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Executives

Robert Blum - President & Chief Executive Officer

Analysts

Josh Schimmer -Lazard Capital Markets

Cytokinetics, Inc. (CYTK) Lazard Capital Markets Healthcare Conference November 13, 2012 8:00 AM ET

Josh Schimmer -Lazard Capital Markets

Okay. I think, we're going to get started. Good morning. I am Josh Schimmer from Lazard Capital Markets' Biotech team. Pleasure to introduce to start off our conference, so first company is Cytokinetics. It's a biotech company developing drugs that target muscle contractility. And, here to present is, Robert Blum, President and Chief Executive Officer. We also have Sharon Barbari, the Chief Financial Officer.

So, Robert, thank you for joining us.

Robert Blum

Thank you, Josh. Thank you to Lazard for welcoming us back to the conference. We are very pleased to be here and providing this update. I'll be making some forward looking statements. I'll refer you to our SEC filings for caveats relating those statements. And, of course, these forward-looking statements, we recognize that they carry certain risks associated with it and they are explained on this slide.

Cytokinetics, a view from above, we are focused as Josh has said to muscle contractility, in particular the mechanics of how muscles perform. We have advanced portfolio of leading first-in-class, best-in-class small molecule activators of cardiac and skeletal muscle.

One is advancing forward, partnered with Amgen in the potential treatment of heart failure. I'll provide updates to program here today. And, another is undergoing a Phase IIb study, currently in an unpartnered program towards disease indication of ALS, where we have orphan and fast-track designations.

This is a picture of the sarcomere. This is the reconstituted, multi-protein complex that drives muscle contractility. The sarcomere is the fundamental unit of muscle contractility and circled on this graphic are those molecular targets that are the targets of our drug mechanisms that cardiac program is directed to cardiac myosin. It's an engine that drives cardiac muscle mechanics and contractility. Omecamtiv is a small molecule activator of cardiac myosin.

Tirasemtiv is an activator of fast-twitch skeletal troponin. These are the protein components that allow for increased muscle force as I'll now elaborate in each program.

The ALS program is one that came subsequent to the cardiac program, but it's advancing very rapidly now in a Phase IIb study that has registration status implications. We announced a few weeks ago that we opened to enrollment this trial. ALS as you may know is a truly grievous illness. ALS afflicts above 25,000 to 30,000 people in the United States in terms of its prevalence.

But, where the mortality associated with this disease is quite striking ALS patients regrettably have only about three to four years often times following a diagnosis and with about 5,000 to 8,000 patients newly diagnosed each year. One can expect those patients will have about three to four years subsequent to that diagnosis and our goal with tirasemtiv is to substantially enhance the activities of daily living and functional status for those patients.

We've done a very thorough job of characterizing safety and tolerability, potential drug, drug interactions, pharmacokinetics and pharmacodynamics of tirasemtiv, firstly in healthy subjects and more recently in ALS patients and also in other indications. We have announced all of these data at prior meetings, and what we've seen like we have observed pre-clinically is that tirasemtiv in activating troponin is enhancing muscle force and power and endurance. And in ALS patients, that's translated into very encouraging pharmacodynamic effects in three completed Phase IIa clinical trials.

The first one in Evidence of Effect study, CY 4021, demonstrated that patients on the drug compared to those same patients when they receive placebo, so this was a crossover design study. Patients were feeling better and also seeing enhancements in pulmonary function and other measures of muscle strength.

We follow that study with two other Phase IIa trials, one of two-week duration and one of three weeks duration to optimize the dosing schedule and to understand issues of safety and regimen. All of those studies are complete now. The two and three-week studies were presented at the AAN meetings earlier this year and demonstrated for really the first time that there is an opportunity with this mechanism of action to actually help these patients improve their functional status as we saw some trends towards increases in ALSFRS, the functional rating scale that is the pivotal endpoint for clinical trials in ALS.

