UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ____________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 31, 2024 the registrant had
Table of Contents
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PART I. |
4 |
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Item 1. |
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Consolidated statements of operations and comprehensive loss |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
Item 3. |
26 |
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Item 4. |
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PART II. |
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Item 1. |
27 |
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Item 1A. |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
65 |
Item 3. |
65 |
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Item 4. |
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Item 5. |
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Item 6. |
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2
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including, but not limited to, statements regarding the ability of zorevunersen (STK-001) to treat the underlying causes of Dravet syndrome and reduce seizures or show improvements in behavior or cognition at the indicated dosing levels or at all, the timing and expected progress of clinical trials, our future results of operations and financial position, business strategy, prospective products, planned preclinical studies and clinical or field trials, regulatory approvals, research and development costs, and timing and likelihood of success, as well as plans and objectives of management for future operations, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A “Risk Factors.” These risks and uncertainties include, but are not limited to:
You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Stoke Therapeutics, Inc. and subsidiary
Consolidated balance sheets
(in thousands, except share and per share amounts)
(unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Prepaid expenses |
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Restricted cash - short-term |
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— |
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Interest receivable |
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Other current assets |
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Total current assets |
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$ |
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$ |
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Restricted cash - long-term |
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Operating lease right-of-use assets |
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Property and equipment, net |
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Total Assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued and other current liabilities |
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Deferred revenue - current portion |
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Total current liabilities |
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$ |
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$ |
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Deferred revenue - net of current portion |
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Other long term liabilities |
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Total long term liabilities |
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity |
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Common stock, par value of $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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$ |
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$ |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Stoke Therapeutics, Inc. and subsidiary
Consolidated statements of operations and comprehensive loss
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
( |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Interest income (expense), net |
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Other income (expense), net |
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( |
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( |
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Total other income (expense) |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding, basic |
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Comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive gain (loss): |
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Unrealized gain (loss) on marketable securities |
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( |
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Total other comprehensive gain (loss) |
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$ |
( |
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$ |
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$ |
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$ |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
Stoke Therapeutics, Inc. and subsidiary
Consolidated statements of stockholders’ equity
(in thousands, except share and per share amounts)
(unaudited)
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Common Stock |
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Additional |
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Accumulated other comprehensive gain (loss) |
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Accumulated |
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Total stockholders’ |
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Shares |
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Amount |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock related to employee stock purchase plan |
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— |
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— |
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— |
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Shares sold as part of controlled equity offering sales agreement |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Balance as of June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock related to employee stock purchase plan |
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— |
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— |
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— |
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Shares sold as part of controlled equity offering sales agreement |
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— |
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— |
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— |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock and warrants upon follow-on offering, net of underwriting discounts, commissions and offering costs |
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— |
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— |
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— |
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Balance as of June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
Stoke Therapeutics, Inc. and subsidiary
Consolidated statements of cash flows
(in thousands)
(unaudited)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization and accretion of marketable securities |
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( |
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( |
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Stock-based compensation |
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Reduction in the carrying amount of right of use assets |
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Changes in assets and liabilities: |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable, accrued liabilities and lease liabilities |
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( |
) |
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Deferred revenue |
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( |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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— |
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Purchases of property and equipment |
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( |
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( |
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Sales of marketable securities |
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Net cash (used in) provided by investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from Employee Stock Purchase Plan |
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Proceeds from issuance of common stock upon exercise of stock options |
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Proceeds from issuance of common stock in controlled equity offering sales agreements |
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Proceeds from follow-on offering, net of underwriting discounts, commissions and offering costs |
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— |
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Net cash provided by financing activities |
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Net increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash—beginning of period |
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Cash, cash equivalents and restricted cash—end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
Stoke Therapeutics, Inc. and subsidiary
Notes to Consolidated financial statements—(unaudited)
1. Nature of the business
Organization
Stoke Therapeutics, Inc. (the “Company”) was founded in June 2014 and was incorporated under the laws of the State of
Shelf Registration
In May 2022, the Company filed a universal Shelf Registration statement on Form S-3 (the “Registration Statement”) with the SEC. The Registration Statement was declared effective by the SEC on May 31, 2022, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $
Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Liquidity
The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. As of the issuance date of these unaudited consolidated financial statements, the Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least twelve months from the issuance date of these unaudited consolidated financial statements.
