Cytokinetics, Incorporated (CYTK) Earnings Call Transcript & Summary

Good afternoon, and welcome, ladies and gentlemen, to Cytokinetics Conference Call. At this time, I would like to inform you that this call is being recorded. [Operator Instructions] I would now like to turn the call over to Diane Weiser, Cytokinetics Senior Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good morning, everyone, and thanks for joining us on the call today. Robert Blum, our President and Chief Executive Officer, will begin with an overview of today's announcement and next steps related to omecamtiv mecarbil. Then we'll open the call to questions, and Robert will be joined by Fady Malik, Executive Vice President of R&D; Libby Schnieders, Senior Vice President of Business Development; Ching Jaw, Senior Vice President and Chief Financial Officer; and Mark Schlossberg, Senior Vice President, Legal & General Counsel. Please note that portions of the following discussion, including our responses to questions, contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements. Our actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in today's press release regarding Amgen's termination of our collaboration agreement available on our website as well as in our SEC filings. We undertake no obligation to update any forward-looking statements after this call. And now I will turn the call over to Robert.

Thank you, Diane, and thank you to everyone for joining us on the call this morning. On Friday of last week, we received notice from Amgen of its termination of our collaboration agreement and its intention to transfer the further development of omecamtiv mecarbil and AMG 594 to Cytokinetics. This notification came as a surprise to us. We and Amgen had previously discussed conducting further analyses of the data arising from GALACTIC-HF and engaging opinion leaders to assess their views on the data as well as to jointly conduct market research on agreed target product profiles. We had planned together for activities that would stretch into 2021 and we expected those activities would result and are having senior level executive discussions in Q1 2021 regarding potential next steps. We had no indications prior to Friday that Amgen would choose to provide their termination notice before completion of these activities. With that said, Cytokinetics will now be gained rights to the field of cardiac sarcomere activation, a field we first pioneered, progressed into clinical development and have worked side-by-side with Amgen to advance. To remind you, the primary results of GALACTIC-HF were recently presented at the American Heart Association Scientific Sessions and simultaneously published in the New England Journal of Medicine. The trial demonstrated a statistically significant effect of treatment with omecamtiv mecarbil to reduce the risk of the primary composite endpoint of cardiovascular death or heart failure events, heart failure hospitalizations and other urgent treatment for heart failure when compared to placebo in patients treated with standard of care. While no reduction in the secondary endpoints of time to CV death was observed in the overall population, the effect of omecamtiv mecarbil on the primary composite endpoint was generally consistent across prespecified subgroups with a potentially greater treatment effects adjusted in patients with lower left ventricular ejection fraction. Following the presentation of the results of GALACTIC-HF at the American Heart Association meetings, Amgen and Cytokinetics circled with over 50 opinion leaders through formal advisory board sessions and one-on-one meetings, and we were preparing for a joint synthesis of those meetings to discuss amongst our senior executives. While our discussions with opinion leaders are continuing, the consensus feedback coming out of these meetings is supportive of the role for omecamtiv mecarbil in the treatment of heart failure patients, particularly the sicker heart failure patients, and of our proceeding to engage regulatory authorities to discuss paths forward towards potential registration. These meetings included top academic cardiology thought leaders as well as community-based specialists who lead high-volume heart failure clinics. Collectively, their feedback regarding the results of GALACTIC-HF is that omecamtiv mecarbil appears to offer a profile especially well positioned as a novel mechanism treatment for advanced heart failure patients who are difficult to treat and at high-risk of worsening disease. To elaborate, GALACTIC-HF is a landmark trial and one of the largest ever conducted in heart failure. It demonstrated a positive effect on the primary composite endpoint in patients receiving standard of care plus omecamtiv mecarbil across a broad diversity of patients as it enrolled both inpatients and outpatients. As noted earlier, there was a more pronounced effect in a prespecified subgroup of patients with lower ejection fraction, which is important as it may inform a phenotype of patients most likely to benefit and as will be key to inform physicians, guidelines and payers. Additional analyses of this subgroup are continuing and will be presented and published in the next few months as we believe will further elaborate on the potential of omecamtiv mecarbil in difficult-to-treat advanced heart failure patients who are especially at high-risk of hospitalization and rehospitalization. While we're still getting our arms around the prevalence and incidence of patient numbers associated with this phenotype, we believe it is a sizable population and represents at least hundreds of thousands of patients in the United States whose heart failure continues to advance despite treatment with existing medications. Moreover, it has been estimated that 