Earnings Labs

Cytokinetics, Incorporated (CYTK)

Q3 2019 Earnings Call· Sat, Nov 2, 2019

$61.10

-0.81%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.
Transcript

Operator

Operator

Good afternoon and welcome ladies and gentlemen to the Cytokinetics Third Quarter 2019 Conference Call. At this time, I'd like to inform you that this call is being recorded and that all participants are in a listen-only mode. [Operator Instructions]. I will now turn the call over to Diane Weiser Cytokinetics' Vice President of Corporate Communications and Investor Relations. Please go ahead.

Diane Weiser

Analyst

Happy Halloween everyone and thanks for joining us on the call today. Robert Blum our President and Chief Executive Officer will kick off the call with a review of our key priorities. Then Fady Malik our EVP of Research and Development will provide updates on key developments for omecamtiv mecarbil our cardiac myosin activator under our collaboration with Amgen as well as our CK-274 our wholly owned cardiac myosin inhibitor now proceeding from Phase I to Phase II development. Then Robert Wong our VP and Chief Accounting Officer will provide a financial overview for the quarter; and Ching Jaw our SVP and Chief Financial Officer will discuss corporate development strategies. Andy Wolff our SVP and Chief Medical Officer can't be on the call today so Robert will then cover off on updates relating to well deceptive artist skeletal muscle proponent activator, under a collaboration with a stellar before concluding with thoughts on the company's outlook, and expected milestones for the remainder of the year. Please note that portions of the following discussion including our responses to questions contain statements that relate to future events and performance rather than historical facts and constitute potent looking statements or actual results might differ materially from those projected and these forward looking statements, cover off on updates relating to reldesemtiv our fast skeletal muscle troponin activator under a collaboration with Astellas before concluding with thoughts on the company's outlook and expected milestones for the remainder of the year. Please note that portions of the following discussion including our responses to questions contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements. Our actual results may 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. We undertake no obligation to update any forward-looking statements after the call. And now I'll turn the call over to Robert.

Robert Blum

Analyst

Thank you Diane and thanks again to everyone for joining us on the call today. We continue to make good progress against our priorities during the third quarter. And to begin today's call I'd like to remind everyone what those priorities are in order to provide some context for the updates you'll be hearing about from the team. Priority number one remains the advancement of omecamtiv mecarbil our cardiac myosin activator currently the subject of 2 ongoing Phase III clinical trials under our collaboration with Amgen. As you may know enrollment in GALACTIC-HF completed in July. That in and of itself is a big achievement considering the number of patients sites and countries that participated in this important clinical trial. Looking forward based on the accrual of clinical of, endpoint events in the trial we expect the second planned interim analysis to occur in the first quarter of 2020. While we certainly don't expect the trial to conclude as a result of that analysis we do recognize that that is a possibility and we need to be ready. With that said both GALACTIC-HF and METEORIC-HF continue to be on track to read out results in 2021. Given the proximity to the results of these key trials Amgen and Cytokinetics have stepped up commercial readiness activities including work streams focused on matters such as market access health economics and medical affairs and we'll elaborate on that in a moment. Priority number two is the advancement of CK-274 our wholly owned cardiac myosin inhibitor for the potential treatment of hypertrophic cardiomyopathy or HCM and we expect to begin Phase II by year-end. As we said we believe CK-274 represents potential next-gen class drug candidate that has now demonstrated a distinct clinical profile in healthy subjects consisting with that which we have observed…

