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Item 1. Business

2021-03-09 compared with 2020-03-23 · 290 added, 243 removed, 687 unchanged (44% of the section changed)

We are a biotechnology company that is pioneering a new way to treat the underlying causes of severe genetic diseases by precisely upregulating protein expression.

We are developing novel antisense oligonucleotide, or ASO, medicines that target ribonucleic acid, or RNA, and modulate precursor-messenger RNA, or pre-mRNA, splicing to upregulate protein expression where needed and with appropriate specificity to near normal levels.

We aim to develop the first precision medicine platform to target the underlying cause of a broad spectrum of genetic diseases in which the patient has one healthy copy of a gene and one mutated copy that fails to produce a protein essential to health.

These diseases, in which the loss of approximately 50 percent of normal protein expression causes disease, are called autosomal dominant haploinsufficiencies.

We utilize our proprietary technology platform, Targeted Augmentation of Nuclear Gene Output, or TANGO, to design ASOs to upregulate the expression of protein by individual genes in a patient.

Our approach is designed to allow us to deliver in a highly precise, durable and controlled manner disease-modifying therapies to a wide range of relevant tissues, including the central nervous system, or CNS, eye, kidney and liver.

Our proprietary technology platform is based on the pioneering work conducted on pre-mRNA splicing and ASOs in the laboratory of one of our co-founders, Adrian R.

We are pioneering a new way to treat the underlying causes of severe genetic diseases by precisely upregulating protein expression.

We are developing novel antisense oligonucleotide (“ASO”) medicines that target ribonucleic acid (“RNA”) and modulate precursor-messenger RNA splicing to upregulate protein expression where needed and with appropriate specificity to near normal levels.

We utilize our proprietary RNA therapeutics platform, Targeted Augmentation of Nuclear Gene Output (“TANGO”), to design ASOs to upregulate the expression of protein by individual genes in a patient.

We were incorporated in June 2014.

In July 2015 and April 2016, we entered into worldwide license agreements with Cold Spring Harbor Laboratory (“CSHL”), and the University of Southampton, respectively, with respect to certain licensed patents and applications relating to TANGO.

TANGO exploits non-productive splicing events to effect targeted enhancement of protein expression.

Since our inception through June 21, 2019, our operations had been financed primarily from the sale of convertible notes payable and our convertible preferred stock.

On June 21, 2019, we completed an initial public offering (“IPO”), of our common stock and issued and sold 9,074,776 shares of common stock at a public offering price of $18.00 per share, which included 1,183,666 shares sold upon full exercise of the underwriters’ option to purchase additional shares of common stock resulting in net proceeds of $151.9 million after deducting underwriting discounts and commissions but before deducting offering costs of approximately $2.5 million.

On July 10, 2020, we entered into an “at-the-market” program and sales agreement with Cantor Fitzgerald & Co., or Cantor, and Stifel, Nicolaus & Company, Incorporated, or Stifel, under which we 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 December 31, 2020, no such shares of our common stock had been offered or sold pursuant to this “at-the-market” program with Cantor and Stifel.

We may terminate this at-the-market program at any time, pursuant to its terms.

On November 24, 2020, we completed an underwritten public offering, of our common stock 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 estimated offering expenses.

Our proprietary RNA therapeutics platform is based on the pioneering work conducted on pre-mRNA splicing and ASOs in the laboratory of one of our co-founders, Adrian R.

Krainer, Ph.D., of Cold Spring Harbor Laboratory in New York.

Inspired by the clinical success of SPINRAZA, an ASO medicine for the treatment of spinal muscular atrophy that was co-invented by Professor Krainer, our company was founded to develop a general antisense approach to upregulate protein expression.

Inspired by the clinical success of SPINRAZA® (nusinersen), an ASO medicine for the treatment of spinal muscular atrophy that was co-invented by Professor Krainer, our company was founded to develop a general antisense approach to upregulate protein expression.

TANGO exploits unique, patented mechanisms for antisense-mediated modulation of splicing to prevent the synthesis of naturally occurring non-productive messenger RNA, or mRNA, and to increase the synthesis of productive mRNA to increase production of functional protein.

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There is a need for novel therapeutics that can restore protein expression and address the underlying genetic causes of haploinsufficiencies .

Within haploinsufficiency diseases, we are initially prioritizing the development of ASOs for the treatment of genetic epilepsies.

Within haploinsufficiency diseases, we continue to prioritize the development of ASOs for the treatment of genetic epilepsies.

According to a 2010 publication in Nature Reviews Neurology and a 2018 publication in JAMA Neurology , more than 50% of epilepsies are now recognized as having a genetic basis and more than 30% of patients are refractory to existing therapies, especially those with a genetic epilepsy.

Our most advanced program is the potentially first disease-modifying therapy for Dravet syndrome, a severe and progressive genetic epilepsy.

Dravet syndrome is caused by loss-of-function mutations in one allele of the SCN1A gene and is characterized by frequent and prolonged seizures beginning in the first year of life, severe intellectual and developmental disabilities and other serious health problems, including, notably, sudden premature death in appro ximately 20% of patients with Dravet syndrome.

Dravet syndrome is caused by loss-of-function mutations in one allele of the SCN1A gene and is characterized by frequent, prolonged, and refractory seizures beginning within the first year of life.

Dravet syndrome is difficult to treat and has a poor long-term prognosis.

The effects of the disease go beyond seizures and often include severe intellectual and developmental disabilities and other serious health problems, including, notably, sudden premature death in approximately 20% of patients with Dravet syndrome.

Current treatments for Dravet syndrome only address the occurrence of seizures, not the underlying cause of disease.

According to a 2017 study as published in the Developmental Medicine & Child Neurology Journ al , more than 90% of Dravet syndrome patients still report suffering from incomplete seizure control with existing antiepileptic regimens.

We designed our lead product candidate, STK-001, to treat Dravet syndrome, a severe and progressive genetic epilepsy.

With a well-defined patient population based on routine genetic testing and learnings from drugs approved for the treatment of Dravet syndrome to inform the clinical and regulatory pathways for STK-001, we anticipate an efficient clinical program for STK-001.

We submitted an investigational new drug application, or IND, for STK-001 to U.S.

Food and Drug Administration, or the FDA, in late 2019.

In the first quarter of 2020, we received communication from the FDA confirming that we may proceed with clinical dosing in the planned Phase 1/2a clinical trial called Monarch.

The single ascending dose portion of this trial is in two parts, A and B, and is designed to evaluate STK-001 in children and adolescents ages 2 to 18 years of age with Dravet syndrome.

Part A allows dosing of two cohorts.

We expect to enroll and begin dosing patients in Part A of the study in the second half of 2020.

Part B of the study will evaluate the higher doses of STK-001.

The FDA has placed a partial clinical hold for the doses planned in Part B of the study.

The partial clinical hold was not due to any identified manufacturing or safety issue, but rather was because additional safety information is needed from preclinical testing to determine the safety profile of doses higher than the current no observed adverse effect level or NOAEL.

The NOAEL was determined using data from a pivotal non-human primate study that evaluated intrathecal delivery of single dose levels of STK-001.

The highest dose administered in this study was equivalent to a human dose that is higher than what we plan to administer in Part B of our Phase 1/2a clinical study and did not demonstrate effects that were considered adverse.

It is the FDA’s position that in order to support administration of STK-001 doses above those planned in Part A, additional nonclinical data to identify any potential safety issues of STK-001 at higher doses will need to be provided.

We have initiated single-dose toxicology studies to more fully characterize the safety profile at higher doses, in order to facilitate the removal of the partial clinical hold and proceed to Part B of the study.

Upon FDA clearance, we will plan to proceed with the higher dosing cohorts planned in Part B of the study.

We are working to minimize any potential delay to continued clinical testing of STK-001.

We still anticipate preliminary data from the study in 2021.

We intend to nominate a second candidate for preclinical development in the second half of 2020.

Our business could be adversely impacted by the effects of the coronavirus known as COVID-19, or other epidemics, which may materially or adversely affect development timelines, and our business, financial condition and results of operations, including those described above.

According to a 2017 study as published in the Developmental Medicine & Child Neurology Journal , more than 90% of Dravet syndrome patients still report suffering from incomplete seizure control with existing antiepileptic regimens.

Our executive management team has extensive collective expertise in human genetics and modulation of RNA processes using ASOs, as well as a track record of success in rare disease drug development.

Our executive team and co-founders have been previously involved with other companies in the discovery, development and commercialization of many treatments for rare diseases, including Sarepta’s Exondys 51 and Biogen’s SPINRAZA.

Our scientific and clinical advisory boards are comprised of leading experts in the fields of human genetics, pre-mRNA splicing and ASOs, and neurodevelopmental and neurodegenerative diseases.

