Cytokinetics, Incorporated (CYTK) Q3 2012 Earnings Report, Transcript and Summary

Good afternoon and welcome, ladies and gentlemen, to the Cytokinetics Third Quarter 2012 Conference Call. At this time, I would like to inform you that this call is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the call for questions and answers after the presentation. I will now turn the call over to Sharon Barbari, Cytokinetics Executive Vice President of Finance and CFO. Please go ahead.

Good afternoon, and thank you for joining the Cytokinetics’ senior management team on this conference call today. Also present during this call are Robert Blum, our President and Chief Executive Officer; Dr. Andrew Wolff, Senior Vice President of Clinical Research and Development and Chief Medical Officer; and Dr. Fady Malik, Senior Vice President of Research and Early Development. Following the forward-looking statement disclaimer, Robert will provide an overview of the past quarter, highlighting advancements in our clinical development program. Andy will then detail recent progress in our clinical development of tirasemtiv, formerly known as CK-2017357, for the potential treatment of ALS, and Fady will update you regarding recent progress in our clinical development of omecamtiv mecarbil for the potential treatment of heart failure. I will then provide a financial overview and comments with respect to our cash position and details on our investments in research and development activities. Robert will then conclude the call with additional comments regarding recent activities and expected next steps for our development programs. We will also update projected company milestones for the remainder of 2012. We will then open the call for questions and answers. The following discussion, including our responses to questions, contain statements that constitute forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to our financial guidance; to the initiation, enrollment, design, conduct, and results of clinical trials; and to other research and development activities. Our actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in our SEC filings, including our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. These forward-looking statements speak only as of today. You should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Now, I’ll turn the call over to Robert.

Thank you, Sharon. During the third quarter, we made important advancements, capitalizing on the positive outcomes we achieved last quarter in both of our clinical-stage development programs. Since our last earnings call, we have made significant progress with our clinical development program for tirasemtiv, our drug candidate for the potential treatment of ALS. Relieving patients suffering caused by this devastating disease is of critical importance for us at Cytokinetics. ALS just may be the most grievous illness I’ve encountered during my 30 years in this business. Anyone who knows someone with ALS understands that these patients ultimately can become prisoners in their own bodies. They suffer progressive neurological impairment over time, even as their cognitive abilities remain intact. They lose their muscle function and coordination, and ultimately may die of respiratory failure or closely related complications such as pneumonia. Tirasemtiv may afford these patients an opportunity to improve or preserve key functional status that correlates with activities of daily living. We are fully committed to understanding whether the increases in skeletal muscle force and endurance that we have observed in smaller trials of shorter duration may now translate into clinically meaningful and durable effects in a larger and longer trial. As evidence of our commitment to discovering and developing an effective treatment for ALS to benefit both patients and their caregivers, yesterday we announced that our Phase IIb clinical trial evaluating tirasemtiv in patients with ALS is now open to enrollment. Previously known as CY 4026, this trial now has a name, BENEFIT-ALS, which stands for Blinded Evaluation of Neuromuscular Affects and Functional Improvement with Tirasemtiv in ALS. In September, we hosted an investigators’ meeting for BENEFIT-ALS. We had over 180 people there, and 53 of our 55 North American sites were represented. Andy will elaborate on this meeting and the BENEFIT-ALS trial in a moment. However, in the meantime, I will just say that the enthusiasm of the clinical investigators and other study personnel in attendance was extraordinary. We left this meeting feeling optimistic about how quickly we may enroll BENEFIT-ALS, which is expected to enroll 400 patients with ALS from over 70 sites throughout the U.S., Canada, and Europe. In addition to our recent progress with tirasemtiv, the clinical trials program for omecamtiv mecarbil also significantly advanced to a key milestone. I am pleased to report that in the most recent quarter, patient enrollment was completed in the second cohort of the ongoing Phase IIb ATOMIC-AHF clinical trial. This second cohort enrolled substantially faster than the first cohort, underscoring increasing enthusiasm for omecamtiv mecarbil in the approximately 140 centers enrolling patients in this trial. Alongside that progress, Cytokinetics and Amgen have been busily preparing to launch another Phase II clinical trial, which is designed to evaluate several modified-release oral formulations of omecamtiv mecarbil in patients with heart failure and left ventricular systolic dysfunction. We are pleased to share this encouraging progress with our shareholders and remain optimistic about the potential for continued progress to follow. With that introduction, I’ll now turn the call over to Andy to elaborate on the progress that we recently achieved in our tirasemtiv program. Later in the call, I’ll return to provide additional perspectives relating to our future plans.

