Stoke Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited. Unless otherwise noted, amounts are in U.S. dollars.
Business context
Stoke is a clinical-stage biotechnology company developing RNA-based antisense oligonucleotide medicines using its TANGO platform. It had no approved products and generated no revenue from product sales. Its lead program, STK-001, is being studied for Dravet syndrome; STK-002 was being developed for autosomal dominant optic atrophy (ADOA).
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $14.4m | $8.1m | $38.4m | $23.3m |
| General and administrative expense | $8.3m | $5.6m | $23.2m | $15.2m |
| Total operating expenses | $22.7m | $13.7m | $61.5m | $38.5m |
| Net loss | $22.6m | $13.7m | $61.4m | $37.7m |
| Net loss per share, basic and diluted | $0.61 | $0.41 | $1.67 | $1.14 |
No revenue means a gross margin is not meaningful. Q3 R&D expense rose about 77% and G&A about 49% year over year; management attributed the increases mainly to higher headcount and advancing development activity. Stock-based compensation was $11.8m for the first nine months of 2021, versus $4.2m in the comparable 2020 period.
- Liquidity: At September 30, 2021, cash and cash equivalents were $149.0m, marketable securities $87.1m, and restricted cash $0.7m; combined, $236.9m. Combined cash, securities and restricted cash were $287.5m at December 31, 2020.
- Cash flow: Nine-month cash used in operating activities was $50.6m, compared with $31.3m in 2020. Investing cash use was $88.2m, primarily reflecting $87.2m of marketable-security purchases and $1.0m of property and equipment purchases. Financing provided $1.1m. Cash, cash equivalents and restricted cash decreased $137.8m, largely reflecting the movement of funds into marketable securities.
- Debt and obligations: The filing reports no credit facility or committed capital source and no financial borrowings. Operating lease liabilities totaled $5.3m; undiscounted future lease payments were $7.8m. Total liabilities were $16.3m, against $253.8m in assets.
- Equity: Accumulated deficit was $171.6m and stockholders’ equity was $237.5m at quarter-end. Common shares outstanding were 36.8m at September 30, 2021.
Material changes and development updates
- Nine-month net loss increased 63% year over year. R&D expense increased $15.1m, including higher STK-001 spending, $2.2m of STK-002 program expense, and increased personnel and facilities costs. G&A expense increased $8.0m, principally due to personnel and external services.
- In September, the company reported interim MONARCH study data indicating that single doses of STK-001 up to 30mg and multiple doses of 20mg were well tolerated at the time of analysis, with no study-drug-related safety concerns reported. Preliminary seizure-diary analyses suggested a trend toward reduced convulsive seizure frequency; the filing cautions that these are interim findings.
- The FDA allowed the MONARCH study to add a 45mg dose level. Dosing above 45mg remained subject to a partial clinical hold. Dosing and enrollment were ongoing at 30mg in the multiple-ascending-dose portion; the company also reported that specified lower-dose cohorts had completed enrollment and dosing.
- The first patient was dosed in the UK ADMIRAL study in September 2021. The filing also reports that STK-002 was nominated as the lead ADOA candidate in November 2021, after the reporting period.
Outlook, risks and contingencies
Management expected operating losses and negative cash flows to continue, with R&D, G&A and capital expenditures expected to increase. The company’s operating plan estimated that September 30 resources would fund operations and capital requirements through the end of 2023. Separately, the financial-statement liquidity disclosure said resources were expected to be sufficient for at least twelve months from issuance. Both estimates depend on assumptions and actual spending may be higher.
Stoke expects to need additional financing before product revenue, which may be unavailable or require dilutive equity issuance or restrictive debt terms. It had no products approved and could not estimate when, if ever, product revenue might begin. Principal risks include clinical and regulatory uncertainty, the continuing partial hold above 45mg for STK-001, patient enrollment and rare-disease market limitations, manufacturing and third-party dependence, intellectual-property protection, and potential COVID-19 effects. The company said it had not experienced clinical-trial delays due to COVID-19 to date, while noting potential future impacts.
There were no material legal proceedings reported. The company disclosed operating lease commitments and contingent milestone, royalty and sublicense obligations under its Cold Spring Harbor Laboratory and University of Southampton licenses; timing and likelihood of milestones or future sales could not be estimated. Management concluded disclosure controls were effective, and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- How subsequent MONARCH safety, pharmacokinetic and efficacy data develop, and whether the FDA changes or lifts the remaining dose restriction.
- Whether interim seizure trends translate into clinically meaningful and durable benefit in larger or later-stage studies.
- Actual cash burn, operating-plan assumptions supporting runway through 2023, and the timing and terms of any additional financing.
- Progress, costs and timelines for STK-001 and STK-002, including the post-quarter STK-002 candidate nomination.
- Potential clinical-trial, supply-chain and enrollment effects from COVID-19, as well as lease and licensing commitments.