Cytokinetics, Incorporated (CYTK) Earnings Call Transcript & Summary

Good morning, and welcome, ladies and gentlemen, to the Cytokinetics conference call. At this time, I would like to inform you that this call is being recorded [Operator Instructions]. I will now turn the call over to Joanna Siegall, Cytokinetics' Senior Manager 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 regarding the structured financing with Royalty Pharma; then Ching Jaw, our SVP and Chief Financial Officer, will summarize the financial terms of each transaction, and will review our revised financial outlook. Robert will then provide final comments before opening the call for questions. At that time, we'll be joined by Fady Malik, EVP, Research and Development; Libby Schnieders, SVP, Business Development; and Andrew Callos, EVP and Chief Commercial Officer. 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 might 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 this morning's press release and our SEC filings, in particular, our quarterly report for the third quarter filed on Form 10-Q. We undertake no obligation to update any forward-looking statements after the call. Compounds or molecular entities mentioned or identified are investigational and have not been approved by the U.S. Food and Drug Administration or any governmental regulatory agencies. Now I will turn the call over to Robert.

Thank you, Joanna, and thank you to everyone for joining us on the call this morning. This morning, we issued a joint press release with Royalty Pharma announcing a structured financing deal comprised of 2 key transactions: one, securing a long-term debt facility from Royalty Pharma to support the potential commercialization of omecamtiv mecarbil and the further development of aficamten as well as another for the sale to Royalty Pharma of revenue participation rights on future worldwide sales of aficamten. At the closing of these transactions, Cytokinetics will receive $100 million and up to an additional $350 million in the future, subject to our having met certain development and regulatory conditions. As we stated previously, it was our goal to complete a structured financing transaction to further bolster our balance sheet to support the development and expansion of our cardiovascular programs and potential franchise. This is consistent with our history of creative deal making and not solely relying upon equity capital fundraising from the capital markets. Today's announcements puts a punctuation point on a structured financing deal campaign that we launched last year and which ultimately had us actively engaging with over a dozen different investment funds, most of which we took into detailed discussions of terms. We were fortunate to have attracted a high level of interest in the deal we were pursuing, and we had an opportunity to consider different deal structures and terms. Ultimately, the deal we're announcing today has us expanding an existing and fruitful relationship that dates back to 2017 with Royalty Pharma and thereby enable synergies and symmetries as we together align on how best to build out on our planned cardiovascular new medicine franchise around cardiac myosin modulators, omecamtiv mecarbil and aficamten. Now I'll turn it over to Ching to elaborate on the details of these transactions.

Thanks, Robert. The deal with Royalty Pharma is comprised of 2 transactions. First, Royalty Pharma has agreed to provide Cytokinetics' long-term capital of up to $300 million, as may be accessed in 5 different tranches to support primarily the potential commercialization of omecamtiv mecarbil and the further development of aficamten as well as other general corporate purposes. The initial tranche of $50 million will be received upon closing of this transaction. Four additional tranches totaling $250 million will be accessible in $25 million increments subject to certain conditions upon the occurrence of certain milestones related to omecamtiv mecarbil and aficamten. Except for a $25 million drawdown requirement if certain milestones are met, the remaining capital is at Cytokinetics option to draw down. Each tranche that Cytokinetics draws down will be followed by an interest-free, payment-free period of 6 quarters -- calendar quarters, after which installment repayments will be required over the next 34 calendar quarters, totaling 1.9x the amount drawn. Secondly, Royalty Pharma has purchased from Cytokinetics, a revenue participation right on aficamten of 4.5% on sales up to USD 1 billion and 3.5% for sales above $1 billion, of future worldwide sales of aficamten, subject to certain step downs. In exchange, Royalty Pharma will pay to Cytokinetics $150 million including $50 million at closing and 2 additional $50 million tranches, each conditional upon the initiation of potential pivotal clinical trials for obstructive HCM and non-obstructive HCM, respectively. The agreement announced today also includes an amendment of the 2017 financial partnership between Cytokinetics and Royalty Pharma, in which Cytokinetics sold to Royalty Pharma a 4.5% royalty on potential worldwide sales of omecamtiv mecarbil, which has now converted to a revenue participation right. This amendment does not change the original economic terms under our 2017 agreement with Royalty Pharma. With the upfront payments and committed capital from these transactions, we believe that we now have at least 2 years of forward cash runway based on our projected 2022 expenditures, inclusive of anticipated commercialization activities for omecamtiv mecarbil and expansions to our development programs and cardiovascular franchise. We will provide our 2022 financial guidance during our Q4 2021 earnings call, which we will convene in February. With that, I'll turn the call back over to Robert.

