Earnings Labs

Cytokinetics, Incorporated (CYTK)

Q3 2014 Earnings Call· Thu, Oct 30, 2014

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Transcript

Operator

Operator

Good afternoon and welcome, ladies and gentlemen, to Cytokinetics' third quarter 2014 conference call. (Operator Instructions) I will now turn the call over to Sharon Barbari, Cytokinetics' Executive Vice President of Finance and CFO. Please go ahead.

Sharon Barbari

Management

Good afternoon and thank you for joining us on this conference call today. Leading today's call is Robert Blum, our President and Chief Executive Officer. Following Robert's initial comments, Andy Wolff, our Senior Vice President and Chief Medical Officer, will comment on the status of our clinical development program for tirasemtiv, our first-in-class fast skeletal muscle activator, which may be developed for the potential treatment of amyotrophic lateral sclerosis or ALS. Afterwards, Fady Malik, our Senior Vice President of Research and Development will provide you with an update on the progress of our Phase I clinical trials program for CK-2127107 or CK-107, our next generation fast skeletal muscle activator, which is being developed for the potential treatment of non-neuromuscular conditions, associated with muscle weakness and impaired muscle function. He will then provide you with an update on the clinical development of omecamtiv mecarbil, our first-in-class cardiac muscle activator, which is being developed for the potential treatment of heart failure. I will then provide a financial overview for the quarter. And Robert will conclude the call with comments about our future plans and milestones. We'll then open the call for questions. Please note that the following discussion, including our responses to questions, contains statements that constitute forward-looking statements for 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 and collaborations with Amgen and Astellas, 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. And we undertake no obligation to update these statements after this call. Now, I'll turn the call over to Robert.

Robert Blum

Management

Thank you, Sharon, and thank you to everyone on the line for joining us for this call today. I'd like to begin our third quarter conference call by providing a summary level update relating to the company's activities, as will be further elaborated upon by my colleagues. Overall, we believe that during the third quarter we made excellent progress in the advancement of all of our development stage programs towards the respective next phases of development. We are especially pleased to be progressing three innovative programs arising from our own research. This is no small feet and attribute to the quality of the science and people at Cytokinetics, who are making it happen. Cytokinetics continues to push forward boldly and tenaciously. We take our mission very seriously and are steadfast in our commitments to serve patients and their caregivers. In the last several months we witnessed an extraordinary social media phenomenon that substantially transform the landscape for education, awareness, advocacy and fund raising for ALS. No one could have anticipated the way that the ALS Ice Bucket Challenge would reach into hearts, minds and chatbooks to elicit a tsunami of support for ALS patients and their caregivers. We are proud to have participated in the challenge, and more importantly to step forward as a leader in the development of potentially the first news therapy for these deserving patients in over 25 years. As you will hear more from Andy in a moment, we believe that there may be a Phase III development path for tirasemtiv, building on improvements in respiratory muscle function that were observed in BENEFIT-ALS, our recently completed Phase IIb clinical trial of tirasemtiv in patients with ALS. We believe that effects of tirasemtiv on slow vital capacity or SVC versus placebo were robust and potentially clinically meaningful.…

