SEC Filing - Stoke Therapeutics

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stok-10q_20220930.htm

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 September 30, 2022

☐	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)

(781) 430-8200

(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 October 31, 2022 the registrant had 39,430,747 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	8
	Notes to unaudited condensed consolidated financial statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
Signatures		78

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:

•

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, STK-002 and our future product candidates;

•

the direct and indirect impact of COVID-19, inflation, interest rates, foreign currency exchange rates and macroeconomic conditions on our business, financial condition and operations, including on our expenses, supply chain, strategic partners, research and development costs, clinical trials and employees;

•

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, STK-002 or any other future product candidate;

•

the success of our collaboration with Acadia Pharmaceuticals and our ability to enter into successful collaborations in the future;

•

our ability to identify patients with the diseases treated by STK-001, STK-002 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 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Stoke Therapeutics, Inc.

Condensed consolidated balance sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 30,			December 31,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	113,396		$	144,895
Marketable securities		138,259			74,915
Prepaid expenses and other current assets		12,551			9,159
Deferred financing costs		—			117
Interest receivable		395		132
Total current assets	$	264,601		$	229,218
Restricted cash		569		569
Operating lease right-of-use assets		5,295			4,939
Property and equipment, net		7,161			4,139
Total assets	$	277,626		$	238,865
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,911		$	2,385
Accrued and other current liabilities		14,046			14,754
Deferred revenue - current portion		12,838			—
Total current liabilities	$	28,795		$	17,139
Deferred revenue - net of current portion		41,078			—
Other long term liabilities		3,610			3,949
Total long term liabilities		44,688			3,949
Total liabilities	$	73,483		$	21,088
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, par value of $0.0001 per share; 300,000,000 shares authorized, 39,426,440 and 36,902,499 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		4			4
Additional paid-in capital		477,337			414,024
Accumulated other comprehensive loss		(1,703	)		(168	)
Accumulated deficit		(271,495	)		(196,083	)
Total stockholders’ equity	$	204,143		$	217,777
Total liabilities and stockholders’ equity	$	277,626		$	238,865

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

Stoke Therapeutics, Inc.

Condensed consolidated statements of operations and comprehensive loss

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Revenue	$	2,905		$	—		$	9,137		$	—
Operating expenses:
Research and development		20,109			14,358			56,777			38,366
General and administrative		9,944			8,325			29,540			23,173
Total operating expenses		30,053			22,683			86,317			61,539
Loss from operations		(27,148	)		(22,683	)		(77,180	)		(61,539	)
Other income:
Interest income (expense), net		995			44			1,643			84
Other income (expense), net		42			42			125			98
Total other income		1,037			86			1,768			182
Net loss	$	(26,111	)	$	(22,597	)	$	(75,412	)	$	(61,357	)
Net loss per share, basic and diluted	$	(0.66	)	$	(0.61	)	$	(1.95	)	$	(1.67	)
Weighted-average common shares outstanding, basic and diluted		39,420,310			36,759,319			38,716,615			36,706,647
Comprehensive loss:
Net loss	$	(26,111	)	$	(22,597	)	$	(75,412	)	$	(61,357	)
Other comprehensive gain (loss):
Unrealized gain (loss) on marketable securities		(427	)		20			(1,535	)		(22	)
Total other comprehensive loss	$	(427	)	$	20		$	(1,535	)	$	(22	)
Comprehensive loss	$	(26,538	)	$	(22,577	)	$	(76,947	)	$	(61,379	)

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

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, 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	)
Stock-based compensation		—		—		4,452			—			—			4,452
Unrealized loss on marketable securities		—		—		—			(42	)		—			(42	)
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
Net loss		—		—		—						(22,597	)		(22,597	)
Stock-based compensation		—		—		4,614			—			—			4,614
Unrealized gain on marketable securities		—		—		—			20			—			20
Issuance of common stock upon exercise of stock options		46,032		—		73			—			—			73
Issuance of common stock related to employee stock purchase plan		11,692		-		334			-			-			334
Balance as of September 30, 2021		36,780,393	$	4	$	409,166		$	(22	)	$	(171,635	)	$	237,513

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

Stoke Therapeutics, Inc.

Condensed consolidated statements of stockholders’ equity continued

(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, 2021		36,902,499	$	4	$	414,024	$	(168	)	$	(196,083	)	$	217,777
Net loss		—		—		—		—			(24,649	)		(24,649	)
Stock-based compensation		—		—		4,975		—			—			4,975
Unrealized loss on marketable securities		—		—		—		(516	)		—			(516	)
Issuance of common stock upon exercise of stock options		53,377		—		93		—			—			93
Shares sold as part of controlled equity offering sales agreement		2,080,486		—		42,128		—			—			42,128
Issuance of common stock related to employee stock purchase plan		8,307		—		169		—			—			169
Balance as of March 31, 2022		39,044,669	$	4	$	461,389	$	(684	)	$	(220,732	)	$	239,977
Net loss		—		—		—		—			(24,652	)		(24,652	)
Stock-based compensation		—		—		6,163		—			—			6,163
Unrealized loss on marketable securities		—		—		—		(592	)		—			(592	)
Issuance of common stock upon exercise of stock options		194,498		—		326		—			—			326
Shares sold as part of controlled equity offering sales agreements		143,300		—		3,099		—			—			3,099
Balance as of June 30, 2022		39,382,467	$	4	$	470,977	$	(1,276	)	$	(245,384	)	$	224,321
Net loss		—		—		—		—			(26,111	)		(26,111	)
Stock-based compensation		—		—		5,926		—			—			5,926
Unrealized loss on marketable securities		—		—		—		(427	)		—			(427	)
Issuance of common stock upon exercise of stock options		8,278		—		33		—			—			33
Issuance of common stock related to employee stock purchase plan		35,695		—		401		—			—			401
Balance as of September 30, 2022		39,426,440	$	4	$	477,337	$	(1,703	)	$	(271,495	)	$	204,143

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

Stoke Therapeutics, Inc.

Condensed consolidated statements of cash flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(75,412	)	$	(61,357	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		937			739
Amortization and accretion of marketable securities		(60	)		86
Stock-based compensation		17,064			11,764
Loss on disposal of property and equipment		—			29
Reduction in the carrying amount of right of use assets		1,446			870
Changes in assets and liabilities:
Prepaid expenses and other current assets		(3,655	)		(2,073	)
Accounts payable and accrued liabilities		(3,729	)		(707	)
Deferred revenue		53,916			—
Net cash used in operating activities	$	(9,493	)	$	(50,649	)
Cash flows from investing activities:
Purchases of marketable securities		(206,190	)		(87,226	)
Purchases of property and equipment		(3,553	)		(997	)
Sales of marketable securities		141,371			—
Net cash used in investing activities	$	(68,372	)	$	(88,223	)
Cash flows from financing activities:
Proceeds from Employee Stock Purchase Plan		570			509
Proceeds from issuance of common stock upon exercise of stock options		452			605
Proceeds from controlled equity offering sales agreements		45,344			—
Other		—			(1	)
Net cash provided by financing activities	$	46,366		$	1,113
Net decrease in cash, cash equivalents and restricted cash