fulc-10q_20210331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number: 001-38978

 

FULCRUM THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-4839948

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

26 Landsdowne Street
Cambridge, Massachusetts 

02139

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 651-8851

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

FULC

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  

As of April 29, 2021, the registrant had 32,679,596 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


 

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," “outlook,” "plan," "potential," "predict," "project," "should," "target," "would," and the negative version of these words and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under the “Risk Factors” section and include, among other things:

 

 

our ongoing clinical trials of losmapimod, including our ongoing Phase 2b and Phase 2 open label clinical trials for the treatment of facioscapulohumeral muscular dystrophy, or FSHD;

 

our ongoing Phase 1 clinical trial of FTX-6058 in healthy adult volunteers and our planned clinical trial of FTX-6058 in patients with sickle cell disease, or SCD;

 

the impact of the COVID-19 pandemic on our business and operations and our future financial results;

 

the initiation, timing, progress and results of our drug target discovery screening programs;

 

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

 

our plans to develop and, if approved, subsequently commercialize losmapimod, FTX-6058 and any other product candidates, including in combination with other drugs and therapies;

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for losmapimod, FTX-6058 and any other product candidates;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents, and marketable securities;

 

the potential advantages of our product candidates;

 

the rate and degree of market acceptance and clinical utility of our products;

 

our estimates regarding the potential market opportunity for our product candidates;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position;

 

the progress and results of our collaborations with Acceleron Pharma Inc. and MyoKardia, Inc., a wholly owned subsidiary of Bristol-Myers Squibb Company;

 

our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and needs for additional financing;

 

the impact of government laws and regulations;

 

our competitive position;

 

developments relating to our competitors and our industry;

 

our ability to maintain and establish collaborations or obtain additional funding; and

 

our expectations regarding the time during which we will be an emerging growth company or a smaller reporting company as defined under the federal securities laws.

i


 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the "Risk Factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

SUMMARY RISK FACTORS

Our business is subject to a number of risks that if realized could materially affect our business, financial condition, results of operations, cash flows and access to liquidity. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. Our principal risks include the following:

 

We have incurred significant losses since our inception. Our net loss was $70.8 million for the year ended December 31, 2020 and $17.0 million for the three months ended March 31, 2021. We expect to incur losses over the next several years and may never achieve or maintain profitability. As of March 31, 2021, we had an accumulated deficit of $238.6 million.

 

 

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue our Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD and continue our Phase 1 clinical trial of FTX-6058 in healthy adult volunteers, prepare for our planned clinical trial of FTX-6058 in patients with SCD, and continue research and development and initiate additional clinical trials of, and seek regulatory approval for, these and other product candidates.

 

 

The ongoing COVID-19 pandemic has and may continue to affect our ability to initiate and complete current or future preclinical studies or clinical trials, disrupt regulatory activities or have other adverse effects on our business and operations. In addition, this pandemic may continue to adversely impact economies worldwide, which could result in adverse effects on our business and operations.

 

 

We are early in our development efforts, and we only have two product candidates in clinical trials. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

 

 

We may not be successful in our efforts to use our product engine to build a pipeline of product candidates. A key element of our strategy is to use our proprietary product engine to identify and validate cellular drug targets that can potentially modulate gene expression to address the root cause of rare diseases, with an initial focus on identifying small molecules specific to the identified cellular target.

 

 

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. The results of preclinical studies and early clinical trials may not be predictive of future results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

 

 

Because we are developing some of our product candidates for the treatment of diseases in which there is little clinical experience and, in some cases, using new endpoints or methodologies, such as the measurement of DUX4-driven gene expression in muscle biopsies in our Phase 2b clinical trial of losmapimod for the treatment of FSHD, the U.S. Food and Drug Administration or other regulatory authorities may not consider the endpoints of our clinical trials to predict or provide clinically meaningful results.

 

 

If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

 

 

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

 


 

 

 

We rely, and expect to continue to rely, on contract manufacturing organizations to manufacture our product candidates. If we are unable to enter into such arrangements as expected or if such organizations do not meet our supply requirements, development and/or commercialization of our product candidates may be delayed.

 

 

We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, which may harm our business.

