Fulcrum Therapeutics, Inc. (NASDAQ:FULC) Q4 2023 Earnings Call Transcript

Fulcrum Therapeutics, Inc. (NASDAQ:FULC) Q4 2023 Earnings Call Transcript February 27, 2024

Fulcrum Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.4, expectations were $-0.44. FULC isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning and welcome to Fulcrum Therapeutics Fourth Quarter and Full Year 2023 Financial Results and Business Update Conference Call. Currently all participants are in listen-only mode. This call is being webcast live and can be accessed on the Investors section of Fulcrum’s website at www.fulcrumtx.com and is being recorded. Please be reminded that remarks made during this call may contain forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. These may include statements about the company’s future expectations, plans, clinical development timelines and financial projections. While these forward-looking statements represent Fulcrum’s view of today, this should not be relied upon as presenting the company’s views in the future.

Fulcrum may update these statements in the future, but is not taking on an obligation to do so. Please refer to Fulcrum’s most recent filing with the Securities and Exchange Commission for a discussion of certain risks and uncertainties associated with the company’s business. Leading the call today will be Alex Sapir, CEO and President of Fulcrum. Joining Alex on the call are Alan Musso, Chief Financial Officer, and Dr. Iain Fraser, Interim Chief Medical Officer. After providing updates on our key programs, there will be a brief Q&A in which Alex, Alan and Iain will be available to answer your questions. With that, it’s my pleasure to turn the call over to Alex.

Alex Sapir: That’s great. Thanks, Valerie, and thanks to all of you for joining us today. 2023 was a year in which we both completed enrollment in our Phase 3 REACH trial for losmapimod for facioscapulohumeral muscular dystrophy, or FSHD for short, and resolved the clinical hold for pociredir, which allowed us to resume clinical testing in patients with sickle cell disease. In the fourth quarter, we continued to drive forward our two key clinical programs and advance our pre-clinical pipeline and with our cash runway that extends into 2026, I do believe that we are well-positioned to execute our corporate objectives and deliver on key milestones in 2024 and beyond. So at this point, let me go a bit deeper and elaborate on the progress we’ve made toward our goal of delivering transformative therapies to improve the lives of patients with rare genetic diseases.

Let’s start with our most advanced program, losmapimod, which is an oral small molecule p38 alpha/beta MAP kinase inhibitor currently in Phase 3 development for the treatment of FSHD. Now, FSHD is a rare form of muscular dystrophy with an estimated US prevalent patient population of 30,000. FSHD is characterized by a slow but relentless loss of muscle function year after year, resulting in significant impairment of upper extremity muscle function and mobility. As a result, many patients are unable to perform daily life activities that you and I take for granted, such as reaching for a cup of coffee, reaching for a cup in the kitchen cabinet, brushing your teeth, feeding yourself, even practicing good hygiene. And about 20% of patients ultimately become wheelchair-bound.

Despite the high unmet need, there are currently no approved treatment options for these patients. So in our quest to bring hope for these patients, in September of last year, we completed enrollment in our global Phase 3 trial for losmapimod, with a total of 260 patients enrolled in the trial. The trial initiated in June 2022 and 15 months later we had surpassed our enrollment expectations, which we believe is a real testament to the high unmet need for this rare disease. We are on track to report top-line data in the fourth quarter of 2024, which will bring us one step closer to delivering the first-ever FDA-approved therapy for FSHD patients. So, just a quick reminder of some of the details around the Phase 3 study, which we call REACH. REACH is a 48-week trial intended to be registration-enabling both in the US and in ex-US geographies.

The primary endpoint for REACH is a change from baseline in the relative surface area, or RSA, which is a quantitative assessment of reachable workspace. RSA is an objective measure of upper extremity range of motion and muscle function that specifically evaluates shoulder and arm mobility using 3D motion sensor technology. In our Phase 2 study, losmapimod demonstrated a 10% change in the RSA score relative to placebo at 48 weeks. And based on interactions with FDA, we are currently assessing the extent to which a change in the RSA score is considered meaningful to patients. Additionally, key secondary endpoints include muscle fat infiltration or MFI, which is an important marker of disease pathology measured by whole-body MRI, shoulder dynamometry, as well as self-reported quality of life measures that will help inform our thinking on our payer strategy as we begin preparing for a commercial launch here in the US.

