Cytokinetics, Incorporated (NASDAQ:CYTK)
Piper Jaffray Healthcare Conference
December 3, 2013 9:30 am ET
Robert Blum - President, Chief Executive Officer
Charles Duncan - Piper Jaffray
So we get started. Good morning, everyone. I want to welcome you to the 25th Annual Piper Jaffray and Companies Healthcare Conference. I’m Charles Duncan. I’m a Senior Biotech Analyst and Managing Director for the firm. And it’s a pleasure to introduce, Mr. Robert Blum. This is the format that I have not been previously exposed to. So you know, let’s make this a pretty interactive, call it intermit affair. Please stop and ask questions any time you want, I will try to catch them.
I will start off by asking Robert, tell us a little bit about Cytokinetics, where did you come from, why are you here? California, I know --
Certain of you know Cytokinetics –
Where are you going?
Tonight off to Milan for the large International ALS gathering that’s going to be taking place later this week.
So many of you know Cytokinetics, we are not a young company. We have been in business since 1998. I have been involved with the company since we commenced our operations. Over 15 years, we have pioneered this area of biology that we know better than anyone else we have contributed to the seminal discoveries in translating that biology to a new pharmacology. And the company is a leader in the areas of muscle biology, muscle mechanics. We are a small molecule drug discovery and development company that has advanced first in class compounds that up to-date in particular muscle biology with the goal of producing new therapeutic modalities.
So fast forward 15 years and roughly about $500 million of invested capital both that of our investors and more importantly that of our partners and I say more importantly because more of that came from our partners. And we are now at a place where we are bringing forward through Phase II clinical trials novel mechanism compounds that have the potential to revolutionalize the way we treat certain diseases of impaired muscle contractility.
One of those is in the area of heart failure partnered with Amgen, a novel cardiac myosin activator entered clinical trials in 2005. Cytokinetics did 7 clinical trials, Phase I and Phase IIa before our partner Amgen exercising option and since then we have done several together. And our goal is to be moving this program into Phase III. The last step is an ongoing Phase II study that I can speak about here in a minute. That’s a program that has more medium to longer term consequence for shareholder value and I expect we will be in a position where we have a good lead on that program moving into Phase III next year.
More immediate, near term is a program that we don’t have partnered purposely we are developing it more independently and that’s a skeletal muscle activator for the potential treatment of ALS and the muscular diseases. First in class compound called tirasemtiv is a skeletal muscle troponin activator. It’s been studied in now 10 completed clinical trials four of which were Phase IIa studies in the setting of ALS and we embarked last year, (inaudible) to the largest Phase II study ever done in the potential treatment of ALS. This morning we announced that study called BENEFIT ALS has completed patient enrollment over 700 patients have been enrolled in that trial and we are looking forward to seeing data from that study in the first half of 2014.
So we are quite optimistic about that trial and we will be reporting later this week at the large ALS gathering on the baseline demographics and enrollment information from that study with efficacy results expected in a few months.
Third program that I will speak only briefly about is a second generation skeletal muscle activator. That’s a compound called CK-107 that’s partnered with Astellas same mechanism of action as tirasemtiv different physiochemical properties, different chemistry, different chemical class. And CK-107 is in Phase I, we have recently completed a Phase I study, we’ll be recording data from that study soon and we have initiated a second Phase I study that’s under the sponsorship of our partner, Astellas, goal is to get that into Phase II next year.
Robert, it strikes me, you mentioned the invested dollars and both from investors as well as partners. It strikes me that Cytokinetics is really a very different approach in terms of its platform. I can’t think of any other company that is focused on muscle biology. In addition, you have signed some very good partnerships. You mentioned being involved in the company for a long time. What is that that you seek in a partnership, why is it that that GSK and Amgen and several others have decided to work with you?
So, our scientists are the ones who best understand the biochemistry and the biophysics of this relatively focused area of biology, anybody who wants to be working in the area of activating muscle biology proteins would naturally want to be engaged with our folks who have spent decades not only at the company but prior to being part of the company working in this field.
