Rocket Pharmaceuticals, Inc. (RCKT) Earnings Call Transcript & Summary

Okay. Great. Thanks, everyone, for joining. To the research disclosure first. So, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. Gaurav, thanks for joining us. So, Jason Russell with the health care banking team. Really pleased to be here with Dr. Gaurav Shah, CEO of Rocket Pharma. So, I'd just like to jump right in. Start with the layup. I knew the company when you first started, few lentiviral gene therapy programs. Company has obviously evolved and emerged over time. So before we get to specific questions, just give us a little bit of context of founding of the company, evolution over these past 4 or 5 years, and we'll go from there.

Jason, good to see you. Great to be here again this year and great to see everyone in the audience here, and have a chance to talk through our program. So, yes, Rocket Pharma, we're a gene therapy company. Before Rocket, I was actually at Novartis working on CAR-T, working on Kymriah and learned a lot about the industry, especially with regard to CMC and clinical trial requirements for an industry-grade trial converting early cell and gene therapy data into something that is going to treat thousands of patients. Learned a lot, applied it to Rocket in the early days and the premise of starting Rocket was instead of thinking of a platform, a science platform, which is how a lot of gene and cell therapy company start. We were started by a group of health care providers and physicians who thought about disease states, where the high unmet need is, where we can attack a protein in a cell that leads to direct clinical benefit and where we could try to address the most number of patients possible. So, in that line of thinking, we came across a few lentiviral-based programs early, one is pyruvate kinase deficiency, another is Fanconi Anemia, another is Leukocyte Adhesion Deficiency-I. These are some of the programs that someone like a Bluebird would have looked at, but did not. So we thought they were really interesting targets where we could build on some of the early lentiviral technology and apply this to new disease states and try to find value relatively quickly. About 2 years into the company, we then found a program called Danon Disease, which is a monogenic rare condition that affects the heart and skeletal muscle leads to weakness. We can get to that a little bit later. But that requires an in vivo AAV approach as opposed to the bone marrow program, which need a lenti approach. So we went from a one-platform multi-disease company into a multiplatform multi-disease company pretty much overnight. All 4 of these programs have now reached clinical proof-of-concept, 2 of them are in pivotal trials. We'll be doing submissions for Fanconi and LAD soon. And the other 2, we anticipate, will start in Phase 2 pivotal trials pretty soon. That's about where we are.

That's great background. So, maybe before we get into specific programs, I know there's going to be a lot of focus on Danon. But sitting here today, you've got a number of relatively late-stage lenti programs, you've got the Danon program. How do you see the evolution of the company going forward?

Yes. So, technically, we're agnostic. I think the main tenet of our philosophy is areas of high unmet need where we can address as many patients as possible with devastating rare diseases. So, with that philosophy, we have looked at many bone marrow programs with an ex-vivo lenti approach. We think that the greater opportunity right now lies in the AAV world. You can target more organs. You can -- it's a simpler process from a CMC perspective. We've also now built an in-house manufacturing facility that will facilitate end-to-end development, so from discovery to commercialization of AAV-based products. So we're pivoting more and more to AAV. We're not close to the lenti approaches either if there are interesting ones that emerge.

Okay. That's clear. Go where you think you can have the right tool for the right disease. Okay. So, maybe pivoting to Danon, I think everyone's focused right now. So, before we get into kind of the data, let's just level set on the disease a little bit, what is Danon disease, how does it present, what's the prognosis for these patients, a little bit on the natural history perhaps?

