Rocket Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statements are unaudited. Amounts below are in U.S. dollars; financial statement amounts are generally converted from thousands to millions.
Business context
Rocket is a clinical-stage gene-therapy company with no approved products and no product revenue. Its pipeline includes lentiviral programs for Fanconi anemia (FA), severe leukocyte adhesion deficiency-I (LAD-I) and pyruvate kinase deficiency (PKD), and AAV programs for Danon disease, PKP2 arrhythmogenic cardiomyopathy and BAG3 dilated cardiomyopathy.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $46.8m | $43.4m | $144.6m | $115.5m |
| General and administrative | $18.6m | $15.1m | $51.8m | $39.7m |
| Total operating expenses | $65.4m | $58.5m | $196.4m | $155.3m |
| Net loss | $61.9m | $57.8m | $185.9m | $155.1m |
| Basic and diluted loss per share | $0.75 | $0.87 | $2.30 | $2.37 |
| Cash used in operating activities | — | — | $165.6m | $122.1m |
With no revenue, operating or profit margins are not meaningful. Q3 operating expenses increased $6.9m year over year, while net loss increased $4.1m; higher other income, including investment accretion, partly offset the expense increase. For the first nine months, operating expenses rose $41.1m and net loss rose $30.8m year over year. Management attributed expense growth mainly to increased R&D and G&A headcount, clinical activity, stock compensation and commercial preparation.
At September 30, 2023, cash and cash equivalents were $225.7m and investments were $211.5m, or $437.2m combined; total assets were $598.8m and stockholders’ equity was $541.1m. The company reported an accumulated deficit of $899.7m. Management expects available cash, cash equivalents and investments to fund operating and capital expenditure requirements through 2025.
Nine-month investing activities provided $42.7m, principally reflecting investment maturities net of purchases, and financing activities provided $208.0m. Cash, cash equivalents and restricted cash increased $85.2m to $227.0m. The company has lease liabilities, including $21.1m under a finance lease and $4.1m under operating leases; the filing does not identify material conventional borrowings. It reports no material off-balance-sheet arrangements.
Material changes and financing
- On September 15, 2023, Rocket completed a public offering of approximately 9.5m common shares and 3.1m pre-funded warrants. Net proceeds were approximately $188.9m after $12.4m of offering costs and discounts.
- The company also raised $17.2m net through its at-the-market program during the first nine months. The program’s available aggregate offering amount was amended to $180.0m. These equity financings increased shares outstanding and are dilutive to existing holders.
- R&D expense for the first nine months increased $29.1m year over year; G&A increased $12.1m. Stock-based compensation was $29.5m versus $21.3m in the prior-year period.
- Rocket recorded a $0.6m impairment of an acquired mice-colony-model intangible asset. It also reported a $0.7m reduction in the fair value of warrant liability during the nine-month period.
Outlook, clinical developments and risks
- LAD-I: FDA accepted the RP-L201 BLA and granted priority review; the stated PDUFA date is March 31, 2024.
- FA: Treatment in Phase 2 studies was completed. U.S. and European regulatory filings for RP-L102 were anticipated in 2024; the company described filings as anticipated in the first half of 2024.
- Danon disease: Rocket reported alignment with FDA on a 12-patient, single-arm Phase 2 pivotal trial at the 6.7 × 1013 GC/kg dose, with a natural-history comparator and biomarker-based co-primary endpoints. The company said it had initiated the global study and was working toward trial activities in Europe and the UK. Higher dosing was discontinued following complement-mediated safety concerns, including thrombotic microangiopathy at the higher dose; the protocol includes additional safety measures.
- PKD: The company reported agreement with FDA on a 10-patient Phase 2 pivotal-trial design, with a primary endpoint of at least a 1.5-point hemoglobin improvement at 12 months.
- Other programs: RP-A601 for PKP2-ACM entered Phase 1. Rocket said it was evaluating the development pathway for BAG3-DCM and planned to submit an IND in 2024.
- Management expects R&D and G&A expenses to increase as programs advance, trials expand, manufacturing investment continues and commercial-readiness work grows. Future revenue timing, if any, is uncertain.
- Key risks include clinical and regulatory uncertainty, trial enrollment and execution, manufacturing and product quality, intellectual-property protection, competition, and the need for future capital. The company cautions that cash sufficiency estimates and development timelines are forward-looking and may not be achieved. It reported no material change to the risk factors in its 2022 Form 10-K.
- Rocket stated that it was not party to litigation expected to have a material adverse effect. Disclosure controls were assessed as effective at the reasonable-assurance level, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the LAD-I BLA receives approval by the March 31, 2024 PDUFA date, and any FDA action or required follow-up.
- Progress and timing of the Danon and PKD pivotal trials, including enrollment, endpoints, safety monitoring and manufacturing readiness.
- Whether FA filings proceed on the stated 2024 timetable and how regulators assess the clinical dataset.
- Cash burn versus management’s runway-through-2025 estimate, including additional trial and manufacturing spending and potential financing needs.
- Share-count and dilution effects of the public offering, pre-funded warrants, ATM issuance, options and other outstanding equity awards.
- Clinical safety and durability of benefit across programs, including Danon high-dose safety findings and longer-term gene-therapy risks.