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Expert Financial Analysis and Reporting

Cytokinetics: Comments on the Patent Situation of Omecamtiv Mecarbil (CYTK, Buy, $6.40)


If you read my note of yesterday, there can be no question that Amgen views omecamtiv mecarbil as a major breakthrough for the treatment of congestive heart failure if phase 2 data can be replicated in phase 3 trials. That note was based on a presentation by Cytokinetics at the Cowen conference on Monday March 7 and comments made by Amgen at a dinner that night. This enthusiasm was strongly reinforced during Amgen’s presentation at Cowen on March 8 by Sean Harper, Vice President of Research and Development. Dr. Harper was very enthusiastic about omecamtiv mecarbil and spent a meaningful amount of his presentation discussing the drug.

Both Amgen and Cytokinetics have hinted that a decision to move into phase 3 trials will be announced in coming months. Still, they have not made the announcement. There remains the uncertainty that while Amgen views the drug in their words as “a game changer” in congestive heart failure, the length of patent protection may not be sufficient to create adequate financial returns on the substantial investment that will be required to do the large and lengthy phase 3 clinical trials.

The Patent Situation for Omecamtiv Mecarbil

I have tried to draw Cytokinetics out on the patent situation and they keep referring me to the disclosure in the 10-K so let’s start with what that document says:

With regard to our drug candidates directed to muscle biology targets, we have a U.S. patent covering omecamtiv mecarbil and U.S. patents covering our skeletal muscle sarcomere activators including, but not limited to, tirasemtiv and CK-2127107, each of which will expire in 2027, 2027 and 2031, respectively, unless extended. We also have additional U.S. and foreign patent applications pending for each of our drug candidates. It is not known or determinable whether other patents will issue from any of our other pending applications or what the expiration dates would be for any other patents that do issue.

All of our drug candidates are still in clinical development and have not yet been approved by the FDA. If any of these drug candidates is approved, then pursuant to federal law, we may apply for an extension of the U.S. patent term for one patent covering the approved drug, which could extend the term of the applicable patent by up to a maximum of five additional years.”

I tried to get the Company to elaborate, but they would not expand much beyond the language of the 10-K.  I understand that the 2027 patent is the composition of matter patent. Under Waxman Hatch, companies can apply to get an extension on the life of the patent if a substantial part of the patent life has been spent doing research. This act is clearly aimed at difficult to develop drugs like omecamtiv and I believe that there is a very high probability there will be a five year patent extension that will give omecamtiv mecarbil exclusivity until 2032.  This would provide about nine to ten years of exclusivity for the drug following introduction.

Cytokinetics says that the 10-K only speaks to the composition of matter patent. They say that there are other patents but they do not disclose what they might be in their public documents.  I am not a patent expert and have spent only a brief period of time on a patent search. Based on experience with other companies, there is likely to be a broad web of other patents that deal with formulations, manufacturing, methods of use and others. I have found patents dealing with formulation of the salt that apparently last until 2034. I hope that the Company will bring more clarity to this situation in the future. At this point, I can’t determine if such patents could extend patent protection beyond 2032.

Investors in looking at the patent situation should also consider another important issue. In almost every important new drug category, it is the case that after the first or pioneer compound (omecamtiv in this case) is developed, there are several other drugs of the same class that are developed and also become blockbusters. This was certainly true of two dominant categories of drug that are standards of care in treating congestive heart failure: the angiotensin converting enzyme inhibitors (ACEs) and angiotensin II receptor blockers (ARBs) At the current time, Amgen and Cytokinetics have a dominant leadership position on the biology of cardiac myosin activators  of which omecamtiv is the first drug. I would expect that if Amgen moves ahead with omecamtiv, it will alsoi aggressively develop follow on drug . Hence,  Amgen has to consider its return from not only omecamtiv but from a second cardiac myosin activator drug or even a third. Indeed, Cytokinetics says that it anticipates advancing a next-generation compound into pre-clinical development in 2016.

Investment Conclusion

I acknowledge that the patent situation is a concern as there may be as few as nine years of marketing exclusivity. This is not ideal, but it should allow Amgen to recover its investment. Each $1 billion of sales probably provides $500 million of pretax operating income and I believe omecamtiv has the potential to achieve several billions of sales annually throughout a good part of the period from 2025 to 2032. I think that Amgen must also consider the potential that they will dominate the cardiac myosin activator drug category and develop other blockbuster compounds in this drug class.  If my view is correct, I think that Amgen will not be deterred by the patent situation.

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  1. Thank you Larry for your thoughts on the patent situation. I will be following this company closely this year.


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