SEC Filing | Rocket Pharmaceuticals, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2022

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

For the transition period from to

Commission File Number: 001-36829

Rocket Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

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

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

(609) 659-8001

(Registrant’s telephone number, including area code)

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

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

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

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

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

Large accelerated filer ☒	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

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

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

As of November 1, 2022, there were 75,684,423 shares of common stock, $0.01 par value per share, outstanding.

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4

	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5

	Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 (unaudited)	6

	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	7

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signature		36

Index

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “can,” “plan,” “potential,” “possible” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

federal, state, and non-U.S. regulatory requirements, including regulation of our current or any other future product candidates by the U.S. Food and Drug Administration (“FDA”);

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

unanticipated delays due to manufacturing difficulties, including the development of our direct manufacturing capabilities for our AAV programs, and any supply constraints or changes in the regulatory environment; our ability to successfully operate in non-U.S. jurisdictions in which we currently or in the future do business, including compliance with applicable regulatory requirements and laws;

•

uncertainties associated with obtaining and enforcing patents to protect our product candidates, and our ability to successfully defend ourselves against unforeseen third-party infringement claims;

•

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

•

natural and manmade disasters, including pandemics such as COVID-19, including additional strains of COVID-19, or any other health epidemic, and other force majeures, which could impact our operations, and those of our partners and other participants in the health care industry, and which could adversely impact our clinical studies, preclinical research activities, drug supply and the global economy as a whole;

•

the impact of global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflict in Ukraine, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our common stock and our ability to access capital markets;

•

our ability to close the Renovacor acquisition and realize the anticipated benefits from the transaction;

•

our estimates regarding our capital requirements; and

•

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

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

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section incorporated by reference from our Annual Report for the year ended December 31, 2021, on Form 10-K, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make or enter into.

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

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

Index

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

Rocket Pharmaceuticals, Inc.

Consolidated Balance Sheets

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

	September 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	196,669		$	232,694
Investments		109,865			156,046
Prepaid expenses and other current assets		4,597			3,319
Total current assets		311,131			392,059
Property and equipment, net		25,613			22,299
Goodwill		30,815			30,815
Restricted cash		1,354			1,343
Deposits		455			455
Operating lease right-of-use assets		1,022			1,569
Finance lease right-of-use asset		46,875			48,480
Total assets	$	417,265		$	497,020
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	27,823		$	19,615
Operating lease liabilities, current		634			863
Finance lease liability, current		1,724			1,689
Total current liabilities		30,181			22,167
Operating lease liabilities, non-current		492			905
Finance lease liability, non-current		19,242			19,144
Other liabilities		37			80
Total liabilities		49,952			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; 67,838,803 and 64,505,889 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		678			645
Additional paid-in capital		1,014,283			946,152
Accumulated other comprehensive loss		(596	)		(161	)
Accumulated deficit		(647,052	)		(491,912	)
Total stockholders’ equity		367,313			454,724
Total liabilities and stockholders’ equity	$	417,265		$	497,020

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

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Operations

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

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Revenue	$	-		$	-		$	-		$	-

Operating expenses:
Research and development		43,383			39,621			115,533			92,459
General and administrative		15,105			10,025			39,728			30,456
Total operating expenses		58,488			49,646			155,261			122,915
Loss from operations		(58,488	)		(49,646	)		(155,261	)		(122,915	)
Research and development incentives		-			-			-			500
Interest expense		(465	)		(534	)		(1,395	)		(2,514	)
Interest and other income, net		1,353			806			2,644			2,218
Amortization of premium on investments - net		(156	)		(744	)		(1,128	)		(2,111	)
Net loss	$	(57,756	)	$	(50,118	)	$	(155,140	)	$	(124,822	)
Net loss per share - basic and diluted	$	(0.87	)	$	(0.79	)	$	(2.37	)	$	(1.99	)
Weighted-average common shares outstanding - basic and diluted		66,215,535			63,825,429			65,406,844			62,828,601

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

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Net loss	$	(57,756	)	$	(50,118	)	$	(155,140	)	$	(124,822	)
Other comprehensive loss
Net unrealized gain (loss) on investments		169			(16	)		(435	)		(55	)
Total comprehensive loss	$	(57,587	)	$	(50,134	)	$	(155,575	)	$	(124,877	)

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

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands except share amounts)

(unaudited)

