ROCKET PHARMACEUTICALS INC

Nature of Business and Basis of Presentation

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

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In September 2023, the FDA accepted the Biologics License Application (BLA) and granted priority review for RP-L201 for the treatment of severe LAD-I. Treatments in the FA Phase 2 studies were completed in 2023 with regulatory filings in the United States (“U.S.”) and Europe (“EU”) for FA anticipated in 2024. Additional work on a gene therapy program for the less common FA subtypes C and G is ongoing.

In the U.S., the Company also hastwo clinical stage andone pre-clinical stagein vivo adeno-associated virus (“AAV”) programs, which include programs for:

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Plakophilin-2 Arrhythmogenic Cardiomyopathy (“PKP2-ACM”), an inheritable cardiac disorder that is characterized by a progressive loss of cardiac muscle mass, severe right ventricular dilation, dysplasia, fibrofatty replacement of the myocardium and a high propensity to arrhythmias and sudden death. This program received FDA clearance of an Investigational New Drug (“IND”) application and the Company has initiated a Phase 1 study.

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

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

Risks and Liquidity

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

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

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations and had an accumulated deficit of $959.4 million as of December 31, 2023. As of December 31, 2023, the Company has $407.5 million of cash, cash equivalents, and investments. Included in the $407.5 million of cash, cash equivalents and investments balance is a payable for securities that have yet to be paid of $13.1 million related to investments in securities that were purchased in 2023 and settled in 2024. The net cash balance, when adjusting for this payable would have been $394.4 million. The Company expects such resources will be sufficient to fund the Company’s operating expenses and capital expenditure requirements into 2026.

On February 28, 2022, the Company entered into a sales agreement (the “Sales Agreement”), with Cowen 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 million (the“Shares”) through Cowen as its sales agent. On September 12, 2023, the Company and Cowen entered into an amendment (the “Amended Sales Agreement”) pursuant to which the aggregate offering amount available under the at-the-market offering program was reduced to $180.0 million. Through December 31, 2023, the Company has sold 4.2 million shares of common stock for net proceeds of $63.8 million pursuant to the at-the-market offering program (see Note 8 “Stockholders’ Equity”), including 0.9 million shares for net proceeds of $17.2 million during the year ended December 31, 2023.

On October 6, 2022, the Company completed a public offering of approximately 7.8 million shares of common stock for net proceeds of $108.1 million (see Note 8“Stockholder’s Equity”).

On September 15, 2023, the Company completed a public offering of approximately 9.5 million shares of our common stock at a public offering price of $16.00 per share and pre-funded warrants to purchase 3.1 million shares of common stock at a price of $15.99 per warrant. The gross proceeds from the public offering were approximately $201.3 million, net of approximately $12.4 million of offering costs, underwriting discounts and commissions, legal and other expenses for net proceeds from the offering of approximately $188.9 million(see Note 8 “Stockholder’s Equity”).

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.

Summary of Significant Accounting Policies

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 U.S. (“U.S. GAAP”). All intercompany accounts have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to goodwill and intangible asset impairments, the accrual of 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 13 “Leases” 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:

Government Grants

Research and development expense was presented net of reimbursements from CIRM (See Note 16“CIRM Grant” for additional disclosure).

Concentrations of credit risk and off-balance sheet risk

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

Investments

Investments consist of U.S. Treasury Securities and Corporate Bonds. Management determines the appropriate classification of these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its investments as available-for-sale pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 320, Investments—Debt and Equity Securities. Investments are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income (loss) in stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. Realized gains and losses are included in investment income on a specific-identification basis. The Company estimates expected credit losses for investments when unrealized losses exist. Unrealized losses that are credit related are recognized in the Company’s consolidated statement of operations and unrealized losses that are not credit related are recognized in accumulated other comprehensive income (loss). There wereno realized gains or losses on investments for the years ended December 31, 2023, 2022 and 2021. For the year ended December 31, 2023 there was net unrealized gains on investments of $0.7 million. For the years ended December 31, 2022 and 2021, there were net unrealized losses on investments of $0.2 million and $0.1 million, respectively.

Intangible Assets

Intangible assets consisted of an indefinite lived intangible IPR&D asset and a mice colony model. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. IPR&D intangible assets which are determined to have had a decrease in their fair value are adjusted downward and an expense is recognized in R&D expenses in the Consolidated Statements of Operations. These IPR&D intangible assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment based on indicators including progress of R&D activities, changes in projected development of assets, and changes in regulatory environment and future commercial markets. If a triggering event occurs that would indicate a potential impairment, the Company will perform a quantitative analysis to determine whether it is more likely than not that the fair value is below carrying amount. If a triggering event occurs that would indicate a potential impairment, the Company will perform a quantitative analysis to determine whether it is more likely than not that the fair value is below carrying amount. The annual impairment assessment for the IPR&D asset related to the Renovacor acquisition was performed as of December 1, 2023. No impairment of the IPR&D asset was recorded for the years ended December 31, 2023 and 2022. The mice colony model was impaired and written off during the year ended December 31, 2023.

Goodwill

Business combinations are accounted for under the acquisition method. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Goodwill is tested for impairment annually as of December 31, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company hasone segment andone reporting unit and as such review’s goodwill for impairment at the consolidated level. When testing goodwill, the Company has the option to first assess qualitative factors for reporting units that carry goodwill. The qualitative assessment includes assessing the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. These events and circumstances include macroeconomic conditions, industry and competitive environment conditions, overall financial performance, reporting unit specific events and market considerations. The Company also considers recent valuations of the reporting unit, including the magnitude of the difference between the most recent fair value estimate and the carrying value, as well as both positive and adverse events and circumstances, and the extent to which each of the events and circumstances identified may affect the comparison of a reporting unit’s fair value with its carrying value. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.