Yes. So, Danon Disease is a devastating rare monogenic disorder, and it's a disorder that's marked by heart weakness -- heart muscle weakness and skeletal muscle weakness, as well as cognitive dysfunction. It's X-linked, affects boys more than girls. And the manifestations happen relatively early in life, especially for boys. The median survival is around age 19. So, the pathophysiology of Danon centers around autophagy. Autophagy is the process whereby the cell cleans up its own debris. So, it's sort of like the recycling center of the cell. And the key to active and functional autophagy is a gene and protein called LAMP2. LAMP2 is like the on-switch of that recycling center. Without that on-switch, debris builds up in these cells and leads to, #1, cardiomyopathy, especially in boys relatively early in life; #2, skeletal myopathy, some muscle weakness; and #3, cognitive dysfunction. What we've done now with an in-vivo AAV approach using the AAV9 capsid, which loves heart, muscle and brain in that order, develop this in-vivo approach with AAV9 transgene that delivers an intact, functional, fully -- full-linked LAMP2 into the cells and those capsids go to the heart, muscle and brain. And what we've discovered in our Phase 1 trial so far, we've treated 7 patients. We've had safety data on all 7, but efficacy data on 5 of these patients is that, in fact, we can restore this on-switch. We can restore autophagy and restart the cleanup of the debris in these cells. And when we do that, over time -- over the course of about 12 to 18 months, these patients have improvements, at least based on the adult data so far, in their actual cell physiology and what the cells look like. So whereas previously, with this disrupted vacuum cleaner or recycling center, the cells have a lot of vacuums that build up. It looks like there's garbage in the cells. After this therapy about a year after, we're seeing devacuolization. So actually removal of vacuoles associated with positive protein expression. And it's remarkably been accompanied by drops in markers of heart failure like BNP and even wall thickness. So we're seeing remodeling of the heart as early as 1 year after treatment, which is usually something that takes many, many years. So, it's the first cardiac gene therapy proof-of-concept that we've seen, and we're very excited to sort of pave the way for the field as we move forward.

And maybe just one follow-up on the comment there. You kind of pointed to where AAV9 tropism is and the cardiac muscle at the top of the list. So, one of the concerns around AAV is always, will it last? And so, do we feel really good about that, just given the nature of the cells in heart? We're not going to know that answer for a long coming, I would assume.

There's 2 components, I think, to weather a gene therapy or a restored protein from gene therapy last or not as durable or not. One is, is there an immune response that destroys the capsid or especially the transgene early on? And usually that happens in weeks 3 to 8, I would say, can go out even 3 or 4 months in some cases. And that capsid and transgene destruction is often accompanied by obvious measures like LFTs and other abnormalities that signal that there's some sort of destruction going on. And it can be prevented by the use of T-cell immune modulators such as sirolimus. If we can get past that window, then durability is probably dependent on how quickly these cells turn over. In the heart, what we know is that cell turnover is minimum, right? So, you and I and hopefully most people around this have more or less the same heart cells as we had when we were younger. The turnover tends to be very miniscule. So, we don't anticipate loss of expression over time. But as you say, we'll obviously follow these patients. And the FDA mandates that we follow patients for about 5 years of AAV, we're probably going to follow patients for 10 years to be.

Sure. Okay. Great. Thank you, Gaurav. So, one more on Danon just on the disease. What is the prevalent and incident population? I mean, I know it's estimates, but how do you think about this market opportunity?

Yes. So, we think that the true prevalence, and this is the same number that we said when we announced the preclinical program, is 15,000 to 30,000 Europe plus U.S. And on average, the incidence is not well characterized, but these patients on average live to about the age of 30, so you can divide that and say it's 500 to 1,000 patients per year incident. We think that at peak, the total addressable market could be in a couple of thousand or so, that's just big level -- high-level estimates. And that's the top-down analysis. It's based on literature review, genomics database analyses and also other surveys. We're also now doing a bottom-up approach, which we haven't disclosed in the past. We're finding patients not by name, but by identity in the U.S. and Europe, and we'll be revealing sort of how that analysis is looking in. At some point, it will match up. I will say that there is a difference in the known cases of Danon. There's a gap between the known cases of Danon and the true prevalence, because this is a relatively newly characterized disorder, the connection between the gene and the triad of symptoms that I described was only put together in the 2000s. So it's relatively new. The LAMP2 protein hasn't even been on diagnostic panels for gene testing for cardiomyopathy patients. So as this happens, that known cases of Danon will eventually match up with the 2 prevalence and we're going to be a big part of that -- filling of that gap.

