# ROCKET PHARMACEUTICALS, INC. (RCKT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ROCKET PHARMACEUTICALS, INC.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1281895/000114036122007036/brhc10034550_10k.htm
Accession: 0001140361-22-007036
Filing date: 2022-02-28
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/RCKT/
All MD&A years: /company/RCKT/mda/
Next year: /company/RCKT/mda/fy2022/ (FY 2022)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, related notes
and other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties such as our plans, objectives, expectations, and intentions. Our actual results
could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included
elsewhere in this Annual Report.

Unless otherwise indicated, references to the terms the “combined company,” “Rocket,” the “Company,” “we,” “our” and “us” refer to Rocket Pharmaceuticals, Inc. (formerly known as
Inotek Pharmaceuticals Corporation) and its subsidiaries. The term “Rocket Ltd” refers to privately-held Rocket Pharmaceuticals, Ltd. prior to its merger with Rome Merger Sub, a wholly owned subsidiary of Rocket Pharmaceuticals, Inc. The term
“Inotek” refers to Inotek Pharmaceuticals Corporation and its subsidiaries prior to the reverse merger. For accounting purposes, the reverse merger is treated as a “reverse acquisition” under U.S. GAAP and Rocket Ltd is considered the accounting
acquirer. Accordingly, the historical financial information included in this Annual Report, unless otherwise indicated or as the context otherwise requires, is that of Rocket Ltd prior to the reverse merger.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Rocket’s financial
statements with a narrative from the perspective of management. Our management’s discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should
be read in connection with, our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

Introduction

We are a clinical-stage, multi-platform biotechnology company focused on the development of first, only and best-in-class gene therapies, with direct on-target mechanism of action and clear clinical
endpoints, for rare and devastating diseases. We have three clinical-stage ex vivo lentiviral vector (“LVV”) programs. These include programs for Fanconi Anemia (“FA”), a genetic defect in the bone marrow
that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I (“LAD-I”), a genetic disorder that causes the immune system to malfunction and
Pyruvate Kinase Deficiency (“PKD”), a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia. Of these, both the Phase 2 FA program and the Phase 1/2 LAD-I program are in potentially
registration-enabling studies in the United States (“U.S.”) and Europe (“EU”). In addition, in the U.S., we have a clinical stage in vivo adeno-associated virus (“AAV”) program for Danon disease, a
multi-organ lysosomal-associated disorder leading to early death due to heart failure. We have global commercialization and development rights to all of these product candidates under royalty-bearing license agreements. Additional work on a gene
therapy program for the less common FA subtypes C and G is ongoing.

Recent Developments

On April 26, 2021, we redeemed in full our 2022 Convertible Notes prior to the redemption date. Holders of approximately $38.4 million remaining principal amount of the 2022 Convertible Notes
converted such notes into approximately 1.3 million shares of the Company’s common stock and cash in lieu of fractional shares. As of December 31, 2021, there were no 2022 Convertible Notes outstanding.

On August 2, 2021, holders of the 2021 Convertible Notes converted the $5.15 million remaining balance of the 2021 Convertible Notes into 160,614 shares of common stock. As of December 31, 2021,
there were no 2021 Convertible Notes outstanding.

On August 27, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a fund affiliated with RTW Investments, LP, our largest shareholder (the “Purchaser”), pursuant to
which we agreed to sell and issue to the Purchaser, in a private placement (the “Private Placement”), 812,516 shares of our common stock at a purchase price of $32.48 per share for aggregate net proceeds of approximately $26.4 million after
deducting estimated offering expenses payable. The Private Placement closed on August 31, 2021.

Financial Overview

Since our inception, we have devoted substantially all of our resources to organizing and staffing the company, business planning, raising capital, acquiring or discovering product candidates and
securing related intellectual property rights, conducting discovery, R&D activities for our product candidates and planning for potential commercialization. We do not have any products approved for sale and have not generated any revenue from
product sales. From inception through December 31, 2021, we raised net cash proceeds of approximately $680.5 million from investors through both equity and convertible debt financing to fund operating activities.

Revenue

To date, we have not generated any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the near future. If our
development efforts for product candidates are successful and result in regulatory approval or license agreements with third parties, we may generate revenue in the future from product sales.