The Company performed the qualitative assessment of its goodwill and determined that it is more likely than not that the fair value of a reporting unit exceeds the carrying value of the reporting unit. As a result, the Company has determined there wasno goodwill impairment as of and for the years ended December 31, 2023, 2022 and 2021.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the useful lives of the asset which arethree tofifteen years. The Company capitalizes purchases of laboratory equipment, machinery and equipment, furniture and fixtures and leasehold improvements in relation to the facility at Cranbury, New Jersey, since it has been determined these assets have alternative future uses to the Company. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations. Costs incurred in connection with development or purchase of internal use software and cloud computing arrangements, including in-substance software licenses, are capitalized. Amortization is computed on a straight-line basis over the estimated useful life of the asset, which issix years. Capitalized software is included in property and equipment in the consolidated balance sheets.

Impairment of Long-Lived Assets

The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducted its impairment analyses of long-lived assets to be held and used in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. The Company recorded an impairment of theintangible long-lived asset related to the mice colony model of approximately $0.6 million during the year ended December 31, 2023. The Company also recorded write downs of property and equipment in each of the years ended December 31, 2023, 2022 and 2021.

Fair Value Measurements

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

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

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

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

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

Warrants

The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480, Distinguishing Liabilities from Equity and/or ASC Topic 815, Derivatives and Hedging, depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are included in interest and other income in the Company’s consolidated statements of operations. Equity-classified warrants are recorded within additional paid-in capital at the time of issuance and are not subject to remeasurement.

R&D expenses, which include salaries and staff costs, license costs, manufacturing and development costs, clinical trial expenses, depreciation and amortization expenses, regulatory and scientific consulting fees, as well as contract research, and stock-based compensation expense, are accounted for in accordance with ASC Topic 730, Research and Development. Accordingly, R&D costs are expensed as incurred.

Foreign Currency Transactions

Certain transactions during the years ended December 31, 2023, 2022 and 2021 are primarily denominated in Euros and British pounds. Gains and losses on foreign currency transactions were not significant for the years ended December 31, 2023, 2022 and 2021.

Treasury Stock

The Company records treasury stock at cost.

The Company issues stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units (“RSUs”). The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company measures the compensation expense of employee and non-employee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized on a straight-line basis over the period during which the employee and nonemployee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors.

The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs and services are classified or in which the award recipient’s service payments are classified. The Company recognizes compensation expense for at least the portion of awards that are vested. Forfeitures are accounted for as they occur.

New York State Life Sciences Research and Development Tax Credit

New York State (“NYS”) allows investors and owners of emerging technology companies focused on biotechnology to claim a tax credit against their NYS Tax return for certain expenditures incurred in NYS, including applicable R&D related expenditures. The credit is recognized as R&D incentives when the eligibility and amount has been approved by NYS. During the years ended December 31, 2023, 2022 and 2021, the Company recorded R&D incentive income of $0, $0.5 million, and $1.0 million, respectively related to the NYS Life Sciences Research and Development Tax Credit.

Income Taxes

The Company accounts for income taxes under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which the Company expects to recover or settle those temporary differences. The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. The Company reduces the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that the Company will not realize some or all of the deferred tax asset.

The Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet differences. In accordance with ASC 740, Income Taxes, the Company recorded a full valuation allowance to fully offset the net deferred tax asset because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets at December 31, 2023 and 2022.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Net Loss Per Share

The Company calculates net loss per share in accordance with FASB ASC 260, Earnings per Share. Basic net loss per share attributable to common shareholders is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Warrants that meet the definition of equity classification and that requires the holder to pay little or no consideration to receive shares upon exercise are considered outstanding in the context of basic earnings per share. Diluted net loss attributable to common shareholders is computed by adjusting net loss attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common shareholders is computed by dividing the diluted net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purposes of this calculation, outstanding options are considered potential dilutive common shares.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business inone operating segment.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources and consists of net loss and changes in unrealized gains and losses on investments.

Leases

The Company determines if an arrangement is a lease at inception. Operating and finance leases are presented in the Company’s consolidated balance sheet as right-of-use assets from leases, current lease liabilities and long-term lease liabilities. Certain of the Company’s lease agreements contain renewal options; however, the Company does not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments using an estimate of the Company’s collateralized borrowing rate for debt with a similar term. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the biotechnology industry. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations). For operating leases, the Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred.

Recent Accounting Pronouncements

There were no recent accounting pronouncements that impacted the Company or are expected to have a significant effect on the consolidated financial statements.

Accounting Pronouncements Not Adopted as of December 31, 2023

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

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

Fair Value of Financial Instruments

Items measured at fair value on a recurring basis are the Company’s investments. 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:

The Company classifies its money market mutual funds as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its U.S. Treasury Securities, Commercial Paper and Corporate 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.

The reconciliation of the Company’s warrant liability, which is recorded as part of Other Liabilities in the consolidated balance sheets, measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

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

The fair value of the Private Warrants has been estimated with the following assumptions:

The fair value change from December 1, 2022, to December 31, 2022, was immaterial.

Property and Equipment, Net

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

Depreciation and amortization during the years ended December 31, 2023, 2022, and 2021 was $4.9 million, $3.9 million and $3.2 million, respectively.

