Cytokinetics, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013. Cytokinetics is a clinical-stage biopharmaceutical company developing small-molecule therapies that modulate muscle function. It had no approved drugs or commercial product sales.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Total revenue | $0.8 million | $1.8 million |
| Research and development expense | $9.8 million | $8.7 million |
| General and administrative expense | $3.6 million | $3.1 million |
| Operating loss | $12.6 million | $9.9 million |
| Net loss | $12.6 million | $9.9 million |
| Net loss per share, basic and diluted | $0.09 | $0.13 |
| Cash used in operating activities | $12.2 million | $8.7 million |
- Revenue fell about 55%; the company attributed the decline mainly to lower Amgen reimbursements and the end of Global Blood Therapeutics reimbursements, partly offset by MyoKardia research reimbursements and grant revenue.
- R&D expense increased about 12%, principally from higher outsourced clinical costs. Skeletal muscle programs accounted for $7.2 million of Q1 2013 R&D expense, versus $5.9 million a year earlier.
- Cash, cash equivalents and short-term investments totaled $61.6 million at March 31, down from $74.0 million at December 31, 2012. Net cash from investing activities was $10.5 million, primarily reflecting investment maturities net of purchases; financing activities provided $5,000.
- Current assets were $63.7 million and current liabilities $5.8 million. Total liabilities were $6.3 million. The filing reports no outstanding equipment financing debt; that debt had been repaid in Q1 2012. Future operating-lease payments totaled $18.4 million, including $3.2 million due within one year.
- The company reported an accumulated development-stage deficit of $461.5 million. Operating margins are not meaningful indicators for this pre-commercial development-stage company.
Material changes and business developments
- Net loss increased 27% year over year, while loss per share narrowed because weighted-average shares rose to 144.1 million from 76.1 million, primarily reflecting prior equity issuance and preferred-stock conversions.
- During Q1, 4,000 Series B preferred shares converted into 4.0 million common shares. After quarter-end, another 6,474 preferred shares converted into 6.474 million common shares. The company reported 148.6 million common shares outstanding on April 26, 2013.
- BENEFIT-ALS, a Phase IIb tirasemtiv trial, had enrolled more than 200 patients. The company increased planned enrollment from approximately 400 to approximately 500 after aggregate data review indicated greater-than-expected variability in the primary endpoint. It expected enrollment completion by mid-2013 and results by year-end.
- Amgen completed enrollment of more than 600 patients in the ATOMIC-AHF Phase IIb trial of intravenous omecamtiv mecarbil; results were expected mid-2013. Dosing began in the COSMIC-HF oral-formulation trial, expected to enroll more than 400 patients.
- After quarter-end, Cytokinetics initiated the first-in-human Phase I trial of CK-2127107. Amgen and Cytokinetics also agreed to continue next-generation cardiac sarcomere activator research through 2014.
Outlook, risks and contingencies
- Management forecast 2013 revenue of $1 million to $3 million, R&D expense of $43 million to $47 million, and G&A expense of $14 million to $15 million. It expected R&D and G&A spending to increase versus 2012.
- Management believed existing cash, equivalents, investments and investment income would fund projected requirements for at least 12 months from the filing’s assessment. The company expected continuing operating losses and cash outflows and may need additional collaboration, equity or debt financing; availability and terms are uncertain.
- Key risks include clinical-trial failure or delay, the need to fund at least one confirmatory Phase III tirasemtiv trial for ALS, dependence on Amgen’s development decisions for omecamtiv mecarbil, and the ability to secure partners or capital. Equity financing could dilute shareholders; debt financing could impose restrictive covenants.
- The filing describes potential adverse effects observed in trials of tirasemtiv and omecamtiv mecarbil, including neurological and balance-related events for tirasemtiv and cardiac-related findings for omecamtiv mecarbil. Clinical efficacy and safety remain unproven.
- No legal proceedings were reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether BENEFIT-ALS enrollment, timing and results matched management’s expectations, and what the data imply about a required Phase III program.
- Whether the $61.6 million liquidity position and projected 12-month runway remain adequate against continuing cash burn and planned development costs.
- Whether revenue guidance and anticipated Amgen, MyoKardia and grant reimbursements were achieved, and how much future development spending depends on collaborators.
- The status and terms of potential financing, remaining shelf and at-the-market capacity, and dilution from preferred-stock conversions, warrants and options.
- Trial results and safety updates for omecamtiv mecarbil, including Amgen’s development plans and the company’s exposure to partner decisions.