Their involvement in both academic research and clinical practice allows us to gain proprietary and early insight into emerging biology and clinical practice that informs our business strategy.

We are using our proprietary TANGO technology platform to create ASOs for the treatment of severe genetic diseases.

We are using our proprietary RNA therapeutics platform to create ASOs for the treatment of severe genetic diseases.

The critical components of our strategy include:

Rapidly advance our lead program, STK-001, to clinical proof-of-concept, approval and commercialization.

We intend to advance our lead product candidate, STK-001, into a Phase 1/2a clinical trial in children and adolescents with Dravet syndrome and to begin dosing patients in the second half of 2020.

Our MONARCH Phase 1/2a clinical trial in children and adolescents with Dravet syndrome is ongoing.

In August 2020, we dosed the first patient in the MONARCH Study.

We are leveraging previously-validated ASO chemistry, a modality that has been successfully utilized for other diseases, a well-defined patient population based on routine genetic testing and learnings from recently approved drugs for the treatment of Dravet syndrome to inform the clinical and regulatory pathways for STK-001 and minimize potential safety concerns and development risk.

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We have built a target discovery process utilizing proprietary bioinformatics algorithms and extensive in-house expertise in whole transcriptome RNA sequencing to rapidly and systematically identify diseases that we believe can be addressed using our platform.

We are advancing several early programs focused on multiple targets, including haploinsufficiency diseases of the CNS, eye, kidney and liver.

Indications beyond genetic epilepsies for which our technology may be applicable include autosomal dominant optic atrophy and autosomal dominant polycystic kidney disease.

In November 2020, we announced the nomination of OPA1 as our next target for preclinical development to treat Autosomal Dominant Optic Atrophy (“ADOA”).

This is the second haploinsufficiency disease similar to Dravet syndrome and provides entry into genetic diseases of the eye.

We are also advancing additional early programs focused on multiple targets, including haploinsufficiency diseases

of the CNS, eye, kidney and liver.

Longer-term, we believe that our ASOs may have the potential to upregulate non-mutated genes in biological pathways to treat diseases or conditions that are caused by multiple genes or are multifactorial, such as autoimmune diseases, aging and cancer.

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A mutation in the gene can alter the amount or activity of the protein.

Currently, there are estimated to be over 10,000 diseases caused by a genetic abnormality in a single gene.

Currently, there are estimated to be over 10,000 diseases caused by a genetic abnormality in an individual gene.

These are also known as monogenic diseases.

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autosomal dominant gain-of-function or dominant negative and autosomal dominant haploinsufficiency, or loss-of-function.

In dominant gain-of-function (dominant negative) diseases, the mutant protein possesses a new deleterious or increased function and acts therefore as a toxic protein.

dominant gain-of-function (dominant negative) diseases, the mutant protein possesses a new deleterious or increased function and acts therefore as a toxic protein.

In our focus area of haploinsufficiency diseases, the mutated allele generates a protein that is severely deficient in amount or activity and results in approximately 50% of normal protein expression.

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We have neither applied for, nor received, FDA approval for any of our product candidates to date.

Current and emerging precision medicines and their limitations

While current and emerging precision medicine approaches have already made and will likely continue to make significant advancements, we believe they currently possess fundamental limitations which must be overcome before they will become a practical approach to treating genetic diseases, especially autosomal dominant haploinsufficiencies.

Gene therapy is designed to introduce a functional copy of a defective gene or gene sequence into a patient’s cell.

This therapeutic approach provides the potential to replace the defective genes that lead to disease.

Today, gene therapy is subject to several technical challenges.

Single stranded adeno-associated virus (ssAAV) gene therapy approaches are unable to efficiently package more than 4.4 kilobases of coding DNA and the more efficient self-complementary AAV (scAAV) are limited to 2.1 kilobases of coding DNA;

thereby restricting their utility to smaller gene targets.

In addition, the inability of current approaches to establish tunable control of the level of protein expression and tissue specificity raises concerns of possible unintended DNA changes and unwanted on- and off-target effects.

Further, gene therapy vectors are complex delivery systems, which significantly increase the cost of manufacturing and the difficulty of maintaining reliable quality among product lots.

A more recent approach is gene editing, which is the process of replacing, deleting or repairing defective DNA in its native genomic location.

The current focus of gene editing is knocking out a diseased gene or correcting an individual mutation within a gene that is frequent within the disease population.

The approach faces many similar challenges to gene therapy and has yet to achieve clinical proof-of-concept.

Gene editing currently suffers from numerous limitations, including the inability to control level and duration of protein expression, a potential for irreversible unintended DNA changes and unwanted on- and off-target effects, and a complex delivery and manufacturing process.

In addition, gene editing repairs one mutation at a time, and thus is not well-suited for the treatment of diseases caused by many mutations in a single gene, as is the case for many haploinsufficiencies, which typically result from multiple spontaneous mutations.

Modified mRNA

Over the past several years, there has been significant investment and progress in the field of modified mRNA.

These therapies are designed to increase mRNA levels by exogenous delivery of modified mRNA.

However, modified mRNA is characterized by significant drug delivery hurdles and its clinical application has largely been limited to novel vaccines.

This therapeutic modality also does not permit precise targeting of tissue and requires complex manufacturing processes that are unproven at commercial scale.

In addition, modified mRNA requires frequent administration given its short duration and safe repeat dosing has yet to be achieved clinically.

Finally, the ability to package large genes is also unproven and may limit utility to smaller gene targets.

Protein-based drugs

Protein-based drugs are manufactured in living cells and can bind with high specificity to a variety of extracellular or cell surface targets or can be used to replace mutated or missing extracellular proteins.

Protein-based drugs can also bind to a very narrow spectrum of intracellular proteins (lysosomal storage proteins).

Antibodies (and antibody-like proteins) have become the most common type of biologic because of the specificity and long duration of action of this type of molecule.

Monoclonal antibody drugs typically act by inhibiting target proteins through competitive binding (antagonists).

Currently, protein-based drugs are unable to address most diseases caused by deficient activity of intracellular or transmembrane proteins, such as ion channels involved in genetic epilepsies.

Additionally, complex manufacturing and short duration after administration can prevent maintaining therapeutic levels of the protein in the body.

Small molecules

Small molecules consist predominantly of hydrophobic organic compounds under 500 daltons in molecular weight and are manufactured through chemical synthesis.

These drugs typically act by deactivating or inhibiting target proteins through competitive binding (antagonists).

In much rarer instances, small molecule agonists can sometimes be identified that increase the activity of a target protein through binding to a regulatory site.

Small molecules are artificial agonists which act through non-natural mechanisms, and therefore do not fully compensate for the loss of a protein that functions in a regulated fashion or as part of a multi-protein complex.

Applications for small molecules are also very limited, and proteins that possess small molecule-binding pockets have been estimated to account for only 2-5% of the human proteome.

Small molecules also lack selectivity and specificity, creating the potential for off-target toxicity.

Finally, these therapeutics typically do not address the underlying cause of genetic diseases and consequently may have limited impact on patient quality of life or life expectancy.

Our precision medicine platform

Oligonucleotides

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Over the past few years, there has been very limited success in developing clinical ASOs to upregulate protein expression due to a focus on indirect and weakly validated mechanisms of action such as targeting microRNAs or long non-coding RNAs that are associated with a gene transcript.

The only exceptions are SPINRAZA, which corrects a unique splicing mutation in SMN2 , and Exondys-51, which generates an internally-truncated form of dystrophin after removing or ‘skipping’ out a mutated exon to restore the reading frame.

The only exceptions are SPINRAZA, which corrects a unique

splicing mutation in SMN2 , and Exondys-51, which generates an internally-truncated form of dystrophin after removing or ‘skipping’ out a mutated exon to restore the reading frame.

Neither drug represents a generalizable strategy to upregulate the expression of protein.

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To date, there has been very limited success in developing clinical double-stranded oligonucleotides to upregulate protein expression.

Given these fundamental limitations of existing modalities, most genetic diseases, particularly auto somal dominant haploinsufficiencies, are dramatically underserved by current therapeutic options.

Within rare diseases, only 5% of conditions have an approved drug treatment, and most approved drugs only manage symptoms with little impact on outcomes and l ife expectancy.

Given these fundamental limitations of existing modalities, most genetic diseases, particularly autosomal dominant haploinsufficiencies, are dramatically underserved by current therapeutic options.

Within rare diseases, only 5% of conditions have an approved drug treatment, and most approved drugs only manage symptoms with little impact on outcomes and life expectancy.

We believe there is a clear need for our novel ASOs, which precisely upregulate target protein expression and have the potential to provide disease-modifying therapies to treat many diseases beyond the reach of current approaches.

