Rocket Pharmaceuticals(RCKT) - 2022 Q4 - Annual Report

FORM 10-K Filing Information This section outlines Rocket Pharmaceuticals' 2022 Form 10-K filing details, including registrant information and incorporated documents Registrant Information Details Rocket Pharmaceuticals' 2022 Form 10-K registrant information, including incorporation state and principal offices - Rocket Pharmaceuticals, Inc. is a Delaware corporation with its principal executive offices in Cranbury, NJ, and its common stock is registered on the NASDAQ Global Market under the symbol RCKT[2][3] Filer Status and Market Value Large accelerated filer with $644.3 million non-affiliate common stock market value as of June 30, 2022 - The registrant is a large accelerated filer and has filed all required reports during the preceding 12 months[4][5] Filer Status and Market Value | Metric | Value | | :----- | :---- | | Aggregate Market Value of Common Stock (non-affiliates, as of June 30, 2022) | $644.3 million | | Common Stock Outstanding (as of February 22, 2023) | 79,347,760 shares | Documents Incorporated by Reference Part III of this 10-K incorporates information from the 2023 Proxy Statement, to be filed within 120 days - Information for Part III of the 10-K is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement, to be filed within 120 days[10] Table of Contents Comprehensive listing of all chapters and items included in the Annual Report on Form 10-K Forward-Looking Statements Identifies forward-looking statements subject to risks that could cause actual results to differ materially - The report contains forward-looking statements, identifiable by words like 'anticipate,' 'expect,' 'will,' and 'may,' which are subject to risks and uncertainties[14] - Key factors that could cause actual results to differ include clinical study timing and results, regulatory approvals, competitor activities, funding availability, manufacturing capabilities, and global economic/political developments[16][17] Summary of Material Business Risks Summarizes key business risks: COVID-19 impacts, commercialization, funding, clinical trials, manufacturing, reimbursement, and IP - The business faces numerous risks, including potential adverse impacts from COVID-19 on preclinical and clinical studies[19] - Key risks include inability to establish sales/marketing, failure to obtain additional funding, lack of product sales revenue, delays in clinical trials, and challenges in demonstrating safety and efficacy[19] - Other significant risks involve production problems, limited manufacturing experience, regulatory compliance, reimbursement availability, pipeline expansion, reliance on third parties, loss of key personnel, and intellectual property protection[19] PART I Detailed overview of the company's business, risk factors, properties, and legal proceedings Item 1. Business Outlines Rocket Pharmaceuticals' business: gene therapy platforms, product pipeline, manufacturing, IP, and regulatory environment Overview Clinical-stage biotech developing gene therapies for rare diseases using LV and AAV platforms, with multiple clinical programs - Rocket Pharmaceuticals is a clinical-stage, multi-platform biotechnology company focused on first, only and best-in-class gene therapies for rare and devastating diseases[23] - The company has three clinical-stage ex vivo lentiviral vector (LV) programs for Fanconi Anemia (FA), Leukocyte Adhesion Deficiency-I (LAD-I), and Pyruvate Kinase Deficiency (PKD)[23] - Clinical-stage in vivo adeno-associated virus (AAV) programs include Danon disease, Plakophilin-2 Arrhythmogenic Cardiomyopathy (PKP2-ACM), and BAG3 Dilated Cardiomyopathy (DCM) (acquired via Renovacor)[23] Gene Therapy Overview Gene therapy treats genetic diseases by delivering functional gene copies using viral vectors (LV, AAV) for potential cures - Gene therapy addresses disease-causing effects of absent or dysfunctional genes by delivering functional copies directly into patient cells, aiming for a cure[26] - Rocket Pharmaceuticals utilizes modified non-pathogenic viruses, called viral vectors (LV and AAV), to deliver therapeutic genes either ex vivo (outside the body) or in vivo (inside the body)[27][28] - Recent FDA approvals for gene therapies indicate a promising regulatory pathway for these products[30] Essential Terminology Defines key terminology for LV and AAV gene therapies, including CD34+ cells and Vector Copy Number, with optimal ranges Gene Therapy Terminology and Optimal Ranges | Term | Definition | Optimal Ranges | | :--- | :--- | :--- | | CD34+ cell(s) (LV Therapy) | Hematopoietic Stem Cell (clinically useful measure) | > 1 million CD34+ cells/kg | | Vector copy number (VCN) [product] (LV Therapy) | Average gene copies per infused stem cell | 0.5 to 2 (target in some studies, 5.0 generally maximum) | | Vector copy number (VCN) [in vivo, post-treatment] (LV Therapy) | Average gene copies per peripheral blood or bone marrow cell | Many disorders correctable with VCNs << 1.0 | | Vector copy number (VCN) [in vivo, post-treatment] (AAV Therapy) | Average gene copies per cell in the organ of interest | Vivo VCNs << 1.0 | Pipeline Overview Pipeline features LV and AAV gene therapy programs for cardiovascular and hematological rare diseases, advancing towards regulatory filings Cardiovascular Programs Develops AAV gene therapies for severe cardiac conditions: Danon Disease, PKP2-ACM, and BAG3 DCM, with ongoing clinical and preclinical progress Danon Disease (RP-A501) RP-A501, an in vivo AAV therapy for Danon Disease, showed promising Phase 1 safety/efficacy, RMAT designation, pivotal study Q2 2023 - RP-A501 is an in vivo AAV therapy for Danon Disease, a multi-organ lysosomal-associated disorder with an estimated prevalence of 15,000-30,000 patients in the U.S. and EU[33][34] - Phase 1 trial (n=7) showed RP-A501 was generally well-tolerated at the low dose (6.7e13 gc/kg), with no drug product-related SAEs in the low-dose adult/older adolescent cohort[36][39] - Efficacy assessments demonstrated sustained cardiac LAMP2B expression, reduced