Thank you, Robert. As Robert mentioned, last month Cytokinetics hosted a BENEFIT-ALS investigator meeting in San Francisco. Robert has already mentioned the enthusiasm we saw among the study personnel at that meeting and I can confirm it. I believe we can expect that the excitement we saw in evidence there may translate into robust enrollment now that the trial is open to enrollment. BENEFIT-ALS is a Phase IIb, multinational, double-blind, randomized, placebo-controlled clinical trial designed to evaluate the safety, tolerability, and potential efficacy of our fast skeletal muscle troponin activator, tirasemtiv, in patients with ALS. The trial is designed to enroll approximately 400 patients, who will be randomized one to one to receive 12 weeks of double-blind treatment with tirasemtiv or placebo. All enrolled patients will complete one week of treatment with open-label tirasemtiv at 125 milligrams twice daily prior to randomization in order to ensure that randomized patients will tolerate that dose of tirasemtiv and also to minimize the potential for unblinding treatment due to generally mild adverse events that tend to occur early during tirasemtiv treatment and that usually resolve by the second week of continued treatment. Clinical assessments will take place monthly during the course of treatment. Patients will also participate in follow-up evaluations at both seven and 28 days after the final dose. The primary endpoint of BENEFIT-ALS is the change from baseline in the ALS Functional Rating Scale in its revised form, or ALSFRS-R. Secondary endpoints will include Maximum Voluntary Ventilation, or MVV, and other measures of skeletal muscle function. Patients will receive tirasemtiv or placebo doses twice daily. Patients taking riluzole at the time of enrollment who are randomized to receive double-blind tirasemtiv will receive riluzole at a reduced dose of 50 milligrams daily. Finally, as we have stated often, we believe that fast skeletal muscle troponin activation with tirasemtiv may have therapeutic value beyond its potential for the treatment of ALS. Accordingly, in the last quarter we closed enrollment and completed treatment of patients in our double-blind, randomized, placebo-controlled, three-period cross-over pharmacokinetic and pharmacodynamic Phase IIa evidence-of-effect clinical trial of tirasemtiv in patients with generalized myasthenia gravis. Patients enrolled in the trial received single oral doses of placebo and tirasemtiv at 250 milligrams and 500 milligrams in random order approximately one week apart. This clinical trial and additional preclinical research related to myasthenia gravis are funded by a grant from the National Institute of Neurological Disorders and Stroke. As always, additional information about our completed or ongoing Phase II trials can be found at www.clinicaltrials.gov. With that update on our tirasemtiv clinical development activities in the third quarter, I’ll turn the call over to Fady for an update on our cardiac muscle contractility program.

Thank you, Andy. Much as Andy described the development progress in our skeletal muscle activator program, I also have some good news to share. In the cardiac muscle contractility program, together with Amgen, we’ve made some important progress this past quarter with the parallel development of the intravenous form of omecamtiv mecarbil in Phase IIb as well as the oral forms moving into Phase II. We’re pleased with the progress of ATOMIC-AHF in the past quarter. To remind you, ATOMIC-AHF, which stands for Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure, is an ongoing international randomized, double-blind, placebo-controlled Phase IIb clinical trial of the intravenous formulation of omecamtiv mecarbil. In the last quarter, ATOMIC-AHF completed enrollment in the second cohort that, as previously announced, only opened to enrollment at the end of May. With nearly 140 sites up and running, the trial is progressing at a productive pace, enrolling over 400 patients to date. If the cumulative safety data support it, cohort 3 will begin following review by the independent data monitoring committee. Again, additional information relating to our Phase II trials can be found at clinicaltrials.gov. In addition to the progress in ATOMIC-AHF, Cytokinetics and Amgen are preparing to initiate a Phase II double-blind, randomized, placebo-controlled, multi-center, dose-escalation study designed to evaluate several modified-release oral formulations of omecamtiv mecarbil in patients with heart failure and left ventricular systolic dysfunction. In the last quarter, we engaged in preparations that included the planning for manufacture of several oral forms of omecamtiv mecarbil and also the drafting of regulatory submissions, both intended to enable the start of Phase II trial. This trial may begin enrollment in early 2013 and is designed to inform the potential selection of one of these oral formulations for advancement into later-phase clinical trials. With that update on our clinical development activities, I will turn the call over to Sharon.

