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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-25 · 278 added, 411 removed, 1047 unchanged (40% of the section changed)

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We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K.

We are a clinical-stage oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs, enabled by our proprietary integrated cell-free protein synthesis platform, XpressCF ® , and our site-specific conjugation platform, XpressCF+ ® .

We aim to design and develop therapeutics using the most relevant and potent modalities, including ADCs, bispecific ADCs, immunostimulatory ADCs, or iADCs, dual conjugate ADCs, or ADC 2 s, and cytokine derivatives.

We are an oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs, enabled by our proprietary integrated cell-free protein synthesis platform, XpressCF ® , and our site-specific conjugation platform, XpressCF+ ® .

We aim to design and develop therapeutics using the most relevant and potent modalities, including ADCs, bispecific ADCs, immunostimulatory ADCs, or iADCs, and dual conjugate ADCs, or ADC 2 s.

Our molecules are directed primarily against clinically validated targets where the current standard of care is suboptimal.

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Our mission is to transform the lives of patients by creating medicines with improved therapeutic profiles for areas of unmet need.

Once identified, production of protein drug candidates can be rapidly and predictably scaled in our current Good Manufacturing Practices, or cGMP, compliant manufacturing facility.

Once identified, production of protein drug candidates can be rapidly and predictably scaled in our current Good Manufacturing Practices, or cGMP, compliant manufacturing facility or in the facility of one of our contract development and manufacturing organization, or CDMO, partners.

We have the ability to manufacture our proprietary cell-free extract that supports our production of proteins on a large scale using a semi-continuous fermentation process.

Our most advanced product candidate is STRO-002, or luveltamab tazevibulin, or luvelta, an ADC directed against folate receptor-alpha, or FolRα, for patients with FolRα-expressing cancers, including ovarian cancer.

Luvelta was designed and optimized for an improved therapeutic index by placing a precise number of linker-warheads at four specific locations within the antibody using our proprietary XpressCF+ ® platform.

Our first Phase 1 trial for luvelta is an open-label study evaluating luvelta as a monotherapy for patients with ovarian and endometrial cancers.

This trial is being conducted in two-parts, dose escalation and dose expansion.

The primary objectives of the clinical trial are to determine the safety and tolerability profile, to define the recommended Phase 2 dose level and interval and to evaluate preliminary anti-tumor activity.

Our secondary objectives are to characterize the human pharmacokinetics and additional safety, tolerability and efficacy measures.

In 2019, we began enrolling patients in a Phase 1 trial of luvelta that focused on ovarian and endometrial cancers.

The Phase 1 trial assessing safety, tolerability and preliminary efficacy of luvelta to treat platinum resistant ovarian cancer has been completed.

In January 2024, we reported near-final results from this Phase 1 trial, in which luvelta exhibited a manageable safety profile together with promising preliminary efficacy data in the tested patient population.

We also presented data from Phase 1b trials assessing safety, tolerability and preliminary efficacy for the treatment of ovarian cancer with luvelta in combination with bevacizumab and for treatment of endometrial cancer.

In August 2021, luvelta was granted Fast Track designation by the U.S.

Food and Drug Administration, or FDA, for the treatment of patients with platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer who have received one to three prior lines of systemic therapy.

We began enrolling patients in a Phase 2/3 trial of luvelta for the treatment of platinum-resistant ovarian cancer, the REFRαME-O1 study, in June 2023.

In January 2024, we presented an aggregated data set from of our Phase I trials of luvelta.

This data set included data from all ovarian cancer patients treated with luvelta as a monotherapy in Phase 1 studies, regardless of FolRα expression levels, dose level of luvelta, or platinum sensitivity or resistance, corresponding to a total of 99 patients, of which 92 were RECIST-evaluable, with 21% platinum sensitive patients and 78% platinum refractory patients.

Patients received a median of three prior lines of therapy.

There were 72% of the patients that had experienced prior bevacizumab therapy and 70% had been treated with a PARP inhibitor.

These patients were not selected for FolRα expression levels and were treated at starting dose levels ≤2.9 mg/kg, 4.3 mg/kg, 5.2 mg/kg or ≥5.6 mg/kg.

The safety profile of luvelta from these aggregated data was shown to be manageable, with a low rate of discontinuation of treatment resulting from neutropenia.

The predominant TEAE was neutropenia, encompassing neutropenia, febrile neutropenia, and decreased neutrophil count, with 69.7% patients reporting any grade neutropenia and 64.6% patients reporting Grade 3 or higher neutropenia.

Neuropathy and arthralgia were the other most commonly reported significant TEAEs, with 57.6% and 16% of patients reporting any grade and Grade 3 or higher arthralgia, respectively, and 44% and 7% patients reporting any grade and Grade 3 or higher neuropathy, respectively.

The observed neutropenia was primarily uncomplicated, with less than 5% incidence of febrile neutropenia.

Neutropenia and arthralgia each led to discontinuation of treatment in 1.5% of patients.

Neuropathy led to discontinuation of treatment in 2.9% of patients.

There were six patients that experienced grade 5 safety events on study, with one such event assessed as probably luvelta related and the remainder assessed as unrelated to luvelta.

We also presented a subset of the aggregated data from our Phase 1 trials of luvelta for which 43 patients with platinum resistant ovarian cancer selected for FolRα TPS ≥25%, or tumors with ≥25% of the tumor cells expressing FolRα at any level of staining intensity, were treated with 4.3 mg/kg or 5.2 mg/kg doses of luvelta, corresponding to all patients treated in phase 1 studies that would be eligible for enrollment in the REFRαME-O1 registrational study.

The ORR observed for this subset population was 28%, with a DOR of 5.7 months and PFS of 5.8 months.

Based on the data from our Phase 1 program, we selected FolRα expression TPS ≥25% as the target eligibility cutoff or threshold for further study in clinical development of luvelta.

We estimate that approximately 80% of the platinum resistant ovarian cancer patients would be eligible for luvelta treatment based on this TPS ≥25% threshold for FolRα expression .

We also opened for enrollment a Phase 1 trial to assess the combination of luvelta and bevacizumab for treatment of ovarian cancer in December 2021 and presented initial preliminary results of this study in January 2024.

Safety signals from this study were generally consistent with those previously reported and the combination treatment with luvelta and bevacizumab demonstrated clinical activity in treated patients regardless of their FolRα expression status.

We also began enrolling patients in an expansion cohort for FolRα-selected endometrial cancer in the fourth quarter of 2021 and presented initial preliminary results from the study at the 2023 ESMO Congress in October 2023.

In this trial, luvelta showed encouraging preliminary anti-tumor activity in FolRα-selected patients, defined by a TPS of >25% FolRα expression, and the safety profile was consistent with prior data in patients with platinum-resistant ovarian cancer.

We expect to present updated results from the bevacizumab combination study in 2024.

Further, we plan to submit an IND for the treatment of NSCLC with luvelta in the first half of 2024.

In addition to the Phase 1 studies discussed above, we initiated a Phase 2/3 study, the REFRαME-O1 study, of luvelta for the treatment of platinum-resistant ovarian cancer in June 2023.

This study comprises two parts;

in Part 1, we anticipate enrolling 50 patients randomized 1:1 to two different doses of luvelta, either 4.3 mg/kg or 5.2 mg/kg plus prophylactic pegfilgrastim for two cycles, followed by reduction to 4.3 mg/kg.

After proceeding to Part 2 of the study, the non-optimized dose of luvelta will be dropped and approximately 516 patients will be randomized 1:1 to the selected luvelta dose or investigators choice of chemotherapy.

The protocol will include an optional interim analysis for ORR and DOR to support a potential application for accelerated approval and the endpoints that will be assessed for a potential full approval are PFS and OS.

The REFRαME-O1 study patient population includes those with platinum-resistant ovarian cancer, 1-3 lines of prior treatment and tumors that express FolRα at TPS≥25% and excludes primary platinum refractory patients and those with ECOG PS of 0-1.

We announced the initiation of Part 1 of the REFRαME-O1 study in June 2023 and the study is ongoing.

We anticipate that Part 1 will be fully enrolled by the end of the first half of 2024.

In 2022 we initiated an exploratory cohort, or cohort C, of 15 patients to assess the safety of treatment with luvelta at 5.2 mg/kg in combination with prophylactic pegfilgrastim and presented preliminary data from ten patients from this cohort in January 2023.

In January 2024 we announced updated data from this cohort based on 16 patients.

In particular:

• Grade 3+ neutropenia was reduced from 66.7% to 6.3%, resulting in a 90.6% decrease in Grade 3+ neutropenia rates at the first cycle of luvelta (p=0.0002);

Grade 3 neutropenia was reduced from 71.4% to 18.8%, resulting in a 73.7% decrease in Grade 3+ neutropenia rates at the first and second cycle (p=0015)

• Overall Grade 3+ neutropenia was reduced from 76.2% to 37.5%

In addition, we have been offering compassionate use of luvelta to treat pediatric patients with relapsed/refractory CBFA2T3-GLIS2, or CBF/GLIS, acute myeloid leukemia, or AML, commonly known as RAM phenotype AML.

Updated compassionate use data continued to show anti-leukemic activity of luvelta in pediatric patients with relapsed/refractory CBF/GLIS AML and was presented at the ASH 2023 in December 2023.

The data showed that luvelta was well tolerated as a monotherapy agent and in combination with standard cancer therapies.

Luvelta was granted Orphan Drug Designation by the FDA in December 2022 in this pediatric patient population.

We expect to begin enrollment of a registration-directed trial of luvelta for treatment of pediatric RAM phenotype AML in the second half of 2024.

Our most advanced assets in preclinical development are STRO-003 and STRO-004.

We believe STRO-003 has the potential to be a first-in-class and best-in-class ADC targeting ROR1 and that STRO-004 has the potential to be a best-in-class ADC targeting TF.

Preclinical data suggest that both STRO-003 and STRO-004 have potent antitumor activity and potential for a differentiated safety profile.

We anticipate being ready to file an IND for each of STRO-003 and STRO-004 in 2024 and 2025, respectively.

Enabled through our proprietary XpressCF ® and XpressCF+ ® platforms, we have entered into multi-target, product-focused collaborations with leading pharmaceutical and biotechnology companies in the field of oncology, with our ongoing relationships that include an immunostimulatory antibody-drug conjugates collaboration with Astellas, a cytokine derivatives collaboration with Merck, and a licensing agreement for luvelta in Greater China with Tasly.

In August 2023, Tasly received its first IND clearance by NMPA in Greater China for luvelta.

Our highest priority wholly-owned preclinical product candidate is STRO-004.

This product candidate is a single homogeneous ADC directed against tissue factor, or TF, which we intend to develop for the treatment of solid tumors.

We anticipate filing an IND for STRO-004 in the second half of 2025.

We believe STRO-004 has the potential to be a best-in-class ADC targeting TF.

Preclinical data suggest that STRO-004 has potent antitumor activity and the potential for a differentiated safety profile.

Our other preclinical assets include an ADC targeting Integrinβ6 and ADC 2 s, and iADCs.

We plan to file three INDs over the next three years, including for STRO-004.

Enabled through our proprietary XpressCF® and XpressCF+® platforms, we have entered into multi-target, product-focused collaborations with leading pharmaceutical and biotechnology companies in the field of oncology, with our ongoing relationships that include licensing to Ipsen, on an exclusive basis, the right to research, develop, manufacture and commercialize STRO-003.

STRO-003 is intended to be developed for the treatment of solid tumors and we anticipate filing of an IND in connection with this program in 2025.

In addition, we have an ongoing iADC collaboration with Astellas.

Our XpressCF ® and XpressCF+ ® platforms have also supported Vaxcyte, focused on discovery and development of vaccines for the treatment and prophylaxis of infectious disease.

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Vaxcyte is responsible for performing all research and development activities, and we provide technical support and supply XtractCF ® and other materials to Vaxcyte.

In June 2023, we entered into a purchase and sale agreement (the “Purchase Agreement”) with Blackstone, in which Blackstone acquired the right to receive our 4% revenue interest in Vaxcyte’s future products, including Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products such as VAX-24 and its second-generation PCV product, VAX-31.

As described further below, following agreement with Vaxcyte on the Form Definitive Agreement and upon effectiveness of an amendment to the licensing agreement, the revenue interest in the 4% royalty on potential future sales of Vaxcyte products other than Vaxcyte’s PCV products reverted to us.

In June 2023, we entered into a purchase and sale agreement, or the Purchase Agreement with Blackstone, in which Blackstone acquired the right to receive our 4% royalty, or revenue interest, in the potential future net sales of Vaxcyte products, including Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products, such as VAX-24 and VAX-31.