autophagic vacuoles, stabilized/decreased cardiac wall thickness, improved/stabilized ejection fraction, and improvements in BNP, NYHA class, and KCCQ scores in compliant patients[40][42][43][49] - The FDA granted RMAT designation for RP-A501, and a single-arm open-label pivotal study with a natural history comparator is anticipated to initiate in Q2 2023[44][50] Phase 1 RP-A501 Study: Improvement or Stabilization Across Key Biomarker, Echo Findings and Functional Measures (Most Recent Visit) | Cohort | Patient ID | Most recent visit (months) | Δ hsTnI | Δ BNP | Δ LV mass | Δ LV max wall thickness | Δ NYHA class | Δ KCCQ score | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Low dose pediatric | 1008 | 12 | ↓ 86% | ↓ 83% | ↓ 29% | ↓ 15% | II -> I | +32.3 | | Low dose pediatric | 1009 | 6 | ↓ 90% | ↓ 62% | ↓ 21% | ↑ 3% | II -> I | +26 | | Low dose adult/ adolescent | 1001 | 36 | ↓ 98% | ↓ 8% | ↓ 32% | ↓ 9% | II -> II | +5.3 | | Low dose adult/ adolescent | 1002 | 36 | ↓ 96% | ↓ 94% | ↓ 48% | ↓ 40% | II -> I | +17.8 | | Low dose adult/ adolescent | 1005 | 30 | ↓ 46% | ↑ 6% | ↓ 14% | ↓ 27% | II -> I | +8.3 | | High dose adult/ adolescent | 1006 | 24 | ↓ 63% | ↓ 69% | ↓ 27% | ↓ 15% | II -> I | +3.1 | Plakophilin-2 Arrhythmogenic Cardiomyopathy (PKP2-ACM) (RP-A601) RP-A601, an AAVrh.74 gene therapy for PKP2-ACM, showed preclinical efficacy; IND filing anticipated Q2 2023 - PKP2-ACM is an inheritable cardiac disorder characterized by arrhythmias and sudden death, with an estimated prevalence of 50,000 patients in the US and EU[51][52] - RP-A601, an AAVrh.74 vector expressing PKP2a, aims to address the root cause of PKP2 deficiency[53] - Preclinical studies showed RP-A601 extended survival, reduced cardiac dilation, preserved LV function, and mitigated arrhythmic phenotype in animal models[54] - An Investigational New Drug (IND) application for RP-A601 is anticipated to be filed in Q2 2023[55] BAG3 Dilated Cardiomyopathy (AAV9-BAG3) Acquired Renovacor's AAV9-BAG3 gene therapy for BAG3 DCM, showing preclinical proof-of-concept; IND submission planned H1 2024 - BAG3 Dilated Cardiomyopathy (DCM) is a highly penetrant genetic variant causing early-onset, rapidly progressing heart failure, estimated to affect up to 30,000 individuals in the United States[56] - Rocket acquired Renovacor's AAV9-based gene therapy program, designed to augment BAG3 protein levels in cardiomyocytes[59] - Initial proof-of-concept for AAV9-BAG3 was demonstrated in BAG3-knockout mouse models, showing improved ejection fraction[59] - An IND submission for BAG3-DCM is planned for the first half of 2024[60] Hematology Programs Develops ex vivo LV gene therapies for Fanconi Anemia, LAD-I, and PKD, with positive clinical data and anticipated BLA/pivotal trials in 2023 Fanconi Anemia Complementation Group A (FANCA) (RP-L102) RP-L102, an ex vivo LV gene therapy for Fanconi Anemia, showed Phase 2 phenotypic correction; BLA filing anticipated Q4 2023 - FA is a rare, life-threatening DNA-repair disorder, with 60-70% of cases from FANCA gene mutations, leading to bone marrow failure and malignancies. Prevalence is ~4,000 patients in U.S. and EU[61][63] - RP-L102 is an ex vivo LV-based program in Phase 2 registrational-enabling clinical trials, administered without cytotoxic conditioning[64][69] - Phase 2 data showed phenotypic correction in at least six of ten evaluable patients, with increased resistance to mitomycin-C (primary endpoint achieved) and concomitant genetic correction and hematologic stabilization[67][69] - The safety profile of RP-L102 has been highly favorable, with no signs of bone marrow dysplasia, clonal dominance, or insertional mutagenesis[69] - Rocket has initiated FDA dialogue for BLA filing plans for RP-L102, anticipated in Q4 2023[70] Leukocyte Adhesion Deficiency-I (LAD-I) (RP-L201) RP-L201, an ex vivo LV gene therapy for severe LAD-I, showed sustained CD18 restoration and 100% survival; BLA filing anticipated Q2 2023 - LAD-I is a rare autosomal recessive disorder causing severe, recurrent, life-threatening infections and substantial infant mortality (60-75% by age two without HSCT)[71] - RP-L201 is an ex vivo LV-based program in a Phase 1/2 registration-enabling clinical trial, with nine severe LAD-I patients treated[72][73] - All nine patients demonstrated sustained CD18 restoration (20%-87% expression) and 100% overall survival at 12 months post-infusion[75] - Patients showed statistically significant reductions in all-cause hospitalizations and severe infections, with resolution of LAD-I-related skin rash and restoration of wound repair capabilities[75][76] - Rocket has initiated FDA discussions for BLA filing plans for RP-L201, anticipated in Q2 2023[77] Pyruvate Kinase Deficiency (PKD) (RP-L301) RP-L301, an ex vivo LV gene therapy for PKD, showed robust efficacy in Phase 1; Phase 2 pivotal trial anticipated Q4 2023 - PKD is a rare autosomal recessive disorder causing chronic non-spherocytic hemolytic anemia, with an estimated 2,500 diagnosed cases in the U.S. and EU[78] - RP-L301 is an ex vivo LV-based program in a global Phase 1 open-label, single-arm clinical trial, with adult and pediatric cohorts[79][80] - Phase 1 data from two adult patients showed normalized hemoglobin levels (from 7.0-7.5 g/dL to 13.3-14.8 g/dL), improved hemolysis, transfusion independence, and improved quality of life at 24 months post-infusion[81][83] - The safety profile of RP-L301 appears highly favorable, with no RP-L301-related serious adverse events and no evidence of insertional mutagenesis[83] - Enrollment in the Phase 1 study is complete, and initiation of the Phase 2 pivotal trial is anticipated in Q4 2023[84] cGMP Manufacturing Operates a 103,720 sq ft cGMP manufacturing facility in Cranbury, NJ, for AAV drug product, with FDA agreement on CMC - Rocket Pharmaceuticals operates a 103,720 square foot cGMP manufacturing facility in Cranbury, New Jersey, for AAV drug product[85] - The facility is scaled to manufacture AAV drug product for a planned Phase 2 pivotal study in Danon disease[85] - The company has an