 

 

We have entered into, and may in the future enter into, collaborations with third parties for the discovery, development or commercialization of product candidates, including our collaborations with Acceleron Pharma Inc. and MyoKardia, Inc. If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates and our business could be adversely affected.

 

 

If we are unable to obtain, maintain, enforce and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

 

 

If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

1

 

Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020

2

 

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

3

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

4

 

Notes to Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 6.

Exhibits

74

Signatures

75

 

 

 

 


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Fulcrum Therapeutics, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

100,745

 

 

$

57,052

 

Marketable securities

 

 

43,111

 

 

 

55,862

 

Accounts receivable

 

 

 

 

 

2,000

 

Unbilled accounts receivable

 

 

532

 

 

 

531

 

Prepaid expenses and other current assets

 

 

2,599

 

 

 

4,065

 

Total current assets

 

 

146,987

 

 

 

119,510

 

Property and equipment, net

 

 

7,834

 

 

 

8,397

 

Restricted cash

 

 

1,092

 

 

 

1,092

 

Other assets

 

 

563

 

 

 

578

 

Total assets

 

$

156,476

 

 

$

129,577

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,797

 

 

$

4,079

 

Accrued expenses and other current liabilities

 

 

5,236

 

 

 

7,267

 

Deferred lease incentive, current portion

 

 

469

 

 

 

469

 

Deferred revenue, current portion

 

 

12,129

 

 

 

14,910

 

Total current liabilities

 

 

22,631

 

 

 

26,725

 

Deferred rent, excluding current portion

 

 

1,663

 

 

 

1,649

 

Deferred lease incentive, excluding current portion

 

 

2,934

 

 

 

3,051

 

Deferred revenue, excluding current portion

 

 

1,494

 

 

 

2,971

 

Total liabilities

 

 

28,722

 

 

 

34,396

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized; 32,677,454 and 28,067,402 shares issued as of March 31, 2021 and December 31, 2020, respectively; 32,594,436 and 27,941,566 shares outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

33

 

 

 

28

 

Treasury stock, at cost; no shares as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

366,344

 

 

 

316,775

 

Accumulated other comprehensive loss

 

 

(4

)

 

 

(2

)

Accumulated deficit

 

 

(238,619

)

 

 

(221,620

)

Total stockholders’ equity

 

 

127,754

 

 

 

95,181

 

Total liabilities and stockholders’ equity

 

$

156,476

 

 

$

129,577

 

 

The accompanying notes are an integral part of these financial statements.

1


 

Fulcrum Therapeutics, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Collaboration revenue

 

$

4,789

 

 

$

750

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

16,334

 

 

 

14,482

 

General and administrative

 

 

5,498

 

 

 

5,064

 

Total operating expenses

 

 

21,832

 

 

 

19,546

 

Loss from operations

 

 

(17,043

)

 

 

(18,796

)

Other income, net

 

 

44

 

 

 

344

 

Net loss

 

$

(16,999

)

 

$

(18,452

)

Net loss per share, basic and diluted

 

$

(0.54

)

 

$

(0.81

)

Weighted-average common shares outstanding, basic and diluted

 

 

31,510

 

 

 

22,719

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,999

)

 

$

(18,452

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(2

)

 

 

(53

)

Total other comprehensive loss

 

 

(2

)

 

 

(53

)

Comprehensive loss

 

$

(17,001

)

 

$

(18,505

)

 

The accompanying notes are an integral part of these financial statements.

 

 

 

2


 

 

Fulcrum Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

Paid-In

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

22,654,444

 

 

$

23

 

 

 

 

 

$

 

 

$

237,931

 

 

$

 

 

$

(150,801

)

 

$

87,153

 

Issuance of common stock under employee benefit plans

 

 

36,472

 

 

 

 

 

 

 

 

 

 

 

 

286

 

 

 

 

 

 

 

 

 

286

 

Vesting of restricted stock awards

 

 

102,221

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Repurchase of unvested restricted stock awards

 

 

 

 

 

 

 

 

8,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of treasury shares

 

 

 

 

 

 

 

 

(8,787

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,693

 

 

 

 

 

 

 

 

 

1,693

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(53

)

 

 

 

 

 

(53

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,452

)

 

 

(18,452

)

Balance at March 31, 2020

 

