10-K

fulc-10k_20201231.htm

10-K

fulc-10k_20201231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

Commission File Number 001-38978

FULCRUM THERAPEUTICS, INC.

(Exact name of registrant as specified in its Charter)

26 Landsdowne StreetCambridge, 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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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 June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based on the closing price of the shares of common stock on the Nasdaq Global Market on June 30, 2020, was approximately $239,959,880.

The number of shares of registrant’s common stock outstanding as of February 25, 2021 was 32,672,223.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A relating to the 2021 Annual Meeting of Stockholders within 120 days of the end of the registrant’s fiscal year ended December 31, 2020. Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.

Table of Contents

Page

PART I

Item 1. Business 1

Item 1A. Risk Factors 58

Item 1B. Unresolved Staff Comments 104

Item 2. Properties 104

Item 3. Legal Proceedings 104

Item 4. Mine Safety Disclosures 104

PART II

Item 6. Selected Financial Data 106

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 120

Item 8. Financial Statements and Supplementary Data 121

Item 9A. Controls and Procedures 121

Item 9B. Other Information 122

PART III

Item 10. Directors, Executive Officers and Corporate Governance 123

Item 11. Executive Compensation 123

Item 14. Principal Accountant Fees and Services 123

PART IV

Item 15. Exhibits and Financial Statement Schedules 124

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 Annual Report on Form 10-K, 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:

• the potential advantages of our product candidates;

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

• our commercialization, marketing and manufacturing capabilities and strategy;

• our intellectual property position;

• the impact of government laws and regulations;

• our competitive position;

• developments relating to our competitors and our industry;

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 Annual Report on Form 10-K, 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 Annual Report on Form 10-K and the documents that we have filed as exhibits to Annual Report on Form 10-K 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 Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, 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.

This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties as well as our own estimates of potential market opportunities. All of the market data used in this Annual Report on Form 10-K involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

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 Annual Report on Form 10-K. Our principal risks include the following:

iii

PART I

Item 1. Business.

Overview

We are a clinical-stage biopharmaceutical company focused on improving the lives of patients with genetically defined rare diseases in areas of high unmet medical need. We have developed a proprietary product engine that we employ to systematically identify and validate cellular drug targets that can potentially modulate gene expression to treat the known root cause of genetically defined diseases. We are using our product engine to identify targets that can be drugged by small molecules regardless of the particular underlying mechanism of gene mis-expression. We have identified drug targets to treat the root causes of facioscapulohumeral muscular dystrophy, or FSHD, and certain hemoglobinopathies, namely sickle cell disease, or SCD, and ß-thalassemia. In August 2019, we initiated a randomized, double-blind, placebo-controlled, multicenter, international Phase 2b clinical trial of losmapimod, our product candidate for FSHD, and a single center, open label Phase 2 clinical trial to investigate the safety and tolerability of chronic treatment with losmapimod in patients with FSHD. The Phase 2b clinical trial and the open label Phase 2 clinical trial completed enrollment in February 2020. In the fourth quarter of 2020, we initiated a Phase 1 clinical trial of FTX-6058, our product candidate for certain hemoglobinopathies and a novel upregulator of fetal hemoglobin, to evaluate the safety, tolerability and pharmacokinetics of FTX-6058 in healthy adult volunteers. In addition, we anticipate initiating a clinical trial of FTX-6058 in patients with SCD in the second half of 2021.

We are using our proprietary product engine to identify and validate drug targets and develop product candidates to address diseases caused by the mis-expression of certain genes. Our product engine integrates patient-derived, tissue-relevant cell models and drug target screens with our pharmacologically-diverse small molecule compound library and customized CRISPR and RNAi libraries. We also employ computational biology and FulcrumSeek, our proprietary database, to guide target selection and to generate hypotheses on other targets that might be relevant along a gene regulatory pathway.

Our first product candidate, losmapimod, is a small molecule that we are developing for the treatment of FSHD, a rare, progressive and disabling muscle wasting disorder that leads to significant physical impairments and disability. Losmapimod selectively targets p38α/ß mitogen activated protein kinase, or p38α/ß. We utilized our product engine to discover that inhibition of p38α/ß reduced expression of the DUX4 gene in muscle cells derived from patients with FSHD. The mis-expression of the DUX4 gene is the known root cause of FSHD. There are no approved therapies for FSHD, one of the most common forms of muscular dystrophy, with an estimated patient population of 16,000 to 38,000 in the United States. In January 2020, the U.S. Food and Drug Administration, or FDA, granted orphan drug designation to losmapimod for the treatment of FSHD, and, in March 2020, the European Medicines Agency, or EMA, granted orphan drug designation to losmapimod for the treatment of FSHD.

Following our discovery of the role of p38α/ß inhibitors in the reduction of DUX4 expression in patients with FSHD, we performed an extensive review of known compounds. As a result of our evaluation, we identified losmapimod as the preferred developmental candidate based on the substantial and attractive preclinical and clinical data. We in-licensed losmapimod from affiliates of GlaxoSmithKline, or GSK, in February 2019. GSK had previously treated nearly 3,500 subjects with losmapimod across multiple clinical trials, including one Phase 3 clinical trial. GSK did not conduct a clinical trial of losmapimod in patients with FSHD or any other muscle disorder. We have conducted extensive preclinical testing of losmapimod in patient-derived, tissue-relevant cell models and have observed that losmapimod selectively reduced DUX4-driven gene expression and restored a healthy gene expression signature with minimal impact on healthy human muscle cells or other cell types.

We are conducting a randomized, double-blind, placebo-controlled, multicenter, international Phase 2b clinical trial, referred to as ReDUX4, to investigate whether treatment with losmapimod reduces DUX4-driven gene expression in affected skeletal muscle. In this Phase 2b clinical trial, secondary endpoints include evaluation of safety and tolerability in FSHD patients, pharmacokinetic in blood, losmapimod concentration in skeletal muscle biopsies, p38α/ß target engagement in blood and in muscle biopsies, and efficacy on the whole-body skeletal muscle MRI biomarker. We are concurrently conducting a single center open label Phase 2 clinical trial to investigate the safety and tolerability of chronic treatment with losmapimod in patients with FSHD. In this open label trial, we are evaluating the ability of losmapimod to reduce DUX4-driven gene expression in affected skeletal muscle over varying treatment durations. We initiated ReDUX4 at multiple sites in the United States, Canada and Europe and the open label Phase 2 clinical trial in Europe in August 2019. We completed dosing in a Phase 1 clinical trial in healthy volunteers and patients with FSHD in September 2019. We presented top-line, blinded results from the Phase 1 clinical trial in October 2019, and we presented unblinded data in March 2020. We utilized data from GSK’s clinical trials of losmapimod and our preclinical data to submit an IND, and clinical trial applications, or CTAs, in

Europe and Canada, at various dates during 2019 that have enabled us to advance our clinical development plan for losmapimod in FSHD, including initiating ReDUX4 in August 2019.

As a result of the COVID-19 pandemic, we extended the ReDUX4 treatment period from 24 to 48 weeks through a protocol amendment to ensure the safety of the subjects and to allow for the opportunity for a biopsy at week 16 as originally intended or at week 36. Approximately 64 subjects who did not complete the original 24-week treatment period continued in the 48-week treatment period in the randomized portion of the trial. The extension from 24 to 48 weeks also allows for a longer assessment in a placebo-controlled design of the skeletal muscle MRI secondary endpoint and the various exploratory clinical endpoints, such as reachable workspace, optimized time up and go test for FSHD, muscle function measures and patient reported outcomes. We expect to present full data from the trial in the second quarter of 2021. We believe that the amendment to the trial protocol provides flexibility to address the challenges presented by the COVID-19 pandemic and supports collection of efficacy and safety data to support continued discussions with regulatory agencies regarding potential registration strategies.

We are additionally conducting several preparatory non-drug studies to assess biomarker endpoints and clinical outcome assessments and are participating in a natural history study that will follow 160 subjects with FSHD in the United States and 60 subjects in Europe over 18 months. We are using data generated to date, and expect to utilize data to be generated from our ongoing preparatory studies and the natural history study to inform future clinical trial designs and discussions with regulatory agencies. We believe that these preparatory studies and the safety data from GSK’s prior losmapimod clinical trials, together with safety and efficacy data generated from our Phase 1 and Phase 2 clinical trials to date, and additional data to be generated from our ongoing ReDUX4 trial, may enable us to apply for accelerated approval of losmapimod for the treatment of FSHD. If we observe positive results in ReDUX4 based on our biomarker efficacy endpoint of reduction in DUX4-driven gene expression in affected skeletal muscle, we plan to discuss the possibility of applying for accelerated approval with regulatory agencies and may seek accelerated approval if such regulatory agencies believe that our biomarker endpoint is sufficiently predictive of clinical benefit. The FDA or other regulatory authorities may require us to conduct comparability assessments of GSK-manufactured tablets to tablets manufactured by us or another party.

In June 2020, we announced that we received notification from the FDA that we may proceed with initiating a Phase 3, randomized, double-blind, placebo-controlled trial of losmapimod in higher risk hospitalized adults with COVID-19, or the LOSVID trial. The LOSVID trial is a Phase 3, international, multicenter trial designed to assess the safety and efficacy of a 15 mg twice per day oral dose of losmapimod compared to placebo for 14 days on top of standard of care in approximately 400 patients hospitalized with COVID-19 and at risk of progression to critical illness based on older age and elevated systemic inflammation. We began enrolling patients in the fourth quarter of 2020. The primary endpoint of the trial is the proportion of patients who progress to death or respiratory failure by day 28. The trial’s secondary endpoints include clinical status on days seven and 14 as measured on the nine point World Health Organization ordinal scale of COVID-19 severity, total number of study days free of oxygen supplementation, all-cause mortality, length of hospitalization and intensive care unit stay, adverse events and viral clearance. In March 2021, we announced the discontinuation of the LOSVID trial following a strategic review.

Our second product candidate, FTX-6058, is our novel small molecule designed to bind embryonic ectoderm development, or EED, and inhibit the transcriptional silencing activity of the polycomb repressive complex 2, or PRC2. FTX-6058 is a small molecule designed to upregulate fetal hemoglobin in patients with SCD and ß-thalassemia. SCD is a genetic blood disorder caused by a mutation in the ß-subunit gene, or HBB gene. This mutation results in the formation of abnormal hemoglobin, which causes red blood cells, or RBCs, to change from a round shape into a sickle shape that significantly impairs their function. ß-thalassemia is a rare blood disorder caused by various genetic mutations in the HBB gene that can significantly impair the production of RBCs.

We designed FTX-6058 to compensate for the root cause of these hemoglobinopathies by inducing the expression of the two γ-globin genes, HBG1/2, whose expression is normally silenced shortly after birth. The HBG1/2 genes encode for γ-globin, a component of fetal hemoglobin, which is known to compensate for the presence of abnormal hemoglobin in SCD and ß-thalassemia. We have observed in vitro and in vivo activation of the HBG1/2 genes in preclinical studies with FTX-6058. We have also observed that FTX-6058 demonstrated robust levels of fetal hemoglobin elevation with no adverse effect on important cellular health markers. We conducted additional pre-clinical profiling in CD34+ derived cells and observed that treatment with FTX-6058 increased HbF levels to approximately 30% of total hemoglobin, as measured by mass

spectrometry, high performance liquid chromatography, and fast protein liquid chromatography techniques. The elevation of HbF was significantly greater than we observed with hydroxyurea in the cell models.

In the fourth quarter of 2020, we initiated our Phase 1 clinical trial of FTX-6058 in healthy adult volunteers. In this trial, we are evaluating the safety, tolerability and pharmacokinetics of FTX-6058. The trial is comprised of four parts. Part A is a randomized, double-blind, placebo-controlled, single ascending dose study in up to six cohorts. Part B is a randomized, double-blind, placebo-controlled, multiple ascending dose study in up to four cohorts dosed once daily for 14 days. Part C is an open label pilot food effect study in subjects randomized to take FTX-6058 with and without a high-fat meal, and Part D is an open label study to evaluate the potential of FTX-6058 to induce a liver enzyme known as CYP3A, which is involved in drug metabolism. We expect to present data from the Phase 1 clinical trial in mid-2021. In addition, we anticipate initiating a clinical trial of FTX-6058 in patients with SCD in the second half of 2021.

According to the National Institutes of Health, or NIH, there are approximately 7,000 rare, genetically defined human diseases, many of which have inadequate or no approved treatments. Our current drug target identification and development efforts are focused on rare neuromuscular, muscular, hematologic and central nervous system, or CNS, disorders. We also anticipate utilizing our product engine to discover drug targets for genetically defined diseases in other therapeutic areas and for other disorders. In addition to drug targets that we prioritize for internal development, we may identify other drug targets that we would consider for development through partnerships. For example, we are utilizing our product engine to discover drug targets within a targeted indication within the pulmonary disease space under our collaboration and license agreement with Acceleron Pharma Inc., or Acceleron, and for the potential treatment of certain genetically defined cardiomyopathies under our collaboration and license agreement with MyoKardia, Inc., or MyoKardia, a wholly owned subsidiary of Bristol-Myers Squibb Company.

Our Pipeline

We designed our proprietary product engine with potential application across a broad array of genetically defined diseases with a known root cause. The following chart summarizes key information about our lead product candidates.

