stok-10q_20210630.htm
false Q2 --12-31 0001623526 true true true true true true true true stok:AccruedAndOtherCurrentLiabilities us-gaap:LiabilitiesNoncurrent P2Y9M18D 0001623526 2021-01-01 2021-06-30 xbrli:shares 0001623526 2021-08-03 iso4217:USD 0001623526 2021-06-30 0001623526 2020-12-31 iso4217:USD xbrli:shares 0001623526 2021-04-01 2021-06-30 0001623526 2020-04-01 2020-06-30 0001623526 2020-01-01 2020-06-30 0001623526 us-gaap:CommonStockMember 2019-12-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001623526 us-gaap:RetainedEarningsMember 2019-12-31 0001623526 2019-12-31 0001623526 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001623526 2020-01-01 2020-03-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001623526 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001623526 us-gaap:CommonStockMember 2020-03-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001623526 us-gaap:RetainedEarningsMember 2020-03-31 0001623526 2020-03-31 0001623526 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001623526 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001623526 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001623526 us-gaap:CommonStockMember 2020-06-30 0001623526 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001623526 us-gaap:RetainedEarningsMember 2020-06-30 0001623526 2020-06-30 0001623526 us-gaap:CommonStockMember 2020-12-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001623526 us-gaap:RetainedEarningsMember 2020-12-31 0001623526 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001623526 2021-01-01 2021-03-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001623526 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001623526 stok:FollowOnOfferingMember us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001623526 stok:FollowOnOfferingMember 2021-01-01 2021-03-31 0001623526 us-gaap:CommonStockMember 2021-03-31 0001623526 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001623526 us-gaap:RetainedEarningsMember 2021-03-31 0001623526 2021-03-31 0001623526 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001623526 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001623526 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001623526 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001623526 us-gaap:CommonStockMember 2021-06-30 0001623526 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001623526 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001623526 us-gaap:RetainedEarningsMember 2021-06-30 0001623526 2020-07-01 2020-07-31 0001623526 stok:AtTheMarketMember 2020-07-01 2020-07-31 0001623526 stok:AtTheMarketMember 2021-06-30 0001623526 stok:UnderwrittenPublicOfferingMember us-gaap:CommonStockMember 2020-11-01 2020-11-30 0001623526 stok:UnderwrittenPublicOfferingMember us-gaap:CommonStockMember 2020-11-30 0001623526 us-gaap:OverAllotmentOptionMember us-gaap:CommonStockMember 2020-11-01 2020-11-30 0001623526 us-gaap:CommonStockMember 2020-11-01 2020-11-30 0001623526 us-gaap:AccountingStandardsUpdate201602Member 2021-06-30 0001623526 us-gaap:AccountingStandardsUpdate201711Member 2021-06-30 0001623526 us-gaap:AccountingStandardsUpdate201813Member 2021-06-30 0001623526 us-gaap:AccountingStandardsUpdate201912Member 2021-06-30 0001623526 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001623526 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001623526 us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2021-06-30 0001623526 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001623526 