There is a convergence on to this field that is coming from different directions, one of which is influenced by where people see markets evolving in the aging demographics. And other trends are pointing to where muscle is going to be an important area for therapeutic innovation. But also company’s who have been working in the areas of bone health and metabolic diseases are also finding that increasing their spill over to muscle and where there can be better approach is to activating muscle that could be complementary to a number of things that other companies are doing. So I think Cytokinetics is very purposefully well-positioned in that space.
In terms of what kinds of deals we do that differentiate our company, we are not doing deals simply for access to capital but more so as advantaging us in our corporate development. The deals we have done are larger deals they are long-term deals. The deals that afford us equal engagement in research and development and commercialization, Cytokinetics is very diligently committed to building its business and as such we preserved key economics and co-commercialization rights that go beyond the typical that you very often see.
For instance in the Amgen deal, we have the ability to not only earn quite substantial milestone payments pre-commercial, you can earn over $600 million in milestone payments, a majority of those payments being pre-commercial.
We also have the right to conduct one of the two pivotal Phase III studies and as would be at our partners expense and as we move into the commercialization arena, we have the right to turn around some of those milestone payments in order to buy up our royalty economics, if we choose not to do that and we just pocket those milestone payments, we are escalating double-digit royalty that approximates a 50% profit interest.
If we were to reinvest some of those milestone dollars in co-funding the Phase III meaning that we take some financial risk along side of our partner, we can ratchet up our royalty economics in a laddered fashion even higher. And that also forges the right to co-promote the product in North America where our sales force will be primarily responsible for the acute care institutions are partnered for the out patient setting.
And our partner would be co-funding our build of that business meaning we would get a royalty that falls more immediately to our bottom line, higher return on sales not a profit sharing where we have to incur profit. But, where we have to incur losses that could be many years before profits could be earned rather instead we get a royalty on sales from the first commercialization. And our partners responsible for the cost of sales, the cost of marketing, cost of goods and cost of clinical and medical.
So these are deals that are powerfully constructed based on failure modes where other companies, I think have to kind of be careful what you wish for in their deal terms very often having a share of profits. But, also a share of losses and where the costs associated with clinical trials, the cost associated with building a commercial business far eclipsed what might be the near term returns and that became a negative drive on the company.
So we have built our deals with a longer term view in mind and having been informed by what were lessons learned in deals that have been done in prior generations of companies.
So for the mathematicians in the room, which I’m not because I’m a biotech analyst, it seems like that that set of payments if they came, all came its about a 3x on the current market cap that’s the one of the products?
So we have got two programs that are partnered where in total we can earn over $1 billion in milestone payments. That’s a number that I don’t tend to focus to as much as what could be pre-commercial and the pre-commercial milestone payments eclipse $500 million.
So prior to seeing any potential approvals for marketing and selling of drug, we can still earn up towards $500 million or more. And our market cap today is hovering around $200 million.
So before we do a deep dive in the molecular biology of what you are doing that we are going to do that. Let me ask you one other strategic question with regard to partnering. It seems that you partner Amgen; there has been a lot of noise around that partnership. Few years ago when you signed it, people thought that Amgen was going to be slow and opaque and folks lost focus on that. And then recently people started wondering about Amgen’s commitment to the cardiovascular space. What do you see in the partner Amgen in terms of what they have been doing in the last couple of years or last year really in terms they really try and capture a growth multiple and how do you think that impacts your discussions with them?
So to answer the question both as it relates to directly to omecamtiv but also as to why I think the context for omecamtiv in terms of what else Amgen is doing also leads on the importance of cardiovascular is to Amgen. So under the new administration of the Amgen, they made a number of changes. There is a new CEO. There is a new head of R&D. What’s happened since they took over their roles would suggest that programs that had originated under the direction of Roger Perlmutter, Head of R&D and Kevin Sharer are now getting as evidenced by a number of public announcements of (dialed-up) resource commitment.
So clearly the PCSK9 program at Amgen is a very high priority and as that’s moved into and through Phase III you are seeing how that’s transforming the company in many key ways and there is a fellow there who runs the commercial business Tony Hooper, who similarly as a very high profile commitment to building an international business around their cardiovascular franchise.
