Fulcrum Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited; amounts below are in U.S. dollars unless noted. Fulcrum is a clinical-stage biotechnology company and has no product sales.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $1.2M | $4.9M | $5.7M | $14.1M |
| Research and development expense | $15.4M | $17.1M | $58.2M | $50.8M |
| General and administrative expense | $9.7M | $8.6M | $31.6M | $20.8M |
| Operating loss | $24.4M | $20.8M | $84.6M | $57.5M |
| Net loss | $23.7M | $20.7M | $83.7M | $57.4M |
| Basic and diluted net loss per share | $0.51 | $0.57 | $1.97 | $1.71 |
- Cash flow: Nine-month operating cash use was $77.4M, compared with $56.6M in 2021. Investing activities provided $48.8M, mainly from net maturities of marketable securities; financing provided $84.1M, mainly from the August stock offering.
- Liquidity: At September 30, cash and cash equivalents were $90.9M and marketable securities were $130.9M, or $221.8M combined. Including $1.1M restricted cash, cash, cash equivalents and restricted cash totaled $92.0M. Current assets were $227.7M and current liabilities $14.7M.
- Debt and leases: The company reported no credit facility or committed capital sources. Operating lease liabilities totaled approximately $14.0M, including $2.5M current. No other borrowings are identified in the filing.
- Equity financing: The August 2022 public offering of 11.0M shares generated $80.8M net proceeds. Common shares issued rose to 52.0M at quarter-end from 40.6M at year-end 2021.
Material changes versus the prior comparable periods
- Q3 collaboration revenue fell $3.8M year over year; nine-month revenue declined $8.4M. Acceleron revenue ended as research activity wound down, while MyoKardia revenue also decreased.
- Nine-month operating expenses increased $18.6M, led by higher R&D ($7.4M) and G&A ($10.8M). R&D included a $5.0M GSK milestone triggered by initiation of the losmapimod Phase 3 REACH trial.
- Q3 R&D expense decreased $1.7M, mainly reflecting lower employee compensation after the workforce reduction and lower external research costs. Q3 G&A increased $1.1M, including higher compensation, partly offset by lower professional services.
- Operating cash use increased $20.7M year over year for the first nine months, reflecting increased development and organizational costs. Other income rose with higher returns on cash and investments.
Outlook, management commentary and risks
- Programs: Losmapimod is in Phase 3 REACH for FSHD; enrollment began in Q2 2022, with completion planned in 2023. FTX-6058 is in a Phase 1b trial for sickle cell disease; the company planned further enrollment into 2023 and a registrational trial in 2023. Fulcrum expected to submit its next IND in 2023.
- Clinical commentary: Management reported October 2022 ReDUX4 extension data showing maintained effect through 96 weeks in patients continuing losmapimod and improvement/slowed progression among those crossing over from placebo; it also described an encouraging safety profile. June 2022 FTX-6058 proof-of-concept data were reported. These are company-reported findings, not evidence of regulatory approval or commercial efficacy.
- Realignment: In August 2022, Fulcrum completed a workforce reduction of 25% of planned headcount to prioritize its two clinical programs. It recorded $0.5M restructuring charges, paid $0.4M, and reported $0.1M accrued at quarter-end. Management anticipated no further significant restructuring costs and projected $40M–$50M cumulative savings through mid-2024.
- Runway and funding: Management estimated existing cash, cash equivalents and marketable securities would fund operations into late 2024, assuming successful implementation of the realignment. The filing cautions that assumptions may prove incorrect; further capital will be needed, and financing may dilute shareholders or require concessions. The separate liquidity note states resources should cover at least 12 months from issuance of the financial statements.
- Collaboration change: Acceleron notified Fulcrum of termination for convenience in June; termination became effective October 1, 2022. Acceleron had not designated any targets. Fulcrum recognized no Acceleron collaboration revenue in Q3 2022 and had no related deferred revenue at quarter-end.
- Contingencies and unusual items: Fulcrum recognized a $5.0M GSK clinical milestone in R&D expense during the first nine months. It disclosed no material legal proceedings and no material indemnification claims or accrued indemnification liabilities. Unrealized losses on marketable securities were $0.9M at September 30; management reported no other-than-temporary impairment and did not expect to need to sell securities in an unrealized-loss position before recovery.
- Key risks: Continued losses, uncertain clinical and regulatory outcomes, patient enrollment and endpoint acceptance, reliance on contract manufacturers and trial providers, competition, intellectual-property protection, and the need for additional financing. Management also cited potential COVID-19-related trial or operational disruption. No product revenue or profitability is assured.
Important facts investors should verify
- Whether losmapimod REACH enrollment and the planned 2023 completion remain on track, and whether regulators accept the trial endpoints and data.
- Whether FTX-6058 enrollment, dose cohorts and the planned registrational-trial timeline progress as stated.
- Whether the $40M–$50M restructuring savings are realized and support the stated late-2024 runway; compare subsequent cash use and updated financing needs.
- How the Acceleron termination affects future collaboration revenue, and the progress and potential economics of the MyoKardia collaboration.
- The consequences of the August equity issuance for dilution, and whether Fulcrum draws on its $50M at-the-market program or obtains other financing.
- The status of the $5.0M GSK milestone and future milestone obligations, along with any changes to lease liabilities, marketable-security losses or clinical supply arrangements.