Stoke Therapeutics, Inc. quarterly report, Q1 FY2021

Business context and reporting period

Stoke Therapeutics, Inc. is a clinical-stage biotechnology company developing RNA-based antisense medicines using its TANGO platform. This unaudited Form 10-Q covers the three months ended March 31, 2021; comparative results are for the three months ended March 31, 2020.

Financial performance and liquidity

With no revenue, operating and profit margins are not meaningful. The increase in R&D expense reflected higher personnel and facilities costs and increased STK-001 and OPA1 activity; higher G&A expense primarily reflected third-party services and personnel. Interest income fell to $18,000 from $674,000, largely reflecting lower market interest rates.

At March 31, cash and cash equivalents were $267.5 million; cash, cash equivalents and restricted cash totaled $267.7 million, down from $287.5 million at year-end 2020. Total assets were $278.9 million, total liabilities $6.4 million, and stockholders’ equity $272.5 million. No debt or credit facility was reported. Operating lease payments totaled $889,000, including $808,000 due within one year. The company reported $20.1 million of operating cash use, $204,000 of investing cash use and $546,000 of financing cash inflow in the quarter.

Material changes versus the prior comparable period

• Net loss increased by $5.8 million, while operating expenses rose by $5.1 million.
• Operating cash use increased by $9.4 million. The filing attributes cash-flow movements in part to changes in accounts payable and accrued liabilities.
• Cash, cash equivalents and restricted cash declined $19.8 million during Q1 2021.
• Weighted-average shares rose to 36.6 million from 32.9 million; loss per share increased from $0.34 to $0.46.

Outlook, management commentary and risks

• Management expects continued operating losses and rising R&D, G&A and capital expenditures. The MD&A says existing cash is expected to fund operations and capital requirements into 2024; the financial-statement liquidity note says cash is expected to suffice for at least 12 months from issuance. Management cautions that its runway estimate depends on assumptions that may prove incorrect.
• The company has no approved products or product sales and expects no product revenue until candidates are developed and approved, a process expected to take years. It may seek additional funding; no committed financing source was reported. Equity financing could dilute holders, and debt financing could impose restrictive covenants.
• STK-001: MONARCH single-ascending-dose enrollment and dosing at 10, 20 and 30 mg were complete. The FDA partial clinical hold remains for doses above 30 mg. Initial safety and pharmacokinetic data were expected in Q3 2021. The multiple-ascending-dose study began dosing in February 2021; the SWALLOWTAIL extension began enrollment and dosing in January.
• The UK authorized the ADMIRAL Phase 1/2a trial; enrollment and dosing were expected to begin in the second half of 2021. Management noted COVID-19 could affect trial timelines, although it had not experienced trial delays as of the filing.
• For OPA1-related autosomal dominant optic atrophy, lead optimization was underway, with a clinical-candidate nomination hoped for by year-end 2021.
• Key risks include clinical safety or efficacy failures, the MONARCH dose restriction, patient-enrollment challenges in rare diseases, regulatory uncertainty, dependence on third-party manufacturers and research organizations, intellectual-property risks, and COVID-19-related disruption. The filing reports acute, transient hind-limb paresis in non-human primates at doses above the relevant no-observed-adverse-effect level and convulsions at extremely high doses; it says these events have not been shown to correlate with STK-001’s mechanism.

Important facts for investors to verify

• Whether the stated cash runway into 2024 remains achievable as trial and development spending increases, and how the separate 12-month liquidity disclosure relates to that estimate.
• MONARCH clinical data, the status and scope of the FDA partial hold, and progress in the multiple-dose and UK trials.
• Whether enrollment, dosing, and vendor supply remain on schedule despite COVID-19 risks.
• OPA1 candidate-selection timing and the resources required to advance both programs.
• Potential dilution or financing needs, and milestone or royalty obligations under the CSHL and University of Southampton licenses.