Thank you, Ching. We're very pleased to announce the structured financing with Royalty Pharma today. As Ching stated, through these transactions, we will receive capital that, in addition to the funds received through our recently expanded collaboration with JI XING for omecamtiv mecarbil in Greater China, provide us with at least 2 years of cash runway based on our projected 2022 burn rate. Our leadership in muscle biology for more than 20 years has been driven by our pioneering science and fueled by a strong balance sheet. These transactions with Royalty Pharma demonstrate yet again our ability to monetize our leadership in muscle biology and diversify access to capital as well as ensure capital efficiencies for the benefit of shareholders. 2021 was a transformational year for Cytokinetics on so many levels. With today's announcement, 2022 is starting out similarly and may prove to be another year of tremendous progress for our company as we plan for the potential commercialization of omecamtiv mecarbil and continue to expand in advance other early and late-stage development programs across our pipeline. We look forward to sharing more updates on our progress in our Q4 2021 earnings call later this quarter. Next, we're going to open up the call for questions. Ching and I are joined by Fady, Libby and Andrew. We are also available to speak to potential questions, including potentially the use of proceeds in light of planned commercialization activities and also expanded development programs. And operator, with that, please let's open the call up to questions.

[Operator Instructions] Your first question comes from the line of Yasmeen Rahimi with Piper Sandler.

Congratulations on the deal. So a few questions for you this morning. The first question for you is a simple one. When do you hope this transaction to close? Second question is, provide some color for us why you decided to also go into the partnership on aficamten, not only omecamtiv? And then I have a third follow-up question.

So I'll turn to Ching for the first, and I'll answer the second. Ching, about closing?

The deal is expected to close later today.

Wonderful.

So that's your first question. Your second question is why aficamten. And frankly, as we committed and indicated through public comments throughout 2021, it was our interest to monetize a small portion of the future royalty on aficamten, much like we did in 2017 with omecamtiv. We like the symmetry in each case, an approximately 4.5% royalty. We think a low single-digit royalty is the right way to proceed enabling of us to maintain control over our programs and also affording us additional capital to advance our business. So in this case, we now go forward with a 4.5% royalty on omecamtiv, also on aficamten. Those are subject to certain conditions and potential changes. But we think that's the right prudent way to be enabling of our advancement of these programs in parallel as is so important to our ambition to build a cardiovascular franchise. And I think that for that partnering aficamten this way, gained us access to additional debt capital for omecamtiv mecarbil. The combination of those 2 together made for an attractive offering that enabled us to negotiate a favorable deal.

And then just a quick follow-up. Can you provide some color sort of on how much sort of the commercialization process in place, how much spend will be allocated for commercial preparedness?

Sure. So I'm going to turn to Andrew to address that. And as he does so, I'll underscore again how our investment in planned commercial activities are gated, gated towards milestones. But with that, I'll turn it over to Andrew.

Sure. So as Robert said, I think that is an important point around the gating of our investment. We have less than 1/3 of our FTEs that we really need for commercialization at this point. So most of the spend for commercialization will occur after we get approved, assuming we get approved in the second half of this year. There are things like sales force promotional spend, media spend, patient support programs, agency spend, et cetera. So we're now in the planning phase and the building phase of our commercial side of the organization. and getting ready to launch omecamtiv mecarbil. So things like sales leadership, commercial operations, analytics, developing campaigns, HEOR work, engaging with payers that are the types of activities that are occurring now with a commercial organization that's in the [ 50 to 60 ] range and then building up once we get approved beyond that.

[indiscernible] lead time activities right now. Much of that is out-of-pocket spending and not fixed costs. As Andrew points out, payroll for commercial remains still modest. And as we get feedback from FDA and as we approach planned commercialization later this year, we can dial up those investments.

Your next question is from Carter Gould with Barclays.

