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Expert Financial Analysis and Reporting

Cytokinetics: Critical Phase IIB Data is Upcoming in 2013 for Omecamtiv Mecarbil and Tirasemtiv (CYTK, Buy. $6.30)

Key Investment Considerations


Cytokinetics Has Two Key Drugs in Phase IIb Development

Cytokinetics (CYTK) has been the pioneer in developing new drugs based on muscle biology which modulate the mechanics of muscle, particularly those which affect contractility. It has two late stage drugs that will be reading out data on critical phase IIb trials in 2013. Phase I and IIa trials for both drugs have shown clinically relevant effects, strong safety profiles and robust pharmacokinetic profiles. However, until investors see topline data from the phase IIb trials it requires a leap of faith to believe that this information accurately defines these drugs and their potential benefit.

Omecamtiv mecarbil is a first in class cardiac myosin activator that activates cardiac muscle contractility. It is being developed for the treatment of congestive heart failure in collaboration with Amgen. It addresses the significant unmet medical need for an inotopic drug that can increase cardiac output (amount of blood pumped by the heart) without overstressing a heart which is already impaired by the damage caused by congestive heart failure.

Tirasemtiv is a fast twitch skeletal muscle activator. It activates fast twitch skeletal muscle to improve the amplification of neuronal input which has the effect of increasing muscle power and endurance. It is initially being studied in amyotrophic lateral sclerosis (ALS). Tirasemtiv does not have an effect on the cause of this disease, which is the deterioration of motor neurons. Its promise lies in improving quality of life by making patients better able to carry on the normal day to day demands of life through its effect on muscle contractility. It may indirectly lengthen life by allowing patients to breathe longer on their own and to be able to chew and consume nutritious food, but this remains to be seen.


Potential Commercial Opportunities for Omecamtiv Mecarbil and Tirasemtiv

Despite considerable effort, scientists have been unsuccessful in trying to develop an inotropic drug with the characteristics of omecamtiv mecarbil for the last 30 years. It would be a significant addition to current therapy for congestive heart failure that could potentially produce a huge improvement in quality of life and could potentially extend life. As important as the therapeutic benefit is the potential reduction of healthcare spending as omecamtiv mecarbil may enable Medicare and private insurance companies to save several billion dollars of costs each year if it can reduce hospital admissions and re-admissions for congestive heart failure.

Omecamtiv mecarbil has multi-billion sales potential if it is successfully developed. It is partnered with Amgen and under the current terms of the deal, CYTK will realize through the form of royalties about half of operating profits. Amgen is funding all of the current trial costs and all of the future costs. I will touch more on this later. There are over $600 million of future payments tied to milestone events, about half of which are tied to pre-commercial events and could be achieved before 2016 or 2017.

There is only one drug approved for ALS and that is Rilutek which produces about a three month extension of survival, but has no effect on quality of life. Nevertheless, it is used in 2/3 of the 20,000 ALS sufferers in the US. If tirasemtiv lives up to the hopes of investigators, it could likely have the same penetration of the market. The ALS treatment community is tightly focused with 75 centers of excellence treating 50% to 60% of the patients. This along with the desperate search by patients for anything that will help and give them hope suggests to me that there would be rapid penetration of the market if the drug is approved.

The benefits of tirasemtiv are not yet well established making it difficult to estimate what the price might be. If it is judged to be clinically meaningful, I think that it could be priced in the same price range as cancer drugs or about $50,000 per year. This would make the annual addressable market in the US $1.0 billion (20,000 patients x $50,000 per patient) and 2/3 penetration would produce sales for tirasemtiv of $670 million. Foreign sales potential as a rule of thumb would be a similar amount. Tirasemtiv has potential applications beyond ALS. It could also be used in other neurological diseases such as multiple sclerosis, myasthenia gravis and muscle wasting (cachexia) that occurs in cancer patients. The commercial potential of these possible applications in the aggregate represents substantial additional opportunity.


