You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our annual report on Form 10-K, filed onFebruary 28, 2022 with theSEC (the "2021 Form 10-K"). This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our 2021 Form 10-K, pursuant to Instruction 2 to paragraph of Item 303 of Regulation S-K. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to "us," "we," "our," or our "Company" and similar terms refer toRocket Pharmaceuticals, Inc. We are a clinical-stage, multi-platform 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. We have 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 potentially registration-enabling studies inthe United States ("U.S.") andEurope ("EU"). In addition, in theU.S. , we have 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. The Danon program is currently in an ongoing Phase 1 trial. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing. We have global commercialization and development rights to all of these product candidates under royalty-bearing license agreements. EffectiveDecember 2021 , a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators. Although we believe that gene therapy may be beneficial to patients afflicted with this disorder, we have opted to focus available resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on the compelling clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood.
recent developments
Market offer program
OnFebruary 28, 2022 , we entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which we may offer and sell, from time to time at its sole discretion, shares through Cowen as our sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to our shelf registration statement on Form S-3. We filed a prospectus supplement with theSEC onFebruary 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement. We will pay Cowen a cash commission of 3.0% of gross proceeds from the sale of the shares pursuant to the Sales Agreement. We also agreed to provide Cowen with customary indemnification and contribution rights. We reimbursed Cowen for certain expenses incurred in connection with the Sales Agreement. ThroughSeptember 30, 2022 , we sold 3.3 million shares under the at-the-market offering program for gross proceeds of$48.0 million , less commissions of$1.4 million for net proceeds of$46.6 million .
Renovacor Merger Agreement
OnSeptember 19, 2022 , we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Renovacor, Inc., aDelaware corporation ("Renovacor") pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, we will acquire Renovacor. The acquisition is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. Subject to the terms and conditions of the Merger Agreement, each share of Renovacor's common stock, par value$0.0001 per share ("Renovacor Shares") outstanding immediately prior to the effective time of the merger (including Company Earnout Shares (as defined in the Merger Agreement)) will be canceled and converted into the right to receive a number of fully paid and non-assessable shares of the Company determined on the basis of an exchange formula set forth in the Merger Agreement (the "Exchange Ratio"). The Exchange Ratio will initially be equal to 0.1676 for each Renovacor Share (subject to adjustment as described in the Merger Agreement). Under certain circumstances further described in the Merger Agreement, the Exchange Ratio may be adjusted upward or downward based on the level of Renovacor's net cash at the closing of the merger and certain other adjustments, as determined in accordance with the Merger Agreement. The acquisition is expected to close by the first quarter of 2023. We incurred approximately$1.3 million of pre-acquisition related costs during the three months endedSeptember 30, 2022 .
Follow-up Public Offering
OnOctober 6, 2022 , we completed a public offering of 7,820,000 shares of our common stock, which included the full exercise of the underwriters' option to purchase an additional 1,020,000 shares of our common stock, at a public offering price of$14.75 per share. The gross proceeds to Rocket from the public offering were approximately$115.3 million , net of$7.1 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of$108.2 million . 20
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Gene Therapy Overview
Genes are composed of sequences of deoxyribonucleic acid ("DNA"), which code for
proteins that perform a broad range of physiologic functions in all living
organisms. Although genes are passed on from generation to generation, genetic
changes, also known as mutations, can occur in this process. These changes can
result in the lack of production of proteins or the production of altered
proteins with reduced or abnormal function, which can in turn result in disease.
Gene therapy is a therapeutic approach in which an isolated gene sequence or
segment of DNA is administered to a patient, most commonly for the purpose of
treating a genetic disease that is caused by genetic mutations. Currently
available therapies for many genetic diseases focus on administration of large
proteins or enzymes and typically address only the symptoms of the disease. Gene
therapy aims to address the disease-causing effects of absent or dysfunctional
genes by delivering functional copies of the gene sequence directly into the
patient's cells, offering the potential for curing the genetic disease, rather
than simply addressing symptoms.
We are using modified non-pathogenic viruses for the development of our gene
therapy treatments. Viruses are particularly well suited as delivery vehicles
because they are adept at penetrating cells and delivering genetic material
inside a cell. In creating our viral delivery vehicles, the viral (pathogenic)
genes are removed and are replaced with a functional form of the missing or
mutant gene that is the cause of the patient's genetic disease. The functional
form of a missing or mutant gene is called a therapeutic gene, or the
"transgene." The process of inserting the transgene is called "transduction."
Once a virus is modified by replacement of the viral genes with a transgene, the
modified virus is called a "viral vector." The viral vector delivers the
transgene into the targeted tissue or organ (such as the cells inside a
patient's bone marrow). We have two types of viral vectors in development, LVV
and AAV. We believe that our LVV and AAV-based programs have the potential to
offer a significant therapeutic benefit to patients that is durable
(long-lasting).
The gene therapies can be delivered either (1) ex vivo (outside the body), in
which case the patient's cells are extracted and the vector is delivered to
these cells in a controlled, safe laboratory setting, with the modified cells
then being reinserted into the patient, or (2) in vivo (inside the body), in
which case the vector is injected directly into the patient, either
intravenously ("IV") or directly into a specific tissue at a targeted site, with
the aim of the vector delivering the transgene to the targeted cells.
We believe that scientific advances, clinical progress, and the greater
regulatory acceptance of gene therapy have created a promising environment to
advance gene therapy products as these products are being designed to restore
cell function and improve clinical outcomes, which in many cases include
prevention of death at an early age. The FDA approval of several gene therapies
in recent years indicates that there is a regulatory pathway forward for gene
therapy products.
Pipeline Overview
The following chart shows the current phases of development for Rocket’s candidate programs and products:
[[Image Removed: graphic]]
AAV Program:
Danon Disease:
Danon disease ("DD") is a multi-organ lysosomal-associated disorder leading to
early death due to heart failure. DD is caused by mutations in the gene encoding
lysosome-associated membrane protein 2 ("LAMP-2"), a mediator of autophagy. This
mutation results in the accumulation of autophagic vacuoles, predominantly in
cardiac and skeletal muscle. Male patients often require heart transplantation
and typically die in their teens or twenties from progressive heart failure.
Along with severe cardiomyopathy, other DD-related manifestations can include
skeletal muscle weakness and intellectual impairment. There are no specific
therapies available for the treatment of DD and medications typically utilized
for the treatment of congestive heart failure (CHF) are not believed to modify
progression to end-stage CHF. Patients with end-stage CHF may undergo heart
transplant, which currently is available to a minority of patients, is
associated with significant short- and long-term complications and is not
curative of the disorder in the long-term. RP-A501 is in clinical trials as an
in vivo therapy for Danon disease, which is estimated to have a prevalence of
15,000 to 30,000 patients in the U.S. and the EU.
