Fulcrum Therapeutics, Inc. (FULC) Q1 2020 Earnings Call Transcript – The Motley Fool

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Fulcrum Therapeutics, Inc.(NASDAQ:FULC)Q12020 Earnings CallMay 13, 2020, 8:00 a.m. ET


Good morning, and welcome to Fulcrum Therapeutics first-quarter 2020 conference call. [Operator instructions] I would now like to turn the call over to Christi Waarich, director of investor relations and corporate communications at Fulcrum. Please proceed.

Christi Waarich -- Director of Investor Relations and Corporate Communications

Thank you, Dmitria. Good morning, and welcome to the Fulcrum Therapeutics conference call to discuss our first-quarter 2020 financial results and recent corporate highlights. Earlier today, we issued a press release outlining our recent progress. For those of you who don't have a copy, you can access it in the investor relations section of our website fulcrumtx.com.

Please be reminded that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements about our future expectations and plans, clinical development time lines and financial projections. While these forward-looking statements represent our views as of today, they should not be relied upon as representing our views in the future. We may update these statements in the future but we are not taking on an obligation to do so.

Please refer to our most recent filings with the Securities and Exchange Commission for a discussion of certain risks and uncertainties associated with our business. With me on today's call are Robert Gould, president and chief executive officer; Diego Cadavid, senior vice president of clinical development; Owen Wallace, chief scientific officer; and Bryan Stuart, chief operating officer. Let me quickly run through this morning's agenda. Robert will begin the call with an overview of our recent progress.

Diego will discuss our FSHD program. Owen will discuss our sickle cell program and research efforts, and Bryan will cover our financials before opening the call for Q&A. With that, it's my pleasure to turn the call over to Robert. Robert?

Robert Gould -- President and Chief Executive Officer

Thank you, Christi. Good morning, everyone, and thank you for joining us today. I first want to thank the healthcare workers, investigators and caregivers for their courage and passion as they continue to support so many during the challenges of COVID-19. Our hearts go out to everyone who's been impacted.

To all of our friends, colleagues and the patient communities we serve, we hope you are keeping safe and healthy. Fulcrum's mission and purpose remain unchanged as we work to discover and develop therapeutics to treat genetically defined diseases by addressing their root cause. I'm proud of how our employees have risen to the evolving challenges of the COVID-19 pandemic. I would like to begin by highlighting some of our recent updates and accomplishments.

Today, we announced an amendment to ReDUX4, our Phase 2b trial with losmapimod in patients with facioscapulohumeral muscular dystrophy or FSHD. Diego will go over the amendment in more detail. These changes will extend the patient treatment from the original trial design and we believe will provide a more robust data set while addressing the challenges presented by COVID-19. Early in the quarter, we received orphan drug designation from the U.S.

Food and Drug Administration for losmapimod in FSHD. I'm pleased to report that we have also received orphan designation from the European Commission for losmapimod for the treatment of FSHD. Like in the U.S., orphan designation is granted by the European Commission to drugs that are intended for the treatment, prevention or diagnosis of life-threatening or chronically debilitating rare diseases. We are extremely pleased to have received this designation, further supporting the advancement of losmapimod's FSHD program.

We recently presented dose-dependent target engagement data in skeletal muscle from our Phase 1 trial with losmapimod during a virtual clinical trial session of the muscular dystrophy association meeting. We continue to make progress with FTX-6058, an oral small-molecule therapeutic designed to induce expression of fetal hemoglobin in select hemoglobinopathies. You'll hear about our sickle cell program from Owen later in the call. We also continue to make progress on our early research-stage activities, including building out FulcrumSeek, our proprietary product engine designed to identify drug targets, programs and clinical development candidates in a broad range of genetically defined diseases.

And we initiated research activities under our collaboration with Acceleron. I would now like to turn the call over to Diego for an update on the FSHD program. Diego?

Diego Cadavid -- Senior Vice President of Clinical Development

Thanks, Robert. As a reminder, FSHD is a progressive disease characterized by severe muscular degeneration that occurs as skeletal muscle is replaced by fat. We estimate there are approximately 16,000 to 38,000 patients in the U.S. and similar incidents worldwide.