Congratulations on the deal, Robert. So I guess the first 1 is, just given -- to what extent is sort of the uncertainty of the timing and label of mavacamten sort of factor into the discussions here as well as just the general uncertainty around that launch? And then now with this additional cash, should we foresee sort of a near-term kind of communication on life cycle planning for aficamten beyond sort of that initial indication?

Very good questions. So I'll turn to Fady for the second question around how we might be thinking about expanded development for aficamten. But I'll mention as to your first part of the question, it really didn't factor into our thinking. We expect mavacamten to be approved. We expect it to be approved with a good label, and we expect BMS to do a really good job in terms of commercializing it. And I think that fed into the appetite on the part of a large number of investment funds to engage with us around aficamten in this deal. But as it relates to label or a REMS program or all the other things that people have been asking us about in recent months, that really didn't factor into this deal in any kind of meaningful way. Fady, could I turn to you maybe now to address how we might be thinking about expanding the development program?

Yes. Thanks for the question, Carter. I think as we've pointed out before, we have several ideas that we want to advance with aficamten and I'm not going to go into specifics today, but they include additional populations such as nHCM or heart failure preserved ejection fraction, also additional trials that may be label enhancing in terms of the primary indication of obstructive HCM. All these things have been on plan, and this transaction helps us to ensure that we have financial ability to prosecute them in the coming year. So I think you'll hear more in the next quarter plus in terms of the specifics with regards to our strategy there.

So you should expect to hear from us regarding Cohort 3 of REDWOOD, you should expect to hear from us regarding what will be our plans for aficamten in terms of additional studies, both SEQUOIA and otherwise, as we'll elaborate a bit more probably on our Q4 earnings call coming up in February.

Your next question is from Charles Duncan with Cantor Fitzgerald.

Congratulations on this transaction. Like the diligence that the Royalty Pharma folks do, but I'm wondering if you could provide, any additional color on -- with regard to some of the -- I guess you mentioned in the press release, $150 million near-term funding. Does that include the upfront payment? And would you, therefore, expect just 1 milestone to trigger in, call it, the next 20 -- 12 months or so? Or could we anticipate multiple milestones being available to trigger additional drawdowns or milestone payments?

Sure. I'll turn that over to Ching to answer, please.

Sure. Charles, so the $150 million near-term that was in our press release is comprised of 3 components. Tranche 1 funding from the debt facility loan agreement. Tranche 1 funding related to the aficamten royalty or revenue purchase agreement. And once we start our Phase III trial in obstructive HCM, tranche 2 of the revenue interest funding kicks into gear. So the $50 million each -- for each of those tranches, that's the $150 million. After that, as we said, we still have access of up to $250 million on the loan agreement as well as an additional $50 million on the royalty side of the agreement.

And to further elaborate, Charles, it is quite possible that you would be seeing us earning additional access to capital through those milestones in the calendar year.

Very good. That's helpful, Robert, need the espresso to kick in, so it wasn't clear initial presentation to me. But going on from that, regarding the commercial build size and timing, I think Andrew answered my initial question of roughly 50, 60 salespeople or so and timing post approval. But I'm wondering if you could provide some color on the interest level. I would imagine there'd be -- you'd be already taking in incoming resumes. And has there been a fair amount of interest in joining that emerging commercial infrastructure? And then also, what do you intend to do ex U.S? Can you help us understand specifically to Europe, if there's an opportunity for only ex U.S. that you might pursue and how you would do it?

Sure. I'll first ask Andrew to answer your question and maybe correct your interpretation of his prior comment, the 50 to 60 and what those people are doing versus future salespeople and then I'll address this.

So the 50 or 60 are not salespeople. There's a few sales leaders in there. They are mainly headquarter people focused on market access, analytics, HEOR, marketing. So those types of colleagues or the colleagues we have in right now in the commercial organization building our commercial infrastructure and planning for launch. When we actually get to launch, the field force will be in the 200 range focused on both cardiology and hospitals. In terms of your question around interest, if you look at Cytokinetics, and we have a -- what could be a launch in the second half of this year of omecamtiv and 2 Phase IIIs, all in novel science on high unmet need. We have generally been able to attract very strong talent, experienced talent and we're generally getting the top candidate that we feel fits best with experience and in Cytokinetics. So there's been a tremendous amount of interest in Cytokinetics. The more people we bring in who have a network and contacts, we certainly have kind of pent-up demand, if you will. So we're not anticipating -- we're not ready to bring salespeople in yet, we'll do that later this year in terms of contingent offers based on approval. But we won't start that process probably until second quarter. And I'll let Robert answer regarding Europe.

