Quarterly Report (10-q)

Date : 08/07/2018 @ 5:01PM
Source : Edgar (US Regulatory)
Stock : Cytokinetics, Incorporated (MM) (CYTK)
Quote : 7.2  0.1 (1.41%) @ 5:29PM

Quarterly Report (10-q)

 

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 June 30, 2018

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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

◻  (Do not check if a smaller reporting company)

  

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  

Number of shares of common stock, $0.001 par value, outstanding as of July 29, 2018: 54,627,997

 

 

 

 


CYTOKINETICS, INCORPORATED

TABLE OF CONTENTS FOR FORM 10-Q

FOR THE three and six months ENDED JUNE 30, 2018

 

 

Page

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements   

3

Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017

3

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2018 and 2017

4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017

5

Notes to Condensed Consolidated Financial Statements

6

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

27

Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

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

49

Item 3. Defaults Upon Senior Securities

49

Item 4. Mine Safety Disclosures

49

Item 5. Other Information

49

Item 6. Exhibits

50

 

 

SIGNATURES

51

 

 

 

2


PART I. FINANCI AL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data) (unaudited)

 

 

June 30, 2018

 

 

December 31, 2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

46,955

 

 

$

125,206

 

Short-term investments

 

 

184,986

 

 

 

143,685

 

Accounts receivable

 

 

236

 

 

 

1,112

 

Contract assets

 

 

10,375

 

 

 

Prepaid and other current assets

 

 

1,677

 

 

 

4,292

 

Total current assets

 

 

244,229

 

 

 

274,295

 

Long-term investments

 

 

 

 

 

16,518

 

Property and equipment, net

 

 

2,598

 

 

 

3,568

 

Other assets

 

 

412

 

 

 

429

 

Total assets

 

$

247,239

 

 

$

294,810

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,336

 

 

$

5,253

 

Accrued liabilities

 

 

16,090

 

 

 

17,392

 

Contract liabilities

 

 

8,132

 

 

 

Deferred revenue, current

 

 

 

 

 

9,572

 

Current portion of long-term debt

 

 

1,703

 

 

 

Other current liabilities

 

 

28

 

 

 

227

 

Total current liabilities

 

 

27,289

 

 

 

32,444

 

Long-term debt, net

 

 

30,662

 

 

 

31,777

 

Liability related to the sale of future royalties, net

 

 

113,144

 

 

 

104,650

 

Deferred revenue, non-current

 

 

 

 

 

15,000

 

Other long-term liabilities

 

 

974

 

 

 

1,097

 

Total liabilities

 

 

172,069

 

 

 

184,968

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value

 

 

 

 

Common stock, $0.001 par value

 

 

55

 

 

 

54

 

Additional paid-in capital

 

 

762,887

 

 

 

755,526

 

Accumulated other comprehensive income

 

 

450

 

 

 

343

 

Accumulated deficit

 

 

(688,222

)

 

 

(646,081

)

Total stockholders’ equity

 

 

75,170

 

 

 

109,842

 

Total liabilities and stockholders’ equity

 

$

247,239

 

 

$

294,810

 

 

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

 

3


CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2018

 

 

June 30, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, milestone, grant and other revenues, net

 

$

4,680

 

 

$

(1,889

)

 

$

8,265

 

 

$

818

 

License revenues

 

 

1,535

 

 

 

4,942

 

 

 

3,218

 

 

 

6,388

 

Total revenues

 

 

6,215

 

 

 

3,053

 

 

 

11,483

 

 

 

7,206

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,582

 

 

 

19,809

 

 

 

43,717

 

 

 

39,098

 

General and administrative

 

 

8,046

 

 

 

8,438

 

 

 

17,310

 

 

 

16,553

 

Total operating expenses

 

 

29,628

 

 

 

28,247

 

 

 

61,027

 

 

 

55,651

 

Operating loss

 

 

(23,413

)

 

 

(25,194

)

 

 

(49,544

)

 

 

(48,445

)

Interest expense

 

 

(898

)

 

 

(782

)

 

 

(1,761

)

 

 

(1,540

)

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

 

 

(4,338

)

 

 

(3,717

)

 

 

(8,467

)

 

 

(6,012

)

Interest and other income, net

 

 

1,126

 

 

 

612

 

 

 

1,968

 

 

 

1,049

 

Net loss

 

$

(27,523

)

 

$

(29,081

)

 

$

(57,804

)

 

$

(54,948

)

Net loss per share - basic and diluted

 

$

(0.51

)

 

$

(0.60

)

 

$

(1.07

)

 

$

(1.22

)

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

 

 

54,293

 

 

 

48,218

 

 

 

54,178

 

 

 

44,910

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities, net

 

 

(39

)

 

 

(78

)

 

 

107

 

 

 

(223

)

Comprehensive loss

 

$

(27,562

)

 

$

(29,159

)

 

$

(57,697

)

 

$

(55,171

)

 

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

 

4


CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(57,804

)

 

$

(54,948

)

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

 

 

 

 

 

 

 

 

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

 

 

8,467

 

 

 

6,036

 

Non-cash equity-related expense

 

 

4,908

 

 

 

4,141

 

Depreciation of property and equipment

 

 

1,291

 

 

 

860

 

Interest receivable and amortization on investments

 

 

(500

)

 

 

(Gain) loss on disposal of equipment

 

 

 

 

 

(82

)

Non-cash interest expense related to long-term debt

 

 

588

 

 

 

278

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

876

 

 

 

24

 

Contract assets

 

 

9,038

 

 

 

Prepaid and other assets

 

 

2,188

 

 

 

(2,663

)

Accounts payable

 

 

(3,918

)