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Danon disease is an X-linked dominant, monogenic rare inherited disorder characterized by progressive cardiomyopathy which is almost universally fatal in males even in settings where cardiac transplantation is available. Danon disease predominantly affects males early in life and is characterized by absence of LAMP2B expression in the heart and other tissues. Preclinical models of Danon disease have demonstrated that AAV-mediated transduction of the heart results in reconstitution of LAMP2B expression and improvement in cardiac function. We currently have one adeno-associated viral vector program targeting DD, RP-A501. We have treated seven patients in the RP-A501 Phase 1 clinical trial, which enrolled young adult and pediatric male DD patients. This includes a first cohort evaluating a low-dose (6.7e13 genome copies (gc)/kilogram (kg)) in adult/older adolescent patients aged 15 or greater (n=3), a second cohort evaluating a higher dose (1.1e14 gc/kg) in adult/older adolescent patients aged 15 or greater (n=2), and we have initiated treatment in a pediatric cohort at a low dose level (6.7e13 gc/kg; n=2). Data disclosed from our Phase 1 study of RP-A501 inMay 2022 andSeptember 2022 included safety and clinical activity results from the three patients treated with the low dose of 6.7e13 gc/kg and from two patients treated with the higher dose of 1.1e14 gc/kg, and initial safety information from the two pediatric patients (pediatric cohort is age 8-14 years) treated with the low dose of 6.7e13 gc/kg. Based on the activity observed in the low dose cohort and to mitigate complement-mediated TMA (safety concerns observed in the high dose cohort) and in agreement with the FDA, we are focusing on the low dose (6.7e13 gc/kg) and we will no longer administer doses of 1.1e14 gc/kg or higher in this trial. Additional safety measures have been implemented and are reflected in the updated trial protocol. These measures include exclusion of patients with end-stage heart failure, and a refined immunomodulatory regimen involving transient B- and T-cell mediated inhibition, with emphasis on preventing complement activation, while also enabling lower steroid doses and earlier steroid taper, with all immunosuppressive therapy discontinued 2-3 months following administration of RP-A501. As presented inMay 2022 at the 25th Annual Meeting of theAmerican Society of Gene andCell Therapy ("ASGCT"), two pediatric patients have received RP-A501 therapy (6.7e13 gc/kg dose level). The two pediatric patients were observed to have normal-range platelets, diminished complement activation relative to the adult cohorts, and no complement-related adverse events. Corticosteroid taper commenced at day 10 following therapy for both patients and there was no significant worsening of the patients' baseline DD-related skeletal myopathy during the weeks following RP-A501. Of note, transaminases and parameters of liver inflammation (including blood levels of gamma-glutamyl transferase, bilirubin and coagulation parameters) were not significantly increased during the weeks following therapy. In the adult (age ?15 years) low-dose cohort, RP-A501 was generally well-tolerated. All 4 adult (age ?15 years) patients with observed immunomodulatory regimen compliance and preserved (>40%) left ventricular ejection fraction at baseline demonstrated disease modification across molecular, echocardiographic, and functional parameters. These patients demonstrated evidence of cardiac LAMP2B expression by immunohistochemistry and reduced levels of autophagic vacuoles on histologic evaluation. Echocardiograms showed stabilized or decreased cardiac wall thickness with improved or stabilized ejection fraction in these patients. Patients in the adult cohorts demonstrated sustained improvement or stabilization in Brain Natriuretic Peptide ("BNP") andNew York Heart Association ("NYHA") class, 6-minute walk test and reported increases in physical activity. Adverse events were manageable with transient immunomodulation. All treatment-related adverse events in pediatric and adult cohorts were reversible with no lasting renal, hepatic, or other sequelae. Efficacy assessments include evaluation of NYHA Functional Classification, which is the most commonly used heart failure classification system. NYHA Class II is where a patient exhibits a slight limitation of physical activity, is comfortable at rest, and ordinary physical activity results in fatigue, palpitation and/or dyspnea. Class I is where a patient exhibits no limitation of physical activity and ordinary physical activity does not cause undue fatigue, palpitation and/or dyspnea. Brain natriuretic peptide (BNP) is a blood-based evaluation and a key marker of heart failure with prognostic significance in CHF and cardiomyopathies. High sensitivity troponin I ("hsTnI") is a blood-based evaluation and a key marker of cardiac injury, one that is (like BNP) frequently elevated in Danon disease patients. Other efficacy parameters include echocardiographic measurements of heart thickness, most notably the thickness of the left ventricular posterior wall, and importantly, measurement of LAMP2B gene expression both via immunohistochemistry and Western blot, as obtained via endomyocardial biopsy. Biopsied heart tissue is also evaluated via hematoxylin and eosin ("H&E") histology and electron microscopy for evidence of DD-associated tissue derangements, including the presence of autophagic vacuoles and disruption of myofibrillar architecture, each of which are characteristic of DD-related myocardial damage. 22
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InSeptember 2022 , interim data for the ongoing Phase 1 trial of RP-A501 was presented at theHeart Failure Society of America ("HFSA") meeting, including updated safety and initial efficacy parameters for the pediatric cohort and longer-term efficacy parameters for the low and high dose adult cohort (patients aged 15 and older; n=5) (data cut-offSeptember 27, 2022 ). In the pediatric cohort, an improvement in NYHA Class (from Class II to I) were reported in both patients after 6 and 9 months of follow-up post-RP-A501. In the adult cohorts, improvement in NYHA Class (from II to I) was observed in three patients (two low-dose and one high-dose) who had closely monitored immunomodulation and stabilization of NYHA Class was observed in one low-dose adult patient without a closely monitored immunomodulatory regimen. Substantial improvements (reductions) in BNP, a key marker of heart failure, were observed in both pediatric patients at 6 and 9 months of follow-up, with levels at these assessments less than 50% of baseline values. Improvements (reductions) in hsTnI, a key marker of myocardial injury, were observed in both pediatric patients at 6 and 9 months of follow-up, with levels at these assessments less than 20% of baseline values. In the adult cohorts, reductions in hsTnI were observed in three low-dose patients and one high-dose patient, with reductions greater than 50% of baseline levels identified in these four patients on at least one assessment, and reductions sustained through 24-36 months of follow-up. Reductions in BNP of at least 25% below baseline values were identified in three low-dose patients and one high-dose patient on at least one assessment. In two of the adult patients, BNP levels were modestly above baseline at the most recent assessment; however baseline BNP levels were either within normal limits or mildly elevated for these two patients. In adult cohort patients with closely monitored immunomodulation (two low-dose and one high-dose) left ventricular (LV) posterior wall thickness improved (approximately 15-25% decrease compared to pretreatment baseline) and reductions in left ventricular mass were identified in four patients, including the patient in the low-dose cohort for whom immunomodulation was not closely monitored. Severe and progressive wall thickening is a hallmark of the hypertrophic cardiomyopathy of Danon disease and is a major