There are currently no approved drugs for FSHD and we are advancing the only known industry-sponsored clinical trial evaluating a potential treatment. Unlike other diseases that can be characterized by the lack of a gene, FSHD is characterized by the aberrant expression of the gene DUX4, the root cause of the disease. We at Fulcrum discovered that losmapimod, a selective p38 MAP kinase inhibitor, reduced the expression of DUX4 in preclinical studies. We therefore believe losmapimod represents a potential novel therapeutic option for FSHD patients.

Our own evidence, as well as independent evidence suggests that we do not have to turn DUX4 off completely to provide benefit. There is a spectrum of DUX4 expression and FSHD presentation that suggests that even an incremental reduction may be beneficial to patients. Thus, we believe, as do independent researchers, that any reduction in DUX4-driven gene expression has the potential for benefit to patients. ReDUX4 is our international Phase 2b, double-blind placebo-controlled trial of losmapimod in patients with genetically confirmed FSHD.

We completed enrollment of 80 patients at the end of February, which exceeded the 66 we had originally planned. The primary endpoint of the trial is the change from baseline in DUX4-driven gene expression in affected skeletal muscle. We also completed enrollment in our Phase 2 single-site open-label trial which has been impacted by COVID-19, and we are considering next steps. Fulcrum is dedicated to maintaining the highest standards in patient and clinician safety in the planning and execution of our clinical research programs.

The safety of our clinical trial participants and their healthcare providers, as well as the integrity of the data we collect remains paramount. In the wake of COVID-19, a number of our clinical trial sites postponed trial-related activities, and we quickly implemented plans to limit the potential disruption to our FSHD program. The original design of the ReDUX4 included a pretreatment biopsy followed by a second biopsy at week 16 of the 24-week treatment period. Following the 24-week trial, patients had the opportunity to roll into an open-label extension.

Prior to the COVID-19 pandemic, 12 of the 80 patients completed their 24 weeks of treatment, including their week 16 biopsy and all enrolled in the open-label extension. As the COVID-19 pandemic continues, our team, in collaboration with our investigators, extended the ReDUX4 trial from 24 to 48 weeks. This allows approximately 67 subjects currently continuing in the trial to receive a biopsy at either week 16 or under the amended protocol at week 36 and after completing the 48-week treatment period, rolling to the open-label extension. To summarize, the ReDUX4 trial has been extended from 24 to 48 weeks with an open-label extension to follow.

Patients will receive a muscle biopsy at either 16 or 36 weeks. This extension will apply to the approximately 67 patients still enrolled in the trial while 12 have already completed and have been rolled into the open-label extension. As part of the modification to the trial, we will also conduct an interim analysis of approximately 25 subjects who have completed their 16-week biopsy. We anticipate sharing data from this interim analysis of subjects' DUX4-driven gene expression signature in the third quarter of this year, and we expect to report top-line data on the primary endpoint in the first quarter of 2021.

The extension from 24 to 48 weeks also allows for a longer assessment in a placebo-controlled design of the skeletal muscle MRI secondary endpoint and the various exploratory clinical endpoints such as reachable workspace, FSHD Timed Up and Go, muscle function measures and patient-reported outcomes. From both independent researchers, as well as our own preparatory studies, we know the DUX4 gene signature is stable over time in this population, and we believe that the longer we are able to treat patients, the greater the potential benefit losmapimod may have on the root cause of the disease. We strongly believe these changes to the ReDUX4 study are in the best interest of the patient community and provide the best opportunity to advance this important development effort as we work to address the challenges presented by COVID-19. All of these changes are designed to enable patients and investigators to continue participation in ReDUX4 and will allow us to collect essential data to support continued dialogue with regulators.

I'll now turn the call over to Owen. Owen?

Owen Wallace -- Chief Scientific Officer

Thanks, Diego. At Fulcrum, we pursue targeted indications where we believe we can develop safe and effective small-molecule therapies to rebalance gene expression. In our work across various indications, we consistently aim to address the root causes of disease to increase the potential efficacy of these treatments and, more broadly, transform the way these diseases are being treated. In spite of the challenges posed by COVID-19, we have continued to make progress on our research and early clinical portfolio.

