cytk-10q_20190331.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 000-50633

 

CYTOKINETICS, INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Delaware

94-3291317

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

280 East Grand Avenue

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 624-3000

 

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, a 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Common Stock, $0.001 par value

Trading symbol

 

CYTK

Name of each exchange on which registered

 

The Nasdaq Global Select Market

Number of shares of common stock, $0.001 par value, outstanding as of April 30, 2019: 57,721,286

 

 

 


Table of Contents

 

CYTOKINETICS, INCORPORATED

TABLE OF CONTENTS FOR FORM 10-Q

FOR THE three MONTHS ENDED March 31, 2019

 

 

Page

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements   

3

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2019 and 2018

4

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

26

Item 4. Controls and Procedures

26

 

 

PART II. OTHER INFORMATION

28

Item 1. Legal Proceedings

28

Item 1A. Risk Factors

28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3. Defaults Upon Senior Securities

55

Item 4. Mine Safety Disclosures

55

Item 5. Other Information

55

Item 6. Exhibits

56

 

 

SIGNATURES

57

 

 

 

 

 

 

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Table of Contents

 

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data) (Unaudited)

 

 

March 31, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,409

 

 

$

42,256

 

Short-term investments

 

 

137,213

 

 

 

156,475

 

Accounts receivable

 

 

4,165

 

 

 

2,231

 

Contract assets

 

 

2,472

 

 

 

4,554

 

Prepaid and other current assets

 

 

3,141

 

 

 

2,158

 

Total current assets

 

 

186,400

 

 

 

207,674

 

Property and equipment, net

 

 

3,175

 

 

 

3,204

 

Other assets

 

 

9,036

 

 

 

300

 

Total assets

 

$

198,611

 

 

$

211,178

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,547

 

 

$

3,764

 

Accrued liabilities

 

 

12,944

 

 

 

15,757

 

Current portion of long-term debt

 

 

6,212

 

 

 

2,607

 

Short-term lease liability

 

 

4,499

 

 

 

 

Other current liabilities

 

 

75

 

 

 

66

 

Total current liabilities

 

 

26,277

 

 

 

22,194

 

Long-term debt, net

 

 

36,382

 

 

 

39,806

 

Liability related to the sale of future royalties, net

 

 

127,308

 

 

 

122,473

 

Long-term lease liability

 

 

5,272

 

 

 

 

Other long-term liabilities

 

 

 

 

 

771

 

Total liabilities

 

 

195,239

 

 

 

185,244

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

55

 

 

 

55

 

Additional paid-in capital

 

 

775,401

 

 

 

768,703

 

Accumulated other comprehensive income

 

 

606

 

 

 

500

 

Accumulated deficit

 

 

(772,690

)

 

 

(743,324

)

Total stockholders’ equity

 

 

3,372

 

 

 

25,934

 

Total liabilities and stockholders’ equity

 

$

198,611

 

 

$

211,178

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data) (Unaudited)

 

 

Three Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

Revenues:

 

 

 

 

 

 

 

 

Research and development revenues

 

$

8,464

 

 

$

3,585

 

License revenues

 

 

 

 

 

1,683

 

Total revenues

 

 

8,464

 

 

 

5,268

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

23,545

 

 

 

22,135

 

General and administrative

 

 

9,437

 

 

 

9,264

 

Total operating expenses

 

 

32,982

 

 

 

31,399

 

Operating loss

 

 

(24,518

)

 

 

(26,131

)

Interest expense

 

 

(1,170

)

 

 

(863

)

Non-cash interest expense on liability related to the sale of future royalties

 

 

(4,819

)

 

 

(4,129

)

Interest income

 

 

1,141

 

 

 

842

 

Net loss

 

$

(29,366

)

 

$

(30,281

)

Net loss per share — basic and diluted

 

$

(0.54

)

 

$

(0.56

)

Weighted-average shares in net loss per share — basic and diluted

 

 

54,821

 

 

 

54,062

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities, net

 

 

106

 

 

 

146

 

Comprehensive loss

 

$

(29,260

)

 

$

(30,135

)

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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CYTOKINETICS, INCORPORATED

condensed CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ Equity

(In thousands, except share data) (Unaudited)

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

 

 

 

 

Balance, December 31, 2018

 

 

54,717,906

 

 

$

55

 

 

$

768,703

 

 

$

500

 

 

$

(743,324

)

 

$

25,934

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,282

 

 

 

 

 

 

 

 

 

2,282

 

Exercise of stock options

 

 

5,116

 

 

 

 

 

 

31

 

 

 

 

 

 

 

 

 

31

 

Vesting of restricted stock units, net of taxes withheld

 

 

165,347

 

 

 

 

 

 

(732

)

 

 

 

 

 

 

 

 

(732

)

Issuance under at-the-market offering, net of issuance costs

 

 

562,811

 

 

 

 

 

 

5,117

 

 

 

 

 

 

 

 

 

5,117

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

106

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,366

)

 

 

(29,366

)

Balance, March 31, 2019

 

 

55,451,180

 

 

$

55

 

 

$

775,401

 

 

$

606

 

 

$

(772,690

)

 

$

3,372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

53,960,832

 

 

$

54

 

 

$

755,526

 

 

$

343

 

 

$

(646,081

)

 

$

109,842

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,403

 

 

 

 

 

 

 

 

 

2,403

 

Exercise of stock options

 

 

59,112

 

 

 