contributor to early mortality in male patients. Evidence of sustained cardiac LAMP2B gene expression by immunohistochemistry with qualitative improvement of vacuoles and cardiac tissue architecture on standard H&E and electron microscopy was observed at both dose levels in four of five patients in the adult cohorts and both patients in the pediatric cohort. Sustained cardiac LAMP2B gene expression by immunohistochemistry was observed in all three adult patients with a closely monitored immunomodulatory regimen through 24 months of follow-up. Importantly, genetic correction (as evidenced by myocardial vector copy numbers ("VCNs") and LAMP2 protein expression were accompanied by reductions in the relative area of autophagic vacuoles relative to overall myocardial area, with decreases in this ratio of at least 20% relative to baseline identified in four adult cohort patients (three of whom had reductions of at least 50%). Substantial reductions (>50% baseline) in vacuolar area were also identified in the one pediatric cohort patient for whom this parameter was evaluable at 6 months post-therapy. In addition to the improvements identified in NYHA Class, improvements in quality of life ("QOL") as reported via the Kansas City Cardiomyopathy Questionnaire ("KCCQ") were noted in three of the adult patients who had closely monitored immunomodulation, and both of the pediatric cohort patients; KCCQ score at baseline was 50 for the initial pediatric patient and was 93 at the most recent 9 month assessment; KCCQ score at baseline was 52 for the second pediatric patient and was 81 at a preliminary 3 month assessment. RP-A501 was generally well tolerated at the 6.7e13 gc/kg dose level, or lower dose. All observed adverse effects were reversible with no lasting sequelae. Early transaminase and creatinine kinase elevations returned to baseline or decreased. No unexpected and serious drug product-related adverse events or severe adverse events were observed in this low dose cohort. The most common adverse events were predominantly mild, not associated with clinical symptoms and were related to elevated transaminases post-treatment. Elevation in transaminases and creatinine kinases was observed in all three low-dose adult cohort patients and returned to baseline levels within the first one to two months post-treatment. There was also a transient and reversible decline in platelets observed in two of three of these patients. These changes were largely responsive to corticosteroids and other immunosuppressive therapies. All patients were given oral steroids to prevent or minimize potential immune-related events. Corticosteroids were associated with transient exacerbation of DD-associated skeletal myopathy, which resolved upon discontinuation of steroid therapy. At the higher dose administered (1.1e14 gc/kg adult cohort), additional immunosuppressive therapies were stipulated and administered to mitigate the immune response associated with RP-A501. Interim data presented at HFSA inSeptember 2022 included that RP-A501 was observed to be generally well tolerated at the low dose with a manageable safety profile across pediatric and adult cohorts. In the pediatric cohort, RP-A501 was well tolerated in both patients with six to eleven months follow-up. The patients were observed to have normal-range platelets, minimal complement activation and no complement-related adverse events. The two pediatric patients received a modified immunomodulatory regimen to mitigate adverse events. No significant immediate or delayed toxicities, significant skeletal myopathy, or late transaminase elevations have been observed. Taken together, the totality of data from the six patients currently enrolled in the Phase 1 trial is expected to support advancement toward a Phase 2 pivotal study. One of the patients receiving therapy on the high dose cohort had progressive heart failure and underwent a heart transplant at Month 5 following therapy. This patient had more advanced disease than the 4 other adult/older adolescent patients who received treatment in the low and high dose cohorts, as evidenced by diminished baseline LV ejection fraction (35%) on echocardiogram and markedly elevated LV filling pressure prior to treatment. His clinical course was characteristic of DD progression. Assessments regarding gene transduction from the explanted heart are summarized below:
explanted heart
• Analysis of the explanted heart revealed significant fibrosis consistent with
advanced DD. • Myocardial tissue from the explanted heart at 5 months post-treatment
showed 100% expression of LAMP2B protein by immunohistochemistry in all
non-fibrotic cardiac regions, including the ventricles and other essential organs
targeted areas
As disclosed in December 2020 , this same patient (one of the two patients
receiving the 1.1e14 gc/kg dose) had more advanced heart failure than the
others, and was the heaviest patient treated to-date (receiving the highest
absolute AAV9 dose). This patient experienced a non-persistent, immune-related
event that was classified as a drug product-related serious adverse event. This
thrombotic microangiopathy ("TMA") event (which was later reclassified as a
Sudden Unexpected Serious Adverse Reaction ("SUSAR") was believed to be likely
due to immune-mediated complement activation, resulting in reversible
thrombocytopenia and acute kidney injury requiring eculizumab and transient
hemodialysis. This patient regained normal kidney function within three weeks.
(This event occurred in the same patient in whom RP-A501 was not associated with
clinical stabilization or improvement, and who required a heart transplant 5
months post-therapy).
Following transplant, this patient has been clinically stable and reports
resolution of a baseline skeletal myopathy that was present prior to treatment.
Analysis of the explanted heart is described above. Of note, this patient had
more advanced heart failure at time of treatment; the clinical protocol has been
modified to exclude enrollment of DD with end-stage CHF/cardiomyopathy. In May
2021 , 5 months after details of this event were disclosed and after recognition
of complement-mediated TMA in other systemic AAV programs, the FDA placed the
study on clinical hold. In response to the FDA's clinical hold, we amended the
trial protocol in order to enable more defined mechanisms for prevention, early
recognition and management of complement-mediated adverse events. The FDA lifted
the clinical hold on August 16, 2021 and investigational treatment in the
pediatric cohort was initiated in the fourth quarter of 2021. Updated results
were presented at HFSA as summarized above.
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Anticipated Milestones Since preliminary clinical activity and ongoing tolerability have been observed in pediatrics along with evidence of longer-term tolerability and clinical activity in adults, we expect these results to support FDA discussions on study design and endpoints for our planned Phase 2 pivotal trial. Phase 2 trial planning activities are expected to begin in the fourth quarter of 2022.
Fanconi Anemia Complementation Group A (FANCA):
FA, a rare and life-threatening DNA-repair disorder, generally arises from a
mutation in a single FA gene. An estimated 60 to 70% of cases arise from
mutations in the Fanconi-A ("FANCA") gene, which is the focus of our program. FA
results in bone marrow failure, developmental abnormalities, myeloid leukemia,
and other malignancies, often during the early years and decades of life. Bone
marrow aplasia, which is bone marrow that no longer produces any or very few red
and white blood cells and platelets leading to infections and bleeding, is the
most frequent cause of early morbidity and mortality in FA, with a median onset
before 10 years of age. Leukemia is the next most common cause of mortality,
ultimately occurring in about 20% of patients later in life. Solid organ
malignancies, such as head and neck cancers, can also occur, although at lower
rates during the first two to three decades of life.