Intangible Assets and Goodwill

The Company’s intangible assets consisted of an indefinite lived intangible IPR&D asset and a mice colony model received from the acquisition of Renovacor. Intangible assets as of December 31, 2023 and 2022 are summarized as follows:

The Company holds intangible assets as a result of the acquisition of Renovacor (see Note 17 “Renovacor Acquisition”). The decrease in gross carrying value of intangibles at December 31, 2023 compared to December 31, 2022 was due to an impairment charge related to a reduction in the estimated fair value of the mice colony model to reflect the limited benefit of the model.

The carrying value of Goodwill as of December 31, 2023 and 2022 was $39.2 million and included $8.3 million as a result of the acquisition of Renovacor in 2022 (see Note 17 “Renovacor Acquisition”):

Accounts Payable and Accrued Expenses

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

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

Stockholders’ Equity

Common Stock

The Company is currently authorized to issue up to 120,000,000 shares of $0.01 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.

Second Amended and Restated 2014 Stock Option and Incentive Plan

In March 2018, Rocket’s Board of Directors approved the Second Amended and Restated 2014 Stock Option and Incentive Plan (the “Revised 2014 Plan”) which was approved by the Company’s shareholders at the Annual Meeting held on June 25, 2018.

Treasury Stock

During the year ended December 31, 2023, the Company recorded sale of treasury stock of $0.06 million. During the year ended December 31, 2022, the Company recorded a repurchase of treasury stock of $0.05 million for shares withheld to pay the payroll tax liability of the vesting of RSUs. There wasno treasury stock as of December 31, 2023.

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 December 31, 2023, the Company sold 4.2 million shares under the at-the-market offering program for gross proceeds of $65.8 million, less commissions of $2.0 million for net proceeds of $63.8 million. During the year ended December 31, 2023, the Company sold 0.9 million shares under the at-the-market offering program for gross proceeds of $17.8 million, less commissions of approximately $0.6 million for net proceeds of $17.2 million. During the year ended December 31, 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. On September 12, 2023, the Company and Cowen entered into the Amended Sales Agreement pursuant to which the aggregate offering amount available under the at-the-market offering program was reduced to $180.0 million.

Public Offerings

On October 6, 2022, the Company completed a public offering of approximately 7.8 million shares of our common stock at a public offering price of $14.75 per share. The gross proceeds from the public offering were approximately $115.3 million, net of $7.2 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of $108.1 million.

On September 15, 2023, the Company completed a public offering of approximately 9.5 million shares of its common stock at a public offering price of $16.00 per share and pre-funded warrants to purchase 3.1 million shares of common stock at a price of $15.99 per warrant. The gross proceeds from the public offering were approximately $201.3 million, net of $12.4 million of offering costs, underwriting discounts and commissions, legal and other expenses for net proceeds from the offering of $188.9 million.

Stock-Based Awards

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:

The following table summarizes stock option activity for the years ended December 31, 2023 and 2022:

The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2023, 2022 and 2021 was$13.37, $9.88, and $31.07, respectively.

The total fair value of options vested during the years ended December 31, 2023, 2022 and 2021 was$26.5 million, $34.9 million and $22.6 million, respectively.

Restricted Stock Units (“RSU”)

The following table summarizes the RSU activity for the years ended December 31, 2023 and 2022:

(1) Common stock issued is net of 120 shares related to taxes.

The total fair value of RSU’s vested during the years ended December 31, 2023, 2022 and 2021 was$6.8 million, $0.8 million, and $0.4 million, respectively.

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

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

As of December 31, 2023, the Company had an aggregate of$52.5 million of unrecognized stock-based compensation expense, which is expected to be recognized over the weighted average period of 1.83 years.

Warrants

A summary of the Company’s outstanding warrants at December 31, 2023 is as follows:

The following table below is the summary of changes in the Company’s warrants to purchase common stock for the years ended December 31, 2023 and 2022:

The Company issued warrants to a related party during the years ended December 31, 2023 and 2021. For the year ended December 31, 2023, the Company sold pre-funded warrants to purchase 3,126,955 shares of common stock (see Note 8“Stockholders Equity”). For the year ended December 31, 2021, the Company incurred a non-cash R&D expense of $12.8 million related to the issuance of the 2021 warrants (see Note 18 “Related Party Transactions”). No warrants were issued to the related party during the year ended December 31, 2022.

Assumed Renovacor Public Warrants

In conjunction with the Renovacor acquisition (see Note 17 “Renovacor Acquisition”) Rocket assumed outstanding original 8,622,644 pre-acquisition public warrants (“Public Warrants”) which were issued in connection with Renovacor’s initial public offering in April 2020. Each Public Warrant initially entitled the holder to purchaseone-half of one share of Renovacor’s common stock at an initial exercise price of $11.50 per whole share, subject to adjustment. No fractional shares will be issued upon exercise of the Public Warrants.

Therefore, the Public Warrants must be exercised in multiples oftwo Public Warrants forone share of the Company’s common stock. The Public Warrants will expire five years following the SPAC merger closing date, or earlier upon redemption or liquidation. As a result of the acquisition, these former Renovacor Public Warrants were converted into Rocket warrants with a right to purchase 760,086 of Rocket common shares at an exercise price of $65.23 per share.

The Company may redeem the Public Warrants in whole and not in part at a price of $0.01 per Public Warrant at any time during the exercise period upon a minimum of 30 days’ prior written notice of redemption if, and only if, the last sale price of the Company’s common stock equals or exceeds $90.75 per share for any 10 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such Public Warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

To date, certain of the above conditions have not been met to redeem the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants.

The Company determined that the Public Warrants met all of the criteria for equity classification. Accordingly, upon closing of the Merger in 2022, the Public Warrants were recorded as a component of additional paid-in capital of $3.4 million.

