What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-10 · 68 added, 59 removed, 285 unchanged (31% of the section changed)

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(“Cantor”) and Stifel, Nicolaus & Company, Incorporated (“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 June 30, 2021, no such shares of our common stock had been offered or sold pursuant to this “at-the-market” program with Cantor and Stifel.

As of September 30, 2021, 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.

In November 2020, we completed an underwritten public offering and issued and sold 2,875,000 shares of common stock at a public offering price of $39.00 per share (the “Follow-On Offering”), 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.

As of June 30, 2021 and December 31, 2020 we had $251.4 million and $287.5 million, respectively, in cash, cash equivalents, marketable securities and restricted cash.

As of September 30, 2021 and December 31, 2020 we had $236.9 million and $287.5 million, respectively, in cash, cash equivalents, marketable securities and restricted cash.

Since inception, we have had operating losses, the majority of which are attributable to research and development activities.

Our net losses were $22.0 million and $13.0 million for the three months ended June 30, 2021 and 2020, respectively and $38.8 million and $24.0 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, we had an accumulated deficit of $149.0 million and as of December 31, 2020 we had an accumulated deficit of $110.3 million.

Our net losses were $22.6 million and $13.7 million for the three months ended September 30, 2021 and 2020, respectively and $61.4 million and $37.7 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had an accumulated deficit of $171.6 million and as of December 31, 2020 we had an accumulated deficit of $110.3 million.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

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Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and restricted cash as of June 30, 2021, will enable us to fund our operating expenses and capital expenditure requirements into 2024.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and restricted cash as of September 30, 2021, will enable us to fund our operating expenses and capital expenditure requirements until the end of 2023.

To date, we have not had any products approved for sale and have not generated any product sales.

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Currently we are monitoring patient enrollment and participation in our clinical trials and our observational study, including the duration and degree to which we may see declines in enrollment, 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 clinical trials and our observational study.

While we continue to enroll and dose patients in our clinical trials at sites across the United States and plan to begin enrolling and dosing patients at sites across the United Kingdom in the second half of 2021, 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.

While we continue to enroll and dose patients in our clinical trials at sites across the United States and the United Kingdom in the second half of 2021, we take into consideration 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 trials.

Currently we have not experienced any delays in our clinical trials.

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 some physical participation in meetings, events and conferences).

Currently we have not experienced any delays in our clinical trials due to COVID-19.

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 minimizing some physical participation in meetings, events and conferences.

We continue to monitor our operations and applicable governmental recommendations, 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 primarily 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.

Our office-based employees had been primarily working from home from early March 2020 through early September 2021.

Since then, our office-based staff have been working in a hybrid-model fluctuating between work from home and work from the office.

Throughout the pandemic, we continue to ensure that essential staffing levels in our operations remain in place, including maintaining key personnel in our laboratories

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A.

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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.

Following interactions with the FDA, in October 2020, we announced that the FDA agreed to allow us to add an additional higher dose level of 30mg of the MONARCH study.

In September 2021, we announced the first patient was dosed in the 30mg multiple ascending dose (“MAD”) portion of the study.

At that time, we also announced that the FDA agreed to allow the Company to add an additional higher dose level (45mg) to the MONARCH study.

In addition, a 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 10mg, 20mg and 30mg single ascending dose portion of the study are now complete.

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

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

Enrollment and dosing in the 10mg, 20mg and 30mg single ascending dose (“SAD”) portion and the 20mg MAD portion of the study are now complete.

Enrollment and dosing in the MAD portion of the study are ongoing at the 30mg dose level.

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.

In this study, patients will initially be administered the same dose level they received in the previous study and will receive a maximum dose level recommended by the safety Monitoring Committee.

One dose will be administered every four months.

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The study is expected to enroll more than 20 children and adolescents with Dravet syndrome across multiple clinical sites in the United Kingdom.

Patient enrollment and dosing are expected to start in the second half of 2021.

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.

In September 2021, we announced the first patient had been dosed in the ADMIRAL study.

Enrollment and dosing are ongoing at the 30mg dose level.

