Fulcrum Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 4, 2021 . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “ Risk Factors ” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. 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 Phase 2b clinical trial, known as ReDUX4, and a Phase 2 open label clinical trial of losmapimod, our product candidate for FSHD, to evaluate the efficacy and safety of losmapimod in addressing the underlying cause of FSHD. We expect to present full data from ReDUX4 at the virtual FSHD International Research Congress taking place June 24-25, 2021. 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 volunteers. 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. In March 2021, we announced the discontinuation of our Phase 3, randomized, double-blind, placebo-controlled trial of losmapimod in higher risk hospitalized adults with COVID-19 following a strategic review. Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property, building our discovery platform, including our proprietary compound library and product engine, identifying drug targets and potential product candidates, in-licensing assets, producing drug substance and drug product material for use in clinical trials and conducting preclinical studies and clinical trials. To date, we have funded our operations primarily from the sale of shares of our common stock in public offerings, a private placement, and in “at-the-market” offerings, or the ATM Offering, through issuances of convertible preferred stock, and from upfront payments received under our collaboration and license agreements. In January 2021, we issued and sold 4,600,000 shares of our common stock in a public offering at a public offering price of $11.00 per share, which includes 600,000 shares issued upon the exercise in full by the underwriters of their option to purchase additional shares at the public offering price, less underwriting discounts and commissions. The net proceeds of the offering were $47.4 million, after deducting underwriting discounts and commissions and offering expenses. We have incurred significant operating losses since our inception and we expect to continue to incur significant operating losses for the foreseeable future. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $17.0 million for the three months ended March 31, 2021 and $18.5 million for the three months ended March 31, 2020. As of March 31, 2021, we had an accumulated deficit of $238.6 million. We expect our expenses and operating losses will increase substantially over the next several years in connection with our ongoing activities, as we: • continue our clinical development of losmapimod, including our ongoing Phase 2b and Phase 2 open label clinical trials for the treatment of FSHD; • continue our clinical development of FTX-6058, including our ongoing Phase 1 clinical trial in healthy adult volunteers and our planned clinical trial of FTX-6058 in patients with SCD; • continue our ongoing preclinical studies; • advance clinical-stage product candidates into later stage trials; • pursue the discovery of drug targets for other rare diseases and the subsequent development of any resulting product candidates; 19 • seek regulatory approvals for any product candidates that successfully complete clinical trials; • scale up our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf, to support our clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval; • establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; • acquire or in-license products, product candidates, technologies and/or data referencing rights; • make any milestone payments to affiliates of GlaxoSmithKline plc, or GSK, under our right of reference and license agreement with GSK upon the achievement of specified clinical or regulatory milestones; • maintain, expand, enforce, defend and protect our intellectual property; • hire additional clinical, quality control and scientific personnel; and • add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and our operations as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves. Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses or the timing of when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As of March 31, 2021, we had $143.9 million in cash, cash equivalents, and marketable securities. We believe that our existing cash, cash equivalents, and marketable securities as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.” Components of Results of Operations Revenue We have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval, we may generate revenue in the future from product sales. We cannot predict if, when or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. In December 2019, we entered into a collaboration and license agreement, or the Acceleron Collaboration Agreement, with Acceleron Pharma Inc., or Acceleron, to identify biological targets to modulate specific pathways associated with a targeted indication within the pulmonary disease space. Under the Acceleron Collaboration 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. The primary goal of the collaboration is to identify and validate potential biological targets for further research in order to support the development, manufacture and commercialization of product candidates by Acceleron for the targeted indication by leveraging our proprietary product engine. Under the terms of the Acceleron Collaboration Agreement, we received a $10.0 million upfront payment from Acceleron in December 2019. In December 2020, we achieved $2.0 million of specified research milestones associated with the Acceleron Collaboration Agreement. We are also eligible to receive up to $436.5 million in the aggregate in milestone payments with respect to certain research, developmental, clinical, regulatory and sales-related milestones, and tiered royalty payments based on Acceleron’s (and any of its affiliates’ and sublicensees’) annual worldwide net sales of products directed to any identified targets. 