Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 13, 2024

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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, 2024

OR

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 7, 2024, the registrant had 82,458,725 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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

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, Use of Proceeds, and Issuer Purchases of Equity Securities

91

Item 3.

Defaults Upon Senior Securities

91

Item 4.

Mine Safety Disclosures

91

Item 5.

Other Information

91

Item 6.

Exhibits

92

Signatures

 

93

 

 

 

 

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Sutro Biopharma, Inc.

Condensed Balance Sheets

(Unaudited)

(In thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

174,579

 

 

$

69,268

 

Marketable securities

 

 

213,675

 

 

 

264,413

 

Investment in equity securities

 

 

-

 

 

 

41,937

 

Accounts receivable

 

 

6,655

 

 

 

36,078

 

Prepaid expenses and other current assets

 

 

10,870

 

 

 

9,846

 

Total current assets

 

 

405,779

 

 

 

421,542

 

Property and equipment, net

 

 

18,997

 

 

 

21,940

 

Operating lease right-of-use assets

 

 

19,027

 

 

 

22,815

 

Other non-current assets

 

 

7,172

 

 

 

3,567

 

Restricted cash

 

 

857

 

 

 

872

 

Total assets

 

$

451,832

 

 

$

470,736

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,216

 

 

$

9,440

 

Accrued compensation

 

 

13,177

 

 

 

14,686

 

Deferred revenue - current

 

 

72,560

 

 

 

20,666

 

Operating lease liability - current

 

 

7,203

 

 

 

6,420

 

Debt - current

 

 

-

 

 

 

4,061

 

Accrued expenses and other current liabilities

 

 

32,135

 

 

 

38,473

 

Total current liabilities

 

 

131,291

 

 

 

93,746

 

Deferred revenue - non-current

 

 

17,999

 

 

 

53,379

 

Operating lease liability - non-current

 

 

17,661

 

 

 

23,154

 

Deferred royalty obligation related to the sale of future royalties

 

 

171,967

 

 

 

149,114

 

Other non-current liabilities

 

 

1,694

 

 

 

1,694

 

Total liabilities

 

 

340,612

 

 

 

321,087

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value — 10,000,000 shares authorized
   as of September 30, 2024 and December 31, 2023;
no shares issued and
   outstanding as of September 30, 2024 and December 31, 2023

 

 

-

 

 

 

-

 

Common stock, $0.001 par value — 300,000,000 shares authorized
   as of September 30, 2024 and December 31, 2023;
82,395,350 and
   
61,009,829 shares issued and outstanding as of September 30, 2024
   and December 31, 2023, respectively

 

 

82

 

 

 

61

 

Additional paid-in-capital

 

 

825,458

 

 

 

708,975

 

Accumulated other comprehensive (loss) income

 

 

106

 

 

 

21

 

Accumulated deficit

 

 

(714,426

)

 

 

(559,408

)

Total stockholders’ equity

 

 

111,220

 

 

 

149,649

 

Total Liabilities and Stockholders’ Equity

 

$

451,832

 

 

$

470,736

 

 

See accompanying notes to unaudited interim condensed financial statements.

2


 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

$

8,520

 

 

$

16,924

 

 

$

47,234

 

 

$

40,010

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

62,108

 

 

 

45,669

 

 

 

181,006

 

 

 

126,660

 

General and administrative

 

 

14,331

 

 

 

15,269

 

 

 

39,423

 

 

 

45,780

 

Total operating expenses

 

 

76,439

 

 

 

60,938

 

 

 

220,429

 

 

 

172,440

 

Loss from operations

 

 

(67,919

)

 

 

(44,014

)

 

 

(173,195

)

 

 

(132,430

)

Interest income

 

 

4,875

 

 

 

4,550

 

 

 

13,882

 

 

 

9,952

 

Unrealized gain on equity securities

 

 

-

 

 

 

694

 

 

 

-

 

 

 

2,023

 

Non-cash interest expense related to the
    sale of future royalties

 

 

(7,910

)

 

 

(5,936

)

 

 

(22,380

)

 

 

(6,378

)

Interest and other income (expense), net

 

 

22,167

 

 

 

(2,739

)

 

 

26,683

 

 

 

(8,640

)

Loss before provision for income taxes

 

 

(48,787

)

 

 

(47,445

)

 

 

(155,010

)

 

 

(135,473

)

Provision for income taxes

 

 

-

 

 

 

1,839

 

 

 

8

 

 

 

2,385

 

Net loss

 

$

(48,787

)

 

$

(49,284

)

 

$

(155,018

)

 

$

(137,858

)

Net loss per share, basic and diluted

 

$

(0.59

)

 

$

(0.81

)

 

$

(2.07

)

 

$

(2.30

)

Weighted-average shares used in computing
   basic and diluted net loss per share

 

 

82,043,671

 

 

 

60,599,025

 

 

 

74,934,737

 

 

 

59,894,181

 

 

See accompanying notes to unaudited interim condensed financial statements.

