ROCKET PHARMACEUTICALS, INC. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36829

Rocket Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware		04-3475813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9 Cedarbrook Drive

Cranbury, NJ 08512

(Address of principal executive office) (Zip Code)

(609) 659-8001

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, $0.01 par value	RCKT	Nasdaq Global Market

As of May 2, 2022, there were 65,837,894 shares of common stock, $0.01 par value per share, outstanding.

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	4

	Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)	5

	Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021 (unaudited)	6

	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)	7

	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

Index

Forward-looking Statements

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•	federal, state, and non-U.S. regulatory requirements, including regulation of our current or any other future product candidates by the U.S. Food and Drug Administration (“FDA”);

•	the timing of and our ability to submit regulatory filings with the FDA and to obtain and maintain FDA or other regulatory authority approval of, or other action with respect to, our product candidates;

•	our competitors’ activities, including decisions as to the timing of competing product launches, pricing, and discounting;

•	whether safety and efficacy results of our clinical trials and other required tests for approval of our product candidates provide data to warrant progression of clinical trials, potential regulatory approval, or further development of any of our product candidates;

•	our ability to develop, acquire and advance product candidates into, enroll a sufficient number of patients into, and successfully complete, clinical studies, and our ability to apply for and obtain regulatory approval for such product candidates, within currently anticipated timeframes, or at all;

•	our ability to establish key collaborations and vendor relationships for our product candidates and any other future product candidates;

•	our ability to acquire additional businesses, form strategic alliances or create joint ventures and our ability to realize the benefit of such acquisitions, alliances, or joint ventures;

•	our ability to successfully develop and commercialize any technology that we may in-license or products we may acquire;

•

unanticipated delays due to manufacturing difficulties, including the development of our direct manufacturing capabilities for our AAV programs, and any supply constraints or changes in the regulatory environment; our ability to successfully operate in non-U.S. jurisdictions in which we currently or in the future do business, including compliance with applicable regulatory requirements and laws;

•	uncertainties associated with obtaining and enforcing patents to protect our product candidates, and our ability to successfully defend ourselves against unforeseen third-party infringement claims;

•	anticipated trends and challenges in our business and the markets in which we operate;

•

natural and manmade disasters, including pandemics such as COVID-19, and other force majeures, which could impact our operations, and those of our partners and other participants in the health care industry, and which could adversely impact our clinical studies, preclinical research activities, and drug supply;

•	our estimates regarding our capital requirements; and

•	our ability to obtain additional financing and raise capital as necessary to fund operations or pursue business opportunities.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section incorporated by reference from our Annual Report for the year ended December 31, 2021, on Form 10-K, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance, or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events, or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Unless stated otherwise, references in this Quarterly Report to “us,” “we,” “our,” or our “Company” and similar terms refer to Rocket Pharmaceuticals, Inc.

Index

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

Rocket Pharmaceuticals, Inc.

Consolidated Balance Sheets

($ in thousands, except shares and per share amounts)

(unaudited)

	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	130,552		$	232,694
Investments		216,041			156,046
Prepaid expenses and other current assets		7,255			3,319
Total current assets		353,848			392,059
Property and equipment, net		24,354			22,299
Goodwill		30,815			30,815
Restricted cash		1,343			1,343
Deposits		455			455
Operating lease right-of-use assets		1,390			1,569
Finance lease right-of-use asset		47,945			48,480
Total assets	$	460,150		$	497,020
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	20,031		$	19,615
Operating lease liabilities, current		838			863
Finance lease liability, current		1,701			1,689
Total current liabilities		22,570			22,167
Operating lease liabilities, non-current		719			905
Finance lease liability, non-current		19,176			19,144
Other liabilities		65			80
Total liabilities		42,530			42,296
Commitments and contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 5,000,000 shares:
Series A convertible preferred stock; 300,000 shares designated as Series A; 0 shares issued and outstanding		-			-
Series B convertible preferred stock; 300,000 shares designated as Series B; 0 shares issued and outstanding		-			-
Common stock, $0.01 par value, 120,000,000 shares authorized; 64,522,057 and 64,505,889 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		645			645
Additional paid-in capital		952,498			946,152
Accumulated other comprehensive loss		(629	)		(161	)
Accumulated deficit		(534,894	)		(491,912	)
Total stockholders’ equity		417,620			454,724
Total liabilities and stockholders’ equity	$	460,150		$	497,020

The accompanying notes are an integral part of these consolidated financial statements.

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Operations

($ in thousands, except shares and per share amounts)

(unaudited)

	Three Months Ended March 31,
	2022			2021

Revenue	$	-		$	-

Operating expenses:
Research and development		30,794			28,309
General and administrative		11,770			10,913
Total operating expenses		42,564			39,222
Loss from operations		(42,564	)		(39,222	)
Research and development incentives		-			500
Interest expense		(464	)		(1,729	)
Interest and other income, net		623			911
Amortization of premium on investments - net		(577	)		(639	)
Net loss	$	(42,982	)	$	(40,179	)
Net loss per share attributable to common stockholders - basic and diluted	$	(0.67	)	$	(0.65	)
Weighted-average common shares outstanding - basic and diluted		64,509,721			61,574,405

The accompanying notes are an integral part of these consolidated financial statements.

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2022			2021

Net loss	$	(42,982	)	$	(40,179	)
Other comprehensive loss
Net unrealized loss on investments		(468	)		(33	)
Total comprehensive loss	$	(43,450	)	$	(40,212	)

The accompanying notes are an integral part of these consolidated financial statements.

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2022 and 2021

(in thousands except share amounts)

(unaudited)

	Common Stock				Treasury		Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Stock		Capital		Income/(Loss)			Deficit			Equity
Balance at December 31, 2021		64,505,889	$	645	$	-	$	946,152	$	(161	)	$	(491,912	)	$	454,724
Issuance of common stock pursuant to exercise of stock options and restricted stock units		16,168		-		-		76		-			-			76
Unrealized comprehensive loss on investments		-		-		-		-		(468	)		-			(468	)
Share-based compensation		-		-		-		6,270		-			-			6,270
Net loss		-		-		-		-		-			(42,982	)		(42,982	)
Balance at March 31, 2022		64,522,057	$	645	$	-	$	952,498	$	(629	)	$	(534,894	)	$	417,620

	Common Stock				Treasury		Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Stock		Capital		Loss			Deficit			Equity
Balance at December 31, 2020		60,996,367	$	610	$	-	$	825,794	$	(42	)	$	(322,843	)	$	503,519
Issuance of common stock pursuant to exercise of stock options		991,432		9		-		8,783		-			-			8,792
Unrealized comprehensive loss on investments		-		-		-		-		(33	)		-			(33	)
Share-based compensation		-		-		-		7,900		-			-			7,900
Net loss		-		-		-		-		-			(40,179	)		(40,179	)
Balance at March 31, 2021		61,987,799	$	619	$	-	$	842,477	$	(75	)	$	(363,022	)	$	479,999

The accompanying notes are an integral part of these consolidated financial statements.

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2022			2021
Operating Activities:
Net loss	$	(42,982	)	$	(40,179	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discount on convertible notes		-			589
Depreciation and amortization of property and equipment		767			674
Amortization of right of use asset		535			-
Write down of property and equipment, net		40			-
Stock-based compensation		6,270			7,900
Accretion of discount on investments, net		577			620
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(3,936	)		(842	)
Accounts payable and accrued expenses		(491	)		7,047
Operating lease liabilities		(33	)		(15	)
Finance lease liability		45			(63	)
Other long term liabilities		(15	)		(14	)
Net cash used in operating activities		(39,223	)		(24,283	)
Investing activities:
Purchases of investments		(143,023	)		(103,815	)
Proceeds from maturities of investments		81,983			74,969
Purchases of property and equipment		(1,955	)		(328	)
Net cash used in investing activities		(62,995	)		(29,174	)
Financing activities:
Issuance of common stock, pursuant to exercise of stock options		76			8,792
Net cash provided by financing activities		76			8,792
Net change in cash, cash equivalents and restricted cash		(102,142	)		(44,665	)
Cash, cash equivalents and restricted cash at beginning of period		234,037			298,666
Cash, cash equivalents and restricted cash at end of period	$	131,895		$	254,001

Supplemental disclosure of non-cash financing and investing activities:
Accrued purchases of property and equipment	$	1,635		$	648
Unrealized loss on investments	$	(468	)	$	(33	)
Reclassification of construction in process to finance right of use asset	$	-		$	325
Supplemental cash flow information:
Cash paid for interest	$	-		$	1,347

The accompanying notes are an integral part of these consolidated financial statements.

Index

ROCKET PHARMACEUTICALS, INC.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data)

(Unaudited)

1.	Nature of Business

Rocket Pharmaceuticals, Inc. (“Rocket” or the “Company”) is a clinical-stage, multi-platform biotechnology company focused on the development of gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. Rocket has three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I”), a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., Rocket has a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. The Company has global commercialization and development rights to all of these product candidates under royalty-bearing license agreements.

