On August 6, 2020 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 reported its financial results for the quarter ended June 30, 2020 and its recent business highlights and developments (Press release, Sutro Biopharma, AUG 6, 2020, View Source [SID1234563223]).
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"Our two proprietary antibody-drug conjugate (ADC) product candidates, STRO-001 and STRO–002, are progressing in Phase 1 clinical trials. We continue to be encouraged by the dose escalation safety and anti-tumor activity data from our Phase 1 clinical trial for STRO-002, including data presented during the AACR (Free AACR Whitepaper) Virtual Meeting on April 27, 2020, which demonstrate preliminary evidence of anti-tumor activity, particularly in a heavily pre-treated patient population, along with an emerging safety profile that indicates that the product candidate has been generally well tolerated," said Bill Newell, Sutro’s Chief Executive Officer. "Additionally, each of our three current collaborations has yielded a novel oncology product candidate in clinical development or in the late stages of preclinical development, all of which were discovered and developed, and are manufactured, using our proprietary and integrated cell-free protein synthesis platform XpressCF and site-specific conjugation platform XpressCF+. Importantly, even with the ongoing COVID-19 pandemic, Sutro remains committed to the health and safety of both patients receiving our therapies and our employees."
Recent Business Highlights and Developments
STRO-002 Clinical Program — Encouraging STRO-002 Interim Phase 1 Clinical Data from an Ongoing Dose Escalation Study in Ovarian Cancer Presented at the AACR (Free AACR Whitepaper) Virtual Meeting in April 2020
STRO-002 is a potential best-in-class ADC targeting folate receptor-alpha (FolRα), which is highly expressed in ovarian cancer.
The STRO-002 Phase 1 clinical trial is currently in dose-escalation, with 30 heavily pre-treated patients enrolled through April 20, 2020, who have recurrent platinum resistant or refractory ovarian cancer. The company is still exploring different doses to select the recommended Phase 2 dose for multiple treatment cycles.
Additional Phase 1 dose-escalation safety and anti-tumor activity data are expected in the second half of 2020.
The dose expansion portion of the Phase 1 clinical trial is expected to begin enrolling patients in the second half of 2020.
Encouraging updated dose-escalation safety and efficacy data were presented on April 27, 2020:
62% of patients saw a reduction in CA-125 levels of 50% or more or a normalization of CA-125 levels;
35% of patients who were evaluable for progression have stayed on study for longer than 24 weeks;
11 patients at 5.2 milligrams per kilogram or higher were continuing on study and had not yet reached 24 weeks;
75% of patients had initial post-baseline scans showing stable disease or a partial response;
100% of evaluable patients who had a CA-125 reduction of 50% or more or normalization achieved stable disease (confirmed or unconfirmed) or a partial response and are still on study; and
Generally well-tolerated in this heavily pre-treated patient population with a median of five prior lines of other therapies-–89% of adverse events were grade 1 or 2-–and prophylactic corticosteroid eye drops have not been necessary.
New STRO-002 Preclinical Data — Presented at 2020 AACR (Free AACR Whitepaper) Virtual Annual Meeting II in June 2020 Suggests Synergy between STRO-002 Antibody-Drug Conjugate and Immune Checkpoint Inhibitors Resulting in Tumor Regression and Adaptive Anti-Tumor Immunity
In June 2020, the results of a preclinical study presented at the 2020 AACR (Free AACR Whitepaper) Virtual Annual Meeting II showed that, in FolRα positive tumor cells, STRO-002 treatment induced hallmarks of immunogenic cell death, killing tumor cells while activating immune cells, including monocytes.
When combined in mouse tumor models with avelumab, an anti-human & mouse PD-L1 monoclonal antibody, the combination treatment enhanced efficacy, leading to more complete responses and increased activation of killer T-cells, than either agent alone.
Importantly, the data suggest that a single dose of STRO-002, when combined with a PD-1/PD-L1 blockade, could provide an effective and protective anti-tumor immune response.
STRO-001 Clinical Program — Phase 1 Clinical Trial and Dose Escalation Ongoing in
Myeloma and Lymphoma
STRO-001 is a potential first-in-class and best-in-class ADC directed against CD74, which is highly expressed in many B cell malignancies.
The STRO-001 Phase 1 clinical trial is currently in dose-escalation, enrolling patients with non-Hodgkin lymphoma and multiple myeloma
Initial safety data of STRO-001 was presented at the EHA (Free EHA Whitepaper) Congress in June 2019, and a safety data update with several additional patients was presented in an abstract in association with the American Society of Hematology (ASH) (Free ASH Whitepaper) Conference on November 6, 2019.
Based on the reported data to date in heavily pre-treated patients, STRO-001 has been generally well-tolerated and no ocular toxicity signals have been observed, with no patients receiving prophylactic corticosteroid eye drops.
Dose escalation in the Phase 1 trial is continuing and the maximum tolerated dose has not yet been reached.
Additional Phase 1 dose-escalation safety and efficacy data is expected in the second half of 2020.
A dose expansion portion of the Phase 1 clinical trial is expected to begin enrolling patients in the first half of 2021.
Cytokine-Derivative Programs (Collaboration with Merck & Co.)