Our precision medicine platform

Treatment of autosomal dominant haploinsufficiency diseases with TANGO

We are developing our proprietary technology platform, TANGO, as potentially the first precision medicine platform for a category of severe genetic diseases known as autosomal dominant haploinsufficiencies.

We are developing our proprietary RNA technology platform, TANGO, as potentially the first precision medicine platform for a category of severe genetic diseases known as autosomal dominant haploinsufficiencies.

We utilize TANGO to design ASOs to increase the expression of protein by individual genes in a patient.

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TANGO operates in a mutation-independent manner, given it utilizes one wild-type allele, and does not alter protein coding splicing isoforms.

The net effect is increased expression of functional protein from the wild-type allele.

The net effect is increased

expression of functional protein from the wild-type allele.

The two categories of non-productive splicing events amenable to TANGO are retained introns and nonsense-mediated mRNA decay of the resulting mRNA.

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Retained introns are found in approximately 60% of gene transcripts and are part of the wild-type sequence of the gene.

In some c ases, retained introns are part of normal gene regulation.

The non-productive mRNA, which contains these retained introns, remain in the nucleus of the cell and are not translated into protein, and offer a reservoir of non-productive mRNA that can be conve rted into productive mRNA.

In some cases, retained introns are part of normal gene regulation.

Our ASOs bind to the pre-mRNA and redirect the splicing machinery to remove the retained intron.

This splice-switching decreases non-productive mRNA and increases productive mRNA, which is translated into increased protein expres sion from the wild-type allele.

This is shown in the figures below, with the left panel illustrating non-productive mRNA, which includes retained introns, and the right panel illustrating our ASOs binding to the pre-mRNA and redirecting the splicing machin ery.

This splice-switching decreases non-productive mRNA and increases productive mRNA, which is translated into increased protein expression from the wild-type allele.

The second category of non-productive splicing events amenable to TANGO is alternative splicing that leads to nonsense-mediated mRNA decay, or NMD, of the resulting mRNA.

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Our lead product candidate, STK-001, targets an NMD exon and the general mechanism is shown in the figure below, with the left panel showing the non-productive mRNA failing to be translated into protein and the right panel showing our ASOs binding to the pre-mRNA and redirecting the splicing machinery.

Although STK-001 is currently our only current product candidate and is still in preclinical testing, we would expect, based on our preclinical studies, for future product candidates targeting a NMD exon to operate in the same manner.

Although STK-001 is currently our only current clinical product candidate, we would expect, based on our preclinical studies, for future product candidates targeting a NMD exon to operate in the same manner.

Advantages of TANGO

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We believe that ASO delivery to the CNS, eye, kidney and liver is well-established, providing us the potential to address a broad range of genetic diseases.

Additionally, although FDA approval for any of our current or future product candidates is not assured, we believe that ASO delivery to the CNS is particularly well-precedented.

Additionally,

although FDA approval for any of our current or future product candidates is not assured, we believe that ASO delivery to the CNS is particularly well-precedented.

Fixed dose, rather than weight-based dosing .

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We leverage large internal datasets of RNAseq from key tissues known to be addressable with antisense, such as the CNS, eye, liver and kidney, that are purpose-built to enhance the capture of non-productive events.

We employ machine learning to iteratively refine our search and scoring criteria for the most a ddressable non-productive mRNA elements based on internal target validation and Hit identification data.

To date, we have identified and assembled a proprietary database of approximately 85,000 non-productive events in the human transcriptome.

Using this l arge internal data set, in combination with publicly available genetic disease databases, we have identified approximately 2,900 monogenic disease-associated genes with one or more non-productive events which we believe are amenable to our TANGO technology .

We believe our approach is highly predictive and enables rapid and systematic identification of those targets that are most likely to have clinical relevance, thereby increasing the probability for clinical success and accelerating the expansion of our e merging pipeline.

We employ machine learning to iteratively refine our search and scoring criteria for the most addressable non-productive mRNA elements based on internal target validation and Hit identification data.

Our technology is amenable to a large number of mutations and can thereby potentially provide a single-drug approach for diseases that are caused by many loss-of-function mutations in a single gene.

We have identified approximately 1,200 monogenic, or single gene, diseases containing at least one NMD-inducing nonproductive event, which we believe may be amenable to TANGO.

Hit identification

Once a TANGO target is validated in cells and tissue that are relevant to the disease, we employ highly-efficient cell lines to rapidly screen for Hit ASOs that can increase the target protein expression by specifically preventing the occurrence of the non-productive event in the target mRNA.

Once a TANGO target is validated in cells and tissues that are relevant to the disease, we employ highly-efficient cell lines to rapidly screen for Hit ASOs that can increase the target protein expression by specifically preventing the occurrence of the non-productive event in the target mRNA.

ASO arrays utilize clinically translatable previously-validated ASO chemistries, such as 2’ methoxyethyl phosphorothioate and PMO.

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Program-specific criteria include, among other relevant factors, the severity of the unmet medical need, the likelihood of therapeutic utility, the feasibility of clinical development, the costs of development and the commercial opportunity.

Portfolio-wide considerations include the ability to demonstrate technical success for our platform, thereby increasing the probability of success and learnings for subsequent programs.

Portfolio-wide considerations include the ability to demonstrate

technical success for our platform, thereby increasing the probability of success and learnings for subsequent programs.

We believe that the learnings from our lead Dravet syndrome program will significantly reduce the uncertainty of development of subsequent programs in our pipeline, particularly those targeting the CNS.

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Our approach leverages previously-validated ASO chemistry and a modality that has been successfully utilized for other diseases, to minimize potential safety concerns and development risk.

We are also initially targeting diseases with established clinical and regulatory pathways.

As an example, we intend to undertake a Phase 1/2a clinical trial for our lead program in Dravet syndrome with a design and endpoints common to other recently approved antiepileptic drugs.

In August 2020, we dosed the first patient in the MONARCH Study for our lead program in Dravet syndrome with a design and endpoints common to other recently approved antiepileptic drugs.

Commercialization

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Several hundred epilepsy-related genes have been identified to date, including genes encoding neuronal ion channels and receptors and genes involved in cellular signaling.

For example, the number of genes included on the epilepsy panel of Invitae Corporation, a leading genetic information company, has grown from 103 in 2015 to 187 in 2019.

For example, the number of genes included on the epilepsy panel of Invitae Corporation, a leading genetic information company, has grown from 103 in 2015 to greater than 300 in 20 20 .

Globally, advances in molecular technology are expected to result in discoveries of additional genetic etiologies of epilepsy, implying a greater role than ever before for genetics in the epilepsy clinic.

The table below lists select genes that are commonly mutated amongst patients with epilepsy and we believe are amenable to TANGO, with current estimates of their prevalence.

We are continuing to evaluate these CNS targets and expect to nominate a second genetic disease candidate for preclinical development by the second half of 2020.

We continu e to evaluate these CNS targets .

Estimated worldwide prevalence

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An analysis of mortality in the Epilepsy Genetics Research Program demonstrated a Dravet syndrome-specific mortality rate of 15.84 per 1,000 patient years.

SUDEP was the most common cause of premature death among Dravet syndrome patients (59%), equating to a Dravet syndrome-specific SUDEP rate of 9.32 per 1,000 patient-years.

SUDEP was the

most common cause of premature death among Dravet syndrome patients (59%), equating to a Dravet syndrome-specific SUDEP rate of 9.32 per 1,000 patient-years.

This is nearly twice the rate for adults with refractory epilepsy.

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Early diagnosis is driven by heightened awareness of Dravet syndrome and other genetic epilepsy disorders as well as an emerging consensus amongst epilepsy specialists that early diagnosis is cost-effective and beneficial for prognosis.

Among pediatric Dravet syndrome patients, approximately 60% in North America and 70% in Germany, France and the United Kingdom undergo genetic testing as part of their diagnostic work-up, according to the Health Advances Report.

We expect this to increase to approximately 85% in North America, Japan, Germany, France and the United Kingdom by 2024 in the aggregate.

Among pediatric Dravet syndrome patients, approximately 90% in North America and Europe undergo genetic testing as part of their diagnostic work-up, according to a 2021 market research report commissioned by Stoke and prepared by Recon Strategy, or the Recon Strategy report.

The incidence of Dravet syndrome is approximately 64 per million births, which translates to an overall prevalence of approximately 35,000 patients across the United States, Canada, Japan, Germany, France and the United Kingdom, with approximately 16,000 patients in the United States.

By comparison, the prevalence of spinal muscular atrophy is approximately 10,000 patients in the United States.

Current treatments

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Patients are typically treated with two to four drugs administered concomitantly, and in most cases the relief provided by polytherapy is insufficient.