Research and Development Expenses

Our R&D program expenses consist primarily of external costs incurred for the development of our product candidates. These expenses include:

[[GREPCENT_TABLE]]
[["","\u2022","expenses incurred under agreements with research institutions that conduct R&D activities including, process development, preclinical, and clinical activities on our behalf;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","costs related to process development, production of preclinical and clinical materials, including fees paid to contract manufacturers and manufacturing input costs for use in internal manufacturing processes;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","consultants supporting process development and regulatory activities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","patent fees; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","costs related to in-licensing of rights to develop and commercialize our product candidate portfolio."]]
[[/GREPCENT_TABLE]]

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We recognize external development costs based on contractual payment schedules aligned with program activities, invoices for work incurred, and milestones which correspond with
costs incurred by the third parties. Nonrefundable advance payments for goods or services to be received in the future for use in R&D activities are recorded as prepaid expenses.

Our direct R&D expenses are tracked on a program-by-program basis for product candidates and consist primarily of external costs, such as research collaborations and third-party manufacturing
agreements associated with our preclinical research, process development, manufacturing, and clinical development activities. Our direct R&D expenses by program also include fees incurred under license agreements. Our personnel, non-program
and unallocated program expenses include costs associated with activities performed by our internal R&D organization and generally benefit multiple programs. These costs are not separately allocated by product candidate and consist primarily
of:

[[GREPCENT_TABLE]]
[["","\u2022","salaries and personnel-related costs, including benefits, travel, and stock-based compensation, for our scientific personnel performing R&D activities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","facilities and other expenses, which include expenses for rent and maintenance of facilities, and depreciation expense; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","laboratory supplies and equipment used for internal R&D activities."]]
[[/GREPCENT_TABLE]]

Our direct R&D expenses consist principally of external costs, such as fees paid to investigators, consultants, laboratories and CROs in connection with our clinical studies, and costs related to
acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, costs associated with
our general discovery platform improvements, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other R&D expenses.

The following table of R&D expenses tracked on a program-by-program basis as well as by type and nature of our expense for our product candidates for the years ended
December 31, 2021 and 2020.   For the year ended December 31, 2019, we did not track expenses by program.

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2021","","","2020"],["Direct Expenses:"],["Danon Disease (AAV) RP-A501","","$","15,804","","","$","18,459"],["Leukocyte Adhesion Deficiency (LVV) RP-L201","","","24,222","","","","5,531"],["Fanconi Anemia (LVV) RP-L102","","","15,453","","","","15,015"],["Pyruvate Kinase Deficiency (LVV) RP-L301","","","4,206","","","","4,990"],["Infantile Malignant Osteopetrosis (LVV) RP-L401 (1)","","","2,236","","","","2,057"],["Other product candidates","","","4,576","","","","1,321"],["Total direct expenses","","","66,496","","","","47,373"],["Unallocated Expenses"],["Employee compensation","","","20,780","","","","14,137"],["Non-cash R&D expense related to the issuance of warrants","","","12,781","","","","26,562"],["Stock based compensation expense","","","11,954","","","","7,121"],["Depreciation and amortization expense","","","5,130","","","","2,770"],["Laboratory and related expenses","","","3,359","","","","4,240"],["Legal and patent fees","","","15","","","","96"],["Professional Fees","","","1,797","","","","1,443"],["Other expenses","","","3,164","","","","1,696"],["Total other research and development expenses","","","58,979","","","","58,066"],["Total research and development expense","","$","125,476","","","$","105,438"],["(1) Effective December 2021, a decision was made to no longer pursue Rocket-sponsored clinical evaluation of RP-L401; this program is to be returned to academic innovators."]]
[[/GREPCENT_TABLE]]

We cannot determine with certainty the duration and costs to complete current or future clinical studies of product candidates or if, when, or to what extent we will generate revenues from the
commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of clinical studies and
development of product candidates will depend on a variety of factors, including:

[[GREPCENT_TABLE]]
[["","\u2022","the scope, rate of progress, and expense of ongoing as well as any clinical studies and other R&D activities that we undertake;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","future clinical study results;"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u2022","uncertainties in clinical study enrollment rates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","changing standards for regulatory approval; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","the timing and receipt of any regulatory approvals."]]
[[/GREPCENT_TABLE]]

We expect R&D expenses to increase for the foreseeable future as we continue to invest in R&D activities related to developing product candidates, including investments in manufacturing, as
our programs advance into later stages of development and as we conduct additional clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful
development of product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of R&D projects or when and to what extent we will generate revenue from the commercialization and sale of any of
our product candidates.

Our future R&D expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of the commercial potential of such product candidates. In addition, we
cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital
requirements. We expect our R&D expenses to increase in future periods for the foreseeable future as we seek to complete development of our product candidates.