 

 

 

342

 

 

 

 

 

 

 

 

 

342

 

Vesting of restricted stock units, net of taxes withheld

 

 

177,602

 

 

 

 

 

 

(866

)

 

 

 

 

 

 

 

 

(866

)

ASC 606 Adoption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,013

 

 

 

18,013

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

146

 

 

 

 

 

 

146

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,281

)

 

 

(30,281

)

Balance, March 31, 2018

 

 

54,197,546

 

 

$

54

 

 

$

757,405

 

 

$

489

 

 

$

(658,349

)

 

$

99,599

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

 

 

Three Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(29,366

)

 

$

(30,281

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Non-cash interest expense on liability related to sale of future royalties

 

 

4,819

 

 

 

4,129

 

Non-cash equity-related expense

 

 

2,282

 

 

 

2,403

 

Depreciation of property and equipment

 

 

286

 

 

 

673

 

Interest receivable and amortization on investments

 

 

(533

)

 

 

96

 

Non-cash interest expense related to debt

 

 

183

 

 

 

177

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,934

)

 

 

1,075

 

Contract assets

 

 

2,082

 

 

 

3,212

 

Prepaid and other assets

 

 

(983

)

 

 

1,406

 

Operating lease right-of-use assets

 

 

856

 

 

 

 

Accounts payable

 

 

(1,217

)

 

 

(2,831

)

Accrued and other liabilities

 

 

(2,466

)

 

 

1,067

 

Contract liabilities

 

 

 

 

 

(9,202

)

Operating lease liabilities

 

 

(916

)

 

 

 

Deferred revenue

 

 

 

 

 

(1,731

)

Net cash used in operating activities

 

 

(26,907

)

 

 

(29,807

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(41,295

)

 

 

(24,224

)

Sales and maturities of investments

 

 

61,196

 

 

 

44,621

 

Purchases of property and equipment

 

 

(257

)

 

 

(261

)

Net cash provided by investing activities

 

 

19,644

 

 

 

20,136

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Public offerings of common stock, net of issuance costs

 

 

5,117

 

 

 

 

Proceeds from common stock award exercise

 

 

31

 

 

 

 

Issuance of equity for stock-based awards and warrants, net

 

 

(732

)

 

 

(524

)

Net cash provided by (used in) financing activities

 

 

4,416

 

 

 

(524

)

Net decrease in cash and cash equivalents

 

 

(2,847

)

 

 

(10,195

)

Cash and cash equivalents, beginning of period

 

 

42,256

 

 

 

125,206

 

Cash and cash equivalents, end of period

 

$

39,409

 

 

$

115,011

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosure - non-cash investing and financing activity:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

$

10,686

 

 

$

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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CYTOKINETICS, INCORPORATED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and Significant Accounting Policies

Cytokinetics, Incorporated (the “Company”, “we” or “our”) was incorporated under the laws of the state of Delaware on August 5, 1997. The Company is a late stage biopharmaceutical company focused on the discovery and development of novel small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions.

Our financial statements contemplate the conduct of our operations in the normal course of business. We have incurred an accumulated deficit of $772.7 million since inception and there can be no assurance that we will attain profitability. The Company anticipates that it will have operating losses and net cash outflows in future periods.

We are subject to risks common to late stage biopharmaceutical companies including, but not limited to, development of new drug candidates, dependence on key personnel, and the ability to obtain additional capital as needed to fund our future plans. Our liquidity will be impaired if sufficient additional capital is not available on terms acceptable to us. To date, we have funded operations primarily through sales of our common stock, contract payments under our collaboration agreements, sale of future royalties, debt financing arrangements, sales of our convertible preferred stock, government grants and interest income. Until we achieve profitable operations, we intend to continue to fund operations through payments from strategic collaborations, additional sales of equity securities, grants and debt financings. We have never generated revenues from commercial sales of our drugs and may not have drugs to market for at least several years, if ever. Our success is dependent on our ability to enter into new strategic collaborations and/or raise additional capital and to successfully develop and market one or more of our drug candidates. As a result, we may choose to raise additional capital through equity or debt financings to continue to fund operations in the future. We cannot be certain that sufficient funds will be available from such a financing or through a collaborator when required or on satisfactory terms. Additionally, there can be no assurance that our drug candidates will be accepted in the marketplace or that any future products can be developed or manufactured at an acceptable cost. These factors could have a material adverse effect on our future financial results, financial position and cash flows.

Based on the current status of our research and development activities, we believe that our existing cash, cash equivalents and investments will be sufficient to fund cash requirements for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q. If, at any time, our prospects for financing research and development programs decline, we may decide to reduce research and development expenses by delaying, discontinuing or reducing funding of one or more of our research or development programs. Alternatively, we might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation

Our condensed consolidated financial statements include the accounts of Cytokinetics and our wholly-owned subsidiary. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements include all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair statement of our financial information. These interim results are not necessarily indicative of results to be expected for the full fiscal year or any future interim period. The balance sheet at December 31, 2018 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. The financial statements and related disclosures have been prepared with the presumption that users of the interim financial statements have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2018, as filed with the SEC.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, investments, accrued research and development expenses, other long-lived assets, stock-based compensation, operating lease assets and liabilities, and the valuation of

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deferred tax assets. We base our estimates on our historical experience and also on assumptions that we believe are reasonable; however, actual results could significantly differ from those estimates.