Our Strategy

We are leveraging the broad applicability of our proprietary product engine to discover and develop small molecule therapies that modulate gene expression to address the known root cause of genetically defined rare diseases in areas of high unmet medical need. We believe that our initial product candidates for the treatment of FSHD, SCD and ß-thalassemia may have the potential to treat patients with these debilitating and, in some cases, life-threatening and novel illnesses. The key components of our strategy include:

Gene Regulation

The human genome provides the blueprint, or genetic code, for life. The sequencing of the human genome has enabled significant insights into understanding the genetic underpinnings of many diseases. Genes are the fundamental units of biology, but the gene itself is rather static. The identity and function of each cell is determined by a specific set of factors that activate or repress mechanisms that regulate genes in the desired manner. There are many mechanisms that control the human genome by up or down regulating gene expression, and these regulatory mechanisms are controlled by various pathways and signals. Defects in a gene or any of these regulatory mechanisms can result in aberrant expression or silencing of a gene that may lead to disease.

The graphic below illustrates the key steps in the gene expression process in cells and how they are under the control of a variety of regulatory signals and pathways.

Our Opportunity

We have the ability to develop, scale and characterize complex cellular models of human disorders of gene mis-regulation. Our current drug target identification and development efforts are focused on rare neuromuscular, muscular, hematologic and CNS disorders. We also anticipate utilizing our product engine to discover drug targets for genetically defined diseases in other therapeutic areas. Our target identification and validation process provides a systematic way to approach the identification of unique drug targets that, when activated or inhibited, may increase or decrease gene expression in genetically defined diseases with the aim of restoring a healthy or functional phenotype. Our product engine is designed to be agnostic to cell type, pathway and therapeutic modality. While our drug target selection process is guided by our strategy to advance small molecule therapeutics that treat the root cause of disease into clinical development, we also may identify drug targets that might be addressable by other treatment modalities, such as antisense oligonucleotides, or ASOs, small interfering RNAs, or siRNAs, or antibodies.

We are continuing to expand our proprietary database, FulcrumSeek, which is designed to facilitate the process by which we assess diseases and generate drug target hypotheses through our computational biology expertise. We screen our proprietary small molecule library and customized CRISPR or RNAi libraries across healthy and diseased human cells, such as skeletal muscle cells, cardiac muscle cells, brain cells and blood cells. Our FulcrumSeek database is designed to provide a unique understanding into gene regulatory and signaling pathways that may be relevant for the activation or repression of a particular gene associated with the disease of interest. To achieve this, we profile many features that are impacted when a cell of interest is treated with a perturbagen, such as a small molecule probe, CRISPR guide, small interfering RNA, or microRNAs. These features include a comprehensive assessment of transcripts that are modulated (quantified by RNA sequencing, or RNAseq) and cellular processes that are measured by imaging techniques. We expect that the data from these screens will allow us to develop a broader understanding of biology that may be relevant in disease. With the completion of each additional screening, FulcrumSeek increases in size, and our insights and knowledge are further expanded. Moreover, with the initiation of our collaborations with Acceleron and MyoKardia, we are further demonstrating the scope of our disease modeling and target identification capabilities with the expansion into pulmonary and cardiovascular disease.

According to the NIH there are approximately 7,000 rare, genetically defined human diseases, many of which have inadequate or no approved treatments. We believe that our approach to selecting and modeling certain of these human diseases with patient-derived tissue-relevant cells, followed by mining our FulcrumSeek database or screening with our proprietary small molecule library and customized CRISPR or RNAi libraries, could be broadly applied to the identification of drug targets that have the potential to balance the expression of many genes known to drive or ameliorate disease.

Our Approach

The ability to intervene in gene regulatory pathways that control gene expression provides the basis of our product engine. Our approach is to broadly search for mechanisms that can change gene expression in the desired manner. These drug targets may be intracellular targets or extracellular targets that affect a signaling pathway. Key considerations we use to determine which genetically defined diseases are suitable to evaluate in drug target identification activities include:

Our product engine is designed to enable us to address diseases in which genes are mis-expressed, silenced or result in mutated gene products, such as RNA or protein, due to an underlying genetic defect. There are varied approaches to treating disease by balancing gene expression including reducing the expression of a gene that causes disease (e.g., DUX4 in FSHD), increasing the expression of an under-expressed gene or expressing a compensatory gene (e.g., HBG1/2 in SCD and ß-thalassemia). Our preclinical modeling of the relevant tissue is critical for success, and we believe this is best achieved using human cell systems derived from patients with the disease. We primarily seek to identify drug targets that may balance gene expression in these human cell systems and that are amenable to drugging using a small molecule. In addition to drug targets that we prioritize for internal development, we may identify other drug targets that we would consider for development through partnerships.

Overview of Our Product Engine

Our product engine is a high-throughput discovery platform that we designed to identify and validate drug targets that balance the expression of the genes known to drive or ameliorate root cause biology. We obtain patient-derived, tissue-relevant cell lines or other relevant human cell lines. We then differentiate these cell lines into those most relevant for the disease pathology, including skeletal muscle myotubes, cardiomyocytes, neurons, RBCs, or other cell lines of interest, which we then scale up, characterize and prepare for screening. We also generate methods to quantify the desired modulation of expression of the gene of interest in these cell lines. We apply our annotated small molecule compound library and customized CRISPR or RNAi libraries to the cells to assess for the desired modulation. We have continued to build our capabilities to maximally profile changes in transcription that occur when relevant cells are treated with small molecules or genetic reagents. In addition to profiling a specific gene of interest, we can evaluate multiple genes of potential interest through multiplexed transcriptome profiling to assess effects on root cause biology. FulcrumSeek is a further expansion of this concept, where thousands of transcripts can be measured, and additional features of cellular health and function can be assessed using high-throughput imaging techniques. Our screening approach, coupled with data mining of FulcrumSeek, is the basis of our target identification strategy. We confirm drug target hits with multiple modalities and undertake further validation in several patient-derived, tissue-relevant cell lines. Additional studies in these cell models are conducted to understand how the modulation of the gene of interest affects cellular function. We employ computational biology, such as machine learning algorithms, using our FulcrumSeek database and other databases to guide drug target selection and generate hypotheses on other drug targets that might be related along a gene regulatory pathway.

To further optimize and increase productivity of our product engine, we have continued to invest in customized lab automation and applied technologies. We believe that these investments have increased assay throughput and robustness and have expanded the breadth of biological parameters we can effectively measure in our assay systems. The first-generation of our product engine was focused on single gene readouts, simple immunocytochemistry, and one-dimensional data analysis focused on an individual gene of interest. With continued investment in the product engine, we have enabled our next-

generation product engine which utilizes RNAseq, high-content imaging, and machine learning. We believe that this next-generation product engine enables drug target screening at scale in physiologically relevant assay systems.

We designed our discovery and development model to recapitulate this systematic approach of applying our product engine to each new disease that we evaluate with the goal of providing disease-modifying therapies to patients. The following graphic presents an overview of our drug target identification process.

Importantly, we designed our next-generation product engine to iteratively and systematically explore disease or indication areas of interest by incorporating both preclinical and clinical data related to potential drug targets. In the case of heterogeneous diseases, this iterative and systematic approach enables us to explore diseases with less defined root cause genes, and instead screen for targets that modulate root cause biology. This approach not only enables us to validate the translatability of our preclinical models to the clinic, but also enables us to generate unique clinical biology insights utilizing public and proprietary clinical datasets, that can be further queried by our FulcrumSeek database or incorporated into our preclinical disease models. As a result, we believe that our next-generation product engine greatly expands the number of diseases that we can potentially interrogate using our screening approach.

Patient-Derived Tissue-Relevant Cell Models

Accurate modeling of human disease is critical for drug discovery endeavors, and we have the ability to model disease and identify drug targets that modulate gene expression in patient-derived, differentiated cells. These cells provide the appropriate context in which to understand signaling pathways that affect human gene expression and function, and have the potential to increase the translatability from preclinical studies to clinical trials. Prior to initiating screening activities, we characterize and expand the cells. We also create a cell line where the genetic defect associated with the disease has been corrected, or use a cell line from a healthy individual, in order to compare the gene regulation between diseased and normal cells. If the degree of gene activation or repression required to have a functional benefit is not known, we will undertake physiological characterization of these cell lines in order to define what threshold of gene regulation is functionally relevant.

Our process to characterize patient-derived cell models, produce cells at scale and develop suitable screens to identify drug targets typically takes between six and nine months. Depending on the disease, we may design the screen to measure effects on RNA and/or protein.

Drug Target Identification

We employ three approaches to identify drug targets that can potentially modulate gene expression to treat genetically defined diseases at the root cause—two lab-based library screening approaches as well as computational biology using our FulcrumSeek database and other databases. We then evaluate possible drug targets identified from these efforts with the goal to advance programs into lead optimization.

Small Molecule Probe Library Screening

Our small molecule probe library is annotated, which means it consists of known, well-characterized molecules that interact with biochemical mechanisms and that have cellular activity. The purpose of our small molecule probe library is to identify and interrogate mechanisms that regulate the expression of genes of interest. We designed our library with the intent to optimize biological diversity, in contrast with other small molecule screening approaches that optimize chemical diversity. The library was developed by our medicinal chemists who reviewed primary and patent literature to identify probe molecules that interact with known biochemical targets. They selected chemical probes based on their cellular activity, potency and selectivity. In order to expand our library beyond commercially-available small molecules, we undertook a custom synthesis campaign to generate compounds that were not available from commercial sources. Our library currently includes more than 6,000 small molecules relating to approximately 2,500 biochemical targets covering a wide breadth of pharmacology, including chromatin modifiers, transcription regulation and RNA processing, kinases and metabolic enzymes. Our library will continue to expand as we identify and acquire new mechanistic probes.

Genetic Screening

We may also use a customized CRISPR or RNAi library screening, which is an approach to interrogate the genome by selectively knocking out, reducing or increasing gene expression, for target identification. We have chosen to use CRISPR and RNAi libraries as complementary or additional screening tools for drug target identification alongside our small molecule screening approach. We use both an array-based CRISPR library and our pooled, custom-designed CRISPR library. Pooled CRISPR screening is an approach to target identification in which we combine cells and reagents in a single tube to simplify the experimental procedures. Pooled CRISPR screening is not suitable for all cell types, and we use array-based CRISPR screening where appropriate. Additionally, we utilize RNAi libraries where CRISPR libraries cannot be employed in the cell type of interest. Specific targets that modulate the gene of interest can be identified via CRISPR or RNAi library screening, and these targets can then be validated for our drug discovery endeavors. If small molecules that interact with these targets are identified from the literature, they are then obtained for further pharmacological validation. If no known chemical matter is available, we may establish a screen to identify chemical matter that interacts with the drug target. This chemical matter

would serve as a starting point for medicinal chemistry work. Alternatively, we may seek partnerships for development using other modalities.

FulcrumSeek and Computational Biology

FulcrumSeek is our proprietary database containing profiles of the effect of perturbagens, or disruptions to cellular processes, on disease-relevant, human derived cell systems. The features captured in this database consist of measures of gene regulation on thousands of genes, and other important assessments of cellular function and health. The primary role of FulcrumSeek and our computational biology capabilities is to generate drug target and biomarker hypotheses using externally generated patient data and internal screening data. We can use FulcrumSeek to aid in the selection of diseases that we may want to consider for a discovery program. Our database and analysis can provide information as to which genes are modulated by our perturbagens and which genes may be difficult to modulate. This information is then integrated into our decision-making process for disease selection. Using FulcrumSeek, our approach is to leverage our network biology capabilities and expertise to determine how pathways interact with each other in a cell, to develop a network map of regulatory interactions that control gene expression and cellular function and propose targets that potentially could be pursued to modulate the root cause gene or root cause biology of diseases of interest. In each case, we explore these hypotheses through biological experimentation designed to validate predicted drug targets and biomarkers. We use confirmatory studies to aid in the refinement of our computational models in an iterative manner.

Drug Target Validation

Our initial focus on drug target validation is to establish a robust link between the drug target that we identified through our screening approaches and modulation of the expression of the root cause gene of interest. Our validation work seeks to evaluate identified drug targets in a manner that allows us to prioritize targets where we may be able to deliver safe and effective therapies to patients. We conduct our validation tests using a diverse set of pharmacological tools and multiple genetic reagents to profile their effect on orthogonal read-outs of gene expression (RNA and protein) and the subsequent effects on physiological function.

The important elements of our systematic approach to drug target validation include:

Development Candidate Discovery and Characterization

Following target identification and target validation, we initiate medicinal chemistry and drug discovery activities to advance a development candidate that is suitable for testing in clinical trials. This work optimizes characteristics that are important for an orally available small molecule, including potency, selectivity, pharmacokinetic, or PK, and safety parameters. There is an opportunity to bypass or considerably accelerate discovery and characterization activities if we identify and validate an attractive drug target that has been pursued previously by others in different indications. For example, available chemical matter and support from the scientific literature regarding p38α/ß enabled us to rapidly identify our product candidate for the treatment of FSHD.

A key element of our preclinical compound profiling approach is to investigate a development candidate across many patient-derived tissue-relevant cells. We choose these cells based on our assessment of the patient heterogeneity that may be encountered in clinical trials. The purpose of this analysis is to enable us to understand if the activity of the molecule differs among cells with different genetic subtypes, or if a patient stratification strategy is appropriate for clinical trials.

Many genetically defined diseases are not well modeled with animal models because such models do not have appropriate predictive validity. In these cases, we seek to develop an engraftment model where patient-derived human cells are engrafted into the relevant tissue of a host, immunodeficient mouse to produce a chimeric mouse. We may use these chimeric mice to assess gene regulation in the engrafted human cells, and for the efficient development of PK-pharmacodynamic, or PK/PD, relationships that will be the basis of therapeutic index calculations and human dose projections.

