SUTRO BIOPHARMA, INC. (STRO)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered a substantial top-line beat driven by Astellas collaboration revenue and recognition of previously deferred revenue from Ipsen’s STRO‑003 decision; revenue of $63.7M vs Street $14.3M; EPS of -$0.14 vs Street -$0.38; both beats were significant catalysts for sentiment improvement . Values retrieved from S&P Global.*
• Operating expenses fell sharply YoY (total OpEx $67.1M vs $74.4M YoY) amid restructuring; net loss narrowed materially to -$11.5M from -$48.0M YoY .
• Pipeline execution reiterated: STRO‑004 first‑in‑human in 2H 2025, STRO‑006 in 2026, dual‑payload ADC IND in 2027; FDA collaboration announced to improve ADC regulatory standards .
• Subsequent update: organizational restructuring (Sept 29) extends cash runway guidance to at least mid‑2027; workforce reduction ~one‑third to prioritize ADC programs—incremental positive for duration to clinical readouts .

What Went Well and What Went Wrong

• What Went Well

  • Revenue beat driven by collaboration accounting dynamics (Astellas milestone activity and Ipsen deferred revenue recognition); revenue $63.7M vs Street $14.3M, a large surprise . Values retrieved from S&P Global.*
  • Material expense reduction: R&D + G&A down to $48.7M in Q2 from $74.4M YoY; net loss per share improved to -$0.14 from -$0.59 YoY .
  • Strategic momentum: STRO‑004 IND on track for 2H 2025; CEO emphasized dual‑payload innovation and safety profile (NHP HNSTD 50 mg/kg) supporting best‑in‑class aspirations .

• What Went Wrong

  • Restructuring and related costs of $18.4M weighed on OpEx; continued charges expected as the luvelta wind‑down proceeds in 2025 .
  • Ipsen opted not to advance STRO‑003 in the ROR1 landscape, prompting revenue reclassification dynamics and heightening partner concentration risk .
  • Deferred royalty obligation climbed to $200.1M and stockholders’ equity moved to a deficit (-$32.1M), highlighting balance sheet leverage and dilution risk if runway needs extend beyond milestones .

Financial Results

• Income statement trend (oldest → newest)

• Actual vs Consensus (S&P Global)

Values retrieved from S&P Global.*

• Operating expense detail

• KPIs and Balance Sheet items

Guidance Changes

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call transcript was not available in the document catalog. We used the Sept 3, 2025 Wells Fargo conference transcript for current-period management commentary and the Q4 2024 earnings call for prior trend context.

Management Commentary

• CEO on pipeline execution and safety: “We are especially excited about our dual‑payload ADCs… we see significant potential to transform cancer treatment… [and] we are well capitalized to meet our top priority of pipeline execution” . “STRO‑004 has a favorable preclinical safety profile in cynomolgus monkeys up to 50 mg/kg” .
• CEO on differentiation vs TF benchmark: “We have seen a 50‑fold increase in exposure with an HNSTD of 50 mg/kg… marked difference vs approved TF program at 3 mg/kg… enabling safe dose escalation” .
• CFO on runway and milestones: “We’ve guided that we have cash into early 2027… expecting milestone payments in the next 9–12 months” .
• CEO on IND timeline and disclosure: “We’re on track with the IND in the second half of this year… ambition is to get to data as quickly as possible and be open to sharing interim top line results” .

Q&A Highlights

• STRO‑004 differentiation and safety: Management emphasized reduced ocular/skin/bleeding liabilities and high HNSTD enabling dose flexibility; focus on broadening beyond cervical tumors to lung, H&N, pancreatic, esophageal .
• Dual‑payload strategy: Targeted “chemo combination” delivery to overcome resistance; dosing profiles suggest higher safe exposure vs MMAE‑only ADCs .
• Funding and runway: Fully funded for three INDs but not for two full Phase 1s without additional efficiencies/milestones; active BD to secure non‑dilutive capital .
• Partner dynamics: Astellas milestone path in 9–12 months; Ipsen stepping back from STRO‑003 reframes ROR1 approach .
• Disclosure cadence: Aim to share interim data quickly post‑FIH initiation .

Estimates Context

• Q2 2025 headline beats: Revenue $63.7M vs $14.3M consensus; EPS -$0.14 vs -$0.38 consensus—both materially better than Street, driven by collaboration accounting (Astellas) and recognition of deferred revenue after Ipsen’s decision . Values retrieved from S&P Global.*
• Estimate base: 10 estimates for revenue and EPS in Q2 2025. Values retrieved from S&P Global.*
• Implications: Street models will likely recalibrate collaboration revenue timing and recognize lower cash burn trajectories given restructuring, with heightened focus on 2H25 FIH start and 2026 readouts. Values retrieved from S&P Global.*

Key Takeaways for Investors

• The quarter’s large top-line beat was driven by non‑recurring collaboration accounting and deferred revenue recognition; recurring collaboration revenue remains timing‑dependent—avoid annualizing Q2 revenue .
• Expense discipline is taking hold; R&D and G&A fell sharply YoY, and restructuring costs are front‑loaded in 2025—improves runway to clinical catalysts .
• Pipeline execution is the core equity narrative: STRO‑004 FIH initiation in 2H 2025 is the next major catalyst; dual‑payload ADCs could be a differentiator in resistance settings .
• Balance sheet highlights both strength and risk: $205.1M cash, but deferred royalty obligation of $200.1M and negative equity warrant close monitoring; subsequent restructuring extended runway to mid‑2027 .
• BD is a meaningful swing factor: Astellas milestones and potential luvelta partnering can extend runway and fund Phase 1s without dilution .
• Trading setup: Near‑term sentiment supported by execution milestones (IND filing, site activation), with Street revisions likely to reflect lower Opex and collaboration timing; however, lack of product revenue and balance sheet obligations temper the multiple until clinical proof points arrive .
• Medium‑term thesis: If STRO‑004 safety/efficacy signals align with preclinical differentiation, platform read‑through to STRO‑006 and dual‑payload programs could re‑rate the equity toward platform value and BD optionality .

Appendices

Additional Context and Disclosures

• Drivers of revenue: “2025 amount related principally to the Astellas collaboration and the recognition of previously deferred revenue as a result of Ipsen’s decision not to advance the STRO‑003 program” .
• Restructuring: “Restructuring and related costs… $18.4M… will continue to recognize… expects a significant portion in 2025” .
• FDA collaboration: “Develop reference materials to improve regulatory standards and enhance analytical methods for ADCs” .

Values retrieved from S&P Global.*