75% of these patients when hospitalized will succumb to their disease within 5 years of hospitalization, underscoring the importance of new treatments. A potential new medicine that can keep patients out of the hospitals would be welcomed by physicians and payers alike. Physicians develop a close relationship with these patients and are limited by currently available options. This is what we're learning and confirming with opinion leaders. But already, we're encouraged by what we're hearing. Opinion leaders with whom we have engaged have shared their viewpoints on the key value drivers for in-patients, who are often hospitalized and rehospitalized with diagnoses of heart failure. The emerging profile of omecamtiv mecarbil to reduce heart failure hospitalization and other urgent events may afford a solid pharmacoeconomic profile, which would be advantageous to combat economic pressures hospitals are confronting given Medicare penalties for 30-day and 60-day readmissions and as are expected to only get more challenging given the prospect of bundled payments. We and Amgen had planned other meetings with opinion leaders as well as activities to inform the commercial positioning and potential returns on sales and marketing. We will continue and complete those activities, but to repeat, we have already received encouragement to proceed towards regulatory discussions as may inform regulatory submissions, and if successful, potential commercialization. And with that said, our diligent work continues. Now we'll proceed independently and deliberately to complete this work, leveraging our expertise and our leadership in cardiac muscle biology and our long-standing goodwill with the heart failure community. Looking at this opportunity from our optics, initial assessments of the potential commercial opportunity appear attractive to Cytokinetics and would certainly move the needle for our company. While we need to better understand these data, to be clear, I do not foresee a scenario in which we do not engage regulatory authorities and seek feedback around a potential registration path forward. We have support from the Executive Committee of GALACTIC-HF as well as investigators and opinion leaders, and we intend to push forward as may serve the interest of patients, physicians and payers. And yes, we see this as an important opportunity at Cytokinetics to serve our shareholders and to reclaim control over our first-in-class drug candidates and to do so with urgency, leveraging what has arisen from our collaboration. With urgency because the results of GALACTIC-HF underscore potential clinical effect and benefit for omecamtiv mecarbil in an area of high unmet need. At Cytokinetics, we are genuinely committed to advancing a new mechanism medicine in heart failure. We are the pioneers as to muscle biology, and we're leaders in translating that biology to an entirely new pharmacology. We now look forward to proceeding to next steps. However, to be clear, it will take some time to define our time lines, and we will require cooperation in these transitions from Amgen. I'd now like to speak to the terms associated with Amgen terminating our collaboration. Amgen is terminating for convenience. And under our collaboration agreement, upon Amgen's termination, research, development and commercialization rights for compounds, including omecamtiv mecarbil and AMG 594, will transition to Cytokinetics. In addition, Amgen will have certain obligations set forth in the agreement to facilitate a reasonably smooth, orderly and prompt transition of these programs, including transfer and assignment to Cytokinetics of specified regulatory filings, data and other information, if requested by Cytokinetics. Transferring inventory of compounds to Cytokinetics at our expense to the extent possible and requested by Cytokinetics, a signing relevant third-party manufacturing agreements to Cytokinetics and granting to Cytokinetics exclusive and nonexclusive licenses to certain intellectual property rights. Importantly, Cytokinetics will have no trailing royalty obligations, no trailing royalty payment obligations to Amgen for either omecamtiv mecarbil or AMG 594. With Cytokinetics' consent, Amgen previously granted a sublicense to Servier to commercialize omecamtiv mecarbil in Europe and the commonwealth of independent states, including Russia. Cytokinetics previously entered into a letter agreement with Amgen and Servier in 2016, which provides that if Amgen's rights to omecamtiv mecarbil are terminated, Servier becomes a direct licensee of Cytokinetics under substantially the same terms as those in our option, license and collaboration agreement between Amgen and Servier. So what can you expect from us moving forward? We look forward to sharing more data soon and elaborating on analyses already in hand that underscore our enthusiasm for proceeding to discuss this program with regulatory authorities. In the meantime, we plan to be considerably more transparent about feedback from market research, and our expected regulatory interactions. We will also assess what would be required to take omecamtiv mecarbil to market by ourselves or otherwise with a partner, so as to inform a decision regarding our potentially seeking a new co-promotion partner in North America as well as consider licensing in other territories. We can now proceed to independently assess the merits of that strategy and the practicality of our going it alone or with another partner or partners in this area of hospital-based commercialization and outpatient specialty cardiology. We will do our best to move swiftly in the interest of integrity, authentic commitment to good science and genuine service to patients. Operator, with that, we can now open up the call to questions, please.

