10-Q: Stoke Therapeutics Q3: Biogen Deal Fuels Revenue, Dravet Syndrome Trial Advances

Stoke Therapeutics reported a significant revenue increase driven by its Biogen collaboration and positive clinical progress for zorevunersen in Dravet syndrome, extending its cash runway to mid-2028.

Summary

• Net income of $51.0 million for the nine months ended September 30, 2025, a significant improvement from a net loss of $78.5 million in the prior year period.
• Revenue for the nine months ended September 30, 2025, increased to $183.0 million from $13.9 million in the prior year, primarily due to the Biogen collaboration.
• Received an upfront payment of $165.0 million from Biogen International GmbH in February 2025 for the joint development and commercialization of zorevunersen.
• Cash, cash equivalents, and marketable securities totaled $328.6 million as of September 30, 2025, expected to fund operations to mid-2028.
• The Phase 3 EMPEROR study for zorevunersen in Dravet syndrome initiated in May 2025, with the first patient dosed in August 2025.
• Open-label extension (OLE) studies for zorevunersen showed substantial and durable reductions in convulsive seizure frequency and continued improvements in cognition and behavior through three years.
• The Phase 1 OSPREY study for STK-002 in Autosomal Dominant Optic Atrophy (ADOA) initiated in August 2025 in the UK, with first patient enrollment planned for the second half of 2025.
• Acadia Pharmaceuticals Inc. terminated the MECP2 and an undisclosed neurodevelopmental program, resulting in the loss of eligibility for up to $662.5 million in potential milestones and royalties.
• Net loss for the three months ended September 30, 2025, increased to $38.3 million from $26.4 million in the prior year period.
• Research and development expenses increased to $96.2 million for the nine months ended September 30, 2025, from $65.7 million in the prior year, largely due to the zorevunersen program.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial performance for the nine-month period due to the Biogen collaboration upfront payment, significantly improving its cash position and extending its operational runway. Clinical programs are advancing with a Phase 3 study initiated for its lead candidate and a Phase 1 for another, supported by positive long-term data. However, the quarterly loss increased, and the termination of two Acadia programs represents a loss of potential future revenue. The company remains pre-revenue from product sales and faces typical high risks associated with clinical-stage biotechnology development.

Positives

• Significant increase in revenue for the nine months ended September 30, 2025, to $183.0 million, primarily driven by the $165.0 million upfront payment from the Biogen collaboration.
• Shift to net income of $51.0 million for the nine months ended September 30, 2025, compared to a net loss of $78.5 million in the prior year period.
• Cash, cash equivalents, and marketable securities of $328.6 million as of September 30, 2025, are projected to fund operations until mid-2028, providing a strong liquidity position.
• Positive clinical progress for zorevunersen (STK-001) in Dravet syndrome, with durable reductions in convulsive seizure frequency and continued improvements in cognition and behavior observed through three years in OLE studies.
• Initiation of the global Phase 3 EMPEROR study for zorevunersen in May 2025, with the first patient dosed in August 2025, marking a significant advancement in the lead program.
• Breakthrough Therapy Designation for zorevunersen from the FDA, potentially enabling expedited regulatory pathways.
• Initiation of the Phase 1 OSPREY study for STK-002 in ADOA in August 2025, expanding the clinical pipeline.
• The One Big Beautiful Bill Act (OBBBA) signed into law, restoring 100% bonus depreciation and immediate expensing of domestic R&E expenditures, which could be beneficial for future tax liabilities.

Negatives

• Increased net loss for the three months ended September 30, 2025, to $38.3 million from $26.4 million in the prior year period.
• Termination of the MECP2 and an undisclosed neurodevelopmental program under the Acadia Agreement, resulting in the loss of eligibility for up to $662.5 million in potential milestone payments and royalties.
• Accumulated deficit of $439.8 million as of September 30, 2025, indicating a history of operating losses.
• Increased research and development expenses, up $30.5 million for the nine months ended September 30, 2025, primarily due to the zorevunersen program, reflecting high costs associated with clinical development.
• Increased sales, general and administrative expenses, up $9.9 million for the nine months ended September 30, 2025.
• A right-of-use asset impairment of $0.7 million recognized in September 2025 due to a sublease agreement.

