...Good morning, I'm Robert Blum, President and CEO of Cytokinetics. I'm gonna make some important statements now, and we're gonna be issuing a concurrent 8-K in order to address some what we believe to be some misunderstandings relating to Cytokinetics. I'll also follow this up with a presentation, a short, brief presentation to elaborate, and then at the same time, hopefully, Akash, the analyst from Jefferies, will be here and we'll engage in some Q&A. So to be clear, our investor relations and corporate communications policy is generally not to comment on rumors. However, given the unique circumstances of our situation, we've decided to make a few comments with the objective to clarify the record regarding speculation about recent strategic interest in Cytokinetics and to provide as much context as we can.
As we had previously stated, throughout 2023, Cytokinetics engaged in business development discussions with potential strategic partners with respect to aficamten. Leading up to and after our late December 2023 disclosure of top-line results from SEQUOIA-HCM, the Phase III clinical trial of aficamten, Cytokinetics was approached by one of the third parties with whom we had previously engaged, regarding its interest in an acquisition for all of our company. Cytokinetics and that third party engaged in good-faith negotiations. The board was supportive of moving forward on a potential acquisition on substantially the terms of the counterparty's communication to us and on terms that we believed were going to be mutually acceptable. However, the third party did not move forward with an acquisition of our company at that time. There are a few additional points I'd like to make by way of background.
Cytokinetics' board is sophisticated, it's highly engaged, and it takes its fiduciary duties to shareholders very seriously. The board is well-advised, and our longtime financial advisors, Centerview and J.P. Morgan, as well as outside legal counsel at Sullivan & Cromwell and Cooley LLP, have been advising the board on potential value creation opportunities since long before recent rumors started, and including through the discussions referenced above. If there had been an actionable proposal in the best interest of shareholders, it would have received support of our board and would have been executed with respect to management. To be clear, management and the board are committed to driving shareholder value in whatever manner can best deliver for shareholders, and we would never stand in the way of a value-maximizing transaction.
While it is unfortunate that private, confidential discussions leaked, we feel it to be in the best interest of our shareholders to give as full a picture as possible. Having made these comments, however, there will be, these will be our final statements on this matter, and we won't comment any further. Turning now to some financial transactions we announced last week. We believe that we struck the right balance between equity, longer-term debt, revenue sharing, and royalty monetization, and we secured access to more than $1 billion of capital, of which approximately $740 million resulted in immediate cash.
These amounts, plus our cash and investments of $634 million at the end of the first quarter in 2024, position us well to fund our strategic priorities, which are: the global commercial launch of aficamten upon potential regulatory approvals, the conduct of additional label-expanding clinical trials of aficamten worldwide, and the advancement of our later-stage pipeline, including a confirmatory phase III clinical trial of omecamtiv, a phase II proof of concept clinical trial of CK-586, and a potential registrational phase III clinical trial of CK-586. We believe the overall cost of capital to Cytokinetics in our deal with Royalty Pharma is misunderstood and is market-rate competitive and carries a low double-digit % interest rate and affords key optionality.
For example, we now have also access to over $300 million in additional capital from Royalty Pharma at our option, as well as an additional $150 million at theirs. We chose to do these deals when we did to enable shareholders visibility to, number one, the now presented and published results from SEQUOIA-HCM in mid-May, as we believe supports a next-in-class opportunity for aficamten. And number two, the amount of capital from both deals, as combined, enables Cytokinetics diversified access to sufficient capital to take the company sustainably through commercialization, while also bringing pipeline programs meaningfully forward through key milestones for further shareholder value creation. We believe these deals fund an additional company activities that unlock the company's strategic value without closing any doors that may also serve shareholder interests.
In summary, we believe fortifying our capital structure, diversifying access to capital, and lowering our overall cost of capital is in the interests of our shareholders, as we communicated previously and as we continue to execute on go-to-market strategies, while also advancing our later-stage pipeline. With those prepared remarks, Akash, I'm just gonna make a couple more-
Sure.
-with some slides, and then we'll go to Q&A. I made some comments there, and I'll caveat those comments and the ones that will follow by suggesting that we don't undertake any obligations to update forward-looking statements, but rather refer you to our SEC filings... As I mentioned in that prepared remarks, we did raise capital. We did raise capital as depicted here through side-by-side financing in a Royalty Pharma transaction, bringing in both near-term capital as well as optionality on longer-term capital. We do believe this addresses what shareholders have expressed interest in, which is both how do we fund commercialization of aficamten globally and sustainably through launch, and at the same time deploy risk capital as provided by Royalty Pharma for advancing our pipeline?