Although improvements in allogeneic (donor-mediated) hematopoietic stem cell
transplant ("HSCT"), currently the most frequently utilized therapy for FA, have
resulted in more frequent hematologic correction of the disorder, HSCT is
associated with both acute and long-term risks, including transplant-related
mortality, graft versus host disease ("GVHD"), a sometimes fatal side effect of
allogeneic transplant characterized by painful ulcers in the GI tract, liver
toxicity and skin rashes, as well as increased risk of subsequent cancers. Our
gene therapy program in FA is designed to enable a minimally toxic hematologic
correction using a patient's own stem cells during the early years of life. We
believe that the development of a broadly applicable autologous gene therapy can
be transformative for these patients.
Each of our LV-based programs utilize third-generation, self-inactivating
lentiviral vectors to correct defects in patients' HSCs, which are the cells
found in bone marrow that are capable of generating blood cells over a patient's
lifetime. Defects in the genetic coding of HSCs can result in severe, and
potentially life-threatening anemia, which is when a patient's blood lacks
enough properly functioning red blood cells to carry oxygen throughout the body.
Stem cell defects can also result in severe and potentially life-threatening
decreases in white blood cells resulting in susceptibility to infections, and in
platelets responsible for blood clotting, which may result in severe and
potentially life-threatening bleeding episodes. Patients with FA have a genetic
defect that prevents the normal repair of genes and chromosomes within blood
cells in the bone marrow, which frequently results in the development of acute
myeloid leukemia ("AML"), a type of blood cancer, as well as bone marrow failure
and congenital defects. The average lifespan of an FA patient is estimated to be
30 to 40 years. The prevalence of FA in the U.S. and EU is estimated to be
approximately 4,000 patients in total. In light of the efficacy seen in
non-conditioned patients, the addressable annual market opportunity is now
believed to be 400 to 500 patients collectively in the U.S. and EU.
We currently have one ex-vivo LV-based program targeting FA, RP-L102. RP-L102 is
our lead lentiviral vector-based program that we in-licensed from Centro de
Investigaciones Energéticas, Medioambientales y Tecnológicas ("CIEMAT"), which
is a leading research institute in Madrid, Spain . RP-L102 is currently being
studied in our Phase 2 registrational enabling clinical trials treating FA
patients at the Center for Definitive and Curative Medicine at Stanford
University School of Medicine ("Stanford"), the University of Minnesota , Great
Ormond Street Hospital ("GOSH") in London and Hospital Infantil de Nino Jesus
("HNJ") in Spain . The trial has enrolled a total of ten patients from the U.S.
and EU with the first patient in this Phase 2 trial treated in December 2019 .
Patients will receive a single intravenous infusion of RP-L102 that utilizes
fresh cells and "Process B" which incorporates a modified stem cell enrichment
process, transduction enhancers, as well as commercial-grade vector and final
drug product.
Resistance to mitomycin-C, a DNA damaging agent, in bone marrow stem cells at a
minimum time point of one year post treatment is the primary endpoint for our
ongoing Phase 2 study. Per agreement with the FDA and EMA, engraftment leading
to bone marrow restoration exceeding a 10% mitomycin-C resistance threshold
could support a marketing application for approval.
In December 2020 , we presented updated interim data from our FA program at the
62nd American Society of Hematology ("ASH") Annual Meeting. The FA data
presented at the ASH Annual Meeting were from seven of the nine patients treated
(out of twelve patients enrolled) as of October 2020 in both the U.S. Phase 1
and global Phase 2 studies of RP-L102 for FA. Patients in these studies received
a single intravenous infusion of "Process B" RP-L102 which incorporates a
modified stem cell enrichment process, transduction enhancers, as well as
commercial-grade vector. Preliminary data from these studies support "Process B"
as a consistent and reproducible improvement over "Process A" which was used in
earlier academic FA studies.
Seven patients had follow-up data of at least two-months and three of the seven
patients had been followed for twelve-months or longer. As patients are treated
with gene therapy product without the use of a conditioning regimen, the data
indicated that RP-L102 was generally well-tolerated with no significant safety
issues reported with infusion or post-treatment. One drug related serious
adverse event of Grade 2 transient infusion-related reaction was observed. In
five out of the seven patients for whom there was follow-up data, evidence of
preliminary engraftment was observed, with bone marrow ("BM") vector copy
numbers ("VCNs") from 0.16 to 0.22 (long-term follow-up only) and peripheral
VCNs ranging from 0.01 (2-month follow-up) to 0.11 (long-term follow-up).
Further, two of the three patients with greater than 12-months follow-up showed
evidence of increasing engraftment, mitomycin-C ("MMC") resistance and stable
blood counts, which suggests a halt in the progression of bone marrow failure.
The third patient with greater than 12-month follow-up contracted Influenza B
nine months post-treatment resulting in progressive BM failure, for which, such
patient received a successful bone marrow transplant at 18 months
post-treatment.
