Fulcrum Therapeutics, Inc. annual report, FY2020

Business context and reporting period

Fulcrum Therapeutics, Inc. is a clinical-stage biopharmaceutical company developing small-molecule treatments for genetically defined rare diseases. This Form 10-K covers the fiscal year ended December 31, 2020; it is not a standalone fourth-quarter report. The company had no product sales and was focused on losmapimod for facioscapulohumeral muscular dystrophy (FSHD), FTX-6058 for hemoglobinopathies, and partnered discovery programs.

Financial performance and liquidity

Metric20202019
Collaboration revenue$8.8 million$0
Research and development expense$59.0 million$71.1 million
General and administrative expense$21.4 million$13.1 million
Total operating expenses$80.4 million$84.2 million
Net loss$70.8 million$82.7 million
Net cash used in operating activities$53.7 million$39.5 million
  • Collaboration revenue comprised $6.3 million from Acceleron and $2.5 million from MyoKardia. The company reported no product revenue.
  • R&D expense fell mainly because 2019 included $25.6 million of losmapimod in-process R&D and a $2.5 million GSK milestone expense. Higher 2020 clinical, manufacturing, and personnel costs partly offset that decline. G&A rose primarily from professional fees and personnel costs.
  • At year-end, cash and cash equivalents were $57.1 million and marketable securities were $55.9 million, totaling $112.9 million. Working capital was $92.8 million; stockholders’ equity was $95.2 million.
  • Management expected year-end cash and securities, plus $46.4 million net proceeds from a January 2021 stock offering, to fund operations and capital expenditures into the fourth quarter of 2022. This estimate depends on assumptions and may change.
  • Net cash used in investing was $57.1 million, mainly reflecting net purchases of marketable securities; financing provided $71.1 million, principally from the June 2020 private placement and ATM offering. The company reported no material debt; it had $19.5 million of operating lease commitments and an $18,000 capital lease obligation.
  • Gross margin is not meaningful to the reported business because the company had no product sales.

Material changes and operating developments

  • Net loss narrowed by $11.9 million versus 2019, while operating cash use increased by $14.2 million.
  • Collaboration revenue began in 2020 as the company performed research services under the Acceleron and MyoKardia agreements. MyoKardia was acquired by Bristol Myers Squibb in November 2020.
  • The company raised $64.2 million net in a June 2020 private placement and $5.7 million net through its ATM program. A further $46.4 million net was raised in a January 2021 public offering.
  • Cash and marketable securities totaled $112.9 million at year-end 2020, versus $96.7 million of cash and cash equivalents and no marketable securities at year-end 2019.

Outlook, risks and unusual items

  • In the ReDUX4 Phase 2b FSHD trial, an August 2020 interim analysis of 29 participants showed no separation from placebo in the primary endpoint across the overall group. A prespecified sensitivity analysis of the highest-baseline-expression subgroup showed a greater reduction with losmapimod; the subgroup was small. The interim analysis was not powered for statistical significance. Full trial data were expected in the second quarter of 2021.
  • COVID-19 disrupted trial-site activities. Fulcrum extended the ReDUX4 treatment period from 24 to 48 weeks to support participant safety and allow additional biopsy timing and longer follow-up.
  • FTX-6058 entered a Phase 1 trial in healthy volunteers in Q4 2020. The company expected data in mid-2021 and anticipated starting a patient trial in sickle cell disease in the second half of 2021.
  • After year-end, in March 2021, Fulcrum announced it had discontinued the LOSVID Phase 3 trial of losmapimod in hospitalized COVID-19 patients following a strategic review.
  • Management expected continued substantial losses and operating cash outflows and stated that additional funding would be needed over time. Development, regulatory, financing, clinical-trial, manufacturing, collaboration, and intellectual-property risks could delay or prevent progress.
  • Losmapimod received FDA and EMA orphan drug designations for FSHD. Accelerated approval was a possible strategy, not an assurance; regulators may not accept the proposed biomarker as predictive of clinical benefit.
  • The company relied on third-party manufacturers and clinical research organizations. It also disclosed that GSK’s losmapimod composition-of-matter patents were expected to expire in 2023, while its own FSHD method-of-use patents were expected to expire in 2038.
  • No material legal proceedings were reported. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020; the auditor did not attest to internal control effectiveness because of the company’s exemption.

Important facts for investors to verify

  • Review the complete ReDUX4 results, including overall and subgroup endpoint findings, clinical measures, safety, and whether regulators consider the biomarker sufficient.
  • Confirm the current FTX-6058 clinical timeline, patient-trial plans, and whether clinical findings support the preclinical fetal-hemoglobin results.
  • Assess the cash runway against actual spending, subsequent financing, trial plans, and collaboration receipts; the stated runway was an estimate, not a guarantee.
  • Check the effects of discontinuing LOSVID on spending, losmapimod strategy, and future development plans.
  • Monitor MyoKardia/Bristol Myers Squibb and Acceleron collaboration progress, milestone conditions, and potential termination or reprioritization.
  • Evaluate dilution from equity financing and stock-based compensation, and the practical strength and duration of intellectual-property protection for losmapimod and FTX-6058.