agreement with the FDA on chemistry, manufacturing, and controls requirements and potency assay plans for its in-house AAV cGMP manufacturing[85] Strategy Aims to be a fully-integrated biotech, developing and commercializing first-in-class gene therapies for rare pediatric diseases - The company aims to become a fully-integrated biotechnology company, developing and commercializing potentially curative first-in-class gene therapies for rare pediatric diseases[86] - Near-term objectives include advancing product candidates, developing proprietary in-house analytics and manufacturing, and commencing registration trials[86] - Medium- to long-term goals involve submitting BLAs for clinical programs, establishing its gene therapy platform, and expanding the pipeline to additional indications[86] - The company believes its competitive advantage lies in its disease-based selection approach, providing a potential first-mover advantage[87] Intellectual Property Protects technology via patents, trade secrets, and in-licensing, with expirations from 2037-2041, leveraging regulatory protections - Rocket Pharmaceuticals protects its technology through patents, trade secrets, know-how, and in-licensing, focusing on gene expression vectors and methods for gene therapy[88][90] - The company's patent portfolio includes both owned and in-licensed patent families for its product candidates[90] - Expected patent expiration dates for current programs range from 2037 to 2041, absent extensions[91][92][93][94] - The company also relies on regulatory protection through orphan drug designations, data exclusivity, market exclusivity, and patent term extensions[88][96] Material Contracts Holds key license agreements with CIEMAT, UCSD, and REGENXBIO for product candidates, involving upfront fees, milestones, and royalties - Rocket has exclusive worldwide license agreements with CIEMAT for lentiviral vectors for PKD, FA-A gene therapy, and LAD-I, involving upfront fees, milestone payments, and low to mid-single digit percentage royalties on net sales[98][99][101][102][104][107] - A license agreement with UCSD grants exclusive worldwide rights for Danon disease treatment, requiring an upfront payment, clinical/commercial milestone payments (up to $1.5 million), and low single-digit percentage royalties[109] - An exclusive license with REGENXBIO Inc. for NAV AAV-9 vector for Danon disease involved a $7.0 million upfront payment, high-single digit to low-teens royalties on net sales, and up to $13.0 million in clinical/regulatory milestone payments per Licensed Product[111][112] - The company also has an at-the-market offering program with Cowen, through which it sold 3.3 million shares for net proceeds of $46.6 million in 2022[113] Competition Operates in a highly competitive biotech industry, differentiating with single-treatment curative therapies for high-mortality/morbidity - The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies and intense competition from larger companies, new entrants, and research institutions[114] - Key competitive factors for product candidates include efficacy, safety, convenience, price, pharmaco-economic value, tolerability, and reimbursement[114] - Rocket aims to differentiate with single-treatment curative therapies for clinical indications addressing mortality or high morbidity[114] Manufacturing Gene therapy manufacturing involves in-house cGMP for AAV and third parties for LV, planning a hybrid approach for commercial production - Rocket's gene therapy platform involves LV and AAV vector production and target cell transduction[117] - GMP manufacturing for AAV drug product commenced at the Cranbury, NJ facility in 2022, supplemented by third-party manufacturers[117] - LV programs currently rely on third-party manufacturers for all components (plasmids, vectors, cell banks, final drug product)[117] - The company plans to use a combination of direct manufacturing and contract manufacturing organizations for future commercial production[117] Government Regulation Gene therapy development is subject to extensive FDA and foreign regulatory oversight, including preclinical, clinical, and BLA requirements - FDA regulates drugs under FDCA and biologics (including gene therapies) under the Public Health Service Act, with CBER overseeing gene therapy products[119][120][121] - The approval process involves preclinical studies (GLP), IND submission, multi-phase clinical trials (GCP), BLA submission, manufacturing facility inspections (cGMP, cGTP), and FDA approval[122][123][124][128][135] - Gene therapy products are subject to specific guidance, including recommendations for long-term follow-up studies (15 years for lentiviral, 5 years for AAV)[239] - Expedited programs like Fast Track, RMAT, Priority Review, and Accelerated Approval are available for serious or life-threatening conditions with unmet medical needs, potentially shortening review times but not altering approval standards[147][148][149][150][151] - Post-marketing requirements include ongoing monitoring, adverse event reporting, compliance with cGMP, and potential REMS, with non-compliance leading to significant sanctions[152][154][155] Coverage and Reimbursement Commercial success depends on adequate reimbursement from third-party payors, with foreign pricing often subject to government controls - Sales of approved products depend on reimbursement from third-party payors (government, managed care, private insurers)[156] - Payors determine coverage based on medical necessity, cost-effectiveness, and may limit products to formularies, potentially excluding FDA-approved drugs[157][158] - Adequate reimbursement is essential for market acceptance and profitability, and the process is time-consuming and varies by payor[157] - Foreign countries, particularly in the EU, often have government price controls, leading to significantly lower prices than in the U.S[160] Anti-Kickback and False Claims Laws and Other Regulatory Matters Business activities are subject to federal and state healthcare fraud, abuse, and data privacy laws, with