SUTRO BIOPHARMA INC

Previous wording

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and belief. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements related to our expectations regarding our future results of operations and financial position, business strategy, market size for our product candidates, potential future milestone and royalty payments, potential growth opportunities, nonclinical and clinical development activities, efficacy and safety profile of our product candidates, our ability to maintain and recognize the benefits of certain designations received by product candidates, our ability to successfully leverage Fast Track Designation, the timing and results of nonclinical studies and clinical trials, collaboration with third parties, the expected impact of pandemics or contagious diseases, such as the COVID-19 pandemic, on our operations, and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “predict,” “target,” “intend,” “could,” “would,” “should,” “project,” “plan,” “expect,” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Current wording

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and belief. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements related to our expectations regarding our future results of operations and financial position, the use and adequacy of our existing cash to achieve our business goals, business strategy, market size for our product candidates, potential future milestone and royalty payments, potential growth opportunities, nonclinical and clinical development activities, efficacy and safety profile of our product candidates, our ability to maintain and recognize the benefits of certain designations received by product candidates, the timing and results of nonclinical studies and clinical trials, collaboration with third parties, the impact of health pandemics, tariffs, regional geopolitical conflicts, changes in interest rates, inflation, potential uncertainty with respect to the debt ceiling and potential government shutdown related thereto, on our operations, and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “predict,” “target,” “intend,” “could,” “would,” “should,” “project,” “plan,” “expect,” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Previous wording

We are a clinical-stage oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs, enabled by our proprietary integrated cell-free protein synthesis platform, XpressCF®, and our site-specific conjugation platform, XpressCF+®. We aim to design and develop therapeutics using the most relevant and potent modalities, including ADCs, bispecific ADCs, immunostimulatory ADCs, or iADCs, dual conjugate ADCs, or ADC 2 s, and cytokine derivatives. Our molecules are directed primarily against clinically validated targets where the current standard of care is suboptimal. We believe that our platform allows us to accelerate the discovery and development of potential first-in-class and/or best-in-class molecules by enabling the rapid and systematic evaluation of protein structure-activity relationships to create optimized homogeneous product candidates. Our mission is to transform the lives of patients by creating medicines with improved therapeutic profiles for areas of unmet need.

Current wording

We are an oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs, enabled by our proprietary integrated cell-free protein synthesis platform, XpressCF®, and our site-specific conjugation platform, XpressCF+®. We aim to design and develop therapeutics using the most relevant and potent modalities, including ADCs, bispecific ADCs, and dual conjugate ADCs, which include immunostimulatory ADCs, or iADCs. Our molecules are directed primarily against clinically validated targets where the current standard of care is suboptimal. We believe that our platform allows us to accelerate the discovery and development of potential first-in-class and/or best-in-class molecules by enabling the rapid and systematic evaluation of protein structure-activity relationships to create optimized homogeneous product candidates. Our mission is to transform the lives of patients by creating medicines with improved therapeutic profiles for areas of unmet need.

Previous wording

Once identified, production of protein drug candidates can be rapidly and predictably scaled in our current Good Manufacturing Practices, or cGMP, compliant manufacturing facility. We have the ability to manufacture our proprietary cell-free extract that supports our production of proteins on a large scale using a semi-continuous fermentation process. Our most advanced product candidate is STRO-002, or luveltamab tazevibulin, or luvelta, an ADC directed against folate receptor-alpha, or FRα, for patients with FRα-expressing cancers, including ovarian cancer.

Current wording

Once identified, production of protein drug candidates can be rapidly and predictably scaled in our current Good Manufacturing Practices, or cGMP, compliant manufacturing facility or in the facility of one of our contract development and manufacturing organization, or CDMO, partners. We have the ability to manufacture our proprietary cell-free extract that supports our production of proteins on a large scale using a semi-continuous fermentation process.

