On November 5, 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 cancer and autoimmune therapeutics, reported its financial results for the quarter ended September 30, 2020 and its recent business highlights and developments (Press release, Sutro Biopharma, NOV 5, 2020, View Source [SID1234570243]).
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"The third quarter of 2020 has been an exciting period for Sutro as we are progressing well on the clinical development of our proprietary antibody-drug conjugate (ADC) candidates. In September at the International Gynecologic Cancer Society Annual Meeting (IGCS), we provided interim data from our STRO-002 dose-escalation Phase 1 trial in ovarian patients with improved efficacy outcomes as our data mature with longer follow-up," said Bill Newell, Chief Executive Officer of Sutro Biopharma. "We look forward to providing a further update in December and also to initiate the dose-expansion portion of the trial in a population who are less heavily pretreated. In addition, we will be sharing our updated interim findings from the non-Hodgkin’s lymphoma (NHL) cohort of the STRO-001 dose-escalation Phase 1, which has been accepted at the 62nd Annual Meeting of the American Society of Hematology (ASH) (Free ASH Whitepaper). Finally, the Sutro team has been diligently working to advance cancer therapeutics and we were honored to receive The World ADC Best New Drug Developer Award for our work in developing clinical programs including STRO-001, STRO-002, and, in partnership with Bristol Meyers Squibb (BMS), CC-99712."
Recent Business Highlights and Developments
STRO-002: Continued progress on our program in STRO-002, folate receptor-alpha (FolRα) targeting ADC for development in ovarian cancer
The dose-escalation portion of the STRO-002 Phase 1 clinical trial completed enrollment as of August 31, 2020. Interim data on dose-escalation trial in patients with recurrent platinum resistant or refractory ovarian cancer was presented at the IGCS in September.
Additional Phase 1 data will be presented by key opinion leader (KOL) and management at the KOL Discussion of STRO-002 Data Event on December 3, 2020.
The dose-expansion portion of the Phase 1 trial is expected to enroll patients in the fourth quarter of 2020.
STRO-001: Dose escalation continues in STRO-001, a CD74 targeting ADC for development in B-cell malignancies
STRO-001 is currently in Phase 1 dose-escalation trial enrolling patients with lymphoma and multiple myeloma. Dose-escalation in the Phase 1 trial is ongoing and the maximum tolerated dose has not yet been reached.
Based on the reported data to date in heavily pre-treated patients, STRO-001 has been generally well-tolerated with no ocular toxicity signals observed.
A dose-expansion portion of the Phase 1 is expected to begin enrolling patients in first half of 2021.
ASH Annual Meeting: Additional Phase 1 dose-escalation data for STRO-001 will be presented at ASH (Free ASH Whitepaper) by Nirav N. Shah, M.D., Assistant Professor of Medicine at the Medical College of Wisconsin. Presentation will include results from patients with advanced, relapsed/refractory NHL and details are as follows:
Title: Preliminary Results of an Ongoing Phase 1 Dose Escalation Study of the Novel Anti-CD74 Antibody Drug Conjugate (ADC), STRO-001, in Patients with B-cell Non-Hodgkin Lymphoma
Session Name: 626. Aggressive Lymphoma (Diffuse Large B-Cell and Other Aggressive B-Cell Non-Hodgkin Lymphomas) – Results from Prospective Clinical Trials: Poster III
Session Date: Monday, December 7, 2020
Session Time: 7:00am-3:30pm PT / 10:00am-6:30pm ET
Abstract: The abstract can be found in the ASH (Free ASH Whitepaper) meeting program under #3030
Merck collaboration: Cytokine derivative programs are advancing in research development for cancer and autoimmune diseases
Sutro is working with Merck on two research programs to discover new therapeutics for cancer and autoimmune diseases and Merck retains the right to nominate a third program.
The collaboration is advancing two cytokine-derivative programs through lead optimization and in March 2020, Merck extended by one year the research term of the collaboration’s first program, which included a $5.0 million payment to Sutro.
BMS collaboration: Phase 1 trial for CC-99712, an ADC targeting BCMA, is continuing to enroll with 3.0 mg/kg in the last reported dose level
Since initiation in the second half of 2019, BMS has been enrolling patients in a Phase 1 dose escalation/expansion trial to assess treatment of relapsed and refractory multiple myeloma. The last reported dose level was 3.0 mg/kg with dose escalation expected to continue.
BMS is responsible for the worldwide clinical development and commercialization of CC-99712. Sutro is entitled to development and regulatory milestone payments and tiered royalties on sales ranging from mid to high single digit percentages.
EMD Serono collaboration: IND for M1231, MUC1-EGFR bispecific ADC, is on track in 2021 for the treatment of solid tumors
EMD Serono is projected to commence first-in-human studies of M1231 in non-small cell lung cancer (NSCLC) and esophageal squamous cell carcinoma in the first quarter of 2021.
Sutro earned a milestone payment during the third quarter of 2020 for the successful delivery of GMP clinical supply for Phase 1 clinical trial testing of M1231, a bispecific ADC manufactured using XpressCF+ technology.
Sutro is responsible for manufacturing early clinical supply of the bispecific ADC and is eligible for development and regulatory milestones and royalties.
Vaxcyte relationship: Demonstrates the power of Sutro’s cell-free technology
Under a license from Sutro, Vaxcyte has the 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 (VAX-24) through the late stages of preclinical development and is targeting an IND filing and clinical study initiation during the second half of 2021.
Sutro is eligible to receive four percent (4%) royalties on worldwide net sales of any licensed vaccine candidates for human health use. 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. Sutro owns approximately 1.6 million shares of Vaxcyte common stock as of September 30, 2020.
Industry Recognition: Recipient of Best New Drug Developer Award at the 7th Annual World ADC Awards
The award recognizes the work on STRO-001 and STRO-002, both currently in Phase 1 studies, and CC-99712, which is under investigation in a Phase 1 trial by collaboration partner BMS.
Sutro’s proprietary rapid and precise protein engineering platform allows for the design and manufacturing of homogeneous molecules, yielding potentially best-in-class ADCs and other therapeutics. Two additional candidates from this platform are projected to enter the clinic in 2021.
Third Quarter 2020 Financial Highlights
Cash, Cash Equivalents and Marketable Securities
As of September 30, 2020, Sutro had cash, cash equivalents and marketable securities of $202.4 million, as compared to $133.5 million as of December 31, 2019, which represents a net cash increase of $68.9 million during the 2020 nine-month period. 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 September 30, 2020, the fair value of the Vaxcyte common stock held by Sutro was $78.8 million.
Net Income due to Unrealized Gain on Vaxcyte Common Stock
Sutro recorded net income of $17.1 million and $27.4 million for the three and nine months ended September 30, 2020, respectively, due primarily to an unrealized gain related to its Vaxcyte common stock of $78.6 million during 2020. The unrealized gain consisted of $78.8 million from the change in estimated fair value of Vaxcyte common stock, partially 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 $17.8 million and $34.4 million for the three and nine months ended September 30, 2020, respectively, compared to $12.3 million and $31.4 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 nine months ended September 30, 2020, were $28.4 million and $80.7 million, respectively, compared to $25.0 million and $72.1 million for the same periods in 2019, including non-cash stock-based compensation of $8.8 million and $7.6 million, and depreciation and amortization expense of $3.1 million and $3.6 million, in the nine months ended September 30, 2020 and 2019, respectively. Total operating expenses for the third quarter of 2020 were comprised of research and development expenses of $19.4 million and general and administrative expenses of $9.1 million, which are expected to increase in future periods as Sutro’s internal product candidates advance in clinical development and additional general and administrative expenses are incurred as a public company.