Assumed Renovacor Private Warrants

Prior to the acquisition, Renovacor had outstanding 3,500,000 warrants (“Private Warrants”) which were issued simultaneously with the closing of the Renovacor Initial Public Offering (“Renovacor IPO”), pursuant to a private placement transaction. Each Private Warrant was exercisable to purchaseone share of Renovacor’s common stock at an exercise price of $11.50. The Private Warrants are identical to the Public Warrants except that the Private Warrants (i) will be exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and (ii) will not be non-redeemable by the Company, in each case, so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Private Warrants purchased by Chardan Capital Markets will not be exercisable more than five years from the effective date of the Renovacor IPO, in accordance with FINRA Rule 5110(f)(2)(G)(i), as long as Chardan Capital Markets or any of its related persons beneficially own these Private Warrants.

As a result of the acquisition, the Private Warrants were converted into warrants with a right to purchase 617,050 of Rocket common shares at an exercise price of $65.23 per share.

The Company determined that the Private Warrants did not meet all of the criteria for equity classification. Accordingly, the Company classifies the Private Warrants as a derivative liability in other liabilities in the consolidated balance sheets. The Company measures the fair value of the warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s operating results for the current period. See Note 4 “Fair Value of Financial Instruments” for discussion of fair value measurement of the warrant liability.

Assumed Renovacor Pre-Funded Warrants

Concurrently with the execution of the SPAC Merger Agreement, Renovacor entered into subscription agreements (the “Subscription Agreements”), with certain investors (“PIPE Investors”), including Chardan Healthcare, certain stockholders of Old Renovacor and certain other institutional and accredited investors, pursuant to which, on the SPAC Closing Date, and concurrently with the closing of the SPAC Business Combination, the PIPE Investors purchased an aggregate of 2,284,776 shares of Renovacor’s common stock, at a price of $10.00 per share, and a pre-funded warrant entitling the holder thereof to purchase 715,224 shares of Renovacor’s common stock (the“Pre- Funded Warrant”) at an initial purchase price of $9.99 per share underlying the Pre-Funded Warrant, for aggregate gross proceeds of approximately $30.0 million (the“PIPE Investment”). The Pre-Funded Warrant was immediately exercisable at an exercise price of $0.01 and is exercisable indefinitely, provided that the holder of the Pre-Funded Warrant was prohibited from exercising such Pre-Funded Warrant in an amount that would cause such holder’s beneficial ownership of our Common Stock to exceed 9.99%, which limitation may be increased up to 19.99% at the option of the holder from time to time.

As a result of the acquisition, these Pre-Funded Warrants were converted into warrants with a right to purchase 126,093 of Rocket common shares at an exercise price of $0.06 per share. These warrants were exercised in January 2023.

The Company determined that the Pre-Funded Warrants met all of the criteria for equity classification. Accordingly, upon closing of the Merger, the Public Warrants were recorded as a component of additional paid-in capital of $2.3 million.

RTW Pre-Funded Warrants

In September 2023, in connection with the Company’s public offering, the Company sold approximately 3.1 million Pre-Funded Warrants to purchase shares of the Company’s common stock to funds affiliated with RTW Investments, LP, the Company’s largest shareholder. The Pre-Funded Warrants were sold for a price of $15.99 per share underlying the Pre-Funded Warrant and were immediately and indefinitely exercisable at an exercise price of $0.01.

Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

In 2023, the Company included the 3,126,955 potential shares from the pre-funded warrants acquired by RTW as it was determined that these met the definition for equity classification and only requires the holder to pay $0.01 per share upon exercise.

The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Income Taxes

No provision for federal or state income taxes was recorded during the years ended December 31, 2023, 2022 and 2021, as the Company incurred operating losses and maintains a full valuation allowance against its net deferred tax assets.

A reconciliation of income tax benefit computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

On October 4, 2023, the Governor of Massachusetts signed into law a bill that included the adoption of a single sales apportionment factor effective on January 1, 2025. As required under ASC 740, the Company has accounted for the deferred tax impacts of this tax law change in the period the tax law was enacted, which has the impact of reducing its state deferred tax assets. The impact of the tax law change is offset by a change in valuation allowance.

Intellectual property rights in different jurisdictions are reflected in the Company’s effective tax rate.

The significant components of the Company’s deferred income tax assets and liabilities after applying the enacted corporate tax rates are as follows:

As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $197.7 million and $77.2 million, respectively. The state NOL begins to expire in 2026. Additionally, $197.7 million of the federal NOL can be carried forward indefinitely. The Company has federal R&D credits of $21.0 million which will begin to expire in 2038.

As required by ASC 740, Income Taxes, the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of NOL carryforwards and capitalized research and development costs. As a result of the fact that the Company has incurred tax losses from inception, management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state net deferred tax assets and, as a result, a full valuation allowance has been established against its net deferred tax assets as of December 31, 2023, 2022 and 2021. The Company has offset certain deferred tax liabilities with deferred tax assets that are expected to generate offsetting deductions within the same period. During the years ended December 31, 2023 and 2022, the valuation allowance increased by $17.2 million and decreased by $2.1 million, respectively. Realization of deferred tax assets is dependent upon the generation of future taxable income.

Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company has completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company became a “loss corporation” as defined in Section 382. The Company experienced multiple ownership changes occurring in 2005, 2007, 2015, and 2018. The ownership change has and will continue to subject our pre-ownership change net operating loss carryforwards to an annual limitation, which will significantly restrict our ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. As a result of the ownership change, the Company is limited to an approximate $1.7 million annual limitation on our ability to utilize our pre-merger NOL’s and R&D Credits. Due to this limitation, approximately $91.2 million of the $127.1 million pre-merger Federal NOL will expire unutilized as the cumulative limitation amount over a 20-year carryforward period is $35.8 million. Additionally, $4.9 million of federal R&D credits will expire unutilized. As a result, the Company has reduced its deferred tax assets related to the Federal NOL and federal R&D credits by an aggregate of $4.9 million which is offset by the corresponding decrease in the valuation allowance. In conjunction with the Renovacor Acquisition (see Note 17 “Renovacor Acquisition”), the Company acquired Renovacor’s federal NOL’s of $46.4 million. The Company has completed a study to assess whether an ownership change has occurred as a result of the transaction. The Company experienced ownership changes occurring in 2021 and 2022. As a result of the ownership changes, the Company is limited on our ability to utilize our Renovacor NOL’s. As a result of the Company’s study, any limitation under IRC Sec. 382 would not result in NOLs expiring unused.

The Company evaluated intercompany transfer pricing agreements. Based on a review of the 2018, 2019 and 2020 tax years, the Company determined that a markup of 10% should have been applied to R&D expenses paid for on behalf of Rocket Pharmaceuticals, Ltd by Rocket Pharmaceuticals, Inc. The net impact was to reduce the Company’s net operating losses for 2018, 2019 and 2020. No income tax expense was recorded as a result of these adjustments.

The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which the Company operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2023, 2022 and 2021, the Company hasnot recorded any uncertain tax positions in its financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. As of December 31, 2023 and 2022, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets.

Leases

Finance Lease

The Company has a lease for a facility in Cranbury, New Jersey, consisting of 103,720 square feet of space including areas for offices, process development, research and development laboratories and 50,000 square feet dedicated to AAV Current Good Manufacturing Practice(“cGMP”) manufacturing facilities to support the Company’s pipeline (such lease, as amended, the “NJ Lease Agreement”). The NJ Lease Agreement has a 15-year term from September 1, 2019, with an option to renew fortwo consecutive five-year renewal terms.

Estimated rent payments for the NJ Lease Agreement are $1.2 million per annum, payable in monthly installments, depending upon the nature of the leased space, and subject to annual base rent increases of 3%. The total commitment under the lease is estimated to be approximately $29.3 million over the 15-year term of the lease. The Company paid a cash security deposit of $0.3 million to the landlord in connection with the NJ Lease Agreement which has been reflectedas part of deposits in the consolidated balance sheets as of December 31, 2023 and 2022.

Operating Leases

On June 7, 2018, the Company entered into athree-year lease agreement for office space in the Empire State Building in New York, NY (the“ESB Lease Agreement”). In connection with the ESB Lease Agreement, the Company established an irrevocable standby letter of credit (the “Empire LOC”) for $0.9 million. On March 26, 2021, the Company entered into Amendment No. 1 to the ESB Lease Agreement (“ESB Lease Amendment”) that extended the term of the lease agreement to June 30, 2024, reduced the rent payments going forward, and reduced the Empire LOC to $0.8 million. The Empire LOC serves as the Company’s security deposit on the lease in which the landlord is the beneficiary and expires August 29, 2024.

The Company has a certificate of deposit of $0.8 million with a bank as collateral for the Empire LOC which is classified as part of restricted cash in the consolidated balance sheets as of December 31, 2023, and 2022, respectively.

On January 4, 2018, in connection with the Reverse Merger with Inotek, the Company assumed an operating lease for Inotek’s former headquarters in Lexington, Massachusetts, with a term which ended on February 28, 2023. In July 2018, the Company signed an agreement to sublease a portion of the Lexington, Massachusetts space and in September 2018, the Company signed an agreement to sublease the remaining portion of the Lexington, Massachusetts space. Rental income received under the sublease agreement totaled $0.3 million for the year ended December 31, 2023, and $0.4 million for the years ended December 31, 2022 and 2021. These amounts were netted against rent expense in the consolidated statements of operations. A security deposit of $0.2 million was returned to the Company in April 2023.

On November 15, 2022, the Company entered into a lease agreement with a lease term until October 31, 2024, for laboratory space in Madrid, Spain. The lease commenced on April 1, 2023 and the Company recognized a right-of-use asset and corresponding lease liability of approximately $0.2 million each.

On December 1, 2022, in connection with the Renovacor acquisition (see Note 17 “Renovacor Acquisition”), the Company acquired the Renovacor operating leases for space at facilities in Hopewell, New Jersey and Cambridge, Massachusetts with remaining lease terms of approximately 10.25 and 1.3 years, respectively. Asof December 31, 2023, lease commencement dates have occurred for all leases andthe Company recognized total right-of-use assets of $3.8 million with corresponding total lease liabilities of $3.6 millionat lease commencement dates, which include right-of-use assets of $2.7 million and lease liabilities of $2.6 million for leases that commenced in 2023. The Company intends to sublease the facilities in Hopewell, New Jersey and signed an agreement to sublease one of these facilities in January 2024.

Rent expense was $2.3 million, $1.2 million, and $1.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The total restricted cash balance for the Company's operating and finance leases as of December 31, 2023 and 2022 was $0.8 million.

Operating lease cost was $1.4 million, $0.8 million, and $0.6 million for the years ended December 31, 2023,2022 and 2021, respectively.

The following table summarizes lease cost for theyears ended December 31, 2023, 2022 and 2021:

The following table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis:

The following table summarizes the operating and financing lease liabilities and right-of-use assets as of December 31, 2023 and 2022:

Commitments and Contingencies

Litigation

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, the Company does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Indemnification Arrangements

Pursuant to its bylaws and as permitted under Delaware law, the Company has indemnification obligations to directors, officers, employees or agents of the Company or anyone serving in these capacities. The maximum potential amount of future payments the Company could be required to pay is unlimited. The Company has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.

