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Expert Financial Analysis and Reporting

Cytokinetics (CYTK, $1.40) Receives a Vote of Confidence from Amgen

Cytokinetics (CYTK) has announced an expansion of the partnering agreement with Amgen (AMGN) for omecamtiv mecarbil, the Company’s lead product which is being developed for congestive heart failure. In the original agreement, rights to omecamtiv in Japan were not included. The expansion gives Amgen rights in Japan as well. Cytokinetics will receive $25 million which is made up of an upfront fee of $15 million and the purchase of $10 million of CYTK stock (price of $1.18). CYTK is also eligible for as much as $50 million of pre-commercialization rights in Japan and double digit royalties on sales.

I view this as a vote of confidence by Amgen in the potential for successful development of omecamtiv mecarbil. The agreement coming before the imminent release (mid-2013) of ATOMIC-AHF phase IIb data is also encouraging that this trial will be successful and support a decision to advance omecamtiv mecarbil into phase III in 2014. ATOMIC-AHF is investigating the use of an IV formulation of omecamtiv mecarbil in 600 patients who were hospitalized for acute heart failure. The $25 million is important in the short term as it adds to the cash position of $62 million at the end of 1Q, 2013. This action reinforces my Buy on the stock which I initiated with a report on March 25, 2013.

The original agreement with Amgen for omecamtiv was in 2006. At the time, CYTK received $42 million as an upfront payment and Amgen made a further equity investment of $33 million. For this, Amgen received an option which if exercised would give Amgen worldwide rights for omecamtiv, ex-Japan. In May 2009, Amgen exercised this option and paid CYTK $50 million. This agreement also has the potential for CYTK to receive up to $600 million in milestones, which the Company has indicated are primarily pre-commercial and to receive double digit royalties.

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