Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~The~~

You should read the following discussion and analysis of our financial condition and results of operations ~~should be read in conjunction~~together with ~~our condensed~~the consolidated financial statements and related notes ~~appearing~~that are included elsewhere in this Quarterly Report on Form 10-Q and our ~~Annual~~annual report on Form 10-K, filed on February 28, 2023 with the SEC (the “2022 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 2022 Form 10-K, ~~for the fiscal year ended December 31, 2016.~~

~~Overview~~

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, ~~biopharmaceutical~~multi-platform biotechnology company ~~which had been~~ focused on the ~~discovery,~~ development of first, only and ~~commercialization~~best-in-class gene therapies, with direct on-target mechanism of ~~therapies~~action and clear clinical endpoints, for ~~ocular diseases, including glaucoma.~~rare and devastating diseases. We ~~had been developing~~ ~~trabodenoson~~have three clinical-stage ex vivo lentiviral vector (“LV”) 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 ~~monotherapy~~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 ½ LAD-I program produced data read out in 2022 and regulatory filings in the United States (“U.S.”) and Europe (“EU”) are anticipated in 2023. Additional work on a ~~fixed-dose combination~~gene therapy program for the less common FA subtypes C and G is ongoing. In the U.S., we also have a clinical stage in vivo adeno-associated virus (“~~FDC”~~AAV”) program for Danon disease, a multi-organ lysosomal-associated disorder leading to ~~treat glaucoma. After failing~~early death due to ~~meet the primary endpoints~~heart failure. The Danon program is currently in ~~our first~~an ongoing Phase 1 trial and pivotal Phase ~~3 trial~~2 study initiation expected in the second quarter of ~~trabodenoson~~ ~~monotherapy for~~ 2023. Additionally, we have an AAV vector program targeting Plakophilin-2 Arrhythmogenic Cardiomyopathy (“PKP2-ACM”), an inheritable cardiac disorder that is characterized by a progressive loss of cardiac muscle mass, severe right ventricular dilation, dysplasia, fibrofatty replacement of the ~~treatment~~myocardium and a high propensity to arrhythmias and sudden death. This program, also referred to as Pegasus, will be approaching IND submission in the second quarter of ~~primary open-angle glaucoma~~2023. As a result of our acquisition of Renovacor, Inc. (“Renovacor”), we are now able to utilize recombinant AAV9-based gene therapy designed to slow or ~~ocular hypertension~~halt progression of BAG3 Dilated Cardiomyopathy (“DCM”), which is the most common form of cardiomyopathy and ~~our Phase 2 FDC clinical trial~~is characterized by progressive thinning of ~~trabodenoson~~ ~~and~~ ~~latanoprost~~ ~~for~~ the ~~treatment~~walls of ~~glaucoma, we voluntarily discontinued our development of~~ ~~trabodenoson.~~

the heart resulting in enlarged heart chambers that are unable to pump blood. We have ~~engaged Perella Weinberg Partners, LP (“Perella Weinberg”)~~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-A601, RP-A501, RP-L102, RP-L201 RP-L301, and BAG3-DCM based on the compelling clinical data to date and potential for therapeutic advancement in these severe disorders of childhood and young adulthood.

Recent Developments

At-the-Market Offering 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 ~~financial advisor to assist us~~prospectus supplement with the SEC on February 28, 2022 in ~~pursuing strategic alternatives~~connection with ~~a goal to enhance stockholder value, including~~ the ~~Proposed Merger (as further described~~offer and ~~defined below), or if the Proposed Merger is not approved and consummated, the possibility of another merger or~~ sale of the ~~Company.~~ 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 March 31, 2023, we sold 4.2 million shares under the at-the-market offering program for gross proceeds of $65.8 million, less commissions of $2.0 million for net proceeds of $63.8 million. During the three months ended March 31, 2023, the Company sold 0.9 million shares under the at-the-market offering program for gross proceeds of $17.8 million, less commission of $0.6 million for net proceeds of $17.2 million.

Renovacor Acquisition

On September ~~12, 2017, we~~19, 2022, the Company entered into an Agreement and Plan of Merger ~~and Reorganization~~ (the “Merger Agreement”) with ~~Rocket Pharmaceuticals, Ltd.,~~Renovacor, a ~~privately held biopharmaceutical company (“Rocket”) and Rome Merger Sub, a wholly owned subsidiary of Inotek (“Merger Subsidiary”),~~Delaware corporation pursuant to which the ~~Merger Subsidiary will be merged with and into Rocket~~Company acquired Renovacor (the ~~“Proposed Merger”~~“Renovacor Acquisition”) at the Effective Time of the Proposed Merger, as defined in the Merger Agreement, with Rocket continuing after the Proposed Merger as the surviving company and a wholly-owned subsidiary of Inotek. We expect to devote significant time and resources to completion of the Proposed Merger, or, if the Proposed Merger is not approved and consummated, identifying and evaluating other strategic alternatives. However, there can be no assurance that such activities will result in the completion of the Proposed Merger or any other agreements or transactions that will enhance stockholder value. Further, the completion of the Proposed Merger, or of any other strategic transaction, ultimately may not deliver the anticipated benefits or enhance stockholder value. Further, the consummation of the Proposed Merger is subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the requisite approvals of our stockholders and Rocket, including the approval of the charter amendments by our stockholders, and the preparation of a proxy statement.. The ~~preliminary proxy statement was filed~~Renovacor Acquisition closed on ~~October 12, 2017.~~

December 1, 2022. Subject to the terms and conditions of the Merger Agreement, ~~the percentage~~each share of the combined company that our stockholders will own following the closing of the Proposed Merger is subject to an adjustment based on the amount of our net cash at the closing. On a pro forma basis, based upon the number of shares of ourRenovacor’s common stock, to be issued in the Proposed Merger, following the closing of the Proposed Merger, if it is approved and consummated, our current stockholders would own approximately 19% of the combined company and current Rocket shareholders would own approximately 81% of the combined company if we have a valuation of at least $47.0 million, which is based on a projected net cash balance (or cash and cash equivalents minuspar value $0.0001 per share outstanding liabilities) at the closing of $42.0 million, plus an additional $5.0 million of enterprise value. Under the terms of the Merger Agreement, Rocket has a stipulated valuation of $200.0 million which is not subject to any adjustments. Ten daysimmediately prior to the ~~closing, our estimated net cash at closing will be mutually agreed upon~~effective time of the Renovacor Acquisition was canceled and converted into the ~~final exchange ratio will be calculated based~~right to receive 0.1763 (the “Exchange Ratio”) fully paid and non-assessable shares of the Company’s common stock, $0.01 par value per share, which was determined on the ~~relative values~~basis of ~~the parties as described~~an exchange formula set forth in the Merger Agreement. ~~If our net cash at closing is within~~The Company issued a ~~range~~total of ~~$40.5 million to $43.5 million, no adjustment will be made to the foregoing split. There can be no assurances as to our level~~3,391,976 shares of ~~net cash between now and the planned closing.~~

The Merger Agreement contains a customary “no-shop” provision under which neither we nor Rocket is permitted to (i) solicit any alternative acquisition proposals, (ii) participate in any negotiations or discussions with any person relating to any alternative acquisition proposal, (iii) approve, endorse or recommend any alternative acquisition proposal, or (iv) enter into any agreement relating to any alternative acquisition proposal. Our “no-shop” provision is subject to certain exceptions that permit our board of directors to comply with its fiduciary duties, which, under certain circumstances, would enable us to provide information to, and engage in discussions or negotiations with, third parties with respect to alternative acquisition proposals.

The Merger Agreement provides each of us and Rocket with specified termination rights. If the Merger Agreement is terminated by us to accept a superior acquisition proposal or under other circumstances specified in the Merger Agreement, we will be required to pay to Rocket or Rocket will be required to pay us, as the case may be, a termination fee of $2 million (the “Termination Fee”). Further,common stock in connection with the ~~termination~~Renovacor Acquisition and incurred approximately $1.3 million of acquisition related costs.

Index

Gene Therapy Overview

Genes are composed of sequences of deoxyribonucleic acid (“DNA”), which provide the 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 ~~Merger Agreement if~~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 ~~stockholders~~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, LV and AAV. We believe that our LV 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 chart below shows the current phases of development of Rocket’s programs and product candidates:

Index

CardiovascularPrograms

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 DD, which is estimated to have a prevalence of 15,000 to 30,000 patients in the U.S. and the EU.

DD 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. DD predominantly affects males early in life and is characterized by absence of LAMP2B expression in the heart and other tissues. Preclinical models of DD have demonstrated that AAV-mediated transduction of the heart results in reconstitution of LAMP2B expression and improvement in cardiac function.

We currently have one AAV program targeting DD, RP-A501. We have treated seven patients in the RP-A501 Phase 1 clinical trial, which enrolled adult/older adolescent 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 a pediatric cohort at a low dose level (6.7e13 gc/kg; n=2).

As previously disclosed, a patient receiving therapy on the high dose cohort (1.1e14 gc/kg dose) had progressive heart failure and underwent a heart transplant at month five following therapy. This patient had more advanced disease than the four other adult/older adolescent patients who received treatment in the low and high dose cohorts, as evidenced by diminished baseline left ventricle ejection fraction (35%) on echocardiogram and markedly elevated left ventricle filling pressure prior to treatment. The patient’s clinical course was characteristic of DD progression. The patient is doing well post-transplant.

Based on the initial efficacy observed in the low dose cohort and to mitigate complement-mediated safety concerns observed in the high dose cohort (thrombotic microangiopathy (“TMA”)) 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.

We are conducting a variety of efficacy assessments in the Phase I clinical study to measure the prospect of benefit for patients. These assessments include the following:

New York Heart Association (“NYHA”) Functional Classification 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. Class III and IV are considered more severe or advanced heart failure.

Brain natriuretic peptide (“BNP”) is a blood-based evaluation and a key marker of heart failure with prognostic significance in CHF and cardiomyopathies. Elevations in BNP are strongly associated with worsening heart failure and poor outcomes in cardiovascular disease.

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 DD patients and has been shown to be markedly elevated in patients with advanced stage disease.

Echocardiographic measurements of heart thickness, most notably, left ventricular mass (“LVM”) and maximal left ventricular wall thickness (“MLVWT”), indicate the degree of hypertrophy present in the heart.

Kansas City Cardiovascular Questionnaire (“KCCQ”) is a validated, patient-reported outcomes assessment that measures a patients perception of their heart failure symptoms, impact of disease on physical and social function, and the impact of their heart failure on overall health status and quality of life. Assessment scores range from 0 (very poor health status) to 100 (excellent health status). Changes in KCCQ score of +/- 5 points are considered meaningful and have been shown to correlate with outcomes.

Histologic examination of endomyocardial biopsies via hematoxylin and eosin (“H&E”) histology and electron microscopy is used to detect 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.

LAMP2B gene expression in endomyocardial biopsy samples is measured via both immunohistochemistry and Western blot and confirms the presence of LAMP2B protein in DD cardiac tissue following RP-A501 treatment.

Index

In September 2022, we presented interim data for the ongoing Phase 1 trial of RP-A501 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/older adolescent cohort (patients aged 15 and older; n=5) (data cut-off September 27, 2022). This data was also presented in November 2022 at the 75th American Heart Association (“AHA”) Annual Meeting. During these presentations we provided incremental safety updates across cohorts. As previously outlined, RP-A501 was generally well tolerated at the 6.7e13 gc/kg dose level and no unexpected and serious drug product-related adverse events or severe adverse events were observed in both adult/older adolescent and pediatric low dose cohorts. All observed adverse effects at both doses were reversible and no lasting sequelae were observed with follow-up of 2-3 years from treatment for the adult/older adolescent cohort and 6-11 months for the pediatric cohort. Any early transaminase and creatinine kinase elevations returned to baseline or decreased, and any transient exacerbation of DD-associated skeletal myopathy resolved upon discontinuation of corticosteroid therapy. The updated safety data presented at HFSA in September 2022 and at AHA in November 2022 reconfirmed that RP-A501 was generally well tolerated at the low dose with a manageable safety profile across pediatric and adult/older adolescent cohorts.

In the pediatric cohort, an improvement in NYHA Class (from Class II to I) was reported in both patients after 6 and 9 months of follow-up post-RP-A501. In the adult/older adolescent 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/older adolescent 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/older adolescent 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/older adolescent cohort patients with closely monitored immunomodulation (two low-dose and one high-dose) left ventricular 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/older adolescent cohorts and both patients in the pediatric cohort. Sustained cardiac LAMP2B gene expression by immunohistochemistry was observed in all three adult/older adolescent 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/older adolescent 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 KCCQ were noted in three of the adult/older adolescent 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.

On December 22, 2022, we announced updates from our end-of-Phase 1 meeting with the FDA regarding RP-A501. During the meeting, we reviewed the positive Phase 1 dataset with the FDA and proposed a study design and endpoints for ongoing clinical development of the investigational gene therapy. Following discussions with the FDA, we anticipate proceeding with a dose of 6.7e13 GC/kg, and we anticipate utilizing a single arm open-label trial design with a robust natural history comparator, pursuant to the FDA’s acknowledgment of the challenges associated with executing a randomized controlled trial in DD. The FDA has also expressed an openness to considering a biomarker-based composite endpoint supported by functional and quality-of-life assessments as measures of patient benefit. We look forward to continued dialogue with the FDA on the design for our proposed pivotal trial, including discussion of appropriate external controls for the study and appropriate endpoints to support accelerated approval. We are now in discussion with the FDA about a trial design that will enable evaluation of two pediatric patients treated with drug product manufactured at our in-house cGMP AAV facility as an initial component of a modestly sized global pivotal study.

Index

On January 9, 2023, we presented additional positive efficacy updates from our Phase I study of RP-A501 during the 41st Annual J.P. Morgan Healthcare Conference. The data presented included several additional months of follow-up, which showed further improvements in key biomarkers, echocardiographic and functional measures. A summary of these updates is provided in the table below. We also provided additional natural history comparator data, which showed the marked divergence of the course of Phase I patients from that of untreated patients in terms of key biomarkers (BNP) and functional measures (NYHA Class). Furthermore, RP-A501 continued to be well tolerated at 2-3 years post treatment in both adult/older adolescent high and low-dose cohorts and at 8 to 13 months in the pediatric cohort. In the pediatric cohort, no significant immediate or delayed toxicities, significant skeletal myopathy, or late transaminase elevation have been observed.

Improvement or Stabilization Observed Across Key Biomarker, Echo Findings and Functional Measures in Phase 1 RP-A501 study

Darker Green = improved; Lighter Green = minimal change (stabilization)

Does not include pt 1007 in Ph1 trial who had advanced HF with EF<40% at enrollment and received HTx 5M following tx due to pre-existing advanced HF. Patient is currently stable.

¹Patient 1008 echocardiographic parameters are M9 visit (M12 pending).

²Patient 1002 NYHA class depicted for M30 visit (M36 pending).

³ Patient 1005 KCCQ score depicted for M24 visit (M30 pending).

In addition to these clinical updates, we also provided updates on our in-house manufacturing activities. We have successfully produced 2 cGMP RP-A501 batches that have superior specifications to Phase I material in both titer and full versus empty particles. We believe the improved quality of our in-house manufactured product will allow for full dosing with lower total viral particles, potentially further optimizing the safety profile of RP-A501.Furthermore, we have agreement from the FDA on the continued utilization of HEK-293 cell-based process through commercialization as well as our comparability approach and potency assay.

Results from the ongoing Phase 1 DD trial represent one of the most comprehensive investigational gene therapy datasets for any cardiac condition. RP-A501 was generally well tolerated with evidence of durable treatment activity and improvement of DD for both pediatric patients with up to nine months of follow-up and four adult/older adolescent patients with up to 36 months of follow-up. All adult/older adolescent and pediatric patients who received a closely monitored immunomodulatory regimen showed improvements across tissue, laboratory, and imaging-based biomarkers, as well as in NYHA class (from II to I) and KCCQ scores with follow-up of six to 36 months.