non-compliance risking severe penalties - Business activities are subject to federal and state anti-kickback, fraud and abuse, and data privacy laws (e.g., Federal Anti-Kickback Statute, False Claims Act, HIPAA)[161][163][164][165][167] - Violations can result in criminal sanctions, civil penalties, exclusion from federal healthcare programs, contractual damages, and reputational harm[163][164][169] - The intent standard for the Federal Anti-Kickback Statute was amended by the ACA to a stricter standard, no longer requiring actual knowledge or specific intent to violate[163] - Evolving data privacy laws (e.g., GDPR, UK GDPR, CCPA, VCDPA, CPA, CTDPA, UCPA) impose complex compliance burdens and potential liabilities[167][280][281][283][284] Healthcare Legislative Reform U.S. healthcare reforms like ACA and IRA aim to control costs and drug pricing, potentially reducing revenues and impacting profitability - The ACA subjected biologic products to biosimilar competition, increased Medicaid rebates, and created Medicare Part D coverage gap discounts[172] - The Inflation Reduction Act (IRA) allows government negotiation of prices for select high-cost Medicare Part D and B drugs, and requires manufacturers to pay rebates if prices increase faster than inflation[175] - These reforms are expected to result in more rigorous coverage criteria and downward pressure on drug prices, potentially harming future revenues and profitability[177][178] - State-level legislation also increasingly targets pharmaceutical pricing, including price controls, discounts, and transparency measures[176] European Union Drug Review and Approval EU drug approval involves national/centralized procedures for ATMPs, offering data/market exclusivity, and accelerated assessment via PRIME - EU clinical trial approval requires national competent authority and ethics committee approval, now streamlined by the Clinical Trials Regulation (EU) No 536/2014[179][180] - Marketing authorization can be centralized (mandatory for ATMPs like gene therapies, evaluated by CAT and CHMP) or national (Decentralized/Mutual Recognition Procedures)[181][182][183] - Innovative products receive 8 years data exclusivity and 2 years market exclusivity (extendable to 11 years). Orphan medicinal products get 10 years market exclusivity, which can be reduced to 6 years or revoked under certain conditions[186][187][188] - PRIME designation facilitates accelerated assessment and early regulatory dialogue for products addressing unmet medical needs[189] Brexit and the Regulatory Framework in the United Kingdom Brexit created separate UK and EU regulatory regimes, increasing complexity and potential divergence, disrupting clinical trials and business - Brexit resulted in separate UK and EU regulatory regimes for pharmaceuticals, potentially increasing regulatory complexity[190] - Great Britain's regulatory regime currently aligns with EU regulations but may diverge in the future, impacting clinical trials and approvals[190] - The cumulative effects of regulatory disruption could add to development lead times and create legal uncertainty[277] Human Capital As of December 31, 2022, Rocket Pharmaceuticals had 240 global full-time employees, focusing on talent attraction, retention, and inclusive culture Human Capital Statistics (as of December 31, 2022) | Metric | Value | | :----- | :---- | | Full-time Employees | 240 | | Employees in United States | 230 | | Employees in Spain | 5 | | Employees in Switzerland | 2 | | Employees in UK, Sweden, Portugal | 1 each | | Labor Union Representation | None | - Objectives include identifying, attracting, recruiting, retaining, incentivizing, developing, and integrating employees, advisors, and consultants[192] - The company is investing in a diverse, equitable, and inclusive culture, with all employees upholding Rocket Behaviors and Code of Conduct[193] Corporate Information Rocket Pharmaceuticals, Inc., incorporated in Delaware in 1999 and listed on NASDAQ, uses its website for SEC filings - Rocket Pharmaceuticals, Inc. was incorporated in Delaware in 1999 as Inotek Pharmaceuticals Corporation and changed its name in January 2018 after a merger[194] - The company's common stock is listed on the NASDAQ Global Market under the symbol 'RCKT'[194] - The company uses its website (www.rocketpharma.com) for disclosing material non-public information and SEC filings[194] Item 1A. Risk Factors Details significant risks impacting Rocket Pharmaceuticals' business: pandemics, financial stability, clinical development, regulatory compliance, and market Risks Related to COVID-19 Pandemic COVID-19 pandemic may adversely impact business, causing disruptions in preclinical/clinical studies, manufacturing, and regulatory timelines - COVID-19 and similar pandemics can adversely impact preclinical and clinical studies, causing disruptions[197][199] - Potential disruptions include delays in patient enrollment, clinical site initiation, diversion of healthcare resources, interruption of trial activities, manufacturing delays, and impacts on FDA/regulatory agency operations[199] Risks Related to Our Financial Condition and Capital Needs History of operating losses and requires substantial additional funding; future profitability uncertain, with potential adverse tax law impacts - The company has incurred net losses since inception ($221.9 million in 2022, $169.1 million in 2021, $139.7 million in 2020) and has an accumulated deficit of $713.8 million as of December 31, 2022[202] - No revenue has been generated from product sales, and profitability is not anticipated in the foreseeable future[201][216] - Substantial additional funding will be required to expand gene therapy platforms, advance product candidates, and potentially commercialize them[214] - Failure to obtain necessary capital could force delays, reductions, or elimination of product development or commercialization efforts[213][214] - Changes in tax law and limitations on the ability to use net operating losses (NOLs) and research and development credits could adversely