Fulcrum Therapeutics, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; comparative figures are for the year ended December 31, 2018. Fulcrum is a clinical-stage biopharmaceutical company developing small-molecule treatments for genetically defined rare diseases. It had no approved products or product-sales revenue.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue recognized | $0 | $0 |
| Research and development expense | $71.1 million | $25.2 million |
| General and administrative expense | $13.1 million | $8.3 million |
| Total operating expenses | $84.2 million | $33.5 million |
| Net loss | $82.7 million | $32.6 million |
| Net loss per share attributable to common stockholders, basic and diluted | $8.13 | $31.14 |
| Net cash used in operating activities | $39.5 million | $22.6 million |
| Cash and cash equivalents at year-end | $96.7 million | $72.8 million |
At December 31, 2019, current assets were $100.1 million and current liabilities were $12.1 million, implying working capital of approximately $87.9 million. Total liabilities were $23.3 million. The filing reports no material conventional debt; capital-lease obligations were approximately $71,000. Future minimum operating-lease payments totaled $21.7 million, with the facility lease extending to June 2028. Profit margins are not meaningful given the absence of revenue.
Material changes and notable items
- Net loss rose $50.1 million year over year, primarily reflecting increased development spending and a $25.6 million noncash in-process research and development charge related to the losmapimod license acquired from GSK. Fulcrum issued GSK 12.5 million Series B preferred shares as partial consideration.
- Losmapimod external R&D expense increased to $40.4 million from $3.1 million as development advanced. Fulcrum also recorded a $2.5 million GSK milestone expense, paid upon initiation of a Phase 2 trial.
- Fulcrum completed its July 2019 IPO, raising $63.9 million in net proceeds. Preferred shares converted into common stock upon the IPO.
- In December 2019, Acceleron paid a $10.0 million upfront collaboration fee. No collaboration revenue had been recognized by year-end; the amount was recorded as deferred revenue. Fulcrum may also receive research, development and sales milestones totaling up to $438.5 million, plus royalties, subject to achievement and contract terms.
- Other income was $1.5 million in 2019, primarily interest income, versus $0.9 million in 2018, which included $0.4 million from a drug-material sale.
Business, outlook and principal risks
- Losmapimod for FSHD: Fulcrum began a 80-patient, placebo-controlled Phase 2b trial and a separate open-label Phase 2 trial in August 2019. The trials completed enrollment in February 2020. In January 2020, the FDA granted orphan drug designation. In March 2020, the company reported dose-dependent target engagement in skeletal muscle in its Phase 1 trial. These are development updates, not evidence of clinical benefit.
- FTX-6058 for sickle cell disease and certain beta-thalassemia: The candidate remained in IND-enabling studies. Management planned to submit an IND in the second half of 2020 and anticipated a Phase 1 trial; these were forward-looking plans, not completed milestones. Reported efficacy findings were preclinical.
- Runway and funding: Management estimated that year-end cash would fund operating expenses and capital needs into the third quarter of 2021, based on assumptions that could change. The company expected significant ongoing losses and stated that additional financing would be needed; it had no committed external source of capital.
- Key risks: Clinical and regulatory outcomes are uncertain; accelerated approval for losmapimod depends on regulators accepting a biomarker as predictive of clinical benefit. Rare-disease enrollment, safety, manufacturing supply and comparability, reimbursement, competition, and intellectual-property protection are significant risks. GSK’s composition-of-matter patents for losmapimod were expected to expire in February 2023; FTX-6058 had no issued patents disclosed.
- Contingencies and commitments: GSK may receive up to $37.5 million in clinical and regulatory milestones and $60.0 million in sales milestones, plus royalties. The Acceleron agreement includes research obligations and restrictions in the targeted pulmonary indication; Acceleron may terminate for convenience. No material legal proceedings were reported.
Important facts for investors to verify
- Whether ReDUX4 shows a meaningful reduction in its muscle-biopsy biomarker and, separately, whether that translates into clinical benefit and supports any accelerated-approval pathway.
- Actual cash burn, R&D commitments and financing needs relative to management’s projected runway into Q3 2021.
- FTX-6058 IND timing, clinical entry and whether preclinical fetal-hemoglobin findings are reproduced in human studies.
- How and when the $10.0 million Acceleron deferred revenue will be recognized, reimbursement of research costs, and whether milestone or royalty payments become achievable.
- Losmapimod supply, manufacturing transfer and comparability requirements, along with the scope, status and enforceability of relevant patent protection.