Cytokinetics, Incorporated (CYTK) Earnings Call Transcript & Summary

Good morning, and welcome, ladies and gentlemen, to Cytokinetics conference call to discuss the outcome of yesterday's FDA Advisory Committee Meeting for omecamtiv mecarbil. 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 Diane Weiser, Cytokinetics Senior Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good morning, and thanks for joining us on the call today. On the call with me today are Robert Blum, President and Chief Executive Officer, who will provide a summary of the Advisory Committee outcome and implications for the potential approval of omecamtiv mecarbil; as well as Fady Malik, EVP of Research and Development; Andrew Callos, EVP and Chief Commercial Officer; and Ching Jaw, SVP and Chief Financial Officer, who will all participate in our Q&A. Please note that portions of the following discussion including our responses to questions, contains 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 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. Good morning, everyone, and thanks for joining us on the call. Yesterday, the U.S. Food and Drug Administration's Cardiovascular and Renal Drugs Advisory Committee voted 8 to 3 that the benefits of omecamtiv mecarbil do not outweigh its risk for the treatment of heart failure with reduced ejection fraction or HFrEF. We're disappointed there was not a greater consensus amongst committee members relating to the benefit risk of omecamtiv mecarbil and we maintain our conviction in the strength of the evidence supporting its potential benefit for certain patients suffering from HFrEF. We continue to believe omecamtiv mecarbil can be a valuable add-on therapy for patients with worsening heart failure who remain at high risk for heart failure events and hospitalization despite being treated with available guideline-directed medical therapy. While the voting did not go the way we had hoped, we do appreciate the committee's discussion as well as the testimony from the patients, caregivers, advocates and clinicians who shared their experiences and underscore the need for this important potential medicine. I will remind you that the FDA will consider the recommendation made by the committee in its review of the NDA, but it is not bound to the committee's recommendation. We will look forward to engaging constructively with the FDA as it completes its review of the application for omecamtiv mecarbil. I would like to thank our colleagues in clinical regulatory biometrics, pharmacology and drug safety who worked tirelessly in preparation for the advisory committee meeting. Our presentations and engagement with the committee were of the highest quality, and I could not be more proud of the presentations, both as scripted and in response to questions. Yesterday's meeting enabled us to share our perspective on the data from this program and to hear how FDA and others responded. That is in and of itself a productive step forward. With that said, the path forward for omecamtiv mecarbil is not clear. The discussions at the committee meeting surfaced positives to be sure, but also issues that weighed importantly on voting. It is still to be determined how FDA will respond to the feedback. The next few months leading into the PDUFA date will be telling, and we commit to keep shareholders informed as much as can be practical given ongoing interactions with FDA. At Cytokinetics, we are not unfamiliar with overcoming challenges, and we certainly have had some with this potential medicine. It's already been a long and winding road for omecamtiv mecarbil, but we do remain hopeful. We will continue to work with the FDA as it conducts its further review of the NDA. But in the meantime, we have contemplated this scenario in our planning, and we will continue to gauge certain spending until such time as we have more clarity. As pertains to our commercial preparedness, importantly, I want to remind you that the pre-commercial infrastructure that we built intentionally serves omecamtiv mecarbil should it be approved, but also lays the groundwork for the potential commercialization of aficamten. As we have purposely designed risk mitigation and synergies into strategies to advance our development pipeline, so too are we looking at our go-to-market strategies and how we would leverage synergies into how we approach those activities. We're not going to elaborate on those matters today nor will we provide 2023 spending guidance today, but much like we do every year, you can expect us to provide that information alongside our Q4 earnings in Q1 2023. In the meantime, and this is important, we will look at ways we can extend cash runway as we continue to prioritize the expanded development of aficamten, both in obstructive and non-obstructive HCM. Yesterday's vote does not change that commitment and only adds to the convictions and urgency we feel to advance our science for the benefit of cardiovascular patients and that means a priority in development to aficamten. And I hope that in the Q&A that will follow, we can elaborate on those matters, as I know, are in particular, of interest to shareholders and analysts on this call. Operator, with that, we can now open the call to questions.

[Operator Instructions] And our first question will come from Jeff Hung from Morgan Stanley.