Yes. We're getting very, very high costs for high-quality people and the number of candidates applying for position is impressive. Regarding Europe, I'm going to ask Libby to speak to our plans for partnering in 2022. But I'll start by saying that for our having done a deal with JI XING to basically bring similar symmetry to the way in which we're approaching Greater China now with JI XING, both aficamten and omecamtiv mecarbil partnered together in a franchise deal in Greater China, it enabled us to think about partnering in Japan and Europe differently. And our goals in 2022 will be oriented towards partnering in those geographies, but under perhaps some different conditions. And Libby, if you could speak a little bit to how you're going to approach partnering in 2022.

Thanks, Robert. And just to expand on your comment, we have engaged in partnering discussions that we will continue now focused on thinking about our long-term strategies and potentially building our organization and how our partners can complement our development and commercial capabilities in these other regions. So you've heard a lot about our focus on the U.S. You've seen our history of looking for complementary expertise from partners. We've done our recent expansion with JI XING that illustrates that. And as we look at Europe, we think about what can complement our ability from a co-promotion perspective, from a leading commercialization perspective and different indications. So the type of creative deal structure that we've engaged in, in the past.

Yes. We believe very strongly in the synergies that accrue from omecamtiv mecarbil and aficamten. And with each deal, we're bolstering our balance sheet so that we now go into partnering in 2022 with over $1 billion of capital, current cash and committed capital and that affords us, we think, additional leverage as well as we want to ensure the best possible deal in Europe or -- and/or Japan. So hopefully, that answers your question.

Your next question is from Anupam Rama with JPMorgan.

Just a quick clarification. I noticed a comment in the press release that aficamten sales royalties. And Robert, I think you talked about this in another question that are subject to certain potential step downs. Are those sales based over some predefined thresholds? Or is there some other lever we should be thinking about?

So it's a difficult question to answer without disclosing something that would be deemed confidential, and I can't elaborate. But I think it's not uncommon in these deals that there would be step-downs under certain circumstances. And I perhaps probably can't do more than that. It's not uncommon language that you would see in contracts of this sort.

Your next question is from Jason Butler with JMP Securities.

It's actually Roy in for Jason. Robert, you mentioned that -- maybe you could elaborate a bit on the use of proceeds from the deal, sorry if I missed it in the earlier question.

Sure. So we've pointed to the fact that there is an opportunity here with this additional capital infusion to further our investment in commercial readiness. It's still gated. It's still a function of what might be feedback we're getting from FDA and other things around our intention to bring omecamtiv mecarbil to market. And it's also intended to be enabling of us to do more than what we've already committed to with regard to aficamten. You've heard us talking about the SEQUOIA study, but we've also pointed to the fact that we would like to do additional studies in patients with HCM obstructive and nonobstructive in order to further this field. And earlier in the call, we spoke about how we might approach that with this additional capital as well -- as well as general corporate use of proceeds. So I hope that answers your question. Does that get to your question?

Yes. That's great. And I guess maybe reading into your comments earlier, is it possible that the non-obstructive HCM Phase III starts this year?

I don't think we should probably comment on that quite yet, but I expect you'll get your answer soon enough.

Okay. Great. And then the 4 tranches, each $50 million for the royalty -- no, no, sorry. For the debt deal, split between omecamtiv and aficamten. Is it fair to assume that that's a single milestone is for approval of omecamtiv and the other 3 are for aficamten?

We can't speak to that. That's confidential to the terms of the deal. I think you're going to have to model that the best way you know how based on deals that you've seen.

Your next question is from Salim Syed with Mizuho.

Congrats on the deal. So I just wanted to focus on some of the assumptions you guys put in your NPV here. So am I interpreting this correctly, this is 2 separate deals on -- if we're looking at aficamten, when you guys ran your NPV and when we're trying to back into what you are assuming for peak sales, we should not be using the $75 million and the $100 million tranche 4 and 5 that are listed in the 8-K. Is that correct? We should just stick to, I guess, the $100 million for oHCM that's listed in the press release?

