ROCKET PHARMACEUTICALS, INC. [RCKT] Filings

ROCKET PHARMACEUTICALS, INC. [RCKT] Filings

ROCKET PHARMACEUTICALS, INC. [RCKTW] Filings

10-Q 1 rckt-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024 or


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36829

Rocket Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware		04-3475813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9 Cedarbrook Drive, Cranbury, NJ		08512
(Address of principal executive office)		(Zip Code)

(609) 659-8001

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	RCKT	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2024, there were 90,975,859 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
	Summary of Abbreviated Terms	3
	Cautionary Statement Regarding Forward-Looking Statements	4
	PART I - FINANCIAL INFORMATION	6
Item 1.	Financial Statements	6
	Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	6
	Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited)	7
	Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 (unaudited)	8
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)	9
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	10
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	41
	PART II - OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

Summary of Abbreviated Terms

Rocket Pharmaceuticals, Inc. may be referred to as Rocket, the Company, we, our or us, in this Quarterly Report, unless the context otherwise indicates. Throughout this Quarterly Report, we have used terms which are defined below:


2023 Form 10-K	Annual Report on Form 10-K for the fiscal year ended December 31, 2023
AAV	Adeno-associated virus
ACM	Arrhythmogenic cardiomyopathy
ASC	Accounting Standard Codification
ASGCT	American Society of Gene & Cell Therapy
BLA	Biologics License Application
BNP	Brain natriuretic peptide
cGMP	Current Good Manufacturing Practice
CIEMAT	Centro de Investigaciones Energéticas, Medioambientales y Tecnológicas
CIRM	California Institute for Regenerative Medicine
CMC	Chemistry Manufacturing Controls
CRL	Complete Response Letter
Cowen	Cowen and Company, LLC
DCM	Dilated Cardiomyopathy
DD	Danon Disease
DNA	Deoxyrubonucleic acid
EMA	European Medicines Agency
EU	European Union
Europe	EU
ESGCT	European Society of Gene & Cell Therapy
FA	Fanconi Anemia
FASB	Financial Accounting Standards Board
FDA	U.S. Food and Drug Administration
GOSH	Great Ormond Street Hospital
HNJ	Hospital Infantil de Nino Jesus
ICD	Implantable cardiac defibrillator
IND	Investigational New Drug application
IPR&D	In process research and development
KCCQ	Kansas City Cardiovascular Questionnaire
LAD-I	Leukocyte Adhesion Deficiency-I
LV	Lentiviral vector
MAA	Marketing Authorization Application
MHRA	Medicines and Healthcare Products Regulatory Agency
NYHA	New York Heart Association
PKD	Pyruvate Kinase Deficiency
PKP2-ACM	Plakophilin-2 Arrhythmogenic Cardiomyopathy
PSU	Performance stock unit
R&D	Research and development
Renovacor	Renovacor, Inc. acquired by Rocket on December 1, 2022
RSU	Restricted stock unit
RTW	RTW Investments, L.P
SEC	Securities and Exchange Commission
Stanford	Center for Definitive and Curative Medicine at Stanford University School of Medicine
U.S.	United States
U.S. GAAP	U.S. Generally Accepted Accounting Principles
UCLA	University of California, Los Angeles

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “aim,” “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “design,” “develop,” “estimate,” “expect,” “expand,” “future,” “hope,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “project,” “pursue,” “seek,” “should,” “strategy,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

our ability to meet our anticipated milestones for our various drug candidates with respect to the initiation and timing of clinical studies;

•

federal, state, and non-U.S. regulatory requirements, including regulation of our current or any other future product candidates by the FDA;

•

the timing of and our ability to submit regulatory filings with the FDA and to obtain and maintain FDA or other regulatory authority approval of, or other action with respect to, our product candidates;

•

our competitors’ activities, including decisions as to the timing of competing product launches, pricing, and discounting;

•

whether safety and efficacy results of our clinical trials and other required tests for approval of our product candidates provide data to warrant progression of clinical trials, potential regulatory approval, or further development of any of our product candidates;

