Cytokinetics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Cytokinetics is a late-stage biopharmaceutical company developing muscle-directed medicines; it has no commercial product sales and expects continued operating losses and cash outflows.
Key financial metrics
Amounts below are in millions of dollars, except per-share data. The filing does not present gross profit or operating margins.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $2.5 | $5.4 | $92.6 | $14.8 |
| Research and development expense | $62.7 | $48.4 | $165.8 | $116.4 |
| General and administrative expense | $48.2 | $26.2 | $124.0 | $63.0 |
| Operating loss | $(108.4) | $(69.2) | $(197.2) | $(164.6) |
| Net loss | $(142.3) | $(76.1) | $(251.6) | $(184.7) |
| Net loss per share, basic and diluted | $(1.52) | $(0.95) | $(2.85) | $(2.48) |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(201.3) | $(97.8) |
- At September 30, cash and cash equivalents were $106.2 million; short- and long-term investments totaled $790.0 million. Combined cash and investments were $896.2 million.
- Working capital was $807.8 million. Current assets were $884.3 million and current liabilities were $76.5 million.
- Debt carrying value was $608.5 million: $63.5 million term loan and $545.0 million convertible notes. Principal debt was approximately $611.1 million. Separately, revenue-participation liabilities totaled $291.3 million.
- Stockholders’ equity was negative $16.0 million, versus positive $243.9 million at December 31, 2021. Accumulated deficit was $1.449 billion.
- Investing cash outflow was $291.4 million and financing cash inflow was $486.3 million for the nine months. Cash and cash equivalents declined $6.4 million during that period.
Material changes and unusual items
- Q3 revenue fell year over year, while nine-month revenue increased chiefly because the company recognized $87.0 million in April 2022 upon extinguishment of its mavacamten royalty participation obligation. This was a one-time item, not product sales.
- Q3 net loss widened to $142.3 million from $76.1 million. Higher R&D spending reflected COURAGE-ALS, cardiac myosin inhibitor programs and early research; higher G&A reflected commercial preparation for omecamtiv mecarbil, outside services and personnel costs.
- In July 2022, the company issued $540.0 million of 3.50% convertible notes due 2027 and used cash plus 8.1 million shares to repurchase approximately $116.9 million principal of its 2026 notes. The induced-conversion loss was $22.2 million. About $21.1 million principal remained on the 2026 notes.
- The company repaid its prior Silicon Valley Bank/Oxford term loan in January and recorded a $2.7 million extinguishment loss. The new Royalty Pharma loan carries an aggregate repayment amount of 190% of principal, including interest and fees, under the stated terms.
- Aficamten royalty-liability estimates were revised upward in Q3, increasing the imputed interest rate to 25.0% and noncash interest expense; the estimate change increased net loss by $2.8 million, or $0.03 per share. A revised omecamtiv royalty estimate reduced net loss by $1.1 million, or $0.01 per share.
- Unrealized losses on available-for-sale securities contributed to accumulated other comprehensive loss, which was $5.6 million at quarter-end.
Outlook, development and risks
- Management said existing cash, cash equivalents and investments were expected to fund requirements for at least 12 months from the filing date. The company nevertheless anticipates continuing losses and cash outflows and may need additional financing, collaborations or spending reductions.
- The FDA extended the omecamtiv mecarbil NDA target action date to February 28, 2023, following a major amendment involving additional pharmacokinetic analyses. An FDA advisory committee meeting was scheduled for December 13, 2022. A dosage-selection test may be required, and the company was pursuing alternatives after the prior assay arrangement ended.
- The FDA timing change was likely to prevent the company from meeting deadlines for the $50 million second and $25 million third Royalty Pharma loan tranches. Further loan and aficamten royalty-sale proceeds depend on specified development milestones and deadlines.
- Aficamten’s Phase 3 SEQUOIA-HCM trial was ongoing. Reldesemtiv’s Phase 3 COURAGE-ALS trial was enrolling; in an October 2022 update after quarter-end, the monitoring committee recommended continuation following its first futility analysis.
- Principal risks include clinical-trial and regulatory failure or delay, patient enrollment, commercial and reimbursement uncertainty, dependence on contract manufacturers and collaborators, financing availability, debt and royalty obligations, and possible dilution from convertible notes. The company has never generated revenue from commercial drug sales.
- After quarter-end, on October 24, 2022, the company terminated capped-call transactions related to the 2026 notes and received $26.4 million gross proceeds.
Investor facts to verify
- FDA review and advisory committee outcome for omecamtiv mecarbil, including whether an acceptable dosage-selection test is needed.
- Cash use, investment liquidity and runway against continuing R&D and commercial-readiness spending.
- Availability of conditional Royalty Pharma financing tranches and the long-term cost of loan and royalty agreements.
- SEQUOIA-HCM and COURAGE-ALS progress, enrollment, interim analyses and eventual efficacy and safety results.
- Potential dilution and repayment obligations under the 2026 and 2027 convertible notes, alongside the company’s negative stockholders’ equity.