So, with that as a backdrop, we raised money in June of this year in order to manufacture drug to proceed to a Phase IIb study. That Phase IIb study has been formed by discussions with each of FDA and EMA, and it is now open to enrollment. That study is a 400-patient trial that is being conducted in the U.S. and Canada and Europe and will be evaluating tirasemtiv dosed twice daily versus placebo for duration of three months treatment. And at the end of three months, the primary efficacy analysis will be a measurement of the ALSFRS and will be in particular looking at the change from base line.

The ALSFRS as depicted in this graphic is a 12-domain patient reported outcome tool that measures everything from fine motor skills to speech and swallowing, handwriting and pulmonary function. And in prior studies, we saw across all of these domains signs that tirasemtiv could even increase the ALSFRS albeit as would be deemed a very successful outcome, a change in the rate of decline would also we believe be approvable.

So, dosing was initiated in this study and we are looking forward to a rapid enrollment from this trial that we believe would allow for data to be had in 2013. This is psychosomatic describes how the study is being conducted. There is a open label tirasemtiv lead in all patients will get tirasemtiv for the first week then be randomized to drug or placebo and receive or placebo for the next 12 weeks with multiple visits in between where we'll be measuring ALSFRS as well as other secondary endpoints.

These are some of the data from the prior Phase IIa experience, where as I indicated there is a certain encouraging signs of dose related effects on the ALSFRS. And, again, I'll reinforce, if we saw in this trial a statistically significant change in the rate of decline of ALSFRS, that would be deemed a significant positive. We are actually seeing from some of these earlier studies potential for increases in ALSFRS, which would really be a homerun.

We also had seen evidence of effect in terms of pulmonary function and here you see some of the data from maximum voluntary ventilation at day 15 demonstrating that tirasemtiv is increasing the potential for increased pulmonary endurance. So, that's our ALS program and tirasemtiv. I'll now shift gears and discuss omecamtiv mecarbil.

Omecamtiv mecarbil is our cardiac myosin activator for the potential treatment of heart failure. Here we are addressing what might be the holy grail of cardio vascular disease in the pharmaceutical business, especially recognizing the aging demographics. Heart failure is the single largest discharged diagnosis amongst Medicare patients is responsible for more hospitalizations than anything else and we have in the United States approximately 5 million patients who are walking around with a diagnosis of chronic heart failure.

And, absent any new drugs in quite some time, these patients have a poor prognosis. The levels of morbidity and mortality at 30 days and at six months, following the discharge and a diagnosis of acute heart failure are ones that require new treatment regimens like we are developing in omecamtiv mecarbil. There's about 30% mortality risk in a 180 days and another 30% to 40% readmission rate, so we can do much better with these patients as we hope they'd be the case with omecamtiv mecarbil.

Like tirasemtiv, we have conducted here as depicted a large number of Phase I and Phase IIa studies. Seven studies conducted by Cytokinetics, one additional one recently completed by Cytokinetics together in collaboration with Amgen, and we are now understanding quite well the safety and dosing tolerability and the pharmacokinetics and pharmacodynamics, and here we have the benefit of echocardiographic evidence, which is quite predictive of what maybe clinical benefit to follow and we've seen a striking unique signature for this drug mechanism in heart failure patients.

This drug leads to an increased duration of systele, which is contractile phase of cardiac contractility. And, with increased systolic ejection time, we are seeing increased stroke volume and at the same time, the heart rate is going down and blood pressure is going down. This is suggestive that the heart has established a more efficient set point for performance.

As I mentioned, this program is partnered with Amgen. They paid $75 million in 2006 to purchase an option that they exercised in 2009 by paying an additional $50 million, and since then we have gone forward into a Phase IIb program and we are eligible to earn up to $600 million in milestone payments. Amgen is fully responsible for the cost of this program, 100% of the cost are born by Amgen. We can earn up to $600 million in milestone payments for majority of those payments payable prior to commercialization. So, we are doing eligible for what maybe a substantial sum of milestone payments over the next several years.

