1.Organization and Principal Activities

Description of Business

Sutro Biopharma, Inc. (the “Company”) is a clinical stage drug discovery, development and manufacturing company focused on leveraging its integrated cell-free protein synthesis and site-specific conjugation platform, XpressCF^®, to create a broad variety of optimally designed, next-generation protein therapeutics, initially for cancer. The Company was incorporated on April 21, 2003, and is headquartered in South San Francisco, California.

The Company operates in one business segment, the development of biopharmaceutical products.         

Liquidity

At-The-Market Sales

During the year ended December 31, 2020, the Company sold an aggregate of 2,614,286 shares of its common stock through its At-the-Market (“ATM Facility”) pursuant to its Common Stock Sales Agreement dated October 4, 2019 with Cowen and Company, LLC, as sales agent. The gross proceeds from these sales were approximately $24.6 million, before deducting fees of approximately $0.8 million, resulting in net proceeds of approximately $23.8 million to the Company.  

2020 Public Offerings

On May 14, 2020, the Company closed a public offering of 12,650,000 shares of its common stock at a public offering price of $7.75 per share, which included the exercise in full of the underwriters’ option to purchase 1,650,000 shares of common stock. The gross proceeds from this offering were approximately $98.0 million, before deducting approximately $6.6 million of underwriting discounts and commissions and other offering expenses, resulting in net proceeds of approximately $91.4 million to the Company.  

On December 11, 2020, the Company closed a public offering of 6,900,000 shares of its common stock at a public offering price of $21.00 per share, which included the exercise in full of the underwriters’ option to purchase 900,000 shares of common stock. The gross proceeds from this offering were approximately $144.9 million, before deducting approximately $9.1 million of underwriting discounts and commissions and other offering expenses, resulting in net proceeds of approximately $135.8 million to the Company.

Term Loan

On February 28, 2020, the Company entered into a loan and security agreement (the “Loan and Security Agreement”) with Oxford Finance LLC (“Oxford”), as the collateral agent and a lender, and Silicon Valley Bank, as a lender (together with Oxford, the “Lenders”), pursuant to which the Lenders agreed to lend the Company up to an aggregate of $25.0 million in a series of term loans (the “Term A Loan”). Upon entering into the Loan and Security Agreement, the Company borrowed $25.0 million from the Lenders, with approximately $9.6 million of such amount applied to the repayment of the outstanding principal, interest and final payment fees owed pursuant to a prior loan and security agreement dated August 4, 2017 with the Lenders. The net proceeds from the Term Loans under the Loan and Security Agreement may be used to satisfy the Company’s future working capital needs and to fund its general business requirements.  Please see an expanded discussion on the Loan and Security Agreement in Note 7 Loan and Security Agreement.

The Company has incurred significant losses and has negative cash flows from operations. As of December 31, 2020, there was an accumulated deficit of $227.9 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 December 31, 2020, the Company had unrestricted cash, cash equivalents and marketable securities of $326.5 million, which is 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 December 31, 2020 will enable the Company to maintain its operation for a period of at least 12 months following the filing date of its financial statements.