Leases

We adopted Accounting Standards Update No. 2016-02, Leases (“ASC 842”) on January 1, 2019 using the modified retrospective approach. There was no cumulative-effect adjustment as of January 1, 2019. Prior period amounts continue to be reported in accordance with our historic accounting under previous lease guidance, ASC 840, Lease Accounting.

We elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed us to carry forward the historical lease classification of those leases in place as of January 1, 2019. We also elected to exclude from our condensed consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for our long-term facilities lease.

In adopting ASC 842, we recognized a right-of-use asset in other assets and a short-term and long-term lease liability on our condensed consolidated balance sheets for our facilities lease that expires in 2021 (the “Lease”). The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. We determined the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. In determining the present value of lease payments, we estimated our incremental borrowing rate based on information available when we adopted ASC 842. We base the lease liability on the present value of remaining lease payments over the remaining term of the Lease, using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized basis at the lease commencement date.

We evaluated our other contracts and determined that, except for the Lease, none of our contracts contained a lease as defined in ASC 842. The impact on the condensed consolidated balance sheets as of January 1, 2019 of adopting ASC 842 is as follows (in thousands):

 

Balance sheet account description

 

ASC 840

January 1, 2019

 

 

ASC 842

January 1, 2019

 

 

Impact of adoption

 

Deferred rent classified as accrued liabilities

 

$

(323

)

 

 

 

 

$

323

 

Deferred rent classified as other long-term liabilities

 

 

(773

)

 

 

 

 

 

773

 

Short-term lease liability

 

 

 

 

 

(4,460

)

 

 

(4,460

)

Long-term lease liability

 

 

 

 

 

(6,227

)

 

 

(6,227

)

Other assets

 

 

 

 

 

9,591

 

 

 

9,591

 

 

We recognize rent expense for the operating lease on a straight-line basis over the lease term in operating expenses on the condensed consolidated statements of operations.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method. On January 1, 2018, for contracts within the scope of ASC 606, we recognized a contract asset or liability and reduced our accumulated deficit for the effect of adopting ASC 606 and did not revise our prior period financial statements. Pursuant to ASC 606, to recognize revenue from a contract with a customer, we:

(i) identify our contracts with our customers;

(ii) identify our distinct performance obligations in each contract;

(iii) determine the transaction price of each contract;

(iv) allocate the transaction price to the performance obligations; and

(v) recognize revenue as we satisfy our performance obligations.

At contract inception, we assess the goods or services promised within each contract and assess whether each promised good or service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaborative Arrangements

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We enter into collaborative arrangements with partners that typically include payment to us for one of more of the following: (i) license fees; (ii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments results in collaboration or other revenues. Where a portion of non-refundable up-front fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligation. The stand-alone selling price may include such items as, forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, to determine the transaction price to allocate to each performance obligation.

For our collaboration agreements that include more than one performance obligation, such as a license combined with a commitment to perform research and development services, we make judgments to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate our progress each reporting period and, if necessary, adjust the measure of a performance obligation and related revenue recognition.

License Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments: We use judgement to determine whether a milestone is considered probable of being reached. Using the most likely amount method, we include the value of a milestone payment in the consideration for a contract at inception if we then conclude achieving the milestone is more likely than not. Otherwise, we exclude the value of a milestone payment from contract consideration at inception and recognize revenue for a milestone at a later date, when we judge that it is more likely than not that the milestone will be achieved. If we conclude it is probable that a significant revenue reversal would not occur, the associated milestone is included in the transaction price. We then allocate the transaction price to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Royalties: For contracts that include sales-based royalties, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. To date, we have not recognized any royalty revenues resulting from contracts.

Research and Development Cost Reimbursements: Our Astellas and Amgen arrangements include promises of research and development services. We have determined that these services collectively are distinct from the licenses provided to Astellas and Amgen and as such, these promises are accounted for as a separate performance obligation recorded over time. We record revenue for these services as the performance obligations are satisfied, which we estimate using internal development costs incurred.

Recent Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which make targeted improvements to clarify the interaction between Topic 808, Collaborative Arrangements, and Topic 606, Revenue from Contracts with Customers. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2018-18.

In June 2016, the FASB issued ASU 2016-13, ‘Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments and is effective for annual and interim reporting periods beginning after December 15, 2019. We are currently evaluating the impact of adopting ASU 2016-13.

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Note 2 — Net Loss Per Share

We excluded the following from diluted net loss per share because inclusion would have been antidilutive (in thousands):

 

 

Three Months Ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

Options to purchase common stock

 

 

5,844

 

 

 

5,099

 

Warrants to purchase common stock

 

 

142

 

 

 

100

 

Restricted Stock and Performance units

 

 

881

 

 

 

619

 

Shares issuable related to the ESPP

 

 

85

 

 

 

42

 

 

 

 

6,952

 

 

 

5,860

 

 

Note 3 — Research and Development Arrangements

Amgen Inc. (“Amgen”)

We and Amgen continue activities related to novel small molecule therapeutics, including omecamtiv mecarbil, that activate cardiac muscle contractility for potential applications in the treatment of heart failure under the collaboration and option agreement between the Company and Amgen, as amended (the “Amgen Agreement”).

We recognize research and development revenue for reimbursements from Amgen of both internal costs of certain full-time employee equivalents and other costs related to the Amgen Agreement. Research and development revenue from Amgen of $4.2 million in the first quarter of 2019 consists of reimbursement of costs we incurred related to METEORIC-HF, a Phase 3 clinical trial intended to evaluate the potential of omecamtiv mecarbil to increase exercise performance. We had no research and development revenue from Amgen in the first quarter of 2018.

