Cytokinetics, Incorporated (CYTK) Q4 2014 Earnings Report, Transcript and Summary

Good afternoon and welcome, ladies and gentlemen, to Cytokinetics' Fourth Quarter 2014 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 company's request, 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 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 provide an update regarding our ongoing interactions with regulatory agencies and plan Phase III clinical development program for tirasemtiv, our first-in-class fast skeletal muscle troponin activator, which we are developing for the potential treatment of amyotrophic lateral sclerosis or ALS. Afterwards, Fady Malik, our Senior Vice President of Research and Development will provide an update on our clinical development program for CK-2127107 or CK-107, our next generation fast skeletal muscle troponin activator, and our plans for Phase II clinical trial in spinal muscular atrophy or SMA. Fady will then provide an update on the clinical development program for omecamtiv mecarbil, our first-in-class cardiac myosin 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 additional perspectives and comments regarding our future plans and key milestones for 2015. 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 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 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. We undertake no obligation to update these statements after this call. I'll now turn the call over to Robert.

Thank you, Sharon, and thank you to everyone on the line for joining us for this call today. I'd like to begin our fourth quarter conference call by providing a summary of Cytokinetics 2014 activities as my colleagues will elaborate during the call. Overall, we're pleased with how Cytokinetics executed, responded and prepared in 2014 in particular in the areas of clinical R&D as well as business development, and in concert with our corporate strategy to enable parallel advancement of our three development stage programs. We believe we are well-positioned in 2015 with our programs preceding towards later stage clinical trials. Looking back on 2014, Cytokinetics steadfastly delivered on our mission even as we had to confront and overcome certain setbacks, we are resilient and our team remains strong in its conviction. We advanced our programs and exceeded our financial guidance for 2014 ending the year with significantly more cash and forward runway than when we began the year. We continue to lead the field of muscle biology related drug discovery and development as evidenced by pipeline progress and is evidenced by yet another innovative deal transaction. Recently, upon completion of certain Phase II readiness activities with CK-107, we announced expansion of our collaboration with Astellas. Much like we expanded our relationship with Amgen for our cardiac muscle program in 2013, following our joint review or results from ATOMIC-AHF and are agreeing to play on this for the further development of omnecamtiv mecarbil in Japan. We are now pleased to expand our relationships with Astellas for our skeletal muscle program and to include neuromuscular indications. And that followed our joint review of data from Phase I studies and are agreeing to plans for the further development of CK- 107 in a Phase II program. Cytokinetics has continued to deliver results in our collaborations and our partners have stepped up by extending and expanding joint research and development programs and making related payments to Cytokinetics that we can then invest in both partnered and unpartnered programs. Expanding our collaboration with Astellas enables us to conduct a Phase II clinical trial of CK-107 and patients with SMA. The deal expansion provided us with $55 million upfront in the form of a license fee, a milestone payment and an equity investment. In addition, we expect to receive over $20 million from Astellas in reimbursements for plan research and development activities over the next two years. The agreement also provides for Cytokinetics to potentially receive over $600 million in pre-commercialization and commercialization milestone payments, as well as escalating royalties to Cytokinetics with increased sales. We retain the option to co-fund the development of CK-107 in SMA and other neuromuscular indications and exchange for increased milestone payments and royalties. And if we exercise our co promotion option, Astellas will reimburse Cytokinetics with certain expenses associated with our promotion activities. We believe CK-107 holds promise for patients and is on a solid footing in collaboration with Astellas. While in 2014 we learned that BENEFIT-ALS did not achieve its primary efficacy endpoint, 12 weeks of treatment with tirasemtiv was associated with statistically significant increases versus placebo in a clinically meaningful measure of respiratory function known as slow vital capacity or SVC. We dedicated much of the second half of 2014 to evaluating the robustness of data from this largest Phase II trial conducted in patients with ALS. I'm pleased to announce today that following extensive analysis of data from BENEFIT-ALS, accompanied by consultations with experts including investigators, other neuromuscular and pulmonology clinicians, payers and also representatives of each of the U.S. FDA and the European EMA, we now plan to initiate a Phase III clinical development program for tirasemtiv in patients with ALS. We have listened carefully to the feedback we have received and we are finalizing the design of a Phase III trial that we believe can confirm and extend results from BENEFIT-ALS. We believe that patients, caregivers, clinicians, payers and regulatory authorities, would all respond well to a new medicine in ALS that slows the rapidly progressive decline in respiratory function. We believe that longer duration treatment with tirasemtiv may result in clinically meaningful effects on SVC and other clinically important measures of respiratory insufficiency and related clinical events. We look forward to tirasemtiv proceeding to Phase III in this year 2015 and answering questions about tolerability, durability of effects on SVC, and correlation with other measures of patient function. Turning away from skull to muscle programs for a moment, in 2014 we continue to work diligently with our partner Amgen. Last year we conducted a Phase I trial omnecamtiv mecarbil in healthy subjects of Japanese ancestry to inform additional preparations for Japan's inclusion in a potential Phase III clinical program. COSMIC-HF which is evaluating oral omecamtiv in patients with chronic heart failure is nearing completion of patient enrollment, data expected from COSMIC-HF in 2015, alongside data from ATOMIC-HF which evaluated intravenous omecamtiv mecarbil in acute heart failure patients should inform how we may proceed to Phase III with this drug candidate under our collaboration with Amgen. We are encouraged by still blinded safety data arising from 100s of patients in COSMIC-HF and are jointly engaging in manufacturing, regulatory clinical and commercial development activities with the assumption that omecamtiv mecarbil may proceed to Phase III in 2016. Let me now turn the call over to Andy so that he can get us started today on elaborating on these development programs and starting with tirasemtiv directed to the potential treatment of ALS.