As an essential business, we continue lab operations, albeit on a more limited basis. As a result, we continue to advance the collaboration with Acceleron, as well as our internal portfolio. We have also advanced our work on FulcrumSeek, our proprietary product engine designed to identify drug targets, programs and clinical development candidates in a broad range of genetically defined diseases. By combining high-throughput RNA sequencing, cellular imaging data and large-scale machine learning, we are monitoring more than 10,000 molecular and cellular features generated by the small-molecule probe and CRISPR perturbagen libraries.

Understanding their effects on gene expression is fundamental to our therapeutic strategy to modulate the genetic root cause of disease. FulcrumSeek is not only the core of our target identification strategy. It also provides us with a unique understanding of how cellular function is altered in human disease. I would like to thank our employees who have continued to work diligently through the COVID-19 crisis to advance our research programs, especially those who are coming into the lab working under social distancing and enhanced health and safety guidelines.

Likewise, our hemoglobinopathy program has continued to advance toward the IND filing. Our approach has focused on the up-regulation of fetal hemoglobin, which could be beneficial for both sickle cell disease and beta-thalassemia. By increasing levels of HbF to compensate for the mutated hemoglobin in sickle cell patients, we believe that we can develop and deliver a potent, effective and selective therapy for patients. This therapeutic strategy is supported by human genetics and pharmacology data where increasing levels of HbF have been shown to be associated with improved prognosis and outcomes, suggesting that HbF may be a surrogate endpoint in future clinical trials.

We're very pleased with our recent progress. Our clinical candidate FCX-6058 has been profiled broadly in preclinical in-vitro and in-vivo models of sickle cell disease, and we have seen robust elevation of HbF at drug concentrations that we believe will be readily achieved in humans based on pharmacokinetic profiling of the compound. We've had an abstract accepted for oral presentation at the 14th Annual Sickle Cell Disease Research & Educational Symposium scheduled for September of this year. We have also filed our non-provisional patent application, and we've completed our IND-enabling studies and toxicology work with FTX-6058.

We plan to submit the IND in sickle cell disease in the second half of 2020 and initiate our Phase 1 trial by the end of the year.With that, I will now turn the call over to Bryan for an update on our financial results for the quarter. Bryan?

Bryan Stuart -- Chief Operating Officer

Thanks, Owen. In these unprecedented times, Fulcrum is committed to making a difference for patients with FSHD and select hemoglobinopathies such as sickle cell disease. We are proceeding with a great sense of urgency to bring these potentially transformative therapies to patients. We ended the first-quarter 2020 with $81.2 million in cash, cash equivalents and marketable securities.

Based on our current operating plan and projections, we believe this will support our operations into the third quarter of 2021, allowing us to advance losmapimod in FSHD and bring FTX-6058 into the clinic while continuing to invest in our discovery-stage efforts. Research and development expenses for the quarter ended March 31, 2020, were $14.5 million, compared to $34.6 million in the first quarter of 2019. Included in that $34.6 million was $25.6 million of onetime costs associated with the issuance of series B convertible preferred stock under the company's license agreement with GSK for the rights to losmapimod. Excluding these onetime costs, the increase of $5.5 million was primarily due to increased costs related to the advancement of losmapimod for the treatment of FSHD, as well as increased personnel-related costs to support the growth of Fulcrum's research and development organization.

General and administrative expenses for the first quarter of 2020 were $5.1 million as compared to $2.6 million for the first quarter of 2019. This increase was primarily due to increased personnel-related costs to support the growth of our organization, as well as increased costs associated with operating as a public company. Overall, we remain undeterred in our mission and continue to expect several upcoming catalysts. We'll report the interim analysis from ReDUX4 in the third quarter of this year.

We'll initiate the Phase 1 trial with FTX-6058 in sickle cell disease and disclose the biochemical drug target by the end of the year, and we'll continue to advance our discovery programs from our product engine while making progress with our partners at Acceleron. We're excited about the work ahead and we continue -- as we continue to execute on our plans, and we look forward to keeping you updated on our progress in the months ahead. Operator, you may now open the line for questions.