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		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	)
Stock-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
Issuance of common stock pursuant to exercise of stock options		2,387		-		3		-			-			3
Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs		1,313,450		13		17,229		-			-			17,242
Unrealized comprehensive loss on marketable securities		-		-		-		(136	)		-			(136	)
Stock-based compensation		-		-		7,369		-			-			7,369
Net loss		-		-		-		-			(54,402	)		(54,402	)
Balance at June 30, 2022		65,837,894		658		977,099		(765	)		(589,296	)		387,696
Issuance of common stock pursuant to exercise of stock options		22,437		-		229		-			-			229
Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs		1,978,472		20		29,278		-			-			29,298
Unrealized comprehensive gain on marketable securities		-		-		-		169			-			169
Stock-based compensation		-		-		7,677		-			-			7,677
Net loss		-		-		-		-			(57,756	)		(57,756	)
Balance at September 30, 2022		67,838,803	$	678	$	1,014,283	$	(596	)	$	(647,052	)	$	367,313

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Income/(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	)
Stock-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
Issuance of common stock pursuant to exercise of stock options		133,838		2		1,113		-			-			1,115
Issuance of common stock pursuant to conversion of notes		1,326,432		13		35,530		-			-			35,543
Unrealized comprehensive loss on investments		-		-		-		(6	)		-			(6	)
Stock-based compensation		-		-		7,311		-			-			7,311
Net loss		-		-		-		-			(34,525	)		(34,525	)
Balance at June 30, 2021		63,448,069		634		886,431		(81	)		(397,547	)		489,437
Issuance of common stock pursuant to exercise of stock options		21,402		-		284		-			-			284
Issuance of common stock pursuant to conversion of notes		160,614		2		5,148		-			-			5,150
Issuance of common stock, net of issuance costs		812,516		8		26,346		-			-			26,354
Warrant Issuance		-		-		7,578		-			-			7,578
Unrealized comprehensive loss on investments		-		-		-		(16	)		-			(16	)
Stock-based compensation		-		-		6,989		-			-			6,989
Net loss		-		-		-		-			(50,118	)		(50,118	)
Balance at September 30, 2021		64,442,601	$	644	$	932,776	$	(97	)	$	(447,665	)	$	485,658

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

Index

Rocket Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2022			2021
Operating Activities:
Net loss	$	(155,140	)	$	(124,822	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discount on convertible notes		-			752
Depreciation and amortization of property and equipment		2,883			2,188
Write down of property and equipment, net		177			-
Right of use asset		1,605			-
Stock-based compensation		21,316			22,200
Accretion of discount on investments, net		1,132			2,089
Expense in connection with warrant issuance		-			7,578
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(1,278	)		1,016
Accounts payable and accrued expenses		7,189			(2,842	)
Operating lease liabilities		(96	)		17
Finance lease liability		134			1,644
Other liabilities		(43	)		(42	)
Net cash used in operating activities		(122,121	)		(90,222	)
Investing activities:
Purchases of investments		(177,460	)		(226,484	)
Proceeds from maturities of investments		222,074			234,146
Payments made to acquire right of use asset		-			(18	)
Purchases of property and equipment		(5,355	)		(5,655	)
Net cash provided by investing activities		39,259			1,989
Financing activities:
Issuance of common stock, pursuant to exercise of stock options		308			10,191
Issuance of common stock, net of issuance costs		-			26,354
Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs		46,540			-
Net cash provided by financing activities		46,848			36,545
Net change in cash, cash equivalents and restricted cash		(36,014	)		(51,688	)
Cash, cash equivalents and restricted cash at beginning of period		234,037			298,666
Cash, cash equivalents and restricted cash at end of period	$	198,023		$	246,978

Supplemental disclosure of non-cash financing and investing activities:
Accrued purchases of property and equipment	$	1,747		$	1,132
Unrealized loss on investments	$	(435	)	$	(55	)
Conversion of convertible notes into common stock	$	-		$	(40,693	)
Reclassification of construction in process from finance right of use asset	$	-		$	39
Supplemental cash flow information:
Cash paid for interest	$	-		$	148

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

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. 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. 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

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

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

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations and had an accumulated deficit of $647.1 million as of September 30, 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 September 30, 2022, the Company sold 3.3 million shares of common stock for net proceeds of $46.6 million pursuant to the at-the-market offering program (see Note 7). As of September 30, 2022, the Company had $306.5 million of cash, cash equivalents and investments.

On October 6, 2022, the Company completed a follow-on offering (the “Offering”) pursuant to which it sold 7,820,000 shares of common stock for net proceeds of $108.2 million. With the proceeds from the Offering and the at-the-market offering program, the Company expects such resources will be sufficient to fund its operating expenses and capital expenditure requirements into the second 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 September 30, 2022 and the results of its operations and its cash flows for the three and nine months ended September 30, 2022. The financial data and other information disclosed in these consolidated notes related to the three and nine months ended September 30, 2022 and 2021 are unaudited. The results for the three and nine months ended September 30, 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.

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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:

	September 30,		December 31,
	2022		2021

Cash and cash equivalents	$	196,669	$	232,694
Restricted cash		1,354		1,343
	$	198,023	$	234,037

Income Taxes

In May 2022, the Company received a notice from the New York City Department of Finance regarding an audit of the NYC Biotechnology Credit for the tax periods ended December 31, 2018 through December 31, 2020, which is ongoing as of September 30, 2022.

