What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-08 · 82 added, 53 removed, 295 unchanged (31% of the section changed)

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The $150,000,000 of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $400,000,000 of securities that may be offered, issued and sold by us under the base prospectus.

As of June 30, 2022, we had not issued any shares pursuant to the Sales Agreement, nor did we issue any shares subsequent to June 30, 2022.

As of June 30, 2022 and December 31, 2021 we had $276.2 million and $220.4 million, respectively, in cash, cash equivalents, marketable securities and restricted cash.

As of September 30, 2022, we had not issued any shares pursuant to the Sales Agreement, nor did we issue any shares subsequent to September 30, 2022.

As of September 30, 2022 and December 31, 2021 we had $252.2 million and $220.4 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 $24.7 million and $22.0 million for the three months ended June 30, 2022 and 2021, respectively and $49.3 million and $38.8 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $245.4 million.

Our net losses were $26.1 million and $22.6 million for the three months ended September 30, 2022 and 2021, respectively and $75.4 million and $61.4 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had an accumulated deficit of $271.5 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, 2022, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and restricted cash as of September 30, 2022, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

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

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If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Program Update

Dravet Syndrome Program – STK-001

In October 2022, the U.S.

Food and Drug Administration (the “FDA”) granted Rare Pediatric Disease Designation to STK-001 for the potential treatment of patients with Dravet syndrome.

In November 2022, we announced positive interim safety, pharmacokinetic (“PK”) and cerebrospinal fluid (“CSF”) drug exposure data from the MONARCH and ADMIRAL studies.

The pooled data from these two studies demonstrated that, as of the time of the interim analysis, single and multiple doses of STK-001 up to 45mg were well-tolerated.

27% (15 of 55) of patients experienced a treatment-emergent adverse event (“TEAE”) related to the study drug, all of which were mild or moderate in severity.

22% (12 of 55) of patients had a treatment-emergent serious adverse event, none of which were related to the study drug.

The most common TEAEs observed were vomiting, headache and seizures.

33% (18 of 55) of patients experienced CSF protein elevation (>50mg/dL) after dosing, but no clinical manifestations were observed.

No TEAEs led to study drug withdrawal.

One of several secondary endpoints for both the MONARCH and ADMIRAL studies was a comparison of the percentage change in convulsive seizure frequency as measured by daily seizure diaries and calculated over 4-week time periods:

between baseline and 12 weeks after treatment;

and between baseline and end of study.

Preliminary analysis using pooled data from the MONARCH and ADMIRAL studies showed that 74% (20 of 27) of patients who were treated with multiple doses of 20mg, 30mg or 45mg of STK-001 and were followed for at least three months after their last dose experienced a reduction from baseline in convulsive seizure frequency.

Median reductions from baseline in convulsive seizure frequency of 55% (45mg, n=6), 20% (30mg, n=17) and 41% (20mg, n=4) were observed in patients treated with three doses of STK-001 as measured from Day 29 after their first dose to three months after receiving their last dose as illustrated below:

Reductions in seizures were observed across all age groups, with seizure reductions more evident among patients ages 2-12 as seen below:

A preliminary analysis from a small cohort of patients treated in the SWALLOWTAIL OLE indicated that safety findings, PK profiles and seizure reductions were maintained with multiple doses of STK-001.

In addition, there was an early indication of improvements among a small group of evaluable patients in some non-seizure comorbidities as measured by the Behavior Rating Inventory of Executive Function—Preschool Version (“BRIEF-P”), an assessment of executive function, which was one of several exploratory endpoints, when compared to the natural progression of the disease over a 12-month period as demonstrated in the BUTTERFLY natural history study, as seen below:

The following PK and CSF exposure findings were also observed as of the time of the interim analysis:

a dose-dependent increase in study drug exposure was observed in plasma with a greater increase observed between 30mg and 45mg than between 20mg and 30mg;

the plasma PK profile was consistent across ADMIRAL and MONARCH patients who were treated at the same dose level;

CSF exposure was measurable up to six months following single and multiple intrathecal doses of STK-001, indicating sustained exposure of STK-001 in the brain.

Dosing is ongoing in MONARCH at 45mg and in ADMIRAL at 70mg.

Dosing is also ongoing in the open-label extension studies, SWALLOWTAIL and LONGWING.

Following recent interactions with regulatory agencies, we have agreed to limit chronic dosing in SWALLOWTAIL to 30mg and in LONGWING to 45mg.

Autosomal Dominant Optic Atrophy Program – STK-002

In August 2022, we announced enrollment of the first patient in the FALCON natural history study of people ages 8 to 60 who are living with autosomal dominant optic atrophy.

The FALCON study is designed to evaluate disease progression and its effect on patients.

Business Update Regarding COVID-19

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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 CMO’s ability to manufacture reagents, materials, or products that we need to use in our research and clinical trial.

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 CMO’s 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 trials, and our ability to hire and retain employees.

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

Risk Factors included in this quarterly report F orm 10 - Q .

Risk Factors included in this quarterly report Form 10-Q.

Financial operations overview

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If we are able to successfully develop, receive regulatory approval for and commercialize any of our current or future product candidates alone or in collaboration with third parties, we may generate revenue from the sales of these product candidates.

In January 2022, the Company entered into a license and collaboration agreement with Acadia Pharmaceuticals Inc.

In January 2022, we entered into a license and collaboration agreement with Acadia Pharmaceuticals Inc.

(“Acadia”) for the discovery, development and commercialization of novel RNA-based medicines for the treatment of severe and rare genetic neurodevelopmental diseases of the central nervous system (the “CNS”).

The agreement focuses on the targets SYNGAP1, MECP2 (Rett syndrome), and an undisclosed neurodevelopmental target of mutual interest.

In connection with each target, the Company will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products.

With respect to SYNGAP1, the Company has agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith the Company granted to Acadia worldwide, co-exclusive (with the Company) licenses for such licensed products.

With respect to MECP2 and the neurodevelopmental target, the Company granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.

Pursuant to the terms of the agreement, the Company received an upfront payment of $60 million from Acadia.

Acadia agreed to fund the research to identify potential licensed products for MECP2 and the neurodevelopmental target, and the Company will equally fund with Acadia the research to identify potential licensed products for SYNGAP1.

The Company is eligible to receive up to $907.5 million in potential total milestone payments based upon the achievement of certain development, regulatory, first commercial sales and sales milestone events across the programs for the three targets, assuming each milestone were achieved at least once.

With respect to licensed products for MECP2 and the neurodevelopmental target, the Company is also eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net sales by Acadia of licensed products worldwide.

In connection with each target, we will collaborate with Acadia to identify potential treatments for further development and commercialization as licensed products.

With respect to SYNGAP1, we have agreed with Acadia to co-develop and co-commercialize licensed products for such target globally, and in connection therewith we granted to Acadia worldwide, co-exclusive (with us) licenses for such licensed products.

With respect to MECP2 and the neurodevelopmental target, we granted to Acadia worldwide, exclusive licenses to develop and commercialize licensed products for such targets.

Pursuant to the terms of the agreement, we received an upfront payment of $60 million from Acadia.

Acadia agreed to fund the research to identify potential licensed products for MECP2 and the neurodevelopmental target, and we will equally fund with Acadia the research to identify potential licensed products for SYNGAP1.

We are eligible to receive up to $907.5 million in potential total milestone payments based upon the achievement of certain development, regulatory, first commercial sales and sales milestone events across the programs for the three targets, assuming each milestone were achieved at least once.

With respect to licensed products for MECP2 and the neurodevelopmental target, we are also eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net sales by Acadia of licensed products worldwide.

Royalties payable under the agreement are subject to standard royalty reductions.

For SYNGAP1 licensed products that the Company is co-developing and co-commercializing, the Company will be responsible for 50% of the development and commercialization costs and will receive 50% of the profits from global commercialization.

The Company is provided with a co-development and co-commercialization opt out option relating to the SYNGAP1 target indication at the Company’s discretion.

Such opt-out would reduce development and commercialization milestones but would provide the Company with royalties on an escalating basis attributable to net sales milestones.

For SYNGAP1 licensed products that we are co-developing and co-commercializing, we will be responsible for 50% of the development and commercialization costs and will receive 50% of the profits from global commercialization.

We are provided with a co-development and co-commercialization opt out option relating to the SYNGAP1 target indication at our discretion.

Such opt-out would reduce development and commercialization milestones but would provide us with royalties on an escalating basis attributable to net sales milestones.

See Note 7—License and Collaboration Agreement with Acadia Pharmaceuticals, Inc.

in our unaudited condensed consolidated financial statements included elsewhere in this Form 10Q.

of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Operating expenses

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We do not allocate employee costs, costs associated with our technology or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are currently deployed across multiple product development programs and, as such, are not separately classified.

We use internal resources to

manage our development activities and our employees work across multiple development programs and, therefore, we do not track their costs by program.

We use internal resources to manage our development activities and our employees work across multiple development programs and, therefore, we do not track their costs by program.

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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A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates.

trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

We expect our research and development expenses to increase for the foreseeable future as we continue the development of product candidates.

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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, 2022 and 2021

Results of operations for the three months ended September 30, 2022 and 20 2 1

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 $18.4 million for the three months ended June 30, 2022 as compared to $14.1 million for the three months ended June 30, 2021, an increase of $4.3 million.

Research and development expenses were $20.1 million for the three months ended September 30, 2022 as compared to $14.4 million for the three months ended September 30, 2021, an increase of $5.7 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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General and administrative expenses

General and administrative expenses were $10.1 million for the three months ended June 30, 2022 as compared to $7.9 million for the three months ended June 30, 2021, an increase of $2.2 million.

General and administrative expenses were $9.9 million for the three months ended September 30, 2022 as compared to $8.3 million for the three months ended September 30, 2021, an increase of $1.6 million.

The increase in general and administrative expenses were primarily attributable to an increase of $1.1 million in personnel costs resulting from an increase in headcount, and an increase of $0.5 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.

Other income (expense)

The change in our other income (expense) for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 primarily reflects an increase in marketable securities balances as well as increased interest rates.

Results of operations for the six months ended June 30, 2022 and 2021

The change in our other income (expense) for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily reflects an increase in marketable securities balances as well as increased interest rates.

Results of operations for the nine months ended September 30, 2022 and 2021

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 $36.7 million for the six months ended June 30, 2022 as compared to $24.0 million for the six months ended June 30, 2021, an increase of $12.7 million.

Research and development expenses were $56.7 million for the nine months ended September 30, 2022 as compared to $38.4 million for the nine months ended September 30, 2021, an increase of $18.3 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 $6.5 million in personnel costs resulting from an increase in headcount, an increase of $3.3 million in expenses related to our STK-001 program and $3.0 million related to our STK-002 program, which is comprised of third-party services and scientific consulting fees and an increase of $0.3 million in external third party expense related to SYNGAP1 and MECP2 offset by a decrease of $0.4 million related to facilities and other costs and 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 $5.3 million in personnel costs resulting from an increase in headcount, an increase of $5.1 million in expenses related to our STK-001 program and $4.4 million related to our STK-002 program, which is comprised of third-party services and scientific consulting fees and an increase of $0.5 million in external third party expense related to SYNGAP1 and MECP2 and an increase of $3.0 million related to facilities and other costs and 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 $19.6 million for the six months ended June 30, 2022 as compared to $14.9 million for the six months ended June 30, 2021, an increase of $4.7 million.

General and administrative expenses were $29.5 million for the nine months ended September 30, 2022 as compared to $23.2 million for the nine months ended September 30, 2021, an increase of $6.3 million.

The increase in general and administrative expenses were primarily attributable to an increase of $ 4.5 million in personnel costs resulting from an increase in headcount, and an increase of $ 1.8 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.

Other income (expense)

The change in our other income (expense) for the six months ended June 30, 2022 as compared to the three months ended June 30, 2021 primarily reflects an increase in marketable securities balances as well as increased interest rates.

The change in our other income (expense) for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily reflects an increase in marketable securities balances as well as increased interest rates.

Liquidity and capital resources

Since our inception through June 30, 2022, our operations have been financed by net proceeds of $490.5 million from the sale of convertible notes payable and our convertible preferred stock, our initial public offering, follow-on offering, proceeds from the controlled equity offering sales agreements and the upfront payment from Acadia.

As of June 30, 2022, we had $276.2 million in cash, cash equivalents, marketable securities, and restricted cash.

Since our inception through September 30, 2022, our operations have been financed by net proceeds of $490.5 million from the sale of convertible notes payable and our convertible preferred stock, our initial public offering, follow-on offering, proceeds from the controlled equity offering sales agreements and the upfront payment from Acadia.

As of September 30, 2022, we had $252.2 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, 2022 and 2021, we had accumulated deficits of $245.4 million and $149.0 million, respectively.

We have incurred losses since our inception in June 2014 and, as of September 30, 2022 and 2021, we had accumulated deficits of $271.5 million and $171.6 million, respectively.

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 primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, costs relating to the build-out of our headquarters and manufacturing facility, license payments or milestone obligations that may arise, laboratory and related supplies, clinical costs, manufacturing costs, legal and other regulatory expenses and general overhead costs.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities, and restricted cash as of June 30, 2022, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

Based upon our current operating plan, we believe that our existing cash, cash equivalents, marketable securities, and restricted cash as of September 30, 2022, will enable us to fund our operating expenses and capital expenditure requirements into 2025.

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.

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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, 2022, cash provided by operating activities was $12.6 million.

This was primarily attributable to $55.8 million in deferred revenue received as part of the Acadia collaboration and to non-cash charges of $14.6 million for share-based compensation, depreciation, amortization and accretion of marketable securities, and reduction in the carrying amount of right of use assets, offset by a net loss of $49.3 million and by a net change of $8.5 million in our net operating assets and liabilities.

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 nine months ended September 30, 2022, cash used in operating activities was $9.5 million.

This was primarily attributable to a net loss of $75.4 million and by a net change of $7.4 million in our net operating assets and liabilities, offset by $53.9 million in deferred revenue received as part of the Acadia collaboration and to non-cash charges of $19.4 million for share-based compensation, depreciation, amortization and accretion of marketable securities, and reduction in the carrying amount of right of use assets.

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.

Investing activities

Our investing activities during the six months ended June 30, 2022 and 2021 have consisted of purchases of property and equipment as well as purchases and sales of marketable securities.

Our investing activities during the nine months ended September 30, 2022 and 2021 have consisted of purchases of property and equipment as well as purchases and sales of marketable securities.

Financing activities

Our financing activities during the six months ended June 30, 2022 consisted of $0.4 million from the exercise of stock options, $0.2 million in proceeds from our Employee Stock Purchase Plan and $45.3 million of net proceeds from the controlled equity offering sales agreements.

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 nine months ended September 30, 2022 consisted of $0.6 million from the exercise of stock options, $0.5 million in proceeds from our Employee Stock Purchase Plan and $45.3 million of net proceeds from the controlled equity offering sales agreements.

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.

Contractual obligations and commitments

The following table summarizes our contractual obligations as of June 30, 2022 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, 2022 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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Our commitments primarily consist of obligations under our agreements with CSHL and the University of Southampton.

As of June 30, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of September 30, 2022, 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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The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our estimates are based on

our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation(s) when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the appropriate method of measuring progress for purposes of recognizing revenue.

We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

We evaluate the measure of progress each reporting

period and, if necessary, adjusts the measure of performance and related revenue recognition.

Amounts received prior to being recognized as revenue are recorded as deferred revenue.

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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