Fulcrum Therapeutics (NASDAQ:FULC) Q1 2020 Earnings Call

0:00 Good morning and welcome to Fulcrum Therapeutics' first quarter 2020 conference call. Currently, all participants are in listen-only mode. There will be a question and answer session at the end of this call. I would now like to turn the call over to Christy Ward, Director of Investor Relations and Corporate Communications at Fulcrum. Please proceed.

0:21 Thank you, Demetri. 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, www.ulcrumtx.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 timelines 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 discussion of certain risks and uncertainties associated with our business.

1:21 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 Brian Stewart, 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 Brian 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?

1:57 Thank you, Christy. 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 compassion as they continue to support so many during the challenges of COVID-19. Our hearts go out to everyone who has 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'd like to begin by highlighting some of our recent updates and accomplishments.

2:43 Today, we announced an amendment to Redux IV, our Phase IIb trial with losmaphimod in patients with fascioscapulohumeral 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 lesmaphimod in FSHD. I'm pleased to report that we have also received orphan designation from the European Commission for Los Matamad 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.

3:38 We are extremely pleased to have received this designation, further supporting the advancement of Los Matamad's FSHD program. We recently presented dose-dependent target engagement data and Skeletal Muscle from our Phase 1 trial with Lasman and Hamad during a virtual clinical trial session of the Muscular Dystrophy Association meeting. We continue to make progress with FDX6058, 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 FulcrumSeq, 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.

4:37 I'd now like to turn the call over to Diego for an update on the FSHD program. Diego?

4:43 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 DOX4, the root cause of the disease. We at Fulcrum discovered that losmapimod, a selected P38 MAP kinase inhibitor, reduced the expression of DOX4 in preclinical studies. We therefore believe Los Mapimor represents a potential novel therapeutic option for FSHD patients.

5:50 Our own evidence, as well as independent evidence, suggests that we do not have to turn DOX4 off completely to provide benefit. There is a spectrum of DOX4 expression and FSHD presentation that suggests that even an incremental reduction may be beneficial to patients. Those we believe, as do independent researchers, that any reduction in dose-fold-driven gene expression has the potential for benefit to patients. Redux4 is our international Phase 2b double-blind placebo-controlled trial of glosmapimod 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 dose for driven gene expression in affected skeletal muscle. We also completed enrollment in our phase two single site open label trial, which has been impacted by COVID-19, and we are considering next steps.

7:02 Fulcrum is dedicated to maintaining the highest standards in patient and clinician safety in the planning and execution 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 pre-treatment biopsy, followed by a second biopsy at week 16 of the 24-week treatment period.

7:51 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 continued, our team, in collaboration with our investigators, extended the Redux4 trial from 24 to 48 weeks. This allows the 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, roll into the open-label extension.

8:45 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 enrolling the trial while 12 have already completed and have enrolled 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' dogs for 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.

9:45 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 times up and go, muscle function measures, and patient-reported outcomes. From both independent researchers as well as our own preparatory studies, we know the DoxFold gene signature is stable over time in this population. And we believe that the longer we're able to treat patients, the greater the potential benefit losmapimod may have on the root cause of the disease.

10:31 We strongly believe these changes to the ReduxFold 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 Redux IV and will allow us to collect essential data to support continued dialogue with regulators. I'll now turn the call over to Owen.

11:06 Owen? 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.

11:52 We have also advanced our work on FulcrumSeq, a 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 perturbogen libraries. Understanding their effects on gene expression is fundamental to our therapeutic strategy to modulate the genetic root cause of disease. FulcrumSeq 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.

12:41 I'd 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 enhance health and safety guidelines. Likewise, our hemoglobinopathy program has continued to advance towards the IND filing. Our approach has focused on the upregulation of fetal hemoglobin, which could be beneficial for both sickle cell disease and beta thalassemia. By increasing levels of HPF 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 HPF have been shown to be associated with improved prognosis and outcomes, suggesting that HPF may be a surrogate endpoint in future clinical trials.

13:40 We're very pleased with our recent progress. Our clinical candidate, FTX6058, has been profiled broadly in preclinical in vitro and in vivo models of sickle cell disease. and we've seen robust elevation of HPF 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 and 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 one trial by the end of the year.

14:34 With that, I will now turn the call over to Brian for an update on our financial results for the quarter. Brian?

14:40 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 of 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 Los Mapamad and 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 31st, 2020 were $14.5 million compared to $34.6 million in the first quarter of 2019.

15:28 Included in that $34.6 million was $25.6 million of one-time costs associated with the issuance of Series B convertible preferred stock under the company's license agreement with GSK for the rights to Los Mapamont. Excluding these one-time costs, the increase of $5.5 million was primarily due to increased costs related to the advancement of Los Mapamon 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.

