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Sutro Biopharma (STRO) Up 50% on Cancer Treatment Collaboration

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Shares of Sutro Biopharma (STRO - Free Report) rallied 50.6% after-hours on Jun 27 after it announced a strategic partnership and licensing agreement with Japan’s pharma giant Astellas Pharma. Per the deal, the companies will develop novel immunostimulatory antibody-drug conjugates (iADCs) for cancer.

Sutro will leverage its own original iADC technologies to make iADCs for three distinct biological targets. iADCs are a next-generation modality with unique cancer-fighting potential for the treatment of cold tumors. iADCs have the potential to offer new options for patients who have not responded well to existing immune checkpoint inhibitors.

iADCs are targeted medicines delivering chemotherapy agents to cancer cells. An iADC, combines a monoclonal antibody with a linker through which it delivers the chemo agent to the cancer cell to boost anti-cancer activity

Per the agreement, Sutro will receive an upfront payment of $90 million to develop iADCs for three biological targets. Sutro will conduct preclinical studies to identify candidate compounds and Astellas will then take care of clinical studies.

Sutro will also be eligible to receive up to $ 422.5 million in development, regulatory and commercial milestone payments for each product candidate. It will be entitled to tiered royalties on worldwide sales of any commercial product resulting from the collaboration.

Shares of Sutro have declined 70.9% in the year compared with the industry’s 21.3% fall.

 

Sutro has been focused on creating a wide variety of optimally-designed protein therapeutics for cancer. Its two most advanced product candidates are STRO-002 and STRO-001.

Sutro began phase I studies for STRO-002, for endometrial and ovarian cancers, in 2019. Last year, the FDA granted Fast Track designation to STRO-002 to treat advanced ovarian cancer in patients who have received one to three prior lines of systemic therapy. Post which, Sutro and Tasly Biopharmaceuticals entered into a licensing agreement, granting the latter rights to develop and commercialize STRO-002 in Greater China.

Its second candidate, STRO-001, which was granted the Orphan Drug Designation by the FDA to treat myeloma, is currently enrolling patients for its phase I studies. Last year, Sutro entered into an exclusive license agreement with BioNova Pharmaceuticals to develop STRO-001 in Greater China.

Sutro is collaborating with Bristol Myers Squibb (BMY - Free Report) to develop CC-99712, a BCMA-targeting ADC, which received Orphan Drug designation from the FDA to treat multiple myeloma.

Sutro has had a long-standing licensing and collaborative partnership with the American pharmaceutical giant Merck & Co. (MRK - Free Report) since 2018. Recently, Sutro and Merck extended the research term for the cytokine derivative program for autoimmune diseases and cancer for an additional two years.

Bristol Myers and Merck are also developing cancer immunotherapies of their own.

Zacks Rank & A Stock to Consider

Sutro currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Aridis Pharmaceuticals (ARDS - Free Report) which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aridis Pharmaceuticals’ loss per share estimates for 2022 has narrowed from $1.78 to 34 cents in the past 30 days. The same for 2023 has narrowed from 75 cents to 60 cents in the same time frame. Shares of ARDS have plunged 47.2% in the year-to-date period.

Earnings of Aridis missed estimates in two of the trailing four quarters and beat the same on the remaining two occasions, the average negative surprise being 75.16%.

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