No, I don't think you can really do it that way. I'll tell you, it's blended, and we had to look at this as blended. Ching and his team in finance did an analysis of our own forecast by indication for both products as well as where The Street was at with regard to aficamten in order to understand how might we best structure a deal that afforded us a monetization of a royalty that would be, frankly, north of where The Street was at in connection with its forecast. So I'm going to turn it back to Ching to kind of elaborate, but I do believe that the way we valued aficamten should meet with great enthusiasm.

Thanks, Robert. So the way we look at this and granted this is very small sample size, so you should take it for a [indiscernible]. We look at the 12 analysts who cover us, some of them have in their models, some of the parts of analysis and we look at how much value they attribute in their models to aficamten. And that range -- that's a fairly wide range, ranges from $17 to $54 a share, just a value attributed to aficamten with a mean of $34 per share. If you could back calculate that based on that price target attributable to aficamten, you can calculate the value of the aficamten and then we compare that with the deal terms of this aficamten deal with Royalty Pharma. And we came to the conclusion that the deal terms we agreed to is in line or slightly better than the mean of the price target attributable to aficamten. I hope that's clear.

Okay. So $34 is what you guys have in your consensus per share for aficamten across all indications, not just oHCM, that's all indications, correct? That's the number we should be looking at?

That's right. But you can't really bracket it solely because if in some ways, the royalty monetization around aficamten was enabling of us to be able to negotiate a debt facility for omecamtiv mecarbil upwards of $300 million on terms that we thought also work better than market. So it's the combination together that you need to also factor into how you think about this deal.

Okay. And then just -- you guys have mentioned several times that there are other indications you're planning to pursue here. The big 1 being HFpEF, which is not listed in the press release, but it doesn't look like there's any potential protection here? Or is that what the step downs refers to in addition -- HFpEF, could that be part of the potential step-down here because that's a large indication, right? If you -- if that actually comes to market, I mean, you're going to still pay 4.5% royalties to Royalty Pharma on HFpEF?

Not surprisingly, Salim, you always ask the very sophisticated, very good questions. I can't answer your question. But I think you'll have to rely on your own intuitions and judgment on how to approach that.

Okay. And just lastly, in the 8-K, you mentioned on tranche 4, that's dependent on receipt of data from SEQUOIA HCM prior to September 30, 2024, which if I'm doing the math correctly, that allows you guys an enrollment time of about 2 years. Is that something that is -- that we should be deemed as conservative or like how much buffer are you guys putting into that? Or are you really expecting it to your enrollment period or so for SEQUOIA?

I'll ask Fady to respond, but we've already communicated some of our expectations for enrollment and maybe he can just repeat those.

Yes. So I think it is conservative. And what we've said before is that we hope to see the majority of enrollment occur in 2022 and without providing guidance, that would put us reading out the trial sometime later in 2023. So that's what we're aiming towards. But obviously, we didn't want to shave it too close in a specific time line.

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

So Robert, I want to start, I guess, I'll call it the other column. Would you talk about potential expansion of other programs, general corporate purposes, anything you'd like to tease us with today?

Yes, it's a very good question because we haven't spoken a lot about other things other than with regard to omecamtiv and aficamten. Obviously, reldesemtiv is a Phase III, but so too do we have a drug candidates in early clinical development that we strongly want to advance into mid-stage development. So this deal, together with the JI XING deal, together with our current cash enables with Fady's supervision of research and development for us to dial up a number of programs. We want to see new INDs filed around programs currently in preclinical sciences. And you'll see announcements relating to all of those things and we'll be in a better position to guide to some of those activities with our Q4 earnings call.

Got it. That's fair. And then I want to focus on the tranches here. And I guess my first question is really sort of black and white. We're in a, call it, unique environment right now with the FDA a little bit. So when you look at the tranche associated with omecamtiv's approval, if omecamtiv to be approved on January 1, 2023, would you not be eligible for that $50 million tranche?

So I'll refer you to our 8-K, which probably is as disclosing as we can be with regard to those matters, anything else would probably be deemed confidential and not to be disclosed. I'm sorry, I probably can't elaborate beyond that.

