Cytokinetics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Cytokinetics is a late-stage biopharmaceutical company developing muscle-directed drug candidates. It has no commercial drug sales; revenue primarily comes from research and development collaborations and licenses. Financial figures below are in millions of dollars unless noted.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Revenue | $8.5 | $5.3 |
| Research and development expense | $23.5 | $22.1 |
| General and administrative expense | $9.4 | $9.3 |
| Operating loss | $(24.5) | $(26.1) |
| Net loss | $(29.4) | $(30.3) |
| Net loss per share, basic and diluted | $(0.54) | $(0.56) |
| Cash used in operating activities | $(26.9) | $(29.8) |
| Cash, cash equivalents and short-term investments | $176.6 at March 31 | $198.7 at December 31 |
| Working capital | $160.1 at March 31 | — |
| Long-term debt carrying value, including current portion | $42.6 at March 31 | $42.4 at December 31 |
Revenue rose about 61%, reflecting higher collaboration R&D revenue; license revenue was zero versus $1.7 million a year earlier. Operating and net losses narrowed modestly. Operating expenses totaled $33.0 million. Cash and investments declined about $22.1 million from year-end. The filing does not provide a clear operating-margin guidance figure; margins are not emphasized given the company’s ongoing development-stage losses.
Material changes and financing
- R&D expense increased $1.4 million year over year. Cardiac muscle program spending rose to $11.5 million from $1.9 million, primarily reflecting omecamtiv mecarbil Phase 3 work and preclinical cardiac myosin inhibitor activities. Skeletal muscle program expense fell to $6.9 million from $17.3 million, partly following the suspension of tirasemtiv development.
- The company issued 562,811 shares through a Cantor at-the-market offering for $5.1 million net proceeds during the quarter. The arrangement allows sales of up to $35 million in aggregate.
- Adoption of ASC 842 lease accounting brought a $9.8 million lease liability onto the balance sheet; the facilities lease expires in 2021.
- Liability related to the sale of future royalties was $127.3 million. Related non-cash interest expense was $4.8 million in the quarter; management expects it to increase over time.
- Oxford Finance and Silicon Valley Bank debt bears interest at the greater of 8.05% or 6.81% plus 30-day U.S. LIBOR. Interest-only payments run through November 2019, followed by principal and interest payments.
Outlook, programs and risks
- Management stated existing cash, cash equivalents and investments should fund requirements for at least 12 months from the filing date. It anticipates future operating losses and cash outflows and may need additional capital, collaboration funding or expense reductions. Specific 2019 revenue, R&D or G&A guidance values are not provided in the supplied filing text.
- Omecamtiv mecarbil is in Phase 3 development with Amgen for heart failure. The GALACTIC-HF monitoring committee reviewed a planned interim analysis and recommended continuing the trial without changes. METEORIC-HF is another Phase 3 study.
- After quarter-end, on May 5, the company reported FORTITUDE-ALS results for reldesemtiv: the prespecified dose-response analysis on the primary endpoint did not reach statistical significance (p=0.11). Results favored reldesemtiv across dose groups, and a post-hoc pooled-dose analysis showed less decline than placebo; those findings are not a substitute for the failed prespecified analysis. Dose-related transaminase elevations and cystatin C eGFR declines were reported.
- CK-274, a cardiac myosin inhibitor being studied for hypertrophic cardiomyopathy, and Amgen’s AMG 594 were in Phase 1 studies. The filing also describes earlier negative reldesemtiv results in COPD and elderly subjects with limited mobility.
- Key risks include clinical-trial failure or delay, partner decisions and dependence on Amgen and Astellas, need for future financing, potential dilution, debt obligations, and the absence of product revenue. The company reported disclosure controls and procedures were ineffective as of March 31, 2019 because of a material weakness in review and verification of financial-close reports. Additional accounting staff and temporary resources were added, but remediation was not yet complete. No material legal proceedings were reported.
Important facts for investors to verify
- Cash runway assumptions, operating cash burn, and the timing and terms of any additional financing.
- GALACTIC-HF and METEORIC-HF progress, results and implications for omecamtiv mecarbil; confirm that trial continuation is not evidence of efficacy.
- Whether the post-quarter FORTITUDE-ALS findings lead to further reldesemtiv development, given the nonsignificant prespecified endpoint and reported safety signals.
- Partner commitments, milestone eligibility, and potential changes in development funding or program control.
- Progress in remediating the financial-reporting material weakness and effectiveness of the controls after testing.
- Debt repayment requirements beginning after November 2019 and the effect of variable LIBOR-linked interest.