Advantages of a Small Molecule Approach

We believe that our approach to the treatment of genetically defined diseases using orally available, small molecule therapeutics may offer significant advantages over other treatment modalities due to:

Our Lead Product Candidates

We have used our proprietary product engine and screening efforts to identify drug targets for our lead product candidates. The following chart summarizes key information about our lead product candidates.

Our Product Candidate for Facioscapulohumeral Muscular Dystrophy

Overview of Facioscapulohumeral Muscular Dystrophy

Facioscapulohumeral muscular dystrophy is a rare, progressive and disabling disease for which there are no approved treatments. FSHD is one of the most common forms of muscular dystrophy and affects both sexes equally, with onset typically in teens and young adults. FSHD is characterized by progressive skeletal muscle loss that initially causes weakness in muscles in the face, shoulders, arms and trunk and progresses to weakness in muscles in lower extremities and the pelvic girdle. Skeletal muscle weakness results in significant physical limitations, including progressive loss of facial muscles that can cause an inability to smile or communicate, difficulty using arms for activities of daily living and difficulty getting out of bed, with many patients ultimately becoming dependent upon the use of a wheelchair for daily mobility activities. The majority of patients with FSHD also report experiencing chronic pain, anxiety and depression. The diagnosis and treatment of patients with FSHD is typically performed by neurologists.

The FSH Society estimated that the prevalence of FSHD in the United States is approximately 1 in 20,000 people. A recent study conducted in the Netherlands reported a more frequent prevalence of 1 in 8,333. Based on these estimates and a U.S. population of 320 million, we estimate that the patient population is between 16,000 to 38,000 in the United States. We believe that there may be additional patients who are not formally diagnosed due to a perceived difficulty of obtaining a diagnosis and the fact that there are no approved treatments. Approximately two-thirds of cases are familial-inherited in an autosomal dominant fashion and one-third of cases are sporadic. FSHD affects all ethnic groups with similar incidence and prevalence.

FSHD Biology

FSHD is caused by aberrant expression of DUX4 in skeletal muscle resulting in the inappropriate presence of DUX4 protein, a transcription factor causing the expression of other genes. Normally DUX4-driven gene expression is limited to early embryonic development, after which time the DUX4 gene is silenced. In patients with FSHD, aberrant production of DUX4 protein in skeletal muscle regulates other genes encoding proteins, some of which are toxic to the muscle. Aberrant DUX4-driven gene expression is the major molecular signature that distinguishes muscle tissue affected by FSHD from healthy muscle. The result of aberrant DUX4 expression in FSHD is death of muscle and its replacement by fat, resulting in skeletal muscle weakness and progressive disability. We believe that reducing expression of the DUX4 gene and its downstream transcriptional program could provide a disease-modifying therapeutic approach for the treatment of FSHD at its root cause. Published preclinical and human data, in addition to in vitro experiments that we have conducted, suggest that any reduction in DUX4 expression may be beneficial for patients. In preclinical studies, we have demonstrated that there is a direct relationship between muscle cell death (apoptosis) and the level of DUX4 expression, and a reduction in DUX4 leads to a concomitant decrease in apoptosis. As illustrated in the graphic below, in animal models where expression of DUX4 in skeletal muscle is induced, a corresponding loss of function is observed with increasing levels of DUX4 expression. In these animal models where low levels of DUX4 are expressed, the animals performed similarly to healthy animals in a mobility assessment, suggesting that complete DUX4 reduction is not required for a functional benefit. Data from human muscle biopsies likewise indicated that increased DUX4 activity is related to worsening muscle pathology.

In all patients with FSHD, the DUX4 gene is unsilenced, or de-repressed, as a result of one of two different types of genetic alterations, leading to FSHD1 or FSHD2. Approximately 95% of patients have FSHD1 and approximately 5% of patients have FSHD2. FSHD1 is caused by the contraction of an array of DNA, known as a D4Z4 repeat, from greater than ten repeat units to nine or fewer units. This contraction causes de-repression of DUX4. Patients with FSHD2 do not have meaningful D4Z4 repeat contraction, but have mutations in a regulatory gene, known as the SMCHD1 gene, that normally contributes to the repression of the DUX4 gene via DNA methylation.

The figure below illustrates how genetic mutations in the D4Z4 repeat array (FSHD1) or the SMCHD1 gene (FSHD2) result in aberrant expression of DUX4 in skeletal muscle.

Our Product Engine Identified the Drug Target for FSHD

We utilized patient-derived FSHD1 muscle cells, known as myotubes, and screened them with our small molecule probe library to identify drug targets that reduced DUX4 expression. We identified several potential drug targets, however the modulation of the majority of the targets adversely affected the health or differentiation of muscle cells. One drug target that we identified from our screening efforts for which we did not observe adverse cell health issues was p38α/ß, which had been studied extensively in other diseases, but had not been reported to be linked to DUX4 expression or FSHD until we conducted our screening efforts. We evaluated multiple small molecule p38α/ß inhibitors and observed a consistent reduction of both DUX4 expression and DUX4-driven gene transcripts with each p38α/ß inhibitor. We conducted further validation experiments to confirm that inhibition of p38α using genetic approaches such as siRNA and CRISPR single-guide RNAs, also led to a reduction in DUX4 expression. Additionally, researchers from Saint Louis University independently published the results of a study which concluded that inhibitors of p38α/ß, including losmapimod, suppressed DUX4 expression in cellular and animal FSHD models.

Losmapimod

After identifying p38α/ß as a potential drug target, we evaluated multiple small molecule inhibitors of p38α/ß. Each of these inhibitors had previously been evaluated in clinical trials for the treatment of various diseases but never in muscle disorders. As a result of our evaluation and relative to other p38α/ß inhibitors, we identified losmapimod as the preferred development candidate based on substantial and attractive preclinical and clinical data regarding safety, PK and target inhibition, and its advanced stage of development. Losmapimod was originally evaluated by GSK in nearly 3,500 subjects in clinical trials across multiple indications and in multiple countries. GSK did not evaluate losmapimod in FSHD or in any other muscle disorder. Although GSK did not pursue regulatory approval in the indications evaluated, losmapimod demonstrated an attractive PK, PD, safety and tolerability profile, including in chronic dosing.

As shown in the figure on the left below, we observed in preclinical studies using losmapimod that inhibition of the p38α/ß pathway reduced DUX4 expression and downstream gene expression, as measured by the mRNA transcribed by MBD3L2, a gene that is only expressed following DUX4 activation. In the study, we demonstrated that MBD3L2 was representative of broader DUX4-driven gene expression changes in myotubes. We assessed the ability of losmapimod to inhibit p38α/ß by measuring the effect on the phosphorylation of a downstream protein called heat shock protein 27, or HSP27. The level of phosphorylation of HSP27 has been used in previous clinical trials, including by GSK, as a biomarker to measure the degree of p38α/ß inhibition. As shown in the figure on the right below, we also observed reduced cell death, or apoptosis, in FSHD myotubes, as measured by active caspase-3. We used active caspase-3 to quantify cell death because it is a protein that has been shown to be an important regulator of the apoptosis pathway in myotubes.

The dotted lines in each graphic above indicate the Cmin (left) and Cmax (right) observed in a clinical trial conducted by GSK that used a 15 mg twice per day dose of losmapimod. Cmin represents the minimum concentration in plasma prior to administration of a subsequent dose and Cmax represents the highest concentration in plasma after administration of a dose.

After identifying losmapimod, we in-licensed the molecule from GSK because we believed that its safety and pharmacology history would significantly expedite our development plan and enhance our future regulatory submissions. In February 2019, we obtained an exclusive worldwide license from GSK to the losmapimod patents and preclinical and clinical data for all indications, subject to certain conditions. This license includes a letter of reference for the FDA providing us the right to reference all the previous INDs that had been filed by GSK for losmapimod, as well as a license to their losmapimod data, including the original preclinical study and clinical trial reports. We also received active pharmaceutical ingredient, or API, and losmapimod tablets that had been manufactured by GSK. We are using the API and tablets to support our clinical development of losmapimod in FSHD, including our ongoing Phase 2 clinical trials. We utilized the GSK data and our preclinical data to submit an IND in the United States and CTAs in Europe and Canada at various dates during 2019, which enabled us to advance our clinical development plan for losmapimod in FSHD, including initiating our randomized, double-blind placebo-controlled multicenter international Phase 2b clinical trial, or ReDUX4, and a single center Phase 2 open label trial in August 2019. The Phase 2b clinical trial and open label Phase 2 clinical trial completed enrollment in February 2020.

Preclinical Development

We conducted several preclinical studies designed to evaluate the ability of losmapimod to reduce DUX4-driven gene expression. In a preclinical study of losmapimod, we treated myotubes from primary cell lines of eight FSHD1 and three FSHD2 patients for four days with different concentrations of losmapimod or vehicle as a negative control. To model the effect of losmapimod treatment on DUX4-driven gene expression across diverse disease-causing genotypes, we measured MBD3L2 transcript levels relative to the transcript levels of POLR2A, a gene whose expression is not regulated by DUX4 protein. We observed that clinically achievable concentrations of losmapimod (30 to 100 nM) decreased DUX4-driven expression by 50% to 65%, as measured by quantitative polymerase chain reaction amplification of the MBD3L2 transcripts. The observed treatment effect was similar in all cells tested regardless of genotype. We believe that this data suggests that losmapimod has the potential to treat FSHD patients across all genotypes.

The graphic below shows the least square mean estimates for DUX4-driven gene expression from 11 FSHD primary cells and healthy cells treated with losmapimod presented as mean and 95% confidence intervals, which demonstrates that losmapimod reduced DUX4-driven gene expression, as measured by MBD3L2 and POLR2A transcript levels in a concentration-dependent manner.

Reduction of DUX4-driven gene expression at increasing concentrations of losmapimod

In our preclinical studies, we have also observed that treatment of FSHD patient-derived myotubes with losmapimod is highly specific for DUX4-driven gene expression. We conducted a study in which we measured the FSHD gene expression signature and observed a minimal impact on myogenesis when healthy human myotubes were treated with losmapimod. We treated FSHD cells with losmapimod for five days and a subsequent RNA-seq analysis revealed that only 89 transcripts (0.45%) out of approximately 20,000 protein coding genes were differentially expressed more than four-fold. Of these 89 differentially expressed transcripts, 90% were transcripts directly regulated by DUX4. We believe that this is strong evidence that the effects of losmapimod in affected skeletal muscle are highly specific for the treatment of the root cause of FSHD. Importantly, we did not observe changes in levels of myogenin, a transcriptional activator that promotes transcription of muscle-specific genes and plays a role in muscle differentiation, cell cycle exit and muscle atrophy, and observed minimal impact on other myogenic factors during myoblast differentiation into myotubes.

GSK observed concentrations of losmapimod in human plasma of 28.4 ng/mL to 74.1 ng/mL with an average of 50.5 ng/mL at a 15 mg twice per day dose in its clinical trials. In preclinical studies in animal models, we observed that losmapimod reached muscle tissue and engaged the p38α/ß target in the muscle tissue. As shown below, we detected similar concentrations of losmapimod in rat plasma and muscle, and significant target engagement is observed at concentrations that we expect to achieve in clinical trials using a 15 mg twice per day dose.

p38α/ß target engagement over time

We obtained further evidence that losmapimod distributed to muscle from a preclinical study in which GSK profiled distribution of losmapimod to all tissues in rats. Our review of this data similarly confirmed that muscles were well exposed to losmapimod.

Clinical Development Overview

We began dosing in a Phase 1 clinical trial of losmapimod in healthy adult volunteers and patients with FSHD in Europe in February 2019 following the filing of a CTA in December 2018. We completed dosing in this trial in September 2019. In August 2019, we initiated a randomized, double-blind placebo-controlled multicenter international Phase 2b clinical trial, ReDUX4, with 80 patients with FSHD to investigate whether oral administration of 15 mg of losmapimod twice per day reduces expression of DUX4-driven genes in affected skeletal muscle. In August 2019, we also initiated a single center open label Phase 2 clinical trial in up to 16 patients with FSHD to investigate the safety and tolerability of 15 mg losmapimod twice per day for chronic use and to evaluate the ability of losmapimod to reduce expression of DUX4-driven genes in affected skeletal muscle over varying durations of treatment. In addition, in February 2020 we initiated an open label extension of the ReDUX4 trial to enable patients in our ongoing Phase 2b clinical trial who are treated with losmapimod to continue receiving treatment after the 24-week or 48-week treatment period and to enable patients given placebo in our Phase 2b clinical trial to be treated with losmapimod.

We believe that a 15 mg twice per day dose of losmapimod is an appropriate dose for the treatment of patients with FSHD based on previous clinical data and p38α/ß target engagement data generated by GSK and p38α/ß target engagement data from our preclinical studies. Results of PK in blood and losmapimod concentrations in skeletal muscle and target engagement in blood from the Phase 1 clinical trial in FSHD patients support the selection of the 15 mg twice per day dose of losmapimod for the ongoing Phase 2 clinical trials.

We submitted a CTA in Europe for the open label Phase 2 clinical trial in April 2019 and submitted CTAs in Europe and Canada for the Phase 2b clinical trial at various dates during 2019. Each of the CTAs have been accepted.

