SEC Filing - Stoke Therapeutics

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10-Q

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, 2023


☐	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 July 31, 2023 the registrant had 44,257,211 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
	Consolidated balance sheets	4
	Consolidated statements of operations and comprehensive loss	5
	Consolidated statements of stockholders’ equity	6
	Consolidated statements of cash flows	7
	Notes to unaudited consolidated financial statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		71

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 inflation, interest rates, foreign currency exchange rates, instability in the global banking system, geopolitical conflict 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.

Consolidated balance sheets

(in thousands, except share and per share amounts)

(unaudited)



	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	192,060		$	113,556
Marketable securities		39,387			116,039
Prepaid expenses		10,950			10,932
Other current assets		3,699			2,955
Interest receivable		136			588
Total current assets	$	246,232		$	244,070
Restricted cash		569			569
Operating lease right-of-use assets		3,646			4,753
Property and equipment, net		6,472			6,675
Total assets	$	256,919		$	256,067
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,556		$	766
Accrued and other current liabilities		12,222			15,748
Deferred revenue - current portion		8,059			14,880
Total current liabilities	$	21,837		$	31,394
Deferred revenue - net of current portion		43,258			36,856
Other long term liabilities		1,629			2,968
Total long term liabilities		44,887			39,824
Total liabilities	$	66,724		$	71,218
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, par value of $0.0001 per share; 300,000,000 shares authorized, 44,202,997 and 39,439,575 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		4			4
Additional paid-in capital		540,919			483,170
Accumulated other comprehensive loss		(379	)		(1,175	)
Accumulated deficit		(350,349	)		(297,150	)
Total stockholders’ equity	$	190,195		$	184,849
Total liabilities and stockholders’ equity	$	256,919		$	256,067

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

Stoke Therapeutics, Inc.

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,
	2023			2022			2023			2022
Revenue	$	(2,481	)	$	3,231		$	2,671		$	6,232
Operating expenses:
Research and development		20,551			18,358			40,182			36,668
General and administrative		10,230			10,111			20,442			19,596
Total operating expenses		30,781			28,469			60,624			56,264
Loss from operations		(33,262	)		(25,238	)		(57,953	)		(50,032	)
Other income:
Interest income (expense), net		2,567			544			4,670			648
Other income (expense), net		41			42			84			83
Total other income		2,608			586			4,754			731
Net loss	$	(30,654	)	$	(24,652	)	$	(53,199	)	$	(49,301	)
Net loss per share, basic and diluted	$	(0.69	)	$	(0.63	)	$	(1.23	)	$	(1.29	)
Weighted-average common shares outstanding, basic and diluted		44,188,464			39,258,358			43,367,032			38,358,936
Comprehensive loss:
Net loss	$	(30,654	)	$	(24,652	)	$	(53,199	)	$	(49,301	)
Other comprehensive gain (loss):
Unrealized gain (loss) on marketable securities		219			(592	)		796			(1,108	)
Total other comprehensive loss	$	219		$	(592	)	$	796		$	(1,108	)
Comprehensive loss	$	(30,435	)	$	(25,244	)	$	(52,403	)	$	(50,409	)

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

Stoke Therapeutics, Inc.

Consolidated statements of stockholders’ equity

(in thousands, except share and per share amounts)

(unaudited)


	Common stock				Additional paid-in capital		Accumulated other comprehensive gain (loss)			Accumulated deficit			Total stockholders' equity
	Shares		Amount
Balance as of December 31, 2021		36,902,499	$	4	$	414,024	$	(168	)	$	(196,083	)	$	217,777
Net loss		—		—		—		—			(24,649	)		(24,649	)
Unrealized loss on marketable securities		—		—		—		(516	)		—			(516	)
Stock-based compensation		—		—		4,975		—			—			4,975
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	)
Unrealized loss on marketable securities		—		—		—		(592	)		—			(592	)
Stock-based compensation		—		—		6,163		—			—			6,163
Issuance of common stock upon exercise of stock options		194,498		—		326		—			—			326
Shares sold as part of controlled equity offering sales agreement		143,300		—		3,099		—			—			3,099
Balance as of June 30, 2022		39,382,467	$	4	$	470,977	$	(1,276	)	$	(245,384	)	$	224,321