Investors Are Cautious

There is great potential for these drugs if they are successfully developed, but investors seem to have significant reservations. The Company caught the imagination of investors early-on based on its unique technology platform and omecamtiv mecarbil was seen as a potential blockbuster. The licensing deal with Amgen reinforced this belief. The stock traded at about $7.50 when the deal with Amgen was announced in December of 2006, but has traded steadily down to the current price of $1.05. Anyone who bought and held the stock for the past six years has probably lost money. Cytokinetics has the outward appearance of a struggling bulletin board company. On December 18, 2012 the listing was transferred from NASDAQ Global Market to the NASDAQ Capital Market because it failed to meet compliance of having a closing price above $1.00 for 30 consecutive days.

Investors have been discouraged by the slow pace of development of omecamtiv mecarbil, which has forced the Company into series of dilutive financings. The drug was first dosed in humans in 2005 and it will not likely go into phase III trials until 2014. Amgen has moved at a methodical pace in developing the drug. While this has had a major negative impact on the stock price of CYTK, the development program has been very thorough and enhances the chances for success in phase III. In the case of tirasemtiv, investors are cautious because ALS has been a graveyard for drug development and has produced a number of high risk drug failures, the most recent being Biogen Idec's dexpramipexole. This is a tough disease target.

The next year will see results from clinical trials that will define the promise of omecamtiv mecarbil and tirasemtiv. There will be one phase IIb trial, ATOMIC-AHF, for omecamtiv mecarbil which will report out data in mid-2013 and data from another phase IIa trial, COSMIC-HF, in late 2013 or early 2014. These will provide a very good insight into the efficacy and safety of the drug. If successful, they will pave the way for the phase III trial to begin possibly in 2H, 2014 with the possibility of topline data in late 2015 or
2016. ATOMIC-AHF is expected to report topline data in mid-2013 and COSMIC-HF sometime in late 2013 or early 2014. The full results of the phase IIb BENEFIT-ALS trial of tirasemtiv will be reported at a conference in December of 2013. This is a huge year for clinical data.


Key Risk Factors

Positive clinical trial outcomes for omecamtiv mecarbil and tirasemtiv are the essence of the investment case for Cytokinetics, but clinical trials are inherently risky and can fail for many unanticipated reasons. Because both drugs are first in class and are targeting two extremely difficult disease targets, the risks may be magnified in the case of CYTK. Here are some of the issues that concern me:

· The data created thus far for both drugs has been encouraging on safety and efficacy, but it is largely based on short term studies. Longer term use might lead to a waning of effect or enhanced safety issues.

· The upcoming trial result for ATOMIC-AHF has a primary endpoint of dyspnea (shortness of breath). In this short of a trial, dyspnea may be a difficult endpoint to reach. This is not likely to be the primary endpoint for the phase III trials and not meeting this endpoint would not necessarily deter Cytokinetics and Amgen from progressing to phase III. Still, this likely would be seen as a negative by many investors.

· ALS is a heterogeneous disease whose causes are not well understood. There is the risk that the enrollment criteria for BENEFIT-ALS will not identify patients most likely to benefit from tirasemtiv.


What I Am Doing With the Stock

Needless to say, this is going to be a big year for Cytokinetics; it is an asymmetric investment opportunity. In the case that the two omecamtiv mecarbil phase II trials are successful, I think that there could be a significant jump in the stock price. The current market valuation is $144 million and if the market comes to view that the phase III trial will be going forward has a reasonable chance of success, I think that we could see a valuation of $250+ million plus. Remember that the partnership with Amgen would provide significant validation for investors that there is meaningful potential for success in phase III. Similarly, a successful outcome for tirasemtiv followed by a partnering deal could have an effect of the same magnitude on the stock.

With very positive outcomes for the trials of both drugs, I think that the market valuation could be $500 million by year end; this is roughly a $3.70 stock price. What are the chances of this? This is obviously a value judgment and this report lays most of the information needed to make your own judgment. My view is that this is a good asymmetric investment opportunity and I intend to buy the stock three trading days or so after this report is published, a practice that I follow when I write on a new company. That is what I intend to do, you should use this report as part of the basis to form your own judgment.


Financial Considerations

The company ended 2012 with $74 million of cash and has provided guidance that this will fund the company for 16 months, roughly through April of 2014. This works out to a monthly cash burn of $4.6 million per month. Amgen is paying for all of the expense of current and future trials of omecamtiv mecarbil under the current agreement. Cytokinetics will not have any cash burn associated with omecamtiv mecarbil.

