SUTRO BIOPHARMA INC

Previous wording

We also opened for enrollment a Phase 1 trial to assess the combination of luvelta and bevacizumab for treatment of ovarian cancer in December 2021 and presented initial preliminary results of this study in January 2024. Safety signals from this study were generally consistent with those previously reported and the combination treatment with luvelta and bevacizumab demonstrated clinical activity in treated patients regardless of their FolRα expression status. We expect to present updated results from the initial cohort of the bevacizumab combination study in 2024. In addition, we began enrolling patients in the expansion phase of the bevacizumab combination Phase 1 study in the first half of 2024. We expect enrollment to be complete in the first half of 2024.

Current wording

We also opened for enrollment a Phase 1 trial to assess the combination of luvelta and bevacizumab for treatment of ovarian cancer in December 2021 and presented initial preliminary results of this study in January 2024. Safety signals from this study were generally consistent with those previously reported and the combination treatment with luvelta and bevacizumab demonstrated clinical activity in treated patients regardless of their FolRα expression status. We expect to present updated results from the initial cohort of the bevacizumab combination study at 2024 ESMO Congress in September 2024. In addition, we are enrolling patients in the expansion phase of the bevacizumab combination Phase 1b study and expect to present initial data from this trial in in the first half of 2025.

Previous wording

Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development and manufacturing activities in support of our own product development efforts and those of our collaborators, raising capital to support and expand such activities and providing general and administrative support for these operations. We have funded our operations to date primarily from upfront, milestone and other payments under our collaboration agreements with BMS, Merck, Astellas, EMD Serono, Vaxcyte, Ipsen, BioNova, and Tasly, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public and other offerings of common stock, sales of our common stock through our ATM Facility, debt financing, and the royalty monetization agreement with Blackstone.

Current wording

Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development and manufacturing activities in support of our own product development efforts and those of our collaborators, raising capital to support and expand such activities and providing general and administrative support for these operations. We have funded our operations to date primarily from upfront, milestone and other payments under our collaboration agreements with Merck, Astellas, Vaxcyte, Ipsen, BMS, EMD Serono, BioNova, and Tasly, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public and other offerings of common stock, sales of our common stock through our At-the-Market Facility (“ATM Facility”) pursuant to our Open Market Sales Agreement SM dated April 2, 2021 (the “Sales Agreement”) with Jefferies LLC (“Jefferies”), debt financing, and the royalty monetization agreement with Blackstone.

Previous wording

We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales. We had a loss from operations of $56.6 million and a net loss of $58.2 million for the three months ended March 31, 2024, which net loss included the non-operating, unrealized gain of $3.7 million related to our holdings of Vaxcyte common stock. We had a loss from operations of $54.9 million and net loss of $50.0 million, which net loss included the non-operating, unrealized loss of $7.0 million related to our holdings of Vaxcyte common stock, for the three months ended March 31, 2023. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We cannot assure you that we will have net income or that we will generate positive cash flow from operating activities in the future. As of March 31, 2024, we had an accumulated deficit of $617.6 million. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, access, marketing, manufacturing and distribution. Our operating expenses would significantly increase due to continued activities to develop, and seek regulatory approvals for, our product candidates, engage in other research and development activities, expand our pipeline of product candidates, continue to develop our manufacturing facility and capabilities, maintain and expand our intellectual property portfolio, seek regulatory and marketing approval for any product candidates that we may develop, acquire or in-license other assets or technologies, ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, and operate as a public company. Current capital market conditions provide a challenging financing environment. In this context, we are continuing our process of evaluating our programs and spending. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, our expenditures on other research and development activities and the timing of achievement and receipt of upfront, milestones and other collaboration agreement payments.

