal therapy for CAH.

The drug achieved an apparent 80% reduction in hormones associated with the disease in a 12-week Phase 2a proof-of-concept clinical trial.

As a result, the firm has initiated a Phase 2b trial and management expects to publish topline results in Q1 2022 at the latest.

Below is the current status of the company’s drug development status:


Source: Company S-1 Filing

Investors in the firm have invested at least $71 million and include Novo Holdings, Omega Fund, RiverVest Venture Fund, HealthCap, Abingworth Bioventures, Rock Springs Capital, Aisling Capital and Citadel Multi-Strategy Equities.

According to a market research report by Market Research Future, the global market for congenital adrenal hyperplasia affects approximately one in 18,000 children per year.

This represents a forecast CAGR (Compound Annual Growth Rate) of negative (7.1%) from 2017 to 2023.

The lack of new product treatments and the high cost of treatment is responsible for the near-term contraction expected in the market.

Also, while the Americas account for the majority of current cases, the Asia Pacific region is the fastest growing region due to the high numbers of patients suffering from genetic disorders.

Major competitive vendors that provide or are developing treatments include:

  • Neurocrine Biosciences (NBIX)
  • BridgeBio Pharma (BBIO)
  • Crinetics Pharmaceuticals (CRNX)
  • Millendo Therapeutics (MLND)
  • Diurnal Group

Spruce’s recent financial results are typical of a development stage biopharma in that they feature no revenue and significant R&D and G&A costs associated with advancing its program.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):


Source: Company registration statement

As of June 30, 2020, the company had $36.6 million in cash and $9.6 million in total liabilities. (Unaudited, interim)

Spruce intends to raise $75 million in gross proceeds from an IPO of five million shares of its common stock, offered at a proposed midpoint price of $15.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price. This is a common feature of life science IPOs.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $353.8 million, excluding the effects of underwriter over-allotment options.

Management says it will use the net proceeds from the IPO as follows:

approximately $5.0 million to fund our two Phase 2b clinical trials of tildacerfont in adult patients with classic CAH;

approximately $20.0 million to fund NDA enabling and commercial readiness activities to market tildacerfont for adults with classic CAH in the United States and Europe, if approved;

approximately $40.0 million to fund our research and development efforts for tildacerfont in children with classic CAH and other rare endocrine disorders, including in a subpopulation of females with a rare form of PCOS; and

any remaining proceeds for working capital and general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed bookrunners of the IPO are Cowen, SVB Leerink, Credit Suisse, and RBC Capital Markets.


Spruce is seeking funding to advance its sole program through Phase 2b trials and for additional, related indications.

The firm’s sole candidate may have three different applications, but investors will need to wait until at least 1H 2022 before topline results are expected to be published.

The market opportunity is difficult to quantify in dollar terms and is expected to contract in the near term ahead due to a lack of new treatments.

Management has disclosed no research or major pharma collaborations, so is pursuing a go-it-alone approach at this time.

The company’s investor syndicate includes a number of notable venture capital firms and strategic investors who specialize in investing in biopharma firms.

Cowen is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 93.9% since their IPO. This is a top-tier performance for all major underwriters during the period.

As to valuation, management is seeking an enterprise value that is within the typical range for biopharma firms at IPO, so the IPO appears reasonably valued.

For life science investors with a long-term hold time frame of 24 to 36 months, my opinion on the IPO is a BUY at up to $15.00 per share.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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