Rocket Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Business context and period. Clinical-stage gene-therapy biotechnology company; this report covers the quarter and six months ended June 30, 2023. Rocket had no approved products and generated no revenue. Its programs target rare diseases using lentiviral and AAV gene therapies.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $51.4 million | $41.4 million | $97.8 million | $72.2 million |
| General and administrative expense | $17.4 million | $12.9 million | $33.2 million | $24.6 million |
| Net loss | $65.7 million | $54.4 million | $124.0 million | $97.4 million |
| Net loss per share, basic and diluted | $0.82 | $0.83 | $1.55 | $1.50 |
Margins: Not meaningful because the company reported no revenue. Operating expenses rose 27% in Q2 and 35% in the first half year over year. Management attributed increases mainly to higher headcount and compensation, clinical-trial activity, stock-based compensation, manufacturing and development, and commercial-preparation costs. Other income improved, including investment discount accretion and higher interest income, partly offsetting the higher operating loss.
Cash flow and liquidity: Operating activities used $108.4 million in the first half of 2023, versus $78.3 million in the prior-year period. Investing activities used $5.5 million; financing provided $18.5 million, principally from $17.2 million in net ATM proceeds. Cash, cash equivalents and investments totaled $307.0 million at June 30, 2023, down from $356.4 million at December 31, 2022. Cash and cash equivalents alone were $45.1 million. Management expects available resources to fund operating and capital requirements into the first half of 2025.
Balance sheet and debt: Total assets were $461.8 million and total liabilities were $58.8 million at June 30, 2023. The filing reports no conventional borrowing balance; lease obligations included $21.1 million of finance lease liabilities and $4.3 million of operating lease liabilities. The accumulated deficit was $837.8 million. Current assets of $312.1 million exceeded current liabilities of $34.3 million.
Material changes and business developments
- Compared with the first half of 2022, net loss increased $26.7 million as operating expenses grew $34.2 million; higher investment-related and interest income partly offset the increase.
- Rocket raised $17.2 million net through its at-the-market offering in the first half of 2023. Cumulative ATM sales through June 30, 2023 were 4.2 million shares for $63.8 million net, creating dilution.
- Common shares outstanding increased to 80.5 million at June 30, 2023 from 79.1 million at year-end 2022. Stock-based compensation expense was $19.2 million for the first half, up from $13.6 million.
- Research and development remains the primary use of funds. Rocket continued investment in clinical programs and its in-house AAV manufacturing capability.
Outlook, commentary and risks
- Danon disease (RP-A501): Management reported ongoing improvement or stabilization in follow-up patients and plans to advance a global pivotal study, subject to agreement with FDA on design. Rocket is focusing on the lower dose after complement-mediated safety concerns, including thrombotic microangiopathy, at the higher dose. One high-dose patient with advanced heart failure underwent transplant five months after treatment; the filing describes the patient’s course as consistent with disease progression.
- Fanconi anemia (RP-L102): Management reported sustained genetic correction in 8 of 12 evaluable patients and phenotypic correction in 7 of 12 with at least 12 months of follow-up. Pivotal-trial enrollment and treatment were complete; a BLA filing was anticipated in Q4 2023. A treated patient developed T-cell lymphoblastic lymphoma; the company reported negligible gene marking in the tumor and said the findings indicated it was not caused by lentiviral insertion.
- LAD-I (RP-L201): All nine treated patients were reported alive at the stated follow-up, with 100% estimated survival at 12 months and favorable reported clinical and safety observations. The company described an FDA BLA filing milestone and anticipated approval in the second half of 2024.
- PKD (RP-L301): Updated results included two adults with sustained efficacy and a first pediatric patient with early signs of efficacy. Management anticipated initiating a Phase 2 pivotal trial in Q4 2023; the program received FDA RMAT and EMA PRIME designations.
- Other programs: RP-A601 for PKP2-ACM received IND clearance and FDA Fast Track and Orphan Drug designations; the Phase 1 study was being initiated. Rocket planned to submit an IND for BAG3-DCM in 2024.
- Funding and execution risks: Rocket has no product revenue, has incurred recurring losses and negative operating cash flows, and expects substantial future R&D spending. It may need additional capital; equity financing could dilute shareholders, and failure to raise funds could impair business plans. Clinical, regulatory, manufacturing, intellectual-property, competition and commercialization risks remain significant. Management said there were no material changes to the risk factors in its 2022 Form 10-K.
- The company reported no material litigation expected to have an adverse effect, no material off-balance-sheet arrangements, and effective disclosure controls at June 30, 2023.
Important facts for investors to verify
- Whether the expected BLA and clinical-trial milestones were achieved on the stated timelines, and whether regulators agree with the proposed trial designs and endpoints.
- Updated safety, durability and efficacy data across the small patient cohorts, especially RP-A501 dose-related safety and RP-L102 follow-up.
- Actual cash burn, remaining cash runway and future financing needs versus management’s estimate of funding into the first half of 2025.
- Potential dilution from further ATM sales, stock awards and outstanding options and warrants.
- Execution and cost of in-house manufacturing scale-up, and the extent to which manufacturing comparability and regulatory requirements affect program timelines.