Effective December 2021, the Company made a decision to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. The Company has opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood.

2.	Risks and Liquidity

The Company has not generated any revenue and has incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities.

The Company’s product candidates are in the development and clinical stage. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations and had an accumulated deficit of $534.9 million as of March 31, 2022.

On February 28, 2022, the Company entered into a sales agreement (the “Sales Agreement”), with Cowen and Company, LLC (“Cowen”), with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share, having an aggregate offering price of up to $200,000,000 (the “Shares”) through Cowen as its sales agent.

As of March 31, 2022, the Company had $346.6 million of cash, cash equivalents and investments. In April 2022, the Company sold 1.3 million shares of common stock for net proceeds of $17.3 million pursuant to the at-the-market offering program (see Note 15 “Subsequent Events”). With the proceeds from the at-the-market facility offering program and other efficiencies, the Company expects such resources will be sufficient to fund its operating expenses and capital expenditure requirements into the first half of 2024.

In the longer term, the future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

3.	Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2021 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022 (“2021 Form 10-K”). The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s consolidated financial position as of March 31, 2022 and the results of its operations and its cash flows for the three months ended March 31, 2022. The financial data and other information disclosed in these consolidated notes related to the three months ended March 31, 2022 and 2021 are unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 and any other interim periods or any future year or period.

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Principles of Consolidation

The consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany accounts have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to goodwill impairment, the accrual of research and development (“R&D”) expenses, the valuation of equity transactions and stock-based awards. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consists of bank deposits, certificates of deposit and money market accounts with financial institutions. Cash equivalents are carried at cost which approximates fair value due to their short-term nature and which the Company believes do not have a material exposure to credit risk. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. The Company’s cash and cash equivalent accounts, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Restricted cash consists of deposits collateralizing letters of credit issued by a bank in connection with the Company’s operating leases (see Note 10 “Commitments and Contingencies” for additional disclosures) and a deposit collateralizing a letter of credit issued by a bank supporting the Company’s corporate credit card. Cash, cash equivalents and restricted cash consist of the following:

	March 31, 2022		December 31, 2021

Cash and cash equivalents	$	130,552	$	232,694
Restricted cash		1,343		1,343
	$	131,895	$	234,037

Reclassifications

Certain reclassifications have been made to the prior year financial statements in order to conform to the current year’s presentation.

Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31, 2022 are consistent with those disclosed in Note 3 to the consolidated financial statements in the 2021 Form 10-K.

Recent Accounting Pronouncements

There were no recent accounting pronouncements that impacted the Company, or which had a significant effect on the consolidated financial statements.

Index

4.	Fair Value of Financial Instruments

Items measured at fair value on a recurring basis are the Company’s investments. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

	Fair Value Measurements as of March 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	79,564	$	-	$	-	$	79,564
		79,564		-		-		79,564

Investments:
United States Treasury securities		134,748		-		-		134,748
Corporate Bonds		-		81,293		-		81,293
		134,748		81,293		-		216,041

	$	214,312	$	81,293	$	-	$	295,605

	Fair Value Measurements as of December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	179,900	$	-	$	-	$	179,900
		179,900		-		-		179,900

Investments:
United States Treasury securities		44,045		-		-		44,045
Corporate Bonds		-		96,696		-		96,696
Municipal Bonds		-		6,000		-		6,000
Agency Bonds		-		9,305		-		9,305
		44,045		112,001		-		156,046

	$	223,945	$	112,001	$	-	$	335,946

The Company classifies its money market mutual funds and U.S. Treasury securities as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its corporate, municipal and agency bonds as Level 2 assets as these assets are not traded in an active market and have been valued through a third-party pricing service based on quoted prices for similar assets.

5.	Property and Equipment, Net

The Company’s property and equipment consisted of the following:

	March 31, 2022			December 31, 2021
Laboratory equipment	$	15,263		$	12,600
Machinery and equipment		10,534			10,432
Computer equipment		218			218
Furniture and fixtures		1,963			1,963
Leasehold improvements		433			407
Internal use software		1,928			1,902
		30,340			27,522
Less: accumulated depreciation and amortization		(5,987	)		(5,223	)
	$	24,354		$	22,299

During the three months ended March 31, 2022 and 2021, the Company recognized $0.8 million and $0.7 million of depreciation and amortization expense, respectively.

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6.	Accounts Payable and Accrued Expenses

As of March 31, 2022 and December 31, 2021, the Company’s accounts payable and accrued expenses consisted of the following:

	March 31, 2022		December 31, 2021
Research and development	$	13,948	$	12,082
Property and equipment		1,635		725
Employee compensation		1,484		4,533
Government grant payable		597		597
Professional fees		1,402		1,196
Other		965		482
	$	20,031	$	19,615

7.	Stockholders’ Equity

At-the-Market Offering

On February 28, 2022, the Company entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares through Cowen as its sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-253756), which was filed with the SEC on March 2, 2021 and which became effective on September 10, 2021. The Company filed a prospectus supplement with the SEC on February 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement.

The Company will pay Cowen a cash commission of up to 3.0% of gross proceeds from the sale of the shares pursuant to the Sales Agreement. The Company has also agreed to provide Cowen with customary indemnification and contribution rights. The Company will also reimburse Cowen for certain expenses incurred in connection with the Sales Agreement. As of March 31, 2022, the Company did not sell any shares under the at-the-market offering program (see Note 15 “Subsequent Events”).

8.	Stock Based Compensation

Stock Option Valuation

The weighted average assumptions that the Company used in the Black-Scholes pricing model to determine the fair value of the stock options granted to employees, non-employees and directors were as follows:

	Three Months Ended March 31,
	2022			2021

Risk-free interest rate		1.88	%		0.62	%
Expected term (in years)		5.86			5.87
Expected volatility		74.07	%		69.41	%
Expected dividend yield		0.00	%		0.00	%
Exercise price	$	17.85		$	36.99
Fair value of common stock	$	17.85		$	36.99

The following table summarizes stock option activity for the three months ended March 31, 2022, under the Second Amended and Restated 2014 Stock Option and Incentive Plan:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding as of December 31, 2021		11,143,761		$	14.51		5.95	$	128,817
Granted		1,336,206			17.85		6.93
Exercised		(6,000	)		12.65			$	20
Forfeited		(426,668	)		34.69
Outstanding as of March 31, 2022		12,047,299		$	14.17		5.93	$	84,961

Options vested and exercisable as of March 31, 2022		9,141,380		$	9.12		4.88	$	84,457
Options unvested as of March 31, 2022		2,905,919		$	30.03		9.22

Index

The weighted average grant-date fair value per share of stock options granted during the three months ended March 31, 2022, and 2021 was $11.60 and $36.99, respectively.

The total fair value of options vested during the three months ended March 31, 2022 and 2021 was $12.5 million and $8.3 million, respectively.

Restricted Stock Units (“RSU”)

The following table summarizes the Company’s RSU activity for the three months ended March 31, 2022:

	Number of Shares			Weighted Average Grant Date Fair Value

Unvested as of December 31, 2021		23,500		$	30.61
Granted		467,172		$	17.06
Exercised		(10,168	)	$	62.32
Forfeited		(22,795	)	$	18.03
Unvested as of March 31, 2022		457,709		$	17.24

Stock-based Compensation

Stock-based compensation expense recognized by award type was as follows:

	Three Months Ended March 31,
	2022		2021

Stock options	$	5,961	$	7,826
Restricted stock units		309		74
Total stock-based compensation expense	$	6,270	$	7,900

Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows:

	Three Months Ended March 31,
	2022		2021

Research and development	$	2,318	$	2,916
General and administrative		3,952		4,984
Total stock-based compensation expense	$	6,270	$	7,900

As of March 31, 2022, the Company had an aggregate of $53.8 million of unrecognized stock-based compensation expense related to both stock options and RSU grants, which is expected to be recognized over the weighted average period of 1.88 years.