Thank you, Fady. As our press release contains detailed financial results for the third quarter 2012, I’ll refer you to that public statement for the details of our P&L and balance sheet. In the past quarter, we have been focused on deploying the from our June 2012 financing to the start-up and initiation activities associated with our BENEFIT-ALS trial. We ended the third quarter with approximately $81.2 million in cash, cash-equivalents, and investments, which represents over 20 months of going forward net cash burn based on our revised 2012 financial guidance. Our third quarter 2012 R&D expenditures totaled $8.8 million. From a program perspective, for the third quarter approximately 73% of our R&D expenses were attributable to our skeletal muscle contractility research and development activities, 13% to our cardiac muscle contractility activities, 3% to our smooth muscle contractility activities, and 11% to our research – other research activities. For the nine months ended September 30, 2012, our R&D expenditures totaled $25.8 million. From a program perspective, for the nine months approximately 69% of our R&D expenses were attributable to our skeletal muscle contractility activities, 13% to our cardiac muscle contractility activities, and 7% to our smooth muscle contractility activities, and 11% to our other research activities. We have made considerable progress on both of our first in-class development programs with our financial resources largely focused on the progression of our skeletal muscle contractility research and development program. We believe that this program together with our cardiac muscle contractility program that is partnered with Amgen represents opportunities for the nearest-term value generation for the company, as both are expected to generate data in 2013. That concludes the financial portion of today’s call. With that, I’ll now turn the call back over to Robert.

Thank you, Sharon. As Sharon mentioned, the financing we completed in the second quarter afforded us the ability to achieve the considerable progress we made in this past quarter on furthering the development of tirasemtiv. I could not be more proud of the diligence with which this organization planned and executed the initiation of BENEFIT-ALS, a milestone in the development of tirasemtiv for the potential treatment of ALS. Last quarter, in addition to my comments regarding our readying for the initiation of BENEFIT-ALS, I also stated that partnering our skeletal muscle activator program was a top priority. That priority is still true today. We are seeking a partnership with a company that shares our vision and sees the broad potential for this novel drug candidate and mechanism of action. We intend to maintain the urgency and momentum for this program for the benefit of patients with ALS, their caregivers, and also our investors. We continue to believe we can secure a partnership that will contribute financially and operationally to the further advancement of tirasemtiv and also ensure a meaningful role for Cytokinetics in the development and commercialization of our first-in-class drug candidate. In parallel, in the past quarter we continued to execute on our strategy to increase revenue from research collaborations in parallel with increases in our development expenses. In August, we signed an agreement with MyoKardia, a Third Rock Ventures funded started company. Under the agreement, MyoKardia will fund activities and personnel at Cytokinetics in connection with an agreed research plan. In addition, Cytokinetics has obtained an equity position in MyoKardia as consideration for an assignment of patent rights related to compounds and the licensing of enabling know-how, both associated with Cytokinetics cardiac sarcomere inhibitor program, which is focused to the treatment of hypertrophic cardiomyopathies. Cytokinetics may also receive payments based on the achievement of preclinical, clinical, and commercial milestones and may receive royalties on the sale of products that may arise from the research. We believe strongly that Cytokinetics and its collaborators, both current and potential new ones, benefit from our maintaining an efficient and productive organization that is integrated across research and development. We have seen ample evidence for the benefits that accrue to Cytokinetics when ongoing research informs development and vice versa. Collaborations like the one we have with Amgen, as well as two we have now announced with Third Rock Ventures funded companies, enable our prudent approach to funding ongoing R&D activities. This is an exciting time for Cytokinetics. We are moving into a later stage of our company’s maturation in which our two lead drug candidates will be investigated in over 1,000 patients with either heart failure or ALS in separate Phase IIb trials. In 2013, we expect to see the results of these trials, which will be very important to Cytokinetics and inform our future plans for potential registration programs. As we have outlined for you what the third quarter of 2012 has delivered, let me now turn to our expected milestones for the fourth quarter of 2012. For tirasemtiv, in the fourth quarter of 2012 we anticipate that data will be available from our recently completed Phase IIa evidence-of-affect clinical trial of tirasemtiv in patients with generalized myasthenia gravis. That trial is also referred to as CY 4023. Also in the skeletal muscle program, in the fourth quarter of 2012 we anticipate filing an IND for CK-2127107, our follow-on compound to tirasemtiv. Turning now to omecamtiv mecarbil: In the fourth quarter of 2012, we anticipate a decision regarding the potential progression to the third cohort of the ATOMIC-AHF clinical trial of omecamtiv mecarbil in patients hospitalized with acute heart failure, following a review by an independent data-monitoring committee of data from the second cohort. Operator, that concludes the formal portion of our call today. I’d now like to open the call up to questions, please.