Anticipated Milestones

On February 7, 2023, we announced that RP-A501 received RMAT designation from the FDA. We are very encouraged by the highly collaborative ongoing dialogue with the FDA for RP-A501 in DD and subject to the continued dialogue and agreement with the FDA anticipate initiating the initial component of the global study in the second quarter of 2023.

Index

Plakophilin-2 Arrhythmogenic Cardiomyopathy (PKP2-ACM)

Arrhythmogenic cardiomyopathy (“ACM”) is an inheritable cardiac disorder that is characterized by a high propensity for arrhythmias and sudden death, a progressive loss of cardiac muscle mass, severe right ventricular dilation, dysplasia, and fibrofatty replacement of the myocardium. Most commonly, the cardiomyopathy initially manifests in the right ventricular free wall, so the disease was termed arrhythmogenic right ventricular dysplasia/cardiomyopathy (ARVD/ARVC). However, since left dominant and biventricular forms have also been observed, this has led more recently to the use of the term ACM. Mutations in the PKP2 gene comprise the most frequent genetically identified etiology of familial ACM. PKP2 encodes for the protein Plakophilin-2, which is a component of the desmosome, an intercellular complex involved in cell-cell adhesion. PKP2 is also involved in transcriptional regulation of calcium signaling between cardiomyocytes. Patients with mutations in PKP2 are typically heterozygous and demonstrate reduced expression of PKP2 in the myocardium. Mean presentation is at the age of 35, and patients have a very high lifetime risk of ventricular arrhythmias, structural ventricular abnormalities, and sudden cardiac death (“SCD”).

There are no specific available medical therapies available that have been shown to be highly effective for ACM, and current treatment protocols follow standard ventricular arrhythmia and cardiomyopathy guidelines, which involve lifestyle modifications (i.e. exercise limitation) and include drug treatments such as beta blockers, anti-arrhythmics and diuretics. The use of these therapies is driven by the arrhythmia burden and severity of cardiomyopathy. These therapies do not ~~approve~~modify the ~~Merger Agreement, we~~course of the disease, and generally provide only symptomatic and/or palliative support. Upon diagnosis, a substantial percentage of patients receive an implantable cardiac defibrillator (“ICD”) for primary or secondary prevention of ventricular arrhythmias and SCD. Of note, ICDs are not curative, and breakthrough life-threatening arrythmias may persist with ongoing risk of death; ICDs furthermore do not prevent the progression to end-stage heart failure. ICD firings, although lifesaving, are physically and emotionally traumatic events. Patients whose condition progresses to end-stage heart failure are considered for cardiac transplantation which, while curative of underlying disease, is itself associated with significant morbidity and mortality. Hence there exists a high unmet medical need in this population. PKP2-ACM is estimated to have ~~agreed~~a prevalence of 50,000 patients in the US and EU.

We currently have one adeno-associated viral vector program targeting PKP2-ACM, RP-A601, which is a recombinant AAVrh.74 vector expressing PKP2a. PKP2-ACM is typically caused by heterozygous pathogenic mutations in the PKP2 gene resulting in reduced PKP2 expression in the myocardium. A once-administered gene therapy that addresses the root cause of the disease (PKP2 deficiency) early in the disease course, could mitigate the early electrical remodeling and diminish the risk of life-threatening arrhythmias and SCD associated with ACM, potentially impeding the development of irreversible cardiac structural changes. Prevention of syncopal episodes, life-threatening arrythmias, SCD, ICD shocks and the resulting anxiety, discomfort and hospitalizations is anticipated to ~~reimburse Rocket~~result in a vastly improved quality of life and survival benefit. Furthermore, such an approach could spare patients the need for ~~its out-of-pocket fees~~lifelong adherence to multiple arrhythmia and ~~expenses~~heart failure drugs that are nonspecific for PKP2-ACM and are associated with their own side effects, enabling patients an opportunity to live without exercise restrictions and with diminished concern for arrhythmias, palpitations, ICD shocks and progression to end-stage heart failure.

In nonclinical studies conducted by the Sponsor, RP-A601 has demonstrated efficacy in altering the natural history of PKP2-driven ACM. PKP2 cKO animals treated with the study drug have exhibited extended survival to the longest timepoint measured (5 months), reduced cardiac dilation and fibrofatty replacement / fibrosis of the myocardium, preserved left ventricular function, and mitigation of the arrhythmic phenotype. Untreated PKP2 cKO mice had a median survival of approximately one month.

Anticipated Milestones

We have achieved pre-clinical proof-of-concept for RP-A601 in an animal model representative of PKP2-ACM, completed pharmacology and GLP toxicology studies, produced GMP drug product, and developed an appropriate potency assay to support a Phase I study. We anticipate filing an IND in the second quarter of 2023.

BAG3 Dilated Cardiomyopathy

Dilated cardiomyopathy (“DCM”) is the most common form of cardiomyopathy and is characterized by progressive thinning of the walls of the heart resulting in enlarged heart chambers that are unable to pump blood. A familial association of DCM can be identified in 20-50% of DCM patients, with up to ~~$0.5 million.~~

40% of familial patients having an identifiable genetic cause. Mutations in the BAG3 gene (BCL-2-associated athanogene 3) are among the more common pathogenic genetic variants observed in familial DCM and these variants are highly penetrant, with approximately 80% of individuals with disease-causing genetic variants in the BAG3 gene developing DCM at > 40 years of age. BAG3 protein is associated with a variety of cellular functions including cardiac contractility, protein quality control (as a co-chaperone), cardiomyocyte structural support and anti-apoptosis. BAG3 associated dilated cardiomyopathy (BAG3-DCM) leads to early onset, rapidly progressing heart failure and significant mortality and morbidity. We estimate that the prevalence of BAG3-associated DCM in the United States to be as many as 30,000 individuals.

Currently, DCM patients with a BAG3 mutation are treated with the standard of care for heart failure, which include angiotensin converting enzyme inhibitors, angiotensin receptor blockers, neprilysin inhibitors, beta-adrenergic receptor antagonists, or beta-blockers, aldosterone antagonists and/or diuretics, along with certain lifestyle changes, and do not address the underlying cause of disease. Patients who meet specific parameters may also undergo placement of an implantable cardioverter defibrillator, a cardiac resynchronization device or a combination of the two. There is no current therapy directly targeting the underlying mechanism of BAG3 associated DCM, and patients diagnosed with BAG3 associated DCM appear to progress to end-stage heart failure and death more rapidly than patients with DCM not associated with BAG3 variants. For example, approximately 19% of patients with BAG3-DCM require mechanical cardiac support, heart transplant, or have heart failure related death at 12 months after diagnosis, nearly twice the rate of similarly staged non-BAG3DCM patients.

Index

In December 2022 we completed our acquisition of Renovacor which provided Rocket with Renovacor’s most advanced program, a recombinant AAV9-based gene therapy designed to deliver a fully functional BAG3 gene to augment BAG3 protein levels in cardiomyocytes and slow or halt progression of BAG3-DCM. Initial proof of concept for AAV9-BAG3 has been demonstrated in studies of BAG3-knockout mouse models, which show treated mice have improved ejection fraction versus untreated knockout mice and comparable ejection fraction to walk test controls at timepoints 4- and 6-weeks post injection.

Anticipated Milestones

We are in the process of evaluating the optimal development pathway for this program and plan to submit an IND for BAG3-DCM in the first half of 2024.

Hematology Programs

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 hematology programs utilize third-generation, self-inactivating LV 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 ~~Merger Agreement provides~~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 LV-based program that ~~immediately~~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. Two additional patients were treated in the US Phase 1 study at Stanford such that a total of 12 patients have received RP-L102 on Rocket-sponsored clinical trials. Patients 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.

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In May 2022, we presented topline data for RP-L102 at ASGCT’s 25^th 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 ~~Effective Time,~~European Society for Cell and Gene Therapy 29^th 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.

In December 2022, we presented positive clinical data for RP-L102 at the 64^th Annual Meeting of ASH. RP-L102 conferred phenotypic correction in at least six of 10 evaluable patients with ≥12 months of follow-up as demonstrated by increased resistance to MMC in bone marrow derived colony forming cells, concomitant genetic correction and hematologic stabilization. A seventh patient has displayed evidence of progressively increasing genetic correction as demonstrated by peripheral blood and bone marrow VCN’s, with recent development of MMC resistance and possible indicators of hematologic stability after 36 months of follow-up. 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. The safety profile of RP-L102 has been highly favorable, and the treatment, administered without any cytotoxic conditioning, has been well tolerated. No signs of bone marrow dysplasia, clonal dominance or insertional mutagenesis related to RP-L102 have been observed.

Anticipated Milestones

Based on achievement of the primary endpoint as defined in our pivotal Phase 2 study for FA, we have initiated FDA dialogue around biologics license application (“BLA”) filing plans for RP-L102 for the ~~Merger Agreement,~~treatment of FA and anticipate making such filing in the ~~board~~fourth quarter of ~~directors~~2023.

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 ~~combined company will consist~~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 upallogeneic 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 $6.6 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 of 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 63^rd 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 ~~individuals, two~~patients with at least 12 months of ~~whom shall be designated~~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.

In December 2022, we presented positive clinical data at the 64^th Annual Meeting of ASH. The presentation included previously disclosed top-line data at three to 24 months of follow-up after RP-L201 infusion for all patients and overall survival data for seven patients at 12 months or longer after infusion. We observed 100% overall survival at 12 months post-infusion via Kaplan Meier estimate and a statistically significant reduction in all hospitalizations, infection and inflammatory-related hospitalizations and prolonged hospitalizations for all nine LAD-I patients with three to 24 months of available follow-up. Data also shows evidence of resolution of LAD-I-related skin rash and restoration of wound repair capabilities. The safety profile of RP-L201 has been highly favorable in all patients with no RP-L201-related serious adverse events to date.

Anticipated Milestones

Based on the positive efficacy and safety data from the Phase 2 pivotal LAD-I trial, we have initiated discussions with the FDA on BLA filing plans for RP-L201 for the treatment of severe LAD-I and anticipate making such filing in the second quarter 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 ~~us (and mutually~~

~~agreeable~~chronic non-spherocytic hemolytic anemia, a disorder in which RBCs do not assume a normal spherical shape and are broken down, leading to ~~Rocket)~~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 ~~other five~~RBC transfusions used to treat the disease. The variability in anemia severity is believed to arise in part from the large number of ~~whom shall be designated by Rocket (until each~~diverse mutations that may affect the PKLR gene. Estimates of ~~their respective successors are duly elected or appointed~~disease incidence have ranged between 3.2 and qualified or their earlier death, resignation or removal). In connection with the Proposed Merger, we will seek to amend our certificate of incorporation to: (i) effect a reverse split of our common stock at a ratio to be determined by us, which is intended to ensure that the listing requirements of the Nasdaq Global Market are satisfied, (ii) change our name to “Rocket Pharmaceuticals, Inc.” and (iii) declassify our board of directors, subject to the approval and consummation of the Proposed Merger.

In September 2017, we entered into separation agreements with ten of our employees. Pursuant to the separation agreements, we agreed to provide severance payments and continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost) for up to six months, primarily depending on duration of service.

~~In addition, we amended employment agreements with the remaining seven current employees (See Note 7 in the accompanying notes to the financial statements).~~

~~In April 2016, we filed a registration statement on Form S-3 containing two prospectuses: (i) a base prospectus which covers the offering, issuance and sale by us of up to $200.0~~51 cases per million in the ~~aggregate~~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 ~~an indeterminate number~~FDA-approved molecularly targeted therapies. Market research indicates the application of ~~shares~~gene therapy to broader populations could increase the market opportunity from approximately 250 to 500 patients per year.

We currently have one ex-vivo LV-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.

Index

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 ~~common stock~~two cohorts to assess RP-L301 in pediatric (age 8-17) and ~~preferred stock, such indeterminate principal amount~~adult populations. The trial is designed to assess the safety, tolerability, and preliminary activity of ~~debt securities~~RP-L301, and ~~such indeterminate number~~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 ~~warrants and;~~RP-L301.

In May 2022, we presented updated data at the 25^th 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 ~~(ii) a sales agreement prospectus covering~~improved QOL both reported anecdotally and as documented via formal QOL assessments. The tolerability profile of RP-L301 appears favorable, with no RP-L301-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.

In December 2022, we presented positive clinical data at the ~~offering, issuance~~64^th Annual Meeting of ASH. The presentation included positive updated data from two adult patients with significant anemia. At 24 months post-infusion, both patients have robust and ~~sale~~sustained efficacy demonstrated by usnormalized hemoglobin (from baseline levels in the 7.0-7.5 g/dL range), improved hemolysis parameters, independence from red blood cell transfusions and improved quality of life both reported anecdotally and as documented via formal quality of life assessments. The safety profile appears highly favorable, with no RP-L301-related serious adverse events through 24 months post-infusion in both adult patients. Insertion site analyses in peripheral blood and bone marrow in both adult patients up to 12 months post-RP-L301 demonstrated highly polyclonal patterns and there has been no evidence of insertional mutagenesis.

Anticipated Milestones

Enrollment in the PKD adult and pediatric cohort is completed in the Phase 1 study. Initiation of the phase 2 pivotal trial is anticipated in the fourth quarter of 2023.

cGMP Manufacturing

Our 103,720 square foot manufacturing facility in Cranbury, New Jersey has been scaled up to manufacture AAV drug product for a ~~maximum aggregate offering price~~planned Phase 2 pivotal study in DD. 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 DD. To further strengthen our manufacturing and commercial capabilities during 2022, we appointed Mayo Pujols, one of ~~$50.0 million~~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. In the medium and long-term, pending favorable data, we expect to submit BLAs for the rest of our ~~common stock~~suite of clinical programs, and establish our gene therapy platform and expand our pipeline to target additional indications that ~~may~~we believe to be ~~issued~~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 ~~sold under an at-the-market sales agreement~~research team with ~~Cowen~~expertise in cell and ~~Company, LLC (the “ATM”). The $50.0 million of common stock~~gene therapy, rare disease drug development and product approval.

We believe that ~~may be issued~~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 sold under the ATM reduces the available balance under the base prospectus by the amount issued. We did not sell any shares of common stock pursuant to the ATM during the nine months ended September 30, 2017. At September 30, 2017, $45.6 million was available for sale of common stock under the ATM. Additionally, in 2016 we issued $52.0 million aggregate principal amount of 5.75% Convertible Senior Notes due 2021 pursuant topotentially provides us with a ~~Prospectus Supplement to our Form S-3, (the “2021 Convertible Notes”), which further reduces the balance available under the base prospectus to $98.0 million as of September 30, 2017.~~

As of September 30, 2017, we had an accumulated deficit of $263.5 million and cash and cash equivalents and short-term investments aggregating $103.1 million. Based on current assumptions, we estimate we have sufficient funding to sustain operations into 2019. See “Liquidity and Capital Resources.”

first-mover advantage.

Financial Overview

Since our inception, ~~on July 7, 1999,~~ we have devoted substantially all of our resources to organizing and staffing the company, business planning, raising capital, acquiring or discovering product ~~research~~candidates and ~~development, applying~~securing related intellectual property rights, conducting discovery, R&D activities for our product candidates and obtaining government and private grants, recruiting management, research and technical staff and other personnel, acquiring operating assets, and undertaking preclinical studies and clinical trials of our lead product candidates.planning for potential commercialization. We ~~have not completed development of any product candidate and we have therefore not generated any revenues from product sales.~~

~~Factors Affecting our Results of Operations~~

~~We are not currently developing~~ ~~trabodenoson.Based upon our current operating assumptions, w~~e do not ~~expect our aggregate operating expenses, excluding strategic transaction-specific expenses, to increase in 2017 over 2016. We may incur significant additional costs related to finalizing~~have any products approved for sale and ~~closing the Proposed Merger.~~

~~We may need to obtain additional funding, if the Proposed Merger is not approved or consummated, in connection with our continuing operations or other strategic review processes.~~ ~~Adequate additional financing may not be available to us on acceptable terms, or at all.~~

~~Financial Overview~~

~~Revenue~~

We have not generated any revenue from product sales. From inception through March 31, 2023, we raised net cash proceeds of approximately $852.8 million from investors through both equity and convertible debt financing to fund operating activities.