Previous wording

Our most advanced asset in preclinical development is STRO-004. a tissue factor, or TF, targeting ADC, which features a DAR8 exatecan payload and site-specific linker design. We believe STRO-004 has the potential to be a best-in-class ADC targeting TF. Preclinical data suggest that STRO-004 has potent antitumor activity and the potential for a differentiated safety profile. We anticipate filing an IND for STRO-004 in the second half of 2025. Our other preclinical assets include dual-payload ADCs, or ADC 2, and immunostimulatory ADCs, or iADCs. We plan to file three INDs over the next three years, including for STRO-004.

Current wording

We believe STRO-004 has the potential to be a best-in-class ADC targeting TF. Preclinical data suggest that STRO-004 has potent antitumor activity and the potential for a differentiated safety profile. Our other preclinical assets include STRO-006, an ADC targeting Integrinβ6, and dual conjugate ADCs, including iADCs. We plan to file three INDs over the next three years, including for STRO-004 and for STRO-006.

Previous wording

Enabled through our proprietary XpressCF® and XpressCF+®platforms, we have entered into multi-target, product-focused collaborations with leading pharmaceutical and biotechnology companies in the field of oncology, with our ongoing relationships that include licensing to Ipsen, on an exclusive basis, the right to research, develop, manufacture and commercialize STRO-003; an immunostimulatory ADC collaboration with Astellas; and a licensing agreement for luvelta in Greater China with Tasly. In August 2023, Tasly received its first IND clearance by NMPA in Greater China for luvelta.

Current wording

Enabled through our proprietary XpressCF® and XpressCF+® platforms, we have entered into multi-target, product-focused collaborations with leading pharmaceutical and biotechnology companies in the field of oncology, with our ongoing relationships that include licensing to Ipsen, on an exclusive basis, the right to research, develop, manufacture and commercialize STRO-003. STRO-003 is intended to be developed for the treatment of solid tumors and we anticipate the filing of an IND in connection with this program in 2026. In addition, we have an ongoing iADC collaboration with Astellas.

Previous wording

Our XpressCF® and XpressCF+® platforms have also supported Vaxcyte, focused on discovery and development of vaccines for the treatment and prophylaxis of infectious disease. The lead programs for Vaxcyte are VAX-31 and VAX-24, its 31-valent and 24-valent, respectively, pneumococcal conjugate vaccine candidates. Vaxcyte is responsible for performing all research and development activities, and we provide technical support and supply XtractCF® and other materials to Vaxcyte. In June 2023, we entered into a purchase and sale agreement (the “Purchase Agreement”) with Blackstone, in which Blackstone acquired the right to receive our 4% revenue interest in Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products such as VAX-24 and VAX-31. Following agreement with Vaxcyte on the Form Definitive Agreement and upon effectiveness of an amendment to the licensing agreement, the revenue interest in the 4% royalty on potential future sales of Vaxcyte products other than Vaxcyte’s PCV products reverted to us. Thus, we retain the right to receive a 4% royalty on sales of Vaxcyte’s products other than PCV products. In November 2023, Vaxcyte exercised its option to access expanded rights to develop and manufacture cell-free extract for use in development and manufacture of its vaccine products, among certain other rights.

Current wording

Our XpressCF® and XpressCF+® platforms have also supported Vaxcyte, focused on discovery and development of vaccines for the treatment and prophylaxis of infectious disease. The lead programs for Vaxcyte are VAX-31 and VAX-24, its 31-valent and 24-valent, respectively, pneumococcal conjugate vaccine candidates. Vaxcyte is responsible for performing all research and development activities and we provide technical support. In June 2023, we entered into a purchase and sale agreement, or the Purchase Agreement with Blackstone, in which Blackstone acquired the right to receive our 4% royalty, or revenue interest, in the potential future net sales of Vaxcyte products, including Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products, such as VAX-24 and VAX-31. Following agreement with Vaxcyte on the Form Definitive Agreement and upon effectiveness of an amendment to the licensing agreement, the revenue interest in the 4% royalty on potential future sales of Vaxcyte products other than Vaxcyte’s PCV products reverted to us. Thus, we retain the right to receive a 4% royalty on sales of Vaxcyte’s products other than PCV products. In November 2023, Vaxcyte exercised its option to access expanded rights to develop and manufacture cell-free extract for use in development and manufacture of its vaccine products, among certain other rights.

