ROCKET PHARMACEUTICALS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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You should read the following discussion and analysis of our financial condition
and results of operations together with the consolidated financial statements
and related notes that are included elsewhere in this Quarterly Report on Form
10-Q and our annual report on Form 10-K, filed on February 28, 2022 with the SEC
(the "2021 Form 10-K"). This discussion contains forward-looking statements
based upon current plans, expectations and beliefs that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including,
but not limited to, those discussed in the section entitled "Risk Factors" and
elsewhere in this Quarterly Report on Form 10-Q. In preparing this MD&A, we
presume that readers have access to and have read the MD&A in our 2021 Form
10-K, pursuant to Instruction 2 to paragraph of Item 303 of Regulation S-K.
Unless stated otherwise, references in this Quarterly Report on Form 10-Q to
"us," "we," "our," or our "Company" and similar terms refer to Rocket
Pharmaceuticals, Inc.

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. The Danon program is
currently in an ongoing Phase 1 trial. Additional work on a gene therapy program
for the less common FA subtypes C and G is ongoing. We have global
commercialization and development rights to all of these product candidates
under royalty-bearing license agreements.

Effective December 2021, a decision was made to no longer pursue
Rocket-sponsored clinical evaluation of RP-L401; this program was returned to
academic innovators. Although we believe that gene therapy may be beneficial to
patients afflicted with this disorder, we have opted to focus available
resources towards advancement of RP-A501, RP-L102, RP-L201 and RP-L301, based on
the compelling clinical data to date and potential for therapeutic advancement
in these severe disorders of childhood and young adulthood.

RECENT DEVELOPMENTS

Market offer program

On February 28, 2022, we entered into the Sales Agreement with Cowen with
respect to an at-the-market offering program pursuant to which we may offer and
sell, from time to time at its sole discretion, shares through Cowen as our
sales agent. The shares to be offered and sold under the Sales Agreement, if
any, will be offered and sold pursuant to our shelf registration statement on
Form S-3. We 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. We will pay Cowen a cash commission of 3.0% of gross proceeds from
the sale of the shares pursuant to the Sales Agreement. We also agreed to
provide Cowen with customary indemnification and contribution rights. We
reimbursed Cowen for certain expenses incurred in connection with the Sales
Agreement. Through September 30, 2022, we 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.

Renovacor Merger Agreement

On September 19, 2022, we entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Renovacor, Inc., a Delaware corporation ("Renovacor")
pursuant to which, among other matters, and subject to the satisfaction or
waiver of the conditions set forth in the Merger Agreement, we will acquire
Renovacor. The acquisition is intended to qualify for federal income tax
purposes as a tax-free reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended. Subject to the terms and
conditions of the Merger Agreement, each share of Renovacor's common stock, par
value $0.0001 per share ("Renovacor Shares") outstanding immediately prior to
the effective time of the merger (including Company Earnout Shares (as defined
in the Merger Agreement)) will be canceled and converted into the right to
receive a number of fully paid and non-assessable shares of the Company
determined on the basis of an exchange formula set forth in the Merger Agreement
(the "Exchange Ratio"). The Exchange Ratio will initially be equal to 0.1676 for
each Renovacor Share (subject to adjustment as described in the Merger
Agreement). Under certain circumstances further described in the Merger
Agreement, the Exchange Ratio may be adjusted upward or downward based on the
level of Renovacor's net cash at the closing of the merger and certain other
adjustments, as determined in accordance with the Merger Agreement. The
acquisition is expected to close by the first quarter of 2023. We incurred
approximately $1.3 million of pre-acquisition related costs during the three
months ended September 30, 2022.

Follow-up public offer

On October 6, 2022, we completed a public offering of 7,820,000 shares of our
common stock, which included the full exercise of the underwriters' option to
purchase an additional 1,020,000 shares of our common stock, at a public
offering price of $14.75 per share. The gross proceeds to Rocket from the public
offering were approximately $115.3 million, net of $7.1 million of offering
costs, commissions, legal and other expenses for net proceeds from the offering
of $108.2 million.

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Overview of Gene Therapy

Genes are composed of sequences of deoxyribonucleic acid ("DNA"), which code for
proteins that perform a broad range of physiologic functions in all living
organisms. Although genes are passed on from generation to generation, genetic
changes, also known as mutations, can occur in this process. These changes can
result in the lack of production of proteins or the production of altered
proteins with reduced or abnormal function, which can in turn result in disease.

Gene therapy is a therapeutic approach in which an isolated gene sequence or
segment of DNA is administered to a patient, most commonly for the purpose of
treating a genetic disease that is caused by genetic mutations. Currently
available therapies for many genetic diseases focus on administration of large
proteins or enzymes and typically address only the symptoms of the disease. Gene
therapy aims to address the disease-causing effects of absent or dysfunctional
genes by delivering functional copies of the gene sequence directly into the
patient's cells, offering the potential for curing the genetic disease, rather
than simply addressing symptoms.

We are using modified non-pathogenic viruses for the development of our gene
therapy treatments. Viruses are particularly well suited as delivery vehicles
because they are adept at penetrating cells and delivering genetic material
inside a cell. In creating our viral delivery vehicles, the viral (pathogenic)
genes are removed and are replaced with a functional form of the missing or
mutant gene that is the cause of the patient's genetic disease. The functional
form of a missing or mutant gene is called a therapeutic gene, or the
"transgene." The process of inserting the transgene is called "transduction."
Once a virus is modified by replacement of the viral genes with a transgene, the
modified virus is called a "viral vector." The viral vector delivers the
transgene into the targeted tissue or organ (such as the cells inside a
patient's bone marrow). We have two types of viral vectors in development, LVV
and AAV. We believe that our LVV and AAV-based programs have the potential to
offer a significant therapeutic benefit to patients that is durable
(long-lasting).

The gene therapies can be delivered either (1) ex vivo (outside the body), in
which case the patient's cells are extracted and the vector is delivered to
these cells in a controlled, safe laboratory setting, with the modified cells
then being reinserted into the patient, or (2) in vivo (inside the body), in
which case the vector is injected directly into the patient, either
intravenously ("IV") or directly into a specific tissue at a targeted site, with
the aim of the vector delivering the transgene to the targeted cells.

We believe that scientific advances, clinical progress, and the greater
regulatory acceptance of gene therapy have created a promising environment to
advance gene therapy products as these products are being designed to restore
cell function and improve clinical outcomes, which in many cases include
prevention of death at an early age. The FDA approval of several gene therapies
in recent years indicates that there is a regulatory pathway forward for gene
therapy products.