Warrants

A summary of the warrants outstanding as of March 31, 2022 is as follows:

Price			Outstanding		Grant Date	Expiration Date
	24.42			7,051	June 28, 2013	June 28, 2023
	57.11			603,386	December 21, 2020	December 21, 2030
	33.63			301,291	August 9, 2021	August 9, 2031
	22.51			153,155	December 17, 2021	December 17, 2031
	22.51			153,155	December 17, 2021	December 17, 2031
		Total		1,218,038

Index

The following table below is the summary of changes in warrants to purchase common stock for the three months ended March 31, 2022:

	Number of Warrant Shares Outstanding and Exercisable		Exercise Price per Share

Balance as of December 31, 2020		610,437
Granted August 2021		301,291	$	33.63
Granted December 2021		306,310	$	22.51
Exercised		-	$	-
Balance as of December 31, 2021		1,218,038
Granted		-	$	-
Exercised		-	$	-
Balance as of March 31, 2022		1,218,038

9.	Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

	Three Months Ended March 31,
	2022			2021

Numerator:
Net loss attributable to common stockholders	$	(42,982	)	$	(40,179	)
Denominator:
Weighted-average common shares outstanding - basic and diluted		64,509,721			61,574,405
Net loss per share attributable to common stockholders - basic and diluted	$	(0.67	)	$	(0.65	)

The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

	Three Months Ended March 31,
	2022		2021
Shares issuable upon conversion of the 2021 Convertible Notes		-		160,536
Shares issuable upon conversion of the 2022 Convertible Notes		-		1,195,449
Warrants exercisable for common shares		1,218,038		610,437
Restricted stock units exercisable for common shares		457,709		-
Options to purchase common shares		12,047,299		10,892,830
		13,723,046		12,859,252

10.	Commitments and Contingencies

The Company determines if an arrangement is a lease at inception. Operating and finance leases are presented in the Company’s consolidated balance sheet as right-of-use assets from leases, current lease liabilities and long-term lease liabilities. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments using an estimate of the Company’s collateralized borrowing rate for debt with a similar term. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the biotechnology industry. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). For operating leases, the Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred.

Index

Finance Lease

The Company has a lease for a facility in Cranbury, New Jersey, consisting of 103,720 square feet of space including areas for offices, process development, research and development laboratories and 50,000 square feet dedicated to AAV Current Good Manufacturing Practice (“cGMP”) manufacturing facilities to support the Company’s pipeline. A smaller area within this facility was originally leased in August 2018, and the lease was amended in June 2019 to include the full building (such lease, as amended, the “NJ Lease Agreement”). The NJ Lease Agreement has a 15-year term from September 1, 2019, with an option to renew for two consecutive five-year renewal terms.

Estimated rent payments for the NJ Lease Agreement are $1.2 million per annum, payable in monthly installments, depending upon the nature of the leased space, and subject to annual base rent increases of 3%. The total commitment under the lease is estimated to be approximately $29.3 million over the 15-year term of the lease. The Company paid a cash security deposit of $0.3 million to the landlord in connection with the NJ Lease Agreement which has been reflected in deposits in the consolidated balance sheets as of March 31, 2022 and December 31, 2021.

The total restricted cash balance for the Company’s operating and finance leases as of March 31, 2022 and December 31, 2021 was $0.8 million.

Operating Leases

On June 7, 2018, the Company entered into a three-year lease agreement for office space in the Empire State Building in New York, NY (the “ESB Lease Agreement”). In connection with the ESB Lease Agreement, the Company established an irrevocable standby letter of credit (the “Empire LOC”) for $0.9 million. On March 26, 2021, the Company entered in Amendment No. 1 to the ESB Lease Agreement (“ESB Lease Amendment”) that extended the term of the lease agreement to June 30, 2024, reduced the rent payments going forward, and reduced the Empire LOC to $0.8 million. The Empire LOC serves as the Company’s security deposit on the lease in which the landlord is the beneficiary and expires August 29, 2024. The Company has accounted for the ESB Lease Amendment as a modification to the ESB Lease Agreement and remeasured the lease liability and adjusted the operating lease right of use asset by $1.1 million. The Company has a certificate of deposit of $0.8 million with a bank as collateral for the Empire LOC which is classified as part of restricted cash in the consolidated balance sheets as of March 31, 2022 and December 31, 2021.

On January 4, 2018, in connection with the Reverse Merger, the Company assumed an operating lease for Inotek’s former headquarters in Lexington, Massachusetts, with a term ending in February 2023. In July 2018, the Company signed an agreement to sublease a portion of the Lexington, Massachusetts space and in September 2018, the Company signed an agreement to sublease the remaining portion of the Lexington, Massachusetts space. Rental income received under the sublease agreement totaled $0.1 million for the three months ended March 31, 2022 and 2021. Rental income is netted against rent expense in the consolidated statements of operations.

Rent expense was $0.3 million for the three months ended March 31, 2022 and 2021.

Lease cost	March 31, 2022
Operating lease cost	$	197
Finance lease cost
Amortization of right of use assets		535
Interest on lease liabilities		464
Total lease cost	$	1,196

Index

The following table summarizes the maturity of the Company’s operating and finance lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and finance lease liabilities as of March 31, 2022:

Maturity of operating lease liabilities	March 31, 2022
2022		688
2023		548
2024		269
2025		64
2026		55
Total lease payments	$	1,624
Less: interest		(67	)
Total operating lease liabilities	$	1,557

Maturity of finance lease liability	March 31, 2022
2022		1,270
2023		1,736
2024		1,791
2025		1,856
2026		1,912
Thereafter		45,003
Total lease payments	$	53,566
Less: interest		(32,689	)
Total finance lease liability	$	20,877

Leases	March 31, 2022

Operating right-of-use assets	$	1,390

Operating current lease liabilities		838
Operating noncurrent lease liabilities		719
Total operating lease liabilities	$	1,557

Finance right-of-use assets	$	47,945

Finance current lease liability		1,701
Finance noncurrent lease liability		19,176
Total finance lease liability	$	20,877

Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	229
Cash flows from finance lease	$	419
Weighted-average remaining lease term - operating leases	2.3 years
Weighted-average remaining lease term - finance lease	22.4 years
Weighted-average discount rate - operating leases		4.34	%
Weighted-average discount rate - finance lease		8.96	%

Litigation

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Index

Indemnification Arrangements

Pursuant to its bylaws and as permitted under Delaware law, the Company has indemnification obligations to directors, officers, employees or agents of the Company or anyone serving in these capacities. The maximum potential amount of future payments the Company could be required to pay is unlimited. The Company has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.

Throughout the normal course of business, the Company has agreements with vendors that provide goods and services required by the Company to run its business. In some instances, vendor agreements include language that requires the Company to indemnify the vendor from certain damages caused by the Company’s use of the vendor’s goods and/or services. The Company has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.

11.	Agreements Related to Intellectual Property

The Company, directly and through its subsidiary Spacecraft Seven, LLC, has various license and research and collaboration arrangements. The transactions principally resulted in the acquisition of rights to intellectual property which is in the preclinical phase and has not been tested for safety or feasibility. In all cases, the Company did not acquire tangible assets, processes, protocols, or operating systems. The Company expenses the acquired intellectual property rights as of the acquisition date on the basis that the cost of intangible assets purchased from others for use in research and development activities, has no alternative future uses.

12.	CIRM Grants

LAD-1 CIRM Grant

On April 30, 2019, the California Institute for Regenerative Medicine (“CIRM”) awarded the Company up to $7.5 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy for RP-L201. Proceeds from the grant will help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients enrolled at the U.S. clinical site, University of California, Los Angeles (“UCLA”) Mattel Children’s Hospital, led by principal investigator Donald Kohn, M.D., UCLA Professor of Microbiology, Immunology and Molecular Genetics, Pediatrics (Hematology/Oncology), Molecular and Medical Pharmacology and member of the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA. In 2019, the Company received the first two grants from CIRM in the aggregate of $1.2 million which were included as an offset against R&D expenses. In 2020, the Company met additional CIRM milestones and received an additional $1.1 million milestone which was recorded as a reduction of R&D expenses in 2020. The Company received the additional milestone payments of $1.1 million and $1.0 million in January and April of 2021, respectively. As of March 31, 2022, the Company met the next CIRM milestone and recorded a receivable of $0.9 million, included in prepaid and other current assets in the consolidated balance sheet, recorded as a reduction of research and development expenses. The Company received the $0.9 million milestone payment on April 5, 2022.

IMO CIRM Grant

On November 12, 2020, the CIRM awarded the Company up to $3.7 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy, RP-L401, for the treatment of IMO. The Company received $1.0 million pursuant to the grant on January 4, 2021, related to the CIRM IMO award. Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators.

13.	Related Party Transactions

During April 2018, the Company entered into an agreement with a member of the Board of Directors for business development consulting services. Payments for the services under the agreement are $28 per quarter, and the Company may terminate the agreement with 14 days’ notice. The Company incurred expenses of $0 and $28 during the three months ended March 31, 2022 and 2021, relating to services provided under this agreement. This agreement was terminated on February 15, 2022.

In October 2020, the Company entered into a consulting agreement with the spouse of one of the Company’s executive officers for information technology advisory services. In exchange for the services provided under the agreement, the Company granted 10,000 restricted stock units which vest over a three-year period.

On August 27, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, the Company’s largest shareholder (the “Purchaser”), pursuant to which it agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of the Company’s common stock at a purchase price of $32.48 per share for aggregate net proceeds of approximately $26.4 million to the Company before deducting estimated offering expenses payable by the Company. The Private Placement closed on August 31, 2021. In addition, concurrently with the execution of the Purchase Agreement, the Company entered into a registration rights agreement with the Purchaser, pursuant to which the Company agreed, following demand by the Purchaser, to file with the Securities and Exchange Commission a Registration Statement on Form S-3 covering the resale of shares of common stock held by the Purchaser as promptly as reasonably practicable following such demand, and in any event within 60 days of such demand.