That's fine. And that's what I was referring to, seeing the 8-K. And then with regard to the 8-K, I see something pretty intriguing here as well with regard to 1 of the tranches, and that's around commercial availability of a diagnostic test. This seems relatively new. Obviously, 1 of the things we're looking for in the potential label is ejection fraction levels at baseline -- diagnostic test, hopefully, you can elaborate on that.

Sure. Very good question. And yes, it is in the 8-K. And it is something we've spoken about in the course of developing omecamtiv mecarbil and in the conduct of GALACTIC, an assay was used in order to determine appropriate exposures as patients were titrating up. And that is something that we are advancing in conversations with FDA as may similarly be something that would be subject to potentially regulatory review as well. So that's an option. That's a path forward. It's not necessarily an obligation, but it's something that we are weighing and obviously, the deal is structured around that as would be a possibility.

Got it. And then my last question is more housekeeping. As part of Ching's prepared comments, I just wanted to actually see. So what actually changed with regard to the 2017 deal other than sort of how you phrased it or the title of it?

Sure. So I'll ask Ching and Libby also if she wants to comment on how this announcement today reads back to our 2017 deal.

Joe, it really is a housecleaning item whereas before, when Amgen was still in the collaboration with us, we receive royalty from Amgen and then we turn around and pay Royalty Pharma 4.5% of what we received -- 4.5 percentage points of what we receive from Amgen. Now that Amgen is no longer with us, Cytokinetics is responsible for sales. And Royalty Pharma will be receiving the same interest that they would have received from us under the Amgen agreement. So they will still receive 4.5% of the worldwide net sales of omecamtiv mecarbil. So that's why I said the economic terms really didn't change.

Your next question is from Jeff Hung with Morgan Stanley.

Just a follow-up on the question on tranches. I guess for the additional 4 tranches, are you able to provide any additional color on how the $250 million is divided between omecamtiv mecarbil and aficamten? And then I don't believe you specified any commercial milestones. So I just want to clarify that there are no commercial milestones from omecamtiv mecarbil to receive the $250 million?

So I'm harkening back to the way it's captured in the 8-K, and I'm not sure we can say anything other than what is there. Ching, Libby, is there a way we can answer Jeff's question beyond what we've already stated?

So yes, if you go to our 8-K, I think the 8-K is fairly detailed in terms of its description of what the tranches are, what the amounts are, what are the milestones and associated timing that we need to achieve those milestones.

Okay. And then you mentioned that you've talked to numerous parties for your sector financing campaign. For the sale of the royalty, was that also a competitive process? And was there additional interest from other parties? I just appreciate any details you can provide.

Yes, a very high level of interest. I've been doing these kinds of deals for a while. And Ching, Libby and I and others have done these deals for a while, and I'd say this deal met with more interest and enthusiasm on the part of bidders than any deal that I've been associated with.

Your next question comes from Serge Belanger with Needham & Company.

I guess my first question is regarding an answer you provided to an earlier question. You said the current single-digit royalty on this deal was ideal to maintain control. Just curious what level of royalty would be too high for you? And whether royalty financing could continue being a source of non-dilutive financing going forward?

It's a very good question. So at different points in time, our cost of capital reflects the maturity of our business. There was a time when we would be more amenable to sell higher percent royalties and do deals that would be feeding certain elements of control to pharma partners. As we've matured our company, our corporate development strategies together with our business development strategies have tracked with progress in R&D. And at this point in time, at our level of corporate development, we believe that a low single-digit royalty is appropriate and still maintaining control over the development and commercialization of our lead programs. But in certain geographies, obviously in our backyard in the United States where we want to be able to build our commercial franchise. Outside of the United States, we look at different geographies differently. And you saw what we did in Greater China. And hopefully, you'll be seeing more deals from us with regard to Japan, Europe and other territories. But we made it a point in this deal to aim to match the royalty that we did in 2017 and the royalty below 5%, we think is affordable and appropriate for our stage of development and our appetite for capital in our interest to manage things on our own.

Okay. And looking towards the OpEx guidance that we'll hear about in February. Just curious if we should expect any acceleration in spend, whether on the commercial side or the R&D side following these 2 transactions?

