ROCKET PHARMACEUTICALS, INC. 10-Q

Item 1. Financial Statements Rocket Pharmaceuticals, Inc. Consolidated Balance Sheets ( $ in thousands, except shares and per share amounts ) (unaudited) March 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 130,552 $ 232,694 Investments 216,041 156,046 Prepaid expenses and other current assets 7,255 3,319 Total current assets 353,848 392,059 Property and equipment, net 24,354 22,299 Goodwill 30,815 30,815 Restricted cash 1,343 1,343 Deposits 455 455 Operating lease right-of-use assets 1,390 1,569 Finance lease right-of-use asset 47,945 48,480 Total assets $ 460,150 $ 497,020 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 20,031 $ 19,615 Operating lease liabilities, current 838 863 Finance lease liability, current 1,701 1,689 Total current liabilities 22,570 22,167 Operating lease liabilities, non-current 719 905 Finance lease liability, non-current 19,176 19,144 Other liabilities 65 80 Total liabilities 42,530 42,296 Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $ 0.01 par value, authorized 5,000,000 shares: Series A convertible preferred stock; 300,000 shares designated as Series A; 0 shares issued and outstanding - - Series B convertible preferred stock; 300,000 shares designated as Series B; 0 shares issued and outstanding - - Common stock, $ 0.01 par value, 120,000,000 shares authorized; 64,522,057 and 64,505,889 shares issued and outstanding at March 31 , 2022 and December 31, 2021 , respectively 645 645 Additional paid-in capital 952,498 946,152 Accumulated other comprehensive loss ( 629 ) ( 161 ) Accumulated deficit ( 534,894 ) ( 491,912 ) Total stockholders’ equity 417,620 454,724 Total liabilities and stockholders’ equity $ 460,150 $ 497,020 The accompanying notes are an integral part of these consolidated financial statements. 4 Index Rocket Pharmaceuticals, Inc. Consolidated Statements of Operations ( $ in thousands, except shares and per share amounts ) (unaudited) Three Months Ended March 31, 2022 2021 Revenue $ - $ - Operating expenses: Research and development 30,794 28,309 General and administrative 11,770 10,913 Total operating expenses 42,564 39,222 Loss from operations ( 42,564 ) ( 39,222 ) Research and development incentives - 500 Interest expense ( 464 ) ( 1,729 ) Interest and other income, net 623 911 Amortization of premium on investments - net ( 577 ) ( 639 ) Net loss $ ( 42,982 ) $ ( 40,179 ) Net loss per share attributable to common stockholders - basic and diluted $ ( 0.67 ) $ ( 0.65 ) Weighted-average common shares outstanding - basic and diluted 64,509,721 61,574,405 The accompanying notes are an integral part of these consolidated financial statements. 5 Index Rocket Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Loss (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 Net loss $ ( 42,982 ) $ ( 40,179 ) Other comprehensive loss Net unrealized loss on investments ( 468 ) ( 33 ) Total comprehensive loss $ ( 43,450 ) $ ( 40,212 ) The accompanying notes are an integral part of these consolidated financial statements. 6 Index Rocket Pharmaceuticals, Inc. Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2022 and 2021 (in thousands except share amounts) (unaudited) Common Stock Treasury Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Stock Capital Income/(Loss) Deficit Equity Balance at December 31, 2021 64,505,889 $ 645 $ - $ 946,152 $ ( 161 ) $ ( 491,912 ) $ 454,724 Issuance of common stock pursuant to exercise of stock options and restricted stock units 16,168 - - 76 - - 76 Unrealized comprehensive loss on investments - - - - ( 468 ) - ( 468 ) Share-based compensation - - - 6,270 - - 6,270 Net loss - - - - - ( 42,982 ) ( 42,982 ) Balance at March 31, 2022 64,522,057 $ 645 $ - $ 952,498 $ ( 629 ) $ ( 534,894 ) $ 417,620 Common Stock Treasury Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Stock Capital Loss Deficit Equity Balance at December 31, 2020 60,996,367 $ 610 $ - $ 825,794 $ ( 42 ) $ ( 322,843 ) $ 503,519 Issuance of common stock pursuant to exercise of stock options 991,432 9 - 8,783 - - 8,792 Unrealized comprehensive loss on investments - - - - ( 33 ) - ( 33 ) Share-based compensation - - - 7,900 - - 7,900 Net loss - - - - - ( 40,179 ) ( 40,179 ) Balance at March 31, 2021 61,987,799 $ 619 $ - $ 842,477 $ ( 75 ) $ ( 363,022 ) $ 479,999 The accompanying notes are an integral part of these consolidated financial statements. 