In December of 2006, Amgen paid $75 million for an option to obtain worldwide rights (ex Japan) to omecamtiv mecarbil following phase IIa trial results. It exercised this option in May of 2009 and paid an additional $50 million. Cytokinetics is eligible to receive an additional $600 million of milestone payments from Amgen. CEO Robert Blum has stated that approximately 50% or $300 million of these milestones relate to clinical and regulatory events that occur before commercialization that could begin in 2016 or 2017.

Under the Amgen agreement, the company cannot discuss the events that trigger the milestones, but reasonable guesses would be the successful completion of the ATOMIC-AF and COSMIC-HF trials (by late 2013 or early 2014), the beginning of phase III trials (2H, 2014), the successful completion of phase III trials (2015), NDA filing and acceptance (2016) and approval of the NDA (2017). Each of these events might lead to the payment of a roughly $60 million milestone payment. I want to re-emphasize that these are my guesses and are not confirmed by the Company.

The Company has the option to re-invest some of these milestone payments into the clinical development of omecamtiv mecarbil with the result that they would receive a greater royalty percentage. This might amount to perhaps $60 million or 10% of the potential milestones. This would also give CYTK the opportunity to co-promote in the US where the CYTK sales force would be primarily responsible for marketing in hospitals. Amgen would be required to reimburse CYTK for its sales and marketing expenses so that the return on sales would be unusually high.

Positive results in the phase IIb trial of tirasemtiv would almost certainly lead to a partnering agreement. In my opinion, the most likely outcome would be for Cytokinetics to retain US rights and partner foreign rights. This deal might be completed in 1H, 2014 with an upfront milestone payment of perhaps $50 million. It might also be the case that worldwide rights would be licensed if the deal terms were compelling and in this case the upfront payment might be as much as $100 million.

There is one other licensing opportunity for Cytokinetics because in the original deal with Amgen, it retained rights for Japan. The Japanese pharmaceutical market is about 10% of the worldwide market. If Amgen paid $600 million for rights to 90% of the world, what is Japan worth? I would point out that there will be much better developed clinical data for a partner in Japan to assess and this enhances the value of a potential deal. I think that the upfront payment for Japanese rights might be on the order of $30 to $50 million.

Cytokinetics has the potential to bring in a staggering $350 to $400 million of milestone payments between now and 2017. These are all subject to the company obtaining positive phase IIb and III trial results for omecamtiv mecarbil and positive phase IIb results for tirasemtiv. In this event, the company would be awash in cash in the 2015 and beyond period. In the case of failure of these trials, the company would run out of cash in about April of 2014. The future of the Company is riding on these results.


Key Points About Tirasemtiv


Amyotrophic Lateral Sclerosis (ALS) is a Horrible Disease

ALS is also called Lou Gehrig's disease; it is a progressive, always fatal, neurological disease that damages or destroys motor neurons in the central nervous system and causes skeletal muscles to atrophy. The motor neurons project their axons from the central nervous system to control voluntary and involuntary muscle contractions. ALS results in loss of control over bodily functions involving muscles. It usually does not affect cognition or the sensations of sight, touch, smell and taste so that mentally alert patients are trapped in a dysfunctional body.

About 75% of patients first start to lose control of voluntary movement in the arms and legs. Others may initially experience problems in swallowing and chewing and a few start with breathing problems. Regardless of where symptoms originate, the disease inexorably spreads. Effects on swallowing and chewing can cause choking and aspiration of food into the lungs. In the terminal stages of the disease, most patients are maintained on feeding tubes and mechanical ventilators. The principal cause of death from ALS is respiratory failure or pneumonia which is result of ventilator use.


The ALSFRS-r Scale is the Key Measurement for Determining Functional Decline in ALS Patients

As I am going to be talking about the development of tirasemtiv for ALS, it is important to understand how clinical trials in ALS are judged. In other words, what is the primary endpoint of ALS trials that will be used to judge the effectiveness of tirasemtiv? All recent clinical trials have used a validated scale called the Amyotrophic Lateral Sclerosis Functional Rating Scale-Revised or ALSFRS-r. It measures the change in functionality of 12 different bodily functions: speech; salivation; swallowing; hand writing; cutting food and handling utensils; dressing and hygiene; turning in bed and adjusting bed clothes; walking; climbing stairs; shortness of breath upon exertion; shortness of breath when lying still; and respiratory insufficiency. Each item is ranked by a physician on a scale of from 4 (normal) to 0 (severely disabled) and is equally weighted in the scale. A normal person would score about 48.