Pipeline Overview

The table below shows the current development phases of Rocket’s program and product candidates:

                           [[Image Removed: graphic]]

AAV Program:

Danon Disease:

Danon disease ("DD") is a multi-organ lysosomal-associated disorder leading to
early death due to heart failure. DD is caused by mutations in the gene encoding
lysosome-associated membrane protein 2 ("LAMP-2"), a mediator of autophagy. This
mutation results in the accumulation of autophagic vacuoles, predominantly in
cardiac and skeletal muscle. Male patients often require heart transplantation
and typically die in their teens or twenties from progressive heart failure.
Along with severe cardiomyopathy, other DD-related manifestations can include
skeletal muscle weakness and intellectual impairment. There are no specific
therapies available for the treatment of DD and medications typically utilized
for the treatment of congestive heart failure (CHF) are not believed to modify
progression to end-stage CHF. Patients with end-stage CHF may undergo heart
transplant, which currently is available to a minority of patients, is
associated with significant short- and long-term complications and is not
curative of the disorder in the long-term. RP-A501 is in clinical trials as an
in vivo therapy for Danon disease, which is estimated to have a prevalence of
15,000 to 30,000 patients in the U.S. and the EU.


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Danon disease is an X-linked dominant, monogenic rare inherited disorder
characterized by progressive cardiomyopathy which is almost universally fatal in
males even in settings where cardiac transplantation is available. Danon disease
predominantly affects males early in life and is characterized by absence of
LAMP2B expression in the heart and other tissues. Preclinical models of Danon
disease have demonstrated that AAV-mediated transduction of the heart results in
reconstitution of LAMP2B expression and improvement in cardiac function.

We currently have one adeno-associated viral vector program targeting DD,
RP-A501. We have treated seven patients in the RP-A501 Phase 1 clinical trial,
which enrolled young adult and pediatric male DD patients. This includes a first
cohort evaluating a low-dose (6.7e13 genome copies (gc)/kilogram (kg)) in
adult/older adolescent patients aged 15 or greater (n=3), a second cohort
evaluating a higher dose (1.1e14 gc/kg) in adult/older adolescent patients aged
15 or greater (n=2), and we have initiated treatment in a pediatric cohort at a
low dose level (6.7e13 gc/kg; n=2).

Data disclosed from our Phase 1 study of RP-A501 in May 2022 and September 2022
included safety and clinical activity results from the three patients treated
with the low dose of 6.7e13 gc/kg and from two patients treated with the higher
dose of 1.1e14 gc/kg, and initial safety information from the two pediatric
patients (pediatric cohort is age 8-14 years) treated with the low dose of
6.7e13 gc/kg.

Based on the activity observed in the low dose cohort and to mitigate
complement-mediated TMA (safety concerns observed in the high dose cohort) and
in agreement with the FDA, we are focusing on the low dose (6.7e13 gc/kg) and we
will no longer administer doses of 1.1e14 gc/kg or higher in this trial.
Additional safety measures have been implemented and are reflected in the
updated trial protocol. These measures include exclusion of patients with
end-stage heart failure, and a refined immunomodulatory regimen involving
transient B- and T-cell mediated inhibition, with emphasis on preventing
complement activation, while also enabling lower steroid doses and earlier
steroid taper, with all immunosuppressive therapy discontinued 2-3 months
following administration of RP-A501. As presented in May 2022 at the 25th Annual
Meeting of the American Society of Gene and Cell Therapy ("ASGCT"), two
pediatric patients have received RP-A501 therapy (6.7e13 gc/kg dose level). The
two pediatric patients were observed to have normal-range platelets, diminished
complement activation relative to the adult cohorts, and no complement-related
adverse events. Corticosteroid taper commenced at day 10 following therapy for
both patients and there was no significant worsening of the patients' baseline
DD-related skeletal myopathy during the weeks following RP-A501. Of note,
transaminases and parameters of liver inflammation (including blood levels of
gamma-glutamyl transferase, bilirubin and coagulation parameters) were not
significantly increased during the weeks following therapy.

In the adult (age ?15 years) low-dose cohort, RP-A501 was generally
well-tolerated. All 4 adult (age ?15 years) patients with observed
immunomodulatory regimen compliance and preserved (>40%) left ventricular
ejection fraction at baseline demonstrated disease modification across
molecular, echocardiographic, and functional parameters. These patients
demonstrated evidence of cardiac LAMP2B expression by immunohistochemistry and
reduced levels of autophagic vacuoles on histologic evaluation. Echocardiograms
showed stabilized or decreased cardiac wall thickness with improved or
stabilized ejection fraction in these patients. Patients in the adult cohorts
demonstrated sustained improvement or stabilization in Brain Natriuretic Peptide
("BNP") and New York Heart Association ("NYHA") class, 6-minute walk test and
reported increases in physical activity. Adverse events were manageable with
transient immunomodulation. All treatment-related adverse events in pediatric
and adult cohorts were reversible with no lasting renal, hepatic, or other
sequelae.

Efficacy assessments include evaluation of NYHA Functional Classification, which
is the most commonly used heart failure classification system. NYHA Class II is
where a patient exhibits a slight limitation of physical activity, is
comfortable at rest, and ordinary physical activity results in fatigue,
palpitation and/or dyspnea. Class I is where a patient exhibits no limitation of
physical activity and ordinary physical activity does not cause undue fatigue,
palpitation and/or dyspnea. Brain natriuretic peptide (BNP) is a blood-based
evaluation and a key marker of heart failure with prognostic significance in CHF
and cardiomyopathies. High sensitivity troponin I ("hsTnI") is a blood-based
evaluation and a key marker of cardiac injury, one that is (like BNP) frequently
elevated in Danon disease patients. Other efficacy parameters include
echocardiographic measurements of heart thickness, most notably the thickness of
the left ventricular posterior wall, and importantly, measurement of LAMP2B gene
expression both via immunohistochemistry and Western blot, as obtained via
endomyocardial biopsy. Biopsied heart tissue is also evaluated via  hematoxylin
and eosin ("H&E") histology and electron microscopy for evidence of
DD-associated tissue derangements, including the presence of autophagic vacuoles
and disruption of myofibrillar architecture, each of which are characteristic of
DD-related myocardial damage.