Sutro is collaborating with Merck on two research programs to discover new therapeutics for cancer and autoimmune diseases. Merck has the right to nominate a third program under this collaboration.
In March 2020, Merck extended by one year the research term of the collaboration’s first program, which included a $5 million payment to Sutro. The collaboration is advancing Sutro’s novel cytokine-derivative product candidate towards IND-enabling studies.
BCMA ADC Clinical Program (CC-99712) (Collaboration with Bristol Myers Squibb)
Since trial initiation in the second half of 2019, BMS has enrolled eight patients in a Phase 1b/2 dose escalation/expansion trial, focused on patients with relapsed and refractory multiple myeloma. The last reported dose level was 3.0 mg/kg with dose escalation continuing.
BMS will be responsible for the worldwide clinical development and commercialization of CC-99712. Sutro is entitled to development and regulatory milestone payments and tiered royalties ranging from mid to high single digit percentages from BMS.
MUC1-EGFR Bispecific ADC Clinical Development Candidate (M1231) (Collaboration with EMD Serono) — Sutro’s Partner Merck KGaA, Darmstadt, Germany, Unveiled Preclinical Data from the Collaboration’s Pre-Development Candidate, a potential First-in-Class Bispecific Antibody-Drug Conjugate Targeting EGFR and MUC1 at 2020 AACR (Free AACR Whitepaper) Virtual Annual Meeting II in June 2020
EMD Serono is projected to commence first in man studies of M1231 in NSCLC and esophageal squamous cell carcinoma in the first quarter of 2021.
Sutro is the manufacturer of M1231 for the early clinical supply of the candidate and is eligible for milestones and royalties. EMD Serono will be responsible for the drug product and the clinical development and commercialization of this clinical development candidate.
24-Valent Pneumococcal Conjugate Vaccine (Vaxcyte—formerly SutroVax—Relationship)
Under a license from Sutro, Vaxcyte has right to use the XpressCF and XpressCF+ platforms to discover and develop vaccine candidates for the treatment or prophylaxis of infectious diseases.
Vaxcyte is progressing their broader spectrum pneumococcal conjugate vaccine (SVX–24) through the late stages of preclinical development and is targeting an IND filing for 2021.
Vaxcyte is responsible for performing all research and development activities, while Sutro provides technical support and supplies XtractCF and other materials to Vaxcyte under a supply agreement.
Sutro is eligible to receive four percent (4%) royalties on worldwide net sales of any licensed vaccine candidates for human health use. Also, Sutro retains the right to discover and develop vaccines for treatment or prophylaxis of any disease not caused by an infectious pathogen, including cancer.
In June 2020, Vaxcyte closed its initial public offering of its common stock.
Follow-on Financing in May 2020
In May 2020, Sutro closed a public offering of its common stock, with net proceeds of approximately $91.4 million.
Second Quarter 2020 Financial Highlights
Cash, Cash Equivalents and Marketable Securities
As of June 30, 2020, Sutro had cash, cash equivalents and marketable securities of $207.0 million, as compared to $133.5 million as of December 31, 2019, which represents a net cash increase of $73.5 million during the first half of 2020. The cash, cash equivalents and marketable securities balance noted above does not include the value associated with Sutro’s holdings of approximately 1.6 million shares of Vaxcyte common stock, which are subject to a lock-up agreement that expires in December 2020. As of June 30, 2020, the fair value of the Vaxcyte common stock held by Sutro was $49.1 million.
Net Income due to Unrealized Gain on Vaxcyte Common Stock
Sutro recorded net income of $29.9 million and $10.3 million for the three and six months ended June 30, 2020, respectively, due primarily to an unrealized gain related to its Vaxcyte common stock of $48.9 million for the 2020 periods. The unrealized gain consisted of $49.1 million from the fair value of Vaxcyte common stock, offset by approximately $0.2 million in adjustments related to revaluations of certain Vaxcyte equity items. Vaxcyte common stock held by Sutro will be measured at fair value based on the closing price of Vaxcyte’s common stock on the last trading day of each reporting period, with any unrealized gains and losses recorded in Sutro’s statements of operations.
Revenue
Revenue was $9.5 million and $16.6 million for the three and six months ended June 30, 2020, respectively, compared to $10.5 million and $19.2 million for the same periods in 2019, related principally to the Merck, BMS, and EMD Serono collaborations. Future collaboration revenue from Merck, BMS, and EMD Serono, and from any future collaboration partners, will fluctuate as a result of the amount and timing of revenue recognition of upfront, milestones and other collaboration agreement payments.
Operating Expenses
Total operating expenses for the three and six months ended June 30, 2020, were $25.9 million and $52.2 million, respectively, compared to $24.2 million and $47.1 million for the same periods in 2019, including non-cash stock-based compensation of $3.0 million and $2.5 million, and depreciation and amortization expense of $1.1 million and $1.2 million, in the three months ended June 30, 2020 and 2019, respectively. Total operating expenses for the second quarter 2020 were comprised of research and development expenses of $17.2 million and general and administrative expenses of $8.6 million, which are expected to increase in 2020 as Sutro’s internal product candidates advance in clinical development and additional general and administrative expenses are incurred as a public company.