 

22,793,137

 

 

$

23

 

 

 

 

 

$

 

 

$

239,914

 

 

$

(53

)

 

$

(169,253

)

 

$

70,631

 

Balance at December 31, 2020

 

 

27,941,566

 

 

$

28

 

 

 

 

 

$

 

 

$

316,775

 

 

$

(2

)

 

$

(221,620

)

 

$

95,181

 

Issuance of common stock in connection with follow-on offering, net of issuance costs

 

 

4,600,000

 

 

 

5

 

 

 

 

 

 

 

 

 

47,402

 

 

 

 

 

 

 

 

 

47,407

 

Issuance of common stock under employee benefit plans

 

 

11,888

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

 

 

 

93

 

Vesting of restricted stock awards

 

 

40,982

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of unvested restricted stock awards

 

 

 

 

 

 

 

 

1,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of treasury shares

 

 

 

 

 

 

 

 

(1,836

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,073

 

 

 

 

 

 

 

 

 

2,073

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,999

)

 

 

(16,999

)

Balance at March 31, 2021

 

 

32,594,436

 

 

$

33

 

 

 

 

 

$

 

 

$

366,344

 

 

$

(4

)

 

$

(238,619

)

 

$

127,754

 

 

The accompanying notes are an integral part of these financial statements.

3


 

 

 

Fulcrum Therapeutics, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(16,999

)

 

$

(18,452

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

603

 

 

 

539

 

Stock-based compensation expense

 

 

2,073

 

 

 

1,693

 

Net amortization of premiums and discounts on marketable securities

 

 

74

 

 

 

(45

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,000

 

 

 

 

Unbilled accounts receivable

 

 

(1

)

 

 

(325

)

Prepaid expenses and other current assets

 

 

1,466

 

 

 

579

 

Other assets

 

 

15

 

 

 

(20

)

Accounts payable

 

 

920

 

 

 

1,429

 

Accrued expenses and other liabilities

 

 

(2,016

)

 

 

(91

)

Deferred revenue

 

 

(4,258

)

 

 

(425

)

Deferred rent and deferred lease incentive

 

 

(103

)

 

 

(86

)

Net cash used in operating activities

 

$

(16,226

)

 

$

(15,204

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(2,997

)

 

 

(55,837

)

Maturities of marketable securities

 

 

15,674

 

 

 

 

Purchases of property and equipment

 

 

(262

)

 

 

(567

)

Net cash provided by (used in) investing activities

 

 

12,415

 

 

 

(56,404

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in connection with follow-on offering, net of issuance costs

 

 

47,424

 

 

 

 

Principal payments on capital lease obligations

 

 

(13

)

 

 

(12

)

Proceeds from issuance of common stock under benefit plans, net

 

 

93

 

 

 

286

 

Net cash provided by financing activities

 

 

47,504

 

 

 

274

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

43,693

 

 

 

(71,334

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

58,144

 

 

 

97,805

 

Cash, cash equivalents, and restricted cash, end of period

 

$

101,837

 

 

$

26,471

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

1

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment purchases unpaid at end of period

 

$

40

 

 

$

163

 

Public offering costs unpaid at end of period

 

$

18

 

 

$

301

 

 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:

 

 

 

March 31,

2021

 

 

March 31,

2020

 

Cash and cash equivalents

 

$

100,745

 

 

$

25,379

 

Restricted cash

 

 

1,092

 

 

 

1,092

 

Total cash, cash equivalents, and restricted cash

 

$

101,837

 

 

$

26,471

 

 

The accompanying notes are an integral part of these financial statements.

4


 

Fulcrum Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Nature of the Business and Basis of Presentation

Fulcrum Therapeutics, Inc. (the “Company” or “Fulcrum”) was incorporated in Delaware on August 18, 2015. The Company is focused on improving the lives of patients with genetically defined rare diseases in areas of high unmet medical need.

The Company is subject to a number of risks similar to other companies in the biotechnology industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, dependence on key personnel, protection of proprietary technology, reliance on third party organizations, risks of obtaining regulatory approval for any product candidate that it may develop, development by competitors of technological innovations, compliance with government regulations, and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The accompanying consolidated financial statements and footnotes to the financial statements have been prepared on the same basis as the most recently audited annual consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2021 and the results of its operations and its cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021 (the “Annual Report on Form 10-K”).

