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Fulcrum Therapeutics Proposes Terms For IPO

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Quick Take

Fulcrum Therapeutics (FULC) has filed to raise gross proceeds of $76.5 million from a U.S. IPO, according to an S-1/A registration statement.

The firm is developing treatments for genetically-defined diseases with high unmet medical need and an initial focus on rare diseases.

FULC is still in early Phase 1 safety trials for its lead candidate, so I view the IPO as more suited to long-term hold institutional investors.

Company & Technology

Cambridge, Massachusetts-based Fulcrum was founded in 2016 to develop treatments for genetically-defined diseases with high unmet medical need and an initial focus on rare diseases.

Management is headed by President, CEO and Director Robert J. Gould, who has been with the firm since its inception and was previously President and CEO at Epizyme.

Fulcrum has developed a product engine that is capable of identifying small-molecule drug targets that can be modulated regardless of the particular underlying mechanism of gene misexpression.

Using its product engine, the company has identified potential candidates for the treatment of facioscapulohumeral muscular dystrophy [FSHD], sickle cell disease [SCD], and beta-thalassemia [BT].

Fulcrum’s lead drug candidate is ‘losmapimod’ that is currently being developed for the treatment of FSHD.

Management commenced a Phase 1 clinical trial in February 2019 to obtain safety and tolerability data for its lead drug candidate in patients with FSHD and anticipates to commence a Phase 2b clinical trial in mid-2019.

Additionally, management expects to file an Investigational New Drug application with the US FDA in mid-2020 for the company’s FTX-HbF, a product candidate for the treatment of SCD and BT.

In 2019, management plans to screen for drug candidates for the treatment of Duchenne muscular dystrophy (UTRN gene), Friedreich ataxia (FXN gene), Myotonic dystrophy 1 (DMPK gene) and alpha-Synucleinopathies (SNCA gene).

Below is the current status of the company’s drug development pipeline:



Source: Company registration statement

Investors in Fulcrum included 6 Dimensions Capital, Sanofi (SNY), NS Investments, Section 32, Leerink Partners, Foresite Capital, Fidelity Management and Research, Casdin Capital, GV, and Third Rock Ventures. Source: Crunchbase

Market & Competition

FSHD is one of the nine primary types of muscular dystrophy that affects both adults and children, with an estimated prevalence at around 1 in 20,000 people, despite data a 2014 Dutch study showing a much higher prevalence of 1 in 8,333.

The disease is projected to affect about 870,000 individuals worldwide, although this number could be very low due to undiagnosed cases.

Major competitors that provide or are developing treatments include:

  • Acceleron Pharma (XLRN)

  • Novartis (NVS)

  • Global Blood Therapeutics (GBT)

  • GlycoMimetics (GLYC)

  • Pfizer (PFE)

  • bluebird bio (BLUE)

  • Aruvant Sciences

  • EpiDestiny

  • Novo Nordisk (CPH:NOVO-B)

Source: Sentieo

Financial Performance

FULC’s recent financial results are typical of a development stage biopharma firm in that they feature no revenue and significant R&D and G&A expenses associated with advancing its pipeline of drug treatment candidates.

Below are financial results from the firm’s registration statement:



Source: Company registration statement

As of March 31, 2019, the company had $62.5 million in cash and $10.1 million in total liabilities. (Unaudited, interim)

IPO Details

FULC intends to raise $76.5 million in gross proceeds from an IPO of 4.5 million shares of its common stock at a midpoint price of $17.00 per share, not including customary underwriter options.

No existing shareholders have indicated an interest to purchase shares at the IPO price. Since it is typical for life science IPOs to have some form of investor support, the absence of this element is a negative signal to prospective investors.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $334.3 million.

Per the firm’s latest filing, it plans to use the net proceeds from the IPO combined with its existing cash as follows:

approximately $45.0 million to advance losmapimod for FSHD

approximately $15.0 million to advance our hemoglobinopathies program;

approximately $30.0 million to fund our ongoing product engine and discovery efforts; and

the remainder for working capital and other general corporate purposes.

Management’s presentation of the company roadshow is not available.

Listed underwriters of the IPO are Morgan Stanley, BofA Merrill Lynch, and SVB Leerink.

Commentary

Fulcrum is seeking public capital to advance its pipeline through Phase 1 safety trials.

The firm has raised $170 million from top tier corporate and venture capital firm investors.

The market opportunity for muscular dystrophy-related diseases is significant and there are numerous and large pharma firms developing treatments for variations of the disease.

As to valuation, at an enterprise value of $334 million, the IPO is priced within the normal range for life science floatations.

However, FULC is still very early stage, with only its lead candidate having recently begun Phase 1 safety trials.

While the firm may have a positive catalyst with a successful readout of its Phase 1 results, if that occurs, the hold period for FULC’s stock should be considered in years, not months.

Accordingly, I view IPOs like these as more suited to long-term hold institutional investors.

Expected IPO Pricing Date: July 17, 2019.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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