Expert Financial Analysis and Reporting

Key Points of the GALACIC-HF Trial

Cytokinetics declined sharply after it announced topline results in the huge 8,500 patient phase 3 GALACTIC-HF trial of omecamtiv mecarbil in congestive heart failure. The study successfully reached the primary endpoint of time to cardiovascular death or first heart failure event with a p-value of 0.025 and a hazard ratio of 0.92; 95% CI: 0.86, 0.99. This was a less than robust result. The key secondary endpoint of time to cardiovascular death was not reached; the failure to show a mortality benefit was taken as quite negative. The immediate conclusion of analysts was that the drug at best could be approved with a lackluster, non-competitive label and at worst might not be approved at all. In the first case, the commercial potential probably would be quite limited.

Last Friday, Cytokinetics held a call with key opinion leaders to discuss the outcome of the trial and the potential for approval. Disappointingly, it was revealed that omecamtiv did not hit any of the secondary endpoints:

• Time to cardiovascular death
• Changes in patient reported outcomes Kansas City Cardiomyopathy Questionnaire Total Symptom Score
• Time to first heart failure hospitalization
• Time to all-cause death

The overall safety profile of omecamtiv mecarbil was very encouraging. It appears to have minimal side effects which in this sick population is very positive. Adverse events and treatment discontinuation of treatment were balanced between the treatment arms. The overall rates of myocardial ischemia, ventricular arrhythmias and death were similar between treatment and placebo groups. Additionally, there was no significant difference in the change in systolic blood pressure between baseline and at 24 or 48 weeks between the omecamtiv mecarbil and placebo groups. There was a small but significant decrease in heart rate in participants assigned to omecamtiv mecarbil compared to placebo at both timepoints. Median cardiac troponin I concentration increased 4 ng/L (95% CI 3-5; limit of detection, 6 ng/L) from baseline with omecamtiv mecarbil compared to placebo.

So here is what the FDA is looking at. The study met its primary endpoint and the side effect profile is almost benign. However, the FDA usually likes to see some or all of the secondary endpoints confirm a positive finding for the primary endpoint.

Highlights of Call with Key Opinion Leaders

During a call on Friday with key opinion leaders, the general conclusion was that omecamtiv produces a positive, clinically meaningful profile in more severe heart failure patients with lower ejection fractions. The mode of action of omecamtiv is to allow the heart to pump more blood without causing it to work harder. Ejection fraction (EF) is a measurement, expressed as a percentage, of how much blood the left ventricle pumps out with each contraction. An ejection fraction of 50 percent means that 50 percent of the total amount of blood in the left ventricle is pushed out with each heartbeat. Normal is 40 to 55%. An ejection fraction below 40 is evidence of heart failure and severe heart failure is roughly between 25% and 30%.

The key opinion leaders pretty much agreed that omecamtiv did not have much of an effect in less severely ill outpatients with higher ejection fractions. These patients were already well controlled by a combination of drugs that are standard of care. Increasing cardiac output with omecamtiv did not produce much benefit in this group. However, in the patients with very low ejection fractions of 25% to 30%, this mode of action may produce a much more profound benefit. All four KOLs on the call felt that omecamtiv was an effective drug in severe heart failure patients with low ejection fractions. One predicted that it would become part of standard of care in this segment of the heart failure population.

Approval of omecamtiv is likely if the FDA agrees with the KOLs that it has a significant role to play in severe heart failure. So is there a commercial opportunity in this event? One KOL pegged the addressable patient population at 1 million patients in the US. The price of Entresto, a drug that was approved in 2015 for heart failure, is about $6,700 per year so at this price the US addressable market for omecamtiv  is $7 billion.

Investment Thesis

Amgen and Cytokinetics will continue to analyze the data to see if this is indeed the case and if so, to convince the FDA to approve the drug. The outcome is by no means certain, but my preliminary judgement is that the FDA will approve omecamtiv. At the current price. I think that there is very little expectation of approval. The market capitalization is only $1.1 billion and  this can be justified by CK 247. Approval of omecamtiv mecarbil could trigger a big rally in the stock.

The next value driver for Cytokinetics is CK-274. This is a selective cardiac myosin inhibitor being studied for use in hypertrophic cardiomyopathy (HCM), a severe cardiac condition different from congestive heart failure. Investors are very keen on this space due to clinical success of Myocardia’s mavacamten in this disease setting. This led to Bristol-Myers acquiring MyoKardia for $13 billion. Interestingly Cytokinetics licensed technology to MyoKardia that was instrumental in mavacamten development and for which CYTK receives a royalty stream.

CK-247 is currently being studied in REDWOOD-HCM study with results from this 18-patient trial expected towards the end of this year. Cytokinetics believes that CK-274 may have a superior pharmacokinetic profile that could prove to have meaningful advantages over mavacamten. It has faster and higher absorbability of the active ingredient and a half-life of 80 hours reduces the need for secondary dosing and also improves patient compliance to dosage schedules. CYTK believes that CK-247 could be a meaningfully better drug than mavacamten and become the gold standard in HCM.

The HCM market has considerable potential and certainly there is room for two drugs. CK-247 is probably three years behind mavacamten in reaching the market. However, the launch of mavacamten may be initially slow. There is no current drug therapy for HCM so that it will require time for Bristol-Myers to educate the market. The uptake of CK-247 could be much quicker than mavacamten as it enters an educated market place.