Rocket Pharmaceuticals: Exciting Potential (NASDAQ:RCKT) – Seeking Alpha | Wonder Mind Kids

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I see nothing in space as promising as the view from a Ferris wheel.“― EB White

Today we take a look at a high beta pre-clinical development issue. The company and the stock have intriguing potential, although the shares are likely to stay volatile. The company has recently been addressing funding needs, has some potential catalysts on the horizon, strong backing from analyst firms, and significant insider buying from a beneficial owner. An analysis follows below.

ABOUT ROCKET PHARMACEUTICALS

October company presentation

Company overview:

Rocket Pharmaceuticals, Inc. (NASDAQ: RKT) is a clinical-stage biopharmaceutical company based in Cranbury, New Jersey, focused on the development of gene therapies for the treatment of rare diseases. The Company’s two viral vector platforms have spawned five clinical programs, one of which has been discontinued. Rocket was founded in 2015 and went public in 2018 via a reverse merger with failed eye group Inotek Pharmaceuticals, with its initial trade at $10.86 per share. Shortly thereafter, the company completed a public offering for net proceeds of $78.8 million at a price of $13.25 per share.

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Alpha wanted

Rocket’s shares trade at just over $17.00 per share, giving it a market cap of about $1.5 billion.

ABOUT ROCKET PHARMACEUTICALS

October company presentation

market

There are more than 7,000 rare diseases — which affect fewer than 200,000 people, according to the FDA — that affect more than 30 million Americans. Of these, about 5% have an FDA-approved therapy. When you consider that approximately 30% of children suffering from a rare disease die before their fifth birthday, the unmet need is significant. About 80% of these diseases are monogenic in origin, which represents a significant opportunity for Rocket and its gene therapies.

UNMET NEEDS AND MARKET

October company presentation

platforms

To capitalize on this prospect and improve the lives of many, the company uses two modified, non-pathogenic viruses to enter cells and deliver missing and properly functioning genetic material to target tissues or organs: ex vivo lentiviral vectors (LVVs), in which the patient’s cells are extracted and the vector is delivered to them in a laboratory, with the modified cells then being reintroduced into the patient; and in vivo Adeno-associated viral vectors (AAVs), where the vector is injected directly into the patient. Rocket’s LVV platform is ideal for hematopoietic stem cell modification [HSCS] to treat hematological and immune disorders, while the AAV platform is best suited for diseases of the heart, liver, eyes and central nervous system. Non-pathogenic viruses are well suited as delivery vehicles due to their ability to enter cells. Almost all of Rocket’s technology has been in-licensed from academia.

CLINICAL PROGRAMS

October company presentation

Pipeline:

The Company’s LLV delivery platform is responsible for three clinical programs, while the AAV platform is responsible for one current clinical candidate.

ROCKET PHARMACEUTICALS pipeline

October company presentation

RP-L201. Its main active ingredient is RP-L201, which is being studied for the treatment of Leukocyte Adhesion Deficiency-1 (LAD-1), an extremely rare genetic disorder of the ITGB2 gene that delays CD18 expression, which in turn impairs the ability of white blood cells to function as Neutrophils are known to invade tissues where they are needed to fight infection. Without donor HSC transplantation (HSCT), mortality occurs by the age of two in 60–75% of severe cases. The moderate form of the disease results in death before the age of 40 in more than half of patients with a poor quality of life characterized by recurrent infections and inflammatory lesions. The total annual incidence of LAD-1 in the US and EU combined is estimated at 50 to 75 people, with approximately 800 to 1,000 currently living with the disease.

