Stoke Therapeutics, Inc. — Q2 2021 Form 10-Q
Business context and period. Unaudited results for the quarter and six months ended June 30, 2021. Stoke is a clinical-stage biotechnology company developing RNA-based medicines using its TANGO platform. It had no approved products and generated no revenue.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $14.1m | $8.0m | $24.0m | $15.2m |
| General and administrative expense | $7.9m | $5.0m | $14.8m | $9.6m |
| Net loss | $22.0m | $13.0m | $38.8m | $24.0m |
| Basic and diluted loss per share | $0.60 | $0.39 | $1.06 | $0.73 |
| Operating cash used | Not stated by quarter | Not stated by quarter | $36.0m | $20.4m |
At June 30, 2021, cash and cash equivalents were $169.1m, marketable securities $82.2m, and restricted cash $0.2m, totaling $251.4m. Total assets were $264.5m, total liabilities $9.4m, and stockholders’ equity $255.1m. The filing reports no debt. Current assets of $260.2m substantially exceeded current liabilities of $8.2m. Accumulated deficit was $149.0m.
Six-month investing cash outflow was $83.0m, primarily from purchases of marketable securities ($82.2m) and property and equipment ($0.7m). Financing provided $0.7m, mainly from option exercises and the employee stock purchase plan. Cash, cash equivalents and restricted cash fell by $118.2m; this decline largely reflects cash invested in marketable securities as well as operating and capital spending.
Gross profit and operating margins are not meaningful because the company had no revenue. The filing does not provide a clear quarterly cash-flow figure. A hypothetical 100-basis-point interest-rate change was estimated to affect the fair value of cash equivalents and marketable securities by approximately $2.5m.
Material changes versus comparable periods
- Q2 net loss increased to $22.0m from $13.0m; six-month net loss increased to $38.8m from $24.0m.
- Six-month R&D expense rose $8.8m, reflecting higher personnel, facilities and other costs, increased STK-001 activity, and new OPA1 program spending. Six-month G&A expense rose $5.3m, principally from personnel and external services.
- Six-month operating cash use increased to $36.0m from $20.4m. Stock-based compensation was $7.2m for the 2021 half-year, versus $2.4m in 2020.
- The company began holding marketable securities during 2021; none were reported at December 31, 2020. The portfolio had $42,000 of unrealized losses at June 30, 2021.
Outlook, programs and risks
- Management expected existing cash, cash equivalents, marketable securities and restricted cash to fund operating expenses and capital expenditures into 2024, based on its current operating plan. The notes also state that liquidity was expected to cover at least twelve months from issuance. Management cautioned that assumptions may prove wrong and that additional financing will be needed over time.
- Management expects operating losses and R&D and G&A spending to continue rising; profitability and product revenue are not expected in the near term.
- STK-001 is in Phase 1/2a studies for Dravet syndrome. The 10mg, 20mg and 30mg single-ascending-dose enrollment and dosing were complete; initial safety and pharmacokinetic data were expected in Q3 2021. The multiple-ascending-dose portion began dosing in February 2021, and an open-label extension began in January 2021.
- An FDA partial clinical hold remained for MONARCH doses above 30mg following non-human-primate findings at higher doses. Dosing above 30mg in that study was not permitted. The U.K. ADMIRAL study was expected to begin enrollment and dosing in the second half of 2021, subject to potential COVID-19 impacts.
- OPA1 was Stoke’s preclinical ADOA program. Lead optimization was on track to identify a clinical candidate by year-end 2021. The company reported preclinical data showing increased OPA1 protein and improved mitochondrial function in patient-derived human cells; this was not clinical evidence of treatment benefit.
- COVID-19 had not caused reported clinical-trial delays as of the filing, but could affect enrollment, site operations, suppliers, manufacturing, and timelines. Other material risks include clinical safety and efficacy uncertainty, low patient populations, regulatory approval, third-party manufacturing and research dependence, intellectual-property rights, and access to additional capital.
- Potential license obligations include milestone payments of up to approximately $0.9m to Cold Spring Harbor Laboratory and £0.4m (approximately $0.6m at June 30, 2021) to the University of Southampton, plus royalties and other contingent costs. No material legal proceedings were reported.
Important facts for investors to verify
- Whether expected Q3 2021 MONARCH safety and pharmacokinetic data were released, and what they showed, including dose-level tolerability and the status of the FDA hold.
- Whether U.K. ADMIRAL enrollment and dosing began as planned, and whether COVID-19 or other operational issues affected trials or supply.
- Whether the stated cash runway into 2024 remains realistic as clinical and preclinical spending increases; monitor operating cash burn, financing needs and any dilution.
- Progress and evidence supporting the OPA1 program, including whether a clinical candidate was selected by the targeted year-end 2021 date.
- The company’s cash and marketable-securities composition, interest-rate exposure, and any material changes in contingent license or lease commitments.