Andrew Wolff

Management

Thank you, Robert. Over the summer we conducted extensive reviews of the BENEFIT-ALS data, and have concluded that effects observed on SVC in patients treated with tirasemtiv are robust and potentially clinically meaningful. In addition, following consultation with clinical and statistical experts, we believe that data from BENEFIT-ALS support progression in tirasemtiv to a potential Phase III clinical trial in patients with ALS. We also began interactions with the FDA regarding results from BENEFIT-ALS, and have received initial feedback. We believe that effects on SVC could be a Phase III clinical trial endpoint and could support registration of tirasemtiv as a potential treatment for patients with ALS. We are encouraged by our initial interactions with the FDA regarding results of BENEFIT-ALS, and we intend to seek further information from them following additional interactions that are planned to occur over the next several months. In addition, we have begun Phase III readiness activities, including the design of the potential Phase III clinical trial in order to inform plans, timelines and costs associated with the further development of tirasemtiv. To remind you, BENEFIT-ALS was Phase IIb multinational double-blind, randomized, placebo-controlled clinical trial, designed to evaluate the safety, tolerability and potential efficacy of tirasemtiv in patients with ALS. In BEENFIT-ALS, treatment with tirasemtiv resulted in a statistically significant and potentially clinically meaningful reduction in the decline of SVC. SVC is a measure of the strength of the skeletal muscles responsible for breathing that has been shown to be an important predictor of disease progression and survival in prior trials of patients with ALS. This pre-specified secondary efficacy endpoint in BENEFIT-ALS declined statistically significantly less on tirasemtiv than on placebo at each assessment time point. In addition, the reduced decline in SVC on tirasemtiv versus placebo in BENEFIT-ALS was observed consistently across all subgroups…

Fady Malik

Management

Thank you, Andy. Turning first to the development of CK-107, our next-generation skeletal muscle troponin activator, partnered with Astellas. We're proud to report that we've completed five Phase I clinical trials and that we've also provided data packages from these trials, which we conducted in collaboration with Astellas. We believe that these trials along with the completed Phase II readiness activities support progression of CK-107 into later stage development. These five Phase I clinical trials explored in healthy volunteers, the tolerability of pharmacokinetic of CK-107 during single and multiple dosing demonstrated translation of the mechanism of action into human as well as establishing it's pharmacodynamic and pharmacokinetic relationship, and supported development of an oral tablet form of CK-107 for use in Phase II clinical trials. Let me summarize briefly our conclusion, following the completion of each of these trials. Single doses of CK-107 were well tolerated up to 4,000 milligrams without an emerging pattern of adverse events. Therefore, maximum tolerated dose was not defined. As pharmacokinetics were linear and dose proportional across the dose range studied with a mean terminal half-life compatible with once or twice daily dosing. Multiple doses of CK-107, both 300 milligram and 500 milligrams dose twice daily were also well tolerated in volunteers in two age groups, 18 to 55 and 65 to 85 years old. There were no differences in the pharmacokinetic of CK-107 between either group, and steady state was achieved over the course of 10 days. We explored the pharmacokinetics of two different physical forms of CK-107 in liquid suspension. Selecting one and subsequently developing a tablet formulation with it. Tablet formulation was studied at single doses of 250 milligrams, 500 milligrams and 1,000 milligrams. They were well tolerated and appeared appropriate for use in potential future clinical trials. Finally, and most importantly,…

Sharon Barbari

Management

Thank you, Fady. As our press release contains detailed financial results for the third quarter of 2014, I'll refer you to that public statement for the details on our P&L and balance sheet. We ended the third quarter with approximately $82.5 million in cash, cash equivalents and investments, which represents approximately 19 to 20 months of going-forward cash burn based on our updated 2014 guidance. Revenues for the third quarter 2014 were $9.4 million. The revenues included $2.7 million in license revenue and $4.8 million of research and development revenues from our collaboration with Astellas, and $1.9 million of research and development revenues from our collaboration with Amgen. Revenues for the nine months ended September 30, 2014, were $25.2 million. The revenues were primarily comprised of $14.1 million of research and development revenues and $7.6 million of license revenues from our collaboration with the Astellas, and $3.4 million of research and development revenues from our collaboration with Amgen. Our third quarter 2014 R&D expenditures totaled $11.4 million. From a program perspective for the third quarter, approximately 67% of our R&D expenses were attributable to our skeletal muscle contractility research and development activities, 25% to our cardiac muscle contractility activities and 8% to our other research activities. For the nine months ended September 30, 2014, our R&D expenditures totaled $35.6 million. And from a program perspective for those nine months, approximately 76% of our R&D expenses were attributable to our skeletal muscle contractility activities, 15% to our cardiac muscle contractility program and 9% to our other research activities. Today, we provided updated financial guidance for 2014. Cash revenues are expected to be approximately $19 million to $21 million; cash R&D expenses are expected to be in the range of $45 million to $48 million; and cash G&A expenses are expected to be in the range of $15 million to $17 million. This financial guidance is on a cash basis and does not include the deferrals of approximately $10.6 million in revenue, associated with the Astellas and Amgen collaboration; and an estimated $3.6 million in non-cash related operating expenses, primarily related to stock-compensation expense. We believe, we currently have sufficient financial resources to enable us to focus on the readiness activities in support of the potential Phase III development path for tirasemtiv. That concludes the financial portion of today's call. With that, I'll now turn the call back over to Robert.