2. Summary of significant accounting policies and recent accounting pronouncements
Basis of presentation and consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany transactions between and among the Company and its consolidated subsidiary have been eliminated.
8
Unaudited interim financial information
The accompanying interim unaudited consolidated financial statements and related disclosures are unaudited and have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and related notes as of and for the year ended December 31, 2023, which was filed with the SEC on March 25, 2024. The Company’s financial information as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 is unaudited, but in the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented of the results of these interim periods have been included. The balance sheet information as of December 31, 2023 was derived from audited consolidated financial statements. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and disclosure of contingent assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from those estimates.
Cash, cash equivalents and restricted cash
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash in checking, sweep and money market accounts.
At June 30, 2024, restricted cash consisted of money market accounts collateralizing letters of credit issued as security deposits in connection with the Company’s leases of its corporate facilities.
Cash and cash equivalents, and restricted cash in the consolidated statements of cash flows consists of the following (in thousands):
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As of June 30, |
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2024 |
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2023 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash - short-term |
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— |
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Restricted cash - long-term |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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Emerging growth company and smaller reporting company status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.
The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the Company’s consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The Company will remain an emerging growth company until the earliest of (i) the last day of the first fiscal year (a) following the fifth anniversary of the completion of the Company's IPO, (b) in which the Company has total annual gross revenue of at least $1.235 billion or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of the Company’s common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three- year period. The Company anticipates ceasing to be an emerging growth company as of December 31, 2024, which is the last day of the fiscal year following the fifth anniversary of the completion of the Company's IPO.
The Company is also a “smaller reporting company,” meaning that in the event of an IPO the market value of its stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to the Company as a result of such offering is less than $700.0 million and its annual revenue is less than $100.0 million during the most recently completed fiscal year. The Company may continue to be a
9
smaller reporting company as long as either (i) the market value of its stock held by non-affiliates is less than $250.0 million or (ii) its annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of its stock held by non-affiliates is less than $700.0 million. If the Company is a smaller reporting company at the time it ceases to be an emerging growth company, the Company may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, the Company may choose to present only the two most recent fiscal years of audited financial statements in its Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
3. Fair value measurements
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
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Fair value measurements as of June 30, 2024 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash equivalents: |
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||||
Money market funds |
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$ |
|
|
$ |
— |
|
|
$ |
— |
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|
$ |
|
||
Total |
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$ |
|
|
$ |
— |
|
|
$ |
— |
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|
$ |
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||
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||||
Marketable Securities: |
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||||
US Government debt securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
Fair value measurements as of December 31, 2023 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash equivalents: |
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||||
Money market funds |
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$ |
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|
$ |
— |
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|
$ |
— |
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|
$ |
|
||
Total |
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$ |
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|
$ |
— |
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|
$ |
— |
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$ |
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||
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Marketable Securities: |
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||||
US Government debt securities |
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$ |
— |
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|
$ |
|
|
$ |
— |
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|
$ |
|
||
Total |
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$ |
— |
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|
$ |
|
|
$ |
— |
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|
$ |
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||
The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy. The carrying value of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.
The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds. Money market funds are publicly traded mutual funds and are presented as cash equivalents on the consolidated balance sheets as of June 30, 2024 and December 31, 2023.