We had accounts receivable of $4.2 million at March 31, 2019 and $1.9 million at December 31, 2018.

In 2018, we paid Amgen $18.8 million and completed the exercise of our option under the Amgen Agreement to co-invest $40.0 million in the Phase 3 development program of omecamtiv mecarbil in exchange for a total incremental royalty from Amgen of up to 4% on increasing worldwide sales of omecamtiv mecarbil outside Japan (the “Co-Invest Option”).

Under the Amgen Agreement, we are eligible to receive over $300.0 million in additional development milestone payments based on various clinical milestones, including the initiation of certain clinical studies, the submission of an application for marketing authorization for a drug candidate to certain regulatory authorities and the receipt of such approvals. Additionally, we are eligible to receive up to $300.0 million in commercial milestone payments provided certain sales targets are met. Due to the nature of drug development, including the inherent risk of development and approval of drug candidates by regulatory authorities, we cannot estimate if and when these milestone payments could be achieved or become due and, accordingly, we consider the milestone payments to be constrained and exclude the milestone payments from the transaction price.

Astellas Pharma Inc. (“Astellas”)

Cytokinetics and Astellas continue activities focused on the research, development, and commercialization of skeletal muscle activators, including reldesemtiv, as novel drug candidates for diseases and medical conditions associated with muscle weakness under the Amended and Restated License and Collaboration Agreement dated December 22, 2014, as amended (the “Astellas Agreement”).

We have recognized research and development revenue from Astellas for reimbursements of internal costs of certain full-time employee equivalents, supporting collaborative research and development programs, and of other costs related to those programs. Revenue from Astellas included research and development revenues of $4.3 million and $3.6 million in the first quarter of 2019 and 2018, respectively and license revenues of $1.7 million in the first quarter of 2018.

In 2014, we and Astellas amended and restated the Astellas Agreement (the “2014 Astellas Amendment”) and expanded the objective of the collaboration to include spinal muscular atrophy (“SMA”) and potentially other neuromuscular indications for reldesemtiv and other fast skeletal muscle troponin activators (“FSTAs”). License revenues in 2018 related to our performance obligations under the 2014 Astellas Amendment. In 2018, we completed all our deliverables for the 2014 Astellas Amendment.

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In 2016, we and Astellas amended the Astellas Agreement (the “2016 Astellas Amendment”) to expand the collaboration to include the development of reldesemtiv for the potential treatment of amyotrophic lateral sclerosis (“ALS”), as well as the possible development in ALS of other FSTAs previously licensed by us to Astellas, and Astellas paid us a $35.0 million non-refundable upfront amendment fee and an accelerated $15.0 million milestone payment for the initiation of the first Phase 2 clinical trial of reldesemtiv in ALS that was otherwise provided for in the Astellas Agreement, as if such milestone had been achieved upon the execution of the 2016 Astellas Amendment, and committed research and development consideration of $44.2 million, for total consideration of $94.2 million. We allocated the consideration to the license and to the research and development services, and recognized license revenue and research and development revenue using the proportional performance model.

Our contract asset from the 2016 Astellas Amendment of $4.6 million at December 31, 2018 increased by $2.8 million as we performed services during the first quarter of 2019, offset by payments we received from Astellas of $4.9 million during the first quarter of 2019, to $2.5 million at March 31, 2019.  We expect to complete all of our deliverables for the 2016 Astellas Amendment in 2019. We had no accounts receivable from Astellas at March 31, 2019 and $0.3 million at December 31, 2018.

Under the Astellas Agreement, additional research and early and late state development milestone payments for research and clinical milestones, including the initiation of certain clinical studies, the submission of an application for marketing authorization for a drug candidate to certain regulatory authorities and the commercial launch of collaboration products could total over $600.0 million and includes up to $95.0 million relating to reldesemtiv in non-neuromuscular indications, and over $100.0 million related to reldesemtiv in each of SMA, ALS and other neuromuscular indications. Additionally, $200.0 million in commercial milestones could be received under the Astellas Agreement provided certain sales targets are met. We are eligible to receive up to $2.0 million in research milestone payments under the collaboration for each future potential drug candidate. Due to the nature of drug development, including the inherent risk of development and approval of drug candidates by regulatory authorities, it is not possible to estimate if and when these milestone payments could be achieved or become due, and accordingly, are constrained and not included in the transaction price.

Note 4 — Cash Equivalents and Investments

The amortized cost, unrealized gains, unrealized losses and fair value of cash equivalents and available for sale investments at March 31, 2019 and December 31, 2018 were as follows (in thousands):

 

 

March 31, 2019

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Money market funds

 

$

32,954

 

 

$

 

 

$

 

 

$

32,954

 

U.S. Treasury securities

 

 

54,185

 

 

 

7

 

 

 

(5

)

 

 

54,184

 

Agency bonds

 

 

56,244

 

 

 

19

 

 

 

(2

)

 

 

56,264

 

Commercial paper

 

 

20,509

 

 

 

8

 

 

 

 

 

 

20,517

 

Corporate obligations

 

 

9,523

 

 

 

6

 

 

 

 

 

 

9,529

 

 

 

$

173,415

 

 

$

40

 

 

$

(7

)

 

