Rocket Pharmaceuticals, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Rocket is a clinical-stage gene-therapy company developing treatments for rare diseases; it had no approved products and generated no revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $28.5 million | $17.0 million |
| General and administrative expense | $10.7 million | $7.2 million |
| Total operating expenses | $39.2 million | $24.1 million |
| Net loss | $40.2 million | $24.7 million |
| Net loss per share, basic and diluted | $0.65 | $0.45 |
| Cash used in operating activities | $24.3 million | $22.2 million |
Operating expenses rose about 63% year over year. R&D growth reflected higher manufacturing and development costs, consumables, personnel, stock compensation and clinical activity; G&A growth was driven mainly by stock compensation and increased headcount and administrative costs. The company recorded $0.5 million of R&D incentives in Q1 2021.
At March 31, cash and cash equivalents were $252.5 million and investments were $213.8 million, totaling $466.4 million. Current assets were $471.8 million versus current liabilities of $40.5 million. Total liabilities were $96.5 million, including convertible notes with a combined carrying value of approximately $40.5 million and finance lease liabilities of $20.7 million. Accumulated deficit was $363.0 million. Management said available resources were expected to fund operating and capital requirements into the second half of 2023.
Investing activities used $29.2 million, principally reflecting net investment purchases; financing activities provided $8.8 million, primarily from stock-option exercises. Cash, cash equivalents and restricted cash decreased by $44.7 million during the quarter. No revenue or operating profit was reported; profit margins are therefore not meaningful.
Material changes and developments
- Net loss increased $15.5 million year over year, alongside higher operating expenses and less favorable investment premium/discount amortization.
- R&D expense increased $11.6 million and G&A expense increased $3.5 million. Stock-based compensation rose to $7.9 million from $4.0 million.
- After quarter-end, holders converted the remaining $38.4 million principal balance of the 6.25% 2022 Convertible Notes into approximately 1.3 million common shares. The filing says approximately $5.2 million principal amount of 2021 Convertible Notes remained outstanding after the conversion.
- Common shares outstanding were 61,987,799 at March 31 and 63,396,954 as of May 3, 2021.
Outlook, programs and risks
- Management expected expenses and losses to increase as programs advance, clinical trials expand, and manufacturing and internal capabilities develop. The company anticipated needing additional financing over the longer term; future equity or debt financing could dilute shareholders or impose restrictive terms.
- On May 10, 2021, Rocket announced that the FDA had placed its RP-A501 Danon disease program on clinical hold. The FDA requested a pause in dosing and protocol and supporting-document revisions concerning patient selection and management. Follow-up activities were to continue; Rocket anticipated further patient treatment by the third quarter of 2021. The company said no new drug-related safety events had been observed in the adult cohorts.
- Management expected updated RP-A501 data in Q4 2021; longer-term Fanconi anemia follow-up in Q2 2021; initial LAD-I and IMO data in Q3 2021; and further PKD data in Q4 2021. These are forward-looking expectations, not assured outcomes.
- Clinical-stage programs face substantial development, safety, efficacy, manufacturing, regulatory, enrollment, intellectual-property and financing uncertainty. COVID-19 and other disruptions could affect operations, trials or supply. The filing reported no material change to previously disclosed risk factors.
- The company disclosed routine litigation and indemnification arrangements, but did not identify litigation expected to have a material adverse effect. It reported no off-balance-sheet arrangements and no material changes to contractual obligations outside the ordinary course.
Key facts for investors to verify
- Progress and FDA requirements for the RP-A501 clinical hold, including timing of resumed dosing and updated safety information.
- Whether clinical results and regulatory progress across FA, LAD-I, PKD and IMO support the projected development timelines.
- Cash burn, investment balances and the assumptions underlying the stated runway into the second half of 2023.
- Share dilution and capital structure after the 2022 Notes conversion, including remaining 2021 Convertible Notes and outstanding equity awards.
- Manufacturing capacity, clinical-trial execution, grant receipts and any subsequent changes to financing needs or guidance.