The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy. Marketable securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
There were
4. Marketable securities
The following table summarizes the Company’s marketable securities as of June 30, 2024 (in thousands):
10
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June 30, 2024 |
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Amortized Cost |
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Unrealized Gains |
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Unrealized Loss |
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Fair Value |
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Marketable securities: |
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||||
US Government debt securities |
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$ |
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|
$ |
— |
|
|
$ |
( |
) |
|
$ |
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||
Total |
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$ |
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|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
The following table summarizes the Company’s marketable securities as of December 31, 2023 (in thousands):
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December 31, 2023 |
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Amortized Cost |
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Unrealized Gains |
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Unrealized Loss |
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Fair Value |
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Marketable securities: |
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||||
US Government debt securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
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||
Total |
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$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
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||
As of June 30, 2024, the weighted average maturity of the Company’s marketable securities ranges from approximately
The Company did
5. Accrued and other current liabilities
Accrued and other current liabilities consisted of the following (in thousands):
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June 30, |
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December 31, |
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2024 |
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2023 |
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||
Accrued employee compensation costs |
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$ |
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|
$ |
|
||
Accrued professional costs |
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Accrued research and development costs |
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Current portion of operating lease liabilities |
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Other current liabilities |
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||
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$ |
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$ |
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6. Commitments and contingencies
Operating lease
The Company determines whether an arrangement is a lease at inception. The Company accounts for a lease when it has the right to control the leased asset for a period of time while obtaining substantially all of the assets’ economic benefits. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. The discount rate used to determine the present value of the lease payments is the Company’s incremental borrowing rate based on the information available at lease inception, as the Company did not have information to determine the rate implicit in the leases. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments (which include initial direct costs and lease incentives). The expense is included in operating expenses in the consolidated statements of operations and comprehensive loss. The Company’s lease agreements also contain variable payments, primarily maintenance-related costs, which are expensed as incurred and not included in the measurement of the right-of-use assets and lease liabilities.
In August 2018, the Company entered into an agreement to lease approximately
In September 2021, the Company entered into an agreement to extend the initial term of the
11
Company recognized a right-of-use asset and operating lease liability of $
In December 2023, the Company entered into an agreement to extend the term of the
In December 2018, the Company entered into an agreement to lease
In June 2021, the Company amended the agreement to extend the initial term of the
Future minimum lease payments under non-cancellable leases as of June 30, 2024 were as follows (in thousands):
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
Lease balances as of June 30, 2024 were as follows (in thousands):
Operating right-of-use assets |
|
$ |
|
|
|
$ |
|
||
|
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|
||
Total operating lease liabilities |
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$ |
|
The weighted average remaining lease term and weighted average discount rate of the Company’s operating leases as of June 30, 2024 were as follows:
Weighted average remaining lease term in years |
|
|
|
|
Weighted average discount rate |
|
|
% |
Lease expense incurred under operating leases was $
License and research agreements
In April 2016, the Company entered into an exclusive, worldwide license agreement with the University of Southampton (the “Southampton Agreement”), whereby the Company acquired rights to foundational technologies related to the Company’s TANGO technology. Under the Southampton Agreement, the Company receives an exclusive, worldwide license under certain licensed patents and applications relating to TANGO. Under the Southampton Agreement, the Company may be obligated to make additional payments that are contingent upon certain milestones being achieved, as well as royalties on future product sales. These royalty obligations survive until the latest of (i) the expiration of the last valid claim of a licensed patent covering a subject product or (ii) the expiration of any regulatory exclusivity for the subject product in a country. In addition, if the Company sublicenses its rights under the Southampton Agreement, the Company is required to pay a mid-single digit percentage of the sublicense revenue to the University of Southampton. As of June 30, 2024, the Company had paid $
12
the three months ended June 30, 2023, and for the six months ended June 30, 2024 these expenses were $
7. License and collaboration agreement with Acadia Pharmaceuticals Inc.
In January 2022, the Company entered into a license and collaboration agreement with Acadia Pharmaceuticals Inc. (“Acadia”) for the discovery, development and commercialization of novel RNA-based medicines for the treatment of severe and rare genetic neurodevelopmental diseases of the central nervous system. The agreement focuses on the targets SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest. In connection with each target, the Company will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products. With respect to SYNGAP1, the Company has agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith the Company granted to Acadia worldwide, co-exclusive (with the Company) licenses for such licensed products. With respect to MECP2 and the neurodevelopmental target, the Company granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.
