Sutro Biopharma Reports Third Quarter 2018 Financial Results

SOUTH SAN FRANCISCO, Calif., Nov. 14, 2018 /PRNewswire/ -- Sutro Biopharma, Inc. (NASDAQ: STRO), a clinical-stage drug discovery, development and manufacturing company focused on the application of precise protein engineering and rational design to create next-generation oncology therapeutics, today reported its financial results for the third quarter ended September 30, 2018.

"This has been an outstanding third quarter for Sutro. We have completed our initial public offering and achieved multiple milestones in the development of our own clinical programs for treatment of multiple myeloma and ovarian cancer," said Bill Newell, Sutro's Chief Executive Officer. "We look forward to working with our newest partners and collaborators as the Sutro team continues to execute at a high level to advance our vision of transforming the lives of patients."

Business Highlights and Recent Developments

STRO-001 Clinical Program

    --  STRO-001 granted Orphan Drug Designation by the U.S. Food and Drug
        Administration (FDA) for the treatment of multiple myeloma.
    --  The Leukemia & Lymphoma Society® (LLS) agreed to contribute clinical
        development funding for STRO-001 through its Therapy Acceleration
        Program, which forges collaborations with biotechnology companies to
        help bring innovative therapies to patients faster.
    --  Potential first-in-class antibody-drug conjugate (ADC) directed against
        CD74 is currently being studied in a Phase 1 clinical trial enrolling
        separate dose escalation cohorts for myeloma and B-cell lymphoma.

STRO-002 Clinical Program

    --  The FDA has concluded their 30-day review of Sutro's Investigational New
        Drug (IND) application for STRO-002, a targeted antibody-drug conjugate
        directed against folate receptor-alpha. Sutro expects to commence a
        Phase 1 clinical trial focused on ovarian and endometrial cancers in
        early 2019.

Corporate Highlights

    --  Collaboration and licensing agreement signed with Merck to discover and
        develop novel immune-modulating therapies for cancer and autoimmune
        disorders.
        --  Sutro is primarily responsible for preclinical research and Merck
            will obtain exclusive worldwide rights to therapeutic candidates
            derived from the collaboration.
        --  Sutro received from Merck an upfront payment of $60 million, a $20
            million investment in its Series E preferred stock, and $10 million
            investment in a private placement of common stock concurrent with
            the IPO.
        --  Sutro is eligible for milestone payments totaling up to $1.6
            billion, assuming the development and sale of all therapeutic
            candidates and all possible indications identified under the
            collaboration, as well as tiered royalties ranging from mid-single
            digit to low teen percentages on worldwide sales of commercial
            products that may result from the collaboration.
    --  The initial public offering (IPO) that closed on October 1, 2018,
        provided Sutro with gross proceeds of $85.0 million, before deducting
        underwriting discounts and commissions and offering expenses.
        Additionally, Sutro received proceeds of $10.0 million from Merck in a
        private placement of common stock concurrent with the IPO.
    --  Appointment of Stephen Worsley as Chief Business Officer and Linda
        Fitzpatrick as Chief People and Communications Officer.

Third Quarter 2018 Financial Highlights

Cash, Cash Equivalents and Marketable Securities

As of September 30, 2018, Sutro had cash, cash equivalents and marketable securities of $123.0 million.

In October 2018, Sutro announced the closing of its IPO of 5,667,000 shares of its common stock at a price of $15.00 per share. The gross proceeds to Sutro from the IPO, before deducting underwriting discounts and commissions and offering expenses, were $85.0 million. In addition to the IPO, Sutro concurrently sold in a private placement to Merck Sharp & Dohme Corp. (Merck) additional shares of common stock at the IPO offering price for gross proceeds of $10.0 million. Proceeds from the IPO and the concurrent private placement are not reflected in Sutro's September 30, 2018 balance sheet.

Revenue

Revenue was $7.8 million for the third quarter of 2018, which included collaboration revenue of $6.9 million recognized primarily from Merck, Celgene and EMD Serono, in addition to other revenue of $0.9 million. During the third quarter of 2018, Sutro began recording revenue from Merck primarily from the $60.0 million upfront payment received by Sutro under the July 2018 collaboration and licensing agreement, for which revenue is being recognized ratably over an approximate four-year period. Future collaboration revenue from Merck, Celgene and EMD Serono, and from any future collaboration partners, will fluctuate as a result of the timing and amount of upfront, milestones and other collaboration agreement payments.