Index

On August 9, 2021, the Company issued a warrant exercisable for 301,291 shares of common stock to a related party for business development and asset identification consulting services (“August 2021 Warrant”). The Company recorded a non-cash R&D expense of $7.6 million during year ended December 31, 2021, related to the issuance of the August 2021 warrant. On December 17, 2021, the Company issued warrants exercisable for 153,155 and 153,155 shares of common stock, respectively to the same related party for business development and asset identification consulting services (“December 2021 Warrants”). The Company recorded a non-cash R&D expense of $5.2 million during year ended December 31, 2021, related to the issuance of the December 2021 warrant. Total non-cash R&D expense of $12.8 million during the year ended December 31, 2021, related to the issuance of the August 2021 and December 2021 warrants. There was no expense related to this item for the three months ended March 31, 2022 and 2021.

In September 2021, the Company entered into a consulting agreement with a member of the Board of Directors for pipeline development, new asset evaluation, and corporate strategy. In lieu of cash for services to be provided under the consulting agreement during its one-year term, the Company granted the board member options to purchase 20,000 shares of the Company’s common stock with a fair value of $0.4 million. There was no expense related to this item for the three months ended March 31, 2022 and 2021.

14.	401(k) Savings Plan

The Company has a defined contribution savings plan (the “Plan”) under Section 401(k) of the Internal Revenue Code of 1986. This Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the Plan may be made at the discretion of the Company’s Board of Directors. The Company has elected the safe harbor match of 4% of employee contributions to the Plan, subject to certain limitations. The Company’s matching contribution for the three months ended March 31, 2022, and 2021 was $0.2 million.

15.	Subsequent Events

In April 2022, the Company sold 1.3 million shares under the at-the-market offering program for gross proceeds of $17.8 million, less commissions of $0.5 million for net proceeds of $17.3 million (see Note 7 “Stockholders Equity”).

Index

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our 2021 Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our 2021 Form 10-K, pursuant to Instruction 2 to paragraph of Item 303 of Regulation S-K. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Rocket Pharmaceuticals, Inc.

We are a clinical-stage, multi-platform biotechnology company focused on the development of first, only and best-in-class gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. We have three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I”), a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in potentially registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., we have a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. We have global commercialization and development rights to all of these product candidates under royalty-bearing license agreements.

Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. Although we believe that gene therapy may be beneficial to patients afflicted with this disorder, we have opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the compelling clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood.

Recent Developments

At-the-Market Offering Program

On February 28, 2022, we entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares through Cowen as its sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-253756), which was filed with the SEC on March 2, 2021 and which became effective on September 10, 2021. We filed a prospectus supplement with the SEC on February 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement. We will pay Cowen a cash commission of up to 3.0% of gross proceeds from the sale of the shares pursuant to the Sales Agreement. We also agreed to provide Cowen with customary indemnification and contribution rights and will also reimburse Cowen for certain expenses incurred in connection with the Sales Agreement. As of March 31, 2022, the Company did not sell any shares under the at-the-market offering program. In April 2022, we sold 1.3 million shares of common stock pursuant to the at-the-market offering program for gross proceeds of $17.8 million, less commissions of $0.5 million for net proceeds of $17.3 million.

Gene Therapy Overview

Genes are composed of sequences of deoxyribonucleic acid (“DNA”), which code for proteins that perform a broad range of physiologic functions in all living organisms. Although genes are passed on from generation to generation, genetic changes, also known as mutations, can occur in this process. These changes can result in the lack of production of proteins or the production of altered proteins with reduced or abnormal function, which can in turn result in disease.

Gene therapy is a therapeutic approach in which an isolated gene sequence or segment of DNA is administered to a patient, most commonly for the purpose of treating a genetic disease that is caused by genetic mutations. Currently available therapies for many genetic diseases focus on administration of large proteins or enzymes and typically address only the symptoms of the disease. Gene therapy aims to address the disease-causing effects of absent or dysfunctional genes by delivering functional copies of the gene sequence directly into the patient’s cells, offering the potential for curing the genetic disease, rather than simply addressing symptoms.

We are using modified non-pathogenic viruses for the development of our gene therapy treatments. Viruses are particularly well suited as delivery vehicles because they are adept at penetrating cells and delivering genetic material inside a cell. In creating our viral delivery vehicles, the viral (pathogenic) genes are removed and are replaced with a functional form of the missing or mutant gene that is the cause of the patient’s genetic disease. The functional form of a missing or mutant gene is called a therapeutic gene, or the “transgene.” The process of inserting the transgene is called “transduction.” Once a virus is modified by replacement of the viral genes with a transgene, the modified virus is called a “viral vector.” The viral vector delivers the transgene into the targeted tissue or organ (such as the cells inside a patient’s bone marrow). We have two types of viral vectors in development, LVV and AAV. We believe that our LVV and AAV-based programs have the potential to offer a significant therapeutic benefit to patients that is durable (long-lasting).

The gene therapies can be delivered either (1) ex vivo (outside the body), in which case the patient’s cells are extracted and the vector is delivered to these cells in a controlled, safe laboratory setting, with the modified cells then being reinserted into the patient, or (2) in vivo (inside the body), in which case the vector is injected directly into the patient, either intravenously (“IV”) or directly into a specific tissue at a targeted site, with the aim of the vector delivering the transgene to the targeted cells.

Index

We believe that scientific advances, clinical progress, and the greater regulatory acceptance of gene therapy have created a promising environment to advance gene therapy products as these products are being designed to restore cell function and improve clinical outcomes, which in many cases include prevention of death at an early age. The FDA approval of several gene therapies in recent years indicates that there is a regulatory pathway forward for gene therapy products.

Pipeline Overview

The chart below shows the current phases of development of Rocket’s programs and product candidates:

AAV Program:

Danon Disease:

Danon disease (“DD”) is a multi-organ lysosomal-associated disorder leading to early death due to heart failure. DD is caused by mutations in the gene encoding lysosome-associated membrane protein 2 (“LAMP-2”), a mediator of autophagy. This mutation results in the accumulation of autophagic vacuoles, predominantly in cardiac and skeletal muscle. Male patients often require heart transplantation and typically die in their teens or twenties from progressive heart failure. Along with severe cardiomyopathy, other DD-related manifestations can include skeletal muscle weakness, liver disease, and intellectual impairment. There are no specific therapies available for the treatment of DD and medications typically utilized for the treatment of congestive heart failure (CHF) are not believed to modify progression to end-stage CHF. Patients with end-stage CHF may undergo heart transplant, which currently is available to a minority of patients, is associated with short- and long-term complications and is not curative of the disorder in the long-term. RP-A501 is in clinical trials as an in vivo therapy for Danon disease, which is estimated to have a prevalence of 15,000 to 30,000 patients in the U.S. and the EU.

Danon disease is an autosomal dominant, rare inherited disorder characterized by progressive cardiomyopathy which is almost universally fatal in males even in settings where cardiac transplantation is available. Danon disease predominantly affects males early in life and is characterized by absence of LAMP2B expression in the heart and other tissues. Pre-clinical models of Danon disease have demonstrated that AAV-mediated transduction of the heart results in reconstitution of LAMP2B expression and improvement in cardiac function.

We currently have one adeno-associated viral vector program targeting DD, RP-A501. We have treated six patients in the RP-A501 Phase 1 clinical trial, which enrolled for adult and pediatric male DD patients. This includes a first cohort evaluating a low-dose (6.7e13 genome copies (vg)/kilogram (kg)) in adult/older adolescent patients aged 15 or greater (n=3), a second cohort evaluating a higher dose (1.1e14 vg/kg) in adult/older adolescent patients aged 15 or greater (n=2), and we have initiated treatment in a pediatric cohort at a low dose level (6.7e13 vg/kg; n=1).

Data disclosed from our Phase 1 study of RP-A501 in November 2021 and January 2022 included safety and clinical activity results from the three patients treated with the low dose of 6.7e13 vg/kg and from two patients treated with the higher dose of 1.1e14 vg/kg, and early safety information from the initial pediatric patient (pediatric cohort is age 8-14 years) treated with the low dose of 6.7e13 vg/kg.

Efficacy assessments include evaluation of New York Heart Association (“NYHA”) Functional Classification, which is the most commonly used heart failure classification system. NYHA Class II is where a patient exhibits a slight limitation of physical activity, is comfortable at rest, and ordinary physical activity results in fatigue, palpitation and/or dyspnea. Class I is where a patient exhibits no limitation of physical activity and ordinary physical activity does not cause undue fatigue, palpitation and/or dyspnea. Brain natriuretic peptide (BNP) is a blood-based evaluation and a key marker of heart failure with prognostic significance in CHF and cardiomyopathies. Other efficacy parameters include echocardiographic measurements of heart thickness, most notably the thickness of the left ventricular posterior wall (LVPW), and importantly, measurement of LAMP2B gene expression both via immunohistochemistry and Western blot, as obtained via endomyocardial biopsy. Biopsied heart tissue is also evaluated on electron microscopy for evidence of DD-associated tissue derangements, including the presence of autophagic vacuoles and disruption of myofibrillar architecture, each of which are characteristic of DD-related myocardial damage.

