Fulcrum Therapeutics: FSHD Steadily Advancing In Phase 3 (NASDAQ:FULC)

Shares of small molecule developer Fulcrum Therapeutics (NASDAQ:FULC) have misplaced greater than 80% of their worth because the IPO was priced at $19 in August 2021. Yr up to now efficiency is destructive 50% after FTX-6058 for sickle cell illness was positioned on full medical maintain by the FDA in late February.

Curiously sufficient, because of extremely promising preliminary information, the share worth hit a excessive of low-teens to start out 2023, permitting the corporate to boost $125M at $13 per share earlier than the underside fell out. Disaster of confidence in management led to a number of prime officers departing together with prior CEO, CFO and Chief Medical Officer.

With new management on the helm, together with the Could 15 appointment of Alex Sapir as CEO (his prior two employers acquired by Pfizer (PFE) and Sobi), I believe this left-for-dead uncommon illness participant deserves a second look.

Chart

Determine 1: FULC weekly chart (Supply: Finviz)

When charts, readability typically comes from looking at distinct time frames so as to decide essential technical ranges and get a really feel for what is going on on. Within the every day chart above, we will see the share worth rocket to the excessive teenagers on enthusiasm for up to date information in SCD adopted by a niche down with information of a full medical maintain by the FDA. After hitting a low of $2.25, a small rebound to mid-$3s has taken place however valuation nonetheless stays very depressed. My preliminary take is that readers on this identify would do properly to determine a partial place earlier than it will get observed.

Overview

Based in 2015 with headquarters in Cambridge (89 staff), Fulcrum Therapeutics at present sports activities an enterprise worth of destructive ~$100M and Q1 money place of $297M offering an operational runway into mid-2025.There are ~60M shares excellent and gathered deficit up to now is $437M.

Fulcrum is concentrated on growing therapies for genetically outlined uncommon ailments in areas of excessive unmet medical want, with losmapimod for FSHD (facioscapulohumeral muscular dystrophy) as its lead product candidate. Curiously, this small molecule program was in-licensed from GSK (GSK) which handled over 3,500 sufferers throughout a number of indications (derisking the protection profile). It is value mentioning that GSK ran research in different indications (COPD, neuropathic ache, rheumatoid arthritis, and so on) however by no means pursued FSHD or different muscular dystrophies (10-Ok submitting).

The second asset of be aware is FTX-6058 (hemoglobin or HbF inducer) for the remedy of SCD (sickle cell illness). FTX-6058 is designed to bind to EED and inhibit PRC2 (polycomb repressive advanced 2), which per a 10-Ok submitting results in potent downregulation of key fetal globin repressors and causes a rise in HbF. The important thing concern right here, as I alluded to briefly above, is that accepted merchandise on this class of medicines (EZH2) have included of their labeling an elevated danger of malignancies (the query being whether or not danger/profit is perfect to deal with this inhabitants of sufferers).

There are extra property in preclinical throughout a wide range of illness areas, the product of the corporate’s proprietary FulcrumSeek product engine used to seek out and validate drug targets with potential to modulate gene expression to deal with recognized root causes of such genetically outlined ailments (10-Ok submitting).

Determine 2: Pipeline (Supply: company presentation)

Digging deeper into losmapimod in FSHD, this illness progresses to the purpose the place sufferers turn out to be depending on wheelchairs and lose capacity to carry out actions of every day residing. Aberrant expression of DUX4 gene is understood to be the basis reason for the illness, and losmapimod selectively targets p38α/ß (which in flip reduces expression of DUX4 in muscle cells). Such an method is much from excellent (within the 2030s will probably get replaced by RNAi or gene remedy modalities), however within the meantime ought to do properly within the absence of competitors if accepted. Estimated affected person inhabitants is 16,000 to 38,000 in the US, however even chopping that in a 3rd for the sake of being conservative and using a $200k price ticket leads to $1B+ peak gross sales potential.

48-week information from the 80-patient part 2b ReDUX4 examine is supportive, with the caveat that major endpoint was not met. Nonetheless, clinically related advantages (versus placebo) on a number of measures of muscle well being and performance in addition to affected person outcomes warranted shifting into part 3. Slower illness development, preservation of regular showing muscle tissues and improved accessible floor space in RWS (reachable workspace) stood out to me (the latter being a key measure of independence).

