Fulcrum Therapeutics, Inc. (FULC) Q4 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to Fulcrum Therapeutics Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce to your host, Chris Calabrese. Thank you, Chris. You may begin.

Thank you, and good morning. Welcome to the Fulcrum Therapeutics Fourth Quarter and Full Year 2022 Financial Results and Business Update Conference Call. 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 the company's future expectations and plans, including the clinical hold of FTX-6058, clinical development time lines and financial projections. While these forward-looking statements represent Fulcrum's views as of today, they should not be relied upon as representing the company's views in the future. Fulcrum may update these statements in the future, but it's not taking on an obligation to do so. Please refer to Fulcrum's most recent filings 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 Dr. Robert J. Gould, Interim Chief Executive Officer of Fulcrum, who will provide a corporate overview and will discuss key pipeline updates; Esther Rajavelu, Chief Financial Officer, who will cover the financials before we open the call for Q&A; and Dr. Alan Ezekowitz, Member of the Fulcrum Board of Directors who will serve as a senior clinical adviser, will be able to answer questions during the Q&A portion of the call. With that, it's my pleasure to turn the call over to Robert.

Thank you, Chris. Good morning. I appreciate everyone taking the time to join us today. We provided several important business updates this morning in our press release and 10-K, including additional color on the FTX-6058 full clinical hold, data from the now suspended 12-milligram cohort of the Phase Ib sickle cell disease trial; updated guidance on our cash runway; and changes to our management team. Let me start by discussing our most recent updates to the FTX-6058 program, our oral HbF inducer for the potential treatment of patients with sickle cell disease. As we announced on February 24, we received verbal notification from the FDA on February 23, that they had placed a full clinical hold on the investigational new drug application for FTX-6058, and we received the formal clinical hold letter from the FDA on February 24. We immediately suspended dosing and paused enrollment in the Phase Ib trial. In its communication to us, the agency noted that the whole related to both preclinical data previously submitted in April, October and December 2022, and nonclinical and clinical evidence with hematological malignancies observed as other inhibitors of the polycomb repressive complex 2 or PRC2. The agencies specifically noted that the profile of hematologic malignancies observed in the nonclinical studies that FTX-6058 is similar to that observed with other inhibitors of PRC 2, and that hematological malignancies have been reported clinically with other PRC2 inhibitors. The agency requested that Fulcrum further define the population for the potential benefit of continued treatment with FTX-6058 outweighs potential risk. The hold was not a result of any clinical finding in the Phase Ib trial that was ongoing at the time of the hold. Prior to the clinical hold, we have completed dosing at 6-milligram dose, and we're completing dosing patients in the 2-milligram cohort and we're enrolling and dosing the 12-milligram dose cohort. In early January, we shared data from the completed 6-milligram cohort with 10 patients that demonstrated up to 9.5% at fluid HbF increases from baseline, and similar treatment responses to FTX-6058 and subjects on and off background hydroxyurea. We also shared partial data from the ongoing 2-milligram cohort in January. This morning, we provided an updated data set from the two patients that completed dosing the 2-milligram cohort and the now suspended 12-milligram cohort, in which we enrolled 3 patients. The 2-milligram patients that completed 84 days of dosing, achieved absolute HbF increases up to 4.6%. Through the end of treatment, suggesting 2-milligram is a potentially minimally efficacious dose. Data from a patient in our 12-milligram cohort, who completed 42 days of treatment, demonstrated absolute HbF increases up to 10% as well as improved biomarkers of hemolysis. A way of comparison at this same early time point of 42 days, adhering patients like the 6-milligram dose had an average increase in absolute HbF of 4.5%, while during patients with a 2-milligram dose had an average increase in absolute HbF of less than 1%. For these new data continue to support a significant reduction of HbF, as well as a robust dose response effect. All 3 subjects of the 12-milligram dose also had an increase in hemoglobin of at least 1 gram per deciliter at the 28-day study time point with one subject achieving a 2-gram per deciliter increase by day 42. We find these initial data to be highly encouraging, and further supportive of the clinical potential of this drug. FTX-6058 has generally been well tolerated to date with no drug-related treatment emergent serious adverse events or discontinuations due to treatment-emergent adverse events. All adhering subjects showed clinically relevant improvement in 6 and 12-milligram dose cohorts, consistent