Thank you, Robert. In the fourth quarter we focused on planning and readiness activity including end of Phase II regulatory interactions to inform the design of a Phase III clinical development program for tirasemtiv for the potential treatment of patients with ALS. Recently, we met with the FDA to discuss results from BENEFIT-ALS and a potential Phase III program. We also recently met with representatives from EMA. While regulatory interactions with each of FDA and EMA are ongoing, we believe that the feedback we received informs our advancement of tirasemtiv to a Phase III clinical development program intended to confirm and extend results from BENEFIT-ALS. As you heard from Robert, our objectives for the Phase III program will include assessing effects of longer duration treatment of tirasemtiv on measures of respiratory function in patients with ALS including effects on SVC but also including other clinically meaningful end points. We believe the information we have received from consultants, market research and regulators aligns in an actionable manner and underscores the importance of respiratory functions for patients with ALS. To remind you, BENEFIT-ALS was a Phase IIb multi-national double blind randomized placebo controlled clinical trial designed to evaluate the safety, tolerability and potential efficacy of tirasemtiv in patients with ALS. The result of BENEFIT-ALS showed that treatment with tirasemtiv resulted in a statistically significant and potentially clinically meaningful reduction versus placebo in the decline of SVC at each assessment over 12 weeks of double blind treatment. The pre specified secondary efficacy end point of SVC is a measure of the strength of the skeletal muscle responsible for breathing that has been shown to be an important predictor of disease progression and survival in prior trials with patients with ALS. In addition, reductions and the decline in SVC on tirasemtiv versus placebo in BENEFIT-ALS were observed consistently across all of the pre specified patient subgroups we examined. Furthermore, the lesser decline in SVC on tirasemtiv versus placebo persisted undiminished at one and four weeks after the last dose of double blind study medication demonstrating the durability of the effect of tirasemtiv on SVC. To confirm the clinical important of these findings, we had consulted with neuromuscular and pulmonary experts both in the United States and Internationally and have concluded that the results from BENEFIT-ALS provide compelling evidence that tirasemtiv may preserve pulmonary function in patients with ALS that warrants investigation in the Phase III clinical development program. I'd like to take a few minutes to distill for you what we learned from our conversation with these experts about the clinical importance of SVC to patients with ALS. Of course in a clinical setting patients with ALS are evaluated in a variety of ways, however the respiratory function is especially important to assess because patients with ALS usually die from respiratory failure. Multiple space were show that the rate of the decline in pulmonary function as measured by Vital Capacity strongly predicts mortality, prior to respiratory failure, the rate of decline in Vital Capacity from vis-à-vis as well as the for below at certain threshold of Vital Capacity governance discussions about advanced direct on health needs and expectations regarding duration of independent living. Referrals to hospital, recommendations regarding feeding tube placement and prescription of Noninvasive Ventilation or all based un-respiratory function measured by Vital Capacity. Third party payers also make decisions about funding such interventions based on Vital Capacity. Thus multi rate of change of Vital Capacity as well as the decline to a specific level of Vital Capacity are of direct importance to the patient and treating physician. When we announced the initiation of our planned Phase III trial, we will elaborate on its design but we believe now that we have the support of all stakeholders to conduct a trial of tirasemtiv to make a firm and extend results of served in benefit ALS. With that update on our plans for tirasemtiv, I will now turn the call over to Fady for an update on our other muscle contractility programs.