7 Index Rocket Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 Operating Activities: Net loss $ ( 42,982 ) $ ( 40,179 ) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discount on convertible notes - 589 Depreciation and amortization of property and equipment 767 674 Amortization of right of use asset 535 - Write down of property and equipment, net 40 - Stock-based compensation 6,270 7,900 Accretion of discount on investments, net 577 620 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 3,936 ) ( 842 ) Accounts payable and accrued expenses ( 491 ) 7,047 Operating lease liabilities ( 33 ) ( 15 ) Finance lease liability 45 ( 63 ) Other long term liabilities ( 15 ) ( 14 ) Net cash used in operating activities ( 39,223 ) ( 24,283 ) Investing activities: Purchases of investments ( 143,023 ) ( 103,815 ) Proceeds from maturities of investments 81,983 74,969 Purchases of property and equipment ( 1,955 ) ( 328 ) Net cash used in investing activities ( 62,995 ) ( 29,174 ) Financing activities: Issuance of common stock, pursuant to exercise of stock options 76 8,792 Net cash provided by financing activities 76 8,792 Net change in cash, cash equivalents and restricted cash ( 102,142 ) ( 44,665 ) Cash, cash equivalents and restricted cash at beginning of period 234,037 298,666 Cash, cash equivalents and restricted cash at end of period $ 131,895 $ 254,001 Supplemental disclosure of non-cash financing and investing activities: Accrued purchases of property and equipment $ 1,635 $ 648 Unrealized loss on investments $ ( 468 ) $ ( 33 ) Reclassification of construction in process to finance right of use asset $ - $ 325 Supplemental cash flow information: Cash paid for interest $ - $ 1,347 The accompanying notes are an integral part of these consolidated financial statements. 8 Index ROCKET PHARMACEUTICALS, INC. Notes to Consolidated Financial Statements ($ in thousands, except share and per share data) (Unaudited) 1. Nature of Business Rocket Pharmaceuticals, Inc. (“Rocket” or the “Company”) is a clinical-stage, multi-platform biotechnology company focused on the development of gene therapies, with direct on-target mechanism of action and clear clinical endpoints, for rare and devastating diseases. Rocket has three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I ” ), a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., Rocket has a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to early death due to heart failure. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. The Company has global commercialization and development rights to all of these product candidates under royalty-bearing license agreements. Effective December 2021, the Company made a decision to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. The Company has opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood. 2. Risks and Liquidity T he 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 companie s. 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 $ 534.9 million as of March 31, 2022. On February 28, 2022, the Company entered into a sales agreement (the “Sales Agreement”), with Cowen and Company, LLC (“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 $ 200,000,000 (the “Shares”) through Cowen as its sales agent. As of March 31, 2022, the Company had $ 346.6 million of cash, cash equivalents and investments. In April 2022, the Company sold 1.3 million shares of common stock for net proceeds of $ 17.3 million pursuant to the at-the-market offering program (see Note 15 “Subsequent Events”). With the proceeds from the at-the-market facility offering program and other efficiencies, the Company expects such resources will be sufficient to fund its operating expenses and capital expenditure requirements into the first half of 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. 3. 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, 2021 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022 (“2021 Form 10-K”). 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 March 31, 2022 and the results of its operations and its cash flows for the three months ended March 31, 2022. The financial data and other information disclosed in these consolidated notes related to the three months ended March 31, 2022 and 2021 are unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 and any other interim periods or any future year or period. 9 Index Principles of Consolidation The consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with accounting principles generally accepted in the United States (“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 impairment, the accrual of research and development (“R&D”) expenses, 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, may 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 10 “Commitments and Contingencies” for additional disclosures) and a deposit collateralizing a letter of credit issued by a bank supporting the Company’s corporate credit card. Cash, cash equivalents and restricted cash consist of the following: March 31, 2022 December 31 , 2021 Cash and cash equivalents $ 130,552 $ 232,694 Restricted cash 1,343 1,343 $ 131,895 $ 234,037 Reclassifications Certain reclassifications have been made to the prior year financial statements in order to conform to the current year’s presentation. Significant Accounting Policies T he significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31, 2022 are consistent with those disclosed in Note 3 to the consolidated financial statements in the 2021 Form 10-K . Recent Accounting Pronouncements There were no recent accounting pronouncements that impacted the Company, or which had a significant effect on the consolidated financial statements . 