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 $173.2 million and a net loss of $155.0 million for the nine months ended September 30, 2024, which net loss included the non-operating, realized gain of $32.1 million related to the sale of our holdings of Vaxcyte common stock. We had a loss from operations of $132.4 million and a net loss of $137.9 million for the nine months ended September 30, 2023, which net loss included the non-operating, unrealized gain of $2.0 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 September 30, 2024, we had an accumulated deficit of $714.4 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. In light of our current resources and the cost of development, 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 $68.5 million and a net loss of $76.0 million for the three months ended March 31, 2025. 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. 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, 2025, we had an accumulated deficit of $862.8 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. We expect a reduction in operating expenses as we strategically reprioritize our resources. However, we anticipate our operating expenses would increase if we advance our product candidates through clinical development, seek regulatory approvals for our product candidates, engage in other research and development activities, expand our pipeline of product candidates, 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. In light of our current resources and the cost of development, 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 and general and administrative 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, Tasly, and Ipsen, 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, Ipsen, EMD Serono, BioNova, and Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to the above collaborators.

Previous wording

Our research and development expenses would increase in the future due to continued activities to advance our product candidates into and through preclinical studies and clinical trials, pursue regulatory approval of our product candidates, expand our pipeline of product candidates, and continue to develop our manufacturing facility and capabilities. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

Current wording

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

Previous wording

The following table summarizes our research and development expenses incurred during the indicated periods. The internal costs include personnel, facility costs and research and scientific related activities associated with our pipeline. The external program costs reflect external costs attributable to our clinical development candidates and preclinical candidates selected for further development. Such expenses include third-party costs for preclinical and clinical studies and research, development and manufacturing services, and other consulting costs.

Current wording

The following table summarizes our research and development expenses incurred during the indicated periods. The internal costs include personnel, facility costs and research and scientific related activities associated with our pipeline. The external program costs reflect external costs attributable to our clinical development candidates prior to the deprioritization of luvelta and preclinical candidates selected for further development. Such expenses include third-party costs for preclinical and clinical studies and research, development and manufacturing services, and other consulting costs.

Previous wording

Our general and administrative expenses consist primarily of personnel costs, expenses for outside professional services, including legal, human resources, audit, accounting and tax services and allocated facilities-related costs. Personnel costs include salaries, employee benefits and stock-based compensation. We expect to incur expenses operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on the Nasdaq Global Market, additional insurance expenses, investor relations activities and other administrative and professional services. The size of our administrative function and our general and administrative expenses to support the anticipated growth of our business would increase as we continue to advance our product candidates into and through the clinic.

Current wording

Our general and administrative expenses consist primarily of personnel costs, expenses for outside professional services, including legal, human resources, audit, accounting and tax services and allocated facilities and IT-related costs. Personnel costs include salaries, employee benefits and stock-based compensation. We incur expenses operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on the Nasdaq Global Market, additional insurance expenses, investor relations activities and other administrative and professional services. We expect a reduction in general and administrative expenses as we strategically reprioritize our resources. However, we anticipate such expenses would increase if we advance our product candidates through clinical development and toward potential commercialization.

Previous wording

Non-cash interest expense will be recognized over the estimated life of the royalty term arrangement 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.

Current wording

Non-cash interest expense will be recognized over the estimated life of the royalty term arrangement using the effective interest method based on the imputed interest rate derived from the 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 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), net, also includes the realized gain on the sale of Vaxcyte common stock.

Current wording

Interest expense includes the financing component under the Astellas Agreement and recorded interest expense associated with the upfront payment.

Previous wording

Total revenue decreased by $8.4 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. This was primarily due to an earned $5.0 million contingent payment from Tasly in 2023, a $2.3 million decrease from Astellas, of which $1.2 million was from the financing component related to the Astellas Agreement, $0.6 million was from research and development services, and $0.5 million was from the ongoing performance related to partially unsatisfied performance obligations, a $0.9 million decrease in Vaxcyte revenue, primarily due to a decrease in research and development services and materials supply, a $0.2 million decrease in BMS revenue due to its decision to end clinical development of CC-99712 in 2023, and a $0.1 million decrease in Merck revenue due to its decision to end clinical development of MK-1484 during the three months ended September 30, 2024. These decreases were partially offset by a $0.2 million in Ipsen revenue from research and development services and materials supply, which commenced in the second quarter of 2024.