Robert Blum

Management

Thank you, Sharon. The last several months have been exciting and productive for us at Cytokinetics. The increased awareness of the grievous nature of ALS, brought about by the ALS Ice Bucket Challenge, has put us in our development program for tirasemtiv at the forefront of the fight to find meaningful therapies for the potential treatment of ALS. As I mentioned earlier, we are very proud to be a leader in the development of potential therapies to treat ALS. Based on the clinical and regulatory feedback that we have received to date, we're encouraged about the potential advancement of tirasemtiv into Phase III development. Our conviction remains strong. However, advancing tirasemtiv into potential Phase III clinical trial requires information that we are still obtaining from FDA and other regulatory authorities, as well as from other programs and partners. We remain steadfast in our commitment to balance the risks of our R&D activities across our portfolio of drug candidates both partnered and unpartnered. Our ultimate goal to serve ALS patients and their caregivers by advancing tirasemtiv is best served by ensuring we can finish what we start, and therefore is coupled with knowing where we stand with our other partnered and funded programs, and are potential earning milestone and other payments from our alliance partners. The progress at Cytokinetics in the third quarter all goes positively and we're pleased to reaffirm our leadership and the potential development of the next drug candidate in the fight against ALS. Tirasemtiv is the first drug candidate to demonstrate a potentially clinically meaningful effect on pulmonary function and other measures of muscle strength for these patients that are so desperately in need. We assume responsibility for taking the next steps and look forward to providing other updates. As you also heard today, we have been…

Operator

Operator

(Operator Instructions) And our first question comes from the line of Joe Pantginis with ROTH Capital Partners.

Joe Pantginis - ROTH Capital Partners

Analyst

I'm going to ask some regulatory questions, and obviously I know these are ongoing, so you might be a little restricted as to the level of detail, but with that said, I guess, I'll split this up into a couple of parts. With regard to the SVC you mentioned on the call today and in the press release, you believed that this can be an endpoint in support of Phase III. Do you have feedback so far that this could be a primary endpoint?

Robert Blum

Management

So I'll be making a statement here that I think should serve as a general rule regarding ongoing regulatory interactions and that is that, we're going to reserve for a public comment those things that have occurred and not necessarily those things that are expected. Well, with regard to your specific question relating to SVC and as a potential primary efficacy endpoint, the answer is yes.

Joe Pantginis - ROTH Capital Partners

Analyst

And I guess, more from a general standpoint is how would you describe the tenor of the discussion that you've had to date? And importantly I guess, I am assuming, maybe its not the case, but I'm assuming that as part of these discussions you've had KOLs there and the impact that the KOLs might have had at these meetings as well as in driving the tenor of these FDA discussions?

Robert Blum

Management

I probably can't comment too much about that other than to say, I think everybody is motivated, and I think that we have a lot more that we need to learn in terms of how aligned this can all be. But probably suffice it to say that's the best we can do.

Joe Pantginis - ROTH Capital Partners

Analyst

And then maybe just quickly and this would be my last one. For 107, when do you anticipate potentially to see some indication visibility for the product as you've discussed the program with Astellas?

Robert Blum

Management

So by the end of the year, we expect the decision can be made about how we may progress in the Phase II. I'll turn it to Fady to maybe comment on, in general, how we're thinking about potential Phase II indications. We won't be naming any specific indications, but I think it would be helpful to have you understand sort of the construct by which we're looking at indications.

