Fulcrum Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Fulcrum is a clinical-stage biotechnology company developing treatments for genetically defined rare diseases; it reported no product sales.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Collaboration revenue | $0.3 million | $2.6 million; down $2.3 million |
| Research and development expense | $16.7 million | $17.8 million; down $1.1 million |
| General and administrative expense | $11.5 million | $10.8 million; up $0.8 million |
| Operating loss | $27.9 million | $26.0 million |
| Other income, net | $3.2 million | $0.1 million |
| Net loss | $24.8 million; $0.41 per share | $25.9 million; $0.64 per share |
| Operating cash used | $24.1 million | $22.1 million |
Net loss narrowed despite a higher operating loss, primarily because investment income increased with higher returns and a larger average investment balance. Revenue declined partly because the Acceleron collaboration had terminated effective October 1, 2022; MyoKardia revenue was $0.3 million, versus $1.7 million a year earlier. No meaningful product gross margin was reported because there were no product sales.
At March 31, cash and cash equivalents were $34.7 million and marketable securities were $263.1 million, totaling $297.8 million, versus $202.9 million at December 31, 2022. The increase primarily reflects a January public offering that generated $117.3 million net. Investing activities used $93.9 million, mainly for net purchases of marketable securities; financing provided $117.7 million. Accumulated deficit was $437.1 million. The company reported no credit facility or committed capital source and no debt borrowings; it did report operating lease liabilities totaling approximately $12.8 million.
Management believes available cash, cash equivalents and marketable securities will fund operating and capital requirements into mid-2025, assuming successful implementation of its operating plan. The financial statements separately state liquidity is sufficient for at least 12 months from issuance. Both estimates depend on assumptions and may change.
Programs, changes and outlook
- Losmapimod: The Phase 3 REACH trial for FSHD was ongoing; the company planned to complete enrollment in the second half of 2023. External losmapimod R&D expense rose to $6.3 million from $3.0 million, primarily as REACH advanced.
- FTX-6058: On February 23, 2023, the FDA placed the SCD investigational new drug application on full clinical hold, citing hematological malignancies observed in nonclinical toxicology studies. Enrollment and dosing in the Phase 1b trial were suspended; the company withdrew its separate beta-thalassemia IND and was working with the FDA to address the hold. Resumption and timing were uncertain.
- Total R&D expense decreased, reflecting lower employee compensation, laboratory and facility costs, partly offset by higher external R&D costs. G&A increased, mainly due to employee compensation, including stock-based compensation, partly offset by lower professional services.
- The company expects significant operating losses and negative operating cash flows for the foreseeable future, with expenses expected to rise as programs progress. It may need additional equity or debt financing, collaborations or licensing arrangements; unavailable or unfavorable financing could delay, reduce or end development programs.
- On April 20, 2023, after quarter-end, Fulcrum amended its MyoKardia agreement to expand research activities and increase the maximum research funding; accounting treatment was still under evaluation.
Risks, contingencies and unusual items
- A securities class action was filed April 28, 2023, concerning alleged disclosures about the FTX-6058 clinical hold. The company said it considers the allegations without merit and intends to defend vigorously.
- The FTX-6058 hold and nonclinical malignancy findings are material development and safety risks; the filing says the FDA may not permit trials to resume.
- The company is dependent on successful clinical development, regulatory approval, third-party manufacturers and clinical trial providers, and future access to capital. It has incurred substantial cumulative losses and may never become profitable.
- Marketable securities had unrealized losses, but the company said it intended and was able to hold the securities until recovery and recorded no credit-related impairment charges for the quarter.
- Disclosure controls and procedures were assessed as effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported.
Key facts for investors to verify
- FDA feedback, required actions and timing for resolving the FTX-6058 clinical hold, including the implications of the nonclinical malignancy findings.
- REACH enrollment progress, expected completion timing and trial results for losmapimod.
- Cash burn, spending plans and the assumptions supporting management’s mid-2025 runway estimate.
- The financial and operational effects of the April 2023 MyoKardia amendment, and subsequent developments in the securities action.
- Potential dilution and share-count effects: the January offering issued 9.6 million shares; period-end shares outstanding were 61.8 million, up from 52.1 million at year-end 2022.