In September 2021, we announced positive interim safety, pharmacokinetic (PK), and cerebrospinal fluid (CSF) drug exposure data from the MONARCH Study.

The data demonstrated that, as of the time of the interim analysis, single doses of STK-001 up to 30mg

and multiple doses of 20mg were well-tolerated with no safety concerns related to the study drug.

Furthermore, preliminary analyses of daily seizure diaries suggested a trend toward a reduction in convulsive seizure frequency among patients treated with single doses of STK-001.

We also shared modeling of predicted brain exposure that suggests >95% of patients are predicted to have pharmacologically active STK-001 brain levels following three doses of 30mg administered one month apart .

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

Our ability to continue our clinical trials 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 and United Kingdom, 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.

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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 in the United States.

Autosomal Dominant Optic Atrophy Program

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

Autosomal Dominant Optic Atrophy Program – STK-002

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

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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.

In May 2021, we presented new preclinical efficacy data for TANGO ASO at The Association for Research in Vision and Ophthalmology (ARVO) Annual meeting and The American Society of Gene and Cell Therapy (ASGCT) Annual Meeting demonstrating, for the first time, that in human cells derived from ADOA patients with different OPA1 mutations TANGO ASO can increase OPA1 protein level and improve mitochondrial function.

Lead optimization is on track to identify a clinical candidate for the treatment of ADOA by the end of 2021.

In May 2021, we presented new preclinical efficacy data for a TANGO ASO at The Association for Research in Vision and Ophthalmology (ARVO) Annual meeting and The American Society of Gene and Cell Therapy (ASGCT) Annual Meeting demonstrating, for the first time, that in human cells derived from ADOA patients with different OPA1 mutations TANGO ASOs can increase OPA1 protein level and improve mitochondrial function.

In November 2021, we announced the nomination of STK-002 as our lead clinical candidate for the treatment of ADOA.

STK-002, a proprietary ASO, is designed to upregulate OPA1 protein expression by leveraging the non-mutant (wild-type) copy of the OPA1 gene.

Based on preclinical data generated to date, the Company believes that STK-002 has the potential to be a disease-modifying therapy for people living with ADOA.

Financial operations overview

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The table below summarizes our research and development expenses incurred by development program (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Non-program specific and unallocated research and

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Our other income (expense), includes (i) interest income earned on cash reserves in our operating money market fund investment accounts and on our marketable securities investments and (ii) other items of income (expense), net.

Results of operations for the three months ended June 30, 2021 and 2020

Results of operations for the three months ended September 30, 2021 and 2020

The following table sets forth our results of operations:

Three Months Ended June 30,

Three Months Ended September 30,

(in thousands)

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Research and development expenses

Research and development expenses were $14.1 million for the three months ended June 30, 2021 as compared to $8.0 million for the three months ended June 30, 2020, an increase of $6.1 million.

Research and development expenses were $14.4 million for the three months ended September 30, 2021 as compared to $8.1 million for the three months ended September 30, 2020, an increase of $6.3 million.

The table below summarizes our research and development expenses (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Personnel-related expenses

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Total research and development expenses

The increase in research and development expenses were primarily attributable to an increase of $1.5 million in personnel costs resulting from an increase in headcount, an increase of $2.0 million in facilities, stock compensation expense and other costs, an increase of $1.8 million in expenses related to our STK-001 program and $1.0 million related to our OPA1 program, which comprised of third-party services and scientific consulting fees, partially offset by a decrease of $0.2 million in non-project specific consulting and third-party services, materials and other costs.

The increase in research and development expenses were primarily attributable to an increase of $2.5 million in personnel costs resulting from an increase in headcount, an increase of $2.3 million in expenses related to our STK-001 program and $1.2 million related to our STK-002 program, which is comprised of third-party services and scientific consulting fees and an increase of $0.4 million in facilities and other costs, partially offset by a decrease of $0.1 million in non-project specific consulting and third-party services, materials and other costs.

The increases in expense reflect the accelerating pace of research and development activities and the increases in personnel, facilities and, third party services to support those activities.

