Cytokinetics, Incorporated (CYTK) Earnings Call Transcript & Summary

Good morning, and welcome, ladies and gentlemen, to Cytokinetics Courage-ALS update 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 Diane Weiser, Senior Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good morning, Wangen and thanks for joining us on the call today to discuss results of the second interim analysis of Courage-ALS. On the call with me today are Robert Blum, President and Chief Executive Officer; and Fady Malik, EVP of Research and Development. 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 our SEC filings, including our current report on Form 8-K filed this morning and our annual report on Form 10-K for the fiscal year ended December 31, 2022. 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 thanks, everyone, for joining us on the call this morning. This morning, we issued a press release announcing that the Data Monitoring Committee for Courage-ALS recently convened to conduct the second planned interim analysis of that Phase III clinical trial of reldesemtiv in patients with ALS. The Data Monitoring Committee reviewed unblinded data from Courage-ALS and recommended the discontinuation of the clinical trial due to futility as it found no evidence of effect in patients treated with reldesemtiv relative to placebo on either the primary endpoint of change from baseline to 24 weeks in the ALSFRS-R or in key secondary endpoints. Cytokinetics has also reviewed the data and concurs with the DMC recommendation. Given these results, study conduct and Courage-ALS will be concluding and in addition, Cytokinetics plans to discontinue treatment with reldesemtiv in all patients, including those in the open-label extension study, COURAGE-ALS-OLE. The second interim analysis was triggered 24 weeks after at least 1/3 of the planned sample size was randomized in Courage-ALS. At the interim analysis, approximately 460 patients had been randomized and over 200 of those patients had reached the 24-week assessment of the trial endpoints. We will be notifying clinical trial investigators of these interim findings as well as regulatory agencies, and you can expect the full data set from this trial to be presented at an upcoming medical meeting. While we had prepared for all potential scenarios relating to this interim analysis, candidly, this news was unexpected and another brutal reminder of the harsh realities that can accompany innovation in high unmet need drug development. As you know, Cytokinetics has been committed to the ALS community for more than 10 years. And following the results of our Phase II clinical trial, FORTITUDE-ALS, we were hopeful that reldesemtiv may provide people living with ALS a new treatment option. That unfortunately is not the case and we stand with the ALS community in our extreme disappointment that we could not bring this therapy to those in need. We're deeply grateful to all the people living with ALS, their caregivers, their families, clinical trial staff and advocacy organizations and all others in the ALS community who have been on this journey with us for these many years. In the coming months, we will assess our next steps for our neuromuscular programs. In the meantime, we remain fully committed to what was already our priority clinical development program, aficamten, our next-in-class cardiac myosin inhibitor, which is currently the subject of a Phase III clinical trial SEQUOIA-HCM, with results expected later this year. We remain on track to complete enrollment of SEQUOIA-HCM in Q2 and to enable results in Q4. In addition, 2 more Phase III clinical trials are planned to begin this year, one in obstructive HCM in the second quarter and one in nonobstructive HCM in the second half of the year. And we also have plans to begin a Phase I study of CK-586, a second cardiac myosin inhibitor for the potential treatment of patients with heart failure and preserved ejection fraction, or HFpEF. The need for new therapies to address the impaired contractility that underlies the pathophysiology of HCM and HFpEF is significant. And in light of the disappointing decision to discontinue the reldesemtiv development program, we have a further opportunity to redeploy resources and double down even more on our cardiac myosin inhibitor program. As it relates to spending, already approximately 2/3 of our R&D spending was focused to the aficamten program, but the discontinuation of Courage-ALS will certainly have an impact on R&D and other spending for 2023 and also 2024 as Courage-ALS and the OLE program were expected to continue conduct through 2024. There will still be costs incurred associated with closing down Courage-ALS through Q2 of this year, but the futility analysis was purposely designed and meant to enable us to gate spending associated with trial milestones. Now we will not be incurring certain costs associated with drug manufacturing in preparation for a potential upsizing of Courage-ALS nor for the conduct of additional NDA-enabling clinical studies, manufacture of commercial supply and other commercial readiness in preparation for a potential approval of reldesemtiv. Additionally, we imagine there will be modest cost savings associated with the winding down other activities, including certain medical education programs. We expect to provide more color on these matters on our Q1 earnings call. 2023 has already been a challenging year for Cytokinetics, but we continue to believe in the science of muscle biology and the promise of our cardiovascular pipeline. And in fact, we have a lot to look forward to still here in 2023. We have overcome challenges throughout our 25-year history, and we remain optimistic about our future, which in the near term will bring what we hope are positive results of SEQUOIA-HCM later this year and potential regulatory filings for our next-in-class myosin inhibitor next year. Finally, I want to conclude by thanking our dedicated employees for their tireless commitment to our mission to bring forward new therapies for patients suffering from diseases of impaired muscle function. Today's news is especially difficult on us all, but we will get through this together like we do and remain even more focused to what we can hopefully deliver for patients in need as well as all stakeholders, including shareholders alike. Operator, with that, we can now open up the call to questions, please.

