Fulcrum Therapeutics(FULC) - 2019 Q4 - Annual Report

markdown [PART I](index=5&type=section&id=PART%20I) [Business](index=5&type=section&id=Item%201.%20Business) Fulcrum Therapeutics is a clinical-stage biopharmaceutical company utilizing a proprietary product engine to develop small molecule therapies for genetically defined rare diseases [Overview and Pipeline](index=5&type=section&id=Overview%20and%20Pipeline) Fulcrum is a clinical-stage biopharmaceutical company focused on genetically defined rare diseases, with its lead product losmapimod for FSHD having completed Phase **2b** trial enrollment and FTX-6058 for hemoglobinopathies expected to have an IND submitted in the second half of **2020** - The company's lead product candidate, losmapimod for facioscapulohumeral muscular dystrophy (FSHD), initiated a **Phase 2b** clinical trial in **August 2019**, which completed enrollment in **February 2020**[16](index=16&type=chunk) - The second product candidate, FTX-6058 for hemoglobinopathies (sickle cell disease and ß-thalassemia), is in IND-enabling studies with a planned IND submission in the second half of **2020**[16](index=16&type=chunk)[24](index=24&type=chunk) Fulcrum Therapeutics Pipeline Status | Program (Product Candidate) | Indication | Discovery | Preclinical | Phase 1 | Phase 2 | Phase 3 | Status | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **losmapimod** | FSHD | ✔ | ✔ | ✔ | **✔** | | Completed Ph 2 enrollment | | **FTX-6058** | Sickle Cell Disease | ✔ | **✔** | | | | Submit IND in **2H 2020** | | **FTX-6058** | ß-Thalassemia | ✔ | **✔** | | | | Submit IND in **2H 2020** | | **Discovery Screening** | Duchenne Muscular Dystrophy | **✔** | | | | | Target ID / Validation | | **Discovery Screening** | Friedreich Ataxia | **✔** | | | | | Target ID / Validation | | **Discovery Screening** | Myotonic Dystrophy 1 | **✔** | | | | | Target ID / Validation | | **Discovery Screening** | α-Synucleinopathies | **✔** | | | | | Target ID / Validation | [Our Strategy and Product Engine](index=7&type=section&id=Our%20Strategy%20and%20Product%20Engine) The company's strategy focuses on rapidly developing lead candidates losmapimod and FTX-6058, while continuously expanding its portfolio using a proprietary product engine that integrates patient-derived cell models, libraries, and a database to identify drug targets modulating gene expression - Key strategic components include rapidly developing losmapimod for FSHD, advancing FTX-6058 into clinical trials, and applying the proprietary product engine to grow the portfolio of candidates for genetically defined diseases[30](index=30&type=chunk) - The product engine uses patient-derived tissue-relevant cell models, an annotated small molecule library, and customized CRISPR libraries to identify drug targets[39](index=39&type=chunk)[42](index=42&type=chunk) - FulcrumSeek, a proprietary database, is used with computational biology to generate drug target and biomarker hypotheses by analyzing the effects of perturbagens on human-derived cell systems[48](index=48&type=chunk) - The company focuses on a small molecule approach, citing advantages in biodistribution, tolerability, manufacturing, and patient access compared to other modalities like ASOs or gene therapies[55](index=55&type=chunk) [Our Product Candidate for Facioscapulohumeral Muscular Dystrophy (FSHD)](index=14&type=section&id=Our%20Product%20Candidate%20for%20Facioscapulohumeral%20Muscular%20Dystrophy%20(FSHD)) Fulcrum is developing losmapimod for FSHD, a rare muscular dystrophy caused by aberrant DUX4 gene expression, with a **Phase 2b** trial initiated in **August 2019** and orphan drug designation granted in **January 2020** - FSHD is a rare, progressive muscle wasting disorder with an estimated U.S. patient population of **16,000** to **38,000**, caused by the mis-expression of the DUX4 gene, with no approved therapies[18](index=18&type=chunk)[57](index=57&type=chunk) - Losmapimod, a p38α/ß inhibitor, was identified through Fulcrum's screening process to reduce DUX4 expression and was in-licensed from GSK, which had previously tested it in nearly **3,500** subjects for other indications, providing a substantial safety database[19](index=19&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - A randomized, double-blind, placebo-controlled **Phase 2b** trial (ReDUX4) was initiated in **August 2019** in **80** patients to evaluate if losmapimod reduces DUX4-driven gene expression in muscle biopsies over a **24**-week period, with enrollment completed in **February 2020**[77](index=77&type=chunk)[113](index=113&type=chunk) - A **Phase 1** trial in healthy volunteers and FSHD patients showed losmapimod was well-tolerated and achieved dose-dependent concentrations in skeletal muscle, supporting the **15** mg twice-daily dose for **Phase 2** trials[111](index=111&type=chunk) [Our Product Candidate for Hemoglobinopathies](index=26&type=section&id=Our%20Product%20Candidate%20for%20Hemoglobinopathies) Fulcrum is developing FTX-6058, a novel small molecule designed to upregulate fetal hemoglobin (HbF) for treating sickle cell disease (SCD) and ß-thalassemia, with an IND submission planned for the second half of **2020** and a **Phase 1** trial in