RCKT: Rocket Pharmaceuticals Analysis and Research Report

2018-04-09 - by Asif , Contributing Analyst - 204 views

Important Note
Fintel Research Reports are free Wikipedia-style reports that are created and edited by people just like you. If you are an expert on a company and would like to help your fellow investors make more informed investing decisions, then you should become a Fintel Contributing Analyst. To do this, register on the site, message us in the online chat, and we will get you started.

Overview

Rocket Pharmaceuticals, Ltd. is a multi-platform biotechnology company focused on the development of first-in-class gene therapies for rare and devastating pediatric diseases. Rocket Pharma has two lentiviral virus (“LVV”) programs currently undergoing clinical testing targeting Fanconi Anemia (“FA”), a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, and three additional LVV programs targeting other rare genetic diseases. In addition, Rocket Pharma has an adeno-associated virus (“AAV”) program for which it expects to file an investigational new drug (“IND”) application in the next 12 months, which will permit the commencement of human clinical studies thereafter. Rocket Pharma has full global commercialization and development rights to all of its product candidates under royalty-bearing license agreements, with the exception of the CRISPR/Cas9 development program (described below) for which Rocket Pharma currently only has development rights.

Rocket Pharma’s two leading LVV and AAV technology platforms are each being designed in collaboration with leading academic and industry partners. Through its gene therapy platforms, Rocket aims to restore normal cellular function by modifying the defective genes that cause each of the targeted disorders.

On January 4, 2018, Inotek Pharmaceuticals Corporation (“Inotek”) and Rocket Pharma completed a business combination in accordance with the terms of the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated as of September 12, 2017, by and among Inotek, Rome Merger Sub, a wholly owned subsidiary of Inotek (“Merger Sub”) and Rocket Pharma, pursuant to which Merger Sub merged with and into Rocket Pharma, with Rocket Pharma surviving as a wholly owned subsidiary of Inotek. This transaction is referred to as “the Merger.” Immediately following the Merger, Inotek changed its name to Rocket Pharmaceuticals, Inc. (“Rocket”).

As a result of the Merger, each outstanding share of Rocket Pharma share capital (including shares of Rocket Pharma share capital to be issued upon exercise of outstanding share options) automatically converted into the right to receive approximately 76.185 shares of Inotek’s common stock, par value $0.001 per share. Following the closing of the Merger, holders of Inotek’s common stock immediately prior to the Merger owned approximately 18.643% on a fully diluted basis, and holders of Rocket Pharma common stock immediately prior to the Merger owned approximately 81.357% on a fully diluted basis, of Rocket’s common stock.

In connection with the closing of the Merger, Rocket’s common stock began trading on The NASDAQ Global Market under the ticker symbol “RCKT” on January 5, 2018. The accompanying financial statements do not give effect to the Merger.

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 drug candidates are in the development 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 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 $31,355 as of December 31, 2017. As of December 31, 2017, the Company had $18,142 of cash on hand. On January 26, 2018, Rocket closed a public offering of common stock and received net proceeds of approximately $78.8 million (see Note 15). Rocket expects that its cash on hand as of December 31, 2017 plus the net proceeds of $78.8 million received from the public offering would be sufficient to fund its operating expenses and capital expenditure requirements through at least March 2019.

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.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the useful life of the asset. The estimated useful lives are three to five years. 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. If the carrying amount of the assets or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. No impairment losses were recognized during the years ended December 31, 2017 and 2016.

Agreements Related to Intellectual Property and Manufacturing Agreements

The Company has entered into various license and research and collaboration arrangements. The transactions principally resulted in the acquisition of intellectual property which is in the pre-clinical phase and have 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 assets 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 161101 and SRA 161101

On November 17, 2015, the Company entered into an exclusive license agreement (“License 161101”) with Fred Hutchinson Research Cancer Center (“Hutch”) under which the Company was granted an exclusive license under the patents specified in the agreement of the License 161101 (the “Patents”) to make, have made, use, sell, offer to sell, and import products and processes using gene therapy for the treatment of FA. The Company additionally has the right to grant one or more sublicenses to any or all of the rights licensed in connection with License 161101. The License Agreement is in effect for the earlier of (a) the expiration date of the last-to-expire patent, on a country-by-country basis, in which a valid claim covers a product in the country in which the product is sold, or (b) 15 years following regulatory approval of the first product. The Company will record as expense any contingent milestone payments or royalties in the period in which such liabilities are incurred.

The Company is obligated to make aggregate payments of up to $1,600 to Hutch upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by License 161101, the Company is obligated to pay a low to mid-single digit royalty on net sales, subject to specified adjustments, by the Company or its sub licensees or affiliates. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sublicenses in specified circumstances.

The Company may terminate this agreement at any time by providing Hutch with 180 days advance notice. License 161101 was amended on January 16, 2016 to include additional patents. No additional consideration was provided by the Company and no other changes were made to the terms of License 161101.