Throughout the normal course of business, the Company has agreements with vendors that provide goods and services required by the Company to run its business. In some instances, vendor agreements include language that requires the Company to indemnify the vendor from certain damages caused by the Company’s use of the vendor’s goods and/or services. The Company has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, the Company believes that the estimated fair value of these indemnification commitments is minimal.

Agreements Related to Intellectual Property

The Company, directly and through its subsidiary Spacecraft Seven, LLC, has various license and research and collaboration arrangements. The transactions principally resulted in the acquisition of rights to intellectual property which is in the preclinical phase and has not been tested for safety or feasibility. In all cases, the Company did not acquire tangible assets, processes, protocols or operating systems. The Company expenses the acquired intellectual property rights as of the acquisition date on the basis that the cost of intangible assets purchased from others for use in research and development activities, has no alternative future uses.

License Agreements with CIEMAT

In March 2016, the Company entered into a license agreement with CIEMAT, CIBER, and FIISFJD, (collectively, “CIEMAT”), granting Rocket worldwide, exclusive rights to certain patents, know-how and other intellectual property relating to LVs containing the human PKLR gene solely within the field of treating PKD. Under the terms of the agreement, the Company is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public, (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at leasttwo uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, Rocket is obligated to pay CIEMAT an up-front payment, royalty payments based on net sales of products or processes involving any of the licensed intellectual property, developmental and regulatory milestone payments, and sublicense revenue payments. The Company is responsible for prosecuting and maintaining the licensed patents at its expense, in cooperation with CIEMAT. Rocket also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with CIEMAT. For five years following the effective date of the license agreement, the Company has a right of first refusal to license any improvements to the licensed intellectual property obtained by CIEMAT at market value. Rocket is obligated to license (without charge) to CIEMAT for non-commercial use any improvements to the licensed intellectual property that it creates.

As consideration for the licensed rights, Rocket paid CIEMAT an initial upfront license fee of €0.03 million (approximately $0.03 million) which was expensed as R&D costs. The Company is obligated to make aggregate milestone payments of up to €1.4 million (approximately $1.5 million) to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the PKD license, Rocket is obligated to pay a low to mid-single digit percentage royalty on net sales, subject to specified adjustments, by the Company or its sublicensees or affiliates. In the event that Rocket enters into a sublicense agreement with a sublicensee, it will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances.

Rocket may terminate this agreement at any time by providing CIEMAT with 90 days advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country.

In July 2016, Rocket entered into a license agreement with CIEMAT granting it worldwide, exclusive rights to certain patents, know-how, data and other intellectual property relating to LVs containing the FANCA gene solely within the field of human therapeutic uses of VSV-G packaged integration component LVs for FA type-A gene therapy. This license is only sublicensable with the prior consent of CIEMAT, not to be unreasonably withheld. Under the terms of the agreement, Rocket is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at leasttwo uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, the Company is obligated to pay CIEMAT an up-front payment, royalty payments based on net sales of products or processes involving any of the licensed intellectual property, regulatory and financing milestone payments, and sublicense revenue payments. The Company is responsible for prosecuting and maintaining the licensed patents at our expense, in cooperation with CIEMAT. Rocket also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with CIEMAT. For five years following the effective date of the license agreement, the Company has a right of first refusal to license any improvements to the licensed intellectual property obtained by CIEMAT at market value. Rocket is obligated to license (without charge) to CIEMAT for non-commercial use any improvements to the licensed intellectual property thatit creates.

As consideration for the licensed rights, Rocket paid CIEMAT an initial upfront license fee of €0.1 million (approximately $0.1 million), which was expensed as R&D costs. The Company is obligated to make aggregate milestone payments of up to €5.0 million (approximately $6.0 million) to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the license, Rocket is obligated to pay a mid-single digit percentage royalty on net sales, subject to specified adjustments, by Rocket or its sublicensees or affiliates. In the event that the Company enters into a sublicense agreement with a sublicensee, the Company will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances.

Rocket may terminate this agreement at any time by providing CIEMAT with 90 days’ advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country.

License Agreement for LAD-I with CIEMAT and UCLB

The Company entered into a license agreement in November 2017, effective September 2017, with CIEMAT and UCL Business PLC (“UCLB”), collectively referred to as (“Licensors”), granting the Company worldwide, exclusive rights to certain patents, know-how and other intellectual property relating to LVs containing the human LAD-I gene solely within the field of treating LAD-I. Under the terms of the agreement, Rocket is obligated to use commercially reasonable efforts to (a) develop and obtain regulatory approval for one or more products or processes covered by the licensed intellectual property, introduce such products or processes into the commercial market and then make them reasonably available to the public, (b) develop or commercialize at least one product or process covered by the licensed intellectual property in at least one country for at leasttwo uninterrupted years following regulatory approval, and (c) use the licensed intellectual property in an adequate, ethical and legitimate manner. In exchange for the license, the Company is obligated to pay Licensors an up-front payment, royalty payments in the mid-single digit percentages based on net sales of products or processes involving any of the licensed intellectual property, developmental and regulatory milestone payments, and sublicense revenue payments. Rocket is responsible for prosecuting and maintaining the licensed patents at its expense, in cooperation with Licensors. The Company also has the first responsibility to enforce and defend the licensed patents against infringement and/or challenge, in cooperation with Licensors. For five years following the effective date of the license agreement, Rocket has a right of first refusal to license any improvements to the licensed intellectual property obtained by Licensors at market value. The Company is obligated to license (without charge) to Licensors for non-commercial use any improvements to the licensed intellectual property that it creates.