•

our ability to develop, acquire and advance product candidates into, enroll a sufficient number of patients into, and successfully complete, clinical studies, and our ability to apply for and obtain regulatory approval for such product candidates, within currently anticipated timeframes, or at all;

•

our ability to establish key collaborations and vendor relationships for our product candidates and any other future product candidates;

•

our ability to develop our sales and marketing capabilities or enter into agreements with third parties to sell and market any of our product candidates;

•

our ability to acquire additional businesses, form strategic alliances or create joint ventures and our ability to realize the benefit of such acquisitions, alliances, or joint ventures;

•

our ability to successfully develop and commercialize any technology that we may in-license or products we may acquire;

•

the development of our direct manufacturing capabilities for our AAV programs;

•

our ability to expand our pipeline to target additional indications that are compatible with our gene therapy technologies;

•

our ability to successfully operate in non-U.S. jurisdictions in which we currently or in the future do business, including compliance with applicable regulatory requirements and laws;

•

our ability to obtain and enforce patents to protect our product candidates, and our ability to successfully defend ourselves against unforeseen third-party infringement claims;

•

anticipated trends and challenges in our business and the markets in which we operate;

•

our estimates regarding our capital requirements; and

•

our ability to obtain additional financing and raise capital as necessary to fund operations or pursue business opportunities.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section incorporated by reference from our Annual Report for the year ended December 31, 2023, on Form 10-K, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance, or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events, or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Rocket Pharmaceuticals, Inc.

Consolidated Balance Sheets

($ in thousands, except shares and per share amounts)


	June 30, 2024			December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	38,607		$	55,904
Investments		240,218			317,271
Prepaid expenses and other current assets		13,900			5,047
Total current assets		292,725			378,222
Property and equipment, net		39,548			39,172
Goodwill		39,154			39,154
Intangible assets		25,150			25,150
Restricted cash		1,362			1,372
Deposits		481			533
Investments		-			34,320
Operating lease right-of-use assets, net		4,551			3,901
Finance lease right-of-use asset, net		43,440			44,517
Total assets	$	446,411		$	566,341
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	34,733		$	45,789
Operating lease liabilities, current		1,033			925
Finance lease liability, current		1,826			1,791
Total current liabilities		37,592			48,505
Operating lease liabilities, non-current		3,565			2,973
Finance lease liability, non-current		19,374			19,353
Other liabilities		1,245			2,936
Total liabilities		61,776			73,767
Commitments and contingencies (Note 13)

Stockholders' equity:
Preferred stock, $0.01 par value, authorized 5,000,000 shares:		-			-
Series A convertible preferred stock; 300,000 shares designated; 0 shares issued and outstanding		-			-
Series B convertible preferred stock; 300,000 shares designated; 0 shares issued and outstanding		-			-
Common stock, $0.01 par value, 180,000,000 shares authorized; 90,956,613 and 90,282,267 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		910			903
Additional paid-in capital		1,475,013			1,450,722
Accumulated other comprehensive income (loss)		(218	)		319
Accumulated deficit		(1,091,070	)		(959,370	)
Total stockholders' equity		384,635			492,574
Total liabilities and stockholders' equity	$	446,411		$	566,341

The accompanying notes are an integral part of these consolidated financial statements.

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Operations

($ in thousands, except shares and per share amounts)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue	$	-		$	-		$	-		$	-

Operating expenses:
Research and development		46,345			51,383			91,572			97,754
General and administrative		27,367			17,374			49,515			33,197
Total operating expenses		73,712			68,757			141,087			130,951
Loss from operations		(73,712	)		(68,757	)		(141,087	)		(130,951	)
Interest expense		(471	)		(468	)		(942	)		(936	)
Interest and other income, net		2,294			846			5,323			2,754
Accretion of discount on investments, net		2,243			2,678			5,006			5,097
Net loss	$	(69,646	)	$	(65,701	)	$	(131,700	)	$	(124,036	)
Net loss per share - basic and diluted	$	(0.74	)	$	(0.82	)	$	(1.40	)	$	(1.55	)
Weighted-average common shares outstanding - basic and diluted		93,746,243			80,472,362			93,759,894			79,965,755

The accompanying notes are an integral part of these consolidated financial statements.

