Fulcrum Therapeutics(FULC) - 2023 Q4 - Annual Report

Part I Business Fulcrum Therapeutics is a clinical-stage biopharmaceutical company developing small molecules for genetically defined rare diseases Clinical Pipeline Overview | Indication | Asset | Mechanism of Action | Preclinical | Phase 1 | Phase 2 | Phase 3 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | FSHD | Losmapimod | DUX4 Reduction | | | | ✓ | | SCD | Pociredir | HbF Induction | | ✓ | | | - The company's primary focus is on developing small molecule therapies for rare genetic diseases with high unmet medical needs[20] - Losmapimod's Phase 3 REACH trial completed enrollment of 260 patients in September 2023, with topline data anticipated in Q4 2024[20] - The FDA lifted a clinical hold on the IND for pociredir in August 2023, and the Phase 1b trial is being re-initiated at higher dose levels (12 mg and 20 mg) with revised criteria to target patients with higher disease severity[21][79] Losmapimod for FSHD Losmapimod is being developed for Facioscapulohumeral Muscular Dystrophy (FSHD), a progressive muscle-wasting disease with no approved treatments - FSHD is a rare, progressive disease with no approved treatments, caused by the aberrant expression of the DUX4 gene in skeletal muscle[28][31] - The pivotal Phase 3 REACH trial is a randomized, double-blind, placebo-controlled study evaluating a 15 mg twice-daily dose of losmapimod over 48 weeks, with the primary endpoint being the absolute change from baseline in Reachable Workspace (RWS)[51] - Previous Phase 2b (ReDUX4) trial data showed that while the primary biomarker endpoint was not met, losmapimod demonstrated clinically relevant benefits on functional measures like RWS and patient-reported outcomes compared to placebo at 48 weeks[37][44] - Losmapimod has an extensive safety history, having been evaluated by its original developer, GSK, in nearly 3,500 subjects across multiple non-muscle indications, where it was generally well-tolerated[36][61] Pociredir for SCD Pociredir is an oral small molecule designed to treat Sickle Cell Disease (SCD) by inducing fetal hemoglobin (HbF) production - Pociredir aims to treat the root cause of SCD by inducing HbF, which is known to mitigate clinical manifestations of the disease[73][74] - Interim Phase 1b data from the 6 mg cohort showed up to 9.5% absolute HbF increases, and data from the 12 mg cohort (prior to the hold) showed up to 10.0% absolute HbF increases from baseline after 42 days[81][82] - The FDA placed a full clinical hold on the pociredir IND in February 2023, citing hematological malignancies observed in toxicology studies, similar to other PRC2 inhibitors; the hold was lifted in August 2023[77][78][79] - The Phase 1b trial is being re-initiated with amended inclusion/exclusion criteria to target patients with higher disease severity, enrolling approximately 10 patients at the 12 mg dose and another 10 at the 20 mg dose[79][85] License Agreements and Collaborations Fulcrum maintains several key strategic agreements for its pipeline, including in-licensing losmapimod and collaborating on new targets - Fulcrum in-licensed losmapimod from GSK, gaining exclusive worldwide rights, with the agreement including up to $37.5 million in development/regulatory milestones and up to $60.0 million in sales milestones, plus tiered royalties[99][101] - The collaboration with MyoKardia (BMS) focuses on identifying targets for cardiomyopathies, for which Fulcrum received a $10.0 million upfront payment and is eligible for up to $298.5 million in milestones per target, plus tiered royalties[105][108] - In July 2023, Fulcrum entered into an exclusive worldwide license agreement with CAMP4 for its Diamond Blackfan Anemia (DBA) program, with potential milestones totaling up to $70.0 million, plus royalties[110][111] Competition The company faces competition from major pharmaceutical and biotechnology firms across its FSHD and SCD programs - For FSHD, there are no approved treatments, and key competitors in clinical development include Roche, Avidity, and Arrowhead Pharmaceutical[131][132] - For SCD, pociredir competes with approved oral therapies (hydroxyurea, voxelotor, crizanlizumab, L-glutamine) and two recently approved gene therapies (lovo-cel and exa-cel)[133][134] - Other SCD therapies in development include small molecules from Novo Nordisk (nDec) and Agios (mitapivat), and an HbS polymerization inhibitor from Pfizer (GBT-601)[137] Government Regulation and Product Approvals The company's operations are subject to extensive regulation by government authorities in the U.S. and other countries - The drug development and approval process in the U.S. requires successful completion of preclinical studies and three phases of human clinical trials before an NDA can be submitted to the FDA[141][155] - The FDA has granted losmapimod Orphan Drug and Fast Track designations for FSHD, while pociredir has received Orphan Drug and Fast Track designations for SCD[39][77] - In the EU, the approval process is managed by the EMA through a centralized procedure for rare diseases, leading to a single marketing authorization valid across the EU[216][217][215] - The company is subject to healthcare laws including the Anti-Kickback Statute, False Claims Act, and pricing regulations like the Inflation Reduction Act of 2022 (IRA), which could impact product pricing and reimbursement[200][208] Human Capital Management The company emphasizes a patient-focused culture and is committed to diversity, equity, and inclusion to attract and retain talent - As of February 20, 2024, the company had 76 full-time employees, with 26 holding M.D. or Ph.D. degrees and 47 engaged in R&D[248] - The company reports a diverse workforce, with women comprising approximately 55% of full-time employees and non-white employees making up about 29% of the U.S. workforce[251] Risk Factors The company faces significant risks related to its financial condition, clinical development, third-party reliance, and intellectual property - The company has a history of significant losses ($97.3 million in 2023) and an accumulated deficit of $509.7 million as of December 31, 2023, and expects to incur losses for several more years[255] - Substantial additional funding is required to continue clinical trials and development programs, and failure to raise capital could force delays or elimination of programs[258] - Clinical drug development