16:18 Overall, we remain undeterred in our mission and continue to expect several upcoming catalysts. We'll report the interim analysis from Redux 4 in the third quarter of this year. We'll initiate the Phase 1 trial with FTX 6058 and 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 in 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.

17:07 Operator, we're now ready for questions. Operator? Ladies and gentlemen, to ask the question at this time, you need to press star, then 1 on your touch-tone telephone. If your question has been answered or you actually need to remove yourself from the queue, please press the penalty. Please stand by while we compile the Q&A roster. And our first question comes from Matthew Harrison with Morgan Stanley.

17:55 You may proceed. This is Kostasson for Matthew. Thank you for taking our questions. 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 you expect the data only to be directional to show you an improvement or not?

18:32 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. Twenty-five 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 III planning. Okay, thank you. And a follow-up question. Will you need to recruit additional subjects, or do you believe you have all the subjects you need at this point?

19:13 We have completed recruitment. We believe we have all the subjects we need. Okay. And 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, 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.

19:58 Yes, when we amended the protocol, we carefully considered Exactly what you're referring to. So we build some windows, time windows around the 36 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. Okay, thank you very much. And our next question comes from Joseph Schwartz with SCV Lerink. You may proceed.

20:43 The 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 REDUX4 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?

21:30 Yes, 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.

22:31 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.

22:48 And are you able to bring patients in and just strike while the iron's 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, you know, 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, you know, require you to take alpha hits?

23:21 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 that are 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.

24:04 That's very helpful. Thank you. 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 Redux 4? Can you provide any color on that front?

24:30 Yes, the open-label study is a single site, so you don't have this opportunity we have in Redux 4 when 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 have had valuable learnings from that trial, which has always been the goal to inform what we don't reduce for. So in that sense, we believe this trial has been helpful.

25:12 That's helpful. Thanks for the color. And our next question comes from Tazeen Ahmad with Bank of America. You may proceed.

25:29 I just wanted to clarify your powering assumption. So you previously said that the study would be powered to show a 50% reduction of Bucks 4 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?

25:51 Hi, Jasine. This is Robert. Just a slight correction. I don't believe that we did power the study for a 50% reduction in the Dux fora. That was not one of the original assumptions. But I'll let Diego speak to the powering assumptions we made.

26:11 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 the 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. Nothing has changed about the power assumptions.

26:45 Okay, 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?

27:07 Yeah, thanks, Suzanne. This is Robert again. You know, one of the things that we've really been struck with is the cooperation of the patients and their willingness to take Lost Math Mod. Just to remind you, as you know, it's an oral drug taken twice daily, seven and a half 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. 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.

27:53 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 most of the patients that are currently in the study, if not all of them that are currently in the study.

28:12 Okay, 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 at both time periods? Because it's a big gap in between the two.

28:34 Yes, this is Diego. So we have done our own preparatory study to look at the stability and variability of the DOX4 gene signature and their natural history. 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. We know from these two studies that these dogs for 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 we collect the repeated biopsies within that interval, we don't expect any impact on greater variability or loss of signature.

29:35 So 36 really came in terms of building flexibility for patients and sites who had not obtained the 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. 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. Ladies and gentlemen, if you have any questions or comments at this time, please press stars in one.

30:45 And our next question comes from Ted Tinthoff with Piper Sandler. You may proceed.

30:53 Well, and thank you for the update. I'm wondering what changes this additional time and data may make to a potential registrational study. And would this be something that now would start at some point next year? And, you know, how, you know, it's still early, obviously, we need this data set, but what would you be envisioning for next steps?

31:22 Yeah, Ted. So I think, first of all, the interim analysis, it's a 16-week data. We're doing that in order to gain insight into what our phase three trial design might look like so we can begin that planning earlier. As you know, we had originally projected the top line data in the third quarter to begin that planning process. And that planning process, we think, can be really informed by this 16-week interim analysis data that we're doing. And again, to remind you, any kind of conditional approval would require a confirmatory trial anyway, and that was the point of having the top-line data available so we could begin that planning process.

32:08 Diego, do you want to add a little more detail on that?

32:11 No, I think if anything, as we said, having a longer duration of treatment against placebo can only make the study better and more informative.

32:26 Yep, makes sense. Excellent. Looking forward to the interim update. Thanks so much for the time. Ladies and gentlemen, this now concludes the Q&A portion of today's conference. I would now like to turn it over to Robert Gold for any closing remarks.

32:44 I want to thank you all for joining us today and for your interest in support of Fulcrum. Please know that we are all hoping that you and your families remain healthy and safe. And thanks again for your time today. Ladies and gentlemen, thank you for attending today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.