Risks

• Inability to develop, obtain regulatory approval for, and commercialize product candidates (zorevunersen, STK-002, future candidates) or significant delays in doing so.
• Success in early preclinical or clinical trials may not be indicative of results in later stages, including for Dravet syndrome or ADOA programs.
• Uncertainty in obtaining regulatory approval, which may be for narrower indications than sought.
• Difficulty in identifying and enrolling patients for trials due to low prevalence of target diseases (Dravet syndrome, ADOA), potentially leading to enrollment delays or slower commercial revenue growth.
• Product candidates may cause undesirable and unforeseen side effects or be perceived as unsafe, delaying or preventing advancement or regulatory approval.
• Rare Pediatric Disease designation or Breakthrough Therapy Designation does not guarantee faster development, regulatory review, or approval, nor does it increase the likelihood of marketing approval.
• Enacted and future legislation (e.g., IRA, OBBBA) may increase the difficulty and cost of obtaining marketing approval and commercializing products, and may affect pricing.
• Commercial success depends on market acceptance by providers, patients, advocacy groups, and third-party payors, which is uncertain.
• Failure to obtain or maintain adequate insurance coverage and reimbursement for product candidates, if approved, could limit marketability and revenue generation.
• Reliance on third parties for genetic testing, CROs, CMOs, and consultants, which may lead to delays or unsuccessful outcomes if they do not perform as required.
• Significant competition in the biotechnology and pharmaceutical industries, with competitors potentially developing more advanced or effective therapies or achieving regulatory approval sooner.
• Complexity of drug manufacturing and reliance on a limited number of third-party manufacturers, posing risks of production difficulties, delays, and increased costs.
• Inability to establish sales and marketing capabilities or enter into effective third-party agreements for commercialization.
• Risk of expending limited resources on a particular product candidate or indication that may not be the most profitable or successful.
• Collaborators (e.g., Acadia, Biogen) may not dedicate sufficient resources, delay development, or terminate agreements, leading to loss of milestones or royalties.
• Need to raise substantial additional funding before achieving profitability, with no guarantee of availability on acceptable terms.
• Limited operating history makes it difficult to evaluate future viability and success.
• Ability to utilize net operating loss carryforwards may be subject to limitations due to ownership changes (IRC Sections 382 and 383).
• Changes in U.S. federal income tax reform (TCJA, OBBBA) could adversely affect the company.
• Difficulty and cost in obtaining, maintaining, and protecting intellectual property, with risks of challenges, narrowing, circumvention, or invalidation of patents.
• Dependence on intellectual property licensed from third parties (e.g., University of Southampton), with risks of non-compliance, termination, or disputes.
• Dependence on intellectual property licensed to third parties (e.g., Biogen), with risks of non-compliance, termination, or disputes.
• Inadequate patent terms to protect competitive position for an adequate amount of time.
• Subject to privacy and data security laws (GDPR, UK GDPR, SEC rules), with failure to comply potentially leading to fines or harm to business.
• Difficulties in managing growth, attracting, and retaining highly skilled employees.
• Risks associated with future acquisitions or strategic alliances, including integration challenges and diversion of management time.
• Potential for fines or penalties from failure to comply with environmental, health, and safety laws.
• Adverse effects from unfavorable global economic conditions, including inflation, interest rates, geopolitical conflicts, and banking system instability.
• Adverse effects from natural disasters and inadequate business continuity plans.
• Failure or security breaches of internal computer and information systems or those of third parties.
• Risk of misconduct or improper activities by employees, investigators, CROs, CMOs, and consultants.
• Significant product liability risk, with potential for substantial liabilities not fully covered by insurance.
• Volatility in the market price of common stock.
• Anti-takeover provisions in charter documents and Delaware law.
• Significant costs and management time devoted to public company compliance.
• Inability to pay cash dividends in the foreseeable future.
• Potential for securities litigation.

Future Outlook

Operating losses and negative cash flows are expected to continue for the foreseeable future. Research and development, sales, general and administrative expenses, and capital expenditures are anticipated to increase as product candidates advance and regulatory approvals are sought. The company does not expect to generate product sales revenue unless and until product candidates successfully complete development and obtain regulatory approval, which is expected to take a number of years. Additional financing through equity offerings, debt financings, or collaborations will be required to fund future cash needs. European sites for the EMPEROR study (zorevunersen) are expected to initiate in 2026, and European sites for the OSPREY study (STK-002) are expected to activate in early 2026. A meeting with the FDA is scheduled before the end of 2025 to review four years of safety and efficacy data for zorevunersen and discuss expedited regulatory pathways.

Management Comments

• We expect that our operating losses and negative cash flows will continue for the foreseeable future.
• Based upon our current operating plan, we believe that our cash, cash equivalents and marketable securities of approximately $328.6 million as of September 30, 2025, will fund operations to mid-2028.
• We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, sales, general and administrative expenses, and capital expenditures will continue to increase.
• We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years.
• If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Industry Context

Stoke Therapeutics operates in the highly competitive biotechnology and pharmaceutical industries, specifically in genetic medicine and antisense oligonucleotide (ASO) fields, characterized by rapid technological change and emphasis on intellectual property. The company's TANGO approach, which aims to upregulate protein expression with RNA-based medicines, represents a new approach to disease treatment, introducing uncertainty regarding safety profiles compared to established ASO therapies. The company faces competition from other RNA-based treatment developers, gene therapy, gene editing, tRNA therapies, modified mRNA therapies, and other ASO approaches. For Dravet syndrome, competitors include companies developing 5-HT agonists, cannabidiols, GABA receptor agonists, glutamate blockers, and gene regulation therapies (e.g., Encoded Therapeutics). For ADOA, while no approved treatments exist, PYC Therapeutics has initiated a dose escalation study for an RNA-based therapy, indicating emerging competition. The industry is subject to increasing scrutiny and legislative initiatives to contain healthcare costs, such as the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA), which could impact drug pricing and reimbursement. The company's reliance on third-party CROs and CMOs is common in the industry but exposes it to risks related to supply chain disruptions, staffing shortages, and macroeconomic conditions affecting these partners.