Yes. So I'll turn to Ching. We haven't given financial guidance yet for 2022 other than to say that we expect our burn rate climbs relative to net of revenue cash consumption in 2021. But Ching, do you want to elaborate on that?

Yes. The only thing I would add is you heard about from Andrew earlier describing how we build -- he is building the commercial franchise, and you heard from Fady a little bit about potential life cycle management programs. Our financial guidance will come out together with the guidance around those points because those will be driving our spending in 2022 and beyond. And we expect to give that guidance again in February during Q4 earnings call.

Yes. And just to emphasize, there are a number of scenarios around which 2022 spending will change. So our initial guidance typically will be wider and over time becomes narrow as we learn more. You can well imagine that if the NDA is approved, spending goes up; if the NDA is not approved, spending doesn't. So there are things like that, that we have to be equipped to manage in terms of expectations.

Your next question is from Dane Leone with Raymond James.

A couple of questions that should be pretty easy here. In the evaluation of how did you -- or to undertake a structured financing deal with someone like Royalty Pharma or others, how did you weigh that versus more traditional avenues of raising capital? For example, on our math, the aficamten royalty deal, again, our model suggest you might be paying around a 23% cost of capital. And then on the development funding deal, we're getting to around a 25% cost of capital. Debt isn't cheap for a company in your position, but there's always the convertible debt option or just raising equity, which is usually well received for a company with your clinical data and outlook. So I would like to get your thoughts on that. And then secondly, we're getting feedback from investors on the timing of this deal happening right ahead of the mavacamten PDUFA and a lot of controversy around the potential REMS program for the drug class. Can you just maybe opine on your thoughts around the timing of now versus once there's more regulatory clarity for potentially what could impact aficamten down the road? And then finally, I think you kind of touched on it, but if you have any more color on the outlook of signing additional commercial partners potentially for omecamtiv specifically over the course of this year, that would be great.

Sure. So 3 questions. I'll turn to Ching first to speak about cost of capital, and I may annotate with some comments afterwards, and then I'll ask Fady to speak about timing of this deal relative to potential approval of mavacamten and the REMS program. And then Libby and I will address some of the partnering as well. Ching?

So Dane, hearing your comment about cost of capital, I'm interested perhaps getting with you privately to go through your model because the cost of capital based on our evaluation of the deal is nowhere near as high as you had quoted. We have access from many sources in terms of senior secured loan which this 1 isn't, but the cost of capital around senior secured loan, for example, the 1 we just paid off the Oxford SVB loan is nowhere near 25%. So we certainly would not access another loan with a cost of capital significantly than what we have access for.

I'll reiterate that I think that the cost of capital that we engineered into this deal is quite substantially lower than what you projected. With regard to other sources of capital, 1 of the hallmarks of the way we've built this company is that we pull different levers at different times, whether that's in business development, whether that's equity capital markets, whether that's royalty monetizations, debt including on converts. And those are all tools that we've availed ourselves of. What we don't want to do is rely on any 1 lever as would be creating, I think, imbalances in our capital mix of the company. And we did do an equity deal last year. We've done a convert as well. And I do think that we need to demonstrate to shareholders that we can monetize our science in ways that isn't only at the expense of equity capital. And that's what we've chosen to do. And I think we have set a high watermark amongst peer group companies in terms of our ability to do those different kinds of deals. Next question regarding the timing in connection with the potential approval of mavacamten and REMS. I think we might have addressed it before, but Fady, anything you want to add there? Fady, I think you're on mute.

As we said earlier, I think the timing of the mavacamten approval really has nothing to do with this timing of this deal. We do expect mavacamten to be approved and received with good enthusiasm in the treating community. People have focused on REMS. And I think as a practicing -- former practicing physician, an interventional cardiologist that used many devices and drugs that had REMS and training programs attached to them, these are not really onerous things. They're [ not in ] to educate the physician and the use of the drug or the device. And frankly, they're good for physician uptake and they're good for patients as well. So I don't think that's a particular hurdle in this area either.