Okay. Great. Maybe just go to a little bit of data. So, you've disclosed quite a bit of data on the adult population. You can briefly comment on why you started in adults, but importantly, you touched on some of this already in your comments. Were there any kind of seminal updates at ASGCT? I think that's the last time we heard from you on the Danon program. And so, let's start there.

Yes. So, the ASGCT updates were all around safety. And so far, what we've seen is very reassuring in terms of safety, we -- just to reiterate really briefly. We have learned from patient to patient on this trial, right? One patient is like 100 patients in some ways because you can really extract a lot of information. It's a complex therapy and complex aftermath post treatment. And we learned that -- if you give too much steroid to these patients to get myopathy, but if you don't get enough T-cell suppression and they could get an immune response, right, 3 to 8 weeks after. So, the current regimen is a combination of pretreatment Rituxan -- Rituxan rituximab, plus sirolimus, which starts just before treatment, plus a rapid steroid taper. This modified regimen has led to what we think is a reassuring safety profile for pediatric patients. We haven't seen clinical complement activation or changes in labs that warrant any further worry with regard to the complement activation as well as the immune response that we might see. So we feel pretty good about safety. Obviously, it's a limited number of patients and -- but it's enough for us to move into Phase 2. On the efficacy side, I would say that this is going to be early data that we read out at HFSA, which is just a couple of weeks away. And I think it's important to iterate and reiterate that all we're looking for is some sort of early signal that the pediatric patients are going to follow the trajectory of adult patients. How can we know that? We can know that through adequate transduction, early signs of protein expression, early signs of stabilization of other biomarkers. As I mentioned earlier, the true remodeling of the heart for these patients doesn't happen until about a year after therapy. So, 3 months or 6 months, you're just not going to see it. But we want to see some direction of efficacy. If we see that direction of efficacy, then I think we feel pretty good about launching our Phase 2 discussions with the FDA pretty soon.

Okay. And will we get any updated kind of longer-term data at HFSA for the adults that you host?

Yes. So, the adult data will have some longer-term durability results, and those will continue to evolve as the trial finishes. So, it's not going to be a full end of Phase 1 update, but it will be sort of an interim look at both pediatrics and adults, but enough to give us a signal as to go, no go for an FDA discussion, I'd say.

Okay. So, a few weeks here end of the month for HFSA, and then once we have that data to the next step, you mentioned regulatory discussions. So walk us through kind of what the plan is and where you plan to go?

It's always the most exciting meetings of other than yours, of course. Most exciting meetings of most of our careers. So we've had a frequent dialogue with the FDA on all of our programs, especially on Danon Disease. We feel like we've built a pretty collaborative relationship there. So, we want to approach the FDA sort of with an end of Phase 1 discussion moving into Phase 1 design -- sorry, Phase 2 design. Phase 2 design, what is it going to look like? 2 things. What are the right endpoints and what is the actual study trial design, right? On the end points, there are several options, but to be concrete about this, I would break this down into 3 categories: Plan A, Plan B, Plan C. Plan A is going to be protein expression as a primary endpoint and other secondary endpoints that could include BNP, wall thickness, NYHA class and maybe even vacuole changes or devacuolization, right?

And these are things that kind of a 1-year time point. Is that the right way to think about it? Is it 3 months? Is it 2 years?