You recently announced that the CK-136 Phase I has begun dosing patients. Can you just remind us of the potential advantages of 136 over omecamtiv mecarbil and what key learnings can you translate from omecamtiv to 136?

Very good question. I'm going to ask Fady to elaborate on that. But for others who may not know, we did announce 136 has restarted in Phase I. This is our cardiac troponin activator. The Phase I study is underway, and Fady can speak to its mechanism, how it may relate. But to be sure, our focus with 136 is not in HFrEF but in other specialty indications that may read on faster time to market and more specialized cardiovascular indications. Fady?

So 136 is distinct from omecamtiv mecarbil. It's a cardiac troponin activator as opposed to myosin activators -- still both are sarcomere proteins and increase the contractility of the cardiac sarcomere. Fundamentally, we developed 136 as an alternative mechanism of explore pharmacology, which appeared to have a particularly broader therapeutic index in omecamtiv mecarbil and potentially the larger maximum increases in cardiac function. And so we are beginning to explore that in humans now in our Phase I study. And as Robert said, as we progress the development program, we'll be looking to develop that into indications where there really are no direct guideline-directed medical therapies and larger unmet need. And I think from the omecamtiv mecarbil program, we certainly learned potentially had a home patient population in ways that may advantage us with CK136.

Our next question will come from Salim Syed from Mizuho.

And sorry, the outcome didn't turn out as you would have liked yesterday or sympathies there. I have one question from us, Robert, just on the -- so is there any scenario here in your mind as you get more clarity from the FDA? And maybe you can just opine as to what sort of meetings are scheduled from this point to the PDUFA date to potentially withdraw the application if you feel like this is not going to get approved.

So I probably cannot comment to your satisfaction on those matters because obviously, this is still quite fluid as to what would be a potential path forward for omecamtiv mecarbil. What I can say is that the advisory committee interactions yesterday illuminated certain issues amongst advisers. And what we need to understand is to what extent are those shared by FDA. You could well imagine that the briefing book that FDA published represents certain views among certain FDA officials, it's unclear yet how that may be perceived by others within FDA. And after the advisory committee, how might they view those matters as well. We've had very extensive interactions with FDA that were not encapsulated in the Advisory Committee meeting of yesterday. And therefore, there's a totality here that needs to be understood. And now that starts the next chapter in these interactions. I'm not going to speculate on what might be the outcome of that, but you can appreciate that there are various work streams that we'll be pursuing in order to understand how FDA will see the advisory committee voting and also other things. With that said, you asked a question about withdrawal of the application, and that hasn't been something we have yet considered. Should we consider that we'll consider all options here as is in the interest of all of our stakeholders. And to maybe round out my answer what I'll say is we have strategies as may be enabling of a path forward, but we're also going to be prudent. We're not going to do imprudent things as would not be in the interest of this enterprise and this company's commitments to aficamten and other things. So you'll hear more about that, I'm sure, as other questions are asked.

Our next question will come from Dane Leone from Raymond James.

Great. So if we put what happens yesterday within just kind of the broader context here, obviously, your team going into this review process felt very confident in terms of the risk benefit that omecamtiv brings for these patients with HFrEF. And that was obviously supported by your advisers and the investigators that you've worked with on the clinical studies -- the briefing docs, obviously had a different opinion and raised a number of concerns that were generally supported by the AdCom panel yesterday. So what I think this brings up is, yes, there's mixed views across the clinical community in terms of the forward path of this drug. But maybe for the investment community, the question is more, yes, there's probably some value this drug should be approved at the end of the day. But what is it going to take to get there, i.e., commitment to running a supplemental study, which seems to be probably the path forward based upon yesterday's outcome. But beyond that, the patient population could be restricted to maybe a more targeted patient population then would generally have been envisioned, I think, or hoped for by your team. So really, what I think everyone is trying to figure out here is, there could be a path forward for this drug -- cardiovascular docs would probably like to have this as an option for their patients. But is Cytokinetics really the company that should bring this forward given some of the challenges? And would this be better served for your team to work with or offload that commercialization or final stages of regulatory development to a company that just has the infrastructure already in place has been through this before and would be probably an easier incremental cost than probably what it's going to take for Cytokinetics to get it there?