late **2020** - SCD affects approximately **100,000** individuals in the U.S. and is caused by a mutation in the HBB gene, leading to abnormal hemoglobin, where increasing fetal hemoglobin (HbF) is a known compensatory mechanism[127](index=127&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - FTX-6058 was designed to inhibit a novel drug target identified by Fulcrum's product engine, leading to the elevation of HbF[142](index=142&type=chunk)[143](index=143&type=chunk) - In preclinical studies, FTX-6058 increased HbF levels to approximately **30%** of total hemoglobin in primary human CD34+ cells and showed a greater effect than hydroxyurea[149](index=149&type=chunk) - The company is conducting IND-enabling studies and plans to submit an IND for FTX-6058 in the second half of **2020**, with a **Phase 1** trial in healthy volunteers and SCD patients planned for late **2020**[157](index=157&type=chunk) [Discovery Screening Programs and Collaborations](index=32&type=section&id=Discovery%20Screening%20Programs%20and%20Collaborations) In **2019**, Fulcrum completed four new drug target identification screens and maintains key collaborations with GSK for losmapimod and Acceleron for pulmonary disease, involving potential milestone and royalty payments - The company completed four new drug target identification screens in **2019** for DMD, FA, DM1, and α-synucleinopathies, with identified targets currently under evaluation[160](index=160&type=chunk) - Under the GSK agreement for losmapimod, Fulcrum may be obligated to make milestone payments up to **$37.5 million** for clinical/regulatory events and up to **$60.0 million** for sales milestones, in addition to royalties[172](index=172&type=chunk) - In **December 2019**, Fulcrum entered a collaboration with Acceleron to identify targets for a pulmonary disease, receiving a **$10.0 million** upfront payment, and is eligible for up to **$438.5 million** in various milestone payments plus tiered royalties[176](index=176&type=chunk)[181](index=181&type=chunk) [Intellectual Property, Manufacturing, and Competition](index=35&type=section&id=Intellectual%20Property,%20Manufacturing,%20and%20Competition) Fulcrum's intellectual property strategy combines owned and in-licensed patents, with the losmapimod method-of-use patent expiring in **2038** and reliance on CMOs for clinical supply, facing competition in SCD and ß-thalassemia but none in FSHD - The losmapimod patent portfolio includes in-licensed composition of matter patents from GSK expiring in **2023** and a Fulcrum-owned method-of-use patent for FSHD expiring in **2038**[189](index=189&type=chunk)[190](index=190&type=chunk) - The intellectual property for FTX-6058 includes one owned PCT application; any resulting patents would have a projected expiration in **2039**[191](index=191&type=chunk) - The company does not own manufacturing facilities and relies on third parties, including obtaining losmapimod tablets and API from GSK for current trials and engaging CMOs for future supply[196](index=196&type=chunk) - There are no approved therapies for FSHD, while for SCD and ß-thalassemia, Fulcrum faces competition from existing treatments like hydroxyurea and luspatercept, as well as from companies developing novel small molecules, gene therapies, and gene editing approaches[203](index=203&type=chunk)[205](index=205&type=chunk)[208](index=208&type=chunk) [Government Regulation](index=39&type=section&id=Government%20Regulation) The company's operations are subject to extensive regulation by the FDA and comparable authorities, covering all stages of product development from preclinical studies to post-approval marketing, with potential for expedited pathways and impact from healthcare laws and reforms - Drug development in the U.S. requires completing preclinical testing, submitting an IND to the FDA, conducting three phases of human clinical trials to establish safety and efficacy, and obtaining NDA approval[214](index=214&type=chunk)[229](index=229&type=chunk) - The FDA offers expedited programs such as Fast Track, Breakthrough Therapy, and Accelerated Approval for drugs treating serious conditions with unmet medical needs, which can potentially speed up development and review[245](index=245&type=chunk)[251](index=251&type=chunk) - The company is subject to healthcare fraud and abuse laws, including the federal Anti-Kickback Statute and the False Claims Act, as well as transparency laws like the Physician Payments Sunshine Act[281](index=281&type=chunk)[283](index=283&type=chunk) - Healthcare reform, including the ACA and subsequent legislative actions, impacts drug pricing, coverage, and reimbursement, creating uncertainty and potential downward pressure on prices for any future approved products[288](index=288&type=chunk)[290](index=290&type=chunk) [Risk Factors](index=59&type=page&id=Item%201A.