Concurrent with License 161101, the Company entered into Sponsored Research Agreement SRA161101 (“SRA 161101”) with Hutch, whereby Hutch will perform a research program in accordance with the Research Plan agreed to between the two parties (as defined in SRA 161101). SRA161101 began on November 19, 2015 and continued for one year and was renewed by mutual agreement of the parties.

On March 6, 2017, the Company entered into a clinical trial agreement with Hutch to perform a clinical trial entitled: Gene Therapy for Patients with Fanconi Anemia Complementation Group A. The Company is obligated to make aggregate payments of $1,223 inclusive of the Company paying $136 upon signing the agreement. The Company may terminate this agreement at any time by providing Hutch 30 days advance notice.

License 161201 and SRA 161201

On December 23, 2015, the Company entered into an exclusive license agreement (“License 161201”) with Hutch under which the Company was granted an exclusive license under the patents specified in License 161201 (the “Patents”) to make, have made, use, sell, offer to sell, and import products and processes. The Company additionally has the right to grant one or more sublicenses to all of the rights licensed in connection with the License Agreement. The License Agreement is in effect for the earlier of (a) the expiration date of the last-to-expire patent, on a country-by-country basis, in which a valid claim covers a product in the country in which the product is sold, or (b) 15 years following regulatory approval of the first product.

The Company is obligated to make aggregate payments of up to $200 to Hutch upon the achievement of specified development and regulatory milestones. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sublicenses in specified circumstances. During the year ended December 31, 2017, the Company paid $50 for the achievement of specified developmental milestones.

The Company may terminate this agreement at any time by providing Hutch with 180 days advance notice.

Concurrent with License 161201, the Company entered into Sponsored Research Agreement SRA161201 (“SRA 161201”) with Hutch, whereby Hutch will perform a research program in accordance with the Research Plan agreed to between the two parties (as defined in SRA 161201). SRA 161201 began on December 23, 2015 and continued for one year and is under negotiation to renew by mutual agreement. The Company and Hutch expect the Research Plan to continue for a five-year period.

The Company is obligated and made payments under the first-year budget for SRA 161201 of $580. In the event the Research Agreement is terminated early, Hutch agrees to return any unexpended and uncommitted funds. It is anticipated that the total funding provided by the Company to the third party for the Research Agreement and the Investigator-Initiated Study Agreement will be up to $1,850; however, the details and annual budget will be determined by the mutual agreement of the Company and Hutch.

PKD (pyruvate kinase deficiency) License Agreement with CIEMAT

On March 8, 2016, the Company entered into an exclusive license agreement (“PKD License”) with CIEMAT under which the Company was granted an exclusive license to develop, make, manufacture, use, commercialize, sell, offer, lease, and import products and processes related to pyruvate kinase deficiency (“PKD”). The Company additionally has the right to grant one or more sublicenses to any or all of the rights listed in connection with the PKD License, with CIEMAT’s prior written consent. The PKD License is in effect for a duration for each of the countries defined in the PKD License 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.

The Company is obligated to make aggregate payments of up to €1,350 to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the PKD License, the Company is obligated to pay a low to mid-single digit royalty on net sales, subject to specified adjustments, by the Company or its sub licensees or affiliates. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sub licensees in specified circumstances.

During the year ending December 31, 2016, the Company paid CIEMAT an initial upfront license fee of €25 (approximately $29) which was expensed as research and development costs.

The Company may terminate this agreement at any time by providing CIEMAT with 90 days advance notice.

Concurrent with the PKD License, the Company entered into a Research Cooperation Agreement (“RCA”) with CIEMAT, whereby CIEMAT will perform a research program in accordance with the research program agreed to between the two parties (as defined in the RCA). The RCA began on March 8, 2016 and will continue through December 1, 2020 or such later date as may be mutually agreed upon by the Company and CIEMAT.

The Company is obligated under the RCA to make aggregate payments of €4,190. At the end of the research program, any unspent funds previously paid by the Company shall be returned to the Company within 90 days of the termination or expiration of the research program. Payments made under this agreement are considered advance payments that are refundable by CIEMAT in the event of early termination, and therefore these amounts are expensed as research services are performed.

Master Research Agreement with CIEMAT

On July 7, 2016, the Company entered into a master research agreement (“MRA”) with CIEMAT whereby the Company will co-fund different research programs to be conducted by CIEMAT that would be described in specific exhibits to the MRA, providing up to €5,150 in total funding support across the various research programs. The MRA also stipulates the Company will be entitled to acquire certain rights to intellectual property arising out of the various research programs through a separate license agreement. The term of the MRA is from July 7, 2016 through July 7, 2021 or such later date as may be mutually agreed upon by the Company and CIEMAT.

FA License Agreement with CIEMAT

On July 15, 2016, the Company entered into an exclusive license agreement (“FA License”) with CIEMAT under which the Company was granted an exclusive license to develop, make, manufacture, use, commercialize, sell, offer, lease, and import products and processes related to FA. The Company additionally has the right to grant one or more sublicenses to any or all of the rights listed in connection with the FA License, with CIEMAT’s prior written consent. The FA License is in effect for a duration for each of the countries defined in the FA License 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.