Current wording

Total revenue increased by $4.4 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This was primarily due to a $5.5 million increase from Astellas, of which $5.7 million was from the ongoing performance related to partially unsatisfied performance obligations, and included a $5.7 million cumulative catch-up in revenue as a result of the change in transaction price due to a $7.5 million contingent payment earned in the first quarter of 2025 for the initiation by Astellas of the first IND-enabling toxicology study under the Astellas Agreement, and $1.5 million from materials supply, which was partially offset by decreases of $1.0 million from the financing component related to the Astellas Agreement and $0.7 million from research and development services. Additionally, there was a $0.3 million increase 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 $0.9 million decrease in Tasly revenue, primarily due to a decrease in research and development services and materials supply, and a $0.4 million decrease in Vaxcyte revenue, primarily due to a decrease in research and development services.

Previous wording

General and administrative expense decreased by $6.4 million, or 14%, during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The overall decrease was due primarily to decreases of $7.8 million in IT-related expenses and $1.2 million in personnel-related expenses, partially offset by increases of $1.8 million in outside services, $0.4 million in equipment and office-related expenses, and $0.4 million in allocated facilities-related expenses.

Current wording

Research and development expense decreased by $5.3 million, or 9%, during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The overall decrease was due primarily to decreases of $3.2 million in outside services, $1.6 million in personnel-related expenses, $0.4 million in preclinical research and clinical development expenses, and $0.3 million in facilities and IT-related expenses. Following the implementation of the Restructuring Plan, we began reporting restructuring-related costs and other costs associated with the deprioritized luvelta program under "Restructuring and related costs" in our interim condensed financial statements. These decreases were partially offset by a $0.3 million increase in laboratory supply expenses.

Previous wording

Interest income increased by $0.3 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due primarily to higher average investment balances and higher average rates of return in 2024.

Current wording

Interest income decreased by $0.9 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due primarily to lower average investment balances and lower average rates of return in 2025.

Previous wording

We sold the remaining shares of Vaxcyte common stock, resulting in no unrealized gain on equity securities during the three months ended September 30, 2024, as compared to an unrealized gain of $0.7 million for the three months ended September 30, 2023. As of September 30, 2024, we do not hold any shares of Vaxcyte common stock.

Current wording

We sold our remaining shares of Vaxcyte common stock during the year ended December 31, 2024, resulting in no unrealized gain on equity securities during the three months ended March 31, 2025, as compared to an unrealized gain of $3.7 million for the three months ended March 31, 2024.

Previous wording

Non-cash interest expense increased by $2.0 million during the three months ended September 30, 2024, as compared to the three months ended September 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.

Current wording

Non-cash interest expense increased by $2.2 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. 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 $24.9 million during the three months ended September 30, 2024, as compared to the three months ended September 2023, primarily due to a recognized gain of $23.7 million on the sale of Vaxcyte common stock, and a decrease of $1.2 million from the financing component related to the Astellas Agreement.

Current wording

Interest and other income (expense), net, decreased by $0.9 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to a decrease of $1.0 million from the financing component related to the Astellas Agreement.

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, sale of shares of Vaxcyte common stock, and a royalty monetization. As of September 30, 2024, we had cash, cash equivalents and marketable securities of $388.3 million, and an accumulated deficit of $714.4 million.

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, sale of shares of Vaxcyte common stock, and a royalty monetization. As of March 31, 2025, we had cash, cash equivalents and marketable securities of $249.0 million, and an accumulated deficit of $862.8 million.