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Revenue

To date, we have not generated any revenue from any sources, including from product sales, ~~since our inception~~ and we do not expect to generate any revenue from the sale of ~~products.~~

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.

Operating Expenses

Research and Development Expenses

~~Research and development~~

Our R&D program expenses consist primarily of external costs incurred for the ~~costs associated with~~development of our ~~research and development activities, conducting preclinical studies and clinical trials and activities related to regulatory filings. Our research and development~~product candidates. These expenses ~~consist of:~~

include:

~~direct clinical and non-clinical expenses which include~~ expenses incurred under agreements with research institutions and consultants that conduct R&D activities including process development, preclinical, and clinical activities on our behalf;

costs related to process development, production of preclinical and clinical materials, including fees paid to contract manufacturers and manufacturing input costs for use in internal manufacturing processes;

consultants supporting process development and regulatory activities; and

costs related to in-licensing of rights to develop and commercialize our product candidate portfolio.

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 ~~organizations (“CROs”), contract~~collaborations and third-party manufacturing ~~organizations,~~agreements associated with our preclinical research, process development, manufacturing, and clinical ~~sites~~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 ~~preclinical~~ activities performed by our internal R&D organization and ~~development activities~~generally benefit multiple programs. These costs are not separately allocated by product candidate and consist primarily of:

salaries and personnel-related costs, ~~associated with regulatory activities;~~

~~employee and consultant-related expenses,~~ including ~~compensation,~~ benefits, travel, and stock-based compensation, ~~expense~~ for ~~research and development~~our scientific personnel ~~as well as consultants that conduct and support clinical trials and preclinical studies; and~~

performing R&D activities;

facilities and other expenses, which include ~~direct and allocated~~ expenses for rent and maintenance of facilities, ~~insurance~~ and ~~other~~depreciation expense; and

laboratory supplies and equipment used ~~in research and development~~for internal R&D activities.

~~We expense research and development~~

Our direct R&D expenses consist principally of external costs, ~~as incurred. We record costs for some development activities,~~ such as fees paid to investigators, consultants, laboratories and Contract Research Organizations (“CROs”) in connection with our clinical ~~trials, based on an evaluation of the progress~~studies, and costs related to ~~completion of~~acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific ~~tasks using data such as subject enrollment, clinical site activations~~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 ~~information our vendors provide to us. We expect research~~indirect costs that are deployed across multiple projects under development and, ~~development expenses to decrease in~~as such, the ~~second half of 2017 compared to the first half of 2017 due to our decision in July 2017 to discontinue development of~~ ~~trabodenoson, and the termination of nine research and development employees in September 2017.~~

costs are separately classified as other R&D expenses.

The following table ~~summarizes our research and development~~presents R&D expenses tracked on a program-by-program basis as well as by type and nature of ~~activity~~expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~

2022.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

(in thousands)
(in thousands)
Trabodenoson - direct clinical and non-clinical

$
1,161

$
5,753

$
8,110

$
16,332

Personnel and other expenses

Employee and consultant-related expenses

1,499

1,959

4,340

5,095

Facility expenses

113

137

392

371

Target validation expenses

25

480

593

516

Other expenses

20

83

104

178

Total personnel and other expenses

1,657

2,659

5,429

6,160

Total research and development expenses

$
2,818

$
8,412

$
13,539

$
22,492

Three Months Ended March 31,
2023 2022
Direct Expenses:
Danon Disease (AAV) RP-A501 $ 6,403 $ 6,374
Leukocyte Adhesion Deficiency (LV) RP-L201 5,841 3,051
Fanconi Anemia (LV) RP-L102 6,548 4,530
Pyruvate Kinase Deficiency (LV) RP-L301 299 854
Infantile Malignant Osteopetrosis (LV) RP-L401⁽¹⁾
- 190
Other product candidates 3,439 3,254
Total direct expenses 22,530 18,253
Unallocated Expenses
Employee compensation $ 11,210 $ 5,549
Stock based compensation expense 3,819 2,318
Depreciation and amortization expense 1,137 827
Laboratory and related expenses 5,102 1,226
Professional Fees 985 561
Other expenses 1,588 2,060
Total other research and development expenses 23,841 12,541
Total research and development expense $ 46,371 $ 30,794

(1) 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. Costs to close out the study were incurred in 2022.

Index

We ~~do not track~~ ~~trabodenoson-related~~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 scope, rate of progress, and expense of ongoing as well as any clinical 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.

We expect R&D expenses ~~by product candidate. All expenses~~to increase for the foreseeable future as we continue to invest in R&D activities related to ~~trabodenoson~~developing product candidates, including investments in manufacturing, as ~~a monotherapy also benefit the FDC product candidate~~ ~~trabodenoson~~ ~~with~~ ~~latanoprost. We have expended approximately $83 million for external~~our programs advance into later stages of development ~~costs related to~~ ~~trabodenoson~~ ~~from inception through September 30, 2017.~~

and as we conduct additional clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and ~~time consuming~~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 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, outcome and costs of our clinical trials and other R&D activities;

the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care;

the market acceptance of our product candidates;

obtaining, maintaining, defending, and enforcing patent claims and other intellectual property rights;

significant and changing government regulation; and

the timing, receipt, and terms of any marketing approvals.

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 ~~are not~~ currently ~~developing~~ ~~trabodenoson~~ ~~in view~~contemplate for the completion of ~~the results~~clinical development of any of our ~~MATrX-1 Phase 3~~product candidates that we may develop or if we experience significant delays in enrollment in any of our clinical ~~trial~~trials, we could be required to expend significant additional financial resources and ~~Phase 2 FDC~~time on the completion of clinical ~~trial~~development of ~~trabodenoson~~ ~~and~~ ~~latanoprost~~. ~~We expect to incur minimal external research and development expenses in the future, subject to the approval and consummation of the Proposed Merger.~~

that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of ~~compensation~~salaries and related benefit costs for personnel, including stock-based compensation and travel expenses for ~~administrative personnel. Other~~our employees in executive, operational, finance, legal, business development, and human resource functions. In addition, other significant general and administrative expenses include ~~travel costs,~~ professional fees for legal, ~~patents,~~ consulting, investor and public relations, auditing, and tax services as well as other ~~direct and allocated~~ expenses for rent and maintenance of facilities, insurance and other supplies used in general and administrative activities. ~~General~~We expect general and administrative ~~expense increased~~expenses to increase for the foreseeable future due to anticipated increases in headcount to support the ~~third quarter~~continued advancement of ~~2017 as compared to the second quarter of 2017 and may increase further in the fourth quarter of 2017~~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.

Index

Interest Expense

Interest expense for the three months ended March 31, 2023 and 2022, related to our financing lease obligation for the ~~Proposed Merger~~Cranbury, NJ facility.

Interest and ~~our defense of the putative class action filed against us on January 6, 2017, amended on July 10, 2017,~~Other Income

Interest and ~~September 5, 2017 (see Part II – Other Information, Item 1. Legal Proceedings).~~

~~Interest Expense~~

~~Interest expense relates to our 2021 Convertible Notes which are due in August 2021.~~

~~Interest Income~~

~~Interest~~other income ~~relates~~related to interest earned from ~~invested funds.~~

investments and cash equivalents and reduced fair value of warrant liability.

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 March 31, 2023, compared to those disclosed in our 2022 Form 10-K.

Index

Results of Operations

Comparison of the Three Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~

~~The following table summarizes the results of our operations for the three months ended September 30, 2017 and 2016:~~

2022

Three Months Ended September 30,

Increase

2017

2016

(Decrease)

(in thousands)

Operating expenses:

Research and development

$
(2,818
)

$
(8,412
)

$
(5,594
)
General and administrative

(3,895
)

(2,311
)

1,584

Loss from operations

(6,713
)

(10,723
)

(4,010
)

Interest expense

(901
)

(525
)

376

Interest income

219

120

(99
)
Net loss

$
(7,395
)

$
(11,128
)

$
(3,733
)

Three Months Ended March 31,
2023 2022 Change
Operating expenses:
Research and development $ 46,371 $ 30,794 $ 15,577
General and administrative 15,823 11,770 4,053
Total operating expenses 62,194 42,564 19,630
Loss from operations (62,194 ) (42,564 ) (19,630 )
Interest expense (468 ) (464 ) (4 )
Interest and other income, net 1,908 623 1,285
Accretion of discount and amortization of premium on investments, net 2,419 (577 ) 2,996
Total other income (expense), net 3,859 (418 ) 4,277
Net loss $ (58,335 ) $ (42,982 ) $ (15,353 )

Research and ~~development~~Development Expenses

R&D expenses

~~Research and development expenses decreased $5.6~~ increased $15.6 million to ~~$2.8~~$46.4 million for the three months ended ~~September 30, 2017, as~~March 31, 2023 compared to ~~$8.4~~the three months ended March 31, 2022. The increase in R&D expenses was primarily driven by increases in manufacturing and development costs of $2.8 million, compensation and benefits of $6.6 million due to increased R&D headcount, direct materials of $0.9 million, and laboratory supplies of $0.9 million.

General and Administrative Expenses

G&A expenses increased $4.1 million to $15.8 million for the three months ended ~~September 30, 2016. This decrease primarily reflects $1.9 million of decreased clinical expenses related~~March 31, 2023, compared to ~~our Phase 3 trial, MATrX-1, for which top-line results were announced in January of 2017 and $1.6 million of decreased clinical expenses related to our~~ ~~Phase 2 FDC clinical trial~~ that commenced in October of 2016, for which top-line results were announced in July 2017. In addition, preclinical expense decreased $2.0 million due to reduced activity, employee-related expenses decreased $0.9 million due to reduced headcount and a reduction of the bonus accrual related to the employees terminated in September 2017 and consulting costs decreased $0.3 million. These decreases are partially offset by $0.7 million of severance expense related to employees terminated during the three months ended ~~September 30, 2017,~~March 31, 2022. The increase in G&A expenses was primarily driven by increases in commercial preparation related expenses of $1.1 million, compensation and ~~an impairment charge~~benefits of ~~$0.4~~$0.7 million due to ~~write-down our laboratory equipment used in the production~~increased G&A headcount and non-cash stock compensation expense of ~~trabodenoson~~ ~~to net realizable value, as we voluntarily discontinued our development of~~ ~~trabodenoson~~ ~~in July 2017.~~

~~General and administrative expenses~~

~~General and administrative expenses~~$1.1 million.

Other Income (Expense), Net

Other income increased ~~$1.6~~$4.3 million to $3.9 million for the three months ended ~~September 30 , 2017, as~~March 31, 2023, compared to ~~$2.3 million for~~ the three months ended ~~September 30, 2016. This~~March 31, 2022. The increase in other income was primarily ~~reflects $1.5~~driven by an increase in interest and other income, net, of $1.3 million and an increase in accretion of increased professional services fees related to the Proposed Merger and $0.4 million of increased legal expenses primarily related to our ongoing securities litigation that commenced in January of 2017 and patents. These increases are partially offset by decreased employee-related expenses of $0.2 million due to decreased headcount.

~~Interest expense~~

~~Interest expense consists of coupon interest~~discount and amortization of ~~debt issuance costs related to our 2021 Convertible Notes which we issued~~premium on investments, net, of $3.0 million. The increase in ~~August 2016~~interest and ~~which are due in August 2021.~~

~~Interest~~other income,

~~Interest income increased $0.1~~ net, of $1.3 million ~~to $0.2 million for the three months ended September 30, 2017, as compared to $0.1 million for the three months ended September 30, 2016, primarily~~was due to ~~higher~~increased interest ~~rates.~~

~~Comparison~~rates of ~~the Nine Months Ended September 30, 2017~~$0.7 million and ~~2016~~

~~The following table summarizes the results~~reduced fair value of ~~our operations for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30,

Increase

2017

2016

(Decrease)

(in thousands)

Operating expenses:

Research and development

$
(13,539
)

$
(22,492
)

$
(8,953
)
General and administrative

(8,996
)

(7,148
)

1,848

Loss from operations

(22,535
)

(29,640
)

(7,105
)

Interest expense

(2,666
)

(525
)

2,141

Interest income

574

285

(289
)
Net loss

$
(24,627
)

$
(29,880
)

$
(5,253
)

~~Research and development expenses~~

Research and development expenses decreased $9.0 million to $13.5 million for the nine months ended September 30, 2017, as compared to $22.5 million for the nine months ended September 30, 2016. This decrease primarily reflects $6.9 millionwarrant liability of decreased clinical expenses related to our Phase 3 trial, MATrX-1, for which top-line results were announced in January of 2017, partially offset by $1.0 million of increased clinical expenses and supplies related to our ~~Phase 2 FDC clinical trial, which was not enrolling patients in the 2016 period. In addition, preclinical expense decreased $2.8 million due to reduced activity, employee-related expenses decreased $1.0 million due to reduced headcount and consulting costs decreased $0.6~~$0.7 million. These decreases are partially offset by $0.8 million of severance expense related to employees terminated during the nine months ended September 30, 2017, and an impairment charge of $0.4 million to write-down our laboratory equipment used in the production of ~~trabodenoson~~ ~~to net realizable value, as we voluntarily discontinued our development of~~ ~~trabodenoson~~ ~~in July of 2017.~~

~~General and administrative expenses~~

General and administrative expenses increased $1.8 million to $9.0 million for the nine months ended September 30, 2017, as compared to $7.1 million for the nine months ended September 30, 2016. This increase primarily reflects $1.5 million of increased professional services fees related to the Proposed Merger, $0.5 million of increased legal expenses primarily related to our ongoing securities litigation that commenced in January of 2017 and patents, and $0.4 million of increased stock-based compensation expense primarily related to restricted stock units granted during the fourth quarter of 2016 and the first quarter of 2017. These increases are partially offset by decreased employee-related expenses of $0.3 million due to decreased headcount and $0.3 million of decreased consulting costs.

~~Interest expense~~

~~Interest expense consists of coupon interest and amortization of debt issuance costs related to our 2021 Convertible Notes which we issued in August 2016 and which are due in August 2021.~~

~~Interest income~~

Interest income increased $0.3 million to $0.6 million for the nine months ended September 30, 2017, as compared to $0.3 million for the nine months ended September 30, 2016, primarily due to higher interest rates.

Liquidity and Capital Resources

~~Since inception, we~~

We have not generated any revenue and have incurred ~~accumulated~~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.

Index

Our consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Rocket has incurred net losses and negative cash flows from ~~our operations. We~~its operations each year since inception. Rocket incurred a net ~~loss~~losses of ~~$24.6~~$58.3 million for the ~~nine~~three months ended ~~September 30, 2017. As~~March 31, 2023, and $221.9 million for the year ended December 31, 2022. We have experienced negative cash flows from operations and as of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, we had an accumulated deficit of ~~$263.5~~$772.1 million and ~~$103.1~~$713.8 million, respectively. As of March 31, 2023, we had $360.0 million of cash, cash equivalents and investments. We expect such resources will be sufficient to fund our operating expenses and capital expenditure requirements into the first half of 2025. We have funded our operations primarily through the sale of equity.

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

	Three Months Ended March 31,
	2023			2022
Net cash used in operating activities	$	(57,560	)	$	(39,223	)
Net cash used in investing activities		(36,721	)		(62,995	)
Net cash provided by financing activities		18,343			76
Net decrease in cash, cash equivalents and restricted cash	$	(75,938	)	$	(102,142	)

Operating Activities

During the three months ended March 31, 2023, operating activities used $57.6 million of cash and cash equivalents, and short-term investments. We are obligated to pay approximately $1.5 million of interest on the 2021 Convertible Notes on each February 1 and August 1 of 2017 through 2021, and on August 1, 2021 the full outstanding principal, currently $52.0 million, is due and payable.

