Cytokinetics May/June Presentations Suggest High Likelihood Of Success

Summary

CEO states Amgen's decision on P3 for Omecamtiv Mecarbil anticipated in "weeks to months."

Excellent prospect for success in current Tirasemtiv P3 which is proceeding on schedule.

Potential milestones from Amgen and Astellas would fund company through approximately 2018.

Cytokinetics (NASDAQ:CYTK) is developing first-in-class therapies that aim to improve muscle function. It has 3 drugs in late stage clinical trials, as well as a robust development program that is expected to produce new drug candidates in the coming years. Cytokinetics website features cogently presented information on all three programs, including slide decks from and webcasts of the presentations that are the subject of this article. Additionally, Stock Doctor has covered Cytokinetics' development programs in depth on Seeking Alpha, including correctly predicting the positive Omecamtiv Mecarbil Phase 2 trial results. Even though he most recently published an article on Cytokinetics in July of last year, his articles provide an excellent overview.

I believe reviewing the Seeking Alpha articles on Cytokinetics and then listening to the recent company webcasts including the current slides can provide interested investors an excellent overview of the strategy behind and roll out of Cytokinetics initiatives.

This article is not intended to give a broad overview of the company, but rather highlight comments made by Cytokinetics CEO Robert Blum at two recent presentations: the Annual Shareholder Meeting on May 18th and the JMP Securities Conference on June 21st.

The most immediate catalyst for Cytokinetics relates to its Heart Failure program where it has partnered with Amgen (NASDAQ:AMGN) in development of Omecamtiv Mecarbil. It is widely expected based on excellent Phase 2 results that were accepted on very short notice for a late breaking presentation at last November's AHA Scientific Sessions that Amgen will soon move the drug into Phase 3. At the JMP Securities Presentation on Tuesday June 21st, JMP analyst Jason Butler began the Q&A by asking CEO Robert Blum that given the positive public comments and excitement expressed of late by top Amgen management about Omecamtiv Mecarbil, "What are Amgen waiting for?" Of course Mr. Blum did not attempt to answer for Amgen, but he did note several things which I believe are salient for investors:

First, he feels the discussions Cytokinetics and Amgen have had with the FDA, EMA, and Health Canada regarding a design for the potential trial have been constructive.

Second, the design under consideration calls for thousands of sick patients to be enrolled. These would not be acutely ill symptomatic patients, but a mix of both outpatients and hospitalized patients preparing for discharge who are at high risk of death or re-admission. The trial will be statistically powered to "demonstrate unequivocally" the effects on the death and re-admission rates.

Third, Servier has the right to co-fund the trial with Amgen in exchange for European Distribution Rights.

And fourth, the cost of the trial would run hundreds of millions of dollars.

Taken together, it's clear the complexity and cost of the trial and Servier's potential involvement necessitate a lot of ducks being lined up before it can be announced. But given the encouraging Phase 2 results which Amgen executives have been citing enthusiastically since December, I believe there is little doubt that Omecamtiv Mecarbil is going to Phase 3. As to the timing of the announcement of a decision, at JMP on Tuesday Mr. Blum used new language saying he expected an announcement to be made in "weeks to months." Previously he had been saying a decision was anticipated "in the next several months."

The market for Heart Failure drugs is one of the largest, making Omecamtiv Mecarbil a potential blockbuster drug. Mr. Blum noted at JMP that if Omecamtiv Mecarbil succeeds in reducing death and re-admission rates through improving cardiac function, it could become essential to the standard of care because it would add to treatment without phasing out other drugs.

With patent protection until 2032 (this includes an anticipated 5 year extension for time in trials mentioned by Mr. Blum at both the Annual Meeting and at JMP) and a trial in Heart Failure costing hundreds of millions of dollars soon to be funded by its partner Amgen, I think the Omecamtiv Mecarbil opportunity on its own has a NPV well in excess of Cytokinetics Market Cap.

Cytokinetics also owns all the rights to Tirasemtiv, which is currently in a Phase 3 Trial for ALS. The trial is proceeding on schedule and it was announced Tuesday that it's anticipated that the first patients in the trial will be moved to an open label extension study late in Q3.