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Loss

($ in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net loss	$	(69,646	)	$	(65,701	)	$	(131,700	)	$	(124,036	)
Other comprehensive loss:
Net unrealized loss on investments		(83	)		(639	)		(537	)		(367	)
Total comprehensive loss	$	(69,729	)	$	(66,340	)	$	(132,237	)	$	(124,403	)

The accompanying notes are an integral part of these consolidated financial statements.

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2024 and 2023

($ in thousands except share amounts)

(unaudited)


										Accumulated
							Additional			Other						Total
	Common Stock				Treasury		Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Stock		Capital			Income/(Loss)			Deficit			Equity
Balance at December 31, 2023		90,282,267	$	903	$	-	$	1,450,722		$	319		$	(959,370	)	$	492,574
Issuance of common stock pursuant to exercise of stock options		73,745		-		-		1,184			-			-			1,184
Issuance of common stock pursuant to vesting of restricted stock units		290,578		3		-		(3	)		-			-			-
Unrealized comprehensive loss on investments		-		-		-		-			(454	)		-			(454	)
Stock-based compensation		-		-		-		10,252			-			-			10,252
Net loss		-		-		-		-			-			(62,054	)		(62,054	)
Balance at March 31, 2024		90,646,590	$	906	$	-	$	1,462,155		$	(135	)	$	(1,021,424	)	$	441,502
Issuance of common stock pursuant to exercise of stock options		159,355		2		-		1,528			-			-			1,530
Issuance of common stock pursuant to vesting of restricted stock units		150,668		2		-		(2	)		-			-			-
Unrealized comprehensive loss on investments		-		-		-		-			(83	)		-			(83	)
Stock-based compensation		-		-		-		11,332			-			-			11,332
Net loss		-		-		-		-			-			(69,646	)		(69,646	)
Balance at June 30, 2024		90,956,613	$	910	$	-	$	1,475,013		$	(218	)	$	(1,091,070	)	$	384,635


											Accumulated
								Additional			Other						Total
	Common Stock				Treasury			Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Stock			Capital			Income/(Loss)			Deficit			Equity
Balance at December 31, 2022		79,123,312	$	791	$	(47	)	$	1,203,074		$	(357	)	$	(713,775	)	$	489,686
Issuance of common stock pursuant to exercise of stock options		88,429		1		-			1,113			-			-			1,114
Issuance of common stock pursuant to vesting of restricted stock units		126,060		1		-			(1	)		-			-			-
Issuance of common stock pursuant to exercise of warrants		126,093		1		-			6			-			-			7
Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs		948,300		10		-			17,212			-			-			17,222
Unrealized comprehensive gain on investments		-		-		-			-			267			-			267
Stock-based compensation		-		-		-			8,915			-			-			8,915
Net loss		-		-		-			-			-			(58,335	)		(58,335	)
Balance at March 31, 2023		80,412,194	$	804	$	(47	)	$	1,230,319		$	(90	)	$	(772,110	)	$	458,876
Issuance of common stock pursuant to exercise of stock options		48,088		-		-			182			-			-			182
Issuance of common stock pursuant to vesting of restricted stock units		61,133		1		-			(1	)		-			-			-
Unrealized comprehensive loss on investments		-		-		-						(632	)					(632	)
Stock-based compensation		-		-		-			10,245			-			-			10,245
Net loss		-		-		-			-			-			(65,701	)		(65,701	)
Balance at June 30, 2023		80,521,415	$	805	$	(47	)	$	1,240,745		$	(722	)	$	(837,811	)	$	402,970

The accompanying notes are an integral part of these consolidated financial statements.