Pursuant to the terms of the agreement, the Company received an upfront payment of $
Acadia agreement accounting
At the commencement of the Acadia agreement, the Company identified three performance obligations consisting of pre-clinical research activities for each of the three targets, SYNGAP1, MECP2, and the undisclosed neurodevelopmental target. The exclusive or co-exclusive licenses granted to Acadia to conduct pre-clinical research activities on each of the three targets, and participation on each of the respective joint research committees were identified as promised services. However, the licenses granted to Acadia and the research activities were determined to be not distinct from each other, and therefore are considered a combined performance obligation for each of the three targets. Participation on each of the joint research committees was determined to be quantitatively and qualitatively immaterial in the context of the arrangement with Acadia.
The Company is recognizing the transaction price for the pre-clinical research activities for each of the three targets over time as the research services are provided. The transfer of control to Acadia occurs over this time period, and in management’s judgment, is the best measure of progress towards satisfying the performance obligation. An input method is used that measures the cost incurred to date in satisfying each of the three research activities in relation to the estimated total projected cost of each of the research activities to fulfill the respective obligations. The cumulative effect of revisions to estimated costs and/or the transaction price to complete the research performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.
Milestone payments that are not within the control of the Company, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. For other milestones, the Company evaluated factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. Milestones that are outside of the Company’s or Acadia’s control will not be recognized until such milestones are achieved. As to the other milestones, to date, no milestone payments have been included in the transaction price due to the uncertainty as to whether these milestones will be achieved. The Company will at the end of each reporting period reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust its estimate of the overall transaction price for each of the research activities on the three targets. Any such adjustments will be recorded on a cumulative catch-up basis.
As of June 30, 2024, the Company had $
13
8. Equity incentive plans
In June 2019, the Company’s board of directors and stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”) which became effective on June 17, 2019 and replaced the Company’s 2014 Equity Incentive Plan (the “2014 Plan”). In addition to the shares of common stock reserved for future issuance under the 2014 Plan that were added to the 2019 Plan upon its effective date, the Company initially reserved
In April 2023, the Company’s board of directors adopted the Stoke Therapeutics, Inc. 2023 Inducement Plan (the “2023 Plan”). As permitted by Nasdaq stock market rules, the Company’s stockholders were not required to approve the 2023 Plan. The 2023 Plan provides for up to
As of June 30, 2024, there were
During the three months ended June 30, 2024, the Company granted options to purchase
Stock-based compensation
As of June 30, 2024, there was $
Stock-based compensation expense recorded as research and development and general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss is as follows (in thousands):
|
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Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
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|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
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$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
2019 Employee stock purchase plan
In June 2019, the Company adopted the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective on June 18, 2019. The Company initially reserved
14
9. Net loss per share
The following table summarizes the computation of basic and diluted net loss per share of the Company (in thousands except share and per share amounts):
|
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Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
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2024 |
|
|
2023 |
|
|
2024 |
|
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2023 |
|
|
||||
Numerator: |
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|
|
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|
|
|
|
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|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Denominator: |
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Weighted-average number of common shares, |
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|
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|
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Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
The Company has included the outstanding pre-funded warrants from the April 2024 offering in the number of total outstanding shares used for the computation of basic and diluted net loss per share for the period ending June 30, 2024, since they have a de minimis exercise price. The Company’s potential dilutive securities, which include common stock options, RSUs, PSUs, and ESPP purchase rights, have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of shares of the Company’s common stock outstanding, including warrants, used to calculate both basic and diluted net loss per share is the same.
The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
|
|
June 30, |
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2024 |
|
|
2023 |
|
||
Outstanding options to purchase common stock |
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Restricted stock units |
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Total |
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10. Income taxes
The Company did
The Company did
11. Subsequent events
Since June 30, 2024, through the date of the issuance of these consolidated financial statements, the Company sold
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and consolidated results of operations together with the section entitled “Risk Factors” and our interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are a clinical-stage company dedicated to addressing the underlying causes of severe diseases by upregulating protein expression with RNA-based medicines. Using our proprietary TANGO (Targeted Augmentation of Nuclear Gene Output) approach, we are developing antisense oligonucleotides (“ASOs”) to selectively restore protein levels.
