Stoke Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Unaudited consolidated results; amounts below are in U.S. dollars unless noted. Stoke is an early-stage biotechnology company developing TANGO-based antisense oligonucleotides. It had no approved products and generated no revenue.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $8.1m | $6.5m | $23.3m | $16.7m |
| General and administrative expense | $5.6m | $3.3m | $15.2m | $7.9m |
| Total operating expenses / operating loss | $13.7m | $9.8m | $38.5m | $24.6m |
| Net loss | $13.7m | $8.6m | $37.7m | $22.2m |
| Basic and diluted loss per share | $0.41 | $0.26 | $1.14 | $1.71 |
Gross margin and operating margin are not meaningful because the company had no revenue. Lower interest income—reflecting reduced cash balances and market rates—partly explains why quarterly net loss rose more than operating loss. Nine-month weighted-average shares increased substantially year over year, in part because the 2019 period included the June 2019 IPO.
- Cash and liquidity: Cash, cash equivalents and restricted cash were $191.7m at September 30, 2020, down from $222.7m at December 31, 2019. Current assets were $195.5m and current liabilities $6.7m; stockholders’ equity was $192.5m.
- Cash flow: Nine-month operating cash use was $31.3m, compared with $20.9m in 2019. Investing cash use was $1.0m; financing provided $1.2m, mainly from option exercises and the employee stock purchase plan. Cash declined by $31.0m.
- Debt and obligations: The filing reports no credit facility or committed capital source and no material debt balance. Operating lease liabilities totaled $1.4m; scheduled lease payments were $1.5m. License agreements include contingent milestone, royalty and sublicense-payment obligations whose timing and likelihood were not estimable.
- Runway and financing: Management expected September 30 cash to fund operating and capital needs into 2023, based on its current plan and assumptions. The financial-statement note separately states cash was expected to cover at least 12 months from issuance. A $400m shelf registration, including up to $150m of shares under a controlled equity offering agreement, was effective; no securities had been issued under it by September 30.
Changes versus comparable periods
- Q3 operating expenses rose $3.9m year over year; net loss increased $5.1m. For the first nine months, operating expenses increased $13.8m and net loss increased $15.5m.
- R&D growth reflected higher staffing, facilities and other development costs. Q3 STK-001 program expense was $2.8m versus $3.2m a year earlier, while total R&D increased. G&A increases reflected headcount, outside services and stock-based compensation.
- Cash used in operations increased $10.4m for the nine-month comparison. 2019 financing included approximately $149.4m of net IPO proceeds; 2020 had no comparable equity offering in the reported period.
- At September 30, cash was $31.0m below year-end 2019. Accumulated deficit increased to $95.7m from $58.0m.
Outlook, programs and key risks
- Management expects continued operating losses and rising R&D, G&A and capital spending. Profitability depends on successful development, regulatory approval and commercialization; timing and costs remain uncertain. Further financing may be needed and could be unavailable or dilutive.
- STK-001 / Dravet syndrome: The Phase 1/2a MONARCH study began dosing in August 2020. The FDA’s partial clinical hold applied to doses above 20 mg when initially announced, following adverse findings in non-human primates at doses above the then-current no-observed-adverse-effect level. On October 7, after quarter-end, the company reported FDA agreement to add a 30 mg single dose level; dosing above 30 mg remained on hold. A multiple-ascending-dose portion was proposed subject to FDA review. Enrollment and dosing were ongoing, with preliminary clinical data expected in 2021.
- OPA1 / autosomal dominant optic atrophy: In November 2020, after quarter-end, Stoke announced OPA1 as a preclinical target. The company described preclinical findings of increased OPA1 protein and improved ATP levels in laboratory models; these are not clinical efficacy results.
- COVID-19: Vendors and manufacturers had continued operating, but the company noted enrollment slowdown in its observational study and potential risks to trial recruitment, site activities, supply and timelines. Clinical-trial sites and hospital resources could be disrupted.
- Other risks: Early-stage clinical and preclinical results may not predict later outcomes; rare-disease enrollment may be difficult; safety, regulatory, manufacturing, intellectual-property and third-party-provider risks could delay or prevent development. The company had no material legal proceedings reported and stated disclosure controls were effective.
Most important facts for investors to verify
- Current unrestricted cash, actual cash burn and whether the projected runway into 2023 remains supported by updated operating assumptions.
- MONARCH trial enrollment, dose escalation, FDA hold status, safety findings and timing and content of clinical data.
- Whether the proposed multiple-ascending-dose study and any protocol changes received FDA clearance, and how COVID-19 affects trial execution.
- Progress and reproducibility of OPA1 preclinical findings before treating them as evidence of clinical potential.
- Future financing needs and potential dilution from the shelf or controlled equity offering, alongside rising operating expenses.
- Contingent license milestones, royalties and other commitments, and any changes in supply, regulatory or intellectual-property risks.