[Operator Instructions] And our first question will come from Srikripa Devarakonda from Truist Securities.

And it is indeed a disappointing result for the company and patients. A big picture question. Now you have the CRL for omecamtiv and discontinuation of the ALS program. Can you help us understand how you're thinking about any potential -- how you're thinking around any potential strategic options has evolved? Have you been getting any strategic interest? I don't know if you can talk about it. But in general, how has that evolved over the last few months?

Thank you. It's a good question. And I imagine many of the folks on the call have that same question today. Obviously, I can't comment on what may be other conversations we've been having relating to strategic options or plans. What I can say is that we are managing the business as best we know how. And that now means that we focus to aficamten in SEQUOIA, aficamten in other clinical trials to be starting, and that represents the key value driver for the company on a go-forward basis, and we'll do what we need to do to ensure we're representing shareholder interest as well as science and patients in executing on those plans.

And our next question will come from Salim Syed from Mizuho.

Robert and my sympathies to the team on this particular readout as well. Robert, I don't mean to belabor the point. I do think it's an important question on this M&A piece here. From the feedback that we get from investors, it's coming out of the one-on-one meetings is that people are getting the sense that it's highly unlikely you'll sell the company prior to a Phase III SEQUOIA readout and there's some concern that even if Phase III SEQUOIA reads out positively, then the question becomes, what does commercial look like? Folks are looking at [indiscernible], et cetera. So just curious like without going into what strategic interest you may or may not be getting, is this the right way to think about M&A now that the pipeline essentially is not there, reldesemtiv is not there, and I presume there's going to be no further development in reldesemtiv and omecamtiv is pretty minimal at this point. So having this notion of wanting to get paid on the pipeline, right? It kind of goes away with this news I'm thinking, right? So does M&A come back on the table prior to the Phase III SEQUOIA readout. If that's something you can give us a little bit more framework on?

Thank you, Salim. And I did read your note already published this morning, and I recognize that there is a prevailing investor sentiment amongst certain very outspoken investors relating to M&A prospects for Cytokinetics. And I recognize that I've heard that. We've discussed it internally. And together with our Board, what I can say is our plans for Cytokinetics to remain focused to maximizing value for shareholders as it relates now principally as oriented in aficamten. We understand very, very much where this company needs to be focused, and we need to do everything we can to bring aficamten forward for science, for patients and for shareholders. It would not be appropriate for me to comment on a call like this about M&A strategy. It's just not the way these things are meant to be. Our company is, as you know, for us, a long, long time dedicated to those things that we can control, and we are engaging in partnering discussions as ultimately can lead us in different directions recognizing that it's incumbent upon us to do what we can, both as it relates to the mission of the company and also to maximize shareholder value. That has always been a principle of guiding light and strategy for the company, and that hasn't changed, except as it is now narrowed. And to your point, pipeline is now thinner. Our pipeline is now from a standpoint of late-stage development anchored in aficamten. Omecamtiv still has what we believe to be upside as it may garner approvals outside the United States, and we still need to map forward the plan inside the United States. But we also recognize that, that's not necessarily as we can manage it in the same way we can for aficamten. And we need to do everything we can in order to bring aficamten forward for patients and as would be recognized in shareholder value. So we will be open to discussions from potential partners and otherwise as would be engaging, but it's still not our intention to seek a partner for aficamten, albeit recognizing we think there are opportunities, we will be welcoming of feedback. At the same time, we're going to be doing what we can. We still believe there is a commercial opportunity that we ourselves can execute on for aficamten. And we will be preparing for the commercial readiness activities as would be enabling of us to make sure that we can reward shareholders through execution of those activities as well. So I don't know if that's the answer to the question you were posing Salim, but it is what we can manage, it is what we can control, and we're going to be internally discussing with our Board how best to maximize shareholder value in recognition of the options presented.

