August 10, 2023 - 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, 2023

☐ 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 7, 2023, the registrant had 60,527,043 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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	95
Item 3.	Defaults Upon Senior Securities	95
Item 4.	Mine Safety Disclosures	95
Item 5.	Other Information	95
Item 6.	Exhibits	96
Signatures		97

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Sutro Biopharma, Inc.

Condensed Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)


	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	235,095		$	47,254
Marketable securities		123,198			255,090
Investment in equity securities		33,349			32,020
Accounts receivable		9,999			7,122
Prepaid expenses and other current assets		10,344			11,667
Total current assets		411,985			353,153
Property and equipment, net		23,636			24,621
Operating lease right-of-use assets		25,138			26,443
Other non-current assets		3,268			1,855
Restricted cash		872			872
Total assets	$	464,899		$	406,944
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,856		$	4,797
Accrued compensation		9,509			13,142
Deferred revenue - current		18,036			16,759
Operating lease liability - current		5,934			4,585
Debt - current		10,197			12,500
Accrued expenses and other current liabilities		19,593			14,764
Total current liabilities		67,125			66,547
Deferred revenue - non-current		79,880			89,885
Operating lease liability - non-current		26,526			29,574
Debt - non-current		-			3,771
Deferred royalty obligation related to the sale of future royalties		136,653			-
Other non-current liabilities		-			119
Total liabilities		310,184			189,896
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value — 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022		-			-
Common stock, $0.001 par value — 300,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 60,471,041 and 57,499,541 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		60			58
Additional paid-in-capital		695,828			670,223
Accumulated other comprehensive loss		16			(618	)
Accumulated deficit		(541,189	)		(452,615	)
Total stockholders’ equity		154,715			217,048
Total Liabilities and Stockholders’ Equity	$	464,899		$	406,944

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,
	2023			2022			2023			2022
Revenues	$	10,412		$	28,096		$	23,086		$	33,993
Operating expenses
Research and development		41,592			32,332			80,991			62,322
General and administrative		14,999			15,143			30,511			30,182
Total operating expenses		56,591			47,475			111,502			92,504
Loss from operations		(46,179	)		(19,379	)		(88,416	)		(58,511	)
Interest income		2,842			197			5,402			313
Unrealized gain (loss) on equity securities		8,321			(3,736	)		1,329			(3,173	)
Non-cash interest expense related to the sale of future royalties		(442	)		-			(442	)		-
Interest and other income (expense), net		(2,915	)		(594	)		(5,901	)		(1,251	)
Loss before provision for income taxes		(38,373	)		(23,512	)		(88,028	)		(62,622	)
Provision for income taxes		151			2,500			546			2,500
Net loss	$	(38,524	)	$	(26,012	)	$	(88,574	)	$	(65,122	)
Net loss per share, basic and diluted	$	(0.64	)	$	(0.55	)	$	(1.49	)	$	(1.39	)
Weighted-average shares used in computing basic and diluted loss per share		60,339,475			46,957,196			59,535,918			46,729,663

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,
	2023			2022			2023			2022
Net loss	$	(38,524	)	$	(26,012	)	$	(88,574	)	$	(65,122	)
Other comprehensive income (loss):
Net unrealized income (loss) on available-for-sale securities		123			(204	)		634			(1,042	)
Comprehensive loss	$	(38,401	)	$	(26,216	)	$	(87,940	)	$	(66,164	)

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			Income (Loss)			Deficit			Equity
Balances at December 31, 2022		57,499,541		$	58	$	670,223		$	(618	)	$	(452,615	)	$	217,048
Exercise of common stock options		53,060			—		314			—			—			314
Issuance of common stock under Employee Stock Purchase Plan		239,060			—		1,097			—			—			1,097
Vesting of restricted stock units		801,769			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(73,003	)		—		(451	)		—			—			(451	)
Stock-based compensation expense		—			—		6,021			—			—			6,021
Issuance of common stock in connection with At-The-Market sale, net of issuance costs of $308		1,641,374			2		10,921			—			—			10,923
Net unrealized income on available-for-sale securities		—			—		—			511			—			511
Net loss		—			—		—			—			(50,050	)		(50,050	)
Balances at March 31, 2023		60,161,801		$	60	$	688,125		$	(107	)	$	(502,665	)	$	185,413
Vesting of restricted stock units		94,500			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		(1,296	)		—		(6	)		—			—			(6	)
Stock-based compensation expense		—			—		6,661			—			—			6,661
Issuance of common stock in connection with At-The-Market sale, net of issuance costs of $151		216,036			—		1,048			—			—			1,048
Net unrealized income on available-for-sale securities		—			—		—			123			—			123
Net loss		—			—		—			—			(38,524	)		(38,524	)
Balances at June 30, 2023		60,471,041		$	60	$	695,828		$	16		$	(541,189	)	$	154,715


									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

Form: 10-Q

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