ROCKET PHARMACEUTICALS INC

Comparison of the Three Months Ended March 31, 2024 and 2023

Research and Development Expenses

R&D expenses decreased $1.1 million to $45.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in R&D expenses was primarily driven by decreases in manufacturing and development and direct costs of $5.8 million. Decreases were partially offset by increases in the costs for compensation and benefits of $1.4 million due to increased R&D headcount, professional fees of $1.1 million, laboratory supplies of $0.9 million, non-cash stock compensation expense of $0.8 million, and clinical trial costs of $0.6 million.

General and Administrative Expenses

G&A expenses increased $6.3 million to $22.1 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase in G&A expenses was primarily driven by increases in commercial preparation related expenses of $3.3 million, legal expenses of $1.5 million, and non-cash stock compensation expense of $0.5 million.

Other Income, Net

Other income increased $1.5 million to $5.3 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase in other income was primarily driven by an increase in accretion of discount on investments, net, of $0.3 million and an increase in interest and other income, net, of $1.1 million. The increase in interest and other income, net, of $1.1 million was due to primarily decreased fair value of warrant liability of $1.1 million.

Liquidity and Capital Resources

We have not generated any revenue and have incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, those related to drug candidate development, technology and data security, patents and proprietary rights, our lack of commercial manufacturing marketing or sales experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional R&D efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities.

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

Our consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Rocket has incurred net losses and negative cash flows from its operations each year since inception. Rocket incurred net losses of $62.1 million for the three months ended March 31, 2024, and $245.6 million for the year ended December 31, 2023. We have experienced negative cash flows from operations and as of March 31, 2024 and December 31, 2023, we had an accumulated deficit of $1.02 billion and $959.4 million, respectively. As of March 31, 2024, we had $330.3 million of cash, cash equivalents and investments. Excluded from the $330.3 million of cash, cash equivalent and investments are receivables from maturity of securities that have yet to be received of $8.6 million recorded as part of prepaid expenses and other current assets. The net balance of cash, cash equivalent and investments balance when adjusting for this receivable would have been $338.9 million. We expect such resources would be sufficient to fund our operating expenses and capital expenditure requirements into 2026. We have funded our operations primarily through the sale of equity.

In the longer term, our future viability is dependent on our ability to generate cash from operating activities or to raise additional capital to finance our operations. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities, in thousands, for each of the periods presented:

Operating Activities

During the three months ended March 31, 2024, operating activities used $56.9 million of cash and cash equivalents, primarily resulting from our net loss of $62.1 million offset by net non-cash charges of $9.8 million, including non-cash stock-based compensation expense of $10.3 million, depreciation and amortization expense of $2.2 million, partially offset by accretion of discount on investments of $2.8 million. Changes in our operating assets and liabilities for the three months ended March 31, 2024 included a decrease in accounts payable and accrued expenses of $2.4 million, an increase in our prepaid expenses of $1.2 million, and a decrease in other liabilities of $1.0 million.

During the three months ended March 31, 2023, operating activities used $57.6 million of cash and cash equivalents, primarily resulting from our net loss of $58.3 million offset by net non-cash charges of $8.2 million, including non-cash stock-based compensation expense of $8.9 million, depreciation and amortization expense of $1.7 million, partially offset by accretion of discount on investments of $2.3 million. Changes in our operating assets and liabilities for the three months ended March 31, 2023, consisted of a decrease in accounts payable and accrued expenses of $7.8 million, a decrease in our prepaid expenses of $0.9 million, and a decrease in other liabilities of $0.7 million.

Investing Activities

During the three months ended March 31, 2024, net cash provided by investing activities was $35.0 million, primarily resulting from proceeds of $101.0 million from the maturities of investments, offset by purchases of investments of $63.9 million, and purchases of property and equipment of $2.0 million.

During the three months ended March 31, 2023, net cash used by investing activities was $36.7 million, primarily resulting from proceeds of $62.3 million from the maturities of investments, offset by purchases of investments of $96.0 million, and purchases of property and equipment of $3.0 million.

Financing Activities

During the three months ended March 31, 2024, net cash provided by financing activities was $1.2 million, consisting of proceeds of $1.2 million from the exercise of stock options.

During the three months ended March 31, 2023, financing activities provided $18.3 million of cash, primarily resulting from net proceeds of $17.2 million from the sale of shares through our at-the-market facility.

Contractual Obligations and Commitments

Information regarding contractual obligations and commitments may be found in Note 13 of our unaudited interim consolidated financial statements in this Quarterly Report on Form 10-Q. We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations.

Recently Issued Accounting Pronouncements

There were no recent accounting pronouncements that impacted the Company, or which had a significant effect on the consolidated financial statements.