So it took me a while to get to the question, but I get it, and I agree with everything you said. I think there's a lot to be learned still from what might be ongoing interactions with the FDA, but there is a cost and an opportunity cost for us to consider this as maybe certain scenarios. So your question included a reference to an additional study, would we do an additional study? That's not on the table right now. We have no such plans to do an additional study. And were that to be asked of us, we'd have to think about that very critically in light of our other priorities, which is aficamten. So whether the commercialization of omecamtiv mecarbil could be handled by us, that all depends. As the Advisory Committee was getting comfortable with where they could see benefit risk, they were describing the population very similar to one that we were already positioned for lower ejection fraction and patients who are advanced heart failure, worsening heart failure at risk of hospitalization, whether that is ejection fraction at 30% or 25%, whether that's with or without AFib, you're still talking about an excess of many hundreds of thousands of patients, maybe even over 1 million patients in the United States who could benefit from a drug like that for which there is no existing treatment, especially for patients who are intolerant to guideline-directed medical therapy. So we need to recalibrate in light of this feedback if it means that FDA is going to be adherent to the vote of the advisers and what that may mean. But I want to underscore that our strategy was always omecamtiv as was to be an on-ramp to aficamten and the commercial infrastructure that we would build for omecamtiv would be the same as that we would deploy for aficamten, and we would benefit from time and market and synergies in support of aficamten commercial launch. That strategy may now need to be revisited if omecamtiv will not be approved. But it's premature to go there right now until such time as we understand where FDA is in connection with yesterday's AdCom.

And our next question will come from Jason Butler from JMP Securities.

I'm going to try and make this a 2-part question, if I can. I know you're not giving the updated financial guidance here, but can you just give us an overview of what the current cash position does covers in terms of aficamten development and commercial prep? And then as you look forward, how are you going to prioritize investments in aficamten and additional indications versus any additional investment in omecamtiv for the early-stage pipeline?

Good questions, and I'm going to turn to Ching to elaborate, but I'll share with you that we had already contemplated this as a potential scenario. And as you'll hear now from Ching, we end the year in a strong position, enabling of us to prioritize aficamten in our R&D spending, and he'll provide some more specifics.

Jason, thanks for the question. Obviously, we still have 2 weeks before the end of the year, but I could tell you that I expect that we will end the year with more than $800 million cash on the balance sheet. That's not including potential funds we could be -- that could be available to us from the various deals we've done with Royalty Pharma and others. In terms of spending, as Robert said earlier, we're not giving financial guidance today. We will do so in our Q4 earnings call. The one thing I could say is our spending has always been gated on FDA approval, and that remains unchanged even after what transpired yesterday. As we planned, the emphasis of the research and development spending will be on aficamten. I could tell you that our projected 2020 spend -- 2023 spend in development, more than 70% of that funding will be directed towards aficamten.

So to speak further to that, that means conducting and completing the SEQUOIA study, and you'll hear updates soon enough on where we are there, which I think you'll find encouraging. More so our plans for a second Phase III study in oHCM as well as a third Phase III study, this one in nHCM. You'll see data from the cohort in REDWOOD in nHCM that we believe very strongly supports moving as swiftly as possible into Phase III in nHCM next year. So those continue to be our priorities in development spending to the tune of what Ching just shared with you.

And our next question will come from Justin Kim from Oppenheimer.

Robert and team, thanks for the perspective on the additional clinical studies, presumably around the ejection fraction population and sort of the willingness to connect those or sort of views as whether it's prudent or not. Just wanted to maybe touch on the sort of assays and for the PK-guided dosing? And what -- just wondering from the sort of company's perspective, whether investment and sort of validating those things would be sort of on the table and something that the company is willing to work with the agency on presumably, if the other matters are sort of addressed and the drug is sort of -- has a great chance to sort of get approved on the basis of need.

I'll ask Fady to speak to this, but understanding that the LCMS MS assay that you heard reference to yesterday, we believe to already be validated as would be potentially deployed were omecamtiv mecarbil to be approved next year. The immunoassay that you also heard reference to is something that would require additional development work, as you heard Fady speak to, that would potentially take upwards of a year in order to be able to meet the different regulatory standards that may be required were that to be deemed required and essential as could be a companion diagnostic. That's a very different threshold or bar. So all of this were it to be invested is still quite modest in terms of incremental spending, but I'll ask Fady if he wants to speak to any other matters there.