3


 

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(48,787

)

 

$

(49,284

)

 

$

(155,018

)

 

$

(137,858

)

Other comprehensive income (loss) :

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized income (loss) on available-for-sale
   securities

 

 

269

 

 

 

(9

)

 

 

85

 

 

 

625

 

Comprehensive loss

 

$

(48,518

)

 

$

(49,293

)

 

$

(154,933

)

 

$

(137,233

)

 

See accompanying notes to unaudited interim condensed financial statements.

4


 

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, 2023

 

 

61,009,829

 

 

$

61

 

 

$

708,975

 

 

$

21

 

 

$

(559,408

)

 

$

149,649

 

Exercise of common stock options

 

 

23,748

 

 

 

 

 

 

117

 

 

 

 

 

 

 

 

 

117

 

Issuance of common stock under
   Employee Stock Purchase Plan

 

 

284,362

 

 

 

 

 

 

911

 

 

 

 

 

 

 

 

 

911

 

Vesting of restricted stock units

 

 

1,215,729

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock transaction associated with taxes
   withheld on restricted stock units

 

 

(77,122

)

 

 

 

 

 

(374

)

 

 

 

 

 

 

 

 

(374

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,068

 

 

 

 

 

 

 

 

 

6,068

 

Net unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(134

)

 

 

 

 

 

(134

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58,213

)

 

 

(58,213

)

Balances at March 31, 2024

 

 

62,456,546

 

 

$

62

 

 

$

715,696

 

 

$

(113

)

 

$

(617,621

)

 

$

98,024

 

Vesting of restricted stock units

 

 

107,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock transaction associated with taxes
   withheld on restricted stock units

 

 

(8,474

)

 

 

 

 

 

(37

)

 

 

 

 

 

 

 

 

(37

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,159

 

 

 

 

 

 

 

 

 

6,159

 

Issuance of common stock in connection with the
   underwritten offering, net of issuance costs of $
3,474

 

 

14,478,764

 

 

 

15

 

 

 

71,512

 

 

 

 

 

 

 

 

 

71,527

 

Issuance of common stock to Ipsen Biopharmaceuticals, Inc.
   (USA) under the Ipsen Investment Agreement

 

 

4,827,373

 

 

 

5

 

 

 

24,566

 

 

 

 

 

 

 

 

 

24,571

 

Net unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48,018

)

 

 

(48,018

)

Balances at June 30, 2024

 

 

81,861,584

 

 

$

82

 

 

$

817,896

 

 

$

(163

)

 

$

(665,639

)

 

$

152,176

 

Exercise of common stock options

 

 

40,000

 

 

 

 

 

 

154

 

 

 

 

 

 

 

 

 

154

 

Issuance of common stock under
   Employee Stock Purchase Plan

 

 

281,885

 

 

 

 

 

 

937

 

 

 

 

 

 

 

 

 

937

 

Vesting of restricted stock units

 

 

231,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock transaction associated with taxes
   withheld on restricted stock units

 

 

(20,069

)

 

 

 

 

 

(74

)

 

 

 

 

 

 

 

 

(74

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,545

 

 

 

 

 

 

 

 

 

6,545

 

Net unrealized income on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

269

 

 

 

 

 

 

269

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48,787

)

 

 

(48,787

)

Balances at September 30, 2024

 

 

82,395,350

 

 

$

82

 

 

$

825,458

 

 

$

106

 

 

$

(714,426

)

 

$

111,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Issuance of common stock under
   Employee Stock Purchase Plan

 

 

287,019

 

 

 

 

 

 

954

 

 

 

 

 

 

 

 

 

954

 

Vesting of restricted stock units

 

 

150,250

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Stock transaction associated with taxes
   withheld on restricted stock units

 

 

(7,606

)

 

 

 

 

 

(33

)

 

 

 

 

 

 

 

 

(33

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,003

 

 

 

 

 

 

 

 

 

6,003

 

Net unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

(9

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49,284

)

 

 

(49,284

)

Balances at September 30, 2023

 

 

60,900,704

 

 

$

61

 

 

$

702,752

 

 

$

7

 

 

$

(590,473

)

 

$

112,432

 

 

See accompanying notes to unaudited interim condensed financial statements.

