On December 19, 2022, Sutro Biopharma, Inc. (the "Company") reported that it has entered into a letter agreement (the "Agreement") with Vaxcyte, Inc. ("Vaxcyte") under which the Company granted to Vaxcyte (i) authorization to enter into an agreement with an independent alternate contract manufacturing organization ("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, 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") (Filing, 8-K, Sutro Biopharma, DEC 19, 2022, View Source [SID1234625452]). The Option is exercisable for five years following the effective date of the Agreement (the "Option Period"), subject to potential acceleration in the event of a change of control of Vaxcyte.
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Pursuant to the Agreement, Vaxcyte will make an upfront payment of $22.5 million to the Company, of which $7.5 million will be paid in shares of Vaxcyte’s common stock and the remaining $15.0 million will be paid in cash. In the event that Vaxcyte elects to exercise the Option, Vaxcyte would pay the Company $75.0 million in cash in two installments, and upon the occurrence of certain regulatory milestones, certain additional milestone payments totaling up to $60.0 million in cash. In the event that Vaxcyte undergoes a change of control, and subsequently exercises the option, a substantial majority of the milestone payments are accelerated.
The Agreement contains customary provisions for termination, including by either party upon mutual written agreement, upon written notice by Vaxcyte that it has elected not to exercise the Option, upon expiration of the Option Period if the Option has not been exercised by then, upon execution by both parties or release from escrow of a definitive agreement following option exercise, and by the Company upon 15 business days’ written notice to Vaxcyte for cause.
The economic terms of the existing agreements between the Company and Vaxcyte will not change upon the effectiveness of the Agreement.
The foregoing description of the terms of the Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Agreement, a copy of which will be filed with the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 10-K for the year ending December 31, 2022.