Cytokinetics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unless stated otherwise, financial amounts below are in millions of dollars. Cytokinetics is a clinical-stage biopharmaceutical company developing muscle-directed medicines; it has no commercial product revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue, entirely research and development | $6.5 | $3.8; up 71% |
| Research and development expense | $31.6 | $21.7; up 45% |
| General and administrative expense | $15.6 | $12.4; up 25% |
| Operating loss | $(40.6) | $(30.4) |
| Net loss | $(47.1) | $(39.4) |
| Net loss per share, basic and diluted | $(0.66) | $(0.66) |
| Net cash used in operating activities | $(29.5) | $(30.1) |
Revenue came from collaboration reimbursements: $4.8 million from Amgen and $1.7 million from Astellas. No license or milestone revenue was recorded in the quarter. Gross and operating margins are not meaningful measures given the absence of product sales and continuing development costs.
At March 31, cash and cash equivalents were $44.6 million, short-term investments $381.0 million and long-term investments $34.7 million. Together these balance-sheet amounts totaled approximately $460.2 million, versus $500.0 million at year-end. Working capital was $397.2 million, down from $443.0 million. Management believed available cash, cash equivalents and investments would fund requirements for at least 12 months from the filing date.
Borrowings were reported at $137.4 million net: a $45.0 million principal term loan and $138.0 million principal amount of 4.0% convertible notes due 2026. The balance sheet also included a $168.9 million liability related to the sale of future royalties and $90.9 million of lease liabilities. The new Oyster Point facility lease commenced March 31, adding a $77.9 million right-of-use asset; undiscounted lease payments for all leases totaled $232.6 million.
Material changes and business developments
- Compared with Q1 2020, revenue rose, but operating expenses increased faster; net loss widened by $7.7 million. The unchanged per-share loss reflects a higher weighted-average share count in 2021.
- Operating cash use was broadly stable year over year. Investing activities used $5.3 million in Q1 2021, primarily reflecting investment purchases and $6.6 million of property and equipment purchases.
- R&D expense increased by $9.8 million, principally due to reldesemtiv development, the cardiac myosin inhibitor program and METEORIC-HF. G&A rose $3.1 million, mainly from personnel-related costs, including stock-based compensation, and outside services.
- Amgen’s termination of its collaboration was scheduled to take effect May 20, 2021, with omecamtiv mecarbil and CK-136 rights transitioning to Cytokinetics. Servier’s sublicense termination took effect March 18, 2021. The company expected lower future collaboration revenue and higher development, regulatory and commercialization costs as it assumed responsibilities.
- After quarter-end, on April 27, Astellas gave notice terminating the agreement for other skeletal sarcomere activators, effective November 1, 2021. A separate arrangement provides up to $12 million of Astellas support for one-third of eligible out-of-pocket costs for a potential reldesemtiv Phase 3 ALS trial.
Outlook, risks and unusual items
- The filing discusses 2021 revenue, R&D and G&A guidance, but the provided filing text does not provide clear numerical guidance values. Management expected increased spending as the pipeline advanced, commercialization planning progressed and Cytokinetics prepared to assume omecamtiv mecarbil responsibilities.
- Management planned to engage regulators in 2021 regarding potential regulatory paths for omecamtiv mecarbil after GALACTIC-HF, and to explore co-development, co-commercialization, licensing or other financing strategies. The company warned that additional capital might be needed and might not be available on acceptable terms.
- GALACTIC-HF met its primary composite endpoint: hazard ratio 0.92 (95% CI 0.86–0.99; p=0.025), with a 2.1% absolute risk reduction. It did not show a reduction in cardiovascular death, and no other secondary endpoints met the prespecified statistical criteria. Regulatory approval was not assured.
- METEORIC-HF enrollment was expected to finish in Q2 2021, with results expected in early 2022; REDWOOD-HCM results were expected mid-2021. These were forward-looking targets, not guarantees.
- A revised estimate of future RPI royalty payments reduced the imputed interest rate on the royalty liability from 15% at year-end to 7% in Q1 and reduced Q1 net loss by $2.9 million, or $0.04 per share. The estimate depends on significant assumptions about future sales, timing and market conditions.
- Key risks include clinical-trial and regulatory uncertainty, transition of programs and manufacturing from partners, loss of collaboration revenue, commercialization costs, financing needs, COVID-19 disruption, competition, and potential dilution or constraints from debt. The company reported no legal proceedings and said disclosure controls were effective as of March 31, 2021.
Important facts for investors to verify
- Whether Amgen’s program transition was completed on schedule and what continuing development, manufacturing and regulatory costs Cytokinetics assumed.
- Regulatory feedback and the evidence needed for any omecamtiv mecarbil filing, including the implications of the negative secondary-endpoint results in GALACTIC-HF.
- Results and timing of REDWOOD-HCM and METEORIC-HF, and progress and funding plans for reldesemtiv and other pipeline programs.
- Cash runway under the expanded development and commercialization plan, including whether additional financing or a draw under the conditional RTW funding commitment is required.
- Assumptions underlying the RPI royalty-liability estimate, future royalty obligations, convertible-note dilution exposure and the long-term Oyster Point lease commitment.