Following agreement with Vaxcyte on the Form Definitive Agreement and upon effectiveness of an amendment to the licensing agreement, the revenue interest in the 4% royalty on potential future sales of Vaxcyte products other than Vaxcyte’s PCV products reverted to us.

Thus, we retain the right to receive a 4% royalty on sales of Vaxcyte’s products other

than PCV products.

In November 2023, Vaxcyte exercised its option to access expanded rights to develop and manufacture cell-free extract for use in development and manufacture of its vaccine products, among certain other rights.

Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development and manufacturing activities in support of our own product development efforts and those of our collaborators, raising capital to support and expand such activities and providing general and administrative support for these operations.

We have funded our operations to date primarily from upfront, milestone and other payments under our collaboration agreements with BMS, Merck, Astellas, EMD Serono, Vaxcyte, BioNova, and Tasly, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public offerings of common stock, sales of our common stock through our ATM Facility, debt financing, and the royalty monetization agreement with Blackstone.

We have funded our operations to date primarily from upfront, milestone and other payments under our collaboration agreements with BMS, Merck, Astellas, Vaxcyte, Ipsen, EMD Serono, BioNova, and Tasly, the issuance and sale of redeemable convertible preferred stock, our initial public offering, or IPO, follow-on public and other offerings of common stock, sales of our common stock through our At-the-Market Facility (“ATM Facility”) pursuant to our Open Market Sales Agreement SM dated April 2, 2021 (the “Sales Agreement”) with Jefferies LLC (“Jefferies”), debt financing, sale of our holdings of Vaxcyte common stock, and the royalty monetization agreement with Blackstone.

We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales.

We had a loss from operations of $89.3 million and a net loss of $106.8 million for the year ended December 31, 2023, which net loss included the non-operating, unrealized gain of $9.9 million related to our holdings of Vaxcyte common stock.

We had a loss from operations of $238.5 million and a net loss of $227.5 million for the year ended December 31, 2024, which net loss included the non-operating, realized gain of $32.1 million related to the sale of our holdings of Vaxcyte common stock.

We had a loss from operations of $89.3 million and net loss of $106.8 million, which net loss included the non-operating, unrealized gain of $9.9 million related to our holdings of Vaxcyte common stock, for the year ended December 31, 2023.

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If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, access, marketing, manufacturing and distribution.

Our operating expenses would significantly increase due to continued activities to develop, and seek regulatory approvals for, our product candidates, engage in other research and development activities, expand our pipeline of product candidates, continue to develop our manufacturing facility and capabilities, maintain and expand our intellectual property portfolio, seek regulatory and marketing approval for any product candidates that we may develop, acquire or in-license other assets or technologies, ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, and operate as a public company.

Current capital market conditions provide a challenging financing environment.

In this context, we are continuing our process of evaluating our programs and spending.

We expect a short-term reduction in operating expenses as we strategically reprioritize our resources.

However, over the long term, we anticipate an increase in our operating expenses as we advance our product candidates through clinical development, seek regulatory approvals for our product candidates, engage in other research and development activities, expand our pipeline of product candidates, maintain and expand our intellectual property portfolio, seek regulatory and marketing approval for any product candidates that we may develop, acquire or in-license other assets or technologies, ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, and operate as a public company.

In light of our current resources and the cost of development, we are continuing our process of evaluating our programs and spending.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, our expenditures on other research and development activities and the timing of achievement and receipt of upfront, milestones and other collaboration agreement payments.

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We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales.

Our total revenue to date has been generated principally from our collaboration and license agreements with BMS, Merck, Astellas, EMD Serono, Vaxcyte, BioNova and Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to the above collaborators.

Our total revenue to date has been generated principally from our collaboration and license agreements with BMS, Merck, Astellas, Vaxcyte, Ipsen, EMD Serono, BioNova, and Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to the above collaborators.

We derive revenue from collaboration arrangements, under which we may grant licenses to our collaboration partners to further develop and commercialize our proprietary product candidates.

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For arrangements that include multiple performance obligations, we allocate the transaction price to the identified performance obligations based on the standalone selling price, or SSP, of each distinct performance obligation.

In instances where SSP is not directly observable, we develop assumptions that require judgment to

determine the SSP for each performance obligation identified in the contract.

In instances where SSP is not directly observable, we develop assumptions that require judgment to determine the SSP for each performance obligation identified in the contract.

These key assumptions may include full-time equivalent, or FTE, personnel effort, estimated costs, discount rates and probabilities of clinical development and regulatory success.

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Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and those of our collaborators, and include salaries, employee benefits, stock-based compensation, laboratory supplies, outsourced research and development expenses, professional services and allocated facilities-related costs.

We expense both internal and external research and development costs as they are incurred.

Nonrefundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as expenses as the related services are performed.

Our research and development expenses would increase in the future due to continued activities to advance our product candidates into and through preclinical studies and clinical trials, pursue regulatory approval of our product candidates, expand our pipeline of product candidates, and continue to develop our manufacturing facility and capabilities.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time consuming.

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Total research and development expenses

We expect a reduction in research and development expenses as we strategically reprioritize our resources.

However, over the longer term, we anticipate such expenses would increase as we advance our product candidates through clinical development, and continue to develop our external manufacturing capabilities.

General and Administrative

Our general and administrative expenses consist primarily of personnel costs, expenses for outside professional services, including legal, human resources, audit, accounting and tax services and allocated facilities-related costs.

Personnel costs include salaries, employee benefits and stock-based compensation.

We expect to incur expenses operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on the Nasdaq Global Market, additional insurance expenses, investor relations activities and other administrative and professional services.

The size of our administrative function and our general and administrative expenses to support the anticipated growth of our business would increase as we continue to advance our product candidates into and through the clinic.

We expect a reduction in general and administrative expenses as we strategically reprioritize our resources.

However, over the longer term, we anticipate such expenses would increase as we advance our product candidates through clinical development and toward potential commercialization.

Interest Income

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As further described in the financial statements in Note 9.

Deferred Royalty Obligation Related to the Sale of Future Royalties, in June 2023, we entered into the Purchase Agreement with Blackstone, pursuant to which we sold to Blackstone our 4% royalty, or revenue interest, in the potential future net sales of Vaxcyte products, including Vaxcyte’s PCV products, such as VAX-24 and VAX-31.

Deferred Royalty Obligation related to the Sale of Future Royalties, in June 2023, we entered into the Purchase

Agreement with Blackstone, pursuant to which we sold to Blackstone our 4% royalty, or revenue interest, in the potential future net sales of Vaxcyte’s PCV products, such as VAX-24 and VAX-31.

Non-cash interest expense will be recognized over the estimated life of the royalty term arrangement using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of potential future royalty payments to be earned and received by Blackstone from Vaxcyte under the 2015 License Agreement.

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Additionally, we identified a financing component under the Astellas Agreement and recorded interest expense associated with the upfront payment.

Other income (expense) includes realized gain (loss) on the equity securities.

Other income (expense), net, also includes the realized gain on the sale of Vaxcyte common stock.

We recorded an income tax charge of $2.4 million during the year ended December 31, 2024.

The income tax charge was primarily due to prior period tax provision to return adjustment.

We recorded an income tax charge of $18.2 million during the year ended December 31, 2023.

The income tax charge was primarily due to unfavorable book-tax differences related to capitalizing and amortizing research and development expenditures under Internal Revenue Code, or IRC, Section 174, the upfront payment from the sale of future royalties, deferred revenue, foreign income tax, and IRC Section 382 limitations imposed on the utilization of our historical tax attributes as a result of cumulative ownership changes that we experienced in prior years.

We recorded a foreign income tax charge of $2.5 million during the year ended December 31, 2022, due to a withholding tax in China on an upfront license fee payment received from Tasly.

All other income tax charges and benefits for the years ended December 31, 2024 and 2023 have been immaterial, primarily due to the net loss in each year.

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Provision for income taxes

*Percentage not meaningful

We have recognized revenue as follows during the indicated periods:

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(in thousands)

Bristol-Myers Squibb Company ("BMS")

Merck Sharp & Dohme Corporation ("Merck")

Merck KGaA, Darmstadt, Germany (operating in the United States and Canada under the name "EMD Serono")

Astellas Pharma Inc.

Tasly Biopharmaceuticals Co., Ltd.

BioNova Pharmaceuticals, Ltd.

Vaxcyte, Inc.

Ipsen Pharma SAS (“Ipsen”)

Merck Sharp & Dohme Corporation (“Merck”)

Bristol Myers Squibb Company (“BMS”)

Merck KGaA, Darmstadt, Germany (operating in the United States and Canada under the name “EMD Serono”)

Total revenue

Total revenue increased by $86.0 million, or 127%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

This was primarily due to a $97.5 million increase in Vaxcyte revenue from an earned $97.5 million in upfront and option exercise payments related to the Option exercised by Vaxcyte under the Vaxcyte Agreement, and a $23.1 million increase from Astellas, of which $13.1 million was from the ongoing performance related to partially unsatisfied performance obligations, $5.3 million was from research and development services, and $4.7 million was from the financing component related to the Astellas Agreement,.

These increases were partially offset by an $18.0 million decrease in Tasly revenue from an earned $25.0 million upfront payment in 2022 under the Tasly License Agreement, partially offset by a contingent payment of $5.0 million earned in 2023, and a $2.0 million in clinical product supply under the 2023 Tasly Supply Agreement, a $5.7 million decrease in Merck revenue primarily due to an earned $10.0 million contingent payment from Merck in 2022, a $0.8 million decrease from the 2022 completion of the performance obligation associated with the extension of the research term for the first target program under the 2018 Merck Agreement, partially offset by a $5.1 million increase in manufacturing activities supporting clinical trial supply, a $4.0 million decrease in BioNova revenue due to an earned licensing option payment in 2022, and a $4.2 million and $2.7 million decrease in BMS and EMD Serono revenue, respectively, due to their decisions to end clinical development of CC-99712 and M1231, respectively, in 2023.

*Percentage not meaningful

Total revenue decreased by $91.7 million, or 60%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This was primarily due to a $98.7 million decrease in Vaxcyte revenue, of which $97.5 million in upfront and option exercise revenue related to the option exercised by Vaxcyte was earned in 2023, and $1.2 million was from a decrease in research and development services and materials supply, a $5.6 million decrease in BMS revenue due to their decision to end clinical development of CC-99712 in 2023, a $5.8 million decrease in Merck revenue, primarily due to a $5.6 million decrease in manufacturing activities supporting clinical trial supply and a $0.2 million decrease in research and development services as a result of Merck’s decision to end clinical development of MK-1484 during the third quarter of 2024.

Lastly, Tasly revenue decreased by $0.9 million primarily due to a $5.0 million contingent payment earned in 2023 and a $0.9 million decrease in clinical product supply under the 2023 Tasly Supply Agreement, which were partially offset by a $5.0 million contingent payment earned in 2024.

These decreases were partially offset by a $18.9 million increase from Astellas, of which $22.9 million was from the ongoing performance related to partially unsatisfied performance obligations, and included a cumulative catch-up adjustment of $17.8 million on the contract modification date from Astellas' decision not to nominate a third target program under the Astellas Agreement and $0.9 million from materials supply, which were partially offset by decreases of $3.5 million from the financing component related to the Astellas Agreement and $1.4 million from research and development services.

Additionally, there was a $0.6 million increase in Ipsen revenue from research and development services and materials supply, which commenced in the second quarter of 2024.

Research and Development Expense

Research and development expense increased by $71.6 million, or 40%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The overall increase was primarily due to increases of $18.1 million in consulting and outside services mainly due to increased CMO-related activities, $13.4 million in personnel-related expenses due to higher headcount, $11.4 million in clinical development expenses, $3.9 million in facilities-related expenses, and $1.3 million in equipment and office-related expenses, partially offset by a decrease of $3.0 million in preclinical research expenses, and $1.9 million in laboratory supplies.

The overall increase was due primarily to increases of $43.0 million in outside services mainly due to increased CMO-related activities, $12.1 million in preclinical research and clinical development expenses, $11.3 million in facilities expenses and IT-related expenses, $4.3 million in personnel-related expenses due to higher headcount, $2.5 million in equipment and office-related expenses, and $0.2 million in travel-related expenses, partially offset by a decrease of $1.7 million in laboratory supplies.

General and Administrative Expense

General and administrative expense increased by $3.0 million, or 5%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The overall increase was primarily due to increases of $2.6 million in consulting and outside services, $1.1 million in equipment and office-related expenses, and $0.7 million in facilities-related expenses, partially offset by a $1.4 million decrease in personnel-related expenses.

General and administrative expense decreased by $14.1 million, or 23%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The overall decrease was due primarily to decreases of $10.5 million in IT-related expenses and $5.7 million in personnel-related expenses, partially offset by increases of $0.8 million in outside services, $0.6 million in equipment and office-related expenses, and $0.6 million in allocated facilities-related expenses.