Balance as of December 31, 2022		39,439,575	$	4	$	483,170	$	(1,175	)	$	(297,150	)	$	184,849
Net loss		—		—		—		—			(22,545	)		(22,545	)
Unrealized gain on marketable securities		—		—		—		577			—			577
Stock-based compensation		—		—		5,887		—			—			5,887
Issuance of common stock upon exercise of stock options		80,611		—		158		—			—			158
Shares sold as part of controlled equity offering sales agreements		4,635,353		—		44,743		—			—			44,743
Issuance of common stock related to employee stock purchase plan		19,550		—		153		—			—			153
Balance as of March 31, 2023		44,175,089	$	4	$	534,111	$	(598	)	$	(319,695	)	$	213,822
Net loss		—		—		—		—			(30,654	)		(30,654	)
Unrealized gain on marketable securities		—		—		—		219			—			219
Stock-based compensation		—		—		6,760		—			—			6,760
Issuance of common stock upon exercise of stock options		27,908		—		48		—			—			48
Balance as of June 30, 2023		44,202,997	$	4	$	540,919	$	(379	)	$	(350,349	)	$	190,195

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

Stoke Therapeutics, Inc.

Consolidated statements of cash flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(53,199	)	$	(49,301	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		1,208			549
Amortization and accretion of marketable securities		(114	)		42
Stock-based compensation		12,647			11,138
Reduction in the carrying amount of right of use assets		1,106			910
Changes in assets and liabilities:
Prepaid expenses and other current assets		(310	)		(4,236	)
Accounts payable and accrued liabilities		(4,076	)		(2,383	)
Deferred revenue		(418	)		55,844
Net cash (used in) provided by operating activities		(43,156	)		12,563
Cash flows from investing activities:
Purchases of marketable securities		—			(196,484	)
Purchases of property and equipment		(1,004	)		(1,523	)
Sales of marketable securities		77,562			62,371
Net cash provided by (used in) investing activities		76,558			(135,636	)
Cash flows from financing activities:
Proceeds from Employee Stock Purchase Plan		206			169
Proceeds from issuance of common stock upon exercise of stock options		153			419
Proceeds from controlled equity offering sales agreements		44,743			45,344
Net cash provided by financing activities		45,102			45,932
Net increase (decrease) in cash, cash equivalents and restricted cash		78,504			(77,141	)
Cash, cash equivalents and restricted cash—beginning of period		114,125			145,464
Cash, cash equivalents and restricted cash—end of period	$	192,629		$	68,323

Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets recognized in exchange for operating leases	$	—		$	1,802
Property and equipment included in accrued expense and accounts payable	$	—		$	754

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

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 Delaware. The Company is a biotechnology company dedicated to addressing the underlying cause of severe diseases by upregulating protein expression with RNA-based medicines.

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 $400,000,000 of its 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 the Company of up to a maximum aggregate offering price of $150,000,000 of its 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 $150,000,000 of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $400,000,000 of securities that may be offered, issued and sold by the Company under the base prospectus. As of June 30, 2023, the Company had issued approximately 4.6 million shares of common stock pursuant to the Sales Agreement for net proceeds of $44.7 million.

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 its consolidated subsidiary have been eliminated.

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, 2022, which was filed with the SEC on March 6, 2023. The Company’s financial information as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 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, 2022 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, 2023, 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):


	As of June 30,
	2023		2022
Cash and cash equivalents	$	192,060	$	67,754
Restricted cash - long-term		569		569
Total cash, cash equivalents and restricted cash	$	192,629	$	68,323

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.