~~The following table summarizes our sources and uses of cash for each of the periods presented:~~

Nine Months Ended September 30,

2017

2016

(in thousands)
Cash used in operating activities

$
(23,124
)

$
(26,128
)

Cash provided by (used in) investing activities

42,453

(23,778
)

Cash provided by financing activities

19

52,868

Net increase in cash and cash equivalents

$
19,348

$
2,962

~~Net cash used in operating activities~~

~~Net cash used in operating activities was $23.1 million for the nine months ended September 30, 2017 and principally resulted~~primarily resulting from our net loss of ~~$24.6~~$58.3 million offset by net non-cash charges of $8.2 million, including non-cash stock-based compensation expense of $8.9 million, accretion of discount on investments of $2.3 million, and ~~a $2.1 million net decrease~~depreciation and amortization expense of $1.7 million. Changes in our operating assets and liabilities ~~partially offset by $2.5~~for the three months ended March 31, 2023 consisted of a decrease in accounts payable and accrued expenses of $7.8 million, a decrease in ~~noncash stock-based compensation, $0.4~~our prepaid expenses of $0.9 million, and a decrease in other liabilities of $0.7 million.

During the three months ended March 31, 2022, operating activities used $39.2 million of ~~noncash interest expense and an impairment charge of $0.4 million related to the write-down of our laboratory equipment used in the production of~~ ~~trabodenoson~~ ~~to net realizable value, as we voluntarily discontinued our development of~~ ~~trabodenoson~~ ~~in July of 2017.~~

~~Net~~ cash, ~~used in operating activities was $26.1 million for the nine months ended September 30, 2016, and principally resulted~~primarily resulting from our net loss of ~~$29.9~~$43.0 million ~~partially~~ offset by ~~$2.0~~net non-cash charges of $8.2 million, ~~in noncash~~including non-cash stock-based compensation expense of $6.3 million, accretion of discount on investments of $0.6, and ~~a $1.5 million net increase~~depreciation and amortization expense of $1.3 million. Changes in our operating assets and ~~liabilities.~~

~~Net~~liabilities for the three months ended March 31, 2022, consisted of a decrease in accounts payable and accrued expenses of $0.5 million and a decrease in our prepaid expenses of $3.9 million.

Investing Activities

During the three months ended March 31, 2023, net cash ~~provided by (used in) investing activities~~

~~Net cash provided~~used by investing activities was ~~$42.5~~$36.7 million, ~~for the nine months ended September 30, 2017, and related~~ primarily ~~to $69.7~~resulting from proceeds of $62.3 million ~~of proceeds~~ from the ~~maturity~~maturities of ~~short-term~~ investments, ~~partially~~ offset by ~~the purchase~~purchases of ~~$27.2~~investments of $96.0 million, ~~of short-term investments.~~

~~Net cash used in investing activities was $23.8 million for the nine months ended September 30, 2016,~~ and ~~related primarily to the purchase of $69.1 million of short-term investments and $45.6 million of proceeds from the maturity of short-term investments. Additionally, we purchased $0.3 million~~purchases of property and equipment inof $3.0 million.

During the ~~nine~~three months ended ~~September 30, 2016.~~

~~Net~~March 31, 2022, investing activities used $63.0 million of cash, ~~provided~~primarily resulting from proceeds of $82.0 million from the maturities of investments, offset by purchases of investments of $143.0 million, and purchases of property and equipment of $2.0 million.

Financing Activities

During the three months ended March 31, 2023, financing activities

~~Net~~ provided $18.3 million of cash, primarily resulting from net proceeds of $17.2 million from the sale of shares through our at-the-market facility.

During the three months ended March 31, 2022, net cash provided by financing activities was ~~$52.9~~$0.1 million, ~~for the nine months ended September 30, 2016, and reflects net proceeds~~consisting of ~~$48.7 million from the issuance of our 2021 Convertible Notes and net proceeds of $4.0 million from~~ the issuance of common stock, pursuant to ~~our ATM.~~

~~Operating Capital Requirements~~

~~To date, we have not generated any revenue from product sales. We have discontinued development~~exercises of ~~trabodenoson~~ ~~and have entered into the Merger Agreement.~~ We expect to continue to generate losses until the approval and consummation of the Proposed Merger, which is expected to occur in the first quarter of 2018, and thereafter if the Proposed Merger is not approved and consummated.

stock options.

Contractual Obligations and Commitments

~~The following summarizes~~

There were no material changes outside the ordinary course of our ~~significant~~business to the contractual obligations ~~as of September 30, 2017:~~

Total

Less than
1 year

1 to 3
years

3 to 5
years

More than
5 years

(in thousands)

Operating facilities lease (1)

$
2,323

$
409

$
846

$
882

$
186

2021 Convertible Notes (2)

63,960

2,990

5,980

54,990

—

Total

$
66,283

$
3,399

$
6,826

$
55,872

$
186

~~(1)~~

~~Represents lease payments for our headquarters in Lexington, Massachusetts.~~

~~(2)~~

~~Represents principal and interest payments on our 2021 Convertible Notes.~~

We enter into contracts in the normal course of business with CROs and contract manufacturers to assist in the performance of our research and development activities and other services and products for operating purposes. To the extent that these contracts

~~provide for termination on notice, and therefore are cancelable contracts, they are not included~~specified in the table of contractual obligations included in “Management’s Discussion and ~~commitments.~~

~~In September 2017, we modified the employment agreements with certain~~Analysis of Financial Condition and Results of Operations” in our 2022 Form 10-K. Information regarding contractual obligations and commitments may be found in Note 12 of our current employees such that in the event of termination in connection with a CIC, we agreed to provide these employees severance payments, at each employee’s current monthly salary rate, and continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost), for up to six months, primarily depending on duration of service. In the event of a qualifying termination in connection with a CIC, we will pay severance costs to our Chief Executive Officer, Chief Medical Officer and Vice President, Finance, consisting of the following: (i) eighteen months, twelve months and six months of salary, respectively, at each person’s then-current monthly salary rate and (ii) continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost), for eighteen, twelve and six months, respectively. In addition, we have committed to pay to all seven remaining employees, if they are employees on the date of a CIC, a retention bonus, with the aggregate of all such retention bonuses equal to approximately $0.6 million.

~~JOBS Act~~

Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, as a result, we will adopt new or revised accounting standards at the same time as other public companies that are not emerging growth companies. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an emerging growth company, we are exempt from Sections 14A(a) and (b) of the Securities Exchange Act of 1934 (the “Exchange Act”) which would otherwise require us to (i) submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “golden parachutes” and (ii) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of our Chief Executive Officer’s compensation to our median employee compensation. We also intend to rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and the rule requiring us to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and theunaudited consolidated financial statements ~~as the auditor discussion and analysis.~~in this Quarterly Report on Form 10-Q. We will continue to remain an “emerging growth company” until the earliest of the following: December 31, 2020; the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.07 billion; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

~~Off-Balance Sheet Arrangements~~

~~We did not have during the periods presented, and we~~ do not ~~currently~~ have any off-balance sheet arrangements ~~as defined under SEC rules.~~

that are material or reasonably likely to become material to our financial condition or results of operations.

Index

Recently Issued Accounting Pronouncements

There were no recent accounting pronouncements that impacted the Company, or which had a significant effect on the consolidated financial statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

~~We are exposed~~

Our exposure to market ~~risks~~risk is principally confined to our cash, cash equivalents and marketable securities. We invest in ~~the ordinary course~~U.S. treasury securities, commercial paper and corporate, government and agency bonds, which as of ~~our business. These market risks are principally limited to interest rate fluctuations.~~March 31, 2023, were classified as available-for-sale. We ~~had~~maintain our cash and cash ~~equivalents~~equivalent balances with high-quality financial institutions and, consequently, we believe that such funds are subject to minimal credit risk. Our investment policy limits the amounts that we may invest in any one type of ~~$49.1 million~~investment and requires all investments held by the Company to be at September 30, 2017, consisting primarily of funds in money market accounts. We also had $54.0 million in short-term investments consisting of certificates of deposit, agency bonds and United States Treasury securities. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believeleast AA+/Aa1 rated, thereby reducing credit risk exposure.

Based on a ~~sudden change~~hypothetical 100 basis point decrease in market interest rates, ~~would have a material effect on~~ the potential losses in future earnings and fair ~~market~~ value of risk-sensitive financial instruments are immaterial, although the actual effects may differ materially from the hypothetical analysis. While we believe our ~~portfolio.~~

cash, cash equivalents, and marketable securities do not contain excessive risk, we cannot provide absolute assurance that, in the future, our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash, cash equivalents, and marketable securities at one or more financial institutions that are in excess of federally insured limits. Given the potential instability of financial institutions, we cannot provide assurance that we will not experience losses on these deposits. We do not utilize interest rate hedging agreements or other interest rate derivative instruments.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive ~~officer~~ and our principal financial ~~officer,~~and accounting officers, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2023, our principal executive officer and interim principal financial and accounting officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports

that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and interim principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Inherent Limitations of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting ~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~ during the ~~quarter ended September 30, 2017,~~period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Index

PART II – OTHER INFORMATION

~~Item 1. Legal Proceedings~~

~~On January 6, 2017, a purported stockholder of the Company filed a putative class action in the U.S. District Court for the District of Massachusetts, captioned~~ ~~Whitehead v. Inotek Pharmaceuticals Corporation, et al.,~~ No. 1:17-cv-10025. An amended complaint was filed on July 10, 2017, and a second amended complaint was filed on September 5, 2017. The second amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against the Company, David Southwell, and Rudolf Baumgartner based on allegedly false and misleading statements and omissions regarding our phase 2 and phase 3 clinical trials of ~~trabodenoson~~. The lawsuit seeks, among other things, unspecified compensatory damages for purchasers of the Company’s common stock between July 23, 2015 and July 10, 2017, as well as interest and attorneys’ fees and costs. On October 6, 2017, defendants filed a motion to dismiss the second amended complaint.

Item 1. Legal Proceedings

From time to time, wethe Company may be subject to ~~other~~ various legal proceedings and claims that arise in the ordinary course of ~~our~~its business activities. Although the results of litigation and claims cannot be predicted with certainty, ~~we do~~the Company does not believe ~~we are~~it is party to any other claim or litigation the outcome of which, if determined adversely to ~~us,~~the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on ~~our~~its business. Regardless of the outcome, litigation can have an adverse impact on usthe Company because of defense and settlement costs, diversion of management resources and other factors.

Item 1A.

Risk Factors

~~We operate~~

Our material risk factors are disclosed in an industry that involves numerous risks and uncertainties. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Form 10-Q for the quarterly period ended September 30, 2017 and our Annual Report on Form 10-K for the year ended December 31, 2016, including our financial statements and related notes hereto. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and ~~stockholder approval and consummation and success of the Proposed Merger with Rocket Pharmaceuticals or other potential strategic alternatives~~. The risks and uncertainties described below may change over time and other risks and uncertainties, including those that we do not currently consider material, may impair our business. In these circumstances, the market priceItem 1A of our ~~common stock could decline.~~

~~Risks Related to~~2022 Form 10-K. There have been no material changes from the ~~Proposed Merger~~

~~If the Proposed Merger with Rocket is not consummated, Inotek’s business could suffer materially and Inotek’s stock price could decline.~~

The consummation of the Proposed Merger with Rocket is subject to a number of closing conditions, including approval by Inotek’s stockholders, approval by NASDAQ of Inotek’s application for initial listing of Inotek’s common stockrisk factors previously disclosed in ~~connection with the Proposed Merger, and other customary closing conditions. Inotek is targeting a closing of the transaction in the first quarter of 2018.~~

such filing.

~~If the Proposed Merger is not consummated, Inotek may be subject to a number of material risks, and its business and stock price could be adversely affected, as follows:~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Index

Item 6.

Exhibits

Exhibit Number	Description of Exhibit
2.1	•		Agreement and Plan of Merger and Reorganization, dated as of September 12, 2017, by and among Inotek ~~has incurred~~Pharmaceuticals Corporation, Rocket Pharmaceuticals, Ltd., and ~~expects~~Rome Merger Sub (incorporated by reference to ~~continue to incur significant expenses related~~Exhibit 2.1 to the ~~Proposed Merger~~Company’s Current Report on Form 8- K (001-36829), filed with ~~Rocket even if~~ the ~~Proposed Merger is not consummated.~~

		SEC on September 13, 2017)
2.2	•	~~The Merger Agreement contains covenants relating to Inotek’s solicitation of competing acquisition proposals and the conduct of Inotek’s business between the date of signing the Merger~~ Agreement and Plan of Merger, dated September 19, 2022, by and among Rocket Pharmaceuticals, Renovacor, Inc., Zebrafish Merger Sub, Inc. and Zebrafish Merger Sub II, LLC (incorporated by reference to Exhibit 2.1 to the ~~closing~~Company’s Current Report on Form 8-K (001-36829), filed with the SEC on September 20, 2022).
3.1	Seventh Amended and Restated Certificate of Incorporation of Rocket Pharmaceuticals, Inc., effective as of February 23, 2015(incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K (001-36829), filed with the SEC on March 31, 2015)
3.2	Certificate of Amendment (Reverse Stock Split) to the Seventh Amended and Restated Certificate of Incorporation of the ~~Proposed Merger. As a result, significant business decisions~~Registrant, effective as of January 4, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on January 5, 2018)
3.3	Certificate of Amendment (Name Change) to the Seventh Amended and ~~transactions before the closing~~Restated Certificate of Incorporation of the ~~Proposed Merger require~~Registrant, effective January 4, 2018 (incorporated by reference to Exhibit 3.2 to the ~~consent of Rocket. Accordingly, Inotek may be unable to pursue business opportunities that would otherwise be in its best interest as a standalone company. If~~Company’s Current Report on Form 8-K (001-36829), filed with the Merger Agreement is terminated after Inotek has invested significant time and resources in the transaction process, Inotek will have a limited ability to continue its current operations without obtaining additional financing to fund its operations.

		SEC on January 5, 2018)
3.4	•	~~Inotek could be obligated~~Certificate of Amendment to ~~pay Rocket a $2,000,000 termination fee in connection~~the Seventh Amended and Restated Certificate of Incorporation of the Registrant, effective as of June 25, 2018 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-36829), filed with the ~~termination~~SEC on June 25, 2019
3.5	Amended and Restated By-Laws of Rocket Pharmaceuticals, Inc., effective as of March 29, 2018 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (001-36829), filed with the SEC on April 4, 2018)
10.1	Assignment, Assumption and Amended & Restated Warrant Agreement, dated January 16, 2023, by and among Rocket Pharmaceuticals, Inc., Zebrafish Merger Sub II, LLC, as successor to Renovacor, Inc,, and Continental Stock Transfer & Trust Company. (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form 8-A (001-36829), filed with the SEC on February 23, 2023.
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the ~~Merger Agreement, depending on~~Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the ~~reason for the termination.~~

			Sarbanes-Oxley Act of 2002
31.2*	•		~~Inotek’s customers, prospective customers, collaborators and other business partners and investors in general may view~~Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the ~~failure~~Securities Exchange Act of 1934, as adopted pursuant to ~~consummate~~Section 302 of the ~~Proposed Merger as a poor reflection on its business or prospects.~~

			Sarbanes-Oxley Act of 2002
32.1**	•		~~Some~~Certification of ~~Inotek’s suppliers, distributors, collaborators~~Principal Executive Officer and ~~other business partners may seek~~Principal Financial Officer pursuant to ~~change or terminate their relationships with Inotek~~18 U.S.C. Section 1350, as ~~a result~~adopted pursuant to Section 906 of the ~~Proposed Merger.~~

		Sarbanes-Oxley Act of 2002
101.INS	• Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	~~As a result~~Inline XBRL Taxonomy Extension Calculation Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Link Document.
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)

*	Filed herewith.

The certification furnished in Exhibit 32.1 hereto is deemed to be furnished with this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Proposed Merger, current and prospective employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect Inotek’s ability to retain its key employees, who may seek other employment opportunities.