Interest Income

Interest income increased by $11.0 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due primarily to higher average investment balances and higher average rates of return in 2023.

Interest income increased by $4.1 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due primarily to higher average investment balances in 2024.

Unrealized Gain on Equity Securities

Unrealized gain on equity securities was $9.9 million during the year ended December 31, 2023 as compared to an unrealized gain of $12.1 million during the year ended December 31, 2022.

The unrealized gain on equity securities in each period was entirely due to the remeasurement of the estimated fair value of our investment in Vaxcyte common stock.

We sold the remaining shares of Vaxcyte common stock, resulting in no unrealized gain on equity securities during the year ended December 31, 2024, as compared to an unrealized gain of $9.9 million for the year ended December 31, 2023.

As of December 31, 2024, we do not hold any shares of Vaxcyte common stock.

Non-cash Interest Expense related to the Sale of Future Royalties

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Non-cash interest expense was recognized on our deferred royalty obligation related to the June 2023 sale of future Vaxcyte royalties pursuant to the Purchase Agreement, using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of potential future royalty payments to be earned and received by Blackstone from Vaxcyte under the 2015 License Agreement.

No non-cash interest expense was recorded during the year ended December 31, 2022.

Interest and Other Income (Expense), Net

Interest and other income (expense), net, increased by $7.8 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the increase of $4.7 million from the financing component related to the Astellas Agreement, a $4.1 million decrease in recognized gain on sale of equity securities sold during the year ended December 31, 2022, partially offset by a decrease of $1.1 million in interest incurred on our outstanding loan.

Interest and other income (expense), net, decreased by $37.0 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023, due primarily to a recognized gain of $32.1 million on the sale of Vaxcyte common stock and decreases of $3.6 million from the financing component related to the Astellas Agreement and $1.3 million in interest incurred on our loan which was fully paid in March 2024.

Liquidity and Capital Resources

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To date, we have incurred significant net losses, and negative cash flows from operations.

Our operations have been funded primarily by payments received from our collaborators, and net proceeds from equity sales, debt, and a royalty monetization.

As of December 31, 2023, we had $333.7 million in cash, cash equivalents and marketable securities, equity securities of $41.9 million, outstanding debt of $4.1 million and an accumulated deficit of $559.4 million.

Upfront Payment from Blackstone

In June 2023, we entered into a Purchase Agreement with Blackstone, pursuant to which we sold to Blackstone our 4% royalty, or revenue interest, in potential future net sales of Vaxcyte products, including Vaxcyte’s PCV products, such as VAX-24 and VAX-31.

We retain the right to discover and develop vaccines for the treatment or prophylaxis of any disease that is not caused by an infectious pathogen, including cancer.

Blackstone made an upfront payment of $140.0 million to us and is also obligated to pay up to an additional $250.0 million upon the achievement of various return thresholds, as set forth in the Purchase Agreement.

Upfront Payments from Vaxcyte and Vaxcyte Equity Ownership

In December 2022, we entered into a letter agreement (the “Vaxcyte Agreement”) with Vaxcyte under which the Company granted to Vaxcyte (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization, or CMO, to source cell-free extract solely for the products it licensed from the us, allowing Vaxcyte to have direct oversight over financial and operational aspects of the relationship with the CMO, and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract for use in connection with the exploitation of certain vaccine compositions (the “Option”).

Pursuant to the Vaxcyte Agreement, we received from Vaxcyte a one-time, nonrefundable, non-creditable, upfront payment of $10.0 million in cash, and 167,780 shares of Vaxcyte’s common stock with a fair value of $7.5 million at the date of the transaction in December 2022.

Additionally, pursuant to the Vaxcyte Agreement, we agreed with Vaxcyte to negotiate the terms and conditions of the Form Definitive Agreement to be entered into in the event Vaxcyte exercises the Option.

In September 2023, we mutually agreed in writing with Vaxcyte upon the Form Definitive Agreement, and in October 2023, we received a $5.0 million payment from Vaxcyte.

In November 2023 (the "Exercise Date"), Vaxcyte exercised the Option by submitting written notice thereof to us and concurrently paid us $50.0 million in cash as the first of two installment payments for the Option exercise price.

Under the Vaxcyte Agreement, Vaxcyte is obligated to pay us an additional $25.0 million in cash within six months of the Exercise Date as the second of two installment payments for the Option exercise price.

Upon the occurrence of certain regulatory milestones, Vaxcyte would be obligated to pay us up to $60.0 million in cash.

In the event that Vaxcyte undergoes a change of control, certain rights and payments may be accelerated.

As of December 31, 2023, we held 667,780 shares of Vaxcyte common stock, which include the 167,780 shares received from Vaxcyte under the Vaxcyte Agreement.

The estimated fair value of Vaxcyte common stock was $41.9 million as of December 31, 2023.

At-The-Market Sales

During the year ended December 31, 2023, we sold an aggregate of 1,857,410 shares of our common stock through our ATM Facility pursuant to the Sales Agreement with Jefferies.

The gross proceeds from these sales were approximately $12.4 million, before deducting fees of approximately $0.4 million, resulting in net proceeds of approximately $12.0 million.

Contingent and Upfront Payments from Tasly

In August 2023, Tasly received the first IND clearance by the NMPA in Greater China.

As a result of this achievement, we earned a $5.0 million contingent payment from Tasly under the Tasly License Agreement.

The contingent payment, net of withholding tax of $0.5 million, resulted in a net payment to us of $4.5 million received in October 2023.

In September 2023, we received a $5.0 million contingent payment from Tasly related to the first patient dosed in our REFRaME-O1 trial for luvelta, net of withholding tax of $0.5 million.

The REFRaME-O1 study consists of two parts, Part I being the dose-finding portion and Part II being the portion of the study that will focus on the selected dose from Part I, and is intended to generate data to enable the potential registration of luvelta.

Although we currently intend to conduct the REFRaME-O1 study to completion, we have the sole discretion to terminate the REFRaME-O1 study at any time.

As such, we have agreed with Tasly, that in the event we terminate the REFRaME-O1 study prior to dosing the first patient in Part II, we will refund Tasly the contingent payment received by us within 30 days of such study termination.

During the year ended December 31, 2022, we earned a $25.0 million nonrefundable upfront payment from Tasly under the Tasly License Agreement to grant Tasly an exclusive license to develop and commercialize luvelta in Greater China.

The upfront payment, net of a withholding tax of $2.5 million, resulted in a net payment to us of $22.5 million received during the year ended December 31, 2022.

Upfront Payment from Astellas

In June 2022, we entered into a License and Collaboration Agreement with Astellas, for the development of immunostimulatory antibody-drug conjugates for up to three biological targets, to be identified by Astellas.

Pursuant to the agreement with Astellas, we received from Astellas a one-time, nonrefundable, non-creditable, upfront payment of $90.0 million during the year ended December 31, 2022.

Contingent Payment from Merck

In July 2022, the first patient was dosed in a Phase 1 study of MK-1484, an investigational candidate resulting from the 2018 Merck Agreement for the first program in our collaboration to develop novel cytokine derivative therapeutics for the treatment of cancer.

As a result of this achievement, we earned and received a $10.0 million contingent payment from Merck during the year ended December 31, 2022.

On February 28, 2020, or the Effective Date, we entered into a loan and security agreement, (the "LSA"), with Oxford Finance LLC, or Oxford, as the collateral agent and a lender, and Silicon Valley Bank, as a lender, together with Oxford, the Lenders, pursuant to which the Lenders have agreed to lend us up to an aggregate of $25.0 million (the "Term A Loan").

Upon entering into the Loan and Security Agreement, we borrowed $25.0 million from the Lenders, with approximately $9.6 million of such amount applied to the repayment of the outstanding principal, interest and final payment fees owed pursuant to the prior loan and security agreement dated August 4, 2017.

In June 2022, we entered into an amendment to the LSA with Oxford and SVB (the “LSA Amendment”).

The LSA Amendment added a financial covenant that requires us to maintain a minimum unrestricted cash balance of

$10.0 million.

We were in compliance with the financial covenant under the LSA Amendment as of December 31, 2023.

In June 2023, we entered into an amendment to the LSA with Oxford and SVB (the “5th LSA Amendment”).

Under the 5th LSA Amendment, effective July 1, 2023, the loan bears interest at the floating per annum rate of interest equal to the greater of (i) 8.07% and (ii) the sum of (a) a specific published 1-month secured overnight financing rate (SOFR) reported on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 0.10%, plus (c) 6.40%.

There was an immaterial impact of the 5th LSA Amendment on our financial statements.

The Term A Loan matured on March 1, 2024 (the “Maturity Date”) and the Company made a final payment of 3.83% of the original principal amount of the Term A Loan on the Maturity Date under the LSA.

In connection with entering into the LSA, we issued to the Lenders warrants exercisable for 81,257 shares of our common stock, or the Debt Warrants.

The Debt Warrants are exercisable in whole or in part, immediately, and have a per share exercise price of $9.23, which was the closing price of our common stock reported on the Nasdaq Global Market on the day prior to the Effective Date.

The Debt Warrants will terminate on the earlier of February 28, 2030 or the closing of certain merger or consolidation transactions.

In June 2021, we entered into a third amendment, or Third Amendment, to our manufacturing facility lease, dated May 18, 2011, as amended, by and between Alemany Plaza LLC, located at San Carlos, California, or San Carlos Lease, as an extension to the term of the San Carlos Lease for a period of five years, or the Lease Extension Period.

Our operations have been funded primarily by payments received from our collaborators, and net proceeds from equity sales, debt, sale of shares of Vaxcyte common stock, and a royalty monetization.

As of December 31, 2024, we had cash, cash equivalents and marketable securities of $316.9 million, and an accumulated deficit of $786.9 million.

Vaxcyte Equity Ownership

During the year ended December 31, 2024, we sold the remaining 667,780 shares of Vaxcyte common stock for net proceeds of $74.0 million.

As of December 31, 2024, we do not hold any shares of Vaxcyte common stock.

Vaxcyte Agreement

In May 2024, Vaxcyte paid us $25.0 million as the second of two installment payments for the Option exercise price under the Vaxcyte Agreement.

Underwritten Offering

In April 2024, we closed an underwritten offering with BofA Securities, Inc., pursuant to which we issued and sold 14,478,764 shares of our common stock at an offering price of $5.18 per share.

The gross proceeds from these sales were approximately $75.0 million, before deducting fees and offering expenses.

Ipsen Agreements

In March 2024, we and Ipsen Pharma SAS (“Ipsen”) entered into an Exclusive License Agreement (the “Ipsen License Agreement”) pursuant to which we licensed to Ipsen, on an exclusive basis, the right to research, develop, manufacture and commercialize STRO-003.

In consideration for the rights and licenses granted by us to Ipsen in the Ipsen License Agreement, Ipsen (i) paid us an upfront license fee in the amount of $50.0 million in April 2024 and (ii) Ipsen Biopharmaceuticals, Inc.

(USA) (“Ipsen USA”) purchased 4,827,373 shares of our common stock for $25.0 million, at a price of approximately $5.18 per share, in accordance with the terms set forth in a certain investment agreement by and between us and the Ipsen USA dated March 29, 2024 (the “Ipsen Investment Agreement”, and, together with the Ipsen License Agreement, the “Ipsen Agreements”).

We are eligible to receive up to an additional $447.0 million in developmental and regulatory milestones, assuming multiple indications, and up to $360.0 million in sales milestones, as well as tiered royalty payments ranging from low double-digit to mid-teen digit percentages of annual net sales of STRO-003, subject to certain adjustments specified in the Ipsen License Agreement.

The royalty payment obligations under the Ipsen License Agreement expire on a country-by-country basis no earlier than ten years following the first commercial sale of STRO-003 in the applicable country.

Ipsen may terminate the Ipsen License Agreement for convenience with sixty calendar days prior written notice or for certain other specified reasons.

We may terminate the Ipsen License Agreement if Ipsen or any of its Affiliates challenge the validity of any patents controlled by us that are licensed under the agreement.

Both Ipsen and we may terminate the Ipsen License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the Ipsen License Agreement or (ii) the other party’s bankruptcy event.

In June 2021, we entered into a third amendment, (the "Third Amendment") to our manufacturing facility lease, dated May 18, 2011, as amended, by and between Alemany Plaza LLC, located at San Carlos, California, or San Carlos Lease, as an extension to the term of the San Carlos Lease for a period of five years, (the "Lease Extension Period").

Pursuant to the Third Amendment, the San Carlos Lease will expire on July 31, 2026, and it includes an option to renew the San Carlos Lease for an additional five years.