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)


	Six Months Ended June 30,
	2024			2023
Operating activities:
Net loss	$	(131,700	)	$	(124,036	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		3,548			2,327
Amortization of finance lease right of use asset		1,077			1,077
Stock-based compensation		21,584			19,160
Accretion of discount on investments, net		(4,996	)		(4,831	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(729	)		2,698
Accounts payable and accrued expenses		2,122			(4,477	)
Operating lease liabilities and right of use assets, net		50			102
Finance lease liability		56			74
Other liabilities		(1,691	)		(523	)
Net cash used in operating activities		(110,679	)		(108,429	)
Investing activities:
Purchases of investments		(102,521	)		(168,930	)
Proceeds from maturities of investments		197,144			170,585
Payments made to acquire right of use asset		-			(36	)
Purchases of property and equipment		(3,965	)		(7,134	)
Net cash provided by (used in) investing activities		90,658			(5,515	)
Financing activities:
Issuance of common stock, pursuant to exercise of stock options		2,714			1,296
Issuance of common stock, pursuant to the at-the-market offering program, net of issuance costs		-			17,222
Issuance of common stock, pursuant to exercise of warrants		-			7
Net cash provided by financing activities		2,714			18,525
Net change in cash, cash equivalents and restricted cash		(17,307	)		(95,419	)
Cash, cash equivalents and restricted cash at beginning of period		57,276			141,857
Cash, cash equivalents and restricted cash at end of period	$	39,969		$	46,438

Supplemental disclosure of non-cash financing and investing activities:
Accrued purchases of property and equipment, ending balance	$	1,036		$	1,265
Investment maturity receivables and purchase payables, ending balance		8,072			-
Operating lease liabilities		1,134			-
Unrealized loss on investments	$	(537	)	$	(365	)

The accompanying notes are an integral part of these consolidated financial statements.

Rocket Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

($ in thousands, except share and per share data) (Unaudited)

Nature of Business

Rocket Pharmaceuticals, Inc. is a fully integrated, late-stage biotechnology company focused on the development of first, only and best in class gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. The Company has three clinical-stage ex vivo lentiviral vector programs, which include programs for:

•

Fanconi Anemia, a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells (RP-L102);

•

Leukocyte Adhesion Deficiency-I, a genetic disorder that causes the immune system to malfunction (RP-L201); and

•

Pyruvate Kinase Deficiency, a red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia (RP-L301).

In September 2023, the FDA accepted the BLA and granted priority review for RP-L201 for the treatment of severe LAD-I. On June 28, 2024 we announced that the FDA had issued a CRL in response to the BLA wherein the FDA requested limited additional CMC information to complete its review. We are in the process of submitting the additional requested information. Treatments in the FA Phase 2 studies were completed in 2023 with regulatory filing in the U.S. anticipated in 2024. In April 2024, the EMA accepted our MAA for RP-L102. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing.

The Company also has two clinical stage and one pre-clinical stage in vivo adeno-associated virus programs, which include programs for:

•

Danon Disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. The DD program is currently in an ongoing Phase 2 pivotal study.

•

Plakophilin-2 Arrhythmogenic Cardiomyopathy, an inheritable cardiac disorder that is characterized by a progressive loss of cardiac muscle mass, severe right ventricular dilation, dysplasia, fibrofatty replacement of the myocardium and a high propensity to arrhythmias and sudden death. This program received FDA clearance of an Investigational New Drug application and the Company has initiated a Phase 1 study.

•

BAG3 Dilated Cardiomyopathy, which is the most common form of cardiomyopathy and is characterized by progressive thinning of the walls of the heart resulting in enlarged heart chambers that are unable to pump blood. The Company utilizes recombinant AAV9-based gene therapy designed to slow or halt progression of BAG3-DCM.

The Company has global commercialization and development rights to all of these product candidates under royalty-bearing license agreements.

Risks and Liquidity

The Company has not generated any revenue and has incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities.

The Company’s product candidates are in the development and clinical stage. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations and had an accumulated deficit of $1.09 billion as of June 30, 2024. As of June 30, 2024, the Company had $278.8 million of cash, cash equivalents and investments. Excluded from the $278.8 million of cash, cash equivalent and investments are receivables from maturity of securities that have yet to be received of $8.1 million that were recorded as part of prepaid expenses and other current assets. The net balance of cash, cash equivalents and investments when adjusting for this receivable would have been $286.9 million. The Company expects such resources will be sufficient to fund the Company’s operating expenses and capital expenditure requirements into 2026.