Determine 3: 96-week open label extension information exhibits upkeep of remedy impact (Supply: company presentation)

Sufferers feeling a lot better on remedy additionally helps the narrative of a profitable launch (if part 3 hits endpoints and is accepted). That is an typically neglected measure that I preserve an in depth eye on in regard to affected person perspective, asking why they’d wish to take a remedy and keep on it (one motive I am lengthy Blueprint Medicines for Ayvakit launch in iSM).

Determine 4: Sufferers’ world impression of change or PGIC helps “sticky” profile of losmapimod (Supply: company presentation)

One factor I like in regards to the part 3 REACH examine (began in Q2 2022) is that from a regulatory standpoint there’s a diploma of derisking because the FDA agreed to utilizing RWS (absolute change from baseline) as the first endpoint. 230 sufferers are being randomized to placebo or losmapimod (15mg twice every day) over a 48-week remedy interval with information anticipated in 2024. Secondary endpoints embrace MFI, PGIC, and High quality of Life in Neurological Issues of the higher extremity (Neuro QoL UE) per 10-Ok.

Shifting on to FTX-6058 in SCD, market potential right here is outsized with prevalence of 100,000 sufferers within the US and 50,000 in EU. Accepted medicine handle and cut back VOC (vaso-occlusive crises) because of which sufferers find yourself within the hospital. International Blood Therapeutics was purchased out by Pfizer for $5.4B in August final 12 months to realize management of voxelotor and earlier-stage SCD candidate within the pipeline. Hydroxyurea is taken into account to be customary of care to scale back frequency of painful disaster and cut back want for blood transfusions (10-Ok submitting).

Part 1b information for FTX-6058 was introduced in January 2023 with no extra sufferers being enrolled because of full medical maintain. The plan had been to file IND individually for beta thalassemia, however this was withdrawn as Fulcrum works with the FDA to get the maintain lifted within the close to time period (I nonetheless lack readability right here on if and when this may occur). Preclinical information confirmed that remedy with FTX-6058 elevated HbF ranges to 30% of whole hemoglobin (basically healing impact). No marvel the market received enthusiastic about this one together with key healthcare hedge funds at the start of 2023, as such an method would have a drastically totally different set of dangers than a extra unique modality like gene remedy the place long-term results are nonetheless unknown.

Determine 5: Increased HbF ranges lead to diminished signs within the 20% vary, with 30%+ representing healing potential (Supply: company presentation)

In people, 6mg cohort information (10 sufferers) confirmed as much as 9.5% absolute HbF will increase from baseline with no distinction in response for sufferers on or off background hydroxyurea (customary of care). Three sufferers in 12 mg cohort (previous to medical maintain) confirmed as much as 10% absolute HbF will increase from baseline after 42 days. I think about it a inexperienced flag that we will simply see a dose-dependent impact (together with helpful influence on pink cell distribution, lower in bilirubin reflective of much less hemolysis and reductions in reticulocytes indicative of more healthy bone marrow operate).

Determine 6: Dose dependent enhance in HbF (Supply: company presentation)

Facet impact profile up to now has been comparatively benign with 14 remedy emergent antagonistic occasions (TEAEs) reported up to now of which two (headache, lip numbness) had been deemed presumably associated to review drug and non-serious. Acute chest syndrome (severe occasion) was thought of to not be associated to FTX-6058. Within the 10-Ok submitting, the corporate notes that they “usually are not sure when we can resume the part 1b trial, if in any respect.” So, the worst case situation is that they don’t come to settlement with the FDA on danger/profit profile and this program will get nixed.

Different Data

For Q1 2023, the corporate reported money and equivalents of $297M evaluating favorably to web lack of $25M (operational runway into mid 2025). G&A bills rose barely to $11.5M, whereas analysis and growth prices decreased to $16.7M. The corporate reiterated that the part 3 REACH trial in FSHD will full enrollment 2H 23 (medical trials gov web site exhibits October 2024 major completion date).

On the convention name, extra readability was offered on medical maintain for FTX-6058 (associated to preclinical information submitted in April, October and December of final 12 months in addition to nonclinical and medical proof of hematologic malignancies noticed with different PRC2 inhibitors). FDA desires Fulcrum to additional outline the inhabitants or good thing about remedy with an emphasis on the way it outweighs potential danger (the “good” information is that the maintain is just not associated to any findings from the part 1b examine). Language feels like the corporate is just not giving up and stays satisfied that FTX-6058 gives favorable danger/profit (whether or not they can persuade the FDA stays to be seen). On Q&A, prior interim CEO Robert Gould highlighted two excellent points together with reversibility of gene expression modifications (preclinical, non-toxicology research are underway and it is a matter of ready for outcomes to debate with the FDA, so this might take a while). To that final level, an analyst asks if this can be a 2024 occasion and Gould was unable to supply readability aside from noting that present steerage is for speedy decision of that timeline.