The original design of ReDUX4 included a muscle biopsy at week 16 during the 24-week treatment period followed by an open label extension. Sixteen of the 80 subjects in trial have completed the 24-week treatment period and rolled over to the open label extension portion of the trial.As a result of the COVID-19 pandemic, we extended the ReDUX4 treatment period from 24 to 48 weeks through a protocol amendment to ensure the safety of the subjects and to allow for the opportunity for a biopsy at week 16 as originally intended or at week 36. Approximately 64 subjects who did not complete the original 24-week treatment period continued in the 48-week treatment period in the randomized portion of the trial. The extension from 24 to 48 weeks also allows for a longer assessment in a placebo-controlled design of the skeletal muscle MRI secondary endpoint and the various exploratory clinical endpoints, such as reachable workspace, optimized time up and go test for FSHD, muscle function measures and patient reported outcomes. We expect to present full data from the trial in the second quarter of 2021. We believe that the amendment to the trial protocol provides flexibility to address the challenges presented by the COVID-19 pandemic and supports collection of efficacy and safety data to support continued discussions with regulatory agencies regarding potential registration strategies.

In August 2020, we announced results from a pre-specified interim analysis of the primary endpoint of the ReDUX4 trial, which is the reduction from baseline of DUX4-driven gene expression in affected skeletal muscle after subjects have been treated with losmapimod or placebo. Secondary and exploratory endpoints were not assessed as part of this analysis. Results from the interim analysis in the first 29 randomized subjects indicate that DUX4-driven gene expression did not show a separation from placebo at 16 weeks. However, in a pre-specified sensitivity analysis, those with the highest pre-treatment DUX4-driven gene expression in their muscle biopsy sample showed a large reduction in DUX4-driven gene expression following treatment with losmapimod compared to placebo. The highest expressing muscle biopsies represent the top quartile of biopsies assessed based on baseline DUX4-driven gene expression.

The interim results included an analysis of the first 29 subjects who completed their 16-week biopsy out of the 80 subjects enrolled. Pharmacokinetics, demographics and the primary endpoint were assessed. The interim analysis was not powered for statistical significance and did not include individual patient level data. Subjects were randomized to receive an oral dose of losmapimod 15mg (n=15) or placebo (n=14) twice per day. While results showed a significant reduction in DUX4-driven gene expression in the muscle biopsies of subjects whose baseline biopsy showed the highest levels of DUX4 gene expression (38-fold decrease with losmapimod, n=3, and 5.4 fold-decrease with placebo, n=5), the population level data analysis of the reduction in DUX4-driven gene expression from all 29 subjects did not show a separation of losmapimod from placebo (3.7 fold increase with losmapimod, n=15, and 2.8 fold increase with placebo, n=14). Results indicated that muscle biopsies within the higher range of DUX4-driven gene expression at baseline may be needed to observe a reduction.

We believe that the safety data from GSK’s prior losmapimod clinical trials, together with safety and efficacy data from our Phase 1 and ongoing Phase 2 clinical trials, may enable us to apply for accelerated approval. We believe a treatment for FSHD may be eligible for accelerated approval because FSHD is a rare, slowly progressive and disabling disease with no approved treatments. We plan to discuss accelerated approval with regulatory agencies if we observe positive results in our Phase 2b clinical trial based on biomarker endpoints that we believe are likely to predict clinical benefit.

We are also conducting or have completed, several preparatory non-drug studies to assess biomarker endpoints and clinical outcome assessments. In addition, we are participating in a natural history study that plans to follow 160 subjects with FSHD in the United States and 60 subjects in Europe over 18 months. Planned enrollment in this study was completed in December 2019. We are using data generated to date, and expect to utilize data generated in the future, from our non-drug studies and the natural history study to inform discussions with regulatory agencies and future clinical trial design.

In January 2020, the FDA granted orphan drug designation to losmapimod for the treatment of FSHD. In March 2020, the EMA granted orphan drug designation to losmapimod for the treatment of FSHD.

Prior Clinical Development of Losmapimod by GSK

GSK conducted multiple Phase 1 and Phase 2 clinical trials and one Phase 3 clinical trial of losmapimod, including in patients with chronic obstructive pulmonary disease, or COPD, acute coronary syndrome and other cardiovascular diseases, neuropathic pain, major depression disorder, focal segmental glomerulosclerosis, and rheumatoid arthritis. Nearly 3,500 subjects in 24 trials were given losmapimod with single doses as high as 60 mg and repeated oral doses as high as 15 mg twice per day for up to 52 weeks. We plan to use a dose of 15 mg twice per day in our clinical trials of losmapimod in FSHD. GSK did not conduct a clinical trial of losmapimod in patients with FSHD or any other muscle disorder.

In clinical trials of losmapimod conducted by GSK, no significant differences were observed in the frequency of adverse events, or AEs, in subjects given losmapimod and subjects given placebo. GSK generally observed a similar frequency of serious adverse events, or SAEs, and deaths between patients given losmapimod and patients given placebo. These trials included extensive evaluation of the cardiovascular risk profile of losmapimod, including completion of an

evaluation of the potential to prolong corrected QT. GSK reported that there was no clinically relevant difference with regard to the occurrence of electrocardiogram abnormalities post-baseline or vital signs with losmapimod as compared to placebo. GSK did not identify a safety signal attributed to losmapimod in any of these trials. There were no SAEs reported in 14 of these 24 clinical trials of losmapimod.

The table below presents safety data from the largest placebo-controlled clinical trial of losmapimod, which was a Phase 3 clinical trial for the treatment of acute coronary syndrome following a heart attack, in which over 1,700 patients were given 7.5 mg of losmapimod or placebo twice per day for 12 weeks and were followed for an additional 12 weeks. In this trial, GSK observed a similar proportion of AEs in the placebo group as compared to the losmapimod group. The data in the table below presents the SAEs reported by more than 0.5% of patients in any group in the trial through 24 weeks.

Placebo Losmapimod

n (%) n (%)

Infections and infestations 54 (3.1) 55 (3.2)

Respiratory, thoracic and mediastinal disorders 24 (1.4) 41 (2.4)

General disorders and administration site conditions 35 (2.0) 26 (1.5)

Renal and urinary disorders 18 (1.0) 31 (1.8)

Musculoskeletal and connective tissue disorders 14 (0.8) 25 (1.5)

There were also ten fatal SAEs in the placebo group and 13 fatal SAEs in the losmapimod group. In the placebo group, the fatal SAEs were infections and infestations (two), general disorders and administrative site conditions (two), respiratory, thoracic and mediastinal disorders (three), cardiac disorder (one), gastrointestinal disorder (one) and neoplasm (one). In the losmapimod group, the fatal SAEs were infections and infestations (four), general disorders and administrative site conditions (three), respiratory, thoracic and mediastinal disorders (two), cardiac disorder (one), injury poisoning and procedural complications (one), gastrointestinal disorder (one) and neoplasm (one).

The following table presents SAEs reported during treatment from a total of 11 Phase 1 and Phase 2 placebo-controlled clinical trials of losmapimod with repeat dosing for which GSK reported integrated data. The 11 trials presented include three of the 14 trials in which no SAEs were reported.

Safety data from 11 clinical trials of losmapimod conducted by GSK

Placebo Losmapimod

n (%) n (%)

Cardiac disorders 17 (2) 41 (3)

Respiratory, thoracic and mediastinal disorders 11 (1) 26 (2)

Infections and infestations 7 (<1) 14 (1)

General disorders and administrative site conditions 7 (<1) 13 (<1)

Nervous system disorders 5 (<1) 10 (<1)

Injury, poisoning and procedural complications 1 (<1) 11 (<1)

Gastrointestinal disorders 1 (<1) 7 (<1)

Vascular disorders 1 (<1) 5 (<1)

Renal and urinary disorders 2 (<1) 4 (<1)

Musculoskeletal and connective tissue disorders 2 (<1) 4 (<1)

Skin and subcutaneous tissue disorders 2 (<1) 4 (<1)

Hepatobiliary disorders 0 4 (<1)

Psychiatric disorders 2 (<1) 3 (<1)

Neoplasms (benign, malignant and unspecified) 1 (<1) 3 (<1)

Blood and lymphatic system disorders 0 1 (<1)

Immune system disorders 0 1 (<1)

Metabolism and nutrition disorders 0 1 (<1)

This table includes safety data from the second largest clinical trial of losmapimod, which was a placebo-controlled Phase 2 clinical trial of losmapimod in patients with COPD, in which 602 adult patients were given 2.5 mg, 7.5 mg or 15 mg of losmapimod or placebo twice per day for 24 weeks and were followed for an additional week. In this trial, GSK observed a similar proportion of AEs in the placebo group as compared to the losmapimod group. Additionally, in this trial there were three fatal SAEs in the placebo group due to severe exacerbation of COPD, acute myocardial infarction and pulmonary embolism, one fatal SAE in the losmapimod 7.5 mg group due to acute myocardial infarction and associated pulmonary edema and two fatal SAEs in the 15 mg group due to respiratory failure and bilateral purulent pleuritis and mediastinitis. The most common SAE observed in the trial was exacerbation of COPD, which was experienced by eight subjects in the placebo group, six subjects in the losmapimod 2.5 mg group, two subjects in the losmapimod 7.5 mg group and three subjects in the losmapimod 15 mg group. Other SAEs in the placebo group included a liver event, eczema, leukoplakia, sinobronchitis and anxiety. Other SAEs in the losmapimod groups included two subjects with liver events, one subject with eczema and leukoplakia, one subject with pyrexia and one subject with pemphigoid.

In addition to the trials and data summarized above, GSK also conducted a placebo-controlled Phase 2 clinical trial in which 184 adult patients with frequently exacerbating COPD were given 15 mg of losmapimod or placebo twice per day for up to 52 weeks. In this trial, the proportion of subjects with AEs and SAEs was higher in the losmapimod group than in the placebo group; there was one fatal SAE in the placebo group and three fatal SAEs in the losmapimod group, none of which was considered related to losmapimod. The data in the table below presents the SAEs reported in the trial.

Placebo Losmapimod

n (%) n (%)

Respiratory, thoracic and mediastinal disorders 2 (2) 7 (8)

Cardiac disorders 3 (3) 4 (4)

Infections and infestations 1 (1) 6 (7)

Injury, poisoning and procedural complications 1 (1) 2 (2)

Neoplasms (benign, malignant and unspecified) 2 (2) 1 (1)

In addition to the 24 trials conducted by GSK, another sponsor conducted a placebo-controlled Phase 2 clinical trial of losmapimod in which 73 subjects with COPD with cardiovascular manifestations were given 7.5 mg of losmapimod or placebo for 16 weeks. There were 36 subjects in the losmapimod group and 37 in the placebo group. In this trial, there were a total of six (17%) SAEs in the losmapimod group, consisting of exacerbations of COPD and pneumonia, and there was one (3%) SAE in the placebo group.

In prior studies, GSK observed that the p38α/ß target inhibition in humans was approximately 10%, 30% and 50% at trough and 40%, 60% and 70% at peak following twice per day doses of 2.5 mg, 7.5 mg and 15 mg, respectively. In addition, based on in vitro data from our studies in FSHD myotubes with losmapimod, we believe that the muscle exposures that we have achieved in rodents, which are similar to concentrations in human blood from the 15 mg twice per day dose, will result in robust p38α/ß target engagement and will reduce DUX4-driven gene expression in FSHD skeletal muscle by more than 50%. We believe that this data supports our determination that 15 mg of losmapimod twice per day is an appropriate dose for the treatment of patients with FSHD.

Our Clinical Development Strategy

Preparatory Studies

There are currently one ongoing and three completed preparatory non-drug studies designed to inform molecular and imaging biomarker and clinical development efficacy endpoints for ongoing clinical trials of losmapimod in patients with FSHD.

Study Subjects(Planned, for ongoing studies) Description / Endpoints Status

Biomarker Preparatory Study (Fulcrum SRA 002-2018)

We designed this preparatory study to investigate, inform and optimize the DUX4-driven gene expression and MRI efficacy biomarker endpoints that are currently in use in Phase 2 clinical trials of losmapimod for the treatment of FSHD. We enrolled and evaluated 17 subjects at seven clinical sites.

This preparatory study was designed to measure aberrant DUX4-driven gene expression in affected skeletal muscle via a subset of DUX4-driven gene transcripts in order to develop a molecular muscle endpoint designed to track the root cause of disease. We are using MRI to inform affected leg muscles selected for biopsy. Based on the results of this study, we believe that the DUX4-driven gene transcript measurement could be a primary endpoint in a clinical trial to support accelerated approval of losmapimod for FSHD. We are also using whole-body MRI scans one to three months apart to evaluate changes in skeletal muscle health (lean muscle tissue volume and muscle tissue infiltration and replacement by fat).

The subjects have clinical severity scores of two to four on the Ricci scale, which is the clinical impairment disability scale for patients with FSHD, where a zero indicates that a subject has no disability and five indicates that a subject is permanently dependent upon the use of a wheelchair for daily mobility activities.

We also are using other MRI-based measures as secondary endpoints in our ongoing Phase 2 clinical trials of losmapimod. We believe that muscle pathology in skeletal muscles of patients with FSHD is predictive of muscle degradation and subsequent fat replacement. We are utilizing MRI-based endpoints to identify the level of muscle pathology and the overall fat content in muscles. MRI imaging sequences, which are settings of pulses and gradients, have been developed that enable an increased contrast between tissues of interest. We use a T2 MRI sequence to observe and quantify areas of high muscle water content, or muscle edema, which is a marker of muscle pathology. These areas have a higher T2 value than the background tissue. T2 provides information about the muscle’s physiological status, however it is not specific for muscle edema and may indicate other abnormal conditions in muscle tissue. We are using the Dixon MRI sequence, or the Dixon method, to quantify the fat content of muscles, which is a marker for muscle degradation. The Dixon method separates the signals from water and fat and the separated fat signal can then be utilized to determine the fat infiltration and fraction within the muscle. We are using these MRI-based approaches as additional efficacy endpoints in our Phase 2 open label trial and Phase 2b clinical trial to identify muscles with higher levels of muscle pathology for muscle biopsy, as evidenced by a higher signal in the T2 sequence, and muscle degradation, as evidenced by intermediate levels of muscle fat fraction determined using the Dixon method.