We think the Royalty Pharma transaction is largely misunderstood, and as you can see here, there are a number of component parts. I won't go into all of these here, but rather I assume during the Q&A, we'll get to these. But I think it's important to understand that one needs to look at this not à la carte, but across the entire menu of options. Yes, it's true that with regard to omecamtiv, we're receiving additional capital, and as Royalty Pharma will get repaid whether it's approved or not. If it is approved, they get repaid out of a modest royalty interest in a revenue-sharing arrangement, and if it's not approved, they do get repaid, as would be longer-term debt.
Longer-term debt that doesn't start in terms of repayment until the earlier of 2028 or 2032, depending on circumstances, and then only over 18-22 quarters. We believe this imputes to a low double-digit cost of capital. But you can't look at that by itself without also understanding what they're paying for CK-586. They're giving us $50 million for a phase I stage program by which, if it is ultimately approved, they get repaid in the form of a 1% royalty and an option to fund registrational studies also for a royalty. If it never is approved, they don't get paid at all. So looking at those two together hopefully helps you understand how these deals enable of us access to risk capital and in a way that is competitive with market deals.
Perhaps, this deal should be reconsidered in light of the other things that we're doing. We do believe that this deal affords us opportunities to unlock shareholder value where it's currently being ignored. For omecamtiv, now in a confirmatory phase III study for 586 and proof of concept phase II, we believe that these two opportunities reflect meaningful shareholder value that needs to be reflected in how people look at Cytokinetics and ultimately its potential. This is the pipeline that we'll talk about with Akash, I know in a moment. It's led by aficamten. Aficamten, not only in its pivotal clinical trial, SEQUOIA, that's now been read out, presented, and published, but by a number of other aficamten studies, FOREST, MAPLE, ACACIA, CEDAR.
We think we're doing right by shareholders by expanding a broad development program for aficamten and also, advancing pipeline, but pipeline at Royalty Pharma's expense. SEQUOIA read out and presented these data in Lisbon in mid-May. These data, we think, are compelling and provide strong support for what should be a next-in-class opportunity for aficamten entering a marketplace that's largely underserved, despite a first-in-class drug being available for patients with oHCM. The study met its primary endpoint with high, effect size, high statistical significance, as you can see here, and also met on every single pre-specified secondary endpoint. When these results were presented a few weeks ago, they were met with resounding applause. We do believe that aficamten, for these data and also ongoing data from the open-label extension FOREST study, support what should be a base case understanding of a differentiated risk mitigation profile.
A profile that we believe will be enabling of safety and convenience to unlock an opportunity that is right now only being served to roughly 5%-7% of eligible patients with the existing therapy. We believe we'll have more to say about a differentiated profile and label, later, this summer and throughout the year, as should hopefully be reassuring. As I mentioned, we're taking omecamtiv forward into a confirmatory study. Consider this, we're on the five-yard line, first in goal, with an opportunity to bring this over the goal line with Royalty Pharma capital. A study that we believe will be a roughly 2,000-patient study, as could be enrolled in 18-24 months, reading out within 2-3 years.
A flexible study design already discussed with FDA, with strong support by experts in heart failure, and where we believe there's a high unmet need, a population of north of 1 million patients in the United States. We believe we have a clear line of sight to at least eight years of market exclusivity with a drug that's already demonstrated positive in an 8,000-patient phase III study. Here are those results.
You can see they're consistent across time points, but admittedly modest in a heterogeneous population of heart failure patients, but where when you look at those with higher risk, as pre-specified in GALACTIC, whether you define high risk by low ejection fraction, recent hospitalization, low blood pressure, Class III, Class IV designation, or high BNP, any way you look at it, these are patients that are seeing a 15%-20% relative risk reduction, as pre-specified in these subgroups on omecamtiv in that large landmark study. And hence why we believe it's incumbent upon us to bring forward omecamtiv to patients who also could benefit. And with that, I'm done. I'll turn it over now to Q&A. Thanks for your attention.
