Rocket Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Rocket is a clinical-stage gene-therapy company with no approved products or product revenue. Its programs target rare diseases using lentiviral and AAV platforms.
Financial performance and position
Amounts below are in millions of dollars except per-share data. The company reported no revenue; commercial margins are therefore not applicable.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $24.8 | $16.7 | $53.3 | $33.7 |
| General and administrative | $9.3 | $6.8 | $19.9 | $14.0 |
| Total operating expenses | $34.0 | $23.6 | $73.3 | $47.7 |
| Net loss | $34.5 | $25.0 | $74.7 | $49.7 |
| Net loss per share | $0.55 | $0.45 | $1.20 | $0.90 |
- Cash flow: Operating activities used $62.8 million in the first half, versus $44.3 million a year earlier. Investing activities provided $20.2 million, mainly reflecting investment maturities net of purchases; financing activities provided $9.9 million, primarily from stock-option exercises.
- Liquidity: At June 30, cash and cash equivalents were $264.6 million and investments were $162.2 million, totaling $426.8 million. Total current assets were $430.4 million and current liabilities were $25.4 million. Accumulated deficit was $397.5 million.
- Debt and leases: $5.15 million principal remained on the 2021 Convertible Notes at June 30. The 2022 Convertible Notes were converted into approximately 1.3 million shares in April. The remaining 2021 Notes were converted into 160,614 shares on August 2; no convertible notes remained outstanding after that conversion. Finance lease liability was $20.7 million.
- Equity: Common shares outstanding were 63.45 million at June 30, versus 61.00 million at December 31, 2020; the filing reported 63.62 million outstanding on August 2.
Changes versus prior comparable periods
- Q2 operating expenses rose $10.5 million year over year, driven mainly by higher R&D costs. Management attributed the increase to manufacturing and development, headcount and compensation, stock-based compensation, clinical trials, and laboratory and facility costs.
- First-half operating expenses increased $25.6 million and net loss widened by $25.0 million. First-half R&D increased $19.7 million and G&A increased $5.9 million.
- Operating cash use increased $18.5 million year over year. Cash, cash equivalents and investments declined from $482.7 million at December 31, 2020 to $426.8 million at June 30, 2021.
- Interest expense was lower in Q2 following the April conversion of the 2022 Notes; increased amortization of investment premiums partly offset this benefit.
Outlook, programs and risks
- Management expects June 30 cash, cash equivalents and investments to fund operating and capital expenditure requirements into the second half of 2023. It expects expenses, particularly R&D, to rise as programs and manufacturing capabilities advance. The company may need additional financing thereafter; equity financing could dilute shareholders.
- Danon disease (RP-A501): The FDA placed the Phase 1 trial on clinical hold in May and requested dosing pause and protocol and supporting-document changes. No new drug-related safety events were reported, but a high-dose patient experienced a serious immune-related thrombotic microangiopathy event. Rocket planned to focus on the lower dose, believed it might resume the trial in Q3 2021, and expected updated data in Q4 2021.
- IMO (RP-L401): The first treated patient died in the weeks after therapy from pulmonary complications, which investigators did not consider related to RP-L401. Enrollment was paused under trial stopping rules pending review with the Independent Data Monitoring Committee; an update was expected in Q4 2021.
- Other pipeline expectations: Longer-term Fanconi anemia follow-up, initial Phase 2 LAD-I data, longer-term PKD data, and an IMO update were expected in Q4 2021. These were anticipated milestones, not financial guidance.
- Key business risks include clinical and regulatory uncertainty, manufacturing and supply challenges, patent and competitive risks, and dependence on future capital. The filing states there were no material changes to risk factors previously disclosed in the 2020 Form 10-K. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the FDA lifted the RP-A501 clinical hold, what protocol changes were required, and whether subsequent safety and efficacy data support continued development.
- The investigation and outcome of the RP-L401 patient death, the monitoring committee’s review, and the timing and conditions for resuming enrollment.
- Whether the Q4 2021 clinical data milestones were achieved and how follow-up results affect trial plans and regulatory timelines.
- Actual cash burn, development and manufacturing spending, and whether management’s runway estimate into the second half of 2023 remains supportable.
- Share dilution from note conversions, option exercises and equity compensation; also assess the long-term finance lease commitments and future financing needs.