Now turning to pociredir, our oral HbF inducer for the potential treatment of patients with sickle cell disease, or SCD for short. Sickle cell is a lifelong inherited blood disorder that severely impacts quality of life for approximately 100,000 people in the US and approximately 4.4 million people worldwide. Historically, the standard of treatment for sickle cell disease has involved blood transfusions, pain medications and hydroxyurea, focusing primarily on symptom relief. And while exciting scientific progress has enabled the advancement and more recently of the approval of gene editing therapeutic approaches, we believe there remains a high unmet need for safe and accessible therapeutic options that are broadly protective of sickle cell symptomatology.

As a first-in-class oral small molecule HbF inducer, we believe pociredir has the potential to address a critical unmet need for patients. Now, just as a quick reminder, in August of 2023, the FDA lifted the clinical hold for pociredir. And I think it’s also really important to note that there were no changes either in the protocol-defined dose escalation scheme or the three-month treatment duration. Clinical trial sites have now been activated and others have been selected and are going through the necessary steps for site activation in order to be ready for patient recruitment for the Phase 1b study we call PIONEER. Based on the revised inclusion-exclusion criteria, we will be enrolling patients with high disease severity. Cohort three of the PIONEER study will evaluate pociredir at the 12 milligram once-daily dose followed by cohort four at the 20 milligram once-daily dose.

Both cohorts are expected to enroll approximately 10 patients each. And we look forward to providing specific guidance on readout of the 12 milligram and 20 milligram cohort as we have additional sites activated and a good basis to project enrollment trajectory. We are looking forward to building on the encouraging clinical data obtained prior to the clinical hold, which demonstrated that pociredir increased total HbF of a magnitude that could translate into a meaningful improvement in disease severity. More specifically, after only 42 days of treatment, we observed up to a 10 percentage point increase in HbF from baseline or total HbF of approximately 25%. We believe that pociredir, as an oral HbF inducer, has the potential to provide a differentiated therapeutic option for people living with sickle cell disease.

Addressing the significant unmet need in the sickle cell community remains a key priority for us, and we are excited to build on this momentum in the years ahead. So that’s the clinical update. For the financial update, let me turn it over to Alan Musso, our Chief Financial Officer, who will walk you through some of the numbers. Alan, over to you.

Alan Musso: Thanks, Alex. I’ll now go over our results for the fourth quarter and full year ended December 31, 2023, beginning with the results for the quarter. Collaboration revenue was $0.9 million for the fourth quarter of 2023 compared to $0.7 million for the same period in 2022. Our research and development expenses were $19 million for the fourth quarter of 2023, compared to $18.6 million for the same period in 2022. The increase of $0.4 million was primarily due to higher personnel cost. General and administrative expenses were $9.9 million for the fourth quarter of 2023 compared to $10.1 million for the same period in 2022. The decrease of $0.2 million was primarily due to lower professional service costs. And for the fourth quarter of 2023, Fulcrum reported a net loss of $24.8 million compared to $26.1 million for the same period in 2022.

I’ll now review the results for the year ended December 31, 2023. Collaboration revenue was $2.8 million for the year ended December 31, 2023, compared to $6.3 million for the same period in 2022. The lower collaboration revenue during 2023 was attributable to the completion of activities under our collaboration agreement with Acceleron, which terminated in October 2022, and due to a decrease in revenues under our collaboration agreement with MyoKardia as we completed our research services during the fourth quarter of 2023. Our research and development expenses were $71.8 million for the year ended December 31, 2023, compared to $76.8 million in 2022. The decrease in 2023 was primarily attributable to a $5 million milestone obligation incurred upon the initiation of the REACH clinical trial in the second quarter of 2022 under our license agreement with GlaxoSmithKline.