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2020-12-31 0001623526 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MoneyMarketFundsMember 2020-12-31 0001623526 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001623526 us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001623526 2020-01-01 2020-12-31 0001623526 us-gaap:CorporateDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:CommercialPaperMember 2021-06-30 0001623526 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2021-06-30 0001623526 us-gaap:AccountingStandardsUpdate201602Member 2020-01-01 0001623526 us-gaap:AccountingStandardsUpdate201602Member srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2020-01-01 utr:sqft 0001623526 2018-08-01 2018-08-31 0001623526 2018-08-31 xbrli:pure 0001623526 2018-12-01 2018-12-31 0001623526 2018-12-31 stok:Option 0001623526 stok:LeaseExtensionEndDateMember 2021-06-01 2021-06-30 0001623526 stok:LeaseExtensionEndDateMember 2021-06-30 0001623526 srt:DirectorMember 2021-04-01 2021-06-30 0001623526 srt:DirectorMember 2021-01-01 2021-06-30 0001623526 srt:DirectorMember 2020-04-01 2020-06-30 0001623526 srt:DirectorMember 2020-01-01 2020-06-30 0001623526 stok:ColdSpringHarborLaboratoryAgreementMember 2015-07-01 2015-07-31 0001623526 stok:ColdSpringHarborLaboratoryAgreementMember 2021-01-01 2021-06-30 0001623526 stok:ColdSpringHarborLaboratoryAgreementMember 2021-06-30 0001623526 stok:ColdSpringHarborLaboratoryAgreementMember 2020-01-01 2020-06-30 iso4217:GBP 0001623526 stok:SouthamptonAgreementMember 2014-06-01 2014-06-30 0001623526 stok:SouthamptonAgreementMember 2021-06-30 0001623526 stok:SouthamptonAgreementMember 2020-12-31 0001623526 stok:SouthamptonAgreementMember 2021-04-01 2021-06-30 0001623526 stok:SouthamptonAgreementMember 2020-04-01 2020-06-30 0001623526 stok:SouthamptonAgreementMember 2021-01-01 2021-06-30 0001623526 stok:SouthamptonAgreementMember 2020-01-01 2020-06-30 0001623526 stok:TwoThousandAndNineteenEquityIncentivePlanMember 2019-06-30 0001623526 stok:TwoThousandAndNineteenEquityIncentivePlanMember 2019-06-01 2019-06-30 0001623526 stok:TwoThousandAndFourteenEquityIncentivePlanMember 2021-06-30 0001623526 stok:TwoThousandAndNineteenEquityIncentivePlanMember 2021-06-30 0001623526 us-gaap:ResearchAndDevelopmentExpenseMember 2021-04-01 2021-06-30 0001623526 us-gaap:ResearchAndDevelopmentExpenseMember 2020-04-01 2020-06-30 0001623526 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-06-30 0001623526 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-06-30 0001623526 us-gaap:GeneralAndAdministrativeExpenseMember 2021-04-01 2021-06-30 0001623526 us-gaap:GeneralAndAdministrativeExpenseMember 2020-04-01 2020-06-30 0001623526 us-gaap:GeneralAndAdministrativeExpenseMember 2021-01-01 2021-06-30 0001623526 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2019-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2021-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2021-01-01 2021-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2021-04-01 2021-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2020-04-01 2020-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember 2020-01-01 2020-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember srt:MaximumMember 2019-06-01 2019-06-30 0001623526 stok:TwoThousandAndNineteenEmployeeStockPurchasePlanMember srt:MaximumMember 2019-06-30 0001623526 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-06-30 0001623526 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-06-30 0001623526 2020-03-27 2020-03-27

