Cytokinetics Inc.’s new deal with RTW Investments gives the company a new presence in Asia and a strong influx of cash that should last at least two or three years.

The funding and equity purchase agreement for San Francisco-based Cytokinetics from RTW affiliates includes a direct equity investment of $50 million at $25 per share of common stock, development funding of up to $90 million for CK-274, a cardiac myosin inhibitor, for one or both indications of obstructive hypertrophic cardiomyopathy (HCM) and non-obstructive HCM.

RTW will receive a royalty in the low single digits on net sales of CK-274 in the U.S., the European Union, the U.K., Switzerland and certain other European countries.

In the deal, RTW also bought Cytokinetics’ royalty rights on future sales of mavacamten, an oral, allosteric cardiac myosin modulator being developed by Myokardia Inc., for $85 million cash.

Mavacamten, a small molecule, is in a pivotal phase III study for treating obstructive and non-obstructive HCM and in a phase II dose-ranging study for treating symptomatic non-obstructive HCM. In May, mavacamten’s phase III study hit its primary and all of its secondary endpoints. Myokardia said it plans to submit an NDA in the first quarter of 2021.

As part of the Cytokinetics deal, privately held Ji Xing Pharmaceuticals Ltd., of Shanghai, a new company formed by RTW, received an exclusive licensing agreement to develop and commercialize CK-274 in greater China. RTW will pay Cytokinetics $250 million in committed capital, funding and sales proceeds and sweetens the pot with $200 million in development and commercial milestones. RTW will also pay royalties on the region’s net sales to Cytokinetics.

Robert Blum, CEO, Cytokinetics

Robert Blum, Cytokinetics CEO, told investors in a call Tuesday morning that the deal factors into a strategy to narrow the gap between CK-274 and mavacamten. While mavacamten’s phase III results were “encouraging,” Blum said, there is an opportunity with the next-generation drug candidate to demonstrate some advantages, especially by extending into China.

“We'll have more to say about that over time with regard to where this could ultimately play out in terms of time to market,” Blum said. “But we do foresee that by going forward, not only in an expanded geographical way but also in multiple parallel indications, we're in an enabled position to move with next-in-class properties to what hopefully can translate into an expansion of the category to the benefit of both mavacamten and CK-274.”

H.C. Wainwright & Co. analyst Joseph Pantginis noted Tuesday that mavacamten is two to three years ahead of CK-274 in terms of clinical development in HCM and heart failure with preserved ejection fraction. Cytokinetics now has the opportunity to narrow that gap by taking advantage of a wider geographical development opportunity combined with the deployment of concomitant studies in those indications, he added.

“We also remind investors that, although next-in-class, CK-274 has the potential to show a differentiated and competitive profile when compared to mavacamten based on its [pharmacokinetics and pharmacodynamics] properties.”

Mizuho Securities analyst Salim Syed noted Tuesday that the deal implies, based on the company’s analysis, that mavacamten and CK-274 “are being modeled in the deal at [about $1 billion] in risk-adjusted peak sales (this is the break-even in other words).”

Syed also wrote that the deal could narrow the gap between CK-274 and mavacamten.

“We estimate there’s currently a [roughly three-year] gap between mavacamten and CK-274 launches, but this could come down with the $90 [million] in developmental funding from RTW,” Syed said.

Cytokinetics stock (NASDAQ:CYTK) jumped at the news as shares gained 16%, or $3.86, to close July 14 at $27.88.

HCM is a chronic, progressive disease characterized by excessive contraction of the heart muscle and the reduced ability of the left ventricle to fill, and it can lead to debilitating symptoms and cardiac dysfunction. It affects about one in every 500 people.

The RTW deal’s funding ensures Cytokinetics has the freedom to continue its co-commercialization plans for omecamtiv mecarbil, a selective cardiac myosin activator, being developed to treat chronic heart failure with reduced ejection fraction, with Amgen Inc., according to Ching Jaw, Cytokinetics chief financial officer. The FDA granted fast track designation to omecamtiv mecarbil in May.

Cytokinetics co-invested with Amgen in the phase III development of omecamtiv mecarbil in exchange for increased royalties from Amgen on worldwide sales of omecamtiv mecarbil outside Japan and co-promotion rights in institutional care settings in North America.

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