November 13, 2024 - 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, 2024

☐ 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

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.

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.

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.

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.

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.

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

Form: 10-Q

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