Current wording

We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales. We had a loss from operations of $105.3 million and a net loss of $106.2 million for the six months ended June 30, 2024, which net loss included the non-operating, unrealized gain of $8.5 million related to our holdings of Vaxcyte common stock. We had a loss from operations of $88.4 million and a net loss of $88.6 million for the six months ended June 30, 2023, which net loss included the non-operating, unrealized gain of $1.3 million related to our holdings of Vaxcyte common stock. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We cannot assure you that we will have net income or that we will generate positive cash flow from operating activities in the future. As of June 30, 2024, we had an accumulated deficit of $665.6 million. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, access, marketing, manufacturing and distribution. Our operating expenses would significantly increase due to continued activities to develop, and seek regulatory approvals for, our product candidates, engage in other research and development activities, expand our pipeline of product candidates, continue to develop our manufacturing facility and capabilities, maintain and expand our intellectual property portfolio, seek regulatory and marketing approval for any product candidates that we may develop, acquire or in-license other assets or technologies, ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, and operate as a public company. Current capital market conditions provide a challenging financing environment. In this context, we are continuing our process of evaluating our programs and spending. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, our expenditures on other research and development activities and the timing of achievement and receipt of upfront, milestones and other collaboration agreement payments.

Previous wording

We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales. Our total revenue to date has been generated principally from our collaboration and license agreements with BMS, Merck, Astellas, Vaxcyte, and Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to the above collaborators.

Current wording

We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales. Our total revenue to date has been generated principally from our collaboration and license agreements with BMS, Merck, Astellas, Vaxcyte, Tasly, and Ipsen, and to a lesser extent, from manufacturing, supply and services and materials we provide to the above collaborators.

Previous wording

Interest expense includes interest incurred on our debt and amortization of debt issuance costs, including accretion of the final payment. Additionally, we identified a financing component under the Astellas Agreement and recorded interest expense associated with the upfront payment. Other income (expense) includes realized gain (loss) on the equity securities.

Current wording

Interest expense includes interest incurred on our debt and amortization of debt issuance costs, including accretion of the final payment. Additionally, we identified a financing component under the Astellas Agreement and recorded interest expense associated with the upfront payment.

Previous wording

Research and development expense increased by $17.5 million, or 44%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The overall increase was due primarily to increases of $11.8 million in outside services mainly due to increased CMO-related activities, $2.7 million in facilities expenses, alongside the allocation of IT-related expenses, which commenced in 2024, $2.2 million in preclinical research and clinical development expenses, $1.7 million in personnel related expenses due to higher headcount, and $0.8 million in equipment and office-related expenses, partially offset by a decrease of $1.7 million in laboratory supplies.

Current wording

Research and development expense increased by $20.4 million, or 49%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The overall increase was due primarily to increases of $11.6 million in outside services mainly due to increased CMO-related activities, $4.0 million in preclinical research and clinical development expenses, $3.2 million in facilities expenses and IT-related expenses, $1.2 million in personnel related expenses due to higher headcount, and $0.8 million in equipment and office-related expenses, partially offset by a decrease of $0.4 million in laboratory supplies.

Previous wording

General and administrative expense decreased by $2.8 million, or 18%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The overall decrease was due primarily to decreases of $2.5 million in allocated IT-related expenses beginning in 2024 and $1.1 million in personnel related expenses, partially offset by increases of $0.5 million in outside services, $0.2 million in equipment and office-related expenses, and $0.1 million in allocated facilities-related expenses.

Current wording

General and administrative expense decreased by $2.6 million, or 18%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The overall decrease was due primarily to decreases of $2.6 million in IT-related expenses and $0.8 million in personnel related expenses, partially offset by increases of $0.3 million in outside services, $0.3 million in allocated facilities-related expenses, and $0.2 million in equipment and office-related expenses.

Previous wording

Interest income increased by $1.5 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due primarily to higher average investment balances and higher average rates of return in 2024.

Current wording

Interest income increased by $2.1 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due primarily to higher average investment balances and higher average rates of return in 2024.

Previous wording

Unrealized gain on equity securities was $3.7 million during the three months ended March 31, 2024, as compared to an unrealized loss of $7.0 million for the three months ended March 31, 2023. The unrealized gain (loss) on equity securities in each period was entirely due to the remeasurement of the fair value of our investment in Vaxcyte common stock.

Current wording

Unrealized gain on equity securities was $4.8 million during the three months ended June 30, 2024, as compared to $8.3 million for the three months ended June 30, 2023. The unrealized gain on equity securities in each period was entirely due to the remeasurement of the fair value of our investment in Vaxcyte common stock.

