Rocket Pharmaceuticals (RCKT) Risk Analysis

Federal net operating losses generated in taxable years beginning after December 31, 2017 generally may not be carried back to prior taxable years, and while such federal net operating losses generated in taxable years beginning after December 31, 2017 will not be subject to expiration, the deduction for such net operating loss in any taxable year will be limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself. However, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) repeals the 80% limitation on the utilization of such federal net operating losses for taxable years beginning after December 31, 2017 and beginning before January 1, 2021 and allows for federal net operating losses generated in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of the five taxable years preceding the taxable year in which the loss arises. This change in law temporarily allowing for the carryback of federal net operating losses is not expected to produce any material benefit for the issuer. As described above, we have incurred significant net losses since our inception and anticipate that we will continue to incur losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our net operating loss or tax credit carryforwards. Additionally, new tax laws could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner that is adverse to us. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or the Tax Act, enacted many significant changes to the U.S. tax laws, including changes in corporate tax rates, which collectively may impact the utilization of our NOLs and other deferred tax assets, the deductibility of expenses, and the taxation of foreign earnings. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation. The impact of changes under the Tax Act, the CARES Act, or future reform legislation could limit our ability to utilize our NOLs or increase our future U.S. tax expense and could have a material adverse impact on our business and financial condition. In general, under Sections 382 and 383 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or net operating losses or tax credits, or credits, (including federal research and development tax credits) to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. As described below, we have experienced numerous “ownership changes” within the meaning of Section 382 of the Internal Revenue Code. Future changes in our stock ownership, many of which are outside of our control, could result in one or more additional ownership changes under Sections 382 and 383 of the Internal Revenue Code and further limit our ability to utilize our net operating losses and credits. Our net operating losses or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our net operating losses or credits if we undergo an ownership change prior to the utilization of all such net operating losses or credits. Risks Related to Capital Needs We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our licensing activities, product development efforts or other operations. We expect to require substantial future capital in order to expand our gene therapy platforms, advance preclinical and clinical development for our current product candidates and other future product candidates, if any, and potentially commercialize these product candidates. We expect our spending levels to increase in connection with our preclinical and clinical activities. Also, if we obtain marketing approval for any of our current or future product candidates, we expect to incur significant expenses related to product sales, medical affairs, marketing, manufacturing, and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, limit or terminate our product development efforts or other operations. Furthermore, to the extent we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, recent volatility in capital markets, rising interest rates and lower market prices for securities generally may affect our ability to access new capital on terms favorable to us, which may harm our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets. We have incurred net losses since our inception. We incurred net losses of $258.7 million, $245.6 million and $221.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $1.22 billion. Substantially all our operating losses have resulted from costs incurred in connection with our R&D programs, buildout of our manufacturing capabilities and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we intend to continue to conduct R&D, clinical trials, regulatory compliance activities, and internal and external manufacturing activities. If any of our product candidates are approved, sales and marketing activities, together with anticipated G&A expenses, would likely result in us continuing to incur significant losses for the foreseeable future. If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any of our product candidates, we may not be successful in commercializing those product candidates if and when they are approved. We have limited sales or marketing infrastructure and have no Company experience in the sale, marketing, or distribution of pharmaceutical products. To achieve commercial success for any approved candidate for which we retain sales and marketing responsibilities, we must either continue to develop our sales and marketing organization or outsource these functions to third parties. In the future, we may choose to continue to build a focused sales, marketing, and commercial support infrastructure to sell, or participate in sales activities with our collaborators for, some of our product candidates if and when they are approved. There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we establish marketing and other commercialization capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our commercialization personnel. If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distribution services, our product revenues or the profitability of these product revenues to us may be lower than if we were to market and sell any medicines we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our medicines effectively. There are risks related to Manufacturing, Commercialization and Development of Our Product Candidates Risks Related to Manufacturing our Product Candidates Products intended for use in gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result in delays in our development or commercialization programs, limit the supply of our products or otherwise harm our business. We currently have development, manufacturing, and testing agreements with third parties to manufacture supplies of certain of our product candidates. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, public health crises such as pandemics and epidemics, disruption in utility services, human error or disruptions in the operations of suppliers. Our product candidates require processing steps that are more complex than those required for small molecule pharmaceuticals. The facilities used by our contract manufacturers to manufacture our product candidates must be inspected by the FDA pursuant to pre-approval inspections that will be conducted after we submit our marketing applications to the FDA. We do not control the manufacturing process of, and will be completely dependent on, our contract manufacturers for compliance with cGMPs in connection with the manufacture of certain of our product candidates. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to pass regulatory inspections and/or maintain regulatory compliance for their manufacturing facilities and we may need to find alternatives, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. We have limited experience in manufacturing, and there can be no assurance that we will be able to manufacture products at the scale our business may require. We have historically relied on third parties to manufacture supplies of our product candidates. We have completed a build-out of a manufacturing facility in Cranbury, New Jersey, and have since completed a limited number of DD AAV cGMP batches. Although some of our employees have experience in the manufacturing of biopharmaceutical products from prior employment at other companies, we as a company have very limited prior experience in manufacturing. As a manufacturer of pharmaceutical products, we will be required to demonstrate and maintain compliance with cGMP requirements related to production processes, quality control and assurance and recordkeeping. Furthermore, establishing and maintaining manufacturing operations may require a reallocation of other resources, particularly the time and attention of certain of our senior management as well as potentially significant capital expenditures. Any failure or delay in the development of our manufacturing capabilities could adversely impact the development or commercialization of our product candidates. Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the potential commercialization of any products that we may develop. We face inherent risks of product liability exposure related to the testing of our product candidates in human clinical trials and will face even greater product liability risks if we commercially sell any approved products. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. We currently hold product liability insurance coverage at a level that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business. We may not be successful in finding strategic collaborators for continuing development of certain of our product candidates or successfully commercializing our product candidates. Risks Related to Ownership of our Common Stock Future sales of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is performing well. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception that such sales may occur, could reduce the market price of our common stock. Our outstanding shares of common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended (the “Securities Act”), or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates of ours. In addition, certain of our employees, executive officers, directors, and affiliated stockholders may enter into Rule 10b5-1 plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the employee, director or officer when entering into the plan, without further direction from the employee, officer, director or affiliated stockholder. A Rule 10b5-1 plan may be amended or terminated in some circumstances. Our employees, executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline. Risks Related to Personnel and Expansion of our Company Risks Related to our Personnel Our business could suffer if it loses the services of, or fails to attract, key personnel. We are highly dependent upon the efforts of our senior management, including our Chief Executive Officer, Gaurav Shah, MD; our President, Head of R&D and Chief Operating Officer, Kinnari Patel, PharmD, MBA; our Chief Financial Officer, Aaron Ondrey; our Chief Business Officer and Senior Vice President, Raj Prabhakar; and our General Counsel, Chief Corporate Officer and Senior Vice President, Martin Wilson. The loss of the services of these individuals and other members of our senior management could delay or prevent the achievement of research, development, marketing, or product commercialization objectives. Our employment arrangements with the key personnel are “at-will.” We do not maintain any “key-man” insurance policies on any of the key employees nor do we intend to obtain such insurance. In addition, due to the specialized scientific nature of our business, we are highly dependent upon our ability to attract and retain qualified scientific and technical personnel and consultants. There is intense competition among major pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions for qualified personnel in the areas of our operations, and we may be unsuccessful in attracting and retaining these personnel. Our employees, principal investigators, consultants, and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading. We are exposed to the risk of fraud or other misconduct by our employees, consultants, and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the U.S. and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained during clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation or could cause regulatory agencies not to approve our product candidates. We have a code of business ethics and conduct applicable to all employees, but it is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. Risks Related to Our Expansion and Growth Plans We may need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations. As our business activities expand, we may expand our full-time employee base and hire more consultants and contractors. Our management may need to divert a disproportionate amount of its attention away from day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational setbacks, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected our ability to generate and/or grow revenues could be reduced and we may not be able to implement our business strategy. We may fail to realize the anticipated benefits of potential acquisitions or business combinations. The success of acquisitions or business combinations will depend on, among other things, our ability to combine our businesses in a manner that allows us to achieve developmental and operational