is uncertain, as highlighted by the FDA's clinical hold on pociredir from February to August 2023, which underscores the risk of delays and unforeseen challenges[288][293] - The company relies on third-party contract manufacturing organizations (CMOs) for its product candidates, which poses risks related to supply, quality, and regulatory compliance[329] - The company's ability to protect its intellectual property is critical, as the composition of matter patents for losmapimod licensed from GSK have expired, increasing reliance on method-of-use patents[367][373] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[490] Cybersecurity The company has implemented a cybersecurity risk management process integrated into its enterprise risk management framework - The company's cybersecurity risk management is integrated into its overall enterprise risk management process and utilizes third-party security providers for testing and assessments[491][492] - The audit committee has oversight responsibility for cybersecurity risks, with the Executive Director, IT & Operations leading the program[495][497] Properties The company's principal facility is leased office and laboratory space in Cambridge, Massachusetts - The company leases approximately 28,731 square feet of office and lab space in Cambridge, MA, with the lease expiring in June 2028[499] Legal Proceedings The company is facing a class action lawsuit alleging violations of the Securities Exchange Act - A class action lawsuit was filed against the company and its officers related to the clinical hold on pociredir, alleging misleading statements about the drug's development[500] - The company filed a motion to dismiss the lawsuit in November 2023 and plans to defend against the litigation vigorously[500] Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[501] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is traded on the Nasdaq Global Market, and it does not anticipate paying cash dividends - Common stock trades on the Nasdaq Global Market under the symbol "FULC"[503] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[505] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's net loss decreased in 2023, and its cash position is expected to fund operations into 2026 Results of Operations (2023 vs. 2022) | (in thousands) | 2023 | 2022 | Change ($) | | :--- | :--- | :--- | :--- | | Collaboration revenue | $2,805 | $6,342 | $(3,537) | | Research and development | $71,801 | $76,782 | $(4,981) | | General and administrative | $41,668 | $41,694 | $(26) | | Total operating expenses | $113,469 | $118,903 | $(5,434) | | Loss from operations | $(110,664) | $(112,561) | $1,897 | | Other income, net | $13,329 | $2,690 | $10,639 | | Net loss | $(97,335) | $(109,871) | $12,536 | - The decrease in R&D expenses was primarily driven by lower external costs for pociredir due to the clinical hold and a $5.0 million milestone payment to GSK in 2022 that did not recur, partially offset by higher costs for the advancing REACH trial[540] - As of December 31, 2023, the company had $236.2 million in cash, cash equivalents, and marketable securities, with a projected cash runway to fund operations into 2026[517] - In January 2023, the company raised net proceeds of $117.3 million from a public offering of its common stock[513][544] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity related to its investment portfolio - The main market risk is interest rate sensitivity on its $236.2 million portfolio of cash, cash equivalents, and marketable securities[576] - The company has some exposure to foreign currency fluctuations from contracts with non-U.S. vendors but does not currently use hedging instruments[577] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for fiscal years 2023 and 2022 Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $25,563 | $35,098 | | Marketable securities | $210,658 | $167,823 | | Total Assets | $257,694 | $226,685 | | Liabilities & Equity | | | | Total current liabilities | $13,675 | $16,725 | | Total Liabilities | $22,501 | $27,743 | | Total Stockholders' Equity | $235,193 | $198,942 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $2,805 | $6,342 | | Total operating expenses | $113,469 | $118,903 | | Loss from operations | $(110,664) | $(112,561) | | Net loss | $(97,335) | $(109,871) | | Net loss per share | $(1.59) | $(2.44) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - There were no disagreements with accountants on accounting and financial disclosure[580] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[582] - Management concluded that internal control over financial reporting was effective as of December 31, 2023[585] - The company is exempt from providing an auditor's attestation report on internal controls due to its status as an emerging growth company[586] Other Information The company terminated its at-the-market (ATM) equity distribution agreement - The company terminated its May 2022 at-the-market (ATM) offering program, which had an aggregate offering price of up to $50.0 million, and no shares were sold under this agreement[589] Part III Directors, Executive Officers and Corporate Governance This information will be provided in the company's 2024 Definitive Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2024 Proxy Statement[593] Executive Compensation This information will be provided in the company's 2024 Definitive Proxy Statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2024 Proxy Statement[595] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This information will be provided in the company's 2024 Definitive Proxy Statement - Information regarding security ownership is incorporated by reference from the forthcoming 2024 Proxy Statement[596] Certain Relationships and Related Transactions, and Director Independence This information will be provided in the company's 2024 Definitive Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the forthcoming 2024 Proxy Statement[597] Principal Accountant Fees and Services This information will be provided in the company's 2024 Definitive Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2024 Proxy Statement[598] Part IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and exhibits filed with the report - This item lists the financial statements and exhibits filed with the Form 10-K[600][603] Form 10-K Summary No Form 10-K summary is provided - This item is not applicable[604]