Sutro Biopharma(US:STRO)2025-05-08 20:30PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited statements for Q1 2025 show increased revenue and a higher net loss due to restructuring costs Condensed Balance Sheets The balance sheet shows decreased total assets and a shift to a stockholders' deficit as of March 31, 2025 Condensed Balance Sheet Data (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $106,229 | $190,304 | | Total current assets | $287,409 | $343,310 | | Total assets | $321,430 | $387,207 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $133,046 | $131,893 | | Deferred royalty obligation | $190,301 | $180,809 | | Total liabilities | $347,241 | $342,606 | | Total stockholders' (deficit) equity | ($25,811) | $44,601 | Condensed Statements of Operations Q1 2025 operations show a 34% revenue increase but a higher net loss of $76.0 million due to restructuring Condensed Statement of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $17,399 | $13,008 | | Research and development | $51,597 | $56,878 | | General and administrative | $13,273 | $12,721 | | Restructuring and related costs | $21,043 | $ - | | Total operating expenses | $85,913 | $69,599 | | Loss from operations | ($68,514) | ($56,591) | | Net loss | ($75,968) | ($58,213) | | Net loss per share, basic and diluted | ($0.91) | ($0.95) | Condensed Statements of Cash Flows Operating activities used $67.9 million in cash, contributing to a net cash decrease of $84.1 million in Q1 2025 Condensed Statement of Cash Flows (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($67,883) | ($64,741) | | Net cash (used in) provided by investing activities | ($16,258) | $64,105 | | Net cash provided by (used in) financing activities | $66 | ($3,429) | | Net decrease in cash, cash equivalents and restricted cash | ($84,075) | ($4,065) | | Cash, cash equivalents and restricted cash at end of period | $107,087 | $66,075 | Notes to Unaudited Interim Condensed Financial Statements Notes detail the March 2025 restructuring, revenue sources, and management's assessment of cash sufficiency - In March 2025, the company initiated a restructuring plan to prioritize its preclinical ADC pipeline, including STRO-004, deprioritizing the luvelta program and reducing its workforce by approximately 50%26 - As of March 31, 2025, the company had $249.0 million in unrestricted cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations for at least 12 months2930 - In March 2025, the company earned a $7.5 million contingent payment from Astellas for the initiation of the first IND-enabling toxicology study74 Revenue by Collaborator (in thousands) | Collaborator | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Astellas Pharma Inc. | $16,879 | $11,385 | | Tasly Biopharmaceuticals Co., Ltd. | $9 | $970 | | Vaxcyte, Inc. | $223 | $647 | | Ipsen Pharma SAS | $288 | $ - | | Total revenue | $17,399 | $13,008 | Restructuring Costs for Q1 2025 (in thousands) | Cost Category | Amount | | :--- | :--- | | Clinical trial & other costs for luvelta deprioritization | $4,255 | | Severance and benefits expense | $8,510 | | Contract termination and other restructuring costs | $8,278 | | Total | $21,043 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased Q1 revenue, a higher net loss from restructuring, and a strategic shift to preclinical programs Overview The company is prioritizing its preclinical ADC pipeline following a March 2025 restructuring and deprioritization of luvelta - The company's most advanced preclinical programs are STRO-004 and STRO-006, with an IND for STRO-004 anticipated in the second half of 2025136 - A March 2025 restructuring plan was approved to reduce operating costs and extend the cash runway, refocusing on the preclinical pipeline141 Results of Operations Revenue rose 34% in Q1 2025, while operating loss widened 21% due to a $21.0 million restructuring charge - The increase in revenue was primarily driven by a $5.5 million increase from Astellas, which included a $5.7 million cumulative catch-up in revenue recognition161 - R&D expenses decreased by $5.3 million (9%) mainly due to lower outside services and personnel-related costs following program reprioritization162 Comparison of Operations (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $17,399 | $13,008 | $4,391 | 34% | | Research and development | $51,597 | $56,878 | ($5,281) | (9)% | | General and administrative | $13,273 | $12,721 | $552 | 4% | | Restructuring and related costs | $21,043 | $ - | $21,043 | * | | Loss from operations | ($68,514) | ($56,591) | ($11,923) | 21% | | Net loss | ($75,968) | ($58,213) | ($17,755) | 31% | Liquidity and Capital Resources The company holds $249.0 million in capital, deemed sufficient for the next twelve months despite ongoing cash burn - As of March 31, 2025, the company had cash, cash equivalents and marketable securities of $249.0 million and an accumulated deficit of $862.8 million169 - Management believes existing capital resources will fund operations through at least the next twelve months from the filing date174 Summary of Cash Flows (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($67,883) | ($64,741) | | Net cash (used in) provided by investing activities | ($16,258) | $64,105 | | Net cash provided by (used in) financing activities | $66 | ($3,429) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its investment portfolio, which is managed conservatively - The company's primary market risk is interest rate sensitivity on its cash, cash equivalents, and marketable securities, which totaled $249.0 million as of March 31, 2025188189 - The company does not engage in trading or speculative investments and a 10% change in interest rates is not expected to have a material impact190 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter's end - Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level193 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025194 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently party to any material legal proceedings - Sutro is not presently a party to any legal proceedings that, in management's opinion, would materially and adversely affect the business197 Item 1A. Risk Factors Key business risks include a history of losses, funding needs, and dependence on unproven technology and collaborators - The company has a history of significant losses ($862.8 million accumulated deficit) and may never achieve or maintain profitability200202 - The business is dependent on the success of product candidates based on novel and unproven ADC technologies (XpressCF® and XpressCF+®)200214222 - The company will need substantial additional funds and may have difficulty accessing capital, which could force program delays or termination200205 - The company faces risks from its reliance on third-party collaborators and an external manufacturing strategy203235252 - There are significant risks related to intellectual property, including the ability to obtain and enforce patents for novel technologies203311335 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities No unregistered sales of equity securities or related activities occurred during the period - None452 Item 5. Other Information No other material information was required to be reported during the period - None454 Item 6. Exhibits This section lists filed exhibits, including executive transition agreements and required officer certifications - Exhibits filed include transition and separation agreements for William J. Newell, Edward C. Albini, and Anne Borgman, and an offer letter for Jane Chung456 - Standard certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906 are included as exhibits456