Thanks so much, Robert, and I will move quickly here, but was really helpful, and I'll switch actually. All right, so Robert, obviously, very interesting comments. You know, you talked about earlier this year, kind of hijacking of kind of the narrative, and you have to run a company. And obviously, sometimes when you have great data, everyone's just focused on kind of the myopic question of: What's the strategic value of the company? I'm only gonna ask one question on this 'cause it is really important, though. When you think about the value of Cytokinetics, and you've traditionally talked about this being a platform company, do you feel like from a strategic position, it's an issue of, A, I'm not getting the proper value of aficamten?
Or is it B, I might be getting the proper value for aficamten, but I'm not getting the value for, let's say, oma-- you know, omecamtiv or CK-586. Is there a nuance here, or is it across the board, we're just simply not getting the value that, you know, the board thinks is appropriate?
So, when I say that, we had what we thought was mutual agreement on key terms, obviously, valuation is contained within key terms. What I will say is that a stock price, as you know better than I do, reflects value in the eyes of certain beholders, and where that's been, for us, a subject of quite a lot of volatility. We saw a 52-week high around $110 a share, and right now we're trading closer to $48 a share. So I don't know exactly how one would ascribe value given that level of volatility. What I will say is that we believe that aficamten represents a very significant, meaningful driver of value for patients and shareholders. We believe that, currently it's being understood for its potential in oHCM, but there's also substantial potential in nHCM that probably isn't yet being recognized.
Mm.
At the same time, of the 18 or 19 analysts that cover us, I think only one might have any value ascribed to the rest of the pipeline. I started this company over 25 years ago with the intention of building forward a pipeline of programs, aficamten being the lead amongst those, but for which myosin and modulating of myosin is validated now across a number of our programs, for which I think to understand us and what we think ultimately Cytokinetics represents for science, medicine, and patients, you have to understand the breadth of the pipeline.
Understood. I'm not gonna push more on this because I know you said there's limited you can say. So instead, I do wanna think about valuation drivers, 'cause I think earlier this year, you gave some important ways you think about the company as a standalone company, right? $15 billion-$20 billion type valuation over a 3-5-year timeframe. I think even when we hosted you in Miami, you're like, "Maybe that's more 2-3 years where we can get that type of valuation." Talk to us about the data points that we're going to be getting, both in the next year, but maybe going in, you know, even longer than that, that makes you confident you're gonna be able to deliver that type of return for shareholders.
Yeah, very good question. So this summer, you'll see a lot more on aficamten, both from SEQUOIA and also from FOREST. We'll provide updates from regulatory interactions, including in this second quarter, where we're discussing with FDA how one might approach risk mitigation in labeling. We'll be submitting a rolling NDA in Q3, completing that in Q3, and in Q4, one should understand whether we're getting priority review or standard review. And at the same time, we'll be presenting and publishing quite a bit more that will elaborate on aficamten and why we believe next in class could be potentially in our future. With that, we're readying for commercial launches, not just in North America, but also in Europe and also in China, and those should be becoming more clear in terms of timelines this year, with potential approvals next year.
I think with regard to the rest of the pipeline, you'll see key milestones associated with, elaboration on the design of the pivotal phase III study for omecamtiv. Again, a very cost-effective, efficient study by which we've already engaged FDA and where we believe that we have strong support within FDA and also the expert heart failure community around omecamtiv, and also, as we move CK-586 forward. All these are value-creating milestones. You'll see next year results from MAPLE-
Mm
... which I think will be, very important for aficamten and value. The following year from ACACIA, and in between, you'll also see, results from omecamtiv and CK-586. So all this is within a 2-3-year timeframe, where we think we can unlock very meaningful, important shareholder value.
Understood. Now, I think a question I get a lot from investors is, you know, does Cyto have a big catalyst. Like, 'cause you had your full data that came out. I think sometimes when everyone expects great data, and it was, then you start, you know, nibbling here and there. The question is, you have your meeting with the FDA on your REMS program sometime mid-year. You said, you know, we're gonna be able to at least give some qualitative updates about how differentiated our REMS program would be. So my question to you is, once you've had that meeting, what is going to be-- what can you kind of disclose, particularly on this concept of a risk-based REMS, which I don't think investors totally appreciate the nuances of?
How much detail could you give us about REMS differentiation this year, post your meeting with the FDA?
... So I'm being purposely selective in my choice of words when I talk about risk mitigation profile, and then I also talk about-
Mm.