20 For the three months ended March 31, 2021 and 2020 , we recognized $2. 6 million and $0.8 million, respectively, of collaboration revenue under the Acceleron Collaboration Agreement . As of March 31, 2021 and December 31, 2020 , we have recorded $5.8 million and $7.9 million, respectively, of deferred revenue associated with the Acceleron Collaboration Agreement, which is classified as either current or net of current portion in our consolidated balance sheets based on the period over which the revenue is expected to be recognized. As of March 31, 2021 , we had received $ 2.2 million of cost reimbursement payments , $2.0 million of milestone payments, and no royalty payments under the Acceleron Collaboration Agreement. As of March 31, 2021 , we recorded unbilled accounts receivable of $0. 5 million related to reimbursable research and development costs under the Acceleron Collaboration Agreement for activities performed during the three months ended March 31, 2021 . In the future, we will recognize additional revenue associated with the $10.0 million upfront payment and the $2.0 million of specified research milestones achieved in December 2020 as we satisfy our performance obligation, and from reimbursement of costs incurred under the Acceleron Collaboration Agreement. In the future, we may also generate additional revenue from milestones and royalty payments under the Acceleron Collaboration Agreement. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year based upon our pattern of performance under the Acceleron Collaboration Agreement and as a result of the timing, amount, and achievement of milestones and reimbursement of costs incurred under the Acceleron Collaboration Agreement. On July 20, 2020, we entered into a collaboration and license agreement, or the MyoKardia Collaboration Agreement, with MyoKardia, Inc., or MyoKardia, pursuant to which we granted to 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 up to a certain number of genes of interest with relevance to certain genetically defined cardiomyopathies. MyoKardia was subsequently acquired by Bristol-Myers Squibb Company in November 2020. The primary goal of the collaboration is to identify and validate potential biological targets for further research, in order to support the development, manufacture and commercialization of product candidates by MyoKardia for the potential treatment of certain genetically defined cardiomyopathies. Under the terms of the MyoKardia Collaboration Agreement, we received a $10.0 million upfront payment and a $2.5 million payment as prepaid research funding 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 potential cardiomyopathy gene targets, and of up to $150.0 million in the aggregate per target for certain other potential cardiomyopathy gene 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. For the three months ended March 31, 2021, we recognized $2.2 million of collaboration revenue under the MyoKardia Collaboration Agreement. For the three months ended March 31, 2020, we did not recognize any collaboration revenue in connection with this arrangement as we had not yet entered into the MyoKardia Collaboration Agreement. As of March 31, 2021 and December 31, 2020, we have recorded $7.8 million and $10.0 million, respectively, of deferred revenue associated with the MyoKardia Collaboration Agreement, which is classified as either current or net of current portion in our consolidated balance sheets based on the period over which the revenue is expected to be recognized. As of March 31, 2021, we had received no cost reimbursement payments and no milestone or royalty payments under the MyoKardia Collaboration Agreement, other than the $2.5 million payment as prepaid research funding in July 2020. As of March 31, 2021, we recorded no accounts receivable related to reimbursable research and development costs under the MyoKardia Collaboration Agreement. In the future, we will recognize additional revenue associated with the $10.0 million upfront payment as we satisfy our performance obligation, and from reimbursement of costs incurred under the MyoKardia Collaboration Agreement, including the $2.5 million prepaid research funding payment. In the future, we may also generate additional revenue from milestones and royalty payments under the MyoKardia Collaboration Agreement. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year based upon our pattern of performance under the MyoKardia Collaboration Agreement and as a result of the timing, amount, and achievement of milestones and reimbursement of costs incurred under the MyoKardia Collaboration Agreement. We may also in the future enter into additional license or collaboration agreements for our product candidates or intellectual property, and we may generate revenue in the future from payments as a result of such license or collaboration agreements. 