Cannabidiol (Epidiolex) and stiripentol ( Diacomit) are currently the only FDA-approved antiepileptic drugs for the treatment of Dravet syndrome.

Cannabidiol was approved in 2018 for the adjunctive treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome in patients two ye ars of age and older.

Cannabidiol (Epidiolex), fenfluramine (Fintepla) and stiripentol (Diacomit) are currently the only FDA-approved antiepileptic drugs for the treatment of Dravet syndrome.

Epidiolex was approved in 2018 for the adjunctive treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome in patients two years of age and older.

Diacomit was approved in 2018 for the treatment of seizures associated with Dravet syndrome in patients two years of age and older taking clobazam.

There are no clinical data to support the use of Diacomit as monotherapy in Dravet syn drome.

These new therapies were approved based on a demonstrated reduction in seizure frequency;

There are no clinical data to support the use of Diacomit as monotherapy in Dravet syndrome.

These therapies were approved based on a demonstrated reduction in seizure frequency;

however, very few patients had complete control of seizure activity.

For patients treated with Epidiolex, only 6.7% reported no convulsive seizures during the treatment period, according to clinical trial data in the drug’s prescribing information.

Tolerance, or a significant diminishment of efficacy over time, is also observed in approximately 25% of patients, thereby limiting the usefulness of this treatment i n the long-term clinical management of patients with Dravet syndrome.

These drugs also do not address the significant non-seizure comorbidities.

Additionally, cannabinoids as a drug class have been associated with adverse effects on cognitive development i n children.

Fenfluramine (Fintepla) is an antiepileptic drug in clinical development for the treatment of Dravet syndrome.

Topline efficacy data for seizure frequency were favorable;

Tolerance, or a significant diminishment of efficacy over time, is also observed in approximately 25% of patients, thereby limiting the usefulness of this treatment in the long-term clinical management of patients with Dravet syndrome.

Additionally, cannabinoids as a drug class have been associated with adverse effects on cognitive development in children.

Fintepla is an antiepileptic drug approved in the U.S.

in 2020 for the treatment of seizures associated with Dravet syndrome in patients two years of age and older with Dravet syndrome;

however, as with Epidiolex and Diacomit, seizure-free rates remain in the low single digits.

Moreover, patients are still likely to be affected by non-seizure comorbidities and may develop tolerance to the drug over time.

None of these approved medicines address the significant non-seizure comorbidities.

Moreover, patients are still likely to be affected by non-seizure comorbidities and may develop tolerance to the drugs over time.

Many of the antiepileptic drugs that are used to treat Dravet syndrome can carry a substantial adverse event burden.

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Preclinical data

We have generated compelling preclinical data that we believe demonstrates proof-of-mechanism for STK-001.

We have generated compelling preclinical data that demonstrates proof-of-mechanism for STK-001.

Our initial target engagement, pharmacology and efficacy studies were performed in mice, including both wild-type and a Dravet syndrome mouse model.

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In wild-type mice, we characterized target engagement and pharmacology of STK-001.

Five groups of neonate (postnatal day two ) mice were administered a single injection dose of 0 (n=5), 0.3, (n=5) 1.0.

(n=6) 3.0 (n=3) and 10.0 (n=5) µg o f STK-001 by intracerebroventricular injection and returned to the home cage for five days.

Five groups of neonate (postnatal day two) mice were administered a single injection dose of 0 (n=5), 0.3, (n=5) 1.0 (n=6) 3.0 (n=3) and 10.0 (n=5) µg of STK-001 by intracerebroventricular injection and returned to the home cage for five days.

Sections of the brain were processed for RNA and protein.

We observed that treatment with STK-001 resulted in a dose-dependent reduction of non-productive mRNA.

Fur thermore, the reduction of non-productive mRNA was associated with an increase of productive mRNA and an increase in Na v 1.1 protein, as denoted in the figures below.

Furthermore, the reduction of non-productive mRNA was associated with an increase of productive mRNA and an increase in Na v 1.1 protein, as denoted in the figures below.

We also evaluated STK-001 pharmacology and efficacy in transgenic mice with a heterozygous deletion of Scn1a .

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Notably, a single injection of STK-001 restored Na v 1.1 protein in Dravet syndrome mice to levels that are near those of the wild-type mice at both 7 and 14 weeks.

These data demonstrate that STK-001 has an impact on Na v 1.1 protein expression and we believe this will translate to a favorable dosing regimen in humans.

These data demonstrate that STK-001 has an impact on Na v 1.1 protein expression and we believe this may translate to a favorable dosing regimen in humans.

In addition to an increase in the Na v 1.1 protein, the administration of a single dose of 20 µg of STK-001 in neonate Dravet syndrome mice (postnatal day two) resulted in a significant reduction in premature mortality.

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EEG is a highly sensitive measure of seizure activity, which enables the detection of seizures that may not be otherwise visible.

These data were presented at the American Epilepsy Society (AES) Annual Meeting in Baltimore in December 2019.

These data are published in Han et al., Science Trans.

Analyses were also performed in silico to understand the specificity of STK-001.

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Further supporting our specificity analysis, we also evaluated brain samples of wild-type neonate mice to ensure that STK-001 does not alter levels of other channels in the highly homologous SCN family.

Importantly, the mRNA levels of closely related ion channels was not altered in the mouse brain five days after administration of 10 µg of STK-001 (n=2/group placebo, n=4/group STK-001), as shown in the figure below.

Importantly, the mRNA levels of closely related ion channels were not altered in the mouse brain five days after administration of 10 µg of STK-001 (n=2/group placebo, n=4/group STK-001), as shown in the figure below.

Similar analysis was performed in wild-type and Dravet syndrome mice treated with 20 µg of STK-001 at 7 and 14 weeks after dosing.

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Single dose GLP toxicology studies in rats and cynomolgus monkeys, that characterized the pharmacology, exposure and tolerability of STK-001 were included in the IND that was submitted to the FDA in late 2019.

These studies provided data to support Part A of the planned initiation of the Phase 1/2a single ascending dose clinical study.

We have initiated additional single-dose toxicology studies in order to facilitate the removal of the partial clinical hold and proceed to Part B of the study.

Multiple dose GLP toxicology studies are underway to provide data to support the multiple ascending dose part of the Phase 1/2a study.

Clinical plan

We expect our Phase 1/2a trial to evaluate STK-001 in children and adolescents with Dravet syndrome.

Patients will be eligible for the trial if they are between the ages of 2 to 18, have had four or more convulsive seizures during a four-week pre-dosing observation period, have an established diagnosis of Dravet syndrome and have evidence of a pathogenic genetic mutation in the SCN1A gene.

These studies provided data to support the initiation of the Phase 1/2a single ascending dose clinical study.

Dravet syndrome clinical program—STK-001

We designed our lead product candidate, STK-001, to treat Dravet syndrome, a severe and progressive genetic epilepsy.

This program draws on a well-defined patient population based on routine genetic testing and learnings from drugs approved for the treatment of Dravet syndrome to inform the clinical and regulatory pathways for STK-001.

We submitted an investigational new drug application (“IND”) for STK-001 to the U.S.

Food and Drug Administration (the “FDA”) in late 2019.

In August 2020, we dosed the first patient with STK-001 in the single ascending dose portion of the MONARCH Phase 1/2a Study at the 10mg dose level.

The MONARCH Study is designed to evaluate single and multiple ascending dose levels of STK-001 in children and adolescents with Dravet syndrome.

Patients are eligible for the trial if they are between the ages of 2 to 18, have an established diagnosis of Dravet syndrome and have evidence of a pathogenic genetic mutation in the SCN1A gene.

Requiring an SCN1A mutation (of which more than 1,700 SCN1A mutations have been identified) for trial enrollment allows for a clear and definitive etiologic diagnosis, a more homogeneous patient population and tailored treatment based on a precision medicine approach.

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All medications and interventions will remain unchanged throughout the trial, which will allow for assessment of STK-001 with a variety of antiepileptic therapies.

The si ngle ascending dose Phase 1/2a trial will be conducted in two parts:

Part A will evaluate single ascending doses in two cohorts.

We plan to begin clinical dosing in Part A at a level that is at least 10-fold below the NOAEL determined in the pivotal GLP to xicology studies.

Part B of the study will evaluate higher single ascending doses of STK-001.

Phase 1/2a clinical testing will also evaluate multiple ascending doses of STK-001.

The primary objectives will be to assess the safety and tolerability of STK-00 1, as well as to characterize human pharmacokinetics.

A secondary objective will be to assess the efficacy as an adjunctive antiepileptic treatment with respect to the percentage change from baseline in convulsive seizure frequency over a 12-week treatment period.

