Expert Financial Analysis and Reporting

Cytokinetics announced on July 14, 2015 the start of the phase 3 trial of tirasemtiv in ALS-VITALITY-ALS (Ventilatory Investigation of Tirasemtiv and Assessment of Longitudinal Indices after Treatment for a Year in ALS). I would expect rapid enrollment in this trial as many of the centers participating in this study also participated in the phase 2b BENEFIT-ALS trial. In addition, there has been no drug approved for ALS since riluzole in December 1995; riluzole is a drug that provides only modest benefits in some patients and was approved on less than robust data. The ALS community of patients, physicians and care givers is desperate for any drug that will have some medically meaningful impact on ALS. Also, there are no competing phase 3 trials in ALS. All of this points to rapid enrollment.

The primary endpoint of VITALITY-ALS is slow vital capacity (SVC) which is a measure of the amount of air expelled from the lungs after a maximum inhalation. It is an indicator or measure of the strength of the skeletal muscles responsible for breathing (e.g., the diaphragm). SVC is expressed as a percentage of air expelled by an ALS patient in comparison to that expected to be expelled from a non-ALS patient. This is determined by an algorithm that predicts a value for healthy people of roughly similar characteristics as the ALS patient such as age, sex and height and divides the ALS patient’s score by the expected value for a normal patient.

SVC is carefully followed during the course of treatment for ALS as an important predictor of disease progression. Most ALS patients die because of respiratory failure. In all previous industry conducted (large) phase 2 or 3 trials, the ALSFRS-r scale has been used as the primary endpoint of the trial and SVC has been a secondary endpoint. VITALITY-ALS is the first trial to be using SVC as the primary endpoint and ALSFRS-r as a secondary endpoint. Patients enrolled in the trial must have an SVC of 70% or greater. In BENEFIT—ALS, patients with these SVC readings seemed to do better. It is expected that SVC of control patients will deteriorate by 2% to 3% per month.

The details of VITALITY-ALS are now available on ClinicalTrials.com. This states that the trial will enroll 445 patients and the trial will be completed in March 2017. However, the primary endpoint of SVC will be measured after 24 weeks of treatment while four out of five of the secondary endpoints will be measured at 48 weeks. The final date for data collection of the primary outcome measure of SVC will be in March 2017. Hence, we should learn whether the trial has successfully reached the primary endpoint sometime in 2Q, 2017. The Company has stated that in order to gain approval, reaching statistical significance in SVC may not be enough for approval. There will have to be some supporting evidence from the secondary endpoints.

In the BENEFIT-ALS trial, there was highly statistically significant improvement in 178 patients treated with tirasemtiv as compared to 210 patients in the control arm (these numbers exclude dropouts.). If phase 2 results are replicated in VITALITY-ALS, it is highly probable that tirasemtiv will be approved in the US by 1H, 2018. Assuming meaningful clinical benefit is shown in VITALITY-ALS comparable to that suggested by the phase 2 results, I think US sales could reach $625 million by 2022. US sales at this level could potentially create value that might translate into $51 to $87 per share by 2022.

Note that this is based only on tirasemtiv sales in the US and there are other value drivers such as international sales of tirasemtiv, omecamtiv and CK-107. I think that CYTK is dramatically under-valued within the biotechnology universe of emerging companies. It has a market capitalization of about $350 million. I just published a more detailed report on the Company entitled Cytokinetics: Phase 3 Trial for Tirasemtiv About to Begin with Topline Results Possible in 2H, 2016; Successful Outcome Could Make the Stock a Homerun (CYTK, $6.35, Buy, For Paid Subscribers).