Previous wording

Non-cash interest expense increased by $7.2 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. Non-cash interest expense was recognized on our deferred royalty obligation related to the June 2023 sale of future Vaxcyte royalties pursuant to the Purchase Agreement, using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of potential future royalty payments to be earned and received by Blackstone from Vaxcyte under the 2015 License Agreement. No non-cash interest expense was recorded during the three months ended March 31, 2023.

Current wording

Non-cash interest expense increased by $6.8 million during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Non-cash interest expense was recognized on our deferred royalty obligation related to the June 2023 sale of future Vaxcyte royalties pursuant to the Purchase Agreement, using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of potential future royalty payments to be earned and received by Blackstone from Vaxcyte under the 2015 License Agreement.

Previous wording

Interest and other income (expense), net, decreased by $0.8 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to decreases of $0.4 million in interest incurred on our outstanding loan and $0.4 million from the financing component related to the Astellas Agreement.

Current wording

Interest and other income (expense), net, decreased by $1.1 million during the three months ended June 30, 2024, as compared to the three months ended June, 2023, primarily due to decreases of $0.8 million from the financing component related to the Astellas Agreement and $0.3 million in interest incurred on our loan which was fully paid in March 2024.

Previous wording

Total revenue increased by $0.3 million during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. This was primarily due to a $5.1 million increase from Astellas, of which $4.7 million was from the ongoing performance related to partially unsatisfied performance obligations, $0.5 million was from research and development services, and $0.4 million was from materials supply, which was partially offset by a $0.4 million decrease from the financing component related to the Astellas Agreement, and a $1.0 million increase in Tasly revenue primarily due to an increase in clinical product supply under the 2023 Tasly Supply Agreement. These increases were partially offset by a $3.2 million combined decrease in BMS and EMD Serono revenue due to their decisions to end clinical development of CC-99712 and M1231, respectively, in 2023, and a $2.5 million decrease in Merck revenue primarily due to a $2.4 million decrease in manufacturing activities supporting clinical trial supply, and a $0.1 million decrease in research and development activities.

Current wording

Total revenue increased by $15.6 million during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This was primarily due to a $22.5 million increase from Astellas, of which $23.0 million was from the ongoing performance related to partially unsatisfied performance obligations, and included a cumulative catch-up adjustment of $17.8 million on the contract modification date from Astellas' decision not to nominate a third target program under the Astellas Agreement, $0.4 million from materials supply, and $0.3 million from research and development services, which were partially offset by a decrease of $1.2 million from the financing component related to the Astellas Agreement. Additionally, there was a $1.0 million increase in Tasly revenue, primarily due to an increase in clinical product supply under the 2023 Tasly Supply Agreement, a $0.1 million increase in Vaxcyte revenue, primarily due to an increase in research and development services and materials supply, and a $0.1 million in Ipsen revenue from research and development services and materials supply, which commenced in the second quarter of 2024. These increases were partially offset by a $5.4 million combined decrease in BMS and EMD Serono revenue due to their decisions to end clinical development of CC-99712 and M1231, respectively, in 2023, and a $2.7 million decrease in Merck revenue, primarily due to a $2.5 million decrease in manufacturing activities supporting clinical trial supply and a $0.2 million decrease in research and development services and materials supply.

Previous wording

To date, we have incurred significant net losses, and negative cash flows from operations. Our operations have been funded primarily by payments received from our collaborators, and net proceeds from equity sales, debt, and a royalty monetization. As of March 31, 2024, we had cash, cash equivalents and marketable securities of $267.6 million, equity securities of $45.6 million, and an accumulated deficit of $617.6 million, which amounts do not include any proceeds under the Ipsen License Agreement or the Underwritten Offering described below.

Current wording

To date, we have incurred significant net losses, and negative cash flows from operations. Our operations have been funded primarily by payments received from our collaborators, and net proceeds from equity sales, debt, and a royalty monetization. As of June 30, 2024, we had cash, cash equivalents and marketable securities of $375.6 million, equity securities of $50.4 million, and an accumulated deficit of $665.6 million.