A third-party study found that these MRI techniques, when applied to FSHD skeletal muscles, were able to quantify the increase in muscle pathology, as measured by fat fraction, as determined using the Dixon method, over a 20-month period. In particular, skeletal muscles with severe muscle pathology, as determined by elevated T2 signal, demonstrated progressive worsening of fat fraction over this period. This effect was observed as early as six months. Skeletal muscles in patients with FSHD that had low muscle pathology, based on a low T2 signal, demonstrated both lower levels of fat fraction and slower fat fraction progression. We believe that these data suggest that fat fraction progression is higher in muscles with a higher level of muscle pathology as measured by T2, and support the usage of these MRI-based endpoints in our ongoing clinical trials of losmapimod for the treatment of FSHD.

Optimized Time Up and Go Test Preparatory Study (Fulcrum SRA 003-2018)

We evaluated a modified version of the classic time up and go, or classic TUG, test that we are optimizing as a clinical outcome assessment of mobility and ambulation, which we refer to as the FSHD-TUG test. The classic TUG test requires patients to get up from a chair, walk three meters, turn around, walk back to the chair and sit down. It was originally developed for clinical practice to assess mobility, balance, walking ability and fall risk in older adults prior to discharge from hospitalization and was used recently as a key secondary efficacy endpoint in a registration trial in multiple sclerosis in Europe. The classic TUG test is also one of the clinical outcome assessments in the ReSOLVE natural history study discussed below.

While we believe that the classic TUG test is a valid, reliable and objective test to quantify functional mobility in all age groups, we believe that a minor modification, asking patients to get up from a standardized bed, will be more appropriate for FSHD patients. We believe that the FSHD-TUG test may be more sensitive to measure treatment effects in patients with FSHD. Patients with FSHD generally have a difficult time rising from a chair and even more so from a recumbent position and this difficulty progresses over time. Patients with FSHD report that limitations in mobility and in the use of the shoulders and upper arms are the two most important areas of concern. The FSHD-TUG test may be a useful clinical outcome assessment endpoint for measurement of treatment effects of losmapimod on mobility.

We tested the FSHD-TUG test in comparison to the classic TUG test in a group of 22 subjects with FSHD and in 20 healthy volunteers who are age and gender matched. The subjects had clinical severity scores of one to four on the Ricci scale. We evaluated the subjects in five visits over approximately 12 months. In addition, 10 of these subjects were enrolled in a three-month sub-study to assess mobility at home using a touchless sensor and machine learning platform for health analytics. We believe that this sub-study will provide valuable information regarding how measures of mobility conducted during clinical visits compare to mobility in every-day setting in subject’s homes. We are analyzing the data from these studies to inform our ongoing Phase 2 trials of losmapimod for the treatment of FSHD.

Direct Patient Input (Fulcrum SRA 004-2018)

We also obtained direct patient input into the design and feasibility of our Phase 2b clinical trial by having 79 patients with FSHD complete a survey based on their review of the proposed schedule of clinical assessments for the trial. The patients provided their views on their willingness to participate and any potential barriers to their participation in our then-planned Phase 2b clinical trial. We conducted these surveys during a face-to-face interview in clinics in the United States and France, via an internet survey for members of an FSHD registry in the United Kingdom and through in-person groups in Canada. This survey study provided us with the ability to refine the protocol for our ongoing Phase 2b clinical trial, if needed, and to inform the design of the long-term open label extension of the ReDUX4 trial to reflect the feedback from patients.

ReSOLVE Natural History Study

The Clinical Trial Readiness to Solve Barriers to Drug Development in FSHD, or ReSOLVE study, is an ongoing natural history study funded by the NIH to help identify the patient population, efficacy biomarker and clinical outcome assessments for future FSHD drug trials. The study is being coordinated by the University of Rochester and University of Kansas Medical Center and enrolled the first subject in April 2018. The study will follow up to 160 subjects for 24 months across a network of eight U.S. clinical centers and will evaluate multiple biomarkers and clinical outcome assessments that may be suitable for clinical trials and will evaluate patient selection criteria based on genetic, demographic or clinical characteristics. Three sites in the European Union have joined the ReSOLVE protocol and will follow 60 subjects for 24 months. We believe that the results of this natural history study will inform the design and implementation of clinical trials and will inform discussions with regulatory agencies. We also believe that this study may provide valuable insights into the timeline for disease progression and functional changes in FSHD in the absence of treatment.

In connection with the ReSOLVE study, we have funded the addition of a clinical outcome assessment, which we refer to as reachable work space, or RWS. RWS is an objective assessment of upper arm function in a quantitative manner by measuring arm and shoulder mobility with and without weights. A hallmark of FSHD progression is weakness in the shoulder muscles and upper arms that eventually leads to an inability of patients to lift their arms above their shoulders. The RWS assessments are analyzed by a central reader. We have provided standardized hardware, software, and testing conditions to evaluate RWS at eight sites that are part of the ReSOLVE study in the United States and at three European sites. Furthermore, the RWS assessment has been registered as medical device in the U.S., Canada and Europe.

A recent third-party study assessed changes in RWS for 18 subjects with FSHD for up to five years. As illustrated in the figure below, the study concluded that the RWS measure is able to detect slow declines in upper extremity function in subjects with FSHD as early as 1 year. The study also found that the most notable declines in RWS were in above-the-shoulder level quadrants with no significant changes in lower quadrants and that RWS declined more significantly if the subjects wore 500-gram weights on their wrists.

Clinical Trial: Phase 1

We conducted a randomized Phase 1 clinical trial of losmapimod in healthy adult volunteers and patients with FSHD in Europe under a CTA that we filed in December 2018. The primary objective of the trial was to investigate the safety and tolerability of losmapimod in healthy volunteers and in FSHD patients. The secondary objective was to evaluate repeated dose PK, and target engagement in FSHD patients in blood and muscle. This trial completed dosing in September 2019 and we presented unblinded data in March 2020.

In the first cohort, 10 healthy volunteers were randomized to a single oral dose of 7.5 mg of losmapimod (n=8) followed by a single oral dose of 15 mg after a wash out period or to single oral dose placebo (n=2) in both dosing periods. In the second cohort, 15 FSHD patients were randomized and treated with placebo (n=3) or 7.5 mg of losmapimod (n=6) or 15 mg of losmapimod (n=6) taken orally twice daily for 14 days. The third cohort was open label with five FSHD patients treated with 15 mg of losmapimod twice daily for 14 days. Biopsies of normal appearing (second cohort) and actively involved (STIR+) muscle (third cohort) were performed at baseline and during treatment.

Losmapimod was well tolerated with no serious adverse events reported. Similar tolerability, safety and PK were observed in healthy volunteers and patients with FSHD. Treatment with losmapimod demonstrated dose-dependent PK and target engagement in blood. FSHD patients treated with losmapimod also achieved dose-dependent concentrations in skeletal muscle, with a muscle to plasma exposure ratio of approximately 1:1. Evidence of dose-dependent target engagement was also observed in skeletal muscle. The losmapimod 15 mg dose taken orally twice daily demonstrated sustained drug concentrations that in preclinical models with human FSHD myotubes resulted in a robust reduction of DUX4-driven gene expression. These data support the selection of the 15 mg dose of losmapimod taken orally twice daily in our ongoing Phase 2b placebo-controlled clinical trial and Phase 2 open label clinical trial of losmapimod.

We manufactured the losmapimod capsules for this trial prior to our license agreement with GSK. For our ongoing Phase 2 clinical trials, we are using losmapimod tablets that were manufactured by GSK. We confirmed that the PK of the losmapimod capsules were consistent with published data on the PK of the losmapimod tablets manufactured by GSK. We also confirmed that the p38α/ß target engagement in blood from our losmapimod capsules is consistent with the previous data on target engagement of the losmapimod tablets manufactured by GSK.

Clinical Trial: Phase 2b (ReDUX4)

In August 2019, we initiated a randomized, double-blind, placebo-controlled multicenter international Phase 2b clinical trial in 80 patients with FSHD1 and clinical severity scores of two to four on the Ricci scale. In this trial, we are evaluating treatment with 15 mg of losmapimod or placebo tablets twice per day over a 24 or 48-week period. Enrollment was completed in February 2020. Patients were randomized 1:1 between the treatment and placebo arms. The FDA accepted the IND for losmapimod in June 2019, and we also submitted CTAs at various dates during 2019 to conduct the trial at sites in Europe and Canada, all of which were accepted.

The primary endpoint is the reduction of DUX4-driven gene expression in affected skeletal muscle biopsies before treatment and after approximately 16 weeks or 36 weeks of treatment. We selected the number of patients to enroll in this trial based on the magnitude of reduction of DUX4-driven gene expression that we have observed in our preclinical studies using losmapimod concentrations similar to those measured when dosing with 15 mg twice per day in clinical trials completed by GSK.

Secondary endpoints of the trial include evaluation of safety and tolerability in FSHD patients, PK in blood, losmapimod concentration in skeletal muscle biopsies, p38α/ß target engagement in blood and in muscle biopsies, and efficacy on the whole-body skeletal muscle MRI biomarker. This trial also includes evaluation of exploratory efficacy endpoints including centrally read RWS, FSHD-TUG test and patient-reported outcomes and muscle strength measured by quantitative dynamometry and motor function ability measurements obtained by physical therapists.

The original design of ReDUX4 included a muscle biopsy at week 16 during the 24-week treatment period followed by an open label extension. Sixteen of the 80 subjects in trial have completed the 24-week treatment period and rolled over to the open label extension portion of the trial. As a result of the COVID-19 pandemic, we extended the ReDUX4 treatment period from 24 to 48 weeks through a protocol amendment to ensure the safety of the subjects and to allow for the opportunity for a biopsy at week 16 as originally intended or at week 36. Approximately 64 subjects who did not complete the original 24-week treatment period continued in the 48-week treatment period in the randomized portion of the trial. The extension from 24 to 48 weeks also allows for a longer assessment in a placebo-controlled design of the skeletal muscle MRI secondary endpoint and the various exploratory clinical endpoints, such as reachable workspace, optimized time up and go test for FSHD, muscle function measures and patient reported outcomes. We expect to present full data from the trial in the second quarter of 2021. We believe that the amendment to the trial protocol provides flexibility to address the challenges presented by the COVID-19 pandemic and supports collection of efficacy and safety data to support continued discussions with regulatory agencies regarding potential registration strategies.

The graphic below presents the design of the Phase 2b clinical trial.

Clinical Trial: ReDUX4 Open Label Extension

In February 2020 we initiated an open label extension of the ReDUX4 trial to enable patients who have completed the 24-week or 48-week treatment period with losmapimod or placebo in ReDUX4 to receive long term treatment with losmapimod. This open label extension includes clinical assessments of safety and efficacy every three months, whole-body musculoskeletal MRI every six months, and a muscle needle biopsy once after six months of treatment. We anticipate that this trial will continue until such time as the drug is approved and available in the commercial setting or the clinical development of losmapimod in FSHD is terminated.

Clinical Trial: Phase 2 Open Label Study Trial

In parallel with the Phase 2b clinical trial, we also initiated in August 2019 an open label, single center Phase 2 clinical trial of losmapimod in up to 16 patients with FSHD1 and clinical severity scores of two to four on the Ricci scale. Patients receive tablets containing 15 mg of losmapimod twice per day for up to 52 weeks. The treatment period is preceded by eight weeks of pre-treatment assessments to establish a baseline for musculoskeletal MRI biomarkers and clinical outcome assessments. We also performed an outpatient mobility assessment using wearable sensors. We are conducting the trial at a single center in the Netherlands.

The primary objective is to investigate the safety and tolerability of losmapimod for chronic dosing in FSHD patients. The primary endpoints are to assess safety and tolerability over the 52-week period. The secondary endpoints are the change from baseline in pHSP27 and the ratio of pHSP27 to total HSP27 in blood and muscle for assessment of the inhibition of p38α/ß during the dosing period. This trial is also designed to provide initial data regarding changes in DUX4-driven gene expression, MRI biomarkers, objective clinical outcome assessments and patient-reported outcomes that may occur at various times following initiation of treatment with losmapimod relative to the pre-treatment period. We intend to use this data to further guide our clinical development strategy for losmapimod in FSHD.

We will measure DUX4-driven gene expression before and during treatment using muscle needle biopsies in affected muscles. All patients had a pre-treatment biopsy and we will obtain a second muscle needle biopsy from each patient after four or eight weeks of treatment. The original trial design included an additional biopsy during chronic treatment at week 48, but we have removed this assessment from the trial protocol because the open label extension of ReDUX4 includes a biopsy during chronic treatment.

We will measure potential losmapimod treatment effects on shoulder and upper arm function and mobility/ambulation, as well as on muscle strength and function and quality of life and activities of daily living, similar to the assessments in the Phase 2b clinical trial. The clinical outcome assessments are RWS, FSHD-TUG, muscle strength, motor function ability and generic and FSHD-specific patient reports of quality of life and activities of daily living. Other exploratory assessments include the six minute walk test, spirometry, and muscle ultrasound. There is also an assessment of day-to-day mobility using wearable sensors.

The graphic below presents the design of the Phase 2 open label trial.