There are no blood tests or imaging modalities that can aid in the diagnosis of ALS. It often takes a while, perhaps a year from the time when the patient begins to experience symptoms to the time when he goes to his primary care doctor. Inexperienced physicians can mistake ALS for other diseases such as rheumatoid arthritis so that there may be a further delay before the patient is referred to a neurologist. Even neurologists have difficulty diagnosing ALS and final diagnosis might ultimately require referral to a neuromuscular specialist. Most patients die within three to four years of diagnosis.


Incidence of ALS

This is an orphan disease with a large unmet need. There are 20,000 people living with ALS; the incidence in men is 1 in 500 and for women it is 1 in 800. Prevalence is low because patients die so quickly. The annual incidence of ALS is about the same as another neuromuscular disease, multiple sclerosis, but because of lesser mortality there are 450,000 patients living with multiple sclerosis. If therapy could allow ALS patients to live longer the prevalence would be higher.

Patients' life spans can be extended modestly by supportive care, but there are no effective drugs. The ALS community is very aware of and interested in tirasemtiv. It is important for ALS patients to know that there is something being done, that there is some hope given the numerous prior failures and the absence of any effective drugs.


Rilutek is the Only Approved Drug for ALS

There is only one drug approved for the treatment of ALS; Sanofi's Rilutek (riluzole), which was approved in the mid-1990s. In younger populations, it has a modest effect on survival of about two to three months. However clinicians report that it has no effect on quality of life or activities of daily living. Even with these poor or limited product characteristics it is used in 2/3 of ALS patients and is reimbursed by Medicare. There are about 75 centers of excellence in the US that treat about 50% to 60% of the US patient population.

Rilutek was studied in two clinical trials. The endpoint of these trials was the need for tracheostomy or death. Interestingly, it did not achieve statistical significance in the first study on its endpoint based on the log rank test (p=0.12) prospectively defined. In the second study the log rank test p value was 0.076. In both trials, it did achieve statistical significance by the Wilcoxon statistical test (p=0.05) and the FDA approved it on this basis. Rilutek appeared to increase median survival by 90 days in younger populations.

The most recent information on Rilutek came from the failed Biogen Idec study of dexapramizole in which Rilutek was used as a control arm. It supported the previous data that shows that Rilutek extends survival by two to three months.


An Overview of Tirasemtiv

Tirasemtiv was first tested in the SOD1 knockout mouse that is considered the best model for pre-clinical testing of ALS drugs. Studies showed that tirasemtiv produced an improvement in grip strength, improvements in hang time and improvements in running time which are measures of endurance and fatigability. Mouse models are almost always the starting point for development of a new drug. They are not necessarily predictive of what the drug may do in humans, but it is a necessary starting point.

The first healthy volunteer was dosed with tirasemtiv in June of 2009. It has since been studied in four phase I trials involving 129 healthy volunteers. It also has been tested in four phase IIa trials involving 143 ALS patients, one phase IIa trial of 61 claudication patients and one phase IIa trial in 32 myasthenia gravis patients. All of the phase IIa trials were randomized and placebo controlled and of short two to three weeks duration. For those who would like to see details of these trials, I would refer you to the company website. I am just going to discuss the results of those trials.

Tirasemtiv is a skeletal troponin activator that amplifies the response to motor neuron input. The therapeutic hypothesis behind the drug is that it will increase muscle power and slow the onset and reduce the degree of muscle fatigue. These trials in humans have shown as in the case of the mouse model that tirasemtiv improves muscle force, power and endurance. It appears to be achieving an amplification of muscle contractility that improves functional parameters such as those found in the ALSFRS-r scale.

The company has chosen to focus initial development of tirasemtiv on ALS. As was previously discussed, the efficacy of tirasemtiv will be measured by the ALSFRS-r scale. A healthy person would have a score of about 48 while a newly diagnosed ALS patient might score in the mid to high 30s. (Remember, they tend to be diagnosed about one year after symptoms begin). The scores at time of death are in the mid-teens.

