BofA Securities has upgraded Fulcrum Therapeutics (NASDAQ:FULC) ahead of the company's phase 3 losmapimod readout, expected by the end of October for Facioscapulohumeral muscular dystrophy (FSHD).
FSHD is a rare genetic muscle disease affecting a child's facial muscles, shoulders, upper arms, and lower legs. These muscles weaken and shrink (atrophy).
The analyst notes that although a previous pivotal study failed using the DUX4 expression endpoint, the company conducted a post-hoc analysis and designed a new study with the endpoint "reachable workspace" (RWS), which has sparked debate in the investment community.
Two key opinion leaders (KOLs) expressed optimism about the upcoming phase 3 results, citing the functional benefits seen in phase 2 using RWS, which measures upper extremity function. Despite being a newer endpoint, the KOLs believe RWS accurately tracks disease progression.
They view the stabilization of RWS in phase 3 as clinically meaningful and believe replicating the phase 2 results—showing a 10% placebo-adjusted change at 48 weeks—would be a success.
However, the analyst remains uncertain about the study's likelihood of success due to the unpredictability of the control arm's response.
BofA upgraded the stock from Underperform to Neutral and increased the price target from $5 to $10, as the analyst increased the likelihood of success (LOS) from 35% to 50%
"We await the ph 3 readout before further de-risking the program and note we continue to view the pociredir story in sickle cell disease (SCD) as a stock overhang," the analyst adds.
BofA notes that losmapimod is expected to be the first treatment for FSHD, but it may face future competition from Avidity Biosciences Inc (NASDAQ:RNA) and Roche Holdings AG (OTC:RHHBY), which are further behind in development.
Price Action: FULC stock is up 1.30% at $8.651 at last check Monday.
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