Market Research

We engaged Clarion Healthcare, LLC to conduct market research with physicians and payors to better understand the commercial landscape and to assist in our commercial planning. A total of 14 physicians in the United States, European Union and Asia and nine payors and payor experts in the United States and European Union were surveyed. Both groups acknowledged the severity of the disease and lack of any existing therapies for patients. Physicians were asked their views on potentially prescribing a small molecule product candidate that effectively repressed DUX4 gene expression in skeletal muscle and resulted in the preservation of muscle function. Based on an April 2018 report prepared by Clarion, we believe that physicians would be receptive to prescribing a product with these qualities, subject to the efficacy and safety of the product, due to the chronic nature of the disease.

Our Product Candidate for Hemoglobinopathies

Hemoglobinopathies are a category of genetic disorders affecting RBCs. We intend to develop FTX-6058 to elevate the level of fetal hemoglobin for the treatment of patients with certain hemoglobinopathies, namely sickle cell disease and for certain types of ß-thalassemia.

Overview of Sickle Cell Disease

Sickle cell disease is a genetic disorder of RBCs. SCD patients typically suffer from serious clinical consequences, which may include vaso-occlusive crises, anemia, pain, infections, stroke, heart disease, pulmonary hypertension, kidney failure, liver disease and reduced life expectancy. According to a study published by the American Medical Association, approximately 32.5% of adult patients with SCD were hospitalized three or more times per year due to pain crises. SCD is reported to shorten patient life expectancy by approximately 20 to 30 years. Patients with SCD are primarily treated by hematologists.

In the United States, where newborn screening for SCD is mandatory, the estimated prevalence is approximately 100,000 individuals. In Europe, the estimated prevalence is approximately 134,000 individuals according to the EMA. According to the World Health Organization, the global incidence is estimated to be approximately 300,000 births annually. SCD is most prevalent in Africa and the Middle East.

Approved drug treatments for SCD focus primarily on the management and reduction of pain episodes,vaso-occlusive crises, and inhibition of hemoglobin S polymerization. The four drug treatments approved in the United States are hydroxyurea, voxelotor, crizanlizumab, and L-glutamine. Hydroxyurea is approved for the treatment of anemia related to SCD to reduce the frequency of painful crises and the need for blood transfusions. Hydroxyurea has a black box warning for myelosuppression and malignancy. In general, it is limited by its adverse side effects, inconsistent patient responses and concerns regarding the cytotoxic effect of the drug. L-glutamine is approved to reduce severe complications associated with the disorder. Voxelotor, marketed by Global Blood Therapeutics, is approved under accelerated approval as a hemoglobin polymerization inhibitor. Crizanlizumab, marketed by Novartis AG, or Novartis, is approved for the reduction in the frequency of vaso-occlusive crises.

Blood transfusions can be utilized to decrease the sickling of RBCs. While blood transfusions can be critical to manage SCD, there are a number of limitations associated with this therapeutic approach, including limited patient access and serious complications such as iron overload. The only potentially curative treatment currently approved for severe SCD is bone marrow transplantation. However, this treatment option is not commonly used due to the difficulties of finding a suitable matching donor and the risks associated with the treatment, which include an approximately 5% mortality rate. Bone marrow transplantation is more commonly offered to pediatric patients with available sibling-matched donors.

While multiple experimental approaches to treat SCD are being explored in clinical trials, the majority are focused on symptomatic relief or gene therapy approaches. Symptomatic approaches under investigation aim to affect issues associated with cell adhesion, sickling, thrombosis and iron homeostasis. We anticipate that a novel orally available therapy that affects the root cause of SCD may be used in combination with symptomatic therapeutics. Novartis and Global Blood Therapeutics, Inc. have received approval for therapies aiming to provide symptomatic relief for patients with SCD. Several gene therapy approaches to treat SCD are focused on elevating fetal hemoglobin, however no gene therapy approaches have been approved for SCD and the efficacy, safety and durability of gene therapy approaches have yet to be established. Gene therapies need to be administered in an in-patient procedure through a bone marrow transplant, which is also referred to as a stem cell transplant or hematopoietic stem cell transplant. As part of the transplant process, the patient receives myeloablative chemotherapy which kills cells in the bone marrow in order to support the gene therapy. Despite ongoing efforts to develop gene therapies for SCD, we believe there is still a high unmet need that could be better addressed by a small molecule, oral therapy to treat the disease by increasing fetal hemoglobin.

SCD Biology

SCD is caused by a mutation in the HBB gene. This gene encodes a protein that is a key component of hemoglobin, a protein complex whose function is to transport oxygen in the body. Hemoglobin in adults is a complex of four proteins, two hemoglobin ß-subunits and two hemoglobin α-subunits. In patients with SCD, hemoglobin is composed of two mutant ß-subunits and two α-subunits and the result is the formation of abnormal hemoglobin. The result of the mutation is less efficient oxygen transport and the formation of RBCs that have a sickle shape. These sickle shaped cells are much less flexible than healthy cells and can block blood vessels (vaso-occlusion) or rupture cells (lysis), leading to pain, anemia, irreversible organ damage or even death.

During fetal development, the major form of hemoglobin is fetal hemoglobin. Similar to hemoglobin in adults, fetal hemoglobin is also a complex of four proteins, two α-subunits and two γ-subunits. Shortly after birth, the genes encoding the γ-subunits, the HBG1 and HBG2 genes, are silenced and the HBB gene is activated. As described above, SCD is caused by a mutation in the HBB gene that gives rise to mutated ß-subunits.

A small subset of individuals with the sickle cell mutation continue to produce high levels of fetal hemoglobin due to inheritance of additional genetic mutations, which is called Hereditary Persistence of Fetal Hemoglobin, or HPFH. Patients with elevated fetal hemoglobin exhibit few, if any, clinical manifestations of SCD. Further, an increase of fetal hemoglobin as low as 3% over baseline in patients without HPFH, due to either therapeutic intervention or the inheritance of other genetic traits, can result in reduced clinical manifestations of the disease.

Our Approach to Address the Root Cause of SCD

Our strategy to address the root cause of SCD was to identify a drug mechanism that induces expression of fetal hemoglobin. We believe that FTX-6058 may address the root cause of SCD through this mechanism of action.

Overview of ß-Thalassemia

ß-thalassemia is a rare blood disorder associated with the absence or reduced production of ß-globin, which is one of the two proteins that comprise adult hemoglobin. This results in an abnormally low level of hemoglobin as well as an excess of α-globin chains that cause destruction of RBCs. The severity of the phenotype is related to the degree of imbalance between α- and non-α-globin chain synthesis. The absence of ß-globin due to HBB gene deletions is referred to as ß0 thalassemia. Other HBB gene alterations allow some ß-globin to be produced but in reduced amounts. A reduced amount of ß-globin is called ß+thalassemia. Many patients with ß-thalassemia require chronic blood transfusions due to severe anemia that results from low hemoglobin levels, which are referred to as transfusion-dependent patients. It is estimated that 40,000 babies are born worldwide with ß-thalassemia per year of whom 25,000 require blood transfusions. Patients with ß-thalassemia are primarily treated by hematologists.

ß-thalassemia has been clinically characterized into three forms, depending on disease severity: major, intermedia and minor. The most severe form, ß-thalassemia major (also known as Cooley’s anemia), is generally diagnosed shortly after birth and patients have life-threatening anemia. Pediatric patients do not grow and gain weight at the typical rates, and often have liver, heart and bone problems. Many ß-thalassemia major patients require frequent blood transfusions to prevent severe anemia, a treatment that itself can cause long-term problems due to a build-up of iron in the body. ß-thalassemia intermedia is a less severe form of the disease that results in mild to moderate anemia. These patients sometimes require blood transfusions depending on the severity of the symptoms. Patients with ß-thalassemia minor suffer from very mild anemia and generally do not require treatment. Having either ß0 or ß+ thalassemia does not necessarily predict clinical disease severity as people with both types have been diagnosed with thalassemia major and thalassemia intermedia. Any increase in fetal hemoglobin has the potential to ameliorate the disease.

The current standard of care for many patients with ß-thalassemia is frequent blood transfusions to manage anemia. The only potentially curative therapy for ß-thalassemia is allogeneic hematopoietic stem cell transplant, which is associated with risks of complications, including mortality, and is limited to patients with a suitable donor. The European Commission granted conditional marketing authorization for ZYNTEGLO, a gene therapy developed by bluebird bio, Inc., or bluebird, for the treatment of adult and adolescent patients with transfusion-dependent ß-thalassemia and with certain genotypes, in Europe in June 2019. bluebird has initiated a rolling biologics license application, or BLA, submission for betibeglogene autotemcel in the United States, which is expected to be completed in mid-2021. Acceleron in collaboration with Celgene Corp., or Celgene, received FDA and EMA approval for luspatercept, an erythroid maturation agent for the treatment of adult patients with anemia associated with ß-thalassemia and who require frequent transfusions. There are also multiple other experimental approaches to treat ß-thalassemia being explored in clinical trials, including approaches that use small molecule, gene therapy and gene editing approaches. Despite ongoing efforts to develop new therapies for ß-thalassemia, we believe there is still a high unmet need that could be addressed by a small molecule, oral therapy to treatment the disease by increasing fetal hemoglobin.

Biology of ß-Thalassemia

ß-thalassemia is caused by genetic mutations in the HBB gene. The mutations interfere with the production of ß-globin. Some mutations result in no ß-globin being produced, while other mutations result in a decreased amount of ß-globin being produced.

Our Approach to Address the Root Cause of ß-Thalassemia

We believe that some types of ß-thalassemia may be treated by a therapy that upregulates fetal hemoglobin. Babies born with ß-thalassemia major generally do not have any symptoms shortly after birth because they have fetal hemoglobin in their blood. As the fetal hemoglobin levels decrease after birth and the ß-globin fails to increase, anemia appears and the babies with ß-thalassemia begin to exhibit symptoms of the disease. Patients with ß-thalassemia intermedia that have higher levels of fetal hemoglobin have fewer symptoms than patients with low levels of fetal hemoglobin. We believe that FTX-6058 may be suitable for clinical development for the treatment of patients who are not ß0 but who are transfusion dependent.

Our Product Engine Identified the Drug Target for SCD and ß-Thalassemia

Applying our product engine, we conducted target identification and validation activities using human umbilical cord blood-derived erythroid progenitor 2, or HUDEP2, cells as a model to study fetal hemoglobin reactivation. HUDEP2 cells are immature RBCs. By screening our small molecule probe library and a CRISPR library, we identified several potential drug targets that activated the HBG1/2 genes and resulted in fetal hemoglobin elevation. Each screening approach identified the same protein complex which we believe plays an important role in the expression of genes responsible for the production of fetal hemoglobin. We conducted additional validation experiments in which we observed that inhibition of several components of this complex resulted in the desired elevation of fetal hemoglobin. We also observed that inhibition of these components did not adversely affect important cell health markers.

We selected a member of this protein complex for drug discovery activities following an assessment of its tractability as a drug target, which we refer to as the HbF drug target. The normal physiological role of the HbF drug target is to facilitate a post-translational protein modification, and the goal of our medicinal chemistry program was to optimize inhibitors of the HbF drug target. We developed in vitro and in vivo target engagement assays, as well as enabled X-ray crystallography, to discover and develop FTX-6058, a novel small molecule inhibitor of the HbF drug target.

FTX-6058

FTX-6058 is our novel small molecule designed to bind EED and inhibit the transcriptional silencing activity of PRC2. FTX-6058 exhibits fetal hemoglobin induction and possesses properties that we believe are well aligned with preferred parameters for oral drug delivery. We studied the cellular potency and the PK data of FTX-6058 in preclinical animal models and observed that its profile supports once daily oral administration. We have not observed any off-target concerns in our in vitro profiling studies, and we have completed GLP in vivo toxicology studies to evaluate FTX-6058. We initiated our Phase 1 clinical trial of FTX-6058 in healthy adult volunteers in the fourth quarter of 2020. In addition, we anticipate initiating a clinical trial of FTX-6058 in patients with SCD in the second half of 2021.

Preclinical Studies

We have observed in vitro and in vivo activation of the HBG1/2 genes in preclinical studies with FTX-6058. We observed that FTX-6058 elevated levels of fetal hemoglobin with minimal adverse effects on important cellular health markers. As depicted in the graphic below, we also observed in vitro upregulation of fetal hemoglobin in primary human CD34+ cells differentiated into RBCs from five different healthy human donors and one SCD donor after seven days of drug treatment. FTX-6058 showed a significant elevation of fetal hemoglobin over baseline in each of these six donor cell lines. We have conducted additional preclinical profiling in CD34+ derived cells and observed that treatment with FTX-6058 increased HbF levels to approximately 30% of total hemoglobin, as measured by mass spectrometry, high performance liquid chromatography, and fast protein liquid chromatography techniques. The elevation of HbF observed with FTX-6058 was significantly greater than we observed with hydroxyurea in these cell models.

Effect of FTX-6058 treatment

in differentiated primary human CD34+ cells

Additionally, we compared the effect of FTX-6058 in CD34+ derived cells relative to that of hydroxyurea. We observed that hydroxyurea had a minimal impact on fetal hemoglobin elevation, whereas we observed that FTX-6058 significantly elevated fetal hemoglobin. In cells treated with the combination of FTX-6058 and hydroxyurea, we observed an increased effect relative to either compound alone.

In preclinical PK/PD studies in mice, we observed that blood cells had dose-dependent drug target engagement after 4.5 days of oral treatment of FTX-6058. FTX-6058 inhibited activity of PRC2, which is responsible for catalyzing tri-methylation of lysine 27 on histone H3 (H3K27me3). As a result, target engagement was assessed by quantifying H3K27me3 levels. We believe our drug target is conserved between species, which is supported by our observation of a concomitant upregulation of the mouse embryonic globin gene under conditions where we observed drug target engagement. Since mice do not have the HBG1/2 genes found in humans, we used the mouse embryonic globin gene hbb-bh1 as a surrogate for the human HBG1/2 genes. We measured the target engagement in the mouse from whole blood. We concluded from the data that FTX-6058 engaged the drug target in vivo and modulated the endogenous mouse globin gene expression program. The results of this study are depicted below.

