The firm is developing therapeutics for severe genetic diseases with a focus on dominant loss-of-function [haploinsufficient] diseases of the central nervous system, eyes, liver, and kidneys.
STOK has no investor support for the IPO and is still extremely early-stage. The IPO is probably more suited to institutional, long time-frame investors.
Company & Technology
Bedford, Massachusetts-based Stoke Therapeutics was founded in 2014 to develop antisense oligonucleotides [ASOs] that targets ribonucleic acids [RNA] and modulates precursor-messenger RNA [pre-mRNA] splicing to upregulate protein expression where needed and with appropriate specificity to near-normal levels.
Management is headed by CEO and Director Edward M. Kaye, who has been with the firm since 2017 and has previously served in various roles at Sarepta Therapeutics, including president and CEO.
Stoke has developed the Targeted Augmentation of Nuclear Gene Output [TANGO] technology platform that “exploits unique, patented mechanisms for antisense-mediated modulation of splicing to prevent the synthesis of naturally occurring non-productive mRNA and to increase the synthesis of productive mRNA to increase production of functional protein.”
Below is a graphic illustration of the TANGO mechanism for protein synthesis upregulation:
Source: Company registration statement
Below is a brief overview video of the company’s lead drug candidate STK-001:
STK-001 is a ASO designed for the treatment of Dravet syndrome, a severe progressive genetic form of epilepsy.
The firm anticipates to submit an investigational new drug application for STK-001 in early 2020, initiate a Phase 1/2 clinical trial in H1 2020 as well as nominate a second drug candidate for preclinical development.
Below is the current status of the company’s anticipated drug development roadmap:
Source: Company website
Investors in Stoke Therapeutics include Alexandria Venture Investments, RA Capital Management, RTW Investments, Perceptive Advisors, Apple Tree Partners, Janus Henderson Investors, Cormorant Asset Management, and Redmile Group among others. Source: Crunchbase
Market & Competition
According to a 2019 market research report by MRFR, the global Dravet syndrome market is projected to grow at a CAGR of 8.5% between 2017 and 2023.
Some of the main factors driving market growth are growing healthcare expenditures, rising research and development efforts, increasing government support, improving regulatory framework, the development of new therapeutics, and increasing adoption rate.
Market growth could be hindered due to poor healthcare system in low and middle-income countries, severe side effects of drugs and other therapeutic agents, as well as lack of awareness in the developing countries.
Major competitors that provide or are developing treatments include:
Biscayne Neurotherapeutics (SUPN)
GW Pharmaceuticals (GHPH)
INSYS Therapeutics (INSY)
OPKO Health (OPK)
Ovid Therapeutics (OVID)
PTC Therapeutics (PTCT)
Sage Therapeutics (SAGE)
STOK’s recent financial results are typical of a development stage biopharma firm in that they feature no revenue and significant R&D and G&A costs associated with advancing its pipeline of treatment programs.
Below are the company’s financial results for the past two and ¼ years (Audited PCAOB for full years):
Source: Company registration statement
As of March 31, 2019, the company had $98.7 million in cash and $3.4 million in total liabilities. (Unaudited, interim)
STOK intends to raise $100 million in gross proceeds from an IPO of 6.7 million shares of its common stock at a midpoint price of $15.00 per share, not including customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price. Since this feature is typical, the lack of existing investor support is a negative signal for IPO investors.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $355.4 million.
Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:
approximately $36.0 million to $39.0 million to advance our lead product candidate, STK-001, through initiation of a Phase 3 clinical trial;
approximately $34.0 million to $37.0 million to nominate, conduct preclinical studies for and demonstrate clinical proof of concept for additional product candidates; and
any remaining amounts to fund working capital and general corporate purposes.
Management’s presentation of the company roadshow is available here.
Listed underwriters of the IPO are J.P. Morgan, Cowen, Canaccord Genuity, and Credit Suisse.
Stoke is seeking a somewhat large biopharma IPO but investors aren’t supporting the IPO as is typical in life science IPO deals.
Its lead candidate, STK-001, still has not begun Phase 1 / 2 trials, so the firm is still at an extremely early development stage. Its first trial is not expected to begin until the first half of 2020 at the earliest.
The market opportunity for Dravet Syndrome is growing but its total size is difficult to determine.
On the commercial collaboration front, management has disclosed no collaborations. These serve to validate the firm’s initial approach, so the lack of them is generally a negative signal in my opinion.
Given the lack of investor support, the extremely early stage of development and a fairly high valuation, this IPO is likely more suited to institutional and long-term hold investors.
Expected IPO Pricing Date: June 18, 2019.
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