Cytokinetics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Cytokinetics is a late-stage biopharmaceutical company developing muscle-function therapies; it has no commercial product sales and depends on collaborations and financing. Financial amounts below are in U.S. dollars; millions unless noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $1.1 million | $6.5 million |
| Research and development expense | $45.9 million | $31.6 million |
| General and administrative expense | $33.1 million | $15.6 million |
| Operating loss | $77.9 million | $40.6 million |
| Net loss | $89.4 million; $1.05 per share | $47.1 million; $0.66 per share |
| Operating cash flow | $(26.8) million | $(29.5) million |
| Cash, cash equivalents and investments | $686.1 million | $623.7 million at December 31, 2021 |
| Working capital | $556.7 million | $463.8 million at December 31, 2021 |
| Borrowings, net carrying value | $195.7 million | $142.8 million at December 31, 2021 |
Revenue was research and development revenue, principally Astellas reimbursement; there were no product sales. Cash used in investing activities was $64.3 million, primarily reflecting investment purchases, and financing provided $93.8 million, principally from Royalty Pharma transactions, partly offset by repayment of the former term loan. Comprehensive loss was $92.2 million, including $2.7 million of unrealized losses on available-for-sale securities. Gross margin is not meaningful for this pre-commercial company.
Material changes and unusual items
- Revenue declined $5.4 million year over year, following the end of the Amgen collaboration and reduced Astellas research reimbursements.
- R&D expense rose $14.4 million, reflecting higher cardiac inhibitor and ALS trial spending, facilities costs and early research. G&A rose $17.5 million, mainly due to commercial-readiness spending for omecamtiv mecarbil, personnel and facilities.
- Interest expense included $6.6 million of non-cash interest accretion on royalty-participation liabilities, versus $2.8 million a year earlier. A $2.7 million debt-extinguishment loss resulted from repaying the Silicon Valley Bank/Oxford term loan.
- The company adopted ASU 2020-06 for its 2026 convertible notes, increasing their carrying value and reducing reported Q1 interest expense by $1.4 million versus prior accounting; the adoption also produced a $38.9 million reduction in equity at transition.
- At March 31, the company had $138 million principal amount of 4.0% convertible notes due 2026 and $50 million principal under the new Royalty Pharma loan. The notes’ if-converted value was $613.8 million, substantially above principal, and conversion could dilute shareholders.
- Royalty Pharma’s aficamten revenue participation liability was carried at $91.9 million and the omecamtiv mecarbil royalty liability at $183.4 million. These arrangements require future royalties and rely on estimates of future product sales.
- On April 25, 2022, the mavacamten royalty was extinguished under a letter agreement; the company was still evaluating the financial-statement impact.
Outlook, developments and risks
- Management stated existing cash, cash equivalents and investments should fund projected cash requirements for at least 12 months from the filing date. It expects ongoing operating losses and cash outflows and may need additional capital; no numerical 2022 revenue or expense guidance is provided in the filing text supplied.
- The January 2022 Royalty Pharma agreements provide up to $300 million of loans, subject to development and other conditions; $50 million had been funded at closing. Up to $250 million remains contingent on milestones, including omecamtiv mecarbil approval and aficamten trial results or NDA acceptance. Loan payments, including interest and fees, total 190% of principal under the stated terms.
- The aficamten royalty-right agreement provides up to $150 million; $100 million had been paid by March 2022, with the remaining $50 million conditional on starting the first pivotal nHCM trial. Royalty Pharma receives a share of future worldwide aficamten net sales.
- The FDA accepted the omecamtiv mecarbil NDA for HFrEF, with a standard-review target action date of November 30, 2022. Approval is uncertain; a dosage-selection test may be required, and the former assay collaboration ended with Amgen’s termination.
- GALACTIC-HF met its primary composite endpoint, but did not demonstrate a reduction in cardiovascular death, and other secondary endpoints were not met under the prespecified testing procedure. METEORIC-HF did not meet its primary exercise-capacity endpoint.
- Aficamten’s Phase 3 SEQUOIA-HCM trial was enrolling; the company also opened an nHCM study cohort. Reldesemtiv’s Phase 3 COURAGE-ALS trial was enrolling. Clinical outcomes, enrollment, regulatory review and commercialization remain material uncertainties.
- Key risks include continued losses, financing and debt/royalty obligations, contingent funding conditions, dependence on partners and contract manufacturers, clinical and regulatory failure or delay, commercial launch and reimbursement challenges, and potential COVID-19-related disruption. The company reported no legal proceedings and stated disclosure controls were effective.
Investor facts to verify
- Progress and FDA action on the omecamtiv mecarbil NDA, including whether an acceptable dosage-selection test is needed.
- Enrollment, results and timing for SEQUOIA-HCM, COURAGE-ALS and aficamten’s nHCM program.
- Cash burn, commercial-readiness spending, and whether the stated 12-month liquidity outlook remains achievable.
- Conditions and deadlines for remaining Royalty Pharma loan and aficamten funding; the resulting repayment and royalty burden.
- Financial-statement effects of the April 2022 mavacamten royalty extinguishment and any subsequent material changes in financing or collaborations.