 

 

(1,888

)

Accrued and other liabilities

 

 

(1,597

)

 

 

(3,912

)

Contract liabilities

 

 

(10,618

)

 

 

Deferred revenue

 

 

(9,572

)

 

 

(51

)

Net cash used in operating activities

 

 

(56,653

)

 

 

(52,205

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(132,208

)

 

 

(201,531

)

Sales and maturities of investments

 

 

108,477

 

 

 

66,928

 

Purchases of property and equipment

 

 

(321

)

 

 

(1,646

)

Net cash used in investing activities

 

 

(24,052

)

 

 

(136,249

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Public offerings of common stock, net of issuance costs

 

 

 

 

112,232

 

Sale of future royalties, net of issuance costs

 

 

 

 

90,621

 

Issuance of common stock related to sale of future royalties, net of issuance costs

 

 

 

 

7,560

 

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

 

 

2,454

 

 

 

11,878

 

Net cash provided by financing activities

 

 

2,454

 

 

 

222,291

 

Net increase (decrease) in cash and cash equivalents

 

 

(78,251

)

 

 

33,837

 

Cash and cash equivalents, beginning of period

 

 

125,206

 

 

 

66,874

 

Cash and cash equivalents, end of period

 

$

46,955

 

 

$

100,711

 

 

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

 

5


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 $688.2 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, 2017 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, 2017, 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 and the valuation of 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.

6


Revenue Recognition – Adoption of Revenue from Contracts with Customers ASC 606

On January 1, 2018, we adopted 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 by $15.7 million 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

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.

7


Income Taxes

We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. We establish valuation allowances when necessary to reduce deferred tax assets to the amounts expected to be realized. We recognize uncertain tax positions taken or expected to be taken on a tax return. Tax positions are initially recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities. We measure our tax positions as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years beginning after December 31, 2017. Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. We continue to analyze certain provisions of the Act including the application of new executive compensation limitation provisions under Internal Revenue Section 162(m). These items are subject to revisions from further analysis of the Tax Act and interpretation of any additional guidance issued by the U.S. Treasury Department, IRS, FASB, and other standard-setting and regulatory bodies.

We did not record a provision for income tax for three and six months ended June 30, 2018 because we expect to report a net tax loss for the year ending December 31, 2018.

Recent Accounting Pronouncements

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 do not expect the adoption of ASU 2016-13 to have a material impact on our financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires us to record right-of-use asset and lease liability on the statement of financial position for operating leases with lease terms of more than 12 months and is effective for annual and interim reporting periods beginning on or after December 15, 2018. We expect to adopt this standard beginning in 2019 using the modified retrospective approach. We do not expect that this standard will have a material impact on our results of operations, but we do expect that upon adoption, it will have a material impact on our assets and liabilities. The primary effect of adoption will be the requirement to record right-of-use assets and corresponding lease obligations for current operating leases with lease terms of more than 12 months.

Note 2 — Net Loss Per Share

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

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

Options to purchase common stock

 

 

5,421

 

 

 

6,170

 

Warrants to purchase common stock

 

 

100

 

 

 

310

 

Restricted Stock and Performance units

 

 

581

 

 

 

461

 

Shares issuable related to the ESPP

 

 

28

 

 

 

18

 

 

 

 

6,130

 

 

 

6,959

 

 

8


Note 3 — Revenue Recognition

The performance obligations for our contract assets and liabilities relate to the research and development services for particular clinical programs, all of which we expect to complete in 2018.

We believe recognizing revenue as research and development services are performed provides a faithful depiction of the transfer of the services because completion of clinical programs results in data useful to determine satisfaction of our promise. We may fund research and development in advance of the performance of the services. When we complete our performance obligation, if we have received more than we incurred, we are obligated to return unused advance funding. We recognize these advance payments as deferred revenue until we perform the related services.

Our revenue for the three and six months ended June 30, 2018 was affected by adopting ASC 606 as follows (in thousands):

 

 

Three Months

Ended

June 30, 2018

 

 

Six Months

Ended

June 30, 2018

 

Research and development revenue using guidance in effect prior to ASC 606

 

$

70

 

 

$

(1,334

)

Impact of adoption of ASC 606

 

 

4,610

 

 

 

9,599

 

Research and development revenue

 

$

4,680

 

 

$

8,265

 

 

 

 

 

 

 

 

 

 

License revenue using guidance in effect prior to ASC 606

 

$

4,314

 

 

$

7,946

 

Impact of adoption of ASC 606

 

 

(2,779

)

 

 

(4,728

)

License revenue

 

$

1,535

 

 

$

3,218

 

 

The impact of adoption of ASC 606 on our net loss per share was as follows (in thousands):

 

 

Three Months

Ended

June 30, 2018

 

 

Six Months

Ended

June 30, 2018

 

Net loss per share using guidance in effect prior to ASC 606

 

$

(0.48

)

 

$

(0.98

)

Impact of adoption of ASC 606

 

 

0.03

 

 

 

0.09

 

Net loss per share

 

$

(0.51

)

 

$

(1.07

)

 

Our contract assets and liabilities changed during the period, as follows (in thousands):

 

 

Three Months

Ended

June 30, 2018

 

 

Six Months

Ended

June 30, 2018

 

Contract liability from the Amgen Agreement for the Co-Invest Option

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

12,500

 

 

$

18,750

 

Payments made for the Co-Invest Option

 

 

(6,250

)

 

 

(12,500

)

Balance at end of period

 

$

6,250

 

 

$

6,250

 

 

 

 

 

 

 

 

 

 

Contract asset from the 2016 Astellas Amendment

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

16,201

 

 

$

19,413

 

Cash received in advance of services performed

 

 

(1,735

)

 

 

(1,735

)

Reduction for services performed

 

 

(4,091

)

 

 

(7,303

)

Balance at end of period

 

$

10,375

 

 

$

10,375

 

 

 

 

 

 

 

 

 

 

Contract liability from the 2014 Astellas Amendment

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

3,336

 

 

$

6,288

 

Reduction for services performed

 

 

(1,454

)

 

 

(4,406

)

Balance at end of period

 

$

1,882

 

 

$

1,882

 

 

 

 

 

 

 

 

 

 

 

9


Note 4 — 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.