Comparison to Industry Standards

• Zorevunersen's clinical data showing "substantial and durable reductions in convulsive seizure frequency" and "continued improvements in cognition and behavior through three years" contrasts with findings from a two-year natural history study in which Dravet syndrome patients treated with standard of care showed "minimal changes," suggesting a potentially differentiated profile compared to existing standard-of-care treatments.
• The company's TANGO technology, which aims to upregulate protein expression, is presented as a "new approach to disease treatment" compared to other antisense oligonucleotides (ASOs) that have received regulatory approval, such as Biogen Inc.'s SPINRAZA and QALSODY, which also utilize intrathecal delivery.
• In the ADOA space, STK-002 is in Phase 1, while PYC Therapeutics has also initiated a dose escalation study for an RNA-based therapy in ADOA, indicating a competitive landscape for emerging treatments.
• The company's financial position, with $328.6 million in cash, cash equivalents, and marketable securities and a runway to mid-2028, is a strong position for a clinical-stage biotechnology company, especially given the high capital requirements for drug development.

Corporate Governance

Legal Proceedings

• Not presently a party to any legal proceedings that, in management's opinion, would have a material adverse effect on the business.
• Acknowledges that litigation can have an adverse impact due to defense and settlement costs, diversion of management resources, negative publicity and reputation harm, and other factors.

Stakeholder Impact

• Shareholders: Potential for dilution from future equity offerings; market price volatility; impact of anti-takeover provisions; capital appreciation as sole source of gain in foreseeable future (no dividends); potential for securities litigation.
• Employees: Need to attract and retain highly skilled personnel; potential impact of loss of key personnel; stock-based compensation plans (2019 Plan, 2023 Plan, ESPP).
• Customers/Patients: Potential for new disease-modifying treatments for Dravet syndrome (zorevunersen) and ADOA (STK-002); risks of undesirable side effects; challenges in patient identification and enrollment for rare diseases; impact of pricing, insurance coverage, and reimbursement on access.
• Suppliers/Creditors: Reliance on third-party contract manufacturers and CROs; potential for supply chain disruptions; impact of macroeconomic conditions on partners.
• Regulatory Bodies: Ongoing interactions with FDA, EMA, PMDA for clinical trials and approvals; compliance with extensive regulatory requirements.

Next Steps

• Enroll first patient in Phase 1 OSPREY study for STK-002 in ADOA in the second half of 2025.
• Meet with the FDA before the end of 2025 to review four years of safety and efficacy data for zorevunersen and discuss expedited regulatory pathways.
• Initiate European sites for the EMPEROR study (zorevunersen) in 2026.
• Activate European sites for the OSPREY study (STK-002) in early 2026.
• Continue to invest in research and development activities related to developing product candidates, including manufacturing.
• Seek regulatory approvals for product candidates.
• Potentially commercialize approved products.
• Hire additional personnel and develop commercial infrastructure.
• Continue to assess the impact of the One Big Beautiful Bill Act (OBBBA) on its estimated annual effective tax rate in 2025.
• Adopt ASU 2023-09 (Income Taxes) effective January 1, 2025, to be reflected in the 2025 Annual Report on Form 10-K.
• Adopt ASU 2024-03 (Income Statement Reporting) for fiscal years beginning after December 15, 2026.

Key Dates

Recommendation

Stoke Therapeutics has demonstrated significant progress with its lead clinical programs, particularly the initiation of a Phase 3 study for zorevunersen in Dravet syndrome, supported by positive long-term data. The substantial upfront payment from the Biogen collaboration has dramatically improved the company's liquidity, extending its cash runway to mid-2028, which is a strong positive for a clinical-stage biotech. However, the company still faces considerable risks inherent in drug development, including the high costs of clinical trials, regulatory uncertainties, and the termination of two Acadia programs. While the long-term potential is promising, especially with the Breakthrough Therapy Designation, the company remains pre-revenue from product sales and will require further capital. The current stage warrants a "hold" as investors await further de-risking through successful clinical trial readouts and regulatory milestones, balancing the strong cash position and clinical progress against the inherent risks and continued operating losses.

Keywords

Stoke Therapeutics, Biotechnology, RNA-based medicines, TANGO technology, Antisense Oligonucleotides (ASOs), Zorevunersen (STK-001), Dravet syndrome, Clinical trials, Phase 3 EMPEROR study, STK-002, Autosomal Dominant Optic Atrophy (ADOA), Phase 1 OSPREY study, Biogen collaboration, Acadia Pharmaceuticals, Drug development, Rare diseases, Orphan Drug Designation, Breakthrough Therapy Designation, SEC filing, 10-Q, Financial results, Biopharmaceutical, Neurodevelopmental diseases, Ophthalmology