affect the business[210][211][212] Risks Related to Clinical Development and Product Regulatory Matters Clinical trials are expensive and uncertain, with risks of delays, failures, unforeseen side effects, and unpredictable regulatory approval - Clinical trials are expensive, time-consuming, and uncertain, with risks of delays or failures in demonstrating safety and efficacy[222][223] - Novel gene therapy technology makes predicting development time and cost, and obtaining regulatory approval, difficult and potentially longer/more expensive[237][238] - Product candidates may cause undesirable or unforeseen side effects, potentially delaying or preventing clinical advancement or regulatory approval[231][233][234] - Orphan drug designation, Fast Track, RMAT, or PRIME designations do not guarantee faster development, review, or approval, nor do they increase the likelihood of marketing approval[244][249][250][251][252] - Even if approved, products remain subject to ongoing regulatory obligations, scrutiny, and potential restrictions, including long-term follow-up studies[262] - Biosimilar competition and healthcare legislative reforms (e.g., ACA, IRA) could limit market potential and reduce reimbursement for approved products[269][272][273] Risks Related to Noncompliance with Applicable Laws or Regulations Business activities are subject to federal/state healthcare fraud, abuse, and data privacy laws, with non-compliance risking severe penalties - Relationships with customers and third-party payors are subject to anti-kickback, fraud and abuse, and other healthcare laws, with non-compliance risking criminal sanctions, civil penalties, and exclusion from government programs[279] - Failure to comply with U.S. and foreign privacy and data protection laws (e.g., GDPR, UK GDPR, CCPA) can lead to significant liabilities, fines (up to 20 million euros or 4% of global revenue for GDPR), and adverse impacts on business[280][281][283] - The global legislative and regulatory landscape for privacy and data protection is evolving, creating uncertainty and increasing compliance costs[288] - The company is also subject to environmental, health, and safety laws, with potential for liability and substantial expenses for non-compliance or remediation[292][293] Risks Related to Manufacturing, Commercialization and Development of Our Product Candidates Manufacturing gene therapies is complex, risking production problems and supply limitations; commercialization success depends on market acceptance and reimbursement - Gene therapy products are complex to manufacture, risking production problems, delays, or supply limitations due to equipment malfunctions, contamination, or raw material shortages[294][295] - The company has limited manufacturing experience and relies on third parties for LV programs, with risks of non-compliance with cGMPs or termination of agreements[295][297][298][299] - Commercial success depends on market acceptance by physicians, patients, and payors, influenced by efficacy, safety, cost, and reimbursement availability[300][302][310] - The success of R&D activities is uncertain, with potential for cost overruns, regulatory delays, unexpected side effects, or insufficient efficacy[315] - Failure to expand the pipeline of additional product candidates or secure strategic collaborations could significantly harm financial position and results of operations[312][314][327][328] Risks Related to Third Parties Heavily relies on third parties for preclinical, clinical, and manufacturing, risking non-performance, delays, or regulatory disruptions - Reliance on third parties (CROs, medical institutions, contract laboratories) for preclinical and clinical programs carries risks of non-compliance, delays, or termination of studies[317][318][319][320][321] - Third-party manufacturers for gene therapy production (especially LV product candidates) introduce risks like inability to negotiate agreements, reduced control, and supply disruptions[325] - Disruptions at the FDA and other government agencies (e.g., due to funding shortages, pandemics) could hinder their ability to review and approve products, causing delays[329][330] Risks Related to Our Intellectual Property Success depends on robust patent protection and trade secrets, with reliance on third-party licenses, risking invalidation or infringement - Reliance on third-party licenses for patent rights and proprietary technology is critical, with risks of non-exclusive rights, unavailability of future licenses, or loss of rights if licensors fail to maintain patents[332][333][334] - Failure to obtain and maintain broad patent protection, or if patents are found invalid/unenforceable, could allow competitors to commercialize similar products[336][340][342][355] - Breach of license agreements could result in loss of license rights essential for commercialization efforts[344] - Inability to protect trade secrets or obtain necessary rights to gene therapy components through acquisitions/in-licenses could harm competitive position and business growth[348][350] - Changes in U.S. or foreign patent law, challenges to inventorship/ownership, or third-party claims of infringement could prevent or delay development and commercialization[356][364][365] Risks Related to Personnel and Expansion of our Company Depends on senior management and qualified personnel, facing risks from misconduct, expansion, acquisition integration, and international operations - The company is highly dependent on senior management and its ability to attract and retain qualified scientific and technical personnel[369] - Risks include employee/partner misconduct (e.g., non-compliance with regulations, fraud, insider trading) and claims of wrongful use/disclosure of third-party confidential information[370][371] - Organizational expansion may lead to management difficulties, operational setbacks, loss of business opportunities, and increased capital expenditures[373] - Potential acquisitions (e.g., Renovacor) carry integration risks, such as loss of key employees, business disruption, and