We have exercised 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”). We paid Amgen $12.5 million to fund the Co-Invest Option during the six months ended June 30, 2018.  We paid the final $6.3 million to fully fund the Co-Invest Option in July 2018. Payments we made to fund the Co-Invest Option in 2016 and 2017 reduced research and development revenues in 2016 and 2017 by $1.3 million and $20.0 million, respectively.

Adoption of ASC 606

We determined that the Amgen Agreement was within the scope of ASC 606. As of January 1, 2018, all the performance obligations under the Amgen Agreement were complete. On January 1, 2018, we recognized a contract liability for $18.8 million with a corresponding increase in accumulated deficit for the Co-Invest Option. Payments in the six months ended June 30, 2018 reduced this contract liability to $6.3 million. Revenue recognized related to the Amgen Agreement during the first half of 2017 consisted of $0.9 million for research and development services, offset by our Co-Invest Option payment of $7.5 million in the first half of 2017.

We paid Amgen $6.3 million and $12.5 million for the Co-Invest Option during the three and six months ended June 30, 2018, respectively.

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.

In 2014, we and Astellas amended and restated the license and collaboration 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”); in connection therewith, Astellas paid us a $30.0 million non-refundable upfront license fee and a $15.0 million milestone payment. We determined at that time that the license for the expanded SMA rights did not have stand-alone value and the license and research and development services were a single unit of accounting and recognized revenue for these payments using the proportional performance model.

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.

10


Astellas’ Option on Tirasemtiv

In 2016, Astellas paid us a $15.0 million non-refundable option fee for the option for a global collaboration for the development and commercialization of tirasemtiv (the “Option on Tirasemtiv”). If Astellas exercises the Option on Tirasemtiv:

 

we will grant Astellas an exclusive license under a license and collaboration agreement to develop and commercialize tirasemtiv outside our commercialization territory of North America, Europe and other select countries (the “License on Tirasemtiv”). Each party would be primarily responsible for the further development of tirasemtiv in its territory and have the exclusive right to commercialize tirasemtiv in its territory.

 

we will receive an option exercise payment ranging from $25.0 million (if exercise occurs following receipt of data from VITALITY-ALS) to $80.0 million (if exercise occurs following receipt of FDA approval) and a milestone payment of $30.0 million from Astellas associated with our initiation of the open-label extension trial for tirasemtiv (VIGOR-ALS). If Astellas exercises the option after the defined review period following receipt of data, Astellas will at that time reimburse us for a share of any additional costs incurred after such review period.

 

the parties will share the future development costs of tirasemtiv in North America, Europe and certain other countries (with Cytokinetics bearing 75% of such shared costs and Astellas bearing 25% of such costs), and Astellas will be solely responsible for the development costs of tirasemtiv specific to its commercialization territory.

Contingent upon the successful development of tirasemtiv, we may receive from Astellas milestone payments. If tirasemtiv is commercialized, Astellas will pay us royalties on sales of tirasemtiv in Astellas’ territory, and we will pay Astellas royalties on sales of tirasemtiv in our territory.

While Astellas holds the Option on Tirasemtiv, we are responsible for and have final decision-making authority on the development of tirasemtiv at our expense. We concluded in 2016 that (i) we had no obligation to Astellas related to any development services pursuant to the Option on Tirasemtiv, (ii) the Option on Tirasemtiv was a substantive option and not a deliverable under the 2016 Astellas Amendment, and (iii) the $15.0 million payment was deferred revenue until the Option on Tirasemtiv is exercised or expires unexercised. The $15.0 million payment was included as deferred revenue in our non-current liabilities at December 31, 2017 (prior to adopting ASC 606).

Adoption of ASC 606

On January 1, 2018, in adopting ASC 606, we concluded: (i) that the original agreement with Astellas in 2013 was outside the scope of ASC 606, since all performance obligations thereunder were completed prior to entering into the 2014 Astellas Amendment and the 2014 Astellas Amendment was not an amendment of the original agreement, (ii) the 2014 Astellas Amendment is a separate agreement within the scope of ASC 606 with no effect on the ongoing accounting for the related license and research and development service deliverables and (iii) the 2016 Astellas Amendment is a separate agreement within the scope of ASC 606. In adopting ASC 606 we determined:

 

Our performance obligations were the delivery of the license and performance of research and development services;

 

The transaction price included the $50.0 million in non-refundable fees, the $35.6 million in committed research and development fees and the $15.0 million Astellas paid us for the Option on Tirasemtiv;

 

The consideration allocated to the license resulted in a contract asset of $19.4 million included in other current assets, with a corresponding decrease to accumulated deficit on January 1, 2018, and to be realized using the proportional performance model; and

 

Research services we perform under the Astellas Agreement in 2018 and beyond are a separate contract.

The transaction price above was allocated to the license (approximately $83 million) and to the services (approximately $18 million) based on their respective stand-alone prices.

Of the revenue we recognized in the first half of 2018, $4.4 million was included in the contract liability at the beginning of the period. This revenue includes the cumulative effect of changes made during the period in the estimated costs of research and development services to be incurred to satisfy the related deliverable.