In the graphic on the left, we measured the amount of drug target engagement modification in mouse blood cells after five days of treatment. In the vehicle-treated mice, we observed maximum levels of protein modification, whereas in the FTX-6058 treated mice, we observed significantly lower levels of modification, which indicates significant target engagement. Each point represents the value for a different mouse, shown as a percent of the average vehicle-treated value. In the graphic on the right, we determined the level of mouse embryonic globin mRNA levels in mouse blood after five days of treatment. The data is from an average of four or five mice per treatment. In these studies, we used a conventional method of assessing statistical significance known as a two-tailed test. The p-value for each of the studies depicted above was 0.0005. A p-value is a conventional statistical method for measuring the statistical significance of experimental results. A p-value of less than 0.05 is generally considered to represent statistical significance, meaning that there is a less than five percent likelihood that the observed results occurred by chance.

Additionally, we studied FTX-6058 in a mouse model of SCD, known as the Townes mouse model. In this model, mouse globin genes have been replaced with human globin genes, thereby allowing investigations of mechanisms that may regulate human hemoglobin gene expression. The Townes mouse model has been widely used to study potential treatments for SCD. As shown in the figures below, we observed that FTX-6058 resulted in a significant increase in fetal hemoglobin expressing cells, or F-cells, and HbF protein levels after 13 days of dosing at 5 mg/kg once per day whereas hydroxyurea resulted in modest increases in F-cells and HbF.

In the graphic on the left, we quantified the percentage of F-cells as a percentage of total cells (%F-cells) for the three treatment conditions from mouse blood, shown as a percentage of vehicle-alone-treated SCD mice. In the graphic on the right, we determined the level of human HbF protein for the three treatment conditions, quantifying HbF protein as a percentage of total hemoglobin. Each value represents the mean value from eight mice per treatment after 13 days of treatment. In these studies, we used a conventional method of assessing statistical significance known as a one-way analysis of variance, or ANOVA. The p-value for FTX-6058 was less than 0.001 for both studies and the p-value for hydroxyurea in the study depicted on the right was less than 0.01.

Our Development Plan for FTX-6058

We initiated a Phase 1 clinical trial of FTX-6058 in the fourth quarter of 2020 to evaluate the safety, tolerability and pharmacokinetics of FTX-6058 in healthy adult volunteers.

The Phase 1 clinical trial of FTX-6058 in healthy adult volunteers is comprised of four parts. Part A is a randomized, double-blind, placebo-controlled, single ascending dose study in up to six cohorts. Part B is a randomized, double-blind, placebo-controlled, multiple ascending dose study in up to four cohorts dosed once daily for 14 days. Part C is an open label pilot food effect study in subjects randomized to take FTX-6058 with and without a high-fat meal, and Part D is an open label study to evaluate the potential of FTX-6058 to induce a liver enzyme known as CYP3A, which is involved in drug metabolism. We expect to present data from the Phase 1 clinical trial in mid-2021.

In addition, we anticipate initiating a clinical trial of FTX-6058 in patients with SCD in the second half of 2021.

We expect that our target SCD patient population will be SCD patients with inadequate disease control and that concomitant use of hydroxyurea and/or L-glutamine will be allowed when available. We also expect to evaluate FTX-6058 in clinical trials for the treatment of ß-thalassemia.

Discovery Screening Programs

We have leveraged our proprietary product engine to discover targets that we are pursuing with small molecules for FSHD, SCD and ß-thalassemia. We are leveraging the broad applicability of our product engine to discover drug targets for other rare, genetically defined diseases across neuromuscular, muscular, hematologic and CNS disorders.

Our target identification strategy and approach continue to evolve. In addition to conducting screens to identify targets that modulate the expression of a single root cause gene, we are able to simultaneously interrogate multiple (approximately 10) root cause genes and to monitor effects on cell health all in a single screen (i.e., multiplexed screening). We believe that this new approach provides significant efficiencies in productivity and allows us to test multiple hypotheses in parallel. Importantly, the expansion of FulcrumSeek with the use of high content molecular profiling, including RNAseq and cellular imaging, allows us to simultaneously measure the expression of 8,000-10,000 genes and integrate key measures related to cell health and biology, which enables us to scale our screening capacity and productivity. With the use of our small molecule probe library and our functional genomics capabilities, we aim to conduct target identification at a significantly increased scale and with cost-effectiveness. Moreover, we are using our product engine in hypothesis testing mode and in hypothesis generation mode, which we expect to increase the probability of identifying attractive targets to advance in our portfolio or in collaboration with partners.

Right of Reference and License Agreement with GlaxoSmithKline

In February 2019, we entered into a right of reference and license agreement with affiliates of GSK, as amended in September 2020, pursuant to which GSK granted us a right of reference to certain INDs filed with the FDA and controlled by GSK or its affiliates relating to losmapimod and an exclusive worldwide license under certain patent rights related to losmapimod. The agreement also provides us with an exclusive worldwide license to certain of GSK’s preclinical and clinical data with respect to losmapimod. As partial consideration for the right of reference and licenses granted under the agreement, we issued 12,500,000 shares of our Series B preferred stock to GSK at the time we entered into the reference and license agreement. The agreement obligates us to use commercially reasonable efforts to develop and commercialize a licensed product for the treatment of FSHD.

The agreement grants us an exclusive, sublicensable license under the licensed patent rights and data rights to research, develop and commercialize losmapimod or any product containing losmapimod as an API, which we refer to as a licensed product, to treat disease in humans. GSK retained the right, without the right to grant sublicenses, to conduct nonclinical research under the licensed patents and data rights and, with our consent, GSK may engage in certain developmental activities relating to the use of a licensed product in connection with a specified prophylactic use. GSK also agreed to and has since transferred to us its existing manufactured supply of losmapimod.

Under the agreement, we will be obligated to make milestone payments to GSK aggregating up to $37.5 million upon the achievement of specified clinical and regulatory milestones with respect to the first licensed product to achieve such milestones, including a $2.5 million milestone payment we made to GSK during the year ended December 31, 2019 upon the imitation of a Phase 2 clinical trial, and up to $60.0 million upon the achievement of one-time aggregate annual worldwide net sales milestones. We will also be obligated to pay royalties ranging from a mid single-digit percentage to a low double-digit, but less than teens, percentage to GSK based on our, and any of our affiliates’ and sublicensees’, annual net sales of licensed products. The royalties are payable on a product-by-product and country-by-country basis, and may be reduced in specified circumstances.

Our obligation to make royalty payments extends with respect to a licensed product in a country until the earlier of the approval of a generic version of such licensed product by the applicable regulatory agency in such country or the tenth anniversary of the first commercial sale of such licensed product in such country, which we refer to as the royalty term. Following the expiration of any exclusive marketing rights or data exclusivity rights granted by a regulatory authority, other than patent rights, for any licensed product on a country-by-country basis, the applicable royalty rate will be reduced. Additionally, if we or our affiliates or sublicensees determine that it is necessary to obtain a license from a third party under any patent rights to exploit a licensed product in a country, then we may deduct a certain percentage of the license fees under such third party license payable by us to the third party from the royalty payment that would otherwise be due to GSK in such country.

If, prior to our completion of the first Phase 2 clinical trial for a licensed product, we wish to sublicense any of the licensed patent or data rights granted to us under the agreement to any third party outside of the United States, we must notify GSK of the terms on which we propose to grant such sublicense. GSK has the right to enter into negotiations with us for such sublicense, and if GSK so elects, then we must negotiate in good faith with GSK for a prescribed period. If we and GSK do not agree to a sublicense of the relevant rights, we may sublicense the relevant rights to the third party on terms no less favorable than any terms offered to us by GSK.

The agreement continues on a country-by-country and licensed product-by-licensed product basis until the expiration of the royalty term in each country, at which time the agreement expires with respect to such licensed product in such country and we shall have a fully-paid up, royalty-free and perpetual license to the licensed patent rights and data with respect to such licensed product in such country. Either party has the right to terminate the agreement if the other party has materially breached in the performance of its obligations under the agreement and such breach has not been cured within the applicable cure period.

Collaboration and License Agreement with Acceleron

In December 2019, we entered into a collaboration and license agreement with Acceleron to identify biological targets to modulate specific pathways associated with a targeted indication within the pulmonary disease space. Under the terms of the collaboration and license agreement, we granted Acceleron an exclusive worldwide license under certain intellectual property rights to make, have made, use, sell, have sold, import, export, distribute and have distributed, market, have marketed, promote, have promoted, or otherwise exploit molecules and products directed against or expressing certain biological targets identified by us for the treatment, prophylaxis, or diagnosis of a targeted indication within the pulmonary disease space, or the Indication.

Pursuant to a mutually agreed research plan, we will perform assay screening and related research activities to identify and validate potential biological targets for further research, in order to support the development, manufacture and commercialization of product candidates by Acceleron. Upon completion of the research activities, we will deliver a data package to Acceleron with respect to the biological targets identified by us in the conduct of the research activities for the treatment, prophylaxis, or diagnosis of the Indication. Within a designated period of receipt of the data package, Acceleron will have the right to designate a specified number of the biological targets identified by us for Acceleron’s research, development, manufacture and commercialization of products or molecules directed to such targets for the treatment, prophylaxis, or diagnosis of the Indication, or the Targets. If Acceleron does not designate any Targets during the designated period, then the agreement will automatically terminate. If Acceleron designates one or more Targets, then Acceleron will be obligated to use commercially reasonable efforts to seek regulatory approval for one product directed to a Target in certain specified countries. Upon receipt of regulatory approval for any product directed to a Target, Acceleron must use commercially reasonable efforts to commercialize such product in certain specified countries.

While we are performing the research activities pursuant to the research plan and for a specified period thereafter, we may not research, develop, manufacture, commercialize, use, or otherwise exploit any compound or product for the treatment, prophylaxis, or diagnosis of the Indication other than for Acceleron. While we are performing the research activities pursuant to the research plan and for a specified period thereafter, other than for Acceleron, we may not research, develop, manufacture, commercialize, use, or otherwise exploit any compound or product for the treatment, prophylaxis, or diagnosis of the Indication that is directed against certain specified biological targets identified by us in the performance of the research activities.

Acceleron may also request that we perform medicinal chemistry services related to the generation and optimization of molecules directed against or expressing biological targets for the treatment, prophylaxis, or diagnosis of the Indication beyond the scope of the research plan. If we agree to provide such medicinal chemistry services, we and Acceleron will negotiate to determine the scope, timeline and budget for such medicinal chemistry services.

Under the agreement, Acceleron made a $10.0 million upfront payment to us. We will be entitled to research milestone payments of up to $18.5 million in the aggregate upon achievement of specified research milestones. Additionally, we will be entitled to development milestone payments of up to $135.0 million in the aggregate upon the first achievement of specified clinical and regulatory milestones by a product directed to a Target, and up to $67.5 million in the aggregate upon the second achievement of specified clinical and regulatory milestones by a product directed to a Target. We will also be entitled to sales milestone payments of up to $145.0 million in the aggregate upon the achievement of one-time aggregate annual worldwide net sales milestones for the first product directed to a Target to achieve such milestones, and up to $72.5 million in the aggregate upon the achievement of one-time aggregate annual worldwide net sales milestones for the second product directed to a Target to achieve such milestones. To date, we have achieved $2.0 million of specified research milestones.Acceleron will also pay us tiered royalties ranging from a mid single-digit percentage to a low double-digit percentage based on Acceleron’s, and any of its affiliates’ and sublicensees’, annual worldwide net sales of products directed to any Target. The royalties are payable on a product-by-product basis during a specified royalty term, and may be reduced in specified circumstances.

The agreement continues on a country-by-country and Target-by-Target basis until the last to expire royalty term for a product directed to such Target, at which time the agreement expires with respect to such Target in such country. Either party has the right to terminate the agreement if the other party has materially breached in the performance of its obligations under the agreement and such breach has not been cured within the applicable cure period. Acceleron also has the right to terminate the agreement for convenience in its entirety or on a Target-by-Target and molecule-by-molecule basis with respect to any molecule directed against a Target.

Collaboration and License Agreement with MyoKardia, a wholly owned subsidiary of Bristol-Myers Squibb Company

In July 2019, we entered into a collaboration and license agreement with MyoKardia, or the MyoKardia Collaboration Agreement, to identify biological targets that are capable of modulating genes of interest with relevance to certain genetically defined cardiomyopathies. Under the terms of the MyoKardia Collaboration Agreement, we granted MyoKardia an exclusive worldwide license under certain intellectual property rights to research, develop, make, have made, use, have used, sell, have sold, offer for sale, have offered for sale, import, have imported, export, have exported, distribute, have distributed, market, have marketed, promote, have promoted, or otherwise exploit products directed against certain biological targets identified by us that are capable of modulating certain genes of interest with relevance to certain genetically defined cardiomyopathies.