The results for RP-L201, which is essentially a single infusion of autologous HSCs transduced with LVV carrying the ITGB2 transgene, were very encouraging. In a phase 1/2 study of nine patients, Rocket Therapy demonstrated 100% overall survival, with all nine patients showing signs of disease reversal (after three to 24 months of follow-up). CD18 expression was maintained at greater than 10% (median 56%) versus an average of 1% < before treatment. In addition, hospital visits for infection and inflammation were significantly reduced (p<0.0001) and no serious adverse events were reported. A BLA/MAA filing is expected in 1H23, with another pivotal extension study targeting the moderate form of LAD-1 expected to begin sometime in 2023. RP-L201 has received Fast Track, Rare Pediatric and Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA, Advanced Therapy Medical Device [ATMP] and European regulatory agencies' Priority Medicines (PRIME) classifications and orphan drug designations from both sides of the pond.

RP-L102. Just behind RP-L201 is PR-L102, which is being studied to treat Fanconi anemia [FA), a rare (1 in ~130,000) DNA-repair disorder that causes bone marrow failure, short stature, and acute myeloid leukemia, amongst other maladies. Patients with FA have a genetic defect that prevents the normal repair of genes and chromosomes within blood cells in the bone marrow. FA generally occurs in the first two decades of life and usually manifests itself in bleeding and infections as the bone marrow can no longer produce or inadequately produces platelets and blood cells. Life expectancy for those afflicted by FA is only 30 to 40 years. Approximately 60%-70% of cases arise from mutations in the FANC-A gene – the others being FANC-C and FANC-G – which is Rocket’s first target.

PROGRA L10: Ra- 102iA emia

October Company Presentation

The current standard of care for FA is HSCT, which has provided many patients with healthy platelets and blood cells. However, a lack of perfect donor matches can result in graft versus host disease (GvHD) with a 10%-15% 100-day mortality rate. Rocket’s gene therapy utilizes patients’ own stem cells, reducing the risk of severely toxic hematologic outcomes.

Interim results of a 12-patient Phase 1/2 trial were encouraging with six of nine patients with greater than 12 months of follow-up post-infusion demonstrating sustained peripheral blood and bone marrow genetic correction with two others trending in that direction. Only one patient progressed to bone marrow failure and underwent successful allogenic HSCT. Rejection of the null hypothesis was hurdled when a fifth patient achieved increased mitomycin-C (a DNA damaging agent in bone marrow stem cells) resistance greater than 10% at two timepoints between 12 and 36 months. Only one severe adverse event (grade 2) was observed. Additionally, none of these patients underwent cytotoxic conditioning (chemotherapy) prior to the infusion.

With RMAT, PRIME, orphan drug, rare pediatric, fast track, and ATMP designations for RP-L102, Rocket expects to huddle with the FDA in 4Q22 to discuss a BLA filing timeline.

RP-L301. The company’s other LLV clinical asset is RP-L301, which is autologous HSCs transduced with LLV containing human PKLR transgene targeting pyruvate kinase deficiency [PKD]. Red blood cells deficient in PKs are oddly (non-spherically) shaped, making them unable to synthesize ATP, leading to anemia. The incidence of PKD is extremely rare, with 75 to 125 new cases in the US and EU. RP-L301 is currently being evaluated in a Phase 1 study of 4 to 5 patients, with data expected in Q4 22. RP-L301 has received orphan designation from both the FDA and EMA, as well as FDA Fast Track and Rare Pediatric Disease tags.

PROGRAM 4:P- 3301 KDr KD

October company presentation

All three of these LLV therapies have been licensed by the Centro de Investigaciones Energéticas, Medioambientales y Tecnológicas (CIEMAT), based in Madrid.

Rocket’s AAV platform technology is in-licensed from UC San Diego.