synergies. It is possible that the integration process could result in the loss of key employees; the disruption of our ongoing business; or inconsistencies in standards, controls, procedures, or policies, in each case, that could adversely affect our ability to achieve the anticipated benefits of the acquisition. Integration efforts between the two businesses will also divert management’s attention from our core business and other opportunities that could have been beneficial to our shareholders. An inability to realize the full extent of, or any of, the anticipated benefits of the acquisition, as well as any delays encountered in the integration process, could have an adverse effect on our business and results of operations, which may affect the value of the shares of our common stock after the completion of the acquisition. If we are unable to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer or cost more to realize than expected. In particular, the acquisition or business combination may not be accretive to our stock value in the near or long term. In addition, any acquisition or business combination may impact the market price for shares of our common stock, which could result in substantial losses for our stockholders. Future formations of strategic alliances or joint ventures with third parties could disrupt our business and harm our financial condition and operating results. We may form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such strategic alliance or joint venture, we will achieve the expected synergies to justify the transaction. The risks we face in connection with any strategic alliance or joint venture, include: • diversion of management time and focus from operating our business to addressing integration challenges; • coordination of R&D efforts; • changes in relationships with strategic partners as a result of any product acquisitions or strategic positioning; • cultural challenges associated with integrating employees; • the need to implement or improve controls, procedures, and policies at any joint venture; • liability for activities of any partnered company prior to any strategic alliance or joint venture, including intellectual property infringement claims, violation of laws, commercial disputes, tax liabilities, and other known liabilities; • unanticipated write-offs or charges. Risks Related to Development of our Pipeline and Research and Development Activities We may not be successful in our efforts to expand our pipeline of additional product candidates for development. Our business model is centered on applying our expertise in rare genetic diseases by establishing focused selection criteria to develop and advance a portfolio of gene therapy product candidates through development into commercialization. We may not be able to continue to identify and develop new product candidates in addition to the pipeline of product candidates that our efforts to date have resulted in. Even if we are successful in continuing to expand our pipeline, any potential product candidates that we identify may not be suitable for clinical development. If we do not successfully identify, develop and commercialize product candidates, we will not be able to obtain product revenue in future periods, which would likely result in significant harm to our financial position and results of operations. The success of our R&D activities, clinical testing and commercialization, upon which we primarily focus, is uncertain. Our primary focus is on our R&D activities and the clinical testing and commercialization of our product candidates, and we anticipate that we will remain principally engaged in these activities for an indeterminate, but substantial, period. R&D was our most significant operating expense for the year ended December 31, 2024. R&D activities, including the conduct of clinical studies, by their nature, preclude definitive statements as to the time required and costs involved in reaching certain objectives. Actual R&D costs, therefore, could significantly exceed budgeted amounts and estimated timeframes may require significant extension. Cost overruns, unanticipated regulatory delays or demands, unexpected adverse side effects or insufficient therapeutic efficacy will prevent or substantially slow our R&D efforts and our business could ultimately suffer. Risks Related to Third Parties We rely on third parties to conduct certain aspects of our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed. We have relied upon and plan to continue to rely upon third parties, including CROs, medical institutions, and contract laboratories for certain aspects of our ongoing preclinical and clinical programs. Nevertheless, we maintain responsibility for ensuring that each of our clinical trials and preclinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our vendors are required to comply with the current requirements of GMP, GCP, and GLP, which are a collection of laws and regulations enforced by the FDA, the EMA or comparable foreign authorities for our drug candidates in clinical development. Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, we cannot guarantee that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse effect on our business, financial condition or results of operations. Risks Related to Ownership of our Common Stock Future sales of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is performing well. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception that such sales may occur, could reduce the market price of our common stock. Our outstanding shares of common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended (the “Securities Act”), or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates of ours. In addition, certain of our employees, executive officers, directors, and affiliated stockholders may enter into Rule 10b5-1 plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the employee, director or officer when entering into the plan, without further direction from the employee, officer, director or affiliated stockholder. A Rule 10b5-1 plan may be amended or terminated in some circumstances. Our employees, executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline. The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our stockholders. Our stock price is likely to be volatile. The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, our stockholders may not be able to sell their shares of common stock at or above the price they paid for their shares. The market price for our common stock may be influenced by many factors, including: • results of clinical trials of our product candidates or those of our competitors; • the success of competitive products