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Expert Financial Analysis and Reporting

Cytokinetics: Takeaways from January 5, 2014 Conference Call (CYTK, Buy, $7.82)

Cytokinetics held a conference call on January 5th in which they added some detail on the collaboration with Astellas on CK-107 for the first indication of spinal muscular atrophy. I discussed this collaboration in a note on December 24, 2014 and you may want to read that note for more background.

The Company provided some additional information, perhaps the most important of which is that CYTK will begin a phase 2 trial (funded largely by Astellas) in SMA in 2015. This trial will be conducted in adolescent and adult sufferers of the disease. There was no precise date set for the beginning of the trial nor were there any details on the trial design. I believe that the companies see SMA as a potentially rapid route to regulatory approval for CK-2127107. Management indicated that the collaboration would potentially also conduct trials in other neuromuscular and non-neurological indications. In regard to the latter, the Company mentioned intermittent claudication and cachexia as possible new disease targets.

As a reminder, CK-2127107 does not directly affect the causes of SMA or other disease states. It is an adjunct therapy which works through improving muscle contractility and therefore quality of life in patients whose muscles are weakened by disease. Hence, it has broad applicability. There are many, many disease states, both neuromuscular and non-neuromuscular diseases that can be addressed.

This can be a very big drug over time. The deal structure allows CYTK to opt for receiving milestones that it can use for other purposes or applying those milestones to clinical development of CK2127107. In the latter case, Cytokinetics will be eligible to receive about half of the operating profits from the drug. Astellas will also help to fund the development of a commercial organization for CYTK that will participate in marketing the drug. CYTK can receive up to $600 million in milestones (primarily pre-commercial) for this drug in all indications of which about $100 million is attributable to SMA.

I had thought that the Company might announce that it was planning a phase 3 trial for tirasemtiv in ALS. It did not make an explicit announcement of such a trial although statements indicated that it will just be a matter of time before this trial is announced. Management specifically stated that tirasemtiv in not part of the Astellas collaboration and will be advance solely by Cytokinetics. Management did say that they have received “clarity from the FDA” that SVC can be an acceptable primary endpoint for a phase 3 trial. Please see this report for more details on this.   Management said that it was going through planning for a phase 3 trial design and statistical analysis to be sent to the FDA. I think that there is an excellent chance that a phase 3 trial of tirasemtiv in ALS will begin in 2015 and we could hear the details in coming months. The Company indicated that it has the financial resources to conduct a phase 3 without the need to raise more capital.

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