Operating Expenses

Total operating expenses for the third quarter of 2018 were $18.0 million, comprised of research and development expenses of $12.6 million and general and administrative expenses of $5.4 million. Total operating expenses for the quarter included non-cash stock-based compensation expense of $0.3 million and depreciation and amortization expense of $1.1 million. In future quarters, Sutro expects to incur additional general and administrative expenses as it operates as a public company following its IPO that closed on October 1, 2018.

Net Loss Per Share Calculation

The financial statements as of September 30, 2018, including share and per share amounts, do not give effect to the IPO, or the conversion of the redeemable convertible preferred stock, as the IPO and such conversions were completed on October 1, 2018. Relatedly, the weighted-average shares used in calculating net loss per share for the third quarter of 2018 include only common stock outstanding prior to the IPO.

About Sutro Biopharma

Sutro Biopharma, Inc., located in South San Francisco, is a clinical-stage drug discovery, development and manufacturing company. Using precise protein engineering and rational design, Sutro is advancing next-generation oncology therapeutics.

Sutro's proprietary and integrated cell-free protein synthesis and site-specific conjugation platform, XpressCF+(TM), led to the discovery of STRO-001 and STRO-002, Sutro's first two internally-developed antibody-drug conjugates, or ADCs. STRO-001 is a potentially first-in-class ADC targeting CD74, a protein highly expressed in multiple myeloma and non-Hodgkin's lymphoma, and is currently in a Phase I study. STRO-002 is a potentially best-in-class ADC targeting folate receptor alpha, a cell-surface protein highly expressed in gynecological cancers.

Sutro is dedicated to transforming the lives of cancer patients by creating medicines with improved therapeutic profiles for areas of unmet need.

To date, Sutro's drug discovery efforts have focused on antibody-drug conjugates, cytokine-based immuno-oncology therapies, and bispecific antibodies primarily directed at clinically-validated targets for which the current standard of care is suboptimal.

Sutro's platform allows it to accelerate discovery and development of potential first-in-class and best-in-class molecules through rapid and systematic evaluation of protein structure-activity relationships to create optimized homogeneous product candidates.

In addition to developing its own oncology pipeline, Sutro is collaborating with select pharmaceutical and biotech companies to discover and develop novel, next-generation therapeutics. As the pace of clinical development accelerates, Sutro and its partners are developing therapeutics designed to more efficiently kill tumors without harming healthy cells.

Follow Sutro on Twitter, @Sutrobio, and at www.sutrobio.com to learn more about our passion for changing the future of oncology.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, anticipated clinical development activities, potential benefits of the company's product candidates and platform and anticipated financial trends. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, the company cannot guarantee future events, results, actions, levels of activity, performance or achievements, and the timing and results of biotechnology development and potential regulatory approval is inherently uncertain. Forward-looking statements are subject to risks and uncertainties that may cause the company's actual activities or results to differ significantly from those expressed in any forward-looking statement, including risks and uncertainties related to the company's ability to advance its product candidates, obtain regulatory approval of and ultimately commercialize its product candidates, the timing and results of preclinical and clinical trials, the company's ability to fund development activities and achieve development goals, the company's ability to protect intellectual property and other risks and uncertainties described under the heading "Risk Factors" in documents the company files from time to time with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release, and the company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Contacts

John Graziano
Solebury Trout
+1 646-378-2942
jgraziano@soleburytrout.com

Xuan Yang
Solebury Trout
+1 646-378-2975
xyang@soleburytrout.com

Media Contacts

David Schull
Russo Partners
(212) 845-4271
david.schull@russopartnersllc.com

Scott Stachowiak
Russo Partners
(646) 942-5630
(646) 300-3590 mobile
scott.stachowiak@russopartnersllc.com


                                                                                   
            
              Sutro Biopharma, Inc.