These patients tend to decline linearly and lose about 0.9 points per month on the ALSFRS-r scale. While the decline in patient status is generally linear, disabilities do vary such as the ability to drive, employment status, wheelchair use and respiratory support. As disabilities mount, so do costs such as loss of a job and the effect on caregivers.


Human Studies of Tirasemtiv

The goal of tirasemtiv is to improve quality of life and slow the deterioration of patients. Its mechanism of action does not go the root cause of ALS in which neuronal function is gradually destroyed. It is hoped that it will slow the inevitable downward spiral of functionality in ALS patients and improve their quality of life. Whether this might prolong life is uncertain. It is hoped that by improving functionality that patients may live longer, but we will have to await long term trials.

In one phase IIa study after two weeks of treatment, investigators saw a dose dependent increase in ALSFRS-r, something that has never previously been observed. Patients after two weeks of dose escalation seemed to be doing better than those at baseline, but remember this was a three week study. There was data showing improvement in pulmonary function, in particular maximum voluntary ventilation or MVV. This is a measure of pulmonary endurance in which patients breathe in and out of a spirometer. Investigators saw a dose dependent increase at the end of two weeks.

The data in all of the phase IIa trials was pooled to see if any trends could be observed in pulmonary function and muscle strength. Investigators concluded that there were improved outcomes as dosage was increased and that patients on drug did better than those on control. The trends were all in favor of improvement in muscle strength and endurance.

The lead investigator for tirasemtiv in the ongoing phase IIb trial (which I will describe shortly) is Dr. Jeremy Schefner of SUNY; he also participated in the phase IIa trials. In his practice he sees about 100 new patients per year and has a patient census of 300 patients. At the Cytokinetics analyst day in December, 2012, he said that this was the first drug that he had been involved with that had shown the ability to increase ALSFRS-r. He is cautiously optimistic about tirasemtiv.


BENEFIT-ALS; the Key Phase IIb Trial for Tirasemtiv is Underway

Based on the short duration phase IIa trials, Cytokinetics believes that tirasemtiv has shown the clinical benefit that the company was expecting based on its mechanism of action. They are now conducting a larger and longer duration phase IIb trial in ALS patients. The trial will randomize 400 ALS patients
over a trial period of 12 weeks. This trial called the Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS or BENEFIT-ALS trial began enrollment in November of 2012. The trial will be conducted in the US, Canada and five countries in Europe. It is scheduled to complete enrollment in mid-2013 and topline data is expected to be presented at a key conference in December 2013.

The length of the study, including screening, dosing, and follow-up, is approximately 20 weeks. After a one-week open-label phase during which all patients will receive CK-2017357 at 125 milligrams twice daily, patients will be randomized one to one to receive double-blind tirasemtiv or matching placebo. The tirasemtiv/placebo dose will be increased no faster than weekly to each patient's highest tolerated daily dose, with a maximum of 250 mg twice daily. The dose may be decreased based on tolerability. Patients will continue treatment at the highest tolerated dose to complete a total of 12 weeks of double-blind treatment. Patients may be on riluzole or not on riluzole at study entry. Patients not on riluzole must stay off riluzole. Patients on riluzole who are getting double-blind tirasemtiv will be given riluzole at half the labeled dosage (50 mg once a day instead of 50 mg twice a day). Blood tests for safety will be performed. Information about any side effects that may occur will also be collected.

The most important side effect seen in the studies done to date is dizziness or light headedness. Physicians who have used the drug say that patients are uncomfortable, but the effects are mild and go away after a week or so. Still, this could cause trouble in the phase IIb trial if a meaningful number of patients given tirasemtiv were to drop out so that tirasemtiv on an intent to treat basis would be disadvantaged versus control. The trial is designed to prevent this by giving all patients in the trial a low 125 mg bid dose of tirasemtiv for one week before randomizing them. In addition, patients are gradually titrated upwards to the maximum tolerated dose of tirasemtiv.