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

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: 001-38938

 

Stoke Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-1144582

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

45 Wiggins Ave

Bedford, Massachusetts

01730

(Address of principal executive offices)

(Zip Code)

(781430-8200

(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

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

STOK

 

Nasdaq Global Select Market

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.     Yes      No  

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).    Yes      No  

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

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

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 August 3, 2021 the registrant had 36,749,090 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed consolidated balance sheets

4

 

Condensed consolidated statements of operations and comprehensive loss

5

 

Condensed consolidated statements of stockholders’ equity

6

 

Condensed consolidated statements of cash flows

7

 

Notes to unaudited condensed consolidated financial statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II.

OTHER INFORMATION

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

Signatures

69

 

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 statements regarding 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:

 

the direct and indirect impact of COVID-19 on our business, financial condition and operations, including on our expenses, supply chain, strategic partners, research and development costs, clinical trials and employees;

 

our ability to become profitable;

 

our ability to procure sufficient funding;

 

our limited operating history;

 

our ability to develop, obtain regulatory approval for and commercialize STK-001 and our future product candidates, including any impact from COVID-19;

 

our success in early preclinical studies or clinical trials, which may not be indicative of results obtained in later studies or trials;

 

our ability to obtain regulatory approval to commercialize STK-001 or any other future product candidate;

 

our ability to identify patients with the diseases treated by STK-001 or our future product candidates, and to enroll patients in trials;

 

the success of our efforts to use TANGO to expand our pipeline of product candidates and develop marketable products;

 

our ability to precisely upregulate protein expression in OPA1 protein-deficient cells and to treat the underlying cause of ADOA;

 

our ability to obtain, maintain and protect our intellectual property;

 

our reliance upon intellectual property licensed from third parties;

 

our ability to identify, recruit and retain key personnel;

 

our financial performance; and

 

developments or projections relating to our competitors or our industry.

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.

Condensed consolidated balance sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

169,070

 

 

$

287,308

 

Marketable Securities

 

 

82,156

 

 

 

 

Prepaid expenses and other current assets

 

 

8,612

 

 

 

6,435

 

Restricted cash - short-term

 

 

147

 

 

 

 

Deferred financing costs

 

 

117

 

 

 

181

 

Interest receivable

 

 

131

 

 

6

 

Total current assets

 

$

260,233

 

 

$

293,930

 

Restricted cash

 

 

75

 

 

205

 

Operating lease right-of-use assets

 

 

1,258

 

 

 

1,115

 

Property and equipment, net

 

 

2,884

 

 

 

2,675

 

Total assets

 

$

264,450

 

 

$

297,925

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

963

 

 

$

1,495

 

Accrued and other current liabilities

 

 

7,234

 

 

 

9,930

 

Total current liabilities

 

$

8,197

 

 

$

11,425

 

Long term liabilities

 

 

1,184

 

 

 

422

 

Total liabilities

 

$

9,381

 

 

$

11,847

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, par value of $0.0001 per share; 300,000,000 shares

   authorized, 36,722,669 and 36,577,149 shares issued and outstanding as

   of June 30, 2021 and December 31, 2020, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

404,145

 

 

 

396,352

 

Accumulated other comprehensive loss

 

 

(42

)

 

 

 

Accumulated deficit

 

 

(149,038

)

 

 

(110,278

)

Total stockholders’ equity

 

$

255,069

 

 

$

286,078

 

Total liabilities and stockholders’ equity

 

$

264,450

 

 

$

297,925

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


Stoke Therapeutics, Inc.

Condensed consolidated statements of operations and comprehensive loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,095

 

 

 

7,968

 

 

 

24,008

 

 

 

15,183

 

General and administrative

 

 

7,934

 

 

 

5,044

 

 

 

14,848

 

 

 

9,563

 

Total operating expenses

 

 

22,029

 

 

 

13,012

 

 

 

38,856

 

 

 

24,746

 

Loss from operations

 

 

(22,029

)

 

 

(13,012

)

 

 

(38,856

)

 

 

(24,746

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

34

 

 

 

39

 

 

 

40

 

 

 

704

 

Other income (expense), net

 

 

28

 

 

 

14

 

 

 

56

 

 

 

44

 

Total other income

 

 

62

 

 

 

53

 

 

 

96

 

 

 

748

 

Net loss

 

$

(21,967

)

 

$

(12,959

)

 

$

(38,760

)

 

$

(23,998

)

Net loss per share, basic and diluted

 

$

(0.60

)

 

$

(0.39

)

 

$

(1.06

)

 

$

(0.73

)

Weighted-average common shares outstanding, basic

   and diluted

 

 

36,708,188

 

 

 

33,054,656

 

 

 

36,675,876

 

 

 

32,976,026

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(21,967

)

 

$

(12,959

)

 

$

(38,760

)

 

$

(23,998

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(42

)

 

 

 

 

 

(42

)

 

 

 

Total other comprehensive loss

 

$

(42

)

 

$

 

 

$

(42

)

 

$

 

Comprehensive loss

 

$

(21,925

)

 

$

(12,959

)

 

$

(38,718

)

 

$

(23,998

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


Stoke Therapeutics, Inc.