The Company is obligated to make aggregate payments of up to €5,025 to CIEMAT upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the FA License, the Company is obligated to pay a mid-single digit royalty on net sales, subject to specified adjustments, by the Company or its sub licensees or affiliates. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sub licensees in specified circumstances.

During the year ending December 31, 2016, Rocket Pharma paid CIEMAT an initial upfront license fee of €125 (approximately $137) which was expensed as research and development costs.

The Company may terminate this agreement at any time by providing CIEMAT with 90 days advance notice.

LAD-I (leukocyte adhesion deficiency-I) Agreement with CIEMAT

On July 15, 2016, the Company entered into a collaboration agreement (as Annex 2 to the MRA) with CIEMAT to perform research in the area of Lentiviral-mediated gene therapy (the “LAD-I Agreement”) for a period of five years from the effective date or later if mutually agreed.

The LAD-I Agreement also provides the Company an option to acquire the related intellectual property rights from CIEMAT to make, manufacture, use, commercialize, sell, offer, lease, and import related products and processes. The Company additionally has the right to grant one or more sublicenses to any or all of the rights listed, with CIEMAT’s prior written consent. Such future license would be in effect for a duration for each of the countries defined in the LAD-I 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.

The Company is obligated to make aggregate payments of up to €3,040 to CIEMAT upon the achievement of specified development and regulatory milestones in addition to €25 per licensed indication. With respect to any commercialized products covered by a future license agreement, the Company is obligated to pay a low to mid-single digit royalty on net sales, subject to specified adjustments, by the Company or its sub licensees or affiliates. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sub licensees in specified circumstances.

The Company may terminate this agreement at any time by providing CIEMAT 180 days advance notice.

At the end of the research program, any unspent funds previously paid by the Company shall be returned to the Company within 90 days of the termination or expiration of the research program. Payments under this agreement are considered advance payments that are refundable by CIEMAT in the event of early termination, and therefore these amounts will be expensed as service is performed over the term of the agreement.

License Agreement for LAD-I with CIEMAT and UCLB

Rocket Pharma entered into a license agreement in November 2017, effective September 2017, with CIEMAT, CIBER, and FIISFJD (which the company refer to collectively as CIEMAT) and UCL Business PLC (“UCLB”), collectively referred to as Licensors, granting Rocket worldwide, exclusive rights to certain patents. As consideration for the licensed rights, Rocket will pay the Licensors an initial license fee of €25 (approximately $30). Rocket Pharma is obligated to make aggregate payments of up to €1,350 (approximately $1,600) to Licensors upon the achievement of specified development and regulatory milestones. Rocket Pharma may terminate this agreement at any time by providing the Licensors 90 days advance notice. During 2017, the Company paid a portion of the license fee and accrued the balance of $26 of the license fee as of December 31, 2017.

Research and Collaboration Agreement with Lund University and Researcher

On August 16, 2016, The Company entered into a contract research and collaboration agreement with Lund University (“LU”) and a researcher (collectively “the LU Agreement”) to perform gene therapy research in the area of Infantile Malignant Osteopetrosis for a period of two years from the effective date or completion of the activities, whichever is the earliest.

The Agreement provides the Company an option to acquire rights from LU in the following manner. Either a) acquire ownership rights to the results on commercially reasonable terms and conditions or b) acquire, on commercially reasonable terms and conditions, an exclusive or non-exclusive, perpetual, assignable license, which may be regionally or field limited, with the right to sub-license, to make, have made, use, import, offer to sell and sell the results under any and all rights which LU has to results. Additionally, the Agreement provides the Company an option to acquire the Researcher’s ownership rights to the results on commercially reasonable terms and conditions.

The Company is obligated to make aggregate payments of up to €478 to LU and the Researcher upon the achievement of specified development and regulatory milestones. With respect to any commercialized products covered by the LU Agreement, the Company is obligated to pay a low single digit royalty on net sales, subject to specified adjustments, by the Company or its sub licensees or affiliates. In the event that the Company enters into a sublicense agreement with a sub licensee, the Company will be obligated to pay a portion of any consideration the Company receives from such sub licensees in specified circumstances.

During the year ending December 31, 2016, the Company paid Lund an upfront license fee of €20 (approximately $24) which was expensed as research and development costs.

The Company may terminate this agreement at any time by providing LU and the Researcher with 90 days’ advance notice.

Payments under this agreement are considered advance payments that are refundable by LU and the Researcher in the event of early termination, and therefore these amounts are expensed as service is performed over the term of the agreement.

As of December 31, 2017, the Company had total remaining commitments under these agreements of $1,331.

Manufacturing Agreements

During the year ended December 31, 2017, the Company entered into non-cancelable commitments with multiple contract manufacturers. Total remaining commitments under these contracts were $1,296 at December 31, 2017.


Comments

Add a Comment