Rocket Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Rocket is a clinical-stage gene-therapy biotechnology company with no approved products and no product revenue. Its programs target rare diseases using lentiviral-vector and AAV approaches.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $40.0m | $21.7m | $93.3m | $55.3m |
| General and administrative | $9.7m | $5.7m | $29.6m | $19.7m |
| Net loss | $50.1m | $29.1m | $124.8m | $78.8m |
| Basic and diluted loss per share | $0.79 | $0.53 | $1.99 | $1.43 |
| Cash used in operating activities | — | — | $90.2m | $61.5m |
At September 30, 2021, cash and cash equivalents were $245.6m and investments were $175.8m, totaling $421.5m. Total assets were $530.2m; current assets were $425.1m and current liabilities $24.5m. Accumulated deficit was $447.7m. The company reported no convertible notes outstanding; finance lease liabilities totaled $20.8m. No operating margin is meaningful because the company had no revenue and incurred operating losses.
Net cash declined $51.7m in the first nine months. Investing activities provided $2.0m, primarily reflecting investment maturities exceeding purchases; financing activities provided $36.5m, including the August private placement. Management said available cash, cash equivalents and investments were expected to fund operating expenses and capital expenditures into the second half of 2023.
Changes versus comparable periods
- Q3 net loss widened by $21.0m year over year; nine-month net loss widened by $46.0m.
- Q3 R&D rose $18.3m and nine-month R&D rose $38.0m, mainly from manufacturing and development, increased staffing and stock compensation, and a $7.6m non-cash warrant expense related to a consulting agreement.
- G&A increased $3.9m in Q3 and $9.9m for the nine-month period, with higher compensation, stock-based compensation and commercial-preparation costs.
- Cash used in operations increased to $90.2m from $61.5m for the first nine months of 2020. The company raised approximately $26.4m net in an August private placement to its largest shareholder and received $10.2m from stock-option exercises.
- The remaining 2022 convertible notes were redeemed/converted in April, and the remaining 2021 convertible notes converted in August; both balances were zero at quarter-end. Common shares outstanding increased to 64.4m from 61.0m at year-end 2020.
Outlook, programs and risks
- Management expects R&D and G&A costs to increase as trials, manufacturing, regulatory work and commercialization preparation advance. The company expects continued losses and may need additional financing; future equity financing could dilute shareholders.
- Danon disease: The FDA lifted the RP-A501 clinical hold in August after protocol and safety-monitoring changes. Pediatric low-dose dosing began in September. The company planned updated clinical data for Q4 2021 and stated it would focus on the low dose after a serious immune-mediated thrombotic microangiopathy event in a high-dose patient.
- Fanconi anemia and LAD-I: Both were described as registration-enabling programs. LAD-I enrollment was complete with nine patients treated; additional data were expected in Q4 2021. The company also expected longer-term Fanconi anemia data in Q4.
- IMO: The first treated patient died following pulmonary complications after conditioning therapy. Investigators and an independent monitoring committee did not consider the death related to RP-L401, but enrollment was paused for review; the committee supported further study under a revised protocol. An update was expected in Q4 2021.
- PKD: Early results in two patients showed improved hemoglobin and other disease markers; the Phase 1 study continued enrolling, with longer-term data expected in Q4.
- Key risks include clinical efficacy and safety uncertainty, regulatory approval and trial timing, manufacturing and supply execution, competition, intellectual-property protection, and the need for additional capital. The filing reported no material changes to previously disclosed risk factors and no litigation expected to have a material adverse effect.
Important facts for investors to verify
- Whether clinical updates and timelines for Danon, Fanconi anemia, LAD-I, PKD and IMO were achieved, and whether subsequent safety findings changed program plans.
- Whether the projected cash runway into the second half of 2023 remains supportable given rising operating expenses and cash burn.
- The full terms and potential dilution associated with the private placement, warrants, stock options and other equity-linked awards.
- How the IMO protocol revision and the Danon high-dose safety event affect enrollment, development costs and regulatory expectations.