Thank you, Andy. Turning first to the development of CK-107, our next-generation skeletal muscle troponin activator partnered with Astellas. I’m pleased to report that last year we completed Phase II readiness development activities in accordance with an agreed plan under the joint over size of Cytokinetics and Astellas. These development activities included certain manufacturing activities, pre-clinical and Phase I clinical studies and other planning related to the potential progression of CK-107 to Phase II clinical development. As Robert mentioned in the fourth quarter Cytokinetics expanded our strategic collaboration with Astellas, enabling development of CK-107 in patients with SMA and potentially other neuromuscular indications. While we and Astellas to continuing discussions about other potential clinical indications including non-neuromuscular indications, we’ve agreed that Cytokinetics will conduct this first Phase II trial in patients with SMA, Astellas was expressed. SMA is a severe neuromuscular disease that occurs in one of every 6 to 10,000 live births each year and is one of the most common and is one of the most common fatal genetic disorders. SMA manifests in various degrees of severity as progressive muscle weakness resulting in respiratory and mobility impairment. There are four types of SMA, named for time of the initial onset of muscle weakness and related symptoms. Type I is Infantile, Type II Intermediate, Type III Juvenile and Type IV Adult onset. Life expectancy and disease severity varies by type from Type I, who have the worst prognosis and a life expectancy of no more than two years from birth, to the Type IV patients, who have a normal life span but with gradual weakness that develops in the proximal muscles of the extremities resulting in mobility problems. Few treatment options exist for these patients, resulting in a high unmet need for new therapeutic options to address symptoms and modify disease progression. We believe that direct activation of the Direct Activation of the Skeletal Sarcomere by CK-107 may address muscle weakness that characterizes SMA and could demonstrate effects on key functional parameters. We’ve embarked on our Phase II clinical planning, exercise and activities and our conducting manufacturing activities that will be needed to complete, we completed before the Phase II clinical trial in SMA can be initiated later this year. In addition to the clinical program we also extended our joint research program focused on the discovery of additional skeletal sarcomere activators through to the end of 2016. Turning now to the development of omecamtiv mecarbil. In the fourth quarter, enrollment of patients continued in the expansion phase of COSMIC-HF. To remind you, omecamtiv mecarbil is a first-in-class cardiac myosin activator that we are developing in collaboration with Amgen for the potential treatment of systolic heart failure.COSMIC HF is a Phase II double-blind, randomized, placebo-controlled multicenter clinical trial designed to asses the pharmacokinetics and tolerability of omecamtiv mecarbil in patients with stable chronic heart failure and left ventricular systolic dysfunction. Secondary objectives are to asses the changes from baseline in echocardiographic parameters and N-terminal pro-Brain Natriuretic Peptide during 20 weeks of treatment. We expect COSMIC-HF to complete patient enrollment this month.Over a 150 patient in COSMIC-HF has completed 20 weeks of dosing with investigational product. Recently the data monitoring committee recommended the trial proceed without any changes to the protocol. While we do not see un-blinded data from COSMIC-HF, we do receive updates on an aggregate and blind of aggregated blinded data. Members of the data monitoring committee meet regularly and receive un-blinded patient level data, they recommended continuation of COSMIC-HF without change, which we can now project or read out later this year. We are encouraged by the recent progress of omecamtiv mecarbil development program, COSMIC-HF represents the last planned clinical trial and a comprehensive Phase I and Phase II clinical trials program that will inform potential progression of omecamtiv mecarbil to a Phase III registration program. We look forward to data from COSMIC-HF later this year and continue to prepare with Amgen for the initiation of a potential Phase III development program. These activities in campus large scale manufacturing and other ongoing R&D activities including Phase III protocol development and activities related to the further development of omecamtiv mecarbil in Japan to inform and ready its potential inclusion in a global Phase III program. With that update on our cardiac and skeletal sarcomere programs, I'll turn the call over to Sharon for an update on our financials.