	•		~~The market price~~Securities Exchange Act of ~~Inotek’s common stock may decline~~1934, as amended, except to the extent that the ~~current market price reflects a market assumption that the Proposed Merger will not be completed.~~ Registrant specifically incorporates it by reference

In addition, if the Merger Agreement is terminated and Inotek’s board of directors determines to seek another business combination, it may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Proposed Merger. In such circumstances, Inotek’s board of directors may elect to, among other things, divest all or a portion of Inotek’s business, or take the steps necessary to liquidate all of Inotek’s business and assets, and in either such case, the consideration that Inotek receives may be less attractive than the consideration to be received by Inotek pursuant to the Merger Agreement with Rocket.

~~Some of Inotek’s officers and directors have different interests that may influence them to support or approve the Proposed Merger.~~

Officers and directors of Inotek participate in arrangements that provide them with interests in the Proposed Merger that are different from its stockholders, including, among others, their continued service as a director of the combined company, retention and severance benefits, the acceleration of restricted stock and option vesting and continued indemnification. These interests, among others, may influence the officers and directors of Inotek to support or approve the Proposed Merger.

~~The Proposed Merger may be completed even though material adverse changes may result from the announcement of the Proposed Merger, industry-wide changes and other causes.~~

In general, either party can refuse to complete the Proposed Merger if there is a material adverse change affecting the other party between September 12, 2017, the date of the Merger Agreement, and the closing. However, some types of changes do not permit either party to refuse to complete the Proposed Merger, even if such changes would have a material adverse effect on Inotek or Rocket, to the extent they resulted from the following and do not have a materially disproportionate effect on Inotek or Rocket, as the case may be:


	•		~~changes in general economic, business, financial or market conditions;~~


	•		~~changes or events affecting the industries or industry sectors in which the parties operate generally;~~


	•		~~changes in generally accepted accounting principles;~~



	•		~~changes in laws, rules, regulations, decrees, rulings, ordinances, codes or requirements issued, enacted, adopted or otherwise put into effect by or under the authority of any governmental body;~~


	•		~~changes caused by the announcement or pendency of the Proposed Merger;~~


	•		~~changes caused by any action taken by either party with the prior written consent of the other party;~~


	•		changes caused by any decision, action, or inaction by the U.S. Federal Drug Administration, which we refer to as the FDA, or another comparable foreign governmental body, with respect to any product candidate of either party;


	•		~~changes caused by any act of war, terrorism, national or international calamity or any other similar event;~~


	•		~~with respect to Inotek, a decline in Inotek’s stock price; or~~


	•		~~with respect to Inotek, a change in the listing status of Inotek’s common stock on the NASDAQ Global Market.~~

~~If adverse changes occur but Inotek and Rocket must still complete the Proposed Merger, the combined company’s stock price may suffer.~~

~~The market price of the combined company’s common stock may decline as a result of the Proposed Merger.~~

~~The market price of the combined company’s common stock may decline as a result of the Proposed Merger for a number of reasons including if:~~


	•		~~the combined company does not achieve the perceived benefits of the Proposed Merger as rapidly or to the extent anticipated by financial or industry analysts;~~


	•		~~the effect of the Proposed Merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or~~


	•		~~investors react negatively to the effect on the combined company’s business and prospects from the Proposed Merger.~~

~~Inotek’s stockholders may not realize a benefit from the Proposed Merger commensurate with the ownership dilution they will experience in connection with the Proposed Merger.~~

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Proposed Merger, Inotek’s stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and stock price following the Proposed Merger. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

During the pendency of the Proposed Merger, Inotek may not be able to enter into a business combination with another party and will be subject to contractual limitations on certain actions because of restrictions in the Merger Agreement.

Covenants in the Merger Agreement impede the ability of Inotek or Rocket to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Proposed Merger. As a result, if the Proposed Merger is not completed, the parties may be at a disadvantage to their competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of Inotek’s common stock, a tender offer for Inotek’s common stock, a merger or other business combination outside the ordinary course of business. Any such transactions could be favorable to such party’s stockholders.

~~The amount of merger consideration is dependent on amount of net cash of Inotek as of a certain determination date prior to closing.~~

Subject to the terms of the Merger Agreement, the percentage of the combined company that Inotek stockholders will own as of the closing of the Proposed Merger is subject to adjustment at the closing based on the level of Inotek’s net cash as of a certain

determination date prior to closing. The level of net cash as of that determination date will be reduced by certain specified liabilities, as defined further in the Merger Agreement, including out-of-pocket costs in connection with any stockholder litigation filed against Inotek and related parties related to the Merger Agreement, including amounts payable to financial advisors and attorneys that are paid, incurred or expected to be incurred, payable or subject to reimbursement by Inotek. Thus, Inotek’s liabilities, including costs in defending against litigation, insofar as these liabilities reduce net cash, may reduce the percentage of the combined company that Inotek stockholders will own as of the closing of the Proposed Merger. Based on Inotek’s current level of net cash and taking into account Inotek’s projected expenses in connection with the proposed transaction, if the Proposed Merger were to close today, the stockholders of Inotek would own approximately 19% of the combined company on a fully-diluted basis and current Rocket shareholders would own approximately 81% of the combined company on a fully-diluted basis. However, in addition to the specified liabilities referenced above, any reductions in Inotek’s net cash balance caused by unexpected liabilities may also reduce the ownership percentage held by Inotek stockholders as of the closing of the Proposed Merger. There can be no assurances as to Inotek’s level of net cash between now and closing.

Because the lack of a public market for Rocket’s ordinary shares makes it difficult to evaluate the fairness of the Proposed Merger, Rocket’s shareholders may receive consideration in the Proposed Merger that is greater than or less than the fair market value of Rocket’s ordinary shares.

The outstanding share capital of Rocket is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Rocket. Since the percentage of Inotek’s equity to be issued to Rocket’s shareholders was determined based on negotiations between the parties, it is possible that the value of the Inotek’s common stock to be issued in connection with the Proposed Merger will be greater than the fair market value of Rocket. Alternatively, it is possible that the value of the shares of Inotek’s common stock to be issued in connection with the Proposed Merger will be less than the fair market value of Rocket.

The combined company will incur significant transaction costs as a result of the Proposed Merger, including investment banking, legal and accounting fees. In addition, the combined company will incur significant consolidation and integration expenses which cannot be accurately estimated at this time. These costs could include the possible relocation of certain operations from Massachusetts to other offices of the combined company as well as costs associated with terminating existing office leases and the loss of benefits of certain favorable office leases. Actual transaction costs may substantially exceed Rocket’s estimates and may have an adverse effect on the combined company’s financial condition and operating results.

~~The Proposed Merger is expected to result in a limitation on Inotek’s ability to utilize our net operating loss carryforward.~~

Under Section 382 of the Code, use of Inotek’s net operating loss carryforwards, which we refer to as NOLs, will be limited if Inotek experiences a cumulative change in ownership of greater than 50% in a moving three year period. Inotek will experience an ownership change as a result of the Proposed Merger and therefore its ability to utilize its NOLs and certain credit carryforwards remaining at the Effective Time will be limited. The limitation will be determined by the fair market value of Inotek’s common stock outstanding prior to the ownership change, multiplied by the applicable federal rate. Limitations imposed on Inotek’s ability to utilize NOLs could cause U.S. federal and state income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs.

The opinion received by Inotek’s board of directors from Perella Weinberg Partners has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.

Perella Weinberg Partners delivered its opinion to the board of directors of Inotek that, as of September 12, 2017, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in its opinion, the exchange ratio provided for in the Merger Agreement was fair, from a financial point of view, to Inotek. The opinion does not speak as of the time the Proposed Merger will be completed or any date other than the date of such opinion. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Inotek or Rocket, changes in general market and economic conditions or regulatory or other factors. Any such changes may materially alter or affect the relative values of Inotek and Rocket. Perella Weinberg Partners does not have any obligation to update, revise or reaffirm its opinion to reflect subsequent developments and has not done so.

~~Certain stockholders could attempt to influence changes within Inotek which could adversely affect Inotek’s operations, financial condition and the value of Inotek’s common stock.~~

Inotek’s stockholders may from time-to-time seek to acquire a controlling stake in Inotek, engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes. Campaigns by stockholders to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, and could disrupt Inotek’s operations and divert the attention of the Inotek board of directors and senior management from the pursuit of the Proposed Merger. These actions could adversely affect Inotek’s operations, financial condition, Inotek’s ability to consummate the Proposed Merger and the value of Inotek common stock.

Inotek and Rocket may become involved in securities litigation and stockholder litigation in connection with the Proposed Merger, and this could divert the attention of Inotek and Rocket management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Inotek and Rocket may become involved in this type of litigation in connection with the Proposed Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of Inotek, Rocket and the combined company.

If we do not successfully consummate the Proposed Merger with Rocket, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the Proposed Merger with Rocket will be successfully consummated. If not, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our operations while we evaluate our strategic alternatives. In addition, if our board of directors were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of our company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may include (i) regulatory and clinical obligations; (ii) obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of our company; (iii) potential litigation against us, and other various claims and legal actions arising in the ordinary course of business; (iv) non-cancelable facility lease obligations and (v) obligations to holders of our 2021 Convertible Notes. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our company. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of our company.

Our business to date has been almost entirely dependent on the success of trabodenoson, and we have recently decided to discontinue further development of trabodenoson and devote significant time and resources to identifying and evaluating strategic alternatives, including the Proposed Merger, which may not be successful.

~~To date, we have invested substantially all of our efforts and financial resources in the research and development of~~ ~~trabodenoson, which was our only product candidate to enter clinical trials. In July 2017, we voluntarily discontinued our development of~~ ~~trabodenoson~~ ~~in view of the results of our MATrX-1 Phase 3 clinical trial and~~ ~~Phase 2 FDC clinical trial of~~ ~~trabodenoson~~ ~~and~~ ~~latanoprost~~.

We are evaluating strategic alternatives with a goal to enhance stockholder value, including the Proposed Merger with Rocket, and have suspended further research and development activities to reduce operating expenses while we evaluate these opportunities.

There can be no assurance that the Proposed Merger with Rocket will be approved and close or that if it is consummated would enhance shareholder value. There also can be no assurance that we will conduct further drug research or development activities in the future.

~~We are substantially dependent on our remaining employees to facilitate the Proposed Merger with Rocket.~~

Our ability to successfully complete the Proposed Merger with Rocket depends in large part on our ability to retain certain of our remaining personnel, particularly David P. Southwell, our President and Chief Executive Officer, Rudolf A. Baumgartner, M.D., our Executive Vice President and Chief Medical Officer, and Dale Ritter, our Vice President—Finance. Despite our efforts to retain these employees, one or more may terminate their employment with us on short notice. The loss of the services of any of these employees could potentially harm our ability to evaluate and pursue strategic alternatives, as well as fulfill our reporting obligations as a public company.

~~Risks Related to the Reverse Stock Split~~

~~The reverse stock split may not increase Inotek’s stock price over the long-term.~~

The principal purpose of the reverse stock split is to increase the per-share market price of Inotek’s common stock above the minimum bid price requirement under the NASDAQ Listing Rules so that the listing of the combined company and the shares of Inotek common stock being issued in the Proposed Merger on either NASDAQ Global Market or NASDAQ Capital Market will be approved. It cannot be assured, however, that the reverse stock split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Inotek’s common stock, it cannot be assured that the reverse stock split will increase the market price of its common stock by a multiple of the reverse stock split ratio chosen by its board of directors in its sole discretion, or result in any permanent or sustained increase in the market price of Inotek’s common stock, which is dependent upon many factors, including Inotek’s business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of the combined company might meet the continued listing requirements for the NASDAQ Capital Market or the NASDAQ Global Market initially, it cannot be assured that it will continue to do so.

~~The reverse stock split may decrease the liquidity of Inotek’s common stock.~~

Although the board of directors believes that the anticipated increase in the market price of Inotek’s common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Inotek’s common stock.

~~The reverse stock split may lead to a decrease in Inotek’s overall market capitalization.~~

Should the market price of Inotek’s common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in Inotek’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Inotek’s common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on Inotek’s stock price due to the reduced number of shares outstanding after the reverse stock split.

~~Risks Related to Our Financial Position and Need for Additional Capital~~

~~We currently have no source of revenue and may never become profitable.~~

We are a clinical-stage biopharmaceutical company with a limited operating history. Our ability to generate revenue and become profitable has depended upon our ability to successfully complete the development of our product candidates for the treatment of ocular diseases, including glaucoma, and obtain the necessary regulatory approvals for our product candidates. We have never been profitable, have no products approved for commercial sale and to date, have not generated any revenues from product sales. In July 2017, we voluntarily discontinued our development of our product candidate, ~~trabodenoson, in view of the results of our MATrX-1 Phase 3 clinical trial and~~ ~~Phase 2 FDC clinical trial of~~ ~~trabodenoson~~ ~~and~~ ~~latanoprost.~~ We have engaged Perella Weinberg as a financial advisor to assist us in pursuing the Proposed Merger. If the Proposed Merger is not approved and consummated, we plan to evaluate other strategic alternatives with a goal to enhance stockholder value. Even if we resume the development of product

candidates and receive regulatory approval for the sale of our product candidates, we do not know when such product candidates will generate revenue, if at all, especially considering the results of our MATrX-1 Phase 3 clinical trial and ~~Phase 2 FDC clinical trial of~~ ~~trabodenoson~~ ~~and~~ ~~latanoprost~~.

In addition, because of the numerous risks and uncertainties associated with approval and consummation of the Proposed Merger and with product development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.

~~We have a history of net losses and anticipate that we will continue to incur net losses for the foreseeable future.~~

We have a history of losses and anticipate that we will continue to incur net losses for the foreseeable future. Our net losses were $42.9 million and $68.0 million for the years ended December 31, 2016 and 2015, respectively. Our net losses were $24.6 million and $29.9 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $263.5 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we evaluate and pursue strategic alternatives with a goal to enhance stockholder value, including the Proposed Merger, or, if the Proposed Merger is not approved and consummated, another merger or sale of the Company. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and our working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or whether we will become profitable.

~~Our short operating history may make it difficult to evaluate the success of our business to date and to assess its future viability.~~

We are a biopharmaceutical company that was founded in 1999. Our operations to date have historically been limited to organizing and staffing the Company, business planning, raising capital, acquiring and developing its technology, identifying and evaluating potential product candidates and delivery technologies, undertaking nonclinical studies, and developing our product candidate ~~trabodenoson~~. We have discontinued our research and development activities relating to our product candidate that was in development. We have not demonstrated our ability to initiate clinical trials for product candidates other than ~~trabodenoson~~, or successfully completed any clinical trials, including large-scale, pivotal clinical trials, obtained marketing approvals, manufactured a commercial scale medicine, or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop one new product candidate from the time it is discovered to when it is available for treating patients. Consequently, any predictions about our future success or viability, or any evaluation of our business or prospects, may not be as accurate as they could be if we had a longer operating history. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges.

The indenture governing our 2021 Convertible Notes contain restrictions that will limit our operating flexibility, and we may incur additional debt in the future that may include similar or additional restrictions.

The indenture governing our 2021 Convertible Notes contain covenants that, among other things, restrict our and our subsidiaries’ ability to take specific actions, even if we believe them to be in our best interest. These covenants include restrictions on our ability and the ability of our future subsidiaries to incur additional indebtedness and issue certain types of preferred stock, other than certain permitted indebtedness and preferred stock. In addition, the indenture governing our 2021 Convertible Notes includes a covenant that limits our ability to merge or consolidate with other entities in certain circumstances, and may impact our ability to enter into a strategic transaction. These covenants and restrictions limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively.

A breach of any of these covenants or other provisions in our future debt agreements could result in an event of default, which if not cured or waived, could result in the 2021 Convertible Notes or such debt becoming immediately due and payable. This, in turn, could cause any of our other debt existing at such time to become due and payable as a result of cross-default or cross-acceleration provisions contained in the agreements governing such other debt. In the event that some or all of our debt is accelerated and becomes immediately due and payable, we may not have the funds to repay, or the ability to refinance, such debt.