Sales of Common Stock

On July 22, 2019, the Company completed an initial public offering (“IPO”) of its common stock and issued and sold 4,500,000 shares of common stock at a public offering price of $16.00 per share, resulting in net proceeds of $63.9 million after deducting underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all 112,500,000 shares of outstanding preferred stock automatically converted into 16,071,418 shares of common stock.

On June 9, 2020, the Company issued and sold 4,029,411 shares of common stock to investors in a private placement at a price of $17.00 per share, resulting in net proceeds of $64.3 million after deducting offering costs.

On August 11, 2020, the Company entered into an Equity Distribution Agreement with Piper Sandler & Co. (“Piper Sandler”), as sales agent, pursuant to which the Company may offer and sell shares of its common stock with an aggregate offering price of up to $75.0 million under an “at-the-market” offering program (the “ATM Offering”). The Equity Distribution Agreement provides that Piper Sandler will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. From the initiation of the ATM Offering through March 31, 2021, the Company has issued and sold 550,000 shares under the ATM Offering, resulting in aggregate net proceeds of $5.7 million after deducting issuance costs of $0.2 million.

On January 22, 2021, the Company completed a public offering of its common stock and issued and sold 4,600,000 shares of common stock at a public offering price of $11.00 per share, resulting in net proceeds of $47.4 million after deducting underwriting discounts and commissions and offering expenses.

5


 

Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the sale of shares of common stock in public offerings, a private placement, and the ATM Offering, through issuances of convertible preferred stock, and from upfront payments received from the collaboration and license agreements with Acceleron Pharma Inc. (“Acceleron”), and MyoKardia, Inc. (“MyoKardia”), a wholly owned subsidiary of Bristol Myers Squibb Company. As of March 31, 2021, the Company had an accumulated deficit of $238.6 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts. The Company expects to finance its future cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

The Company expects that its cash, cash equivalents, and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these financial statements. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. As a result, the Company could deplete its capital resources sooner than it currently expects. If the Company is unable to raise additional funds through equity or debt financings when needed, it may be required to delay, limit, reduce or terminate development or future commercialization efforts or grant rights to develop and market product candidates that it would otherwise prefer to develop and market itself.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Fulcrum Therapeutics Securities Corp., which is a Massachusetts subsidiary created to buy, sell, and hold securities. All intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amount of expenses during the reported periods. Estimates inherent in the preparation of these consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued expenses, stock-based compensation expense, and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results could differ from those estimates or assumptions.

Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities, and restricted cash. The Company’s cash, cash equivalents, and restricted cash are deposited in accounts at large financial institutions. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash, cash equivalents and restricted cash are held. The Company maintains its cash equivalents in money market funds that invest in U.S. Treasury securities. The Company’s marketable securities primarily consist of corporate bonds and commercial paper, and potentially subject the Company to concentrations of credit risk. The Company has adopted an investment policy that limits the amounts the Company may invest in any one type of investment. The Company has not experienced any credit losses and does not believe it is exposed to any significant credit risk on these funds.

6


 

Recent Accounting Pronouncements—To Be Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended by various subsequently issued ASUs. The standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Lessees are required to classify leases as either finance or operating leases. If the lease is effectively a financed-purchase by the lessee, it is classified as a financing lease, otherwise it is classified as an operating lease. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which permits entities to continue applying legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year that the entity adopts the new leasing standard. In November 2019, the FASB deferred the effective date of ASU 2016-02, as amended, for private companies to fiscal years beginning after December 15, 2020. In June 2020, the FASB further deferred the effective date of ASU 2016-02, as amended, for private companies to fiscal years beginning after December 15, 2021. The new standard will become effective for the Company on January 1, 2022. The Company will apply the transition method permitted by ASU 2016-02, as amended. The Company is currently evaluating the effect that adoption of the standard is expected to have on the Company’s consolidated financial statements and related disclosures. The Company expects to take advantage of certain available expedients by electing the transition package of practical expedients permitted within ASU 2016-02, which allows the Company to not reassess previous accounting conclusions around whether arrangements are, or contain, leases, the classification of leases, and the treatment of initial direct costs. The Company also expects to make an accounting policy election to exclude leases with an initial term of twelve months or less from the balance sheet.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The new standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial position and results of operations.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes. The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The new standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial position and results of operations.