[Operator Instructions] Your first question is from the line of Jason Butler with JMP Securities.

First one, I get that you're not updating financial guidance here, but can you just give us a sense of what the ballpark costs of the planned activities were with Amgen in terms of continuing to investigate the commercial opportunity, the market research, the dialogue with practitioners and towards the goal of getting regulatory feedback? And then from an R&D perspective, what happens to the cost of METEORIC? Does Amgen continue to cover anything there? And then I have follow-up questions.

Good questions. I'll start, and Ching, if you want to add anything or Fady. To your first question, the costs associated with further engagement of opinion leaders in market research were expected to be modest and shared jointly and those were plans that had been discussed, albeit by people within our organizations at mid-levels and not at the senior-most levels. With regard to our financials. As you've heard from Ching, we expect to end 2020 with over $500 million in cash and cash equivalents on our balance sheet and even as we have this new information and as we peer into 2021, we still expect that will, under all scenarios we're contemplating, represent at least 2 to 3 years of forward cash. With regard to METEORIC, we believe that this study will continue. We had agreed with Amgen with respect to a budget around which METEORIC would be proceeding, as we've already guided to completing enrollment in 2021 and read out results in 2021. Ching or Fady, anything else you want to add?

Yes. I would just add that there are multiple scenarios around which we could go to market, either by ourselves or would contract sales organization or would ponder partners, and we will assess the merits and associate the cost of each of these options before determining what our next steps are.

Okay. You could well imagine that those scenarios that Ching is speaking of, which we have been reviewing already, recognizing this could be a potential outcome, are more likely to have effect to our spending in 2022-2023 more than 2021, but we'll be able to get our arms around those in due course and provide proper financial guidance once we have it.

Okay. Great. And then obviously, you're still learning about the patient population. But can you give us any sense in terms of a commercial strategy? Is this going to be more focused on hospitals and specialists versus to what extent do you think the commercial outreach would need to focus on primary care docks and community cardiologists?

Very good questions. So we and Amgen have been discussing these matters for years, and that included potential deployment of resources and what each company would be doing, and it had always been our expectation that Cytokinetics would be building an institutional care hospital-based selling force as would be our primary focus. And Amgen's primary focus was going to be cardiologists, specialty care, heart failure specialists in the community. And as such, we have an idea as to what would be deemed competitive with regard to sales and marketing resources as would become optimal for a new medicine. But as you know, given the trial GALACTIC, which looked at patients who were at high risk of hospitalization, given a recent hospitalization, the focus was to be on catching patients as they were in the hospital and being discharged. So we have a handle on what that looks like from a commitment to commercialization. And to your question, yes, it's not a primary care selling activity. It's a specialty care selling activity and one around which we have already some prescribed numbers that we can now understand whether it makes sense from a practicality and tractable standpoint for us to do that ourselves or with fee-for-service contracts or with other co-promotion partners. But it's not at all, as your question implies, something that's so formidable that it would be deemed a primary care effort that would be unaffordable to us. I hope that answers your question.

