Expert Financial Analysis and Reporting

Investment Thesis

I continue with my long standing buy recommendation on the stock. I think a Buy at this level is justified by the prospects for omecamtiv mecarbil alone even if tirasemtiv were to fail in its phase 3 trial in ALS and CK-107 is not progressed in spinal muscular atrophy. Of course, I think that there is a reasonable chance for success for both tirasemtiv and CK-107.

Overview

Cytokinetics made a late breaker presentation on the COSMIC-HF trial of omecamtiv mecarbil in heart failure at the American Heart Association on Sunday, November 8th. This was followed by an investor presentation at 7:00 AM on Monday November 9th at which three key opinion leaders (KOLs) opined on the trial and the drug. Rather than going into excruciating detail on results, let me summarize my thoughts and some of those of the KOLs. The press release discussed results of the trial in some detail for those who want details on the trial.

My Conclusion

I believe that the chances for Amgen taking omecamtiv mecarbil into phase 3 are close to 100%. I would be astounded if Amgen did not do so. I think that until the topline results for COSMIC-HF were announced on October 27th that most investors were ambivalent as to whether Amgen would proceed to phase 3. The KOLs were all quite enthusiastic about the results of COSMIC-HF and all agreed with me that the drug should be taken into phase 3. (Full disclosure, they made these decisions on their own without consulting me.)

Comments on COSMIC-HF

The COSMIC-HF trial was designed to look at pharmacokinetic endpoints of omecamtiv (what the drug does to the heart and body) and not clinical endpoints. In the phase 3 trial, the likely endpoints will be measures of clinical outcomes such as reduced re-admissions to the hospital for heart failure (a good choice for the primary endpoint) or measures of morbidity. It is unlikely that median overall survival will be a primary endpoint because it would take years to reach.

The pharmacokinetic measurements are strongly indicating that the heart is pumping more blood which is of course the objective of treating congestive heart failure. The KOLS were all extremely impressed by significant improvement in these measures. They said that improvements seen with omecamtiv mecarbil were comparable to pharmacokinetic effects seen with other drug therapies that then translated into profound clinical benefits. They each expected the pharmacokinetic benefits to translate into significant medical/ clinical/ pharmaco-economic benefits. This will be the object of the phase 3 trial.

A Brief Look at Heart Failure and Drugs Used to Treat the Disease

Heart failure is caused by damage to the heart muscle which impairs the ability of the heart to pump efficiently; heart attacks and long term elevations of blood pressure are prime causes. In response, the remaining healthy tissue of the heart has to work harder and this results in it becoming more muscular, enlarged and mis-shapened; it is less efficient at pumping blood. The objective of drug therapy is to help the heart pump more blood.

If you think of the heart as the pump which moves blood through the pipes (cardiovascular system), there are two meaningful ways of making it pump more blood. One way is to widen the arteries (I am over-simplifying) making it easier for the heart to pump more blood because of reduced resistance in the arteries. This is the mode of action of drug classes that affect the renin system such as ACE inhibitors and A-II receptor blockers. Beta-blockers work by slowing the heart rate, which allows the left ventricle (the main pumping chamber of the heart) to fill more completely and they also lower blood pressure. Most of these type of drugs are now generic, but as branded products there were several distinct drugs that produced billions and billions of dollars of sales.

The other way of increasing the amount of blood pumped is to make the heart pump more strongly. The problem with this approach is that forcing an already badly damaged heart to work harder can cause life threatening heart attacks and cardiac arrhythmias. Digitalis and milrinone are existing drugs that make the heart pump more blood but at the cost of these life threatening side effects. Patients feel much better when initially put on such drugs, but usage is sharply constrained by side effect fears.

Omecamtiv Play a Major Role in Treating Heart Failure

What the medical community so badly needs is a drug that can make the heart pump more blood without causing it to work harder and this is what omecamtiv appears to do. It effectively cause the heart to contract longer rather than harder so that it pumps more blood while reducing the heart rate (a measure of how hard the heart is working). The data from COSMIC-HF showed and KOLS concurred that the side effects of omecamtiv are comparable to placebo including the incidence of heart attacks and cardiac arrhythmias.

There has been one great concern with omecamtiv that has caused Amgen to proceed slowly and methodically. Believe it or not, this drug began human trials ten years ago and has been tested in over 1000 patients. This concern was that like digitalis and milrinone, it might increase the stress on the heart and result in a greater incidence of heart attacks and cardiac arrhythmias. The incidence in COSMIC-HF was comparable between omecamtiv and placebo, but this was a small 488 patient trial randomized 2:1 for omecamtiv.

Omecamtiv Related Issues to Worry About-Emphasis on Troponin

If you are looking for something to worry about, it is that omecamtiv is associated with a slight rise in troponin which is a protein released into the blood when the heart muscle is damaged by a heart attack or arrhythmia. This is a closely watched marker. Going back to the ATOMIC-AHF study in acute heart failure, there was an association noted between omecamtiv and increased troponin levels, This was closely monitored in COSMIC-HF and indeed there were increased troponin levels in 223 of 299 (75%) patients on omecamtiv as opposed to 55 of 149 (37%) on placebo. There is an obvious imbalance toward omecamtiv.

A rise in troponin does not establish that a heart attack or cardiac arrhythmia has occurred. Indeed, the average increase in troponin in the words of one KOL was slight and ten years ago would have gone undetected. He said it was comparable to what would occur after a long run. Each of the omecamtiv patients who experienced an increase in troponin levels was carefully adjudicated by a committee of physicians. They concluded that in each case the increase was not an indicator that a heart attack or cardiac arrhythmia had occurred.

Another thing to worry about is whether the effects of omecamtiv will be sustained over time. The COSMIC-HF trial only lasted for 20 weeks and heart failure patients are likely to require treatment for several years. I have no reason to think that the effects of omecamtiv could wane over time, but this will have to be established in phase 3 trials.

Medical Utility and Commercial Opportunity for Omecamtiv is Huge

The really exciting thing about omecamtiv mecarbil is that it could potentially be added to all existing treatments. It has a distinct mechanism of action and should produce an additive effect to the currently used standard of care therapies. It does not produce the effects relating to blood pressure, renal function and potassium levels that these drugs do; consequently it should not worsen the side effect profile. All of this suggests the potential for omecamtiv to become a component of first line treatment for the vast majority of heart failure patients. This is a gigantic, multi-billion opportunity if phase 3 trials support the preliminary conclusions that have been drawn from COSMIC-HF.