The previous trial, BENEFIT-ALS showed a statistically significant slowing in the rate of decline of Slow Vital Capacity in ALS patients. Mr. Blum confirmed in answering a question at the Annual Meeting on May 18th that he believes that if the rate of decline in Slow Vital Capacity in the current trial, VITALITY-ALS, continues to diverge from the rate seen in untreated patients (well documented over previous ALS trials) that this will add significantly to the totality of evidence that will be the basis for the FDA decision. Of note to investors, Vitality-ALS is designed to confirm at 24 weeks an equivalent slowing in decline of Slow Vital Capacity seen in BENEFIT-ALS at 12 weeks. Based on the statistically significant data from BENEFIT-ALS, it seems probable that patients will continue to gain benefit between weeks 12 and 24. And though it's believed some secondary endpoints will need to show improvement to gain approval, such a significant slowing in the rate of decline of Slow Vital Capacity over 24 weeks is likely to correlate with improvements in some of the secondary endpoints.

VITALITY-ALS is designed conservatively vis-a-vis the improvement in Slow Vital Capacity already seen in BENEFIT-ALS, and Tirasemtiv succeeding in buying back months of Slow Vital Capacity for patients afflicted with this dreaded disease would be a compelling result. As most people are aware from the Ice Bucket Challenge (Cytokinetics received a $1.5 million grant from the ALS Association of the funds raised to help fund VITALITY-ALS) the ALS community is passionate in its advocacy for its patients and a drug that slows the decline in SVC for patients in a meaningful way will receive a great deal of attention. There is a vast unmet need, with no effective therapy currently available.

Furthermore, as Mr. Blum noted at JMP, ALS is one of just two indications that automatically qualify patients for Medicare. There is a single payer system in the United States with regards to ALS. Cytokinetics has retained full rights to Tirasemtiv and believes if it gains approval it can handle distribution in house for the US market of approximately 25,000-30,000 patients (ALS is difficult to diagnose, and takes over a year to diagnose on average, making it problematic to estimate the exact number of cases at any one time). In regards to this effort, Mr. Blum believes the treatment of domestic ALS patients being largely concentrated in relatively few Centers for Excellence will help Cytokinetics to capably handle distribution should Tirasemtiv be approved. With Europe having about as many ALS patients as the USA, the potential market for Tirasemtiv is significant- if successful, I would not be surprised to see 50% or more of the US and European ALS patients on Tirasemtiv within 5 years of approval.

The third drug in Clinical Trials is CK-107, which is partnered with Astellas (OTCPK:ALPMY). It currently is in a Phase 2 trial for type II, III, or IV SMA patients who are at least 12 years old. There is a tremendous unmet need for these patients as there is no treatment available for adolescents and adults. Additionally, Astellas is funding a Phase 2 COPD trial to begin later this year. Mr. Blum also noted at JMP that a third Phase 2 trial in an as yet unnamed indication is expected in the near term, and that plans to advance a new compound into the clinic under this partnership are in the works. The collaboration with Astellas represents a third avenue to commercialization for Cytokinetics, and one which is being pursued intently by both parties. In both the SMA and COPD trials, improving time to muscle fatigue is key to the hypotheses of the trials, and this is a direction Cytokinetics is clearly looking to pursue very broadly should it successfully commercialize a drug. When asked a wide open question at the Annual Meeting about potential post-commercialization development plans Mr. Blum indicated an interest in applications for healthy aging, and he suggested they may gain insight in this regard from what they learn from the upcoming COPD trial in which exercise tolerance will be studied.

Cytokinetics has three promising late stage candidates and is continuing drug development through its partnerships with Amgen and Astellas. Financially, it had over $108 million in cash at the end of March, which Mr. Blum stated at JMP represents about 18-24 months of burn, and he added that with the milestones they may receive this year from Amgen and Astellas it is their hope to end 2016 with two years of cash runway.

Small biotechs are currently in a bear market, and I believe this is particularly true of those that have been around a long time without commercializing a drug. Cytokinetics is a pioneer in its field and has outstanding partners in Amgen and Astellas. The resources are in place to see its late stage candidates through the approval process, and commercialization in any indication would result in a share price multiples of its current level. Because of the immense size of the Heart Failure market, should Omecamtiv Mecarbil succeed, the resulting share price would be many times the current level. There is always risk in investing in small biotechs, but I believe Cytokinetics, with 3 promising late stage candidates, presents a rare and attractive risk/reward profile for the risk tolerant investor.

Disclosure: I am/we are long CYTK.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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