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$100M positions Cytokinetics well re Amgen with omecamtiv

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By Randy Osborne
Staff Writer

Cytokinetics Inc. kept mum on the eventual sales force for omecamtiv mecarbil, possible changes in the Royalty Pharma deal's assigned percentage, and an additional safety trial with the phase III candidate, as well as potential reimbursement from Amgen Inc. for "certain activities" in co-promoting.

But analysts knew enough to hail the Royalty deal as what Piper Jaffray's Charles Duncan called, during Cytokinetics' conference call with investors, "a great way to bolster the balance sheet" while hanging onto upside with omecamtiv, a cardiac myosin activator for chronic heart failure (HF).

South San Francisco-based Cytokinetics put together an arrangement with Royalty for some of the payout due from Amgen on worldwide sales, selling Royalty 4.5 percent for $90 million in an up-front cash payment. The pact could include another 1 percent depending on approval timing, i.e., "if there's a delay beyond what we agreed would be a reasonable time frame to expect this drug to be commercializable," CEO Robert Blum said, though he would not specify the time frame and pointed out that the compound has "three to four, maybe four to five years" of trials ahead.

Royalty Pharma is buying $10 million of Cytokinetics' stock, too, at a 9.8 percent premium to Wednesday's closing price, and Cytokinetics has further agreed with Royalty to exercise its option to co-invest $40 million in the phase III program under the collaboration with Amgen. Cytokinetics could get an incremental royalty of up to 4 percent on increasing worldwide sales outside Japan.

Also, under the agreement with Thousand Oaks, Calif.-based Amgen, made in 2006, Cytokinetics holds the right to collect more than $600 million in potential milestone payments plus escalating, double-digit royalties that may surpass 20 percent on tiered worldwide sales ex-Japan (with a lower royalty rate in Japan). By exercising its option and co-funding, Cytokinetics can co-promote the drug candidate in institutional care settings in North America, with reimbursement by Amgen for certain sales efforts. An Amgen/Cytokinetics team would handle commercialization. The decision to push omecamtiv into phase III trials was made last year. (See BioWorld Today, Sept. 2, 2016.)

"We always planned to do this, but we wanted to make certain that when we did it, we were in a position to co-fund at the maximum level, and that would afford us co-promotion rights that we so desired," Blum said. "What we've been in effect able to do through this transaction is bring on board another partner, but a financial partner" in Royalty. "We do earn substantially more in potential royalties on net sales from Amgen than that which we are selling," he said, an escalating royalty based on increasing sales that was not disclosed.

Duncan wrote in a research report that "cash is king and more is better, in the short and even long run." The Royalty deal "points to math that can be used to estimate value of omecamtiv and, by extension, Cytokinetics' shares," in his view. "This additional cash should be sufficient to fund further development of the company's skeletal muscle activators, including tirasemtiv, through 2019." What's more, "the diligence conducted by Royalty prior to this investment provides some external validation on the probability of clinical success and the commercial potential for omecamtiv."

TIRASEMTIVE ADVANCES WITH ASTELLAS

Late last year, Cytokinetics and Amgen disclosed the launch of the GALACTIC-HF phase III trial, with the activation of the first clinical site, and COSMIC-HF phase II data were published in The Lancet at the same time. The phase III start meant a $26.7 million milestone payment to Cytokinetics. "We believe these are very interesting times for Cytokinetics, with strong cash, two pharma partners and late-stage product candidates," said Roth Capital analyst Joseph Pantginis at the time.

The other partner is Tokyo-based Astellas Pharma Inc., which in 2013 teamed with Cytokinetics on skeletal muscle activators for weakness-related disorders in a tie-up that preserved rights to tirasemtiv for Cytokinetics and included the follow-on compound CK-2127107 (or CK-107, as it's more often known). Terms provided $40 million for Cytokinetics during the first two years, when the company agreed to handle research and development, with potential milestone payments up to $450 million. Of the first $40 million, $16 million was the nonrefundable up-front payment, and the terms provided for $24 million in reimbursement of sponsored research activities. (See BioWorld Today, June 26, 2013.)

The GALACTIC-HF trial with omecamtiv in chronic heart failure with reduced ejection fraction is ongoing under a special protocol assessment with the FDA. It's randomized and placebo-controlled, with dose titration up to a maximum dose of 50 mg twice daily based on the plasma concentration of omecamtiv. The primary endpoint is time to cardiovascular death or first heart failure event. Secondary endpoints include time to cardiovascular death, patient-reported outcomes as measured by the Kansas City Cardiomyopathy Questionnaire Total Symptom Score, time to first heart failure hospitalization and all-cause death. About 8,000 patients at 800 global sites will be enrolled, with final data collection expected in early 2021.

Tirasemtiv, for its part, is undergoing a phase III trial called VITALITY-ALS, a test of the candidate in amyotrophic lateral sclerosis (ALS). Cowen and Co. analyst Ritu Baral noted in an October research report that "there was growing acceptance of slow vital capacity as a pivotal endpoint at the American Academy of Neurology 2016 meeting as well as at the December 2015 ALS-Motor Neurone Disease meeting," which boded well for tirasemtiv. "Another VITALITY data safety monitoring board's look has successfully been passed, which we view as very positive given early tolerability concerns with the compound, although Cytokinetics remains blinded to overall tolerability." The company said compliance and patient retention is better than the phase II BENEFIT trial and well within expected trial conduct parameters. "We are still somewhat cautious on the data, due to be top-lined in the fourth quarter of 2017, due to the nature of phase II trial datasets and general clinical development difficulty within ALS," she wrote. Tirasemtiv failed at the phase IIb stage in the spring of 2014. (See BioWorld Today, April 28, 2014.)

Shares of Cytokinetics (NASDAQ:CYTK) closed Thursday at $10.95, up 55 cents.