Revenue from Astellas included (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2018

 

 

June 30, 2017

 

Research and development revenues

 

$

4,680

 

 

$

4,942

 

 

$

8,265

 

 

$

6,388

 

License revenues

 

 

1,535

 

 

 

3,973

 

 

 

3,218

 

 

$

6,698

 

Total Revenue from Astellas

 

$

6,215

 

 

$

8,915

 

 

$

11,483

 

 

$

13,086

 

Of the transaction price allocated to the research and development services, approximately $4.6 million remains unrecognized at June 30, 2018.

11


We had accounts receivable from Astellas of $0.2 million at June 30, 2018 and no accounts receivable at December 31, 2017. 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 milesto nes 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 d rug 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 5 — Cash Equivalents and Investments

The amortized cost and fair value of cash equivalents and available for sale investments at June 30, 2018 and December 31, 2017 were as follows (in thousands):

 

 

June 30, 2018

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Money market funds

 

$

37,992

 

 

$

 

 

$

 

 

$

37,992

 

U.S. Treasury securities

 

 

91,000

 

 

 

1

 

 

 

(108

)

 

 

90,893

 

Agency bonds

 

 

39,634

 

 

 

 

 

 

(5

)

 

 

39,629

 

Commercial paper

 

 

49,160

 

 

 

6

 

 

 

(3

)

 

 

49,163

 

Corporate obligations

 

 

12,619

 

 

 

 

 

 

(15

)

 

 

12,604

 

 

 

$

230,404

 

 

$

7

 

 

$

(130

)

 

$

230,281

 

 

 

 

December 31, 2017

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Cash equivalents

 

$

111,501

 

 

$

 

 

$

 

 

$

111,501

 

Short-term investments

 

$

143,895

 

 

$

 

 

$

(210

)

 

$

143,685

 

Long-term investments

 

$

16,538

 

 

$

 

 

$

(20

)

 

$

16,518

 

 

Investments available for sale at June 30, 2018 excludes an investment in equity with a fair value and unrealized gain of $0.7 million. At June 30, 2018, there were no investments that had been in a continuous unrealized loss position for 12 months or longer.

Interest income was $1.1 million and $2.0 million for the three and six months ended June 30 2018 and $0.6 million and $1.0 million for the three and six months ended June 30, 2017, respectively.  

Note 6 — 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.

12


Fair value of financial assets:

Financial assets measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 are classified in the table below in one of the three categories described above (in thousands):

 

 

June 30, 2018

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Assets

At Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

37,992

 

 

$

 

 

$

 

 

$

37,992

 

U.S. Treasury securities

 

 

90,893

 

 

 

 

 

 

 

 

 

90,893

 

Agency bonds

 

 

 

 

 

39,629

 

 

 

 

 

 

39,629

 

Commercial paper

 

 

 

 

 

49,163

 

 

 

 

 

 

49,163

 

Corporate obligations

 

 

 

 

 

12,604

 

 

 

 

 

 

12,604

 

 

 

$

128,885

 

 

$

101,396

 

 

$

 

 

$

230,281

 

 

 

 

December 31, 2017

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Assets

At Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

51,001

 

 

$

 

 

$

 

 

$

51,001

 

U.S. Treasury securities

 

 

165,801

 

 

 

 

 

 

 

 

 

165,801

 

Agency bonds

 

 

 

 

 

54,329

 

 

 

 

 

 

54,329

 

Equity securities

 

 

573

 

 

 

 

 

 

 

 

 

573

 

 

 

$

217,375

 

 

$

54,329

 

 

$

 

 

$

271,704

 

 

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 June 30, 2018 and December 31, 2017, the fair value of the long-term debt approximated its carrying value of $32.4 million and $31.8 million, respectively, because it is carried at a market observable interest rate, which is considered Level 2.

As of June 30, 2018, 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 9 – “Liability Related to Sale of Future Royalties”).

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

Note 7 — Balance Sheet Components

Accrued liabilities were as follows (in thousands):

 

 

June 30, 2018

 

 

December 31, 2017

 

Accrued liabilities:

 

 

 

 

 

 

 

 

Research and development services

 

$

10,290

 

 

$

9,436

 

Compensation related

 

 

4,527

 

 

 

6,260

 

Other accrued expenses

 

 

1,273

 

 

 

1,696

 

Total accrued liabilities

 

$

16,090

 

 

$

17,392

 

 

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. Our Long-term debt and unamortized debt discount balances are as follows (in thousands):

 

 

 

June 30, 2018

 

 

December 31, 2017

 

Notes payable, gross

 

$

32,000

 

 

$

32,000

 

Less: Unamortized debt discount and issuance costs

 

 

(41

)

 

 

(325

)

Accretion of final payment fee

 

 

406

 

 

 

102

 

Carrying value of notes payable

 

 

32,365

 

 

 

31,777

 

Less: Current portion of long-term debt

 

 

(1,703

)

 

 

 

Long-term debt

 

$

30,662

 

 

$

31,777

 

13


Payments on the notes payable will be interest only through May 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 li fe 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 $0.8 million and $0.8 million for the three months ended June 30, 2018 and 2017, respectively and $1.8 million and $1.5 million for the six months ended June 30, 2018 and 2017, respectively. 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 8.9% at June 30, 2018.

Minimum payments under the Loan Agreement are (in thousands):

2018

 

$

2,615

 

2019

 

 

7,963

 

2020

 

 

11,187

 

2021

 

 

10,417

 

2022

 

 

10,176

 

Total minimum payments

 

 

42,358

 

Less: Interest and final payment

 

 

(10,358

)

Notes payable, gross

 

$

32,000

 

 

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.  Concurrently, we entered into a Common Stock Purchase Agreement with RPI through which RPI purchased 875,676 shares of our common stock for $10.0 million (the “RPI Common Stock”).