21 Operating Expenses Research and Development Expenses Research and development expenses represent costs incurred by us for the discovery, development, and manufacture of our product candidates and include: • external research and development expenses incurred under agreements with contract research organizations, contract manufacturing organizations, and consultants; • salaries, payroll taxes, employee benefits and stock-based compensation expenses for individuals involved in research and development efforts; • laboratory supplies; • costs related to compliance with regulatory requirements; and • facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance and other operating costs. We expense research and development costs as incurred. We recognize expenses for certain development activities, such as clinical trials and manufacturing, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment or other information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of expenses incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. These amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered. External costs represent a significant portion of our research and development expenses, which we track on a program-by-program basis following the nomination of a development candidate. Our internal research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expense. We do not track our internal research and development expenses on a program-by-program basis as the resources are deployed across multiple projects. The following table summarizes our external research and development expenses by program following nomination as a development candidate for the three months ended March 31, 2021 and 2020. Pre-development candidate expenses, unallocated expenses and internal research and development expenses are classified separately. Three Months Ended March 31, (in thousands) 2021 2020 Losmapimod external expenses $ 6,196 $ 5,619 FTX-6058 external expenses 2,209 1,371 Pre-development candidate expenses and unallocated expenses 4,110 3,625 Internal research and development expenses 3,819 3,867 Total research and development expenses $ 16,334 $ 14,482 The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the remainder of the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing our product candidates, including the uncertainty related to: • the timing and progress of preclinical and clinical development activities, including in light of COVID-19; • the number and scope of preclinical and clinical programs we decide to pursue; • our ability to raise additional funds necessary to complete clinical development of and commercialize our product candidates; • our ability to maintain our current research and development programs and to establish new ones; • our ability to establish new licensing or collaboration arrangements; 22 • the progress of the development efforts of parties with whom we may enter into collaboration arrangements; • the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; • the receipt and related terms of regulatory approvals from applicable regulatory authorities; • the availability of raw materials and active pharmaceutical ingredient, or API, for use in production of our product candidates; • our ability to establish and operate a manufacturing facility, or secure manufacturing supply through relationships with third parties; • our ability to consistently manufacture our product candidates in quantities sufficient for use in clinical trials; • our ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally; • our ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio; • the commercialization of our product candidates, if and when approved; • our ability to obtain and maintain third-party coverage and adequate reimbursement for our product candidates, if approved; • the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors; • competition with other products; and • a continued acceptable safety profile of our products following receipt of any regulatory approvals. A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate, and potentially other candidates. Research and development activities account for a significant portion of our operating expenses. We expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy, which includes advancing losmapimod for the treatment of FSHD, advancing FTX-6058 for the treatment of certain hemoglobinopathies, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, and seeking regulatory approvals for our product candidates that successfully complete clinical trials. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. General and Administrative Expenses General and administrative expenses consist of personnel-related costs, including salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, human resources, business operations and other administrative functions, legal fees related to patent, intellectual property and corporate matters, fees paid for accounting and tax services, consulting fees and facility-related costs not otherwise included in research and development expenses. We expect our general and administrative expenses will increase for the foreseeable future to support our expanded infrastructure and increased costs of expanding our operations and operating as a public company. These increases will likely include increased expenses related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company. Other Income, Net Other income, net consists primarily of interest income related to our investments in cash equivalents and marketable securities. 23 Results of Operations Comparison of the Three Months Ended March 31, 2021 and 2020 The following summarizes our results of operations for the three months ended March 31, 2021 and 2020, along with the changes in those items in dollars: Three Months Ended March 31, Change (in thousands) 2021 2020 $ Collaboration revenue $ 4,789 $ 750 $ 4,039 Operating expenses: Research and development 16,334 14,482 1,852 General and administrative 5,498 5,064 434 Total operating expenses 21,832 19,546 2,286 Loss from operations (17,043 ) (18,796 ) 1,753 Other income, net 44 344 (300 ) Net loss $ (16,999 ) $ (18,452 ) $ 1,453 Collaboration Revenue Collaboration revenue increased by $4.0 million from $0.8 million for the three months ended March 31, 2020 to $4.8 million for the three months ended March 31, 2021. We recognize revenue under each of the Acceleron Collaboration Agreement and MyoKardia Collaboration Agreement based on our pattern of performance related to the respective identified performance obligation, which is the period over which we will perform research services under each of the Acceleron Collaboration Agreement and MyoKardia Collaboration Agreement. For the