5


 

Sutro Biopharma, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(155,018

)

 

$

(137,858

)

Adjustments to reconcile net loss to net cash used in
   operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

5,350

 

 

 

5,085

 

Accretion of discount on marketable securities

 

 

(8,180

)

 

 

(6,022

)

Stock-based compensation

 

 

18,772

 

 

 

18,685

 

Non-cash lease expenses

 

 

3,788

 

 

 

2,447

 

Realized gain on sale of equity securities

 

 

(32,139

)

 

 

-

 

Unrealized gain on equity securities

 

 

-

 

 

 

(2,023

)

Non-cash interest expense on deferred royalty obligation

 

 

22,380

 

 

 

6,378

 

Other

 

 

610

 

 

 

414

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

29,423

 

 

 

(9,505

)

Prepaid expenses and other assets

 

 

(4,629

)

 

 

778

 

Accounts payable

 

 

(3,415

)

 

 

755

 

Accrued compensation

 

 

(1,509

)

 

 

(1,773

)

Accrued expenses and other liabilities

 

 

(6,610

)

 

 

4,579

 

Deferred revenue

 

 

16,085

 

 

 

(4,507

)

Change in operating lease liability

 

 

(4,710

)

 

 

(3,121

)

Net cash used in operating activities

 

 

(119,802

)

 

 

(125,688

)

Investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

 

(335,490

)

 

 

(379,728

)

Maturities of marketable securities

 

 

360,697

 

 

 

390,960

 

Sales of marketable securities

 

 

33,796

 

 

 

11,231

 

Proceed from sale of equity securities

 

 

74,047

 

 

 

-

 

Purchases of equipment and leasehold improvements

 

 

(2,030

)

 

 

(2,874

)

Net cash provided by investing activities

 

 

131,020

 

 

 

19,589

 

Financing activities

 

 

 

 

 

 

Proceeds from sales of common stock, net of issuance costs

 

 

71,527

 

 

 

11,971

 

Proceeds from sales of common stock to Ipsen Biopharmaceuticals, Inc. (USA)

 

 

25,000

 

 

 

-

 

Payment of debt

 

 

(4,083

)

 

 

(9,375

)

Proceeds from the sale of future royalties, net of issuance costs

 

 

-

 

 

 

136,208

 

Proceeds from exercise of common stock options

 

 

271

 

 

 

314

 

Taxes paid related to net shares settlement of restricted stock units

 

 

(485

)

 

 

(490

)

Proceeds from employee stock purchase plan

 

 

1,848

 

 

 

2,051

 

Net cash provided by financing activities

 

 

94,078

 

 

 

140,679

 

Net increase in cash, cash equivalents and restricted cash

 

 

105,296

 

 

 

34,580

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

70,140

 

 

 

48,126

 

Cash, cash equivalents and restricted cash at end of period

 

$

175,436

 

 

$

82,706

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

63

 

 

$

971

 

Income tax paid

 

$

15,166

 

 

$

-

 

Supplemental disclosure of non-cash investing and financing information:

 

 

 

 

 

 

Purchases of equipment included in accounts payable and accrued expense

 

$

676

 

 

$

327

 

Financing component associated with program fees

 

$

5,186

 

 

$

7,531

 

Premium on common stock issued to Ipsen Biopharma, Inc. (USA)

 

$

429

 

 

$

-

 

 

See accompanying notes to unaudited interim condensed financial statements.

6


 

Sutro Biopharma, Inc.

Notes to Unaudited Interim Condensed Financial Statements

1. Organization and Principal Activities

Description of Business

Sutro Biopharma, Inc. (the “Company”), is a clinical-stage oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs. The Company was incorporated on April 21, 2003, and is headquartered in South San Francisco, California.

The Company operates and manages its business as one operating segment. The Company’s Chief Executive Officer reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance.

All the Company’s long-lived assets are maintained in the United States.

Liquidity

The Company has incurred significant losses and has negative cash flows from operations. As of September 30, 2024, there was an accumulated deficit of $714.4 million. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development and other operational activities.

As of September 30, 2024, the Company had unrestricted cash, cash equivalents, and marketable securities of $388.3 million which are available to fund future operations. The Company will need to raise additional capital to support the completion of its research and development activities and to support its operations.

The Company believes that its unrestricted cash, cash equivalents, and marketable securities as of September 30, 2024 will enable the Company to maintain its operations for a period of at least