$

173,448

 

 

 

 

December 31, 2018

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Money market funds

 

$

34,771

 

 

$

 

 

$

 

 

$

34,771

 

U.S. Treasury securities

 

 

56,999

 

 

 

 

 

 

(41

)

 

 

56,958

 

Agency bonds

 

 

61,792

 

 

 

1

 

 

 

(14

)

 

 

61,779

 

Commercial paper

 

 

19,448

 

 

 

 

 

 

(13

)

 

 

19,435

 

Corporate obligations

 

 

17,644

 

 

 

2

 

 

 

(8

)

 

 

17,638

 

 

 

$

190,654

 

 

$

3

 

 

$

(76

)

 

$

190,581

 

Investments available for sale at March 31, 2019 excludes an investment in equity of $0.7 million. At March 31, 2019, there were no investments that had been in a continuous unrealized loss position for 12 months or longer.

Interest income was $1.1 million for the three months ended March 31, 2019 and $0.8 million for the three months ended March 31, 2018.

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Note 5 — Fair Value Measurements

We value our financial assets and liabilities at fair value, defined as the price that would be received for assets when sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

We primarily apply the market approach for recurring fair value measurements and endeavors to utilize the best information reasonably available. Accordingly, we use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and consider the security issuers’ and the third-party issuers’ credit risk in our assessment of fair value.

We classify fair value based on the observability of those inputs using a hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement):

Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or through corroboration with observable market data; and

Level 3 — Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-developed valuation models.

Fair value of financial assets:

Using this hierarchy, we classify our financial assets at fair value as follows (in thousands):

 

March 31, 2019

 

 

 

Fair Value Measurements Using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Assets

At Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

32,954

 

 

$

 

 

$

 

 

$

32,954

 

U.S. Treasury securities

 

 

54,184

 

 

 

 

 

 

 

 

 

54,184

 

Agency bonds

 

 

 

 

 

56,264

 

 

 

 

 

 

56,264

 

Commercial paper

 

 

 

 

 

20,517

 

 

 

 

 

 

20,517

 

Corporate obligations

 

 

 

 

 

9,529

 

 

 

 

 

 

9,529

 

 

 

$

87,138

 

 

$

86,310

 

 

$

 

 

$

173,448

 

 

 

December 31, 2018

 

 

 

Fair Value Measurements Using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Assets

At Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

34,771

 

 

$

 

 

$

 

 

$

34,771

 

U.S. Treasury securities

 

 

56,958

 

 

 

 

 

 

 

 

 

56,958

 

Agency bonds

 

 

 

 

 

61,779

 

 

 

 

 

 

61,779

 

Commercial paper

 

 

 

 

 

19,435

 

 

 

 

 

 

19,435

 

Corporate obligations

 

 

 

 

 

17,638

 

 

 

 

 

 

17,638

 

 

 

$

91,729

 

 

$

98,852

 

 

$

 

 

$

190,581

 

The carrying amount of our accounts receivable and accounts payable approximates fair value due to the short-term nature of these instruments.

Fair value of financial liabilities:

As of March 31, 2019 and December 31, 2018, the fair value of the long-term debt approximated its carrying value of $42.6 million and $42.4 million, respectively, because it is carried at a market observable interest rate, which is considered Level 2.

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As of March 31, 2019, the fair value of liability related to the sale of future royalties is based on our current estimates of future royalties expected to be paid to RPI Finance Trust (“RPI”), an entity related to Royalty Pharma, over the life of the arrangement, which are considered Level 3 (See Note 8 – “Liability Related to Sale of Future Royalties”).

There were no transfers between Level 1, Level 2, and Level 3 during the periods presented.

Note 6 — Balance Sheet Components

Accrued liabilities were as follows (in thousands):

 

 

March 31, 2019

 

 

December 31, 2018

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Research and development services

 

$

7,457

 

 

$

8,618

 

Compensation related

 

 

3,899

 

 

 

6,118

 

Other accrued expenses

 

 

1,588

 

 

 

1,021

 

Total accrued liabilities

 

$

12,944

 

 

$

15,757

 

 

Note 7 — Leases

The Lease for our facilities expires in 2021 and includes rental payments on a graduated scale and payment of certain operating expenses. As of March 31, 2019, the weighted average remaining lease term is 2.3 years, the weighted average discount rate used to determine the operating lease liability was 9% and the undiscounted future non-cancellable lease payments under our operating leases as of March 31, 2019 is as follows (in thousands):

Years ending December 31:

 

 

 

 

2019 remainder

 

$

3,532

 

2020

 

 

4,846

 

2021

 

 

2,464

 

Total undiscounted future lease payments

 

 

10,842

 

Less: Present value adjustments

 

 

(1,071

)

Total lease liability

 

$

9,771

 

Cash paid for amounts included in the measurement of lease liabilities for the three months March 31, 2019 was $1.2 million and was included in net cash used in operating activities in our condensed consolidated statements of cash flows.

Rent expense was $1.3 million and $1.2 million for the three months ended March 31, 2019 and 2018, respectively.