Your next question is from the line of Joe Pantginis with H.C. Wainwright.

So first, I guess, an observation here: This just appears to be a very, very fast decision by Amgen. And I guess my question is open-ended in the sense that, look, when you look at the data that you put out and your comments today, we're looking at a market population of, let's call it, at least 1 million patients. So the potential for a company to return rights based on having a subpopulation be too small, or something of that nature, certainly does not appear to be the case. So I guess my open-ended question is really at this point, and I know you're still assessing everything that's going on here, but what was Amgen's motivation here? What is the Street missing at this point?

It's a very good question, and I wish I could answer it. I don't know the answer to your question. I've not had senior level interactions with Amgen to explain this decision. Amgen's press release this morning indicated that the results of GALACTIC did not meet their high hurdle. I'm not exactly sure what that's meaning, but I do believe that these results, as we have triangulated with opinion leaders, underscore that those opinion leaders, and we talk to the very top of the ladder heart failure experts together with Amgen as well as everybody up and down, and we're getting a consensus strong support for movement forward. I don't know what Amgen's criteria for advancement were. I think that's a question that would better be posed to Amgen.

No, I understand. I appreciate the feedback, Robert. And I guess 2, I guess, smaller questions, if you will, is, I guess, do you have any body language yet from Servier with regarding their commitment to the program? And second, when do you anticipate going to the FDA?

Good questions. As far as I'm aware, Servier learned of this news today, and I'll be moving swiftly to have discussions directly with Servier. They were participants, as Fady can elaborate, in meetings with opinion leaders over the last week, both formal advisory boards and I believe also, they've been doing some of their own independent forensics with their own advisers. As far as going to FDA as soon as we can practically do that, that's going to require some cooperation from Amgen, as I mentioned, but our hope would be to do that within the next few months. And once we can understand better, we'll give more formal guidance. So I expect you'll see that we'll be much more forthcoming about what we're doing now. Please understand that in order to go to FDA, we have to best understand that phenotype that I alluded to before. That's going to require some additional analyses that are ongoing. There are analyses that we have that will soon be presented and published that will elaborate on what we've indicated and as you'll see soon, but there's still further that we and the executive committee of the clinical trial want to do in order to best assess the profile in order to have that meaningfully constructive conversation with FDA and EMA. And in that way, it depends on how quickly those analyses can be completed, framed into briefing books and submitted to regulatory authorities, but we'll do that as rapidly as we can.

Next question is from the line of Charles Duncan with Cantor Fitzgerald.

I just wanted to follow-up on the last question regarding FDA timing and see if -- it sounds like there's some additional analyses in terms of phenotype understanding, but what about clinical data? What about data from GALACTIC or even METEORIC? Could that impact the timing with which an NDA is filed? And I guess, as an additional question or an extension of the previous question, would you anticipate still being able to file an NDA by the end of '21?

Certainly. But let me first answer your question by saying the phenotype is arising from data from GALACTIC. So it's not like this is not rooted in results from GALACTIC. But let me ask Fady, please, to speak more to how this is all coming together with analyses that will inform strategy.

Yes. Charles, I think the answer to that part of your question is that GALACTIC is a large study. We were able to construct, if you will, a patient phenotype from baseline characteristics that can inform where the drugs more best apply. And while we pointed to the EF less than 28% subgroup, and that certainly is a meaningful, biologically plausible marker of drug effect, I think that by itself doesn't define the phenotype. You have some patients with lower ejection fractions that haven't been in the hospital for 11, 12 months who are stable on background therapy and have low blood -- normal blood pressures and NT-proBNPs, which are normal. And you have patients with those same ejection fraction who have been in the hospital 2 or 3 times in the last 6 months who have a blood pressure of 100 who are on guideline therapy, but not able to maximize guideline therapy. And so I think it's looking at the GALACTIC data set and thinking what's the patient population where we think omecamtiv mecarbil is best applied. And those are the complex and multivariate analyses that we'll be doing in the coming weeks, and that will help us form strategy by which to approach regulators.