Our general and administrative expenses were $41.7 million for each of the years ended December 31, 2023 and 2022. The net loss was $97.3 million for the year ended December 31, 2023 compared to $109.9 million in 2022. And now turning to the balance sheet. We ended 2023 with cash, cash equivalents and marketable securities of $236.2 million, compared to $202.9 million as of December 31, 2022. This increase in our cash position is primarily due to net proceeds from our January 2023 equity offering of $117.3 million, partially offset by our net cash used in operating activities in 2023. And during the fourth quarter of 2023, our cash burn was $20.9 million. We continue to operate from a strong financial position with a cash runway into 2026. And with that, let me turn the call back over to Alex.

Alex Sapir: Great. Thanks so much, Alan. So, as all of you can see, we are well-positioned for a very exciting 2024 and are encouraged by the progress across our two clinical programs, losmapimod, which has the potential — which has first-in-market potential for patients with FSHD, and pociredir, which has best-in-class potential for patients living with sickle cell disease. So at this point, Valerie, let’s go ahead and open it up for questions.

Operator: [Operator Instructions] Our first question comes from the line of Matthew Biegler of Oppenheimer. Your line is open.

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Q&A Session

Matthew Biegler: Hey, good morning, guys. I just wanted to maybe tag on something you said about on the regulatory side of the coin here for losmapimod. Can you just walk us through your interactions with the FDA and where you are with discussions on the clinical benefit for reachable workspace? And I guess what you’ll need to show in REACH to make them happy? Thanks.

Alex Sapir: Yeah, thanks so much, Matt, for the question. Let me just say a couple of things and I’ll turn it over to Iain to go in a bit more detail. So, the REACH study is a very well-powered study with the 260 patients that we had enrolled. We’ve got a 96% powering on that study, and we believe that, that study has the potential to be registration-enabling based on our interactions to date with FDA. But I think more specifically, to answer your question around reachable workspace, let me turn that one over to Iain.

Iain Fraser: Yeah. Thanks, Alex. And thanks, Matt. So, obviously there are no drugs approved for FSHD, and so there’s no precedent in the regulatory sphere for an endpoint. However, we have had a number of productive and indeed ongoing discussions with FDA involving both the review division, which is in neurology, as well as the COA division. And we’re executing on a plan that we’ve agreed upon with them that we believe will establish the clinical meaningfulness of the reachable workspace. Specifically, there are a couple of components to that. The first is that we’re generating additional data from observational studies in FSHD. So this is not involving any treatment with losmapimod, but observing these patients, as requested by the agency to identify what is for them the most appropriate measures of change in upper extremity function.

And this is achieved through evaluating items on patient-reported outcomes. The next step will be to apply those back to the REACH data themselves in order to derive what is the clinically meaningful threshold for reachable workspace. And then secondly, we are conducting a number of exit interviews of patients that have gone through the REACH study. And this will help to enhance our understanding as well as FDA’s understanding of what a change in RWS means for them. And our expectation is that at the very latest, these data would all be available at the time of NDA submission. And of course, ultimately, FDA will ultimately make the final determination as to what is considered clinically meaningful, considering the totality of evidence.

Matthew Biegler: Okay. So effectively we can say that there needs to be a little bit more validation work done on the RWS assay. Is that a fair characterization?

Iain Fraser: Well, I think the validation work on the instrument itself, in terms of the test, retest capabilities, the training process that goes into it, the provision of the technical pieces of it, all of that has been done, and is really quite satisfactory. I think it’s the last remaining piece around the clinical meaningfulness, and what is considered minimally, clinically significant change.

Matthew Biegler: Understood. Thanks a lot.

Alex Sapir: Yeah, thanks, Matt.

Operator: Thank you. One moment, please. Our next question comes from the line of Corinne Johnson of Goldman Sachs. Your line is open.

Unidentified Analyst: Good morning. This is Craig on for Corinne. I guess one for us. How familiar are physicians with reachable workspace endpoint? And can you describe some of your physician education efforts that you’re planning once you have the data?

Alex Sapir: Yeah, great question, Craig. And thanks for asking that. I’ll start, and then I’ll certainly turn it over to Iain, if he has any others. So I would say that reachable workspace is not a standard instrument that neuromuscular specialists currently use when evaluating their patients with FSHD, it is somewhat of a novel instrument. And so in terms of the answer to your question about what we’re doing from an educational standpoint, to really train them on what reachable workspace is and what a change in reachable workspace actually means, we’re doing a number of programs throughout the year. We’ve got a program in two weeks at the MDA conference, the CME program, in which we’re actually spending a lot of time with the physicians that have signed up for that program, walking through what is reachable workspace, what is a normal baseline for patients, and what does a change in reachable workspace actually mean.