As this program moves into Phase III, we have an option ourselves to co-fund Phase III in fixed dollar increments. If we don't do that, we earn an escalated royalty on increasing sales with that royalty approximates about 50% profits interest. If we do exercise our option and co-fund those Phase III studies, our royalty can climb even higher and that affords us co-promotion rights. Those co-promotion rights are on a basis of reimbursement of our sales force costs by Amgen, so the return on sales would be very attractive in that scenario.

So, this program is advancing under Amgen sponsorship. And depicted here, we have now completed enrollment in the second of three cohorts in an ongoing IV study called ATOMIC-AHF. This is a study of 600 acutely ill hospitalized heart failure patients. Later this quarter, we expect a decision from the DMC regarding the potential progression to the third and final cohort, which if we get that green light, should begin enrolling in this fourth quarter to allow for that study to conclude we hope in the first half of 2013 and data we would expect sometime in mid-2013.

We also believe that we'll be proceeding now to a Phase IIb study of the oral forms of omecamtiv mecarbil building on a completed Phase I study earlier this year, and therefore we could also expect that study to be enrolling patients next year our goal to be moving towards a Phase III readiness decision with both, an IV and oral form of omecamtiv mecarbil next year.

This is the design of the ATOMIC-AHF study I referenced a moment ago. In here, you can see it's a sequential dose escalation multi-cohort trial. 200 patients in each cohort, each cohort 100 patients on drug, 100 on placebo getting 48 hours of treatment, primary efficacy analysis is dyspnea, and we will be looking at dyspnea at 48 hours and at other time points.

This study is primarily a safety tolerability and PK study, but it does have a primary efficacy analysis as long as you are enrolling 600 patients you should aim for an efficacy end point that could ultimately make its way in to your labeled indication, but we and Amgen are looking at this together primarily to see if these sequential cohorts targeting increasing plasma concentrations of omecamtiv mecarbil are well tolerated in acutely ill heart failure patients and we'll know that answer next year.

Ultimately our goal with this program and Amgen's goal with this program is to develop the IV and the oral form of omecamtiv, so that it can be together used as a regimen starting a heart failure patient in the hospital on the IV form of the drug discharging them on the oral and ultimately saying we hope expected benefit in terms of reduced debt and readmission which as I mentioned before is unacceptably high in heart failure patients, so that would be our registration strategy to allow for the IV and the oral forms of the drug to be approvable we hope together.

I'll end this presentation with some more of a corporate look.

You can see how the heart failure and the ALS programs fit together, but what may not already be obvious is that these mechanisms of action translate well beyond those two indications. There is no reason why tirasemtiv could produce increases in muscle force and power and endurance in ALS patients, where that wouldn't also be true we believe in a large number of other orphan and rare neuromuscular diseases as well as other non-neuromuscular diseases that common denominator loss of muscle mass and impaired muscle function such as occurs with heart failure patients who get cachexia, or aging patients who have sarcopenia and frailty.

So, our belief is that this mechanism of action can translate to a franchise and hence we are planning to also bring forward a second compound, one that could be developed for orphan and rare diseases, the other for the primary care indications and that second compound, which we refer to is CK 107 should be the subject of an IND filing, also this quarter.

Here are our financials. As Sharon shared them with the investor community in our Q3 earnings call a few weeks ago, you can see based on our having raised $60 million in June of this year that we have on our balance sheet now over $80 million in cash, cash equivalents and short-term investments, which represents over 20 months of forward cash burn given our guidance. The guidance that I'll share with you in a moment, this is the spending in the third quarter. You can see it's primarily weighted towards the skeletal program and reflected the increased investment in manufacturing and other clinical R&D costs associated with readiness for the benefit ALS trial now enrolling.