As consideration for the licensed rights, Rocket paid Licensors an initial upfront license fee of €0.03 million (approximately $0.04 million), which was expensed as R&D costs. The Company is obligated to make aggregate payments of up to €1.4 million (approximately $1.5 million) to Licensors upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the LAD-I license, Rocket is obligated to pay a mid-single digit percentage royalty on net sales, subject to specified adjustments, by the Company or its sublicensees or affiliates. In the event that the Company enters into a sublicense agreement with a sublicensee, it will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances.

Rocket may terminate this agreement at any time by providing the Licensors with 90 days advance notice. The license is in effect for a duration for each of the countries defined in this agreement for as long as a license right exists that covers the licensed product or process in such country, or until the end of any additional legal protection that should be obtained for the license rights in each country.

License Agreement for DD with UCSD

In February 2017, the Company entered into a License Agreement with The Regents of the University of California, represented by its San Diego campus (“UCSD”), under which UCSD granted us an exclusive, sublicensable, worldwide license to certain intellectual property rights for the treatment of lysosomal storage diseases, including DD. In exchange for the license, the Company became obligated to make an up-front payment, certain clinical and commercial milestone payments, royalty payments (on net sales of products covered by a valid claim within the licensed intellectual property), maintenance fees and sublicense revenue payments. The upfront license fee of $0.05 million was expensed as research and development costs in 2020. The Company is obligated to make aggregate milestone payments of up to $1.5 million to UCSD upon the achievement of specified development and regulatory milestones for the treatment of DD. A reduced schedule of milestone payments applies to achieving the same milestones for additional indications. With respect to any commercialized products covered by the agreement, the Company is obligated to pay a low single digit percentage royalty on net sales, subject to specified adjustments. If it enters into a sublicense agreement with a sublicensee, it will be obligated to pay a portion of any consideration received from such sublicensees in specified circumstances. The Company is also subject to certain diligence milestones for development of a product using the intellectual property licensed from UCSD under this agreement. The term of the license agreement with UCSD is through the expiration of the licensed patents, some of which are still in the pending application phase.

REGENXBIO, Inc. License

On November 19, 2018, the Company entered into a license agreement with REGENXBIO Inc. (“RGNX”), pursuant to which the Company obtained an exclusive license for all U.S. patents and patent applications related to RGNX’s NAV AAV-9 vector for the treatment of DD in humans byin vivo gene therapy using AAV-9 to deliver any known LAMP2 transgene isoforms and all possible combinations of LAMP2 transgene isoforms (the “Field”), as well as an exclusive option to license (the “Option Right”) all U.S. patents and patent applications fortwo additional NAV AAV vectors in the Field (each, a“Licensed Patent” and collectively, the “Licensed Patents”).

Under the terms of the license agreement, the Company is obligated to use commercially reasonable efforts to develop, commercialize, market, promote and sell products incorporating the Licensed Patents (“Licensed Products”). Unless the license agreement is terminated earlier as provided below, the license from RGNX expires on a country-by-country, Licensed Product-by-Licensed Product basis until the later of the expiration date of the last to expire of the last valid claim of the applicable Licensed Patent orten years after the first commercial sale of a Licensed Product in such country. The license agreement provides that RGNX may terminate the agreement upon a material breach by the Company if the Company does not cure such breach within a specified notice period if the Company commences a challenge against RGNX or certain of its licensors to declare or render invalid or unenforceable the licensed patents or upon the Company’s bankruptcy or insolvency. The Company may terminate the agreement in its entirety or terminate one or more of the licensed vectors at any time uponsix months’ notice. The Company’s Option Right expired four years from the date of the license agreement.

In consideration for the rights granted to the Company under the license agreement, the Company made an upfront payment to RGNX of $7.0 million. The license agreement provides for royalties payable to RGNX in the high-single digits to low-teens on net sales levels of Licensed Products during the royalty term. If successful, the Company will be required to make milestone payments to RGNX of up to $13.0 million for each Licensed Product upon the achievement of specified clinical development and regulatory milestones in the U.S. and EU. In addition, the Company shall pay RGNX 20% of the payment fees received from a priority review voucher issued in connection with or otherwise related to a Licensed Product. These royalty obligations are subject to specified reductions if additional licenses from third parties are required. The Company must also pay RGNX a portion of all non-royalty sublicense income (if any) received from sublicensees. The Company paid and expensed a $1.0 million license fee payment under the RGNX agreement upon the dosing of the first DD patient in 2019 and a $2.0 million license fee payment upon initiation of a Phase 2 pivotal trial in 2023. There wereno additional milestones achieved or related payments made during the years ended December 31, 2023, 2022 and 2021.

CIRM Grants

LAD-I CIRM Grant

On April 30, 2019, the CIRM awarded the Company up to $7.5 million under a CLIN2 grant award to support the clinical development of its LV-based gene therapy for RP-L201. Proceeds from the grant will help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients enrolled at the U.S. clinical site, UCLA Mattel Children’s Hospital, led by principal investigator Donald Kohn, M.D., UCLA Professor of Microbiology, Immunology and Molecular Genetics, Pediatrics (Hematology/Oncology), Molecular and Medical Pharmacology and member of the Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at UCLA. Through December 31, 2023, the Company has received$5.8 million in total RP-L201 grants from CIRM. As of December 31, 2023, the Company met the final CIRM milestone and recorded a receivable of $0.05 million, included in prepaid and other current assets in the consolidated balance sheet, recorded as a reduction of research and development expenses. The Company received the $0.05 million final milestone payment on January 2, 2024.