Fady Malik

Analyst

Thanks Robert. The most important developments in our cardiovascular program this quarter is centered around completing enrollment in GALACTIC-HF and beginning to advance CK-274 into Phase II clinical development as a result of supportive and encouraging data coming out of the Phase I study in healthy volunteers. I'll address both of these developments starting with omecamtiv and GALACTIC-HF. On our last call we discussed the breadth of enrollment of more than 8200 heart failure patients in GALACTIC-HF and this, that this now represents one of the largest outcome trials ever conducted in heart failure. So why is this important and how is the treatment landscape in heart failure changing as omecamtiv mecarbil gets closer to the finish line in this trial. While it's an exciting time in the treatment of heart failure with newer medicines like Entresto being added to standard of care and existing medicines like the SGLT2 inhibitors recently demonstrating reduced risk for worsening heart failure and cardiovascular death when added to the standard of care. These developments underscore the continuing burden of heart failure and the opportunity to improve patient outcomes with new approaches to treatment. With this backdrop and given our having enrolled over 8200 patients in GALACTIC-HF we are hearing increased enthusiasm for the clinical community and its thought leaders for the important potential omecamtiv mecarbil may represent to heart failure therapy. As therapeutic rationale and development make it the first and only heart failure medicine specifically developed to treat the fundamental problems for these patients that is the inability of their hearts to pump effectively. As such omecamtiv mecarbil has the opportunity to become foundational in treating heart failure with reduced ejection fraction. In GALACTIC-HF we've now enrolled, we now have over 10,000 patient years cumulative exposure with a number of patients having been…

Robert Wong

Analyst

Thanks Fady. I'll first provide an update on cash revenue and spending and then Ching will review our corporate development strategy. More details of our results for the third quarter 2019 are included in the press release which we released earlier this afternoon. We ended the third quarter with $166 million in cash and investments. Our revenue in Q3 2019 came from our strategic alliances with Amgen and Astellas. For Amgen we recognized revenue associated with the reimbursement of our development expenses related to METEORIC-HF. For Astellas we recognized revenue for reimbursement of our research activity as well as for development expenses incurred related to our closing out of FORTITUDE-ALS. Our third quarter 2019 R&D expenses decreased to $20.2 million from $21.7 million in the third quarter of 2018 primarily due to lower spending related to our neuromuscular development activities offset by increased activities related to METEORIC-HF and CK-274. More than half of our R&D expenses were attributable to our cardiovascular programs as expected given activity for METEORIC-HF and the cardiac myosin inhibitor programs. And the remainder of our expenses were attributable primarily to our early research activity. Our third quarter 2019 G&A expenses were $9.8 million up from $7.2 million in Q3 2018 due primarily to increased outside legal expenses and higher personnel-related costs including stock-based compensation. And now Ching will provide our corporate development strategies.

Ching Jaw

Analyst

Thanks Robert. As Robert mentioned we ended the third quarter with $166 million in cash which represents nearly 24 months of forward cash based on our 2019 guidance of $85 million to $90 million net cash burn. As we have previously stated our strategy remains to manage our cash prudently through the expected readout of results from GALACTIC-HF in 2021. Towards that objective in September we presented our strategic plan to our Board which focused on prioritizing near-term spending to position the company for long-term growth. Prior to the Board meeting we engaged the company's middle management and senior leadership team in a program prioritization exercise and then we did the same with our 4 members. We consider scientific and clinical validation probabilities of technical success regulatory path to approval and market access and commercial potential. We also assess unmet patient needed and potential for impacts. The results from all 3 groups were remarkably similar and echo what Robert outlined at the start of the call. We consider omecamtiv mecarbil to be our top priority CK-274 in OSDM to be our second priority and reldesemtiv in ALS to be our third priority. As such near-term spending will be allocated based on the strength of order. What that also means is that others of our programs in development and research will not receive comparable funding until such time as we have access to more capital. For long-term growth we also discussed with the Board our approach to broaden our research platform and to strengthen our commercial capabilities in anticipation of potentially multiple commercial product launches in the next few years. As we look toward year-end our balance sheet remains strong but we also are continuing to seek additional capital to extend our cash runway to our recent expansion of activity inclusive of potential business development collaborations and/or project financing. In the third quarter we made progress toward our potentially executing on multiple transactions some of which we can foresee occurring in this current fourth quarter. We remain confident in our ability to vigilantly deploy capital against our prioritized programs to deliver optimal patient care and return on investment for our shareholders. And with that I'll turn the call back over to Robert.