Christi Waarich -- Director of Investor Relations and Corporate Communications

Operator, we're now ready for questions.


[Operator instructions] And our first question comes from Matthew Harrison with Morgan Stanley. You may proceed.

Kostas Biliouris -- Morgan Stanley -- Analyst

This is Kostas on for Matthew. A couple of questions from my side. The first one is whether you guys expect to lose any power given that you will only have 25 subjects in the first interim analysis. Do you think you will have enough power to see a signal there? Or do you expect the data only to be directional, to show you an improvement or not?

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. Thank you for the question. This is Diego Cadavid. The sample size of 80 subjects is -- we believe has appropriate power to answer the question at the end of the trial.

25 subjects, we believe, will give us an initial opportunity to look at the data and help us prepare and make some early insights into Phase 3 planning.

Kostas Biliouris -- Morgan Stanley -- Analyst

OK, thank you. And a follow-up question. Will you need to recruit additional subjects or you believe you have all the subjects you need at this point?

Diego Cadavid -- Senior Vice President of Clinical Development

We have completed recruitment. We believe we have all the subjects we needed.

Kostas Biliouris -- Morgan Stanley -- Analyst

OK. And then finally, I was wondering whether -- in the second part, when you expect all the subjects to have a biopsy at 16 or 36 weeks, given that there might be a second wave of the pandemic, of additional -- a second wave of infections, how certain you are you can have all the subjects complete the second biopsy at 36 weeks and whether there is any actions you are taking to mitigate this risk of losing some patients there again? Thank you.

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. When we amended the protocol, we carefully considered exactly what you're referring to. So we've built some windows -- time windows around the 36th week and sites have flexibility, as well as patients. So right now, we anticipate that we will get the data either at week 16 or at week 36 regardless.

Kostas Biliouris -- Morgan Stanley -- Analyst

OK. Thank you very much.


And our next question comes from Joseph Schwartz with SVB Leerink. You may proceed.

Joseph Schwartz -- SVB Leerink -- Analyst

My question would be, can you talk about how you arrived at a doubling in duration for the ReDUX protocol with respect to the clinical endpoints? Will patients in ReDUX still be evaluated at 24 weeks? And how many patients are hitting this time point in the second half of this year when it seems like social distancing might relax? And then when would most patients be hitting the 48-week time point? Have you done an analysis there to consider that this is in your best interest given -- however this pandemic might evolve with respect to its different waves based on where you're enrolling these patients?

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. The ReDUX4 trial completed enrollment in about six months between August of last year and February of this year. Therefore, the patients are moving across all the visits over a period of six months. We decided to extend the study by an additional 24 weeks because we believe, based on what is happening and what we expect to happen with COVID-19, this will give flexibility for the patients to collect data across a much longer period, where we expect the clinics to be open even if intermittently.

So overall, we believe that even if some 24-week visits are missed, patients would come back later. And as you know, FSHD is a slowly progressive disease. We are not counting acute events. So as long as we are collecting the data over time, we believe we'll be able to answer the efficacy questions.

Especially, many sites are still open. The impact of the pandemic is not affecting every site.

Joseph Schwartz -- SVB Leerink -- Analyst

And are you able to bring patients in and just strike while the iron is a little bit warmer in this period we seem to be entering as we speak now? Could you bring patients in for an evaluation? Can you talk about -- is it just at 24 and 48 weeks that the clinical assessments are being performed? Or do you have any ability to sneak in some additional sites without making additional protocol adjustments that might require you to take alpha hits?

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. This amendment builds flexibility. So all the visits of the original protocol over 24 weeks are open -- sites that are open, patients are coming. And the amendment provides additional opportunities at week 36, week 48 with extended windows.

So we really give opportunities to capture as much data regardless of what happens with COVID-19. We're very fortunate that not only the sites but the patients are very committed, and that's reflected in the high subject retention we have on the trial.