We also intend to measure non-seizure aspects of the disease, such as quality of life as secondary endpoints.

These endpoints as well as other exploratory endpoints will be informed based on our two-year observational study (BUTTE RFLY), which is ongoing and designed to evaluate seizure frequency and non-seizure comorbidities associated with the disease, including motor and speech impairment, intellectual and developmental disabilities, behavioral deficits and abnormal sleep pattern s.

The primary objectives are the assess ment of the safety and tolerability of STK-001, as well as to characterize human pharmacokinetics.

A secondary objective is to assess the efficacy as an adjunctive antiepileptic treatment with respect to the percentage change from baseline in convulsive seizure frequency over a 12-week treatment period.

We are measur ing non-seizure aspects of the disease, such as quality of life as secondary endpoints.

These endpoints as well as other exploratory endpoints will be informed based on our two-year observational study (BUTTERFLY) .

Enrollment in BUTTERFLY is complete and the study is ongoing .

BUTTERFLY is designed to evaluate seizure frequency and non-seizure comorbidities associated with the disease, including motor and speech impairment, intellectual and developmental disabilities, behavioral deficits and abnormal sleep patterns.

Data from the study will support clinical development plans for STK-001.

We expect to enroll approximately 36 children and adolescents in BUTTERFLY.

Importantly, the currently approved antiepileptic drugs for Dravet syndrome, such as Epidiolex, provide a potential regulatory pathway to approval based on defined seizure control endpoints.

We will be leveraging an analogous trial design, including a four-week pre-dosing observation period to assess baseline seizure frequency, and serum chemistries, a 12-week treatment period and a 6-month safety follow-up.

Dosing by intrathecal injections will be fixed across the patient population given that the quantity of non-productive mRNA remains constant across individuals and that the total cerebral spinal fluid volume is similar between adults and children.

We expect to enroll and begin dosing patients in Part A of the Phase 1/2a study in the second half of 2020.

We anticipate preliminary clinical data from Part A of the study in 2021.

The FDA has placed a partial clinical hold for the doses planned in Part B of the study.

We have initiated additional single-dose toxicology studies in order to facilitate the removal of the partial clinical hold and to proceed to Part B of the study after completion of dosing in Part A.

Upon FDA clearance, we will plan to proceed with the higher dosing cohorts planned in Part B of the study.

At the conclusion of Part B we will evaluate multiple ascending doses of STK-001.

We are working to minimize any potential delay to continued clinical testing of STK-001.

In March 2020, we announced the FDA had placed a partial clinical hold on doses of STK-001 above 20mg in the MONARCH Study, pending additional preclinical testing to determine the safety profile of doses higher than the current no observed adverse effect level (“NOAEL”).

When intrathecal doses above the NOAEL were administered to non-human primates (“NHPs”) adverse hind limb paresis was observed.

This finding is known to occur following intrathecal delivery of ASOs to NHPs and is not known to translate to the human experience.

When extremely high dose levels were administered, acute convulsions were observed immediately following STK-001 administration.

The dose levels were well above the range of corresponding human doses that would ever be administered in the clinic and were delivered in a formulation that was at a higher concentration than would be administered in the clinic.

There is no apparent correlation of these acute adverse events with the mechanism of action of STK-001.

Following interactions with the FDA, in October 2020, we announced that the FDA agreed to allow us to add an additional higher dose level to the SAD portion of the study such that a total of three dose levels will be evaluated:

10 mg, 20 mg, and 30mg.

Dosing above 30mg in this study remains on FDA partial clinical hold.

In addition, a multiple ascending dose (“MAD”) portion was added to the MONARCH Study based on preclinical repeat-dose toxicology data, which were reviewed by the FDA.

There were no adverse effects observed in the NHP repeat dose study.

Enrollment and dosing in the first two cohorts (10mg and 20mg) of the single ascending dose portion of the study are now complete.

Enrollment and dosing of patients in the 30mg single ascending dose cohort is now underway.

In February 2021, the first patient in the MAD portion of the study was dosed with STK-001 at the 20mg level.

We expect to announce initial safety and pharmacokinetic data from the SAD portion of the MONARCH Study in the second half of 2021.

In January 2021, we initiated enrollment and dosing in our SWALLOWTAIL Open Label Extension (OLE) study of STK-001 for children and adolescents with Dravet syndrome.

SWALLOWTAIL is designed to evaluate the long-term safety and tolerability of repeated doses of STK-001 in patients with Dravet syndrome who previously participated in studies of STK-001.

In this study, patients will initially be administered the same dose level they received in the previous study and will receive a maximum of three doses.

One dose will be administered every four months.

While we continue working to minimize any potential delay to continued clinical testing of STK-001, we expect that the COVID-19 pandemic may directly or indirectly impact the timeline.

Our ability to continue the clinical trial or initiate the MAD portion of the clinical trial may be adversely affected, directly or indirectly, by the COVID-19 pandemic.

For example, although our Phase 1/2a study of STK-001 for the treatment of Dravet syndrome has not been delayed, we plan to have clinical trial sites in various parts of the United States, some of which have had high incident rates of COVID-19 patients.

Restrictions on travel and/or transport of clinical materials, as well as diversion of hospital staff and resources to COVID-19 infected patients, could disrupt trial operations as well as recruitment, possibly resulting in a slowdown in enrollment and/or deviations from or disruptions in key clinical trial activities, such as clinical trial site monitoring.

These challenges may lead to difficulties in meeting protocol-specified procedures.

We have not yet discussed with regulatory authorities the evidence necessary for approval of STK-001.

However, in addition to requesting Fast Track Designation, if we see evidence of clinical efficacy, then we would plan to meet with regulatory authorities to discuss expedited regulatory pathways, such as Breakthrough Therapy Designation.

However, in addition to requesting Fast Track Designation, if we see evidence of clinical efficacy, then we would plan to meet with regulatory authorities to discuss expedited regulatory pathways.

Program update

Autosomal Dominant Optic Atrophy program

In November 2020, we announced the nomination of OPA1 as our next target for preclinical development to treat Autosomal Dominant Optic Atrophy (“ADOA”).

ADOA is the most common inherited optic nerve disorder seen in clinical practice and causes progressive and irreversible vision loss in both eyes starting in the first decade of life.

Many children progress to blindness.

Roughly half of people with ADOA fail driving standards and up to 46% are registered as legally blind.

The disease affects one in 30,000 people globally with a higher incidence of approximately one in 10,000 in Denmark due to a founder effect.

65% to 90% of ADOA is caused by mutations in one allele of the OPA1 gene, most of which lead to

haploinsufficiency and disease manifestation.

More than 400 different OPA1 mutations have been reported in people diagnosed with ADOA.

Most mutations result in a severe decrease – up to 50% – of the normal amount of the OPA1 protein.

There is no strong genotype-phenotype correlation.

OPA1 is a dynamin-related GTPase that plays a key role in maintaining mitochondria structure and dynamics.

The OPA1 protein is imported into the mitochondria and is the crucial molecule that mediates inner mitochondria membrane fusion and cristae morphogenesis and is critical for oxidative phosphorylation and ATP synthesis.

Insufficient OPA1 activity causes mitochondria dysfunction with consequent insufficient ATP production, excess reactive oxygen species production and eventual cell death.

High energy demanding cells such as neurons and cardiomyocytes are particularly susceptible to mitochondria dysfunction, and retinal ganglion cells (“RGCs”) are a neuronal cell type most susceptible to loss of OPA1 protein as evidenced by RGC death in ADOA caused by OPA1 haploinsufficiency.

A clinical diagnosis of ADOA is made when a patient meets some or all of the following criteria:

pathogenic variant of the OPA1 gene identified in the patient or a family member;

reduced visual acuity;

temporal disc pallor;

visual field defect;

color vision defect (acquired blue-yellow loss);

thinning of retinal nerve fiber layer and abnormal visual evoked potentials.

Clinical findings are based on:

intraocular pressure measurement;

visual field assessment;

color discrimination;

dilated slit lamp biomicroscopy;

optical coherence tomography;

or visual electrophysiology.

Patients suspected of ADOA are recommended to receive genetic testing to confirm the clinical diagnosis, help identify other family members who are affected and ensure patients avoid stressors that could increase disease progression (e.g.

smoking, alcohol).

The prognosis for many patients with ADOA is poor and the rate of visual loss can be difficult to predict given significant inter- and intra-familial variability.

There are currently no available treatments for ADOA.

Because ADOA causes deterioration of the optic nerves, corrective aids such as glasses or contacts do not help to improve vision lost to the disease.

Supportive services and low-vision aids are offered for patients with severely decreased visual acuity.