The clinical meaningfulness of that change, going back to the first question that Matt asked, will ultimately be sort of determined once we have the REACH data. But there’s a number of activities that we’re doing this year and in 2025 to really educate physicians on reachable workspace so that when the data does come out, they’ve got some context for those results. Iain, anything you would add?

Iain Fraser: No, the only thing I would add, perhaps, obviously all of the investigators in our clinical studies, both the ReDUX4 Phase 2 as well as REACH in Phase 3, are very well familiar with it now because of their participation in the study. And they obviously speak to their colleagues as well. So I think there’s some level of dissemination through the clinical trials themselves. And then additionally, as Alex said, we have some CME programs that are designed to inform and educate physicians around that.

Unidentified Analyst: Got it. Thank you very much.

Alex Sapir: All right. Thanks, Craig.

Operator: Thank you. One moment, please. Our next question comes from the line of Joseph Schwartz of Leerink Partners. Your line is open.

Joori Park: Hi. Good morning. I’m Joori Park dialing in for Joe. Thank you for taking our question. The first one is on losmapimod. Given reachable workspace isn’t a standard instrument, how can physicians measure benefit in the real world if they don’t have access to the tools? Are there other metrics that could track with reachable workspace or clinically meaningful benefits? And I have a follow-up. Thank you.

Alex Sapir: Okay, that’s great. Yeah, I think — thanks so much for the question. I think to answer that, let me turn that over to Iain, our Chief Medical Officer.

Iain Fraser: Yeah, I think the advantage of reachable workspace is that it provides a quantitative assessment that treating physicians typically use in a more qualitative sense, to understand how their patients are doing. So it allows us to put some numbers around those qualitative terms. And since there haven’t been any therapies that alter the course of the disease available to date, there’s really been no need to do that, all the therapy is symptomatic to this point. So it’s really adding a little bit of quantitative measures around the more qualitative sense in the clinic. I think the important pieces to point out here are, number one, that reachable workspace has been shown previously, prior to Fulcrum’s involvement, that FSHD patients exhibit a decline in their reachable workspace over time.

That’s in a small natural history study that was published several years ago, and that’s consistent with clinical observations around measuring muscle strength by more traditional measures like dynamometry, for example. We know that, in addition, the reachable workspace correlates with instruments, patient-reported outcome instruments, such as the Neuro-QoL Upper Extremity questionnaire and that work has been published. And we’ve also shown from our Phase 2 data a correlation between the reachable workspace and the shoulder abductor dynamometry. And it’s the shoulder abductor dynamometry, because obviously reachable workspace is focused on the upper extremity, and the shoulder abductor is a major muscle component of that. So there are correlations that have been observed in the reachable workspace.

And as I say, probably most importantly, it’s that documentation of the decline experienced by these patients, and that’s what the patients report is this inevitable decline over time. And that’s something that the treating physicians and caregivers also report. And so there’s consistency in the measure from that respect as well.

Joori Park: Okay, got it. Thank you. And then my second question is on pociredir. I know that baseline characteristics like HbF can play a role and how much HbF you can achieve. So would it be possible to provide patient baseline characteristics ahead of your next update so we can better contextualize and appreciate the data when they are released? Thank you very much.

Iain Fraser: Yeah, this is Iain again. So maybe I can just add that we do have in our corporate presentation on the web, the data from the initial 16 patients that were enrolled in the study that includes a plot of their HbF, and it includes the baseline fetal hemoglobins that they went in with. The comment that I would make there is that there was a range of baseline HbFs, and I think, speaking from memory, it was about 3% at the low end and just under 20% at the high end. And we know that in the sickle cell patient population in general, it’s around 5% to 10% is sort of the average baseline. So we’ve seen to date a pretty widespread across baseline HbFs. And while we don’t have three months data in all of those patients, certainly the initial slope of the increase in HbF across all of those baselines looked pretty similar.