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In September 2022, interim data for the ongoing Phase 1 trial of RP-A501 was
presented at the Heart Failure Society of America ("HFSA") meeting, including
updated safety and initial efficacy parameters for the pediatric cohort and
longer-term efficacy parameters for the low and high dose adult cohort (patients
aged 15 and older; n=5) (data cut-off September 27, 2022). In the pediatric
cohort, an improvement in NYHA Class (from Class II to I) were reported in both
patients after 6 and 9 months of follow-up post-RP-A501. In the adult cohorts,
improvement in NYHA Class (from II to I) was observed in three patients (two
low-dose and one high-dose) who had closely monitored immunomodulation and
stabilization of NYHA Class was observed in one low-dose adult patient without a
closely monitored immunomodulatory regimen. Substantial improvements
(reductions) in BNP, a key marker of heart failure, were observed in both
pediatric patients at 6 and 9 months of follow-up, with levels at these
assessments less than 50% of baseline values. Improvements (reductions) in
hsTnI, a key marker of myocardial injury, were observed in both pediatric
patients at 6 and 9 months of follow-up, with levels at these assessments less
than 20% of baseline values. In the adult cohorts, reductions in hsTnI were
observed in three low-dose patients and one high-dose patient, with reductions
greater than 50% of baseline levels identified in these four patients on at
least one assessment, and reductions sustained through 24-36 months of
follow-up. Reductions in BNP of at least 25% below baseline values were
identified in three low-dose patients and one high-dose patient on at least one
assessment. In two of the adult patients, BNP levels were modestly above
baseline at the most recent assessment; however baseline BNP levels were either
within normal limits or mildly elevated for these two patients. In adult cohort
patients with closely monitored immunomodulation (two low-dose and one
high-dose) left ventricular (LV) posterior wall thickness improved
(approximately 15-25% decrease compared to pretreatment baseline) and reductions
in left ventricular mass were identified in four patients, including the patient
in the low-dose cohort for whom immunomodulation was not closely monitored.
Severe and progressive wall thickening is a hallmark of the hypertrophic
cardiomyopathy of Danon disease and is a major contributor to early mortality in
male patients. Evidence of sustained cardiac LAMP2B gene expression by
immunohistochemistry with qualitative improvement of vacuoles and cardiac tissue
architecture on standard H&E and electron microscopy was observed at both dose
levels in four of five patients in the adult cohorts and both patients in the
pediatric cohort. Sustained cardiac LAMP2B gene expression by
immunohistochemistry was observed in all three adult patients with a closely
monitored immunomodulatory regimen through 24 months of follow-up. Importantly,
genetic correction (as evidenced by myocardial vector copy numbers ("VCNs") and
LAMP2 protein expression were accompanied by reductions in the relative area of
autophagic vacuoles relative to overall myocardial area, with decreases in this
ratio of at least 20% relative to baseline identified in four adult cohort
patients (three of whom had reductions of at least 50%). Substantial reductions
(>50% baseline) in vacuolar area were also identified in the one pediatric
cohort patient for whom this parameter was evaluable at 6 months post-therapy.
In addition to the improvements identified in NYHA Class, improvements in
quality of life ("QOL") as reported via the Kansas City Cardiomyopathy
Questionnaire ("KCCQ") were noted in three of the adult patients who had closely
monitored immunomodulation, and both of the pediatric cohort patients; KCCQ
score at baseline was 50 for the initial pediatric patient and was 93 at the
most recent 9 month assessment; KCCQ score at baseline was 52 for the second
pediatric patient and was 81 at a preliminary 3 month assessment.

RP-A501 was generally well tolerated at the 6.7e13 gc/kg dose level, or lower
dose. All observed adverse effects were reversible with no lasting sequelae.
Early transaminase and creatinine kinase elevations returned to baseline or
decreased. No unexpected and serious drug product-related adverse events or
severe adverse events were observed in this low dose cohort. The most common
adverse events were predominantly mild, not associated with clinical symptoms
and were related to elevated transaminases post-treatment. Elevation in
transaminases and creatinine kinases was observed in all three low-dose adult
cohort patients and returned to baseline levels within the first one to two
months post-treatment. There was also a transient and reversible decline in
platelets observed in two of three of these patients. These changes were largely
responsive to corticosteroids and other immunosuppressive therapies. All
patients were given oral steroids to prevent or minimize potential
immune-related events. Corticosteroids were associated with transient
exacerbation of DD-associated skeletal myopathy, which resolved upon
discontinuation of steroid therapy. At the higher dose administered (1.1e14
gc/kg adult cohort), additional immunosuppressive therapies were stipulated and
administered to mitigate the immune response associated with RP-A501. Interim
data presented at HFSA in September 2022 included that RP-A501 was observed to
be generally well tolerated at the low dose with a manageable safety profile
across pediatric and adult cohorts. In the pediatric cohort, RP-A501 was well
tolerated in both patients with six to eleven months follow-up. The patients
were observed to have normal-range platelets, minimal complement activation and
no complement-related adverse events. The two pediatric patients received a
modified immunomodulatory regimen to mitigate adverse events. No significant
immediate or delayed toxicities, significant skeletal myopathy, or late
transaminase elevations have been observed.

Taken together, the totality of data from the six patients currently enrolled in
the Phase 1 trial is expected to support advancement toward a Phase 2 pivotal
study.

One of the patients receiving therapy on the high dose cohort had progressive
heart failure and underwent a heart transplant at Month 5 following therapy.
This patient had more advanced disease than the 4 other adult/older adolescent
patients who received treatment in the low and high dose cohorts, as evidenced
by diminished baseline LV ejection fraction (35%) on echocardiogram and markedly
elevated LV filling pressure prior to treatment. His clinical course was
characteristic of DD progression. Assessments regarding gene transduction from
the explanted heart are summarized below:

explanted heart

• Analysis of the explanted heart revealed significant fibrosis consistent with

    advanced DD.


  • Myocardial tissue from the explanted heart at 5 months post-treatment

displayed 100% LAMP2B protein expression by immunohistochemistry throughout

nonfibrous regions of the heart, including the ventricles and other essential regions

    targeted areas



As disclosed in December 2020, this same patient (one of the two patients
receiving the 1.1e14 gc/kg dose) had more advanced heart failure than the
others, and was the heaviest patient treated to-date (receiving the highest
absolute AAV9 dose). This patient experienced a non-persistent, immune-related
event that was classified as a drug product-related serious adverse event. This
thrombotic microangiopathy ("TMA") event (which was later reclassified as a
Sudden Unexpected Serious Adverse Reaction ("SUSAR") was believed to be likely
due to immune-mediated complement activation, resulting in reversible
thrombocytopenia and acute kidney injury requiring eculizumab and transient
hemodialysis. This patient regained normal kidney function within three weeks.
(This event occurred in the same patient in whom RP-A501 was not associated with
clinical stabilization or improvement, and who required a heart transplant 5
months post-therapy).