Previous wording

In consideration for the rights and licenses granted by us to Ipsen in the Ipsen License Agreement, Ipsen (i) paid us an upfront license fee in the amount of $50.0 million in April 2024 and (ii) Ipsen Biopharmaceuticals, Inc. (USA) (“Ipsen USA”) purchased 4,827,373 shares of our common stock for $25.0 million, at a price of $5.18 per share, representing a 17% premium to the volume weighted average price (“VWAP”) of our common stock for the twenty trading day period prior to the parties’ execution of the Ipsen License Agreement, in accordance with the terms set forth in a certain investment agreement by and between us and the Ipsen USA dated March 29, 2024 (the “Ipsen Investment Agreement”).

Current wording

In consideration for the rights and licenses granted by us to Ipsen in the Ipsen License Agreement, Ipsen (i) paid us an upfront license fee in the amount of $50.0 million in April 2024 and (ii) Ipsen Biopharmaceuticals, Inc. (USA) (“Ipsen USA”) purchased 4,827,373 shares of our common stock for $25.0 million, at a price of approximately $5.18 per share, in accordance with the terms set forth in a certain investment agreement by and between us and the Ipsen USA dated March 29, 2024 (the “Ipsen Investment Agreement”, and, together with the Ipsen License Agreement, the “Ipsen Agreements”).

Previous wording

Cash used in operating activities for the three months ended March 31, 2023 was $61.0 million. Our net loss of $50.1 million included non-cash charges of $7.0 million for the unrealized loss on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $6.0 million for stock-based compensation, $1.8 million for the accretion of discount on marketable securities, $1.6 million for depreciation and amortization, and $0.6 million for noncash lease expense. Cash used in operating activities also reflected a net change in operating assets and liabilities of $24.4 million, due to an increase of $7.4 million in prepaid expenses and other assets, a decrease of $6.8 million in accrued compensation expense primarily due to bonuses paid in 2023 in connection with certain company 2022 goal achievements, a decrease of $4.4 million in deferred revenue from revenue recognized under our collaboration agreements, an increase of $2.8 million in accounts receivable from our collaborators, a decrease of $2.2 million in accounts payable and other liabilities due to timing of payments, and a decrease of $0.8 million in our operating lease liability.

Current wording

Cash used in operating activities for the six months ended June 30, 2024 was $55.3 million. Our net loss of $106.2 million included non-cash charges of $14.5 million for non-cash interest expense on our deferred royalty obligation, $12.2 million for stock-based compensation, $8.5 million for the unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $5.5 million for the accretion of discount on marketable securities, $3.5 million for depreciation and amortization, and $2.5 million for non-cash lease expense. Cash used in operating activities also reflected a net change in operating assets and liabilities of $31.7 million, due to a decrease of $29.1 million in accounts receivable primarily from receiving $25.0 million from Vaxcyte as the second of two installment payments for the Option exercise price under the Vaxcyte Agreement, and an increase of $21.2 million in deferred revenue primarily due to the upfront payment from Ipsen, partially offset by revenue recognized under the Astellas Agreement, which were partially offset by a decrease of $8.7 million in accounts payable, accrued expenses and other liabilities due to timing of payments, a decrease of $4.7 million in accrued compensation expense primarily due to bonuses paid in 2024 in connection with certain company 2023 goal achievements, a decrease of $3.0 million in our operating lease liability, and an increase of $2.1 million in prepaid expenses and other assets.

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was $64.7 million. Our net loss of $58.2 million included non-cash charges of $7.2 million for non-cash interest expense on our deferred royalty obligation, $6.1 million for stock-based compensation, $3.7 million for the unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $2.7 million for the accretion of discount on marketable securities, $1.8 million for depreciation and amortization, and $1.2 million for non-cash lease expense. Cash used in operating activities also reflected a net change in operating assets and liabilities of $16.6 million, due to a decrease of $7.2 million in deferred revenue from revenue recognized under our collaboration agreements, decrease of $7.6 million in accrued compensation expense primarily due to bonuses paid in 2024 in connection with certain company 2023 goal achievements, a decrease of $2.7 million in accounts payable, accrued expenses and other liabilities due to timing of payments, an increase of $2.4 million in prepaid expenses and other assets, and a decrease of $1.5 million in our operating lease liability, which was partially offset by a decrease of $4.8 million in accounts receivable from our collaborators.

