Shares of this penny stock Sutro Biopharma (NASDAQ:STRO) have been up over 50% in the past few days on the strength of an earnings beat. The recent acquisition of ImmunoGen by AbbVie (NYSE:ABBV) for a substantial premium highlights the potential value of antibody-drug conjugate (ADC) specialists. With Sutro also boasting a pipeline of promising drug candidates in the same class, it could be an equally appealing target. Considering these factors alongside recent financial performance, Sutro’s stock appears to offer an appealing opportunity for biotech investors.
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More About ADC
Sutro Biopharma is a clinical-stage biotech company focused on developing pharmaceutical products. It leverages its proprietary technology, XpressCF, and XpressCF+, a cell-free protein synthesis platform, to develop oncology therapeutics.
The company has concentrated its drug discovery efforts on antibody-drug conjugates (ADCs), cytokine-based immuno-oncology therapies, and bispecific antibodies.
Sutro Biopharma has established collaborations with various companies, including Merck Sharp & Dohme Corporation, Vaxcyte, Tasly Biopharmaceuticals, EMD Serono, and Astellas Pharma Inc., to further develop and commercialize its products.
Recent News Driving the Stock
The company recently reported fiscal results for the year ending on December 31, 2023. Revenue was $153.7 million, a significant increase from the $67.8 million posted in the previous year. This growth is attributed mainly to Vaxcyte’s exercise of a manufacturing rights agreement option, paying $50 million to Sutro, along with a commitment to pay an additional $25 million within the next six months, as well as other collaborations with Astellas and Merck (MRK).
The growth primarily stems from Vaxcyte’s execution of a manufacturing rights agreement option, resulting in a $50 million payment to Sutro, along with a commitment to pay an additional $25 million within the next six months. Additionally, collaborations with Astellas and Merck, as well as a recognized contingent payment from Tasly, have contributed to this growth.
Despite the jump in revenue, the company reported a net loss for 2023 of $106.793 million or an EPS of -$1.78 per share, which outperformed expectations of -$3.08. The magnitude of this outperformance helped to catalyze the shares to rise significantly higher immediately following the announcement.
As of year-end 2023, Sutro had cash and investments totaling $333.7 million and Vaxcyte common stock valued at $41.9 million. The company has also actively been selling its common stock, raising over $70 million towards a goal of accumulating approximately $129 million by selling shares. This financial standing is projected to provide a cash runway extending into the second half of 2025.
What is the Price Target for STRO?
The shares have been trending up over the past year. They are currently trading towards the upper end of the 52-week price range of $2.00-$6.13 and continue to exhibit positive price momentum, trading above the 20-day (4.30) and 50-day (4.30) moving averages.
Analysts following the company have been bullish on the stock. For example, analyst Reni Benjamin from JMP Securities recently reiterated a Buy rating with a price target of $17.00. He believes the company’s strong financial foundation and promising pipeline of therapeutic candidates offer an attractive risk-reward scenario.
The stock is rated a Strong Buy based on the ratings and 12-month price targets of seven Wall Street analysts who published opinions in the past three months. The average price target for STRO is $11.17, which represents a 97.70% upside from current levels.
Final Thoughts on STRO
Sutro Biopharma has emerged as an intriguing play in the biotech space. It is well-positioned for future growth with a robust pipeline of ADC candidates and strategic collaborations with Vaxcyte, Astellas, Merck, and Tasly. Sutro’s strong financial standing, promising therapeutic pipeline, and the potential for acquisition make it a captivating play for savvy biotech investors.