Our next question comes from Jeff Hung from Morgan Stanley.

I guess given the update and the study wind-down ongoing until 2Q, how should we think about the Astellas' reimbursements for costs from Courage-ALS? Does that remain similar to your prior guidance for the year?

Yes. Good question. We are still eligible for further reimbursement from Astellas relating to the conduct of Courage-ALS, that reimbursement is capped and will likely conclude in this calendar year, but will be offsetting some of the spending associated with the wind-down of Courage-ALS. Overall -- and we're still getting our arms around these numbers. Overall, I expect there to be an impact in 2023 that could be as much as 5% to 10% or even more of our current budget that will be now diminished in light of the fact that we'll be discontinuing Courage-ALS and the OLE, but some of those costs still need to be calibrated in light of wind-down activities. So we'll have a lot more that we will be able to say about these matters on our Q1 earnings call.

Our next question comes from Dane Leone from Raymond James.

And also, obviously, apologies around Courage-ALS not working. A little difficult to follow up the questions just directly asking when you're going to sell the company, but I'll try here. I think for the pipeline in cardiology, the debate's really around: one, how important to the ultimate market realization in obstructive HCM will be the head-to-head comparison with metoprolol in your view and the feedback from your investigators and the clinical community? And then secondly, where are you at in the progression with having the nonobstructive and maybe some relation from nonobstructive HCM to HFpEF in looking for that aficamten and the drug class could actually be effective agents in HFpEF and what the regulatory guidance has evolved to be if you were to run a HFpEF study with these agents?

So I'm going to turn it over to Fady, but I'll start by saying we believe investing in aficamten is the most important thing we can be doing right now and the head-to-head study with metoprolol is part of that strategy as is the expanding of the strategy to include the indication of nHCM and thinking about 586 in HFpEF, those are the best ways we can be investing in the future of this company and maximizing value. I'll turn to Fady now to answer your specific questions.

Thanks, Robert. The feedback we've gotten from investigators on the design and the scientific question we're addressing in our head-to-head comparison of aficamten to metoprolol has been extremely positive. It answers -- it will answer for them a key question in terms of where to position aficamten in the care of these patients to understand the relative magnitude, the benefit of these 2 molecules. It's expected, of course, that the impact on exercise performance will be quite substantial of aficamten in the absence of beta-blockers and it's known that beta-blockers don't impact exercise performance. But there are other symptomatic benefits that we think will accrue and we're very excited to conduct this study. And I think that will be important for understanding where to position the mechanism of action. The other thing I think it evaluates will be how does the mechanism of action contribute to overall disease progression. We'll be looking at how the heart changes over the course of the trial, and we'll be able, again, to look there as to how cardiac myosin inhibitors change disease progression compared to beta-blockers, which I think also reads importantly on the importance of this mechanism of action. In relation to your second part of your question of nHCM, I think the results we reported at the beginning of March were quite impressive. There's a few things in Cardiology that improve patient symptoms to the magnitude that these -- this mechanism of action does as we've seen in our oHCM patients, in our nHCM patients. And nHCM serves as a model for certain types of HFpEF patients that have substantially thickened hearts, have high ejection fraction and really where they may be [ peanut copies ] of genetic nHCM. And we think that, that represents an opportunity to develop and expand field and potentially provide similar benefits to those patients where there really aren't very good alternatives.