Renovacor Acquisition

On September 19, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Renovacor, a Delaware corporation pursuant to which, on December 1, 2022, the Company acquired Renovacor (the “Renovacor Acquisition”). On December 1, 2022, pursuant to the terms of the Merger Agreement, (i) Merger Sub I merged with and into the Company (the “First Merger”) and (ii) the Company, as the surviving company of the First Merger merged with and into Merger Sub II (the “Second Merger”), with Merger Sub II surviving the Second Merger. Subject to the terms and conditions of the Merger Agreement, at the closing of the Renovacor Acquisition each share of Renovacor’s common stock outstanding immediately prior to the effective time of the First Merger were canceled and converted into the right to receive 0.1763 (the“Exchange Ratio”) of fully paid and non-assessable shares of the Company common stock, which was determined on the basis of the exchange formula set forth in the Merger Agreement that was subject to adjustment depending on the level of the Renovacor’s net cash at the closing. Prior to the market opening on December 1, 2022, Renovacor shares ceased to trade on NYSE and upon the closing of the acquisition, Renovacor’s outstanding common stock were converted into 3,391,976 shares of Rocket common stock.

Total consideration for the Renovacor Acquisition was $72.3 million, consisting of $62.4 million for common stock outstanding, $2.7 million for the portion of equity compensation attributable to the pre-combination service period, and $7.2 million for assumed warrants. The consideration was based on the estimated fair values on the acquisition date of (i)3,391,976 common shares issued for shares outstanding for common shares of Renovacor,(ii)estimated fair value of employee stock options to acquire 367,852 common shares of the Company,(iii)28,798 common shares issued for employee time-vesting RSUs, and (iv) warrants to acquire 1,503,229 common shares (see Note 10 “Warrants”).

The total consideration for the acquisition of Renovacor of $72.3 million consisted of the following:

(1)

Represents consideration paid for cash in lieu of fractional shares.

(2)

Assumed Renovacor Warrants of $7,183 with $5,671 classified as equity and $1,512 classified as liabilities.

The acquisition has been accounted for as a business combination using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the fair value of acquired IPR&D assets are classified as indefinite-life assets until the successful completion or abandonment of the associated research and development efforts.

The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the acquisition date based on their respective fair values summarized below:

(1)

Includes other receivables, prepaid expenses, account payable and accrued liabilities

The fair value assigned to acquired IPR&D was based on the present value of expected after-tax cash flows attributable to Renovacor’s most advanced AAV-based gene therapy targeting BAG3-DCM. The present value of expected after-tax cash flows was determined by estimating the after-tax costs to complete development into a commercially viable product, estimating future revenue and ongoing expenses to produce, and discounting the resulting net cash flows to present value. The cost and revenue projections used were reduced based on the assessed probabilities of different stages of development. Acquired IPR&D will be accounted for as an indefinite-lived intangible asset until regulatory approval in a major market or discontinuation of development.

The excess of purchase price over the fair value of amounts assigned to identifiable assets acquired and liabilities assumed represents the goodwill amount of $8.3 million resulting from the acquisition. The goodwill recorded as part of the acquisition is primarily attributable to the broadening ofthe Company’s portfolio and research capabilities, deferred taxes and the assembled workforce. The goodwill attributable to the acquisition has been recorded as a non-current asset inthe Company’s consolidated balance sheet and is not amortized, but subject to review for impairment annually. The Company incurred $3.2 million of acquisition related general and administrative costs during the year ended December 31, 2022.

Related Party Transactions

On December 21, 2020, the Company entered into a consulting agreement with a related party. Pursuant to the consulting agreement, the related party provides certain business development and asset identification consulting services to the Company. On August 9, 2021, the Company issued a warrant exercisable for 301,291 shares of common stock to the same related party for business development and asset identification consulting services (“August 2021 Warrant”). The Company recorded a non-cash R&D expense of $7.6 million during year ended December 31, 2021, related to the issuance of the August 2021 warrant. On December 17, 2021, the Company issued warrants exercisable for 153,155 and 153,155 shares of common stock, respectively to the same related party for business development and asset identification consulting services (“December 2021 Warrants”). The Company recorded a non-cash R&D expense of $5.2 million during year ended December 31, 2021, related to the issuance of the December 2021 warrant. Total non-cash R&D expense of $12.8 million during the year ended December 31, 2021, related to the issuance of the August 2021 and December 2021 warrants.

In September 2021, the Company entered into a consulting agreement with a member of the Board of Directors for pipeline development, new asset evaluation, and corporate strategy. In lieu of cash for services to be provided under the consulting agreement during itsone-year term, the Company granted the board member options to purchase 20,000 shares of the Company’s common stock with a fair value of $0.4 million.

In June 2023, the Company entered into a consulting agreement with the spouse of one of the Company’s executive officers for information technology advisory services. The Company incurred expenses of approximately $0.02 million for the year ended December 31, 2023, relating to services provided under this agreement.

In September 2023, in connection with the Company’s public offering, the Company sold approximately 3.1 million pre-funded warrants to purchase shares of the Company’s common stock to funds affiliated with RTW Investments, LP, the Company’s largest shareholder (see Note 8 “Stockholders’ Equity”).

401(k) Savings Plan

The Company has a defined contribution savings plan (the “Plan”) under Section 401(k) of the Internal Revenue Code of 1986. This Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the Plan may be made at the discretion of the Company’s Board of Directors. The Company has elected the safe harbor match of 4% of employee contributions to the Plan, subject to certain limitations. The Company’s matching contribution for the years ended December 31, 2023, 2022, and 2021 was $1.4 million, $0.9 million, and $0.6 million, respectively.