Stoke Therapeutics, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Stoke is an early-stage biopharmaceutical company developing antisense medicines using its TANGO platform. It had no approved products and generated no revenue.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $7.2 million | $4.1 million |
| General and administrative | $4.5 million | $2.2 million |
| Total operating expenses | $11.7 million | $6.3 million |
| Net loss | $11.0 million | $5.7 million |
| Basic and diluted loss per share | $0.34 | $6.89 |
| Net cash used in operating activities | $10.8 million | $6.5 million |
Cash, cash equivalents and restricted cash were $211.5 million at March 31, 2020, down from $222.7 million at December 31, 2019. The company reported $214.3 million in stockholders’ equity and $6.5 million in total liabilities, including $1.9 million of operating lease liabilities. It reported no debt facility or committed financing. Operating margin is not meaningful because the company had no revenue.
Management stated that its current operating plan supported funding operating and capital requirements into 2023; the financial-statement liquidity note separately said cash was expected to cover requirements for at least 12 months from issuance. These are management estimates dependent on assumptions and spending needs.
Material changes versus Q1 2019
- Net loss increased by $5.3 million, as R&D rose $3.1 million and G&A rose $2.3 million. Management attributed the R&D increase mainly to STK-001 activity, personnel, consulting and facilities; G&A growth reflected additional personnel and public-company support costs.
- Operating cash use increased by $4.2 million. Cash and cash equivalents were substantially higher than in March 2019, reflecting the 2019 IPO proceeds.
- Weighted-average shares rose substantially following the June 2019 IPO and conversion of preferred stock; therefore, the year-over-year loss-per-share figures are not directly comparable.
Outlook, developments and risks
- STK-001, intended for Dravet syndrome, received FDA confirmation in Q1 2020 that Part A of the planned Phase 1/2a Monarch trial could proceed. Stoke planned to begin enrolling and dosing in the second half of 2020 and anticipated preliminary study data in 2021.
- The FDA placed a partial clinical hold on higher-dose Part B pending additional nonclinical safety information. The company said the hold was not due to an identified manufacturing or safety issue and had started additional single-dose toxicology studies to support removal of the hold.
- COVID-19 had not delayed trial initiation as of the filing, and vendors and manufacturers were then operating without reported disruption. However, the company warned that the pandemic could affect enrollment, site activity, supply, staffing and timelines; remote monitoring and visits were among mitigation efforts.
- Management expected losses and R&D, G&A and capital spending to increase. The company expected to need additional financing eventually and warned it might not be available on acceptable terms or at all.
- Stoke planned to nominate a second preclinical candidate in the second half of 2020. It had received U.S. Orphan Drug Designation for STK-001 in August 2019.
- Key risks include clinical and regulatory uncertainty, the Part B hold, COVID-19 disruption, reliance on third-party manufacturers and research vendors, limited patient populations, funding needs, and dependence on licensed intellectual property. Management reported no material legal proceedings and said disclosure controls were effective.
Most important facts for investors to verify
- Whether Part A began on schedule, and the pace of trial enrollment and dosing amid COVID-19 conditions.
- Results and regulatory implications of the additional toxicology studies, and whether the FDA lifts the Part B partial hold.
- Actual cash burn and whether the stated runway into 2023 remains supported as development spending increases.
- Progress toward the expected 2021 preliminary data and the planned second candidate nomination in the second half of 2020.
- Any material changes in supplier continuity, clinical-trial operations, financing plans or intellectual-property rights.