Previous wording

Premises in the fourth quarter of 2020 to conduct certain planning and tenant improvement work. The Sublease is subordinate to the lease agreement, effective December 12, 2016, between the Sublessor and HCP Oyster Point III LLC (the "Landlord"). We commenced using the remaining 29,711 square feet of the Premises, (the "Expansion Premises"), on July 1, 2023 under the sublease agreement. The Sublease for both the Initial Premises and Expansion Premises will expire on December 31, 2027. With a commencement date on the Initial Premises of July 1, 2021, and Expansion Premises of July 1, 2023, the aggregate estimated base rent payments due over the term of the Sublease are approximately $39.1 million, including the approximately $5.2 million in potential financial benefit to us of base rent abatement to be provided by the Sublessor, subject to certain terms contained in the Sublease. The Sublease contains customary provisions requiring us to pay our pro rata share of utilities and a portion of the operating expenses and certain taxes, assessments and fees of the Premises and provisions allowing the Sublessor to terminate the Sublease upon the termination of the lease with the Landlord or if we fail to remedy a breach of certain of our obligations within specified time periods. Additionally, we posted a security deposit of $0.9 million, which is reflected as restricted cash in non-current assets on our Balance Sheets as of September 30, 2024 and December 31, 2023.

Current wording

In September 2020, we entered into a sublease agreement, (the "Sublease with Five Prime Therapeutics, Inc."), or (the "Sublessor"), for approximately 115,466 square feet, in a building located in South San Francisco, California, or (the "Premises"). We use the Premises as our corporate headquarters and to conduct (or expand) research and development activities. We commenced making monthly payments for the first 85,755 square feet of the Premises, or Initial Premises, in July 2021, with occupancy of such space commencing in August 2021. We were provided early access to the Initial Premises in the fourth quarter of 2020 to conduct certain planning and tenant improvement work. The Sublease is subordinate to the lease agreement, effective December 12, 2016, between the Sublessor and HCP Oyster Point III LLC (the "Landlord"). We commenced using the remaining 29,711 square feet of the Premises, (the "Expansion Premises") on July 1, 2023 under the sublease agreement. The Sublease for both the Initial Premises and Expansion Premises will expire on December 31, 2027. With a commencement date on the Initial Premises of July 1, 2021, and Expansion Premises of July 1, 2023, the aggregate estimated base rent payments due over the term of the Sublease are approximately $39.1 million, including the approximately $5.2 million in potential financial benefit to us of base rent abatement to be provided by the Sublessor, subject to certain terms contained in the Sublease. The Sublease contains customary provisions requiring us to pay our pro rata share of utilities and a portion of the operating expenses and certain taxes, assessments and fees of the Premises and provisions allowing the Sublessor to terminate the Sublease upon the termination of the lease with the Landlord or if we fail to remedy a breach of certain of our obligations within specified time periods. Additionally, we posted a security deposit of $0.9 million, which is reflected as restricted cash in non-current assets on our Balance Sheets as of March 31, 2025 and December 31, 2024.

Previous wording

We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, marketing and distribution arrangements, royalty monetizations, or other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay, reduce the scope of or suspend one or more of our pre-clinical and clinical studies, research and development programs or commercialization efforts, and may necessitate us to delay, reduce or terminate planned activities in order to reduce costs. Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

Current wording

We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, marketing and distribution arrangements, royalty monetizations, or other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay, reduce the scope of or suspend one or more of our preclinical and clinical studies, research and development programs or commercialization efforts, and may necessitate us to delay, reduce or terminate planned activities in order to reduce costs. Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

Previous wording

Cash used in operating activities for the nine months ended September 30, 2024 was $119.8 million. Our net loss of $155.0 million included non-cash amounts of $32.1 million for the realized gain on the sale of Vaxcyte common stock, $22.4 million for non-cash interest expense on our deferred royalty obligation, $18.8 million for stock-based compensation, $8.2 million for the accretion of discount on marketable securities, $5.4 million for depreciation and amortization, and $3.8 million for non-cash lease expense. Cash used in operating activities also reflected a net change in operating assets and liabilities of $24.6 million, due to a decrease of $29.4 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 $16.1 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 $10.0 million in accounts payable, accrued expenses and other liabilities due to timing of payments, a decrease of $4.7 million in our operating lease liability, an increase of $4.6 million in prepaid expenses and other assets, and a decrease of $1.5 million in accrued compensation expense primarily due to bonuses paid in 2024 in connection with certain company 2023 goal achievements.