Condensed consolidated statements of stockholders’ equity

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Common Stock

 

 

Additional

paid-in capital

 

 

Accumulated other comprehensive loss

 

 

Accumulated

deficit

 

 

Stockholders’

equity

 

 

 

Shares

 

 

Amount

 

 

Amount

 

 

Amount

 

 

Amount

 

 

Amount

 

Balance as of December 31, 2019

 

 

32,861,842

 

 

$

3

 

 

$

282,460

 

 

$

 

 

$

(58,035

)

 

$

224,428

 

Net Loss

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

(11,039

)

 

 

(11,039

)

Stock-based compensation

 

 

 

 

 

 

 

 

754

 

 

 

 

 

 

 

 

 

754

 

Issuance of common stock upon exercise of stock options

 

 

105,508

 

 

 

 

 

 

199

 

 

 

 

 

 

 

 

 

199

 

Balance as of March 31, 2020

 

 

32,967,350

 

 

$

3

 

 

$

283,413

 

 

$

-

 

 

$

(69,074

)

 

$

214,342

 

Net loss

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

(12,959

)

 

 

(12,959

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,649

 

 

 

 

 

 

 

 

 

1,649

 

Issuance of common stock upon exercise of stock options

 

 

245,194

 

 

 

 

 

 

368

 

 

 

 

 

 

 

 

 

368

 

Balance as of June 30, 2020

 

 

33,212,544

 

 

$

3

 

 

$

285,430

 

 

$

 

 

$

(82,033

)

 

$

203,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

36,577,149

 

 

$

4

 

 

$

396,352

 

 

$

 

 

$

(110,278

)

 

$

286,078

 

Net loss

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

(16,793

)

 

 

(16,793

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,698

 

 

 

 

 

 

 

 

 

2,698

 

Issuance of common stock upon exercise of stock options

 

 

111,858

 

 

 

 

 

 

371

 

 

 

 

 

 

 

 

 

371

 

Issuance of common stock upon follow-on offering, net of underwriting discounts and offering costs

 

 

 

 

 

 

 

 

(64

)

 

 

 

 

 

 

 

 

(64

)

Issuance of common stock related to employee stock purchase plan

 

 

8,801

 

 

 

 

 

 

175

 

 

 

 

 

 

 

 

 

175

 

Balance as of March 31, 2021

 

 

36,697,808

 

 

$

4

 

 

$

399,532

 

 

$

 

 

$

(127,071

)

 

$

272,465

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,967

)

 

 

(21,967

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(42

)

Stock-based compensation

 

 

 

 

 

 

 

 

4,452

 

 

 

 

 

 

 

 

 

4,452

 

Issuance of common stock upon exercise of stock options

 

 

24,861

 

 

 

 

 

 

161

 

 

 

 

 

 

 

 

 

161

 

Balance as of June 30, 2021

 

 

36,722,669

 

 

$

4

 

 

$

404,145

 

 

$

(42

)

 

$

(149,038

)

 

$

255,069

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


Stoke Therapeutics, Inc.

Condensed consolidated statements of cash flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(38,760

)

 

$

(23,998

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

485

 

 

 

417

 

Amortization and accretion of marketable securities

 

 

37

 

 

 

-

 

Stock-based compensation

 

 

7,150

 

 

 

2,403

 

Loss on disposal of property and equipment

 

 

29

 

 

 

3

 

Reduction in the carrying amount of right of use assets

 

 

548

 

 

 

510

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(2,301

)

 

 

25

 

Accounts payable and accrued liabilities

 

 

(3,155

)

 

 

223

 

Net cash used in operating activities

 

$

(35,967

)

 

$

(20,417

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(82,235

)

 

 

-

 

Purchases of property and equipment

 

 

(724

)