across subjects, both on and off background hydroxyurea, which is the current standard of care. These clinical data gave us great confidence that FTX-6058 has the potential to provide a differentiated therapeutic option for people living with sickle cell disease and a favorable benefit risk profile. We remain committed to 6058 further development and look forward to working closely with the FDA to address all outstanding concerns as rapidly as possible. We will provide an update once we have more clarity on the path forward. For now, we are suspending our previous guidance to complete the Phase Ib trial, and our guidance to select the registration enabling dose in the fourth quarter of 2023. Now turning to our most advanced program, Losmapimod is a selective p38 alpha/beta mitogen activated protein kinase inhibitor. Losmapimod is in Phase III development for the treatment of FSHD. FSHD is an autosomal dominant genetic facioscapulohumeral muscular dystrophy, which has an estimated patient population of 16,000 to 38,000 in the United States alone. It is characterized by progressive muscle death and fat infiltration and results in the inability to perform daily life activities due to a significant impairment of upper extremity function, loss of mobility and chronic pain. While it is one of the most common points in muscular dystrophy, there are currently no approved treatments. And we believe losmapimod has the potential to address the urgent need for a safe and effective disease-modifying treatment that can slow or stop disease progression. We initiated reach our double-blind placebo-controlled Phase III trial of losmapimod in June 2022, and are currently enrolling patients in the U.S., Canada and Europe. The trial is expected to enroll approximately 230 adults, and we are on track to complete enrollment in the second half of 2023. The primary endpoint is the absolute change from baseline in reachable workspace, or RWS, a quantitative measure of upper extremity range of motion and function that's specifically evaluates shoulder and proximal arm moves with 3D motion sensor technologies. Preserving the upper extremity function is critical for maintaining the ability for self-care and other activities of daily living, that directly influence quality of life and independence. In addition to safety and tolerability, secondary endpoints include Muscle Fat Infiltration, or MFI, an important marker of disease pathology and self-reported outcomes such as the Patient Global Impression of Change, or PGIC, and quality of life measures. These will include health care utilization questionnaires that will inform our thinking about payer strategy as we prepare for a potential commercial launch. REACH was designed as a highly efficient 48-week trial and is intended to be registration enabling both in the U.S. and in ex-U.S. geographies. We are confident that we have selected reliable measures of disease progression and we hope to demonstrate meaningful advantages for losmapimod compared to placebo. Encouraging, our Phase IIb ReDUX4 trial demonstrated significant improvement in RWS relative to placebo at 48 weeks. Furthermore, top line results from the ongoing open-label extension shows that participants in the initial treatment arm who continue to receive losmapimod has demonstrated durability of effect through a 96-week period. Additionally, patients who crossed over from placebo to losmapimod, after the initial 48-week trial period, showed improvement in slowing of disease progression as measured by RWS mean change from baseline. We believe these data support the disease-modifying potential and long-term benefit of losmapimod. To date, losmapimod has been dosed in over 3,600 patients across multiple therapeutic areas and results from ReDUX4 and our open-label extension trial provide evidence of an encouraging safety and tolerability profile. We have reached alignment with regulators in the U.S. and Europe on the primary endpoint for REACH. And as we drive our clinical path forward for losmapimod, we'll continue to leverage the large safety database, and build on our learnings from ReDUX4, an ongoing open-label extension trial. Now turning to other corporate matters. We announced this morning that Dr. Santiago Arroyo, our Chief Medical Officer, who joined us in November 2022 designed from the company late last week, effective March 7 to pursue another opportunity. We are excited to appoint Dr. Iain Fraser, as interim CMO effective today. Dr. Fraser brings over 2 decades of experience in advancing therapies through early and late-stage development and possesses deep expertise in regulatory affairs. He most recently served as Vice President and Clinical Fellow at AlloVir, an Elevate Bio Company. He previously held clinical development roles of increasing responsibility at Abide Therapeutics that was acquired by Lundbeck in 2019. And prior to that was part of the clinical development organization in Merck. In addition to Dr. Fraser joining us, Dr. Alan Ezekowitz member of the Fulcrum Board of Directors since February 2017, will serve as a senior clinical advisor to ensure program continuity. With that, I will turn the call over to Esther to provide an update on our financials.