The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and
commercialization, including the uncertainty of:

[[GREPCENT_TABLE]]
[["","\u2022","the scope, progress, outcome and costs of our clinical trials and other R&D activities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","the market acceptance of our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","obtaining, maintaining, defending, and enforcing patent claims and other intellectual property rights;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","significant and changing government regulation; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","the timing, receipt, and terms of any marketing approvals."]]
[[/GREPCENT_TABLE]]

A change in the outcome of any of these variables with respect to the development of our product candidates that we may develop could mean a significant change in the costs and timing associated
with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate for the completion of clinical
development of any of our product candidates that we may develop or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the
completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefit costs for personnel, including stock-based compensation and travel expenses for our employees in executive,
operational, finance, legal, business development, and human resource functions. In addition, other significant general and administrative expenses include professional fees for legal, consulting, investor and public relations, auditing, and tax
services as well as other expenses for rent and maintenance of facilities, insurance and other supplies used in general and administrative activities. We expect general and administrative expenses to increase for the foreseeable future due to
anticipated increases in headcount to support the continued advancement of our product candidates. We also anticipate that as we continue to operate as a public company with increasing complexity, we will continue to incur increased accounting,
audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses.

Interest Expense

Interest expense is related to the 2021 Convertible Notes, which were converted into common stock on August 2, 2021, the 2022 Convertible Notes, which were redeemed and converted into common stock in
April 2021, and our financing lease obligation for the Cranbury, NJ facility.

Interest Income

Interest income is related to interest earned from investments and cash equivalents.

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Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2021","","","2020","","","Change"],["","","(in thousands)"],["Operating expenses:"],["Research and development","","$","125,476","","","$","105,438","","","$","20,038"],["General and administrative","","","41,772","","","","28,865","","","","12,907"],["Total operating expenses","","","167,248","","","","134,303","","","","32,945"],["Loss from operations","","","(167,248",")","","","(134,303",")","","","(32,945",")"],["Research and development incentives","","","1,000","","","","-","","","","1,000"],["Interest expense","","","(2,977",")","","","(6,967",")","","","3,990"],["Interest and other income, net","","","3,068","","","","2,150","","","","918"],["(Amortization of premium) accretion of discount on investments - net","","","(2,912",")","","","(580",")","","","(2,332",")"],["Total other expense, net","","","(1,821",")","","","(5,397",")","","","3,576"],["Net loss","","$","(169,069",")","","$","(139,700",")","","$","(29,369",")"]]
[[/GREPCENT_TABLE]]

Research and Development Expenses

R&D expenses increased $20.0 million to $125.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily due to an increase in
manufacturing and development costs of $14.8 million, an increase in compensation and benefits of $6.6 million due to increased R&D headcount, an increase in non-cash stock compensation expense of $4.8 million, an increase in lab supplies and
office expense of $2.9 million, an increase in depreciation and amortization of $1.9 million, offset by a decrease in new research agreements of $13.8 million in non-cash expenses due to the issuance of warrants in December 2020 and August and
December 2021.

General and Administrative Expenses

G&A expenses increased $12.9 million to $41.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increases in G&A expenses were primarily driven by
an increase in non-cash stock compensation expense of $5.8 million, an increase in compensation and benefits of $1.8 million due to increased G&A headcount, an increase in office and administrative costs of $2.5 million due to increased
insurance costs, an increase in commercial preparation expenses of $2.2 million, offset by a decrease in debt conversion expense recorded for the year ended December 31, 2020 of $2.0 million due to the refinancing of the 2021 Convertible Notes in
February 2020.  There were no debt conversion expenses recorded for the year ended December 31, 2021.

Other Expense, Net

Other expense, net was $1.8 million for the year ended December 31, 2021 compared to $5.4 million for the year ended December 31, 2020. The change was primarily due to reduced interest expense
associated with the 2022 Convertible Notes which were fully redeemed in April 2021 and the 2021 Convertible Notes which were converted in August 2021, as well as a decrease of $2.3 million in accretion income related to our investments, due to
lower interest rates for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