Joseph Schwartz -- SVB Leerink -- Analyst

That's very helpful. And then have you been able to garner any insights to date from the open-label trial? It sounds like you suggested it's been impacted from COVID-19, and I heard you're evaluating the next steps there. So why has that been impacted more, it sounds, than ReDUX4? Can you provide any color on that front?

Diego Cadavid -- Senior Vice President of Clinical Development

Yes. The open-label study is single site so you don't have this opportunity we have in ReDUX4 where we have many sites. And therefore, if one region that happens to be where this site is, is heavily affected, of course, the impact will be larger. That site is in the Netherlands.

We have always considered that a learning trial. The trial began in August. So obviously, we've had valuable learnings from that trial, which has always been the goal to inform what we do in ReDUX4. So in that sense, we believe this trial has been helpful.

Joseph Schwartz -- SVB Leerink -- Analyst

That's helpful. Thanks for the color.


And our next question comes from Tazeen Ahmad with Bank of America. You may proceed.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

I just wanted to clarify your powering assumptions. So you previously said that the study would be powered to show a 50% reduction of DUX4 at week 16. Just based on the changes that you're talking about, how does that affect the potential path to accelerated approval? And have you spoken with FDA about this particular item?

Robert Gould -- President and Chief Executive Officer

Hi, Tazeen. This is Robert. Just a slight correction on -- I don't believe that we did power the study for a 50% reduction in the DUX4. That was not one of the original assumptions.

But I'll let Diego speak to the powering assumptions we made.

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. Robert is correct. We have never disclosed what the assumptions are for the power. This amendment is not impacting the power.

The sample size is the same. It only adds some flexibility. Because they're on treatment, muscle biopsy can be at week 16 or week 36, and we don't really expect a loss of subjects based on this amendment. Therefore, nothing has changed about the power assumptions.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

OK. And how are you taking into account -- you're effectively increasing the length of the study to a year. What are you seeing in compliance rates for the study so far? And does this increase -- do you have any buffer, if you will, for potential dropouts in the study with the extended time of observation?

Robert Gould -- President and Chief Executive Officer

Yeah. Thanks, Tazeen. This is Robert again. One of the things that we've really been struck with is the cooperation of the patients and their willingness to take losmapimod.

Just to remind you, as you know, it's an oral drug taken twice daily, 7.5 milligram tablets, so two tablets in the morning, two tablets in the evening. And we just had not only a high retention rate of the patients, but we believe high compliance as well. And so the original trial was enrolling 66 patients. And because of the response we had from the patient community and the opportunity we had, we actually increased that to 80 patients.

So even if things were to change with the patients, we do believe that we're still going to be able to have the original 66 patients. But at this point in time, we believe we're going to be able to retain most of the patients that are currently in the study, if not all of them that are currently in the study.

Tazeen Ahmad -- Bank of America Merrill Lynch -- Analyst

OK. And my last question is about taking the biopsy at 16 weeks or 36. How did you come up with 36? And how do you feel confident in the integrity of the readings of both time periods? Because there's a big gap between the two.

Diego Cadavid -- Senior Vice President of Clinical Development

Yeah. This is Diego. So we have done our own preparatory study to look at the stability and variability of the DUX4 gene signature and the natural history, and that was done about six, eight weeks apart. The academic group of the Wellstone collaboration had done it over a year apart, and they were very generous and shared all their data with us.

So we know from these two studies that these DUX4 signature at the population level is very stable. So this interval between eight weeks or a year apart basically gives us a good argument that as long as you -- we collect repeated biopsies within that interval, we don't expect any impact on greater variability or loss of signature. So 36 really came in terms of building flexibility for patients and sites who had not obtained a 16-week biopsy as the pandemic moves, assuming that over time there will be a decrease of peaks and sites will be able to reopen and bring the patients in to obtain these biopsies. It's 36 weeks but we have a window so sites and patients can be flexible, and we believe that is the best chance to collecting the efficacy endpoint without losing power and keeping the quality.


[Operator instructions] And our next question comes from Ted Tenthoff with Piper Sandler. You may proceed.

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Fulcrum Therapeutics, Inc. (FULC) Q1 2020 Earnings Call Transcript - The Motley Fool

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