FULC - An Updated View On Fulcrum Therapeutics

2023-09-25 14:10:47 ET

Summary

• Fulcrum Therapeutics, Inc. has had some key potential catalysts resolved positively recently.
• These included the FDA lifted the clinical hold on Fulcrum's sickle-cell disease candidate, allowing the company's Phase 1b trial to move forward.
• The company has also made progress in filling management positions and has initiated a Phase 3 study for its late-stage candidate, Losmapimod.
• An updated analysis around Fulcrum Therapeutics follows in the paragraphs below.

Leverage is a two-edged sword. The edge that can cut you, cuts deeper. ”? Naved Abdali.

I last took a look at Fulcrum Therapeutics, Inc. ( FULC ) in April of this year. In that article I noted the company had some key potential catalysts on its near-term horizon. The conclusion was that the stock seemed to merit a small, covered call holding at the time.

The stock had moved up since that piece, as one of those potential catalysts was resolved positively for the company. However, the stock has recently given up most of those gains as the overall market has weakened significantly over the past month. Is it worth buying the dip in this rollercoaster of a stock? An updated analysis follows below.

Company Overview:

This clinical-stage biotech concern is based in Cambridge, MA. The company is focused on finding treatments for genetically defined afflictions with high unmet medical needs. Currently, the stock trades just over four bucks a share and sports an approximate market capitalization of $260 million.

Recent Developments:

On August 22nd, the company announced that the FDA had lifted the clinical hold around Fulcrum's sickle-cell disease {SCD} candidate FTX-6058. With the hold now lifted, the company's early-stage Phase 1b trial can now move forward. The hold was originally placed on the Investigational New Drug or IND application the company filed on FTX-6058.

There also has been some management turnover at Fulcrum since we last revisited with the company as it filled some openings. The firm appointed a new CEO in May and a new CFO in August. Of note, the new CFO previously served in the same position at a company called ReViral that was purchased by drug giant Pfizer ( PFE ) in 2022.

The company has continued to push its most promising late-stage candidate, Losmapimod in development. Losmapimod is a selective p38?/? mitogen activated protein kinase ((MAPK)) inhibitor that is targeting the treatment of Facioscapulohumeral muscular dystrophy, or FSHD.

FSHD is a rare, progressive and disabling disease that results in severe skeletal muscle weakness. There are no current-approved treatments for this rare affliction. FSHD affects some 30,000 individuals in the U.S. In June, the company initiated a 48-week Phase 3 study "REACH" to evaluate this compound to treat FSHD. The primary endpoint for this trial will be the change from baseline in reachable workspace or RWS, which is a quantitative measure of upper extremity range of motion and function that specifically evaluate shoulder and arm mobility using 3D motion sensor technology. Top line data from REACH is expected out in late 2024.

Analyst Commentary & Balance Sheet:

Since the clinical hold was lifted, both Stifel Nicolaus ($11 price target, up from $4 previously) and H.C. Wainwright ($14 price target) have upgraded the stock to a Buy. Meanwhile, Oppenheimer ($16 price target) reissued its Buy rating Goldman Sachs ($5 price target) stuck with its Sell rating on the shares, as did Bank of America ($4.50 price target). Stifel within its Fulcrum upgrade noted that " investors shouldn't ignore the potential with phase 3 asset losmapimod for acioscapulohumeral muscular dystrophy."

Approximately seven percent of outstanding float in the shares is currently held short. There has been no notable insider activity in the stock since January of this year. Fulcrum Therapeutics ended the second quarter with just under $280 million in cash and marketable securities on the balance sheet . The company had a $23.8 million net loss for the quarter, and management has stated that current cash balances are adequate to fund all planned activities into mid-2025.

Verdict:

The company has made progress since I last looked at it. It got the clinical hold lifted on its most promising early-stage candidate, and the company also filled the holes in its C-suite. Finally, the pivotal Phase 3 "REACH" study has kicked off.

I recently " rolled " my covered call holdings in Fulcrum Therapeutics, Inc. to move to a later dated expiration and pick up an additional option premium as the story seems to be improving around Fulcrum Therapeutics and the company has a couple of promising " shots on goal" as well.

That said, this stock only should be considered by risk-tolerant investors for a small position within a well-diversified biotech portfolio.

Leveraging existing resources is innovation’s sweetest play .”? Richie Norton.

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