                                                                  
           
              Condensed Statements of Operations and Comprehensive Loss

                                                                                        
            
              (Unaudited)

                                                                     
            
              (In thousands, except share and per share amounts)




                                                                     Three Months Ended                                               Nine Months Ended


                                                           
        
        September 30,                             
            
              September 30,



                                                             2018                                          2017                                         2018               2017




            Revenue:



            Collaboration revenue                                     $
            6,924                                                 $
            17,499          $
         13,955      $
          47,701



              Other revenue-related parties                                       912                                                       
            -                 5,378          
            -




            Total revenue                                                       7,836                                                           17,499                 19,333              47,701




            Operating expenses



            Research and development                                           12,642                                                           13,669                 39,475              39,499



            General and administrative                                          5,351                                                            4,895                 13,806              12,306




            Total operating expenses                                           17,993                                                           18,564                 53,281              51,805




            Loss from operations                                             (10,157)                                                         (1,065)              (33,948)            (4,104)



            Interest income                                                       403                                                               62                    483                 192



            Interest expense                                                    (415)                                                           (235)               (1,199)              (235)



            Other income (expense), net                                          (68)                                                           (180)                   840               (197)




            Net loss                                               $
            (10,237)                                               $
            (1,418)       $
         (33,824)    $
          (4,344)




            Net loss per share, basic and diluted                   $
            (21.26)                                                $
            (3.14)        $
         (71.06)     $
          (9.77)




            Weighted-average shares used in computing net                     481,613                                                          451,550                476,023             444,594
       loss per share




            Other comprehensive income:



            Unrealized gain (loss) on available-for-sale                         (27)                                                               5                   (27)                 16
      securities




            Comprehensive loss                                     $
            (10,264)                                               $
            (1,413)       $
         (33,851)    $
          (4,328)


                                                                                                              
       
                Sutro Biopharma, Inc.

                                                                                                            
       
                Condensed Balance Sheets

                                                                                                        
     
         (In thousands, except share and per share amounts)




                                                                                                                                                                   September 30,                  December 31,


                                                                                                                                                                            2018                           2017



                                                                                                                                                                    (Unaudited)                            (1)



     
                Assets



     Current assets:



     Cash and cash equivalents                                                                                                                                                   $
           41,353               $
             22,020



     Marketable securities                                                                                                                                                                81,597                    
              -



     Accounts receivable, net                                                                                                                                                              2,443                           1,624



     Prepaid expenses and other current assets                                                                                                                                             1,979                           1,985




     Total current assets                                                                                                                                                                127,372                          25,629



     Property and equipment, net                                                                                                                                                          11,673                          13,997



     Other long-term assets                                                                                                                                                                5,966                           1,128



     Restricted cash                                                                                                                                                                          15                              15




     Total assets                                                                                                                                                               $
           145,026               $
             40,769




     
                Liabilities, Redeemable Convertible Preferred Stock, and Stockholders'


     
                   Deficit



     Current liabilities:



     Accounts payable                                                                                                                                                             $
           4,594                $
             2,902



     Accrued compensation                                                                                                                                                                  4,085                           3,639



     Deferred revenue-current                                                                                                                                                             24,229                          10,709



     Debt-current                                                                                                                                                                          3,182                          14,634



     Other current liabilities                                                                                                                                                               815                              72




     Total current liabilities                                                                                                                                                            36,905                          31,956



     Deferred revenue, non-current                                                                                                                                                        48,805                          13,159



     Deferred rent                                                                                                                                                                           473                             428



     Redeemable convertible preferred stock warrant liability                                                                                                                                867                           1,708



     Debt-non-current                                                                                                                                                                     11,500                    
              -



     Other noncurrent liabilities                                                                                                                                                            664                              14




     Total liabilities                                                                                                                                                                    99,214                          47,265



     Commitments and Contingencies



     Redeemable convertible preferred stock                                                                                                                                              187,246                         102,505



     Stockholders' deficit:



     Common stock                                                                                                                                                                    
             -                   
              -



     Note receivable from stockholder                                                                                                                                                
             -                          (208)



     Additional paid-in-capital                                                                                                                                                            7,428                           6,218



     Accumulated other comprehensive loss                                                                                                                                                   (27)                   
              -



     Accumulated deficit                                                                                                                                                               (148,835)                      (115,011)




     Total stockholders' deficit                                                                                                                                                       (141,434)                      (109,001)




     
                Total liabilities, redeemable convertible preferred stock, and stockholders' deficit                                                                          $
           145,026               $
             40,769




              (1)              The condensed balance sheet as
                                  of December 31, 2017 was
                                  derived from the audited
                                  financial statements included
                                  in the Company's registration
                                  statements on Form S-1 filed
                                  with the Securities and
                                  Exchange Commission on
                                  September 26, 2018.

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SOURCE Sutro Biopharma, Inc.