Cytokinetics, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Amounts below are in U.S. dollars; financial figures are in millions unless stated otherwise. Cytokinetics is a clinical-stage biopharmaceutical company with no commercial drug sales, developing muscle-function therapies.
Financial performance and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $7.9 | $9.4 | $18.9 | $25.2 |
| Operating expenses | $16.8 | $15.4 | $47.3 | $48.4 |
| Operating loss | $(8.9) | $(6.0) | $(28.4) | $(23.2) |
| Net loss | $(8.8) | $(6.0) | $(28.3) | $(23.1) |
| Net loss per share | $(0.23) | $(0.16) | $(0.73) | $(0.65) |
| Operating cash flow | Not stated for the quarter | $14.8 | $(36.7) |
- At September 30, cash and cash equivalents were $26.0 million and short-term investments were $72.0 million; combined, $98.0 million, versus $83.2 million at December 31, 2014. Total current assets were $100.5 million and current liabilities $30.1 million.
- Cash from operations for the first nine months was largely driven by receipt of $45 million from Astellas in January 2015 ($30 million upfront license fee and $15 million milestone), partly offset by operating cash use. Deferred revenue was $25.7 million at September 30.
- Total liabilities were $34.9 million, principally deferred revenue; the filing reports no debt outstanding at September 30. In October, the company borrowed $15 million under a new loan agreement, bearing 7.5% annual interest. Up to another $25 million was available subject to conditions.
- Accumulated deficit was $525.5 million. No commercial product revenue was reported.
Material changes versus the prior comparable period
- Nine-month revenue fell $6.3 million year over year, chiefly reflecting lower Astellas research reimbursements and the absence of a $2.0 million research milestone recognized in 2014. Revenue mix shifted: 2015 included recognition of Astellas upfront fees, while 2014 included revenue from Astellas before it became a related party.
- Nine-month net loss widened by $5.2 million despite a $1.1 million decrease in total operating expenses, as revenue declined. R&D expense decreased $2.5 million, largely because the BENEFIT-ALS trial ended in 2014; G&A increased $1.4 million, primarily from personnel and legal costs.
- Quarterly R&D was broadly flat, while quarterly G&A increased $1.3 million, including higher commercial-development, legal and personnel costs.
Outlook, programs, risks and unusual items
- Management forecast 2015 revenue of $31–34 million, R&D expense of $51–54 million and G&A expense of $21–23 million. It expected existing cash, cash equivalents and investments at September 30 to fund requirements for at least 12 months, while anticipating continuing losses and future operating cash outflows.
- VITALITY-ALS, a Phase 3 tirasemtiv trial, began in July 2015; sites were being activated and enrollment had started. A $1.5 million ALS Association grant supports the trial and biomarker work; a $0.5 million milestone payment was triggered in August.
- The company anticipated starting a Phase 2 CK-2127107 trial in spinal muscular atrophy in Q4 2015 with Astellas; it also expected Astellas to start a Phase 2 COPD trial in the first half of 2016.
- After quarter-end, the company announced COSMIC-HF top-line results for omecamtiv mecarbil: improvements in several cardiac-function measures were statistically significant; adverse events appeared generally comparable to placebo, with a small troponin increase reported. These October results were subsequent to the reporting period.
- Key risks include clinical-trial failure or delay, uncertainty over regulatory acceptance of slow vital capacity as a tirasemtiv endpoint, dependence on Amgen and Astellas for partnered programs, need for additional financing, and possible dilution or debt covenant restrictions. The October loan is secured by company assets other than intellectual property and carries covenants and default provisions.
- The company’s lawsuit against Pharm-Olam alleging fraudulent inducement, breach of contract and negligence remained pending; it seeks monetary damages. A related North Carolina action filed by Pharm-Olam was dismissed in September. No gain was recorded for the company’s claim.
Important facts for investors to verify
- Clinical progress, enrollment and endpoint/regulatory strategy for VITALITY-ALS, and the resources needed to complete tirasemtiv development.
- Whether Astellas and Amgen meet development plans and provide expected reimbursements, milestones or other collaboration funding.
- Actual 2015 revenue and expense outcomes against management’s ranges, and the timing and quality of cash flows underlying reported operating cash provided.
- Terms, covenants, repayment capacity and conditions for drawing the remaining October loan commitment; also the amount and dilution from Cantor Fitzgerald equity sales.
- Full COSMIC-HF data and safety findings, beyond the post-quarter top-line announcement.