Yes, we went into this deal with the objective of closing it in and around the end of 2021, as we had been pointing and we closed it a couple of days into 2022, but it was never as would be predicated on anything with regard to mavacamten. In fact, we're pretty bullish on expectations for mavacamten. And as such, I think the deal reflects those kinds of high-end interest. With regard to partnering in Europe, and I think we may have touched on this a little bit earlier, we think this deal is enabling of our strategy that we continue to prosecute. Libby is already been an active engagement with potential partners in Japan and also throughout Europe. Libby, anything you want to add there?

No, I think you hit on the key points. The strategy is, as we've articulated before, which is really looking at our cardiovascular franchise opportunities to complement what we expect to build versus what our established expertise from a partner. So not much more to out there.

Yes. Our history has taught us that doing a deal opens the door on another deal. And now we have a 2017 deal with Royalty Pharma and a 2022 deal with Royalty Pharma. We did 2 deals with JI XING . Previously, our relationships with Amgen, with Astellas, a first deal to get a second deal in an expansion and an extension. And I do think that these deals that we've announced or enabling of our business development strategy, and we should be partnering in Europe, we should be partnering in Japan, but on terms that, again, are favorable as a function of our having a strong balance sheet. So it's still our intention, very much our intention to be partnering in other territories.

Your next question is from Justin Kim with Oppenheimer & Company.

I know a lot has been covered already, but I just thought it was interesting to see the timing of the last participation agreement payment aligned with the nHCM pivotal study start. And I know we've talked about this before, but does the team have any additional visibility on endpoint candidates for that pivotal study? And just sort of what -- in what respect these elements may follow or emulate the mavacamten study expected to start later this year?

Sure. I'll turn it to Fady to address how we're thinking about potential end points as we may be advancing towards nHCM.

Yes. I mean I think the -- there are 2 kinds of endpoints. There are short-term endpoints that really are biomarker-driven to give you a sense of whether you think remodeling of the heart is occurring in a positive way. The -- unlike oHCM where there is a fixed or rather a dynamic gradient that can be reduced rather acutely and result in significant potential treatment benefit. nHCM, there isn't such a rapidly changing or rapidly addressable physiologic issue with the heart. It's really a longer-term problem in terms of trying to regress some of the hypertrophy, improve the relaxation of the heart and the filling of the heart, and subsequently, its overall function. So in that context, there -- we think that treatment of patients with nHCM, where we require longer exposure to the drug. And then ultimately, the types of endpoints that 1 might pursue or similar to what you might see in oHCM. It's going to be a symptom improvement, exercise capacity improvement and those are the 2 things that patients with both the obstructive or non-obstructive disease suffer from. These are not generally mortal diseases with high mortality and morbidity.

Understood. And maybe just a clarification. I know you had mentioned some ability to fully capture the aficamten opportunity if it expands beyond sort of the 2 indications set forth. Is that sort of language about -- around the ability to negotiate it based on proof-of-concept data? I mean, is that where something like a HFpEF opportunity may lie in?

Yes. I mean nHCM is a really severe form of HFpEF if you think about it. It's a thickening of the heart. And HFpEF, certain subsegments of HFpEF, you see the same thing, the heart stick in. It's filling function is abnormal. And there's some parallels between the 2 conditions. So I think 1 can provide, if you will, proof of concept for the other and point to how to potentially expand the development program in that direction.

Understood. And just for Robert, I mean, I guess, in terms of just the royalty agreement, though, is sort of proof-of-concept data and HFpEF, I mean the agreement talks a little bit about the ability to negotiate terms. I'm just wondering if that's sort of where you would expect potential changes to be made to this agreement in the event that HFpEF become sort of more advanced?

Yes, it's a very good question. And it was posed slightly differently earlier in the call, and I addressed it as best I can, which is the 8-K reflects on what could be certain scenarios and around which the royalties could be adjusted, but I'm not really in a position to elaborate on those, but it is a good question.

At this time, there are no additional questions. I'll turn it back over to management for closing remarks.

Thank you, operator. And thanks to all the participants on our teleconference today. Thanks for your interest in today's announcements. These deals afford us a very meaningful extension of our cash runway, enabling of us a diversification around our access to capital as we see as is in the interest of shareholders, and at the same time, furthers our mission to advance these new medicines into the hands of patients and to deliver on the promise of our science. We appreciate the continued support and interest in what we're doing at Cytokinetics. And operator, with that, we can now conclude the call.

Thank you. This concludes today's conference call. You may now disconnect.