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Note 8 — Long-Term Debt

We have a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (Oxford and SVB, collectively the “Lenders”) to fund our working capital and other general corporate needs. During the three months ended September 30, 2018, following the satisfaction of certain conditions related to Phase 2 data for reldesemtiv in spinal muscular atrophy specified in the Loan Agreement, we drew down an additional $10.0 million under the Loan Agreement. Our Long-term debt and unamortized debt discount balances are as follows (in thousands):

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Notes payable, gross

 

$

42,000

 

 

$

42,000

 

Less: Unamortized debt discount and issuance costs, net of interest payable

 

 

(98

)

 

 

(135

)

Accretion of final payment fee

 

 

692

 

 

 

548

 

Carrying value of notes payable

 

 

42,594

 

 

 

42,413

 

Less: Current portion of long-term debt

 

 

6,212

 

 

 

2,607

 

Long-term debt

 

$

36,382

 

 

$

39,806

 

 

Payments on the notes payable will be interest only through November 2019, followed by 41 months of monthly payments of interest and principal. We are required to make a final payment upon loan maturity of 6.5% of the notes payable, which we accrete over the life of the notes payable. The interest rate under the Amended Loan Agreement is the greater of (a) 8.05% or (b) the sum of 6.81% plus the 30-day U.S. LIBOR rate.

The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to us and includes customary events of default, including but not limited to the nonpayment of principal or interest, violations of covenants and material adverse changes. Upon an event of default, the Lenders may, among other things, accelerate the loans and foreclose on the collateral. Our obligations under the Loan Agreement are secured by substantially all our current and future assets, other than our intellectual property.

Interest expense was $1.2 million for the first quarter of 2019 and $0.9 million for the first quarter of 2018. The effective interest rate on the Loan Agreement, including the amortization of the debt discount and issuance cost, and the accretion of the final payment, was 9.3% at March 31, 2019.

Future minimum payments under the Loan Agreement are (in thousands):

 

Years ending December 31:

 

 

 

 

2019 remainder

 

 

4,184

 

2020

 

 

17,634

 

2021

 

 

16,266

 

2022

 

 

15,248

 

Future minimum payments

 

 

53,332

 

Less: Interest and final payment

 

 

(11,332

)

Notes payable, gross

 

$

42,000

 

 

Note 9 - Liability Related to Sale of Future Royalties

In February 2017, we entered into a Royalty Purchase Agreement (the “Royalty Agreement”), under which we sold a portion of our right to receive royalties on potential net sales of omecamtiv mecarbil (and potentially other compounds with the same mechanism of action) under the Amgen Agreement to RPI for a payment of $90.0 million (the “Royalty Monetization”). The Royalty Monetization is non-refundable, even if omecamtiv mecarbil is never commercialized.

We recognized $4.8 million and $4.1 million in non-cash interest expense in the three months ended March 31, 2019 and 2018, respectively, related to the Royalty Agreement. 

Note 10 — Stockholders’ Equity

Committed Equity Offering

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In March 2019, we and Cantor Fitzgerald & Co. entered into a Committed Equity Offering, an at-the-market issuance sales agreement (the “Cantor Agreement”), pursuant to which we could issue and sell shares of common stock having an aggregate offering price of up to $35.0 million. During the first quarter of 2019, we issued 562,811 shares for net proceeds of $5.1 million under the Cantor Agreement.

Equity Incentive Plan

At March 31, 2019, 0.7 million authorized shares were available for grant under the 2004 Equity Plan.

Warrants

At March 31, 2019, we had outstanding warrants with a weighted average exercise price of $6.85 per share to purchase 142,359 shares of our common stock, issued pursuant to the Loan Agreement.

Note 11 — Commitments and Contingencies

In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by or on behalf of us, or from intellectual property infringement claims made by third parties. In addition, we have indemnification agreements with our directors and certain of our officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and certain of our officers and employees, and former officers and directors in certain circumstances. We maintain product liability insurance and comprehensive general liability insurance, which may cover certain liabilities arising from our indemnification obligations. It is not possible to determine the maximum potential amount of exposure under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular indemnification obligation. Such indemnification obligations may not be subject to maximum loss clauses. We are not currently aware of any matters that could have a material adverse effect on our financial position, results of operations or cash flows.

 

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included elsewhere in this report. Operating results are not necessarily indicative of results that may occur in future periods.

This report contains forward-looking statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We intend that such statements be protected by the safe harbor created thereby. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements about or relating to:

 

guidance concerning revenues, research and development expenses and general and administrative expenses for 2019;

 

the sufficiency of existing resources to fund our operations for at least the next 12 months;

 

our capital requirements and needs for additional financing;

 

the initiation, design, conduct, enrollment, progress, timing and scope of clinical trials and development activities for our drug candidates conducted by ourselves or our partners, Amgen Inc. (“Amgen”) and Astellas Pharma Inc. (“Astellas”), including the anticipated timing for initiation of clinical trials, anticipated rates of enrollment for clinical trials and anticipated timing of results becoming available or being announced from clinical trials;

 

the results from the clinical trials, the non-clinical studies and chemistry, manufacturing, and controls (“CMC”) activities of our drug candidates and other compounds, and the significance and utility of such results;

 

anticipated interactions with regulatory authorities;

 

the suspended development of tirasemtiv, our first-generation fast skeletal muscle troponin activator, for the potential treatment of amyotrophic lateral sclerosis (“ALS”);

 

our and our partners’ plans or ability to conduct the continued research and development of our drug candidates and other compounds;

 

the advancement of omecamtiv mecarbil in Phase 3 clinical development;

 

our expected roles in research, development or commercialization under our strategic alliances with Amgen and Astellas;

 

the properties and potential benefits of, and the potential market opportunities for, our drug candidates and other compounds, including the potential indications for which they may be developed;