Thank you, Robert. I will first provide an update on our cash position and runway guidance, and then review fourth quarter and full year 2022 financial results. We ended December 31, 2022, with cash, cash equivalents and marketable securities of $202.9 million compared to $218.2 million in December 31, 2021. In January 2023, we strengthened our balance sheet and cash position following an underwritten public offering of 9.6 million shares of common stock at a public offering price of $13 per share. The gross proceeds from this offering were approximately $125 million before the deduction of underwriting discounts and other offering-related expenses and resulted in approximately -- approximate net proceeds of $117 million to the company. We continue to operate from a strong financial position with a pro forma cash balance of approximately $320 million and expect our cash, cash equivalents and marketable securities to fund our operating expenses into mid-2025, assuming a tiny resolution of the FTX-6058 clinical hold. Now turning to the fourth quarter and full year 2022 financials. Collaboration revenue was $0.7 million for the fourth quarter of 2022 and $6.3 million for the full year 2022, compared to $5.1 million for the fourth quarter of '21 and $19.2 million for full year '21. The decrease was primarily due to the previously announced termination of Fulcrum's collaboration agreement with Acceleron Pharma. Total operating expenses were $28.7 million for the fourth quarter of '22 and $118.9 million for the full year '22, compared to $28.6 million for the fourth quarter of '21 and $100.2 million for full year '21. The increase was primarily due to increased employee-related costs, including increased stock-based compensation and increases in R&D, and including a $5 million milestone paid to GSK upon the initiation of the Phase III REACH trial. Net loss was $26.1 million for the fourth quarter of '22 and $109.9 million for full year '22, compared to a net loss of $23.5 million for the fourth quarter of '21 and $80.8 million for full year '21. With that, I'll turn the call back to Robert for closing remarks.

Thank you, Esther. We remain focused on driving our clinical programs forward, exploring opportunities to leverage the value of our research engine and executing on our corporate objectives. We remain on track to complete enrollment for our FSHD Phase III REACH trial in the second half of this year, and are committed to working with the FDA to resolve the clinical hold on FTX-6058. We will provide updates as communication with the FDA proceeds. I want to reiterate that we are optimistic there is a path forward to resolve the full clinical hold on FTX-6058, and we are working diligently to enable FTX-6058 expeditious return to the clinic. Before we conclude today's call, I want to extend my sincere appreciation and gratitude for the foundational work that has brought us closer to treating the root cause of genetically defined [indiscernible] diseases and bringing transformative therapies to patients. I would like to thank the entire Fulcrum team, our investors and the many people who have been supportive along the way, including our patients and their families. With that, we are happy to take questions Operator?

[Operator Instructions] We'll take a first question from the line of Matthew Harrison with Morgan Stanley.

Great. I guess two for me. So first, are you expecting to request the Type A meeting with the FDA? And could you maybe just talk a little bit about what your current plan is given that you now have the full letter around handling the clinical hold? And then secondly, I guess, just specifically on the hematologic malignancies that you observe in the RAT study, do you expect that you could potentially exclude certain patients from the clinical study to change the risk? Or do you think -- and I know it's very early, do you think a new toxicology study may be necessary?

Thank you, Matt. Just taking your second question first. We -- as we move forward in the dialogue with the FDA, they noted that they were really encouraging us asking us to define a patient population that may benefit from the elevations in HbF and then, therefore, address the benefit/risk ratio. As you probably know, numerous other studies that have gone on in the sickle cell arena have defined higher risk, patients that are at higher risk for things like VOCs. And we're taking a close look at those studies. Our study was essentially an oncoming study in sickle cell patients. And moving forward, one of the things we're considering is what the higher risk population, sickle cell population will look like. The clinical hold noted that the profile of malignancies observed in the studies of 6058 was similar to that observed with other inhibitors of PRC2. And we believe that we can address all other questions with the data that we have in hand.

Thanks, Robert. And just a follow-up, are you planning to request the Type A meeting or not? And I don't know if you can -- if you know that yet.

Yes. We're still working through exactly what our strategy is going to be moving forward. I meant to mention that. Certainly, we've had the letter almost immediately after we had the call with them, which really does us a jump start on putting that plan together. And we'll keep updating as the plan develops.

We take the next question from the line of Matt Biegler with Oppenheimer.

What's the best comp here as it relates to cancer risk? Is it tazemetostat, that's an EZH1 inhibitor, but it also works on the PRC2 access. It was recently approved and think lymphoma. Is there a reason to think that cancer risk might be lower with your drug? Because I think you're only reducing methylation by about 70%, whereas I think tazemetostat completely ablates it. So I'm just kind of curious what your thoughts are there.

Yes. That's precisely correct. So tazemetostat improved in epithelioid sarcoma as well as relapsed refractory follicular lymphoma and that's, therefore, from the information that's been provided on tazemetostat. We have the most insight into what happens when you fully inhibit the PRC2 complex. In the label for tazemetostat, they noted neutropenia, thrombocytopenia, anemia as reasons for dose modification of tazemetostat. And I'd point out that in healthy volunteers in our sickle cell population, we've not observed any of those effects. So we think there's a fundamental difference in the clinic and how [indiscernible] 6058 is interacting and affecting hematologic development versus how an EZH2 inhibitor like tazemetostat is affecting that. Does that answer your question?