three months ended March 31, 2021, we recognized $2.6 million of collaboration revenue under the Acceleron Collaboration Agreement. For the three months ended March 31, 2020, we recognized $0.8 million of collaboration revenue under the Acceleron Collaboration Agreement. For the three months ended March 31, 2021, we recognized $2.2 million of collaboration revenue under the MyoKardia Collaboration Agreement. For the three months ended March 31, 2020, we did not recognize any collaboration revenue as we had not yet entered into the MyoKardia Collaboration Agreement. Research and Development Expenses The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, Change (in thousands) 2021 2020 $ External research and development $ 9,327 $ 7,624 $ 1,703 Employee compensation 3,819 3,868 (49 ) Laboratory supplies 1,559 1,072 487 Facility costs 1,283 1,360 (77 ) Other 346 558 (212 ) Total research and development expenses $ 16,334 $ 14,482 $ 1,852 Research and development expense increased by $1.8 million from $14.5 million for the three months ended March 31, 2020 to $16.3 million for the three months ended March 31, 2021. The increase in research and development expense was primarily attributable to the following: • $1.7 million in increased external research and development costs, primarily relating to our ongoing Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD and our discontinued Phase 3 clinical trial of losmapimod for the treatment of COVID-19, as well as our Phase 1 clinical trial of FTX-6058 in healthy adult volunteers and our planned clinical trial of FTX-6058 in patients with SCD; and • $0.5 million in increased laboratory supplies costs, partially offset by a $0.2 million decrease in other costs. 24 General and Administrative Expenses The following table summarizes our general and administrative expenses for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, Change (in thousands) 2021 2020 $ Professional services $ 1,952 $ 1,825 $ 127 Employee compensation 2,906 2,584 322 Facility costs 208 230 (22 ) Other 432 425 7 Total general and administrative expenses $ 5,498 $ 5,064 $ 434 General and administrative expenses increased by $0.4 million from $5.1 million for the three months ended March 31, 2020 to $5.5 million for the three months ended March 31, 2021. The increase in general and administrative expenses was primarily attributable to the following: • $0.3 million in increased employee compensation costs, including stock-based compensation expense, primarily due to increased general and administrative headcount to support the growth of our organization; and • $0.1 million in increased professional services costs. Other Income, Net Other income, net decreased by $0.3 million from $0.3 million for the three months ended March 31, 2020 to less than $0.1 million for the three months ended March 31, 2021. The decrease in other income, net was primarily attributable to a decrease in investment income on our cash, cash equivalents, and marketable securities as a result of an overall decreased rate of return. Liquidity and Capital Resources Sources of Liquidity We have incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. As of March 31, 2021, we have funded our operations primarily with aggregate gross proceeds of $357.0 million from the sale of shares of our common stock in public offerings, a private placement, and the ATM Offering, through issuances of convertible preferred stock, and from upfront payments received under our collaboration and license agreements. As of March 31, 2021, we had cash, cash equivalents, and marketable securities of $143.9 million. On July 22, 2019, we completed an IPO of our common stock and issued and sold 4,500,000 shares of common stock at a public offering price of $16.00 per share, resulting in net proceeds of $63.9 million after deducting underwriting discounts and commissions and offering expenses. On June 9, 2020, we issued and sold 4,029,411 shares of common stock in a private placement at a price of $17.00 per share, resulting in net proceeds of $64.2 million, after deducting offering costs. In December 2019, we received a $10.0 million upfront payment upon execution of the Acceleron Collaboration Agreement and in January 2021 we received $2.0 million in specified research milestones under the Acceleron Collaboration Agreement. In July 2020, we received a $10.0 million upfront payment and a $2.5 million payment as prepaid research funding under the MyoKardia Collaboration Agreement. On August 11, 2020, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 17, 2020, or the Shelf Registration Statement. Under the Shelf Registration Statement, we may offer and sell up to $250.0 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities or units during the three-year period that commenced upon the Shelf Registration Statement becoming effective. In connection with the filing of the Shelf Registration Statement, we entered into an Equity Distribution Agreement with Piper Sandler & Co., or Piper Sandler, as sales agent, pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $75.0 million under the ATM Offering. As of March 31, 2021, we have issued and sold 550,000 shares of common stock under the ATM Offering, resulting in net proceeds of $5.7 million after deducting offering costs. 