After the one week lead in period, the patients who can tolerate tirasemtiv are randomized into a drug group and control group; the duration of the trial is 12 weeks. The objective of the trial is to show that patients in the control group decline more rapidly than those on tirasemtiv as measured by the ALSFRS-r scale. Over a 12 week period, historical experience shows that ALS patients experience a decline of about 0.9 points per month so that over a 12 week period, they would be expected to show a decline of 2.70 points in the ALSFRS-r scale. The trial assumes that patients in the tirasemtiv arm will decline by 1.52 points over three months so that the treatment effect is a lesser decline of 1.18 points at the end of 12 weeks; the trial is 80% powered to show this.

Dr. Schefner felt that a 1.18 point decline would produce a meaningful clinical benefit. He warned about relying on anecdotal evidence, but he noted that in the shorter duration phase IIa trials that patients told him that they knew they were on the drug because they felt better. One patient was able to walk without a walker for the first time in many months. If these effects were noticeable after two to three weeks, the improvement (actually a lesser rate of decline) may be more profound at 12 weeks. BENEFIT-ALS, if successful, will provide Cytokinetics with data to design a phase III trial.


Key Points about Omecamtiv


Congestive Heart Failure

Congestive heart failure (CHF) is a life threatening condition that can result from heart attacks or prolonged hypertension. While simplistic, it is useful to compare the cardiovascular system to a pump (the heart) and the pipes (blood vessels). CHF is a condition in which the heart is not pumping enough blood because it has been damaged and the pipes or blood vessels are clogged up making it harder to pump blood through them. Blood can pool in the body causing shortness of breath, swelling in the limbs and exercise intolerance. An already damaged heart muscle is asked to pump harder. This causes the heart to enlarge and become flabby and increasingly less functional. This downward spiral in heart function eventually leads to death.

Congestive heart failure has a very profound health effect on individuals and a concomitant effect on national healthcare spending. It occurs in 2.4% of the US population (primarily older patients) and because of the aging baby boomer population this percentage will increase. It is a chronic disease that patients may live with for some years but short term exacerbations often lead to acute hospital stays. It is the most frequent cause of hospitalization for people over 65 and there are about 1 million hospitalizations and discharges from the hospital in which CHF is determined to be the primary cause. There are an additional 1 million hospitalization in which CHF is listed as a secondary cause.

The cost to the health care system for a hospital visit of a Medicare patient is constrained by that program's cost containment regulations to $10,000. Non-Medicare patients can cost up to $30,000 to treat. About 18% of CHF discharges are readmitted in 30 days and it is estimated that this costs Medicare $15 billion each year. It is estimated that if effective drug therapy could prevent readmissions, Medicare could save $12 billion per year. It is this unmet medical need that is the goal of omecamtiv. Readmission within 30 days can be a major problem for hospitals as Medicare will not pay more fees beyond those for the original admission. A hospital can be on the hook for $10,000 or more of additional costs. There is a discussion about extending this period to 60 days. If omecamtiv in its clinical trials can establish that it can meaningfully reduce hospital readmissions, it should quickly gain formulary acceptance.


The Need for New Drugs: The Opportunity for Omecamtiv Mecarbil

Any drug that can help patients stay alive and remain out of the hospital and reduce length of stay and costs of hospitalization would be deemed a significant breakthrough. The morbidity and mortality associated with congestive heart failure dwarfs that of most cancers. If a patient is discharged today after hospitalization, there is a 28% chance of dying within six months and they have a 30% to 40% chance of being readmitted to a hospital within six months. There is the opportunity to do better with safer and more effective medicines.

Patients entering the hospital are choked with the blood pooling in the extremities and organs and are short of breath. Acute therapy in the hospital is aimed at reducing the amount of fluids with diuretics which cause the patient to excrete more water in the urine. A variety of well-known anti-hypertensive agents are used to help dilate the blood vessels. This is effective therapy in both the hospital and outpatient setting.

The missing element in the current treatment regimen is a drug that can make the heart safely pump more blood. Digitalis is a naturally occurring substance found in the Foxglove plant that has been used to treat the symptoms of CHF by increasing the contractility of heart muscle. More recently a class of drugs called phosphodiesterase inhibitors, the best of which is milrinone, has been introduced to therapy that does the same thing. The mechanism of action of digitalis and milrinone causes the heart to contract with more force. In an already badly damaged heart, this increase in oxygen consumption and increase in calcium can cause life-threatening irregular heart rhythms. Even though these drugs probably lead to decreased time of survivial, many patients and physicians are willing to take the risk because their quality of life improves so dramatically with their use.