 

 

(691

)

Net cash used in investing activities

 

$

(82,959

)

 

$

(691

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from Employee Stock Purchase Plan

 

 

175

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

532

 

 

 

567

 

Payments of follow-on offering costs

 

 

(2

)

 

 

 

Net cash provided by financing activities

 

$

705

 

 

$

567

 

Net decrease in cash, cash equivalents and restricted cash

 

$

(118,221

)

 

$

(20,541

)

Cash, cash equivalents and restricted cash—beginning of period

 

$

287,513

 

 

$

222,676

 

Cash, cash equivalents and restricted cash—end of period

 

$

169,292

 

 

$

202,135

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Property and equipment included in accrued expense and accounts payable

 

$

 

 

$

40

 

Right-of-use asset recognized upon entering into amended lease

 

$

690

 

 

$

 

Right-of-use assets recognized in exchange for operating leases

        upon adoption of Topic 842

 

$

 

 

$

2,153

 

Deferred offering costs not yet paid

 

$

 

 

$

77

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7


 

Stoke Therapeutics, Inc. and subsidiaries

Notes to condensed consolidated financial statements—(unaudited)

1. Nature of the business and basis of presentation

Organization

Stoke Therapeutics, Inc. (the “Company”) was founded in June 2014 and was incorporated under the laws of the State of Delaware. The Company is a biotechnology company dedicated to addressing the underlying cause of severe diseases by up-regulating protein expression with RNA-based medicines.

Shelf Registration

In July 2020, the Company filed a universal shelf registration statement on Form S-3 (the “Registration Statement”) with the Securities and Exchange Commission (“SEC”). The Registration Statement was declared effective by the SEC in July 2020, and covers the offering, issuance, and sale by the Company of up to a maximum aggregate offering price of $400,000,000 of our common stock, preferred stock, debt securities, warrants to purchase the Company’s common stock, preferred stock or debt securities, subscription rights to purchase the Company’s common stock, preferred stock or debt securities and/or units consisting of some or all of these securities. In July 2020, the Company entered into an “at-the-market” program and sales agreement with Cantor Fitzgerald & Co. (“Cantor”) and Stifel, Nicolaus & Company, Incorporated, (“Stifel”), under which the Company may, from time to time, offer and sell common stock having an aggregate offering value of up to $150.0 million, referred to as our “at-the-market” offering with Cantor and Stifel. As of June 30, 2021, no such shares of the Company’s common stock had been offered or sold pursuant to this “at-the-market” program with Cantor and Stifel. The Company may terminate this at-the-market program at any time, pursuant to its terms.

Follow-on public offering

In November 2020, the Company completed an underwritten public offering and issued and sold 2,875,000 shares of common stock at a public offering price of $39.00 per share, which included 375,000 shares sold upon full exercise of the underwriters’ option to purchase additional shares of common stock, resulting in net proceeds of $104.9 million after deducting underwriting discounts and commissions and offering expenses.

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 condensed consolidated financial statements the Company expects that its cash, cash equivalents, marketable securities and restricted cash will be sufficient to fund its operating expenses and capital expenditure requirements through at least twelve months from the issuance date of these unaudited condensed consolidated financial statements.

2. Summary of significant accounting policies and recent accounting pronouncements

Basis of presentation and consolidation

The accompanying unaudited condensed 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 its consolidated subsidiary have been eliminated.

8


Unaudited interim financial information

The accompanying interim unaudited condensed 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 footnotes as of and for the year ended December 31, 2020, which was filed with the SEC on March 9, 2021. The Company’s financial information as of June 30, 2021, and for the six months ended June 30, 2021 and 2020 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, 2020 was derived from audited 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 unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, 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 six 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, 2021, 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 condensed consolidated statements of cash flows consists of the following (in thousands):

 

 

 

As of June 30,

 

 

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

169,070

 

 

$

201,930

 

Restricted cash - short-term

 

$

147

 

 

$

 

Restricted cash - long-term

 

$

75

 

 

$

205

 

Total cash, cash equivalents and restricted cash

 

$

169,292

 

 

$

202,135

 

 

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (“observable inputs”) and the Company’s own assumptions (“unobservable inputs”). Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier value hierarchy that distinguishes between the following:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3—Unobservable inputs developed using estimates of assumptions developed by the Company, which reflect those that a market participant would use.