REMS. So there are different ways of addressing risk, and we're engaging with FDA in this second quarter around a spectrum of, potential ways to address risk, which, go from a no REMS scenario to one that would be differentiated. And I do believe in this calendar year, you'll have an opportunity to understand why we're confident that we'll have a differentiated risk mitigation profile around which we can't know for certain until ultimately we have, discussions with FDA next year after a mid-cycle review meeting. But we do believe that we've had very constructive conversations with FDA, where we foresee there's no possibility we'll have the same REMS program.
Right. I mean, if—to me, it almost would be dangerous 'cause you have a different drug and a different titration, so that actually would be borderline illogical. But I think the question—this is really how I view it, and you tell me if this is the appropriate way when we think about a risk-based REMS. Okay, I titrate my patients for, you know, two months, three months, depending on their LVEF at that cutoff, right? Maybe it's over 55, maybe it's 50 to 55, maybe it's borderline at that point. There's going to be differences in the echo monitoring requirements for patients on aficamten. When I look at your data, I mean, you can kind of back it out, you know, the vast majority of your patients are still above that 55 threshold.
So, A, do you agree with that kind of framework when you think about a REMS? And then, B, remind us from your data at SEQUOIA, what percentage of patients were having an LVEF after that titration above 55?
So, I think your calculus is providing a substrate for which one should assume a differentiated risk mitigation profile, depending on baseline echoes and other measures of risk. If you look at summary basis of approval for mavacamten, the first-in-class cardiac myosin inhibitor, the REMS program is a derivative of FDA concerns about things that relate to what prompts an excursion in EFs, and also, what are the consequences of those and where DDIs and, and long half-life and other things may contribute to that. I think FDA has already demonstrated a willingness to understand the difference between aficamten and the first-in-class compound by enabling of a different dose titration strategy in the pivotal phase III study and the open-label extension that continues.
I think your points are valid ones, that the frequency of echo monitoring, and the window around which one is dose titrating can be, determined by physician choice, absent other, concerns like DDIs. So we do believe that we're in a good position to have a de novo dialogue with FDA about what we've learned from our experience with aficamten, as will not be, substantially biased by what would be a mechanistic hypothesis-
Right.
- associated with the REMS.
Understood. So, maybe not to put words in your mouth, but when you talk about differentiated REMS, we're not just talking about food effect, you know, or ability to titrate faster. Still within, you know, that framework is less echo monitoring requirements for a meaningful subset of your patients as a base case.
You know, the objective should be to learn from FOREST as physicians or absent guardrails of a clinical trial, using this as a proxy in real-world experience. What we're seeing in FOREST is an even lower incidence of EF excursions below 50, and where physicians are choosing to uptitrate patients, as fits their schedule, with less frequent echo monitoring being an objective of a modified risk mitigation. Keep an eye on FOREST, and keep an eye on data that we'll be presenting that we believe makes a strong, compelling argument for what should be an approach one would expect upon approval.
Understood. Now, you know, it's funny, I feel like with, with share price, sometimes, investors are a bit hypocritical. I look at Edgewise at kind of a $1.5-$2 billion valuation. Really interesting mini pig data. I'm not gonna lie. It was interesting to look at, at ACC. You have human data on CK-586, in the same indication where I think an ideal regimen, where you're not having a monitoring requirement would be important. I don't think you've published many. I would love if you had that. I'd love to look at it, but absent preclinical data, can you tell us the human data you've seen so far in healthy volunteers that makes you confident that in 586, you are not going to need a monitoring requirement in that HFrEF type population?
Firstly, understood, we're looking at HFpEF-
Sorry, yeah.
as an indication for CK-586, and, you know, dog and cat and mini pig data notwithstanding, I do believe that there are doses for CK-586, where one would be able to see gradient reductions which do not associate with EF excursions. Ultimately, it's gonna be a full dose range of doses and with gradients, not in preclinical models, but in humans, that determine in a population whether one should expect the absence of EF monitoring. I believe that's possible with CK-586. With Edgewise compound, I think one still needs to see dose response data, and in humans, reflective of gradients that are found in a population of HCM patients before one could make any of those kinds of assertions.
And so maybe just lastly on that, A, is there any plan to release phase I data on 586 this year?
You'll see phase I data from CK-586 this year.
Understood. And is the healthy volunteer data helpful? Do you feel like it's, it's appropriately de-risked your concerns around a monitoring requirement?
Um, yes.
On that note, this was a fun-filled 25 minutes. Thanks, everyone, for joining us, and Robert, Andrew, thank you so much for the time.