One other subject of central significance is defining affected person populations that may most profit from the elevation of HbF they’re seeing (looks as if FDA is pushing for a better danger inhabitants than was being evaluated beforehand). Administration contends that gene and cell therapies have their very own distinctive challenges together with potential security dangers as properly. A associated query is whether or not the ten% absolute induction bar for HbF remains to be related in a better danger inhabitants and interim Chief Medical Officer Iain Fraser states they do not see themselves as going up in opposition to gene remedy and gene enhancing – getting sufferers into the 20% to 30% vary is related to medical profit for both genetic or pharmacological approaches and nearer to 30% is related to practical treatment (feels like they may transfer up probably past the 12mg dose to attain maximal profit).

As for competitors in FSHD, I am conscious that Arrowhead Prescribed drugs (ARWR) has a promising preclinical candidate that would get partnered within the close to time period (RNAi has but to make inroads in muscle). Avidity Biosciences (RNA) has an AOC (antibody oligonucleotide conjugate) program in part 1, however severe antagonistic occasion (basically a stroke) has already been noticed in a DM1 affected person handled with AOC1001 and this could possibly be platform-related. I believe that FSHD could possibly be primed for a gene remedy method, however this is able to not exchange losmapimod till the 2030s, for my part.

As for institutional buyers of be aware, Adage Capital Companions not too long ago elevated its place to over 5% of the corporate and RA Capital owns an ~18% stake. RTW Investments owns ~9% of the corporate and Suvretta Capital Administration elevated its stake to five.1M shares. Nonetheless, insider gross sales over the previous 12 months don’t encourage confidence. I do see that RA Capital’s latest purchases had been within the $5 to $13 vary (considerably underwater on its place).

As for related management expertise, with the lineup at present being refreshed it is encouraging that recently-appointed CEO Alex Sapir served prior as CEO of ReViral (bought to Pfizer for as much as $525M) and similar function at Dova Prescribed drugs (acquired by Sobi in $915M deal). Excessive turnover in 2022 (a number of CSOs, CMO, VP Finance, President R&D, CEO function) to not point out after the medical maintain debacle is a pink flag to my eyes.

Shifting on to government compensation, money portion of wage for former CEO Bryan Stuart is affordable (within the vary of comparable firms I’ve coated) however the degree of choices awards seems outsized.

Determine 7: Government compensation desk (Supply: proxy submitting)

Shifting onto helpful nuggets from members of the ROTY group, again in February it was identified that ORIC Prescribed drugs (ORIC) has its personal PRC2 inhibitor (world rights licensed from Mirati Therapeutics) in growth initially for prostate most cancers. Preclinical information confirmed higher efficiency than enzalutamide and preliminary information replace from part 1b examine is predicted 2H 23. If particularly promising, maybe Fulcrum may obtain a sympathy bump in valuation as properly. Equally, if Fulcrum’s FTX-6058 will get again on observe within the clinic in SCD, ORIC stands to profit (may out-license this indication for important economics whereas retaining rights in oncology).

Determine 8: Robust single agent exercise noticed for ORIC-944, considerably higher than blockbuster drug enzalutamide (Supply: Wainwright presentation)

Delving additional into the most cancers danger that involved the FDA, see tazmetostat approval doc from the FDA which cites “recognized severe danger of acute myeloid leukemia, myelodysplastic syndrome, T lymphoblastic lymphoma, and different secondary malignancies.” For additional context, as for antagonistic occasions it was famous that second major malignancy was the most typical motive for remedy discontinuation (2% of sufferers). Remember nonetheless that concentrating on PRC2 may carry particular benefits over EZH2 together with overcoming resistance mutations.

As for IP, losmapimod seems to have a prolonged runway with patent overlaying use for remedy of FSHD expiring in 2038. Extra provisional or pending purposes are anticipated to run out between 2038 to 2043. On the con aspect, understand that composition of matter (licensed from GSK) has expired. For FTX-6058, two issued US patents directed to composition of matter are anticipated to run out in 2040 (per 10-Ok).