General and administrative expenses

General and administrative expenses were $7.9 million for the three months ended June 30, 2021 as compared to $5.0 million for the three months ended June 30, 2020, an increase of $2.9 million.

The increase in general and administrative expenses were primarily attributable to an increase of $0.8 million in personnel costs resulting from an increase in headcount, and an increase of $2.1 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including human resources, information technology, audit, tax, public relations, communications and other general and administrative activities and expenses including stock compensation expense.

The change in our other income for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily reflects a decrease in cash balances and in market interest rates.

Results of operations for the six months ended June 30, 2021 and 2020

General and administrative expenses were $8.3 million for the three months ended September 30, 2021 as compared to $5.6 million for the three months ended September 30, 2020, an increase of $2.7 million.

The increase in general and administrative expenses were primarily attributable to an increase of $2.3 million in personnel costs resulting from an increase in headcount, and an increase of $0.4 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including human resources, information technology, audit, tax, public relations, communications and other general and administrative activities.

The change in our other income for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 primarily reflects a decrease in cash balances and in market interest rates.

Results of operations for the nine months ended September 30, 2021 and 2020

The following table sets forth our results of operations:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Research and development expenses

Research and development expenses were $24.0 million for the six months ended June 30, 2021 as compared to $15.2 million for the six months ended June 30, 2020, an increase of $8.8 million.

Research and development expenses were $38.4 million for the nine months ended September 30, 2021 as compared to $23.3 million for the nine months ended September 30, 2020, an increase of $15.1 million.

The table below summarizes our research and development expenses (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Personnel-related expenses

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Total research and development expenses

The increase in research and development expenses were primarily attributable to an increase of $2.7 million in personnel costs resulting from an increase in headcount, an increase of $3.0 million in facilities, stock compensation expense and other costs, an increase of $2.4 million in expenses related to our STK-001 program and $1.1 million related to our OPA1 program, which comprised of third-party services and scientific consulting fees, partially offset by a decrease of $0.4 million in non-project specific consulting and third-party services, materials and other costs.

The increase in research and development expenses were primarily attributable to an increase of $7.2 million in personnel costs resulting from an increase in headcount, an increase of $1.3 million in facilities and other costs, an increase of $4.8 million in expenses related to our STK-001 program and $2.2 million related to our STK-002 program, which is comprised of third-party services and scientific consulting fees, partially offset by a decrease of $0.4 million in non-project specific consulting and third-party services, materials and other costs.

The increases in expense reflect the accelerating pace of research and development activities and the increases in personnel, facilities and, third party services to support those activities.

General and administrative expenses

General and administrative expenses were $14.9 million for the six months ended June 30, 2021 as compared to $9.6 million for the six months ended June 30, 2020, an increase of $5.3 million.

The increase in general and administrative expenses were primarily attributable to an increase of $1.3 million in personnel costs resulting from an increase in headcount, and an increase of $4.0 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including human resources, information technology, audit, tax, public relations, communications and other general and administrative activities and expenses including stock compensation expense.

The change in our other income for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 primarily reflects a decrease in cash balances and in market interest rates.

General and administrative expenses were $23.2 million for the nine months ended September 30, 2021 as compared to $15.2 million for the nine months ended September 30, 2020, an increase of $8.0 million.

The increase in general and administrative expenses were primarily attributable to an increase of $6.3 million in personnel costs resulting from an increase in headcount, and an increase of $1.7 million in third-party services to support our in-house personnel in various aspects of developing and supporting the business including human resources, information technology, audit, tax, public relations, communications and other general and administrative activities.

The change in our other income for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 primarily reflects a decrease in cash balances and in market interest rates.

Liquidity and capital resources

Since our inception through June 30, 2021, our operations have been primarily financed by net proceeds of $385.3 million from the sale of convertible notes payable and our convertible preferred stock as well as our IPO and Follow-On Offering.

As of June 30, 2021, we had $251.4 million in cash, cash equivalents, marketable securities and restricted cash.

Since our inception through September 30, 2021, our operations have been primarily financed by net proceeds of $385.3 million from the sale of convertible notes payable and our convertible preferred stock as well as our IPO and Follow-On Offering.