or technologies; • commencement or termination of collaborations; • regulatory or legal developments in the U.S. and other countries; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our product candidates or clinical development programs; • the results of our efforts to discover, develop, acquire or in-license additional product candidates; • actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; • negative publicity around gene therapy in general, or our product candidates; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in the structure of healthcare payment systems; • macroeconomic conditions, including inflation and rising interest rates, capital market volatility and global conflicts, including the Russia-Ukraine war, the Israel-Hamas war and the conflict between China and Taiwan; • market conditions in the pharmaceutical and biotechnology sectors; and • general economic, industry and market conditions. If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance. RTW, our largest stockholder, may have the ability to significantly influence all matters submitted to stockholders for approval. RTW Investments, LP, in the aggregate, beneficially owns approximately 17.1% of our outstanding shares of common stock. This concentration of voting power gives RTW the power to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, RTW could significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as one of our stockholders. Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be stockholders’ sole source of gain. General Risk Factors Our limited operating history may make it difficult for us to evaluate the success of our business to date and to assess our future viability. Our operations to date have predominantly focused on organizing and staffing our company, business planning, raising capital, acquiring our technology, administering, and expanding our gene therapy platforms, identifying potential product candidates, undertaking research, preclinical studies and clinical trials of our product candidates, building out our R&D and manufacturing capabilities, and establishing licensing arrangements and collaborations. We have not yet obtained marketing approvals, manufactured a commercial-scale product, or conducted sales and marketing activities necessary for successful commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history. We are currently a drug discovery and clinical stage company and at a later point we will need to transition to a commercial stage company. We cannot guarantee that we will be successful in this transition. If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock. As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), we are required to furnish a report by management on the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting. Preparing such attestation report and the cost of compliance with reporting requirements requires significant management time. Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. Our internal computer systems, or those of our third-party collaborators or other contractors, may fail or suffer security breaches, which could result in a material disruption of our development programs. Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations. RTW, our largest stockholder, may have the ability to significantly influence all matters submitted to stockholders for approval. RTW Investments, LP, in the aggregate, beneficially owns approximately 17.1% of our outstanding shares of common stock. This concentration of voting power gives RTW the power to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, RTW could significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as one of our stockholders. Because we have never declared or paid cash dividends on our capital stock. We currently intend to retain all future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be stockholders’ sole source of gain for the foreseeable future. General Risk Factors Our limited operating history may make it difficult for us to evaluate the success of our business to date and to assess our future viability. Our operations to date have predominantly focused on organizing and staffing our company, business planning, raising capital, acquiring our technology, administering, and expanding our gene therapy platforms, identifying potential product candidates, undertaking research, preclinical studies and clinical trials of our product candidates, building out our R&D and manufacturing capabilities, and establishing licensing arrangements and collaborations. We have not yet obtained marketing approvals, manufactured a commercial-scale product, or conducted sales and marketing activities necessary for successful commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history. We are currently a drug discovery and clinical stage company and at a later point we will need to transition to a commercial stage company. We cannot guarantee that we will be successful in this transition. If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock. Provisions in our corporate charter documents and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our Board of Directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors. Among other things, these provisions: • permit only the Board of Directors to establish the number of directors; • require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. Our internal computer systems, or those of our third-party collaborators, may fail or suffer from security breaches. Such events could result in a loss, or unauthorized disclosure, of confidential or proprietary information and materially disrupt our operations, including our development programs. Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception that such sales may occur, could reduce the market price of our common stock. If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline. The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our stockholders. RTW, our largest stockholder, may have the ability to significantly influence all matters submitted to stockholders for approval. Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be stockholders’ sole source of gain. General Risk Factors Our limited operating history may make it difficult for us to evaluate the success of our business to date and to assess our future viability. Our operations to date have predominantly focused on organizing and staffing our company, business planning, raising capital, acquiring our technology, administering, and expanding our gene therapy platforms, identifying potential product candidates, undertaking research, preclinical studies and clinical trials of our product candidates, building out our R&D and manufacturing capabilities, and establishing licensing arrangements and collaborations. We have not yet obtained marketing approvals, manufactured a commercial-scale product, or conducted sales and marketing activities necessary for successful commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history. We are currently a drug discovery and clinical stage company and at a later point we will need to transition to a commercial stage company. We cannot guarantee that we will be successful in this transition. If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock. Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management. Our internal computer systems, or those of our third-party collaborators, may fail or suffer security breaches, which could result in a material disruption of our development programs. Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations. RTW, our largest stockholder, may have the ability to significantly influence all matters submitted to stockholders for approval. Because we have never declared or paid cash dividends on our capital stock, capital appreciation, if any, will be stockholders’ sole source of gain for the foreseeable future. General Risk Factors Our limited operating history may make it difficult for us to evaluate the success of our business to date and to assess our future viability. If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock. Provisions in our corporate charter documents and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable. RTW, our largest stockholder, may have the ability to significantly influence all matters submitted to stockholders for approval. In addition, product liability lawsuits against us could cause us to incur substantial liabilities and could limit the potential commercialization of any products that we may develop. We have limited experience in manufacturing, and there can be no assurance that we will be able to manufacture products at the scale our business may require. We have historically relied on third parties to manufacture supplies of our product candidates. We have completed a build-out of a manufacturing facility in Cranbury, New Jersey, and have since completed a limited number of DD AAV cGMP batches. Although some of our employees have experience in the manufacturing of biopharmaceutical products from prior employment at other companies, we as a company have very limited prior experience in manufacturing. As a manufacturer of pharmaceutical products, we will be required to demonstrate and maintain compliance with cGMP requirements related to production processes, quality control and assurance and recordkeeping. Furthermore, establishing and maintaining manufacturing operations may require significant capital expenditures. Any failure or delay in the development of our manufacturing capabilities could adversely impact the development or commercialization of our product candidates. Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the potential commercialization of any products that we may develop. We face inherent risks of product liability exposure related to the testing of our product candidates in human clinical trials and will face even greater product liability risks if we commercially sell any approved products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. We currently hold product liability insurance coverage at customary levels, but which may not be adequate to cover all liabilities that we may incur. Risks Related to Commercialization of our Product Candidates Our ability to successfully develop and commercialize our product candidates will substantially depend upon the availability of reimbursement for the costs of the resulting drugs and related treatments. Sales of our product candidates will depend, both domestically and abroad, on the extent to which the costs of our product candidates will be covered and paid by government authorities and other third-party payors, such as private health insurers. We have not commenced efforts to have our product candidates reimbursed by government or third-party payors. If coverage and reimbursement are not available or are available only at limited levels, we may not be able to successfully commercialize our products. In the U.S., the principal decisions about coverage and reimbursement for new medicines are typically made by the CMS, and private payors tend to follow CMS decisions. It is difficult to predict what CMS will decide for novel products such as ours. Third-party payors are increasingly limiting both coverage and the level of reimbursement of new drugs. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors. In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed, and the requirements vary widely from country to country. Historically, products launched in the EU do not follow the U.S. price structures, with generally lower prices, which could impact our ability to achieve adequate reimbursement. We face intense competition and rapid technological change and our competitors may develop therapies that are more advanced or effective than ours. We are engaged in gene therapy for severe genetic and rare diseases, which is a competitive and rapidly changing field, and our competitors include major multinational pharmaceutical companies, biotechnology companies, and academic institutions. Risks Related to Our Intellectual Property Our rights to intellectual property for the development and commercialization of our product candidates are subject to the terms of licenses granted to us by others. We are heavily reliant upon such licenses and our patent portfolio may not provide exclusive rights in all relevant territories or fields of use, which could allow competitors to develop similar products. Licenses to additional third-party technology that may be required for our development programs may not be available on commercially reasonable terms. In addition, disputes regarding the prepared, filed, and prosecuted patents, or claims challenging inventorship or ownership, could adversely affect our ability to protect our technology and products. Furthermore, research funded by the U.S. government may grant the government certain march-in rights with respect to our licensed technology, which could affect our competitive position. Risks Related to Finding Strategic Collaborators We may not be successful in finding strategic collaborators for the continued development and commercialization of our product candidates. If we fail to enter into such arrangements or are forced to operate independently, we may have to fund development at our own expense, which could adversely affect our business. Risks Related to Our Expansion and Growth Plans We may