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InMay 2021 , we presented positive clinical data at the 24th Annual Meeting of the ASGCT. The preliminary data from the Phase 1/2 trials presented in a poster at ASGCT were from nine pediatric patients and showed increasing evidence of engraftment in at least six of the nine patients, including two patients with at least 15-months of follow-up and four patients with at least 6-months of follow-up. RP-L102 demonstrated a highly favorable tolerability profile with all subjects being treated without conditioning and with no sign of dysplasia. One patient experienced a Grade 2 transient infusion-related reaction. InDecember 2021 , we presented encouraging clinical data at the 63rd Annual Meeting of theAmerican Society of Hematology (ASH). The preliminary results from the Phase 1/2 trials presented in a poster at ASH were from eleven pediatric patients and showed increasing evidence of engraftment in at least six of eight patients for whom there are at least 12 months of follow-up, including bone marrow progenitor cell resistance to mitomycin-C (MMC) ranging from 16-63% in six patients (bone marrow cells in FA patients are highly sensitive to DNA-damaging agents including MMC; this susceptibility to DNA damage is believed to mediate the FA-associated bone marrow failure and predisposition to malignancy. In addition to the development of MMC-resistance in BM hematopoietic cells, sustained peripheral VCN levels were seen in six of seven patients with at least 12-months of follow-up. One patient experienced an Influenza B infection approximately 9 months following treatment with concomitant progressive hematologic failure requiring allogeneic hematopoietic stem cell transplant, which was administered successfully; the remaining patients have not required transfusions. RP-L102 demonstrated a highly favorable tolerability profile with all subjects being treated without cytotoxic conditioning and no signs of dysplasia. The only RP-L102 related serious adverse event to-date has been a Grade 2 transient infusion-related reaction in one patient. InMay 2022 , we presented updated data for RP-L102 at ASGCT's 25th Annual Meeting. Five of nine evaluable patients as of theApril 4, 2022 cut-off date had increased resistance to MMC in bone marrow-derived colony forming cells, ranging from 21% to 42% at 12 to 18 months, increasing to 51% to 94% at 18 - 21 months. The primary endpoint has been achieved, based on a trial protocol in which statistical and clinical significance requires a minimum of five patients to attain increased MMC resistance at least 10% above baseline at two or more timepoints, and concomitant evidence of genetic correction and clinical stabilization. A sixth patient has displayed evidence of progressively increasing genetic correction as evidenced by peripheral VCN. Three additional patients were less than 12 months post-treatment at the time of presentation. One patient had progressive bone marrow failure following therapy and underwent successful allogeneic transplant as previously disclosed. The tolerability profile of RP-L102 appears favorable with no signs of dysplasia, clonal dominance or oncogenic integrations; as previously reported, one patient experienced a Grade 2 transient infusion-related reaction, which resolved. InOctober 2022 , we presented data for RP-L102 at theEuropean Society for Cell and Gene Therapy 29th Annual Meeting, including the clinical activity results presented at the ASGCT 2022 meeting. We also disclosed at least one of the additional three patients in our Phase 2 trial of RP-L102 for FA for whom there is less than 12 months of follow-up has demonstrated initial evidence of engraftment (as demonstrated by bone marrow mitomycin-C resistance and VCN in blood and bone marrow) at levels comparable to those seen in the five patients for whom there is longer-term evidence of progressive engraftment and phenotypic correction. We also disclosed that one of the initial five patients in this trial who had evidence of engraftment developed a T-cell lymphoblastic lymphoma approximately 22 months after RP-L102 administration. A surgical biopsy of the lymphoma indicated negligible gene markings (VCN of 0.003) at a juncture when concomitant VCN in blood and bone marrow were 0.26 and 0.42 respectively. These findings conclusively indicate that the lymphoma did not result from a LV-mediated insertion, as there were essentially no gene markings in the tumor (the very low but detectable VCN is likely the result of blood cells in the tumor specimen). FA is a cancer-predisposition syndrome and cancers may develop in patients under the age of 10. Importantly, the patient tolerated induction chemotherapy for the lymphoma without significant complications and is currently in a complete response. The presence of gene-corrected hematopoietic cells may have contributed to this patient's overall tolerance of chemotherapy.
Expected milestones
Based on the achievement of the primary endpoint as defined in our pivotal Phase 2 study for AF, we have initiated a dialogue with the FDA regarding plans to submit the Biological License Application (“BLA”) for RP-L102 for AF treatment and we anticipate making such a submission in the second half of 2023. Continued data readouts for the FA program are expected in the fourth quarter of 2022.
Leukocyte Adhesion Deficiency-I (LAD-I):
LAD-I is a rare autosomal recessive disorder of white blood cell adhesion and migration, resulting from mutations in the ITGB2 gene encoding for the Beta-2 Integrin component, CD18. Deficiencies in CD18 result in an impaired ability for neutrophils (a subset of infection-fighting white blood cells) to leave blood vessels and enter tissues where these cells are needed to combat infections. As is the case with many rare diseases, accurate estimates of incidence are difficult to confirm; however, several hundred cases have been reported to date. Most LAD-I patients are believed to have the severe form of the disease. Severe LAD-I is notable for recurrent, life-threatening infections and substantial infant mortality in patients who do not receive an allogeneic HSCT. Mortality for severe LAD-I has been reported as 60 to 75% by age two in the absence of allogeneic HCST. We currently have one ex-vivo program targeting LAD-I, RP-L201. RP-L201 is a clinical program that we in-licensed from CIEMAT. We have partnered withUCLA to leadU.S. clinical development efforts for the LAD-I program.UCLA and its Eli and Edythe Broad Center ofRegenerative Medicine and Stem Cell Research is serving as the leadU.S. clinical research center for the registrational clinical trial for LAD-I, and HNJ and GOSH serving as the lead clinical sites inSpain andLondon , respectively. This study has received a$7.5 million CLIN2 grant award from theCalifornia Institute for Regenerative Medicine ("CIRM") to support the clinical development of gene therapy for LAD-I. 25
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The open-label, single-arm, Phase 1/2 registration-enabling clinical trial of RP-L201 has treated nine severe LAD-I patients to assess the safety and tolerability of RP-L201 to date. The first patient was treated atUCLA with RP-L201 in the third quarter 2019. Enrollment is now complete in both the Phase 1 and 2 portions of the study; nine patients have received RP-L201 at 3 investigative centers in theU.S. andEurope . InDecember 2021 , we presented positive clinical data at the 63rd Annual Meeting of ASH. The ASH oral presentation included preliminary data from eight of nine severe LAD-I patients, as defined by CD18 expression of less than 2%, who received RP-L201 treatment as of theNovember 8, 2021 , data cut-off date. Eight patients had follow-up data of at least three months, and four of the eight patients had been followed for 12 months or longer. All infusions of RP-L201 were well tolerated and no drug product-related serious adverse events were reported. Evidence of preliminary efficacy was observed in all eight evaluable patients. All eight patients demonstrated neutrophil CD18 expression that exceeded the 4-10% threshold associated with survival into adulthood and consistent with reversal of the severe LAD-I phenotype including six patients with at least 6 months of follow-up. Peripheral blood VCN levels have been stable and in the 0.54 - 2.94 copies per genome range. No patients had LAD-I related infections requiring hospitalization after hematopoietic reconstitution post-RP-L201. Additional updates presented inJanuary 2022 included a ninth patient achieving CD18 expression of 61% at 3 months, with the preliminary observation that all nine of nine patients have demonstrated 26% to 87% CD18 expression at timepoints ranging from 3 to 24 months following RP-L102, with stable CD18 expression levels for each patient subsequent to month 3. InMay 2022 , we presented updated data at ASGCT's 25th Annual Meeting. The presentation included efficacy and safety interim data at three to 24 months of follow-up after infusion for all nine treated patients and overall survival data, including survival data for the seven patients with at least 12 months of follow-up after infusion as of theMarch 9, 2022 cut-off date. All patients, aged three months to nine years, demonstrated sustained CD18 restoration and expression on more than 10% of neutrophils (range: 20%-87%, median: 56%). At one year, the overall survival without allogeneic hematopoietic stem cell transplantation across the cohort is 100% based on the Kaplan-Meier estimate. As of the data cut-off, all nine patients are alive and clinically stable. All patients demonstrated a statistically significant reduction in the rate of all-cause hospitalizations and severe infections, relative to pre-treatment. Evidence of resolution of LAD-I-related skin rash and restoration of wound repair capabilities has been shown along with sustained phenotypic correction. The tolerability profile of RP-L201 has been highly favorable in all patients with no RP-L201-related adverse events. Adverse events related to other study procedures, including busulfan conditioning, have been previously disclosed and consistent with the tolerability profiles of those agents and procedures. Anticipated Milestones We have initiated discussions with health authorities on BLA filing plans for RP-L201 for the treatment of severe LAD-I and anticipate making such filing in the first half of 2023.
