On Tuesday, BofA Securities maintained its Underperform rating on Fulcrum Therapeutics (NASDAQ:FULC) with a consistent stock price target of $5.00. The firm's stance comes after Fulcrum Therapeutics announced an exclusive licensing agreement with Sanofi (NASDAQ:SNY) for the development of losmapimod outside the United States for facioscapulohumeral muscular dystrophy (FSHD).
Under the terms of the agreement, Fulcrum will receive an $80 million upfront payment and may receive up to $975 million in regulatory and commercial milestones, along with tiered royalties on ex-US sales starting in the low teens.
The collaboration with Sanofi also includes an equal split of all future global development costs for losmapimod. The deal is seen as strategically sensible for Fulcrum, leveraging Sanofi's extensive experience in marketing rare neuromuscular therapies.
Despite the partnership's potential, BofA Securities underscores that the commercial opportunity for losmapimod remains uncertain, as the primary endpoint for its phase 3 trial has not been clinically validated yet.
The phase 3 readout for losmapimod is anticipated in the fourth quarter, which is expected to be a significant event for Fulcrum Therapeutics. BofA Securities plans to conduct a survey with Key Opinion Leaders (KOLs) ahead of the readout to gauge expectations and better understand the drug's commercial potential.
The firm's reiteration of the Underperform rating reflects a cautious outlook on Fulcrum's pipeline programs, which are believed to still require substantial de-risking. The upcoming phase 3 results will be closely watched as an indicator of losmapimod's viability and its potential impact on Fulcrum's future prospects.
InvestingPro Insights
As BofA Securities maintains a cautious stance on Fulcrum Therapeutics (NASDAQ:FULC), current InvestingPro data shows that the company holds a market capitalization of $456.83 million, with a notably high revenue valuation multiple.
Despite the potential influx of capital from the licensing agreement with Sanofi, Fulcrum's balance sheet reflects a challenging financial position with a negative gross profit margin of -2760.6% for the last twelve months as of Q1 2023, and an operating income margin at an alarming -4484.38%. This data underscores the firm's concerns about the commercial viability of Fulcrum's pipeline.
Still, it's not all caution in the wind. Fulcrum's stock has seen a significant return over the past year, with a 124.77% increase, and the company's liquid assets exceed its short-term obligations. These are key points that investors may consider when evaluating the company's financial health and growth potential. Moreover, Fulcrum's recent price was $7.35, which is above the InvestingPro fair value estimate of $6.63, reflecting investor optimism post the Sanofi deal announcement.
InvestingPro Tips suggest that while Fulcrum is quickly burning through cash and analysts do not anticipate the company will be profitable this year, it holds more cash than debt, which may provide some financial flexibility in the near term. To explore more about Fulcrum's financial health and to access additional insights, investors can visit https://www.investing.com/pro/FULC. There are 10 more InvestingPro Tips available for Fulcrum, which can be accessed with a subscription. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.