Cytokinetics, Incorporated — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. The company is a clinical-stage biopharmaceutical developer and has no commercial drug sales.
Financial performance and liquidity
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $1.7m | $1.4m | $5.4m | $3.2m |
| Operating expenses | $11.8m | $12.1m | $34.3m | $39.3m |
| Operating loss | $(10.1)m | $(10.7)m | $(29.0)m | $(36.1)m |
| Net loss | $(10.0)m | $(10.6)m | $(28.9)m | $(36.0)m |
| Basic and diluted loss per share | $(0.07) | $(0.15) | $(0.31) | $(0.55) |
- Nine-month operating cash use was $26.3m, down from $34.7m a year earlier. Investing activities used $35.4m, primarily as the company purchased investments; financing provided $58.3m.
- At September 30, cash, cash equivalents and investments totaled $81.2m, versus $49.0m at December 31, 2011. Current assets were $78.8m and current liabilities $4.6m. The company stated available cash and investments should fund operations for at least 12 months.
- Total liabilities were $4.7m. The remaining equipment-financing debt was repaid in March 2012; future operating-lease payments totaled $19.9m, including $3.0m due within one year.
- Gross proceeds from June public offerings were approximately $60m ($56m net); the company also received $2.8m net through its at-the-market facility during the first nine months. The offerings substantially increased the share count and included warrants and convertible preferred stock.
Changes versus prior-year period
- Nine-month revenue rose to $5.4m from $3.2m, mainly reflecting higher Amgen reimbursements and new research-cost reimbursements from Global Blood Therapeutics and MyoKardia; there were no license revenues in either comparative period.
- Nine-month R&D expense fell $2.8m, principally due to lower laboratory, personnel and smooth-muscle program costs, partly offset by higher cardiac-program spending. G&A expense fell $2.1m. Net loss narrowed by $7.1m.
- Cash and investments increased by $32.2m, mainly from the June financing and ATM share sales, partially offset by operating cash use. Common shares outstanding were 142.4m at September 30, compared with 74.9m at December 31, 2011.
Outlook, programs and risks
- 2012 guidance: revenue of $5m–$7m; R&D expense of $42m–$46m; and G&A expense of $12m–$14m. Management expected fourth-quarter R&D spending to exceed the prior-year quarter.
- Management said the company expects continuing operating losses and cash outflows. It may need additional funding; financing may be unavailable or dilutive, and collaboration funding or terms are not assured.
- Amgen leads development of omecamtiv mecarbil outside Japan. Enrollment in the second ATOMIC-AHF cohort was completed; a decision on a possible third cohort was expected in Q4 2012. A Phase II oral-formulation study was being planned for potential initiation in early 2013.
- The company opened the tirasemtiv BENEFIT-ALS Phase IIb trial to enrollment in October 2012, targeting approximately 400 patients. It anticipated Q4 2012 data from its tirasemtiv myasthenia gravis trial and an IND filing for CK-2127107 by year-end 2012.
- Key risks include clinical or regulatory failure and delays, adverse effects, dependence on Amgen and other collaborators, lack of a partner or funding for later-stage tirasemtiv development, reliance on contract manufacturers, and potential dilution. NASDAQ had notified the company of a minimum-bid-price deficiency; the stated compliance period ended December 17, 2012.
- The company reported no legal proceedings and no material change in market-risk exposure. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether clinical data and trial progress meet the timelines and objectives described, including ATOMIC-AHF, BENEFIT-ALS, the myasthenia gravis study and CK-2127107 development.
- Whether the stated 12-month liquidity runway remains adequate relative to operating cash burn, research plans and lease commitments, and whether additional financing is required.
- Potential dilution from 47.4m warrants issued in June, 23.0m common shares issuable upon conversion of Series B preferred stock, and other outstanding warrants and equity awards.
- Progress toward Nasdaq’s $1.00 minimum-bid-price requirement and any impact on listing status or trading liquidity.