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Comparison of the Years Ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2020","","","2019","","","Change"],["","","(in thousands)"],["Operating expenses:"],["Research and development","","$","105,438","","","$","57,907","","","$","47,531"],["General and administrative","","","28,865","","","","18,244","","","","10,621"],["Total operating expenses","","","134,303","","","","76,151","","","","58,152"],["Loss from operations","","","(134,303",")","","","(76,151",")","","","(58,152",")"],["Research and development incentives","","","-","","","","250","","","","(250",")"],["Interest expense","","","(6,967",")","","","(5,958",")","","","(1,009",")"],["Interest and other income, net","","","2,150","","","","3,414","","","","(1,264",")"],["(Amortization of premium) accretion of discount on investments - net","","","(580",")","","","1,175","","","","(1,755",")"],["Total other expense, net","","","(5,397",")","","","(1,119",")","","","(4,278",")"],["Net loss","","$","(139,700",")","","$","(77,270",")","","$","(62,430",")"]]
[[/GREPCENT_TABLE]]

Research and Development Expenses

R&D expenses increased $47.5 million to $105.4 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily the result of an increase in
new research agreements totaling $26.6 million in non-cash R&D expenses due to the issuance of a warrant in December 2020, an increase in manufacturing consumables of $5.5 million, an increase in compensation expense of $6.2 million due to
increased R&D headcount; an increase in clinical trials expense of $3.9 million, an increase in amortization expense related to the Cranbury, NJ lease of $1.7 million, and an increase in lab supplies of $2.0 million, offset by the CIRM grant
of $1.1 million which was offset against LAD-1 R&D expenses, and a decrease in research agreements of $0.6 million primarily due to the $1.4 million license payment for the Stanford University’s Laboratory for Cell and Gene Therapy (“LCGM”)
facility made in 2019.

General and Administrative Expenses

G&A expenses increased $10.6 million to $28.9 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase in G&A expenses was primarily driven by
fees of $2.0 million incurred in connection with the February and June 2020 convertible notes exchange, an increase in non-cash stock compensation expense of $4.2 million, an increase in compensation and benefits of $2.5 million due to increased
G&A headcount and an increase in office and administrative expense of $1.0 million due primarily to increased insurance expense for the year ended December 31, 2020 as compared to 2019.

Other Expense, Net

Other expense, net was $5.4 million for the year ended December 31, 2020 compared to other expense, net of $1.1 million for the year ended December 31, 2019. The change was primarily due to a
decrease in interest income related to our investments of $2.8 million due to lower interest rates, an increase in interest expense of $1.0 million, and a decrease in research and development incentives due to the receipt of the New York City
biotech tax credit in 2019, which was phased out by New York City and did not reoccur in 2020.

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, uncertainty of drug
candidate development, technological uncertainty, uncertainty regarding patents and proprietary rights, having no commercial manufacturing experience, marketing or sales capability or experience, dependency on key personnel, compliance with
government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional R&D efforts, including extensive preclinical and clinical testing and regulatory approval,
prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

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

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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 $169.1 million, $139.7 million, and $77.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. We
have experienced negative cash flows from operations and has an accumulated deficit of $491.9 million as of December 31, 2021. As of December 31, 2021, we had $388.7 million of cash, cash equivalents and investments. We expect such resources
would be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2023. We have funded our operations primarily through the sale of its equity and debt securities.

On April 30, 2019, the California Institute for Regenerative Medicine (“CIRM”) awarded us up to $6.5 million under a CLIN2 grant award to support the clinical development of gene therapy for LAD-I.
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, University of California, Los Angeles (“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. In 2019, we received the first two grants from CIRM in the aggregate of $1.2 million which were included as an offset against R&D expenses. In 2020, we met additional CIRM milestones and received an
additional $1.1 million milestone which was recorded as a reduction of R&D expenses in 2020. We received the additional milestone payments of $1.1 million and $1.0 million in January and April of 2021, respectively. As of December 31, 2021 we
did not meet the next milestone and therefore no receivable has been recorded.

On November 12, 2020, the CIRM awarded us up to $3.7 million under a CLIN2 grant award to support the clinical development of our lentiviral vector (LVV)-based gene therapy, RP-L401, for the
treatment of IMO. We received $1.0 million pursuant to the grant on January 4, 2021 related to the CIRM IMO award and recorded a receivable, included in prepaid and other assets in the consolidated balance sheet, and a reduction of R&D
expenses of $0.9 million as of December 31, 2020. We recorded a reduction of research and development expense of $0.1 million for the year ended December 31, 2021. As of December 31, 2021, we did not meet the next milestone and no receivable has
been recorded.

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.