The aggregate estimated base rent payments due over the Lease Extension Period is approximately $4.2 million, subject to certain terms contained in the San Carlos Lease.

In June 2021, we entered into a first amendment, or First Amendment, to our manufacturing facility lease, dated March 4, 2015, as amended, by and between 870 Industrial Road LLC, located at San Carlos, California, or the Industrial Lease, as an extension to the term of the Industrial Lease for a period of five years, or the Industrial Lease Extension Period.

In June 2021, we entered into a first amendment, or First Amendment, to our manufacturing facility lease, dated March 4, 2015, as amended, by and between 870 Industrial Road LLC, located at San Carlos, California, (the "Industrial Lease"), as an extension to the term of the Industrial Lease for a period of five years, (the "Industrial Lease Extension Period").

Pursuant to the first Amendment, the Industrial Lease will expire on June 30, 2026, and it includes an option to renew the Industrial Lease for an additional five years.

The aggregate estimated base rent payments due over the Industrial Lease Extension Period is approximately $4.3 million, subject to certain terms contained in the Industrial Lease.

In September 2020, we entered into a sublease agreement, or the Sublease with Five Prime Therapeutics, Inc., or the Sublessor, for approximately 115,466 square feet, in a building located in South San Francisco, California, or the Premises.

In September 2020, we entered into a sublease agreement, (the "Sublease with Five Prime Therapeutics, Inc."), or (the "Sublessor"), for approximately 115,466 square feet, in a building located in South San Francisco, California, or (the "Premises").

We use the Premises as our corporate headquarters and to conduct (or expand) research and development activities.

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We were provided early access to the Initial Premises in the fourth quarter of 2020 to conduct certain planning and tenant improvement work.

The Sublease is subordinate to the lease agreement, effective December 12, 2016, between the Sublessor and HCP Oyster Point III LLC, or the Landlord.

We commenced using the remaining 29,711 square feet of the Premises, or the Expansion Premises, on July 1, 2023 under the sublease agreement.

The Sublease is subordinate to the lease agreement, effective December 12, 2016, between the Sublessor and HCP Oyster Point III LLC (the "Landlord").

We commenced using the remaining 29,711 square feet of the Premises, (the "Expansion Premises"), on July 1, 2023 under the sublease agreement.

The Sublease for both the Initial Premises and Expansion Premises will expire on December 31, 2027.

With a commencement date on the Initial Premises of July 1, 2021, and Expansion Premises of July 1, 2023, the aggregate estimated base rent payments due over the term of the Sublease are approximately $39.1 million, including the approximately $5.2 million in potential financial benefit to us of base rent abatement to be provided by the Sublessor, subject to certain terms contained in the Sublease.

The Sublease contains customary provisions requiring us to pay our pro rata share of utilities and a portion of the operating expenses and certain taxes, assessments and fees of the Premises and provisions allowing the Sublessor to terminate the Sublease upon the termination of the lease with the Landlord or if we fail to remedy a breach of certain of its obligations within specified time periods.

Additionally, we posted a security deposit of $0.9 million, which is reflected as restricted cash in non-current assets on our Balance Sheets as of December 31, 2024 and 2023.

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Adequate additional funding may not be available to us on acceptable terms, or at all.

Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay, reduce the scope of or suspend one or more of our pre-clinical and clinical studies, research and development programs or commercialization efforts, and may necessitate us to delay, reduce or terminate planned activities in order to reduce costs.

Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay, reduce the scope of or suspend one or more of our preclinical and clinical studies, research and development programs or commercialization efforts, and may necessitate us to delay, reduce or terminate planned activities in order to reduce costs.

unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

To the extent we raise additional capital through new collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

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If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

In March 2025, we approved a restructuring plan with an associated reduction in workforce as a result of a review of current strategic priorities, resource allocation, and cost reduction intended to reduce operating costs, streamline operations and extend our cash runway.

We intend to decommission or otherwise exit our manufacturing facility in San Carlos by the end of 2025 and rely on an external manufacturing strategy where all elements of our product candidates and platform reagents are manufactured by qualified third-party CMOs.

The following table summarizes our cash flows during the periods indicated:

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(in thousands)

Cash (used in) provided by operating activities

Cash used in investing activities

Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by financing activities

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Cash used in operating activities for the year ended December 31, 2024 was $191.5 million.

Our net loss of $227.5 million included non-cash amounts of $32.1 million for the realized gain on the sale of Vaxcyte common stock, $31.1 million for non-cash interest expense on our deferred royalty obligation, $24.7 million for stock-based compensation, $9.7 million for the accretion of discount on marketable securities, $7.2 million for depreciation and amortization, and $5.1 million for non-cash lease expense.

Cash used in operating activities also reflected a net change in operating assets and liabilities of $8.9 million, due to a decrease of $27.5 million in accounts receivable primarily from receiving $25.0 million from Vaxcyte as the second of two installment payments for the option exercise price under the Vaxcyte Agreement, and an increase of $7.8 million in deferred revenue primarily due to the upfront payment from Ipsen, partially offset by revenue recognized under the Astellas and Tasly Agreements, which were partially offset by an increase of $11.6 million in prepaid expenses and other assets primarily due to increase in CMO-related activities, a decrease of $6.6 million in accounts payable, accrued expenses and other liabilities due to timing of payments, a decrease of $6.4 million in our operating lease liability, and a decrease of $1.8 million in accrued compensation expense.

Cash used in operating activities for the year ended December 31, 2023 was $111.6 million.

Our net loss of $106.8 million included non-cash charges of $24.9 million for stock-based compensation, $12.6 million for non-cash interest expense on our deferred royalty obligation, $9.9 million for the unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $9.1 million for the accretion of discount on our marketable securities, $6.8 million for depreciation and amortization, $3.6 million for noncash lease expenses and $0.6 million in other non-cash charges.

Cash used in operating activities also reflected a net change in operating assets and liabilities of $34.4 million, due to a decrease of $32.6 million in our deferred revenue from revenue recognized under our collaboration agreements, an increase of $28.9 million in accounts receivable primarily due to a receivable from Vaxcyte under the Vaxcyte Agreement, and a decrease of $4.6 million in our operating lease liability, which were partially offset by an increase of $30.1 million in accounts payable, accrued expenses and other liabilities mainly due to the tax liability and timing of payments, an increase of $1.5 million in accrued compensation due to increased headcount, and a decrease of $0.1 million in prepaid expenses and other assets.

Cash provided by operating activities for the year ended December 31, 2022 was $3.5 million.

Our net loss of $119.2 million included non-cash charges of $26.3 million for stock-based compensation, $12.1 million for the unrealized gain on equity securities as a result of the remeasurement of the estimated fair value of our investment in Vaxcyte common stock, $5.7 million for depreciation and amortization, $4.1 million for the realized gain on equity securities, $2.6 million for noncash lease expenses, $0.4 million for the accretion of discount on our marketable securities and $0.3 million in other non-cash charges.

Cash provided by operating activities also reflected a net change in operating assets and liabilities of $104.4 million, due to an increase of $93.6 million in our deferred revenue balance primarily due to the upfront payment from Astellas, a decrease of $5.3 million in accounts receivable from our collaborators, an increase of $5.3 million in accounts payable, accrued expenses and other liabilities due to timing of payments, an increase of $1.7 million in accrued compensation due to increased headcount, and an increase of $1.9 million in our operating lease liability, which were partially offset by an increase of $3.5 million in prepaid expenses and other assets.

payments, an increase of $1.5 million in accrued compensation due to increased headcount, and a decrease of $0.1 million in prepaid expenses and other assets.

Cash Flows from Investing Activities

Cash provided by investing activities of $218.5 million for the year ended December 31, 2024 was primarily related to maturities and sales of marketable securities of $609.1 million, and net proceeds from the sale of Vaxcyte common stock of $74.0 million, partially offset by purchases of marketable securities of $461.5 million, and purchases of property and equipment of $3.1 million, principally for laboratory equipment.

Cash used in investing activities of $3.9 million for the year ended December 31, 2023 was primarily related to purchases of marketable securities of $460.3 million and purchases of property and equipment of $4.3 million, principally for laboratory equipment, partially offset by maturities and sales of marketable securities of $460.7 million.

Cash used in investing activities of $35.0 million for the year ended December 31, 2022 was primarily related to purchases of marketable securities of $216.7 million and purchases of property and equipment of $7.9 million, principally for laboratory equipment, partially offset by maturities and sales of marketable securities of $160.8 million and proceeds from sale of Vaxcyte equity securities of $28.7 million.

Cash Flows from Financing Activities

Cash provided by financing activities of $94.1 million for the year ended December 31, 2024 was primarily related to $71.5 million of net proceeds from the underwritten common stock offering, $25.0 million of proceeds from Ipsen USA upon the purchase of our common stock under the Ipsen Investment Agreement, $1.8 million of net proceeds received from participants in our employee equity plans, and $0.3 million of proceeds received from the exercise of common stock options, partially offset by debt repayment of $4.1 million and a $0.5 million tax payment related to the net shares settlement of vested restricted stock units.

Cash provided by financing activities of $137.5 million for the year ended December 31, 2023 was primarily related to $136.2 million of net proceeds from the sale of future royalties, $12.0 million of net proceeds from our ATM Facility sales of common stock, $2.0 million of net proceeds received from participants in our employee equity plans and $0.3 million of proceeds received from the exercise of common stock options, partially offset by debt repayment of $12.5 million and a $0.5 million tax payment related to the net share settlement of certain vested restricted stock units.

Cash provided by financing activities of $48.3 million for the year ended December 31, 2022 was primarily related to $56.3 million of net proceeds from our ATM Facility sales of common stock, $1.6 million of net proceeds received from participants in our employee equity plans and $0.3 million of proceeds received from the exercise of common stock options, partially offset by debt repayment of $9.4 million and a $0.5 million tax payment related to the net share settlement of certain vested restricted stock units.

Contractual Obligations and Other Commitments

In addition to the contractual obligations and commitments as noted above and elsewhere in this Annual Report with regards to the leases and term loans, we enter into agreements in the normal course of business, including with contract research organizations for clinical trials, contract manufacturing organizations for certain manufacturing services, and vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

In addition to the contractual obligations and commitments as noted above and elsewhere in this Annual Report with regards to the leases, we enter into agreements in the normal course of business, including with contract research organizations for clinical trials, contract manufacturing organizations for certain manufacturing services, and vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

Critical Accounting Policies and Estimates

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We do not have any products approved for commercial sale and have not generated any revenue from commercial product sales.

Our total revenue to date has been generated principally from our collaboration and license agreements with BMS, Merck, Astellas, EMD Serono, Vaxcyte, BioNova, Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to our collaborators.

Our total revenue to date has been generated principally from our collaboration and

license agreements with BMS, Merck, Astellas, Vaxcyte, Ipsen, EMD Serono, BioNova, and Tasly, and to a lesser extent, from manufacturing, supply and services and materials we provide to our collaborators.

When we enter into collaboration agreements, we assess whether the arrangements fall within the scope of ASC 808, Collaborative Arrangements (ASC 808) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards.

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(i) identify the contract(s) with a customer;

identify the performance obligations in the contract;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

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At the end of each subsequent reporting period, we re-evaluate the probability of achievement of each such milestone and any related constraint and, if necessary, adjust our estimate of the overall transaction price.

Since milestone and contingent payments may become payable to us upon the initiation of a clinical study or filing for or receipt of regulatory approval, we review the relevant facts and circumstances to determine when we should update the transaction price, which may occur

before the triggering event.

When we update the transaction price for milestone and contingent payments, we allocate the changes in the total transaction price to each performance obligation in the agreement on the same basis as the initial allocation.

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To the extent our future estimates of earned royalties are greater or less than previous estimates or the estimated timing of such payments is materially different than our previous estimates, we will prospectively recognize related non-cash interest expense.

As of December 31, 2023, we had federal net operating loss, or NOL, carryforwards of $140.2 million and federal general business credits from research and development expenses totaling $20.0 million, as well as state NOL carryforwards of $100.5 million and state research and development credits of $26.0 million.

If not utilized, the federal NOL carryforwards will expire at various dates beginning in 2027, and the federal credits will expire at various dates beginning in 2032.

As of December 31, 2024, we had federal net operating loss, or NOL, carryforwards of $149.8 million and federal general business credits from research and development expenses totaling $30.5 million, as well as state NOL carryforwards of $108.0 million and state research and development credits of $32.1 million.If not utilized, the federal NOL carryforwards will expire at various dates beginning in 2027, and the federal credits will expire at various dates beginning in 2032.

The state NOL carryforwards will expire at various dates beginning in 2030, if not utilized.

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Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate.

benefit is still appropriate.

The recognition and measurement of tax benefits requires significant judgment.