Pyruvate Kinase Deficiency (PKD):
Red blood cell PKD is a rare autosomal recessive disorder resulting from
mutations in the pyruvate kinase L/R ("PKLR") gene encoding for a component of
the red blood cell ("RBC") glycolytic pathway. PKD is characterized by chronic
non-spherocytic hemolytic anemia, a disorder in which RBCs do not assume a
normal spherical shape and are broken down, leading to decreased ability to
carry oxygen to cells, with anemia severity that can range from mild
(asymptomatic) to severe forms that may result in childhood mortality or a
requirement for frequent, lifelong RBC transfusions. The pediatric population is
the most commonly and severely affected subgroup of patients with PKD, and PKD
often results in splenomegaly (abnormal enlargement of the spleen), jaundice and
chronic iron overload which is likely the result of both chronic hemolysis and
the RBC transfusions used to treat the disease. The variability in anemia
severity is believed to arise in part from the large number of diverse mutations
that may affect the PKLR gene. Estimates of disease incidence have ranged
between 3.2 and 51 cases per million in the white U.S. and EU population.
Industry estimates suggest at least 2,500 cases in the U.S. and EU have already
been diagnosed despite the lack of FDA-approved molecularly targeted therapies.
Market research indicates the application of gene therapy to broader populations
could increase the market opportunity from approximately 250 to 500 patients per
year.
We currently have one ex-vivo LVV-based program targeting PKD, RP-L301. RP-L301
is a clinical stage program that we in-licensed from CIEMAT. The IND for RP-L301
to initiate the global Phase 1 study cleared in October 2019 . This program has
been granted US and EMA orphan drug disease designation.
This global Phase 1 open-label, single-arm, clinical trial is expected to enroll
four to five adult and pediatric PKD patients in the U.S. and Europe . The trial
will be comprised of two cohorts to assess RP-L301 in pediatric (age 8-17) and
adult populations. The trial is designed to assess the safety, tolerability, and
preliminary activity of RP-L301, and initial safety evaluation will occur in the
adult cohort before evaluation in pediatric patients. Stanford will serve as the
lead site in the U.S. for adult and pediatric patients, HNJ will serve as the
lead site in Europe for pediatrics, and Hospital Universitario Fundación Jiménez
Díaz will serve as the lead site in Europe for adult patients. In July 2020 , we
treated the first patient in our clinical trial of RP-L301.
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InDecember 2021 , we presented positive clinical data at the 63rd Annual Meeting of ASH. The ASH poster presentation included preliminary data from two adult patients with severe anemia and substantial transfusion requirements who were treated as of theNovember 3, 2021 cut-off date. Each of these patients had experience extensive PKD-related disease complications including hepatic iron overload. Both patients have had marked improvement in hemoglobin levels, from baselines of 7.4 and 7.0 g/dL to 12-month values of 13.3 and 14.8 g/dL respectively; this represents an improvement from severe (Hb <8g/dL) to normal levels. Both patients have been transfusion independent subsequent to post-treatment hematopoietic reconstitution. Anemia resolution has been accompanied by marked improvement in additional markers of hemolysis, including bilirubin, erythropoietin, and reticulocyte counts. RP-L301 has been well tolerated in these adult patients, with no drug product related serious adverse events or infusion-related complications observed through 12-months post-treatment. Both patients have reported improved QOL following treatment with increases on FACT-An and additional designated QOL evaluations sustained through 12 months following therapy. InMay 2022 , we presented updated data at the 25th Annual Meeting of the ASGCT. The presentation included data from two adult patients with severe or transfusion-dependent anemia as of theApril 13, 2022 cut-off date. At 18 months post-infusion, both patients had sustained transgene expression, normalized hemoglobin, improved hemolysis, no red blood cell transfusion requirements post-engraftment and improved QOL both reported anecdotally and as documented via formal QOL assessments. The tolerability profile of RP-L301 appears favorable , with no RP-L-301-related serious adverse events through 18 months post-infusion. Transient transaminase elevation was seen in both patients post-therapy/conditioning, with no clinical stigmata of liver injury and subsequent resolution without clinical sequelae. The pediatric cohort is currently enrolling. Anticipated Milestones Enrollment in the PKD pediatric cohort is ongoing, and additional Phase 1 data are expected in the first half of 2023. Initiation of the phase 2 pivotal trial is expected to occur in 2023.
cGMP Manufacturing
Our state-of-the-art, 103,720 square foot manufacturing facility inCranbury, New Jersey . has been scaled up to manufacture AAV drug product for a planned Phase 2 pivotal study in Danon disease. The facility also houses lab space for research & development and quality. We reached an understanding with the FDA on chemistry, manufacturing, and controls requirements to start AAV cGMP manufacturing at our in-house facility as well as potency assay plans for a Phase 2 pivotal trial in Danon disease. To further strengthen our manufacturing and commercial capabilities we appointedMayo Pujols , one of the most seasoned cell and gene therapy technical operations and manufacturing leaders in the industry, as our Chief Technical Officer.
Strategy
We seek to bring hope and relief to patients with devastating, undertreated, rare pediatric diseases through the development and commercialization of potentially curative first-in-class gene therapies. To achieve these objectives, we intend to develop into a fully-integrated biotechnology company. In the near and medium-term, we intend to develop our first-in-class product candidates, which are targeting devastating diseases with substantial unmet need, develop proprietary in-house analytics and manufacturing capabilities and continue to commence registration trials for our currently planned programs. We expect to submit our first BLA for the LAD program in the first half of 2023. In the medium and long-term, pending favorable data, we expect to submit BLAs for the rest of our suite of clinical programs, and establish our gene therapy platform and expand our pipeline to target additional indications that we believe to be potentially compatible with our gene therapy technologies. In addition, during that time, we believe that our currently planned programs will become eligible for priority review vouchers from the FDA that provide for expedited review. We have assembled a leadership and research team with expertise in cell and gene therapy, rare disease drug development and product approval. We believe that our competitive advantage lies in our disease-based selection approach, a rigorous process with defined criteria to identify target diseases. We believe that this approach to asset development differentiates us as a gene therapy company and potentially provides us with a first-mover advantage.
