Cytokinetics, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Filed February 25, 2022. Cytokinetics is a clinical-stage biopharmaceutical company developing muscle-activating and muscle-inhibiting therapies. It had no marketed products and generated no product-sales revenue.
Financial results and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $70.4 million | $55.8 million | Up $14.6 million |
| Research and development expense | $159.9 million | $97.0 million | Up $62.9 million |
| General and administrative expense | $96.8 million | $52.8 million | Up $44.0 million |
| Operating loss | $186.3 million | $93.9 million | Loss widened |
| Net loss | $215.3 million | $127.3 million | Loss widened |
| Net loss per share, basic and diluted | $2.80 | $1.97 | Loss per share increased |
| Operating cash flow | $(142.5) million | $8.9 million | Decreased $151.4 million |
| Cash flow from investing | $(147.8) million | $(196.5) million | Lower outflow |
| Cash flow from financing | $320.0 million | $234.1 million | Higher inflow |
- Revenue composition: $54.9 million license revenue, $10.6 million research and development revenue, and $5.0 million milestone revenue. License revenue primarily reflected the Ji Xing omecamtiv mecarbil agreement; research revenue largely came from Amgen and Astellas reimbursements.
- Margins: The filing provides no meaningful product gross margin because the company had no commercial product sales. Operating expenses substantially exceeded revenue.
- Year-end liquidity: Cash and cash equivalents were $112.7 million and short-term investments were $359.0 million, totaling $471.6 million. Including $152.1 million of long-term investments, cash, cash equivalents and investments totaled approximately $623.7 million. Working capital was $463.8 million.
- Debt and other obligations: At December 31, 2021, principal indebtedness was $183.0 million: $45.0 million term loan and $138.0 million convertible notes due 2026. Balance-sheet carrying values were $47.4 million and $95.5 million, respectively. The company also reported a $179.1 million liability related to sold future royalties and $87.0 million deferred revenue.
- Capital raised: A July 2021 public offering produced $296.9 million net proceeds. The company also issued $20.0 million of common stock to RTW investors in December; $15.1 million was allocated to the stock component under its accounting treatment.
Material changes and developments
- Revenue rose 26% year over year, but operating expenses increased 71%; the net loss widened by $88.0 million. R&D growth reflected greater cardiac-program and ALS-trial spending, regulatory costs, new-facility expense, and approximately $14.6 million of Amgen transition-related materials costs. G&A rose with commercial-readiness spending, personnel and facility costs.
- Amgen’s termination of its collaboration became effective May 20, 2021, returning worldwide omecamtiv mecarbil and CK-136 rights to Cytokinetics. Servier’s European sublicense termination took effect in March 2021. Cytokinetics assumed development and commercialization responsibilities and associated costs, and said it was evaluating new partners and building commercial capabilities.
- Astellas terminated its other skeletal sarcomere activator collaboration effective November 1, 2021. Astellas’ cost-sharing commitment for the reldesemtiv COURAGE-ALS trial continues, capped at $12 million.
- The company relocated to its new South San Francisco facility in 2021. The move contributed to higher lease and property costs, and the company recorded a $2.8 million impairment loss on former headquarters right-of-use assets.
- Shares outstanding increased from 71.0 million to 84.8 million during 2021. The July public offering was the main financing source; the company reported no issuer share repurchases.
Outlook, commentary and risks
- Management said existing cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months after issuance of the financial statements, but emphasized that this estimate depends on assumptions and additional capital may be needed. The filing text provided does not give clear numeric 2022 revenue, R&D or G&A guidance.
- On January 7, 2022, the company entered Royalty Pharma agreements: a $50 million initial term loan, with up to $250 million of additional loans conditional on development and regulatory milestones; and $50 million initial proceeds from selling aficamten revenue interests, with up to $100 million additional proceeds conditional on clinical-trial starts. The loan’s aggregate repayment amount is generally 190% of principal. Cytokinetics also repaid its prior term loan in early 2022. These transactions occurred after year-end and are not included in 2021 cash balances.
- On February 4, 2022, the FDA accepted the omecamtiv mecarbil HFrEF NDA for standard review, with a November 30, 2022 target action date. Approval is uncertain: GALACTIC-HF met its primary composite endpoint (HR 0.92; p=0.025), but secondary endpoints were not met, including cardiovascular death. A dosage-selection test may be required, and the assay agreement used in trials ended with the Amgen collaboration.
- On February 15, 2022, Cytokinetics reported that the Phase 3 METEORIC-HF trial did not meet its primary exercise-capacity endpoint. The filing also reports positive 2021 Phase 2 REDWOOD-HCM results for aficamten and an open Phase 3 SEQUOIA-HCM trial; the FDA granted aficamten Breakthrough Therapy Designation. COURAGE-ALS, a Phase 3 reldesemtiv trial, was open to enrollment.
- Key risks include clinical-trial failure or delay, regulatory rejection, enrollment and COVID-19 disruption, reliance on CROs and contract manufacturers, loss of former partners’ support, substantial ongoing cash burn, financing availability and milestone-dependent funding, commercialization capability, reimbursement and pricing, competition, and intellectual-property challenges. No material legal proceedings were reported.
- An unusual accounting estimate change reduced 2021 non-cash interest expense on the omecamtiv royalty liability by $9.8 million versus 2020 and reduced 2021 net loss by $11.5 million, or $0.15 per share. The liability’s estimated imputed rate fell from 15% to 10%, based on revised sales and timing assumptions.
Important facts for investors to verify
- FDA review outcome and any requirement, clearance or approval for an omecamtiv mecarbil dosage-selection test.
- Whether aficamten Phase 3 results meet endpoints and funding conditions, and whether additional Royalty Pharma proceeds become available.
- Enrollment, interim analyses, safety and efficacy progress in COURAGE-ALS and SEQUOIA-HCM.
- Cash burn, commercial-launch spending, financing needs, and the obligations and covenants attached to debt and royalty transactions.
- Assumptions underlying the royalty liability and revenue recognition, including the $54.9 million Ji Xing license allocation and milestone estimates.