I would guide to 1 year approximately. Obviously, we're aggressive, and we'll see what works and what the earliest signal is, but I think 1 year is reasonable. So, primary and then some secondaries, that's Plan A. Plan B would be a composite series of endpoints or co-primaries with any of these combinations. There's precedent for that. So we feel pretty good that Plan B could at least be viable. Plan A could be viable as well. And PLAC would be more of a randomized trial where we would have to look at something like a clinical endpoint. Even if it's a randomized trial, that's not something we're scared of. We think that the trial would be 50 patients or less and could be done pretty rapidly. But we feel, looking at the data from the adults and having talked to some advisory board members with experience in cardiomyopathy approvals recently, we feel that protein expression in this disease is uniquely meaningful because it's a full length protein. There's an abundance of preclinical data that support protein expression and good outcomes. There's an abundance of clinical data. Now, in our trial, as well as the natural history of females who have 25% to 50% expression and live 25 years longer than males on average, so there's sort of a natural experiment there. And we feel that we're going to have a qualified assay to actually measure protein expression. So we feel good about Plan A, but the other plans are also okay if that's where we land.

So just to help handicap that though, and we didn't touch on this. I mean, these boys have nothing today, right? I mean, what is the paradigm for someone diagnosed with data?

That's a great question, and I should have led with that earlier. So, the boys with Danon Disease have fulminant and rapid heart failure. And by the age of '19, they've either been transplanted or they passed away -- the percent of boys who actually get a heart transplant is low. It's probably around 20%. So, there's a lot of room for improvement there and new therapies. Even transplant when it works only works for about 10 years on average. There's about a 47% survival rate at 10 years in transplanted boys. So, there really are no alternatives. Unfortunately this is a disease where it's not a secreted protein. You can't use a small molecule or a protein. It has to be a gene therapy basically.

Maybe before we move to the rest of the pipeline, perhaps somewhat controversial question. I mean, maybe specific to Rocket but specific to gene therapy, and there's been a lot of developments recently, Sarepta saying they're going to the FDA, Bluebird got approved. I mean, how do you find the audience with the FDA and your expectation of the interactions?

It's evolved. Sometimes it's evolved to be more collaborative and sometimes there have been some challenges. I think, the key to FDA success is frequent, transparent and mutually educational dialogue and patients. The only way to get these therapies onto the market is in collaboration with the FDA. There's like nothing else to be said, right? So, just like we work very closely with our academic partners, our investor partners, we have to work with the FDA in the same way. It's the same thing. We have to be side-by-side. So, the clinical hold for Danon was a great example of how I think our team is uniquely positioned to navigate these uncertain times with the FDA. First of all, we got the whole lifted in, I think, a near record time of 3 months. And it happened through daily back and forth between us and the FDA. We read literature together. Our physicians talked frequently sometimes twice a day, and we had an integrated dialogue between our CMC clinical teams and their CMC clinical teams. And it was -- I think that it was a remarkable achievement on the team's part. But I think it's sort of exemplary of how we want to approach FDA interactions moving forward and how we can try to mitigate the risk there. And I think we've found that with patients and with these sort of transparent dialogues the FDA is very willing to listen and work with us, because ultimately our goal is the same, which is to bring these therapies to kids with devastating diseases.

Well, I mean, I do think it speaks to the company and kind of what the team has built and the professionalism and appreciation of what you're trying to accomplish. So, it's not prevalent in every organization. Okay. So, enough on Danon. You have a whole pipeline of other candidates. So, let's talk about -- actually I want to touch on the manufacturing one. I've actually toured the manufacturing facility. It's great. What advantages does that give you? I mean, you have your whole in-house capability. What are you scaled to for Danon and for AAV in general?

Cost, major reductions in cost. And I'm not remarking on Rocket specifically, but sometimes in other companies, I know that a therapy for one patient can cost $1 million. So, getting it down to even the tens of thousands ultimately, it's remarkable. So, costs and ultimately a margin to time, right? We can -- we don't have to reserve a slot, the slot is ours and time is control. And third is flexibility to bring other programs in and build upon Danon with our AAV pipeline in the future. So I think those 3 are reasons we made a big CapEx investment early on. Much of that is behind us, but the fruits of that are going to be that for what we're calling wave 2, many new AAV programs coming on board will have a path to in-house manufacturing that really streamlined the development plans.

Okay. So a little foreshadowing there you do expect, I mean, you've kind of noted that you have these confidential programs in the background, you expect more to come here on the AAV side.