Servicing our debt requires a significant amount of cash, and if the Proposed Merger with Rocket is not approved and consummated, we may not have sufficient cash flow from our business to pay our substantial debt.

We currently have no source of revenue. If the Proposed Merger with Rocket is not approved by our stockholders and consummated, we will be required to make scheduled payments of the principal and interest on or to refinance our indebtedness, including the 2021 Convertible Notes. We expect any continuing business would generate cash flow from operating activities sufficient to service our obligations under our 2021 Convertible Notes and any future indebtedness.

~~We may not have the ability to repurchase our 2021 Convertible Notes upon a fundamental change, and our future debt may contain limitations on our ability to repurchase the 2021 Convertible Notes.~~

Holders of our 2021 Convertible Notes have the right to require us to repurchase their 2021 Convertible Notes upon the occurrence of a fundamental change, the occurrence of certain change of control transactions or delisting events, at a fundamental change repurchase price equal to 100% of the principal amount of the 2021 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of 2021 Convertible Notes surrendered therefor. In addition, our ability to repurchase the 2021 Convertible Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase 2021 Convertible Notes at a time when the repurchase is required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing any future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2021 Convertible Notes.

~~The fundamental change repurchase feature of our 2021 Convertible Notes may delay or prevent an otherwise beneficial attempt to take over our company.~~

The terms of our 2021 Convertible Notes require us to repurchase the 2021 Convertible Notes in cash in the event of a fundamental change. A takeover of our company, if such takeover constituted a “fundamental change,” would trigger an option of the holders of the 2021 Convertible Notes to require us to repurchase the 2021 Convertible Notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to investors in the 2021 Convertible Notes.

~~Risks Related to Development, Potential Regulatory Approval and Commercialization~~

If we are found in violation of federal or state “fraud and abuse” laws or other healthcare laws, we may face penalties, which may adversely affect our business, financial condition and results of operation.

In the United States, we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, false claims laws and other laws intended, among other things, to reduce fraud and abuse in federal and state healthcare programs. The Federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration, directly or indirectly, in cash or in kind, that is intended to induce or reward the referral of business, including the purchase, lease, order or arranging for or recommending the purchase, lease or order of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid. Although we have sought to structure our business arrangements in compliance with all applicable requirements, many healthcare fraud and abuse laws are broadly written, and it may be difficult to determine precisely how the law will be applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under the Federal Anti-Kickback Statute. The federal false claims and civil monetary penalties laws, including the civil False Claims Act prohibits any individual or entity from, among other things, knowingly presenting or causing to be presented for payment to the government, including the federal healthcare programs, claims for reimbursed drugs or services that are false or fraudulent, or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government. The civil False Claims Act has been interpreted to prohibit presenting claims for items or services that were not provided as claimed, or claims for medically unnecessary items or services. Cases have been brought under false claims laws alleging that off-label promotion of pharmaceutical products or the provision of kickbacks have resulted in the submission of false claims to governmental healthcare programs. In addition, private individuals have the ability to bring actions on behalf of the government under the civil False Claims Act as well as under the false claims laws of several states. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, we are prohibited from, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services to obtain money or property of any healthcare benefit program.

Additionally, the federal Physician Payments Sunshine Act within the Patient Protection and Affordable Care Act, as amended by the Health Care Education and Reconciliation Act, or collectively the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to certain payments or other transfers of value provided to physicians and teaching hospitals, and certain ownership and investment interests held by physicians and their immediate family members.

Many states have adopted laws similar to the aforementioned laws, including state anti-kickback and false claims laws, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 U.S. Department of Health and Human Services Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There may be ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information on certain types of individuals and organizations. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other and from HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.

Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our business arrangements with third parties have complied and will in the future comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that the government could allege violations of, or convict us of violating, these laws. If we are found in violation of one of these laws, we could be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from governmental funded federal or state healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations. Were this to occur, our business, financial condition and results of operations and cash flows may be materially adversely affected.

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our products, if we resume the development of any product candidates, could be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. If we resume development of any product candidate, any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

If we reallocate our resources to acquire or develop one or more new product candidates, we may not be successful in developing such new product candidates and we will once again be subject to all the risks and uncertainties associated with research and development of products and technologies.

If the Proposed Merger is not approved and consummated, and we are unable to complete another strategic transaction, we may explore the possibility of reallocating our resources toward developing, acquiring, by acquisition or in-license, new product candidates. If we decide to acquire one or more new product candidates, we cannot guarantee that any such acquisition would result in the identification and successful development of one or more approved and commercially viable products. The development of products and technologies is subject to a number of risks and uncertainties, including:



	•	~~the time, costs and uncertainty associated with the clinical testing required to demonstrate the safety and effectiveness of a product candidate to obtain regulatory approvals;~~

~~the ability to raise sufficient funds to fund the research and development of any one or more new product candidates;~~

the ability to find third party strategic partners to assist or share in the costs of product development, and potential dependence on such strategic partners, to the extent we may rely on strategic partners for future sales, marketing or distribution;

~~the ability to protect the intellectual property rights associated with any one or more new product candidates;~~

~~litigation;~~

~~competition;~~

~~ability to comply with ongoing regulatory requirements;~~

~~government restrictions on the pricing and profitability of products in the United States and elsewhere; and~~

the extent to which third-party payers, including government agencies, private health care insurers and other health care payers, such as health maintenance organizations, and self-insured employee plans, will cover and pay for newly approved therapies.

~~Risks Related to Our Reliance on Third Parties~~

We have depended on third parties to conduct some of the operations of our clinical trials and other portions of our operations, and we may not have been able to, and my not in the future be able to, control their work as effectively as if we performed these functions ourselves.

We have relied on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to oversee and conduct our clinical trials, and to perform data collection and analysis of our product candidates. We have expected in the past, and may in the future expect, if the Proposed Merger is not approved and consummated and we resume development of our product candidates, to rely on these third parties to conduct clinical trials of any other potential products that we develop. These parties are not our employees and we cannot control the amount or timing of resources that they devote to our program. In addition, any CRO that we have retained and may retain in the future will be subject to the FDA’s regulatory requirements or similar foreign standards and we do not have control over compliance with these regulations by these providers. Our agreements with third-party service providers have been trial-by-trial and project-by-project bases. Typically, we have been able to terminate the agreements with notice and occasionally the third-party service provider have been able to terminate the agreement without notice. Typically, we have been responsible for the third party’s incurred costs and occasionally we have to pay cancellation fees. If any of our relationships with our third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. We also have relied on other third parties to store and distribute drug supplies for our clinical trials.

Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities, and we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan, the protocols for the trial and the FDA’s regulations and international standards, referred to as Good Clinical Practice, or GCP, requirements, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Preclinical studies must also be conducted in compliance with other requirements, such as Good Laboratory Practice, or GLP, and the Animal Welfare Act. Managing performance of third-party service providers can be difficult, time consuming and cause delays in our development programs. We have had and currently have a small number of employees only one of which is in research and development, which limits the internal resources we have available to identify and monitor our third-party providers.

Furthermore, these third parties may conduct clinical trials for competing drugs or may have relationships with other entities, some of which may be our competitors. As such, the ability of these third parties to provide services to us may be limited by their work with these other entities. The use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.

If these third parties do not successfully carry out their contractual duties or obligations and meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols according to regulatory requirements or for other reasons, our financial results and reputation could be harmed.

~~If we attempt to form collaborations in the future, we may not be able to do so.~~

If the Proposed Merger is not approved and consummated, and we are unable to complete another strategic transaction, we may attempt to form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect to programs that we believe may complement or augment our business. We may face significant competition in seeking appropriate strategic partners, and the negotiation process to secure appropriate terms is time-consuming and complex. We may not be successful in our efforts to establish such a strategic partnership for any future product candidates and programs on terms that are acceptable to us, or at all. This may be because our product candidates and programs may be deemed to be at too early of a stage of development for collaborative effort, our research and development pipeline may be viewed as insufficient, the competitive or intellectual property landscape may be viewed as too intense or risky, and/or third parties may not view our product candidates and programs as having sufficient potential for commercialization, including the likelihood of an adequate safety and efficacy profile.

~~If we enter into a collaboration, we may be unable to realize the potential benefits of any collaboration.~~

If the Proposed Merger is not approved and consummated, and we are unable to complete another strategic transaction, we may enter into a collaboration with respect to the development and/or commercialization of one or more product candidates, and there is no guarantee that the collaboration would be successful. Collaborations may pose a number of risks, including:



•	collaborators often have significant discretion in determining the efforts and resources that they will apply to the collaboration, and may not commit sufficient resources to the development, marketing or commercialization of the product or products that are subject to the collaboration;



•	~~collaborators may not perform their obligations as expected;~~



•	any such collaboration may require us to relinquish potentially valuable rights to its current product candidates, potential products or proprietary technologies or grant licenses on terms that are not favorable to us;



•	collaborators may cease to devote resources to the development or commercialization of our product candidates if the collaborators view our product candidates as competitive with their own products or product candidates;



•	disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the course of development, might cause delays or termination of the development or commercialization of product candidates, and might result in legal proceedings, which would be time consuming, distracting and expensive;



•	~~collaborators may be impacted by changes in their strategic focus or available funding, or business combinations involving them, which could cause them to divert resources away from the collaboration;~~



•	~~collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;~~



•	~~the collaborations may not result in us achieving revenues to justify such transactions; and~~



•	~~collaborations may be terminated and, if terminated, may result in a need for us to raise additional capital to resume further development or commercialization of the applicable product candidate.~~

~~As a result, a collaboration may not result in the successful development or commercialization of any potential future product candidates.~~

~~Risks Related to Intellectual Property~~

~~If we are sued for infringing the patent rights or misappropriating the trade secrets of third parties, such litigation could be costly and time consuming.~~

It is possible that we have failed, and may in the future fail, to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Moreover, it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to their product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may have failed to identify relevant patents or patent applications or may have identified pending patent applications of potential interest but incorrectly predicted the likelihood that such patent applications may issue with claims of relevance to our technology. In addition, we may have been unaware of one or more issued patents that would be infringed by our activities, or we may have incorrectly concluded that a third-party patent was invalid, unenforceable or not infringed by our activities. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover have covered our activities.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding patent rights with respect to our technology or products candidates, including interferences, oppositions and inter partes review proceedings before the U.S. Patent and Trademark Office (“USPTO”) and corresponding foreign patent offices. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our past or future product candidates, to the extent we resume development of any, may be subject to claims of infringement of the patent rights of third parties, who may assert infringement claims against us based on existing or future patent rights. Third parties may assert that we have employed their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our past and future product candidates and third parties could allege that our technology infringes such claims. Further, because patent applications can take many years to issue, third parties may have currently pending patent applications that may later result in issued patents that our future product candidates may infringe, or that such third parties claim are infringed by the use of our technologies. The outcome of patent litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either did not and do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on it. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

If we are found to infringe a third party’s patent rights, we could be found liable for monetary damages and lose valuable intellectual property rights. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. Parties making claims against us for infringement of their patent rights may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize any product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

We may be subject to claims that we or our employees have misappropriated the intellectual property, including trade secrets, of a third party, or claiming ownership of what we regard as our own intellectual property.

Many of our employees were previously employed at universities, biotechnology companies or other pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the intellectual property and other proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed such intellectual property, including trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages,

we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.

~~We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.~~

We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we have not filed a patent application or where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets. Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Further, the FDA, as part of its Transparency Initiative, a proposal by the FDA to increase disclosure and make data more accessible to the public, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that may in the future compete with our products, if the Proposed Merger is not approved and consummated and we resume the development of any product candidates, or cause additional, material adverse effects upon our competitive business position and financial results.

Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

~~Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.~~

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and/or management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for other activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of such competitors’ greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the U.S. PTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have historically had systems in place to remind us to pay these fees, and we employed an outside firm and relied on our outside counsel and our annuity service provider to pay these fees due to non-U.S. patent agencies. However, since we have voluntarily discontinued development of trabodenoson, we have stopped maintaining the majority of our patents. The U.S. PTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. This non-compliance can result in

abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. The abandonment or lapse of our patents could have a material adverse effect on our business.

~~Risks Related to Our Business Operations and Industry~~

~~Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.~~

We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, or SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

~~Our business is affected by macroeconomic conditions.~~

Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from current and future conditions in the global financial markets. For instance, if inflation or other factors were to significantly increase our business costs, it may not be feasible to pass through price increases to patients. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations.

If the Proposed Merger is not approved and consummated and we explore other strategic alternatives or resume research and development of product candidates, interest rates and the ability to access credit markets could also adversely affect our business and results of operations. Similarly, these macroeconomic factors could affect the ability of our potential future contract manufacturers, sole-source or single-source suppliers or licensees to remain in business or otherwise manufacture or supply product. Failure by any of them to remain in business could affect our ability to develop and manufacture products.

~~If product liability lawsuits are successfully brought against us, our insurance may be inadequate and we may incur substantial liability.~~

We face an inherent risk of product liability claims as a result of the clinical testing of our product candidates. We will face an even greater risk if we, in the future, commercially sell our product candidates or any other potential products that we may develop. We maintain product liability insurance with an aggregate limit of $10 million that covers our clinical trials and we may maintain insurance against product liability lawsuits for commercial sale of our product candidates. Historically, the potential liability associated with product liability lawsuits for pharmaceutical products or product candidates has been unpredictable. Although we believe that our current insurance is a reasonable estimate of our potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the insurance, we may be subject to claims in connection with our clinical trials and product candidates and, potentially in the future, commercial use of our product candidates, for which our insurance coverage may not be adequate, and the cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial.

For example, we may be sued if any product or product candidate we have developed or will develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of any future product candidates. Regardless of the merits or eventual outcome, liability claims may result in:

~~reduced resources of our management to pursue our business strategy;~~

~~decreased demand for our product candidates or potential products that we may develop;~~

~~injury to our reputation and significant negative media attention;~~

Index

SIGNATURES

•

~~withdrawal of clinical trial participants;~~

~~termination of clinical trial sites or entire trial programs;~~

~~initiation of investigations by regulators;~~

~~product recalls, withdrawals or labeling, marketing or promotional restrictions;~~

~~significant costs to defend resulting litigation;~~

~~diversion of management and scientific resources from our business operations;~~

~~substantial monetary awards to trial participants or patients;~~

~~loss of revenue; and~~

~~the inability to commercialize any products that we may develop.~~

Insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against product liability claims, it could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

Additionally, we do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, auto, property, workers’ compensation, products liability and directors’ and officers’ insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would materially adversely affect our financial position, cash flows and results of operations.

~~We may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.~~

Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, financial condition and results of operations. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business

~~Our business and operations would suffer in the event of system failures.~~

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, damage our reputation and any potential further development of our product candidates could be delayed.

~~A breach of the Company’s computer systems and networks could materially adversely affect the Company’s business and financial condition~~.

Our business requires us, including some of our vendors, to use and store personally identifiable and other sensitive information, such as health and medical data, for employees and patients. The security measures put in place by the Company, and such vendors, cannot provide absolute security, and the Company and our vendors’ information technology infrastructure may be vulnerable to criminal cyber-attacks or data security incidents due to employee error, malfeasance, or other vulnerabilities. The techniques used by criminals to obtain unauthorized access to sensitive data are increasing in sophistication and are often novel, or change frequently. Such attacks now often take the form of phishing, spear-phishing, and other forms of human engineering and impersonation. These attacks could target not only personally identifiable information of the Company’s employees and patients but the Company’s intellectual property, trade secrets (such as drug formulations), and other proprietary information. The Company may be unable to anticipate these techniques or implement adequate preventative measures. As a result, there is no guarantee that despite the Company’s best efforts, the Company will not become the victim of such an attack in the future, that unauthorized parties will not gain

~~access to sensitive data stored on the Company’s systems or the systems of Company’s vendors, or that any such incident will be discovered in a timely manner.~~

Any such incident could compromise the Company’s or such vendors’ networks, and the information stored by the Company or such vendors could be accessed, misused, shared publicly, corrupted, lost, held for ransom, or stolen, resulting in fraud, including wire fraud related to Company assets, corporate espionage, or other harm. Moreover, if a data security incident or breach affects the Company’s systems or such vendors’ systems or results in the unauthorized release of personally identifiable information, the Company’s reputation could be materially harmed and the Company may be exposed to a risk of loss or litigation and possible liability, which could result in a material adverse effect on the Company’s business, results of operations, and financial condition. In the event clinical or other medical data from patients that have been or may in the future be enrolled in clinical trials is exposed to unauthorized persons, either by the Company or the Company’s vendors, the Company could face challenges enrolling patients in any potential future trials. The Company’s insurance coverage may not cover or may be inadequate to cover the losses it could incur should the Company experience a major data security event.

Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could significantly harm our business.

We are exposed to the risk of fraud or other misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors. Misconduct by these parties could include failures to comply with the regulations of the FDA and comparable non-U.S. regulatory authorities, provide accurate information to the FDA and comparable non-U.S. regulatory authorities, comply with fraud and abuse and other healthcare laws in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We adopted a code of ethics, but it is not always possible to identify and deter employee and other 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. If any such actions are instituted against us resulting from such misconduct those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

We and our development partners, third-party manufacturers and suppliers use biological materials and may use hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.

We and our development partners, third-party manufacturers and suppliers may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. Our operations and the operations of our third-party manufacturers and suppliers also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive and current or future environmental laws and regulations may impair any potential product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our business and reputation could be substantially harmed and any potential clinical trials or regulatory approvals could be suspended.

~~Risks Related to Ownership of Our Common Stock~~

~~The availability of our common stock and securities linked to our common stock for sale in the future could reduce the market price of our common stock.~~

In the future, we may issue equity and equity-linked securities to raise cash for acquisitions or otherwise. We may also acquire interests in other companies by using a combination of cash and our common stock or just our common stock. We may also issue preferred stock or additional securities convertible into our common stock or preferred stock. Any of these events may dilute your ownership interest in our company and have an adverse effect on the price of our common stock.

~~Our common stock may be delisted from the NASDAQ Global Market if we are unable to maintain compliance with NASDAQ’s continued listing standards.~~

NASDAQ imposes, among other requirements, continued listing standards including minimum bid and public float requirements. The price of our common stock must trade at or above $1.00 to comply with NASDAQ's minimum bid requirement for continued listing on the NASDAQ. If our stock trades at bid prices of less than $1.00 for a period in excess of 30 consecutive business days, the NASDAQ could send a deficiency notice to us for not remaining in compliance with the minimum bid listing standards. During the third quarter of fiscal year 2017, our common stock has traded below $1.00. If the closing bid price of our common stock fails to meet NASDAQ's minimum closing bid price requirement, or if we otherwise fail to meet any other applicable requirements of the NASDAQ and we are unable to regain compliance, NASDAQ may make a determination to delist our common stock.

If we fail to maintain the listing of our common stock with a U.S. national securities exchange, the liquidity of our common stock could be adversely affected and the delisting could constitute a fundamental change under the indenture governing our 2021 Convertible Notes.

If our common stock is delisted by NASDAQ, our common stock may be eligible to trade on the OTC Bulletin Board or another over-the-counter market. Any such alternative would likely result in it being more difficult for us to raise additional capital through the public or private sale of equity securities and for investors to dispose of, or obtain accurate quotations as to the market value of, our common stock. In addition, there can be no assurance that our common stock would be eligible for trading on any such alternative exchange or markets.

If a delisting occurs and we are unable to list such shares on any of on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Capital Market or other exchange such event would constitute a “fundamental change” under the indenture governing our 2021 Convertible Notes. If a fundamental change were to occur, we would be required to make an offer to purchase our convertible notes at a price equal to 100% of the aggregate principal amount outstanding plus accrued and unpaid interest, and complete such purchase within a couple of months after the effective date of the fundamental change. We cannot provide assurance that a delisting will not occur under the above-mentioned circumstances. The occurrence of delisting would have a material adverse effect upon our business, results of operations, financial condition and liquidity, and would substantially adversely impact the trading price of our common stock and other securities, and would require us to refinance our convertible notes which could result in a voluntary or involuntary bankruptcy proceeding if such a refinancing is unsuccessful.

~~The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above your purchase price of our shares.~~

Our initial public offering was completed in February 2015. Therefore, there has only been a public market for our common stock for a short period of time. Our common stock is listed on NASDAQ. Since shares of our common stock were sold in our initial public offering in February 2015 at $6.00 per share, our stock price has reached a high of $19.45 per share and a low of $0.85 per share through November 3, 2017.

The trading price of our common stock is likely to continue to be volatile, and you can lose all or part of your investment in us. In fact, following our announcement of the results of our Phase 3 monotherapy clinical trial on January 3, 2017, the price of our common stock dropped $4.35 per share, or 71%, from $6.10 per share as of the close of business on December 30, 2016, to $1.75 per share as of the close of business on January 3, 2017. Also, following our announcement of the results of our Phase 2 FDC clinical trial on July 7, 2017, the price of our common stock dropped $0.78 per share, or 45%, from $1.73 per share as of the close of business on July 7, 2017, to $0.95 per share as of the close of business on July 10, 2017. The closing price of our common stock was $2.40 on November 3, 2017. In addition to other factors described in this “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and this Report on Form 10-Q for the quarterly period ended September 30, 2017, the non-approval by our stockholders or non-consummation or termination of the Merger Agreement may have a significant impact on the market price of our common stock.

In addition, the stock market, in general, and small pharmaceutical and biotechnology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, a significant decline in the financial markets and other related factors beyond our control may cause our stock price to decline rapidly and unexpectedly.

We and our management are parties to a lawsuit which, if adversely decided against us, could adversely affect our business and cause the price of our common stock to continue to decrease. We may also be subject to other securities litigation in the future, which is expensive and could divert management attention.

Our share price has been and may continue to be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. This risk is especially relevant for us because our stock price declined following our announcement of the results of our Phase 3 clinical trial of ~~trabodenoson~~ for the treatment of primary open-angle glaucoma or ocular hypertension and the results of our Phase 2 FDC clinical trial. On January 6, 2017, a purported stockholder of the Company filed a putative class action in the U.S. District Court for the District of Massachusetts, captioned ~~Whitehead v. Inotek Pharmaceuticals Corporation, et al.~~, No. 1:17-cv-10025. An amended complaint was filed on July 10, 2017, and a second amended complaint was filed on September 5, 2017. The second amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against the Company, David Southwell, and Rudolf Baumgartner based on allegedly false and misleading statements and omissions regarding our Phase 2 and Phase 3 clinical trials of ~~trabodenoson~~. The lawsuit seeks, among other things, unspecified compensatory damages for purchasers of the Company’s common stock between July 23, 2015 and July 10, 2017, as well as interest and attorneys’ fees and costs. On October 6, 2017, defendants filed a motion to dismiss the second amended complaint. The Company will continue to vigorously defend plaintiff’s claims. This litigation or future litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any adverse determination in this or future litigation could also subject us to significant liabilities.

Our existing principal stockholders, executive officers and directors own a significant percentage of our common stock and will be able to exert a significant control over matters submitted to our stockholders for approval.

As of September 19, 2017, our officers and directors, and stockholders who individually own more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 50% of our common stock.

This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. As a result, these stockholders, if they acted together, could significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of the Proposed Merger with Rocket or other mergers or other business combination transactions. These stockholders may be able to determine all matters requiring stockholder approval. The interests of these stockholders may not always coincide with our interests or the interests of other stockholders or noteholders. This may also prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as a stockholder or noteholder, and they may act in a manner that advances their best interests and not necessarily those of other stockholders or noteholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock and 2021 Convertible Notes.

A substantial number of shares of our common stock are eligible for future sale in the public market, and the issuance or sale of equity, convertible or exchangeable securities in the market, including shares issuable upon conversion of our convertible notes, or the perception of such future sales or issuances, could lead to a decline in the trading price of our common stock.

Any issuance of shares of our common stock or other securities, including for the purposes of raising capital to fund our operations, financing acquisitions and the expansion of our business, will have a dilutive effect on our existing stockholders. In addition, the perceived market risk associated with the possible issuance of a large number of shares of our common stock, including pursuant to the exercise of our currently outstanding stock options, or issuances of securities convertible or exchangeable into a large number of shares of our common stock could cause some of our stockholders to sell their common stock, thus causing the trading price of our common stock to decline. Subsequent sales of our common stock in the open market, exercises of our currently outstanding stock options and the subsequent sale of the shares acquired thereunder or the sale by us of shares of our common stock or securities convertible or exchangeable into our common stock for capital raising purposes could also have an adverse effect on the trading price of our common stock. If our common stock price declines, it will be more difficult for us to raise additional capital or we may be unable to raise additional capital at all.

In August 2016, we issued $52.0 million aggregate principal amount of our 5.75% Convertible Senior Notes due 2021, or the 2021 Convertible Notes. The 2021 Convertible Notes are convertible at the option of the holder at an initial conversion rate of approximately 124.7505 shares of our common stock per $1,000 principal amount of 2021 Convertible Notes, which is equivalent to an initial conversion price of approximately $8.02 per share of our common stock, and is subject to adjustment upon certain events and conditions, including the issuance of stock dividends and payment of cash dividends. In addition, in certain circumstances, the conversion rate will also be increased with respect to a holder’s conversion of 2021 Convertible Notes in connection with the occurrence of one or more corporate events. A substantial number of shares of our common stock are reserved for issuance upon conversion of the 2021 Convertible Notes. The issuance of shares of our common stock upon conversion of the 2021 Convertible Notes would dilute the ownership interest of our common stockholders and may materially adversely affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

In connection with other collaborations, joint ventures, license agreements or future financings that we may enter into in the future, we may issue additional shares of common stock or other equity securities, and the value of the securities issued may be substantial and create additional dilution to our existing and future common stockholders.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our stock, or provide more favorable relative recommendations about our competitors, our stock price could decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Because we do not intend to declare cash dividends on our shares of common stock in the foreseeable future, stockholders must rely on appreciation of the value of our common stock for any return on their investment.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, we expect that only appreciation of the price of our common stock, if any, will provide a return to holders of our common stock for the foreseeable future.

~~The requirements associated with being a public company require significant company resources and management attention.~~

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, the listing requirements of the securities exchange on which our common stock is traded and other applicable securities rules and regulations. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent rules implemented by the SEC and NASDAQ may also impose various additional requirements on public companies. As a result, we incur substantial legal, accounting and other expenses. Further, the corporate infrastructure demanded of a public company may divert management’s attention from implementing our business strategy. We have made, and will

continue to make, changes to our corporate governance standards, disclosure controls and financial reporting and accounting systems to meet our reporting obligations. However, the measures we take may not be sufficient to satisfy our obligations as a public company, which could subject us to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

The JOBS Act will allow us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our common stock.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

the “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer;

the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act, and instead provide a reduced level of disclosure concerning executive compensation; and

~~any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.~~

We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) December 31, 2020; (ii) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

Although we are still evaluating the JOBS Act, we currently intend to take advantage of some, but not all, of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company.” For example, we have irrevocably elected under Section 107 of the JOBS Act not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging growth company,” which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an “emerging growth company,” we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.

Some provisions of our charter document, Delaware law and the indenture that governs our 2021 Convertible Notes may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and our bylaws as well as provisions of the Delaware General Corporation Law, or DGCL, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:

~~establishing a classified board of directors such that not all members of the board are elected at one time;~~

~~allowing the authorized number of our directors to be changed only by resolution of our board of directors;~~

~~limiting the removal of directors by the stockholders;~~

~~authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;~~

•

~~prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;~~

~~eliminating the ability of stockholders to call a special meeting of stockholders;~~

~~establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; and~~

~~requiring the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal our bylaws.~~

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, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.

In addition, the terms of our 2021 Convertible Notes require us to repurchase the 2021 Convertible Notes in cash in the event of a fundamental change. A takeover of our company, if such takeover constituted a “fundamental change,” would trigger an option of the holders of the 2021 Convertible Notes to require us to repurchase the 2021 Convertible Notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to investors in the 2021 Convertible Notes.

~~Item 2.~~ ~~Unregistered Sales of Equity Securities~~

~~None.~~

~~Item 3.~~

~~Defaults upon Senior Securities~~

~~None.~~

~~Item 4.~~

~~Mine Safety Disclosures~~

~~Not applicable.~~

~~Item 5.~~

~~Other Information~~

~~None.~~

~~Item 6.~~

~~Exhibits~~

~~The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index below.~~

~~EXHIBIT INDEX~~

Incorporated by Reference to:
Exhibit
No.

Description

Form or
Schedule

Exhibit
No.

Filing
Date with
SEC

SEC File
Number

2.1

Agreement and Plan of Merger and Reorganization, dated as of September 12, 2017, by and among Inotek Pharmaceuticals Corporation, Rocket Pharmaceuticals, Ltd. and Rome Merger Sub

8-K

2.1

9/13/2017

001-36829

3.1

Amended and Restated Certificate of Incorporation of the Registrant.

10-K

3.1

3/31/2015

001-36829

3.2

Amended and Restated By-Laws of the Registrant.

10-K

3.2

3/31/2015

001-36829

4.1

Specimen Common Stock Certificate of the Registrant.

10-K

4.1

3/31/2015

001-36829

4.2

Base Indenture, dated as of August 5, 2016, by and between the Registrant and Wilmington Trust, National Association

8-K

4.1

8/5/2016

001-36829

4.3

First Supplemental Indenture, dated as of August 5, 2016, by and between the Registrant and Wilmington Trust, National Association

8-K

4.2

8/5/2016

001-36829

4.4

Form of 5.75% Convertible Senior Note due 2021

8-K

4.3

8/5/2016

001-36829

10.1

Amendment to Offer Letter, effective as of August 7, 2017, by and between Inotek and Rudolf A. Baumgartner, MD

8-K

10.1

8/8/2017

001-36829

10.2

Amendment to Offer Letter, effective as of September 1, 2017, by and between Inotek and Dale Ritter

8-K

10.1

9/1/2017

001-36829

10.3

Amendment to Offer Letter, effective as of September 1, 2017, by and between Inotek and David Southwell

8-K

10.2

9/1/2017

001-36829

10.4

Amendment to Offer Letter, effective as of September 12, 2017, by and between Inotek and Rudolf A. Baumgartner, MD

8-K

10.1

9/13/2017

001-36829

10.5*

Form of Retention Bonus Letter

31.1*

Certification of Principal Executive Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

31.2*

Certification of Principal Financial Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

32.1*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act rules 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Link Document.

*	~~Filed herewith.~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			~~INOTEK~~ROCKET PHARMACEUTICALS, ~~CORPORATION~~ INC.