We concluded that there are two units of accounting for the Royalty Monetization and the RPI Common Stock: (1) the Liability related to sale of future royalties and (2) the sale of the RPI Common Stock. We determined the fair value for the Liability related to sale of future royalties at the time of the Royalty Monetization to be $96.7 million, with an effective annual non-cash interest rate of 17% based on our estimate of the cash flows to be received over the life of the Royalty Agreement. We further determined that the fair value of the RPI Common Stock was $8.1 million at the time we entered into the Royalty Agreement.  

We allocated the consideration of $100.0 million and related transaction costs of $1.8 million on a relative fair value basis to the liability for $92.3 million and the common stock for $7.7 million. We continue to accrete the Liability related to sale of future royalties using the interest method with an annual pre-tax interest rate of 17%. The transaction costs are amortized to non-cash interest expense over the estimated term of the Royalty Agreement. As of December 31, 2017, we determined the fair value at $131.6 million, after considering the new statutory effective tax rate of 21% in 2018. We recognized $4.3 million and $3.7 million in non-cash interest expense in the three months ended June 30, 2018 and 2017, respectively, and $8.5 million and $6.0 million in non-cash interest expense in the six months ended June 30, 2018 and 2017, related to the Royalty Agreement. 

14


Note 10 — Stockholders’ Equity

Equity Incentive Plan

At December 31, 2017, we had outstanding 171,250 Performance Units with an award date fair value per unit of $7.00. The performance criteria for these Performance Units were met in 2017 and these units vested in March 2018.

As of June 30, 2018, 2.2 million authorized shares were available for grant under the 2004 Equity Plan.

Warrants

At June 30, 2018, we had outstanding warrants to purchase 100,106 shares of our common stock, issued pursuant to the Loan Agreement, with a weighted average exercise price of $6.74 per share.

Note 11 — Commitments and Contingencies

Commitments

Operating Lease:   Our non-cancelable operating lease for our facilities expires in 2021 and includes rental payments on a graduated scale and our payment of certain operating expenses. We recognize rent expense on a straight-line basis over the lease period. Rent expense was $1.3 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, and $2.5 million and $1.8 million for the six months ended June 30, 2018 and 2017, respectively.

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.

 

15


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 2018;

 

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 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 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;

16


 

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 were incorporated in Delaware in August 1997 as Cytokinetics, Incorporated. We are a late-stage biopharmaceutical company focused on the discovery and development of first-in-class muscle activators as potential treatments for debilitating diseases in which muscle performance is compromised and/or declining. 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. Our most advanced research and development programs relate to the biology of muscle function and are directed to small molecule modulators of the contractility of cardiac muscle or skeletal muscle. We are also conducting earlier-stage research directed to other compounds with the potential to modulate muscle contractility and other muscle functions.

Our drug candidates currently in clinical development are omecamtiv mecarbil, a novel cardiac myosin activator, and reldesemtiv, a next-generation fast skeletal muscle troponin activator (“FSTA”) with orphan drug designation from FDA for the potential treatment of spinal muscular atrophy (“SMA”).

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, including omecamtiv mecarbil (the “Amgen Agreement”). Amgen, in collaboration with Cytokinetics, is conducting GALACTIC-HF ( G lobal A pproach to L owering A dverse C ardiac Outcomes T hrough I mproving C ontractility in H eart Failure), a Phase 3 cardiovascular outcomes clinical trial of omecamtiv mecarbil in heart failure. Cytokinetics and Amgen are also planning a second Phase 3 clinical trial intended to evaluate its potential to increase exercise performance, a trial to be conducted by Cytokinetics.

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Reldesemtiv is structurally distinct from our first-generation FSTA, tirasemtiv, and 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 further amended in 2016 and 2017 (the “Astellas Agreement”). Astellas holds an exclusive license to develop and commercialize reldesemtiv worldwide, subject to our development and commercialization participation rights.

In June 2018, we announced data from a hypothesis-generating, Phase 2 clinical study of reldesemtiv in patients with SMA (the “SMA Study”) were presented at the 2018 Annual Cure SMA Conference in Dallas. We conducted the SMA Study in collaboration with Astellas.  The SMA Study, which examined two dose levels of reldesemtiv, 150 mg or 450 mg twice daily, met its primary objective to determine potential pharmacodynamic effects of reldesemtiv after multiple oral doses in patients with SMA, and secondary objectives to evaluate the safety, tolerability and pharmacokinetics of reldesemtiv The SMA Study showed dose- and concentration-dependent increases in time to muscle fatigue as measured by changes from baseline in Six Minute Walk Distance (“6MWD”), a sub-maximal exercise test of aerobic capacity and endurance, and Maximal Expiratory Pressure (“MEP”), a measure of strength of respiratory muscles, after eight weeks of treatment with reldesemtiv. The study demonstrated dose-dependent increases in 6MWD in ambulatory patients as measured at both post-baseline time points, week four and week eight. The study also showed increases vs. placebo in MEP. Other assessments in the study, including the Hammersmith Functional Motor Score - Extended, Revised Upper Limb Module, Timed Up-and-Go and Forced Vital Capacity, did not demonstrate meaningful differences between reldesemtiv versus placebo. Adverse events were similar between groups receiving reldesemtiv and placebo. The most commonly observed adverse effects were headache, constipation and nausea. Four patients had serious adverse events reported that resulted in early termination of study drug treatment, all considered to be unrelated to reldesemtiv.

