Stoke Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited financial statements; amounts below are in U.S. dollars unless noted. Stoke is a clinical-stage biotechnology company developing RNA-based medicines using its TANGO platform. It had no approved products or product sales.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $3.2 million | $0 | $6.2 million | $0 |
| Research and development | $18.4 million | $14.1 million | $36.7 million | $24.0 million |
| General and administrative | $10.1 million | $7.9 million | $19.6 million | $14.8 million |
| Operating loss | $(25.2) million | $(22.0) million | $(50.0) million | $(38.9) million |
| Net loss | $(24.7) million | $(22.0) million | $(49.3) million | $(38.8) million |
| Net loss per share, diluted | $(0.63) | $(0.60) | $(1.29) | $(1.06) |
Operating expenses exceeded revenue substantially; conventional operating or gross margins are not meaningful for this development-stage business. Interest and other income totaled $0.6 million for Q2 and $0.7 million for the first half. The company recorded no income tax benefit, citing a full valuation allowance on deferred tax assets.
- Liquidity at June 30, 2022: Cash and cash equivalents of $67.8 million, marketable securities of $207.9 million, and restricted cash of $0.6 million; combined total was $276.2 million, versus $220.4 million at December 31, 2021.
- Cash flows, first half: Operating cash provided was $12.6 million versus $36.0 million used in the prior-year period. The 2022 inflow primarily reflected $55.8 million of Acadia-related deferred revenue, not operating profitability. Investing activities used $135.6 million, largely reflecting net purchases of marketable securities; financing activities provided $45.9 million.
- Debt and liabilities: The filing reports no credit facility or committed capital sources and does not identify outstanding borrowings. Total liabilities were $77.1 million, including $55.8 million of deferred revenue and $6.0 million of operating lease liabilities. Operating lease commitments totaled $6.4 million.
- Equity: Stockholders’ equity was $224.3 million and accumulated deficit was $245.4 million at June 30. The company raised $45.3 million net through its controlled equity offering during the first half, issuing approximately 2.2 million shares.
Material changes versus the prior comparable period
- Q2 revenue began with the Acadia collaboration; the prior-year quarter had no revenue. First-half revenue was $6.2 million, primarily recognized over time as research services were performed.
- First-half R&D rose 52.7% to $36.7 million, driven mainly by increased personnel costs and spending on STK-001 and STK-002. First-half G&A rose 32.0% to $19.6 million, largely due to higher personnel and outside-service costs.
- First-half net loss increased 27.2% to $49.3 million. Cash and cash equivalents declined from year-end, while marketable securities increased; total cash, cash equivalents, marketable securities and restricted cash increased overall.
- Accumulated other comprehensive loss was $1.3 million at June 30, including $1.1 million of first-half unrealized losses on available-for-sale marketable securities.
Outlook, management commentary and risks
- Management expects continued operating losses, negative cash flows over the longer term, and rising R&D, G&A and capital expenditures. It stated that available cash, cash equivalents, marketable securities and restricted cash should fund operations and capital needs into 2025 under its current operating plan; this estimate depends on assumptions and resources could be used sooner than expected. The notes also state that funds are expected to cover requirements for at least 12 months from issuance.
- The January 2022 Acadia agreement covers SYNGAP1, MECP2 (Rett syndrome) and an undisclosed neurodevelopmental target. Stoke received a $60 million upfront payment and is eligible for up to $907.5 million in potential milestones. MECP2 and the undisclosed-target research is funded by Acadia; SYNGAP1 research costs are shared equally. Stoke and Acadia will share SYNGAP1 development and commercialization costs and profits 50/50, subject to an opt-out. Milestones are uncertain and none had been included in the transaction price as of June 30.
- STK-001 is in Phase 1/2a and open-label extension studies for Dravet syndrome; dosing in the UK LONGWING extension began in May. A partial FDA clinical hold on MONARCH dosing above 45 mg remained in place. STK-002 is in development for autosomal dominant optic atrophy; management cited positive preclinical non-human-primate target-engagement and protein-upregulation findings.
- Management reported no significant clinical-trial delays from COVID-19 to date, but cautioned that the pandemic could affect enrollment, site activity, staffing, suppliers and timelines. Other central risks include clinical and regulatory failure, adverse effects, difficulty enrolling patients in rare-disease trials, reliance on third parties and collaborators, intellectual-property challenges, competition, and the need for additional financing. Additional equity financing could dilute shareholders; financing may not be available on acceptable terms.
- A hypothetical 100-basis-point interest-rate change was estimated to affect the fair value of cash equivalents and marketable securities by approximately $2.8 million. Management said inflation had not materially affected results for the periods reported.
- No material legal proceedings were reported. Management concluded disclosure controls and procedures were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether the stated runway into 2025 remains supportable as clinical spending, hiring and manufacturing investment increase, and how much liquidity is readily available versus invested in securities.
- Clinical progress and safety findings for STK-001, including the scope and status of the FDA hold above 45 mg, and the evidence and development timeline for STK-002.
- Acadia collaboration execution, the pace and cost of research obligations, revenue recognition, and the conditions and likelihood of potential milestones and royalties.
- The effect of further equity issuance, including use of the new shelf registration and controlled equity offering capacity, on share count and shareholder dilution.
- Whether increases in R&D and G&A spending, together with trial enrollment, supply-chain and regulatory risks, alter the company’s funding needs or development plans.