need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations. Our management may be diverted to managing growth, which may affect our core operations and our ability to generate revenues. We may also fail to realize the anticipated benefits of potential acquisitions or business combinations. Integration challenges, dilution of existing stockholders, and unexpected liabilities could have a material adverse effect on our business. Risks Related to Third Party Relationships We rely on third parties to conduct certain aspects of our preclinical studies, clinical trials, and other functions. Any failure by these third parties to perform their duties or comply with regulatory requirements could materially harm our business. Switching or adding additional third parties may incur additional costs and delays, disrupting our development timelines. Risks Related to Development of our Pipeline and R&D Activities We may not be successful in expanding our pipeline of product candidates. Our future revenue depends on our ability to identify, develop, and commercialize new product candidates. Failure to do so would materially harm our business. The success of our R&D activities, clinical testing and commercialization is inherently uncertain, and our actual R&D costs may significantly exceed our estimates. Risks Related to Ownership of our Common Stock (Repeated) Future sales in the public market of our common stock, including by our employees and other affiliated stockholders, may cause our stock price to decline. Dilution from additional equity issuances could also have a negative effect. If securities analysts downgrade our stock or cease coverage, our stock price could be adversely affected. The trading market for our common stock is volatile and may be influenced by many unpredictable factors, including clinical trial results, competitive developments, regulatory changes, and market conditions. RTW, our largest stockholder, may have significant influence over matters submitted to stockholders, which could limit the ability of other stockholders to effect change. Because we do not intend to pay cash dividends, stockholders’ gains will be solely dependent on stock price appreciation. General Risk Factors (Repeated) Our limited operating history, our lack of commercial-scale operations, and our status as a clinical stage company make it difficult to predict our future success or viability. If we fail to maintain effective internal controls over financial reporting, our reported financial results could be unreliable, which could adversely affect investor confidence and our stock price. Provisions in our corporate charter and under Delaware law may discourage or delay beneficial acquisitions or management changes. Our computer systems are vulnerable to security breaches which could result in the loss or disclosure of confidential data and disrupt our business. General economic, political and market conditions, including those affected by global conflicts or economic downturns, could negatively impact our business. RTW, our largest stockholder, may continue to exercise significant control over our company, potentially limiting the influence of other stockholders. Because we have never paid dividends and do not expect to do so, stockholders’ returns will depend entirely on stock price appreciation, which is uncertain. General Risk Factors (Repeated Again) Our limited operating history and our status as a clinical stage company make it difficult to assess our long-term viability. If we fail to maintain effective internal financial controls, our ability to meet reporting obligations could be compromised, potentially leading to regulatory sanctions and a decline in our stock price. Provisions in our corporate charter and bylaws may make it difficult for stockholders to replace current management or force changes they deem desirable. Product Liability, Manufacturing, Commercialization and Development Risks (Repeated) Our operations are subject to extensive governmental regulations, and failures in areas such as manufacturing compliance or product liability can materially harm our business. Risks Related to Commercialization of our Product Candidates (Repeated) Successful commercialization of our product candidates is dependent on obtaining adequate reimbursement from government and private payors. Failure to secure this could adversely affect our revenue potential. Competitive pressures, rapid technological change, and the possibility that our patent rights may expire or be successfully challenged further compound these risks. Ethical, legal and social issues, including those related to genetic testing, may also reduce demand for gene therapy products. Risks Related to Our Intellectual Property (Repeated) Our ability to protect our technology is dependent on complex patent laws and on the strength of our intellectual property rights, which may be challenged or circumvented by competitors. If we are unable to obtain or maintain sufficient patent protection, our competitive position could be significantly weakened. Risks Related to Finding Strategic Collaborators (Repeated) Our future growth may depend on our ability to form strategic alliances or joint ventures, and failure to secure such arrangements could force us to bear additional costs internally. Risks Related to International Operations Because we conduct business internationally, we are exposed to risks such as differing regulatory requirements, reduced intellectual property protection, fluctuations in foreign currency, and disruptions caused by geopolitical events or natural disasters. Disclosure Regarding Internal Controls As a public company, we are required to maintain effective internal controls over financial reporting. Any deficiencies in these controls could result in regulatory sanctions, litigation, or a loss of investor confidence. Provisions in Our Corporate Charter Certain provisions in our certificate of incorporation and bylaws may deter acquisition proposals or make it more difficult for stockholders to elect new directors, which could adversely affect our stock price. RTW’s Influence RTW Investments, LP, as our largest stockholder, currently owns approximately 17.1% of our common stock, giving it significant influence over corporate decisions, which may not always align with the interests of other stockholders. General Risk Factors Concerning Our Limited Operating History Our historical focus on R&D and clinical development rather than marketing and commercial operations makes it challenging to evaluate our future performance. If unfavorable economic or market conditions persist, our ability to execute our business plan could be compromised. Item 1A. Risk Factors