Yes, that makes sense. I also -- I wanted to follow-up about the prior question about identifying a patient population with maybe the [indiscernible] to benefit. Do you foresee something like including only patients with higher baseline HbF? And just remind us, has there been a link between baseline HbF and HbF induction on drug yet?

So before I let Alan address the higher risk population, let me speak to the baseline question. We have not seen a relationship between higher baseline HbF and the degree of induction of HbF that we're seeing with FTX-6058. That is, we now have patients whose baseline range from about 4% HbF to up to about 20% HbF. And certainly, in the 6-milligram data where we have the most patient experience independent of where they start and independent on whether they are on hydroxyurea or not, we see similar increases of about 10% HbF. Alan, maybe you want to speak to the higher-risk population question?

Yes. The all-comers study that we did, which was an open-label study in Phase Ib, we recognized that we need incidents because we need a baseline of VOC and guided by some of our -- the studies that have been done with gene therapy and gene manipulation therapies, increasing the frequency of VOCs as well as the seriousness of other complications like chest syndrome and other episodes are parts of the population that we would like to exclude. And the strategy would be just like that, we would start with a high-risk population and then expand that out as we go along.

We take the next question from the line of Madhu Kumar with Goldman Sachs.

This is Rob on for Madhu. First, how does the PRC2 complex inhibition you observed compared to other PRC2 drugs used in cancer? And then what dose of 6058 do you preclinically observe hematologic malignancy risk? And what does that translate to clinically?

Yes. So we're -- as we've discussed previously, we're getting about 70% to 80% inhibition of the H3K27 Trimethylation mark. Tazemetostat, where we have the most insight in the PRC2 inhibitions, getting 80% to 100%. And that appears to be the best differentiation that we can compare. We've not really discussed the degree of preclinical exposure related to the malignancies related to the clinical dose that we're using. But we're confident that we have the ability to define and benefit risk as we move forward in sickle cell patients.

We take the next question from the line of Judah Frommer with Credit Suisse.

Yes. Just following up on defining that benefit/risk profile. Have you had further clarity from FDA on whether potentially gene editing programs are precedent for definition of that risk? Or are they more leaving it up to you? And is that what you're particularly working on if you feel the preclinical data set you have is sufficient currently?

Yes. So we've not had specific conversations nor is there any indication from them that they're making that comparison. Certainly, the gene editing approaches have risks associated with them that they are discussing with the FDA. And we think that provides clarity on how we can define a population in which the benefit is greater.

Okay. And is your sense that defining that population would be potentially a step into getting back to the broader sickle cell population or that you could be restricted to that defined higher risk population?

It's a little early for us to know that yet because, of course, that involves discussions with the FDA. Our current plan is to define what and discuss with the FDA what we think that higher risk population is. And as Alan said, once we demonstrated beneficial -- what we think will demonstrate a beneficial benefit/risk ratio in that higher risk population, it provides the opportunity for us to continue discussions on additional populations.

Okay. And then just lastly, just curious, we've seen some gene editing programs kind of drop out in sickle cell recently, coincidental timing in your view. Could there be anything that maybe FDA communicated to those programs that might be related to here. And then maybe just more kind of general unmet need sickle cell from FDA's perspective, you got any incremental insight on that, which seems still to be pretty large, but understandably, risk benefit needs to be defined.

Yes. I think, unfortunately, for sickle cell patients, it's coincidental that all this data came up at the same time. There is no indication in our correspondence that we received in the clinical hold letter that there was any read-through from the gene editing world.

We'll take our next question from the line of Dae Gon Ha with Stifel.

I'll stick with the nonclinical observations, if I may. Can you go into a little bit more detail around what exactly were the observations and the duration at which point you observe this? There were a couple of, I guess, references earlier about tazemetostat, but that, I guess, label indicated about 9 months before they saw that. So when in your RAT and potentially DOGS, I believe the in-life portion is complete. Have you seen that? And then related to that going forward, I guess, as you contemplate more nonclinical studies, what do you define as a bar for disclosure or materiality to disclose to the public?