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We had cash, cash equivalents and marketable securities of $316.9 million and $333.7 million as of December 31, 2024 and 2023, respectively, which consisted of money market funds, commercial paper, corporate debt securities, asset-backed securities, U.S.

government securities, U.S.

agency securities and supranational debt securities.

government securities, and U.S.

agency securities.

Such interest earning instruments carry a degree of interest rate risk;

however, historical fluctuations in interest income have not been significant.

Additionally, we had equity securities of $41.9 million as of December 31, 2023, consisting solely of common stock of Vaxcyte.

Equity risk is the risk we will incur economic losses due to adverse changes in equity prices.

Our potential exposure to changes in equity prices results from our Vaxcyte common stock holdings.

Therefore, we are subject to market risk if such holdings materially decrease in value.

A hypothetical 10 percent decrease in the market price for our equity investments as of December 31, 2023 would decrease the fair value by $4.2 million.

We intend to manage equity price risk going forward by continuously evaluating market conditions.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

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We do not believe that our cash, cash equivalents or marketable securities have significant risk of default or illiquidity.

As of December 31, 2023 and 2022, we had $4.1 million and $16.3 million, respectively, in debt outstanding, net of debt discount and accretion of final payment.

Until June 30, 2023, our existing debt with Oxford and SVB bore interest at a floating per annum rate equal to the greater of (i) 8.07% or (ii) the sum of (a) the greater of (1) the thirty (30) day U.S.

LIBOR rate reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or (2) 1.67%, plus (b) 6.40%.

In June 2023, we entered into an amendment to the LSA with Oxford and SVB (the “5th LSA Amendment”).

There was an immaterial impact of the 5th LSA Amendment on our financial statements.

This debt matured on March 1, 2024 and was interest-only through March 1, 2022.

Such interest-bearing debt carried a limited degree of interest rate risk.

If overall interest rates had increased or decreased by 100 basis points during the periods presented our interest expense would not have been materially affected.

Financial Statemen ts and Supplementary Data

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(the Company) as of December 31, 2024 and 2023, the related statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Description of the Matter

As discussed in Note 2 and Note 10 to the financial statements, on June 21, 2023, the Company closed a purchase and sale agreement (the “Agreement”) with Blackstone Life Sciences (“Blackstone”), pursuant to which the Company sold to Blackstone its 4% royalty in potential net sales of Vaxcyte Inc.’s products and received an upfront payment of $140 million.

As discussed in Note 9 to the financial statements, on June 21, 2023, the Company closed a purchase and sale agreement (the “Agreement”) with Blackstone Life Sciences (“Blackstone”), pursuant to which the Company sold to Blackstone its 4% royalty in potential net sales of Vaxcyte Inc.’s products and received an upfront payment of $140 million.

The Company concluded the Agreement represented a sale of future royalties and accounted for the transaction under Accounting Standards Codification (ASC) 470 as debt.

The Company estimated the amount of future royalty payments and expected interest expense using the effective interest rate method over the life of the agreement.

value of the liability related to the sale of future royalties at December 31, 2023 was $149.1 million and the interest expense for the year ended December 31, 2023 was $12.6 million.

The Company estimated the amount of future royalty payments and expected interest expense using the effective interest rate method

over the life of the agreement.

The carrying value of the liability related to the sale of future royalties at December 31, 2024 was $180.8 million and the interest expense for the year ended December 31, 2024 was $31.1 million.

The auditing of the Agreement was complex due to the significant judgment and estimation used by management related to the sale of future royalties and due to the nature and extent of audit effort required to address these matters.

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How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the review of estimation used related to the sale of future royalties and its calculation.

To test the carrying value of the liability related to the sale of future royalties and the amount of interest expense recognized, our audit procedures included, among others, assessing the methodology used, evaluating the reasonableness of the significant estimates discussed above, and testing the completeness and accuracy of the underlying data used by the Company.

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We also recalculated the current year interest expense using the effective interest method based on the Company’s estimate of future royalties to be paid.

We involved professionals outside of the core audit team to assist in the assessment of the estimation methodology and significant assumptions used in determining the future sales for which royalties will be paid.

/s/ Ernst & Young LLP

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Operating lease liability-non-current

Debt-non-current

Deferred royalty obligation related to the sale of future royalties

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as of December 31, 2024 and 2023;

0 shares issued and

no shares issued and

outstanding as of December 31, 2024 and 2023

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Additional paid-in-capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

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Interest income

Unrealized gain (loss) on equity securities

Unrealized gain on equity securities

Non-cash interest expense related to the

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Balances at December 31, 2021

Exercise of common stock options and common stock warrants

Return and retirement of common stock

Exercise of common stock options

Issuance of common stock under Employee Stock

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Stock-based compensation expense

Issuance of common stock in connection with

At-The-Market sale, net of issuance costs of $ 2,026

Net unrealized loss on available-for-sale securities

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At-The-Market sale, net of issuance costs of $ 459

Net unrealized loss on available-for-sale securities

Net unrealized income on available-for-sale securities

Balances at December 31, 2023

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Stock-based compensation expense

Issuance of common stock in connection with

At-The-Market sale, net of issuance costs of $ 459

Issuance of common stock in connection with the

underwritten offering, net of issuance costs of $ 3,474

Issuance of common stock to Ipsen Biopharmaceuticals, Inc.

(USA) under the Ipsen Investment Agreement

Net unrealized income on available-for-sale securities

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Operating activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

(Accretion of discount) amortization of premium on marketable securities

Accretion of discount on marketable securities

Stock-based compensation

Non-cash lease expenses

Realized gain on equity securities

Unrealized (gain) loss on equity securities

Realized gain on sale of equity securities

Unrealized gain on equity securities

Non-cash interest expense on deferred royalty obligation

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Change in operating lease liability

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Investing activities

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Proceeds from exercise of options for Vaxcyte shares

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Financing activities

Proceeds from sales of common stock, net of issuance costs

Proceeds from sales of common stock to Ipsen Biopharmaceuticals, Inc.

Payments of debt

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Taxes paid related to net share settlement of restricted stock units

Return and retirement of common stock

Proceeds from employee stock purchase plan

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

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Purchase of property and equipment included in accounts payable

Remeasurement of operating lease right-of-use assets for lease modification

Financing component associated with program fees

Value of 167,780 shares of Vaxcyte common stock received under the Vaxcyte

Financing component associated with program fees

Premium on common stock issued to Ipsen Biopharma, Inc.

See accompanying notes to financial statements.

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Sutro Biopharma, Inc.

(the “Company”), is a clinical-stage oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs.

(the “Company”), is an oncology company developing site-specific and novel-format antibody drug conjugates, or ADCs.

The Company was incorporated on April 21, 2003 and is headquartered in South San Francisco , California .

The Company operates in one business segment, the development of biopharmaceutical products.

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Chief Executive Officer, the Company’s chief operating decision maker, in deciding how to allocate resources and assessing performance.

The Company operates and manages its business as one operating segment.

The Company’s Chief Executive Officer reviews financial information on an aggregate basis for the purposes of allocating and evaluating financial performance.

All of the Company’s long-lived assets are maintained in the United States.

At-The-Market Sales

During the year ended December 31, 2023, the Company sold an aggregate of 1,857,410 shares of its common stock through its At-the-Market Facility (“ATM Facility”) pursuant to its Open Market Sales Agreement SM dated April 2, 2021 with Jefferies LLC (“Jefferies”), as sales agent (the “Sales Agreement”).

During the year ended December 31, 2023, the gross proceeds from these sales were approximately $ 12.4 million, before deducting fees of approximately $ 0.4 million, resulting in net proceeds of approximately $ 12.0 million, to the Company.

Underwritten Offering

In April 2024, the Company closed an underwritten offering with BofA Securities, Inc., pursuant to which the Company issued and sold 14,478,764 shares of its common stock at an offering price of $ 5.18 per share.

The gross proceeds from these sales were approximately $ 75.0 million, before deducting fees and offering expenses.

The Company has incurred significant losses and has negative cash flows from operations.

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Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development and other operational activities.

As of December 31, 2023, the Company had unrestricted cash, cash equivalents and marketable securities of $ 333.7 million and equity securities of $ 41.9 million, consisting solely of common stock of Vaxcyte, which are available to fund future operations.

As of December 31, 2024, the Company had unrestricted cash, cash equivalents and marketable securities of $ 316.9 million which are available to fund future operations.

The Company will need to raise additional capital to support the completion of its research and development activities and to support its operations.

The Company believes that its unrestricted cash, cash equivalents, marketable securities and investments in equity securities as of December 31, 2023 will enable the Company to maintain its operations for a period of at least 12 months following the filing date of these financial statements.

The Company believes that its unrestricted cash, cash equivalents, and marketable securities as of December 31, 2024 will enable the Company to maintain its operations for a period of at least 12 months following the filing date of these financial statements.

Basis of Presentation and Summary of Significant Accounting Policies

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Actual results could differ from such estimates or assumptions.

Recent Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280):

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ASU 2023-07 is effective for the Company in the Company's annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal 2025 on a retrospective basis.

The Company adopted the new standard effective beginning fiscal year 2024.

The Company presented the effects of the adoption of ASU 2023-07 in Note 10.

Segment Reporting.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures.

The amendments of this update are related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2023-07 on the Company's financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which enhances the disclosures required for income taxes in the Company's annual financial statements.

ASU 2023-09 is effective for the Company in the Company's annual reporting for fiscal 2025 on a prospective basis.

Early adoption and retrospective reporting are permitted.

The Company is currently evaluating the impact of ASU 2023-09 on the Company's financial statements.

The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which is intended to enhance transparency into the nature and function of expenses, primarily through additional disclosures on certain cost and expenses.

ASU 2024-03 should be applied on a prospective basis, and retrospective application is permitted.

ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on its disclosures.

Cash, Cash Equivalents, Marketable Securities and Restricted Cash

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When appropriate, the Company provides for an allowance for credit risks by reserving for specifically identified doubtful accounts, although historically the Company has not experienced credit losses from its accounts receivable .

Investments in Equity Securities

Investment in Equity Securities

Vaxcyte common stock held by the Company is measured at fair value at each reporting period based on the closing price of Vaxcyte’s common stock on the last trading day of each reporting period, with any realized or unrealized gains and losses recorded in the Company’s Statements of Operations.

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As of December 31, 2024 and 2023, management believes that no revision to the remaining useful lives or write down of the remaining long-lived assets is required.

The Company adopted ASU 2016-02 (Topic 842), Leases (Accounting Standards Codification, or “ASC”, 842) on July 1, 2021 , effective as of January 1, 2021.

The Company determines if an arrangement is or contains a lease at contract inception by assessing whether the arrangement contains an identified asset and whether the lessee has the right to control such asset.

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In June 2023, the Company entered into a purchase and sale agreement (the “Purchase Agreement”) with Blackstone, pursuant to which the Company sold to Blackstone its 4 % royalty, or revenue interest, in the potential future net sales of Vaxcyte products, including Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products such as VAX-24 and its second-generation PCV product, VAX-31, (the “Purchased Interest”) under that certain Amended and Restated SutroVax Agreement, dated October 12, 2015, by and between the Company and Vaxcyte, as amended (the “2015 License Agreement”).

In June 2023, Blackstone made an upfront payment of

$ 140.0 million to the Company and will also pay up to an additional $ 250.0 million upon the achievement of various return thresholds as set forth in the Purchase Agreement.

The net proceeds from the upfront payment received by the Company from the sale of future royalties from Vaxcyte are recorded as deferred royalty obligation related to the sale of future royalties on the Company's Balance Sheets.

In June 2023, Blackstone made an upfront payment of $ 140.0 million to the Company and will also pay up to an additional $ 250.0 million upon the achievement of various return thresholds as set forth in the Purchase Agreement.

The net proceeds from the upfront payment received by the Company from the sale of future royalties from Vaxcyte are recorded as deferred royalty

obligation related to the sale of future royalties on the Company's Balance Sheets.

As royalties are earned and remitted pursuant to the 2015 License Agreement, the balance of the deferred royalty obligation will be amortized over the estimated life of the royalty term arrangement, and non-cash interest expense related to the sale of future royalties is recorded using the effective interest method.

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3 to the 2015 License Agreement, the revenue interest in the 4 % royalty on potential future net sales of Vaxcyte products other than Vaxcyte’s PCV products reverted to the Company.

Issuance fees and costs directly related to the Purchase Agreement were offset against the initial carrying value of the deferred royalty obligation and were amortized using the effective interest method over the estimated life of the royalty term arrangement.

Issuance fees and costs directly related to the Purchase Agreement were offset against the initial carrying value of the deferred royalty obligation and are being amortized using the effective interest method over the estimated life of the royalty term arrangement.