 

the sufficiency of the clinical trials conducted with our drug candidates to demonstrate that they are safe and efficacious;

 

our receipt of milestone payments, royalties, reimbursements and other funds from current or future partners under strategic alliances, such as with Amgen or Astellas;

 

our ability to continue to identify additional potential drug candidates that may be suitable for clinical development;

 

our plans or ability to commercialize drugs, with or without a partner, including our intention to develop sales and marketing capabilities;

 

the focus, scope and size of our research and development activities and programs;

 

the utility of our focus on the biology of muscle function, and our ability to leverage our experience in muscle contractility to other muscle functions;

 

our ability to protect our intellectual property and to avoid infringing the intellectual property rights of others;

 

future payments and other obligations under loan and lease agreements;

 

potential competitors and competitive products;

 

retaining key personnel and recruiting additional key personnel; and

 

the potential impact of recent accounting pronouncements on our financial position or results of operations.

Such forward-looking statements involve risks and uncertainties, including, but not limited to:

 

Amgen’s decisions with respect to the timing, design and conduct of research and development activities for omecamtiv mecarbil and related compounds, including decisions to postpone or discontinue research or development activities relating to omecamtiv mecarbil and related compounds;

 

Astellas’ decisions with respect to the timing, design and conduct of research and development activities for reldesemtiv and other skeletal muscle activators, including decisions to postpone or discontinue research or development activities

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relating to reldesemtiv and other skeletal muscle activators, as well as Astellas’ decisions with respect to its option to enter into a global collaboration for the development and commercialization of tirasemtiv;

 

our ability to enter into strategic partnership agreements for any of our programs on acceptable terms and conditions or in accordance with our planned timelines;

 

our ability to obtain additional financing on acceptable terms, if at all;

 

our receipt of funds and access to other resources under our current or future strategic alliances, in the development, testing, manufacturing or commercialization of our drug candidates or slower than anticipated patient enrollment, in our or partners’ clinical trials, or in the manufacture and supply of clinical trial materials;

 

failure by our contract research organizations, contract manufacturing organizations and other vendors to properly fulfill their obligations or otherwise perform as expected;

 

results from non-clinical studies that may adversely impact the timing or the further development of our drug candidates and other compounds;

 

the possibility that the FDA or foreign regulatory agencies may delay or limit our or our partners’ ability to conduct clinical trials or may delay or withhold approvals for the manufacture and sale of our products;

 

changing standards of care and the introduction of products by competitors or alternative therapies for the treatment of indications we target that may limit the commercial potential of our drug candidates;

 

difficulties or delays in achieving market access and reimbursement for our drug candidates and the potential impacts of health care reform;

 

changes in laws and regulations applicable to drug development, commercialization or reimbursement;

 

the uncertainty of protection for our intellectual property, whether in the form of patents, trade secrets or otherwise;

 

potential infringement or misuse by us of the intellectual property rights of third parties;

 

activities and decisions of, and market conditions affecting, current and future strategic partners;

 

accrual information provided by our contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other vendors;

 

potential ownership changes under Internal Revenue Code Section 382; and

 

the timeliness and accuracy of information filed with the U.S. Securities and Exchange Commission (the “SEC”) by third parties.

In addition, such statements are subject to the risks and uncertainties discussed in the “Risk Factors” section and elsewhere in this document. Such statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Item 1.

Business

When used in this report, unless otherwise indicated, “Cytokinetics,” “the Company,” “we,” “our” and “us” refers to Cytokinetics, Incorporated. CYTOKINETICS, and our logo used alone and with the mark CYTOKINETICS, are registered service marks and trademarks of Cytokinetics. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.

Overview

We are a late-stage biopharmaceutical company focused on discovering, developing and commercializing first-in-class muscle activators and best-in-class muscle inhibitors as potential treatments for debilitating diseases in which muscle performance is compromised and/or declining. We have discovered and are developing muscle-directed investigational medicines that may potentially improve the healthspan of people with devastating cardiovascular and neuromuscular diseases of impaired muscle function. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and expertise regarding the cytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. As a leader in muscle biology and the mechanics of muscle performance, we are developing small molecule drug candidates specifically engineered to impact muscle function and contractility.

Our drug candidates currently in clinical development are: omecamtiv mecarbil, a novel cardiac myosin activator which we are developing for the potential treatment of heart failure, reldesemtiv, a novel fast skeletal muscle troponin activator (“FSTA”) which we are developing for the potential treatment of amyotrophic lateral sclerosis (“ALS”) and spinal muscular atrophy (“SMA”), CK-

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3773274 (“CK-274”), a novel cardiac myosin inhibitor, which we are developing for the potential treatment of hypertrophic cardiomyopathy (“HCM”) and AMG 594, a novel cardiac troponin activator which is the subject of a Phase 1 clinical study.

Omecamtiv mecarbil is being evaluated for the potential treatment of heart failure under a strategic alliance with Amgen established in 2006 to discover, develop, and commercialize novel small molecule therapeutics designed to activate cardiac muscle contractility pursuant to the collaboration and option agreement dated December 29, 2006, as amended (the “Amgen Agreement”). Amgen, in collaboration with Cytokinetics, is conducting GALACTIC-HF (Global Approach to Lowering Adverse Cardiac Outcomes Through Improving Contractility in Heart Failure), a Phase 3 cardiovascular outcomes clinical trial of omecamtiv mecarbil in heart failure. In collaboration with Amgen, we are conducting METEORIC-HF (Multicenter Exercise Tolerance Evaluation of Omecamtiv Mecarbil Related to Increased Contractility in Heart Failure), a second Phase 3 clinical trial intended to evaluate its potential to increase exercise performance.