(Operator Instructions) Our first question comes from the line of Chad Messer with Needham & Company.

Hi, Chad. Chad Messer – Needham & Company: Hi. Hi guys. Congratulations on the progress and thanks for taking my question. Can you hear me okay?

I can hear you okay. Chad Messer – Needham & Company: All right. I apologize, I’m doing this from home on a cell phone because we don’t have a lot of power in my neck of woods right now, but I was glad I was able to get on the call. My question is this: On – it’s on the planned Phase IIb with tirasemtiv, the BENEFIT-ALS trial, I was wondering if you could give me a little bit more on the design where you have all patients running in for one week before being randomized. And I understand a little bit your explanation about how that helps AEs to keep blinded, but you also talked a little bit about, you know, examination of tolerability, so, I mean, what – you just want to have more patients with one week safety data or could you – maybe you can explain a little bit more about what you are trying to accomplish there, and, if you could, are you worried at all, or why aren’t you worried at all, that putting the placebo patients on drug for a while might make it a little confounding on the efficacy endpoints?

So, the reason that we did that was to some degree in response to feedback from FDA on the protocol, and we ourselves had had – discussed the issue with the potential for the occurrence of adverse events, but primarily this mild dizziness, to unblind the trial. And what we learned from our Phase II studies that we presented at the American Academy of Neurology last April is that, in the great majority of patients who experienced dizziness – and that’s really only about half of them, anyway – but those that do get it, almost all of them tend to be free of dizziness by the second week of continued treatment at a given dose. So by bringing everybody into the study and giving them a week of tirasemtiv – first of all, probably only half of them will experience the dizziness, but the good part is, after they’re randomized, if the dizziness resolves it’ll be impossible to distinguish whether that is resolution of the symptom with continued treatment or whether they’ve just been withdrawn to placebo. The other benefit, which was not really the primary reason that we did it but it is also benefit of doing at this way, is that it does ensure that anybody who is randomized will tolerate at least the starting step in the dose titration. That dose level’s pretty well-tolerated anyway, so I don’t expect we would lose too many patients, but what I would say is – any patient that truly can’t tolerate a week at 125 milligrams twice daily probably just really isn’t a good candidate for the study. And so it keeps those patients out of the intent-to-treat trial, and I don’t – you know, I think over the course of a three-month study, I don’t really see much likelihood for confounding the efficacy analysis. Chad Messer – Needham & Company: Okay. All right. Well, thanks for that added explanation, and good luck with the trial.

Thank you, Chad, and be safe.

(Operator Instructions) And we seem to have no further questions at this time.

Okay. Thank you, operator, and thank you to the participants on our teleconference today for your continued interest in Cytokinetics. For those of you on the east coast, we wish you well. If anyone has questions following review of the transcript, by all means please reach out to us as we will also reach out to you. We look forward to updating you on our continued progress. And operator, with that we can conclude the call.

Ladies and gentlemen, this concludes today’s conference call. We thank you for your participation. You may all disconnect.