failure to realize anticipated benefits[374] - Strategic alliances or joint ventures could disrupt business, lead to conflicts with collaborators, or divert management time and focus[376][378][383] - International operations expose the company to risks like different regulatory requirements, reduced IP protection, economic/political instability, and foreign currency fluctuations[381][382] Risks Related to Ownership of our Common Stock Common stock price is volatile; future sales may cause dilution; capital appreciation is sole gain source as no cash dividends are anticipated - The market price of common stock is volatile and can fluctuate due to clinical trial results, competition, regulatory developments, and macroeconomic conditions[390] - Future sales of common stock, including by RTW Investments, LP (25.2% beneficial ownership), or through equity/convertible debt issuances, could cause significant dilution and stock price decline[385][393] - The company does not anticipate paying cash dividends, so capital appreciation is the sole source of gain for stockholders[394][395] - Provisions in corporate charter documents and Delaware law could make an acquisition of the company more difficult[399] Other Risks Related to Our Business Faces risks from internal control over financial reporting, computer system failures, social media challenges, and unfavorable economic/political developments - Failure to maintain proper and effective internal control over financial reporting could impair financial statement accuracy, harm operating results, and negatively impact investor confidence[396][398] - Internal computer systems or those of third-party collaborators are vulnerable to failures or security breaches, risking disruption of development programs and loss of proprietary information[401][402] - The increasing use of social media platforms presents risks related to regulatory compliance (e.g., adverse event reporting) and managing negative or inaccurate public information[403] - Unfavorable national or global economic conditions or political developments (e.g., inflation, global conflicts) could adversely affect business, financial condition, or results of operations[404] Item 1B. Unresolved SEC Comments No unresolved comments from the SEC as of the filing date of this report - No unresolved SEC comments[405] Item 2. Properties Primary facilities include Cranbury, NJ headquarters/manufacturing, a New York office, and assumed Renovacor leases - Corporate headquarters, R&D, and cGMP manufacturing facility in Cranbury, NJ: 103,720 sq ft, lease until 2034[406] - Office space in New York, NY: 6,600 sq ft, lease until July 2024[406] - Additional storage facility in Dayton, NJ: 4,666 sq ft[406] - Assumed leases from Renovacor acquisition for facilities in Hopewell, NJ (15,463 sq ft, lease until March 2033) and Cambridge, MA (5,945 sq ft, sublease until April 2024), with intent to sublease[408][409] Item 3. Legal Proceedings Not party to any legal proceedings expected to have a material adverse effect, though litigation can incur significant costs - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business[410] - Litigation can incur substantial defense and settlement costs and divert management resources[410] Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[411] PART II Covers market information for common equity, management's discussion and analysis, and controls and procedures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Provides information on Rocket Pharmaceuticals' common stock market, including trading symbol, stockholder count, and dividend policy - Common stock is traded on the NASDAQ Global Market under the symbol 'RCKT'[412] Common Stock Information | Metric | Value | | :----- | :---- | | Last Reported Sale Price (Feb 22, 2023) | $19.20 per share | | Stockholders of Record (Feb 22, 2023) | 45 | - The company has never declared or paid cash dividends and intends to retain all future earnings for business growth, making capital appreciation the sole source of gain for stockholders[417] - No repurchases of common stock were made during the year ended December 31, 2022[419] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition and results of operations, covering business overview, financial developments, and liquidity Introduction Clinical-stage biotech focused on developing gene therapies for rare diseases using LV and AAV platforms, with a pipeline of clinical programs - Rocket Pharmaceuticals is a clinical-stage, multi-platform biotechnology company developing gene therapies for rare and devastating diseases[423] - The pipeline includes LV programs for FA, LAD-I, PKD, and AAV programs for Danon disease, PKP2-ACM, and BAG3 DCM[423] - The RP-L401 program was discontinued in December 2021 to focus resources on other advanced candidates[425] Recent Developments In 2022, Rocket Pharmaceuticals engaged in significant financial activities: an at-the-market offering, Renovacor acquisition, and public offering - Through December 31, 2022, the company sold 3.3 million shares via an at-the-market offering program, generating $46.6 million in net proceeds[426] - Acquired Renovacor, Inc. on December 1, 2022, issuing 3,391,976 shares of common stock as part of the $72.3 million total consideration[427][672][673] - Completed a public offering on October 6, 2022, selling 7,820,000 shares for $108.1 million in net proceeds[428] Financial Overview No product sales revenue generated or anticipated; operations funded primarily through equity and convertible debt - No revenue from product sales has been generated to date, and none is expected in the near future[430] - From inception through December 31, 2022, the company raised approximately $835.6 million in net cash proceeds from equity and convertible debt financing[429] - R&D expenses primarily consist of external costs for preclinical, clinical, and manufacturing activities, as well as internal personnel and facility costs[431][434] - R&D expenses are expected to increase as programs advance and additional clinical trials are