Our first compound, zorevunersen (STK-001), is in clinical testing for the treatment of Dravet syndrome, a severe and progressive genetic epilepsy. Dravet syndrome is characterized by frequent, prolonged and refractory seizures beginning within the first year of life. The disease is classified as a developmental and epileptic encephalopathy due to the developmental delays and cognitive impairment associated with it. Dravet syndrome is one of many diseases caused by a haploinsufficiency, in which a loss of approximately 50% of normal protein levels leads to disease. We have completed two Phase 1/2a open-label studies of zorevunersen, MONARCH in the United States and ADMIRAL in the United Kingdom. We also have two ongoing Open Label Extension (“OLE”) studies of zorevunersen for children and adolescents with Dravet syndrome, SWALLOWTAIL in the U.S. and LONGWING in the United Kingdom. Patients who participated in the MONARCH study in the United States or the ADMIRAL study in the United Kingdom and met study entry criteria were eligible to continue treatment in SWALLOWTAIL or LONGWING, respectively, both of which are designed to evaluate the long-term safety and tolerability of repeat doses of zorevunersen.
We are also pursuing treatment for a second haploinsufficient disease, autosomal dominant optic atrophy (“ADOA”), the most common inherited optic nerve disorder. STK-002 is our lead clinical candidate for the treatment of ADOA. STK-002 is designed to upregulate OPA1 protein expression by leveraging the non-mutant (wild-type) copy of the OPA1 gene to restore OPA1 protein expression with the aim to stop or slow vision loss in patients with ADOA. We have received authorization in the United Kingdom to proceed with a Phase 1 open-label study (OSPREY) of children and adults ages 6 to 55 who have an established diagnosis of ADOA and have evidence of a genetic mutation in the OPA1 gene. We expect the OSPREY study to start later this year.
In May 2022, we filed a universal Shelf Registration statement on Form S-3 (the “Registration Statement”) with the SEC. The Registration Statement was declared effective by the SEC on May 31, 2022, and contains two prospectuses: a base prospectus, which covers the offering, issuance and sale by us of up to a maximum aggregate offering price of $400.0 million of our common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, subscription rights to purchase common stock, preferred stock or debt securities and/or units consisting of some or all of these securities; and a sales agreement prospectus covering the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of common stock that may be issued and sold under a Controlled Equity Offering Sales Agreement (“Sales Agreement”). The specific terms of any securities to be offered pursuant to the base prospectus will be specified in a prospectus supplement to the base prospectus. The $150.0 million of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $400.0 million of securities that may be offered, issued and sold by us under the base prospectus.
As of June 30, 2024, we had issued approximately 6.5 million shares of common stock pursuant to the Sales Agreement for net proceeds of $53.4 million. Since June 30, 2024, the Company has issued approximately 0.3 million shares of common stock pursuant to the Sales Agreement for net proceeds of $4.0 million. We may terminate this at-the-market program at any time, pursuant to its terms. On April 2, 2024, we completed an underwritten public offering of our common stock and issued and sold 5,555,557 shares of common stock at a public offering price of $13.50 per share and issued pre-funded warrants to purchase 3,703,730 shares of common stock at a public offering price of $13.499 per share subject to an exercise price equal to $0.0001. The common stock and pre-funded warrants sold resulted in net proceeds of $119.9 million after deducting underwriting discounts, commissions and offering costs. No pre-funded warrants have been exercised as of June 30, 2024.
As of June 30, 2024 and December 31, 2023 we had $282.0 million and $201.4 million, respectively, in cash, cash equivalents and marketable securities.
Since inception, we have had operating losses, the majority of which are attributable to research and development activities. Our net losses were $25.7 million and $30.7 million for the three months ended June 30, 2024 and 2023, respectively and $52.1 million and $53.2 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $453.9 million.
Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We expect to continue to
16
incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses and losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products, as well as hire additional personnel, develop commercial infrastructure, pay fees to outside consultants, lawyers and accountants, and incur increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Based upon our current operating plan, we believe that our existing cash, cash equivalents and marketable securities as of June 30, 2024 will enable us to fund our operating expenses and capital expenditure requirements at least to the end of 2025. To date, we have not had any products approved for sale and have not generated any product sales. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Program Update
Dravet Syndrome Program – zorevunersen
In August 2024 we announced that the U.S. Food and Drug Administration removed the partial clinical hold on higher doses of zorevunersen in the MONARCH and SWALLOWTAIL studies in the United States. While the MONARCH study has been completed, patients in the SWALLOWTAIL OLE study in the United States currently receive chronic dosing every four months of 45mg of zorevunersen. In the United Kingdom, Patients in the LONGWING OLE study receive chronic dosing every four months of 45mg of zorevunersen as well.
Discussions with global regulatory agencies are underway and we are on track to provide a regulatory update on Phase 3 registrational plans for zorevunersen in the second half of 2024.
Financial operations overview
Revenue
We currently do not have any products approved for sale and have not generated any revenue from product sales since inception through June 2024. If we are able to successfully develop, receive regulatory approval for and commercialize any of our current or future product candidates alone or in collaboration with third parties, we may generate revenue from the sales of these product candidates.
In January 2022, we entered into a license and collaboration agreement with Acadia Pharmaceuticals Inc. (“Acadia”) for the discovery, development and commercialization of novel RNA-based medicines for the treatment of severe and rare genetic neurodevelopmental diseases of the central nervous system. The agreement focuses on the targets SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest. In connection with each target, we will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products. With respect to SYNGAP1, we have agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith we granted to Acadia worldwide, co-exclusive (with us) licenses for such licensed products. With respect to MECP2 and the neurodevelopmental target, we granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.
Pursuant to the terms of the agreement, we received an upfront payment of $60.0 million from Acadia. Acadia agreed to fund the research to identify potential licensed products for MECP2 and the neurodevelopmental target, and we will equally fund with Acadia the research to identify potential licensed products for SYNGAP1. We are eligible to receive up to $907.5 million in potential total milestone payments based upon the achievement of certain development, regulatory, first commercial sales and sales milestone events across the programs for the three targets, assuming each milestone were achieved at least once. With respect to licensed products for MECP2 and the neurodevelopmental target, we are also eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net sales by Acadia of licensed products worldwide. Royalties payable under the agreement are subject to standard royalty reductions. For SYNGAP1 licensed products that we are co-developing and co-commercializing, we will be responsible for 50% of the development and commercialization costs and will receive 50% of the profits from global commercialization. We are provided with a co-development and co-commercialization opt out option relating to the SYNGAP1 target
17
indication at our discretion. Such opt-out would reduce development and commercialization milestones but would provide us with royalties on an escalating basis attributable to net sales milestones.
See Note 7—License and Collaboration Agreement with Acadia Pharmaceuticals, Inc. of the notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Operating expenses
Research and development
Research and development expenses consist primarily of costs incurred for the development of our discovery work and preclinical programs, which include:
We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates. Our direct research and development expenses are tracked on a program-by-program basis from the point a program becomes a clinical candidate for us and consists primarily of external costs, such as fees paid to consultants, central laboratories and contractors in connection with our preclinical activities. We do not allocate employee costs, costs associated with our technology or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are currently deployed across multiple product development programs and, as such, are not separately classified. We use internal resources to manage our development activities and our employees work across multiple development programs and, therefore, we do not track their costs by program.
The table below summarizes our research and development expenses incurred by development program (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Zorevunersen (STK-001) |
|
$ |
6,543 |
|
|
$ |
7,055 |
|
|
$ |
15,076 |
|
|
$ |
13,132 |
|
STK-002 |
|
|
1,509 |
|
|
|
1,552 |
|
|
$ |
3,215 |
|
|
|
3,689 |
|
SYNGAP1 |
|
|
239 |
|
|
|
25 |
|
|
$ |
523 |
|
|
|
101 |
|
MECP2 |
|
|
254 |
|
|
|
277 |
|
|
$ |
497 |
|
|
|
408 |
|
Non-program specific and unallocated research and |
|
|
12,591 |
|
|
|
11,642 |
|
|
|
24,193 |
|
|
|
22,852 |
|
Total research and development expenses |
|
$ |
21,136 |
|
|
$ |
20,551 |
& | ||||||||