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

Sorry for the result as well. So I'll preface my question by saying, I'm certainly not looking to put a square peg in a round hole, but having essentially followed your neuro program from the beginning, starting with tirasemtiv, I guess I wanted to join your comments to the evolving landscape in ALS. So in your prepared comments, you mentioned about even the secondary endpoints. So is there anything to look at with regard to breathing capacity? And then second, when I said joining to what's been going on in the space and regulatory evolution with studies potentially progressing beyond ALSFRS-R, overall survival, longer-term follow-up. I'm just curious if there's any potential linkage there?

Yes. So these data are really quite fresh. We've only had a matter of a day or so to look through these analyses in order to be able to come to this very difficult decision. But from what we're seeing right now, I would not be optimistic that there will be that kind of diamond in the rough observation for what could be another path forward for reldesemtiv. We're coming to this conclusion to discontinue the trial and the OLE because we do not believe that even were there to be longer-term follow-up, there would be an opportunity to resurrect reldesemtiv. So this being the second of our fast skeletal troponin activators that we've taken through to late-stage clinical trials, we have to be honest about the harsh reality of novel innovation in drug discovery and be accepting of the integrity of the data we've seen, which, to this point, do not point to a path forward.

Our next question comes from Jason Zemansky from Bank of America.

Let me also offer my sympathies on the outcomes. Maybe to follow up on your previous answer, I appreciate it somewhat early in the postmortem here. But as we think about the broader MOA, are there any clear takeaways about the potential of fast skeletal muscle troponin activators. I mean do you still believe this approach can be effective? Do you think this was a specific issue with reldesemtiv that can potentially be improved similar to tirasemtiv? Or alternatively, is there maybe a better underlying pathophysiological strategy that needs to be undertaken here?

Very good question. And as you predicted, it may be premature to really comment on the mechanism beyond reldesemtiv and in ALS. I'll ask Fady to comment, but we do have other research associated with this mechanism as could potentially read on other indications, but we also have to be critical in the way we look at even that in light of these findings, and that will take some time. But Fady, is there anything else you'd like to add to that?

Yes. I'll just add, I think in other neuromuscular conditions, certainly preclinical models and even some clinical data, we did early trials with tirasemtiv in myasthenia gravis. We did an early trial in spinal muscular atrophy with reldesemtiv, relatively small studies that also indicated their potential improvement as was -- in patient that was reflected by preclinical data that we generated as well. As Robert said, I think we do have to take these results with -- from Courage-ALS into that equation and decide in terms of how predictive we think these models are in terms of predicting patient improvement in these other indications, and we'll certainly be doing so as we evaluate what the future may be for fast scale formula activation.

Our next question comes from Madhu Kumar from Goldman Sachs.

So maybe following up on some of the comments during the prepared remarks around operating expense impact from reldesemtiv. How's maybe on the kind of cadence of the remaining costs that you mentioned as part of the wind down and how some of the cadence of operating expense impact on '23 and '24? And then I guess, sort of beyond that, is there any sense of like out-year operating expense impact beyond that point? Or we just really focus in on '23 and '24? Thank you.

Yes. So in terms of what we have reasonable resolution to in terms of granular insights into spending, we've been focused to '23 and '24 as it relates to reldesemtiv because that was going to be the time period under which Courage-ALS was going to be concluding reading out, and we were going to be manufacturing and conducting other activities in support of a potential launch in 2025. And now that will not be. So that's where I think we have the ability to point to what could be savings of tens of millions of dollars in 2023 and even more as would have been on our P&L in 2024. We're anticipating that this will have effect to extend cash runway in 2023 in light of reduced spending this year, but also 2024. So it's too early to say by how many months we could see cash runway extended. But we need to be looking at where we also can be redeploying certain resources internally, for instance, people who were working on the Courage-ALS program who now will be available to be part of the expanding development program for aficamten and some of the hiring we might have been doing we no longer will need to do, some of the contracting we would have been doing, we may no longer need to do. So all of this will be requiring of some time, and we hope to have more clarity on what we can share in that regard when we have our earnings call coming up soon.

Our next question comes from Justin Kim from Oppenheimer & Co.