Pharmaceutical companies have spent many years trying to develop a drug that increases the amount of blood that the heart pumps with each beat without dangerous side effects. The mode of action of omecamtiv is that it can increase the stroke volume (amount of blood pumped) and ejection fraction (amount of blood ejected from the left ventricle) without increasing the oxygen consumption (measure of how hard the heart is working) and ejection fraction with each beat. It is hoped that this will avoid the life threatening side effects of digitalis and milrinone. Essentially, omecamtiv causes the heart to contract longer and without the violent contractions that are the mechanism of action of digitalis and milrinone. If omecamtiv is found to be effective without limiting side effects, it can have a profoundly positive effect on CHF outcomes and lead to a major reduction in healthcare spending.


What We Know About Omecamtiv: Clinical Trial Results So Far

The development of omecamtiv mecarbil is more complex than that for tirasemtiv. ALS patients suffer dramatic impairment in quality of life, have a short life expectancy and cannot be offered effective therapy. While CHF is a life threatening disease, patients do have the expectation for a better and longer life than ALS patients and have access to somewhat effective but by no means optimal therapy. The therapeutic objective of omecamtiv is to allow the heart to pump more blood with each beat without increasing the work load of the heart, thereby reducing dangerous side effects. Existing inotropic drugs like digitalis and milrinone are effective in causing the heart to pump more blood, but this comes at the price of life-threatening side effects.

Phase I and II trials had to be skillfully designed and carefully executed to determine the efficacy and safety profile of omecamtiv. The side effect profile associated with the mechanism of action was the most critical issue to be examined in phase I and II trials but there were others. Omecamtiv mecarbil will be given to patients who are taking multiple other drugs, not only for CHF but for other diseases. The potential for drug to drug interaction had to be carefully evaluated. Also, omecamtiv in the hospital setting will be used as an intravenous formulation and in the outpatient setting with an oral formulation. Patients must experience a seamless transition from an effective intravenous to an effective oral dose as they leave the hospital.

Cytokinetics and its partner Amgen have now completed seven phase I trials involving 203 patients. These studies over several years have characterized both an intravenous dosage form and multiple oral forms of omecamtiv which that believe to have demonstrated safety and tolerability as well as assessing the pharmacokinetics and pharmacodynamics of the drug.

They have demonstrated through electrocardiographic and pharmacodynamic evidence that omecamtiv produces a dose dependent effect in terms of improving stroke volume and ejection fraction. These are measures of the amount of fluid that is pumped out of the heart with every beat and into systemic circulation. Critically it does this without causing the dangerous side effects of existing inotropes. Milrinone and digitalis cause the heart to contract with more force, but this can lead to increased heart rate and life threatening arrhythmias. These result from making an already damaged and overburdened heart work harder. Omecamtiv improves cardiac performance without increasing oxygen consumption, heart rate or arrhythmias.

The major side effect concern with omecamtiv is based on its mechanism of action. At very high doses it can cause the left ventricle to eject so much blood that it can cause cardiac ischemia. This dose dependent ischemia has been observed at high doses in the early trials.

Based on the information gained in phase I trials the companies next executed two phase IIa trials, a 45 patient trial in stabile heart failure and a 94 patient trial in ischemic cardiomyopathy. These were randomized, placebo controlled trials that gave confirmation that the drug has efficacy in CHF. They have seen in healthy volunteers and in heart failure patients that there is a ruthlessly consistent (CEO Robert Blum's words) dose dependent effect of omecamtiv in improving cardiac performance with increasing plasma levels.

During the analysts' day presentation in December, 2012, I had the chance to hear from Chris O'Oconnor who runs the Duke Heart Clinic and is the lead investigator on the ATOMIC-HF trial which I will discuss shortly. He was very positive on omecamtiv with the expected caveat that it is still early in its development cycle. He said that omecamtiv appears to be the answer to a thirty year search for an effective inotropic agent with no limiting side effects. He emphasized that it is the side effect profile that is the most exciting aspect of the drug.