Following transplant, this patient has been clinically stable and reports
resolution of a baseline skeletal myopathy that was present prior to treatment.
Analysis of the explanted heart is described above. Of note, this patient had
more advanced heart failure at time of treatment; the clinical protocol has been
modified to exclude enrollment of DD with end-stage CHF/cardiomyopathy. In May
2021, 5 months after details of this event were disclosed and after recognition
of complement-mediated TMA in other systemic AAV programs, the FDA placed the
study on clinical hold. In response to the FDA's clinical hold, we amended the
trial protocol in order to enable more defined mechanisms for prevention, early
recognition and management of complement-mediated adverse events. The FDA lifted
the clinical hold on August 16, 2021 and investigational treatment in the
pediatric cohort was initiated in the fourth quarter of 2021. Updated results
were presented at HFSA as summarized above.

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Anticipated Milestones
Since preliminary clinical activity and ongoing tolerability have been observed
in pediatrics along with evidence of longer-term tolerability and clinical
activity in adults, we expect these results to support FDA discussions on study
design and endpoints for our planned Phase 2 pivotal trial. Phase 2 trial
planning activities are expected to begin in the fourth quarter of 2022.

Fanconi Anemia Complementation Group A (FANCA):

FA, a rare and life-threatening DNA-repair disorder, generally arises from a
mutation in a single FA gene. An estimated 60 to 70% of cases arise from
mutations in the Fanconi-A ("FANCA") gene, which is the focus of our program. FA
results in bone marrow failure, developmental abnormalities, myeloid leukemia,
and other malignancies, often during the early years and decades of life. Bone
marrow aplasia, which is bone marrow that no longer produces any or very few red
and white blood cells and platelets leading to infections and bleeding, is the
most frequent cause of early morbidity and mortality in FA, with a median onset
before 10 years of age. Leukemia is the next most common cause of mortality,
ultimately occurring in about 20% of patients later in life. Solid organ
malignancies, such as head and neck cancers, can also occur, although at lower
rates during the first two to three decades of life.

Although improvements in allogeneic (donor-mediated) hematopoietic stem cell
transplant ("HSCT"), currently the most frequently utilized therapy for FA, have
resulted in more frequent hematologic correction of the disorder, HSCT is
associated with both acute and long-term risks, including transplant-related
mortality, graft versus host disease ("GVHD"), a sometimes fatal side effect of
allogeneic transplant characterized by painful ulcers in the GI tract, liver
toxicity and skin rashes, as well as increased risk of subsequent cancers. Our
gene therapy program in FA is designed to enable a minimally toxic hematologic
correction using a patient's own stem cells during the early years of life. We
believe that the development of a broadly applicable autologous gene therapy can
be transformative for these patients.

Each of our LV-based programs utilize third-generation, self-inactivating
lentiviral vectors to correct defects in patients' HSCs, which are the cells
found in bone marrow that are capable of generating blood cells over a patient's
lifetime. Defects in the genetic coding of HSCs can result in severe, and
potentially life-threatening anemia, which is when a patient's blood lacks
enough properly functioning red blood cells to carry oxygen throughout the body.
Stem cell defects can also result in severe and potentially life-threatening
decreases in white blood cells resulting in susceptibility to infections, and in
platelets responsible for blood clotting, which may result in severe and
potentially life-threatening bleeding episodes. Patients with FA have a genetic
defect that prevents the normal repair of genes and chromosomes within blood
cells in the bone marrow, which frequently results in the development of acute
myeloid leukemia ("AML"), a type of blood cancer, as well as bone marrow failure
and congenital defects. The average lifespan of an FA patient is estimated to be
30 to 40 years. The prevalence of FA in the U.S. and EU is estimated to be
approximately 4,000 patients in total. In light of the efficacy seen in
non-conditioned patients, the addressable annual market opportunity is now
believed to be 400 to 500 patients collectively in the U.S. and EU.

We currently have one ex-vivo LV-based program targeting FA, RP-L102. RP-L102 is
our lead lentiviral vector-based program that we in-licensed from Centro de
Investigaciones Energéticas, Medioambientales y Tecnológicas ("CIEMAT"), which
is a leading research institute in Madrid, Spain. RP-L102 is currently being
studied in our Phase 2 registrational enabling clinical trials treating FA
patients at the Center for Definitive and Curative Medicine at Stanford
University School of Medicine ("Stanford"), the University of Minnesota, Great
Ormond Street Hospital ("GOSH") in London and Hospital Infantil de Nino Jesus
("HNJ") in Spain. The trial has enrolled a total of ten patients from the U.S.
and EU with the first patient in this Phase 2 trial treated in December 2019.
Patients will receive a single intravenous infusion of RP-L102 that utilizes
fresh cells and "Process B" which incorporates a modified stem cell enrichment
process, transduction enhancers, as well as commercial-grade vector and final
drug product.

Resistance to mitomycin-C, a DNA damaging agent, in bone marrow stem cells at a
minimum time point of one year post treatment is the primary endpoint for our
ongoing Phase 2 study. Per agreement with the FDA and EMA, engraftment leading
to bone marrow restoration exceeding a 10% mitomycin-C resistance threshold
could support a marketing application for approval.

In December 2020, we presented updated interim data from our FA program at the
62nd American Society of Hematology ("ASH") Annual Meeting. The FA data
presented at the ASH Annual Meeting were from seven of the nine patients treated
(out of twelve patients enrolled) as of October 2020 in both the U.S. Phase 1
and global Phase 2 studies of RP-L102 for FA. Patients in these studies received
a single intravenous infusion of "Process B" RP-L102 which incorporates a
modified stem cell enrichment process, transduction enhancers, as well as
commercial-grade vector. Preliminary data from these studies support "Process B"
as a consistent and reproducible improvement over "Process A" which was used in
earlier academic FA studies.

Seven patients had follow-up data of at least two-months and three of the seven
patients had been followed for twelve-months or longer. As patients are treated
with gene therapy product without the use of a conditioning regimen, the data
indicated that RP-L102 was generally well-tolerated with no significant safety
issues reported with infusion or post-treatment. One drug related serious
adverse event of Grade 2 transient infusion-related reaction was observed. In
five out of the seven patients for whom there was follow-up data, evidence of
preliminary engraftment was observed, with bone marrow ("BM") vector copy
numbers ("VCNs") from 0.16 to 0.22 (long-term follow-up only) and peripheral
VCNs ranging from 0.01 (2-month follow-up) to 0.11 (long-term follow-up).
Further, two of the three patients with greater than 12-months follow-up showed
evidence of increasing engraftment, mitomycin-C ("MMC") resistance and stable
blood counts, which suggests a halt in the progression of bone marrow failure.
The third patient with greater than 12-month follow-up contracted Influenza B
nine months post-treatment resulting in progressive BM failure, for which, such
patient received a successful bone marrow transplant at 18 months
post-treatment.