So it didn’t appear that those that were starting out higher had a lower response or vice versa. I think where — the critical piece of this is where do the patients end up with after three months. Looks like from the six-milligram data that we have, which is the highest dose that’s gone out to three months, may not even be plateauing fully at the three months mark. And so that will obviously need to be evaluated further as we move through the process. But we will, once we have the data around the fetal hemoglobin, we will reveal those baseline HbFs as well, because it is an important component.

Operator: Thank you. One moment, please. Our next question comes from the line of Dae Gon Ha of Stifel. Your line is open.

Dae Gon Ha: Hey, good morning. Thanks for taking our questions and congrats on all the progress. Three questions, if I may. One. Alex, have you guys actually started some pre-commercialization work with the payers specifically? I think there was quite a bit of questions around physicians and their comfort as well as the regulators. But how do payers feel about the reachable workspace and the magnitude you showed so far? Second, sticking with losmapimod, the 10% change you detected in ReDUX4, I was wondering if you could go into a little bit more on the test, retest variability you mentioned to an earlier question. Any other evidence you can point to that kind of gives us some comfort around your Phase 3 REACH powering, and then I’ve got a follow up on the pociredir story.

Alex Sapir: Okay, great. Yeah, why don’t I — I’ll take question one and then I’ll turn question number two over to Iain, and then we’ll come back to you for question number three. Thanks, Dae Gon, I think really good question. So, yeah, we have done some initial payer work both in the US as well as ex-US, and I don’t remember the specifics of the study that we did, but I think it was around 10 payers that we had spoken to, and shared with them the target product profile and shared with them the results of the ReDUX4 study. And they obviously were well aware that there was no available treatment options for these patients. And the objective of the work that we did was really to try to understand their thoughts around pricing.

And what we heard loud and clear from those payers is that they would expect that when this drug gets approved and comes to market, that it would command rare disease type pricing, such as in the hundreds of thousands of dollars. I think probably a really good comp to look at would be the pricing that Biogen has with SKYCLARYS. So it’s — SKYCLARYS targets Friedreich’s ataxia, again, neuromuscular disease. Not a lot of mortality, but high morbidity. So very, very similar to what we see with FSHD. The biggest difference between FA and FSHD is the prevalent population. FSHD is about four times the size. So the payer work that we’ve done, albeit somewhat limited to date, has really been around pricing. And the feedback that we’ve heard from payers that they would expect this as the first entrant in a rare disease to be priced in hundreds of thousands of dollars, similar to other rare disease therapies.

I will say, Dae Gon, the other thing that we’re also doing, and while this hasn’t been confirmed with payers, I think our instinct is that payers will require a confirmed genetic test of FSHD before approving the product. And as of right now, because there are no treatment options for patients with FSHD, very little genetic testing is done. And of the genetic testing that is done, it’s clunky, in that it takes a lot of time to get these genetic tests back. They’re expensive. Sometimes the insurance company will pay for it, sometimes they won’t. So that’s an area that we’re going to spend a lot of time on in 2024 and 2025 to really streamline that process of genetic testing, because right now, it is not as efficient as we feel like it needs to be at the time that we launch, given our instinctive assumption that payers will require confirmed genetic testing before agreeing to approve the drug.

So on the second question, Iain, maybe I’ll turn that one over to you.

Iain Fraser: Yeah, sure. So, briefly, just to recap, the ReDUX4 reachable workspace data, as you indicated, showed that ten percentage point treatment effect difference that was derived from a repeated measures model that was used to assess that endpoint. And that is the same model that will be used for the REACH study. And just to recap, that includes evaluations at baseline, week four, week 12, 24, 36, and 48. So it’s not just a single comparison of the week 48 out to the baseline value. So it incorporates all of those measures over time. And the treatment effect difference on an RSA unit score was about 0.05 with a baseline reachable workspace score in those patients of 0.54 to 0.53, that’s five quadrants of the theoretical max there would be 1.25, just to contextualize that.

So those were the data points that were used to power the Phase 3 REACH study. 230 patients originally projected, and 260 originally — finally enrolled in that study. With respect to the test, retest, so we do have that — I don’t have that number in front of me, and we can circle back to you with that. That’s in the published literature, and certainly can confirm that aspect outside of the ReDUX4 study. The variability in the change from baseline in reachable workspace, that standard deviation went into the power calculations for the REACH study. And so, we’re incorporating not just the treatment effect size, but also the variability from that in ReDUX4.