On February 28, 2022, the Company entered into a sales agreement (the “Sales Agreement”), with Cowen, with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share, having an aggregate offering price of up to $200 million (the “Shares”) through Cowen as its sales agent. On September 12, 2023, the Company and Cowen entered into an amendment (the “Amended Sales Agreement”) pursuant to which the aggregate offering amount available under the at-the-market offering program was reduced to $180.0 million. Through June 30, 2024, the Company has sold 4.2 million shares of common stock for net proceeds of $63.8 million pursuant to the at-the-market offering program (see Note 8 “Stockholders’ Equity”). The Company did not sell any shares under the at-the-market offering program during the six months ended June 30, 2024.

In the longer term, the future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2024. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s consolidated financial position as of June 30, 2024 and the results of its operations and its cash flows for the six months ended June 30, 2024. The financial data and other information disclosed in these consolidated notes related to the three and six months ended June 30, 2024 and 2023 are unaudited. The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 and any other interim periods or any future year or period.

Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the three and six months ended are consistent with those disclosed in Note 3 to the consolidated financial statements in the 2023 Form 10-K with the most significant policies also being listed here.

Principles of Consolidation

The consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with U.S. GAAP. All intercompany accounts have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to goodwill and intangible asset impairments, the accrual of R&D expenses, and the valuation of equity transactions and stock-based awards. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consists of bank deposits, certificates of deposit and money market accounts with financial institutions. Cash equivalents are carried at cost which approximates fair value due to their short-term nature and which the Company believes do not have a material exposure to credit risk. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. The Company’s cash and cash equivalent accounts, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts.

Restricted cash consists of deposits collateralizing letters of credit issued by a bank in connection with the Company’s operating leases (see Note 12 “Leases” for additional disclosures) and a deposit collateralizing a letter of credit issued by a bank supporting the Company’s corporate credit cards. Cash, cash equivalents and restricted cash consist of the following:


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	38,607	$	55,904
Restricted cash		1,362		1,372
Total cash, cash equivalents and restricted cash	$	39,969	$	57,276

Concentrations of credit risk and off-balance sheet risk

Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and available-for-sale securities. The Company maintains its cash and cash equivalent balances with high quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. The Company’s marketable securities consist of U.S. Treasury Securities and Corporate Bonds. The Company’s investment policy limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be at least AA-/Aa3 rated, thereby reducing credit risk exposure.

Investments

Investments consist of U.S. Treasury Securities and Corporate Bonds. Management determines the appropriate classification of these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its investments as available-for-sale pursuant to FASB ASC 320, Investments-Debt and Equity Securities. Investments are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income (loss) in stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. Realized gains and losses are included in investment income on a specific-identification basis. The Company estimates expected credit losses for investments when unrealized losses exist. Unrealized losses that are credit related are recognized in the Company’s Consolidated Statements of Operations and unrealized losses that are not credit related are recognized in accumulated other comprehensive income (loss). For the three and six months ended June 30, 2024 and 2023, there were no unrealized losses that were credit related. For the three and six months ended June 30, 2024, there were net unrealized losses on investments of $0.1 and $0.5 million, respectively. For the three and six months ended June 30, 2023 there were $0.6 and $0.4 million of net unrealized losses on investments, respectively.

Intangible Assets

Intangible assets related to in process research and development projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. IPR&D intangible assets which are determined to have had a decrease in their fair value are adjusted downward and an expense is recognized in R&D expenses in the Consolidated Statements of Operations. These IPR&D intangible assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment based on indicators including progress of R&D activities, changes in projected development of assets, and changes in regulatory environment and future commercial markets. If a triggering event occurs that would indicate a potential impairment, the Company will perform a quantitative analysis to determine whether it is more likely than not that the fair value is below carrying amount.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. FASB ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

•

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 - Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•

Level 3 - Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, deposits, accounts payable and accrued expenses approximate their respective carrying values due to the short-term nature of most of these instruments.

Warrants

The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in accordance with FASB ASC 480, Distinguishing Liabilities from Equity and/or FASB ASC 815, Derivatives and Hedging, depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are included in interest and other income in the Company’s Consolidated Statements of Operations.