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In May 2021, we presented positive clinical data at the 24th Annual Meeting of
the ASGCT. The preliminary data from the Phase 1/2 trials presented in a poster
at ASGCT were from nine pediatric patients and showed increasing evidence of
engraftment in at least six of the nine patients, including two patients with at
least 15-months of follow-up and four patients with at least 6-months of
follow-up. RP-L102 demonstrated a highly favorable tolerability profile with all
subjects being treated without conditioning and with no sign of dysplasia. One
patient experienced a Grade 2 transient infusion-related reaction.

In December 2021, we presented encouraging clinical data at the 63rd Annual
Meeting of the American Society of Hematology (ASH). The preliminary results
from the Phase 1/2 trials presented in a poster at ASH were from eleven
pediatric patients and showed increasing evidence of engraftment in at least six
of eight patients for whom there are at least 12 months of follow-up, including
bone marrow progenitor cell resistance to mitomycin-C (MMC) ranging from 16-63%
in six patients (bone marrow cells in FA patients are highly sensitive to
DNA-damaging agents including MMC; this susceptibility to DNA damage is believed
to mediate the FA-associated bone marrow failure and predisposition to
malignancy. In addition to the development of MMC-resistance in BM hematopoietic
cells, sustained peripheral VCN levels were seen in six of seven patients with
at least 12-months of follow-up. One patient experienced an Influenza B
infection approximately 9 months following treatment with concomitant
progressive hematologic failure requiring allogeneic hematopoietic stem cell
transplant, which was administered successfully; the remaining patients have not
required transfusions. RP-L102 demonstrated a highly favorable tolerability
profile with all subjects being treated without cytotoxic conditioning and no
signs of dysplasia. The only RP-L102 related serious adverse event to-date has
been a Grade 2 transient infusion-related reaction in one patient.

In May 2022, we presented updated data for RP-L102 at ASGCT's 25th Annual
Meeting.  Five of nine evaluable patients as of the April 4, 2022 cut-off date
had increased resistance to MMC in bone marrow-derived colony forming cells,
ranging from 21% to 42% at 12 to 18 months, increasing to 51% to 94% at 18 - 21
months. The primary endpoint has been achieved, based on a trial protocol in
which statistical and clinical significance requires a minimum of five patients
to attain increased MMC resistance at least 10% above baseline at two or more
timepoints, and concomitant evidence of genetic correction and clinical
stabilization. A sixth patient has displayed evidence of progressively
increasing genetic correction as evidenced by peripheral VCN. Three additional
patients were less than 12 months post-treatment at the time of presentation.
One patient had progressive bone marrow failure following therapy and underwent
successful allogeneic transplant as previously disclosed. The tolerability
profile of RP-L102 appears favorable with no signs of dysplasia, clonal
dominance or oncogenic integrations; as previously reported, one patient
experienced a Grade 2 transient infusion-related reaction, which resolved.

In October 2022, we presented data for RP-L102 at the European Society for Cell
and Gene Therapy 29th Annual Meeting, including the clinical activity results
presented at the ASGCT 2022 meeting. We also disclosed at least one of the
additional three patients in our Phase 2 trial of RP-L102 for FA for whom there
is less than 12 months of follow-up has demonstrated initial evidence of
engraftment (as demonstrated by bone marrow mitomycin-C resistance and VCN in
blood and bone marrow) at levels comparable to those seen in the five patients
for whom there is longer-term evidence of progressive engraftment and phenotypic
correction. We also disclosed that one of the initial five patients in this
trial who had evidence of engraftment developed a T-cell lymphoblastic lymphoma
approximately 22 months after RP-L102 administration. A surgical biopsy of the
lymphoma indicated negligible gene markings (VCN of 0.003) at a juncture when
concomitant VCN in blood and bone marrow were 0.26 and 0.42 respectively. These
findings conclusively indicate that the lymphoma did not result from a
LV-mediated insertion, as there were essentially no gene markings in the tumor
(the very low but detectable VCN is likely the result of blood cells in the
tumor specimen). FA is a cancer-predisposition syndrome and cancers may develop
in patients under the age of 10. Importantly, the patient tolerated induction
chemotherapy for the lymphoma without significant complications and is currently
in a complete response. The presence of gene-corrected hematopoietic cells may
have contributed to this patient's overall tolerance of chemotherapy.

Planned milestones

Based on achievement of the primary endpoint as defined in our pivotal Phase 2 study for FA, we have entered into a dialogue with the FDA regarding plans to file Biologics License Applications (“BLA “) for RP-L102 for the treatment of AF and expect to make such a filing in the second half of 2023. Further data reads for the FA program are expected in the fourth quarter of 2022.

Leukocyte Adhesion Deficiency-I (LAD-I):

LAD-I is a rare autosomal recessive disorder of white blood cell adhesion and
migration, resulting from mutations in the ITGB2 gene encoding for the Beta-2
Integrin component, CD18. Deficiencies in CD18 result in an impaired ability for
neutrophils (a subset of infection-fighting white blood cells) to leave blood
vessels and enter tissues where these cells are needed to combat infections. As
is the case with many rare diseases, accurate estimates of incidence are
difficult to confirm; however, several hundred cases have been reported to
date.  Most LAD-I patients are believed to have the severe form of the disease.
Severe LAD-I is notable for recurrent, life-threatening infections and
substantial infant mortality in patients who do not receive an allogeneic HSCT.
Mortality for severe LAD-I has been reported as 60 to 75% by age two in the
absence of allogeneic HCST.

We currently have one ex-vivo program targeting LAD-I, RP-L201. RP-L201 is a
clinical program that we in-licensed from CIEMAT. We have partnered with UCLA to
lead U.S. clinical development efforts for the LAD-I program. UCLA and its Eli
and Edythe Broad Center of Regenerative Medicine and Stem Cell Research is
serving as the lead U.S. clinical research center for the registrational
clinical trial for LAD-I, and HNJ and GOSH serving as the lead clinical sites in
Spain and London, respectively. This study has received a $7.5 million CLIN2
grant award from the California Institute for Regenerative Medicine ("CIRM") to
support the clinical development of gene therapy for LAD-I.

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The open-label, single-arm, Phase 1/2 registration-enabling clinical trial of
RP-L201 has treated nine severe LAD-I patients to assess the safety and
tolerability of RP-L201 to date. The first patient was treated at UCLA with
RP-L201 in the third quarter 2019. Enrollment is now complete in both the Phase
1 and 2 portions of the study; nine patients have received RP-L201 at 3
investigative centers in the U.S. and Europe.

