Stoke Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited financial statements are consolidated and prepared under U.S. GAAP. Stoke is a clinical-stage biotechnology company developing RNA-based medicines using its TANGO platform; it has no approved products and no product-sale revenue.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $5.2 million | $3.0 million |
| Research and development expense | $19.6 million | $18.3 million |
| General and administrative expense | $10.2 million | $9.5 million |
| Operating loss | $24.7 million | $24.8 million |
| Net loss | $22.5 million | $24.6 million |
| Net loss per share, basic and diluted | $0.53 | $0.66 |
| Net cash used in operating activities | $21.4 million | $32.5 million provided |
Revenue came from recognizing Acadia collaboration consideration, not product sales. Revenue rose $2.2 million year over year, while operating expenses increased $2.0 million. Operating loss was essentially unchanged; net loss narrowed, chiefly alongside a rise in net interest income to $2.1 million from $0.1 million as interest rates increased. Operating margins are not a meaningful indicator of product economics at this development stage.
At March 31, cash and cash equivalents were $190.3 million, marketable securities $63.3 million, and restricted cash $0.6 million, totaling $254.2 million. Current assets were $270.2 million and current liabilities $31.5 million. The filing reports no credit facility or committed capital source and no interest-bearing debt; liabilities included $47.6 million of deferred revenue and $4.5 million of operating lease liabilities. Accumulated deficit was $319.7 million.
Operating cash use was $21.4 million. Investing activities provided $53.1 million, mainly from $53.3 million of marketable-security sales; financing activities provided $45.1 million, including $44.7 million of net proceeds from equity sales under the controlled offering agreement. The 2022 operating cash inflow reflected $58.0 million of Acadia-related deferred revenue, making the year-over-year cash-flow comparison atypical.
Material changes and business developments
- R&D expense increased 7% year over year, mainly from higher personnel costs and facilities spending. G&A expense increased 8%, primarily from personnel costs. STK-001 program spending was broadly flat; STK-002 spending increased modestly.
- Common shares outstanding increased to 44.2 million from 39.4 million at December 31, 2022. Stoke sold approximately 4.6 million shares under its controlled equity offering in Q1 for $44.7 million net proceeds.
- Acadia collaboration revenue increased as research services were performed. At quarter-end, $47.6 million of upfront consideration remained associated with unsatisfied or partially unsatisfied performance obligations. Stoke is eligible for up to $907.5 million in potential milestones, subject to achievement, plus specified royalties and shared SYNGAP1 economics.
- In February 2023, Stoke gave notice to terminate its Cold Spring Harbor Laboratory license agreement, expecting termination within 90 days. Management said it did not expect a significant impact on intellectual property underlying current candidates or continued TANGO development.
Outlook, programs, and risks
- Management expects operating losses and negative operating cash flows to continue, with R&D, G&A, and capital expenditures expected to rise. Based on its current operating plan, management said available cash, cash equivalents, marketable securities, and restricted cash should fund operations and capital needs through the end of 2025; this estimate depends on assumptions and may prove incorrect.
- For STK-001 in Dravet syndrome, MONARCH and ADMIRAL remain ongoing. The filing reports interim pooled data from 55 patients: doses up to 45 mg were described as well tolerated; 74% of 27 patients receiving multiple 20, 30, or 45 mg doses and followed for at least three months had a reduction in convulsive seizure frequency. These are preliminary, open-label findings and may not predict later trial results. MONARCH remained on partial clinical hold for multiple doses above 45 mg and single doses above 70 mg. Stoke expected further 45 mg multiple-dose data in mid-2023, preliminary 70 mg multiple-dose data in the second half of 2023, completion of Phase 1/2a studies in 2023, and Phase 3 initiation in 2024.
- For STK-002 in autosomal dominant optic atrophy, the UK authorized the clinical trial application in April 2023, after quarter-end. Stoke planned to initiate a UK Phase 1/2 study in early 2024. The FALCON natural-history study is intended to support development.
- Principal risks include clinical and regulatory failure or delay, the partial hold and safety uncertainties, small patient populations and enrollment challenges, reliance on third-party manufacturers and collaborators, intellectual-property and licensing risks, and the need for additional financing. Equity financing may dilute shareholders; debt financing, if pursued, could impose restrictive covenants. Macroeconomic and banking-system instability could affect financing, vendors, and operations.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2023. It reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, safety, and efficacy in STK-001 trials, including the status of the partial clinical hold and whether interim seizure findings are confirmed in larger or later-stage studies.
- Whether the expected clinical milestones—additional 2023 data, Phase 1/2a completion in 2023, and Phase 3 start in 2024—were achieved, and the status and timing of STK-002’s planned study.
- Cash burn, remaining runway, and financing needs against management’s end-of-2025 runway estimate; also monitor potential dilution from further equity issuance.
- Acadia research progress, recognition of deferred revenue, and the conditions and likelihood of milestone, royalty, and co-development economics.
- Completion and consequences of the CSHL license termination, including confirmation that relevant intellectual-property rights remain sufficient for Stoke’s programs.