On Thursday, BofA Securities revised its stance on shares of Fulcrum Therapeutics (NASDAQ: NASDAQ:FULC), downgrading the stock from Neutral to Underperform. The firm also slashed the price target to $2.00, a significant decrease from the previous $10.00.
This adjustment follows the announcement of disappointing results from Fulcrum's phase 3 REACH study, which evaluated losmapimod as a treatment for Facioscapulohumeral Muscular Dystrophy (FSHD).
The study failed to meet its primary endpoint, which was the reachable workspace (RWS) as measured by relative surface area (RSA). The results indicated only a marginal improvement of 0.013 in RSA for losmapimod compared to a 0.010 improvement for placebo patients at week 48.
Although there were positive trends observed in Muscle Fat Infiltration and Shoulder Abductor Strength, these secondary endpoints did not reach statistical significance. Moreover, several patient-reported outcomes did not show statistically significant differences, which was a crucial aspect for key opinion leaders (KOLs) according to the analyst.
In light of these results, Fulcrum Therapeutics has decided to halt further development of losmapimod. The company plans to present the full study data at an upcoming medical meeting. BofA Securities noted that while the study's outcome was disappointing, it was not entirely unexpected due to the novelty of the RWS endpoint and the inherent risks associated with how the control arm could respond.
The failure of the phase 3 trial prompted BofA Securities to remove the value of losmapimod from its valuation model and adjust operating expense estimates for Fulcrum. The company reported having $273.8 million in cash, cash equivalents, and marketable securities (CCE) at the end of the second quarter, which will now be redirected towards advancing their sickle cell and early discovery programs.
Despite this pivot, BofA Securities maintains a conservative outlook on Fulcrum's sickle cell program candidate, pociredir, citing the need for significant de-risking. The new price target of $2 reflects these updated assessments and the removal of losmapimod's projected value.
In other recent news, Fulcrum Therapeutics has experienced significant developments. The company announced the suspension of its drug losmapimod's development after it failed to meet primary and secondary endpoints in a Phase 3 trial.
In response, Stifel downgraded Fulcrum's stock from Buy to Hold, adjusting the price target to $3.00 from the previous $22.00. Despite this setback, Fulcrum remains financially robust, with a cash position of $273.8 million as of the second quarter of 2024.
In the wake of losmapimod's suspension, the focus has shifted to another product, pociredir, being developed for sickle cell disease, with updates expected in 2025. In addition, the company has issued pre-funded warrants in lieu of common stock to two institutional stockholders, RA Capital Healthcare Fund, L.P., and an unnamed entity.
InvestingPro Insights
Following the recent downgrade by BofA Securities, investors may find additional context through InvestingPro data and insights. Fulcrum Therapeutics currently holds a market capitalization of approximately $222.46 million. Despite the setback with losmapimod, analysts have recognized potential in the company, anticipating sales growth in the current year. Moreover, Fulcrum's balance sheet reflects a strategic position where cash reserves surpass debt, which could provide some financial flexibility as the company shifts its focus to other programs like sickle cell disease treatments.
While the company does not currently pay dividends, which is typical for many biotech firms focusing on drug development, its stock price has seen a high return over the last year, with a 69.54% price total return. This could indicate investor optimism about the company's long-term prospects despite recent hurdles.
However, it is important to note that the company has not been profitable over the last twelve months, and analysts do not expect profitability this year. For those interested in further analysis, InvestingPro offers additional tips on Fulcrum Therapeutics, providing deeper insights into the company's financial health and market position.
Investors considering Fulcrum Therapeutics may also refer to the InvestingPro platform for more detailed metrics and tips, including 5 analysts who have revised their earnings upwards for the upcoming period, suggesting a potential upside in the company's financial performance. To explore these insights, visit InvestingPro's dedicated page for Fulcrum Therapeutics at https://www.investing.com/pro/FULC.
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