Current wording

Cash used in operating activities for the three months ended March 31, 2025 was $67.9 million. Our net loss of $76.0 million included non-cash amounts of $9.3 million for non-cash interest expense on our deferred royalty obligation, $5.5 million for stock-based compensation, $1.9 million for depreciation and amortization, $1.4 million for non-cash lease expense, and $1.1 million for the accretion of discount on marketable securities. Cash used in operating activities also reflected a net change in operating assets and liabilities of $9.1 million, due to an increase of $4.9 million in accounts receivable primarily due to a $7.5 million receivable from Astellas for their initiation of an IND-enabling toxicology study for the first program in our collaboration with Astellas, which was partially offset by a decrease in accounts receivable from our other collaborators, a decrease of $4.7 million in deferred revenue primarily due to revenue recognized under the Astellas Agreement, a decrease of $1.7 million in our operating lease liability, and a decrease of $1.3 million in accrued compensation expense primarily due to bonuses paid in 2025 in connection with certain company 2024 goal achievements, which was partially offset by an increase in severance and benefits obligations under the Restructuring Plan. The decrease in operating assets and liabilities were partially offset by an increase of $3.7 million in accounts payable, accrued expenses and other liabilities due to timing of payments,

Previous wording

Cash used in operating activities for the nine months ended September 30, 2023 was $125.7 million. Our net loss of $137.9 million included non-cash amounts of $18.7 million for stock-based compensation, $6.4 million for non-cash interest expense on our deferred royalty obligation, $6.0 million for the accretion of discount on marketable securities, $5.1 million for depreciation and amortization, $2.4 million for non-cash lease expense, and $2.0 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. Cash used in operating activities also reflected a net change in operating assets and liabilities of $12.8 million, due to an increase of $9.5 million in accounts receivable from our collaborators, a decrease of $4.5 million in deferred revenue from revenue recognized under our collaboration agreements, a decrease of $3.1 million in our operating lease liability, and a decrease of $1.8 million in accrued compensation expense, which were partially offset by an increase of $5.3 million in accounts payable, accrued expenses and other liabilities due to timing of payments, and a decrease of $0.8 million in prepaid expenses and other assets.

Current 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.

Previous wording

Cash provided by investing activities of $131.0 million for the nine months ended September 30, 2024 was primarily related to maturities and sales of marketable securities of $394.5 million, and net proceeds from the sale of Vaxcyte common stock of $74.0 million, partially offset by purchases of marketable securities of $335.5 million, and purchases of property and equipment of $2.0 million, principally for laboratory equipment.

Current wording

Cash used in investing activities of $16.3 million for the three months ended March 31, 2025 was primarily related to purchases of marketable securities of $142.4 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 $127.3 million.

Previous wording

Cash provided by investing activities of $19.6 million for the nine months ended September 30, 2023 was primarily related to maturities and sales of marketable securities of $402.2 million, partially offset by purchases of marketable securities of $379.7 million, and purchases of property and equipment of $2.9 million, principally for laboratory equipment.

Current 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.

Previous wording

Cash provided by financing activities of $94.1 million for the nine months ended September 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, $1.8 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 $4.1 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 $0.1 million for the three months ended March 31, 2025 was primarily related to $0.3 million of net proceeds received from participants in our employee equity plans, partially offset by a $0.2 million tax payment related to the net shares settlement of vested restricted stock units.

Previous wording

Cash provided by financing activities of $140.7 million for the nine months ended September 30, 2023 was primarily related to $136.2 million of net proceeds from the sale of future royalties, $12.0 million of net proceeds from our ATM Facility sales of common stock, $2.0 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 $9.4 million and a $0.5 million tax payment related to the net shares settlement of vested restricted stock units.

Current 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.

Previous wording

There have been no material changes to our critical accounting policies and estimates discussed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

See Note 2 and Note 10 to our interim condensed financial statements for our accounting policies and estimates related to the restructuring and related costs. Other than these accounting policies and estimates, there have been no material changes to our critical accounting policies and estimates discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.