Index

In November 2021 and January 2022, data for the ongoing Phase 1 trial of RP-A501 was presented, including efficacy parameters for the low and high dose cohorts in patients aged 15 and older with at least 12 months follow-up (n=5). An improvement in NYHA Class (from II to I) was observed in three patients (two low-dose and one high-dose) who had closely monitored immunosuppression with follow-up greater than one year and stabilization was observed in one low-dose patient without a closely monitored immunosuppressive regimen. A substantial improvement in BNP, a key marker of heart failure, was observed in all three low-dose patients and one high-dose patient. Among the three low-dose patients, BNP decreased from a pretreatment baseline by 57% at 24 months, 79% at 18 months, and 75% at 15 months, respectively. In one high-dose patient, BNP decreased from a pretreatment baseline by 67% at 12 months. In patients with closely monitored immunosuppression (two low-dose and one high-dose) left ventricular (LV) posterior wall thickness improved (average 23% decrease compared to pretreatment baseline) and ejection fraction improved or stabilized (average 20% increase compared to pretreatment baseline) at 12 to 18 months on echocardiography. Severe and progressive wall thickening is a hallmark of the hypertrophic cardiomyopathy of Danon Disease and is a major contributor to early mortality in male patients. Cardiac output remained normal for all patients with improved or stable left heart filling pressures as measured by cardiac catheterization. Three low-dose patients and one high-dose patient demonstrated improvements in the 6-minute walk test (6MWT). One low-dose patient improved from a pretreatment baseline of 443 meters (m) to 467 m at 24 months. The second low-dose patient improved from a pretreatment baseline of 405 m to 410 m at 18 months. The third low-dose patient improved from a pretreatment baseline of 427 m to 435 m at 15 months. One high-dose patient improved from a pretreatment baseline of 436 m to 492 m at 12 months. Evidence of sustained cardiac LAMP2B gene expression by immunohistochemistry and Western blot with qualitative improvement of vacuoles and cardiac tissue architecture on electron microscopy was observed at both dose levels. Sustained cardiac LAMP2B gene expression by immunohistochemistry was observed in all three patients with a closely monitored immunosuppressive regimen. Specifically, LAMP2B gene expression by immunohistochemistry in the low-dose (6.7e13 vg/kg) was 68% in one patient at Month 12 and 92% in another patient at Month 9. In one patient who received the high-dose (1.1e14 vg/kg), LAMP2B gene expression by immunohistochemistry was 100% at Month 12.

One of the patients receiving therapy on the high dose cohort had progressive heart failure and underwent a heart transplant at Month 5 following therapy. This patient had more advanced disease than the 4 other adult/older adolescent patients who received treatment in the low and high dose cohorts, as evidenced by diminished LV ejection fraction (35%) on echocardiogram and markedly elevated LV filling pressure prior to treatment. His clinical course was characteristic of DD progression. Assessments regarding gene transduction from the explanted heart are summarized below:

Explanted Heart

•

Analysis of the explanted heart revealed significant fibrosis consistent with advanced DD.

•

Myocardial tissue from the explanted heart at 5 months post-treatment displayed 100% LAMP2B protein expression by immunohistochemistry throughout non-fibrotic cardiac regions including the ventricles and other essential targeted areas

RP-A501 was generally well tolerated at the 6.7e13 vg/kg dose level, or lower dose. All observed adverse effects were reversible with no lasting sequelae. Early transaminase and creatinine kinase elevations returned to baseline or decreased. No unexpected and serious drug product-related adverse events or severe adverse events were observed in this low dose cohort. The most common adverse events were predominantly mild, not associated with clinical symptoms and were related to elevated transaminases post-treatment. Elevation in transaminases and creatinine kinases was observed in all three low-dose patients and returned to baseline levels within the first one to two months post-treatment. There was also a transient and reversible decline in platelets observed in these three patients. These changes were largely responsive to corticosteroids and other immunosuppressive therapies. All patients were given oral steroids to prevent or minimize potential immune-related events. Corticosteroids were associated with transient exacerbation of DD-associated skeletal myopathy, which resolved upon discontinuation of steroid therapy. At the higher dose administered (1.1e14 vg/kg), additional immunosuppressive therapies were stipulated and administered to mitigate the immune response associated with RP-A501. As disclosed in December 2020, one of the two patients receiving the 1.1e14 vg/kg dose had more advanced heart failure than the others, and was the heaviest patient treated to-date (receiving the highest absolute AAV9 dose). This patient experienced a non-persistent, immune-related event that was classified as a drug product-related serious adverse event. This thrombotic microangiopathy (“TMA”) event (which was later reclassified as a Sudden Unexpected Serious Adverse Reaction (“SUSAR”) was believed to be likely due to immune-mediated complement activation, resulting in reversible thrombocytopenia and acute kidney injury requiring eculizumab and transient hemodialysis. This patient regained normal kidney function within three weeks. (This event occurred in the same patient in whom RP-A501 was not associated with clinical stabilization or improvement, and who required a heart transplant 5 months post-therapy).

Following transplant, this patient has been clinically stable and reports resolution of a baseline skeletal myopathy that was present prior to treatment. Analysis of the explanted heart is described above. Of note, this patient had more advanced heart failure at time of treatment; the clinical protocol has been modified to exclude enrollment of DD with end-stage CHF/cardiomyopathy. In May 2021, 5 months after details of this event were disclosed and after recognition of complement-mediated TMA in other systemic AAV programs, the FDA placed the study on clinical hold. In response to the FDA’s clinical hold, we amended the trial protocol in order to enable more defined mechanisms for prevention, early recognition and management of complement-mediated adverse events. The FDA lifted the clinical hold on August 16, 2021 and dosing of the pediatric cohort was initiated in the fourth quarter of 2021.

Index

Based on the activity observed in the low dose cohort and to mitigate complement-mediated TMA (safety concerns observed in the high dose cohort) and in agreement with the FDA, we are focusing on the low dose (6.7e13 vg/kg) and we will no longer administer doses of 1.1e14 vg/kg or higher in this trial. Additional safety measures have been implemented and are reflected in the updated trial protocol. These measures include exclusion of patients with end-stage heart failure, and a refined immunosuppressive regimen involving transient B- and T-cell mediated inhibition, with emphasis on preventing complement activation, while also enabling lower steroid doses and earlier steroid taper, with all immunosuppressive therapy discontinued 2-3 months following therapy. As announced in January 2022, the initial pediatric patient received RP-A501 therapy (6.7e13 vg/kg dose level) without evidence of significant complement activation and with stable platelet levels; there was no worsening of the patient’s baseline DD-related skeletal myopathy during the weeks following RP-A501.

Fanconi Anemia Complementation Group A (FANCA):

FA, a rare and life-threatening DNA-repair disorder, generally arises from a mutation in a single FA gene. An estimated 60 to 70% of cases arise from mutations in the Fanconi-A (“FANCA”) gene, which is the focus of our program. FA results in bone marrow failure, developmental abnormalities, myeloid leukemia, and other malignancies, often during the early years and decades of life. Bone marrow aplasia, which is bone marrow that no longer produces any or very few red and white blood cells and platelets leading to infections and bleeding, is the most frequent cause of early morbidity and mortality in FA, with a median onset before 10 years of age. Leukemia is the next most common cause of mortality, ultimately occurring in about 20% of patients later in life. Solid organ malignancies, such as head and neck cancers, can also occur, although at lower rates during the first two to three decades of life.

Although improvements in allogeneic (donor-mediated) hematopoietic stem cell transplant (“HSCT”), currently the most frequently utilized therapy for FA, have resulted in more frequent hematologic correction of the disorder, HSCT is associated with both acute and long-term risks, including transplant-related mortality, graft versus host disease (“GVHD”), a sometimes fatal side effect of allogeneic transplant characterized by painful ulcers in the GI tract, liver toxicity and skin rashes, as well as increased risk of subsequent cancers. Our gene therapy program in FA is designed to enable a minimally toxic hematologic correction using a patient’s own stem cells during the early years of life. We believe that the development of a broadly applicable autologous gene therapy can be transformative for these patients.