25 On January 22, 2021, we completed a public offering of our common stock and issued and sold 4,600,000 shares of common stock at a public offering price of $11.00 per share, resulting in net proceeds of $4 7 .4 million after deducting underwriting discounts and commissions and offering expenses. Cash Flows The following table provides information regarding our cash flows for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, (in thousands) 2021 2020 Net cash used in operating activities $ (16,226 ) $ (15,204 ) Net cash provided by (used in) investing activities 12,415 (56,404 ) Net cash provided by financing activities 47,504 274 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 43,693 $ (71,334 ) Net Cash Used in Operating Activities Net cash used in operating activities was $16.2 million during the three months ended March 31, 2021 compared to net cash used in operating activities of $15.2 million during the three months ended March 31, 2020. The increase in net cash used in operating activities of $1.0 million was primarily due to increased external research and development costs as we continue to advance our lead programs, increased employee compensation costs, and increased general and administrative costs associated with operating as a public company. Net Cash Provided by (Used in) Investing Activities Net cash provided by investing activities was $12.4 million during the three months ended March 31, 2021 compared to net cash used in investing activities of $56.4 million during the three months ended March 31, 2020. The increase in net cash provided by investing activities of $68.8 million was primarily due to higher net maturities of marketable securities during the three months ended March 31, 2021, as compared to net purchases of marketable securities during the three months ended March 31, 2020. Net Cash Provided by Financing Activities Net cash provided by financing activities was $47.5 million during the three months ended March 31, 2021 compared to net cash provided by financing activities of $0.3 million during the three months ended March 31, 2020. Net cash provided by financing activities during the three months ended March 31, 2021 primarily consisted of net proceeds of approximately $47.4 million from the completion of the public offering of our common stock in January 2021. Net cash provided by financing activities during the three months ended March 31, 2020 primarily consisted of net proceeds of approximately $0.3 million from the issuance of common stock under our benefit plans. Funding Requirements We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we continue the research and development of, initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, we expect to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future. Based on our current operating plan, we believe that our existing cash, cash equivalents, and marketable securities as of March 31, 2021, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022. However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect. 26 Our funding requirements and timing and amount of our operating expenditures will depend largely on: • the progress, costs and results of our ongoing Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD, our ongoing Phase 1 clinical trial of FTX-6058 in healthy adult volunteers and our planned clinical trial of FTX-6058 for the treatment of SCD; • the scope, progress, costs and results of discovery research, preclinical development, laboratory testing and clinical trials for our current product candidates in additional indications or for any future product candidates that we may pursue; • the impact of the COVID-19 pandemic on our business and operations; • the number of and development requirements for other product candidates that we pursue; • the costs, timing and outcome of regulatory review of our product candidates; • our ability to enter into contract manufacturing arrangements for supply of API and manufacture of our product candidates and the terms of such arrangements; • the success of our collaborations with Acceleron and MyoKardia; • our ability to establish and maintain additional strategic collaborations, licensing or other arrangements and the financial terms of such arrangements; • the payment or receipt of milestones, royalties and other collaboration-based revenues, if any; • the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval; • the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; and • the extent to which we acquire or in-license other products, product candidates, technologies or data referencing rights. A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We will need to continue to rely on additional financing to achieve our business objectives. In addition to the variables described above, if and when any of our product candidates successfully complete development, we will incur substantial additional costs associated with regulatory filings, marketing approval, post-marketing requirements, maintaining our intellectual property rights, and regulatory protection, in addition to other commercial costs. We cannot reasonably estimate these costs at this time. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration arrangements, strategic alliances and marketing, distribution or licensing arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the future sale of equity securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts, and additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements, strategic alliances or marketing, distribution or licensing arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations During the three months ended March 31, 2021, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” in our Annual Report on Form 10-K filed with the SEC on March 4, 2021. 27 Off-Balance Sheet Arrangements We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Our estimates are based on our historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and amount of expense recognized that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and assumptions on an ongoing basis. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates. During the three months ended March 31, 2021, there were no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K filed with the SEC on March 4, 2021. Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Emerging Growth Company Status The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.