Robert Blum

Analyst

Thank you, Ching. To pick up on Ching's comments regarding prioritization of R&D programs and spending the exercise we went through with our management team and Board was especially instructive and based on conversations we've had with many of you we believe our internal priorities are well aligned with feedback we've received from external stakeholders as well. As we execute on these priorities we do so with an eye toward initiating commercialization of what could be our first approved therapy omecamtiv mecarbil. As you've heard we're substantially dialing up precommercial activities specifically in the areas of health economic and outcomes research market access and commercial planning and we've added key new hires to our teams alongside those of counterparts at Amgen. The number of concurrent work streams and support of potential launch readiness is impressive and underscores the significant opportunity that omecamtiv mecarbil represents to patients with systolic dysfunction heart failure with the clinical and economic burden that's only growing given the aging demographics. I also want to emphasize our enthusiasm and urgency to initiate REDWOOD-HCM the Phase II clinical trial of CK-274 in patients with obstructive HCM. This is a patient population in great need of novel therapies to treat both the symptoms of HCM which impact everyday life and the ability to do some of the things that we take for granted like walking up a flight of stairs or going food shopping as well as the underlying contractile dysfunction and fibrosis. As Fady discussed the data from our Phase I study argued well to what we may see in the Phase II trial and ultimately what physicians can look forward to in terms of ease-of-use titration and potential safety and efficacy in the clinical setting. Finally we're continuing to delve deeply and critically to evaluate the results…

Operator

Operator

[Operator Instructions] And we will take your first question from Jason Butler with JMP Securities.

Jason Butler

Analyst

Thanks. Congrats on all the progress across the pipeline in the quarter. I had a couple on 274 and then a follow-up on omecamtiv. For the Phase II REDWOOD trial Fady I think you said that you're going to be assessing the LVOT gradient both at rest and post exercise. If that's correct can you just talk about those 2 measures? And how we should think about those data points? And how informative each is in terms of Phase III planning? And then can you just speak to how you think about opportunities for CK-274 beyond obstructive HCM for example and most obviously on unobstructed patients?

Fady Malik

Analyst

Yes, sure. I'll take the first question. So just to be clear what we will be assessing is the effect of 274 on the left ventricular outflow gradient at rest and post-Valsalva not post exercise. So Valsalva is a breathing maneuver where you bear down against a closed glottis so that you're generating intrathoracic pressure and increasing the gradient through that means. It's a common maneuver that's done in HCM patients to look at maximum gradient. And so those 2 maneuvers will look at both that, the Valsalva grading and the resting gradient in this trial. There won't be an exercise assessed in this trial. I think our experience in other domains just really to be confident in a placebo-controlled trial of, effect of any drug on exercise. We need a much larger study than we have planned right now for this Phase II trial. The second question you asked if you can remind me was...

Diane Weiser

Analyst

Wanted to know the impact of that 2 Phase III plan.

Fady Malik

Analyst

Right. So the relationship of Phase III planning is that the effect of CK-274 on the gradient is the most sensitive way by which we can establish dose and a dosing regimen. So it's a highly sensitive biomarker of cardiac myosin, inhibitor's effect and it'll enable us really to characterize exposure response relationship and set dose properly for Phase III. So that I think was the main objective of our Phase II study is to ensure that we are dosing patients that are similar to those that we would enroll in Phase III and then we dose them with a similar dosing regimen as we would've employed in Phase III.

Robert Blum

Analyst

So Jason you also asked about next steps that could include other indications. And I think we're putting those on pause right now to better understand the landscape around which a cardiac myosin inhibitor may have effect in non-obstructive HCM but also in other indication where we have ambition. So as you heard our priorities laid out those are certainly potential priorities down the road. But given our current capital and how we're thinking about our business right now we're going to focus to those things that we underscored in this call.

Jason Butler

Analyst

Great. And then just one on omecamtiv. Can you provide any color around the upcoming interim in terms of whether the stopping boundaries are focused on the primary endpoint versus key secondary endpoints such as cardiovascular death? And then do you have any plans to present or publish baseline characteristics or the statistical analysis plan at any point?

Fady Malik

Analyst

Yes. I can't really comment on specifics of what the criteria are. Clearly obviously they would involve the primary endpoint being met but I won't really comment beyond that. The baseline characteristics of the trial will be something that will come out in appropriate academic forum in the next few months. And the, we are planning to publish a paper on the design anaphylactic that will hopefully also be in the public domain in the next few months as well.