Robert and team, I'm sorry to hear the news as well. I just had a couple of questions really predominantly on the aficamten program and maybe just on nHCM. Has the team had a clear picture on when might be a potential venue per the KCCQ data in the Redwood -- I'm sorry, the Redwood-HCM study. And can you just remind us whether the protocol or withdrawal of beta blockers differs in this population versus the obstructive...

Sure. Fady, do you want to take that, please?

Sure. Just to your last question, withdrawal of beta blockers in many patients is pretty similar. You can't just stop it. You need to taper the drug a little bit. But just to remind you, we did not withdraw beta blockers in the nHCM patients. They were left on their background medical therapy. The first part of your question towards the KCCQ, I would expect us to be able to share those data in the first half of this year. I can't say specifically where yet. But hopefully, we'll be able to articulate that shortly.

Our next question will come from Ashwani Verma from UBS.

Sorry to hear the disappointing news. So Robert, we've seen 2 pipeline failures here in quick succession, OM and now reldesemtiv. Has that changed your perfection about what's the hurdle rate for R&D programs going forward?

So firstly, with regard to omecamtiv, I would not characterize that as a failure. The GALACTIC study was a positive study, but it was not sufficient to garner approval in the United States. We're still hopeful it could enable approvals outside the United States and maybe through mechanisms that we will be investigating inside the United States. After the comprehensive clinical trials program of omecamtiv, we believe that, that science has proven to be effective in supporting the original therapeutic hypothesis there. With reldesemtiv, that's different. After tirasemtiv and now reldesemtiv, I think we do have to be accepting of the reality that fast skeletal troponin activation in ALS is not yielding the success we had hoped for and the original therapeutic hypothesis has not been validated. How does that read on the probability of success across our pipeline? Is that your question?

No, I'm trying to understand, I can only -- I guess you were previously thinking that some of these programs might be successful, have not been successful either to get to the market or to have a positive trial outcome? Does that change your view going forward that like some of the more ambitious programs are maybe something that you need to rationalize or not pursue and just focus on the key programs that have more likelihood of success?

So one doesn't always know when you embark on a drug discovery program, where the success may lie and when you're doing innovative drug discovery like we are, you have to be constantly assessing what you know and what might change the probability of success in light of those predictive signposts along the way. With aficamten, we have expectation of success in light of the fact that mavacamten has already demonstrated effectiveness against endpoints that we're assessing in Phase III. So yes, we do believe that the yield on the investment dollars we're putting into aficamten have a higher probability of returning for the science, for patients, and for shareholders. And we are doubling down very substantially on our commitment to aficamten already over 2/3 of our R&D spending going to aficamten, and that number will be higher now in light of reldesemtiv. But for other programs that we have in research and in early development, we continue to want to be innovating and pushing boundaries of drug discovery, and we'll continue to invest in those programs, albeit in a balanced way, more modestly relative to where we think we get higher investment returns. But our mission has not changed. The purpose and values of this company has not changed, but we do recognize where we need to redeploy resources as they can return more and better for shareholders. So I think we're -- to your point and your question, we are reconfiguring how we invest in our pipeline in light of where we think those higher yields may be.

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 all on the call today. This is obviously a very, very difficult day for Cytokinetics and also for patients with ALS. Already this morning, we've received many e-mail messages in light of this news thanking Cytokinetics for our long-standing commitment to this disease area and calling out Cytokinetics as the gold standard for companies devoting to patients with ALS. We recognized, however, that this science associated with reldesemtiv in ALS is not delivering. And hence, we've had to make a very difficult decision to pull back on our program with reldesemtiv as it relates to ALS and have to reassess across our neuromuscular development programs, how much we can commit to them in light of also recognizing that our bread is buttered on aficamten and expanding the development program for aficamten in light of where that has higher yield returns for science, for patients and for shareholders. And we will do that, and we'll continue to commit to all that we can for the benefit of all stakeholders in light of these new observations and findings. We appreciate that investors have interest to see us do just that. We're aligned with investors in the same way we're aligned with patients and in the science, and we look forward to keeping you up-to-date on our progress. Thanks very much, operator. We can conclude the call.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a great day.