Our ASOs are designed to target the underlying cause of ADOA, which is OPA1 haploinsufficiency, by decreasing a non-productive mRNA splicing event in the OPA1 gene to increase productive OPA1 mRNA and OPA1 protein in the retinal ganglion cells.

OPA1 preclinical data for the potential treatment of ADOA

We previously identified a novel exon inclusion event (“Exon X”) in OPA1 that leads to non-productive mRNA due to introduction of a premature termination codon (“PTC”) (Figure 1 below).

In April 2020 and June 2020, we provided data in presentations at the American Society of Gene & Cell Therapy and the Association for Research in Vision and Ophthalmology meetings, respectively, showing that ASO-14 blocked the incorporation of Exon X with consequent dose-dependent increase in productive OPA1 mRNA and protein due to reduction of Exon X-directed non-sense mediated decay (“NMD”) of OPA1 mRNA (Figure 2 below).

We have now demonstrated that a single injection of ASO-14 surrogate in the rabbit eye leads to a dose-dependent increase in ASO accumulation in the retina that correlated with an increase in target engagement (removal of Exon X) and an increase in OPA1 protein (Figure 3 below).

The study was conducted using female NZW rabbits that were injected with a single dose of vehicle alone or vehicle containing ASO (n=3/group).

On Days 15 and 29, the retinal tissue was collected and analyzed.

Specifically, we learned that retinal exposure of ASO-14 surrogate (ST-1102) was elevated with increased dosing, dose-dependent target engagement was seen at all three time-points examined, and protein increase of OPA1 protein was observed at both Day 15 and Day 29 of the study.

We further showed that in OPA1 haploinsufficient human cells, ASO-14-mediated increase in OPA1 protein translates to improved mitochondrial function as measured by the substantial restoration of Adenosine triphosphate (“ATP”) levels in the treated cells (Figure 4 below).

ATP is produced by the mitochondria and is the key energy carrying molecule in cells.

We observed a 20% ATP deficit in OPA1 +/- HEK293.

Treatment with ASO-14 restored ATP levels to ~90% of control cells.

A representation of the non-productive mRNA splicing event in OPA1

Inhibition of NMD with cycloheximide allows for evaluation of the abundance of this event in vitro

Rabbit ASO demonstrates dose-dependent OPA1 protein increase in rabbit retina

Human ASO demonstrates ATP upregulation in OPA1 haploinsufficient HEK293 cells

** = P value 0.0006

*** = P value <0.0001

### = P value 0.0006

We believe our preclinical data to date support the use of our TANGO technology to treat ADOA due to OPA1 haploinsufficiency.

We have observed that ASO-mediated specific reduction in non-productive OPA1 mRNA provides an increase in productive OPA1 mRNA and an increase in OPA1 protein in a dose-dependent manner in vitro .

We have also observed dose-dependent ASO exposure and consequent reduction in non-productive mRNA and increase in OPA1 protein in vivo in the rabbit retina.

Test compounds were well-tolerated in wild-type rabbit for up to 29 days after intravitreal injection (maximum days evaluated).

ASO-mediated increase in OPA1 protein levels in OPA1 haploinsufficient cells correlated with a substantial restoration of mitochondrial function as measured by an increase in ATP synthesis capability.

The TANGO approach utilizes the wild-type OPA1 allele and can potentially be used to treat ADOA due to loss of OPA1 activity in a mutation-independent manner.

As with STK-001 for Dravet syndrome, our study and development of the use of our TANGO technology to treat ADOA is subject to the risks and uncertainties stemming from the COVID-19 pandemic, which may directly or indirectly impact our ability to pursue this new target, and the timing in which we do so.

Additional product opportunities

Dravet syndrome and genetic epilepsies represent one disease area within a broader spectrum of novel precision medicines for treatment of haploinsufficiency diseases.

We intend to nominate a second genetic disease preclinical candidate by the second half of 2020 and will seek to further establish a pipeline of product candidates in the future.

Since ASOs have been previously shown to have a very long half-life when injected into the eye and could provide therapeutics with dosing regimens of two to three administrations per year, we are exploring certain ophthalmologic diseases that could be treated through upregulation of protein pathways to reduce inflammation, block neovascularization and reduce retinal degeneration.

We are also advancing several early programs focused on multiple targets, including haploinsufficiency diseases of the CNS, eye, kidney and liver, given the ability of our ASOs to target cells in these organs.

We are also advancing additional programs focused on multiple targets, including haploinsufficiency diseases of the CNS, eye, kidney and liver, given the ability of our ASOs to target cells in these organs.

These tissues are affected in many severe genetic diseases.

Additional non-epilepsy indications for which our technology may be applicable include autosomal dominant optic atrophy and autosomal dominant polycystic kidney disease.

Longer-term, we believe that ASOs designed using TANGO may have the potential to upregulate non-mutated genes in biological pathways to treat diseases or conditions caused by multiple genes or are multifactorial, such as autoimmune diseases, aging and cancer.

For these diseases, we intend to opportunistically secure partnerships with pharma partners whose scientific, development or commercial capabilities complement our own.

Business Update Regarding COVID-19

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S.

economy and financial markets.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, liquidity and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, our third party contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other third party vendors have been able to continue to provide services and supply reagents, materials, and products and currently do not anticipate any significant disruption in services or interruptions in supply.

We have pursued mitigation strategies to keep key research activities on track.

Our third-party CMOs continue to operate their manufacturing facilities at or near normal levels.

While we currently do not anticipate any significant interruptions in our manufacturing processes, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our third-party suppliers and CMOs ability to manufacture reagents, materials, or products that we need to use in our research and clinical trial.

However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, our observational study, our clinical trial, and our ability to hire and retain employees.

Our ability to continue our observational study may be adversely affected, directly or indirectly, by the COVID-19 pandemic.

Currently we are monitoring patients in our observational study, including the duration and degree to which we may see delays in conducting in-person follow-ups, and disruptions in our ability to monitor patients due to hospitals closing sites or diverting the resources that are necessary to conduct our observational study.

While we continue to enroll and dose patients in our Phase 1/2a clinical trial at sites across the United States, we expect that COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trial activities due to hospitals closing sites and/or diverting the resources that are necessary to conduct clinical trials.

We are pursuing approaches to help mitigate the impact to our clinical trial.

Currently we have not experienced any delay in initiating our clinical trial.

The COVID-19 pandemic has caused us to modify our business practices (including but not limited to curtailing or modifying employee travel, moving to partial remote work, and cancelling physical participation in meetings, events and conferences) and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, patients and business partners.

Our office-based employees have been working from home since early March 2020, while ensuring essential staffing levels in our operations remain in place, including maintaining key personnel in our laboratories.

Manufacturing

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We have personnel with extensive technical, manufacturing, analytical and quality experience and good project management to oversee contract manufacturing and testing activities.

We will continue to expand and strengthen our network of third-party providers but may also consider investing in internal manufacturing capabilities in the future if there is a technical need, or a strategic or financial benefit.

We will continue to expand and strengthen our network of third-party providers but may also consider investing in additional internal manufacturing capabilities in the future if there is a technical need, or a strategic or financial benefit.

Manufacturing is subject to extensive regulations that impose procedural and documentation requirements.

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If our current product candidate, STK-001, is approved for the treatment of Dravet syndrome, it may compete with other products currently marketed or in development.

Currently marketed antiepileptic drugs range from ca nnabidiols, such as GW Pharmaceuticals, plc’s Epidiolex, to GABA receptor agonists, such as clobazam, to glutamate blockers, such as topiramate.

Companies such as Zogenix, Ovid Therapeutics/Takeda, Xenon Pharmaceuticals, and Encoded Therapeutics are also d eveloping treatments for Dravet syndrome.

Currently marketed antiepileptic drugs range from cannabidiols, such as GW Pharmaceuticals, plc’s Epidiolex, Fintepla® (fenfluramine) from Zogenix, to GABA receptor agonists, such as clobazam, to glutamate blockers, such as topiramate.

Companies such as Ovid Therapeutics/Takeda, Xenon Pharmaceuticals, and Encoded Therapeutics are also developing treatments for Dravet syndrome.

Many of the currently marketed antiepileptic drugs are available as generics.

In addition, numerous compounds are in clinical development for treatment of epil epsy.

To our knowledge, the clinical development pipeli ne includes cannabinoids, 5-HT release stimulants, cholesterol 24-hydroxylase inhibitors, and sodium channel antagonists from a variety of companies.

In addition, numerous compounds are in clinical development for treatment of epilepsy.

To our knowledge, the clinical development pipeline includes cannabinoids, 5-HT release stimulants, cholesterol 24-hydroxylase inhibitors, and sodium channel antagonists from a variety of companies.

Importantly, we believe none of the drugs in clinical development address the underlying genetic cause of Dravet syndrome.