Robert Blum

Analyst

I think in many respects having that information will elaborate on some of the things you've been asking about Jason. And that will be forthcoming.

Jason Butler

Analyst

Right, great. appreciate all the all of the additional details. Thanks for taking questions. Thank you

Operator

Operator

Your next question comes from the line of Joe Pantginis with H.C. Wainwright.

Joe Pantginis

Analyst · H.C. Wainwright.

Hi, guys, Good afternoon. Thanks for taking the questions. A couple of questions. Actually it's nice to get the visibility on the Astellas' collaboration for reldesemtiv and reaching almost ultimate endpoint here of having these negotiations virtually complete. So my first question is I guess they're somewhat related is can you give any indication of the level of co-funding that Astellas might provide for the Phase III? And also I guess it impacts what your, the overall impact on milestone revenue is for the next 24 months.

Robert Blum

Analyst · H.C. Wainwright.

Hello, Joe, Yes. So obviously this is still a matter that is dynamic. And at this stage we have agreement and principle but there are still a number of other things that have to be agreed and finalized before we could really answer your question. But I think you should expect that were we to make a final agreement this would be a program that Cytokinetics would be advancing where the majority of development cost nonclinical and clinical would be borne by Cytokinetics. And Astellas would provide cofunding but it would not be a majority but rather a minority of that co-funding. And in exchange for royalty the flip side of that is Cytokinetics would be retaining the exclusive commercial rights in order to enable a substantially bigger piece of the economics on the other side. And with regard to milestones and royalties I think that will have to stay silent for now. We'll not comment like we have been before on what would be potential milestones and royalties only that which is earned.

Joe Pantginis

Analyst · H.C. Wainwright.

I understand. And then I guess the question is the drug or open for re-partnering? Is this something you want to consider? Or wait until you have some finalized Phase III protocols? And then secondly a question for Fady maybe I just wanted to see if there was any update regarding METEORIC.

Robert Blum

Analyst · H.C. Wainwright.

So I'll start and I'll turn it over to Fady. Regarding partnering the reason we approached Astellas the way we did is very much because we have the conviction ourselves to be leading the development of, and commercialization of reldesemtiv in ALS and SMA. So I think partnering is not right now something that we're giving much thought to as much as we're rather instead trying to figure out how we ourselves want to go forward and what kind of timing protocol budget etc.. And with respect to METEORIC I'll turn it back to Fady.

Fady Malik

Analyst · H.C. Wainwright.

Yes. We're very pleased with how METEORIC is going. We've continuing to add sites to the study regularly. The site's enrolling well. The sites that are open that we have, I think we're on track in terms of enrollment in that study. Types of patients we're getting and I'm very pleased to see sort of these are the kinds of patients that I think we can have an impact on their exercise performance just based on the initial characteristics of their exercise testing. So I'd say everything's going smoothly there.

Operator

Operator

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

Chad Messer

Analyst · Needham & Company.

Hello. Good evening. First I had one on the NEALS data. The, those results make a lot of logical sense to me. Was that something you also looked at with reldesemtiv in any way?

Robert Blum

Analyst · Needham & Company.

So this is with reldesemtiv. Those data that we...

Chad Messer

Analyst · Needham & Company.

I meant with tirasemtiv. My apologies. A - Robert Blum Your question is did we look at the effects of tirasemtiv parsing slow progressers from faster progressers. I'll let Fady answer that question. But before he does I'll say one of the things that prompted us to do this is increasingly momentum in the ALS community to look at slow progressers distinctly from faster progressers in clinical research in general. And as you may know the FDA recently approved a drug called edaravone that was studied in an all-comers population and was demonstrated no effect in that first Phase III study. But then based on a post-hoc analysis identified a clinically meaningful effect in a group of faster progressing patients and then studied that group again in another Phase III trial. Only 129 patients in that second Phase III trial saw a meaningful effect on ALSFRS in the past six months and submitted that for FDA approval. FDA approved it for all patients faster and slower progressing patients. So that was remarkable and very important in informing the way we wanted to approach some of these analyses and some of our thinking. But I'll now turn to Fady to answer your direct question.

