Stoke's Revenue Surge Masks Persistent Binary Risks in Phase 3 Dravet Trial

What happened

Stoke Therapeutics reported a 117% revenue surge in Q3 2025, as highlighted in a recent Investors Business Daily article. However, the DeepValue report clarifies that this revenue is primarily from non-recurring collaboration payments with Biogen and Acadia, not from product sales, reflecting milestone achievements rather than sustainable growth. The stock has appreciated approximately 160% over the past year, pushing the market cap to $1.69 billion, which embeds high expectations for the success of zorevunersen in the ongoing Phase 3 EMPEROR trial for Dravet syndrome. Despite the positive spin in the news, the company faces significant risks including safety concerns from intrathecal ASO use, regulatory scrutiny due to prior clinical holds, and ultra-orphan market limitations that complicate enrollment and pricing. Consequently, while the revenue boost provides short-term financial cushion, it does not materially de-risk the core clinical asset or alter the binary investment thesis centered on the EMPEROR trial outcomes expected in 2027.

Implication

The collaboration revenue spike offers near-term liquidity but doesn't change the fact that Stoke's valuation is heavily reliant on zorevunersen's success in the EMPEROR trial, with a market cap far exceeding its $328.6 million cash balance. Any failure or safety issue in the Phase 3 study could erase most of the equity value, as the current price assumes a high probability of approval and commercial success in ultra-orphan markets. The stock's rapid appreciation has narrowed the margin of safety, making it susceptible to volatility from clinical updates, regulatory feedback, or competitive moves in the antisense and gene therapy space. For risk-tolerant investors, this setup may offer entry points on pullbacks, but for most, it's better to wait for clearer de-risking events such as positive interim safety data or pipeline diversification from STK-002 in ophthalmology. Overall, the investment remains highly speculative, and the news should not distract from the core binary risk profile that the DeepValue report emphasizes, with a 'WAIT' recommendation still prudent.

Thesis delta

The revenue surge reported in the news does not shift the fundamental thesis; it remains a wait-and-see scenario with high binary risk centered on the EMPEROR trial. While the additional cash from collaborations extends the runway to mid-2028, it doesn't reduce the clinical or regulatory uncertainties surrounding zorevunersen, and the stock's valuation already reflects optimistic success probabilities. Therefore, the recommendation to wait for more concrete data before investing stands unchanged.