Sutro’s stock tumbled nearly 19% after the company announced it will sideline its FRα-targeted antibody-drug conjugate luveltamab tazevibulin, which it was studying for ovarian cancer. The biotech will seek licensing opportunities for the asset.
After the completion of a strategic review on Thursday, Sutro Biopharma will now move forward with a focus on its next-generation antibody-drug conjugates—and a much smaller headcount.
Alongside its Q4 2024 earnings, Sutro announced that it is terminating 50% of its employees and winding down operations at its manufacturing-support facility in San Carlos, California, according to an SEC filing. The company expects both processes to be complete by the end of the year. Sutro had 310 full-time employees by the end of 2024.
Sutro also reoriented its developmental focus and has now deprioritized luveltamab tazevibulin (luvelta), an antibody-drug conjugate (ADC) originally being developed for ovarian cancer but that the company had also begun testing in lung cancer. Sutro’s stock fell 18.7% from $1.34 at market open on Thursday to $1.09 in after-hours trading.
“The tough decisions were driven by STRO’s inability to secure a partner on Luvelta; however we think efforts in lung cancer will still continue, and we are preserving some optimism for the data to look good enough for a deal,” Truists analysts wrote in a note to investors Friday morning.
Luvelta was originally being developed for ovarian cancer, particularly in patients with low expression levels of FRα and who, as a result, are ineligible for existing FRα-targeting therapies. In December 2024, Sutro released early Phase II/III data for luvelta, touting a 32% objective response rate in patients with platinum-resistant ovarian cancer. At the time, the biotech said that it was on-track to file an accelerated approval application for luvelta by mid-2027.
Meanwhile, Sutro had already started pursuing other indications. In August 2024, the company announced it had initiated a Phase II trial of luvelta for patients with non-small cell lung cancer.
Chung in a statement on Thursday said that the shift away from luvelta “will result in considerable reduction of operating costs and allow us to chart a new future for Sutro.” Still, the biotech remains confident in luvelta and will explore licensing partnership opportunities for the asset.
“STRO has not yet been able to secure a partner for Luvelta, and in light of this, we believe the decision to deprioritize development was primarily driven by the need to conserve capital,” the Truists analysts wrote. “But based on our discussions, we think STRO may be maintaining optionality in lung cancer (as the more meaningful “carrot” to attract a deal), and potentially pediatric leukemia (as a way to secure a priority review voucher).”
With its pipeline pivot, Sutro will now focus on its early-stage pipeline, anchored by STRO-004, a tissue factor–targeted exatecan ADC that the biotech says could have best-in-class potential for solid tumors. Sutro is eyeing an Investigational New Drug (IND) application for STRO-004 in the second half of this year. The biotech will also now be prioritizing STRO-006, an integrin beta-6 ADC that is also being positioned as a treatment for several solid tumors. Clinical development is set to start next year.
Sutro is also advancing a dual-payload ADC program, for which an IND is planned for 2027.
Alongside the staffing and pipeline changes, Sutro is also shaking up its masthead, with CEO Bill Newell stepping down from his role, effective Thursday. He will be succeeded by current COO Jane Chung, who was also appointed as a member of Sutro’s Board.
By the end of 2024, Sutro had $316.9 million in cash, cash equivalents and marketable securities. Thursday’s restructuring program will cost the biotech $40 million to $45 million, but will result in savings that are expected to extend Sutro’s runway into the fourth quarter of 2026.