Current wording

Cash used in operating activities for the six months ended June 30, 2023 was $92.2 million. Our net loss of $88.6 million included non-cash charges of $12.7 million for stock-based compensation, $3.6 million for the accretion of discount on marketable securities, $3.3 million for depreciation and amortization, $1.3 million for the unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $1.3 million for non-cash lease expense, and $0.4 million for non-cash interest expense on our deferred royalty obligation. Cash used in operating activities also reflected a net change in operating assets and liabilities of $16.7 million, due to a decrease of $8.7 million in deferred revenue from revenue recognized under our collaboration agreements, a decrease of $3.6 million in accrued compensation expense primarily due to bonuses paid in 2023 in connection with certain company 2022 goal achievements, an increase of $2.9 million in accounts receivable from our collaborators, a decrease of $1.7 million in our operating lease liability, and an increase of $0.1 million in prepaid expenses and other assets, which were partially offset by an increase of $0.5 million in accounts payable, accrued expenses and other liabilities due to timing of payments.

Previous wording

Cash provided by investing activities of $67.5 million for the three months ended March 31, 2023 was primarily related to maturities and sales of marketable securities of $121.2 million, partially offset by purchases of marketable securities of $52.8 million, and purchases of property and equipment of $0.9 million, principally for laboratory equipment.

Current wording

Cash used in investing activities of $16.3 million for the six months ended June 30, 2024 was primarily related to purchases of marketable securities of $292.3 million, and purchases of property and equipment of $1.2 million, principally for laboratory equipment, partially offset by maturities and sales of marketable securities of $277.2 million, .

Previous wording

Cash provided by investing activities of $64.1 million for the three months ended March 31, 2024 was primarily related to maturities and sales of marketable securities of $199.5 million, partially offset by purchases of marketable securities of $135.0 million, and purchases of property and equipment of $0.4 million, principally for laboratory equipment.

Current wording

Cash provided by investing activities of $133.6 million for the six months ended June 30, 2023 was primarily related to maturities and sales of marketable securities of $277.5 million, partially offset by purchases of marketable securities of $141.4 million, and purchases of property and equipment of $2.5 million, principally for laboratory equipment.

Previous wording

Cash used in financing activities of $3.4 million for the three months ended March 31, 2024 was primarily related to a debt repayment of $4.1 million, and a $0.4 million tax payment related to the net shares settlement of vested restricted stock units, partially offset by a $0.9 million of net proceeds received from participants in our employee equity plans, and $0.1 million of proceeds received from the exercise of common stock options.

Current wording

Cash provided by financing activities of $93.1 million for the six months ended June 30, 2024 was primarily related to $71.5 million of net proceeds from the underwritten offering, $25.0 million of proceeds from Ipsen USA upon the purchase of our common stock under the Ipsen Investment Agreement, $0.9 million of net proceeds received from participants in our employee equity plans, and $0.1 million of proceeds received from the exercise of common stock options, partially offset by debt repayment of $4.1 million and a $0.4 million tax payment related to the net shares settlement of vested restricted stock units.

Previous wording

Cash provided by financing activities of $8.8 million for the three months ended March 31, 2023 was primarily related to $10.9 million of net proceeds from our ATM Facility sales of common stock, $1.1 million of net proceeds received from participants in our employee equity plans and $0.3 million of proceeds received from the exercise of common stock options, partially offset by debt repayment of $3.1 million and a $0.5 million tax payment related to the net shares settlement of vested restricted stock units.

Current wording

Cash provided by financing activities of $146.4 million for the six months ended June 30, 2023 was primarily related to $139.7 million of net proceeds from the sale of future royalties, $12.0 million of net proceeds from our ATM Facility sales of common stock, $1.1 million of net proceeds received from participants in our employee equity plans, and $0.3 million of proceeds received from the exercise of common stock options, partially offset by a debt repayment of $6.3 million and a $0.5 million tax payment related to the net shares settlement of vested restricted stock units.