In December 2021, we presented positive clinical data at the 63rd Annual Meeting
of ASH. The ASH oral presentation included preliminary data from eight of nine
severe LAD-I patients, as defined by CD18 expression of less than 2%, who
received RP-L201 treatment as of the November 8, 2021, data cut-off date. Eight
patients had follow-up data of at least three months, and four of the eight
patients had been followed for 12 months or longer. All infusions of RP-L201
were well tolerated and no drug product-related serious adverse events were
reported. Evidence of preliminary efficacy was observed in all eight evaluable
patients. All eight patients demonstrated neutrophil CD18 expression that
exceeded the 4-10% threshold associated with survival into adulthood and
consistent with reversal of the severe LAD-I phenotype including six patients
with at least 6 months of follow-up. Peripheral blood VCN levels have been
stable and in the 0.54 - 2.94 copies per genome range. No patients had LAD-I
related infections requiring hospitalization after hematopoietic reconstitution
post-RP-L201. Additional updates presented in January 2022 included a ninth
patient achieving CD18 expression of 61% at 3 months, with the preliminary
observation that all nine of nine patients have demonstrated 26% to 87% CD18
expression at timepoints ranging from 3 to 24 months following RP-L102, with
stable CD18 expression levels for each patient subsequent to month 3.

In May 2022, we presented updated data at ASGCT's 25th Annual Meeting. The
presentation included efficacy and safety interim data at three to 24 months of
follow-up after infusion for all nine treated patients and overall survival
data, including survival data for the seven patients with at least 12 months of
follow-up after infusion as of the March 9, 2022 cut-off date. All patients,
aged three months to nine years, demonstrated sustained CD18 restoration and
expression on more than 10% of neutrophils (range: 20%-87%, median: 56%). At one
year, the overall survival without allogeneic hematopoietic stem cell
transplantation across the cohort is 100% based on the Kaplan-Meier estimate. As
of the data cut-off, all nine patients are alive and clinically stable. All
patients demonstrated a statistically significant reduction in the rate of
all-cause hospitalizations and severe infections, relative to pre-treatment.
Evidence of resolution of LAD-I-related skin rash and restoration of wound
repair capabilities has been shown along with sustained phenotypic correction.
The tolerability profile of RP-L201 has been highly favorable in all patients
with no RP-L201-related adverse events. Adverse events related to other study
procedures, including busulfan conditioning, have been previously disclosed and
consistent with the tolerability profiles of those agents and procedures.

Anticipated Milestones
We have initiated discussions with health authorities on BLA filing plans for
RP-L201 for the treatment of severe LAD-I and anticipate making such filing in
the first half of 2023.

Pyruvate Kinase Deficiency (PKD):

Red blood cell PKD is a rare autosomal recessive disorder resulting from
mutations in the pyruvate kinase L/R ("PKLR") gene encoding for a component of
the red blood cell ("RBC") glycolytic pathway. PKD is characterized by chronic
non-spherocytic hemolytic anemia, a disorder in which RBCs do not assume a
normal spherical shape and are broken down, leading to decreased ability to
carry oxygen to cells, with anemia severity that can range from mild
(asymptomatic) to severe forms that may result in childhood mortality or a
requirement for frequent, lifelong RBC transfusions. The pediatric population is
the most commonly and severely affected subgroup of patients with PKD, and PKD
often results in splenomegaly (abnormal enlargement of the spleen), jaundice and
chronic iron overload which is likely the result of both chronic hemolysis and
the RBC transfusions used to treat the disease. The variability in anemia
severity is believed to arise in part from the large number of diverse mutations
that may affect the PKLR gene. Estimates of disease incidence have ranged
between 3.2 and 51 cases per million in the white U.S. and EU population.
Industry estimates suggest at least 2,500 cases in the U.S. and EU have already
been diagnosed despite the lack of FDA-approved molecularly targeted therapies.
Market research indicates the application of gene therapy to broader populations
could increase the market opportunity from approximately 250 to 500 patients per
year.

We currently have one ex-vivo LVV-based program targeting PKD, RP-L301. RP-L301
is a clinical stage program that we in-licensed from CIEMAT. The IND for RP-L301
to initiate the global Phase 1 study cleared in October 2019. This program has
been granted US and EMA orphan drug disease designation.

This global Phase 1 open-label, single-arm, clinical trial is expected to enroll
four to five adult and pediatric PKD patients in the U.S. and Europe. The trial
will be comprised of two cohorts to assess RP-L301 in pediatric (age 8-17) and
adult populations. The trial is designed to assess the safety, tolerability, and
preliminary activity of RP-L301, and initial safety evaluation will occur in the
adult cohort before evaluation in pediatric patients. Stanford will serve as the
lead site in the U.S. for adult and pediatric patients, HNJ will serve as the
lead site in Europe for pediatrics, and Hospital Universitario Fundación Jiménez
Díaz will serve as the lead site in Europe for adult patients. In July 2020, we
treated the first patient in our clinical trial of RP-L301.

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In December 2021, we presented positive clinical data at the 63rd Annual Meeting
of ASH. The ASH poster presentation included preliminary data from two adult
patients with severe anemia and substantial transfusion requirements who were
treated as of the November 3, 2021 cut-off date. Each of these patients had
experience extensive PKD-related disease complications including hepatic iron
overload. Both patients have had marked improvement in hemoglobin levels, from
baselines of 7.4 and 7.0 g/dL to 12-month values of 13.3 and 14.8 g/dL
respectively; this represents an improvement from severe (Hb <8g/dL) to normal
levels. Both patients have been transfusion independent subsequent to
post-treatment hematopoietic reconstitution. Anemia resolution has been
accompanied by marked improvement in additional markers of hemolysis, including
bilirubin, erythropoietin, and reticulocyte counts. RP-L301 has been well
tolerated in these adult patients, with no drug product related serious adverse
events or infusion-related complications observed through 12-months
post-treatment. Both patients have reported improved QOL following treatment
with increases on FACT-An and additional designated QOL evaluations sustained
through 12 months following therapy.

In May 2022, we presented updated data at the 25th Annual Meeting of the ASGCT.
The presentation included data from two adult patients with severe or
transfusion-dependent anemia as of the April 13, 2022 cut-off date. At 18 months
post-infusion, both patients had sustained transgene expression, normalized
hemoglobin, improved hemolysis, no red blood cell transfusion requirements
post-engraftment and improved QOL both reported anecdotally and as documented
via formal QOL assessments. The tolerability profile of RP-L301 appears
favorable , with no RP-L-301-related serious adverse events through 18 months
post-infusion. Transient transaminase elevation was seen in both patients
post-therapy/conditioning, with no clinical stigmata of liver injury and
subsequent resolution without clinical sequelae. The pediatric cohort is
currently enrolling.