RP-A501. Rocket’s only clinical AAV therapy (RP-A501) has garnered the most attention from investors in recent years. It is being studied in the treatment of Danon disease, a genetic mutation in the LAMPB2 gene responsible for the accumulation of autophagic vacuoles primarily in cardiac and skeletal muscle, leading to severe myocardiopathy, liver disease and intellectual development. Male patients typically require heart transplants and die in their teens or 20s. Danon is thought to affect 15,000 to 30,000 in the US and EU, with 800 to 1,200 new cases each year. While certainly not huge, these numbers represent a large patient population for Rocket Therapy, making approval a potential blockbuster. However, concerns about the therapy were compounded when the FDA suspended its Phase 1 clinical trial in May 2021 after one young adult patient (of two) in the higher dose cohort experienced a serious adverse event. After Rocket left the high-dose cohort and made other protocol changes, the FDA lifted the lockdown in August 2021. In the five patients with 12 months of follow-up, evidence of sustained cardiac LAMP2B gene expression as well as qualitative improvements of cardiac tissue vacuoles and architecture were observed. A patient with much more advanced disease progressed and required a heart transplant. Overall, there is plenty of positive data/evidence to advance RP-A501 into the Phase 2 trial, which is expected to occur prior to YE22 following an end to the Phase 1 meeting with the FDA. RP-A501 has received Orphan Drug, Rare Pediatric, and Fast Track designations in the United States

RP-A501: Danon's disease

October company presentation

Renovacor acquisition

Although the Company decided not to pursue its RP-L401 product for the treatment of infantile malignant osteopetrosis following an investigator-led Phase 1 study, it will add another program (BAG3 Dilated Cardiomyopathy) if it completes the proposed acquisition of the Gens completes therapy concerns Renovacor (RCOR) – probably in 1Q23. When the transaction was announced on September 19, 2022, the implied value from the exchange of 0.1676 shares of RCKT for each RCOR share was ~$40 million.

Balance sheet and analyst commentary:

To fund the advancement of its programs, Rocket has been a serial issuer of its common stock and has raised over $620 million in net proceeds since the beginning of 2019 through four secondary offerings, one private placement and one ATM facility. The net effect was to dilute shareholders by 63% over that period. The most recent secondary offering was valued on October 3, 2022, where it is expected to raise net proceeds of just over US$100 million at US$14.75 per share. Rocket Pharmaceuticals had $306.5 million in cash and investments as of September 30, 2022, meaning it has a cash runway now into the second half of 2024.

So far in November, six analyst firms including Needham and BTIG have given or re-rated this stock as buy/outperform. Price targets offered range from $33 to $65 per share.

Beneficial owner RTW Investment, represented on the board by Chairman Roderick Wong, used the recent secondary offering to increase its position, acquiring 1.36 million shares. RTW owns 24% of Rocket.

Verdict:

When we first visited Rocket around YE19, the stock was trading in the mid 20’s. After the pandemic-related sell-off briefly pushed RCKT shares below $10 in March 2020, they traded above $60 nine months later, supported by positive clinical trial data from FA and LAD-1. A few months later, the company used its increased share price to raise $280.8 million at $56 — the last runner-up until the most recent raise. After an update to the PKD study was used as a profit-taking event in March 2021, news of RP-A501’s clinical lockout in May 2021 didn’t hurt the stock much. The protracted slide began in July 2021, just before the clinical shutdown was lifted, when the biotech sector sold off significantly.

ROCKET PHARMACEUTICALS Milestones

October company presentation

Aside from the small patient populations for its therapies — RP-A501 is the only current candidate with blockbuster potential — there’s not much to complain about here. Despite being a small sample, there seems to be plenty of evidence to get RP-A501 into a pivotal study around 22. Rocket actually reverses disease through its gene therapy concepts. There are many companies developing gene therapies, but there are many rare diseases that need this strategy. With likely two FDA approvals in the next 24 months confirming his approach, the bet here is that a deep-pocketed big pharma will buy Rocket to acquire its in-licensed viral vector platforms, and at a significant multiple its current price. Therefore, a small stake within a well-diversified biotech portfolio seems warranted.

Earth is a small city with many neighborhoods in a very large universe.” – Ron Garan

Editor’s Note: This article covers one or more Microcap stocks. Please be aware of the risks associated with these stocks.

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