10 Index 4. Fair Value of Financial Instruments Items measured at fair value on a recurring basis are the Company’s investments. 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 March 31 , 2022 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market mutual funds $ 79,564 $ - $ - $ 79,564 79,564 - - 79,564 Investments: United States Treasury securities 134,748 - - 134,748 Corporate Bonds - 81,293 - 81,293 134,748 81,293 - 216,041 $ 214,312 $ 81,293 $ - $ 295,605 Fair Value Measurements as of December 31, 2021 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market mutual funds $ 179,900 $ - $ - $ 179,900 179,900 - - 179,900 Investments: United States Treasury securities 44,045 - - 44,045 Corporate Bonds - 96,696 - 96,696 Municipal Bonds - 6,000 - 6,000 Agency Bonds - 9,305 - 9,305 44,045 112,001 - 156,046 $ 223,945 $ 112,001 $ - $ 335,946 The Company classifies its money market mutual funds and U.S. Treasury securities 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 corporate, municipal and agency 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. 5. Property and Equipment, Net The Company’s property and equipment consisted of the following: March 31, 2022 December 31, 2021 Laboratory equipment $ 15,263 $ 12,600 Machinery and equipment 10,534 10,432 Computer equipment 218 218 Furniture and fixtures 1,963 1,963 Leasehold improvements 433 407 Internal use software 1,928 1,902 30,340 27,522 Less: accumulated depreciation and amortization ( 5,987 ) ( 5,223 ) $ 24,354 $ 22,299 During the three months ended March 31, 2022 and 2021, the Company recognized $ 0.8 million and $ 0.7 million of depreciation and amortization expense, respectively. 11 Index 6. Accounts Payable and Accrued Expenses As of March 31, 2022 and December 31, 2021, the Company’s accounts payable and accrued expenses consisted of the following: March 31, 2022 December 31, 2021 Research and development $ 13,948 $ 12,082 Property and equipment 1,635 725 Employee compensation 1,484 4,533 Government grant payable 597 597 Professional fees 1,402 1,196 Other 965 482 $ 20,031 $ 19,615 7. Stockholders’ Equity At-the-Market Offering 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 (File No. 333 - 253756) , which was filed with the SEC on March 2, 2021 and which became effective on September 10, 2021. 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 up to 3.0 % of gross proceeds from the sale of the shares pursuant to the Sales Agreement. The Company has also agreed to provide Cowen with customary indemnification and contribution rights. The Company will also reimburse Cowen for certain expenses incurred in connection with the Sales Agreement. As of March 31, 2022, the Company did no t sell any shares under the at-the-market offering program (see Note 15 “Subsequent Events”) . 8. Stock Based Compensation Stock Option Valuation The weighted average assumptions that the Company used in the Black-Scholes pricing model to determine the fair value of the stock options granted to employees, non-employees and directors were as follows: Three Months Ended March 31, 2022 2021 Risk-free interest rate 1.88 % 0.62 % Expected term (in years) 5.86 5.87 Expected volatility 74.07 % 69.41 % Expected dividend yield 0.00 % 0.00 % Exercise price $ 17.85 $ 36.99 Fair value of common stock $ 17.85 $ 36.99 The following table summarizes stock option activity for the three months ended March 31, 2022, under the Second Amended and Restated 2014 Stock Option and Incentive Plan: Number of Shares Weighted Average Exercise Price Weighted Average Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of December 31, 2021 11,143,761 $ 14.51 5.95 $ 128,817 Granted 1,336,206 17.85 6.93 Exercised ( 6,000 ) 12.65 $ 20 Forfeited ( 426,668 ) 34.69 Outstanding as of March 31, 2022 12,047,299 $ 14.17 5.93 $ 84,961 Options vested and exercisable as of March 31, 2022 9,141,380 $ 9.12 4.88 $ 84,457 Options unvested as of March 31, 2022 2,905,919 $ 30.03 9.22 12 Index The weighted average grant-date fair value per share of stock options granted during the three months ended March 31, 2022, and 2021 was $ 11.60 and $ 36.99 , respectively. The total fair value of options vested during the three months ended March 31, 2022 and 2021 was $ 12.5 million and $ 8.3 million, respectively. Restricted Stock Units (“RSU”) The following table summarizes the Company’s RSU activity for the three months ended March 31, 2022: Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31 , 2021 23,500 $ 30.61 Granted 467,172 $ 17.06 Exercised ( 10,168 ) $ 62.32 Forfeited ( 22,795 ) $ 18.03 Unvested as of March 31 , 2022 457,709 $ 17.24 Stock-based Compensation Stock-based compensation expense recognized by award type was as follows: Three Months Ended March 31, 2022 2021 Stock options $ 5,961 $ 7,826 Restricted stock units 309 74 Total stock-based compensation expense $ 6,270 $ 7,900 Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows : Three Months Ended March 31, 2022 2021 Research and development $ 2,318 $ 2,916 General and administrative 3,952 4,984 Total stock-based compensation expense $ 6,270 $ 7,900 As of March 31, 2022, the Company had an aggregate of $ 53.8 million of unrecognized stock-based compensation expense related to both stock options and RSU grants, which is expected to be recognized over the weighted average period of 1.88 years. Warrants A summary of the warrants outstanding as of March 31, 2022 is as follows: Price Outstanding Grant Date Expiration Date 24.42 7,051 June 28, 2013 June 28, 2023 57.11 603,386 December 21, 2020 December 21, 2030 33.63 301,291 August 9, 2021 August 9, 2031 22.51 153,155 December 17, 2021 December 17, 2031 22.51 153,155 December 17, 2021 December 17, 2031 Total 1,218,038 13 Index The following table below is the summary of changes in warrants to purchase common stock for the three months ended March 31, 2022: Number of Warrant Shares Outstanding and Exercisable Exercise Price per Share Balance as of December 31, 2020 610,437 Granted August 2021 301,291 $ 33.63 Granted December 2021 306,310 $ 22.51 Exercised - $ - Balance as of December 31, 2021 1,218,038 Granted - $ - Exercised - $ - Balance as of March 31, 2022 1,218,038 9. Net Loss Per Share Basic and diluted net loss per share attributable to common stockholders was calculated as follows: Three Months Ended March 31, 2022 2021 Numerator: Net loss attributable to common stockholders $ ( 42,982 ) $ ( 40,179 ) Denominator: Weighted-average common shares outstanding - basic and diluted 64,509,721 61,574,405 Net loss per share attributable to common stockholders - basic and diluted $ ( 0.67 ) $ ( 0.65 ) The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Three Months Ended March 31, 2022 2021 Shares issuable upon conversion of the 2021 Convertible Notes - 160,536 Shares issuable upon conversion of the 2022 Convertible Notes - 1,195,449 Warrants exercisable for common shares 1,218,038 610,437 Restricted stock units exercisable for common shares 457,709 - Options to purchase common shares 12,047,299 10,892,830 13,723,046 12,859,252 10. Commitments and Contingencies The Company determines if an arrangement is a lease at inception. Operating and finance leases are presented in the Company’s consolidated balance sheet as right-of-use assets from leases, current lease liabilities and long-term lease liabilities. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments using an estimate of the Company’s collateralized borrowing rate for debt with a similar term. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the biotechnology industry. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). For operating leases, the Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred. 14 Index Finance Lease The Company has a lease for a facility in Cranbury, New Jersey, consisting of 103,720 square feet of space including areas for offices, process development, research and development laboratories and 50,000 square feet dedicated to AAV Current Good Manufacturing Practice (“cGMP”) manufacturing facilities to support the Company’s pipeline. A smaller area within this facility was originally leased in August 2018, and the lease was amended in June 2019 to include the full building (such lease, as amended, the “NJ Lease Agreement”). The NJ Lease Agreement has a 15 -year term from September 1, 2019, with an option to renew for two consecutive five-year renewal terms. Estimated rent payments for the NJ Lease Agreement are $ 1.2 million per annum, payable in monthly installments, depending upon the nature of the leased space, and subject to annual base rent increases of 3 %. The total commitment under the lease is estimated to be approximately $ 29.3 million over the 15 -year term of the lease. The Company paid a cash security deposit of $ 0.3 million to the landlord in connection with the NJ Lease Agreement which has been reflected in deposits in the consolidated balance sheets as of March 31, 2022 and December 31, 2021. The total restricted cash balance for the Company’s operating and finance leases as of March 31, 2022 and December 31, 2021 was $ 0.8 million. Operating Leases On June 7, 2018, the Company entered into a three-year lease agreement for office space in the Empire State Building in New York, NY (the “ESB Lease Agreement”). In connection with the ESB Lease Agreement, the Company established an irrevocable standby letter of credit (the “Empire LOC”) for $ 0.9 million. On March 26, 2021, the Company entered in Amendment No. 1 to the ESB Lease Agreement (“ESB Lease Amendment”) that extended the term of the lease agreement to June 30, 2024 , reduced the rent payments going forward, and reduced the Empire LOC to $ 0.8 million. The Empire LOC serves as the Company’s security deposit on the lease in which the landlord is the beneficiary and expires August 29, 2024 . The Company has accounted for the ESB Lease Amendment as a modification to the ESB