Convertible Notes Payable

On January 4, 2018, in connection with the reverse merger with Inotek, Inotek’s obligations under its outstanding convertible notes, with an aggregate principal value of $52.0 million, were assumed
by us (the “2021 Convertible Notes”). The 2021 Convertible Notes were issued in 2016 and matured on August 1, 2021 (“Maturity Date”). The 2021 Convertible Notes were unsecured and accrued interest at a rate of 5.75% per annum. Each holder of a
2021 Convertible Note (the “Holder”) had the option until the close of business on the second business day immediately preceding the Maturity Date to convert all, or any portion, of the 2021 Convertible Notes held by them at a conversion rate of
31.1876 shares of our common stock per $1.00 principal amount of 2021 Convertible Notes (the “Conversion Rate”) which is $32.08 per share.

On February 20, 2020 and June 5, 2020, we entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of the 2021 Convertible Notes. Pursuant to
the Exchange Agreements, on February 20, 2020, we exchanged approximately $39.35 million aggregate principal amount of the 2021 Convertible Notes (representing approximately 76% of the aggregate outstanding principal amount of the 2021
Convertible Notes) for (a) approximately $39.35 million aggregate principal amount of 6.25% Convertible Senior Notes due August 2022 (the “2022 Convertible Notes”) (an exchange ratio equal to 1.00 2022 Convertible Note per exchanged 2021
Convertible Note) and (b) $0.1 million to pay the accrued and unpaid interest on the exchanged 2021 Convertible Notes from February 1, 2020, to February 20, 2020, the closing date of the February 20, 2020 exchange transactions. Additionally, we
repurchased 3,000 shares of our common stock that have been retired for an aggregate amount of $72 from certain holders of the 2021 Convertible Notes participating in the exchange transactions in privately negotiated, private transactions.

Also pursuant to the Exchange Agreements, on June 12, 2020, we exchanged $7.5 million aggregate principal amount of the 2021 Convertible Notes for (a) $7.5 million aggregate principal amount of our
newly issued 2022 Convertible Notes (an exchange ratio equal to 1.00 2022 Convertible Notes per exchanged 2021 Convertible Notes) and (b) approximately $11 to pay the accrued and unpaid interest on the exchanged 2021 Convertible Notes from, and
including, February 1, 2020, to, but excluding, the closing date of the exchange transaction, adjusted to take into account the unearned accrued interest on the 2022 Convertible Notes from, and including, February 20, 2020, to, but excluding, the
closing date of the exchange transaction.

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In December, 2020, $8.5 million principal amount, representing a carrying value of $7.6 million of the 2022 Convertible Notes were converted into 298,562 shares of common stock.

On April 26, 2021, we called for the redemption of the remaining $38.4 million principal amount of the 2022 Convertible Notes as our stock price traded above the Conversion Rate for at least 20
trading days during a 30-day consecutive trading period.  On April 26, 2021, we redeemed in full the 2022 Convertible Notes prior to the redemption date.  Holders of approximately $38.4 million remaining principal amount of the 2022 Convertible
Notes converted such notes in accordance with the terms of the Exchange Agreements into approximately 1.3 million shares of our common stock and cash in lieu of fractional shares. As of December 31, 2021, there were no 2022 Convertible Notes
outstanding.

On August 2, 2021, holders of the 2021 Convertible Notes converted the $5.15 million remaining balance of the 2021 Convertible Notes into 160,614 shares of our common stock. As of December 31, 2021,
there were no 2021 Convertible Notes  outstanding.

Contractual Obligations

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to
income taxes and lease arrangements are provided in “Item 8. Financial Statements”, “Note 11. Income Taxes” and “Note 12. Commitments and Contingencies”, respectively.

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.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2021","","","2020","","","2019"],["Cash used in operating activities","","$","(121,163",")","","$","(74,640",")","","$","(64,663",")"],["Cash provided by (used in) investing activities","","","18,853","","","","(96,591",")","","","(39,011",")"],["Cash provided by financing activities","","","37,681","","","","282,989","","","","177,791"],["Net change in cash, cash equivalents and restricted cash","","$","(64,629",")","","$","111,758","","","$","74,117"]]
[[/GREPCENT_TABLE]]

Net Cash Used in Operating Activities

During the year ended December 31, 2021, operating activities used $121.2 million of cash, primarily resulting from our net loss of $169.1 million and net changes in our operating assets and
liabilities of $3.4 million, partially offset by net non-cash charges of $51.3 million, including expenses in connection with the issuance of warrant of $12.8 million, stock-based compensation expense of $29.2 million, accretion of discount on
investments of $2.9 million and depreciation and amortization expense of $5.4 million. Changes in our operating assets and liabilities for the year ended December 31, 2021 consisted of a decrease in accounts payable and accrued expenses of $4.8
million and a decrease in prepaid expenses and other assets of $1.3 million.