3. Fair Value Measurements

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the fair value hierarchy classification of such fair values as of March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

Fair Value Measurements at

March 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

100,745

 

 

$

100,745

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

13,075

 

 

 

 

 

 

13,075

 

 

 

 

Commercial paper

 

 

30,036

 

 

 

 

 

 

30,036

 

 

 

 

Total

 

$

143,856

 

 

$

100,745

 

 

$

43,111

 

 

$

 

7


 

 

 

 

 

Fair Value Measurements at

December 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

57,052

 

 

$

57,052

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

23,339

 

 

 

 

 

 

23,339

 

 

 

 

Commercial paper

 

 

32,523

 

 

 

 

 

 

32,523

 

 

 

 

Total

 

$

112,914

 

 

$

57,052

 

 

$

55,862

 

 

$

 

 

There were no transfers between fair value levels during the three months ended March 31, 2021.

4. Cash Equivalents and Marketable Securities

Cash equivalents and marketable securities consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

Fair Value Measurements at

March 31, 2021

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

100,745

 

 

$

 

 

$

 

 

$

100,745

 

Total cash equivalents

 

 

100,745

 

 

 

 

 

 

 

 

 

100,745

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

13,079

 

 

 

 

 

 

(4

)

 

 

13,075

 

Commercial paper

 

 

30,036

 

 

 

 

 

 

 

 

 

30,036

 

Total marketable securities

 

 

43,115

 

 

 

 

 

 

(4

)

 

 

43,111

 

Total cash equivalents and marketable securities

 

$

143,860

 

 

$

 

 

$

(4

)

 

$

143,856

 

 

 

 

Fair Value Measurements at

December 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

57,052

 

 

$

 

 

$

 

 

$

57,052

 

Total cash equivalents

 

 

57,052

 

 

 

 

 

 

 

 

 

57,052

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

23,341

 

 

 

2

 

 

 

(4

)

 

 

23,339

 

Commercial paper

 

 

32,523

 

 

 

 

 

 

 

 

 

32,523

 

Total marketable securities

 

 

55,864

 

 

 

2

 

 

 

(4

)

 

 

55,862

 

Total cash equivalents and marketable securities

 

$

112,916

 

 

$

2

 

 

$

(4

)

 

$

112,914

 

 

There were no sales of marketable securities during the three months ended March 31, 2021. As of March 31, 2021, the aggregate fair value of securities that were in an unrealized loss position for less than twelve months was $13.1 million.

The Company determined that it did not hold any securities with any other-than-temporary impairment as of March 31, 2021. As of March 31, 2021, the remaining contractual maturity of all of the Company’s marketable securities is less than one year. As of March 31, 2021, the Company did not intend to sell, and would not be more likely than not required to sell, the securities in an unrealized loss position before recovery of their amortized cost bases.

8


 

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Lab equipment

 

$

7,179

 

 

$

6,877

 

Furniture and fixtures

 

 

594

 

 

 

594

 

Computer equipment

 

 

373

 

 

 

373

 

Software

 

 

199

 

 

 

199

 

Leasehold improvements

 

 

6,210

 

 

 

6,210

 

Construction in process

 

 

 

 

 

262

 

Total property and equipment

 

 

14,555

 

 

 

14,515

 

Less: accumulated depreciation

 

 

(6,721

)

 

 

(6,118

)

Property and equipment, net

 

$

7,834

 

 

$

8,397

 

 

Depreciation expense for the three months ended March 31, 2021 and 2020 was $0.6 million and $0.5 million, respectively.  

6. Additional Balance Sheet Detail

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Prepaid expenses

 

$

2,140

 

 

$

3,668

 

Prepaid sign-on bonuses subject to vesting provisions

 

 

99

 

 

 

147

 

Interest income receivable

 

 

102

 

 

 

176

 

Other

 

 

258

 

 

 

74

 

Total prepaid expenses and other current assets

 

$

2,599

 

 

$

4,065

 

 

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

External research and development

 

$

3,718