No, nothing really. I mean I think the -- as you heard yesterday, the gold standard methodology LCMS is already validated in a way that's clinically robust in the immunoassay as well as something that we have made a lot of progress in terms of progressing with the partner there that have developed the assay. So there's not a lot more investment per se. I mean there may be a lot of paperwork involved but not a lot of investment.

Our next question will come from Joe Pantginis from H.C. Wainwright.

I certainly share your disappointment and -- but I definitely want to echo Robert's earlier comments about the quality of the presentations and answer. So my question wanted to focus on, I guess, past discussions with the FDA. There was a bit of -- you can call it an opening of the Kimono by the FDA referencing your discussions surrounding the filing and approach that they were generally -- that we were generally not privy to in your discussions with the FDA. So I guess I would ask it this way. Is there anything to share that gives a layer of hope of them being receptive to a negotiated label despite the panel outcome. I mean, even if you were to like look forward and you alluded to in one of your answers that a negotiated label of the reduced ejection fraction and even a potential black box with, say, AFib or something along those lines. But I guess any visibility on past discussions.

That's a good question. Obviously, the briefing book disclosed things that we had not shared previously, but were consistent, hopefully with what we had indicated were the topics of discussion and risks and issues that we anticipated to be discussed at the Advisory Committee. What you saw referenced were specific communications from FDA to the sponsor and remembering the sponsor at that time was Amgen. But for -- as we transition Phase II to Phase III, what might the Phase III study need to demonstrate in order to be a standalone pivotal trial. And what you heard us say in the scripted remarks yesterday was where we believe that COSMIC in accordance with FDA published guidance, lends mechanistic support as would be confirmatory evidence for what was observed in GALACTIC. And you heard, hopefully, at the end of the Advisory Committee meeting Norm Stockbridge, refer to that matter in a way that I interpreted to be perhaps enabling a further discussion than what might be -- what was concluded by advisers in connection with COSMIC as a confirmatory study. So that's all to still be determined whether there is a path forward in that regard as would be enabling of the strategy as was originally our intention, COSMIC confirmatory of what we saw in GALACTIC. I don't think there's anything else that was perhaps revealing in connection with the FDA disclosures other than maybe the P values. And as you know, in an 8,000 patient study, a P value of 0.0.025 is persuasive and compelling. Is it standalone sufficient? That's what I think FDA will need to determine now that they have the totality of the evidence. Fady, anything you want to add to that?

No. I mean I think the FDA positions on these things sometimes don't line up perfectly with the Advisory Committee's positions on these things. And it's really up to them to think about how to navigate the advice they received, whether the advice they received is concurrent with the sentiment in the heart failure community writ large and what's the best thing for patients and the availability of potential medicine that might be used in a very high unmet clinical need population. So I think in our future discussions with them, we'll see where things go and be able to report back to you as we understand how that progresses.

And I hope it was obvious from the discussions yesterday that Cytokinetics has been responsive and accommodating a feedback, acknowledging what were the limitations in GALACTIC, but also where the opportunities may be for patients and how we've been flexible in our interactions with FDA with a want to see this science translate into a new medicine for patients. And I think that's what shareholders should expect of us. But at the same time, understanding when it may be necessary to pivot if that's, in fact, required.

And our next question will come from Charles Duncan from Cantor Fitzgerald.

Yes. So Robert and team and very, very well conducted AdCom yesterday. Appreciate all the diligence. I had a 2-part question, if you will, and that is regarding anything new or learned from reviewing the briefing documents or the discussion yesterday that would suggest new analysis that you could provide to the agency in the near term, perhaps before the PDUFA date? And then secondarily, in terms of a proposed REMS, are you contemplating that or anything that you could change that, that would perhaps, I guess, reduce the risk that AdCom had highlighted?