In March 2019, we, Amgen and Les Laboratoires Servier and Institut de Recherches Internationales Servier (“Servier”) announced that the Data Monitoring Committee (DMC) for GALACTIC-HF recently completed the first planned interim analysis, which included consideration of pre-specified criteria for futility. The DMC reviewed data from GALACTIC-HF and recommended that GALACTIC-HF continue without changes to its conduct. The futility analysis was triggered once a pre-specified number of cardiovascular deaths had occurred in GALACTIC-HF as stipulated by the trial’s protocol. The futility analysis allowed the potential for stopping GALACTIC-HF early had the interim analysis shown a low likelihood of the trial demonstrating a clinically meaningful and statistically significant benefit on the primary endpoint in patients receiving omecamtiv mecarbil, plus standard of care, compared to patients receiving placebo plus standard of care.

Reldesemtiv selectively activates the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to calcium, leading to an increase in skeletal muscle contractility. Cytokinetics and Astellas are developing reldesemtiv under the Amended and Restated License and Collaboration Agreement dated December 22, 2014, as amended (the “Astellas Agreement”). Astellas holds an exclusive license to develop and commercialize reldesemtiv worldwide, subject to our development and commercialization participation rights. In collaboration with Astellas, we conducted a Phase 2 clinical trial of reldesemtiv in patients with SMA and are conducting a Phase 2 clinical trial of reldesemtiv in patients with ALS, called FORTITUDE-ALS (Functional Outcomes in a Randomized Trial of Investigational Treatment with CK-2127107 to Understand Decline in Endpoints – in ALS). Astellas, in collaboration with us, conducted a Phase 2 clinical trial of reldesemtiv in patients with chronic obstructive pulmonary disease (“COPD”) and a Phase 1b clinical trial of reldesemtiv in elderly subjects with limited mobility.

On May 05, 2019, we announced that results of FORTITUDE-ALS were presented at the American Academy of Neurology Annual Meeting in Philadelphia. FORTITUDE-ALS did not achieve statistical significance for a pre-specified dose-response relationship in its primary endpoint of change from baseline in SVC after 12 weeks of dosing (p=0.11). Similar analyses of ALSFRS-R and slope of the Muscle Strength Mega-Score yielded p-values of 0.09 and 0.31, respectively. However, patients on all dose groups of reldesemtiv declined less than patients on placebo for SVC and ALSFRS-R, with larger and clinically meaningful differences emerging over time.

While the dose-response analyses for the primary and secondary endpoints did not achieve statistical significance at the level of 0.05, in a post-hoc analysis pooling the doses together, patients who received reldesemtiv in FORTITUDE-ALS declined less than patients who received placebo. The trial showed effects favoring reldesemtiv across dose levels and timepoints with clinically meaningful magnitudes of effect observed at 12 weeks for the primary and secondary endpoints. The differences between reldesemtiv and placebo in SVC and ALSFRS-R total score observed after 12 weeks of treatment were still evident at follow-up, four weeks after the last dose of study drug.

The incidence of early treatment discontinuations, serious adverse events and clinical adverse events in FORTITUDE-ALS were similar between placebo and active treatment arms. The most common clinical adverse effects in the trial included fatigue, nausea and headache. The leading cause for early termination from FORTITUDE-ALS for patients who received placebo was progressive disease; the leading cause for early termination for patients who received reldesemtiv was a decline in cystatin C based estimated glomerular filtration rate (“eGFR”), a measure of renal function. Elevations in transaminases and declines in cystatin C eGFR were dose-related.

CK-274 is a novel, oral, small molecule cardiac myosin inhibitor that we discovered independent of our collaborations. CK-274 arose from an extensive chemical optimization program conducted with careful attention to therapeutic index and pharmacokinetic properties that may translate into best-in-class potential in clinical development. CK-274 was designed to reduce the hypercontractility that is associated with HCM. In preclinical models, CK-274 reduces myocardial contractility by binding directly to cardiac myosin at a distinct and selective allosteric binding site, thereby preventing myosin from entering a force producing state. CK-274 reduces the number of active actin-myosin cross bridges during each cardiac cycle and consequently reduces myocardial contractility. This mechanism of action may be therapeutically effective in conditions characterized by excessive hypercontractility, such as HCM. We

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are conducting a Phase 1 double-blind, randomized, placebo-controlled, multi-part, single and multiple ascending dose clinical trial of CK-274 in healthy adult subjects.

AMG 594 was discovered under our joint research program with Amgen. In collaboration with Cytokinetics, Amgen is conducting a randomized, placebo-controlled, double-blind, single and multiple ascending dose, single-center Phase 1 study to assess the safety and tolerability, pharmacokinetics and pharmacodynamics of AMG 594 in healthy subjects.

Our research continues to drive innovation and leadership in muscle biology. All of our drug candidates have arisen from our cytoskeletal research activities. Our focus on the biology of the cytoskeleton distinguishes us from other biopharmaceutical companies, and potentially positions us to discover and develop novel therapeutics that may be useful for the treatment of severe diseases and medical conditions. Each of our drug candi