%20Risk%20Factors) The company faces substantial risks, including a history of significant losses and the need for additional capital to fund operations - The company has a history of significant operating losses (**$82.7 million** in **2019**) and expects to incur losses for the next several years, with profitability dependent on successful product development and commercialization[325](index=325&type=chunk) - Substantial additional funding will be required to continue clinical trials and R&D, and failure to raise capital could force delays or elimination of programs[328](index=328&type=chunk) - Clinical drug development is a lengthy, expensive, and uncertain process, where early trial results may not predict future success, and product candidates may fail at any stage[347](index=347&type=chunk) - The company relies on third parties for clinical trials and manufacturing, which introduces risks related to performance, quality, and supply chain continuity[395](index=395&type=chunk)[399](index=399&type=chunk) - Intellectual property risks include the potential inability to obtain and maintain patent protection, the expiration of key patents (losmapimod composition of matter patent in **2023**), and the possibility of infringement lawsuits[416](index=416&type=chunk)[419](index=419&type=chunk)[423](index=423&type=chunk) [Properties](index=103&type=section&id=Item%202.%20Properties) The company's main facility is approximately **28,731** square feet of leased office and laboratory space located in Cambridge, Massachusetts, with the current lease set to expire in **June 2028** - The company's principal facilities consist of approximately **28,731** square feet of leased office and laboratory space in Cambridge, Massachusetts[550](index=550&type=chunk) - The lease for the Cambridge facility expires in **June 2028**[550](index=550&type=chunk) [Legal Proceedings](index=103&type=section&id=Item%203.%20Legal%20Proceedings) As of the reporting date, Fulcrum Therapeutics, Inc. is not a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[551](index=551&type=chunk) [PART II](index=104&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=104&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Fulcrum's common stock began trading on the Nasdaq Global Market under the symbol "FULC" on **July 18, 2019**, with **74** holders of record as of **February 28, 2020**, and the company has never paid cash dividends - The company's common stock began trading on the Nasdaq Global Market under the symbol "FULC" on **July 18, 2019**[554](index=554&type=chunk) - The company completed its IPO on **July 22, 2019**, selling **4,500,000** shares at **$16.00** per share, resulting in net proceeds of **$63.9 million**[563](index=563&type=chunk)[564](index=564&type=chunk) - As of **December 31, 2019**, none of the net proceeds from the IPO had been used to fund operations[565](index=565&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[556](index=556&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=106&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported a net loss of **$82.7 million** for **2019**, a significant increase from the **$32.6 million** loss in **2018**, primarily due to a **$45.9 million** rise in R&D expenses, with **$96.7 million** in cash and cash equivalents expected to fund operations into the third quarter of **2021** [Results of Operations](index=110&type=section&id=Results%20of%20Operations) For the year ended **December 31, 2019**, the company's net loss increased to **$82.7 million** from **$32.6 million** in **2018**, primarily due to a surge in research and development expenses to **$71.1 million** from **$25.2 million**, driven by a **$25.6 million** IPR&D expense and **$9.1 million** in higher clinical trial costs Comparison of Results of Operations (**2019** vs. **2018**) | (in thousands) | **2019** | **2018** | Change ($) | | :--- | :--- | :--- | :--- | | Research and development | **$71,072** | **$25,184** | **$45,888** | | General and administrative | **$13,145** | **$8,314** | **$4,831** | | **Total operating expenses** | **$84,217** | **$33,498** | **$50,719** | | Loss from operations | (**$84,217**) | (**$33,498**) | (**$50,719**) | | Other income, net | **$1,540** | **$910** | **$630** | | **Net loss** | (**$82,677**) | (**$32,588**) | (**$50,089**) | - Research and development expenses increased by **$45.9 million**, primarily due to a **$25.6 million** in-process research and development (IPR&D) expense related to the GSK license agreement and a **$9.1 million** increase in external clinical activity costs for losmapimod[597](index=597&type=chunk) - General and administrative expenses increased by **$4.8 million**, mainly from a **$2.5 million** increase in consulting and professional fees and a **$2.3 million** increase in personnel-related costs due to headcount growth[597](index=597&type=chunk) [Liquidity and Capital Resources](index=112&type=section&id=Liquidity%20and%20Capital%20Resources) As of **December 31, 2019**, Fulcrum had **$96.7 million** in cash and cash equivalents, primarily funded by IPO proceeds and collaborations, with existing cash expected to fund operations into the third quarter of **2021** - As of **December 31, 2019**, the company had cash and cash equivalents of **$96.7 million**[600](index=600&type=chunk) Cash Flow Summary (**2019** vs. **2018**) | (in thousands) | **2019** | **2018** | | :--- | :--- | :--- | | Net cash used in operating activities | (**$39,483**) | (**$22,562**) | | Net cash used in investing activities | (**$944**) | (**$8,981**) | | Net cash provided by