Thank you, Charles. Good question. So there are a couple of things that advisers requested of us yesterday that given the format of the meeting, it wasn't possible to provide that analysis back to those advisers, but FDA has certainly access to all of the information, not all of which got aired yesterday at the Advisory Committee meeting. So I'm not aware of any new analyses that would necessarily be prompted by yesterday's discussion, although I am aware that there may be other analyses we and FDA are discussing. With regard to REMS, interestingly, that was not something that came up in our interactions with FDA nor at the Advisory Committee meeting. So I'm not sure there's any value to considering a REMS program in light of yesterday's feedback. But at the end of the day, we'll have to see what FDA is interested in both as it relates to the overall application and also yesterday. Fady, anything you want to add to that?

Yes. No, we -- obviously, we have a lot of analyses that we didn't get to with the Advisory Committee. But we've shared with the FDA and have had those discussions and I think it's not so much a question of analyses, but really a question of deciding whether the data support an indication in a specific population where the drug has a meaningful clinical effect, which obviously we believe there is such a population. And the question with us is whether that is persuasive to FDA.

I can tell you if I ended up in that situation with low ejection fraction, I'd like the option to have the drug, but appreciate you taking the questions from me.

I appreciate that, Charles. If you were to do just a search on omecamtiv in the Twitterverse today, I think you'd find that a lot of heart failure specialists and experts in clinical research would agree with you.

And our next question will come from Serge Belanger from Needham.

Just one quick question. Can you remind us of the Royalty financing agreements that are linked to omecamtiv? And are there any contingencies around those agreements in the event there's no path to approval or you choose not to launch the product?

Yes. So I'll turn to Ching to elaborate, and we can only share that which is public. But the net of this is there were certain tranches of capital that tied to omecamtiv and we were expecting, albeit combined with potential business development that we would have access to line of credit to support a potential launch of omecamtiv mecarbil. And now we'll have to revisit that as it relates to debt on our balance sheet that will be something that we will not be pursuing as would have been possible if we were to be launching omecamtiv. If we do end up launching omecamtiv mecarbil, we'll revisit that. Ching?

Yes. So Serge, I think you might be referring to the Royalty deal we did was Royalty Pharma back in 2017. There is no contingency associated with that transaction if we don't get approval for omecamtiv mecarbil.

So we sold then a revenue interest in omecamtiv mecarbil for cash in 2017, that there's no call back on that cash or recourse or anything of that sort. So we have 2 deals with Royalty Pharma, one in 2017, one in 2022 that pertained to omecamtiv mecarbil.

And our next question will come from Madhu Kumar from Goldman Sachs.

Hey, this is Rob on for Madhu. We were just wondering what's the physician overlap between HCM and HFrEF docs? Can you speak a little bit into how that pre-commercial planning would transfer over to aficamten?

Good question. I'm going to ask Andrew Callos, our Chief Commercial Officer, to speak to that. And the good news is he's always in his planning been thinking about a franchise strategy where there is high overlap. So we will pivot and he can speak to sort of the overlap as we see it for aficamten.

Yes. Thanks for the question. There is a large overlap between both sets of physicians, mostly around location. They are co-located heart fail centers and HCM centers are often located in the same areas. So when we did our initial analysis, the overlap was over 80%. And where the overlap really matters at the end of the day is how you deploy sales reps. Our sales reps are always going to be deployed after approval for omecamtiv. So in the scenario where omecamtiv wouldn't get approved, then we would flex and focus on aficamten alone in the scenario where it does get approved independent of label, that's always been contemplated as well. So either way, we're going to be able to deploy a field force with that overlap in mind. And I think, as Robert said, everything we've built is for the franchise. So we've been building capabilities, infrastructure, hiring people. And really, it was around commercializing our product and launching a product with either one or both products in mind.

The vast majority of the investment spending that has occurred to this point is an enabling of infrastructure to support omecamtiv and aficamten. And were it to be that omecamtiv is not approved it's not difficult to redeploy that same infrastructure in support of aficamten as would otherwise already be our objective in 2023, understanding that we need to be ready to go to market for aficamten as soon as 2024, 2025. So kudos to Andrew and his team for putting in place that support network, that infrastructure as is flexible and can pivot if that's what is necessary.

And our next question will come from Yasmeen Rahimi from Piper Sandler.