Revenue Recognition

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The carrying amounts of accounts receivable, prepaid expenses, accounts payable, accrued liabilities and accrued compensation and benefits approximate fair value due to the short-term nature of these items.

The fair value of the Company’s outstanding loan (See Note 7) is estimated using the net present value of the payments, discounted at an interest rate that is consistent with market interest rate, which is a Level 2 input.

The estimated fair value of the Company’s outstanding loan approximates the carrying amount, as the loan bears a floating rate that approximates the market interest rate.

The carrying value of the deferred royalty obligation related to the sale of future royalties under the 2015 License Agreement with Vaxcyte approximates its fair value as of December 31, 2024, and is based on the Company's current estimates of future royalties expected to be earned over the estimated life of the royalty term arrangement.

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Corporate debt securities

Equity securities

Asset-backed securities

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agency securities

Supranational debt securities

Where applicable, the Company uses quoted market prices in active markets for identical assets to determine fair value.

This pricing methodology applies to Level 1 investments, which are comprised of money market funds, U.S.

This pricing methodology applies to Level 1 investments, which are comprised of money market funds, and U.S.

government securities and the shares of Vaxcyte common stock held by the Company.

If quoted prices in active markets for identical assets are not available, then the Company uses quoted prices for similar assets or inputs other than quoted prices that are observable, either directly or indirectly.

These investments are included in Level 2 and consist of commercial paper, corporate debt securities, asset-backed securities, U.S.

agency securities and supranational debt securities.

These investments are included in Level 2 and consist of commercial paper, corporate debt securities, asset-backed securities, and U.S.

agency securities.

These assets are valued using market prices when available, adjusting for accretion of the purchase price to face value at maturity.

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In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy.

As of December 31, 2023, the deferred royalty obligation

related to the sale of future Vaxcyte royalties was classified as Level 3 within the valuation hierarchy.

Refer to Note 10 below for information relating to the Purchase Agreement between the Company and Blackstone, pursuant to which the Company sold to Blackstone its 4 % royalty, or revenue interest, in potential future net sales of Vaxcyte products, including VAX-24 and VAX-31.

As of December 31, 2022, the Company did not hold any securities that were classified as Level 3 within the valuation hierarchy.

As of December 31, 2024 and 2023, the deferred royalty obligation related to the sale of future Vaxcyte royalties was classified as Level 3 within the valuation hierarchy.

Refer to Note 9 below for inform ation relating to the Purchase Agreement between the Company and Blackstone, pursuant to which the Company sold to Blackstone its 4 % royalty, or revenue interest, in potential future net sales of Vaxcyte’s pneumococcal conjugate vaccine, or PCV, products, including VAX-24 and VAX-31 .

Investments in Equity Securities

As of December 31, 2023 and 2022 , the Company held 667,780 shares of Vaxcyte common stock with an estimated fair value of $ 41.9 million and $ 32.0 million, respectively.

The Company recognized an unrealized gain (loss) of $ 9.9 million, $ 12.1 million and $( 4.5 ) million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company sold zero and 1,058,434 shares of Vaxcyte common stock at their fair market value during the years ended December 31, 2023 and 2022, respectively.

The Company recognized a gain of $ 4.1 million on equity securities during the year ended December 31, 2022 which is recorded under interest and other income (expense), net, in the Statements of Operations.

During the year ended December 31, 2024, the Company sold 667,780 shares of Vaxcyte common stock it held at their fair market value of approximately $ 74.0 million, net of transaction cost and recognized a gain of $ 32.1 million which is recorded under interest and other income (expense), net, in the Statements of Operations.

No shares of Vaxcyte common stock were sold during the year ended December 31, 2023.

The Company recognized an unrealized gain of $ 9.9 million and $ 12.1 million on equity securities during the years ended December 31, 2023, and 2022, respectively.

As of December 31, 2024, the Company did no t hold any shares of Vaxcyte common stock.

As of December 31, 2023, the Company held 667,780 shares of Vaxcyte common stock with an estimated fair value of $ 41.9 million.

Cash Equivalents and Marketable Securities

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agency securities

Supranational debt securities

amounts classified as cash equivalents

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No marketable securities had maturities of more than one year as of December 31, 2024 and 2023.

There were $ 110.9 million and $ 139.5 million of investments in an unrealized loss position of $ 33,000 and $ 0.6 million as of December 31, 2023 and 2022, respectively .

During the years ended December 31, 2023, 2022 and 2021, the Company did no t record any other-than-temporary impairment charges on its available-for-sale

There were $ 69.9 million and $ 110.9 million of investments in an unrealized loss position of $ 9,000 and $ 33,000 as of December 31, 2024 and 2023, respectively .

During the years ended December 31, 2024, 2023 and 2022, the Company did no t record any other-than-temporary impairment charges on its available-for-sale securities.

Based on the Company’s procedures under the expected credit loss model, including an assessment of unrealized gains and losses on the portfolio after December 31, 2024, the Company concluded that the unrealized losses for its marketable securities were not attributable to credit and therefore an allowance for credit losses for these securities has not been recorded as of December 31, 2024.

Also, based on the scheduled maturities of the investments, the Company was more likely than not to hold these investments for a period of time sufficient for a recovery of the Company’s cost basis.

Also, based on the scheduled

maturities of the investments, the Company was more likely than not to hold these investments for a period of time sufficient for a recovery of the Company’s cost basis.

The Company recognized no material gains or losses on its cash equivalents and current marketable securities as of December 31, 2024 and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income (loss) for the year then ended.

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(in thousands)

Bristol-Myers Squibb Company ("BMS")

Merck Sharp & Dohme Corporation ("Merck")

Merck KGaA, Darmstadt, Germany (operating in the United

States and Canada under the name "EMD Serono")

Astellas Pharma Inc.

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Vaxcyte, Inc.

Ipsen Pharma SAS (“Ipsen”)

Merck Sharp & Dohme Corporation (“Merck”)

Bristol Myers Squibb Company (“BMS”)

Merck KGaA, Darmstadt, Germany (operating in the United

States and Canada under the name “EMD Serono”)

BioNova Pharmaceuticals, Ltd.

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The Company expects to recognize approximately $ 69.8 million of the deferred revenue over the next twelve months .

Collaboration with BMS

BMS Agreement and 2018 BMS Master Services Agreement

In September 2014, the Company signed a Collaboration and License Agreement (the “BMS Agreement”) with BMS to discover and develop bispecific antibodies and/or antibody-drug conjugates (“ADCs”), focused primarily on the field of immuno-oncology, using the Company’s proprietary integrated cell-free protein synthesis platform, XpressCF ® .

In August 2017, the Company entered into an amended and restated collaboration and license agreement with BMS to refocus the collaboration on four programs that were advancing through preclinical development, including an ADC program targeting B cell maturation antigen (“BCMA ADC” or “CC-99712”).

In May 2019, the U.S.

Food and Drug Administration cleared the investigational new drug (“IND”) application for the BCMA ADC, which was discovered and manufactured by the Company and is the first collaboration program IND.

In March 2018, the Company entered into a Master Development and Clinical Manufacturing Services Agreement (the “2018 BMS Master Services Agreement”) with BMS, wherein BMS requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply.

In June 2023, the Company received a notice of termination from BMS indicating that it was stopping development of CC-99712 due to a portfolio prioritization decision.

The termination of the BMS Agreement was effective as of October 7, 2023 (the "Termination Date").

Following the Termination Date, the Company has sole worldwide rights to CC-99712.

As of December 31, 2023 and 2022, there was no deferred revenue under the BMS Agreement.

As of December 31, 2023 and 2022, there was zero and $ 3.1 million, respectively, of deferred revenue under the 2018 BMS Master Services Agreement.

Revenues under the BMS Agreement and the 2018 BMS Master Services Agreement were as follows:

Year ended December 31,

(in thousands)

Research and development services

Materials supply

Total revenue

Collaboration with Merck

2018 Merck Agreement

In July 2018, the Company entered into an agreement (the “2018 Merck Agreement”) with Me rck for access to the Company’s technology and the identification and preclinical research and development of two target programs, with an option for Merck to engage the Company to continue these activities for a third program, upon the payment of an additional amount, focusing on cytokine derivatives for cancer and autoi mmune disorders, with an initial transaction price of $ 60.0 million.

The option to expand activities to a third program expired in January 2021.

In March 2020, Merck exercised its option to extend the research term of the collaboration’s first cytokine-derivative program by one year , which, pursuant to the terms of the 2018 Merck Agreement, triggered a payment of $ 5.0 million.

In April 2021, the Company earned a $ 15.0 million contingent payment for the initiation by Merck of the first IND-enabling toxicology study under the first cytokine-derivative program in the collaboration.

In September 2021, the Company entered into an amendment to the 2018 Merck Agreement (the “2021 Amendment”) to extend the research term for the first program in the 2018 Merck Agreement.

Under the terms of the 2021 Amendment, the Company received a payment of $ 2.5 million with an additional $ 7.5 million to be received upon the achievement of certain developmental milestones by Merck on a second molecule under the first cytokine-derivative program of the collaboration.

Merck decided not to pursue further development of a second molecule under the first cytokine-derivative program of the collaboration and, therefore, allowed the option to extend the period for nomination of additional clinical candidates under the 2021 Amendment to expire in June 2022.

In December 2021, Merck did not extend the research term for the second research program of the collaboration, which research program reverted to the Company.

The first research program of the collaboration is focused on MK-1484, a d istinct cytokine derivative molecule for the treatment of cancer.

The Company is eligible to receive aggregate contingent payments of up to approximately $ 500 million for the target program selected by Merck, assuming the develo pment and sale of the therapeutic candidate and all possible indications identified under the collaboration.

If one or more products from the target program is developed for non-oncology or a single indication, the Company will be eligible for reduced aggregate contingent payments.

In addition, the Company is eligible to receive tiered royalties ranging from mid-single digit to low teen percentages on the worldwide sales of any commercial products that may result from the collaboration .

In July 2022, the first patient was dosed with MK-1484 in a Phase 1 study.

As a result of this achievement, the Company earned and received a $ 10.0 million contingent payment from Merck during the year ended December 31, 2022.

As of December 31, 2023 and 2022, there was no deferred revenue under the 2018 Merck Agreement and 2021 Amendment.

2020 Merck Master Services Agreement

In August 2020, the Company entered into a Pre-Clinical and Clinical Supply Agreement (the “2020 Merck Master Services Agreement”) with Merck, wherein Merck requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply, upon completion of the research programs under the 2018 Merck Agreement.

As of both December 31, 2023 and 2022, there was no deferred revenue under the 2020 Merck Master Services Agreement.

Revenues under the 2018 Merck Agreement and the 2020 Merck Master Services Agreement were as follows:

Year ended December 31,

(in thousands)

Ongoing performance related to

unsatisfied performance obligations

Contingent payment

Research and development services

Financing component on unearned revenue

Materials supply

Total revenue

Collaboration with EMD Serono

MDA Agreement and 2019 EMD Serono Supply Agreement

The Company signed a Collaboration Agreement and a License Agreement with EMD Serono in May 2014 and September 2014, respectively, which were entered into in contemplation of each other and therefore treated as a single agreement for accounting purposes.

The Collaboration Agreement was subsumed into the License Agreement (the “MDA Agreement”), which agreement is to develop ADCs for multiple cancer targets.

In April 2019, the Company entered into an ADC Product Preclinical and Phase I Clinical Supply Agreement (the “2019 EMD Serono Supply Agreement”) with EMD Serono, wherein EMD Serono requested the Company to provide development, manufacturing and supply chain management services, including clinical product supply.

In March 2023, EMD Serono disclosed its decision to close the Phase 1a trial of M1231 in patients with solid tumors and not initiate a previously planned expansion study.

EMD Serono stated that the decision was based on strategic portfolio considerations.

As of December 31, 2023 and 2022, there was no deferred revenue related to payments received by the Company under the EMD Serono agreements.

R evenues under the EMD Serono agreements were as follows:

Year ended December 31,

(in thousands)

Contingent payment

Research and development services

Materials supply

Total revenue

Astellas License and Collaboration Agreement

In June 2022, the Company entered into a License and Collaboration Agreement (the “Astellas Agreement”) with Astellas for the development of immunostimulatory antibody-drug conjugates for up to three biological targets, to be identified by Astellas.

The Company will conduct research and pre-clinical development of any compound (as designated by Astellas) in each of the three programs in accordance with the terms of a research plan between the Company and Astellas.

The Company will conduct research and preclinical development of any compound (as designated by Astellas) in each of the three programs in accordance with the terms of a research plan between the Company and Astellas.

Astellas will have an exclusive worldwide license to develop and commercialize any such designated compound, subject to the Company’s rights to participate in cost and profit sharing in the United States, as described below.

