Expert Financial Analysis and Reporting

Overview and Investment Importance

Those who read my initiation report on Cytokinetics (CYTK) understand that the importance of successfully conducting a phase III trial for omecamtiv mecarbil and then commercializing the product cannot be overstated. It could bring in as much as $300 million of pre-commercialization milestones from its partner Amgen by mid-2017. In addition, omecamtiv mecarbil targets a serious unmet need for a safe inotropic agent for congestive heart failure. If it can safely replicate the clinical effects seen in phase I and II trials and can show a durable effect, this could be a several billion dollar drug with Cytokinetics realizing as much as half of the profits.

Cytokinetics probably will be reporting the phase IIb results for omecamtiv mecarbil in the ATOMIC-AHF trial in 2Q, 2013. Investors are attuned to looking for statistical significance on the primary endpoint of a trial to judge its success. ATOMIC-AHF may be importantly different as reaching the primary endpoint is not the key issue for Amgen and Cytokinetics making the decision to move forward into a pivotal phase III trial. I will touch on this shortly.

Successful results in the phase IIb ATOMIC-AHF trial is one prerequisite for starting phase III and the other is a successful outcome in the phase IIb COSMIC-HF trial. The latter is intended to determine the oral dosage form that the Company will use in phase III. Both ATOMIC-AHF and COSMIC-HF are unusual in the sense that they fill the role of fine tuning the design of the phase III trial. Over the course of human trials for omecamtiv mecarbil that have gone on in the past seven years, I think both Amgen and Cytokinetics are reasonably confident that omecamtiv mecarbil should progress into phase III. This is in contrast to most phase IIb trials that investors encounter in which achieving the primary endpoint in phase IIb is critical to the decision to move to phase III.

Cytokinetics has not given any formal guidance, but it is my best judgment that COSMIC-HF will complete in 4Q, 2013 or 1Q, 2014 and that Cytokinetics and Amgen will have an end of phase II meeting with the FDA in 2Q, 2014. The phase III trial could start in 2H, 2014 and topline data could be available in 1H, 2016. There could be meaningful milestone payments between now and the mid 2017 that could act as continuing catalysts for the stock. These might include the start of phase III, completion of enrollment in phase III, successful results in phase III, and filing of an NDA and the approval of the NDA. To reiterate, as much as $300 million of milestones could be paid to Cytokinetics before the launch and the same amount after the launch.

Design of ATOMIC-AHF

The primary outcome measure of ATOMIC-AHF, according to ClinTrials.gov is to to evaluate the effect of 48 hours of intravenous omecamtiv mecarbil compared with placebo on dyspnea (shortness of breath) in subjects with left ventricular systolic dysfunction hospitalized for acute heart failure over a 48 hour time frame.

There are three secondary outcome measures, also over a 48 hour period:

· To characterize pharmacokinetics of omecamtiv mecarbil including metabolites following IV infusion and to evaluate the relationship between omecamtiv mecarbil plasma concentration and echocardiographic parameters in subjects with acute heart failure,

· To assess the safety and tolerability of three dose levels of IV omecamtiv mecarbil compared with placebo in subjects with left ventricular systolic dysfunction hospitalized for acute heart failure, and

· To evaluate the effects of 48 hours treatment with IV omecamtiv mecarbil on additional measures of dyspnea, patient global assessment, change in NT-proBNP, incidence of worsening heart failure, and short term clinical outcomes.

Amgen and Cytokinetics are most interested in the secondary endpoints in assessing whether omecamtiv mecarbil will progress to a phase III trial. The dyspnea endpoint for the phase IIb was included to see if there might be a possible reading for an endpoint that regulatory authorities consider a sign of clinical benefit. While dyspnea is a possible registration endpoint for trials in congestive heart failure, it is probable that the endpoint that will be used in the omecamtiv mecarbil phase III will be a composite of overall mortality and hospital readmissions. In ATOMIC-AHF, patients being treated are critically ill and for a short two day period of time, it may be difficult to achieve the dyspnea endpoint.

Issues for Starting Phase III for Omecamtiv Mecarbil

The primary interest of Amgen and Cytokinetics is to show that omecamtiv mecarbil can prevent patients discharged from the hospital with congestive heart failure from being readmitted and to prevent admissions in the first place. This would also manifest as a decline in overall mortality. This is quite a bit different from the design and types of patients enrolled in ATOMIC-AHF.

In ATOMIC-AHF, the companies will be focused on whether increasing levels of omecamtiv mecarbil produce a dose dependent response as has been pretty convincingly demonstrated in earlier trials. They will also look at other measures as previously described to see evidence of efficacy. Safety has not been an issue in earlier trials and ATOMIC-AHF will be looked at to see if that continues to hold. The trial has moved from the first to the second and now to the third cohort. This means that there have been no safety issues in the first and second cohorts. Topline data from ATOMIC-AHF could be available in 2Q, 2013.

COSMIC-HF is a phase IIa double-blind, randomized, placebo-controlled, study designed to evaluate several modified-release oral formulations of omecamtiv mecarbil. The objective of the trial is to select the best formulation for the phase III trial. The companies have not been too specific on the design of the trial to date. They have said that in an initial cohort of patients they will compare the oral formulations for a short duration. Then a second cohort will receive daily doses for a longer amount of time.

The companies have not given guidance on when data from COSMIC-HF will be available, but I am guessing late 2013 or early 2014. They have said that this is more than a trial to determine safety and tolerability, but there won't be a primary efficacy assessment. That will be reserved for the phase III trial. The primary objective is to get an intravenous and oral dosage form product that is well tolerated and that can be pharmacodynamically and pharmacokinetically predictable in a population of heart failure patients.

In terms of a rough design for the phase III trial, remarks made by management suggest that the endpoint could be a composite of overall mortality and hospital readmissions. In terms of hospital readmissions, 28% of discharged congestive heart failure patients are re-admitted within 30 days. This gives rise to a lot of events that comprise the endpoint. It might be the case that 2000 patients could be enrolled in one year and that 500 events, probably enough for a statistically significant read on the trial, could occur by early 2016 leading to the reporting of phase III topline data in 1 H, 2016.