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Our commercial opportunity could be substantially limited if our competitors develop and commercialize products that are more effective, safer, less toxic, more convenient or less expensive than our comparable products.

In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of the entry of our products.

In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a

strong market position in advance of the entry of our products.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of other drugs.

The key competitive factors affecting the successful of all of our programs are likely to be their efficacy, safety, convenience and availability of reimbursement.

The key competitive factors affecting the succes s of all of our programs are likely to be their efficacy, safety, convenience and availability of reimbursement.

Reimbursement

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With respect to our TANGO platform, we have exclusively licensed intellectual property for our TANGO technology from the University of Southampton and Cold Spring Harbor Laboratory, which includes issued U.S.

patents and pending U.S.

patents and pending

and foreign patent applications that cover the TANGO mechanisms.

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As of December 31, 20 20 , the issued U.S.

patent, pending U.S.

patent applications and pending foreign patent applications that we have licensed from Cold Spring Harbor Laboratory are anticipated to expire in 2035, absent any patent term adjustments or extensions.

patent s , pending U.S.

patent application s and pending foreign patent applications that we have licensed from Cold Spring Harbor Laboratory are anticipated to expire in 2035, absent any patent term adjustments or extensions.

Separately, we have filed patent applications with claims that are intended to cover compositions of matter of oligonucleotides designed to target specific elements in genes for more than 140 genetic diseases that we believe are amenable to upregulation of target protein expression using our TANGO platform.

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The issued patent and any patents that may issue from these pending patent applications are expected to expire between 2035 and 2036, absent any patent term adjustments or extensions.

As of December 31, 2019, we also own pending U.S.

patent applications relating to STK-001, and any patents that may issue from these pending patent applications are expected to expire between 2038 and 2040, absent any patent term adjustments or extensions.

As of December 31, 2020, we also own a U.S.

patent, pending U.S.

patent applications, PCT international applications and pending foreign patent applications relating to STK-001, and the U.S.

patent any patents that may issue from these pending patent applications are expected to expire between 2038 and 2040, absent any patent term adjustments or extensions.

The term of individual patents depends upon the laws of the countries in which they are obtained.

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However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

The patent positions of companies like ours are gener ally uncertain and involve complex legal and factual questions.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions.

No consistent policy regarding the scope of claims allowable in patents in the field of genetic therapy has emerged in the United States.

The patent situation outside of the United States is e ven more uncertain.

Changes in the patent laws and rules, either by legislation, judicial decisions, or regulatory interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual prope rty rights, and more generally could affect the value of our intellectual property.

In particular, our ability to stop third parties from making, using, selling, offering to sell, importing or otherwise commercializing any of our patented inventions, eithe r directly or indirectly, will depend in part on our success in obtaining, defending and enforcing patent claims that cover our technology, inventions, and improvements.

With respect to both licensed and company-owned intellectual property, we cannot be su re that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our platform and product candidates and the methods used to manufacture them.

The patent situation outside of the United States is even more uncertain.

Changes in the patent laws and rules, either by legislation, judicial decisions, or regulatory interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property.

In particular, our ability to stop third parties from making, using, selling, offering to sell, importing or otherwise commercializing any of our patented inventions, either directly or indirectly, will depend in part on our success in obtaining, defending and enforcing patent claims that cover our technology, inventions, and improvements.

With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our platform and product candidates and the methods used to manufacture them.

Moreover, our issued patents and those that may issue in the future may not guarantee us the right to practice our technology in relation to the commercialization of our platform’s product candidates.

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Our issued patents and those that may issue in the future may be challenged, narrowed, circumvented or invalidated, which could limit our ability to stop competitors from marketing related platforms or product candidates or limit the length of the term of patent protection that we may have for our TANGO platform and product candidates.

In addition, the rights granted under any iss ued patents may not provide us with protection or competitive advantages against competitors with similar technology.

In addition, the rights granted under any

issued patents may not provide us with protection or competitive advantages against competitors with similar technology.

Furthermore, our competitors may independently develop similar technologies.

For these reasons, we may have competition for our TANGO plat form and product candidates.

Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before any product candidate can be commercialized, any related patent may expire or re main in force for only a short period following commercialization, thereby reducing any advantage of the patent.

For this and other risks related to our proprietary technology, inventions, improvements, platforms and product candidates, please see the sect ion entitled “Risk factors—Risks related to our intellectual property.”

For these reasons, we may have competition for our TANGO platform and product candidates.

Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before any product candidate can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

For this and other risks related to our proprietary technology, inventions, improvements, platforms and product candidates, please see the section entitled “Risk factors—Risks related to our intellectual property.”

We have filed for trademark protection of the “Stoke Therapeutics” mark with the United States Patent and Trademark Office and foreign trademark organizations.

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For more information, please see the section entitled “Risk factors – Risks related to our intellectual property.”

License agreements

Cold Spring Harbor Laboratory

In July 2015, we entered into a worldwide license agreement with CSHL, or the CSHL Agreement, with respect to the TANGO patents.

License and research agreements

In July 2015, we entered into a worldwide license agreement (the “CSHL Agreement”), with CSHL, with respect to TANGO patents.

The CSHL Agreement was subsequently amended in May 2019 and in July 2020.

Under the CSHL Agreement, we receive an exclusive (except with respect to certain government rights and non-exclusive licenses), worldwide license under certain patents and applications relating to TANGO.

As part of the CSHL Agreement, we granted CSHL 164,927 shares of common stock.

The CSHL Agreement obligates us to make additional payments that are contingent upon certain milestones being achieved as well as royalties in the low- to mid-single digits on future product sales.

These royalty obligations last on a product-by-product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a patent covering a subject product or (ii) the expiration of any regulatory exclusivity for the subject product in a country.

In addition, if we sublicense rights under the CSHL Agreement, we are required to pay a maximum of twenty percent of the sublicense revenue to CSHL, which may be reduced upon achievement of certain milestones for the applicable subject product.

The maximum aggregate potential milestone payments payable total approximately $900,000.

Additionally, certain licenses under the CSHL Agreement require us to reimburse CSHL for certain past and ongoing patent related expenses;

however there were no expenses related to these reimbursable patent costs during the years ended December 31, 2019 and 2018.

University of Southampton

In April 2016, we entered into an exclusive, worldwide license agreement with the University of Southampton, or the Southampton Agreement, whereby we acquired rights to foundational technologies related to our TANGO technology.

Under the Southampton Agreement, we receive an exclusive, worldwide license under certain licensed patents and applications relating to TANGO.

As part of the Southampton Agreement, we paid 55,000 pounds sterling (approximately $73,000 as of the date thereof) as an up-front license fee.

Under the Southampton Agreement, we may be obligated to make additional payments that are contingent upon certain milestones being achieved, as well as royalties in the low- to mid-single digits on future product sales.

As part of the CSHL Agreement, we granted CSHL 164,927 shares of common stock valued based on an independent appraisal at approximately $0.07 million.

The CSHL Agreement obligates us to make additional payments that are contingent upon certain milestones being achieved.

We are also required to pay royalties, tiered based on the scope of patent coverage for each licensed product, ranging from a low-single digit percentage to a mid-single digit percentage on annual net sales.

These royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until the latest of (i) the expiration of the last valid claim of a CSHL patent covering the applicable licensed product or (ii) the expiration of any regulatory exclusivity for the applicable licensed product.

In addition, if we sublicense the rights under the CSHL Agreement, we are required to pay a maximum of twenty percent of the sublicense revenue to CSHL, which may be reduced to a mid-teens or a mid-single digit percentage upon achievement of certain clinical milestones for the applicable licensed product.

Finally, we are required to pay an annual license maintenance fee of $0.01 million, which amount is creditable against any owed royalty or milestone payments.

The maximum aggregate potential milestone payments payable total approximately $0.9 million.

Additionally, certain licenses under the CSHL Agreement require us to reimburse CSHL for certain past and ongoing patent related expenses, however there were no expenses related to these reimbursable patent costs during the years ended December 31, 2020 and 2019.

In April 2016, we entered into an exclusive, worldwide license agreement with the University of Southampton, (the “Southampton Agreement”), whereby we acquired rights to foundational technologies related to our TANGO technology.

Under the Southampton Agreement, we receive d an exclusive, worldwide license under certain licensed patents and applications relating to TANGO.

As part of the Southampton Agreement, we paid 0.06 million pounds sterling (approximately $0.0 8 million as of the date thereof) as an up-front license fee.

Under the Southampton Agreement, we 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 we sublicense our rights under the Southampton Agreement, we are required to pay a mid-single digit percentage of the sublicense revenue to the University of Southampton.

The maximum aggregate potential milestone payments payable by us total approximately 400,000 pounds sterling (approximately $530,000 as of December 31, 2019).