Lease Agreement and remeasured the lease liability and adjusted the operating lease right of use asset by $ 1.1 million. The Company has a certificate of deposit of $ 0.8 million with a bank as collateral for the Empire LOC which is classified as part of restricted cash in the consolidated balance sheets as of March 31, 2022 and December 31, 2021 . On January 4, 2018, in connection with the Reverse Merger, the Company assumed an operating lease for Inotek’s former headquarters in Lexington, Massachusetts, with a term ending in February 2023 . In July 2018, the Company signed an agreement to sublease a portion of the Lexington, Massachusetts space and in September 2018, the Company signed an agreement to sublease the remaining portion of the Lexington, Massachusetts space. Rental income received under the sublease agreement totaled $ 0.1 million for the three months ended March 31, 2022 and 2021. Rental income is netted against rent expense in the consolidated statements of operations. Rent expense was $ 0.3 million for the three months ended March 31, 2022 and 2021. Lease cost March 31, 2022 Operating lease cost $ 197 Finance lease cost Amortization of right of use assets 535 Interest on lease liabilities 464 Total lease cost $ 1,196 15 Index The following table summarizes the maturity of the Company’s operating and finance lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and finance lease liabilities as of March 31, 2022: Maturity of operating lease liabilities March 31, 2022 2022 688 2023 548 2024 269 2025 64 2026 55 Total lease payments $ 1,624 Less: interest ( 67 ) Total operating lease liabilities $ 1,557 Maturity of finance lease liability March 31, 2022 2022 1,270 2023 1,736 2024 1,791 2025 1,856 2026 1,912 Thereafter 45,003 Total lease payments $ 53,566 Less: interest ( 32,689 ) Total finance lease liability $ 20,877 Leases March 31, 2022 Operating right-of-use assets $ 1,390 Operating current lease liabilities 838 Operating noncurrent lease liabilities 719 Total operating lease liabilities $ 1,557 Finance right-of-use assets $ 47,945 Finance current lease liability 1,701 Finance noncurrent lease liability 19,176 Total finance lease liability $ 20,877 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 229 Cash flows from finance lease $ 419 Weighted-average remaining lease term - operating leases 2.3 years Weighted-average remaining lease term - finance lease 22.4 years Weighted-average discount rate - operating leases 4.34 % Weighted-average discount rate - finance lease 8.96 % Litigation From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 16 Index Indemnification Arrangements Pursuant to its bylaws and as permitted under Delaware law, the Company has indemnification obligations to directors, officers, employees or agents of the Company or anyone serving in these capacities. The maximum potential amount of future payments the Company could be required to pay is unlimited. The Company has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal. Throughout the normal course of business, the Company has agreements with vendors that provide goods and services required by the Company to run its business. In some instances, vendor agreements include language that requires the Company to indemnify the vendor from certain damages caused by the Company’s use of the vendor’s goods and/or services. The Company has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal. 11. Agreements Related to Intellectual Property The Company, directly and through its subsidiary Spacecraft Seven, LLC, has various license and research and collaboration arrangements. The transactions principally resulted in the acquisition of rights to intellectual property which is in the preclinical phase and has not been tested for safety or feasibility. In all cases, the Company did not acquire tangible assets, processes, protocols, or operating systems. The Company expenses the acquired intellectual property rights as of the acquisition date on the basis that the cost of intangible assets purchased from others for use in research and development activities, has no alternative future uses. 12. CIRM Grants LAD-1 CIRM Grant On April 30, 2019, the California Institute for Regenerative Medicine (“CIRM”) awarded the Company up to $ 7.5 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy for RP-L201. Proceeds from the grant will help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients enrolled at the U.S. clinical site, University of California, Los Angeles (“UCLA”) Mattel Children’s Hospital, led by principal investigator Donald Kohn, M.D., UCLA Professor of Microbiology, Immunology and Molecular Genetics, Pediatrics (Hematology/Oncology), Molecular and Medical Pharmacology and member of the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA. In 2019, the Company received the first two grants from CIRM in the aggregate of $ 1.2 million which were included as an offset against R&D expenses. In 2020, the Company met additional CIRM milestones and