Stock-Based Compensation

The Company issues stock-based awards to employees and non-employees, generally in the form of stock options, RSUs and PSUs.

The Company measures the compensation expense of employee and non-employee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost of stock options and RSUs is recognized over the requisite service period of the awards on a straight-line basis with forfeitures recognized as they occur. The vesting condition for PSUs is performance based and the cost of PSUs is recognized when it is likely that the performance goals associated with the PSUs will be achieved and the awards will vest.

The Company classifies stock-based compensation expense in its Consolidated Statements of Operations in the same manner in which the award recipient’s payroll costs and services are classified or in which the award recipient’s service payments are classified.

Recent Accounting Pronouncements

Accounting Pronouncements Not Adopted as of June 30, 2024

ASU 2023-09: Income Taxes Topic 740 - Improvements to Income Tax Disclosures. This update standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. This update is required to be effective for the Company for fiscal periods beginning after December 15, 2024. As this accounting standard is not expected to change the Company’s accounting, it is not expected to have a material impact on the Company's consolidated financial statements.

ASU 2023-07: Segment Reporting Topic 280 - Improvements to Reportable Segment Disclosures. This update requires expanded annual and interim disclosures for significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. This update will be effective for fiscal years beginning after December 15, 2023, and is to be applied retrospectively to all periods presented in the financial statements. Early adoption is permitted. As this accounting standard is not expected to change the Company’s accounting, it is not expected to have a material impact on the Company’s consolidated financial statements.

Fair Value of Financial Instruments

Items measured at fair value on a recurring basis are the Company’s investments and warrant liability. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:


	Fair Value Measurements as of June 30, 2024 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	21,569	$	-	$	-	$	21,569
		21,569		-		-		21,569

Investments:
U.S. Treasury securities		-		227,801		-		227,801
Corporate bonds		-		12,417		-		12,417
		-		240,218		-		240,218

Total assets	$	21,569	$	240,218	$	-	$	261,787

Liabilities:
Warrant liability	$	-	$	-	$	105	$	105
Total liabilities	$	-	$	-	$	105	$	105

	Fair Value Measurements as of December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	50,737	$	-	$	-	$	50,737
U.S. Treasury securities		-		2,487		-		2,487
		50,737		2,487		-		53,224

Investments:
U.S. Treasury securities		-		312,696		-		312,696
Corporate bonds		-		38,895		-		38,895
		-		351,591		-		351,591

Total assets	$	50,737	$	354,078	$	-	$	404,815

Liabilities:
Warrant liability	$	-	$	-	$	1,876	$	1,876
Total liabilities	$	-	$	-	$	1,876	$	1,876

The Company classifies its money market mutual funds as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its U.S. Treasury Securities and Corporate Bonds as Level 2 assets as these assets are not traded in an active market and have been valued through a third-party pricing service based on quoted prices for similar assets.

The reconciliation of the Company’s warrant liability, which is recorded as part of other liabilities in the Consolidated Balance Sheets, measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:


	Warrant Liability
Balance, December 31, 2023	$	1,876
Fair value adjustments		(1,771	)
Balance, June 30, 2024	$	105

The Company utilizes a Black-Scholes model to value the warrant liability (see Note 10 “Warrants”) at each reporting period, with changes in fair value recognized in the Consolidated Statements of Operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in an options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the expected volatility of its common stock based on historical volatility of the Company and of a peer group, considering the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

The fair value of the warrant liability has been estimated with the following assumptions:


	June 30, 2024			December 31, 2023
Stock price	$	21.53		$	29.50
Exercise price	$	65.23		$	65.23
Expected volatility		59.62	%		68.83	%
Risk-free interest rate		4.85	%		4.70	%
Expected dividend yield		-			-
Expected life (years)		0.81			1.31
Fair value per warrant	$	0.17		$	3.04

Property and Equipment, Net

The Company’s property and equipment consisted of the following:


	June 30, 2024			December 31, 2023
Laboratory equipment	$	32,352		$	29,232
Machinery and equipment		12,572			12,325
Computer equipment		417			244
Furniture and fixtures		2,777			2,777
Leasehold improvements		7,107			6,723
Internal use software		1,903			1,903
		57,128			53,204
Less: accumulated depreciation and amortization		(17,580	)		(14,032	)
Total property and equipment, net	$	39,548		$	39,172

During the three and six months ended June 30, 2024, the Company recognized $1.8 million and $3.5 million of depreciation and amortization expense, respectively. During the three and six months ended June 30, 2023, the Company recognized $1.2 million and $2.3 million of depreciation and amortization expense, respectively.

Intangible Assets and Goodwill

The Company’s indefinite lived intangible assets consist of an acquired IPR&D asset received in the acquisition of Renovacor on December 1, 2022. Intangible assets as of June 30, 2024 and December 31, 2023 are summarized as follows:


	June 30, 2024		December 31, 2023
Gross carrying value	$	25,150	$	25,150
Accumulated amortization		-		-
Total intangible assets	$	25,150	$	25,150

The carrying value of Goodwill as of June 30, 2024 and December 31, 2023 was $39.2 million.

Accounts Payable and Accrued Expenses

The Company’s accounts payable and accrued expenses consisted of the following:


	June 30, 2024		December 31, 2023
Research and development	$	17,356	$	13,867
Investment payable		-		13,137
Employee compensation		7,291		9,930
Property and equipment		1,036		1,077
Professional fees		5,989		6,006
Other		3,061		1,772
Total accounts payable and accrued expenses	$	34,733	$	45,789

The $13.1 million investment payable at December 31, 2023 was related to investment purchases of available-for-sale securities in 2023 that settled in 2024.

Stockholders’ Equity

At-the-Market Offering Program

On February 28, 2022, the Company entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares through Cowen as its sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3. The Company filed a prospectus supplement with the SEC on February 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement. The Company will pay Cowen a cash commission of 3.0% of gross proceeds from the sale of the shares pursuant to the Sales Agreement. The Company has provided Cowen with customary indemnification and contribution rights. The Company has reimbursed Cowen for certain expenses incurred in connection with the Sales Agreement. On September 12, 2023, the Company and Cowen entered into the Amended Sales Agreement pursuant to which the aggregate offering amount available under the at-the-market offering program was reduced to $180.0 million. Through June 30, 2024, the Company sold 4.2 million shares under the at-the-market offering program for gross proceeds of $65.8 million, less commissions of $2.0 million for net proceeds of $63.8 million. The Company did not sell any shares under the at-the-market offering program during the six months ended June 30, 2024.

Stock-Based Compensation

Stock Option Valuation

The weighted average assumptions that the Company used in a Black-Scholes pricing model to determine the fair value of stock options granted to employees, non-employees and directors were as follows:

ROCKET PHARMACEUTICALS, INC. [RCKT] Filings
ROCKET PHARMACEUTICALS, INC. [RCKTW] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-02-27]
10-Q	[2023-11-07]
10-Q	[2023-08-09]
10-Q	[2023-05-05]
10-K	[2023-02-28]
10-Q	[2022-11-04]
10-Q	[2022-08-09]
10-Q	[2022-05-06]
10-K	[2022-02-28]
10-Q	[2021-11-05]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-06]
10-Q	[2020-08-05]
10-Q	[2020-05-08]
10-K	[2020-03-06]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-08]
10-Q	[2018-11-09]
10-Q	[2018-08-14]
10-Q	[2018-05-11]
10-K	[2018-03-07]
10-Q	[2017-11-08]
10-Q	[2017-08-03]
10-Q	[2017-05-10]
10-K	[2017-03-16]
10-Q	[2016-11-09]
10-Q	[2016-08-10]
10-Q	[2016-05-11]
10-K	[2016-03-23]
10-Q	[2015-11-12]
10-Q	[2015-08-07]
S-1	[2015-07-31]
10-Q	[2015-05-14]
10-K	[2015-03-31]
S-1	[2014-11-05]

Six Months Ended June 30,

Risk-free interest rate