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Today we will look at developmental concern with a pipeline of potential new gene therapies. The company is the result of recent merger and has one of the best ticker symbols and names in the high beta biotech space. Is it worthy of a small investment within a well-diversified biotech portfolio. We attempt to answer that question in the paragraphs below.
Rocket Pharmaceuticals (RCKT) is a New York City based early-stage, clinical biopharmaceutical company that was founded in 1999. In January of this year the company completed a merger with Inotek Pharmaceuticals. The new entity focused on advancing a pipeline of gene therapy programs targeting rare and undertreated diseases. Rocket Pharmaceuticals currently trades for just over $20.00 a share and has a market capitalization just north of $800 million currently.
Rocket is utilizing a multi-platform development approach that leverages their well-established lentiviral vector and adeno-associated viral vector gene delivery methods. Initially, the company will be targeting devastating rare diseases in children that lead to early mortality in the absence of bone marrow transplant or other invasive procedures. The company’s lead program is a lentiviral vector-based gene therapy for Fanconi Anemia. The company’s research and manufacturing partners include: The Fred Hutchinson Cancer Research Center; Centre for Energy; Environment and Technology; Centro de Investigacion Biomedica en Red; The Instituto de Investigación Sanitaria Fundación Jimenez Diaz; Lund University, Lund, Sweden; and Molmed. As of now, the company is on schedule for regulatory submissions for LAD-I, PKD and AAV programs over the next 12 Months. With regulatory fillings on track, the company could have four gene therapy programs in clinical development in 2019.
The company has a few key milestones to be on the lookout for. Firstly, the company will be updating patient data from their ongoing Phase 1/2 study of RP-L102 conducted with CIEMAT is expected to be updated over the next 12 months. The company provided an update last week at the American Society of Gene and Cell Therapy’s 21st Annual Meeting in Chicago which caused a nice rise in the stock. Secondly, an investigational medicinal product dossier is expected to be filed in the fourth quarter of 2018 for leukocyte adhesion deficiency-I. Thirdly, an IMPD application is expected to be filed in early 2019 for Pyruvate Kinase Deficiency. Fourthly, they will continue to advance preclinical studies in infantile malignant osteopetrosis in order to support a first-n-human trial.
The only program that the company currently has in clinical development is their Fanconi Anemia program. FA is a rare and serious inherited blood disorder that leads to bone marrow failure. FA is the result of FANC gene mutations which impairs DNA repair function. This ultimately leads to bone marrow failure and later cancer. No cure is available, and the current standard of care is a bone marrow transplant. The prevalence of the disease in the US and EU is around 2,000 people. According to St. Jude, about 31 babies are born with the disease each year in the United States. Approximately, 10% of people with Fanconi anemia develop leukemia.
Currently, a Phase 1/2 LVV-based gene therapy for Fanconi Anemia is being conducted with academic partners in the U.S. and Europe. Additional patient data is expected in 2018 and a registration study is anticipated to start in 2019. Data presented in October of 2017 by Rocket’s partners at CIEMAT in Spain presented interesting interim results. Data showed promising in vivo engraftment and stabilization of blood counts despite declining counts in the months to years preceding therapy. Also, in December Rocket’s collaboration partners at the Fred Hutchinson Cancer Research Center presented data from a pilot trial assessing the feasibility of a novel lineage depletion protocol for hematopoietic stem cell enrichment and subsequent transduction with the LVV-based gene therapy, RP-L101. lentiviral transduction and re-infusion of gene modified cells was shown to effectively produce long-term engraftment in mice. The company stated that patient treatment with this new protocol is underway.
Analyst Commentary and Balance Sheet:
Rocket Pharmaceuticals ended the first quarter with cash and cash equivalents of $182 million, compared to $18 million of cash as of December 31, 2016. The company did a secondary offering in late January**.** R&D expenses were $5.7 million for the 3 months ended March 31, 2018, compared to $2.2 million for the comparable period in 2017. General and administrative expenses were $8.6 million for the 3 months ended March 31,2017, compared to $585,000 for the comparable period in 2017. Overall, the company had a net loss of $15.3 million for Q1 of 2018. Based on their current operating plans, the company estimates that its cash, cash equivalents and short-term investments as of the end of the first quarter will be sufficient to run its operations into 2020.
Analysts are mixed on the stock and the shares receive sparse coverage despite an over $800 million market cap. The latest recommendation comes via Cowen on May 11th, 2018. The firm reiterated their buy rating and didn’t issue a price target. The analyst over at Cowen is positive on the company prospects based on the possible depth of its pipeline and the data produced thus far by Rocket’s lead program for Fanconi Anemia, “Rocket’s lead program for Fanconi Anemia has produced solid proof-of-concept clinical data and is expected to enter pivotal development in 2019. We expect Rocket to create long-term shareholder value as its gene therapy programs advance.”
Rocket has multiple ‘shots on goal’, now has sufficient funding in place over the near term and has upcoming trial milestones that could be catalysts for its stock. That said, it has little analyst coverage and is the result of a recent merger which I usually view as a ‘red flag’. Given that, I can only offer up a tepid recommendation as a ‘watch item’ position within a well-diversified biotech portfolio. I prefer several other CAR-T concerns over Rocket which is probably a good topic for another column at a later date.
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