Fady Malik

Management

I think, we know that this mechanism of action amplifies the response of muscle to nerve input reduces fatigability, increases muscle power, and it potentially has effects on muscle with longer term dosing, as we saw in BENEFIT in relation to respiratory function. The specific indications are still under discussion between us and Astellas. And in the past we've talked about things like COPD and heart failure, other things like that, but there are also smaller, potentially faster to investigate indications, which we're also considering that might be quite applicable to the mechanism of action.

Robert Blum

Management

I think in some respects, the challenge here is actually to prioritize potential indications, and in that way the two companies have worked both independently, but then also collaboratively, in order to review the results of market research and clinical development plans and budgets, how we think about the regulatory path in order to be able to get a consensus position, and very pleased by the way in which the two companies have worked through this process. And by the end of the year, I expect we'll be in a position where we'll have come up with that prioritization. And as we may enter into Phase II, that's not been decided yet. We should hopefully be able to give more clarity publicly to what our plans are.

Operator

Operator

And our next question comes from the line of Charles Duncan with Piper Jaffray.

Charles Duncan - Piper Jaffray

Analyst · Piper Jaffray.

On tirasemtiv, we're looking for to seeing you make progress, and I understand it's a little premature to be able to answer definitively some of these questions, but you mention possibly starting Phase III in 2015. Can we assume that that could be, as early as perhaps mid-'15, that you'd have a protocol? And can you provide any color on what you're kicking around in terms of the sizing of the trial and the duration of dosing? Is it perhaps six months trial or maybe even a little bit longer trial?

Robert Blum

Management

So I'll start it, then I'll turn it over to Andy. In terms of timing, it really depends not only on the ongoing regulatory interactions, but also as I mentioned in my prepared comments, it relates to funding. And when are we going to be willing to make a commitment to this, that's going to be a function of some things that we expect can be occurring over the next several months to enable the start of a study whereby mid-2015 is not a part of reason. I think that's a reasonable assumption whatever you think to line up for us, but again that's not guidance, that's not a commitment, that's a possibility. I say that knowing that we've already developed a protocol, a statistical analysis that would accompany the protocol. We're refining it. That's going to require more pressure testing internally with consultants and certainly with regulatory authorities, so we do have a view to what the study could look like. And I'll turn to Andy to provide some broad brushstroke parameters around how we are thinking about that.

Andrew Wolff

Management

So I think we are pretty comfortable that we could evaluate the primary endpoint on Slow Vital Capacity after six months, a double-blind placebo-controlled treatment. But we would probably continue patients on beyond that for an additional six months, so that some patients would receive tirasemtiv for a full year and others would be transitioned on the tirasemtiv after six months on placebo, and I think that's probably about the right level of detail for now.

Robert Blum

Management

Yes, I think that's right. And the other thing I might add is in terms of sizing, this is not a study that, which Andy just described maybe the plan, wouldn't require thousands of patients, but rather hundreds of patients and that's where ultimately we have to understand both the time points of primary efficacy analysis and the statistical plan in order to be able to put final definition to size. But I think that gives you parameters around size and duration as we're thinking about it.

Charles Duncan - Piper Jaffray

Analyst · Piper Jaffray.

One other question along those kind of the same lines in terms of Phase III. It sounds like the primary endpoint SVC -- I guess my question, is it still the case that perhaps it isn't going to require a survival endpoint to be clinically meaningful. I mean couple of years ago, we did diligence, we talked to thought leaders, and they didn't think that was important. I guess, I am wondering, is that consistent with the feedback you're still getting from thought leaders? And perhaps does that square with the kind of feedback you're getting from the regulators?

Robert Blum

Management

So how about if we answer that question from the standpoint of thought leaders, because I think as it pertains to regulatory authorities, until we have a final alignment, I don't want to get too far in front of ourselves on this. I think more importantly its how do we see these things and that's where I think we're largely informed by the conversations we've had, consultations with thought leaders. And with that I'll ask Andy to maybe comment on the meaningfulness of SVC and how it pertains to survival.