This is the guidance I mentioned. This guidance to be clear, reflects those committed revenues and is not inclusive of what maybe other potential revenues in the way of milestones or other deals and we are moving aggressively towards a potential in our ALS program relating to tirasemtiv. So, we have the potential for other revenues and other cash burn coverage and sponsorship as may occur moving into 2013.

These are the milestones for the company. We have outlined these all year long and we have ticked off most of them now. We still have others later this quarter we expect. We expect to file an IND as I mentioned for CK 107, we expect to proceed from cohort 2 to cohort 3 with the ATOMIC-AHF study and we also look forward to myasthenia gravis data of Phase IIa study of tirasemtiv in yet another disease population we are also looking forward to that data in this calendar year.

So, with that, I'll end the presentation and I gather we have time for Q&A, and Josh, you may want to lead us off.

Question-and-Answer Session

Josh Schimmer -Lazard Capital Markets

(Inaudible).

Robert Blum

So, the same criteria apply. The criteria are primarily ones relating to safety and tolerability. There is a DMC that meets on a periodic basis. And with each cohort also closing, they meet and they review the data looking principally at the AEs to see if there is an unweighted balance towards omecamtiv versus placebo. And, as that was not the case, they gave us the green light to proceed to cohort 2, and they will do that again as they look at cohort 2 data for might be the proceeding to cohort 3.

Larry?

Unidentified Analyst

(Inaudible).

Robert Blum

So, Larry's question relates to ALSFRS and what's known historically about that measure. And the answer is, this is an endpoint that has been very well characterized over about 20 years in clinical trials.

On our website, we have a poster that we presented about a year ago that looks historically at that instrument and what is known about the ALSFRS is that it very predictably declines about 0.92 points per month across a population of ALS patients, so approximately 1 point per month.

Some patients are faster progressers, some are slower like one tends to decline with that instrument in a consistent fashion and across a population about 1 point per month, so we would expect in a three-month study that those patients receiving the standard of care placebo will be declining about 2.7 points and we have powered based on that assumption. Yes.

Unidentified Analyst

(Inaudible).

Robert Blum

Yes. So, Larry's question relates to the inclusion criteria for the benefit ALS study and particular around lumbar. The inclusion criteria detailed on www.clinicaltrials.gov, but what I can say is, this is a study that has reasonably broader inclusion criteria to allow for a larger population of patients to participate.

The drug mechanism of action may allow an amplification of muscle response to neuronal input whether that is early onset or more advanced, so we are not providing for the inclusion of patients at the very end of their disease progression. There needs to be some residual muscle response that we would expect we could show amplification, but where those patients who typically come into these studies will have an ALSFRS of about 36 or approximately in the mid-30s. That suggest that they are about a year into their disease progression, the maximums ALSFRS score is 48.

So, typically by the time a patients gets a definitive diagnosis, they have gone through about a year of work up and those are patients that very often then would participate in clinical trials, but patients can participate in our study even after they have had symptom for two to three-year, so we'd expect that patients who have compromised lumbar involvements would still be eligible to participate.

Unidentified Analyst

So, in the first Phase IIa study that is true. CY-4021, that was a single-dose placebo-controlled crossover and we saw those effects even after a single dose. As we conducted then two and three week evaluations, we saw effects on those assessments and others including the ALSFRS, but your question, the most consistent effect we've seen across three Phase IIa studies is an effect on MVV. MVV, maximum [ventilatory] volume is a measure of pulmonary endurance. And one measures MVV by patients breathing in and out a spirometer and you are measuring liters per minute in air flow and it could be a quite fatiguing assessment and we've seen across all three studies increases in MVV, which seems quite logical given that the [diaphragm] muscle is primarily fast-twitch skeletal muscle, and by amplifying and activating skeletal muscle, we believe we are having effect on pulmonary function. Four of the 12 domains in the ALSFRS are ones that measure pulmonary function, so we believe that may ultimately drive the ALSFRS scores.

Josh Schimmer -Lazard Capital Markets

Thank you very much for coming, [Rob].

Robert Blum

Thank you so much for having us.

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