As of September 30, 2021, we had $236.9 million in cash, cash equivalents, marketable securities and restricted cash.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

We have incurred losses since our inception in June 2014 and, as of June 30, 2021, we had an accumulated deficit of $149.0 million.

We have incurred losses since our inception in June 2014 and, as of September 30, 2021, we had an accumulated deficit of $171.6 million.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and restricted cash as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into 2024.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and restricted cash as of September 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements until the end of 2023.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future.

We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other

similar arrangements.

We will continue to seek funds through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all.

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The following table summarizes our cash flows:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Operating activities

During the six months ended June 30, 2021, cash used in operating activities was $36.0 million and was primarily attributable to a net loss of $38.8 million, partially offset by non-cash charges of $8.2 million for share-based compensation, depreciation, and reduction in the carrying amount of right of use assets, and a net change of $5.4 million in our net operating assets and liabilities.

During the six months ended June 30, 2020 , cash used in operating activities was $ 20.4 million and was primarily attributable to a net loss of $ 24 .0 million, partially offset by non-cash charges of $ 3.3 million for share-based compensation , depreciation , and reduction in the carrying amount of right of use assets , and a net change of $ 0.

3 million in our net operating assets and liabilities.

During the nine months ended September 30, 2021, cash used in operating activities was $50.6 million and was primarily attributable to a net loss of $61.4 million, partially offset by non-cash charges of $13.5 million for share-based compensation, depreciation, amortization and accretion of marketable securities, loss on disposal of property and equipment, and reduction in the carrying amount of right of use assets, and a net change of $2.8 million in our net operating assets and liabilities.

During the nine months ended September 30, 2020, cash used in operating activities was $31.3 million and was primarily attributable to a net loss of $37.7 million, partially offset by non-cash charges of $5.6 million for share-based compensation, loss on disposal of property and equipment, depreciation, and reduction in the carrying amount of right of use assets, and a net change of $0.8 million in our net operating assets and liabilities.

Investing activities

Our investing activities during the six months ended June 30, 2021 consisted of purchases of marketable securities and purchases of property and equipment.

Our investing activities during the six months ended June 30, 2020 have consisted principally of purchases of property and equipment.

Our investing activities during the nine months ended September 30, 2021 consisted of purchases of marketable securities and purchases of property and equipment.

Our investing activities during the nine months ended September 30, 2020 consisted of purchases of property and equipment.

Financing activities

Our financing activities during the six months ended June 30, 2021 consisted of $0.5 million from the exercise of stock options and $0.2 million in proceeds from our Employee Stock Purchase Plan.

Our financing activities during the six months ended June 30, 2020 consisted primarily of $0.6 million from the exercise of stock options.

Our financing activities during the nine months ended September 30, 2021 consisted of $0.6 million from the exercise of stock options and $0.5 million in proceeds from our Employee Stock Purchase Plan.

Our financing activities during the nine months ended September 30, 2020 consisted of $1.2 million from the exercise of stock options and $0.4 million in proceeds from our Employee Stock Purchase Plan, offset by $0.4 million in deferred financing costs.

Contractual obligations and commitments

The following table summarizes our contractual obligations as of June 30, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future fiscal periods:

The following table summarizes our contractual obligations as of September 30, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future fiscal periods:

Payments Due by Fiscal Period

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The amended lease provides us with the option to extend the term of the lease for an additional two years with a base annual rent increase of 3 %.

In September 2021, we entered into an agreement to extend the initial term of the 23,000 square foot lease for a period of three years ending December 31, 2024.

In addition, this agreement provides for the lease of an additional 15,000 square feet of rentable space beginning in April 2022 and ending on December 31, 2024.

Initial monthly lease payments are approximately $0.1 million with respect to the 23,000 square feet space, and $0.1 million with respect to the 15,000 square feet space, and in each case subject to annual rent escalations.

Our commitments primarily consist of obligations under our agreements with CSHL and the University of Southampton.

As of June 30, 2021, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of September 30, 2021, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see Note 6—Commitments and Contingencies of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q .

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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-Q

Item 2. Management’s Discussion and Analysis