Thank you, Fady. As our press release contains detailed financial results for the fourth quarter of 2014, I'll refer you to that public statement for the details of our P&L and balance sheet. We ended the fourth quarter with approximately $83 million in cash and cash equivalents and investments, which represents approximately 24 months of going-forward net cash burn based on our 2015 guidance. That guidance includes the estimated cost of a plan Phase III development activities for tirasemtiv in 2015 and ‘16. The cash year end include 10 million from the purchase of common stock by Astellas in December, however it did not included in additional 45 million that we received in January related to the expansion of our collaboration with Astellas. Revenues for the fourth quarter of 2014 were $21.8 million compared to $24.3 million during the same period in 2013. Revenues for the fourth quarter of 2014 included $2.3 million of licensed revenue, $3.3 million of research and development revenues and 15 million in milestone revenues from our collaboration with Astellas, in addition $1.1 million in research and development revenues from our collaboration with Amgen and a $100,000 in milestone revenues from our collaboration with myocardial. Revenues for the same period in 2013 included $2.4 million of licensed revenues and $4.1 million of research and development revenues from our collaboration with Astellas and $17.2 million of licensed revenues and $0.6 million of research and development revenues from our collaboration with Amgen. Revenues for the 12 months ended December 31, 2014 were $46.9 million compared to $30.6 million for the same period in 2013. Revenues for the 12 months of 2014 were primarily comprised of $15.4 million of research and development revenues, $9.8 million of licensed revenues and $17 million in milestone revenues from our collaboration with Astellas, $4.5 million of research and development revenues from our collaboration with Amgen and $100,000 in milestone revenue from our collaboration myocardial. Revenues for the same period in 2013 were primarily comprised of $3.9 million of licensed revenues and $6.4 million of research and development revenues from our collaboration with Astellas and $17.2 million of licensed revenue and $2 million of research and development revenues from our collaboration with Amgen, as well as a million dollars in revenues from our collaboration with myocardial. Our fourth quarter 2014 R&D expenditures totaled $8.8 million from a programs perspective for the fourth quarter approximately 66% of our R&D expenses are attributable to our skeletal muscle contractility research and development activities which includes expenses associated with tirasemtiv and CK-107, 20% to cardiac muscle contractility activities and 42% to our other research activities. For the 12 months ended December 31, 2014 our R&D expenditures totaled $44.4 million from a programmed perspective for those 12 months approximately 74% of our R&D expenditures were attributable to our skeletal muscle contractility activities which includes expense associated with tirasemtiv and CK-107, 17% to our cardiac muscle contractility program and 9% to our other research activities. Today we announced our financial guidance for 2015, cash revenues are expected to be approximately $40 to $43 million, cash R&D expenses are expected to be in the range of $55 to $58 million and cash G&A expenses will be in the range of $15 million to $18 million, this guidance includes approximately 30 million in revenue which will be deferred and recognized over two year period ending in 2016 under generally accepted accounting principles. This guidance excludes the 15 million milestone payments earned in 2014 from Astellas and estimated 3.6 million in non-cash related operating expenses, primarily related to stock compensation expense. That concludes the financial portion of today’s call. With that, I’ll turn the call back over to Robert.

Thank you, Sharon. As Cytokinetics we embarked on our most important year today. In 2015 we are readying to start our first Phase III clinical trial, a trial that we believe can confirm and extend the results from benefit ALS. The first trial to demonstrate potentially clinically meaningful effects on respiratory function and muscle strength in patients with ALS, we’re encouraged and optimistic following extensive analysis consultations and planning activities that Cytokinetics and tirasemtiv can deliver on the trust and hope that patients with ALS and their care givers have placed in us. Also in 2015, we expect results from COSMIC-HF a large international Phase II trial of omecamtiv mecarbil. We believe omecamtiv mecarbil represents one of the more promising and innovative drug candidates in an area of high and med need. After characterization of intravenous and oral forms of omecamtiv mecarbil in a dozen clinical trials and rolling well over a thousand subjects, we eagerly wait the results from COSMIC-HF to inform potential progression to Phase III. Also in 2015, we look forward to initiating a first Phase II trial of CK-107 in patients with SMA, like ALS and heart failure SMA is also a severe and progressive disease and one for which our skeletal muscle activator hold promise for addressing limitation of muscle weakness. We’re pleased to take steps for to engage patients with SMA and their care givers and pledge the same intelligence and dedication to innovative drug development that has been our hallmark. Now let me turn to our expected milestones for 2015. For tirasemtiv, Cytokinetics expects to initiate a Phase III clinical development program for tirasemtiv in patients with ALS in the second quarter of 2015.For CK-107, Cytokinetics expects to initiate a Phase II trial of CK-107 in patients with SMA in the second half of 2015. For omecamtiv mecarbil, Cytokinetics expects enrolment of patients in the expansion Phase of COSMIC-HF to conclude in this first quarter of 2015 and results from COSMIC-HF to be available in the second half of 2015. We expect to continue joint development activities and collaboration with Amgen directed to the potential advancement of omecamtiv mecarbil to Phase III clinical development. So in conclusion, I’m looking to 2015 with great anticipation. We’ve entered the year stronger operationally, programmatically and financially. Our programs are progressing with the benefit of excellent science, careful oversight and intelligent planning. Our employees are stead fastly dedicated to our mission to bring forward new medicines for patients suffering from severe diseases for which our expertise in the biology and pharmacology of muscle mechanics can make a meaningful difference. We look forward to keeping you informed of our progress. Operator, that concludes the formal portion of our call today, I'd now like to open up the call to questions, please.