Omecamtiv is one of the products now in that portfolio and the others are more advanced and in some ways we are drafting half of this successes and commitments that they are making. They are quite substantially dialing up their human resources around the area. There are quite a number of new additions and others planned for building a business around cardiology products. Firstly to serve PCSK9 and their competitive battle there but also as together with Amgen and Servier, we now have – in the Amgen portfolio ivabradine which is a drug that is marketed in Europe but now Amgen as to develop and market in the United States.
In order to get rights to ivabradine from Servier, Amgen with Cytokinetics consent gave Servier commercial rights to omecamtiv. So Servier doesn’t have rights to develop omecamtiv mecarbil in Europe but rather instead Servier will be the commercial partner for Amgen and Cytokinetics in Europe. We could very nicely benefit from their expertise already being successful commercially in Europe understanding the regulatory and reimbursement environment for omecamtiv and heart failure in Europe.
So seeing Amgen do that deal should provide further evidence of their commitment to the heart failure space and cardiology which is benefiting omecamtiv especially right now as we are moving from Phase II to Phase III.
So that makes sense for me. Before we dive into some of the assets under development, are there any questions on some of the partnerships (inaudible). Oh, good.
So how is it going with COSMIC, the cardiovascular program the chronic heart failure? How is it going?
So COSMIC study –
Enrollment is now getting geared up again.
So COSMIC has two phases, a dose escalation phase which is now completed and a dose expansion phase which is getting ready to start. Just to back up a bit, we are developing both an IV form of omecamtiv mecarbil and an oral form of omecamtiv mecarbil. And the goal is to approach FDA and EMA with a strategy for coupling the IV and the oral for registration program that would involve both forms as a regimen for the acute care and chronic treatment of heart failure.
Earlier this year, we announced data relating to the IV form in a trial called ATOMIC that was presented at the European Society of Cardiology meetings in early September those data support movement of omecamtiv mecarbil into Phase III. But, however, we are now finishing up with the oral study called COSMIC. So the first phase of COSMIC is escalation phase out of studying three oral forms although omecamtiv versus placebo each for one week initially at 25 b.i.d and then at 50 b.i.d. Between cohort one and cohort two 25 b.i.d and 50 b.i.d, we selected one oral form to advance into the expansion phase. We announced that a few weeks ago.
So we are now gearing up to initiate enrollment in the expansion phase where that one oral form of omecamtiv will be studied at two different dose levels 25 b.i.d and 50 b.i.d versus placebo for a longer period of time. That will be done in about 125 centers around the world and we are in the midst of putting the finishing touches on a protocol amendment that will enable that expansion phase to get under way and why is that important? It’s important because as you will see when this protocol amendment is made public, the design of this protocol amendment enables us a better transitioning into Phase III. The strategy we are employing in this expansion Phase is intended to give us a leg-up on movement into Phase III. And it I think will underscore our enthusiasm and commitment to proceed to Phase III –
As well Amgen?
As well as Amgen.
Which is not a small sector, right?
Yes. I mean, wouldn’t be making this protocol amendment, if we didn’t believe this will equip us to be advantaged as we go into Phase III.
Okay. All right. So, you mentioned ATOMIC results which came out in September couple of different venues. Did (stock) didn’t necessarily respond positively to that and it’s a complex study, but what do you think we are in the results that perhaps or missed by investors or what do you take away from those results that encourages you to continue to invest in the program?
So what was the purpose of the Phase II study? The purpose was to look for dose depending effects that would read on movement of the drug from Phase II to Phase III and validate the therapeutic hypotheses for this as a differentiated drug to improve systolic performance.
So what have we seen? We saw a dose depending effects on dyspnea relief in an acutely ill hospitalized heart failure population those effects were border lines statistical significance we have nominal statistical significance in one of the perspective, we need to find analysis even as this study was quite admittedly underpowered and never was designed with that in mind we almost hit it. But, we didn’t. But, we did see dose depending effects which give us the confidence that the drug is working with higher exposures working better.
Moreover, we saw that the drug had effects in reducing death and worsening heart failure in a dose dependent fashion. We saw that the drug was associated with reductions in ventricular tachyarrhythmias in a dose dependent fashion. We saw that the drug was associated with increased systolic ejection time in a dose dependent fashion. This is the signature of pharmcodynamic hallmark of this drug. And we saw that the drug unlike other (anisotropies) is associated with statistically significant dose dependent reductions in heart rate.