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The transaction price of $ 90.0 million was allocated among the performance obligations using the Company’s best estimate of the standalone selling price, or SSP, for each of the associated performance obligations.

Revenue allocated to the three target programs, which totaled $ 89.1 million, is being recognized on a proportion of performance basis, using FTE cost as the basis of measurement, with such performance expected to occur over an estimated service period of four years for each target program.

As it pertains to the JSC performance obligation, the revenue allocated to such performance obligation was $ 0.9 million, and is being recognized on a proportion of performance basis using FTE cost as the basis of measurement, and such effort is expected to be incurred on a relatively consistent basis throughout the term of the Astellas Agreement.

Additionally, under ASC 606, the Company determined a financing component associated with the $ 90.0 million upfront payment and has calculated $ 32.8 million as of December 31, 2023 on the unearned revenue portion beyond one year from the effective date of the agreement, which amount is being recognized as interest expense and revenue over the estimated service period for the three target programs.

Revenue allocated to the three target programs, which totaled $ 89.1 million, was being recognized on a proportional performance basis, using FTE cost as the basis of measurement, with such performance expected to occur over an estimated service period of four years for each target program.

For the JSC performance obligation, revenue allocated to such performance obligation was $ 0.9 million, and was being recognized on a proportional performance basis using FTE cost as the basis of measurement, and such effort is expected to be incurred on a relatively consistent basis throughout the term of the Astellas Agreement.

Additionally, under ASC 606, the Company determined a financing component associated with the $ 90.0 million upfront payment and has calculated $ 24.7 million as of December 31, 2024 on the unearned revenue portion beyond one year from the effective date of the agreement, which amount is being recognized as interest expense and revenue over the estimated service period for the target programs.

The Company is also eligible to receive up to $ 422.5 million in development, regulatory and commercial milestones for each product candidate, and tiered royalties ranging from low double-digit to mid-teen percentages on worldwide sales of any commercial products that may result from the collaboration, subject to customary deductions under certain circumstances.

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In the event the Company makes such election, it will share commercialization costs and profits relating to such product candidate equally with Astellas in the United States, and no royalties will be due from Astellas for net sales of such product candidates in the United States.

In June 2024, Astellas notified the Company that it would not be nominating a third target program.

This decision was based on Astellas' strategic portfolio considerations.

Pursuant to ASC 606, Astellas' decision to not elect a third target program is a change in the scope of the original contract and thus represents a contract modification.

At the date of the modification, the Company determined that the remaining research and development activities related to the first target program and the second target program to be undertaken by the Company after the notice of termination were not distinct from the related activities performed on each target prior to the modification.

Accordingly, after re-allocation of the updated transaction price, the Company updated the cost-based input measure of progress for the remaining performance obligations and recorded a cumulative catch-up adjustment to revenue of $ 17.8 million on the modification date relating to the ongoing unsatisfied performance obligations.

For the JSC performance obligation, as the remaining services were determined to be distinct from those already provided, the Company determined that the contract modification should be treated as a termination of the existing contract and the creation of a new contract, to be accounted for prospectively.

Revenues under the Astellas Agreement were as follows:

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The Company will retain development and commercial rights of luvelta globally outside of Greater China, including the United States.

Under the Tasly License Agreement, Tasly was obligated to make to the Company an initial nonrefundable upfront payment of $ 40.0 million, with additional potential payments totaling up to $ 345 million related to development, regulatory and commercialization contingent payments and milestones.

The Company will provide luvelta to Tasly under appropriate clinical and commercial supply service agreements.

Upon commercialization, the Company will receive tiered royalties, ranging from low- to mid-teen percentages based on annual net sales of luvelta in Greater China for at least ten years following the first commercial sale of luvelta in Greater China.

The Company determined that the Tasly License Agreement falls within the scope of ASC 808, as both parties are active participants in the activities and are exposed to significant risks and rewards dependent on the success of the commercialization of indications for luvelta in Greater China.

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The withholding tax of $ 0.5 million was recorded as an income tax charge related to the contingent payment.

During the year ended December 31, 2023, the Company also recorded a $ 5.0 million contingent payment, received by the Company from Tasly related to the first patient dosed in the Company’s REFRaME-O1 trial for luvelta, as deferred revenue, net of withholding tax of $ 0.5 million.

Although it currently intends to conduct the REFRaME-O1 study to completion, the Company has the sole discretion to terminate the REFRaME-O1 study at any time.

As such, the Company has agreed with Tasly that, in the event the Company terminates the REFRaME-O1 study prior to dosing the first patient in Part II, the Company will refund Tasly the contingent payment received by the Company within 30 days of such study termination.

Given the above, the contingent payment received by the Company was considered constrained for accounting purposes during the year ended December 31, 2023, since the Company could not conclude it was probable that a significant reversal in the amount of revenue recognized would not occur.

The withholding tax was recorded by the Company as a tax charge related to the received contingent payment.

During the year ended December 31, 2024, the Company recognized a $ 5.0 million contingent payment as revenue, net of withholding tax, after the Company announced the selected dose from the dose-optimization portion (Part 1) of REFRaME-O1 for luvelta.

2023 Tasly Supply Agreement

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As of December 31, 2024 and 2023, there was $ 12.4 million and $ 6.9 million in such accruals related to the Vaxcyte Supply Agreement.

For the years ended December 31, 2023, 2022 and 2021, the agreed-upon reimbursements by Vaxcyte of the costs associated with such arrangements, principally for pass-through costs from the CMOs, were $ 8.6 million, $ 12.4 million and $ 8.9 million, respectively, and were accounted for by the Company as a reduction to research and development expense based on the Company’s conclusion that Vaxcyte was not a customer for such activities and associated payments.

For the years ended December 31, 2024, 2023 and 2022, the agreed-upon reimbursements by Vaxcyte of the costs associated with such arrangements, principally for pass-through costs from the CMOs, were $ 9.0 million, $ 8.6 million and $ 12.4 million, respectively, and were accounted for by the Company as a reduction to research

and development expense based on the Company’s conclusion that Vaxcyte was not a customer for such activities and associated payments.

Vaxcyte Agreement

In December 2022, the Company entered into a letter agreement (the “Vaxcyte Agreement”) with Vaxcyte under which the Company granted to Vaxcyte (i) authorization to enter into an agreement with an independent alternate CMO to source cell-free extract solely for the products it licensed from the Company, allowing Vaxcyte to have direct oversight over financial and operational aspects of the relationship with the CMO (“CMO Relationship Rights”), and (ii) a right, but not an obligation, to obtain certain exclusive rights to internally manufacture and/or source extract from certain CMOs and the right to independently develop and make improvements to extract for use in connection with the exploitation of certain vaccine compositions (the “Option”).

The Option was exercisable for five years following the effective date of the Vaxcyte Agreement (the “Option Period”), subject to potential acceleration in the event of a change of control of Vaxcyte.

Pursuant to the Vaxcyte Agreement, the Company received a one-time, nonrefundable, non-creditable, upfront payment of $ 10.0 million in cash, and 167,780 shares of Vaxcyte common stock with a fair value of $ 7.5 million in December 2022.

Additionally, pursuant to the Vaxcyte Agreement, th e Company and Vaxcyte agreed to negotiate the terms and conditions of a form definitive agreement to be entered into in the event Vaxcyte exercises the Option (the “Form Definitive Agreement”).

In September 2023, the Company and Vaxcyte mutually agreed upon the Form Definitive Agreement, and in October 2023, the Company received a $ 5.0 million payment from Vaxcyte.

Effective immediately upon agreement to the Form Definitive Agreement, the Company and Vaxcyte entered into amendment No 3.

(the “Amendment”) to that certain license agreement between the Company and Vaxcyte, dated August 1, 2014, and amended and restated on October 12, 2015, and amended again on May 9, 2018 and May 29, 2018 (the “License Agreement”).

The Amendment amended certain terms of the License Agreement including with respect to (i) royalty reduction provisions applicable in the event of expiration of relevant patent

claims, which would result in lower royalties payable by Vaxcyte under certain circumstances, (ii) the ownership, prosecution, maintenance and enforcement of certain intellectual property rights licensed or arising under the License Agreement, and (iii) the timing and form for financial reporting of royalty payment calculations.

In November 2023 (the "Exercise Date"), Vaxcyte exercised the Option by submitting written notice thereof to the Company and concurrently paid the Company $ 50.0 million in cash as the first of two installment payments for the Option exercise price.

Under the Vaxcyte Agreement, Vaxcyte is obligated to pay the Company an additional $ 25.0 million in cash within six months of the Exercise Date as the second of two installment payments for the Option exercise price.

In May 2024, Vaxcyte paid the Company an additional $ 25.0 million in cash as the second of two installment payments for the Option exercise price under the Vaxcyte Agreement.

Also , the Company received a one-time, nonrefundable, non-creditable, upfront payment of $ 10.0 million in cash, and 167,780 shares of Vaxcyte common stock with a fair value of $ 7.5 million in December 2022.

Upon the occurrence of certain regulatory milestones, Vaxcyte would be obligated to pay the Company certain additional payments totaling up to $ 60.0 million in cash.

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These contingent payments were considered constrained variable consideration or otherwise not eligible for revenue recognition at inception and as of December 31, 2024.

The Company evaluated the terms of the Vaxcyte Agreement and concluded that the Vaxcyte Agreement is considered a new standalone contract and distinct from the previously existing agreements with Vaxcyte.

Under ASC 606, the Company determined that Vaxcyte is a customer for this arrangement and identified the promised goods and services under the Vaxcyte Agreement as:

(1) the Option;

(2) the Form Definitive Agreement;

(3) CMO Relationship Rights;

and (4) Joint steering committee participation.

The Company concluded that the promises within the contract are interrelated and interdependent of one another.

As such, these are not considered distinct but are combined as a single performance obligation.

This single performance obligation is considered a material right as it provides Vaxcyte with the right to acquire additional goods at a price it would not have received without having entered into the Vaxcyte Agreement.

Revenue from the single performance obligation amounting to $ 97.5 million was recognized during the year ended December 31, 2023, as the Option was exercised by Vaxcyte on the Exercise Date and the single performance obligation was satisfied under the Vaxcyte Agreement.

As of December 31, 2023 and 2022, there was zero and $ 17.5 million, respectively, of deferred revenue related to the payments received by the Company under the Vaxcyte Agreement.

Revenues under the Vaxcyte agreements were as follows:

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Refer to Note 9 below for information relating to the Purchase Agreement between the Company and Blackstone, pursuant to which the Company sold to Blackstone its 4 % royalty, or revenue interest, in potential future net sales of Vaxcyte products, including VAX-24 and VAX-31.

BioNova Option Agreement

In October 2021, the Company entered into an agreement with BioNova granting BioNova the option to obtain exclusive rights to develop and commercialize STRO-001 in China, Hong Kong, Macau and Taiwan (“Greater China”) and amended the BioNova Option Agreement with BioNova in the first quarter of 2023.

In March 2024, BioNova notified the Company that it had decided to terminate both the BioNova Option Agreement and clinical development of STRO-001 in Greater China.

Following receipt of this notice, the Company decided to suspend development of STRO-001.

Ipsen Agreements

In March 2024, the Company and Ipsen Pharma SAS (“Ipsen”) entered into an Exclusive License Agreement (the “Ipsen License Agreement”) pursuant to which the Company licensed to Ipsen, on an exclusive basis, the right to research, develop, manufacture and commercialize STRO-003.

In consideration for the rights and licenses granted by the Company to Ipsen in the Ipsen License Agreement, (i) Ipsen paid the Company an upfront license fee in the amount of $ 50.0 million in April 2024 and (ii) Ipsen Biopharmaceuticals, Inc.

(USA) (“Ipsen USA”), a fully-owned Affiliate of Ipsen, purchased 4,827,373 shares of the Company’s common stock for $ 25.0 million, at a price of approximately $ 5.18 per share, in accordance with the terms set forth in a certain investment agreement by and between the Company and Ipsen USA dated March 29, 2024 (the “Ipsen Investment Agreement”, and, together with the Ipsen License Agreement, the “Ipsen Agreements”).

The fair market value of the common stock issued to Ipsen USA in April 2024 was $ 24.6 million, based on the stock price on the date of issuance, resulting in a $ 0.4 million premium on the Ipsen Investment Agreement.

The Company is eligible to receive up to an additional $ 447.0 million in developmental and regulatory milestones, assuming multiple indications, and up to $ 360.0 million in sales milestones, as well as tiered royalty

payments ranging from low double-digit to mid-teen digit percentages of annual net sales of STRO-003, subject to certain adjustments specified in the Ipsen License Agreement.

Ipsen may terminate the Ipsen License Agreement for convenience with sixty calendar days prior written notice or for certain other specified reasons.

