November 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 September 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 November 3, 2022, the registrant had 57,475,466 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 Interim 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	94
Item 5.	Other Information	94
Item 6.	Exhibits	95
Signatures		96

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Sutro Biopharma, Inc.

Condensed Balance Sheets

(In thousands, except share and per share amounts)


	September 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	96,779		$	30,414
Marketable securities		190,560			130,343
Investment in equity securities		36,909			37,181
Accounts receivable		11,241			12,454
Prepaid expenses and other current assets		11,064			8,123
Total current assets		346,553			218,515
Property and equipment, net		24,281			22,550
Operating lease right-of-use assets		27,073			29,041
Marketable securities, non-current		-			68,775
Other non-current assets		1,921			1,655
Restricted cash		872			872
Total assets	$	400,700		$	341,408
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,443		$	11,327
Accrued compensation		10,380			11,417
Deferred revenue - current		15,920			5,496
Operating lease liability - current		2,631			1,037
Debt - current		12,500			9,375
Other current liabilities		4,414			3,084
Total current liabilities		58,288			41,736
Deferred revenue - non-current		74,732			-
Operating lease liability - non-current		31,038			31,224
Debt - non-current		6,783			15,738
Other non-current liabilities		133			146
Total liabilities		170,974			88,844
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value — 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021		-			-
Common stock, $0.001 par value — 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 54,631,360 and 46,327,131 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		55			46
Additional paid-in-capital		649,028			586,243
Accumulated other comprehensive loss		(1,336	)		(314	)
Accumulated deficit		(418,021	)		(333,411	)
Total stockholders’ equity		229,726			252,564
Total Liabilities and Stockholders’ Equity	$	400,700		$	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						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenues	$	25,147		$	8,517		$	59,140		$	51,226
Operating expenses
Research and development		31,714			26,602			94,036			74,473
General and administrative		14,643			16,589			44,825			40,241
Total operating expenses		46,357			43,191			138,861			114,714
Loss from operations		(21,210	)		(34,674	)		(79,721	)		(63,488	)
Interest income		1,014			109			1,327			481
Unrealized gain (loss) on equity securities		3,496			4,483			323			(1,881	)
Interest and other expense, net		(2,788	)		(820	)		(4,039	)		(2,525	)
Loss before provision for income taxes		(19,488	)		(30,902	)		(82,110	)		(67,413	)
Provision for income taxes		-			-			2,500			-
Net loss	$	(19,488	)	$	(30,902	)	$	(84,610	)	$	(67,413	)
Net loss per share, basic and diluted	$	(0.37	)	$	(0.67	)	$	(1.74	)	$	(1.46	)
Weighted-average shares used in computing basic and diluted loss per share		52,345,732			46,162,544			48,622,258			46,060,010

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net loss	$	(19,488	)	$	(30,902	)	$	(84,610	)	$	(67,413	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities		20			15			(1,022	)		(159	)
Comprehensive loss	$	(19,468	)	$	(30,887	)	$	(85,632	)	$	(67,572	)

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
Exercise of common stock options		16,659			—		85			—			—			85
Issuance of common stock under Employee Stock Purchase Plan		124,351			—		607			—			—			607
Vesting of restricted stock units		76,875			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(7,606	)		—		(50	)		—			—			(50	)
Stock-based compensation expense		—			—		6,782			—			—			6,782
Issuance of common stock in connection with At-The-Market sale, net of issuance costs of $902		5,746,849			6		32,706			—			—			32,712
Net unrealized gain on available-for- sale securities		—			—		—			20			—			20
Net loss		—			—		—			—			(19,488	)		(19,488	)
Balances at September 30, 2022		54,631,360		$	55	$	649,028		$	(1,336	)	$	(418,021	)	$	229,726


							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

Form: 10-Q

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