Financial Summary
Since our inception, we have devoted substantially all of our resources to organizing and staffing the company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights, conducting discovery, R&D activities for our product candidates and planning for potential commercialization. We do not have any products approved for sale and have not generated any revenue from product sales. From inception throughSeptember 30, 2022 , we raised net cash proceeds of approximately$727.2 million from investors through both equity and convertible debt financing to fund operating activities.
Income
To date, we have not generated any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the near future. If our development efforts for product candidates are successful and result in regulatory approval or license agreements with third parties, we may generate revenue in the future from product sales.
operating expenses
Research and development expenses
Expenses for our research and development program consist primarily of external costs incurred for the development of our product candidates. These expenses include:
• expenses incurred under agreements with research institutions and consultants
that carry out R&D activities, including process development, preclinical studies and
clinical activities on our behalf;
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• costs related to the development of processes, production of preclinical and clinical
materials, including fees paid to contract manufacturers and manufacturing
input costs for use in internal manufacturing processes;
• consultants who support the development of regulatory processes and activities; Y
• costs related to the licensing of rights to develop and commercialize our products.
portfolio of candidate products.
We recognize external development costs based on contractual payment schedules
aligned with program activities, invoices for work incurred, and milestones
which correspond with costs incurred by the third parties. Nonrefundable advance
payments for goods or services to be received in the future for use in R&D
activities are recorded as prepaid expenses.
Our direct R&D expenses are tracked on a program-by-program basis for product
candidates and consist primarily of external costs, such as research
collaborations and third-party manufacturing agreements associated with our
preclinical research, process development, manufacturing, and clinical
development activities. Our direct R&D expenses by program also include fees
incurred under license agreements. Our personnel, non-program and unallocated
program expenses include costs associated with activities performed by our
internal R&D organization and generally benefit multiple programs. These costs
are not separately allocated by product candidate and consist primarily of:
• salaries and personnel-related costs, including benefits, travel, and
stock-based compensation, for our scientific personnel performing R&D
activities;
• facilities and other expenses, including rent and maintenance expenses
of facilities, and depreciation expense; and • laboratory supplies and equipment used for internal R&D activities. Our direct R&D expenses consist principally of external costs, such as fees paid to investigators, consultants, laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, costs associated with our general discovery platform improvements, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other R&D expenses. The following table presents R&D expenses tracked on a program-by-program basis as well as by type and nature of expense for the three and nine months endedSeptember 30, 2022 and 2021. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Direct Expenses: Danon Disease (AAV) RP-A501 $ 8,058
$3,497 $24,001
Leukocyte Adhesion Deficiency (LVV) RP-L201
5,719 7,896 15,814 18,167 Fanconi Anemia (LVV) RP-L102 7,141 6,379 16,228 11,986 Pyruvate Kinase Deficiency (LVV) RP-L301 433 1,109 1,919 3,530 Infantile Malignant Osteopetrosis (LVV) RP-L401 (1) 91 729 280 1,975 Other product candidates 4,689 2,128 11,719 3,998 Total direct expenses 26,131 21,738 69,961 51,460 Unallocated Expenses Employee compensation $ 7,983
$5,524 $20,495
Stock-based compensation expense
3,040 3,084 8,247 9,148 Depreciation and amortization expense 1,090 1,258 2,976 3,627 Laboratory and related expenses 3,033 651 3,940 2,745 Professional Fees 819 400 2,009 1,216 Other expenses 1,287 6,966 7,905 8,998 Total other research and development expenses 17,252 17,883 45,572 40,999 Total research and development expense$ 43,383
(1) cash
We cannot determine with certainty the duration and costs to complete current or future clinical studies of product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of clinical studies and development of product candidates will depend on a variety of factors, including:
• the scope, rate of progress, and expenses of ongoing clinical procedures, as well as
studies and other R&D activities that we undertake;
• future clinical study results;
• uncertainties in clinical study enrollment rates;
• changing standards for regulatory approval; and
• the timing and receipt of any regulatory approvals.
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We expect R&D expenses to increase for the foreseeable future as we continue to invest in R&D activities related to developing product candidates, including investments in manufacturing, as our programs advance into later stages of development and as we conduct additional clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of R&D projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. Our future R&D expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of the commercial potential of such product candidates. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our R&D expenses to increase in future periods for the foreseeable future as we seek to further development of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
• the scope, progress, outcome and costs of our clinical trials and other R&D activities
activities;
• the efficacy and potential benefits of our product candidates compared to
alternative treatments, including any standard of care; • the market acceptance of our product candidates;
• obtain, maintain, defend and enforce the claims of patents and other
Intellectual Property Rights;
• Significant and changing government regulation; Y
• the timing, receipt and terms of marketing approvals.
A change in the outcome of any of these variables with respect to the development of our product candidates that we may develop could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate for the completion of clinical development of any of our product candidates that we may develop or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.
General and adminsitrative expenses
General and administrative expenses consist primarily of salaries and related benefit costs for personnel, including stock-based compensation and travel expenses for our employees in executive, operational, finance, legal, business development, and human resource functions. In addition, other significant general and administrative expenses include professional fees for legal, consulting, investor and public relations, auditing, and tax services as well as other expenses for rent and maintenance of facilities, insurance and other supplies used in general and administrative activities. We expect general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to support the continued advancement of our product candidates. We also anticipate that as we continue to operate as a public company with increasing complexity, we will continue to incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses.
Interest expenses
Interest expense for the three and nine months endedSeptember 30, 2022 , was related to our financing lease obligation for theCranbury, NJ facility. Interest expense for the three and nine months endedSeptember 30, 2021 , was related to the 2021 Convertible Notes which converted into common stock onAugust 2, 2021 , the 2022 Convertible Notes, which were redeemed and converted into common stock inApril 2021 , and the financing lease obligation for theCranbury, NJ facility.
Interest income
Interest income was related to interest earned on investments and cash equivalents.
Critical accounting policies and significant judgments and estimates
There have been no material changes in our critical accounting policies and estimates in the preparation of our condensed consolidated financial statements during the three months endedSeptember 30, 2022 compared to those disclosed in our 2021 Form 10-K. 29
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Results of Operations
Comparison of the three months ended
Three Months Ended September 30,
2022 2021 Change
Operating expenses:
Research and development $ 43,383 $ 39,621 $ 3,762
General and administrative 15,105 10,025 5,080
Total operating expenses 58,488 49,646 8,842
Loss from operations (58,488 ) (49,646 ) (8,842 )
Research and development incentives - - -
Interest expense (465 ) (534 ) 69
Interest and other income, net 1,353 806
547
Amortization of premium on investments - net (156 ) (744 ) 588 Total other income (expense), net 732 (472 ) 1,204 Net loss$ (57,756 ) $ (50,118 ) $ (7,638 )
Research and development expenses
R&D expenses increased$3.8 million to$43.4 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase in R&D expenses was primarily driven by increases in manufacturing and development costs of$4.0 million , compensation and benefits of$2.5 million due to increased R&D headcount, direct materials of$2.2 million , laboratory supplies of$1.8 million and professional fees of$0.9 million . Increases noted were offset by a decrease in licensing fees of$7.6 million attributable to the Neptune Warrant expense recorded in the three months endedSeptember 30, 2021 .