In addition, in collaboration with Astellas, we are conducting a Phase 2 clinical trial of reldesemtiv in patients with amyotrophic lateral sclerosis (“ALS”), called FORTITUDE-ALS ( F unctional O utcomes in a R andomized T rial of I nvestigational T reatment with CK-2127107 to U nderstand D ecline in E ndpoints – in ALS ). Astellas, in collaboration with Cytokinetics, is conducting 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. We and Astellas are continuing to conduct a joint research program focused on next-generation skeletal muscle activators.

All of our drug candidates have demonstrated evidence of potentially clinically relevant pharmacodynamic activity in humans. We expect to continue to focus on translating the observed pharmacodynamic activity of these compounds into potentially meaningful clinical benefits for patients. All 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 candidates has a novel mechanism of action compared to currently marketed drugs, which we believe validates our focus on the cytoskeleton as a productive area for drug discovery and development. We intend to leverage our experience in muscle contractility to expand our current pipeline, and expect to identify additional potential drug candidates that may be suitable for clinical development.

As we mark our 20 th anniversary, our research continues to drive innovation and leadership in muscle biology, evidenced by three new muscle biology directed compounds advancing from research to development in 2018. Under our collaboration with Amgen, we are continuing pre-clinical development of a next-generation cardiac muscle activator; we expect to submit an IND in 2018 and plan to initiate Phase 1 studies for this potential drug candidate by year-end or in early 2019. Under our collaboration with Astellas, we jointly advanced a next-generation skeletal muscle activator into IND-enabling studies. Cytokinetics conducted regulatory interactions and is conducting IND-enabling studies of an unpartnered cardiac sarcomere directed compound in preparation to begin Phase 1 studies in the fourth quarter of 2018.

Research and Development Programs

Our long-standing interest in the cytoskeleton has led us to focus our research and development activities on the biology of muscle function and, in particular, small molecule modulation of muscle contractility. We believe that our expertise in the modulation of muscle contractility is an important differentiator for us. Our preclinical and clinical experience in muscle contractility may position us to discover and develop additional novel therapies that have the potential to improve the health of patients with severe and debilitating diseases or medical conditions.

Small molecules that affect muscle contractility may have several applications for a variety of serious diseases and medical conditions. For example, heart failure is a disease often characterized by impaired cardiac muscle contractility which may be treated by modulating the contractility of cardiac muscle. Similarly, certain diseases and medical conditions associated with muscle weakness may be amenable to treatment by enhancing the contractility of skeletal muscle. Because the modulation of the contractility of different types of muscle, such as cardiac and skeletal muscle, may be relevant to multiple diseases or medical conditions, we believe we can leverage our expertise in these areas to more efficiently discover and develop potential drug candidates that modulate the applicable muscle type for multiple indications.

We segment our research and development activities related to muscle contractility by our cardiac muscle contractility program and our skeletal muscle contractility program.  We also conduct research and development on novel treatments for disorders involving muscle function beyond muscle contractility.

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Cardiac Muscle Contractility Program

Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in the heart. The cardiac sarcomere is a highly ordered cytoskeletal structure composed of cardiac myosin, actin and a set of regulatory proteins. Cardiac myosin is the cytoskeletal motor protein in the cardiac muscle cell. It is directly responsible for converting chemical energy into the mechanical force, resulting in cardiac muscle contraction. This program is based on the hypothesis that activators of cardiac myosin may address certain adverse properties of existing positive inotropic agents. Current positive inotropic agents, such as beta-adrenergic receptor agonists or inhibitors of phosphodiesterase activity, increase the concentration of intracellular calcium, thereby increasing cardiac sarcomere contractility. The effect on calcium levels, however, also has been linked to potentially life-threatening side effects. In contrast, our novel cardiac myosin activators work by a mechanism that directly stimulates the activity of the cardiac myosin motor protein, without increasing the intracellular calcium concentration. They accelerate the rate-limiting step of the myosin enzymatic cycle and shift it in favor of the force-producing state. Rather than increasing the velocity of cardiac contraction, this mechanism instead lengthens the systolic ejection time, which results in increased cardiac function in a potentially more oxygen-efficient manner.

Omecamtiv mecarbil

Our lead drug candidate from our cardiac contractility program is omecamtiv mecarbil, a novel cardiac myosin activator. We expect omecamtiv mecarbil to be developed as a potential treatment across the continuum of care in heart failure both for use in the hospital setting and for use in the outpatient setting. Omecamtiv mecarbil is the subject of a Phase 3 development program in patients with reduced ejection fraction under our strategic alliance with Amgen.

Amgen Strategic Alliance

Our strategic alliance with Amgen to discover, develop, and commercialize novel small molecule therapeutics designed to activate cardiac muscle contractility, including omecamtiv mecarbil, for the potential treatment of heart failure is governed by the Amgen Agreement. Amgen has exclusive, worldwide rights to develop and commercialize omecamtiv mecarbil and related compounds subject to our specified development and commercial participation rights. Amgen has also entered an alliance with Les Laboratoires Servier and Institut de Recherches Internationales (“Servier”) for exclusive commercialization rights in Europe as well as the Commonwealth of Independent States, including Russia. Servier contributes funding for development and provides strategic support to the program.

Under the Amgen Agreement we are eligible for potential additional pre-commercialization and commercialization milestone payments of over $600.0 million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration, and royalties that escalate based on increasing levels of annual net sales of products commercialized under the agreement. The Amgen Agreement also provides for us to receive increased royalties by co-funding the Phase 3 development program for omecamtiv mecarbil and other drug candidates under the collaboration.