Dae Gon Ha: Okay, appreciate the color there. Switching gears to pociredir. Alex, on the site activation, it seems like you’re making some progress on certain sites that have already been activated, but you’re also going out to activate more. Just wondering, for those that you’re working on now, what are some pushes and pulls you’re hearing from them before they can get on board? And sort of separate to that is, what pieces of data are you looking to collect to further expand the TAM of pociredir longer term? Thanks so much, guys.

Alex Sapir: Yeah, great questions, Dae Gon, and thanks for asking those. Yes, I think the — or actually, let me back up a little bit. So at the ASH meeting, we had an opportunity to probably interact on a one-on-one basis with maybe 30 of the top thought leaders in sickle cell. And I think while there were a minority of physicians that said that they weren’t interested in participating in the study, primarily because of the fact that it is a small study, and it’s a new site, and it’s going to take nine months to get that site up and running and they may only be able to give us sort of one to two patients, they said, for the time being, we’re going to sit on the sidelines and come back to us once you are ready to enroll in a larger sort of Phase 2, 3 study.

So the sites that we’re talking to right now are all sites that have expressed an interest, and a lot of those or many of those physicians that we spoke to at ASH, I would say the majority of those physicians that we spoke to were very interested in the potential that pociredir could bring to their patients. So all the sites that we’re talking with right now, we’ve sort of screened out all those that are no longer interested. And so, we’re essentially — have identified a series of sites that are very interested in participating, and essentially we’re just going through — going through the, you know, getting the IRBs to approve it, getting the contracts through. And the second question? Second part of that question, Dae Gon?

Dae Gon Ha: Yeah, with regards to the trial, the PIONEER trial, I mean your long-term goal is to eventually expand the TAM, right, given the high severity of disease right now? So what kind of data are you looking to collect in PIONEER before you can look to expand that?

Alex Sapir: Yeah, great question. And I think some of that has to do with conversations that we’ve had with the agency to date, and Iain has been intimately involved in those conversations. Maybe I’ll turn that one over to, Iain.

Iain Fraser: Yeah, absolutely, Alex. And it’s clear that the agency thinks of this in terms of risk and benefit. And they articulated that certainly in terms of their dealings with the gene therapy approaches in particular, which we know are associated with pretty significant risk, including malignancy, with a black box warning going to the bluebird product. However, they feel that they understand the upside and the benefits of those therapies much better than they do with something like pociredir, which is still in early development. So I think the initial approach here is in the context of the PIONEER study, this three-month study is really to articulate fully at doses that we think are likely to be therapeutic, which are the 12 and potentially the 20 milligram once daily doses, what sort of fetal hemoglobin inductions we can see in those patients.

And I think really demonstrating that, and based on our initial experience at the 12-milligram dose, which only went out to six weeks or so, we feel that patients will be able to reach that high 20%, maybe even low 30% range where the disease becomes transformative. And so it’s really filling out the efficacy side, at least in the first instance on HbF before being able to go back to the agency, and A, to relax some of the inclusion-exclusion criteria in the first instance, and B, to extend the dosing beyond the three months, which is the context of the current trial.

Dae Gon Ha: Excellent. Thank you very much, guys.

Alex Sapir: Yeah. Thanks, Dae Gon.

Operator: Thank you. This concludes the question-and-answer portion of the call. I will now turn the call back over to Fulcrum’s CEO, Alex, for closing remarks. Alex?

Alex Sapir: That’s great. Yeah, thanks so much, Valerie. And I guess, just to wrap up, as you can see from our progress that we’ve made and our plans for 2024, we remain deeply committed to treat the root causes of genetically defined rare diseases and bringing these transformative therapies to patients. And before we conclude today’s call, as I always do, I would like to extend my sincere appreciation and gratitude to my fellow Fulcrum teammates, to the physicians we work with to advance our clinical studies, and finally, and most importantly to the patients and their families. Thanks again to everyone who joined this morning. And please stay safe and healthy. Thanks so much.

Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.