[Operator Instructions] And our first question comes from the line of Charles Duncan with Piper Jaffray.

Good afternoon, Robert. Thanks for taking my question and thanks for the color on all the things that you planned to do this year. Quick question regarding tirasemtiv. I'm wondering, do you plan to seek a spot. I mean it seems like you've gotten some pretty good feedback from the regulatory agencies. But are you going to seek kind of a formalized spot on that -- on that trail?

Good question. Thanks for asking. It’s something that we would not likely speak to until we’ve made our final determinations and these are ongoing activities that are - as you can appreciate still very fluid. If something that we've been considering but we have not made any final determinations around.

Okay and second question regarding that probably -- probably the same or similar answer is that, it seems to me that since we've never seen an impact on SBC in the past in an ALF trial. I'm wondering if this could possibly rise to the level of a breakthrough therapy designation.

Here again I think that still to be determined. We're focused to the start of the Phase III clinical trial and we're not going to be communicating that play by play on the regulatory interactions throughout the process but rather when we got something meaningful and material to share that's when will disclose it.

And I know the protocols probably not fully finalized, but can you provide us even a rough order of magnitude estimate on cost and timing. And then wanted to ask you a question about funding.

Sure. Let met turn to Fady to address that in some broad brushstrokes.

The trial is going to be designed to confirm the effects that we saw in BENEFIT obviously and so the scope of it will be similar, probably won't be as large necessarily given the power that we had and benefit too examine change in SVC. Trial will be longer because we’ll be looking to extend that effect, to extend it out to longer time points and then also to be able to correlate improvements and decline of SVC with other respiratory parameters. So, I think the details as you indicate are still being finalized protocols still coming together in its final form and once that's put together and the trial starts we'd be happy to share in more detail.

So one of the things that we get often asked relates to, how are we going to address some of the things we learned in BENEFIT-ALS including tolerability and early termination that we'd like to improve upon in Phase III study, may be I’ll ask Andy if you wouldn’t mind just commenting a bit on what you were thinking in that way.

So you recall that in BENEFIT-ALS all patients who met eligibility criteria received week of open label tirasemtiv at the starting those of 125 milligrams twice a day for a week before they were randomized to either tirasemtiv or placebo and part of the reason for doing that was to ensure that patients would tolerate that before they were randomized but I think what we learned from our investigators, that week is not really not long enough to determine that. I think patients and investigators all consult rushed and because the patients were very interested getting end of the trial I think we saw too often that the decision was made to randomize the patient only to have them decide relatively shortly thereafter that they really couldn’t put out with the adverse events they were experiencing. So we think a two week period gives them more time. It also gives more time for these adverse events such as to anticipate as they often do it continue treatment just gives investigator and the patient little more information before the randomization occurs. And then during double blind treatment, we've titrated up every week and we think slower tight ration would be helpful as we try to achieve the target dose.

So a longer slower dose I think is probably the way we’re going to approach that. And we’ve got some other ideas that you’ll hear more about with the initiation of Phase III that we think will address some of those issues. You also asked about the potential cost of the study maybe I'll ask Fady to mention sort of where we are in the process towards readiness for Phase III and Sharon to speak in general about where we think this is from a order of magnitude cost input.

For sometime now been going through the process of evaluating our partners in this particular trial and going through their capabilities and presentations and thinking as a team that we want to assemble which now will be conducting a global trial. So this is from the outset will a global clinical trial. The team is quite far in those preparations and so that’s why we are pointing to start of the study in the second quarter.

Okay. And funding?