And I'm really sorry that AdCom did not go as well as you hoped for. I know you worked really hard on that. And I also appreciate you hosting this call for all of us analysts in being able to ask our questions so really helpful. I guess the first question that I have is like, can you maybe help us understand, are there any examples of a cardiovascular product where the AdCom voted not in favor, but the drug still received approval. So if you could just maybe share that example with us that would be helpful. And then 2, like what would you say is the probability after yesterday's AdCom that the FDA is likely to require an additional study or a large study. I appreciate you taking a 2-part question.

Sure. So I'll start by -- as you may know there was a study published where FDA tended to not go in favor of AdCom votes in about 20% of cases, although generally speaking, that was where the AdCom was in favor and the FDA was not. But however, in cardiorenal, there are several examples, including one I lived with albeit many years ago where an AdCom voted against and the FDA ended up going in favor of a medicine that I was involved with in the mid-1990s. Since then, there have been several other instances where FDA has taken a position different than was the case with an AdCom. One was with CV Therapeutics. One was with the Medicines Company, and there are others too. And I think there's ample evidence to suggest that cardiorenal advisory committees and FDA are not always on the same page given the complexities associated with cardiovascular medicine. You heard from one of the advisers yesterday about how at least he as an individual, felt about the deliberations relative to what might have been where this oncology. And I think FDA will be called upon in this case to consider the totality of the evidence here in support of potential approval, albeit with an advisory committee vote that was not speaking to in totality benefit over risk. So I do think there are precedents how relevant they are is something that I think you as analysts will have to determine, but there are certainly precedents. And in the meantime, we will maintain our high integrity commitment to science and data that we have and see where that takes us.

And then just in terms of the probability of additional studies required. What would you estimate that based on yesterday's interaction?

I really can't speculate on that, I'm sorry. I just don't know how FDA will view that matter.

Our next question will come from Ashwani Verma from UBS.

So just quick, does the regulatory outcome here change your view on the risk reward on clinical programs for the rest of your pipeline? Like do you think there are some stretch goals on any of the programs that now you feel a little less excited about given the learnings from this experience? And then second, quickly, on the enrollment for Phase III SEQUOIA study, when can we expect an update? And how is that progressing?

I'll ask Fady to comment from his perspective on the first part of your question in terms of risk reward, but I'll say personally, I think we were pretty sober to the risks associated with an advisory committee and what might be expected from a benefit risk standpoint for a new cardiovascular medicine. It's for that reason knowing that GALACTIC produced admittedly modest effect on the primary composite endpoint that we took the position that we did where we thought the effect was more amplified. But I don't think I learned or we learned anything new yesterday from the discussion that would read on how we approach others of our pipeline projects. Fady?

Yes. I mean I think, as you know, 2 late-stage projects we have ongoing. One is a cardiac myosin inhibitor for HCM. We obviously have already mentioned our plans to focus on that and it doesn't really change our approach to that development program. The other being reldesemtiv in ALS and things that we have ongoing now in earlier development so far, strategies, I wouldn't say have been influenced to a substantial degree. Obviously, we'll take into account some of the thinking from our discussions around the omecamtiv program and applies there, but no major changes in strategy with those earlier programs. As it relates to SEQUOIA, as it relates to courage, these are studies that are very well powered to determine what we expect to see and the benefit risk there is already something that we think is very much in favor of active arm in connection with what we've seen in Phase II. So I don't think that changes based on anything we discussed yesterday.

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Robert Blum, President and CEO, for any closing remarks.

Thank you, operator, and thanks to everybody who joined us on the call today. Obviously, the vote yesterday was disappointing, but we're in a business where we are accustomed to potential risks and setbacks, and we mitigate those, and we manage around them, we pivot and we move forward. And in connection with omecamtiv, we will do that. And we had already planned for this scenario as would be enabling of us to focus on aficamten with our R&D spending, and that remains our interest to us and high conviction to us. We will explore what might be viable and a path forward for omecamtiv mecarbil, but we will not bet the company on omecamtiv mecarbil and never intended to. It's always been our plan to manage a portfolio as is in the interest of science, patients and shareholders, and that remains our conviction. So with that, I'll end the call.

Thanks very much for your interest, and we'll look forward to keeping you abreast of progress. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day. Goodbye.