August 8, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-38662

SUTRO BIOPHARMA, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	47-0926186
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

111 Oyster Point Blvd, South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 881-6500

Not Applicable:

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, $0.001 par value

STRO

The Nasdaq Stock Market LLC
(Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2022, the registrant had 52,161,451 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Balance Sheets	2
	Condensed Statements of Operations	3
	Condensed Statements of Comprehensive Loss	4
	Condensed Statements of Stockholders’ Equity	5
	Condensed Statements of Cash Flows	6
	Notes to Unaudited Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Mine Safety Disclosures	93
Item 5.	Other Information	93
Item 6.	Exhibits	94
Signatures		95

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Sutro Biopharma, Inc.

Condensed Balance Sheets

(In thousands, except share and per share amounts)


	June 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	79,115		$	30,414
Marketable securities		112,513			130,343
Investment in equity securities		34,008			37,181
Accounts receivable		97,671			12,454
Prepaid expenses and other current assets		8,204			8,123
Total current assets		331,511			218,515
Property and equipment, net		23,600			22,550
Operating lease right-of-use assets		27,716			29,041
Marketable securities, non-current		-			68,775
Other non-current assets		1,921			1,655
Restricted cash		872			872
Total assets	$	385,620		$	341,408
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,567		$	11,327
Accrued compensation		7,748			11,417
Deferred revenue - current		6,490			5,496
Operating lease liability - current		1,120			1,037
Debt - current		12,500			9,375
Other current liabilities		4,147			3,084
Total current liabilities		44,572			41,736
Deferred revenue - non-current		90,000			-
Operating lease liability - non-current		32,069			31,224
Debt - non-current		9,779			15,738
Other noncurrent liabilities		142			146
Total liabilities		176,562			88,844
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value — 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021		-			-
Common stock, $0.001 par value — 300,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 48,674,232 and 46,327,131 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		49			46
Additional paid-in-capital		608,898			586,243
Accumulated other comprehensive loss		(1,356	)		(314	)
Accumulated deficit		(398,533	)		(333,411	)
Total stockholders’ equity		209,058			252,564
Total Liabilities and Stockholders’ Equity	$	385,620		$	341,408

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Revenues	$	28,096		$	28,049		$	33,993		$	42,709
Operating expenses
Research and development		32,332			25,309			62,322			47,871
General and administrative		15,143			12,545			30,182			23,652
Total operating expenses		47,475			37,854			92,504			71,523
Loss from operations		(19,379	)		(9,805	)		(58,511	)		(28,814	)
Interest income		197			175			313			372
Unrealized (loss) gain on equity securities		(3,736	)		4,325			(3,173	)		(6,364	)
Interest and other expense, net		(594	)		(847	)		(1,251	)		(1,705	)
Loss before provision for income taxes		(23,512	)		(6,152	)		(62,622	)		(36,511	)
Provision for income taxes		2,500			-			2,500			-
Net loss	$	(26,012	)	$	(6,152	)	$	(65,122	)	$	(36,511	)
Net loss per share, basic and diluted	$	(0.55	)	$	(0.13	)	$	(1.39	)	$	(0.79	)
Weighted-average shares used in computing basic and diluted loss per share		46,957,196			46,116,175			46,729,663			46,007,892

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net loss	$	(26,012	)	$	(6,152	)	$	(65,122	)	$	(36,511	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities		(204	)		(45	)		(1,042	)		(174	)
Comprehensive loss	$	(26,216	)	$	(6,197	)	$	(66,164	)	$	(36,685	)

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)


									Accumulated
						Additional			Other						Total
	Common Stock					Paid-In-			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			(Loss)			Deficit			Equity
Balances at December 31, 2021		46,327,131		$	46	$	586,243		$	(314	)	$	(333,411	)	$	252,564
Exercise of common stock options		32,497			—		180			—			—			180
Issuance of common stock under Employee Stock Purchase Plan		146,165			—		1,006			—			—			1,006
Vesting of restricted stock units		465,731			1		(1	)		—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(44,665	)		—		(404	)		—			—			(404	)
Stock-based compensation expense		—			—		6,974			—			—			6,974
Net unrealized loss on available-for- sale securities		—			—		—			(838	)		—			(838	)
Net loss		—			—		—			—			(39,110	)		(39,110	)
Balances at March 31, 2022		46,926,859		$	47	$	593,998		$	(1,152	)	$	(372,521	)	$	220,372
Exercise of common stock options		298			—		2			—			—			2
Vesting of restricted stock units		31,375			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(1,296	)		—		(9	)		—			—			(9	)
Stock-based compensation expense		—			—		6,696			—			—			6,696
Issuance of common stock in connection with At-The-Market sale, net of issuance costs of $690		1,716,996			2		8,211			—			—			8,213
Net unrealized loss on available-for- sale securities		—			—		—			(204	)		—			(204	)
Net loss		—			—		—			—			(26,012	)		(26,012	)
Balances at June 30, 2022		48,674,232		$	49	$	608,898		$	(1,356	)	$	(398,533	)	$	209,058


									Accumulated
						Additional			Other						Total
	Common Stock					Paid-In-			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			Income (Loss)			Deficit			Equity
Balances at December 31, 2020		45,752,116		$	46	$	559,746		$	129		$	(227,873	)	$	332,048
Exercise of common stock options		129,161			—		1,360			—			—			1,360
Issuance of common stock under Employee Stock Purchase Plan		93,346			—		873			—			—			873
Vesting of restricted stock units		147,349			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(18,366	)		—		(407	)		—			—			(407	)
Stock-based compensation expense		—			—		3,952			—			—			3,952
Net unrealized loss on available-for- sale securities		—			—		—			(129	)		—			(129	)
Net loss		—			—		—			—			(30,359	)		(30,359	)
Balances at March 31, 2021		46,103,606		$	46	$	565,524		$	—		$	(258,232	)	$	307,338
Exercise of common stock options		40,902			—		452			—			—			452
Return and retirement of common stocks		(6,804	)		—		—			—			—			—
Vesting of restricted stock units		3,750			—		—			—			—			—
Stock-based compensation expense		—			—		5,907			—			—			5,907
Net unrealized gain on available-for- sale securities		—			—		—			(45	)		—			(45	)
Net income		—			—		—			—			(6,152	)		(6,152	)
Balances at June 30, 2021		46,141,454		$	46	$	571,883		$	(45	)	$	(264,384	)	$	307,500

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)


		Six Months Ended

Form: 10-Q

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