Stoke Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2019. The company is an early-stage biotechnology developer of antisense medicines using its TANGO platform. It has no approved products and has generated no revenue.
Financial results and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $6.0 million | $1.9 million | $10.2 million | $3.1 million |
| General and administrative expense | $2.4 million | $1.1 million | $4.6 million | $1.8 million |
| Net loss | $7.8 million | $3.0 million | $13.6 million | $4.9 million |
| Net loss per share, basic and diluted | $1.54 | $4.36 | $4.57 | $7.14 |
| Cash used in operating activities | Not separately provided for the quarter | $12.8 million | $4.4 million |
At June 30, 2019, cash, cash equivalents and restricted cash totaled $242.9 million, compared with $105.6 million at December 31, 2018. Total liabilities were $4.8 million, with no debt reported. Stockholders’ equity was $241.5 million and accumulated deficit was $39.3 million. The filing does not provide a meaningful gross margin; the company had no revenue.
Cash from financing activities was $150.6 million in the first half, principally reflecting the June IPO. The filing reports approximately $149.4 million of IPO proceeds net of underwriting discounts, commissions and offering costs in its notes, while the cash flow discussion reports $151.9 million after underwriting discounts and commissions but before offering costs. Management estimates available cash will fund operating expenses and capital expenditures into 2023, subject to assumptions and execution risks.
Material changes and notable items
- Q2 operating expenses rose to $8.4 million from $3.0 million; first-half expenses increased to $14.8 million from $4.9 million. Management attributed the increase mainly to STK-001 development, higher headcount, and facilities and public-company-related costs.
- STK-001 research and development expense was $2.9 million in Q2 and $4.3 million for the first half, versus $0.3 million and $0.4 million in the comparable 2018 periods.
- The June 21 IPO issued 9,074,776 shares at $18 per share. The offering included full exercise of the underwriters’ option. Preferred stock converted into common stock at IPO closing; a one-for-9.95 reverse stock split was also effected.
- Interest income was $0.6 million in Q2 and $1.2 million in the first half, reflecting the larger cash balance.
- First-half investing cash outflow was $0.5 million, mainly for property and equipment. Operating lease commitments totaled $2.9 million as of June 30.
Outlook, commentary and risks
Management planned to submit an investigational new drug application for STK-001 by early 2020 and expected to begin a Phase 1/2 trial in the first half of 2020. It also planned to nominate a second genetic-disease candidate for preclinical development by the first half of 2020. On August 6, 2019, the FDA granted STK-001 orphan drug designation. Management expects research and development, general and administrative expenses, and losses to increase as programs advance and the company operates as a public company.
Key uncertainties include preclinical and clinical success, regulatory approval, patient identification and trial enrollment, manufacturing and third-party performance, intellectual-property protection and licensing, access to future financing, and eventual market access and reimbursement. The company warns that early research results may not predict later clinical outcomes and that it may never achieve profitability. It reported no material legal proceedings and concluded disclosure controls were effective as of June 30, 2019.
Investor verification points
- Reconcile the IPO proceeds figures: approximately $149.4 million net of offering costs versus $151.9 million before offering costs.
- Track STK-001 IND-enabling work, the planned IND submission and Phase 1/2 trial timing, and progress on the second candidate.
- Assess quarterly cash burn and whether the stated runway into 2023 remains supportable as development and public-company costs rise.
- Review future disclosures on clinical safety and efficacy, trial enrollment, manufacturing readiness, licensing obligations and potential additional financing.
- Consider the potential effect of dilution and share sales following the IPO lock-up expiration scheduled for December 16, 2019.