From a cost perspective obviously since we don’t have a final protocol in place in that, all we can really is give brush broad strokes of what we think the clinical will cost in that summer between $25 million and $50 million, we’ll be able to give more specific guidance once we have a final protocol and we’ll be able to narrow that range down.

So that’s the range that we’ve included in our guidance right now and we’ll pinpoint that more as we get definitive information and the study gets underway.

And BENEFIT-ALS can you remind us about how much that was in the trial?

That was the study in the same range closer to $35 million to $40 million.

This one might be a little short or a little smaller in terms that numbers of patients, but a little bit longer in terms of exposure. One last question, then I'll hop back in the queue, regarding omecamtiv. I'm wondering, Robert you mentioned that you've been made aware of kind of blinded safety data. And although it's only over 20 weeks, it seems like nothing stands out to you, at least this point. And so I guess my question is, does the biggest issue with omecamtiv remain therapeutic window or is it translating the improved cardiac output into meaningful clinical benefit in your mind?

So that’s a really good question the Phase II study is not really designed with clinical outcomes in mind, that’s really going to be addressed in Phase III. In Phase II we are looking to ensure that we can maintain target plasma concentrations and exposures with oral dosing out of 20 weeks and those are well tolerated and associated with a durability of effect is measured by multiple echocardiographic parameters, those single one of which is defined as a primary efficacy end point but where we’d like to see that the things that we know and love about this drug for shorter duration in terms of effects on systolic ejection time and stroke volume ejection fraction and other echocardiographic parameters are maintained as the drug is dosed orally in the chronic heart failure population. Fady is there anything else that you’d add to that.

I think it’s the natural step would you take before embarking on a long term Phase III program to dose patients, are sizable number of patients for several months and look at the overall data set.

This is seen if or when decision in terms of next steps in Phase III?

So it’s hard to answer that question, this is a joint decision that we make together at joint development committee with our partners at Amgen and it’s got to be data informed. The data from the ATOMIC-AHF Study, we believe supports progression of Phase III but we also have to see this data too. But we’re proceeding right now in terms of activities at both companies with the goal that this could be entering Phase III, and we want to be best ready for that.

Good deal. Thanks for the added color.

Our next question comes from the line of Joe Pantginis with ROTH Capital Partners.

Hi, this is actually [indiscernible] for Joe. Thanks for taking the questions. Just have a few sort ones in domain. First one is that, what are the types of SVC measurements that you’re looking to agree on with the FDA for the upcoming Phase III?

So, there are number of ways of looking at SVC and also other respiratory parameters of function. And as we have discussed with FDA and where we are now based on those inputs planning for the Phase III study would looking at absolute changes from baseline. We’re looking at sloping change in fall of SVC; we’re looking at SVC falls below at certain threshold. We’re looking at how those changes have effect to measures of respiratory insufficiency in terms of time to event. And there are respiratory questions and parameters within the ALS functional rating scale that we’re interested in and all together we’re looking at a constellation of those things to inform whether this drug in Phase III longer duration treatment is having effects to slow the rapidly progressive decline of respiratory function. So we’re not going to be specific on this call is to what in particular this study is designed for in terms of primary versus secondary or how we’re going to be approaching that.

That's one of the offices, great. And I was also wondering you mentioned that it will be a longer trial and since you’re looking at respiratory measurements and you mentioned that those are extremely important for did these progressions and for the patients. I was wondering, if since this is the longer trial will be able to see may be some correlation between SVC improvements and expect on survival or is that too much less?

So, we certainly will be monitoring for that, that’s not what the study would be designed to demonstrate with the statistical significance on mortality.

Okay. And being that SVC is the primary end points, I was wondering how much the ALSFRS score will have, how much of an impact they will have into broader scheme of things when you look at all the trial data at end.

I’ll turn that over to Fady to answer.

Yeah, I think, ALSFRS is something we certainly plan to monitor over the course of the study, it was not really impacted in BENEFIT-ALS but it is an important measure of overall disease progression and we’ve certainly would want to know whether we were impacting at adversely or even potentially with longer treatment seeing a positive effect emerge. And as Robert pointed our earlier, there are particular and particular respiratory domains of the ALSFRS that will be a special interest, so it’s definitely something we will be looking at.

In light of your question, I will ask Andy to comment on in BENEFIT-ALS, what we learned about the respiratory domains within that functional rating scale over 12-weeks of treatment with tirasemtiv.