conducted[439][440] - General and administrative expenses are expected to increase due to anticipated headcount growth and public company operating costs[442] Results of Operations Increased net losses in 2022, driven by higher R&D and G&A expenses, with improved other income due to decreased interest expense Consolidated Statements of Operations Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Research and development expenses | $165,570 | $125,476 | $105,438 | | General and administrative expenses | $58,773 | $41,772 | $28,865 | | Total operating expenses | $224,343 | $167,248 | $134,303 | | Net loss | $(221,863) | $(169,069) | $(139,700) | - R&D expenses increased by $40.1 million in 2022 (to $165.6 million) primarily due to higher manufacturing and development costs ($26.3 million), laboratory supplies ($6.6 million), and compensation/benefits ($11.5 million), partially offset by decreased license fees[447] - G&A expenses increased by $17.0 million in 2022 (to $58.8 million) mainly due to commercial preparation expenses ($4.9 million), increased headcount compensation ($4.4 million), and acquisition-related expenses ($3.2 million)[448] - Other income (expense), net, increased by $4.3 million in 2022 (to $2.5 million) due to decreased interest expense from convertible notes and increased interest income[449] Liquidity and Capital Resources History of net losses and negative cash flows; $399.7 million in cash and investments expected to fund operations through 2024 - The company has incurred net losses and negative cash flows from operations since inception, with an accumulated deficit of $713.8 million as of December 31, 2022[455][457] Cash, Cash Equivalents and Investments (as of December 31) | Year | Amount (in millions) | | :--- | :------------------- | | 2022 | $399.7 | | 2021 | $388.7 | | 2020 | $302.0 | - Current resources are expected to fund operating expenses and capital expenditure requirements through 2024[457] - Future viability depends on generating cash from operations or raising additional capital, with risks of stockholder dilution or restrictive debt covenants[459] Net Cash Flows (in thousands) | Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Operating activities | $(178,142) | $(121,163) | $(74,640) | | Investing activities | $(69,326) | $18,853 | $(96,591) | | Financing activities | $155,288 | $37,681 | $282,989 | | Net change in cash, cash equivalents and restricted cash | $(92,180) | $(64,629) | $111,758 | Critical Accounting Policies and Estimates Financial statements rely on significant estimates for R&D expenses, stock-based compensation, goodwill, and intangible assets - Critical accounting policies include Accrued Research and Development Expenses, Stock-Based Compensation, Goodwill, and Intangible Assets[474] - Goodwill is tested for impairment annually or more frequently if circumstances indicate impairment, using a qualitative assessment[475] - Intangible assets (IPR&D) are indefinite-lived until development completion/abandonment and are tested for impairment annually[478] - Accrued R&D expenses are estimated based on contractual payment schedules, invoices, and assessment of services performed by third parties (CROs, CMOs, investigative sites)[479] - Stock-based compensation is recognized based on fair value using the Black-Scholes option pricing model, expensed over the service period[480] Recent Accounting Pronouncements No recent accounting pronouncements significantly impacted or are expected to affect consolidated financial statements - No recent accounting pronouncements had a significant effect on the consolidated financial statements[482] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Quantitative and Qualitative Disclosures About Market Risk are not applicable - Quantitative and Qualitative Disclosures About Market Risk are not applicable[483] Item 8. Financial Statements and Supplementary Data Financial statements required by this item are included in Item 15 of this Annual Report - Financial statements are included in Item 15 of the Annual Report[483] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[484] Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022[485] - Management maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO 2013 framework[487] - The effectiveness of internal control over financial reporting was audited by EisnerAmper LLP, who expressed an unqualified opinion[488] - Internal controls have inherent limitations and may not prevent or detect all misstatements[489] - No material changes in internal control over financial reporting occurred during the period[490] Item 9B. Other Information No other information is reported under this item - No other information is reported under this item[491] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Disclosure Regarding Foreign Jurisdictions that Prevent Inspections is not applicable - Disclosure Regarding Foreign Jurisdictions that Prevent Inspections is not applicable[492] PART III Incorporates information on directors, executive compensation, security ownership, related transactions, and accountant fees by reference Item 10. Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[494] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the company's 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[495] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[496] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement[497] Item 14. Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2023 Proxy Statement; EisnerAmper LLP is the independent firm - EisnerAmper LLP is the independent public accounting firm[498] - Information for this item is incorporated by reference from the 2023 Proxy Statement[498] PART IV Details exhibits, financial statements, schedules, and the Form 10-K summary Item 15. Exhibits, Financial Statements and Schedules Lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, including consolidated financial statements - The section includes consolidated financial statements: Balance Sheets, Statements of Operations, Comprehensive Loss, Changes in Stockholders' Equity, and Cash Flows, along with their notes[500] - All financial statement schedules have been omitted as not applicable or information is included in financial statements/notes[499] - A comprehensive list of exhibits, including merger agreements, corporate governance documents, stock plans, license agreements, and certifications, is provided[501][502][503] Item 16. Form 10-K Summary Form 10-K Summary is not applicable to the company - Form 10-K Summary is not applicable[506] Signatures Contains the required signatures for the Annual Report on Form 10-K Index to Consolidated Financial Statements Provides an index to the consolidated financial statements included in the Annual Report Report of Independent Registered Public Accounting Firm Presents the independent auditor's report on the company's financial statements and critical audit matters Opinion on the Financial Statements EisnerAmper LLP issued an unqualified opinion on Rocket Pharmaceuticals' consolidated financial statements for 2020-2022 - EisnerAmper LLP issued an unqualified opinion on the consolidated financial statements for 2020, 2021, and 2022[517] - The financial statements present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[517] Critical Audit Matters Accruals for R&D expenses were a critical audit matter due to complex cost estimation for third-party contracts where invoicing may not align - Accruals for research and development expenses were identified as a critical audit matter[522] - The complexity arises from estimating progress and costs incurred under third-party contracts (CROs, CMOs, investigative sites) where invoicing may not match service timing[523] - Audit procedures included inspecting contracts, invoices, payments, confirming amounts, and comparing company estimates to actual progress and data[524] Report of Independent Registered Public Accounting Firm (Internal Control) Presents the independent auditor's opinion on the effectiveness of the company's internal control over financial reporting Opinion on Internal Control over Financial Reporting EisnerAmper LLP issued an unqualified opinion on Rocket Pharmaceuticals' internal control over financial reporting as of December 31, 2022 - EisnerAmper LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2022[528] - The assessment was based on criteria established in the Internal Control – Integrated Framework (2013) issued by COSO[528] - Internal control over financial reporting has inherent limitations and may not prevent or detect all misstatements[532][533] Consolidated Balance Sheets Presents Rocket Pharmaceuticals' financial position as of December 31, 2022, and 2021, detailing total assets, liabilities, and equity Consolidated Balance Sheet Summary (in thousands) | Metric | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $140,517 | $232,694 | | Investments | $259,153 | $156,046 | | Total current assets | $364,060 | $392,059 | | Property and equipment, net | $29,009 | $22,299 | | Goodwill | $39,154 | $30,815 | | Intangible assets | $25,724 | $- | | Total assets | $551,807 | $497,020 | | Accounts payable and accrued expenses | $36,660 | $19,615 | | Total current liabilities | $39,169 | $22,167 | | Total liabilities | $62,121 | $42,296 | | Total stockholders' equity | $489,686 | $454,724 | - Total assets increased from $497.0 million in 2021 to $551.8 million in 2022, driven by increases in investments, property and equipment, goodwill, and intangible assets[536] - Total liabilities increased from $42.3 million in 2021 to $62.1 million in 2022, primarily due to higher accounts payable and accrued expenses[536] - Total stockholders' equity increased from $454.7 million in 2021 to $489.7 million in 2022[536] Consolidated Statements of Operations Shows Rocket Pharmaceuticals' financial performance for 2020-2022, reporting net losses with no revenue, primarily driven by operating expenses Consolidated Statements of Operations Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $- | $- | $- | | Research and development | $165,570 | $125,476 | $105,438 | | General and administrative | $58,773 | $41,772 | $28,865 | | Total operating expenses | $224,343 | $167,248 | $134,303 | | Loss from operations | $(224,343) | $(167,248) | $(134,303) | | Net loss | $(221,863) | $(169,069) | $(139,700) | | Net loss per share (basic and diluted) | $(3.26) | $(2.67) | $(2.52) | - The company generated no revenue in 2022, 2021, or 2020[538] - Net loss increased from $139.7 million in 2020 to $221.9 million in 2022[538] - R&D expenses increased by $40.1 million (32%) from 2021 to 2022, and G&A expenses increased by $17.0 million (41%) in the same period[447][448] Consolidated Statements of Comprehensive Loss Shows Rocket Pharmaceuticals' total comprehensive loss for 2020-2022, driven by net loss and minor unrealized losses on investments Consolidated Statements of Comprehensive Loss Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net loss | $(221,863) | $(169,069) | $(139,700) | | Net unrealized loss on investments | $(196) | $(119) | $(62) | | Total comprehensive loss | $(222,059) | $(169,188) | $(139,762) | - Total comprehensive loss increased from $139.8 million in 2020 to $222.1 million in 2022[541] - Net unrealized losses on investments were minor, contributing $(0.2) million in 2022[541] Consolidated Statements of Changes in Stockholders' Equity Details movements in common stock, additional paid-in capital, and accumulated deficit for 2020-2022 Key Changes in Stockholders' Equity (in thousands, except share amounts) | Metric | December 31, 2022 | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | :--- | | Common Stock Shares | 79,123,312 | 64,505,889 | 60,996,367 | | Common Stock Amount | $791 | $645 | $610 | | Additional Paid-in Capital | $1,203,074 | $946,152 | $825,794 | | Accumulated Deficit | $(713,775) | $(491,912) | $(322,843) | | Total Stockholders' Equity | $489,686 | $454,724 | $503,519 | - Issuance of common stock (net of costs) from public offerings and at-the-market program contributed $108.1 million and $46.6 million, respecti