Fady Malik

Analyst · Needham & Company.

Yes. We did look at those sorts of things in the VITALITY study as well. And the, I think our conclusion were very similar in that close to slowest progressers' benefit the least and they say dilute the signal that you see with the faster progressers. So it makes sense if you will having taking a look at it and FORTITUDE to do, that we saw the same thing.

Robert Blum

Analyst · Needham & Company.

It stands to reason that it's the therapeutic hypothesis for an investigational medicine is to slow the decline of disease progression. It's difficult to separate that potential effect out absent some measure of progression in a patient population. So it's in one way an enrichment strategy to enroll those patients who are faster progressing but it's also a practical one.

Chad Messer

Analyst · Needham & Company.

That all makes sense to me. And you've kind of almost completely precluded my follow-up to that which is whether looking at the faster progressers is what makes sense to your next trial. I don't know maybe you'll comment any further on trial design. I know you're still working that out but that sounds like a logical way to consider.

Robert Blum

Analyst · Needham & Company.

Here's what I'll tell you Chad. There is still a lot of work we need to do in order to be able to make a commitment to a next trial. We mentioned that we did have a round of questions with FDA the Type C meeting interaction but we still would have an end of Phase II meeting. There's still a whole bunch of work we want to do with our statisticians and with clinical opinion leaders. We not only want to talk to clinical experts and regulatory authorities but we're doing a very deep dive with payers. Both in Europe and the U.S. we want to understand what they perceived to be a more meaningful value drivers before we might commit to another trial. So all of this is going to take some time and I think it's the right thing to do to be asking and answering these questions. And we'll have more to say as we continue these activities.

Chad Messer

Analyst · Needham & Company.

Right. Great. And then if we could just move on quickly to HCM. Can you maybe briefly educate me on what the important differences are between obstructive and nonobstructive? At a clinical level the patient's look have a lot of similarities but both you guys and MyoKardia have kind of prioritized the obstructive. I'm wondering if there's anything trickier about the unobstructive one whether it's clinically or regulatorily or just a heterogeneity or something. Any direction on that would be appreciated.

Fady Malik

Analyst · Needham & Company.

Yes certainly. So the HCM patients are classified into these 2 subtypes. And the reasons for the classification is that the obstructive patients the muscles the heart thickens asymmetrically. And it thickens to a greater extent right underneath where the blood exits the heart out of the aortic valve. And so as the heart's contracting that obstruction gets in the way with blood leaving the heart and therefore it's called obstructive hypertrophic cardiomyopathy. In those patients relatively small changes in the way that that muscle functions can have big impacts on the outflow of blood from the heart because the obstruction lead for the obstruction can greatly improve forward cardiac output. The nonobstructive patients generally have thickening of the heart all around and maybe it may not be the same everywhere maybe a bit asymmetrical but it is right underneath where the outflow leaves the heart. And in those patients their symptoms are derived from how stiff the heart is. And so different factors are at play if you will in terms of relieving. And you really need to probably see improvements in the way the heart feels the way the heart remodels potentially as it may take longer to see it impact of drug therapy in that population whereas in the obstructive patient you can achieve a relatively quick pharmacodynamic effect is relieving the obstruction and thereby improving their symptoms on the basis of that.

Chad Messer

Analyst · Needham & Company.

Okay. I guess given that we have an opportunity to learn a lot this quarter from the mavacamten the Stage II study anything you are particularly hoping to learn from that?

Fady Malik

Analyst · Needham & Company.

Yes. Absolutely. I mean it will be very interesting to see how the nonobstructive patients behave. I'm optimistic that they will find positive effects of the mechanism of action in that patient population and, on their symptoms and potentially on their exercise tolerance as well.

Operator

Operator

Your next question comes from the line of Jeff Hung with Morgan Stanley.

Jeff Hung

Analyst · Morgan Stanley.

Hi. This is Hannah on for Jeff. We have just a few more questions on CK-274. So how long do you expect enrollment to take? And when might we see initial data? And then given that the Phase I was in healthy volunteers can you remind us what gives you confidence that we'll see the LVOT gradient improvements in the obstructive HCM patients?