Each of our LVV-based programs utilize third-generation, self-inactivating lentiviral vectors to correct defects in patients’ HSCs, which are the cells found in bone marrow that are capable of generating blood cells over a patient’s lifetime. Defects in the genetic coding of HSCs can result in severe, and potentially life-threatening anemia, which is when a patient’s blood lacks enough properly functioning red blood cells to carry oxygen throughout the body. Stem cell defects can also result in severe and potentially life-threatening decreases in white blood cells resulting in susceptibility to infections, and in platelets responsible for blood clotting, which may result in severe and potentially life-threatening bleeding episodes. Patients with FA have a genetic defect that prevents the normal repair of genes and chromosomes within blood cells in the bone marrow, which frequently results in the development of acute myeloid leukemia (“AML”), a type of blood cancer, as well as bone marrow failure and congenital defects. The average lifespan of an FA patient is estimated to be 30 to 40 years. The prevalence of FA in the U.S. and EU is estimated to be approximately 4,000 patients in total. In light of the efficacy seen in non-conditioned patients, the addressable annual market opportunity is now believed to be 400 to 500 patients collectively in the U.S. and EU.

We currently have one ex-vivo LVV-based program targeting FA, RP-L102. RP-L102 is our lead lentiviral vector-based program that we in-licensed from Centro de Investigaciones Energéticas, Medioambientales y Tecnológicas (“CIEMAT”), which is a leading research institute in Madrid, Spain. RP-L102 is currently being studied in our Phase 2 registrational enabling clinical trials treating FA patients at the Center for Definitive and Curative Medicine at Stanford University School of Medicine (“Stanford”), the University of Minnesota, Great Ormond Street Hospital (“GOSH”) in London and Hospital Infantil de Nino Jesus (“HNJ”) in Spain. The trial is expected to enroll a total of ten patients from the U.S. and EU with the first patient in this Phase 2 trial treated in December 2019. Patients will receive a single intravenous infusion of RP-L102 that utilizes fresh cells and “Process B” which incorporates a modified stem cell enrichment process, transduction enhancers, as well as commercial-grade vector and final drug product.

Resistance to mitomycin-C, a DNA damaging agent, in bone marrow stem cells at a minimum time point of one year post treatment is the primary endpoint for our ongoing Phase 2 study. Per agreement with the FDA and EMA, engraftment leading to bone marrow restoration exceeding a 10% mitomycin-C resistance threshold could support a marketing application for approval.

In December 2020, we presented updated interim data from our FA at the 62nd American Society of Hematology (“ASH”) Annual Meeting. The FA data presented at the ASH Annual Meeting were from seven of the nine patients treated (out of twelve patients enrolled) as of October 2020 in both the U.S. Phase 1 and global Phase 2 studies of RP-L102 for FA. Patients in these studies received a single intravenous infusion of “Process B” RP-L102 which incorporates a modified stem cell enrichment process, transduction enhancers, as well as commercial-grade vector. Preliminary data from these studies support “Process B” as a consistent and reproducible improvement over “Process A” which was used in earlier academic FA studies.

Seven patients had follow-up data of at least two-months and three of the seven patients had been followed for twelve-months or longer. As patients are treated with gene therapy product without the use of a conditioning regimen, the data indicated that RP-L102 was generally well-tolerated with no significant safety issues reported with infusion or post-treatment. One drug related serious adverse event of Grade 2 transient infusion-related reaction was observed. In five out of the seven patients for whom there was follow-up data, evidence of preliminary engraftment was observed, with bone marrow (“BM”) vector copy numbers (“VCNs”) from 0.16 to 0.22 (long-term follow-up only) and peripheral VCNs ranging from 0.01 (2-month follow-up) to 0.11 (long-term follow-up). Further, two of the three patients with greater than 12-months follow-up showed evidence of increasing engraftment, mitomycin-C (“MMC”) resistance and stable blood counts, which suggests a halt in the progression of bone marrow failure. The third patient with greater than 12-month follow-up contracted Influenza B nine months post-treatment resulting in progressive BM failure, for which, such patient received a successful bone marrow transplant at 18 months post-treatment.

Index

In May 2021, we presented positive clinical data at the 24th Annual Meeting of the American Society of Gene and Cell Therapy (“ASGCT”). The preliminary data from the Phase 1/2 trials presented in a poster at ASGCT were from nine pediatric patients and showed increasing evidence of engraftment in at least six of the nine patients, including two patients with at least 15-months of follow-up and four patients with at least 6-months of follow-up. RP-L102 demonstrated a highly favorable tolerability profile with all subjects being treated without conditioning and with no sign of dysplasia. One patient experienced a Grade 2 transient infusion-related reaction.

In December 2021, we presented encouraging clinical data at the 63rd Annual Meeting of the American Society of Hematology (ASH). The preliminary results from the Phase 1/2 trials were presented in a poster at ASH were from eleven pediatric patients and showed increasing evidence of engraftment in at least six of eight patients for whom there are at least 12 months of follow-up, including bone marrow progenitor cell resistance to mitomycin-C (MMC) ranging from 16-63% in six patients (bone marrow cells in FA patients are highly sensitive to DNA-damaging agents including MMC; this susceptibility to DNA damage is believed to mediate the FA-associated bone marrow failure and predisposition to malignancy. In addition to the development of MMC-resistance in BM hematopoietic cells, sustained peripheral VCN levels were seen in six of seven patients with at least 12-months of follow-up. One patient experienced an Influenza B infection approximately 9 months following treatment with concomitant progressive hematologic failure requiring allogeneic hematopoietic stem cell transplant, which was administered successfully; the remaining patients have not required transfusions. RP-L102 demonstrated a highly favorable tolerability profile with all subjects being treated without cytotoxic conditioning and no signs of dysplasia. The only RP-L102 related serious adverse event to-date has been a Grade 2 transient infusion-related reaction in one patient.

Leukocyte Adhesion Deficiency-I (LAD-I):

LAD-I is a rare autosomal recessive disorder of white blood cell adhesion and migration, resulting from mutations in the ITGB2 gene encoding for the Beta-2 Integrin component, CD18. Deficiencies in CD18 result in an impaired ability for neutrophils (a subset of infection-fighting white blood cells) to leave blood vessels and enter tissues where these cells are needed to combat infections. As is the case with many rare diseases, accurate estimates of incidence are difficult to confirm; however, several hundred cases have been reported to date. Most LAD-I patients are believed to have the severe form of the disease. Severe LAD-I is notable for recurrent, life-threatening infections and substantial infant mortality in patients who do not receive an allogeneic HSCT. Mortality for severe LAD-I has been reported as 60 to 75% by age two in the absence of allogeneic HCST.

We currently have one ex-vivo program targeting LAD-I, RP-L201. RP-L201 is a clinical program that we in-licensed from CIEMAT. We have partnered with UCLA to lead U.S. clinical development efforts for the LAD-I program. UCLA and its Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research is serving as the lead U.S. clinical research center for the registrational clinical trial for LAD-I, and HNJ and GOSH serving as the lead clinical sites in Spain and London, respectively. This study has received a $6.5 million CLIN2 grant award from the California Institute for Regenerative Medicine (“CIRM”) to support the clinical development of gene therapy for LAD-I.

The ongoing open-label, single-arm, Phase 1/2 registration-enabling clinical trial of RP-L201 has treated four severe LAD-I patients to assess the safety and tolerability of RP-L201 to date. The first patient was treated at UCLA with RP-L201 in the third quarter 2019. Enrollment is now complete in both the Phase 1 and 2 portions of the study; 9 patients have received RP-L102 at 3 investigative centers in the U.S. and Europe.

In December 2021, we presented positive clinical data at the 63rd Annual Meeting of ASH. The ASH oral presentation included preliminary data from eight of nine severe LAD-I patients, as defined by CD18 expression of less than 2%, who received RP-L201 treatment as of the November 8, 2021, data cut-off date. Eight patients had follow-up data of at least three months, and four of the eight patients had been followed for 12 months or longer. All infusions of RP-L201 were well tolerated and no drug product-related serious adverse events were reported. Evidence of preliminary efficacy was observed in all eight evaluable patients. All eight patients demonstrated neutrophil CD18 expression that exceeded the 4-10% threshold associated with survival into adulthood and consistent with reversal of the severe LAD-I phenotype including six patients with at least 6 months of follow-up. Peripheral blood VCN levels have been stable and in the 0.54 – 2.94 copies per genome range. No patients had LAD-I related infections requiring hospitalization after hematopoietic reconstitution post-RP-L201. Additional updates presented in January 2022 included a ninth patient achieving CD18 expression of 61% at 3 months, with the preliminary observation that all nine of nine patients have demonstrated 26% to 87% CD18 expression at timepoints ranging from 3 to 24 months following RP-L102, with stable CD18 expression levels for each patient subsequent to month 3.