As for different helpful nuggets from the 10-Ok submitting (you need to all the time scan these as a result of buyers might not get the entire image from press releases), GSK settlement for losmapimod was inked in 2019 and resulted in issuance of 12.5M Collection B most well-liked inventory at the moment (GSK nonetheless owns 1.7M widespread shares I imagine). Fulcrum stays on the hook for as much as $37.5M in growth and regulatory milestone funds in addition to royalties in mid-single to low double-digit vary. MyoKardia drug discovery settlement was inked in July 2020 for which Fulcrum may obtain as much as $298M in milestone funds plus mid-single to low double-digit royalties on gross sales of web merchandise ensuing from collaboration. As a caveat, Fulcrum has no manufacturing amenities (lack of inside management and counting on contract manufacturing organizations may lead to provide bottlenecks or disruptions).

Ultimate Ideas

To conclude, with destructive $100M enterprise valuation, I believe that pessimism is extreme and it might take little or no to maneuver the needle right here. Losmapimod in FSHD, whereas removed from a treatment and leaving a lot to be desired, would nonetheless symbolize a big advance for this sizeable affected person inhabitants for which nothing is accepted. From regulatory standpoint, the part 3 examine appears considerably derisked given FDA’s inexperienced mild for the RWS (reachable workspace) endpoint. As for FTX-6058 in SCD, the prospect of an oral capsule that gives a shot at practical treatment or at the least excessive sufficient HbF ranges to considerably cut back signs would appear fairly useful to my eyes. The danger right here once more is on the regulatory aspect (if the FDA permits them to maneuver ahead) and medical (if malignancy danger is an actual problem or overblown).

For readers who’re within the story and have finished their due diligence, FULC is a Speculative Purchase at present ranges. Given the speculative nature of the corporate, I remind readers {that a} decrease portfolio weighting is warranted. For example, if one owns 3% portfolio weighting and the inventory triples or extra with clearing of FDA maintain or additional information updates (or part 3 win for FSHD), the profit to the portfolio is substantial. Conversely, from a danger perspective, it the inventory finally ends up being a zero (FTX-6058 is DOA and part 3 FSHD examine fails), the general fallout to the portfolio can be restricted to a manageable degree.

Whereas dilution within the close to time period is just not a priority given the sturdy stability sheet, key dangers embrace the FDA not lifting the medical maintain for FTX-6058 and deciding that danger/profit profile of the drug candidate is just not applicable in SCD. Equally, part 3 FSHD examine may fail major endpoint or even when it barely achieves the specified end result, total information bundle could possibly be lower than compelling which may lead to a failed (or subpar) launch effort. Competitors in FHSD is extremely more likely to overtake losmapimod in the long run whether or not from an RNAi, gene remedy or different modality (although the excellent news is these are fairly a number of years behind within the clinic. Roche’s R07204239 (anti myostatin antibody) is also in part 2.

As for ROTY’s medical stage portfolio, I proceed to weigh danger/reward profile of the corporate for potential inclusion sooner or later within the close to to medium time period. Taking part in satan’s advocate, it may be too speculative for us as I usually require a excessive diploma of derisking and infrequently choose a extra validated drug discovery platform (able to producing extra high-value property to maneuver into the clinic).

Creator’s Be aware: I vastly admire you taking the time to learn my work and hope you discovered it helpful. Whereas I submit analysis on many firms that curiosity me, in ROTY (medical stage) and Core Biotech (business stage) portfolios I personal simply 15 or fewer names so as to concentrate on tales which might be highest conviction for me.

Disclaimer: Commentary introduced is NOT individualized funding recommendation. Opinions supplied listed below are NOT personalised suggestions. Readers are anticipated to do their very own due diligence or seek the advice of an funding skilled if wanted prior to creating trades. Methods mentioned shouldn’t be mistaken for suggestions, and previous efficiency is probably not indicative of future outcomes. Though I do my greatest to current factual analysis, I don’t in any manner assure the accuracy of the data I submit. I reserve the fitting to make funding selections on behalf of myself and associates concerning any safety with out notification besides the place it’s required by regulation. Needless to say any opinion or place disclosed on this platform is topic to alter at any second because the thesis evolves. Investing in widespread inventory can lead to partial or whole lack of capital. In different phrases, readers are anticipated to kind their very own buying and selling plan, do their very own analysis and take accountability for their very own actions. If they aren’t in a position or prepared to take action, higher to purchase index funds or discover a totally vetted fee-only monetary advisor to deal with your account.