Fady Malik

Analyst · Morgan Stanley.

Yes. So it's a little early to comment on how long we think the trial will last. We think we expect to see results in 2020 from some set of patients in that trial. We'll have more to say about it as trial gets under way and begins rolling in our upcoming quarterly call. As to your second question the effects of CK-274 in healthy volunteers was to reduce overall cardiac function. And so it is, was clearly active in that population. And that effect of reducing cardiac contractility is the basis for reducing the left ventricular outflow tract obstruction. So, and we fully expect the healthy volunteer data to be predictive of what we will see in patients.

Robert Blum

Analyst · Morgan Stanley.

Yes. It's not just the Phase I data that then supports through that therapeutic hypothesis. It's also preclinical data they're very consistent for pharmacodynamic effects. What I'll also say is with regard to timing of results as Fady indicated that depends on enrollment it also depends on whether we're going to be dose escalating from 1 to 2 cohorts or 2 to 3 cohorts. That will ultimately be going to be determined based on the data we're observing.

Jeff Hung

Analyst · Morgan Stanley.

Great. And then if I can just ask one more on financials. How were you thinking about the cash burn and expenses? Are you still guiding to I think it was $85 million to $90 million in cash burn?

Ching Jaw

Analyst · Morgan Stanley.

That is correct. For 2019 we're still guiding to $85 million to $90 million in net cash burn.

Operator

Operator

Your last question comes from the line of Ted Tenthoff from Piper Jaffray.

Ted Tenthoff

Analyst

Hi guys, Most of my questions have been answered but I want to kind of get a sense for sort of the opportunity for 274 in different types of the conditions. So whether it'd be obstructive or unobstructive or nonobstructive how do you sort of see that progressing if you could share it?

Robert Blum

Analyst

Yes. I'll start and maybe ask Fady to comment. We've been working in this field for quite a long time as pioneers. As it pertains to both activating and inhibiting cardiac myosin we've learned a lot preclinically and clinically that reads across multiple different patient populations. And we certainly understand this biology quite well. As such we're looking at this development program as it pertains to addressing issues of hypercontractility whether that manifests itself in patients with HCM obstructive or non-obstructive but there are also other populations that have hypercontractility as I'll ask Fady maybe to elaborate.

Fady Malik

Analyst

Yes. I think there are obviously the patients with HCM the obstructive nonobstructive patients. There's also a large population of patients with heart failure with preserved ejection fraction and I think we're learning more about those patients and how to subclassify them. Certainly there is going to be a substantial portion I think the basis for their symptoms and their condition is underlying hypercontractility of the heart. Often you see in these patients very high ejection fractions hearts that have hypertrophy. It may not have hypertrophy and increases in cardiac function of the degree that the HCM patients do but there are part of that continuum. And they may also provide an eventual opportunity to explore this mechanism in.

Robert Blum

Analyst

You may have seen the article in The Wall Street Journal yesterday about heart failure and its increasing prevalence and clinical and economic burden. And that's not just systolic dysfunction heart failure increasingly cardiometabolic disease is reading on HFpEF and there are components and subsets of the HFpEF group that we're especially interested in. And this is a very significant area of ongoing research and development outside of Cytokinetics. So it's premature to be speculating too much on that until we have more of the basis by which we can commit to shareholders as to what we would be expecting to do. But please know that it is an area of very high interest for us.

Operator

Operator

And there are no further questions at this time.

Robert Blum

Analyst

Thank you, operator. And I want to say thank you and Happy Halloween to everybody that joined on the call. I hope we didn't keep you too long. I will say that we shared quite a bit today about how we're thinking about priorities at the company and how we're thinking about extending and preserving capital through our most important value-generating milestones. And I do believe that as we've elaborated we're aligned with feedback we've received externally from shareholders but also as is in keeping with our reputation and history of following the science. As such we look forward to keeping you updated on our progress as we conclude 2019 and peer through 2020 and especially as we recognize there are quite significant value creating milestones anticipated as we go forward. With that I'll end the call and thank you everybody for your time and your interest in our company.

Operator

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.