Okay. That's helpful, Fady and Robert. But I guess, an additional question along those lines. Would you imagine that the GALACTIC-HF trial results are sufficient to support an NDA? Or would you imagine that an additional trial need to be conducted? I believe these are subgroup analyses. They were potentially prespecified, but what are your thoughts in terms of additional clinical activities to support an NDA?

Well, certainly, that's what we've been discussing with opinion leaders. Certainly, that's what was intended with GALACTIC. GALACTIC is an 8,000 patient clinical trial that achieved its primary composite endpoint with a p less than 0.05. So it's reasonable for us to assume that it should be, as a pivotal trial, sufficient for NDA submission and potential registration, but we can't obviously know that absent being able to discuss it with regulatory authorities. So that's what we intend to do as soon as we can.

And I guess one additional question on clinical data and then one on Servier. With regard to clinical data and decision by Amgen, was there any additional independent efficacy or safety analysis that they conducted that may have turned the opinion of the company on that beyond just kind of the top line data that we've all seen?

Very good question. So I'll ask Fady to comment further. But the way this is set up, there's a database for GALACTIC and a clone of that database. And there's a database that resides at Amgen, and a clone of that database that resides with the Brigham And Women's Hospital performing independent analysis as they are represented on the executive committee of the clinical trial. And it's been a collaborative and coordinated exercise to perform analyses and to confirm those analyses between those 2 resident databases. Fady, anything you want to add to that?

Yes. I would just say that we've been sharing analyses and data that have come out of the trial. I'm not aware of anything that we haven't seen. It's not to say that there isn't anything, but I think that right now, all the data that we've -- that's been generated out of the study has been shared amongst the partners.

Okay. That's helpful. Final question on Servier. We haven't paid much attention to that aspect of potential commercialization. And I guess I'm wondering what could come your way now from Servier should they continue to be engaged in the collaboration, in terms of milestone payments or anything?

Exactly. So with our consent, Amgen entered into an arrangement with Servier a few years ago, as Servier provided co-funding and strategic support for the development program they received rights sub-licensed from Amgen, with our consent, to commercialize omecamtiv mecarbil in Europe and those other countries that I mentioned. But subject to the very same obligations that Amgen had to us, meaning Amgen had royalty and milestone payment obligations to us and those become Servier's obligations. Now instead of passing through Amgen, they would become direct obligations to Cytokinetics. But there are other things that we now inherit in terms of obligations to Servier, including as it relates to coordination and supply and other things. So these are details that will still need to be ironed out. But Servier, were they to remain moving forward under a collaboration with Cytokinetics, would have those commercial rights subject to those payments. And this is something that we'll be discussing with Servier. Servier, as you may know, is a leading cardiovascular company in Europe. That's why Amgen, with Cytokinetics' consent, elected to go down that path together. Servier has great expertise in matters associated with commercialization of heart failure medicines in Europe. So that's something that we find very appealing.

I know it would be speculation, but do you sense that Servier has any interest in building a presence in the States?

It's a very good question. It's something -- yes, it's a very good question and something that we will be discussing with them.

Your next question is from the line of Ted Tenthoff with Piper Sandler.

So thanks for the thoughtful update this morning. Obviously, very fluid situation in transit. But I think you provided us with a lot of information. It really seems to me that METEORIC becomes a lot more important at this point. So I just wanted to see if there's any more clarity in terms of enrollment and when we could get data from that trial.