~~November 8, 2017~~ May 5, 2023	By:	~~By:~~	/s/ ~~David P. Southwell~~ Gaurav Shah, MD
			~~David P. Southwell~~ Gaurav Shah, MD
			~~President,~~ Chief Executive Officer and Director
		(Principal Executive Officer)

~~November 8, 2017~~ May 5, 2023	By:	~~By:~~	/s/ ~~Dale Ritter~~ John Militello
			~~Dale Ritter~~ John Militello
		VP of Finance, Senior Controller and Treasurer
	~~Vice President–Finance~~	(Interim Principal Financial Officer and Principal Accounting Officer)

9 Cedarbrook Drive, Cranbury, NJ		08512
(Address of principal executive office)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	RCKT	Nasdaq Global Market

Large accelerated filer ☒	☐	Accelerated filer	☒ ☐

Non-accelerated filer ☐	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company		☒
	☐

	~~Page~~
~~PART I – FINANCIAL INFORMATION~~

~~Item 1. Consolidated Financial Statements (Unaudited)~~	4

~~Consolidated Balance Sheets~~	4
~~Consolidated Statements of Operations~~	5
~~Consolidated Statements of Comprehensive Loss~~	6
~~Consolidated Statements of Cash Flows~~	7
~~Notes to Consolidated Financial Statements~~	8

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	21

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~	27

~~Item 4. Controls and Procedures~~	27

~~PART II – OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~	28

~~Item 1A. Risk Factors~~	28

~~Item 2. Unregistered Sales of Equity Securities~~	48

~~Item 3. Defaults Upon Senior Securities~~	48

~~Item 4. Mine Safety Disclosures~~	48

~~Item 5. Other Information~~	48

~~Item 6. Exhibits~~	48

~~Signatures~~	50

	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	49,146		$	29,798
Short-term investments		53,979			96,675
Prepaid expenses and other current assets		747			1,876
Total current assets		103,872			128,349
Property and equipment, net		615			1,130
Other assets		168			168
Total assets	$	104,655		$	129,647

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	383		$	1,592
Accrued expenses and other current liabilities		2,900			4,246
Accrued interest		484			1,204
Total current liabilities		3,767			7,042
2021 Convertible Notes, net of issuance costs		49,390			48,960
Other long-term liabilities		423			477
Total liabilities		53,580			56,479

Commitments and Contingencies (Note 7)

Stockholders’ equity:
Preferred Stock, $0.001 par value: 5,000,000 shares authorized and no shares issued or outstanding		—			—
Common stock, $0.01 par value: 120,000,000 shares authorized at September 30, 2017 and December 31, 2016; 27,222,745 and 26,986,318 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		272			270
Additional paid-in capital		314,332			311,829
Accumulated deficit		(263,504	)		(238,877	)
Accumulated other comprehensive loss		(25	)		(54	)
Total stockholders’ equity		51,075			73,168
Total liabilities and stockholders’ equity	$	104,655		$	129,647

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	4

	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	5

	Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)	6

	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	7

	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signature		40

	March 31,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	64,579		$	140,517
Investments		266,505			215,877
Prepaid expenses and other current assets		6,949			7,666
Total current assets		338,033			364,060
Property and equipment, net		30,588			29,009
Goodwill		39,154			39,154
Intangible assets		25,724			25,724
Restricted cash		1,340			1,340
Deposits		459			608
Investments		28,957			43,276
Operating lease right-of-use assets		4,369			1,972
Finance lease right-of-use asset		46,133			46,664
Total assets	$	514,757		$	551,807
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	28,609		$	36,660
Operating lease liabilities, current		849			773
Finance lease liability, current		1,748			1,736
Total current liabilities		31,206			39,169
Operating lease liabilities, non-current		3,506			1,088
Finance lease liability, non-current		19,294			19,269
Other liabilities		1,875			2,595
Total liabilities		55,881			62,121
Commitments and contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 5,000,000 shares:
Series A convertible preferred stock; 300,000 shares designated as Series A; 0 shares issued and outstanding		-			-
Series B convertible preferred stock; 300,000 shares designated as Series B; 0 shares issued and outstanding		-			-
Common stock, $0.01 par value, 120,000,000 shares authorized; 80,412,194 and 79,123,312 shares issued and 80,409,623 and 79,120,741 shares outstanding at March 31, 2023 and December 31, 2022, respectively		804			791
Treasury stock, at cost, 2,571 common shares at March 31, 2023 and December 31, 2022, respectively		(47	)		(47	)
Additional paid-in capital		1,230,319			1,203,074
Accumulated other comprehensive loss		(90	)		(357	)
Accumulated deficit		(772,110	)		(713,775	)
Total stockholders’ equity		458,876			489,686
Total liabilities and stockholders’ equity	$	514,757		$	551,807

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating expenses:
Research and development	$	(2,818	)	$	(8,412	)	$	(13,539	)	$	(22,492	)
General and administrative		(3,895	)		(2,311	)		(8,996	)		(7,148	)
Loss from operations		(6,713	)		(10,723	)		(22,535	)		(29,640	)

Interest expense		(901	)		(525	)		(2,666	)		(525	)
Interest income		219			120			574			285
Net loss	$	(7,395	)	$	(11,128	)	$	(24,627	)	$	(29,880	)

Net loss per share attributable to common stockholders—basic and diluted	$	(0.27	)	$	(0.41	)	$	(0.91	)	$	(1.12	)

Weighted-average number of shares outstanding—basic and diluted		27,041,324			26,930,730			27,007,567			26,660,126

											Accumulated
								Additional			Other						Total
	Common Stock				Treasury			Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Stock			Capital			Income/(Loss)			Deficit			Equity
Balance at December 31, 2022		79,123,312	$	791	$	(47	)	$	1,203,074		$	(357	)	$	(713,775	)	$	489,686
Issuance of common stock pursuant to exercise of stock options		88,429		1		-			1,113			-			-			1,114
Issuance of common stock pursuant to vesting of restricted stock units		126,060		1		-			(1	)		-			-			-
Issuance of common stock pursuant to exercise of warrants		126,093		1		-			6			-			-			7
Issuance of common stock pursuant to the at-the-market offering program, net of issuance costs		948,300		10		-			17,212			-			-			17,222
Unrealized comprehensive gain on investments		-		-		-			-			267			-			267
Stock-based compensation		-		-		-			8,915			-			-			8,915
Net loss		-		-		-			-			-			(58,335	)		(58,335	)
Balance at March 31, 2023		80,412,194	$	804	$	(47	)	$	1,230,319		$	(90	)	$	(772,110	)	$	458,876

	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Certificates of deposit	$	11,284	$	—	$	—		$	11,284
Agency bonds		2,005		—		—			2,005
United States Treasury securities		40,715		—		(25	)		40,690
	$	54,004	$	—	$	(25	)	$	53,979

	Fair Value Measurements as of
	March 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	31,353	$	-	$	-	$	31,353
Corporate Bonds		-		3,778		-		3,778
United States Treasury securities		7,670		-		-		7,670
		39,023		3,778		-		42,801

Investments:
Commercial Paper		-		5,147		-		5,147
United States Treasury securities		228,443		-		-		228,443
Corporate Bonds		-		54,159		-		54,159
Agency Bonds		-		7,713		-		7,713
		228,443		67,019		-		295,462

Total assets	$	267,466	$	70,797	$	-	$	338,263

Liabilities:
Warrant liability	$	-	$	-	$	815	$	815
Total liabilities	$	-	$	-	$	815	$	815

	Fair Value Measurements as of
	December 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	90,527	$	-	$	-	$	90,527
Commercial Paper		-		3,899		-		3,899
United States Treasury Securities		3,848		-		-		3,848
Corporate Bonds		-		8,618		-		8,618
		94,375		12,517		-		106,892

Investments:
Commercial Paper		-		1,151		-		1,151
United States Treasury securities		189,444		-		-		189,444
Corporate Bonds		-		60,905		-		60,905
Agency Bonds		-		7,653		-		7,653
		189,444		69,709		-		259,153

Total assets	$	283,819	$	82,226	$	-	$	366,045

Liabilities:
Warrant liability	$	-	$	-	$	1,512	$	1,512
Total liabilities	$	-	$	-	$	1,512	$	1,512

	Warrant Liability
Balance, December 31, 2022	$	1,512
Fair value adjustments		(697	)
Balance, March 31, 2023	$	815

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Numerator:
Net loss applicable to common stockholders	$	(7,395	)	$	(11,128	)	$	(24,627	)	$	(29,880	)

Denominator:
Weighted average common shares outstanding - basic and diluted		27,041,324			26,930,730			27,007,567			26,660,126
Net loss per share applicable to common stockholders - basic and diluted	$	(0.27	)	$	(0.41	)	$	(0.91	)	$	(1.12	)

	March 31, 2023			December 31, 2022
Stock price	$	17.13		$	18.39
Exercise price	$	65.23		$	65.23
Expected volatility		67.38	%		71.25	%
Risk-free interest rate		4.04	%		4.14	%
Expected dividend yield		-			-
Expected life (years)		2.07			2.39
Fair value per warrant	$	1.32		$	2.45

	March 31,			December 31,
	2023			2022
Laboratory equipment	$	23,317		$	21,905
Machinery and equipment		11,443			11,326
Computer equipment		244			244
Furniture and fixtures		2,216			2,135
Leasehold improvements		1,694			589
Internal use software		1,903			1,903
		40,817			38,102
Less: accumulated depreciation and amortization		(10,229	)		(9,093	)
	$	30,588		$	29,009

	Useful lives	September 30, 2017			December 31, 2016
Office equipment	5 years	$	357		$	407
Computer hardware and software	3 - 7 years		96			263
Laboratory equipment	5 years		—			446
Leasehold improvements	7 years		445			445
Assets held for sale			14			—
Total			912			1,561
Less: accumulated depreciation			(297	)		(431	)
Property and equipment, net		$	615		$	1,130

	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net
In process research & development	$	25,150	$	-	$	25,150
Mice colony model		574		-		574
Total intangible assets	$	25,724	$	-	$	25,724

	September 30, 2017		December 31, 2016
Severance and benefits	$	930	$	544
Compensation and benefits		706		1,627
Government payable		499		478
Professional fees		455		311
Research and development		209		1,148
Other		101		138
Total	$	2,900	$	4,246

	September 30, 2017
Gross proceeds	$	52,000
Initial value of issuance costs recorded as debt discount		(3,262	)
Amortization of debt discount		652
Carrying value	$	49,390

	Number of Shares			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at December 31, 2016		2,664,832		$	6.16
Granted		315,000		$	1.80
Exercised		—
Cancelled		(624,248	)	$	6.42
Outstanding at September 30, 2017		2,355,584		$	5.51	$	—

Exercisable at September 30, 2017		1,424,501		$	5.68	$	—
Weighted-average years remaining on contractual life		8.07
Unrecognized compensation cost related to non-vested stock options	$	3,568

	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2016		470,000		$	6.50
Granted		931,000		$	1.60
Vested		(225,625	)	$	1.69
Cancelled		(88,500	)	$	1.70
Outstanding at September 30, 2017		1,086,875		$	1.05

				Weighted			Weighted
				Average			Average		Aggregate
	Number of			Exercise			Contractual		Intrinsic
	Shares			Price			Term (Years)		Value

Outstanding as of December 31, 2022		13,138,870			$	14.52		5.46		$	118,767
Granted		1,792,097				20.36		6.86
Exercised		(88,429	)			12.59					631
Cancelled		(191,148	)			33.99
Outstanding as of March 31, 2023		14,651,390			$	14.99		5.85		$	97,263

Options vested and exercisable as of March 31, 2023		10,586,141			$	12.60		4.52		$	92,808
Options unvested as of March 31, 2023		4,065,249			$	21.24		9.32		$	4,455

Exercise Price	Outstanding		Grant/Assumption Date	Expiration Date
24.42		7,051	June 28, 2013	June 28, 2023
57.11		603,386	December 21, 2020	December 21, 2030
33.63		301,291	August 9, 2021	August 9, 2031
22.51		153,155	December 17, 2021	December 17, 2031
22.51		153,155	December 17, 2021	December 17, 2031
65.23		617,050	December 1, 2022	April 23, 2025
65.23		760,086	December 1, 2022	December 1, 2026
Total		2,595,174

	Number of Warrant Shares Outstanding and Exercisable			Exercise Price per Share
Balance as of December 31, 2022		2,721,267
Granted		-
Exercised		(126,093	)	$	0.06
Balance as of March 31, 2023		2,595,174

Lease cost	March 31, 2023
Operating lease cost	$	358
Finance lease cost
Amortization of right of use assets		538
Interest on lease liabilities		468
Total lease cost	$	1,364

Year	Amount
2017	$	102
2018		411
2019		421
2020		430
2021		439
Thereafter		520
Total	$	2,323

Fiscal Year Ending December 31,	March 31, 2023
2023 (nine months)		869
2024		798
2025		538
2026		545
2027		506
Thereafter		2,941
Total lease payments	$	6,197
Less: interest		(1,842	)
Total operating lease liabilities	$	4,355

Leases	March 31, 2023
Operating right-of-use assets	$	4,369

Operating current lease liabilities		849
Operating noncurrent lease liabilities		3,506
Total operating lease liabilities	$	4,355

Finance right-of-use assets	$	46,133

Finance current lease liability		1,748
Finance noncurrent lease liability		19,294
Total finance lease liability	$	21,042

Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	261
Cash flows from finance lease	$	431
Weighted-average remaining lease term - operating leases	8.2 years
Weighted-average remaining lease term - finance lease	21.4 years
Weighted-average discount rate - operating leases		8.08	%
Weighted-average discount rate - finance lease		8.96	%

	Fair Value Measurements at
	September 30, 2017
	Total		Level 1		Level 2		Level 3
Assets:
Money market mutual funds (included in cash and cash equivalents)	$	48,981	$	48,981	$	—	$	—

Certificates of deposit	$	11,284	$	—	$	11,284	$	—
Agency bonds		2,005		—		2,005		—
United States Treasury securities		40,690		40,690		—		—
Short-term investments	$	53,979	$	40,690	$	13,289	$	—

Working capital⁽¹⁾	$	(5,210	)
Cash and cash equivalents		42,755
Property and equipment		1,414
Operating lease right-of-use assets		1,161
Other non-current assets		113
IPR&D		25,150
Other intangible asset		574
Operating lease liability		(970	)
Deferred tax liability		(1,061	)
Net assets acquired		63,926
Goodwill		8,339
Purchase consideration	$	72,265

	Three Months Ended September 30,						Increase
	2017			2016			(Decrease)
(in thousands)
Operating expenses:
Research and development	$	(2,818	)	$	(8,412	)	$	(5,594	)
General and administrative		(3,895	)		(2,311	)		1,584
Loss from operations		(6,713	)		(10,723	)		(4,010	)

Interest expense		(901	)		(525	)		376
Interest income		219			120			(99	)
Net loss	$	(7,395	)	$	(11,128	)	$	(3,733	)

	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	(in thousands)
Operating facilities lease (1)	$	2,323	$	409	$	846	$	882	$	186
2021 Convertible Notes (2)		63,960		2,990		5,980		54,990		—
Total	$	66,283	$	3,399	$	6,826	$	55,872	$	186

		Incorporated by Reference to:
Exhibit No.	Description	Form or Schedule	Exhibit No.	Filing Date with SEC	SEC File Number

2.1	Agreement and Plan of Merger and Reorganization, dated as of September 12, 2017, by and among Inotek Pharmaceuticals Corporation, Rocket Pharmaceuticals, Ltd. and Rome Merger Sub	8-K	2.1	9/13/2017	001-36829

3.1	Amended and Restated Certificate of Incorporation of the Registrant.	10-K	3.1	3/31/2015	001-36829

3.2	Amended and Restated By-Laws of the Registrant.	10-K	3.2	3/31/2015	001-36829

4.1	Specimen Common Stock Certificate of the Registrant.	10-K	4.1	3/31/2015	001-36829

4.2	Base Indenture, dated as of August 5, 2016, by and between the Registrant and Wilmington Trust, National Association	8-K	4.1	8/5/2016	001-36829

4.3	First Supplemental Indenture, dated as of August 5, 2016, by and between the Registrant and Wilmington Trust, National Association	8-K	4.2	8/5/2016	001-36829

4.4	Form of 5.75% Convertible Senior Note due 2021	8-K	4.3	8/5/2016	001-36829

10.1	Amendment to Offer Letter, effective as of August 7, 2017, by and between Inotek and Rudolf A. Baumgartner, MD	8-K	10.1	8/8/2017	001-36829

10.2	Amendment to Offer Letter, effective as of September 1, 2017, by and between Inotek and Dale Ritter	8-K	10.1	9/1/2017	001-36829

10.3	Amendment to Offer Letter, effective as of September 1, 2017, by and between Inotek and David Southwell	8-K	10.2	9/1/2017	001-36829

10.4	Amendment to Offer Letter, effective as of September 12, 2017, by and between Inotek and Rudolf A. Baumgartner, MD	8-K	10.1	9/13/2017	001-36829

10.5*	Form of Retention Bonus Letter
31.1*	Certification of Principal Executive Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

31.2*	Certification of Principal Financial Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act rules 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350.

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Link Document.