We do expect more to come with possibly announcements starting as early as next year.

Okay. Great. Now, I do want to spend a few minutes on the lenti program. So -- and I know we're short changing them. Both Fanconi and LAD-I, very late stage, so if you could take one at a time and kind of give us the current status of each?

Yes. So, Fanconi Anemia and LAD-I, both reached their primary endpoint, and we announced that at ASGCT. LAD-I, we had anticipated and it came on time. Fanconi actually came in 3 or 4 months ahead of schedule because of some flexibility in scheduling for patient follow-ups. The activities for filing an LAD were already put in place and are still on track for first half of 2023. Fanconi, we haven't given exact guidance. We do think that the filing will happen in 2023. For both Fanconi and LAD, we've now had CMC meetings with the FDA where we've reached understanding on what the CMC modules would look like in the BLA. We're now going to have similar dialogues in the clinical front, then move to pre-BLA meetings and then we anticipate launches towards the end of '23, early '24 for both of them.

And we touched on this at the beginning, but I mean those are still really important programs for the company, right? I mean, you're -- I guess, there's been this stigma around lentiviral gene therapy that's been with us for 1.5 years now. You clearly are going to be doing a lot in the AAV side of things, but these are going to be your first commercial programs, it seems. So, maybe just frame for us how that works. I mean, you're going to be a fully integrated gene therapy company and what the approach to evolving into that commercial entity will be.

Yes. I think, first of all, we have a chance here to build a commercial enterprise, right? And starting with LAD, then Fanconi. And based on that infrastructure that we build, we'll be able to plug in the AAV programs as well as pyruvate kinase deficiency by the way. So this is something we're very excited about. We think that in the rare disease landscape with 5 to 8 centers of excellence in the U.S. and a similar number in Europe -- in the EU plus U.K., we think that we can build a commercial enterprise pretty successfully on our own. And once, I think, that we have a little further clarity with both FDA and EMA on the exact filing time lines, we'll be able to start having discussions with payers and others around the table. Now, lenti versus AAV. For a while, let's say that we're looking forward for 2023 to 2025 or so, the lenti franchise will be like the commercial arm of Rocket. And then we'll have an R&D arm that's focused on AAV. Over time, it will all be part of the commercial franchise. And yes, also in FA and LAD and possibly Danon and PKD, there are pediatric review vouchers that could be granted. So, a lot of exciting times coming out here as we move toward commercial. And I think back to the manufacturing question, having that in-house manufacturing readiness really saves us a lot of headache when it comes to trying to be a commercial manufacturing organization as well.

Okay. Great. We covered a lot of ground. Last question for me. What is it that you truly think makes Rocket special?

Yes. Looking around the room. Well, so wear my heart, Danon [ socks ] here.

You're not being videotaped.

I know. I think that we're highly mission-driven. And I think each person here is like 3 people or 4 people because when you put your spirit and your passion and sort of your lives work into a company, it's no longer work, right? It becomes something that is highly personal. And I think every person who has joined the company shares in that desire to do something that is bigger than the individual or even bigger than the company. So, think about in 10 years from now, it's 2032, and gene therapy has it stay. Right now, there's a lot of potential. But let's say, in 10 years, something like Danon Disease is an afterthought and patients and families with Danon Disease, maybe by then there's a small molecule that stabilize disease, but they talk about this therapy that was working 10 years ago. And I don't know what happened to that world of gene therapy, but they had a cure in what happened. That will be a terrible place to be versus the headline where Danon patients are diagnosed, treated with gene therapy and then lead normal lives, right? So we definitely want to go for that second headline. And I think those folks, not just people in the company, but I think our academic partners and others around the table share in that mission. So, I think that's what's special. I think that also binds probably all of us in this room and other gene therapy companies as well. But yes, I think that's maybe driven us to work a little bit harder and think a little bit more.

Awesome.

We'll leave it there. Thank you.

Okay. Thanks for your time.

Thank you, guys.