General and adminsitrative expenses
G&A expenses increased$5.1 million to$15.1 million for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 . The increase in G&A expenses was primarily driven by increases in compensation and benefits of$1.3 million due to increased G&A headcount, non-cash stock compensation expense of$0.7 million , office and administrative expenses of$0.4 million and Renovacor pre-acquisition related expenses of$1.3 million .
Other Income (Expenses), Net
Other income increased by$1.2 million to$0.7 million for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 . The increase in other income was primarily driven by an increase in interest and other income, net, of$0.5 million due to increased interest rates and an increase in investment amortization, net, of$0.6 million .
Comparison of the Nine Months Ended
Nine Months Ended September 30,
2022 2021 Change
Operating expenses:
Research and development $ 115,533 $ 92,459 $ 23,074
General and administrative 39,728 30,456 9,272
Total operating expenses 155,261 122,915 32,346
Loss from operations (155,261 ) (122,915 ) (32,346 )
Research and development incentives - 500 (500 )
Interest expense (1,395 ) (2,514 )
1,119
Interest and other income, net 2,644 2,218
426
Amortization of premium on investments – net (1,128) (2,111)
983
Total other income (expense), net 121 (1,907 ) 2,028 Net loss$ (155,140 ) $ (124,822 ) $ (30,318 ) 30
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Research and development expenses
R&D expenses increased$23.1 million to$115.5 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase in R&D expenses was primarily driven by increases in manufacturing and development costs of$15.8 million , laboratory supplies of$4.5 million , compensation and benefits expense of$5.2 million due to increased R&D headcount and direct materials of$3.0 million . Increases noted were offset by a decrease in non-cash stock compensation expense of$0.9 million and a decrease in license fees of$7.7 million attributable to the Neptune Warrant expense recorded in the nine months endedSeptember 30, 2021 .
General and adminsitrative expenses
G&A expenses increased$9.3 million to$39.7 million for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 2021 . The increase in G&A expenses was primarily driven by increases in commercial preparation expenses which consists of commercial strategy, medical affairs, market development and pricing analysis of$2.5 million , compensation and benefits of$2.8 million due to increased G&A headcount and legal expense of$1.3 million .
Other Income (Expenses), Net
Other income increased by$2.0 million to$0.1 million for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 2021 . The increase in other income was primarily driven by decreased interest expense of$1.1 million associated with the 2022 Convertible Notes that were redeemed inApril 2021 and the 2021 Convertible Notes that were converted inAugust 2021 , an increase in interest and other income, net of$0.4 million due to increased interest rates and an increase in investment amortization, net, of$1.0 million .
Liquidity, Capital Resources and Operations Plan
We have not generated any revenue and have 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 R&D 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. Our drug candidates are in the development and clinical stage. There can be no assurance that our R&D will be successfully completed, that adequate protection for our 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 our product development efforts are successful, it is uncertain when, if ever, we will generate significant revenue from product sales. We operate in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. Our 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. We have incurred net losses and negative cash flows from our operations each year since inception. We had net losses of$155.1 million for the nine months endedSeptember 30, 2022 , and$169.1 million for the year endedDecember 31, 2021 . As ofSeptember 30, 2022 andDecember 31, 2021 , we had an accumulated deficit of$647.1 million and$491.9 million , respectively. As ofSeptember 30, 2022 , we had$306.5 million of cash, cash equivalents and investments. We expect such resources would be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2024. We have funded our operations primarily through the sale of our equity and debt securities. In the longer term, our future viability is dependent on our ability to generate cash from operating activities or to raise additional capital to finance our operations. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. Cash Flows Nine Months Ended September 30, 2022 2021 Net cash used in operating activities$ (122,121 ) $ (90,222 ) Net cash provided by investing activities 39,259 1,989 Net cash provided by financing activities 46,848 36,545
Net decrease in cash, cash equivalents and restricted cash $ (36,014)
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operating activities
During the nine months endedSeptember 30, 2022 , operating activities used$122.1 million of cash and cash equivalents, primarily resulting from our net loss of$155.1 million offset by net non-cash charges of$27.1 million , including non-cash stock-based compensation expense of$21.3 million , accretion of discount on investments of$1.1 million , and depreciation and amortization expense of$2.9 million . Changes in our operating assets and liabilities for the nine months endedSeptember 30, 2022 consisted of an increase in accounts payable and accrued expenses of$7.2 million and a decrease in our prepaid expenses of$1.3 million . During the nine months endedSeptember 30, 2021 , operating activities used$90.2 million of cash, primarily resulting from our net loss of$124.8 million offset by net non-cash charges of$34.8 million , including non-cash stock-based compensation expense of$22.2 million , warrant issuance of$7.6 million , accretion of discount on investments of$2.1 million , and depreciation and amortization expense of$2.2 million . Changes in our operating assets and liabilities for the nine months endedSeptember 30, 2021 consisted of an increase in accounts payable and accrued expenses for$2.8 million , a decrease in finance lease liability of$1.6 million and a decrease in our prepaid expenses of$1.0 million .
Investment activities
During the nine months endedSeptember 30, 2022 , net cash provided by investing activities was$39.3 million , primarily resulting from proceeds of$222.1 million from the maturities of investments, offset by purchases of investments of$177.5 million , and purchases of property and equipment of$5.4 million . During the nine months endedSeptember 30, 2021 , net cash provided by investing activities was$2.0 million , consisting of proceeds of$234.1 million from the maturities of investments, offset by purchases of investments of$226.5 million , purchases of property and equipment of$4.9 million , and purchases of internal use software of$0.7 million . Financing Activities During the nine months endedSeptember 30, 2022 , financing activities provided$46.8 million of cash, primarily resulting from net proceeds of$46.6 million from the sale of shares through our at-the-market facility. During the nine months endedSeptember 30, 2021 , net cash provided by financing activities was$36.5 million , consisting of the issuance of common stock related to theAugust 2021 private placement of$26.4 million and issuance of common stock pursuant to exercises of stock options.
Contractual Obligations and Commitments
There were no material changes outside the ordinary course of our business to the contractual obligations specified in the table of contractual obligations included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2021 Form 10-K. Information regarding contractual obligations and commitments may be found in Note 10 of our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q. We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations.
Recently Issued Accounting Pronouncements
There were no recent accounting pronouncements that impacted the Company, or that had a significant effect on the consolidated financial statements.
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