Pursuant to a mutually agreed research plan, we will perform assay screening and related research activities to identify and validate up to a specified number of potential cardiomyopathy gene targets, or the Identified Targets, for further research, development, manufacture and commercialization by MyoKardia. We and MyoKardia will work together to determine how best to advance at each stage of the research activities under the research plan and to identify which of the Identified Targets, if any, meet the criteria set forth in the research plan, or the Cardiomyopathy Target Candidates. Upon completion of the research plan, the parties will work together to prepare a final data package and MyoKardia may designate certain Cardiomyopathy Target Candidates for MyoKardia’s further exploitation under the MyoKardia Collaboration Agreement, or the Cardiomyopathy Targets. If MyoKardia does not designate any Cardiomyopathy Targets during the designated period, then the MyoKardia Collaboration Agreement will automatically terminate. If MyoKardia designates one or more Cardiomyopathy Targets, then MyoKardia will be obligated to use commercially reasonable efforts to seek regulatory approval for and to commercialize one product directed against an Identified Target in certain specified countries.

During the period in which we are performing the research activities pursuant to the research plan, or the Research Term and for a specified period beyond the Research Term if MyoKardia designates a Cardiomyopathy Target, we may only use the data generated from such research activities for MyoKardia in accordance with the MyoKardia Collaboration Agreement. During the Research Term and for a specified period thereafter, we may not research, develop, manufacture, commercialize, use, or otherwise exploit any compound or product (a) that is a compound or product under the MyoKardia Collaboration Agreement that is directed against the Cardiomyopathy Target Candidates for the treatment, prophylaxis, or diagnosis of any indication or (b) for the treatment of any genetically defined cardiomyopathies shown to be related to certain specified genes of interest that are modulated by the Cardiomyopathy Targets.

Under the MyoKardia Collaboration Agreement, MyoKardia made a $10.0 million upfront payment and a $2.5 million payment as prepaid research funding to us in July 2020. MyoKardia will also reimburse us for the costs of the research activities not covered by the prepaid research funding, up to a maximum amount of total research funding (including the prepaid research funding). Upon the achievement of specified preclinical, development and sales milestones, we will be entitled to preclinical milestone payments, development milestone payments and sales milestone payments of up to $298.5

million in the aggregate per target for certain Identified Targets, and of up to $150.0 million in the aggregate per target for certain other Identified Targets. MyoKardia will also pay us tiered royalties ranging from a mid single-digit percentage to a low double-digit percentage based on MyoKardia’s, and any of its affiliates’ and sublicensees’, annual worldwide net sales of products under the MyoKardia Collaboration Agreement directed against any Identified Target. The royalties are payable on a product-by-product basis during a specified royalty term, and may be reduced in specified circumstances.

The MyoKardia Collaboration Agreement continues on a country-by-country and product-by-product basis until the last to expire royalty term for a product, at which time the MyoKardia Collaboration Agreement expires with respect to such product in such country. Either party has the right to terminate the MyoKardia Collaboration Agreement if the other party has materially breached in the performance of its obligations under the MyoKardia Collaboration Agreement and such breach has not been cured within the applicable cure period. MyoKardia also has the right to terminate the MyoKardia Collaboration Agreement for convenience in its entirety or on a target-by-target, product-by-product or molecule-by-molecule basis.

Intellectual Property

We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to the development of our business, including by seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in our field.

Our future commercial success depends, in part, on our ability to: obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business; defend and enforce in our intellectual property rights, in particular our patents rights; preserve the confidentiality of our trade secrets; and operate without infringing, misappropriating or violating the valid and enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

The patent positions of biotechnology and pharmaceutical companies like ours are generally uncertain and can involve complex legal, scientific and factual issues. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. We also cannot ensure that patents will issue with respect to any patent applications that we or our licensors may file in the future, nor can we ensure that any of our owned or licensed patents or future patents will be commercially useful in protecting our product candidates and methods of manufacturing the same. In addition, the coverage claimed in a patent application may be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our products will be protected or remain protectable by enforceable patents. Moreover, any patents that we hold may be challenged, circumvented or invalidated by third parties. See “Risk Factors—Risks Related to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.

We generally file patent applications directed to our key programs in an effort to secure our intellectual property positions vis-a-vis these programs. As of February 25, 2021, we owned or in-licensed eight U.S. patents, three U.S. pending non-provisional patent applications and related pending foreign patent applications, two pending Patent Cooperation Treaty, or PCT, applications and two U.S. provisional patent applications.

The intellectual property portfolio for our most advanced programs as of February 25, 2021, is summarized below. Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the U.S. Patent and Trademark Office may be significantly narrowed before issuance, if issued at all. We expect this may be the case with respect to some of our pending patent applications referred to below.

Losmapimod and Derivatives

The patent portfolio for losmapimod is based upon Fulcrum-owned patents, patent applications and in-licensed patents directed to new methods of using losmapimod and other p38 inhibitors to treat FSHD, pharmaceutical compositions generically and specifically covering p38 inhibitors, and methods for identifying novel compositions to treat FSHD. As of February 25, 2021, we owned two U.S. patents, two U.S. pending non-provisional patent applications and related foreign patent applications, and one U.S. pending provisional application that relate to our p38α/ß program, relating to methods of using losmapimod and certain other p38 inhibitors for the treatment of FSHD. These patents and patent applications are expected to expire in 2038.

Losmapimod is also currently protected by patents owned by GSK (as a composition of matter and certain uses which do not include FSHD) and certain of these patents are licensed to us. As of February 25, 2021,we control through our exclusive licensing agreement with GSK six issued U.S. patents and related foreign patents and patent applications, all relating to losmapimod and its pharmaceutical compositions. The U.S. patents and related foreign patents directed to losmapimod composition of matter are expected to expire in 2023.

FTX-6058

As of February 25, 2021, the intellectual property portfolio for our FTX-6058 program include two owned PCT applications and two pending U.S. patent applications directed in part to pharmaceutical compositions as well as to methods for using and making these compositions.In order to continue to pursue protection based on PCT applications, we will need to nationalize the international applications into U.S. non-provisional patent applications and ex-U.S. applications prior to the applicable expiration deadline of the PCT applications. If issued, any patents that may issue from the U.S. non-provisional patent applications and/or foreign patent applications would be projected to have statutory expiration dates between 2039 and 2040, excluding any additional term for patent term adjustments or patent term extension, if applicable.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

In the United States, the term of a patent covering an FDA-approved drug may, in certain cases, be eligible for a patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 as compensation for the loss of patent term during the FDA regulatory review process. The period of extension may be up to five years, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible for an extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering the use of losmapimod and products from our intellectual property may be entitled to patent term extensions. If our use of drug candidates or the drug candidate itself receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved use or drug candidate. We also intend to seek patent term extensions in any jurisdictions where available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

In addition to patent protection, we rely upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and confidential know-how are difficult to protect. We seek to protect our proprietary information, in part, using confidentiality agreements with any collaborators, scientific advisors, employees and consultants and invention assignment agreements with our employees. We also have agreements requiring assignment of inventions with selected consultants, scientific advisors and collaborators. These agreements may not provide meaningful protection. These agreements may also be breached, and we may not have an adequate remedy for any such breach. In addition, our trade secrets and/or confidential know-how may become known or be independently developed by a third party, or misused by any collaborator to whom we disclose such information. Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our products or to obtain or use information that we regard as proprietary. Although we take steps to protect our proprietary information, third parties may independently develop the same or similar proprietary information or may otherwise gain access to our proprietary information. As a result, we may be unable to meaningfully protect our trade secrets and proprietary information. See “Risk Factors—Risks Related to our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.

Manufacturing

We do not have any manufacturing facilities. We have obtained sufficient losmapimod tablets, or drug product, from GSK to complete our ongoing Phase 2 clinical trials in FSHD. We believe that we have received a sufficient quantity of losmapimod API from GSK to complete further clinical trials in FSHD. We have engaged a contract manufacturing organization to prepare our own API and to manufacture losmapimod tablets. We believe that we have all the necessary information from GSK to enable the required technology transfers to contract manufacturing organizations.

We have obtained sufficient quantities of FTX-6058 to complete our ongoing Phase 1 clinical trial from a contract manufacturing organization.

We expect to continue to rely on third parties for the manufacture of FTX-6058 for any future clinical trials and for the manufacture of any future product candidates for preclinical and clinical testing, as well as for commercial manufacture if our product candidates receive marketing approval. Our lead product candidates are small molecules and can be manufactured in

reliable and reproducible synthetic processes from readily available starting materials. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industry may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The key competitive factors affecting the success of all of our therapeutic product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval or emergency use authorizations for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. If our product candidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic products.

If our lead product candidates are approved for the indications for which we are currently undertaking clinical trials, they will compete with the therapies and currently marketed drugs discussed below.

FSHD

There are no approved therapies for the treatment of FSHD. Controlled trials of albuterol, corticosteroids and a myostatin inhibitor all failed to demonstrate a clinical benefit to patients with FSHD. Low-intensity aerobic exercise tailored to the patient’s distribution of weakness may provide some limited beneficial effect. Limited range of motion in the shoulder girdle can stem from periscapular muscle weakness, and in such cases surgical scapular fixation can result in some functional improvement for certain patients. There is also no standard practice regarding the use of physical or occupational therapy across countries and sites.

We are not aware of any product candidate currently in clinical development for FSHD with the same mechanism of action as losmapimod or that is designed to treat the root cause of FSHD.

SCD

Approved drug treatments for SCD focus primarily on the management and reduction of pain episodes, vaso-occlusive crises, and inhibition of hemoglobin S polymerization. The four drug treatments approved in the United States are hydroxyurea, voxelotor, crizanlizumab, and L-glutamine. Hydroxyurea, marketed by Bristol-Myers Squibb Company, is approved for the treatment of anemia related to SCD, to reduce the frequency of painful crises and the need for blood transfusions. Voxelotor, marketed by Global Blood Therapeutics, is approved under accelerated approval as a hemoglobin polymerization inhibitor. Crizanlizumab, marketed by Novartis, is approved for the reduction in the frequency of vasoocclusive crises. L-glutamine, marketed by Emmaus Life Sciences, Inc., is approved to reduce severe complications associated with the disorder.

Blood transfusions can be utilized to decrease the sickling of RBCs. While blood transfusions can be critically important to the management of SCD, there are a number of limitations associated with this therapeutic approach, including limited patient access and serious complications such as iron overload. The only potentially curative treatment currently approved for severe SCD is bone marrow transplantation. However, this treatment option is not commonly used given the difficulties of finding a suitable matched donor and the risks associated with the treatment, which include an approximately 5% mortality rate. Bone marrow transplantation is more commonly offered to pediatric patients with available sibling-matched donors.

FTX-6058 could face competition from a number of different therapeutic approaches in development for patients with SCD. EpiDestiny, Inc., or EpiDestiny, in collaboration with Novo Nordisk A/S, is evaluating EPI01, a small molecule designed to increase production of fetal hemoglobin, which has completed a Phase 1 clinical trial. Imara, Inc. is evaluating IMR-687, a PDE9 inhibitor, in Phase 2a and Phase 2b clinical trials in patients with sickle cell anemia. Agios Pharmaceuticals, Inc., is evaluating mitapivat, a PKR activator, in a Phase 1 clinical trial in patients with SCD. Forma Therapeutics Holdings, Inc., is evaluating FT-4202, a PKR activator, in a Phase 2/3 clinical trial. Takeda Pharmaceutical Company Limited, is evaluating TAK-755, recombinant ADAMTS13 protein, in a Phase 1/2 clinical trial in participants with baseline health SCD and SCD with acute vaso-occlusive crisis. Pfizer, is evaluating PF-07059013, a hemoglobin subunit beta modulator, in a Phase 1 clinical trial. CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuticals Incorporated, or Vertex), is evaluating CTX001, a gene therapy, in a Phase 1/2 clinical trial. Aruvant Sciences, Inc. is evaluating ARU-1801, a gene therapy, in a Phase 1/2 clinical trial. CSL Behring, is evaluating CSL200 CAL-H, a gene therapy, in a Phase 1 clinical trial. Sangamo Therapeutics Inc., or Sangamo, in collaboration with Bioverativ Inc., or Bioverativ, is developing BIVV-003, a gene editing cell therapy that modifies cells to produce functional RBCs using fetal hemoglobin, in a Phase 1/2 clinical trial. There are also several other gene editing approaches being evaluated by Intellia Therapeutics, Inc. (in collaboration with Novartis) and Editas Medicine, Inc. Pfizer conducted a Phase 1b clinical trial with PF-04447943, a PDE9 inhibitor, in patients with SCD.

ß-thalassemia

The current standard of care for many patients with ß-thalassemia is frequent blood transfusions to manage anemia. The one drug treatment approved in the United States is luspatercept. Luspatercept, marketed by Celgene, is approved as an erythroid maturation agent for the treatment of adult patients with anemia associated with ß-thalassemia and who require regular red blood cell transfusions. The only potentially curative therapy for ß-thalassemia is allogeneic hematopoietic stem cell transplant, which is associated with serious risk and is limited to patients with a suitable donor. The European Commission granted conditional marketing authorization for ZYNTEGLO, a gene therapy developed by bluebird for the treatment of adult and adolescent patients with transfusion-dependent ß-thalassemia and with certain genotypes, in Europe in June 2019. bluebird has initiated a rolling biologics license application, or BLA, submission for betibeglogene autotemcel in the United States, which is expected to be completed in mid-2021. Acceleron in collaboration with Celgene Corp., or Celgene, received FDA and EMA approval for luspatercept, an erythroid maturation agent for the treatment of adult patients with anemia associated with ß-thalassemia and who require frequent transfusions.

FTX-6058 could face competition from a number of different therapeutic approaches in development for patients with transfusion-dependent ß-thalassemia.

FULC US Equity

FULC · 10-K · period ended 2020-12-31

Item 1. Business.

FULC US Equity☆

FULC · 10-K · period ended 2020-12-31

Item 1. Business.

FULC US Equity