Phase IIB and Phase IIa Trials Designed to Aid in the Planning of the Phase III Trials of Omecamtiv

The first human was dosed in 2005 with omecamtiv mecarbil. The phase I and phase II trials have been conducted extremely carefully and have stretched over eight years. The companies are now involved in a randomized phase IIb trial for the intravenous form of omecamtiv. They will soon start another phase IIa
that has the goal of selecting an oral formulation. If these trials are successful, they could start the phase III trial in 2H 2014.

The phase I and phase IIa trials provided information on clinical efficacy and safety that encouraged the companies to begin a phase IIb trial in acute heart failure patients with the intravenous formulation of omecamtiv. This trial is a dose escalation trial designed to assess both efficacy and safety as the dose is increased. Previous trials have suggested that the dose effect in humans plateaus at 400 ng/ ml. Obviously, it makes no sense to go above this dose but the companies have to answer the question of what blood levels are effective and what are the side effects associated with these doses.

In order to answer this question, the company designed a phase IIb trial that enrolled three cohorts of patients starting with a low dose in the first cohort. The first cohort of patients began the trial in April of 2011 at a dose of 115 ng/ml. The second cohort began enrolling in May of 2012 at a dose of 230 ng/ml. The third and final cohort began enrolling at 330 ng/ml in November of 2012 and just completed enrollment. The progression from the first to the second and then the third cohort indicates that there have been no worrisome safety issues at the two lower doses.

The name of this phase IIb trial is ATOMIC-AHF which is short for Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure Patients. The primary endpoint of ATOMIC-AHF is dyspnea (shortness of breath) in patients with left ventricular systolic dysfunction hospitalized for acute heart failure. (Note: The left ventricle pumps oxygenated blood into the aorta from which it is distributed throughout the body. Systole is the contraction of the left ventricle that drives blood out of the heart). The secondary endpoints are: (1) additional measures of dyspnea, (2) patients' global assessments of how they feel, (3) change in N-terminal pro brain-type natriuretic peptide (a biomarker associated with the severity of heart failure) and (4) short-term clinical outcomes in these patients. The trial will also evaluate the relationship between plasma concentrations and echocardiographic parameters.

The topline results will likely be reported in mid-2013. This is the first large and truly meaningful trial and is a critical milestone for the company. No one can ever accuse Amgen of moving too rapidly into Phase IIb. It's taken a long time and a lot of capital to get to this current and critical stage of development.

The ATOMIC-AHF trial will give an insight into the clinical benefit of omecamtiv for short term usage of the intravenous dose in hospitalized patients. However, this is not a significant unmet medical need and has meaningful, but much less potential than an oral formulation for outpatient usage. One therapeutic goal of omecamtiv is to treat a patient in the hospital setting and then switch them to the oral form when they are discharged. The therapeutic aim is to sharply reduce readmissions. A second goal is to give the patients an oral dosage form that will keep them out of the hospital. The oral is by far the most important dosage form.

In July of 2012, Cytokinetics and Amgen reviewed data from a Phase I clinical trial designed to assess the safety, tolerability and pharmacokinetics of multiple oral formulations of omecamtiv mecarbil in healthy volunteers. Based on this, the companies selected oral formulations for further evaluation in stable CHF patients. This led to the design of COSMIC-HF which is short for Chronic Oral Study of Myosin Activation to I ncrease Contractility in Heart Failure.

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.

What about the Phase III Trial?

Amgen and Cytokinetics haven't given guidance on when a phase III trial will begin. I would speculate that it may be sometime in 2H, 2014. The patient population will be similar to the high risk patient population studied in ATOMIC-AHF. The expectation is that the Phase III program will be enrolling patients who are at high risk of death or readmission, meaning they are in hospital, or have recently been discharged.

The companies may ask the FDA to consider the reduction of hospital admission and readmissions as an endpoint in their phase III trial. There is good reason to believe that the FDA will go along with this endpoint instead of asking for mortality as an endpoint. If so, this would speed up the completion of the trial quite significantly so that topline results might be available in late 2015 and an NDA filed in 2016. If the FDA asks for a mortality endpoint, it might move these timelines out a year.

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