Renovacor Acquisition

3 Months Ended

Mar. 31, 2023

14.	Renovacor Acquisition

On September 19, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Renovacor, a Delaware corporation pursuant to which, on December 1, 2022, the Company acquired Renovacor (the “Renovacor Acquisition”). On December 1, 2022, pursuant to the terms of the Merger Agreement, (i) Merger Sub I merged with and into the Company (the “First Merger”) and (ii) the Company, as the surviving company of the First Merger merged with and into Merger Sub II, with Merger Sub II surviving the Second Merger. Subject to the terms and conditions of the Merger Agreement, at the closing of the Renovacor Acquisition each share of Renovacor’s common stock outstanding immediately prior to the effective time of the First Merger were canceled and converted into the right to receive 0.1763 (the “Exchange Ratio”) of fully paid and non-assessable shares of the Company common stock, which was determined on the basis of the exchange formula set forth in the Merger Agreement that was subject to adjustment depending on the level of the Renovacor’s net cash at the closing. Prior to the market opening on December 1, 2022, Renovacor shares ceased to trade on NYSE and upon the closing of the acquisition, Renovacor’s outstanding common stock were converted into 3,391,976 shares of Rocket common stock.

Total consideration for the Renovacor Acquisition was $72.3 million, consisting of $62.4 million for common stock outstanding, $2.7 million for the portion of equity compensation attributable to the pre-combination service period, and $7.2 million for assumed warrants. The consideration was based on the estimated fair values on the acquisition date of (i) 3,391,976 common shares issued for shares outstanding for common shares of Renovacor, (ii) estimated fair value of employee stock options to acquire 367,852 common shares of the Company, (iii) 28,798 common shares issued for employee time-vesting RSUs, and (iv) warrants to acquire 1,503,229 common shares (see Note 10 “Warrants”).

The total consideration for the acquisition of Renovacor of $72.3 million consisted of the following:

	Shares		Value		Total
Stock consideration		3,391,976	$	18.39	$	62,378
Cash consideration⁽¹⁾						29
Stock options		367,852				2,163
Time-vesting RSUs		28,798				512
Assumed warrants⁽²⁾		1,503,229				7,183
Total consideration		5,291,855			$	72,265

(1)	Represents consideration paid for cash in lieu of fractional shares.

(2)	Assumed Renovacor Warrants of $7,183 with $5,671 classified as equity and $1,512 classified as liabilities.

The acquisition has been accounted for as a business combination using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the fair value of acquired IPR&D assets are classified as indefinite-life assets until the successful completion or abandonment of the associated research and development efforts.

The preliminary purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the acquisition date based on their respective preliminary fair values summarized below:

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

(1)	Includes other receivables, prepaid expenses, account payable and accrued liabilities.

The excess of purchase price over the fair value of amounts assigned to identifiable assets acquired and liabilities assumed represents the goodwill amount of $8.3 million resulting from the acquisition. The goodwill recorded as part of the acquisition is primarily attributable to the broadening of the Company’s portfolio and research capabilities, deferred taxes and the assembled workforce. The goodwill attributable to the acquisition has been recorded as a non-current asset in the Company’s consolidated balance sheet and is not amortized, but subject to review for impairment annually.