You really sort of need to look at the individual question to understand how little change there really was or even could be expected in those three respiratory questions. Look out at the question 12, which is about the use of mechanical ventilation, the entry criteria require that patients not beyond at baseline, so essentially none of them were and then to fall even one point on that scale, you have to be using it intermittently. And then three months basically almost no one fell from not using it intermittently, so the summary statements for all three of those questions is almost all our patients came in rated as 4, which is normal, no functional deficit and also then finished the study at 4. There is no other longer study that we may see more change on those.

So the ALSFRS is of excellent tool for measuring progression of the disease over a longer period of time in a 12-week study, it has its limitations, it can be a more course instrument to detect the deficit that we would have wanted to see, so in that respect we’ve learned a lot about how we want to approach use of ALSFRS and also the respiratory parameters within this ALSFRS in a Phase III study and will employee those learning’s as you learn more in time.

Okay, great. Thank you for all the information guys. That’s really helpful.

Your next question comes from the line of Jason Butler with JMP Securities

Hi Robert. Thanks for taking the question. I just wanted to follow up on the duration question for that the tirasemtiv Phase III trial, when you look at the patients that you enrolled and BENEFIT-ALS and the time since diagnosis and that the natural history of the disease. How long do you think, it would take to see patients or what we would have expected for patients to start meeting mechanical ventilation assistance?

Very good question, I’ll start and ask my colleagues to provide their comments, so as you might recall patients coming into BENEFIT-ALS had a baseline SVC of between 85% and 95% of predicted normal. We saw in our placebo population much like has been seen in the natural history studies and also whether database is like to proactive database that SVC tends to decline on average about 3 percentage points per month. So that you might draw straight-line and see for a population, how long it might take for them to far below 50% of predicted normal where the American academy and neurology guidelines point to the use of mechanical ventilation and support. That varies in terms of compliance of guidelines by geographies tends to be something that in Europe, clinicians will turn to ventilator support earlier but that gives you a sense of how rapidly progressive of the disease is from a respiratory standpoint and what might be expected here in terms of time to event. Fady, Andy anything you’d want to add to that.

Make that sense it really.

Is that answer to your question Jason?

Yes. That's, helpful. Thank you, Robert. And then obviously you are looking for -- for clarity on endpoints and duration from regulatory authorities, are there any another points of clarity on the trail design or conduct that you're still in discussion on?

So let me turn to Fady to answer that first and then let me add to that.

I think we have, what we need its always hard to know until you has the final protocol and get their final comments but, the comments we’ve had and the guidance that we received at least they think in form this protocol the sufficient extent at the moment, so I think we have what we need in order to get started on it.

Yes, I'd like to echo that. So while we are having on going discussions with FDA and EMA those are going to be concluded necessarily at a point in time where we have been would start to study afterwards, we are going to starting to study, we already know enough that helps us guide to final protocol development and timing, so that we can put together the final plans and budgets but those conversations will no doubt continue.

Okay, great. And then last question from me, as -- based on your current or most recent interactions, do you see this Phase III trial as the only Phase III trial that you would need for full approval or could it be -- could you require a confirmatory post-approval study as well?

It’s an excellent question; one that I think will have to be data dependent. And at this time in light of still needing to conduct a study it’s not something that I think we can be speculating on.

Okay, great. That’s helpful. Thanks a lot for taking the questions.

Your next question comes from the line of Chad Messer with Needham.

It sounds like that 2015 is going to be another important year for you guys. So my question is this and I know you're still working on the protocol has been, limited amount you've been able to say but you have shared something so for example the tolerability is something you're hoping to improve upon based on some things you learned in the 2b. Is there anything you could do to sort of address the -- I'll just call it disappointing result with ALSFRS endpoint or do you just believe that endpoint is not relevant and does not need to be queried it all in Phase III?

Well, I think, I mean the end point needs to be clearly but I think there is a pretty clear, so I would say concusses set its not the only relevant end point in ALS. It’s a, it’s a broad scale and impacting any of this specific domains by in fact be considered meaningful, so the respiratory domain as ALSFRS for instance by itself is probably something that would be considered clinically meaningful. So we intend to measure the ALSFRS in the study, we’re not measuring it but it does not need to serve as the primary end point.

Okay. Would you be concerned it parts or all of the ALSFRS actually went against tirasemtiv treatment on, I said would you be concern if they did?