Andrew Wolff

Management

So I will say that our investigators and other thought leaders have been uniformly enthusiastic about the effects that we observed, to slow the decline in SVC and BENEFIT-ALS from the very first evening that they saw that. And I may have mentioned before, either to you directly or perhaps on one of these calls, that the evening when we shared the data from BENEFIT-ALS with our investigators, one of them came up to me and said, you know, when I saw your first press release, I thought you had a negative trial, but in fact this is the most positive trial we've ever had in ALS. So they're extremely enthusiastic about the significance of the results on the slow vital capacity. And as you may that is the parameter that gets trapped at every clinic visit. And patients are perhaps, if not more likely to know, and I think more likely know, at least as likely to know what their vital capacity is, than they are in their ALS functional rating scale score. It's used to make key clinical decisions, when patients will begin to go on mechanical validation, part line and permanently. And I think as we mentioned during the call itself, it has been shown in prior studies to correlate well with times you permit mechanical validation and survival. So I think that we believe that it's an appropriate Phase III endpoint. We have a reason to believe that [Technical Difficulty], but until we're able to confirm it, that's about all we can say.

Robert Blum

Management

In terms of having the reason on survival, I think the many dozens of conversations we've been having, we have universal consensus that SVC is predictive of survival and prognostic for these patients, and therefore it's what the neurological specialist rely on, it's what the pulmonologist rely on, it's frankly in fact, what payors rely on in terms of decision making and reimbursement as it pertains to mechanical ventilation.

Charles Duncan - Piper Jaffray

Analyst · Piper Jaffray.

That's helpful and kind of consistent with the situation, as I recall in IPF. Let me ask you one last question, then I'll hop back in the queue. And that is regarding using tirasemtiv or perhaps developing this mechanism in other neuromuscular disorders begun to ALS. I know the Astellas deal is for non-neuromuscular disorders. I guess my question is, if you wanted to pursue something like in myasthenia gravis or something like that, would you do it with tirasemtiv or would you perhaps seek to expand the deal that you have with Astellas and go forward with 107?

Robert Blum

Management

So you're right. And that our current deal with Astellas has the field of license for the collaboration limited to the non-neuromuscular indications. So neither Astellas nor Cytokinetics are in a position where we can develop CK-107 for neuromuscular indications. For instance, in myasthenia gravis, tirasemtiv as you know has been studied there and we have no restrictions on our ability to develop tirasemtiv in ALS and other neuromuscular indications. As far as what might be the appetite to do anything beyond that, I probably shouldn't speak to that. I think our focus has been on tirasemtiv in ALS.

Operator

Operator

And your next question comes from the line of Jason Butler with JMP Securities.

Jason Butler - JMP Securities

Analyst · JMP Securities.

Just one on CK-107, just putting this into context of the tirasemtiv development program in Phase II, when you ran, say, smaller faster two data trials. Given the larger resources that Astellas may have, is that a program we might see replicated or could they start-off with broader Phase II trials right from the outset?

Robert Blum

Management

So you're referring to the fact that with tirasemtiv, we did these single-dose Evidence of Effect studies. That's one of the things that we're still discussing. The Phase I program for CK-107 does borrow from learnings in connection with tirasemtiv, where we already have validation for the mechanism of action in certain indications including, as you may recall, in the treatment of intermittent claudication. So we wouldn't have to repeat some of those studies, and we might be in a position where we can go forward into longer duration treatment and other indications. That said, there is always, what is the current talks coverage; and one of the other things that might limit where we can go and that's something that is part of the equation in terms of how we're thinking about Phase II. But it's really encouraging and refreshing to think about where we can go with fast skeletal muscle activation beyond what we at Cytokinetics are able to do independently. And that's where I think Astellas has been an excellent partner in terms of thinking about, as we both have use the term new frontiers to expand this mechanism beyond. So I think you'll have a lot more clarity on that as we get that here. I think the key point is that for most of 2014, this program has been the subject of activities where we really haven't commented on them publicly, we only had indicated that there is an agreed development plan. And the five Phase I studies was a trial order commitment that we executed on very well and effectively. And I think the data are really supportive of moving forward. And I think Astellas shares that view with us.