We have exercised our option under the Amgen Agreement to fully 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 and the right to co-promote omecamtiv mecarbil in institutional care settings in North America, with reimbursement by Amgen for certain sales force activities (the “Co-Invest Option”). A joint commercial operating team comprising representatives of Cytokinetics and Amgen will then be responsible for the day-to-day management of the commercialization program of omecamtiv mecarbil.

Amgen generally has discretion to elect whether to pursue or abandon the development of omecamtiv mecarbil and may terminate our strategic alliance for any reason upon six months’ prior notice. With our consent, Amgen granted Servier an option to commercialize omecamtiv mecarbil in Europe and the CIS, including Russia, which Servier decided to exercise. In August 2016, we entered into a letter agreement with Amgen and Servier, which provides that if Amgen’s rights to omecamtiv mecarbil are terminated with respect to the territory subject to Servier’s sublicense, the sublicensed rights previously granted by Amgen to Servier with respect to omecamtiv mecarbil will remain in effect and become a direct license or sublicense of such rights by us to Servier, on substantially the same terms as those in the Option, License and Collaboration Agreement between Amgen and Servier.

Omecamtiv Mecarbil: Clinical Development

GALACTIC-HF : GALACTIC-HF is a Phase 3 cardiovascular outcomes clinical trial of omecamtiv mecarbil which is being conducted by Amgen, in collaboration with Cytokinetics. The primary objective of this double-blind, randomized, placebo-controlled multicenter clinical trial is to determine if treatment with omecamtiv mecarbil when added to standard of care is superior to standard of care plus placebo in reducing the risk of cardiovascular death or heart failure events in patients with high risk chronic heart failure and reduced ejection fraction. GALACTIC-HF is being conducted under a Special Protocol Assessment (“SPA”) with the U.S. FDA. GALACTIC-HF is planned to enroll approximately 8,000 symptomatic chronic heart failure patients in over 900 sites in 35 countries who are either currently hospitalized for a primary reason of heart failure or have had a hospitalization or admission to an emergency room for heart failure within one year prior to screening. Patients are being randomized to either placebo or omecamtiv mecarbil with dose titration up to a maximum dose of 50 mg twice daily based on the plasma concentration of omecamtiv mecarbil after initiation of drug therapy. The primary endpoint is a composite of time to cardiovascular death or first heart failure event, which is defined as either a hospitalization for heart failure or other urgent treatment for worsening heart failure. Secondary endpoints include time to cardiovascular death; patient reported outcomes as measured by the Kansas City Cardiomyopathy Questionnaire Total Symptom Score; time to first heart failure hospitalization; and all-cause death.

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Cytokinetics and Amgen are planning a second Phase 3 trial of omecamtiv mecarbil which is intended to evaluate its potential to increase exercise performance in patients with heart failure.

Ongoing Research in Cardiac Muscle Contractility

In January 2018, we announced that, under our strategic alliance with Amgen , a next-generation cardiac muscle activator was nominated as a development candidate by the Joint Research Committee. This milestone triggered a $1 million payment from Amgen to Cytokinetics .

Skeletal Muscle Contractility Program

Our skeletal muscle contractility program is focused on the activation of the skeletal sarcomere, the basic unit of skeletal muscle contraction. The skeletal sarcomere is a highly ordered cytoskeletal structure composed of skeletal muscle myosin, actin, and a set of regulatory proteins, which include the troponins and tropomyosin. This program leverages our expertise developed in our ongoing discovery and development of cardiac sarcomere activators, including the cardiac myosin activator, omecamtiv mecarbil.

We believe that our skeletal sarcomere activators may lead to new therapeutic options for diseases and medical conditions associated with aging, muscle weakness and wasting and neuromuscular dysfunction. The clinical effects of muscle weakness and wasting, fatigue and loss of mobility can range from decreased quality of life to, in some instances, life-threatening complications. By directly improving skeletal muscle function, a small molecule activator of the skeletal sarcomere potentially could enhance functional performance and quality of life in patients suffering from diseases or medical conditions associated with skeletal muscle weakness or wasting, such as ALS, SMA, COPD or sarcopenia (general frailty associated with aging).

Reldesemtiv

Reldesemtiv is our next-generation FSTA . It is structurally distinct from tirasemtiv and 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. Reldesemtiv has demonstrated pharmacological activity in preclinical models and evidence of potentially clinically relevant pharmacodynamic effects in humans. The FDA has granted reldesemtiv orphan drug designation for the potential treatment of SMA. We have approval for use of reldesemtiv as the International Nonproprietary Name from the World Health Organization and the United States Adopted Name Council and now refer to the drug candidate previously designated as CK-2127107 as reldesemtiv.

Astellas Strategic Alliance

Our strategic alliance with Astellas to advance novel therapies for diseases and medical conditions associated with muscle impairment and weakness is governed by the Astellas Agreement. We initially exclusively licensed to Astellas rights to co-develop and potentially co-commercialize reldesemtiv and other FSTAs in non-neuromuscular indications and to develop and commercialize other novel mechanism skeletal muscle activators in all indications, subject to certain Cytokinetics’ development and commercialization rights. Subsequently, we and Astellas expanded the strategic alliance to include certain neuromuscular indications, including SMA, for reldesemtiv and other FSTAs and to advance reldesemtiv into Phase 2 clinical development, initially in SMA. In 2016, we and Astellas further expanded the strategic alliance to include the development of reldesemtiv for the potential treatment of ALS, as well as the possible development in ALS of other FSTAs previously licensed by us to Astellas, and granted Astellas an option for a global collaboration for the development and commercialization of tirasemtiv (the “Option on Tirasemtiv”).