As of December 31, 2019, we have recorded no liabilities under the Southampton Agreement.

The maximum aggregate potential milestone payments payable by us totaled approximately 0.4 million pounds sterling (approximately $0.5 million as of December 3 1 , 2020).

As of December 3 1 , 2020, and December 31, 2019, we had recorded no liabilities under the Southampton Agreement.

Government regulation

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A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans.

If FDA has neither commented on nor questioned the IND within this 30-day pe riod, the clinical trial proposed in the IND may begin.

The clinical trial proposed in the IND may begin after a safe to proceed communication is received from the FDA.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator.

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Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap.

In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence of effectiveness.

In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested

to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence of effectiveness.

Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug generally for a specific indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks.

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In most cases FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug.

A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances, such as where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.

A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances, including (1) where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) when in conjunction with other confirmatory evidence.

After completion of the required clinical testing, an NDA is prepared and submitted to FDA.

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FDA has agreed to certain performance goals in the review of new drug applications to encourage timeliness.

Most applications for standard review drug products are reviewed within ten to twelve months;

most applications for priority review drugs are reviewed in six to eight months.

Priority review can be applied to drugs that FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists.

Most applications for standard review drug products are reviewed within ten to twelve months of the date of submission of the new drug application to FDA;

the target review period for priority review drugs is six months from the date of filing (accepted for review by the FDA) of the new drug application.

Priority review can be applied to an application for a drug that treats a serious condition and if approved would provide a significant improvement in safety or effectiveness over existing treatments or provide a treatment where no adequate therapy exists.

The review process for both standard and priority review may be extended by FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an external drug advisory committee—typically a panel that includes clinicians and other experts—for review, evaluation and a recommendation as to whether the application should be approved.

FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an external drug advisory committee—typically a panel that includes clinicians, statisticians, patient representatives and other experts—for review, evaluation and a recommendation as to whether the application should be approved.

FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.

Before approving an NDA, FDA will typically inspect one or more clinical sites to assure compliance with GCP.

Additionally, FDA will inspect the facility or the facilities at which the drug is manufactured.

Additionally, FDA will inspect the facility or the facilities at which the drug substance and drug product are manufactured.

FDA will not approve the product unless compliance with current good manufacturing practices, or cGMPs, is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

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Breakthrough therapy designation facilitates Intensive Guidance from the FDA on an “Efficient Drug Development Program, Beginning as Early as Phase 1”.

Under the FDA’s A ccelerated A pproval regulations, FDA may approve a drug for a serious or l ife-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irr eversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alte rnative treatments.

Under the FDA’s Accelerated Approval regulations, FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives.

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for that product, for that indication.

During the seven-year exclusivity period, FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

During the seven-year exclusivity period, FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such

as a showing of clinical superiority to the product with orphan drug exclusivity.

Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.

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(ii) the listed patent has expired;

(iii) the listed patent has not expired but will expire on a particular date and app roval is sought after patent expiration;

(iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration;

or (iv) the listed patent is invalid or will not be infringed by the new product.

The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or car ve out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the refe renced product have expired.

The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carve out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.

If the ANDA applicant has provided a Paragraph IV c ertification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA.

The NDA and patent holders may then initiate a patent infringement lawsuit i n response to the notice of the Paragraph IV certification.

The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, exp iration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA.

The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification.

The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

Upon NDA approval of a new chemical entity, or NCE, which is a drug that contains no active moiety that has been approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA cannot receive any ANDA seeking approval of a generic version of that drug.

Certain changes to a drug, such as the addition of a new indication to the package insert, are associated with a three-year period of exclusivity during which FDA cannot approval an ANDA for a generic drug that includes the change.

any ANDA seeking approval of a generic version of that drug.

An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.

If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period.

Certain changes to a drug, such as the addition of a new indication to the package insert, can be the subject of a three-year period if the application contains reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the sponsor that were essential to the approval of the application.

FDA cannot approv e an ANDA for a generic drug that includes the change during the exclusivity period.

Patent term extension

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As in the United States, post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution would apply to any product that is approved outside the United States.

Other heal thcare laws

Other healthcare laws

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain general business and marketing practices in the pharmaceutical industry in recent years.

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This includes claims made to programs where the federal government reimburses, such as Medicaid, as well as programs where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were

used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.

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Still other states require the posting of information relating to clinical studies and their outcomes.

Some states require the reporting o f certain pricing information, including information pertaining to and justifying price increases, or prohibit prescription drug price gouging.

In addition, states such as California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes.

Several additional states are considering similar proposals.

Some states require the reporting of certain pricing information, including information pertaining to and justifying price increases, or prohibit prescription drug price gouging.

In addition, certain states require pharmaceutical companies to implement compliance programs and/or marketing codes.

Certain states and local jurisdictions also require the registration of pharmaceutical sales representatives.

Compliance with these laws i s difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Efforts to ensure that business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs.

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The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) proscribed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer what are now 70% point of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs and therapeutic biologics to be covered under Medicare Part D, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (ix) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

The current U.S.

presidential administration and Congress have, and we expect they will continue to, seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA.

Since January 2017, the current U.S.

presidential administration has issued two executive orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

For example, on October 12, 2017, the current U.S.

presidential administration issued an executive order that expands the use of association health plans and allows anyone to purchase short-term health plans that provide temporary, limited insurance.

This executive order also calls for the halt of federal payments to health insurers for cost-sharing reductions previously available to lower-income Americans to afford coverage.

There is still uncertainty with respect to the impact this executive order could have on coverage and reimbursement for healthcare items and services covered by plans that were authorized by

Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA.

While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law.

The TCJA, among other things, included a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health c overage for all or part of a year that is commonly referred to as the “individual mandate”.

Additionally, on January 22, 2018, the current U.S.

presidential administration signed a continuing resolution on appropriations for fiscal year 2018 that delayed t he implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excis e tax on non-exempt medical devices.

There have been legislative and judicial efforts to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA, including measures taken during the Trump administration.

The Tax Cuts and Jobs Act of 2017, or the TCJA, among other things, included a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.

In November 2020, the United States Supreme Court held oral arguments on the Fifth Circuit U.S.

Court of Appeals decision that held that the individual mandate is unconstitutional.

It is uncertain how the United States Supreme Court will rule on this case or how healthcare measures of the Biden administration will impact the ACA and our business.

Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on certain high cost employer-sponsored insurance plans and the medical device excise tax on non-exempt medical devices, and effective January 1, 2021, also eliminates the health insurer tax.

Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.

More recently, in July 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment.

There is still uncertainty with respect to the impact the current U.S.

presidential administration and the Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the ACA.

However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

In addition, CMS published a final rule that would give states greater flexibility, effective January 1, 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures.

United States federal government agencies also currently face potentially significant spending reductions, which may further impact healthcare expenditures.

On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year.

These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken.

Moreover, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 2030 unless additional Congressional action is taken.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

The Consolidated Appropriations Act, 2021 extended the suspension of the 2% Medicare sequester through March 31, 2021.

Moreover, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover

overpayments to providers from three to five years.

If federal spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels.

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Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

At the federal level, the current U.S.

presidential administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients.

Additionally, on May 11, 2018, the current U.S.

presidential administration laid out the administration’s “Blueprint” to reduce the cost of prescription medications while preserving innovation and cures.

While the Department of Health and Human Services, or HHS, is soliciting feedback on some of these measures, other actions may be immediately implemented by HHS under existing authority.

Although a number of these, and other potential, proposals will require authorization through additional legislation to become effective, Congress and the current U.S.

presidential administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare, and reform government program reimbursement methodologies for drug products.

At the federal level, the Trump administration’s budget proposal for fiscal year 2021 included at $135 billion allowance to support legislative proposals seeking to reduce drug process, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower cost generic and biosimilar drugs.

In particular, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals.

FDA also released a final rule in September 2020 providing guidance for states to build and submit importation plans for drugs from Canada.

Further, in November 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

The CMS also issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

In December 2020, CMS issued a final rule implementing significant manufacturer price reporting changes under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements.

It is unclear to what extent these new regulations will be implemented and to what extent these regulations or any future legislation or regulations by the Biden administration will have on our business, including our ability to generate revenue and achieve profitability.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 was signed into law.

The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investiga tion for FDA approval.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program;

however, manufacturers are not obligated to provide investigational new drug products under the current federal right to try law.

As of December 31, 2019, we had 56 employees.

Employees and Human Capital Resources

As of December 31, 2020, we had 79 employees, 31 of whom have an M.D.

We have not experienced any work stoppages.

We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.

The principal purposes of our equity incentive and cash-based performance bonus plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business