Cytokinetics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The company is a late-stage biopharmaceutical developer of muscle-directed medicines and had no commercial product sales. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue, primarily collaboration reimbursements | $2.8 | $3.6 | $9.4 | $7.4 |
| Research and development expense | $36.4 | $21.8 | $68.0 | $43.5 |
| General and administrative expense | $21.2 | $14.2 | $36.8 | $26.6 |
| Operating loss | $(54.8) | $(32.4) | $(95.4) | $(62.7) |
| Net loss | $(61.6) | $(40.8) | $(108.7) | $(80.2) |
| Net loss per share, basic and diluted | $(0.86) | $(0.68) | $(1.52) | $(1.35) |
| Net cash used in operating activities | Not separately provided for the quarter | $(59.0) | $(57.6) |
- At June 30, cash and cash equivalents were $37.2 million; short- and long-term investments totaled $386.8 million. Combined cash, cash equivalents and investments were $424.0 million, down from $501.0 million at year-end 2020.
- Working capital was $302.5 million, versus $443.0 million at December 31, 2020. The company stated that available cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months.
- Borrowings had a net carrying amount of $139.1 million: term loan $46.8 million and 2026 convertible notes $92.3 million. The notes have $138.0 million principal and 4.0% stated interest; the term loan rate was 8.05%. Separately, the liability for sold future royalties was $171.8 million.
- Operating lease liabilities were $107.9 million; undiscounted future lease payments were $236.8 million. The new Oyster Point facility lease began in March 2021, with rent payments scheduled to start in October.
Changes versus the prior comparable period
- Q2 revenue declined $0.8 million year over year, while first-half revenue increased $2.0 million. Revenue consisted largely of Amgen and Astellas research reimbursements; no license or milestone revenue was recorded in the 2021 periods shown.
- Q2 R&D expense increased $14.7 million and first-half R&D expense increased $24.5 million. Management cited increased cardiac myosin inhibitor and METEORIC-HF spending, reldesemtiv/C OURAGE-ALS preparation, transition costs from Amgen, and $7.3 million of omecamtiv mecarbil materials purchased in the quarter.
- Q2 G&A expense rose $7.0 million and first-half G&A rose $10.2 million, primarily due to personnel and stock compensation, outside services, and the Oyster Point lease.
- First-half net loss increased $28.5 million year over year. Operating cash use was broadly similar to the prior-year first half.
Outlook, developments and risks
- Amgen’s collaboration termination became effective May 20, 2021; worldwide development and commercialization rights to omecamtiv mecarbil and CK-136 reverted to Cytokinetics. The company expects to fund continued omecamtiv mecarbil development itself and is evaluating partnering and licensing options. The Servier sublicense had terminated effective March 18, 2021.
- Astellas gave notice terminating the other skeletal sarcomere activators agreement, effective November 1, 2021. Astellas had agreed to contribute up to $12 million toward one-third of eligible out-of-pocket costs for the planned reldesemtiv Phase 3 ALS trial.
- Management anticipated higher research, development and commercial-planning costs, including costs associated with taking over programs and preparing for a potential omecamtiv mecarbil launch. No numerical 2021 revenue or expense guidance is clearly provided in the supplied filing text.
- GALACTIC-HF met its primary composite endpoint: hazard ratio 0.92 (95% CI 0.86–0.99; p=0.025). It did not show a reduction in cardiovascular death, and secondary endpoints were not met under the prespecified testing procedure. Regulatory discussions and potential NDA pathways remained under evaluation.
- METEORIC-HF enrollment was completed in June. The company planned to start a Phase 3 aficamten trial in obstructive HCM by year-end 2021 and COURAGE-ALS in ALS by year-end; COURAGE-ALS was announced open to enrollment on August 2, after the quarter. On July 19, after quarter-end, the company announced positive topline results from Cohorts 1 and 2 of the aficamten Phase 2 REDWOOD-HCM trial.
- On July 23, 2021, after quarter-end, the company closed a common-stock offering that raised approximately $297.3 million net. This is a significant subsequent liquidity event, not included in June 30 cash and investments.
- Key risks include clinical-trial and regulatory uncertainty, the cost and execution risks of taking over Amgen programs and building commercial capabilities, reliance on partners and contract manufacturers, future financing needs, and possible COVID-19-related disruption. The company reported an accumulated deficit of $1.1 billion and expected continuing operating losses and cash outflows.
- The company recorded a first-half estimate change for the RPI royalty liability that reduced net loss by $2.8 million, or $0.04 per share; it did not affect revenue. Management reported effective disclosure controls as of June 30, 2021, and no legal proceedings.
Important facts for investors to verify
- Whether regulators consider GALACTIC-HF sufficient to support an omecamtiv mecarbil NDA, given the primary-endpoint result and lack of benefit on key secondary endpoints.
- Upcoming clinical results and execution for aficamten, reldesemtiv, and METEORIC-HF, including trial timing, safety, enrollment and funding needs.
- Post-offering cash runway and spending trajectory as Cytokinetics assumes greater development and potential commercialization costs.
- Terms and availability of the conditional RTW funding commitment, the royalty obligations associated with financing, and the company’s debt and lease commitments.
- Transition of manufacturing, regulatory, assay and other program responsibilities from Amgen, and the effects of the Amgen and Astellas terminations on future collaboration revenue.