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

The significant accounting policies used in the preparation of these consolidated financial statements for the three and nine months ended September 30, 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.

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
	September 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	152,398	$	-	$	-	$	152,398
		152,398		-		-		152,398

Investments:
United States Treasury securities		75,329		-		-		75,329
Corporate Bonds		-		34,536		-		34,536
		75,329		34,536		-		109,865

	$	227,727	$	34,536	$	-	$	262,263

	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:

	September 30,			December 31,
	2022			2021
Laboratory equipment	$	17,968		$	12,600
Machinery and equipment		10,807			10,432
Computer equipment		244			218
Furniture and fixtures		2,125			1,963
Leasehold improvements		568			407
Internal use software		1,903			1,902
		33,615			27,522
Less: accumulated depreciation and amortization		(8,002	)		(5,223	)
	$	25,613		$	22,299

During the three and nine months ended September 30, 2022 the Company recognized $1.1 million and $2.9 million of depreciation and amortization expense, respectively. During the three and nine months ended September 30, 2021 the Company recognized $0.8 million and $2.2 million of depreciation and amortization expense, respectively.

Index

6.	Accounts Payable and Accrued Expenses

As of September 30, 2022 and December 31, 2021, the Company’s accounts payable and accrued expenses consisted of the following:

	September 30,		December 31,
	2022		2021
Research and development	$	17,027	$	12,082
Property and equipment		1,747		728
Employee compensation		4,793		4,533
Government grant payable		597		597
Professional fees		1,779		1,196
Other		1,880		479
	$	27,823	$	19,615

7.	Stockholders’ Equity

At-the-Market Offering Program

On February 28, 2022, the Company entered into the Sales Agreement with Cowen with respect to an at-the-market offering program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares through Cowen as its sales agent. The shares to be offered and sold under the Sales Agreement, if any, will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3. The Company filed a prospectus supplement with the SEC on February 28, 2022 in connection with the offer and sale of the shares pursuant to the Sales Agreement.

The Company will pay Cowen a cash commission of 3.0% of gross proceeds from the sale of the shares pursuant to the Sales Agreement. The Company has provided Cowen with customary indemnification and contribution rights. The Company reimbursed Cowen for certain expenses incurred in connection with the Sales Agreement. Through September 30, 2022, the Company 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.

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:

	Nine Months Ended September 30,
	2022			2021

Risk-free interest rate		2.40	%		0.78	%
Expected term (in years)		5.82			5.84
Expected volatility		73.21	%		69.31	%
Expected dividend yield		0.00	%		0.00	%
Exercise price	$	15.79		$	53.98
Fair value of common stock	$	15.79		$	53.98

Index

The following table summarizes stock option activity for the nine months ended September 30, 2022, under the Second Amended and Restated 2014 Stock Option and Incentive Plan:

				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value

Outstanding as of December 31, 2021		11,143,761		$	14.51		5.95	$	128,817
Granted		2,192,166			15.79		6.30
Exercised		(30,824	)		9.99				167
Cancelled		(574,109	)		33.07
Outstanding as of September 30, 2022		12,730,994		$	13.91		5.68	$	88,457

Options vested and exercisable as of September 30, 2022		9,715,600		$	10.92		4.60	$	85,081
Options unvested as of September 30, 2022		3,015,394		$	23.48		9.15	$	3,376

The weighted average grant-date fair value per share of stock options granted during the nine months ended September 30, 2022, and 2021 was $15.79 and $53.98, respectively.

The total fair value of options vested during the nine months ended September 30, 2022 and 2021 was $26.9 million and $18.2 million, respectively.

Restricted Stock Units (“RSU”)

The following table summarizes the Company’s RSU activity for the nine months ended September 30, 2022:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Unvested as of December 31, 2021		23,500		$	30.61
Granted		939,122			16.10
Vested		(10,168	)		62.32
Forfeited		(56,585	)		16.10
Unvested as of September 30, 2022		895,869		$	16.23

Stock-based Compensation

Stock-based compensation expense recognized by award type was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Stock options	$	6,694	$	6,831	$	19,332	$	21,872
Restricted stock units		983		158		1,984		328
Total share based compensation expense	$	7,677	$	6,989	$	21,316	$	22,200

Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Research and development	$	3,040	$	3,084	$	8,247	$	9,148
General and administrative		4,637		3,905		13,069		13,052
Total share based compensation expense	$	7,677	$	6,989	$	21,316	$	22,200

As of September 30, 2022, the Company had an aggregate of $50.1 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 2.05 years.

Index

Warrants

A summary of the warrants outstanding as of September 30, 2022 is as follows:

Exercise 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