financing activities | **$64,343** | **$105,025** | - The company estimates that its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of **2021**[607](index=607&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=118&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its cash and cash equivalents, with foreign currency exchange rate risk from international vendors, but no material effect from inflation or hedging instruments currently in use - The primary market risk is interest rate sensitivity on cash and cash equivalents of **$96.7 million**, but a **10%** change in rates is not expected to be material[642](index=642&type=chunk) - The company is exposed to foreign currency exchange rate risk due to contracts with vendors outside the U.S., but does not currently hedge this risk[643](index=643&type=chunk) [Financial Statements and Supplementary Data](index=118&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal years ended **December 31, 2019** and **2018**, including the Report of the Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit), Statements of Cash Flows, and accompanying Notes Consolidated Balance Sheet Highlights (As of **Dec 31, 2019**) | (In thousands) | Amount | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | **$96,713** | | Total current assets | **$100,083** | | **Total assets** | **$110,439** | | **Liabilities & Equity** | | | Total current liabilities | **$12,140** | | **Total liabilities** | **$23,286** | | Total stockholders' equity | **$87,153** | Consolidated Statement of Operations Highlights (Year Ended **Dec 31, 2019**) | (In thousands) | Amount | | :--- | :--- | | Research and development | **$71,072** | | General and administrative | **$13,145** | | **Total operating expenses** | **$84,217** | | Loss from operations | (**$84,217**) | | **Net loss** | (**$82,677**) | [Controls and Procedures](index=119&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2019**, with no material changes reported during the fourth quarter of **2019** - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of **December 31, 2019**[648](index=648&type=chunk) - As a newly public company, the annual report does not include a management assessment or auditor attestation on internal control over financial reporting, per SEC transition rules[649](index=649&type=chunk) [PART III](index=120&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=120&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding the company's directors, executive officers, and corporate governance practices is incorporated by reference from the upcoming Definitive Proxy Statement for its **2020** Annual Meeting of Stockholders - Information required for this item will be included in the Definitive Proxy Statement for the **2020** Annual Meeting of Stockholders and is incorporated by reference[654](index=654&type=chunk) [Executive Compensation](index=120&type=section&id=Item%2011.%20Executive%20Compensation) Details concerning executive compensation are incorporated by reference from the company's Definitive Proxy Statement to be filed for its **2020** Annual Meeting of Stockholders - Information required for this item will be included in the Definitive Proxy Statement for the **2020** Annual Meeting of Stockholders and is incorporated by reference[656](index=656&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=120&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners, management, and related stockholder matters is incorporated by reference from the company's Definitive Proxy Statement for its **2020** Annual Meeting of Stockholders - Information required for this item will be included in the Definitive Proxy Statement for the **2020** Annual Meeting of Stockholders and is incorporated by reference[657](index=657&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=120&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information about certain relationships, related-party transactions, and director independence is incorporated by reference from the company's Definitive Proxy Statement for its **2020** Annual Meeting of Stockholders - Information required for this item will be included in the Definitive Proxy Statement for the **2020** Annual Meeting of Stockholders and is incorporated by reference[658](index=658&type=chunk) [Principal Accounting Fees and Services](index=120&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Details regarding principal accounting fees and services are incorporated by reference from the company's Definitive Proxy Statement for its **2020** Annual Meeting of Stockholders - Information required for this item will be included in the Definitive Proxy Statement for the **2020** Annual Meeting of Stockholders and is incorporated by reference[659](index=659&type=chunk) [PART IV](index=121&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=121&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and exhibits filed as part of the Annual Report on Form **10**-K, with financial statement schedules omitted as not applicable - This section includes the consolidated financial statements and lists all exhibits filed with the Form **10**-K, which are incorporated by reference[662](index=662&type=chunk)[665](index=665&type=chunk)