The strategic alliance with Astellas includes a joint research program focused on the discovery of additional next-generation skeletal muscle activators, including sponsored research at Cytokinetics. This research program has been extended through 2019.

We have options to conduct early-stage development for certain agreed indications at our initial expense, subject to reimbursement if development continues under the strategic alliance; to co-promote collaboration products containing FSTAs for neuromuscular indications in the U.S., Canada and Europe; and to co-promote other collaboration products in the U.S. and Canada. Astellas will reimburse us for certain expenses associated with our co-promotion activities.

Astellas is primarily responsible for the development of reldesemtiv in ALS, but we are conducting FORTITUDE-ALS and will share in the operational responsibility for later clinical trials. Subject to specified guiding principles, decision making will be by consensus, subject to escalation and, if necessary, Astellas’ final decision making authority on the development (including regulatory affairs), manufacturing, medical affairs and commercialization of reldesemtiv and other FSTAs in ALS. We and Astellas share equally the costs of developing reldesemtiv in ALS for potential registration and marketing authorization in the U.S. and Europe, provided that (i) Astellas has agreed to solely fund Phase 2 development costs of reldesemtiv in ALS subject to a right to recoup our share of such costs plus a 100% premium by reducing future milestone and royalty payments to us and (ii) we may defer (but not eliminate) a portion of our co-funding obligation for development activities after Phase 2 for up to 18 months, subject to certain conditions. We have the right to co-fund our share of such Phase 2 development costs on a current basis, in which case there would not be a premium due to Astellas.

Based on the achievement of pre-specified criteria, we may receive over $600.0 million in milestone payments relating to the development and commercial launch of collaboration products, including up to $112.0 million (of which we have received $17.0 million) relating to early development of reldesemtiv and for later-stage development and commercial launch milestones for reldesemtiv in non-neuromuscular indications, and over $100.0 million in development and commercial launch milestones for reldesemtiv in each of SMA and other neuromuscular indications. We may also receive up to $200.0 million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products.

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If Astellas commercializes any collaboration products, we will also receive royalties on sale s of such collaboration products, including royalties ranging from the high single digits to the high teens on sales of products containing reldesemtiv. We can co-fund certain development costs for reldesemtiv and other compounds in exchange for increased milestone payments and royalties; such royalties may increase under certain scenarios to exceed twenty percent. In addition to the foregoing development, commercial launch and sales milestones, we may also receive payments for the achievement of pre-specif ied milestones relating to the joint research program.

Astellas generally has discretion to elect whether to pursue or abandon the development of reldesemtiv. Astellas may terminate our strategic alliance in whole or in part for any reason upon six months’ prior notice at any time following expiration of the strategic alliance’s research term, which will expire December 31, 2019.

Astellas’ Option on Tirasemtiv :   If Astellas were to exercise the Option on Tirasemtiv, we would grant Astellas an exclusive license to develop and commercialize tirasemtiv outside our commercialization territory of North America, Europe and other select countries under a license and collaboration agreement for tirasemtiv and each party would then be primarily responsible for the further development of tirasemtiv in its territory and have the exclusive right to commercialize tirasemtiv in its territory. Should Astellas exercise this option, we would receive an option exercise payment ranging from $25.0 million to $80.0 million and a milestone payment of $30.0 million from Astellas associated with the initiation of the open-label extension trial for tirasemtiv, VIGOR-ALS ( V entilatory I nvestigations in G lobal O pen-Label R esearch in ALS ). If Astellas were to exercise the option after the defined review period following receipt of data from VITALITY-ALS, Astellas would reimburse us for a share of any additional costs incurred after such review period. In addition, the parties will share the future development costs of tirasemtiv in North America, Europe and certain other countries (with Cytokinetics bearing 75% of such shared costs and Astellas bearing 25% of such costs), and Astellas would be solely responsible for the development costs of tirasemtiv specific to its commercialization territory. Contingent upon the successful development of tirasemtiv, we may receive from Astellas milestone payments up to $100.0 million for the initial indication and up to $50.0 million for each subsequent indication. If tirasemtiv were to be commercialized, Astellas would pay us royalties (at rates ranging from the mid-teens to twenty percent) on sales of tirasemtiv in Astellas’ territory, and we would pay Astellas royalties (at rates up to the mid-teens) on sales of tirasemtiv in our territory, in each case subject to various possible adjustments.

Reldesemtiv: Clinical Development

COPD : Astellas, in collaboration with Cytokinetics, is conducting a Phase 2 randomized, double-blind, placebo controlled, two period crossover clinical trial of reldesemtiv in patients with COPD designed to assess the effect of reldesemtiv on physical function in patients with COPD. The trial is expected to enroll approximately 40 patients in the United States and is designed to assess the effect of reldesemtiv compared to placebo on exercise tolerance. Additionally, the trial will assess the cardiopulmonary and neuromuscular effect of reldesemtiv relative to placebo and the effect of reldesemtiv on resting spirometry relative to placebo. The safety, tolerability and pharmacokinetics of reldesemtiv also will be assessed. Astellas has completed patient enrollment and we expect results from this Phase 2 clinical trial of reldesemtiv in patients with COPD in the third quarter of 2018.

Frailty : Astellas, in collaboration with Cytokinetics is conducting a Phase 1b clinical trial of reldesemtiv in elderly subjects with limited mobility. This trial is expected to enroll at least 60 elderly adults with limited mobility. Patients will be randomized to one of two treatment sequences in a 1:1 ratio to receive both reldesemtiv and placebo over two 14-day treatment periods, separated by a 14-day washout period. During treatment periods, patients will receive 500 mg of reldesemtiv or placebo twice daily, except on days 1 and 14, when they receive 500 mg of relde