During the year ended December 31, 2020, operating activities used $74.6 million of cash, primarily resulting from our net loss of $139.7 million and net changes in our operating assets and
liabilities of $15.0 million, partially offset by net non-cash charges of $50.0 million, including expenses in connection with the issuance of warrants of $26.6 million, stock-based compensation expense of $18.6 million and accretion of discount
on convertible notes of $2.8 million. Changes in our operating assets and liabilities for the year ended December 31, 2020 consisted of an increase in finance lease liability of $5.6 million, an increase in accounts payable and accrued expenses
of $6.4 million and an increase in prepaid expenses and other assets of $1.5 million.

During the year ended December 31, 2019, operating activities used $64.7 million of cash, primarily resulting from our net loss of $77.3 million and net changes in our operating assets and
liabilities of $3.7 million, partially offset by net non-cash charges of $16.3 million, including stock-based compensation expense of $13.4 million and accretion of discount on convertible notes of $3.6 million. Changes in our operating assets
and liabilities for the year ended December 31, 2019 consisted of a decrease in accounts payable and accrued expenses of $2.7 million and an increase in prepaid expenses and other assets of $0.9 million.

Net Cash Provided by (Used in) Investing Activities

During the year ended December 31, 2021, net cash provided by investing activities was $18.9 million, consisting of proceeds of $272.4 million from the maturities of investments,
offset by purchases of investments of $245.9 million, and purchases of property and equipment of $7.6 million.

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During the year ended December 31, 2020, net cash used in investing activities was $96.6 million, consisting of proceeds of $141.8 million from the maturities of investments,
offset by purchases of investments of $209.3 million, purchases of property and equipment of $20.6 million, and payments made to acquire right of use asset of $8.5 million.

During the year ended December 31, 2019, net cash used in investing activities was $39.0 million, consisting primarily of purchases of property and equipment which is considered construction in
progress of $23.3 million related primarily to our Cranbury, New Jersey facility, and investment purchases of $184.3 million offset by proceeds of $168.6 million from the maturities of investments.

Net Cash Provided by Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $37.7 million, consisting of proceeds from the issuance of common stock related to the August 2021 Private
Placement and issuance of common stock, pursuant to exercises of stock options.

During the year ended December 31, 2020, net cash provided by financing activities was $283.0 million, consisting primarily of proceeds from the issuance of common stock for $280.8 million. On
December 14, 2020, we completed a public offering of 5,339,286 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 696,428 shares of our common stock, at a public offering price of $56.00
per share. The net proceeds to Rocket from the December 2020 public offering were approximately $280.8 million.

During the year ended December 31, 2019, net cash provided by financing activities was $177.8 million, consisting of proceeds from the issuance of common stock for $177.8 million. On April 18, 2019,
we completed a public offering of 5,175,000 shares of common stock. The net proceeds to Rocket from the April 2019 public offering were approximately $86.1 million. On December 10, 2019, we completed a public offering of 4,393,000 shares of
common stock. The net proceeds to Rocket from the December 2019 public offering were approximately $91.7 million.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been
prepared in in conformity with accounting principles generally accepted in the United States (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We periodically review our estimates as a result of changes in circumstances, facts and experience. The
effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate.

For a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies” included in the notes to our consolidated financial
statements appearing elsewhere in this report. We consider the most critical accounting policies to be those related to our Accrued Research and Development Expenses.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts
and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced
or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make
estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid
to:

[[GREPCENT_TABLE]]
[["","\u2022","CROs in connection with performing R&D services on our behalf;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","investigative sites or other providers in connection with clinical trials;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","vendors in connection with non-clinical development activities; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","vendors related to product manufacturing, development and distribution of clinical supplies."]]
[[/GREPCENT_TABLE]]

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We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage non-clinical studies
and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed
the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing
service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and level of effort to be expended in each period. If the actual timing of the performance of services or the level
of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed
relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period.

Stock-Based Compensation

We issue stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units. We account for 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. We measure the compensation expense of employee and nonemployee 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.  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.

We classify stock-based compensation expense in our statement 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.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”). The new standard requires that
expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for
available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an
option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. The new standard was effective beginning January 1, 2021. The adoption of ASU
2016-13, and related updates, did not have a material impact on the Company’s consolidated financial position and results of operations.