Would you be concerned if they did? why did you have to be concerned if they went and enough of the magnitude difference that even approached something specifically significant but I would imagine given what we saw in benefit that we could expect to see a relatively neutral effect on ALSFRS-R that we’re showing no impact one way to the other, in a clear fact on the respiratory measures that will be employing, I think we would be falling.

I think the field is learning a lot about the limitations of ALSFRS and I think were hoping to inform that with study like BENEFIT-ALS which was as large in international as it was, not to say that it’s not useful but its certainly not the only thing to look. And we’re encouraged by the feedback we’re getting that there other ways of measuring function that don’t rely on ALSFRS but Fady’s point, we just still measure it and especially of a longer study we may see that the drug does have a positive effect on ALSFRS. One of the things that were looking to this Phase III study to hopefully demonstrate is that with improved tolerability we may see effects that lean in the favor of tirasemtiv, some of the tolerability issues that we think we can address; they have confounded the findings regarding ALSFRS in BENEFIT-ALS.

And Robert, I know you've said you haven't made any final decision on an SPA, but given that you're still finalizing the protocol, is that something you did want to go ahead and do -- I just, do you still think you'd be able to start to study in the second quarter? I guess that my question would be?

Yes, I know don’t want to putting more emphasis on finalizing the protocol then it deserves, so finalizing the protocol is something that is relatively straight forward for where we are today based on the inputs we already have and the information that we have gleaned from regulatory authorities and also consultations and others, so one shouldn’t interrupt that to mean that we’ve got a long way to go to make that happen.

Okay, thank you. I appreciated the added insight.

And our final question comes from the line of George Zavoico with MLV and Company.

Thanks for the update on the guidance. I have a question regarding the -- this is actually for Sharon. You've guided to $55 million -- if I'm not wrong, $55 million to $58 million in R&D. And my question is, much of this is reimbursed as evident by the R&D revenues related parties this quarter. You actually are profitable this quarter as you were a year ago. So could you -- you're basically just paying for the tirasemtiv because 107 was paid for by Astellas and omecamtiv by Amgen. So can you break down a little bit where you get the $65 million and how much of that you might expect to get reimbursed by?

To the reimbursement on coming to forms to the Astellas, the Astellas I think we told you over the next two years will have 20 million in reimbursement from Astellas with respect to what we’re going to get both for the clinical development and the reimbursement of FTEs both on the development and the research side of things. And then to the 55 million to 58 million includes the 2015 portion of that, I'm not going to get into the detail of what that is, it includes the tirasemtiv clinical trial and that includes the research organization some of which is reimbursed by Amgen and the rest of the organization which is not. And then obviously the G&A expenses of 15 million to 18 million those aren’t reimbursed. Does that help you?

Yes, it helps. So from a cash flow perspective though, because it's amortized over few years or two years, your P&L is actually -- cash flow is actually more favorable than what it appears from just the income statement. Is that fair?

So if we take a look at the revenue guidance was 40 million to 43 million which includes the 30 million that we received in January for the upfront payment from Astellas. So I think that if you look at that back gives you an idea of what the overall reimbursement are. So net for the year we’re going to be on a cash flow basis net $30 million to $33 million in burn.

I think that’s why Sharon pointed to the pro forma where we indicate that we have approximately an over 24 months of cash.

Yeah. Now that’s very comfortable position to be in for sure.

And that does not include any potential milestone payments that we might earn on future progress.

Yes, I mean that's even better. And the last question, that you mention preclinical research in your press release and you did mention, I think about it on the call, you expect anything coming out of that, that you can talk about more definitively this year or maybe next year?

So we tend not to point to that in our guidance but as you know we have active research collaborations with each of our parterns Amgen and Astellas. And those are directed to next generation approaches when we have compounds that enter IND enabling studies will speak to that. We have also unpartnered program here under supervision of Fady and the team and those are also directed towards other aspects of muscle biology. We continue to lead in this area not only with respect to contractility but also the Energetics and metabolism of muscle and other areas that will be hopefully translating into other monetizable events and progress and development but we prefer not to speak to where we are with those research programs or the specific targets of them.

Sure that's understandable. But that also includes a smooth muscle biology, right?

It includes lots of things.

Okay, good luck and look forward to pretty good news flow this year.

Thank you, George. Appreciate that.

And we have no further questions in queue conference back over to Mr. Blum.

So, thank you operator, and thank you to all the participants on our teleconference today. 2014 was a strong year. 2015 looks to be another very important year. We appreciate your continued support, your interest in the company and operator with that, we’ll conclude the call.