So this suggest that what we view to be the mechanistic hypothesis for cardiac myosin activation was borne out by these data from this trial in this severely ill population of symptomatic acute heart failure patients. These are probably the very sickest patients we will ever see with this drug and the drug was well-tolerated and had dose dependent effects that we think support progression to Phase III.
The fact that we were measuring this new relief is interesting but more compelling for what maybe – what we are interested in for Phase III is what does this drug do for death and hospital readmission when administered over a longer period of time. So again, our goal is to start patients with the intravenous form of the drug in the hospital stabilize them maybe render them less symptomatic but where the real action and unmet need in this population is what happens to them upon discharge.
Upon discharge, these patients are at an unacceptably high-risk of death and readmission which as quite significant clinical and economic implications such that if you can keep patients alive and out of a hospital longer following a diagnosis of acute heart failure you got a drug that could be a welcome addition clinically and pharmco-economically.
Welcome addition. I would say it’s a paradigm shift (inaudible).
Yes. That’s where this drug I think as its greatest potential and that’s where we’re coupling the IV and the oral together in Phase III is in keeping with that strategy.
Okay. We only have a few minutes. I wanted to ask before we go and talk about tirasemtiv, if there are any questions on omecamtiv. Okay. So as I said, only a couple of minutes, tirasemtiv ALS very difficult disease to treat one drug out there that’s been approved, another drug that was a derivative of that recently failed. What keeps the up above ALS program, anything or how would you probabilize the potential for tirasemtiv or define -- maybe define success in this Phase II?
Many of us in this room have been around this business for a long time and know that historically everything that has been attempted in ALS has failed. And I think there is good reason for that. Every drug that’s ever been attempted to demonstrate a therapeutic effect in the potential treatment of ALS has had a therapeutic hypothesis even some times not a particularly solid one. But, where it was directed towards neuronal cell death what causes these neurons to die in this terribly ruthless disease.
And we know very little about the underlying mechanism that associates with neuronal cell death. We know very little about the etiology and the pathophysiology of ALS is probably not even one disease it’s a constellation of many different diseases lumped under one umbrella category.
Regardless of what causes ALS, what causes neurons to die, we know that the disease must manifest itself in terms of impaired function. And ours is the first drug ever to be attempted study in clinical trials in ALS that has a (inaudible) therapeutic hypothesis validated by a pharmcodynamic evidence that supports amplification of muscle function. So ours is the first approach directed to the muscle. And we have demonstrated preclinically, ex vivo, in vivo, in healthy volunteers in Phase IIa ALS patients that the drug is having a dose depending effect to amplify muscle force, power and time to muscle fatigue.
In every single study that we have done, we have seen dose dependent precise pharmcodynamic effects that suggest that this drug is in fact amplifying muscle function. So it stands to reason that if it’s doing it in healthy volunteers, if its doing in ALS patients in an exposure directed way in shorter durations studies that it makes sense to evaluate whether those effects are doable over a longer period of time.
So we haven’t come at this quickly nobody is going to point to this program as having moved too rapidly into Phase IIb. We did four Phase IIa studies in ALS patients all placebo controlled cross over studies and where we did see dose dependent effects on muscle function. So we made the decision about a year ago to do the Phase IIb study, targeting the enrollment of 680 patients, this morning we announced that we have enrolled over 700 patients in the BENEFIT ALS study and we are evaluating drug versus placebo over 12 weeks. The goal is to see whether the drug is having effect at 12 weeks versus placebo.
There are two ways to win with this study, one is that we could demonstrate an improvement versus baseline as we have seen in Phase IIa that’s perhaps the grand slam scenario and we are not banking on that. More conservatively we powered this study to demonstrate a lesser decline at 12 weeks and that’s also a victory if we were to achieve that that’s never been done before. And we have 80% power to detect a difference of one point in the ALSFRS at 12 weeks and we should see those results in the first half of 2014.
Oh, very good, Robert. Unfortunately, we are out of time. With those few more patients (inaudible) good luck with that. Thank you for sharing the Cytokinetics story with us. And thank you to everyone for your interest in our conference. Thank you.
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