Pyruvate Kinase Deficiency (PKD):

Red blood cell PKD is a rare autosomal recessive disorder resulting from mutations in the pyruvate kinase L/R (“PKLR”) gene encoding for a component of the red blood cell (“RBC”) glycolytic pathway. PKD is characterized by chronic non-spherocytic hemolytic anemia, a disorder in which RBCs do not assume a normal spherical shape and are broken down, leading to decreased ability to carry oxygen to cells, with anemia severity that can range from mild (asymptomatic) to severe forms that may result in childhood mortality or a requirement for frequent, lifelong RBC transfusions. The pediatric population is the most commonly and severely affected subgroup of patients with PKD, and PKD often results in splenomegaly (abnormal enlargement of the spleen), jaundice and chronic iron overload which is likely the result of both chronic hemolysis and the RBC transfusions used to treat the disease. The variability in anemia severity is believed to arise in part from the large number of diverse mutations that may affect the PKLR gene. Estimates of disease incidence have ranged between 3.2 and 51 cases per million in the white U.S. and EU population. Industry estimates suggest at least 2,500 cases in the U.S. and EU have already been diagnosed despite the lack of FDA-approved molecularly targeted therapies. Market research indicates the application of gene therapy to broader populations could increase the market opportunity from approximately 250 to 500 patients per year.

Index

We currently have one ex-vivo LVV-based program targeting PKD, RP-L301. RP-L301 is a clinical stage program that we in-licensed from CIEMAT. The IND for RP-L301 to initiate the global Phase 1 study cleared in October 2019. This program has been granted US and EMA orphan drug disease designation.

This global Phase 1 open-label, single-arm, clinical trial is expected to enroll six adult and pediatric PKD patients in the U.S. and Europe. The trial will be comprised of three cohorts to assess RP-L301 in young pediatric (age 8-11), older pediatric (age 12-17) and adult populations. The trial is designed to assess the safety, tolerability, and preliminary activity of RP-L301, and initial safety evaluation will occur in the adult cohort before evaluation in pediatric patients. Stanford will serve as the lead site in the U.S. for adult and pediatric patients, HNJ will serve as the lead site in Europe for pediatrics, and Hospital Universitario Fundación Jiménez Díaz will serve as the lead site in Europe for adult patients. In July 2020, we treated the first patient in our clinical trial of RP-L301.

In December 2021, we presented positive clinical data at the 63rd Annual Meeting of ASH. The ASH poster presentation included preliminary data from two adult patients with severe anemia and substantial transfusion requirements who were treated as of the November 3, 2021 cut-off date. Each of these patients had experience extensive PKD-related disease complications including hepatic iron overload. Both patients have had marked improvement in hemoglobin levels, from baselines of 7.4 and 7.0 g/dL to 12-month values of 13.3 and 14.8 g/dL respectively; this represents an improvement from severe (Hb <8g/dL) to normal levels. Both patients have been transfusion independent subsequent to post-treatment hematopoietic reconstitution. Anemia resolution has been accompanied by marked improvement in additional markers of hemolysis, including bilirubin, erythropoietin, and reticulocyte counts. RP-L301 has been well tolerated in these adult patients, with no drug product related serious adverse events or infusion-related complications observed through 12-months post-treatment. Both patients have reported improved quality of life (QOL) following treatment with increases on FACT-An and additional designated QOL evaluations sustained through 12 months following therapy.

Infantile Malignant Osteopetrosis (IMO):

IMO is a genetic disorder characterized by increased bone density and bone mass secondary to impaired bone resorption. During normal growth and development small areas of bone are constantly being broken down by special cells called osteoclasts, then made again by cells called osteoblasts. In IMO, the cells that break down bone (osteoclasts) do not work properly, which leads to the bones becoming thicker and not as healthy. Untreated IMO patients may suffer from a compression of the bone-marrow space, which results in bone marrow failure, anemia, and increased infection risk due to the lack of production of white blood cells. Untreated IMO patients may also suffer from a compression of cranial nerves, which transmit signals between vital organs and the brain, resulting in blindness, hearing loss and other neurologic deficits.

IMO represents the autosomal recessive, severe variants of a group of disorders characterized by increased bone density and bone mass secondary to impaired bone resorption. IMO typically presents in the first year of life and is associated with severe manifestations leading to death within the first decade of life in the absence of allogeneic HSCT, although HSCT results have been limited to-date and notable for frequent graft failure, GVHD and other severe complications.

Approximately 50% of IMO results from mutations in the TCIRG1 gene, resulting in cellular defects that prevent osteoclast bone resorption. As a result of this defect, bone growth is markedly abnormal. It is estimated that IMO occurs in 1 out of 250,000-300,000 within the general global population, although incidence is higher in specific geographic regions including Costa Rica, parts of the Middle East, the Chuvash Republic of Russia, and the Vasterbotten Province of Northern Sweden.

Effective December 2021, the Company made a decision to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. The Company has opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the compelling clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood.

Strategy

We seek to bring hope and relief to patients with devastating, undertreated, rare pediatric diseases through the development and commercialization of potentially curative first-in-class gene therapies. To achieve these objectives, we intend to develop into a fully-integrated biotechnology company. In the near- and medium-term, we intend to develop our first-in-class product candidates, which are targeting devastating diseases with substantial unmet need, develop proprietary in-house analytics and manufacturing capabilities and continue to commence registration trials for our currently planned programs. In the medium and long-term, we expect to submit our first biologics license applications (“BLAs”) and establish our gene therapy platform and expand our pipeline to target additional indications that we believe to be potentially compatible with our gene therapy technologies. In addition, during that time, we believe that our currently planned programs will become eligible for priority review vouchers from the FDA that provide for expedited review. We have assembled a leadership and research team with expertise in cell and gene therapy, rare disease drug development and product approval.

We believe that our competitive advantage lies in our disease-based selection approach, a rigorous process with defined criteria to identify target diseases. We believe that this approach to asset development differentiates us as a gene therapy company and potentially provides us with a first-mover advantage.

Index

Financial Overview

Since our inception, we have devoted substantially all of our resources to organizing and staffing the company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights, conducting discovery, R&D activities for our product candidates and planning for potential commercialization. We do not have any products approved for sale and have not generated any revenue from product sales. From inception through March 31, 2022, we raised net cash proceeds of approximately $680.5 million from investors through both equity and convertible debt financing to fund operating activities.

Revenue

To date, we have not generated any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the near future. If our development efforts for product candidates are successful and result in regulatory approval or license agreements with third parties, we may generate revenue in the future from product sales.

Operating Expenses

Research and Development Expenses

Our R&D program expenses consist primarily of external costs incurred for the development of our product candidates. These expenses include:

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expenses incurred under agreements with research institutions and consultants that conduct R&D activities including process development, preclinical, and clinical activities on our behalf;

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costs related to process development, production of preclinical and clinical materials, including fees paid to contract manufacturers and manufacturing input costs for use in internal manufacturing processes;

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consultants supporting process development and regulatory activities;

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patent fees; and

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costs related to in-licensing of rights to develop and commercialize our product candidate portfolio.

We recognize external development costs based on contractual payment schedules aligned with program activities, invoices for work incurred, and milestones which correspond with costs incurred by the third parties. Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses.

Our direct R&D expenses are tracked on a program-by-program basis for product candidates and consist primarily of external costs, such as research collaborations and third-party manufacturing agreements associated with our preclinical research, process development, manufacturing, and clinical development activities. Our direct R&D expenses by program also include fees incurred under license agreements. Our personnel, non-program and unallocated program expenses include costs associated with activities performed by our internal R&D organization and generally benefit multiple programs. These costs are not separately allocated by product candidate and consist primarily of:

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salaries and personnel-related costs, including benefits, travel, and stock-based compensation, for our scientific personnel performing R&D activities;

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facilities and other expenses, which include expenses for rent and maintenance of facilities, and depreciation expense; and

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laboratory supplies and equipment used for internal R&D activities.

Our direct R&D expenses consist principally of external costs, such as fees paid to investigators, consultants, laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, costs associated with our general discovery platform improvements, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other R&D expenses.

Index

The following table presents R&D expenses tracked on a program-by-program basis as well as by type and nature of expense for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
	2022		2021
Direct Expenses:
Danon Disease (AAV) RP-A501	$	6,374	$	3,799
Leukocyte Adhesion Deficiency (LVV) RP-L201		3,051		6,406
Fanconi Anemia (LVV) RP-L102		4,530		3,595
Pyruvate Kinase Deficiency (LVV) RP-L301		854		1,859
Infantile Malignant Osteopetrosis (LVV) RP-L401⁽¹⁾		190		796
Other product candidates		3,254		692
Total direct expenses		18,253		17,147
Unallocated Expenses
Employee compensation		5,549		4,664
Stock based compensation expense		2,318		2,916
Depreciation and amortization expense		827		1,176
Laboratory and related expenses		1,226		647
Legal and patent fees		-		59
Professional Fees		561		466
Other expenses		2,060		1,234
Total other expense, net Total other research and development expenses		12,540		11,162
Total research and development expense	$	30,794	$	28,309

(1) Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators.

We cannot determine with certainty the duration and costs to complete current or future clinical studies of product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of clinical studies and development of product candidates will depend on a variety of factors, including:

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the scope, rate of progress, and expense of ongoing as well as any clinical studies and other R&D activities that we undertake;

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future clinical study results;

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uncertainties in clinical study enrollment rates;

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changing standards for regulatory approval; and

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the timing and receipt of any regulatory approvals.