Anticipated Milestones
Enrollment in the PKD pediatric cohort is ongoing, and additional Phase 1 data
are expected in the first half of 2023. Initiation of the phase 2 pivotal trial
is expected to occur in 2023.

cGMP manufacturing

Our state-of-the-art, 103,720 square foot manufacturing facility in Cranbury,
New Jersey. has been scaled up to manufacture AAV drug product for a planned
Phase 2 pivotal study in Danon disease. The facility also houses lab space for
research & development and quality. We reached an understanding with the FDA on
chemistry, manufacturing, and controls requirements to start AAV cGMP
manufacturing at our in-house facility as well as potency assay plans for a
Phase 2 pivotal trial in Danon disease. To further strengthen our manufacturing
and commercial capabilities we appointed Mayo Pujols, one of the most seasoned
cell and gene therapy technical operations and manufacturing leaders in the
industry, as our Chief Technical Officer.

Strategy

We seek to bring hope and relief to patients with devastating, undertreated,
rare pediatric diseases through the development and commercialization of
potentially curative first-in-class gene therapies. To achieve these objectives,
we intend to develop into a fully-integrated biotechnology company. In the near
and medium-term, we intend to develop our first-in-class product candidates,
which are targeting devastating diseases with substantial unmet need, develop
proprietary in-house analytics and manufacturing capabilities and continue to
commence registration trials for our currently planned programs. We expect to
submit our first BLA for the LAD program in the first half of 2023. In the
medium and long-term, pending favorable data, we expect to submit BLAs for the
rest of our suite of clinical programs, and establish our gene therapy platform
and expand our pipeline to target additional indications that we believe to be
potentially compatible with our gene therapy technologies. In addition, during
that time, we believe that our currently planned programs will become eligible
for priority review vouchers from the FDA that provide for expedited review. We
have assembled a leadership and research team with expertise in cell and gene
therapy, rare disease drug development and product approval.

We believe that our competitive advantage lies in our disease-based selection
approach, a rigorous process with defined criteria to identify target diseases.
We believe that this approach to asset development differentiates us as a gene
therapy company and potentially provides us with a first-mover advantage.

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 September 30, 2022, we raised net cash proceeds of
approximately $727.2 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.

Functionnary costs

Research and development costs

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

• expenses incurred under agreements with research institutes and consultants

who conduct R&D activities, including process development, preclinical and

    clinical activities on our behalf;



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Index

• costs related to the development of processes, the production of preclinical and clinical data

materials, including fees paid to subcontractors and manufacturing

the costs of inputs to be used in internal manufacturing processes;

• consultants supporting process development and regulatory activities; and

• costs related to the acquisition of development and marketing rights for our

portfolio of product candidates.



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:
  • salaries and personnel-related costs, including benefits, travel, and
    stock-based compensation, for our scientific personnel performing R&D
    activities;

• facilities and other expenses, which include rental and maintenance expenses

    of facilities, and depreciation expense; and


  • laboratory supplies and equipment used for internal R&D activities.



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 presents R&D expenses tracked on a program-by-program basis
as well as by type and nature of expense for the three and nine months ended
September 30, 2022 and 2021.

                                                         Three Months Ended September 30,           Nine Months Ended September 30,
                                                            2022                  2021                 2022                  2021
Direct Expenses:
Danon Disease (AAV) RP-A501                            $         8,058      

$3,497 $24,001 $11,804
Leukocyte adhesion deficiency (LVV) RP-L201

                      5,719                 7,896               15,814               18,167
Fanconi Anemia (LVV) RP-L102                                     7,141                 6,379               16,228               11,986
Pyruvate Kinase Deficiency (LVV) RP-L301                           433                 1,109                1,919                3,530
Infantile Malignant Osteopetrosis (LVV) RP-L401 (1)                 91                   729                  280                1,975
Other product candidates                                         4,689                 2,128               11,719                3,998
Total direct expenses                                           26,131                21,738               69,961               51,460
Unallocated Expenses
Employee compensation                                  $         7,983     

$5,524 $20,495 $15,265
Stock-based compensation expense

                                 3,040                 3,084                8,247                9,148
Depreciation and amortization expense                            1,090                 1,258                2,976                3,627
Laboratory and related expenses                                  3,033                   651                3,940                2,745
Professional Fees                                                  819                   400                2,009                1,216
Other expenses                                                   1,287                 6,966                7,905                8,998
Total other research and development expenses                   17,252                17,883               45,572               40,999
Total research and development expense                 $        43,383      

$39,621 $115,533 $92,459

(1) Workforce December 2021, it was decided to no longer pursue the Rocket-sponsored clinical evaluation of RP-L401; this program was returned to academic innovators.

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:

• the extent, rate of progress and ongoing expenditures as well as any

    studies and other R&D activities that we undertake;


  • future clinical study results;


  • uncertainties in clinical study enrollment rates;


  • changing standards for regulatory approval; and


  • the timing and receipt of any regulatory approvals.



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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
further 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:

• the scope, progress, results and costs of our clinical trials and other R&D

Activities;

• the efficacy and potential advantages of our product candidates over

    alternative treatments, including any standard of care;


  • the market acceptance of our product candidates;

• obtaining, maintaining, defending and enforcing patent and other claims

intellectual property rights;

• significant and changing government regulations; and

• the timing, receipt and conditions of any marketing authorization.



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 charges

Interest expense for the three and nine months ended September 30, 2022, was
related to our financing lease obligation for the Cranbury, NJ facility.
Interest expense for the three and nine months ended September 30, 2021, was
related to the 2021 Convertible Notes which converted into common stock on
August 2, 2021, the 2022 Convertible Notes, which were redeemed and converted
into common stock in April 2021, and the financing lease obligation for the
Cranbury, NJ facility.

interest income

Interest income was related to interest earned on investments and cash equivalents.

Critical Accounting Policies and Significant Judgments and Estimates

There have been no material changes in our critical accounting policies and
estimates in the preparation of our condensed consolidated financial statements
during the three months ended September 30, 2022 compared to those disclosed in
our 2021 Form 10-K.


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Index

Operating results

Comparison of the three months ended September 30, 2022 and 2021

                                                   Three Months Ended September 30,
                                                   2022             2021         Change

Operating expenses:
Research and development                       $     43,383       $  39,621     $  3,762
General and administrative                           15,105          10,025        5,080
Total operating expenses                             58,488          49,646        8,842
Loss from operations                                (58,488 )       (49,646 )     (8,842 )
Research and development incentives                       -               -            -
Interest expense                                       (465 )          (534 )         69
Interest and other income, net                        1,353             806 

547

Amortization of premium on investments - net           (156 )          (744 )        588
Total other income (expense), net                       732            (472 )      1,204
Net loss                                       $    (57,756 )     $ (50,118 )   $ (7,638 )


Research and development costs

R&D expenses increased $3.8 million to $43.4 million for the three months ended
September 30, 2022 compared to the three months ended September 30, 2021. The
increase in R&D expenses was primarily driven by increases in manufacturing and
development costs of $4.0 million, compensation and benefits of $2.5 million due
to increased R&D headcount, direct materials of $2.2 million, laboratory
supplies of $1.8 million and professional fees of $0.9 million. Increases noted
were offset by a decrease in licensing fees of $7.6 million attributable to the
Neptune Warrant expense recorded in the three months ended September 30, 2021.

