2023-04-11 13:17:49 ET
Summary
- STRO is playing second fiddle to perpetually second fiddle player ImmunoGen in ovarian cancer.
- Although there are certain positive aspects to the molecule, I see little traction here.
- Its platform, however, is interesting.
I covered Sutro Biopharma ( STRO ) in January 2021, and I can see that I was fairly excited about this company. Shares are now down 80% in the last couple years, and I did say the high price tag of the stock in 2021 was not tenable for a major investment - so let’s take a look at why they are down and if that represents an opportunity.
Sutro develops cancer medicines using antibody-drug conjugates, bispecific antibodies, and cytokine-based therapeutics. It has two platforms, XpressCF, a cell-free protein synthesis platform, and XpressCF+, a site-specific drug conjugation platform. Lead asset Luvelta (STRO-002), a FolR? ADC targeting endometrial and ovarian cancer in a phase 1b trial. One ovarian cancer trial has a bevacizumab combo, and the others are monotherapies. A second asset, STRO-001, is a CD74 ADC targeting two indications, lymphoma and multiple myeloma in a phase 1/b trial. The entire pipeline:
The company earlier presented phase 1 interim dose-escalation data from luvelta. Data showed that patients who started at the higher dose level demonstrated higher ORR and median PFS, with those who started at 5.2 mg/kg experienced 43.8% ORR, 5.4 months median DOR, and 6.6 months median PFS. Data from up to November 2022 is given below:
Data shows that there is dose dependent improvement in the trial, with higher TPS scores showing better drug activity. Higher doses also saw higher ORR, but median DOR was less. mPFS was also marginally higher.
Neutropenia was the most common grade 3+ AE, and it was more common in the higher dose cohort. Also notable, there was a per protocol usage of prophylactic pegfilgrastim in Cohort C on day 8. This strategy reduced Grade 3+ neutropenia at Cycle 1 by 85%, when compared to Cohort A. It also reduced dose delays by 60%. Arthralgia was the second most common grade 3+ AE requiring dose reduction. Other details about adverse events:
-
G3+ large and small intestinal obstructions as complications of metastatic cancer
-
G3+ acute kidney injury attributed to concomitant AEs (sepsis and dehydration) and not direct drug injury
-
G3+ pulmonary embolism in 2 patients
The last two AEs, pulmonary embolism, need to be investigated. If they are drug related or even treatment emergent, that is not a good thing. There was a grade 5 (meaning, death) febrile neutropenia in a patient, which caused some consternation among analysts for an otherwise efficacious molecule. However, active management of the AE with dose reduction and prophylaxis reassured most of them.
However, the patient death also resulted in some problems in China. According to a Sutro 10Q :
In February 2022, Tasly indicated that it would like to discuss and renegotiate the terms of the Tasly License Agreement. Based on the currently ongoing discussions, we believe substantial uncertainty exists as to whether Tasly will timely deliver the initial payment of $40.0 million to us in accordance with the terms of the Tasly License Agreement. We believe that we have performed all our material obligations under the Tasly License Agreement and are considering all remedies available under the Tasly License Agreement.
The two companies later agreed on a lower upfront fee of $25mn.
The company is planning a phase 2/3 “integrated” trial design to support both accelerated and full approvals. The accelerated part will involve an interim analysis of ORR with DOR and safety, while the full approval part will use topline PFS data. However, if Immunogen’s mirv gets full approval before that, this window will close.
Late last year, the FDA approved Immunogen’s mirvetuximab for FRa-high platinum resistant ovarian cancer. With the approval of this ADC, this has become the main competition of Sutro’s luvelta. According to Sutro, its molecule has a broader reach than mirv’s:
While Elahere is approved for FR?-high patients, representing 35-40% of the ovarian cancer population, Sutro has argued that STRO-002 has shown strong activity in >25% FR? expressers, accounting for 70-80% of patients.
Mirv, now known as elahere, also has an eye toxicity problem, which, according to Sutro, is due to its “poorly designed” linker. While Sutro has never had an eye problem, it needs to get a convincing handle on neutropenia.
Besides this, the other programs are at an early stage. However, Sutro has a collaboration with Astellas for its iADC platform, with $90mn in upfront payment and $422.5mn in future milestones. iADC is Immunostimulatory Antibody Drug Conjugate, which combines a cytotoxin with a immunomodulator.
The company has a number of other collaborations with Bristol Myers Squibb, Merck, Vaxcyte and with two Chinese companies for exposure in Mainland China. The company pulled in $600mn in collaboration fees in its lifetime, which is an impressive achievement for a small company. Even more impressive is how they spent all that cash.
Financials
STRO has a market cap of $276mn and the cash balance detail is:
As of December 31, 2022, Sutro had cash, cash equivalents and marketable securities of $302.3 million, as compared to $287.3 million as of September 30, 2022, and approximately 0.7 million shares of Vaxcyte common stock with a fair value of $32.0 million…
Research and development expenses were $137.2 million and general and administrative expenses were $59.5 million for 2022. At that rate, the company has a cash runway well into 2024, but not much beyond that. They will probably not have pivotal data before their cash runs out.
Bottom line
STRO is an interesting company running a me-too molecule through so-so trials against Immunogen’s mirv; its only consolation is that this is IMGN’s first approval in 4 decades of existence, so investors are quite unsure what to make of its upcoming Mirasol trial, and whether that will produce enough data for full approval. Cash is also a small problem with Sutro. On the positive side, Astellas taking an interest is a huge derisking event, however, it is my opinion that Japanese companies sometimes throw money at American companies that other American companies will not touch. This is an opinion, and I am proffering no proof of this opinion. However, I have held this belief for long. Considering all of this, I will remain on the sidelines.
For further details see:
Sutro: Too Little, Too Late For STRO-002, But Platform Is Interesting