We expect R&D expenses to increase for the foreseeable future as we continue to invest in R&D activities related to developing product candidates, including investments in manufacturing, as our programs advance into later stages of development and as we conduct additional clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of R&D projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

Our future R&D expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of the commercial potential of such product candidates. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our R&D expenses to increase in future periods for the foreseeable future as we seek to further development of our product candidates.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

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the scope, progress, outcome and costs of our clinical trials and other R&D activities;

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the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care;

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the market acceptance of our product candidates;

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obtaining, maintaining, defending, and enforcing patent claims and other intellectual property rights;

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significant and changing government regulation; and

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the timing, receipt, and terms of any marketing approvals.

Index

A change in the outcome of any of these variables with respect to the development of our product candidates that we may develop could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate for the completion of clinical development of any of our product candidates that we may develop or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefit costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance, legal, business development, and human resource functions. In addition, other significant general and administrative expenses include professional fees for legal, consulting, investor and public relations, auditing, and tax services as well as other expenses for rent and maintenance of facilities, insurance and other supplies used in general and administrative activities. We expect general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to support the continued advancement of our product candidates. We also anticipate that as we continue to operate as a public company with increasing complexity, we will continue to incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses.

Interest Expense

Interest expense for the three months ended March 31, 2022, is related to our financing lease obligation for the Cranbury, NJ facility. Interest expense for the three months ended March 31, 2021, related to the Convertible Notes and our financing lease obligation for the Cranbury, NJ facility.

Interest Income

Interest income is related to interest earned from investments and cash equivalents.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in in conformity with accounting principles generally accepted in the United States (“US GAAP”). The preparation of these 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 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. Actual results may differ from these estimates under different assumptions or conditions. We periodically review our estimates as a result of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate.

Our significant accounting policies are described in more detail in our 2021 Form 10-K.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

	Three Months Ended March 31,
	2022			2021			Change

Operating expenses:
Research and development	$	30,794		$	28,309		$	2,485
General and administrative		11,770			10,913			857
Total operating expenses		42,564			39,222			3,342
Loss from operations		(42,564	)		(39,222	)		(3,342	)
Research and development incentives		-			500			(500	)
Interest expense		(464	)		(1,729	)		1,265
Interest and other income, net		623			911			(288	)
Amortization of premium on investments - net		(577	)		(639	)		62
Total other expense, net		(418	)		(957	)		539
Net loss	$	(42,982	)	$	(40,179	)	$	(2,803	)

Research and Development Expenses

Index

R&D expenses increased $2.5 million to $30.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in R&D expenses was primarily driven by an increase in laboratory supplies of $1.3 million, an increase in compensation and benefits of $0.8 million due to increased R&D headcount, an increase in manufacturing and development costs of $0.6 million, offset by a decrease in R&D non-cash stock-based compensation expense of $0.6 million.

General and Administrative Expenses

G&A expenses increased $0.9 million to $11.8 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase in G&A expenses was primarily driven by an increase in commercial preparation expenses which consists of commercial strategy, medical affairs, market development and pricing analysis of $1.1 million, an increase in compensation and benefits of $0.3 million due to increased G&A headcount, an increase in legal expense of $0.2 million, offset by a decrease of $1.0 million in G&A stock-based compensation expense.

Other Expense, Net

Other expense, net decreased by $0.5 million to $0.4 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The decrease in other expense, net was primarily driven by reduced interest expense of $1.3 million associated with the 2022 Convertible Notes that were redeemed in April 2021 and the 2021 Convertible Notes that were converted in August 2021, as well as a decrease of $0.5 million in research and development incentives due to the receipt of the New York State R&D tax credit in 2021.

Liquidity, Capital Resources and Plan of Operations

We have not generated any revenue and have incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional R&D efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

Our drug candidates are in the development and clinical stage. There can be no assurance that our R&D will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate significant revenue from product sales. We operate in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

Our consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Rocket has incurred net losses and negative cash flows from its operations each year since inception. We had net losses of $42.9 million for the three months ended March 31, 2022, and $169.1 million for the year ended December 31, 2021. As of March 31, 2022 and December 31, 2021, we had an accumulated deficit of $534.9 million and $491.9 million, respectively. As of March 31, 2022, we had $346.6 million of cash, cash equivalents and investments. We expect such resources would be sufficient to fund our operating expenses and capital expenditure requirements into the first half of 2024. We have funded our operations primarily through the sale of our equity and debt securities.

In the longer term, our future viability is dependent on our ability to generate cash from operating activities or to raise additional capital to finance our operations. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

Cash Flows

	Three Months Ended March 31,
	2022			2021
Net cash used in operating activities	$	(39,223	)	$	(24,283	)
Net cash used in investing activities		(62,995	)		(29,174	)
Net cash provided by financing activities		76			8,792
Net decrease in cash, cash equivalents and restricted cash	$	(102,142	)	$	(44,665	)

Index

Operating Activities

During the three months ended March 31, 2022, operating activities used $39.2 million of cash, primarily resulting from our net loss of $43.0 million offset by net non-cash charges of $8.2 million, including non-cash stock-based compensation expense of $6.3 million, accretion of discount on investments of $0.6 million, and depreciation and amortization expense of $1.3 million. Changes in our operating assets and liabilities for the three months ended March 31, 2022, consisted of a decrease in accounts payable and accrued expenses of $0.5 million and a decrease in our prepaid expenses of $3.9 million.

During the three months ended March 31, 2021, operating activities used $24.3 million of cash, primarily resulting from our net loss of $40.2 million offset by net non-cash charges of $9.8 million, including non-cash stock-based compensation expense of $7.9 million and depreciation of $0.7 million. Changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted of an increase in accounts payable and accrued expenses for $7.0 million and a decrease in our prepaid expenses of $0.8 million.

Investing Activities

During the three months ended March 31, 2022, investing activities used $63.0 million of cash, primarily resulting from proceeds of $82.0 million from the maturities of investments, offset by purchases of investments of $143.0 million, and purchases of property and equipment of $2.0 million.

During the three months ended March 31, 2021, investing activities used $29.2 million of cash, primarily resulting from proceeds of $75.0 million from the maturities of investments, offset by purchases of investments of $103.8 million, and purchases of property and equipment of $0.3 million.

Financing Activities

During the three months ended March 31, 2022, financing activities provided $0.1 million of cash, consisting of issuance of common stock, pursuant to exercises of stock options and restricted stock units.

During the three months ended March 31, 2021, financing activities provided $8.8 million of cash, consisting of issuance of common stock, pursuant to exercises of stock options.

Contractual Obligations and Commitments

There were no material changes outside the ordinary course of our business to the contractual obligations specified in the table of contractual obligations included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K. Information regarding contractual obligations and commitments may be found in Note 10 of our unaudited consolidated condensed financial statements in this Quarterly Report on Form 10-Q. We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 of our unaudited consolidated condensed financial statements in this Quarterly Report on Form 10-Q.

Item 3

Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of March 31, 2022, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Index

Inherent Limitations of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Our material risk factors are disclosed in Item 1A of our 2021 Form 10-K. There have been no material changes from the risk factors previously disclosed in such filing.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None

Index

Item 6.

Exhibits

Exhibit
Number	Description of Exhibit
2.1	Agreement and Plan of Merger and Reorganization, dated as of September 12, 2017, by and among Inotek Pharmaceuticals Corporation, Rocket Pharmaceuticals, Ltd. and Rome Merger Sub (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8- K (001-36829), filed with the SEC on September 13, 2017)
3.1	Seventh Amended and Restated Certificate of Incorporation of Rocket Pharmaceuticals, Inc., effective as of February 23, 2015(incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March31, 2015)
3.2	Certificate of Amendment (Reverse Stock Split) to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective as of January 4, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018)
3.3	Certificate of Amendment (Name Change) to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective January 4, 2018 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018)
3.4	Certificate of Amendment to the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective as of June 25, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on June 25, 2019
3.5	Amended and Restated By-Laws of Rocket Pharmaceuticals, Inc., effective as of March 29, 2018 (incorporated by reference to Exhibit3.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on April 4, 2018)
10.1	Sales Agreement, dated February 28, 2022, by and between the Registrant and Cowen and Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on March 1, 2022).
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Link Document.
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)

* Filed herewith.

** The certification furnished in Exhibit 32.1 hereto are deemed to be furnished with this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ROCKET PHARMACEUTICALS, INC.

May 6, 2022	By:	/s/ Gaurav Shah, MD
		Gaurav Shah, MD
		Chief Executive Officer and Director
		(Principal Executive Officer)

May 6, 2022	By:	/s/ John Militello
		John Militello
		VP of Finance, Senior Controller and Treasurer
		(Interim Principal Financial Officer and Principal Accounting Officer)