General and administrative expenses

G&A expenses increased $5.1 million to $15.1 million for the three months ended
September 30, 2022, compared to the three months ended September 30, 2021. The
increase in G&A expenses was primarily driven by increases in compensation and
benefits of $1.3 million due to increased G&A headcount, non-cash stock
compensation expense of $0.7 million, office and administrative expenses of $0.4
million and Renovacor pre-acquisition related expenses of $1.3 million.

Other income (expenses), net

Other income increased by $1.2 million to $0.7 million for the three months
ended September 30, 2022, compared to the three months ended September 30, 2021.
The increase in other income was primarily driven by an increase in interest and
other income, net, of $0.5 million due to increased interest rates and an
increase in investment amortization, net, of $0.6 million.

Comparison of the nine months ended September 30, 2022 and 2021

                                                   Nine Months Ended September 30,
                                                  2022            2021         Change

Operating expenses:
Research and development                       $   115,533     $   92,459     $  23,074
General and administrative                          39,728         30,456         9,272
Total operating expenses                           155,261        122,915        32,346
Loss from operations                              (155,261 )     (122,915 )     (32,346 )
Research and development incentives                      -            500          (500 )
Interest expense                                    (1,395 )       (2,514 ) 

1,119

Interest and other income, net                       2,644          2,218   

426

Amortization of premiums on investments – net (1,128 ) (2,111 )

983

Total other income (expense), net                      121         (1,907 )       2,028
Net loss                                       $  (155,140 )   $ (124,822 )   $ (30,318 )



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Index

Research and development costs

R&D expenses increased $23.1 million to $115.5 million for the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021. The
increase in R&D expenses was primarily driven by increases in manufacturing and
development costs of $15.8 million, laboratory supplies of $4.5 million,
compensation and benefits expense of $5.2 million due to increased R&D headcount
and direct materials of $3.0 million. Increases noted were offset by a decrease
in non-cash stock compensation expense of $0.9 million and a decrease in license
fees of $7.7 million attributable to the Neptune Warrant expense recorded in the
nine months ended September 30, 2021.

General and administrative expenses

G&A expenses increased $9.3 million to $39.7 million for the nine months ended
September 30, 2022, compared to the nine months ended September 30, 2021. The
increase in G&A expenses was primarily driven by increases in commercial
preparation expenses which consists of commercial strategy, medical affairs,
market development and pricing analysis of $2.5 million, compensation and
benefits of $2.8 million due to increased G&A headcount and legal expense of
$1.3 million.

Other income (expenses), net

Other income increased by $2.0 million to $0.1 million for the nine months ended
September 30, 2022, compared to the nine months ended September 30, 2021. The
increase in other income was primarily driven by decreased interest expense of
$1.1 million associated with the 2022 Convertible Notes that were redeemed in
April 2021 and the 2021 Convertible Notes that were converted in August 2021, an
increase in interest and other income, net of $0.4 million due to increased
interest rates and an increase in investment amortization, net, of $1.0 million.

Liquidity, capital resources and plan of operations

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.

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. We have incurred net losses and
negative cash flows from our operations each year since inception. We had net
losses of $155.1 million for the nine months ended September 30, 2022, and
$169.1 million for the year ended December 31, 2021. As of September 30, 2022
and December 31, 2021, we had an accumulated deficit of $647.1 million and
$491.9 million, respectively. As of September 30, 2022, we had $306.5 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 2024. We have funded our operations primarily through
the sale of our equity and debt securities.

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

                                                                 Nine Months Ended September 30,
                                                                   2022                   2021
Net cash used in operating activities                        $        (122,121 )     $       (90,222 )
Net cash provided by investing activities                               39,259                 1,989
Net cash provided by financing activities                               46,848                36,545

Net decrease in cash, cash equivalents and restricted cash ($36,014) ($51,688)



                                       31

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Index

Operational activities

During the nine months ended September 30, 2022, operating activities used
$122.1 million of cash and cash equivalents, primarily resulting from our net
loss of $155.1 million offset by net non-cash charges of $27.1 million,
including non-cash stock-based compensation expense of $21.3 million, accretion
of discount on investments of $1.1 million, and depreciation and amortization
expense of $2.9 million. Changes in our operating assets and liabilities for the
nine months ended September 30, 2022 consisted of an increase in accounts
payable and accrued expenses of $7.2 million and a decrease in our prepaid
expenses of $1.3 million.

During the nine months ended September 30, 2021, operating activities used $90.2
million of cash, primarily resulting from our net loss of $124.8 million offset
by net non-cash charges of $34.8 million, including non-cash stock-based
compensation expense of $22.2 million, warrant issuance of $7.6 million,
accretion of discount on investments of $2.1 million, and depreciation and
amortization expense of $2.2 million. Changes in our operating assets and
liabilities for the nine months ended September 30, 2021 consisted of an
increase in accounts payable and accrued expenses for $2.8 million, a decrease
in finance lease liability of $1.6 million and a decrease in our prepaid
expenses of $1.0 million.

Investing activities

During the nine months ended September 30, 2022, net cash provided by investing
activities was $39.3 million, primarily resulting from proceeds of $222.1
million from the maturities of investments, offset by purchases of investments
of $177.5 million, and purchases of property and equipment of $5.4 million.

During the nine months ended September 30, 2021, net cash provided by investing
activities was $2.0 million, consisting of proceeds of $234.1 million from the
maturities of investments, offset by purchases of investments of $226.5 million,
purchases of property and equipment of $4.9 million, and purchases of internal
use software of $0.7 million.

Financing Activities

During the nine months ended September 30, 2022, financing activities provided
$46.8 million of cash, primarily resulting from net proceeds of $46.6 million
from the sale of shares through our at-the-market facility.

During the nine months ended September 30, 2021, net cash provided by financing
activities was $36.5 million, consisting of the issuance of common stock related
to the August 2021 private placement of $26.4 million and issuance of common
stock pursuant to exercises of stock options.

Contractual obligations and commitments

There were no material changes outside the ordinary course of our business to
the contractual obligations specified in the table of contractual obligations
included in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our 2021 Form 10-K. Information regarding contractual
obligations and commitments may be found in Note 10 of our unaudited
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

No recent accounting pronouncements have impacted the Company or had a material impact on the consolidated financial statements.

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