Jason Butler - JMP Securities

Analyst · JMP Securities.

And then just a quick question on tirasemtiv. As you mentioned a couple of times that you're still expecting to have more interactions with FDA. Do you have any formal interaction scheduled with FDA or is this something that's just continuing on an informal basis?

Robert Blum

Management

It's the question that I would be asking if I were you, but it's not a question that I can answer. I really don't want to get into the game of pointing to when there might be meetings and have people start to calibrate when we're going to be making disclosures. I don't think that's in the interest of a long-term value of the company. So we're going to really just limit our conversations right now to that which has occurred.

Operator

Operator

And our final question comes from the line of George Zavoico with MLV & Co. George Zavoico - MLV & Co.: I have a question regarding a potential competitor for the next ALS trial. I'm referring to the percentage on trial in IPF, which I'm encouraged to see that the FDA approved it on the basis of primary endpoint of SVC, and not that or any other secondary endpoints. My question is, I mean FVC and SVC are related, so first question is a quick one. Did you measure FVC in BENEFIT? I don't remember. And number two, I'm wondering whether you can use this as a potential template in your discussions with the FDA for the next Phase III trial design?

Robert Blum

Management

So I'll ask Andy to start by talking about what we measured in BENEFIT-ALS and how SVC and FVC relate one to another. And then, maybe I'll ask Fady to comment on a program that you referenced could be a competitor to what we're talking about here in ALS.

Andrew Wolff

Management

So we did not measure forced vital capacity and BENEFIT-ALS. We measured slow vital capacity in each case. You're measuring them vital capacity, and it's really a matter of methodology, and not something completely different one from the other. If I'm measuring on forced vital capacity, the patient inhales as deeply as he or she can and then exhales as completely as he or she can. But they do it as fast as they can. And ALS clinical researchers have founded that request to do that quickly is difficult for them, and so if they ask them to exhale completely, they allow them to do it more slowly. They seem to get more reproducible measurements that way from ALS patients. But as one of our pulmonary consultants told us, when we were reviewing these data with them last summer, what's vital capacity is vital capacity, and he really encouraged us, not to get hung up over what was fast and what was slow. I think we are in terms of the design of this study. I think we're in a good place, where we are now. We'd be in a position to comment more about the details of it, after we've actually had our feedbacks with FDA. But I am not so sure that a trial of disease is going to be that informative to a trial in a different disease with the different division even as the endpoint might be similar. George Zavoico - MLV & Co.: But it's nice also to see that, in referring to, I think what Charles mentioned was whether overall survival is going to be an endpoint, and it was a secondary endpoint trial. I think that it adds a bit of an encouragement and thinking about what the endpoints might be for your next trial?

Andrew Wolff

Management

Look in the past, I mean we have had interactions around whether survival would be a required endpoint in an ALS trial. And in general, regulatory guidance that we have received in the past has been that it is not necessary for registration of trial. But those regulatory discussions can always evolve, but we haven't had that indication today.

Robert Blum

Management

And in Europe, as you may know, there is a set of draft guidelines for the approval of potential drugs for the treatment of ALS, which emphasize the importance of function, not requiring of survival. And FDA has been indicating in the past by Phase III studies that other companies have performed. Unfortunately, which have not succeeded, but where survival was not required as a primary FDA analysis. So we believe that that may also be the case, as we continue our interactions.

Operator

Operator

Thank you. And we have no further questions at this time. And I would like to turn the conference back over to Mr. Blum.

Robert Blum

Management

So thank you to everybody for participating in our call today. It's certainly been very busy and productive third quarter. We are looking forward to keeping you updated on our progress. And with that, we'll thank everybody for their support and interest in the company. Operator, we can now conclude the call.