Cytokinetics, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter report. Cytokinetics is a clinical-stage biopharmaceutical company developing muscle-directed medicines; it reported no commercial product sales.
Financial results and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $26.9 million | $31.5 million |
| Research and development expense | $86.1 million | $89.1 million |
| General and administrative expense | $39.6 million | $31.3 million |
| Operating loss | $98.9 million | $88.9 million |
| Net loss | $121.7 million | $106.3 million |
| Net loss per share, basic and diluted | $2.11 | $1.95 |
| Net cash used in operating activities | $90.9 million | $101.2 million |
- Revenue fell $4.6 million, primarily because 2018 included $5.1 million of Astellas license revenue. 2019 R&D reimbursement revenue was $26.9 million; no royalty revenue was recognized.
- R&D expense declined $3.0 million: lower skeletal-muscle program spending was partly offset by increased cardiac development, including omecamtiv mecarbil and CK-274. G&A increased $8.3 million, mainly from legal and personnel-related costs.
- At year-end, cash and cash equivalents were $36.4 million, short-term investments $188.7 million and long-term investments $42.7 million: $267.8 million combined. Current assets were $233.8 million and current liabilities $26.0 million.
- Debt included $45.0 million principal under the secured term loan and $138.0 million principal of 4.0% convertible notes due 2026. The notes’ balance-sheet carrying value was $84.2 million after accounting discounts. A separate liability for previously sold future royalties was $143.3 million.
- Financing provided $159.8 million net cash, including $133.9 million net proceeds from the notes and $36.2 million from at-the-market stock sales, partly offset by $13.4 million for capped calls. Shares outstanding rose to 59.2 million from 54.7 million.
Business developments and comparison
- Omecamtiv mecarbil: Amgen-led Phase 3 GALACTIC-HF enrollment was completed in July 2019, with more than 8,200 participants. The monitoring committee recommended continuing the trial after its final planned interim analysis; the company expected top-line results in Q4 2020. METEORIC-HF was the second Phase 3 study.
- CK-274: The Phase 1 study met its stated objectives, supporting advancement to Phase 2 REDWOOD-HCM, which began in Q1 2020.
- Reldesemtiv: In FORTITUDE-ALS, the Phase 2 trial’s primary dose-response endpoint did not reach statistical significance (p=0.11). Reported post-hoc analyses showed numerical or subgroup effects favoring treatment, but these are not confirmatory results. The company and Astellas were discussing revised collaboration terms.
- Under the proposed, non-binding Astellas agreement in principle, Cytokinetics would take exclusive control of FSTAs, including reldesemtiv, while Astellas would contribute a portion of reldesemtiv Phase 3 ALS costs and receive royalties. Definitive agreements were not yet signed; until then, existing terms remained in effect.
- R&D spending shifted materially by program: cardiac muscle spending rose to $45.8 million from $19.0 million, while skeletal muscle spending fell to $14.6 million from $50.9 million.
Outlook, risks and other notable items
- Management said existing cash, cash equivalents, investments and investment income were expected to fund projected operating requirements for at least 12 months after the financial statements were issued. The company also cautioned that it expects continuing losses and may need additional financing; availability and terms are uncertain.
- The filing refers to 2020 revenue, R&D and G&A guidance, but the provided filing text does not provide clear numerical guidance values.
- Key risks include clinical-trial failure or delay, dependence on Amgen and Astellas and their development decisions, lack of product revenue, financing needs, debt obligations, regulatory and reimbursement uncertainty, and intellectual-property and manufacturing risks.
- The $90 million royalty monetization received in 2017 is accounted for as financing; related non-cash interest expense was $20.7 million in 2019 versus $17.8 million in 2018.
- The company entered a 12-year lease for a future 234,892-square-foot facility, with $217.7 million of undiscounted lease payments disclosed at year-end and a $34.1 million tenant-improvement allowance. The filing notes possible move timing and holdover-cost risks.
- A prior-year material weakness in financial reporting controls was reported remediated as of December 31, 2019; management and the auditor concluded controls were effective. The financial statements received an unqualified audit opinion. The company reported no material legal proceedings.
- The filing disclosed a December 2019 fraudulent invoice payment of approximately $100,000 following an employee email intrusion and a short-lived ransomware incident; it reported no material losses from the incidents.
Investor facts to verify
- GALACTIC-HF and METEORIC-HF progress, results, and any resulting regulatory path for omecamtiv mecarbil.
- Whether Cytokinetics and Astellas executed definitive revised collaboration terms, including funding, rights, and royalty economics for reldesemtiv and other FSTAs.
- Available liquidity and cash burn relative to management’s runway estimate, including future financing or dilution needs.
- Debt terms, scheduled term-loan payments, convertible-note conversion and repurchase provisions, and the accumulating royalty-related liability.
- REDWOOD-HCM progress and the implications of the non-significant primary FORTITUDE-ALS result for reldesemtiv’s development prospects.