November 10, 2021 - 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, 2021

☐	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) 392-8412

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 4, 2021, the registrant had 46,270,347 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Comprehensive (Loss) Income	3
	Condensed Statements of Stockholders’ Equity	4
	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	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
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	89
Item 3.	Defaults Upon Senior Securities	89
Item 4.	Mine Safety Disclosures	89
Item 5.	Other Information	89
Item 6.	Exhibits	90
Signatures		91

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,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	30,707		$	206,152
Marketable securities		159,231			120,341
Investment in equity securities		39,763			41,644
Accounts receivable		12,330			5,559
Prepaid expenses and other current assets		8,698			4,486
Total current assets		250,729			378,182
Property and equipment, net		23,319			12,935
Operating lease right-of-use assets		30,129			—
Marketable securities, non-current		64,279			—
Other non-current assets		2,144			2,122
Restricted cash		872			872
Total assets	$	371,472		$	394,111
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,173		$	5,544
Accrued compensation		8,487			8,823
Deferred revenue—current		7,804			14,603
Operating lease liability - current		1,445			—
Debt—current		6,250			—
Other current liabilities		296			627
Total current liabilities		35,455			29,597
Deferred revenue, non-current		145			6,100
Operating lease liability - non-current		32,073			—
Deferred rent		—			1,340
Debt—non-current		18,714			24,545
Other noncurrent liabilities		1,505			481
Total liabilities		87,892			62,063
Stockholders’ equity:
Preferred stock, $0.001 par value — 10,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value — 300,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 46,261,060 and 45,752,116 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		46			46
Additional paid-in-capital		578,850			559,746
Accumulated other comprehensive (loss) income		(30	)		129
Accumulated deficit		(295,286	)		(227,873	)
Total stockholders’ equity		283,580			332,048
Total Liabilities and Stockholders’ Equity	$	371,472		$	394,111

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,
	2021			2020			2021			2020
Revenues (including amounts from related parties of $0 during both the three and nine months ended September 30, 2021, and $0 and $2,813 during the three and nine months ended September 30, 2020, respectively)		8,517		$	17,823		$	51,226		$	34,444
Operating expenses
Research and development		26,602			19,361			74,473			54,223
General and administrative		16,589			9,079			40,241			26,435
Total operating expenses		43,191			28,440			114,714			80,658
Loss from operations		(34,674	)		(10,617	)		(63,488	)		(46,214	)
Interest income		109			295			481			1,320
Unrealized gain (loss) on equity securities		4,483			29,778			(1,881	)		78,638
Interest and other expense, net		(820	)		(2,317	)		(2,525	)		(6,328	)
Net (loss) income	$	(30,902	)	$	17,139		$	(67,413	)	$	27,416
Net (loss) income per share, basic	$	(0.67	)	$	0.46		$	(1.46	)	$	0.91
Net (loss) income per share, diluted	$	(0.67	)	$	0.45		$	(1.46	)	$	0.90
Weighted-average shares used in computing basic net (loss) income per share		46,162,544			36,887,266			46,060,010			29,994,917
Weighted-average shares used in computing diluted net (loss) income per share		46,162,544			37,877,552			46,060,010			30,349,856

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive (Loss) Income

(Unaudited)

(In thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net (loss) income	$	(30,902	)	$	17,139		$	(67,413	)	$	27,416
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale securities		15			(161	)		(159	)		72
Comprehensive (loss) income	$	(30,887	)	$	16,978		$	(67,572	)	$	27,488

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
	Preferred Stock				Common Stock					Paid-In-			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		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 loss on available-for- sale securities		—		—		—			—		—			(45	)		—			(45	)
Net loss		—		—		—			—		—			—			(6,152	)		(6,152	)
Balances at June 30, 2021		—	$	—		46,141,454		$	46	$	571,883		$	(45	)	$	(264,384	)	$	307,500
Exercise of common stock options		—		—		15,911			—		160			—			—			160
Issuance of common stock under Employee Stock Purchase Plan		—		—		52,463			—		892			—			—			892
Vesting of restricted stock units		—		—		81,375			—		—			—			—			—
Stock transaction associated with taxes withheld on restricted stock units		—		—		(30,143	)		—		(580	)		—			—			(580	)
Stock-based compensation expense		—		—		—			—		6,495			—			—			6,495
Net unrealized gain on available-for- sale securities		—		—		—			—		—			15			—			15
Net loss		—		—		—			—		—			—			(30,902	)		(30,902	)
Balances at September 30, 2021		—	$	—		46,261,060		$	46	$	578,850		$	(30	)	$	(295,286	)	$	283,580

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-In-

Comprehensive

Accumulated

Stockholders’

Amount

Capital

Income (Loss)

Deficit

Equity

Balances at December 31, 2019

—

23,098,969

Form: 10-Q

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