Just to remind you, we had done 4, 13, 17 and 26-week studies in rats, and 4 weeks, 13 weeks and 39-week studies in dogs. We've just received the draft report on the 39-week study in the dogs. And certainly, much of that material was available to the FDA at the initial IND as well as provided and the updates that I referred to earlier in my script. We've not disclosed when during the course of those treatments from malignancies appeared. But certainly, the FDA was comfortable with the healthy volunteer study as well as the initial sickle cell population. We will continue to provide updates as we have correspondence and dialogue with the FDA, on how we define that benefit risk and particularly the plans and discussions with not only increasing the benefit side, but also what they would -- and we would like to do to address the risk on...

Dan Gon, do you have any further questions?

No. Thank you very much.

We'll take the next question from the line of Ed Tenthoff with Piper Sandler.

So I think we've extensively covered 6058. So good luck on that. And I think it's important, this drug could really differentiate with the broadest population possible I think if you're able to ultimately establish safety in that population. I'm looking for to hear more as this progresses. So looking at losmapimod maybe just kind of remind us where you see this drug most appropriate? Is this a drug that would be broadly applied to? Or again, I know we're working with reachable workspace as the primary endpoint, but where do you kind of see as the most appropriate patients FSHD for that drug?

Yes, we do think this is a drug that has potential to be broadly applicable in the FSHD population. I'll remind you that the population based on a white paper and voice of the patient has repeatedly advocated for an agent that stabilizes the disease at the stage that they're at. It's a disease of adaptation. And certainly, with the reachable workspace results that we saw in the ReDUX4 study, we were able to stabilize patients where they were and patients around placebo declined and then stabilize when they crossed over to the open-label extension. That trial took patients who were -- and if you will, a broad patient population who are showing symptomology, but we're not yet in a wheelchair. So in sort of 2 to 4 range of the clinical scale that's used in FSHD. And that's where the bulk of the population lies. So we think it's broadly applicable across a very broad patient population.

Great. Excited for that data complete enrollment this year. And that data, hopefully, next year.

We take next question from the line of Joseph Schwartz with SVB Securities.

I was wondering, have you looked at the impact of FTX-6058 on erythroid maturation via flow cytometry on CD34 cultures to determine that it isn't inducing maturation arrest. And a related question, have you done any red blood cell viscosity deformity, morphology and [indiscernible] on the patients treated so far? And what about [SL] data in order to be confident that FTX is promoting the development of quality RBC.

Yes. We have looked at the red cell differentiation of hematopoiesis and really don't see any effect. And that's consistent with the correction of anemia that we're seeing in the patient population. Certainly, we didn't see any impact on erythroid maturation in vitro or in vivo studies. One potential data that you might focus on is the reduction in the absolute particular site count. But that's consistent with ameliorating the anemia. So -- and there's no other evidence or an effect on the red cell differentiation. In terms of the formability of the red cell, what we've looked at is the RDW the distribution work, which is sort of a surrogate for the formability. And as we showed at 6 and also as we're seeing at 12, we get normalization of those parameters. So that's consistent with preventing the sickling event from occurring. We're still analyzing the [indiscernible] cells. I'll remind you in the preclinical studies, we saw all of the cells responding that is the percent of cells were pancellular or the raise in HbF was pancellular.

Okay. And then will you be reporting any more data on these patients, partially those in [indiscernible] an off drug?

Yes. As we move forward and as we provided all the data we have as of -- I forget the exact cutoff date, but we've provided all the data we have in hand currently and we'll be considering how we provide updates on these patients moving forward. Certainly, you're still interested and we're still following them.

We'll take the next question from the line of Tazeen Ahmad with Bank of America.

Robert, just to clarify maybe on time lines, if we could. Do you think that if you're correct in that you think you'll be able to answer all the questions the agency has with data that's in-house? Do you think that the clinical hold could be listed in this calendar year? Or could it be something that could take a while? And then secondly, can you remind us of what next-gen assets you have in-house? How you quantified themselves for and what their profile might be in terms of differentiating on the safety side?

So we've not -- as we're still engaging in dialogue with the FDA, it's a little hard for me to predict how quickly the clinical hold will be lifted because, as you know, there's timing that we don't control. We're anticipating it will be at least 4 to 6 months at the earliest. We have a number of other programs in both the sickle cell as well as the muscle dystrophy stage that are at the preclinical drug discovery stage, and we'll be discussing those more in the future as you probably recall, we do not anticipate filing another IND this year.

Were that -- was the feedback from the FDA change that plan at all?

No.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would now like to turn the floor back over to Robert Gould for closing comments. Over to you, sir.

Thank you very much to everyone for your time and attention today. Please stay safe and healthy, and this completes today's call. Thank you.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.