Cytokinetics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Cytokinetics is a late-stage biopharmaceutical company developing muscle-directed therapies. It had no commercial product sales and continued to incur operating losses.
Financial results and liquidity
Amounts below are in millions of dollars except per-share amounts.
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $89.0 | $2.8 | $90.1 | $9.4 |
| Research and development expense | $57.1 | $36.4 | $103.1 | $68.0 |
| General and administrative expense | $42.7 | $21.2 | $75.8 | $36.8 |
| Operating loss | $(10.9) | $(54.8) | $(88.7) | $(95.4) |
| Net loss | $(19.8) | $(61.6) | $(109.3) | $(108.7) |
| Net loss per share | $(0.23) | $(0.86) | $(1.28) | $(1.52) |
- Q2 revenue included a one-time $87.0 million gain recognized after the extinguishment of obligations associated with the company’s sold mavacamten royalty. It was not product-sales revenue. The company also reported $1.0 million in milestone revenue and $1.0 million in R&D revenue.
- Higher R&D spending reflected increased clinical development, including COURAGE-ALS and cardiac muscle inhibitor programs, and early research. Higher G&A reflected commercial-launch preparation, personnel and facilities costs.
- First-half operating cash use was $117.3 million, compared with $59.0 million in 2021. Investing activities provided $1.0 million and financing activities provided $97.3 million. Cash and cash equivalents declined by $19.0 million to $93.6 million.
- Cash, cash equivalents and investments totaled $596.7 million at June 30, 2022, versus $623.7 million at December 31, 2021. Working capital was $535.4 million.
- At June 30, borrowings were $197.0 million: $62.3 million in term loans and $134.7 million in convertible notes. Separately, liabilities related to revenue participation agreements totaled $282.3 million. Total liabilities were $660.3 million and stockholders’ equity was $111.4 million.
Material changes, financing and outlook
- The $87.0 million royalty-related revenue drove the year-over-year increase in reported revenue and helped reduce the quarterly net loss; it should not be read as recurring operating revenue. First-half net loss was broadly similar to the prior year despite lower operating loss, partly reflecting higher non-cash interest expense on royalty participation liabilities.
- In January 2022, the company entered Royalty Pharma arrangements: a $50.0 million loan was funded, and it received $100.0 million under the aficamten revenue participation agreement, including a $50.0 million payment following initiation of the first pivotal oHCM trial. Up to a further $250.0 million of loans and $50.0 million of aficamten proceeds were subject to development milestones and other conditions. Loan repayment terms provide for total payments, including interest and fees, equal to 190% of principal.
- On July 6, 2022, after quarter-end, the company issued $540.0 million of 3.50% convertible notes due 2027, receiving approximately $523.3 million net proceeds. It used cash and approximately 8.0 million shares to repurchase $116.9 million principal amount of 2026 notes. This financing materially changed the capital structure after the balance-sheet date.
- Management said existing cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months from the filing date. The company also expects substantial future R&D and commercial-readiness spending and anticipates operating losses and cash outflows. No clear numeric 2022 revenue, R&D expense or G&A expense guidance is provided in the supplied filing text.
Pipeline, management commentary and key risks
- Omecamtiv mecarbil: The FDA accepted the HFrEF application but extended the target action date to February 28, 2023 after classifying additional pharmacokinetic analyses as a major amendment. An advisory committee meeting was scheduled for December 13, 2022. The company was pursuing an alternative dosage-selection test following termination of the Amgen assay arrangement; FDA requirements for such a test could affect approval and timing. METEORIC-HF did not meet its primary exercise-capacity endpoint.
- Aficamten: The Phase 3 SEQUOIA-HCM trial in obstructive HCM was enrolling; the FDA had granted Breakthrough Therapy Designation. The company also opened an open-label study cohort in non-obstructive HCM. Development and regulatory outcomes remain uncertain.
- Reldesemtiv: The Phase 3 COURAGE-ALS trial was enrolling, with an open-label extension initiated. The prior Phase 2 ALS study did not meet its prespecified dose-response significance test; favorable post-hoc findings do not establish efficacy.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, lack of product revenue, dependence on additional financing and collaborators, commercial-launch costs, and the possibility that milestone-linked Royalty Pharma funding will not become available. The company stated it had no material off-balance-sheet arrangements and reported no legal proceedings. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether the FDA approves omecamtiv mecarbil, the final label and any dosage-selection-test requirements, and the outcome of the scheduled advisory committee process.
- Enrollment, timing and results for SEQUOIA-HCM and COURAGE-ALS, including prespecified endpoints and safety findings.
- Cash burn and runway relative to planned development and commercial-readiness spending; distinguish recurring cash resources from one-time royalty-related revenue.
- Post-quarter-end debt, share issuance and 2026-note repurchase effects, along with conditions for additional Royalty Pharma funding and future royalty obligations.
- Potential partner arrangements, product pricing and reimbursement prospects, and the company’s ability to fund development without commercial revenue.