Fulcrum Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Fulcrum is a clinical-stage biotechnology company developing therapies for genetically defined rare diseases. It had no product sales; reported revenue was collaboration revenue.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $2.0 million | — | $2.75 million | — |
| Research and development | $12.8 million | $10.9 million | $27.3 million | $45.5 million |
| General and administrative | $5.1 million | $2.6 million | $10.2 million | $5.2 million |
| Net loss | $15.7 million | $13.2 million | $34.1 million | $50.0 million |
| Net loss per common share | $0.66 | $9.21 | $1.47 | $32.85 |
| Cash used in operating activities | Not separately reported | Not separately reported | $29.3 million | $22.0 million |
- At June 30, cash and cash equivalents were $75.7 million and marketable securities were $56.0 million, totaling $131.7 million. Restricted cash was an additional $1.1 million.
- Current assets were $134.8 million versus current liabilities of $13.9 million. Total liabilities were $22.7 million; the filing reports no credit facility or committed capital source and only a small capital-lease obligation.
- Operating cash use was $29.3 million; investing cash use was $56.6 million, mainly net purchases of marketable securities; financing provided $65.0 million, primarily from the June private placement.
- No product gross margin is reported. The company continued to incur losses and had an accumulated deficit of $184.9 million.
Changes versus the prior comparable period
- Q2 net loss increased by $2.5 million year over year as operating expenses grew; collaboration revenue of $2.0 million partially offset costs.
- Q2 R&D rose $1.9 million, chiefly from higher personnel costs and manufacturing expenses. Q2 G&A rose $2.5 million, primarily from professional fees and personnel costs.
- Six-month R&D declined $18.2 million, principally because 2019 included $25.6 million of one-time in-process R&D expense for the GSK losmapimod asset acquisition. This decline was partly offset by higher staffing, clinical activity, manufacturing and FTX-6058 development costs.
- Six-month net loss narrowed by $15.9 million, largely reflecting the absence of that 2019 acquisition charge, despite increased G&A and operating cash use.
- Fulcrum raised $68.5 million gross through a June 2020 private placement of 4,029,411 shares at $17.00 per share; offering costs were approximately $4.2 million. Share count and potential dilution increased.
Programs, outlook and key risks
- Losmapimod for FSHD: The Phase 2b ReDUX4 trial was extended from 24 to 48 weeks in response to COVID-19 disruptions, with topline results expected in Q1 2021 and full results in Q2 2021. In an August 2020 prespecified interim analysis of 29 participants, the overall primary-endpoint analysis did not show separation from placebo. A sensitivity analysis of the highest-baseline-expression subgroup showed a reduction with losmapimod; this small subgroup analysis was not proof of efficacy. The interim analysis was not powered for statistical significance, and secondary and exploratory endpoints were not assessed.
- Losmapimod for COVID-19: The company initiated a Phase 3 trial in hospitalized, higher-risk adults, targeting approximately 400 participants. It planned a futility and sample-size interim analysis in Q4 2020 and topline data in Q1 2021. Enrollment, changing standards of care, competing treatments, pandemic conditions and safety or efficacy outcomes could affect the program.
- FTX-6058: Management planned to submit an IND in Q3 2020 and begin a Phase 1 trial in Q4 2020 for a potential hemoglobinopathy therapy.
- Collaboration revenue: Q2 revenue came from the Acceleron collaboration; $8.3 million remained deferred at June 30. The agreement includes research reimbursement and potential research, development and sales milestones and royalties, all subject to performance and achievement conditions.
- Subsequent event: In July 2020, MyoKardia paid a $10.0 million upfront amount and $2.5 million in prepaid research funding under a new collaboration. Additional reimbursements, milestones and royalties may be payable; accounting treatment was still under evaluation. These amounts were not June 30 cash or Q2 revenue.
- Runway and funding: Management expected June 30 liquidity plus the MyoKardia payments to fund operations and capital expenditures into Q1 2022. This estimate depends on assumptions; losses and negative operating cash flows are expected to continue, and additional financing may be needed.
- Other risks and contingencies: COVID-19 affected trial execution and could disrupt sites, suppliers and operations. Clinical, regulatory, manufacturing, collaboration, financing and intellectual-property risks remain significant. The losmapimod composition-of-matter patents licensed from GSK were expected to expire in February 2023. The company reported no material legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Follow complete ReDUX4 data and assess the interim subgroup findings against the full trial population, endpoints and statistical analysis.
- Check LOSVID enrollment, interim review, trial completion and whether evolving COVID-19 care affects the trial’s relevance.
- Confirm FTX-6058 IND and Phase 1 timing and assess subsequent safety and clinical updates.
- Reconcile cash burn and collaboration receipts with the stated Q1 2022 runway, including the timing and accounting of MyoKardia funds.
- Monitor share-count dilution, option overhang, and the resale registration for private-placement shares.
- Assess the strength and duration of intellectual-property protection for losmapimod and FTX-6058, and the milestone, royalty and termination terms of the GSK, Acceleron and MyoKardia arrangements.