received an additional $ 1.1 million milestone which was recorded as a reduction of R&D expenses in 2020. The Company received the additional milestone payments of $ 1.1 million and $ 1.0 million in January and April of 2021, respectively. As of March 31, 2022, the Company met the next CIRM milestone and recorded a receivable of $ 0.9 million, included in prepaid and other current assets in the consolidated balance sheet, recorded as a reduction of research and development expenses. The Company received the $ 0.9 million milestone payment on April 5, 2022. IMO CIRM Grant On November 12, 2020, the CIRM awarded the Company up to $ 3.7 million under a CLIN2 grant award to support the clinical development of its LVV-based gene therapy, RP-L401, for the treatment of IMO. The Company received $ 1.0 million pursuant to the grant on January 4, 2021, related to the CIRM IMO award. Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. 13. Related Party Transactions During April 2018, the Company entered into an agreement with a member of the Board of Directors for business development consulting services. Payments for the services under the agreement are $ 28 per quarter, and the Company may terminate the agreement with 14 days’ notice. The Company incurred expenses of $ 0 and $ 28 during the three months ended March 31, 2022 and 2021, relating to services provided under this agreement. This agreement was terminated on February 15, 2022. In October 2020 , the Company entered into a consulting agreement with the spouse of one of the Company’s executive officers for information technology advisory services. In exchange for the services provided under the agreement, the Company granted 10,000 restricted stock units which vest over a three-year period. On August 27, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, the Company’s largest shareholder (the “Purchaser”), pursuant to which it agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of the Company’s common stock at a purchase price of $ 32.48 per share for aggregate net proceeds of approximately $ 26.4 million to the Company before deducting estimated offering expenses payable by the Company. The Private Placement closed on August 31, 2021. In addition, concurrently with the execution of the Purchase Agreement, the Company entered into a registration rights agreement with the Purchaser, pursuant to which the Company agreed, following demand by the Purchaser, to file with the Securities and Exchange Commission a Registration Statement on Form S-3 covering the resale of shares of common stock held by the Purchaser as promptly as reasonably practicable following such demand, and in any event within 60 days of such demand. 17 Index On August 9, 2021, the Company issued a warrant exercisable for 301,291 shares of common stock to a related party for business development and asset identification consulting services (“August 2021 Warrant”). The Company recorded a non-cash R&D expense of $ 7.6 million during year ended December 31, 2021, related to the issuance of the August 2021 warrant. On December 17, 2021, the Company issued warrants exercisable for 153,155 and 153,155 shares of common stock, respectively to the same related party for business development and asset identification consulting services (“December 2021 Warrants”). The Company recorded a non-cash R&D expense of $ 5.2 million during year ended December 31, 2021, related to the issuance of the December 2021 warrant. Total non-cash R&D expense of $ 12.8 million during the year ended December 31, 2021, related to the issuance of the August 2021 and December 2021 warrants. There was no expense related to this item for the three months ended March 31, 2022 and 2021. In September 2021 , the Company entered into a consulting agreement with a member of the Board of Directors for pipeline development, new asset evaluation, and corporate strategy. In lieu of cash for services to be provided under the consulting agreement during its one-year term, the Company granted the board member options to purchase 20,000 shares of the Company’s common stock with a fair value of $ 0.4 million. There was no expense related to this item for the three months ended March 31, 2022 and 2021. 14. 401(k) Savings Plan The Company has a defined contribution savings plan (the “Plan”) under Section 401(k) of the Internal Revenue Code of 1986. This Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the Plan may be made at the discretion of the Company’s Board of Directors. The Company has elected the safe harbor match of 4 % of employee contributions to the Plan, subject to certain limitations. The Company’s matching contribution for the three months ended March 31, 2022, and 2021 was $ 0.2 million. 15. Subsequent Events In April 2022, the Company sold 1.3 million shares under the at-the-market offering program for gross proceeds of $ 17.8 million, less commissions of $ 0.5 million for net proceeds of $ 17.3 million (see Note 7 “Stockholders Equity”). 18 Index