Cytokinetics, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 8, 2020. Cytokinetics is a late-stage biopharmaceutical company developing muscle-function medicines. It had no product sales; revenue came from collaborations and research reimbursements.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $3.8 million | $8.5 million |
| Research and development expense | $21.7 million | $23.5 million |
| General and administrative expense | $12.4 million | $9.4 million |
| Operating loss | $30.4 million | $24.5 million |
| Net loss | $39.4 million; $0.66 per share | $29.4 million; $0.54 per share |
| Net cash used in operations | $30.1 million | $26.9 million |
| Cash, cash equivalents and investments | $237.2 million | At March 31, 2020 |
| Working capital | $205.2 million | At March 31, 2020 |
| Borrowings, net | $130.8 million | Term loan and convertible notes |
Revenue fell mainly because collaboration research revenue was lower: Amgen revenue was $2.3 million versus $4.2 million, and Astellas revenue was $1.5 million versus $4.3 million. R&D expense declined by $1.8 million, largely reflecting completion of reldesemtiv trials in 2019, partly offset by increased METEORIC-HF and CK-274 activity. G&A rose by $3.0 million, primarily due to personnel-related costs, stock-based compensation and outside services. Higher interest expense, including convertible-note expense, contributed to the larger net loss. No meaningful operating margin is presented; the company reported operating and net losses.
Cash and investments totaled $237.2 million; cash alone was $49.8 million. Management expected existing cash, cash equivalents and investments to fund requirements for at least 12 months from filing. The balance sheet also included a $149.0 million net liability from the sale of future royalties, in addition to borrowings. Accumulated deficit was $904.4 million and stockholders’ deficit was $45.7 million.
Programs, changes and outlook
- Omecamtiv mecarbil: Amgen’s Phase 3 GALACTIC-HF trial completed enrollment of 8,256 patients. The monitoring committee recommended continuing without changes after its final planned interim analysis. Top-line results were expected in Q4 2020; the company did not anticipate a COVID-related delay. METEORIC-HF enrollment was temporarily suspended because of COVID-19; completion by year-end 2020 depended on enrollment restarting by the end of Q2.
- CK-274: Phase 2 REDWOOD-HCM began in Q1, but enrollment was temporarily suspended because of COVID-19. First-cohort data were expected in the second half of 2020 if enrollment was completed by mid-year. CK-271’s IND was submitted in Q1, with a Phase 1 start planned for Q2.
- Reldesemtiv and Astellas: The 2019 Phase 2 FORTITUDE-ALS trial missed statistical significance on its primary dose-response endpoint (p=0.11); secondary dose-response analyses also did not meet the 0.05 threshold. Post-hoc analyses showed numerical or subgroup findings favoring treatment, but do not establish efficacy. On April 23, 2020, after quarter-end, Cytokinetics regained exclusive control of reldesemtiv, CK-601 and other fast skeletal regulatory activators. Astellas agreed to contribute one-third of potential Phase 3 reldesemtiv ALS out-of-pocket costs, capped at $12 million, and provide certain drug-substance inventory. Cytokinetics would owe Astellas royalties on specified reldesemtiv markets. Astellas retained collaboration rights for other skeletal sarcomere activators, with potential development milestones up to $250 million and commercial milestones up to $200 million, subject to terms and achievement.
- COVID-19: Most employees moved to remote work in March. Enrollment was paused in METEORIC-HF, REDWOOD-HCM and the AMG 594 Phase 1 study; site-startup and continuity measures continued. Further delays could affect development timelines, trial integrity, operations and access to capital.
No quantified 2020 revenue, R&D or G&A guidance is clearly provided in the supplied filing text. The company stated it expected continuing operating losses and cash outflows and may need additional financing. Its $45.0 million term loan carried an 8.05% rate at quarter-end, with interest-only payments extended through July 2021; the $138.0 million 2026 convertible notes bear 4.0% cash interest and have a $10.55 initial conversion price. The company also disclosed a $217.7 million undiscounted commitment under its future Oyster Point lease, expected to commence as early as September 2021.
Key investor checks
- Track GALACTIC-HF results and whether METEORIC-HF and REDWOOD-HCM enrollment resumes on the stated conditional timelines.
- Assess the clinical and financing implications of Cytokinetics taking control of the fast skeletal activator program, including reldesemtiv’s mixed Phase 2 findings and the possible Phase 3 cost contribution from Astellas.
- Monitor cash burn, financing needs and the stated 12-month liquidity outlook; the company has no commercial product revenue and warns that additional capital may not be available on acceptable terms.
- Evaluate debt service, potential convertible-note dilution and the substantial future royalty liability, as well as the Oyster Point lease commitment.
- Consider COVID-19-related clinical, operational and capital-market uncertainty and the risks of trial failure, regulatory delay, partner decisions and future commercialization.