Sure. I'll start and then ask Fady. But I would reiterate what we said months ago and weeks ago, days ago, GALACTIC stands on its own merits. I would not interpret this action of the last few days to suggest that we've changed our views with regard to GALACTIC and its ability to secure potential registration for omecamtiv mecarbil independent of METEORIC. I want to make that clear. METEORIC is a second study, but it was always designed that GALACTIC should be critical path to a potential approval. The executive committee of the clinical trial as well as opinion leaders believe that it's worth discussing this with regulatory authorities as could represent sufficient results for stand-alone approval independent of METEORIC, and that's what we'll do. With regard to your question about METEORIC, let me ask Fady to update you.

Thanks. Yes. I think, as Robert said, physician and payer community, they're very interested in outcomes, which is what we measured in GALACTIC. The outcome in New York is exercise performance, which certainly speak to an added dimension, but I don't think would drive necessarily uptake and use of omecamtiv mecarbil the -- by itself. And so the -- but to answer your question, New York is continuing. We are hoping to -- our plan is to complete enrollment in the first half of next year, reach trial results by the end of next year. And as Robert indicated, that's not necessarily gating to our proceeding with regulatory interactions on the basis of GALACTIC and filing NDA on the basis of GALACTIC, if that turns out to be if people are amenable to that in next year prior to having the results of METEORIC.

Right. I appreciate that. It just -- it seems to me that if you're going to be going for a label of keeping people out of the hospital, which was shown in GALACTIC, the exercise data could be meaningful with respect to that label. One last follow-up question. I think you mentioned sort of what the potential patient population was in terms of how many hospitalizations occur in the U.S. I think it's somewhere around $1 million or so. But could you just refresh what you said on that?

Sure. In the United States, there are 6 million patients and growing with heart failure, roughly half of whom have heart failure with reduced ejection fraction. And amongst those, there are over 1 million primary discharge diagnoses each year with a primary diagnosis of heart failure, meaning there are more than that number who are admitted, treated, some of whom, unfortunately, succumb to their disease in the hospital. And over 1 million discharged diagnosis with a primary diagnosis of heart failure. When you consider the all listed diagnosis, that number, we believe, more than doubles. So these are patients who are in and out, in and out of the hospital. And as Fady can speak to, these advanced heart failure patients with worsening disease are oftentimes maxed out on their existing meds. And what's potentially quite attractive is a new mechanism therapy that could address underlying poor cardiac performance without necessarily introducing other issues associated with adverse effects like lowering blood pressure and impairing renal function. These are patients that are complicated. And as you may have heard on our investor and media event held approximately a week ago, these are patients that are very challenging and oftentimes ones for which physicians don't know what they might do that they haven't already tried. Fady, anything you want to add?

Yes. I'll just add that I think Mike Selker presented that very well in our investor call in which you pointed to the fact that current therapies begin to be withdrawn in those patients as their heart failure gets worse because they are more difficult to use and they have issues with the adverse consequences of those therapies. And so again, a drug like omecamtiv mecarbil, which is easy to start, doesn't drop blood pressure, doesn't interact with kidney function, things like that, and would help keep those patients out of the hospital, certainly has a lot of appeal to physicians like that. And that's consistent with the feedback we've got from many other opinion leaders.

I believe omecamtiv mecarbil, based on the results of GALACTIC, may be affording a very interesting profile to be considered, and this is what we want to be discussing with physicians and payers alike. But not only have we seen with the results from GALACTIC-HF a favorable safety and tolerability profile in those data and also a consistent effect across prespecified subgroups, but we believe that translates into an economic value story. We need to do further assessments and pressure testing, but we believe that can translate into an economic value story in a population that is amongst the most challenging for those hospitals and physicians given Medicare public policy and other private payer restrictions and penalties. This may be amongst one of the very first medicines where that all comes together if these analyses continue to bear fruit in such a way that there is a very, very fundamentally important pharmacoeconomic value story to be told here as well.

Your next question is from the line of Dane Leone with Raymond James.