The Company may terminate the Ipsen License Agreement if Ipsen or any of its Affiliates challenge the validity of any patents controlled by the Company that are licensed under the agreement.

Both Ipsen and the Company may terminate the Ipsen License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the Ipsen License Agreement or (ii) the other party’s bankruptcy event.

The Company concluded that the Ipsen License Agreement contains three promised goods and services consisting of the STRO-003 license, technology transfer, and IND-enabling activities.

The Company concluded that these promised goods and services are not distinct from each other, and all play an integral role in allowing Ipsen to file an IND and begin its development of STRO-003.

As such, the STRO-003 license, technology transfer, and IND-enabling activities are accounted for as one single performance obligation.

The Ipsen License Agreement and the Ipsen Investment Agreement are being accounted for as one arrangement because they were entered into at or near the same time and negotiated in contemplation of one another.

The Company determined that the total transaction price of the Ipsen License Agreement was $ 50.4 million, comprised of the one-time, nonrefundable, non-creditable upfront payment of $ 50.0 million paid by Ipsen under the Ipsen License Agreement, and a $ 0.4 million premium from the Ipsen Investment Agreement.

Revenue for the performance obligation will be recognized at a point in time when the Company has completed all its deliverables, i.e., STRO-003 license, technology transfer, and IND-enabling activities, at which time Ipsen would have what it needs from the Company to file an IND for STRO-003.

Ipsen Transition Services Agreement ("TSA"), Material Transfer Agreement ("MTA") and Manufacturing and Supply Agreement (“MSA”)

In July 2024, the Company executed the Transition Services Agreement (“TSA”) with Ipsen.

The TSA outlines the terms and conditions for transition services requested by Ipsen as part of the Ipsen License Agreement.

Further, as part of the transition activities under the TSA, Ipsen and the Company executed a Material Transfer Agreement ("MTA") to govern the transfer of certain materials from the Company to Ipsen for research and development purposes.

The pricing for the services and material supply is outlined in the TSA and MTA.

In December 2024, the Company executed the Manufacturing and Supply Agreement (“MSA”) with Ipsen.

The MSA outlines the terms and conditions for certain manufacturing services, manufacturing transition activities and transfer of the manufacturing technology as part of the Ipsen License Agreement.

The pricing is based on an agreed upon cost-plus arrangement.

Revenues under the Ipsen agreements were as follows:

Year ended December 31,

(in thousands)

Research and development services

Materials supply

Total revenue

As of December 31, 2024, there was $ 53.2 million of deferred revenue related to the Ipsen Agreements.

Collaboration with Merck

In August 2024, Merck informed the Company of its decision to discontinue the clinical trial of MK-1484 in patients.

Merck stated that the decision was based on strategic portfolio considerations.

Property and Equipment, Net

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Depreciation and amortization expense amounted to $ 7.2 million, $ 6.8 million and $ 5.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Loan and Security Agreement

In August 2017, the Company entered into a loan and security agreement with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) under which it borrowed $ 15.0 million (the “August 2017 Loan”).

In connection with the August 2017 Loan, the Company issued to Oxford and SVB warrants to purchase 46,359 shares of Company's common stock.

On February 28, 2020, (the “Effective Date”), the Company entered into a loan and security agreement (the “Loan and Security Agreement”) with Oxford as the collateral agent and a lender, and SVB as a lender (together with Oxford, the “Lenders”), pursuant to which the Lenders agreed to lend the Company up to an aggregate of $ 25.0 million (the “Term A Loan”).

Upon entering into the Loan and Security Agreement, the Company borrowed $ 25.0 million from the Lenders, with approximately $ 9.6 million of such amount applied to the repayment of the outstanding principal, interest and final payment fees owed pursuant to the August 2017 Loan.

As such, the August 2017 Loan has been paid in full.

The Company accounted for the issuance of the Loan and Security Agreement and repayment of the August 2017 Loan as a debt modification.

The associated unamortized debt discount on the August 2017 Loan and new lender fees from the debt issuance was amortized as interest expense using the effective interest method until the maturity date of the Term A Loan.

In June 2022, the Company entered into an amendment to the Loan and Security Agreement with Oxford and SVB (the “LSA Amendment”).

The LSA Amendment added a financial covenant that requires the Company to maintain a minimum unrestricted cash balance of $ 10.0 million.

The Company was in compliance with the financial covenant under the LSA Amendment as of December 31, 2023.

In June 2023, the Company entered into an amendment to the Loan and Security Agreement with Oxford and SVB (the “5th LSA Amendment”).

Under the 5th LSA Amendment, effective July 1, 2023, the loan bore interest at the floating per annum rate of interest equal to the greater of (i) 8.07 % and (ii) the sum of (a) a specific published 1-month secured overnight financing rate (SOFR) reported on the last business day of the month that immediately precedes the month in which the interest will accrue plus (b) 0.10 %, plus (c) 6.40 % .

There was an immaterial impact of the 5th LSA Amendment on the financial statements of the Company.

The Term A Loan matured on March 1, 2024 (the “Maturity Date”) and the Company made a final payment of 3.83 % of the original principal amount of the Term A Loan on the Maturity Date.

In connection with entering into the Loan and Security Agreement, the Company issued to the Lenders warrants exercisable for 81,257 shares of the Company’s common stock (the “2020 Warrants”).

The 2020 Warrants are exercisable in whole or in part, immediately, and have a per share exercise price of $ 9.23 , which was the closing price of the Company’s common stock reported on the Nasdaq Global Market on the day prior to the Effective Date.

The 2020 Warrants will terminate on the earlier of February 28, 2030 or the closing of certain merger or consolidation transactions.

The estimated fair value upon issuance of the Warrants of $ 0.6 million is recorded as a debt discount on the associated borrowings on the Company’s Balance Sheet.

The debt discount was amortized to interest expense over the repayment period of the loan using the effective-interest method.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded interest expense related to loans outstanding of $ 1.3 million, $ 2.4 million and $ 2.6 million, respectively, with average interest rates of 11.49 %, 8.72 % and 8.07 %, respectively, which includes interest related to the accretion of debt discount of $ 0.3 million, $ 0.5 million and $ 0.6 million, respectively.

Long-term debt and net premium balances are as follows:

(in thousands)

Principal amount of debt outstanding

Net premium associated with accretion of final payment and

other debt issuance costs

Debt, current and non-current

Debt, current portion

Debt, non-current portion

Future minimum payments of principal and estimated payments of interest on the Company’s Loan and Security Agreement as of December 31, 2023 are as follows:

Year Ending December 31:

(in thousands)

Total future maturities - 2024

amount representing interest

final payment

Total principal amount of debt outstanding

Commitments and Contingencies

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Due to the Company's then ongoing manufacturing obligations under the 2015 License Agreement, the Company accounted for the proceeds as imputed debt and, therefore, will recognize future non-cash royalty revenues.

Non-cash interest expense will be

recognized over the estimated life of the royalty term arrangement using the effective interest method based on the imputed interest rate derived from estimated amounts and timing of potential future royalty payments to be received from Vaxcyte.

As part of the sale, the Company incurred approximately $ 3.8 million in transaction costs, which are being amortized over the estimated life of the royalty term arrangement using the effective interest method.

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The Company periodically assesses the estimated royalty payments to be earned by Blackstone from Vaxcyte and, to the extent that the amount or timing of such payments is materially different than our original estimates, the Company will prospectively adjust the imputed interest rate and the related amortization of the deferred royalty obligation.

As of December 31, 2023, our effective interest rate used to amortize the liability is 17.0 %.

As of December 31, 2024, the Company's effective interest rate used to amortize the liability is 19.8 %.

During the year ended December 31, 2024, the Company recognized approximately $ 31.1 million of non-cash interest expense on the deferred royalty obligation, which amount will increase such balance.

As of December 31, 2024, Blackstone has not received any royalty payment from Vaxcyte and, therefore, the deferred royalty obligation has not begun to be amortized.

The following table shows the activity of the deferred royalty obligation since transaction inception through December 31, 2023:

The following table shows the activity of the deferred royalty obligation for the years ended December 31, 2024 and 2023:

(in thousands)

Liability related to sale of future Vaxcyte royalties - beginning balance

Proceeds from the sale of future Vaxcyte royalties

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Amortization of issuance costs

Deferred royalty obligation related to the sale of future Vaxcyte royalties, net

Liability related to the sale of future Vaxcyte royalties - ending balance

Segment Reporting

The Company operates in one business segment that focuses on developing site-specific and novel-format ADCs.

The Company's Chief Executive Officer , as the chief operating decision-maker, reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance.

Consistent with this decision-making process, the Chief Executive Officer uses loss from operations to monitor budget versus actual results for purposes of evaluating performance and to make decisions about the allocation of resources.

Summary of the segment net loss, including significant segment expenses were as follows:

Year Ended December 31,

(in thousands)

Personnel-related expenses

Outside services

Preclinical research and clinical development expenses

Laboratory supplies

Facility and maintenance expenses

Equipment and office-related expenses

Travel-related expenses

Operating expenses

Loss from operations

Non-cash interest expense related to the sale of future royalties

Interest income

Interest and other (income) expense, net

Non-operating income

Loss before provision for income taxes

Income tax expense

Segment net loss

Reconciliation of profit or loss

Adjustments and reconciling items

All of the Company’s long-lived assets are maintained in the United States.

Stockholders’ Equity

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The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2024 and the exercise prices, multiplied by the number of in-the-money stock options) that would have been received by the stock option holders had all stock option holders exercised their stock options on December 31, 2024.

For the years ended December 31, 2023, 2022 and 2021, the aggregate intrinsic value of stock options exercised was $ 30,000 , $ 0.1 million and $ 2.8 million, respectively, determined at the date of the option exercise.

For the years ended December 31, 2024, 2023 and 2022, the aggregate intrinsic value of stock options exercised was immaterial, determined at the date of the option exercise.

Employee Stock Options Valuation

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The aggregate number of shares issued over the term of the Company’s ESPP, subject to stock-splits, recapitalizations or similar events, may not exceed 2,300,000 shares of the Company’s common stock.

At the Company’s annual stockholder meeting in June 2024, the Company amended the ESPP (the “Amended ESPP”) to increase the overall limit on the number of shares that may be issued under the Amended ESPP throughout its ten-year term from 2,300,000 shares to 3,050,0000 shares of the Company’s common stock.

The fair value of the ESPP shares is estimated using the Black-Scholes option pricing model.

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For the year ended December 31, 2024, the Company recognized an income tax expense of $ 2.4 million.

The income tax charge for the year ended December 31, 2023, was primarily due to unfavorable book-tax differences related to capitalizing and amortizing research and development expenditures under Internal Revenue Code, or IRC, Section 174, the upfront payment from the sale of future royalties, deferred revenue, foreign income tax, and IRC Section 382 limitations imposed on the utilization of the Company's historical tax attributes as a result of cumulative ownership changes that the Company experienced in prior years.

This was primarily due to prior period tax provision to return adjustment.

The effective tax rates for the year ended December 31, 2024 vary from the U.S.

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All losses to date have been incurred domestically.

For the year ended December 31, 2023, the Company recognized an income tax expense of $ 18.2 million.

The Company recorded a foreign income tax charge of $ 2.5 million during the year ended December 31, 2022, due to a withholding tax in China on its license revenue from Tasly.

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Deferred revenue

Accruals and other

Operating lease liability

Stock based compensation

Fixed asset basis

Accruals and other

Total deferred tax assets

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The Company believes that the amount by which the unrecognized tax benefits may increase or decrease within the next 12 months is not estimable.

The Company has elected to recognize, if incurred, interest and penalties related to liabilities for uncertain tax positions as a part of income tax expense.

Interest and penalties were immaterial during the year ended December 31, 2023.

The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be sustained upon examination by the relevant income tax authorities.

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Gross unrecognized tax benefit at December 31

The Company is subject to taxation in the United States and various state jurisdictions.

All tax years remain subject to examination for U.S.

federal and state purposes.

All net operating losses generated to date are subject to adjustment for U.S.

federal and state purposes.

The Company is not currently under examination in federal or state jurisdictions.

Net Loss Per Share

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Shares to be issued under ESPP

Subsequent Event

Restructuring

On March 13, 2025, the Company announced the completion of a strategic portfolio review resulting in the prioritization of the Company's three wholly-owned preclinical programs in the Company's next-generation ADC pipeline.

The Company also announced that the Company is deprioritizing additional investment into development of luvelta across all indications and is reducing headcount by nearly 50 percent.

Further, given the Company’s significant progress in fully externalizing the cell-free manufacturing to scale, the Company intends to exit its internal GMP manufacturing facility by year-end.

The Company is currently evaluating the accounting impact on the 2025 financial statements.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis