chemicalbilly
I lined Stoke Therapeutics (NASDAQ:STOK) in February, and though I used to be mildly constructive, I’m fortunate I didn’t exit and purchase the inventory – as a result of STOK is now down 40% after failing to make the grade within the section 1/2 epilepsy trial I was discussing final time.
STOK develops therapies for uncommon illnesses. It makes use of its “proprietary TANGO (Focused Augmentation of Nuclear Gene Output) method, [in] growing antisense oligonucleotides (ASOs) to selectively restore protein ranges.” This expertise is developed by co-founder Adrian R. Krainer, Ph.D., of Chilly Spring Harbor Laboratory in New York. Dr Krainer was a part of the workforce that invented SPINRAZA, the primary antisense oligonucleotide, or ASO, which is now a $2bn blockbuster. It’s best to examine my Stoke Therapeutics: A Preclinical Biopharma With A Multibillion Greenback Market Cap on STOK from 2020 for a whole dialogue.
From the very starting, STOK had an unimaginable valuation, presumably fueled by its scientific pedigree. Its IPO was at $16, and once I lined it in 2020, the market cap was a whopping $1.8bn. In February, once I final lined it, that had come right down to $364mn, which appeared to me to be unfair given the assorted positives. Proper now, although, the market cap is $234mn, so now we have to see what is occurring incorrect with this firm.
One downside is the indication – Dravet Syndrome – which I mentioned earlier. There are 15000 US sufferers, which looks like a big quantity, however when GW Pharma used to personal epidiolex, an accredited Dravet drug together with Fintepla, the drug made simply $330mn within the first full 12 months of launch. Jazz Pharma holds rights to the drug now, and final 12 months, epidiolex made almost $770mn. After all, this determine comes from the three indications it’s accredited in – however one may marvel if the market has area for one more drug.
The proper response can be to level out the differential mechanism of STK-001. Epidiolex, Fintepla and others tackle the seizures related to DS. For instance, Epidiolex is a cannabidiol indicated for seizures associated to those illnesses. STK-001 is an ASO meant to be healing by addressing the haploinsufficiency seen in DS sufferers. As famous at Endpoints:
Sufferers with Dravet syndrome have one purposeful gene copy and one mutated copy – what’s known as a haploinsufficiency – leading to half as a lot protein as wanted to take care of regular well being. Stoke’s Focused Augmentation of Nuclear Gene Output (TANGO’) platform is designed to deal with haploinsufficiencies by rising – or stoking – protein output from wholesome genes, thus compensating for the mutant copy of the gene.
Thus, STK-001 could have a particular place within the scheme of issues. Plus, it’ll have confirmed the platform, derisking the corporate.
Final time, I mentioned early knowledge from a trial which confirmed that the drug is working and therapeutically energetic, with a numerically higher rating in a sure metric than epidiolex. Nevertheless, sure questions of safety – notably elevated protein within the cerebrospinal fluid presumably related to dosage – restricted the dosing, and triggered the inventory to stumble. This was final time, and there have been different troubles these days.
In July, the corporate launched knowledge that confirmed glorious efficacy however troubling security particulars. The corporate stated:
Citing knowledge from ongoing trials named MONARCH and ADMIRAL, Stoke stated that 74 sufferers aged 2 to 18 who obtained the remedy tolerated STK-001 sufficiently at single or a number of doses starting from 10mg – 70mg.
Nevertheless, 32% of sufferers skilled a treatment-emergent opposed occasion associated to STK-001, and 20% skilled a treatment-emergent critical opposed occasion.
By way of efficacy, on the highest dose of 70mg, the imply reductions in convulsive seizure frequency reached 80% (n = 6) and 89% (n = 3) from baseline to a few months and 6 months after the final dose, respectively.
The imply discount in convulsive seizure frequency stood at 19% (n = 14) and 45% (n = 8) at three months and 6 months, respectively, after the final dose amongst 16 sufferers who obtained the 45mg dose.
As we do see, the efficacy knowledge when it comes to the convulsion seizure frequency is now even higher than earlier than, albeit in a small inhabitants of sufferers. Nevertheless, the opposed occasion profile has develop into worse, with 20% of sufferers experiencing a critical opposed occasion rising from the remedy. That is likely poor knowledge, and triggered the inventory to lose 30% of its worth in a single day.
Thus, though in March the corporate obtained approval from the FDA to make use of a 70mg dose in one among its research, a few of these research stay on partial medical maintain for doses above 45mg, and the poor AE profile shouldn’t be serving to take away these holds.
Financials
STOK has a market cap of $234mn and a money steadiness of $231mn. Analysis and growth bills for the three months ended June 30, 2023, have been $20.6 million, whereas common and administrative bills for the three months ended June 30, 2023, have been $10.2 million. At that fee, the corporate has a money runway of 6-7 quarters. Nevertheless, given an enterprise worth of simply $11mn, clearly the market holds no excessive opinion of STOK. A excessive quick curiosity of 24% additionally confirms that poor opinion.
STOK is nearly completely held by establishments, firms and PE/VC companies. Key holders are Skorpios Belief, RTW and Redmile. There aren’t any insider buys, and the Chief Medical Officer himself is promoting inventory frequently.
Dangers
The protection profile is actually a threat. In early phases of trial, in a sign with accredited treatment, a poor security profile trumps a constructive efficacy profile. The corporate has money, nevertheless it additionally has a excessive quick curiosity and little market enthusiasm. The CMO frequently promoting inventory shouldn’t be a constructive both.
Bottomline
I agree that I’ve repeatedly modified my opinion on STOK. The primary article stated it was overvalued when it was $1.8bn in market cap. The second stated it was undervalued when it was $364mn. At present, it’s $234mn, however I’m nonetheless going to keep away from the inventory as a result of there isn’t any clear derisking taking place right here.