9


To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in the condensed consolidated statement of stockholders’ equity as a reduction of additional paid-in capital.

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 unaudited condensed 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 (1) the last day of its first fiscal year (a) in which the Company has total annual gross revenues of at least $1.07 billion, or (b) in which the Company is deemed to be a large accelerated filer, which means the market value of its common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, (2) the date on which it has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period and (3) December 31, 2024.

The Company is also a “smaller reporting company,” meaning that, the market value of its stock held by non-affiliates is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. The Company may continue to be a smaller reporting company as long as either (i) the market value of its stock held by non-affiliates is less than $250 million or (ii) its annual revenue is less than $100 million during the most recently completed fiscal year and the market value of its stock held by non-affiliates is less than $700 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.

Recently adopted accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard established a right-of-use model that requires all lessees to recognize right-of-use assets and lease liabilities on their balance sheet that arise from leases as well as provide disclosures with respect to certain qualitative and quantitative information related to a company's leasing arrangements. The Company adopted Topic 842 on January 1, 2020 using the modified retrospective approach and elected to apply the transition method that allows companies to continue applying guidance under the lease standard in effect at that time in the comparative period financial statements and recognize a cumulative-effect adjustment to the balance sheet on the date of adoption. The Company elected the package of practical expedients to not reassess its prior conclusions about lease identification, lease classification and indirect costs and to not separate lease and non-lease components.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the

10


FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. For public business entities, the amendments in Part I of ASU-2017-11 were effective for fiscal years and interim periods within those years beginning after December 15, 2018. For all other entities, the amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The Company adopted Part 1 of this standard on January 1, 2020 and the adoption of this update did not have a material impact on its consolidated financial statements and financial statement disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. This ASU removed the following disclosure requirements: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the end of the reporting period; (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for all entities, for fiscal years beginning after December 15, 2019 with early adoption permitted. The Company adopted this standard on January 1, 2020 and the adoption of this update did not have a material impact on its consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This ASU is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. The Company adopted this standard on January 1, 2021 and the adoption of this update did not have a material impact on its consolidated financial statements.

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):

 

 

 

Fair value measurements as of June 30, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

169,070

 

 

$

 

 

$

 

 

$

169,070

 

Total

 

$

169,070

 

 

$

 

 

$

 

 

$

169,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

 

 

$

17,729

 

 

$

 

 

$

17,729

 

Commercial paper

 

$

 

 

$

39,448

 

 

$

 

 

$

39,448

 

US Government debt securities

 

$

 

 

$

24,979

 

 

$

 

 

$

24,979

 

Total

 

$

 

 

$

82,156

 

 

$

 

 

$

82,156

 

 

 

 

Fair value measurements as of December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

287,308

 

 

$

 

 

$

 

 

$

287,308

 

Total

 

$

287,308

 

 

$

 

 

$

 

 

$

287,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

 

 

$

 

 

$

 

 

$

 

Commercial paper

 

$

 

 

$

 

 

$

 

 

$

 

US Government debt securities

 

$

 

 

$

 

 

$

 

 

$

 

Total

 

$

 

 

$

 

 

$

 

 

$

 

 

11


 

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above and in Note 2. 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 condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

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 transfers among the Level 1 to Level 2 category in the June 30, 2021 period presented. There were no transfers to Level 3 in the periods presented.

 

 

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of June 30, 2021 (in thousands):

 

 

 

June 30, 2021

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Loss

 

 

Fair Value

 

Marketable securities: