Cytokinetics
Annual Report 2010

Plain-text annual report

Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KANNUAL REPORT UNDER SECTION 13 or 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934(Mark One)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934Commission file number: 000-50633CYTOKINETICS, INCORPORATED(Exact name of registrant as specified in its charter)Delaware 94-3291317(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification Number)Robert I. BlumPresident and Chief Executive Officer280 East Grand AvenueSouth San Francisco, CA 94080(650) 624-3000(Address, including zip code, or registrant’s principal executive offices and telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value The NASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post such files).* Yes o No o*The registrant has not yet been phased into the interactive data requirements.Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer o Accelerated filer  Non-accelerated filer o(Do not check if a smaller reporting company) Smaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No The aggregate market value of the voting and non-voting common equity held by non-affiliates was $118.2 million computed by reference to thelast sales price of $2.37 as reported by the NASDAQ Global Market, as of the last business day of the Registrant’s most recently completed secondfiscal quarter, June 30, 2010. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any otherpurpose.The number of shares outstanding of the Registrant’s common stock on February 28, 2011 was 66,910,100 shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Proxy Statement for its 2011 Annual Meeting of Stockholders to be filed with the Securities and ExchangeCommission, are incorporated by reference to Part III of this Annual Report on Form 10-K. CYTOKINETICS, INCORPORATEDFORM 10-KYear Ended December 31, 2011INDEX PagePART I Item 1. Business 4 Item 1A. Risk Factors 20 Item 1B. Unresolved Staff Comments 41 Item 2. Properties 41 Item 3. Legal Proceedings 41 Item 4. Reserved 41 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 42 Item 6. Selected Financial Data 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 66 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 107 Item 9A. Controls and Procedures 107 Item 9B. Other Information 107 PART III Item 10. Directors, Executive Officers and Corporate Governance 107 Item 11. Executive Compensation 108 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 108 Item 13. Certain Relationships and Related Transactions, and Director Independence 108 Item 14. Principal Accountant Fees and Services 108 PART IV Item 15. Exhibits and Financial Statement Schedules 109 Signatures 114 EX-10.65 EX-10.66 EX-23.1 EX-31.1 EX-31.2 EX-32.11Table of ContentsPART IThis report contains forward-looking statements that are based upon current expectations within the meaning of the Private SecuritiesLitigation Reform Act of 1995. We intend that such statements be protected by the safe harbor created thereby. Forward-lookingstatements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the resultsdiscussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statementsabout or relating to: • guidance concerning revenues, research and development expenses and general and administrative expenses for 2011; • the sufficiency of existing resources to fund our operations for at least the next 12 months; • our capital requirements and needs for additional financing; • the initiation, design, progress, timing and scope of clinical trials and development activities for our drug candidates andpotential drug candidates conducted by ourselves or our partners, such as Amgen, Inc. (“Amgen”), including the anticipatedtiming for initiation of clinical trials and anticipated dates of data becoming available or being announced from clinical trials; • the results from the clinical trials and non-clinical and pre-clinical studies of our drug candidates and other compounds, and thesignificance and utility of such results; • our plans to file an investigational new drug application (“IND”) for CK-2066260 with the U.S. Food and Drug Administration(“FDA”); • our and our partners’, such as Amgen’s, plans or ability to conduct the continued research and development of our drugcandidates and other compounds; • our expected roles in research, development or commercialization under our strategic alliances, such as with Amgen; • the properties and potential benefits of, and the potential market opportunities for, our drug candidates and other compounds,including the potential indications for which they may be developed; • the sufficiency of the clinical trials conducted with our drug candidates to demonstrate that they are safe and efficacious; • our receipt of milestone payments, royalties, reimbursements and other funds from current or future partners under strategicalliances, such as with Amgen; • our plans to seek strategic alternatives for our mitotic kinesin inhibitor drug candidates with third parties; • our ability to continue to identify additional potential drug candidates that may be suitable for clinical development; • our plans or ability to commercialize drugs with or without a partner, including our intention to develop sales and marketingcapabilities; • the focus, scope and size of our research and development activities and programs; • the utility of our focus on the cytoskeleton and our ability to leverage our experience in muscle contractility to other musclefunctions; • the issuance of shares of our common stock under our committed equity financing facility entered into with Kingsbridge CapitalLimited (“Kingsbridge”) in 2007; • our ability to protect our intellectual property and to avoid infringing the intellectual property rights of others; • expected future sources of revenue and capital; • losses, costs, expenses and expenditures;2Table of Contents • future payments under loan and lease obligations and equipment financing lines; • potential competitors and competitive products; • retaining key personnel and recruiting additional key personnel; • expected future amortization of employee stock-based compensation; and • the potential impact of recent accounting pronouncements on our financial position or results of operations.Such forward-looking statements involve risks and uncertainties, including, but not limited to, those risks and uncertaintiesrelating to: • Amgen’s decisions with respect to the timing, design and conduct of development activities for omecamtiv mecarbil, includingdecisions to postpone or discontinue research or development activities relating to omecamtiv mecarbil; • our ability to obtain additional financing; • our receipt of funds and access to other resources under our current or future strategic alliances; • difficulties or delays in the development, testing, production or commercialization of our drug candidates; • difficulties or delays in or slower than anticipated patient enrollment in our or our partners’ clinical trials; • adverse side effects, including potential drug-drug interactions, or inadequate therapeutic efficacy of our drug candidates thatcould slow or prevent product approval (including the risk that current and past results of preclinical research or non-clinical orclinical development may not be indicative of future clinical trials results); • results from non-clinical studies that may adversely impact the timing or the further development of our drug candidates andpotential drug candidates; • the possibility that the FDA or foreign regulatory agencies may delay or limit our or our partners’ ability to conduct clinical trialsor may delay or withhold approvals for the manufacture and sale of our products; • activities and decisions of, and market conditions affecting, current and future strategic partners; • our ability to enter into partnership agreements for any of our programs on acceptable terms and conditions or in accordance withour planned timelines; • the conditions in our 2007 committed equity financing facility with Kingsbridge that must be fulfilled before we can requireKingsbridge to purchase our common stock, including the minimum volume-weighted average share price; • our ability to maintain the effectiveness of our registration statement permitting resale of securities to be issued to Kingsbridge byus in connection with our 2007 committed equity financing facility; • the availability of funds under our grant from the National Institute of Neurological Disorders and Stroke in future periods; • changing standards of care and the introduction of products by competitors or alternative therapies for the treatment ofindications we target that may make our drug candidates commercially unviable; • the uncertainty of protection for our intellectual property, whether in the form of patents, trade secrets or otherwise; and • potential infringement or misuse by us of the intellectual property rights of third parties.In addition such statements are subject to the risks and uncertainties discussed in the “Risk Factors” section and elsewhere in thisdocument. Operating results reported are not necessarily indicative of results that may occur in future periods.3Table of ContentsItem 1. BusinessOverviewWe were incorporated in Delaware in August 1997 as Cytokinetics, Incorporated. We are a clinical-stage biopharmaceuticalcompany focused on the discovery and development of novel small molecule therapeutics that modulate muscle function for the potentialtreatment of serious diseases and medical conditions. Our research and development activities relating to the biology of muscle functionhave evolved from our knowledge and expertise regarding the cytoskeleton, a complex biological infrastructure that plays a fundamentalrole within every human cell. Our current research and development programs relating to the biology of muscle function are directed tosmall molecule modulators of the contractility of cardiac, skeletal and smooth muscle.Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in the heart. Ourlead drug candidate from this program, omecamtiv mecarbil (formerly known as CK-1827452), is a novel cardiac muscle myosinactivator. We have conducted a clinical development program for omecamtiv mecarbil for the potential treatment of heart failure,comprised of a series of Phase I and Phase IIa clinical trials. In May 2009, Amgen acquired an exclusive license to develop andcommercialize omecamtiv mecarbil worldwide, except Japan, subject to our development and commercialization participation rights.Further details regarding our strategic alliance with Amgen can be found below in Item 1 of this report under “Muscle ContractilityFocus — Cardiac Muscle Contractility Program — Amgen Strategic Alliance.”CK-2017357 is the lead drug candidate from our skeletal sarcomere activator program. The skeletal muscle sarcomere is the basicunit of skeletal muscle contraction. CK-2017357 is currently the subject of a Phase IIa clinical trials program. We believe CK-2017357may be useful in treating diseases or medical conditions associated with skeletal muscle weakness or wasting. In March 2010, CK-2017357 received an orphan drug designation from the FDA for the treatment of amyotrophic lateral sclerosis (also known as ALS or LouGehrig’s disease). We are also advancing a second, structurally distinct, fast skeletal muscle sarcomere activator, CK-2066260, in non-clinical studies intended to enable the filing of an IND with the FDA. Both of these compounds selectively activate the fast skeletal muscletroponin complex, which is a set of regulatory proteins that modulates the contractility of the fast skeletal muscle sarcomere.In our smooth muscle contractility program, we are conducting non-clinical development of compounds that directly inhibit smoothmuscle myosin, the motor protein central to the contraction of smooth muscle. These compounds cause the relaxation of contractedsmooth muscle, and so may be useful as potential treatments for diseases and conditions associated with excessive smooth musclecontraction, such as bronchoconstriction associated with asthma and chronic obstructive pulmonary disease.Earlier research activities at the company were directed to the inhibition of mitotic kinesins, a family of cytoskeletal motor proteinsinvolved in the process of cell division, or mitosis. This research produced three drug candidates that have progressed into clinical testingfor the potential treatment of cancer: ispinesib, SB-743921 and GSK-923295. Effective February 2010, our strategic alliance withGlaxoSmithKline (“GSK”) relating to our mitotic kinesin inhibitors terminated by mutual agreement. We are currently evaluating strategicalternatives for these drug candidates with third parties.Two of our drug candidates directed to muscle contractility have now demonstrated pharmacodynamic activity in patients:omecamtiv mecarbil in patients with heart failure and CK-2017357 in patients with ALS. In 2011, we expect to focus on translating theobserved pharmacodynamic activity of these compounds into potentially meaningful clinical benefits for these patients. Our potentialdrug candidate CK-2066260 has demonstrated4Table of Contentspharmacological activity in preclinical models. Following is a summary of the planned clinical and non-clinical development activities forour drug candidates and potential drug candidates directed to muscle contractility:Potential/Drug Mechanism of Mode of Potential Planned 2011Candidate Action Administration Indication(s) Development ActivitiesOmecamtiv mecarbil cardiac musclemyosin activator intravenous heart failure We anticipate that Amgen will initiate aPhase IIb clinical trial in hospitalized acuteheart failure patients with left ventricularsystolic dysfunction in 1H 2011.Omecamtiv mecarbil cardiac musclemyosin activator oral heart failure We and Amgen are discussing thedevelopment strategy for oral formulations ofomecamtiv mecarbil.CK-2017357 fast skeletalmuscle troponinactivator oral diseases and conditions associatedwith muscle weakness or wasting* We anticipate:• continuing our Phase IIa trial in patientswith claudication; data anticipated in 1H2011. • continuing our Phase IIa trial in patientswith myasthenia gravis; data anticipated bythe end of 2011. • initiating a Phase I drug-drug interactionstudy in healthy volunteers in 1H 2011. • initiating a Phase II multi-dose trial inALS patients mid-year 2011 followingavailability of data from the riluzole arm fromthe drug-drug interaction study.CK-2066260 fast skeletalmuscle troponinactivator oral diseases and conditions associatedwith muscle weakness or wasting* We anticipate:• filing an IND by mid-year 2011.• initiating a first-in-humans Phase Iclinical trial in healthy volunteers in 2H2011.*e.g., ALS, claudication, sarcopenia, cachexia, myasthenia gravisDuring 2011, we intend to continue non-clinical development activities associated with our smooth muscle myosin inhibitors.All of our drug candidates and potential drug candidates have arisen from our cytoskeletal research activities. Our focus on thebiology of the cytoskeleton distinguishes us from other biopharmaceutical companies, and potentially positions us to discover anddevelop novel therapeutics that may be useful for the treatment of severe diseases and medical conditions. We believe that this focus andthe resulting knowledge and expertise that we have developed, especially with our proprietary technologies that permit us to evaluate thefunction of cytoskeletal proteins in high information content biological assays, has allowed us to increase the efficiency of our drugdiscovery activities. Our research and development activities since our inception in 1997 have produced five drug candidates that haveprogressed into clinical testing and one potential drug candidate currently in non-clinical development for which we plan to file an IND.Each has a novel mechanism of action compared to currently marketed drugs, which we believe validates our focus on the cytoskeletonas a robust area for drug discovery. We intend to leverage our experience in muscle contractility in order to expand our current pipeline,and expect to continue to be able to identify additional potential drug candidates that may be suitable for clinical development.5Table of ContentsOur Corporate StrategyOur goal is to discover, develop and commercialize novel drug products that modulate muscle function in ways that may benefitpatients with disorders that cause serious diseases or medical conditions, with the intent of establishing a fully integratedbiopharmaceutical company. We intend to achieve this by: • Focusing on drug discovery and development activities relating to the biology of muscle function. We intend to capitalize onthe knowledge and expertise we have acquired in each of our cardiac, skeletal muscle and smooth muscle contractility researchand development programs. In these programs, we are investigating potential treatments for diseases or medical conditions whereimpaired regulation of the contractile function of muscle plays a key role and such diseases or conditions may be amenable totreatment by modulation of muscle contractility, such as heart failure, and medical conditions associated with skeletal muscleweakness or wasting. Many of these diseases and medical conditions affect in particular the growing population of agingpatients, a demographic that is the subject of increasing regulatory and reimbursement attention. Accordingly, targeting unmetmedical needs in these areas may provide us competitive opportunities. • Leveraging our cytoskeletal expertise and proprietary technologies to increase the speed, efficiency and yield of our drugdiscovery and development processes. We believe that our unique understanding of the cytoskeleton and our proprietaryresearch technologies should enable us to discover and potentially to develop drug candidates with novel mechanisms of actionthat may offer potential benefits not provided by existing drugs. We expect that we may be able to leverage our expertise in musclecontractility to advance to other muscle functions and similarly may impact serious medical diseases and conditions. This mayallow us to develop a diversified pipeline of drug candidates in a cost-effective way while managing risk. • Building development and commercialization capabilities directed at concentrated markets. We focus our drug discoveryand development activities on disease areas for which there are serious unmet medical needs. In particular, we direct our activitiesto potential commercial opportunities in concentrated and tractable customer segments, such as hospital specialists, that may beaddressed by a smaller, targeted sales force. In this manner, we believe that a company with limited resources may be able tocompete effectively against larger, more established companies with greater financial and commercial resources. For theseopportunities, we intend to develop clinical development and sales and marketing capabilities with the goal of becoming a fully-integrated biopharmaceutical company. • Establishing select strategic alliances to support our drug development programs while preserving significant developmentand commercialization rights. We believe that such alliances may allow us to obtain financial support and to capitalize on thetherapeutic area expertise and resources of our partners that can potentially accelerate the development and commercialization ofour drug candidates. Where we deem appropriate, we plan to retain certain rights to participate in the development of drugcandidates and commercialization of potential drugs arising from our alliances, so that we can expand and capitalize on ourinternal development capabilities and build our commercialization capabilities.Muscle Contractility FocusOur long-standing interest in the cytoskeleton has led us to focus our research and development activities on the biology of musclefunction, and in particular, small molecule modulation of muscle contractility. We believe that our expertise in the modulation of thecontractility of each of cardiac, skeletal and smooth muscle is an important differentiator for us. Our preclinical and clinical experience inmuscle contractility may position us to discover and develop additional novel therapies that have the potential to improve the health ofpatients with severe and debilitating diseases or medical conditions.Small molecules that affect muscle contractility may have several applications for a variety of serious diseases and medicalconditions. For example, heart failure is a disease often characterized by impaired cardiac muscle contractility which may be treated bymodulating the contractility of cardiac muscle; certain neuromuscular diseases and medical conditions associated with muscle weaknessmay be amenable to treatment by enhancing the6Table of Contentscontractility of skeletal muscle; and asthma and chronic obstructive pulmonary disease are diseases in which constriction of the airwaysmay be treated by relaxation of the airway smooth muscle.Because each muscle type may be relevant to multiple diseases or medical conditions, we believe we can leverage our expertise ineach of cardiac, skeletal and smooth muscle contractility to more efficiently discover and develop as potential drugs compounds thatmodulate the applicable muscle type for multiple indications. In addition, muscle has biological functions other than contractility.Accordingly, our knowledge and expertise could also serve as an entry point to the discovery of novel treatments for disorders involvingmuscle functions other than muscle contractility, such as metabolism, growth and energetics.We are currently developing a number of small molecule compounds arising from our muscle contractility programs. Omecamtivmecarbil, a novel cardiac muscle myosin activator, was studied by Cytokinetics in a series of Phase I and Phase IIa clinical trials for thepotential treatment of heart failure. Following the exercise of its option, Amgen is responsible for the clinical development of omecamtivmecarbil, subject to Cytokinetics’ development and commercialization participation rights.CK-2017357 is our lead drug candidate from our skeletal muscle contractility program, and has been the subject of two Phase Iclinical trials in healthy volunteers. We have initiated three Phase IIa clinical trials of CK-2017357. We have completed one of these trials;the other two are ongoing. We plan to initiate additional clinical trials of CK-2017357. Potential indications for which this drug candidatemay be useful include skeletal muscle weakness associated with neuromuscular diseases and other medical conditions characterized byskeletal muscle weakness or wasting. We are also advancing a potential drug candidate from this program, CK-2066260 in non-clinicalstudies intended to enable the filing of an IND in 2011.In addition, we are conducting research and non-clinical development of compounds that inhibit smooth muscle myosin for potentialuse as bronchodilators, vasodilators, or both. We are continuing to conduct discovery, characterization and lead optimization activities forother compounds with the potential to modulate muscle contractility and other muscle functions, such as growth, energetics andmetabolism.Cardiac Muscle Contractility ProgramOverview. Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in theheart. The cardiac sarcomere is a highly ordered cytoskeletal structure composed of cardiac muscle myosin, actin and a set of regulatoryproteins. This program is currently directed towards the discovery and development of small molecule cardiac muscle myosin activatorswith the goal of developing novel drugs to treat acute and chronic heart failure. Cardiac muscle myosin is the cytoskeletal motor protein inthe cardiac muscle cell. It is directly responsible for converting chemical energy into the mechanical force, resulting in cardiac musclecontraction. This program is based on the hypothesis that activators of cardiac muscle myosin may address certain adverse properties ofexisting positive inotropic agents. Current positive inotropic agents, such as beta-adrenergic receptor agonists or inhibitors ofphosphodiesterase activity, increase the concentration of intracellular calcium, thereby increasing cardiac sarcomere contractility. Theeffect on calcium levels, however, also has been linked to potentially life-threatening side effects. In contrast, our novel cardiac musclemyosin activators work by a mechanism that directly stimulates the activity of the cardiac muscle myosin motor protein, withoutincreasing the intracellular calcium concentration. They accelerate the rate-limiting step of the myosin enzymatic cycle and shift it in favorof the force-producing state. Rather than increasing the velocity of cardiac contraction, this mechanism instead lengthens the systolicejection time, which results in increased cardiac function in a potentially more oxygen-efficient manner.Background on Heart Failure Market. Heart failure is a widespread and debilitating syndrome affecting millions of people in theUnited States. The high and rapidly growing prevalence of heart failure translates into significant hospitalization rates and associatedsocietal costs. About 5.7 million people in the United States have heart failure, resulting in nearly one million hospital discharges with theprimary diagnosis of heart failure and approximately 300,000 deaths each year. For people over 65 years of age, heart failure incidencesapproach 10 per 1000 and approximately 50% of people diagnosed with heart failure will die within 5 years of diagnosis. These numbersare increasing due to the aging of the U.S. population and an increased likelihood of survival following7Table of Contentsacute myocardial infarctions. The costs to society attributable to the prevalence of heart failure are high, especially as many chronic heartfailure patients suffer repeated acute episodes. Despite currently available therapies, readmission rates for heart failure patients remainhigh. It is estimated that between 13% and 33% of patients initially admitted to the hospital for chronic heart failure will be readmittedwithin 12 to 15 months of the initial admission. Mortality rates over the five-year period following a diagnosis of heart failure areapproximately 60% in men and 45% in women. The high morbidity and mortality in the setting of current therapies points to the need fornovel therapeutics that offer further reductions in morbidity and mortality. The annual cost of heart failure to the U.S. health care systemis estimated to be $39 billion. A portion of that cost is attributable to drugs used to treat each of chronic and acute heart failure.Approximately 70% of those costs are due to hospitalization, home health and physician care. New drug therapies that could reduce thenumber of hospitalizations could decrease the cost to the health care system.Amgen Strategic Alliance. In December 2006, we entered into a collaboration and option agreement with Amgen to discover,develop and commercialize novel small molecule therapeutics that activate cardiac muscle contractility for potential applications in thetreatment of heart failure, including omecamtiv mecarbil. The agreement provided Amgen with a non-exclusive license and access tocertain technology. The agreement also granted Amgen an option to obtain an exclusive license worldwide, except Japan, to develop andcommercialize omecamtiv mecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised its option.In connection with the exercise of its option, Amgen paid us an exercise fee of $50.0 million. As a result, Amgen is now responsiblefor the development and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan),subject to our development and commercialization participation rights. Under the agreement, Amgen will reimburse us for agreed researchand development activities we perform. The agreement provides for potential pre-commercialization and commercialization milestonepayments of up to $600.0 million in the aggregate on omecamtiv mecarbil and other potential products arising from research under thecollaboration, and royalties that escalate based on increasing levels of annual net sales of products commercialized under the agreement.The agreement also provides for us to receive increased royalties by co-funding Phase III development costs of drug candidates under thecollaboration. If we elect to co-fund such costs, we would be entitled to co-promote omecamtiv mecarbil in North America and participatein agreed commercialization activities in institutional care settings, at Amgen’s expense.Omecamtiv Mecarbil (formerly CK-1827452). Our lead drug candidate from this program is omecamtiv mecarbil, a novelcardiac muscle myosin activator. We conducted a clinical trials program for omecamtiv mecarbil comprised of multiple Phase I and PhaseIIa clinical trials designed to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetic profiles of both intravenous andoral formulations in a diversity of patients, including patients with stable heart failure and patients with ischemic cardiomyopathy. Inthese trials, omecamtiv mecarbil exhibited generally linear, dose-proportional pharmacokinetics across the dose ranges studied. Theadverse effects observed at intolerable doses in humans appeared similar to the adverse findings which occurred in preclinical safetystudies at similar plasma concentrations. These effects are believed to be related to the mechanism of action of this drug candidate which,at intolerable doses, resulted in an excessive prolongation of the systolic ejection time (i.e.,the time in which the heart is contracting).However, these effects resolved promptly with discontinuation of the infusions of omecamtiv mecarbil.We expect omecamtiv mecarbil to be developed as a potential treatment across the continuum of care in heart failure both as anintravenous formulation for use in the hospital setting and as an oral formulation for use in the outpatient setting.In September 2010, Cytokinetics and Amgen announced plans to initiate a Phase IIb clinical trial of an intravenous formulation ofomecamtiv mecarbil in hospitalized patients with acutely decompensated heart failure prior to initiating further clinical trials of oralformulations of omecamtiv mecarbil. We anticipate that, in the first half of 2011, Amgen will initiate this trial, which will be conductedby Amgen in collaboration with Cytokinetics. This trial is planned to be an international, multicenter, randomized, double-blind,placebo-controlled study in approximately 600 patients, enrolled sequentially in three ascending-dose cohorts. In each cohort, patients willbe randomized to receive omecamtiv mecarbil or placebo. The primary objective of the trial will be to evaluate the8Table of Contentseffect of 48 hours of intravenous omecamtiv mecarbil compared to placebo on dyspnea (shortness of breath) in patients with leftventricular systolic dysfunction hospitalized for acute heart failure. The secondary objectives will be to assess the safety and tolerabilityof three dose levels of intravenous omecamtiv mecarbil compared with placebo and to evaluate the effects of 48 hours of treatment withintravenous omecamtiv mecarbil on additional measures of dyspnea, patients’ global assessments, change in N-terminal pro brain-typenatriuretic peptide (a biomarker associated with the severity of heart failure) and short-term clinical outcomes in these patients. Inaddition, the trial will evaluate the relationship between omecamtiv mecarbil plasma concentrations and echocardiographic parameters inpatients with acute heart failure.We and Amgen are discussing the development strategy for oral formulations of omecamtiv mecarbil. We anticipate that these plansmay include studies designed to investigate the safety, tolerability and pharmacokinetics of multiple oral formulations of omecamtivmecarbil.Ongoing Research in Cardiac Muscle Contractility. We have agreed with Amgen upon a research plan focused on joint researchactivities in 2011 that will be directed to potential next-generation compounds in our cardiac muscle contractility program.Skeletal Muscle Contractility ProgramOverview. Our skeletal muscle contractility program is focused on the activation of the skeletal sarcomere, the basic unit of skeletalmuscle contraction. The skeletal sarcomere is a highly ordered cytoskeletal structure composed of skeletal muscle myosin, actin, and aset of regulatory proteins, which include the troponins and tropomyosin. This program leverages our expertise developed in our ongoingdiscovery and development of cardiac sarcomere activators, including the cardiac muscle myosin activator omecamtiv mecarbil.Our skeletal sarcomere activators have demonstrated pharmacological activity in preclinical studies that may lead to new therapeuticoptions for diseases and medical conditions associated with aging, muscle weakness and wasting and neuromuscular dysfunction. Theclinical effects of muscle weakness and wasting, fatigue and loss of mobility can range from decreased quality of life to, in someinstances, life-threatening complications. By directly improving skeletal muscle function, a small molecule activator of the skeletalsarcomere potentially could enhance functional performance and quality of life in patients suffering from diseases or medical conditionscharacterized or complicated by muscle weakness or wasting. These may include diseases and medical conditions associated withskeletal muscle weakness or wasting, such as ALS, claudication (which usually refers to cramping pains and fatigue in the leg musclesassociated with peripheral artery disease), myasthenia gravis, sarcopenia, post-surgical rehabilitation and general frailty associated withaging, and cachexia in connection with heart failure or cancer.CK-2017357 is the lead potential drug candidate from this program. We are also advancing another compound from this program,CK-2066260, in non-clinical studies intended to enable the filing of an IND. CK-2017357 and CK-2066260 are structurally distinctand selective small molecule activators of the fast skeletal sarcomere. These compounds activate the fast skeletal muscle troponin complexby increasing its sensitivity to calcium, leading to an increase in skeletal muscle contractility.Each of CK-2017357 and CK-2066260 has demonstrated encouraging pharmacological activity in preclinical models, and withrespect to CK-2017357, in healthy volunteers and ALS patients. We are evaluating the potential indications for which CK-2017357 andCK-2066260 may be useful. In a recent Phase IIa clinical trial of CK-2017357 in ALS patients, evidence of potentially clinically relevantpharmacodynamic effects was observed. In March 2010, CK-2017357 received an orphan drug designation from the FDA for thetreatment of ALS. In July 2010, we were awarded a grant in the amount of $2.8 million by the National Institute of NeurologicalDisorders and Stroke, which is intended to support research and development of CK-2017357 for the potential treatment of myastheniagravis for three years. The grant was awarded under the American Recovery and Reinvestment Act of 2009.We have initiated three “evidence of effect” Phase IIa clinical trials of CK-2017357: one trial in patients with ALS, which wascompleted in December 2010, one ongoing trial in patients with symptoms of claudication associated with peripheral artery disease, andone ongoing trial in patients with generalized myasthenia gravis. Our evidence of effect clinical trials are intended to translate themechanism of action of CK-2017357, as demonstrated9Table of Contentspharmacodynamically in healthy volunteers, to patients with impaired muscle function and potentially to establish statisticallysignificant and clinically relevant evidence of pharmacodynamic effects. These trials may then form the basis for larger clinical trialsdesigned to demonstrate proof of concept.Market Potential for CK-2017357, CK-2066260 and Other Skeletal Sarcomere Activators. Limited options exist for thetreatment of ALS, which affects as many as 30,000 Americans, with an estimated 5,600 new cases diagnosed each year in the U.S. ALSis 20% more common in men than women; however, with increasing age, the prevalence becomes more equal between men and women.The life expectancy of an ALS patient averages two to five years from the time of diagnosis with 90 to 95% of those diagnosed with ALShaving the sporadic form. Of the remaining ALS patient population, 5 to 10% have a family history of the disease (familial ALS). Incases of familial ALS, there is a 50% chance each offspring will develop the disease. Death is usually due to respiratory failure because ofdiminished strength in the skeletal muscles responsible for breathing.Peripheral artery disease (“PAD”) affects about 8 million Americans, 12 to 20% of whom over the age of 65 years. PAD isassociated with significant morbidity and mortality and has been estimated to impact the quality of life of approximately 2 millionsymptomatic Americans. Estimates of the proportion of PAD patients who have intermittent claudication range from 10% to about one-third to one-half.Myasthenia gravis is a chronic, autoimmune, neuromuscular disease and is the most common primary disorder of neuromusculartransmission. The current prevalence of myasthenia gravis in the U.S. is estimated to be 20 per 100,000 people — between 53,000 and60,000 cases. The actual prevalence may be higher because myasthenia gravis is frequently under diagnosed. Approximately 13,600 newcases of myasthenia gravis are diagnosed each year.We are evaluating other market opportunities for CK-2017357, CK-2066260 and other compounds that may arise from our skeletalmuscle contractility program.CK-2017357 Clinical Trials:Phase I (healthy volunteers): During 2010, we announced data from two Phase I clinical trials evaluating CK-2017357. The firstwas a two-part, single-dose trial. Part A of this trial was designed to assess the safety, tolerability and pharmacokinetic profile ofincreasing single oral doses of this drug candidate in healthy male volunteers and to determine its maximum tolerated dose and associatedplasma concentrations. The maximum tolerated single dose of CK-2017357 in Part A of the trial was 2000 mg. Part B of this trial wasdesigned to assess the pharmacodynamic effects, versus placebo, of CK-2017357 on skeletal muscle function after single oral doses of250, 500 and 1000 mg, and to assess the relationship of the effects observed to the associated plasma concentrations of CK-2017357,also in healthy male volunteers. In Part B, CK-2017357 produced concentration-dependent, statistically significant increases versusplacebo in the force developed by the tibialis anterior muscle. In both Part A and Part B, CK-2017357 was well-tolerated and no seriousadverse events were reported. In Part A, at the single dose that exceeded the maximum tolerated dose, moderately severe dizziness and anepisode of syncope (a temporary loss of consciousness) were reported. In both Part A and Part B, adverse events of dizziness andeuphoric mood appeared to increase in frequency with escalating doses of CK-2017357; however, at the maximum tolerated dose andbelow, all these adverse events were characterized as mild in severity.The second trial was a multiple-dose, Phase I clinical trial of CK-2017357 designed to investigate the safety, tolerability andpharmacokinetic profile of CK-2017357 after multiple oral doses to steady state in healthy male volunteers. This trial evaluated doses of250 mg and 375 mg that produced plasma concentrations in the range associated with pharmacodynamic activity in Part B of the single-dose Phase I clinical trial. At steady state, both the maximum plasma concentration and the area under the CK-2017357 plasmaconcentration versus time curve from before dosing until 24 hours after dosing were generally dose-proportional. In general, systemicexposure to CK-2017357 in this trial was high and inter-subject variability was low. In addition, these multiple-dose regimens of CK-2017357 were well-tolerated, and no serious adverse events were reported. Adverse events included dizziness, headache and euphoricmood. All these events were judged to have been mild in severity, except for one complaint of dizziness that was classified as moderatelysevere.Phase IIa (ALS): In April 2010, we initiated and in December 2010, we presented final data from a Phase IIa evidence of effectclinical trial of CK-2017357 in ALS patients. This trial was intended to determine whether the10Table of Contentsmechanism of action of CK-2017357 could produce a pharmacodynamic signal in ALS patients that would warrant further study.Accordingly, no specific primary endpoint was designated. Instead, a broad range of parameters, including patient and physician globalassessments, measures of muscle strength and fatigability and indices of pulmonary function, were evaluated. The trial employed arandomized, placebo-controlled, three-period crossover design, and was intended to evaluate the pharmacokinetics andpharmacodynamics of single doses of CK-2017357 in ALS patients. The trial enrolled 67 patients. Patients were administered single oraldoses of placebo and of CK-2017357, at each of 250 mg and 500 mg, in a double-blind fashion and in random order, at least 6 daysapart. Patients underwent the evaluations described above before each dose, and again at 3, 6, and 24 hours afterwards.Results from this trial were presented in December 2010 at the Clinical Trials Session at the 21st International Symposium onALS/Motor Neurone Diseases. Both patients and investigators perceived a positive change in the patients’ overall status at six hours afterdosing with CK-2017357, based on a global assessment in which the patient and the investigator each independently assessed whetherthe patient was “better”, “same”, or “worse” compared to just before dosing on that day. A clear relationship was observed betweenimprovements in these global assessments and both the CK-2017357 dose and plasma concentration. The investigators proposed that theimprovements seen in the patients’ and investigators’ global assessments may have resulted from a decrease in the fatigability of thepatients’ muscles, as evidenced by data from a test of sub-maximal hand-grip fatigability. Certain parameters of pulmonary function alsotrended towards improvement after treatment with CK-2017357, which the investigators proposed might have contributed to the improvedpatients’ and investigators’ global assessments. The investigators also concluded that these single doses of CK-2017357 appeared to besafe and generally well-tolerated by the patients in this trial. There were no serious adverse events judged to have been drug-related, andmost adverse events were classified by the investigators as mild. Most reports of dizziness, the most frequent and most clearly dose-related adverse event in the trial, were classified as mild and none were determined to be severe. We plan to present additional analyses ofthe data from this trial during a Plenary Session at the 63rd Annual Meeting of the American Academy of Neurology in April 2011 inHonolulu, Hawaii.Phase IIa (claudication): In June 2010, we initiated a Phase IIa evidence of effect clinical trial of CK-2017357 in patients withsymptoms of claudication associated with PAD. This clinical trial is a double-blind, randomized, placebo-controlled, three-periodcrossover, pharmacokinetic and pharmacodynamic study. At least 36 and up to 72 patients may be enrolled in this trial. Patients areadministered single oral doses of placebo and of 2 different dose levels of CK-2017357 in a double-blind fashion and in random order, atleast 6 days apart. These dose levels were originally 375 mg and 750 mg; however, as described below, the protocol has been amended tolower the 750 mg dose to 500 mg. The primary objective of this clinical trial is to evaluate the pharmacodynamic effects of single doses ofCK-2017357 on several measures of skeletal muscle function and fatigability in these patients. The secondary objectives of this trial areto evaluate and characterize the relationship, if any, between the doses and plasma concentrations of CK-2017357 and itspharmacodynamic effects and to evaluate the safety and tolerability of CK-2017357 administered as single oral doses to these patients. InOctober 2010, we conducted an interim review of data from this trial that suggested potential pharmacodynamic activity of CK-2017357to increase skeletal muscle performance in these patients. In addition, this review suggested that the single oral doses of CK-2017357administered were generally well-tolerated by most patients in this trial. However, serious adverse events were reported by two patients:dizziness and mental confusion in one and dizziness and dyskinesia (or abnormal movements) in the other. Both patients requiredinpatient observation until their symptoms resolved. These events were not life-threatening and appeared to resolve spontaneously andcompletely without any additional treatment. Following these observations, the protocol was amended to lower the 750 mg dose to 500 mg.We are continuing to conduct this trial and anticipate that data will be available from this trial in the first half of 2011.Phase IIa (myasthenia gravis): In January 2011, we initiated our third Phase IIa evidence of effect clinical trial of CK-2017357.This clinical trial is a double-blind, randomized, three-period crossover, placebo-controlled, pharmacokinetic and pharmacodynamicstudy of CK-2017357 in patients with generalized myasthenia gravis. At least 36 and up to 78 patients may be enrolled in this trial.Patients receive, in a double-blind fashion and in random order, a single oral dose of placebo or 250 mg or 500 mg of CK-2017357, atleast 7 days apart. The primary objective of this trial is to assess the effects of CK-2017357 on measures of muscle strength, musclefatigue and pulmonary function. The secondary objectives of this clinical trial are to evaluate and characterize the relationship, if any,between the doses and plasma concentrations of CK-2017357 and its pharmacodynamic effects; to evaluate the11Table of Contentssafety and tolerability of CK-2017357 administered as single doses to patients with myasthenia gravis; and to evaluate the effect of CK-2017357 on investigator- and patient-determined global functional assessment and the Modified MG Symptom Score, an assessmentcombining patient reports and physician evaluations to assess the severity of symptoms due to myasthenia gravis. We are continuing toconduct this trial, and anticipate that data will be available from this trial by the end of 2011.CK-2017357 Planned Clinical Development:In the first half of 2011, we anticipate initiating a Phase I drug-drug interaction clinical trial of CK-2017357 administered orally tohealthy volunteers. This trial is intended to evaluate the effects of CK-2017357 on the pharmacokinetics of riluzole and other drugs aswell as the pharmacokinetics of CK-2017357 when administered after a meal and when fasting.In the first half of 2011, we anticipate initiating a Phase II multiple-dose, safety, tolerability, pharmacokinetic andpharmacodynamic clinical trial of CK-2017357 in ALS patients. This trial is expected to evaluate patients receiving daily oral doses ofCK-2017357 for up to 14 days. The primary objective of this trial will be to evaluate the safety and tolerability of multiple doses of CK-2017357 in patients with ALS. In addition, patients will be asked to report their ALS symptoms using the ALS Functional Rating Scale-Revised (ALSFRS-R). Patients will also undergo tests of muscle fatigability, certain indices of pulmonary function, and patients’ andinvestigators’ global status assessments. This Phase II trial may be initiated after we have completed the initial part of the Phase I drug-drug interaction trial, which will focus on drug-drug interaction between riluzole and CK-2017357.CK-2066260 Planned Clinical Development:We anticipate that, in the first half of 2011, we will file an IND with the FDA to perform a Phase I, first-time-in-humans clinicaltrial of CK-2066260. We also anticipate initiating that trial in healthy volunteers in the second half of 2011.Ongoing Research in Skeletal Muscle Activators:Our research on the direct activation of skeletal muscle continues in two areas. In addition to continuing our work with selective fastskeletal sarcomere activators from new structural series, we are conducting translational research with our existing series of skeletalsarcomere activators to explore the potential clinical applications of this novel approach in preclinical studies. We also have a researchprogram aimed at the discovery and validation of other chemically and pharmacologically distinct mechanisms to activate the skeletalsarcomere.Smooth Muscle Contractility ProgramOverview. Smooth muscle is a non-striated form of muscle that is found in the circulatory, respiratory, digestive and genitourinaryorgan systems and is responsible for the contractile properties of these tissues. The contractile elements in non-striated muscle are notarranged into sarcomeres and the regulation of smooth muscle differs from that in cardiac and skeletal muscles. Smooth musclecontractility is driven by smooth muscle myosin, a cytoskeletal motor protein that is directly responsible for converting chemical energyinto mechanical force. Our smooth muscle contractility program is focused on the discovery and development of small molecule smoothmuscle myosin inhibitors, and leverages our expertise in muscle function and its application to drug discovery. Our inhaled smoothmuscle myosin inhibitors have demonstrated pharmacological activity in preclinical models of bronchoconstrictive diseases and mayhave applications for indications such as asthma or chronic obstructive pulmonary disease. Our smooth muscle myosin inhibitors,administered orally or intravenously, have also demonstrated pharmacological activity in preclinical models of vascular constriction. Weintend to continue to conduct non-clinical development of compounds from this program.Ongoing research in smooth muscle myosin inhibitors. In May 2010, a poster summarizing non-clinical data regarding oursmooth muscle contractility program was presented at the American Thoracic Society’s 2010 International Conference.We are continuing to conduct early research activities to develop direct smooth muscle myosin inhibitor compounds for potential usein acute or chronic settings. Our research focus is to differentiate our compounds from existing drugs that are bronchodilators orvasodilators that act by indirectly causing smooth muscle relaxation, such12Table of Contentsas commonly used beta-agonists and calcium channel blockers. We are particularly interested in potential applications for our compoundswhere the benefits of currently available treatments are constrained by adverse side effects or limited effectiveness.Mitotic Kinesin InhibitorsWe currently have three drug candidates for the potential treatment of cancer: ispinesib, SB-743921 and GSK-923295. All of thesearose from our earlier research activities directed to the role of the cytoskeleton in cell division and were progressed under our strategicalliance with GSK. This strategic alliance was established in 2001 to discover, develop and commercialize novel small moleculetherapeutics targeting mitotic kinesins for applications in the treatment of cancer and other diseases. Mitotic kinesins are a family ofcytoskeletal motor proteins involved in the process of cell division, or mitosis. Under this strategic alliance, we focused primarily on twomitotic kinesins: kinesin spindle protein (“KSP”) and centromere-associated protein E (“CENP-E”). Inhibition of KSP or CENP-Einterrupts cancer cell division, causing cell death. Ispinesib and SB-743921 are structurally distinct small molecules that specificallyinhibit KSP. GSK-923295 specifically inhibits CENP-E.We agreed with GSK to terminate our strategic alliance effective February 28, 2010. We have retained all rights to ispinesib, SB-743921 and GSK-923295, subject to certain royalty obligations to GSK. GSK remains responsible for completing its Phase I clinicaltrial of GSK-923295 in cancer patients, at its expense. We are evaluating strategic alternatives for the future development andcommercialization of ispinesib, SB-743921 and GSK-923295 with third parties.Research and Development ExpenseOur research and development expense was $38.0 million, $39.8 million and $54.0 million for 2010, 2009 and 2008, respectively,and $415.3 million for the period from August 5, 1997 (date of inception) through December 31, 2010.Our Patents and Other Intellectual PropertyOur policy is to seek patent protection for the technologies, inventions and improvements that we develop that we consider importantto the advancement of our business. As of December 31, 2010, we had 120 issued U.S. patents and over 200 additional pending U.S. andforeign patent applications. We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain ourcompetitive position. Our commercial success will depend on obtaining and maintaining patent protection and trade secret protection forour drug candidates and technologies and our successfully defending these patents against third-party challenges. We will only be able toprotect our technologies from unauthorized use by third parties to the extent that valid and enforceable patents cover them or we maintainthem as trade secrets.With regard to our drug candidates directed to muscle biology targets, we have a U.S. patent covering omecamtiv mecarbil and aU.S. patent covering our skeletal muscle sarcomere activators including, but not limited to, CK-2017357, each of which will expire in2027 unless extended. We also have additional U.S. and foreign patent applications pending for each of our drug candidates and potentialdrug candidates. It is not known or determinable whether other patents will issue from any of our other pending applications or what theexpiration dates would be for any other patents that do issue. With regard to our mitotic kinesin inhibitor drug candidates, we have aU.S. patent covering ispinesib that will expire in 2020, unless extended; a U.S. patent covering SB-743921 that will expire in 2023,unless extended; and a U.S. patent covering GSK-923295 that will expire in 2025, unless extended. We have additional U.S. and foreignpatent applications pending for each of ispinesib, SB-743921 and GSK-923295. It is not known or determinable whether patents willissue from any of these 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 drugcandidates is approved, then pursuant to federal law, we may apply for an extension of the U.S. patent term for one patent covering theapproved drug, which could extend the term of the applicable patent by up to a maximum of five additional years.13Table of ContentsThe degree of future protection of our proprietary rights is uncertain because legal means may not adequately protect our rights orpermit us to gain or keep our competitive advantage. Due to evolving legal standards relating to the patentability, validity andenforceability of patents covering pharmaceutical inventions and the claim scope of these patents, our ability to enforce our existingpatents and to obtain and enforce patents that may issue from any pending or future patent applications is uncertain and involvescomplex legal, scientific and factual questions. The standards that the U.S. Patent and Trademark Office and its foreign counterparts useto grant patents are not always applied predictably or uniformly and are subject to change. To date, no consistent policy has emergedregarding the breadth of claims allowed in biotechnology and pharmaceutical patents. Thus, we cannot be sure that any patents will issuefrom any pending or future patent applications owned by or licensed to us. Even if patents do issue, we cannot be sure that the claims ofthese patents will be held valid or enforceable by a court of law, will provide us with any significant protection against competitiveproducts, or will afford us a commercial advantage over competitive products. For example: • we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications andissued patents; • we or our licensors might not have been the first to file patent applications for the inventions covered by our pending patentapplications and issued patents; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing ourintellectual property rights; • some or all of our or our licensors’ pending patent applications may not result in issued patents or the claims that issue may benarrow in scope and not provide us with competitive advantages; • our and our licensors’ issued patents may not provide a basis for commercially viable drugs or therapies or may be challengedand invalidated by third parties; • our or our licensors’ patent applications or patents may be subject to interference, opposition or similar administrativeproceedings that may result in a reduction in their scope or their loss altogether; • we may not develop additional proprietary technologies or drug candidates that are patentable; or • the patents of others may prevent us or our partners from discovering, developing or commercializing our drug candidates.The defense and prosecution of intellectual property infringement suits, interferences, oppositions and related legal andadministrative proceedings are costly, time-consuming to pursue and result in diversion of resources. The outcome of these types ofproceedings is uncertain and could significantly harm our business.Our ability to commercialize drugs depends on our ability to use, manufacture and sell those drugs without infringing the patents orother proprietary rights of third parties. U.S. and foreign issued patents and pending patent applications owned by third parties exist thatmay be relevant to the therapeutic areas and chemical compositions of our drug candidates and potential drug candidates. While we areaware of certain relevant patents and patent applications owned by third parties, there may be issued patents or pending applications ofwhich we are not aware that could cover our drug candidates. Because patent applications are often not published immediately after filing,there may be currently pending applications, unknown to us, which could later result in issued patents that our activities with our drugcandidates could infringe.Currently, we are aware of an issued U.S. patent, at least one pending U.S. patent application and certain foreign patent applicationsassigned to Curis, Inc. (“Curis”), relating to certain compounds in the quinazolinone class. Ispinesib falls into this class of compounds.We have opposed the granting of certain of these patents to Curis in Europe and in Australia. Curis or a third party may assert that themanufacture, use, importation or sale of ispinesib may infringe one or more of its patents. We believe that we have valid defenses againstthe issued U.S. patent owned by Curis if it were to be asserted against us. However, we cannot guarantee that a court would find thesedefenses valid or that any additional defenses would be successful. We have not attempted to obtain a license to these patents. If we decideto seek a license to these patents, we cannot guarantee that such a license would be available on acceptable terms, if at all.14Table of ContentsThe development of our drug candidates and the commercialization of any resulting drugs may be impacted by patents of companiesengaged in competitive programs with significantly greater resources. This could result in the expenditure of significant legal fees andmanagement resources.We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate orobtainable. However, trade secrets are often difficult to protect, especially outside of the United States. While we use reasonable efforts toprotect our trade secrets, our employees, consultants, contractors, partners and other advisors may unintentionally or willfully discloseour trade secrets to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets would be expensiveand time-consuming, and the outcome would be unpredictable. Even if we are able to maintain our trade secrets as confidential, ourcompetitors may independently develop information that is equivalent or similar to our trade secrets.We seek to protect our intellectual property by requiring our employees, consultants, contractors and other advisors to executenondisclosure and invention assignment agreements upon commencement of their employment or engagement, through which we seek toprotect our intellectual property. Agreements with our employees also preclude them from bringing the proprietary information or materialsof third parties to us. We also require confidentiality agreements or material transfer agreements from third parties that receive ourconfidential information or materials.For further details on the risks relating to our intellectual property, please see the risk factors under Item 1A of this report, including,but not limited to, the risk factors entitled “Our success depends substantially upon our ability to obtain and maintain intellectualproperty protection relating to our drug candidates and research technologies” and “If we are sued for infringing third party intellectualproperty rights, it will be costly and time-consuming, and an unfavorable outcome would have a significant adverse effect on ourbusiness.”Government RegulationThe FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantialrequirements upon the clinical development, manufacture, marketing and distribution of drugs. These agencies and other federal, stateand local entities regulate research and development activities and the testing, manufacture, quality control, labeling, storage, recordkeeping, approval, advertising and promotion of our drug candidates and drugs.In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act and implementing regulations. Theprocess required by the FDA before our drug candidates may be marketed in the United States generally involves the following: • completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies, all performed inaccordance with the FDA’s good laboratory practice regulations; • submission to the FDA of an investigational new drug application (“IND”), which must become effective before clinical trialsmay begin; • performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the drug candidate for eachproposed indication in accordance with good clinical practices; • submission of a new drug application (“NDA”) to the FDA, which must usually be accompanied by payment of a substantialuser fee; • satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced toassess compliance with current good manufacturing practice (“cGMP”) regulations and FDA audits of select clinical investigatorsites to assess compliance with good clinical practices (“GCP”); and • FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.This testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that anyapprovals for our drug candidates will be granted on a timely basis, if at all.15Table of ContentsPreclinical tests include laboratory evaluation of product chemistry, formulation and stability, and studies to evaluate toxicity andpharmacokinetics in animals. The results of preclinical tests, together with manufacturing information and analytical data, are submittedas part of an IND application to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA,within the 30-day period, raises concerns or questions about the conduct of the clinical trial, including concerns that human researchsubjects may be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. Similar regulatory procedures generally apply in those countries outside of the United Stateswhere we conduct clinical trials. Our submission of an IND or a foreign equivalent, or those of our collaborators, may not result inauthorization from the FDA or its foreign equivalent to commence a clinical trial. A separate submission to an existing IND must also bemade for each successive clinical trial conducted during product development. Further, an independent institutional review board (“IRB”)or its foreign equivalent for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinicaltrial before it commences at that center and it must monitor the clinical trial until completed. The FDA, the IRB or their foreignequivalents, or the clinical trial sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjectsor patients are being exposed to an unacceptable health risk.Clinical Trials: For purposes of an NDA submission and approval, clinical trials are typically conducted in the following threesequential phases, which may overlap: • Phase I: These clinical trials are initially conducted in a limited population to test the drug candidate for safety, dose tolerance,absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients. In some cases, a sponsor maydecide to conduct a “Phase Ib” clinical trial, which is a second, safety-focused Phase I trial typically designed to evaluate thepharmacokinetics and tolerability of the drug candidate in combination with currently approved drugs. • Phase II: These clinical trials are generally conducted in a limited patient population to identify possible adverse effects andsafety risks, to make an initial determination of potential efficacy of the drug candidate for specific targeted indications and todetermine dose tolerance and optimal dosage. Multiple Phase II clinical trials may be conducted by the sponsor to obtaininformation prior to beginning larger and more expensive Phase III clinical trials. Phase IIa clinical trials generally are designed tostudy the pharmacokinetic or pharmacodynamic properties and to conduct a preliminary assessment of safety of the drugcandidate over a measured dose response range. In some cases, a sponsor may decide to conduct a Phase IIb clinical trial, whichis a second, typically larger, confirmatory Phase II trial that could, if positive and accepted by the FDA, serve as a pilot orpivotal clinical trial in the approval of a drug candidate. • Phase III: These clinical trials are commonly referred to as pivotal clinical trials. If the Phase II clinical trials demonstrate that adose range of the drug candidate is potentially effective and has an acceptable safety profile, Phase III clinical trials are thenundertaken in large patient populations to further evaluate dosage, to provide substantial evidence of clinical efficacy and tofurther test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical trial sites.In some cases, the FDA may condition approval of an NDA for a drug candidate on the sponsor’s agreement to conduct additionalclinical trials to further assess the drug’s safety and effectiveness after NDA approval, known as Phase IV clinical trials.The clinical trials we conduct for our drug candidates, both before and after approval, and the results of those trials, are generallyrequired to be included in a clinical trials registry database that is available and accessible to the public via the internet. A failure by us toproperly participate in the clinical trial database registry could subject us to significant civil monetary penalties.Health care providers in the United States, including research institutions from which we or our partners obtain patient information,are subject to privacy rules under the Health Insurance Portability and Accountability Act of 1996 and state and local privacy laws. Inthe European Union, these entities are subject to the Directive 95/46-EC of the European Parliament on the protection of individuals withregard to the processing of personal data and individual European Union member states implementing additional legislation. Othercountries have similar privacy legislation. We could face substantial penalties if we knowingly receive individually identifiable health16Table of Contentsinformation from a health care provider that has not satisfied the applicable privacy laws. In addition, certain privacy laws and genetictesting laws may apply directly to our operations and/or those of our partners and may impose restrictions on the use and disseminationof individuals’ health information and use of biological samples.New Drug Application. The results of drug candidate development, preclinical testing and clinical trials are submitted to the FDAas part of an NDA. The NDA also must contain extensive manufacturing information. In addition, the FDA may require that a proposedRisk Evaluation and Mitigation Strategy, also known as a REMS, be submitted as part of the NDA if the FDA determines that it isnecessary to ensure that the benefits of the drug outweigh its risks. The FDA may refer the NDA to an advisory committee for review,evaluation and recommendation as to whether the application should be approved. The FDA often, but not always, follows the advisorycommittee’s recommendations. The FDA may deny approval of an NDA by issuance of a complete response letter if the applicableregulatory criteria are not satisfied, or it may require additional clinical data, including data in a pediatric population, or an additionalpivotal Phase III clinical trial or impose other conditions that must be met in order to secure final approval for an NDA. Even if such dataare submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are notalways conclusive and the FDA may interpret data differently than we or our partners do. Once issued, the FDA may withdraw a drugapproval if ongoing regulatory requirements are not met or if safety problems occur after the drug reaches the market. In addition, theFDA may require further testing, including Phase IV clinical trials, and surveillance or restrictive distribution programs to monitor theeffect of approved drugs which have been commercialized. The FDA has the power to prevent or limit further marketing of a drug basedon the results of these post-marketing programs. Drugs may be marketed only for the approved indications and in accordance with theprovisions of the approved label. Further, if there are any modifications to a drug, including changes in indications, labeling ormanufacturing processes or facilities, we may be required to submit and obtain prior FDA approval of a new NDA or NDA supplement,which may require us to develop additional data or conduct additional preclinical studies and clinical trials.Satisfaction of FDA regulations and requirements or similar requirements of state, local and foreign regulatory agencies typicallytakes several years. The actual time required may vary substantially based upon the type, complexity and novelty of the drug candidateor disease. Typically, if a drug candidate is intended to treat a chronic disease, as is the case with some of our drug candidates, safetyand efficacy data must be gathered over an extended period of time. Government regulation may delay or prevent marketing of drugcandidates for a considerable period of time and impose costly procedures upon our activities. The FDA or any other regulatory agencymay not grant approvals for new indications for our drug candidates on a timely basis, if at all. Even if a drug candidate receivesregulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages or restrictivedistribution programs. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a drugmay result in restrictions on the drug or even complete withdrawal of the drug from the market. Delays in obtaining, or failures to obtain,regulatory approvals for any of our drug candidates would harm our business. In addition, we cannot predict what future U.S. or foreigngovernmental regulations may be implemented.Orphan Drug Designation. Some jurisdictions, including the United States, may designate drugs for relatively small patientpopulations as orphan drugs. The FDA grants orphan drug designation to drugs intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the United States. For example, the FDA has granted CK-2017357 an orphan drug designation for the treatment of ALS.An orphan drug designation does not shorten the duration of the regulatory review and approval process. If a drug based on a drugcandidate which has an orphan drug designation receives the first FDA marketing approval for the indication for which the designationwas granted, then the approved drug is entitled to orphan drug exclusivity. This means that the FDA may not approve another company’sapplication to market the same drug for the same indication for a period of seven years, except in certain circumstances, such as ashowing of clinical superiority to the drug with orphan exclusivity or if the holder of the orphan drug designation cannot assure theavailability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the designationwas granted. Competitors may receive approval of different drugs or biologics for the indications for which the orphan drug hasexclusivity.17Table of ContentsOther regulatory requirements. Any drugs manufactured or distributed by us or our partners pursuant to FDA approvals or theirforeign counterparts are subject to continuing regulation by the applicable regulatory authority, including recordkeeping requirements andreporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required to register theirestablishments with the FDA and other applicable regulatory authorities, and are subject to periodic unannounced inspections by theseregulatory authorities for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural anddocumentation requirements upon us and our third-party manufacturers. Failure to comply with the statutory and regulatory requirementscan subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure ofproduct, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturers orsuppliers will be able to comply with the cGMP regulations and other ongoing FDA and other regulatory requirements. If our present orfuture third-party manufacturers or suppliers are not able to comply with these requirements, the FDA or its foreign counterparts may haltour clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug.For further details on the risks relating to government regulation of our business, please see the risk factors under Item 1A of thisreport, including, but not limited to, the risk factor entitled “The regulatory approval process is expensive, time-consuming and uncertainand may prevent our partners or us from obtaining approvals to commercialize some or all of our drug candidates.”CompetitionWe compete in the segments of the pharmaceutical, biotechnology and other related markets that address cardiovascular diseases andother diseases relating to muscle dysfunction, each of which is highly competitive. We face significant competition from mostpharmaceutical companies and biotechnology companies that are also researching and selling products designed to address cardiovasculardiseases and diseases and medical conditions associated with skeletal muscle weakness and wasting. Many of our competitors havesignificantly greater financial, manufacturing, marketing and drug development resources than we do. Large pharmaceutical companiesin particular have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also havesignificantly greater research capabilities than we do. In addition, many universities and private and public research institutes are activein research of cardiovascular diseases and diseases where there is muscle dysfunction, some in direct competition with us.We believe that our ability to successfully compete will depend on, among other things: • our drug candidates’ efficacy, safety and reliability; • the speed and cost-effectiveness at which we develop our drug candidates; • the selection of suitable indications for which to develop our drug candidates; • the successful completion of clinical development and laboratory testing of our drug candidates; • the timing and scope of any regulatory approvals we or our partners obtain for our drug candidates; • our or our partners’ ability to manufacture and sell commercial quantities of our approved drugs to meet market demand; • acceptance of our drugs by physicians and other health care providers; • the willingness of third party payors to provide reimbursement for the use of our drugs; • our ability to protect our intellectual property and avoid infringing the intellectual property of others; • the quality and breadth of our technology; • our employees’ skills and our ability to recruit and retain skilled employees; • our cash flows under existing and potential future arrangements with licensees, partners and other parties; and • the availability of substantial capital resources to fund development and commercialization activities.18Table of ContentsOur competitors may develop drug candidates and market drugs that are less expensive and more effective than our future drugs orthat may render our drugs obsolete. Our current or future competitors may also commercialize competing drugs before we or our partnerscan launch any drugs developed from our drug candidates. These organizations also compete with us to attract qualified personnel andpotential parties for acquisitions, joint ventures or other strategic alliances.If omecamtiv mecarbil is approved for marketing by the FDA for heart failure, it would compete against other drugs used for thetreatment of heart failure. These include generic drugs, such as milrinone, dobutamine or digoxin and newer marketed drugs such asnesiritide. Omecamtiv mecarbil could also potentially compete against other novel drug candidates in development, such as istaroxamine,which is being developed by Debiopharm Group; bucindolol, which is being developed by ARCA biopharma, Inc.; relaxin, which isbeing developed by Novartis; CD-NP, which is being developed by Nile Therapeutics, Inc, and glial growth factor (GGF-2) which isbeing developed by Acorda Therapeutics, Inc. In addition, there are a number of medical devices being developed for the potentialtreatment of heart failure.With respect to CK-2017357, CK2066260 and other compounds that may arise from our skeletal muscle contractility program,potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033, a selective androgen receptor modulator, formuscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancer cachexia. AcceleronPharma, Inc. is conducting clinical development with ACE-031, a myostatin inhibitor, and related compounds to evaluate their ability totreat diseases involving the loss of muscle mass, strength and function. We are aware that other companies are developing potential newtherapies for ALS, such as Biogen Idec, Inc., Mitsubishi Tanabe Pharma Corporation, Eisai Inc., Trophos SA, Isis Pharmaceuticals,Inc. and Sangamo BioSciences, Inc. If CK-2017357 or other of our skeletal muscle sarcomere activators are approved for the treatment ofclaudication associated with peripheral artery disease, they will compete with currently approved therapies for the treatment of peripheralartery disease. We are also aware that a number of companies are developing potential new treatments for peripheral artery disease orassociated symptoms of claudication. If CK-2017357 or other of our skeletal muscle sarcomere activators are approved for the treatmentof myasthenia gravis, they will compete with currently approved therapies for the treatment of myasthenia gravis, including but notlimited to anticholinesterase agents, such as pyridostigmine bromide and neostigmine bromide, corticosteroids, such as prednisone, andimmunomodulatory drugs, such as azathiaprine and cyclosporine. We are also aware that a number of companies are developing orcommercializing in certain markets potential new treatments for myasthenia gravis, such as Benesis Corp. (GB-0998), AlexionPharmaceuticals, Inc. (eculizumab) and Astellas (tacrolimus).For further details on the risks relating to our competitors, please see the risk factors under Item 1A of this report, including, but notlimited to, the risk factor entitled “Our competitors may develop drugs that are less expensive, safer or more effective than ours, whichmay diminish or eliminate the commercial success of any drugs that we may commercialize.”EmployeesAs of December 31, 2010, our workforce consisted of 105 full-time employees, 28 of whom hold Ph.D. or M.D. degrees, or both,and 21 of whom hold other advanced degrees. Of our total workforce, 76 are engaged in research and development and 29 are engaged inbusiness development, finance and administration functions.We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We believe thatour relations with our employees are good.Available InformationWe file electronically with the Securities and Exchange Commission (“SEC”) our annual reports on Form 10-K, quarterly reports onForm 10-Q and current reports on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or theExchange Act. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at19Table of Contents1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other informationregarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-Kand amendments to those reports on the day of filing with the SEC on our website at www.cytokinetics.com or by contacting the InvestorRelations Department at our corporate offices by calling 650-624-3000. The information found on our website is not part of this or anyother report filed with or furnished to the SEC.Item 1A. Risk FactorsIn evaluating our business, you should carefully consider the following risks in addition to the other information in thisreport. Any of the following risks could materially and adversely affect our business, results of operations, financial condition oryour investment in our securities, and many are beyond our control. It is not possible to predict or identify all such factors and,therefore, you should not consider any of these risk factors to be a complete statement of all the potential risks or uncertainties thatwe face.Risks Related To Our BusinessWe have a history of significant losses and may not achieve or sustain profitability and, as a result, you may lose all or partof your investment.We have generally incurred operating losses in each year since our inception in 1997, due to costs incurred in connection with ourresearch and development activities and general and administrative costs associated with our operations. Our drug candidates are in theearly stages of clinical testing, and we and our partners must conduct significant additional clinical trials before we and our partners canseek the regulatory approvals necessary to begin commercial sales of our drugs. We expect to incur increasing losses for at least severalmore years, as we continue our research activities and conduct development of, and seek regulatory approvals for, our drug candidates,and commercialize any approved drugs. If our drug candidates fail or do not gain regulatory approval, or if our drugs do not achievemarket acceptance, we will not be profitable. If we fail to become and remain profitable, or if we are unable to fund our continuing losses,you could lose all or part of your investment.We will need substantial additional capital in the future to sufficiently fund our operations.We have consumed substantial amounts of capital to date, and our operating expenditures will increase over the next several years ifwe expand our research and development activities. We have funded all of our operations and capital expenditures with proceeds fromprivate and public sales of our equity securities, strategic alliances with Amgen, GSK and others, equipment financings, interest oninvestments and government grants. We believe that our existing cash and cash equivalents, short-term investments and interest earned oninvestments should be sufficient to meet our projected operating requirements for at least the next 12 months. We have based this estimateon assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Becauseof the numerous risks and uncertainties associated with the development of our drug candidates and other research and developmentactivities, including risks and uncertainties that could impact the rate of progress of our development activities, we are unable to estimatewith certainty the amounts of capital outlays and operating expenditures associated with these activities.For the foreseeable future, our operations will require significant additional funding, in large part due to our research anddevelopment expenses and the absence of any revenues from product sales. Until we can generate a sufficient amount of product revenue,we expect to raise future capital through strategic alliance and licensing arrangements, public or private equity offerings and debtfinancings. We do not currently have any commitments for future funding other than grant funding for our myasthenia gravis preclinicaland clinical activities, and reimbursements, milestone and royalty payments that we may receive under our collaboration and optionagreement with Amgen. We may not receive any further funds under that agreement. Our ability to raise funds may be adversely impactedby current economic conditions, including the effects of the recent disruptions to the credit and financial markets in the United States andworldwide. In particular, the pool of third-party capital that in the past has been available to development-stage companies such as ourshas decreased significantly in recent years, and such20Table of Contentsdecreased availability may continue for a prolonged period. As a result of these and other factors, we do not know whether additionalfinancing will be available when needed, or that, if available, such financing would be on terms favorable to our stockholders or us.To the extent that we raise additional funds through strategic alliances or licensing and other arrangements with third parties, we willlikely have to relinquish valuable rights to our technologies, research programs or drug candidates, or grant licenses on terms that maynot be favorable to us. To the extent that we raise additional funds by issuing equity securities, our stockholders will experience additionaldilution. To the extent that we raise additional funds through debt financing, the financing may involve covenants that restrict ourbusiness activities. In addition, funding from any of these sources, if needed, may not be available to us on favorable terms, or at all, orin accordance with our planned timelines.If we can not raise the funds we need to operate our business, we will need to discontinue certain research and development activitiesand our stock price likely would be negatively affected.We depend on Amgen for the conduct, completion and funding of the clinical development and commercialization ofomecamtiv mecarbil (formerly known as CK-1827452).In May 2009, Amgen exercised its option to acquire an exclusive license to our drug candidate omecamtiv mecarbil worldwide,except for Japan. As a result, Amgen is responsible for the clinical development and obtaining and maintaining regulatory approval ofomecamtiv mecarbil for the potential treatment of heart failure worldwide, except Japan.We do not control the clinical development activities being conducted or that may be conducted in the future by Amgen, including,but not limited to, the timing of initiation, termination or completion of clinical trials, the analysis of data arising out of those clinicaltrials or the timing of release of data concerning those clinical trials, which may impact our ability to report on Amgen’s results. Amgenmay conduct these activities more slowly or in a different manner than we would if we controlled the clinical development of omecamtivmecarbil. For example, Amgen has informed us that it now plans to initiate a Phase IIb clinical trial of an intravenous formulation ofomecamtiv mecarbil in hospitalized patients with acutely decompensated heart failure prior to initiating further clinical trials of oralformulations of omecamtiv mecarbil. Amgen is responsible for filing future applications with the FDA or other regulatory authorities forapproval of omecamtiv mecarbil and will be the owner of any marketing approvals issued by the FDA or other regulatory authorities foromecamtiv mecarbil. If the FDA or other regulatory authorities approve omecamtiv mecarbil, Amgen will also be responsible for themarketing and sale of the resulting drug, subject to our right to co-promote omecamtiv mecarbil in North America if we exercise our optionto co-fund Phase III development costs of omecamtiv mecarbil under the collaboration. However, we cannot control whether Amgen willdevote sufficient attention and resources to the clinical development of omecamtiv mecarbil or will proceed in an expeditious manner, evenif we do exercise our option to co-fund the development of omecamtiv mecarbil. Even if the FDA or other regulatory agencies approveomecamtiv mecarbil, Amgen may elect not to proceed with the commercialization of the resulting drug in one or more countries.Amgen generally has discretion to elect whether to pursue or abandon the development of omecamtiv mecarbil and may terminate ourstrategic alliance for any reason upon six months prior notice. If the initial results of one or more clinical trials with omecamtiv mecarbildo not meet Amgen’s expectations, Amgen may elect to terminate further development of omecamtiv mecarbil or certain of the potentialclinical trials for omecamtiv mecarbil, even if the actual number of patients treated at that time is relatively small. If Amgen abandonsomecamtiv mecarbil, it would result in a delay in or could prevent us from commercializing omecamtiv mecarbil, and would delay andcould prevent us from obtaining revenues for this drug candidate. Disputes may arise between us and Amgen, which may delay or causethe termination of any omecamtiv mecarbil clinical trials, result in significant litigation or cause Amgen to act in a manner that is not inour best interest. If development of omecamtiv mecarbil does not progress for these or any other reasons, we would not receive furthermilestone payments or royalties on product sales from Amgen with respect to omecamtiv mecarbil. If Amgen abandons development ofomecamtiv mecarbil prior to regulatory approval or if it elects not to proceed with commercialization of the resulting drug followingregulatory approval, we would have to seek a new partner for clinical development or commercialization, curtail or abandon that clinicaldevelopment or commercialization, or undertake and fund the clinical development of omecamtiv21Table of Contentsmecarbil or commercialization of the resulting drug ourselves. If we seek a new partner but are unable to do so on acceptable terms, or atall, or do not have sufficient funds to conduct the development or commercialization of omecamtiv mecarbil ourselves, we would have tocurtail or abandon that development or commercialization, which could harm our business.We have never generated, and may never generate, revenues from commercial sales of our drugs and we will not have drugsto market for at least several years, if ever.We currently have no drugs for sale and we cannot guarantee that we will ever develop or obtain approval to market any drugs. Toreceive marketing approval for any drug candidate, we must demonstrate that the drug candidate satisfies rigorous standards of safetyand efficacy to the FDA in the United States and other regulatory authorities abroad. We and our partners will need to conduct significantadditional research and preclinical and clinical testing before we or our partners can file applications with the FDA or other regulatoryauthorities for approval of any of our drug candidates. In addition, to compete effectively, our drugs must be easy to use, cost-effectiveand economical to manufacture on a commercial scale, compared to other therapies available for the treatment of the same conditions. Wemay not achieve any of these objectives. Currently, our only drug candidates that have progressed into clinical development are:omecamtiv mecarbil, our drug candidate for the potential treatment of heart failure; CK-2017357, our drug candidate for the potentialtreatment of diseases associated with aging, muscle wasting and neuromuscular dysfunction; and ispinesib, SB-743921 and GSK-923295, our drug candidates for the potential treatment of cancer. We cannot be certain that the clinical development of these or anyfuture drug candidates will be successful, that they will receive the regulatory approvals required to commercialize them, or that any ofour other research programs will yield a drug candidate suitable for clinical testing or commercialization. Our commercial revenues, ifany, will be derived from sales of drugs that we do not expect to be commercially marketed for at least several years, if at all. Thedevelopment of any one or all of these drug candidates may be discontinued at any stage of our clinical trials programs and we may notgenerate revenue from any of these drug candidates.Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates, which could prevent orsignificantly delay completion of clinical development and regulatory approval.Prior to receiving approval to commercialize any of our drug candidates, we or our partners must adequately demonstrate to the FDAand foreign regulatory authorities that the drug candidate is sufficiently safe and effective with substantial evidence from well-controlledclinical trials. In clinical trials we or our partners will need to demonstrate efficacy for the treatment of specific indications and monitorsafety throughout the clinical development process and following approval. None of our drug candidates have yet been demonstrated to besafe and effective in clinical trials and they may never be. In addition, for each of our current preclinical compounds, we or our partnersmust adequately demonstrate satisfactory chemistry, formulation, stability and toxicity in order to submit an IND to the FDA, or anequivalent application in foreign jurisdictions, that would allow us to advance that compound into clinical trials. Furthermore, we or ourpartners may need to submit separate INDs (or foreign equivalent) to different divisions within the FDA (or foreign regulatory authorities)in order to pursue clinical trials in different therapeutic areas. Each new IND (or foreign equivalent) must be reviewed by the new divisionbefore the clinical trial under its jurisdiction can proceed, entailing all the risks of delay inherent to regulatory review. If our or ourpartners’ current or future preclinical studies or clinical trials are unsuccessful, our business will be significantly harmed and our stockprice could be negatively affected.All of our drug candidates are prone to the risks of failure inherent in drug development. Preclinical studies may not yield resultsthat would adequately support the filing of an IND (or a foreign equivalent) with respect to our potential drug candidates. Even if theresults of preclinical studies for a drug candidate are sufficient to support such a filing, the results of preclinical studies do notnecessarily predict the results of clinical trials. As an example, because the physiology of animal species used in preclinical studies mayvary substantially from other animal species and from humans, it may be difficult to assess with certainty whether a finding from astudy in a particular animal species will result in similar findings in other animal species or in humans. For any of our drug candidates,the results from Phase I clinical trials in healthy volunteers and clinical results from Phase I and II trials in patients are not necessarilyindicative of the results of larger Phase III clinical trials that are necessary to establish whether22Table of Contentsthe drug candidate is safe and effective for the applicable indication. Likewise, interim results from a clinical trial may not be indicativeof the final results from that trial.In addition, while the clinical trials of our drug candidates are designed based on the available relevant information, in view of theuncertainties inherent in drug development, such clinical trials may not be designed with focus on indications, patient populations,dosing regimens, safety or efficacy parameters or other variables that will provide the necessary safety or efficacy data to supportregulatory approval to commercialize the resulting drugs. For example, in previously conducted two-stage Phase II clinical trials designedto evaluate the safety and efficacy of ispinesib as monotherapy in the first- or second-line treatment of patients with different forms ofcancer, ispinesib did not satisfy the criteria for advancement to Stage 2. In addition, individual patient responses to the dose administeredof a drug may vary in a manner that is difficult to predict. Also, the methods we select to assess particular safety or efficacy parametersmay not yield the same statistical precision in estimating our drug candidates’ effects as may other alternative methodologies. Even if webelieve the data collected from clinical trials of our drug candidates are promising, these data may not be sufficient to support approval bythe FDA or foreign regulatory authorities. Preclinical and clinical data can be interpreted in different ways. Accordingly, the FDA orforeign regulatory authorities could interpret these data in different ways than we or our partners do, which could delay, limit or preventregulatory approval.Administering any of our drug candidates or potential drug candidates may produce undesirable side effects, also known as adverseeffects. Toxicities and adverse effects observed in preclinical studies for some compounds in a particular research and developmentprogram may also occur in preclinical studies or clinical trials of other compounds from the same program. Potential toxicity issues mayarise from the effects of the active pharmaceutical ingredient itself or from impurities or degradants that are present in the activepharmaceutical ingredient or could form over time in the formulated drug candidate or the active pharmaceutical ingredient. Thesetoxicities or adverse effects could delay or prevent the filing of an IND (or a foreign equivalent) with respect to our drug candidates orpotential drug candidates or cause us or our partners to modify, suspend or terminate clinical trials with respect to any drug candidate atany time during the development program. The FDA, other regulatory authorities, our partners or we may modify, suspend or terminateclinical trials with our drug candidates at any time. If these or other adverse effects are severe or frequent enough to outweigh the potentialefficacy of a drug candidate, the FDA or other regulatory authorities could deny approval of that drug candidate for any or all targetedindications. Even if one or more of our drug candidates were approved for sale as drugs, the occurrence of even a limited number oftoxicities or adverse effects when used in large populations may cause the FDA to impose restrictions on, or stop, the further marketing ofthose drugs. Indications of potential adverse effects or toxicities which do not seem significant during the course of clinical trials may laterturn out to actually constitute serious adverse effects or toxicities when a drug is used in large populations or for extended periods of time.We have observed certain adverse effects in the clinical trials conducted with our drug candidates. For example, in clinical trials ofomecamtiv mecarbil, doses that exceeded the maximum tolerated dose were associated with complaints of chest discomfort, palpitations,dizziness and feeling hot, increases in heart rate, declines in blood pressure, electrocardiographic changes consistent with acutemyocardial ischemia and transient rises in the MB fraction of creatine kinase and cardiac troponins I and T, which are indicative ofmyocardial infarction. In Phase IIa clinical trials of CK-2017357, adverse events of dizziness, headache, fatigue, somnolence(sleepiness), euphoric mood, muscle spasms, gait disturbance, muscular weakness, nausea, and dysarthria (difficulty speaking)appeared to increase in frequency with increasing doses of CK-2017357. In clinical trials of ispinesib, the most commonly observeddose-limiting toxicity was neutropenia, a decrease in the number of a certain type of white blood cell that results in an increase insusceptibility to infection.Further, the administration of two or more drugs contemporaneously can lead to interactions between them, and in clinical trials, ourdrug candidates may interact with other drugs that the trial subjects are taking. For example, many ALS patients take riluzole, acommercially available treatment for ALS. In a Phase IIa clinical trial of CK-2017357 in ALS patients, we observed in the patients takingriluzole increases in the blood plasma concentration of riluzole associated with the administration of CK-2017357. Accordingly, we planto conduct a Phase I drug-drug interaction clinical trial intended to evaluate the effects of CK-2017357 on the pharmacokinetics of riluzoleand other drugs to better understand the significance of this finding. If this drug-drug interaction trial23Table of Contentsproduces materially adverse findings, it may call into question the feasibility of developing CK-2017357 as a treatment for ALS.In addition, clinical trials of omecamtiv mecarbil and CK-2017357 enroll patients who typically suffer from serious diseases whichput them at increased risk of death. These patients may die while receiving our drug candidates. In such circumstances, it may not bepossible to exclude with certainty a causal relationship to our drug candidate, even though the responsible clinical investigator may viewsuch an event as not study drug-related. For example, in a Phase IIa clinical trial designed to evaluate and compare the oralpharmacokinetics of both modified and immediate release formulations of omecamtiv mecarbil in patients with stable heart failure, apatient died suddenly after receiving the immediate release formulation of omecamtiv mecarbil, without having reported any precedingadverse events. The clinical investigator assessed the patient’s death as not related to omecamtiv mecarbil. However, the event wasreported to the appropriate regulatory authorities as possibly related to omecamtiv mecarbil because the immediate cause of the patient’sdeath could not be determined, and therefore, a relationship to omecamtiv mecarbil could not be excluded definitively.Any failure or significant delay in completing preclinical studies or clinical trials for our drug candidates, or in receiving andmaintaining regulatory approval for the sale of any resulting drugs, may significantly harm our business and negatively affect our stockprice.Clinical trials are expensive, time-consuming and subject to delay.Clinical trials are subject to rigorous regulatory requirements and are very expensive, difficult and time-consuming to design andimplement. The length of time and number of trial sites and patients required for clinical trials vary substantially based on the type,complexity, novelty, intended use of the drug candidate and safety concerns. We estimate that the clinical trials of our current drugcandidates will each continue for several more years. However, the clinical trials for all or any of these drug candidates may takesignificantly longer to complete. The commencement and completion of our clinical trials could be delayed or prevented by many factors,including, but not limited to: • delays in obtaining, or inability to obtain, regulatory or other approvals to commence and conduct clinical trials in the manner weor our partners deem necessary for the appropriate and timely development of our drug candidates and commercialization of anyresulting drugs; • delays in identifying and reaching agreement, or inability to identify and reach agreement, on acceptable terms, with prospectiveclinical trial sites and other entities involved in the conduct of our clinical trials; • delays or additional costs in developing, or inability to develop, appropriate formulations of our drug candidates for clinical trialuse, including an appropriate modified release oral formulation for omecamtiv mecarbil; • slower than expected rates of patient recruitment and enrollment, including as a result of competition for patients with otherclinical trials; limited numbers of patients that meet the enrollment criteria; patients’, investigators’ or trial sites’ reluctance toagree to the requirements of a protocol; or the introduction of alternative therapies or drugs by others; • for those drug candidates that are the subject of a strategic alliance, delays in reaching agreement with our partner as toappropriate development strategies; • a regulatory authority may require changes to a protocol for a clinical trial that then may require approval from regulatoryagencies in other jurisdictions where the trial is being conducted; • an institutional review board (“IRB”) or its foreign equivalent may require changes to a protocol that then require approval fromregulatory agencies and other IRBs and their foreign equivalents, or regulatory authorities may require changes to a protocol thatthen require approval from the IRBs or their foreign equivalents;24Table of Contents • for clinical trials conducted in foreign countries, the time and resources required to identify, interpret and comply with foreignregulatory requirements or changes in those requirements, and political instability or natural disasters occurring in thosecountries; • lack of effectiveness of our drug candidates during clinical trials; • unforeseen safety issues; • inadequate supply of clinical trial materials; • uncertain dosing issues; • failure by us, our partners, or clinical research organizations, investigators or site personnel engaged by us or our partners tocomply with good clinical practices and other applicable laws and regulations, including those concerning informed consent; • inability or unwillingness of investigators or their staffs to follow clinical protocols; • inability to monitor patients adequately during or after treatment; • introduction of new therapies or changes in standards of practice or regulatory guidance that render our drug candidates or theirclinical trial endpoints obsolete; and • results from non-clinical studies that may adversely impact the timing or further development of our drug candidates.We do not know whether planned clinical trials will begin on time, or whether planned or currently ongoing clinical trials will need tobe restructured or will be completed on schedule, if at all. Significant delays in clinical trials will impede our ability to commercialize ourdrug candidates and generate revenue and could significantly increase our development costs.If we fail to enter into and maintain successful strategic alliances for our drug candidates, potential drug candidates orresearch and development programs, we will have to reduce, delay or discontinue our advancement of those drugcandidates, potential drug candidates and programs or expand our research and development capabilities and increase ourexpenditures.Drug development is complicated and expensive. We currently have limited financial and operational resources to carry out drugdevelopment. Our strategy for developing, manufacturing and commercializing our drug candidates and potential drug candidatescurrently requires us to enter into and successfully maintain strategic alliances with pharmaceutical companies or other industryparticipants to advance our programs and reduce our expenditures on each program. Accordingly, the success of our developmentactivities depends in large part on our current and future strategic partners’ performance, over which we have little or no control.We have retained all rights to develop and commercialize CK-2017357, CK-2066260, ispinesib, SB-743921 and GSK-923295.We currently do not have a strategic partner for these drug candidates. We are relying on GSK to complete its Phase I clinical trial forGSK-923295. We expect to rely on one or more strategic partners or other arrangements with third parties to advance and develop each ofCK-2017357, CK-2066260 and other compounds from our skeletal muscle contractility program; ispinesib, SB-743921 and GSK-923295; and our smooth muscle myosin inhibitors. However, we may not be able to negotiate and enter into such strategic alliances orarrangements on acceptable terms, if at all, or in accordance with our planned timelines.We rely on Amgen to conduct non-clinical and clinical development for omecamtiv mecarbil for the potential treatment of heartfailure. If Amgen elects to terminate its development activities with respect to omecamtiv mecarbil, we currently do not have an alternativestrategic partner for this drug candidate.Our ability to commercialize drugs that we develop with our partners and that generate royalties from product sales depends on ourpartners’ abilities to assist us in establishing the safety and efficacy of our drug candidates, obtaining and maintaining regulatoryapprovals and achieving market acceptance of the drugs once commercialized. Our partners may elect to delay or terminate developmentof one or more drug candidates, independently develop drugs that could compete with ours or fail to commit sufficient resources to themarketing and distribution25Table of Contentsof drugs developed through their strategic alliances with us. Our partners may not proceed with the development and commercialization ofour drug candidates with the same degree of urgency as we would because of other priorities they face. In addition, new businesscombinations or changes in a partner’s business strategy may adversely affect its willingness or ability to carry out its obligations under astrategic alliance.If we are not able to successfully maintain our existing strategic alliances or establish and successfully maintain additional strategicalliances, we will have to limit the size or scope of, or delay or discontinue, one or more of our drug development programs or researchprograms, or undertake and fund these programs ourselves. Alternatively, if we elect to continue to conduct any of these drug developmentprograms or research programs on our own, we will need to expand our capability to conduct clinical development by bringing additionalskills, technical expertise and resources into our organization. This would require significant additional funding, which may not beavailable to us on acceptable terms, or at all.We depend on contract research organizations to conduct our clinical trials and have limited control over their performance.We have used and intend to continue to use contract research organizations (“CROs”) within and outside of the United States toconduct clinical trials of our drug candidates, such as CK-2017357. We do not have control over many aspects of our CROs’ activities,and cannot fully control the amount, timing or quality of resources that they devote to our programs. CROs may not assign as high apriority to our programs or pursue them as diligently as we would if we were undertaking these programs ourselves. The activitiesconducted by our CROs therefore may not be completed on schedule or in a satisfactory manner. CROs may also give higher priority torelationships with our competitors and potential competitors than to their relationships with us. Outside of the United States, we areparticularly dependent on our CROs’ expertise in communicating with clinical trial sites and regulatory authorities and ensuring that ourclinical trials and related activities and regulatory filings comply with applicable laws. Our CROs’ failure to carry out developmentactivities on our behalf according to our and the FDA’s or other regulatory agencies’ requirements and in accordance with applicableU.S. and foreign laws, or our failure to properly coordinate and manage these activities, could increase the cost of our operations anddelay or prevent the development, approval and commercialization of our drug candidates. In addition, if a CRO fails to perform asagreed, our ability to collect damages may be contractually limited. If we fail to effectively manage the CROs carrying out the developmentof our drug candidates or if our CROs fail to perform as agreed, the commercialization of our drug candidates will be delayed orprevented.We have no manufacturing capacity and depend on our strategic partners and contract manufacturers to produce ourclinical trial drug supplies for each of our drug candidates and potential drug candidates, and anticipate continued relianceon contract manufacturers for the development and commercialization of our potential drugs.We do not currently operate manufacturing facilities for clinical or commercial production of our drug candidates or potential drugcandidates. We have limited experience in drug formulation and manufacturing, and we lack the resources and the capabilities tomanufacture any of our drug candidates or potential drug candidates on a clinical or commercial scale. Amgen has assumedresponsibility to conduct these activities for the ongoing clinical development of omecamtiv mecarbil worldwide, except Japan. We haverelied on GSK to conduct these activities for the clinical development of GSK-923295. For CK-2017357, CK-2066260 and our otherdrug candidates and potential drug candidates, we rely (and for omecamtiv mecarbil, ispinesib and SB-743921, we have relied) on alimited number of contract manufacturers. In particular, we rely on single-source contract manufacturers for the active pharmaceuticalingredient and the drug product supply for our clinical trials. We expect to rely on contract manufacturers to supply all future drugcandidates for which we conduct clinical development. If any of our existing or future contract manufacturers fail to performsatisfactorily, it could delay clinical development or regulatory approval of our drug candidates or commercialization of our drugs,producing additional losses and depriving us of potential product revenues. In addition, if a contract manufacturer fails to perform asagreed, our ability to collect damages may be contractually limited.Our drug candidates and potential drug candidates require precise high-quality manufacturing. The failure to achieve and maintainhigh manufacturing standards, including failure to detect or control anticipated or26Table of Contentsunanticipated manufacturing errors or the frequent occurrence of such errors, could result in patient injury or death, discontinuance ordelay of ongoing or planned clinical trials, delays or failures in product testing or delivery, cost overruns, product recalls or withdrawalsand other problems that could seriously hurt our business. Contract drug manufacturers often encounter difficulties involving productionyields, quality control and quality assurance and shortages of qualified personnel. These manufacturers are subject to stringent regulatoryrequirements, including the FDA’s current good manufacturing practices regulations and similar foreign laws and standards. Eachcontract manufacturer must pass a pre-approval inspection before we can obtain marketing approval for any of our drug candidates andfollowing approval will be subject to ongoing periodic unannounced inspections by the FDA, the U.S. Drug Enforcement Agency andother regulatory agencies, to ensure strict compliance with current good manufacturing practices and other applicable governmentregulations and corresponding foreign laws and standards. We seek to ensure that our contract manufacturers comply fully with allapplicable regulations, laws and standards. However, we do not have control over our contract manufacturers’ compliance with theseregulations, laws and standards. If one of our contract manufacturers fails to pass its pre-approval inspection or maintain ongoingcompliance at any time, the production of our drug candidates could be interrupted, resulting in delays or discontinuance of our clinicaltrials, additional costs and potentially lost revenues. In addition, failure of any third party manufacturers or us to comply with applicableregulations, including pre-or post-approval inspections and the current good manufacturing practice requirements of the FDA or othercomparable regulatory agencies, could result in sanctions being imposed on us. These sanctions could include fines, injunctions, civilpenalties, failure of regulatory authorities to grant marketing approval of our products, delay, suspension or withdrawal of approvals,license revocation, product seizures or recalls, operational restrictions and criminal prosecutions, any of which could significantly andadversely affect our business.In addition, our existing and future contract manufacturers may not perform as agreed or may not remain in the contractmanufacturing business for the time required to successfully produce, store and distribute our drug candidates. If a natural disaster,business failure, strike or other difficulty occurs, we may be unable to replace these contract manufacturers in a timely or cost-effectivemanner and the production of our drug candidates would be interrupted, resulting in delays and additional costs.Switching manufacturers or manufacturing sites would be difficult and time-consuming because the number of potentialmanufacturers is limited. In addition, before a drug from any replacement manufacturer or manufacturing site can be commercialized, theFDA and, in some cases, foreign regulatory agencies, must approve that site. These approvals would require regulatory testing andcompliance inspections. A new manufacturer or manufacturing site also would have to be educated in, or develop substantially equivalentprocesses for, production of our drugs and drug candidates. It may be difficult or impossible to transfer certain elements of amanufacturing process to a new manufacturer or for us to find a replacement manufacturer on acceptable terms quickly, or at all, eitherof which would delay or prevent our ability to develop drug candidates and commercialize any resulting drugs.We may not be able to successfully scale-up manufacturing of our drug candidates in sufficient quality and quantity, whichwould delay or prevent us from developing our drug candidates and commercializing resulting approved drugs, if any.To date, our drug candidates have been manufactured in small quantities for preclinical studies and early-stage clinical trials. Inorder to conduct larger scale or late-stage clinical trials for a drug candidate and for commercialization of the resulting drug if that drugcandidate is approved for sale, we will need to manufacture it in larger quantities. We may not be able to successfully increase themanufacturing capacity for any of our drug candidates, whether in collaboration with third-party manufacturers or on our own, in atimely or cost-effective manner or at all. If a contract manufacturer makes improvements in the manufacturing process for our drugcandidates, we may not own, or may have to share, the intellectual property rights to those improvements. Significant scale-up ofmanufacturing may require additional validation studies, which are costly and which the FDA must review and approve. In addition,quality issues may arise during those scale-up activities because of the inherent properties of a drug candidate itself or of a drug candidatein combination with other components added during the manufacturing and packaging process, or during shipping and storage of thefinished product or active pharmaceutical ingredients. If we are unable to successfully scale-up manufacture of any of our drugcandidates in sufficient quality and27Table of Contentsquantity, the development of that drug candidate and regulatory approval or commercial launch for any resulting drugs may be delayed orthere may be a shortage in supply, which could significantly harm our business.The mechanisms of action of our drug candidates and potential drug candidates are unproven, and we do not knowwhether we will be able to develop any drug of commercial value.We have discovered and are currently developing drug candidates and potential drug candidates that have what we believe are novelmechanisms of action directed against cytoskeletal targets, and intend to continue to do so. Because no currently approved drugs appearto operate via the same biochemical mechanisms as our compounds, we cannot be certain that our drug candidates and potential drugcandidates will result in commercially viable drugs that safely and effectively treat the indications for which we intend to develop them.The results we have seen for our compounds in preclinical models may not translate into similar results in humans, and results of earlyclinical trials in humans may not be predictive of the results of larger clinical trials that may later be conducted with our drug candidates.Even if we are successful in developing and receiving regulatory approval for a drug candidate for the treatment of a particular disease, wecannot be certain that we will also be able to develop and receive regulatory approval for that or other drug candidates for the treatment ofother diseases. If we or our partners are unable to successfully develop and commercialize our drug candidates, our business will bematerially harmed.Our success depends substantially upon our ability to obtain and maintain intellectual property protection relating to ourdrug candidates, potential drug candidates and research technologies.We own, or hold exclusive licenses to, a number of U.S. and foreign patents and patent applications directed to our drug candidates,potential drug candidates and research technologies. Our success depends on our ability to obtain patent protection both in the UnitedStates and in other countries for our drug candidates and potential drug candidates, their methods of manufacture and use, and ourtechnologies. Our ability to protect our drug candidates, potential drug candidates and technologies from unauthorized or infringing useby third parties depends substantially on our ability to obtain and enforce our patents. If our issued patents and patent applications, ifgranted, do not adequately describe, enable or otherwise provide coverage of our technologies and drug candidates and potential drugcandidates, including omecamtiv mecarbil, CK-2017357, CK-2066260, ispinesib, SB-743921 and GSK-923295, we or our licenseeswould not be able to exclude others from developing or commercializing these drug candidates. Furthermore, the degree of future protectionof our proprietary rights is uncertain because legal means may not adequately protect our rights or permit us to gain or keep ourcompetitive advantage.Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventionsand the claim scope of these patents, our ability to enforce our existing patents and to obtain and enforce patents that may issue from anypending or future patent applications is uncertain and involves complex legal, scientific and factual questions. The standards which theU.S. Patent and Trademark Office and its foreign counterparts use to grant patents are not always applied predictably or uniformly andare subject to change. To date, no consistent policy has emerged regarding the breadth of claims allowed in biotechnology andpharmaceutical patents. Thus, we cannot be sure that any patents will issue from any pending or future patent applications owned by orlicensed to us. Even if patents do issue, we cannot be sure that the claims of these patents will be held valid or enforceable by a court oflaw, will provide us with any significant protection against competitive products, or will afford us a commercial advantage overcompetitive products. In particular: • we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications andissued patents; • we or our licensors might not have been the first to file patent applications for the inventions covered by our pending patentapplications and issued patents; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing ourintellectual property rights; • some or all of our or our licensors’ pending patent applications may not result in issued patents or the claims that issue may benarrow in scope and not provide us with competitive advantages;28Table of Contents • our and our licensors’ issued patents may not provide a basis for commercially viable drugs or therapies or may be challengedand invalidated by third parties; • our or our licensors’ patent applications or patents may be subject to interference, opposition or similar administrativeproceedings that may result in a reduction in their scope or their loss altogether; • we may not develop additional proprietary technologies or drug candidates that are patentable; or • the patents of others may prevent us or our partners from discovering, developing or commercializing our drug candidates.Patent protection is afforded on a country-by-country basis. Some foreign jurisdictions do not protect intellectual property rights tothe same extent as in the United States. Many companies have encountered significant difficulties in protecting and defending intellectualproperty rights in foreign jurisdictions. Some of our development efforts are performed in countries outside of the United States throughthird party contractors. We may not be able to effectively monitor and assess intellectual property developed by these contractors. Wetherefore may not be able to effectively protect this intellectual property and could lose potentially valuable intellectual property rights. Inaddition, the legal protection afforded to inventors and owners of intellectual property in countries outside of the United States may not beas protective of intellectual property rights as in the United States. Therefore, we may be unable to acquire and protect intellectual propertydeveloped by these contractors to the same extent as if these development activities were being conducted in the United States. If weencounter difficulties in protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantiallyharmed.We rely on intellectual property assignment agreements with our corporate partners, employees, consultants, scientific advisors andother collaborators to grant us ownership of new intellectual property that is developed. These agreements may not result in the effectiveassignment to us of that intellectual property. As a result, our ownership of key intellectual property could be compromised.Changes in either the patent laws or their interpretation in the United States or other countries may diminish the value of ourintellectual property or our ability to obtain patents. For example, the U.S. Congress is currently considering bills that could changeU.S. law regarding, among other things, post-grant review of issued patents and the calculation of damages once patent infringement hasbeen determined by a court of law. If enacted into law, these provisions could severely weaken patent protection in the United States.If one or more products resulting from our drug candidates is approved for sale by the FDA and we do not have adequate intellectualproperty protection for those products, competitors could duplicate them for approval and sale in the United States without repeating theextensive testing required of us or our partners to obtain FDA approval. Regardless of any patent protection, under current law, anapplication for a generic version of a new chemical entity cannot be approved until at least five years after the FDA has approved theoriginal product. When that period expires, or if that period is altered, the FDA could approve a generic version of our product regardlessof our patent protection. An applicant for a generic version of our product may only be required to conduct a relatively inexpensive studyto show that its product is bioequivalent to our product, and may not have to repeat the lengthy and expensive clinical trials that we or ourpartners conducted to demonstrate that the product is safe and effective. In the absence of adequate patent protection for our products inother countries, competitors may similarly be able to obtain regulatory approval in those countries of generic versions of our products.We also rely on trade secrets to protect our technology, particularly where we believe patent protection is not appropriate or obtainable.However, trade secrets are often difficult to protect, especially outside of the United States. While we endeavor to use reasonable efforts toprotect our trade secrets, our or our partners’ employees, consultants, contractors or scientific and other advisors may unintentionally orwillfully disclose our information to competitors. In addition, confidentiality agreements, if any, executed by those individuals may not beenforceable or provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use ordisclosure. Pursuing a claim that a third party had illegally obtained and was using our trade secrets would be expensive and time-consuming, and the outcome would be unpredictable. Even if we are able to maintain our trade secrets as confidential, if our competitorsindependently develop information equivalent or similar to our trade secrets, our business could be harmed.29Table of ContentsIf we are not able to defend the patent or trade secret protection position of our technologies and drug candidates, then we will not beable to exclude competitors from developing or marketing competing drugs, and we may not generate enough revenue from product sales tojustify the cost of development of our drugs or to achieve or maintain profitability.If we are sued for infringing third party intellectual property rights, it will be costly and time-consuming, and anunfavorable outcome would have a significant adverse effect on our business.Our ability to commercialize drugs depends on our ability to use, manufacture and sell those drugs without infringing the patents orother proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications owned by thirdparties exist in the therapeutic areas in which we are developing drug candidates and seeking new potential drug candidates. In addition,because patent applications can take several years to issue, there may be currently pending applications, unknown to us, which couldlater result in issued patents that our activities with our drug candidates could infringe. There may also be existing patents, unknown tous, that our activities with our drug candidates could infringe.Currently, we are aware of an issued U.S. patent and at least one pending U.S. patent application assigned to Curis, Inc., relating tocertain compounds in the quinazolinone class. Ispinesib falls into this class of compounds. The Curis U.S. patent claims a method ofinhibiting signaling by what is called the hedgehog pathway using certain quinazolinone compounds. Curis also has pending applicationsin Europe, Japan, Australia and Canada with claims covering certain quinazolinone compounds, compositions thereof and methods oftheir use. Two of the Australian applications have been allowed and two of the European applications have been granted. We have opposedthe granting of certain of these patents to Curis in Europe and in Australia. Curis has withdrawn one of the Australian applications. Oneof the European patents that we opposed was recently revoked and is no longer valid in Europe. Curis has appealed this decision.Curis or a third party may assert that the manufacture, use, importation or sale of ispinesib may infringe one or more of its patents.We believe that we have valid defenses against the issued U.S. patent owned by Curis if it were to be asserted against us. However, wecannot guarantee that a court would find these defenses valid or that any additional defenses would be successful. We have not attemptedto obtain a license to these patents. If we decide to seek a license to these patents, we cannot guarantee that such a license would beavailable on acceptable terms, if at all.Other future products of ours may be impacted by patents of companies engaged in competitive programs with significantly greaterresources (such as Merck & Co., Inc., Merck GmbH, Eli Lilly and Company, Bristol-Myers Squibb Company, Novartis andAstraZeneca AB). Further development of these products could be impacted by these patents and result in significant legal fees.If a third party claims that our actions infringe its patents or other proprietary rights, we could face a number of issues that couldseriously harm our competitive position, including, but not limited to: • infringement and other intellectual property claims that, even if meritless, can be costly and time-consuming to litigate, delay theregulatory approval process and divert management’s attention from our core business operations; • substantial damages for past infringement which we may have to pay if a court determines that our drugs or technologies infringea third party’s patent or other proprietary rights; • a court prohibiting us from selling or licensing our drugs or technologies unless the holder licenses the patent or other proprietaryrights to us, which it is not required to do; and • if a license is available from a holder, we may have to pay substantial royalties or grant cross-licenses to our patents or otherproprietary rights.If any of these events occur, it could significantly harm our business and negatively affect our stock price.30Table of ContentsWe may undertake infringement or other legal proceedings against third parties, causing us to spend substantial resourceson litigation and exposing our own intellectual property portfolio to challenge.Third parties may infringe our patents. To prevent infringement or unauthorized use, we may need to file infringement suits, whichare expensive and time-consuming. In an infringement proceeding, a court may decide that one or more of our patents is invalid,unenforceable, or both. In this case, third parties may be able to use our technology without paying licensing fees or royalties. Even if thevalidity of our patents is upheld, a court may refuse to stop the other party from using the technology at issue on the ground that the otherparty’s activities are not covered by our patents. Policing unauthorized use of our intellectual property is difficult, and we may not be ableto prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as inthe United States. In addition, third parties may affirmatively challenge our rights to, or the scope or validity of, our patent rights.We may become involved in disputes with our strategic partners over intellectual property ownership, and publications by ourresearch collaborators and clinical investigators could impair our ability to obtain patent protection or protect ourproprietary information, either of which would have a significant impact on our business.Inventions discovered under our current or future strategic alliance agreements may become jointly owned by our strategic partnersand us in some cases, and the exclusive property of one of us in other cases. Under some circumstances, it may be difficult to determinewho owns a particular invention or whether it is jointly owned, and disputes could arise regarding ownership or use of those inventions.These disputes could be costly and time-consuming, and an unfavorable outcome could have a significant adverse effect on our businessif we were not able to protect or license rights to these inventions. In addition, our research collaborators and clinical investigatorsgenerally have contractual rights to publish data arising from their work. Publications by our research collaborators and clinicalinvestigators relating to our research and development programs, either with or without our consent, could benefit our current or potentialcompetitors and may impair our ability to obtain patent protection or protect our proprietary information, which could significantly harmour business.We may be subject to claims that we or our employees have wrongfully used or disclosed trade secrets of their formeremployers.Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including ourcompetitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that theseemployees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.Litigation may be necessary to defend against these claims. If we fail in defending these claims, in addition to paying monetary damages,we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper orprevent our ability to develop and commercialize certain potential drugs, which could significantly harm our business. Even if we aresuccessful in defending against these claims, litigation could result in substantial costs and distract management.Our competitors may develop drugs that are less expensive, safer or more effective than ours, which may diminish oreliminate the commercial success of any drugs that we may commercialize.We compete with companies that have developed drugs or are developing drug candidates for cardiovascular diseases, cancer andother diseases for which our drug candidates may be useful treatments. For example, if omecamtiv mecarbil is approved for marketing bythe FDA for heart failure, that drug candidate would compete against other drugs used for the treatment of heart failure. These includegeneric drugs, such as milrinone, dobutamine or digoxin and newer marketed drugs such as nesiritide. Omecamtiv mecarbil could alsopotentially compete against other novel drug candidates in development, such as bucindolol, which is being developed by ARCAbiopharma, Inc.; relaxin, which is being developed by Novartis; CD-NP, which is being developed by Nile Therapeutics, Inc., and glialgrowth factor (GGF-2) which is being developed by Acorda Therapeutics, Inc. In addition, there are a number of medical devices beingdeveloped for the potential treatment of heart failure.31Table of ContentsWith respect to CK-2017357, CK-2066260 and other compounds that may arise from our skeletal muscle contractility program,potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033, a selective androgen receptor modulator, formuscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancer cachexia. AcceleronPharma, Inc. is conducting clinical development with ACE-031, a myostatin inhibitor, and related compounds to evaluate their ability totreat diseases involving the loss of muscle mass, strength and function. We are aware that other companies are developing potential newtherapies for ALS, such as Biogen Idec, Inc., Mitsubishi Tanabe Pharma Corporation, Eisai Inc., Trophos SA, Isis Pharmaceuticals,Inc. and Sangamo BioSciences, Inc. If CK-2017357 or other of our skeletal muscle sarcomere activators are approved for the treatment ofclaudication associated with peripheral artery disease, they will compete with currently approved therapies for the treatment of peripheralartery disease. We are also aware that a number of companies are developing potential new treatments for peripheral artery disease orassociated symptoms of claudication. If CK-2017357 or other of our skeletal muscle sarcomere activators are approved for the treatmentof myasthenia gravis, they will compete with currently approved therapies for the treatment of myasthenia gravis, including but notlimited to anticholinesterase agents, such as pyridostigmine bromide and neostigmine bromide, corticosteroids, such as prednisone, andimmunomodulatory drugs, such as azathiaprine and cyclosporine. We are also aware that a number of companies are developing orcommercializing in certain markets potential new treatments for myasthenia gravis, such as Benesis Corp. (GB-0998), AlexionPharmaceuticals, Inc. (eculizumab) and Astellas (tacrolimus).If approved for marketing by the FDA, depending on the approved clinical indication, our anti-cancer drug candidates ispinesib,SB-743921 and GSK-923295 would compete against existing cancer treatments such as paclitaxel, docetaxel, vincristine, vinorelbine,navelbine, ixabepilone and potentially against other novel anti-cancer drug candidates that are currently in development. These includecompounds that are reformulated taxanes, other tubulin binding compounds or epothilones. We are also aware that Merck & Co., Inc.,Eli Lilly and Company, Bristol-Myers Squibb Company, AstraZeneca AB, Array Biopharma Inc., ArQule, Inc., Alnylam, Inc. andothers are conducting research and development focused on KSP and other mitotic kinesins.Our competitors may: • develop drug candidates and market drugs that are less expensive or more effective than our future drugs; • commercialize competing drugs before we or our partners can launch any drugs developed from our drug candidates; • hold or obtain proprietary rights that could prevent us from commercializing our products; • initiate or withstand substantial price competition more successfully than we can; • more successfully recruit skilled scientific workers and management from the limited pool of available talent; • more effectively negotiate third-party licenses and strategic alliances; • take advantage of acquisition or other opportunities more readily than we can; • develop drug candidates and market drugs that increase the levels of safety or efficacy that our drug candidates will need to showin order to obtain regulatory approval; or • introduce therapies or market drugs that render the market opportunity for our potential drugs obsolete.We will compete for market share against large pharmaceutical and biotechnology companies and smaller companies that arecollaborating with larger pharmaceutical companies, new companies, academic institutions, government agencies and other public andprivate research organizations. Many of these competitors, either alone or together with their partners, may develop new drug candidatesthat will compete with ours. These competitors may, and in certain cases do, operate larger research and development programs or havesubstantially greater financial resources than we do. Our competitors may also have significantly greater experience in: • developing drug candidates; • undertaking preclinical testing and clinical trials;32Table of Contents • building relationships with key customers and opinion-leading physicians; • obtaining and maintaining FDA and other regulatory approvals of drug candidates; • formulating and manufacturing drugs; and • launching, marketing and selling drugs.If our competitors market drugs that are less expensive, safer or more efficacious than our potential drugs, or that reach the marketsooner than our potential drugs, we may not achieve commercial success. In addition, the life sciences industry is characterized by rapidtechnological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Our competitorsmay render our technologies obsolete by improving existing technological approaches or developing new or different approaches,potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach and proprietarytechnologies.Our failure to attract and retain skilled personnel could impair our drug development and commercialization activities.Our business depends on the performance of our senior management and key scientific and technical personnel. The loss of theservices of any member of our senior management or key scientific or technical staff may significantly delay or prevent the achievementof drug development and other business objectives by diverting management’s attention to transition matters and identifying suitablereplacements. We also rely on consultants and advisors to assist us in formulating our research and development strategy. All of ourconsultants and advisors are either self-employed or employed by other organizations, and they may have conflicts of interest or othercommitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to us. Inaddition, if and as our business grows, we will need to recruit additional executive management and scientific and technical personnel.There is currently intense competition for skilled executives and employees with relevant scientific and technical expertise, and thiscompetition is likely to continue. Our inability to attract and retain sufficient scientific, technical and managerial personnel could limit ordelay our product development activities, which would adversely affect the development of our drug candidates and commercialization ofour potential drugs and growth of our business.Any future workforce and expense reductions may have an adverse impact on our internal programs and our ability to hireand retain skilled personnel.In light of our continued need for funding and cost control, we may be required to implement future workforce and expensereductions, which may negatively affect our productivity and limit our research and development activities. For example, as part of ourstrategic restructuring and workforce reduction in 2008, we discontinued our early research activities in oncology. Our future success willdepend in large part upon our ability to attract and retain highly skilled personnel. We may have difficulty retaining and attracting suchpersonnel as a result of a perceived risk of future workforce reductions. In addition, the implementation of workforce or expense reductionprograms may divert the efforts of our management team and other key employees, which could adversely affect our business.We may expand our development and clinical research capabilities and, as a result, we may encounter difficulties inmanaging our growth, which could disrupt our operations.We may have growth in our expenditures, the number of our employees and the scope of our operations, in particular with respect tothose drug candidates that we elect to develop or commercialize independently or together with a partner. To manage our anticipated futuregrowth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities andcontinue to recruit and train additional qualified personnel. Due to our limited resources, we may not be able to effectively manage theexpansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead tosignificant costs and may divert our management and business development resources. Any inability to manage growth could delay theexecution of our business plans or disrupt our operations.33Table of ContentsWe currently have no sales or marketing staff and, if we are unable to enter into or maintain strategic alliances withmarketing partners or to develop our own sales and marketing capabilities, we may not be successful in commercializing ourpotential drugs.We currently have no sales, marketing or distribution capabilities. We plan to commercialize drugs that can be effectively marketedand sold in concentrated markets that do not require a large sales force to be competitive. To achieve this goal, we will need to establishour own specialized sales force and marketing organization with technical expertise and supporting distribution capabilities. Developingsuch an organization is expensive and time-consuming and could delay a product launch. In addition, we may not be able to develop thiscapacity efficiently, cost-effectively or at all, which could make us unable to commercialize our drugs. If we determine not to market ourdrugs on our own, we will depend on strategic alliances with third parties, such as Amgen, which have established distribution systemsand direct sales forces to commercialize them. If we are unable to enter into such arrangements on acceptable terms, we may not be able tosuccessfully commercialize these drugs. To the extent that we are not successful in commercializing any drugs ourselves or through astrategic alliance, our product revenues and business will suffer and our stock price would decrease.Risks Related To Our IndustryThe regulatory approval process is expensive, time-consuming and uncertain and may prevent our partners or us fromobtaining approvals to commercialize some or all of our drug candidates.The research, testing, manufacturing, selling and marketing of drugs are subject to extensive regulation by the FDA and otherregulatory authorities in the United States and other countries, and regulations differ from country to country. Neither we nor our partnersare permitted to market our potential drugs in the United States until we receive approval of a new drug application (“NDA”) from theFDA. Neither we nor our partners have received marketing approval for any of Cytokinetics’ drug candidates.Obtaining NDA approval is a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and otherapplicable foreign and U.S. regulatory requirements may subject us to administrative or judicially imposed sanctions. These includewarning letters, civil and criminal penalties, injunctions, product seizure or detention, product recalls, total or partial suspension ofproduction, and refusal to approve pending NDAs or supplements to approved NDAs.Regulatory approval of an NDA or NDA supplement is never guaranteed, and the approval process typically takes several yearsand is extremely expensive. The FDA and foreign regulatory agencies also have substantial discretion in the drug approval process.Despite the time and efforts exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon clinicaltrials or to repeat or perform additional preclinical testing and clinical trials. The number and focus of preclinical studies and clinicaltrials that will be required for approval by the FDA and foreign regulatory agencies varies depending on the drug candidate, the disease orcondition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. In addition, theFDA may require that a proposed Risk Evaluation and Mitigation Strategy, also known as a REMS, be submitted as part of an NDA ifthe FDA determines that it is necessary to ensure that the benefits of the drug outweigh its risks. The FDA and foreign regulatory agenciescan delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to: • they might determine that a drug candidate is not safe or effective; • they might not find the data from preclinical testing and clinical trials sufficient and could request that additional trials beperformed; • they might not approve our, our partner’s or the contract manufacturer’s processes or facilities; or • they might change their approval policies or adopt new regulations.Even if we receive regulatory approval to manufacture and sell a drug in a particular regulatory jurisdiction, other jurisdictions’regulatory authorities may not approve that drug for manufacture and sale. If we or our partners fail to receive and maintain regulatoryapproval for the sale of any drugs resulting from our drug candidates, it would significantly harm our business and negatively affect ourstock price.34Table of ContentsIf we or our partners receive regulatory approval for our drug candidates, we or they will be subject to ongoing obligationsto and continued regulatory review by the FDA and foreign regulatory agencies, and may be subject to additional post-marketing obligations, all of which may result in significant expense and limit commercialization of our potential drugs.Any regulatory approvals that we or our partners receive for our drug candidates may be subject to limitations on the indicated usesfor which the drug may be marketed or require potentially costly post-marketing follow-up studies or compliance with a REMS. Inaddition, if the FDA or foreign regulatory agencies approves any of our drug candidates, the labeling, packaging, adverse event reporting,storage, advertising, promotion and record-keeping for the drug will be subject to extensive regulatory requirements. The subsequentdiscovery of previously unknown problems with the drug, including adverse events of unanticipated severity or frequency, or thediscovery that adverse effects or toxicities observed in preclinical research or clinical trials that were believed to be minor actuallyconstitute much more serious problems, may result in restrictions on the marketing of the drug or withdrawal of the drug from themarket.The FDA and foreign regulatory agencies may change their policies and additional government regulations may be enacted that couldprevent or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or extent of adverse governmentregulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able tomaintain regulatory compliance, we might not be permitted to market our drugs and our business would suffer.If physicians and patients do not accept our drugs, we may be unable to generate significant revenue, if any.Even if our drug candidates obtain regulatory approval, the resulting drugs, if any, may not gain market acceptance amongphysicians, healthcare payors, patients and the medical community. Even if the clinical safety and efficacy of drugs developed from ourdrug candidates are established for purposes of approval, physicians may elect not to recommend these drugs for a variety of reasonsincluding, but not limited to: • introduction of competitive drugs to the market; • clinical safety and efficacy of alternative drugs or treatments; • cost-effectiveness; • availability of coverage and reimbursement from health maintenance organizations and other third-party payors; • convenience and ease of administration; • prevalence and severity of adverse side effects; • other potential disadvantages relative to alternative treatment methods; or • insufficient marketing and distribution support.If our drugs fail to achieve market acceptance, we may not be able to generate significant revenue and our business would suffer.The coverage and reimbursement status of newly approved drugs is uncertain and failure to obtain adequate coverage andreimbursement could limit our ability to market any drugs we may develop and decrease our ability to generate revenue.Even if one or more of our drug candidates is approved for sale, the commercial success of our drugs in both domestic andinternational markets will be substantially dependent on whether third-party coverage and reimbursement is available for our drugs by themedical profession for use by their patients, which is highly uncertain. Medicare, Medicaid, health maintenance organizations and otherthird-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of newdrugs. As a result, they may not cover or provide adequate payment for our drugs. They may not view our drugs as cost-effective and35Table of Contentsreimbursement may not be available to consumers or may be insufficient to allow our drugs to be marketed on a competitive basis. If weare unable to obtain adequate coverage and reimbursement for our drugs, our ability to generate revenue will be adversely affected.Likewise, current and future legislative or regulatory efforts to control or reduce healthcare costs or reform government healthcareprograms, such as the Patient Protection Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, could resultin lower prices or rejection of coverage and reimbursement for our potential drugs. Changes in coverage and reimbursement policies orhealthcare cost containment initiatives that limit or restrict reimbursement for any of our drug candidates that are approved could causeour potential future revenues to decline.We may be subject to costly product liability or other liability claims and may not be able to obtain adequate insurance.The use of our drug candidates in clinical trials may result in adverse effects. We cannot predict all the possible harms or adverseeffects that may result from our clinical trials. We currently maintain limited product liability insurance. We may not have sufficientresources to pay for any liabilities resulting from a personal injury or other claim excluded from, or beyond the limit of, our insurancecoverage. Our insurance does not cover third parties’ negligence or malpractice, and our clinical investigators and sites may haveinadequate insurance or none at all. In addition, in order to conduct clinical trials or otherwise carry out our business, we may have tocontractually assume liabilities for which we may not be insured. If we are unable to look to our own or a third party’s insurance to payclaims against us, we may have to pay any arising costs and damages ourselves, which may be substantial.In addition, if we commercially launch drugs based on our drug candidates, we will face even greater exposure to product liabilityclaims. This risk exists even with respect to those drugs that are approved for commercial sale by the FDA and foreign regulatoryagencies and manufactured in licensed and regulated facilities. We intend to secure additional limited product liability insurance coveragefor drugs that we commercialize, but may not be able to obtain such insurance on acceptable terms with adequate coverage, or atreasonable costs. Even if we are ultimately successful in product liability litigation, the litigation would consume substantial amounts ofour financial and managerial resources and may create adverse publicity, all of which would impair our ability to generate sales of theaffected product and our other potential drugs. Moreover, product recalls may be issued at our discretion or at the direction of the FDAand foreign regulatory agencies, other governmental agencies or other companies having regulatory control for drug sales. Product recallsare generally expensive and often have an adverse effect on the reputation of the drugs being recalled and of the drug’s developer ormanufacturer.We may be required to indemnify third parties against damages and other liabilities arising out of our development,commercialization and other business activities, which could be costly and time-consuming and distract management. If third parties thathave agreed to indemnify us against damages and other liabilities arising from their activities do not fulfill their obligations, then we maybe held responsible for those damages and other liabilities.To the extent we elect to fund the development of a drug candidate or the commercialization of a drug at our expense, we willneed substantial additional funding.The discovery, development and commercialization of new drugs is costly. As a result, to the extent we elect to fund the developmentof a drug candidate or the commercialization of a drug, we will need to raise additional capital to: • expand our research and development capabilities; • fund clinical trials and seek regulatory approvals; • build or access manufacturing and commercialization capabilities; • implement additional internal systems and infrastructure; • maintain, defend and expand the scope of our intellectual property; and • hire and support additional management and scientific personnel.36Table of ContentsOur future funding requirements will depend on many factors, including, but not limited to: • the rate of progress and costs of our clinical trials and other research and development activities; • the costs and timing of seeking and obtaining regulatory approvals; • the costs associated with establishing manufacturing and commercialization capabilities; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; • the costs of acquiring or investing in businesses, products and technologies; • the effect of competing technological and market developments; and • the status of, payment and other terms, and timing of any strategic alliance, licensing or other arrangements that we have enteredinto or may establish.Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect tocontinue to finance our future cash needs primarily through strategic alliances, public or private equity offerings and debt financings. Wecannot be certain that additional funding will be available on acceptable terms, or at all. If we are not able to secure additional fundingwhen needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and developmentprograms or future commercialization initiatives.Responding to any claims relating to improper handling, storage or disposal of the hazardous chemicals and radioactiveand biological materials we use in our business could be time-consuming and costly.Our research and development processes involve the controlled use of hazardous materials, including chemicals and radioactive andbiological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination ordischarge and any resultant injury from those materials. Federal, state and local laws and regulations govern the use, manufacture,storage, handling and disposal of hazardous materials. We may be sued for any injury or contamination that results from our or thirdparties’ use of these materials. Compliance with environmental laws and regulations is expensive, and current or future environmentalregulations may impair our research, development and production activities.Our facilities in California are located near an earthquake fault, and an earthquake or other types of natural disasters,catastrophic events or resource shortages could disrupt our operations and adversely affect our results.All of our facilities and our important documents and records, such as hard copies of our laboratory books and records for our drugcandidates and compounds and our electronic business records, are located in our corporate headquarters at a single location in SouthSan Francisco, California near active earthquake zones. If a natural disaster, such as an earthquake or flood, a catastrophic event suchas a disease pandemic or terrorist attack, or a localized extended outage of critical utilities or transportation systems occurs, we couldexperience a significant business interruption. Our partners and other third parties on which we rely may also be subject to businessinterruptions from such events. In addition, California from time to time has experienced shortages of water, electric power and naturalgas. Future shortages and conservation measures could disrupt our operations and cause expense, thus adversely affecting our businessand financial results.Risks Related To an Investment in Our SecuritiesWe expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or at or above yourinvestment price.The stock market, particularly in recent years, has experienced significant volatility, particularly with respect to pharmaceutical,biotechnology and other life sciences company stocks, which often does not relate to the37Table of Contentsoperating performance of the companies represented by the stock. Factors that could cause volatility in the market price of our commonstock include, but are not limited to: • announcements concerning any of the clinical trials for our compounds, such as omecamtiv mecarbil for heart failure and CK-2017357 and CK-2066260 for the potential treatment of diseases associated with aging, muscle wasting and neuromusculardysfunction (including, but not limited to, the timing of initiation or completion of such trials and the results of such trials, anddelays or discontinuations of such trials, including delays resulting from slower than expected or suspended patient enrollment ordiscontinuations resulting from a failure to meet pre-defined clinical end-points); • announcements concerning our strategic alliance with Amgen or future strategic alliances; • failure or delays in entering additional drug candidates into clinical trials; • failure or discontinuation of any of our research programs; • issuance of new or changed securities analysts’ reports or recommendations; • failure or delay in establishing new strategic alliances, or the terms of those alliances; • market conditions in the pharmaceutical, biotechnology and other healthcare-related sectors; • actual or anticipated fluctuations in our quarterly financial and operating results; • developments or disputes concerning our intellectual property or other proprietary rights; • introduction of technological innovations or new products by us or our competitors; • issues in manufacturing our drug candidates or drugs; • market acceptance of our drugs; • third-party healthcare coverage and reimbursement policies; • FDA or other U.S. or foreign regulatory actions affecting us or our industry; • litigation or public concern about the safety of our drug candidates or drugs; • additions or departures of key personnel; • substantial sales of our common stock by our existing shareholders, whether or not related to our performance; • volatility in the stock prices of other companies in our industry or in the stock market generally.These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, whichmay limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of ourcommon stock. In addition, when the market price of a stock has been volatile, holders of that stock have instituted securities classaction litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incursubstantial costs defending the lawsuit. Such a lawsuit could also divert our management’s time and attention.If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders frominfluencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.As of February 28, 2011, our executive officers, directors and their affiliates beneficially owned or controlled approximately 13.6%of the outstanding shares of our common stock (after giving effect to the exercise of all outstanding vested and unvested options andwarrants). Accordingly, these executive officers, directors and their affiliates, acting as a group, will have substantial influence over theoutcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all orsubstantially all of our assets or any other significant corporate transactions. These stockholders may also delay or prevent a change ofcontrol of us, even if such a change of control would benefit our other stockholders. The significant concentration38Table of Contentsof stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest mayexist or arise.Volatility in the stock prices of other companies may contribute to volatility in our stock price.The stock market in general, and the NASDAQ Global Market (“NASDAQ”) and the market for technology companies inparticular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operatingperformance of those companies. Further, there has been particular volatility in the market prices of securities of early stage anddevelopment stage life sciences companies. These broad market and industry factors may seriously harm the market price of ourcommon stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’ssecurities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantialcosts, potential liabilities and the diversion of management’s attention and resources, and could harm our reputation and business.Our common stock is thinly traded and there may not be an active, liquid trading market for our common stock.There is no guarantee that an active trading market for our common stock will be maintained on NASDAQ, or that the volume oftrading will be sufficient to allow for timely trades. Investors may not be able to sell their shares quickly or at the latest market price iftrading in our stock is not active or if trading volume is limited. In addition, if trading volume in our common stock is limited, trades ofrelatively small numbers of shares may have a disproportionate effect on the market price of our common stock.Evolving regulation of corporate governance and public disclosure may result in additional expenses, use of resources andcontinuing uncertainty.Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Actof 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and new Securities and Exchange Commission(“SEC”) regulations and NASDAQ Stock Market LLC rules are creating uncertainty for public companies. We are presently evaluatingand monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional costs wemay incur or the timing of these costs. For example, compliance with the internal control requirements of Section 404 of the Sarbanes-Oxley Act has to date required the commitment of significant resources to document and test the adequacy of our internal control overfinancial reporting. We can provide no assurance as to conclusions of management or by our independent registered public accountingfirm with respect to the effectiveness of our internal control over financial reporting in the future. In addition, the SEC has adoptedregulations that will require us to file corporate financial statement information in a new interactive data format known as XBRLbeginning in 2011. We may incur significant costs and need to invest considerable resources to implement and to remain in compliancewith these new requirements.These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack ofspecificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governingbodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions todisclosure and governance practices. We intend to maintain high standards of corporate governance and public disclosure. As a result, weintend to invest the resources necessary to comply with evolving laws, regulations and standards, and this investment may result inincreased general and administrative expenses and a diversion of management time and attention from revenue-generating activities tocompliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended byregulatory or governing bodies, due to ambiguities related to practice or otherwise, regulatory authorities may initiate legal proceedingsagainst us, which could be costly and time-consuming, and our reputation and business may be harmed.39Table of ContentsWe have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeablefuture.We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings,if any, to fund the development and growth of our businesses. In addition, the terms of existing or any future debts may preclude us frompaying these dividends.Risks Related To Our Financing Vehicles and InvestmentsOur committed equity financing facility with Kingsbridge may not be available to us if we elect to make a draw down, mayrequire us to make additional “blackout” or other payments to Kingsbridge, and may result in dilution to our stockholders.In October 2007, we entered into a committed equity financing facility with Kingsbridge, which we amended in October 2010. Thiscommitted equity financing facility entitles us to sell and obligates Kingsbridge to purchase, from time to time through March 31, 2011,shares of our common stock for cash consideration up to an aggregate of $75.0 million, subject to certain conditions and restrictions. Todate, we have received $20.9 million in gross proceeds under this committed equity financing facility. Under this committed equityfinancing facility, we have sold 8,936,547 shares and may sell up to a maximum total of 9,779,411 shares. This is the maximumnumber of shares we may sell to Kingsbridge without our stockholders’ approval under the rules of the NASDAQ Stock Market LLC.This limitation may further limit the amount of proceeds we are able to obtain from this committed equity financing facility.Kingsbridge will not be obligated to purchase shares under this committed equity financing facility unless certain conditions aremet, which include a minimum volume-weighted average price of $2.00 for our common stock. As of the close of market on March 9,2011, the price for our common stock was $1.50. In addition Kingsbridge’s obligations to purchase shares under this facility arecontingent upon the accuracy of our representations and warranties made to Kingsbridge; our compliance with laws; the effectiveness ofthe registration statement registering for resale the shares of common stock to be issued in connection with this committed equity financingfacility; and the continued listing of our stock on NASDAQ. In addition, Kingsbridge may terminate this committed equity financingfacility if it determines that a material adverse event has occurred affecting our business, operations, properties or financial condition andif such condition continues for a period of 10 days from the date Kingsbridge provides us notice of such material adverse event. If we areunable to access funds through this committed equity financing facility, we may be unable to access additional capital on reasonableterms or at all.We are entitled, in certain circumstances, to deliver a blackout notice to Kingsbridge to suspend the use of the resale registrationstatement and prohibit Kingsbridge from selling shares under the resale registration statement. If we deliver a blackout notice in the 15trading days following the settlement of a stock sale, or if the registration statement is not effective in circumstances not permitted by theagreement, then we must make a payment to Kingsbridge, or issue Kingsbridge additional shares in lieu of this payment. This paymentor issuance of shares is calculated based on the number of shares actually held by Kingsbridge pursuant to the most recent sale of stockunder the committed equity financing facility and the change in the market price of our common stock during the period in which the useof the registration statement is suspended. If the trading price of our common stock declines during a suspension of the registrationstatement, the blackout payment or issuance of shares could be significant.When we choose to sell shares to Kingsbridge under this committed equity financing facility, or issue shares in lieu of a blackoutpayment, it will have a dilutive effect on our current stockholders’ holdings, and may result in downward pressure on the price of ourcommon stock. The share price for sales of stock to Kingsbridge under this committed equity financing facility is discounted by up to10% from the volume-weighted average price of our common stock. If we sell stock under this committed equity financing facility whenour share price is decreasing, we will need to issue more shares to raise the same amount of cash than if our stock price was higher.Issuances of stock in the face of a declining share price will have an even greater dilutive effect than if our share price were stable orincreasing, and may further decrease our share price.40Table of ContentsItem 1B. Unresolved Staff CommentsNone.Item 2. PropertiesOur facilities consist of approximately 81,587 square feet of research and office space. We lease 50,195 square feet located at 280East Grand Avenue, and 31,392 square feet at 256 East Grand Avenue, in South San Francisco, California until 2018 with an option torenew the lease for an additional three years. We believe that these facilities are suitable and adequate for our current needs.Item 3. Legal ProceedingsWe are not a party to any material legal proceedings.Item 4. Reserved41Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is quoted on the NASDAQ Global Market under the symbol “CYTK,” and has been quoted on this marketsince our initial public offering on April 29, 2004. Prior to such date, there was no public market for our common stock. The followingtable sets forth the high and low closing sales price per share of our common stock as reported on the NASDAQ Global Market for theperiods indicated. Closing Sale Price High Low Fiscal 2009: First Quarter $2.87 $1.45 Second Quarter $3.08 $1.64 Third Quarter $5.30 $2.71 Fourth Quarter $5.24 $2.59 Fiscal 2010: First Quarter $3.54 $2.91 Second Quarter $3.56 $2.37 Third Quarter $2.80 $2.08 Fourth Quarter $2.93 $2.05 On February 28, 2011, the last reported sale price for our common stock on the NASDAQ Global Market was $1.57 per share. Wecurrently expect to retain future earnings, if any, for use in the operation and expansion of our business and have not paid and do not inthe foreseeable future anticipate paying any cash dividends. As of February 28, 2011, there were 111 holders of record of our commonstock.42Table of ContentsEquity Compensation InformationInformation regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Part III,Item 12.Comparison of Historical Cumulative Total Return Among Cytokinetics, Incorporated, the NASDAQ Stock Market (U.S.)Index and the NASDAQ Biotechnology Index(*)(*)The above graph shows the cumulative total stockholder return of an investment of $100 in cash from December 31, 2005 throughDecember 31, 2010 for: (i) our common stock; (ii) the NASDAQ Stock Market (U.S.) Index; and (iii) the NASDAQ BiotechnologyIndex. All values assume reinvestment of the full amount of all dividends. Stockholder returns over the indicated period should not beconsidered indicative of future stockholder returns. 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Cytokinetics, Incorporated $100.00 $114.37 $72.32 $43.58 $44.50 $31.96 NASDAQ Stock Market (U.S.) Index $100.00 $110.28 $121.92 $73.12 $106.25 $125.40 NASDAQ Biotechnology Index $100.00 $101.02 $105.65 $92.31 $106.74 $122.76 The information contained under this caption “Comparison of Historical Cumulative Total Return Among Cytokinetics,Incorporated, the NASDAQ Stock Market (U.S.) Index and the NASDAQ Biotechnology Index” shall not be deemed to be solicitingmaterial or to be filed with the Securities and Exchange Commission (“SEC”), nor shall such information be incorporated by referenceinto any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to theextent that we specifically incorporate it by reference into such filing.Sales of Unregistered SecuritiesNone.43Table of ContentsItem 6. Selected Financial DataThe following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and “Item 8, “Financial Statements and Supplemental Data” of this report on Form 10-K. Year Ended December 31, 2010 2009 2008 2007 2006 (In thousands, except per share amounts) Statement of Operations Data: Revenues: Research and development revenues from related parties(2) $1,487 $7,171 $186 $1,388 $1,622 Research and development, grant and other revenues 1,090 — — — 4 License revenues from related parties(2) — 74,367 12,234 12,234 1,501 Total revenues 2,577 81,538 12,420 13,622 3,127 Operating expenses: Research and development 38,013 39,840 53,950 53,388 49,225 General and administrative 14,199 15,626 15,076 16,721 15,240 Restructuring charges (reversals) — (23) 2,473 — — Total operating expenses 52,212 55,443 71,499 70,109 64,465 Operating income (loss) (49,635) 26,095 (59,079) (56,487) (61,338)Interest and other, net(3) 172 (1,401) 2,705 7,593 4,223 Income (loss) before income taxes (49,463) 24,694 (56,374) (48,894) (57,115)Income tax provision (benefit) (176) 150 — — — Net income (loss) $(49,287) $24,544 $(56,374) $(48,894) $(57,115)Net income (loss) per common share: Basic $(0.77) $0.43 $(1.14) $(1.03) $(1.56)Diluted $(0.77) $0.42 $(1.14) $(1.03) $(1.56)Weighted average shares used in computing net income (loss)per common share:(1) Basic 64,165 57,390 49,392 47,590 36,618 Diluted 64,165 57,961 49,392 47,590 36,618 44Table of Contents As of December 31, 2010 2009 2008 2007 2006 (In thousands) Balance Sheet Data: Cash and cash equivalents, investments, ARS andinvestment put option related to ARS $72,845 $114,727 $76,892 $139,764 $109,542 Restricted cash 788 1,674 2,750 5,167 6,034 Working capital 66,174 96,735 36,033 95,568 127,228 Total assets 77,992 122,599 87,454 155,370 169,516 Long-term portion of equipment financing lines 152 985 2,615 4,639 7,144 Deficit accumulated during the development stage (360,650) (311,363) (335,907) (279,533) (230,639)Total stockholders’ equity(1) 70,516 101,428 49,766 99,916 106,313 (1)In 2006, we sold 10,285,715 shares in two registered direct offerings for net proceeds of approximately $66.9 million, and sold2,740,735 shares of common stock to Kingsbridge Capital Limited (“Kingsbridge”) pursuant to the 2005 committed equityfinancing facility for net proceeds of $17.0 million. In 2007, we sold 2,075,177 shares of common stock to Kingsbridge pursuant tothe 2005 committed equity financing facility for net proceeds of $9.5 million. In January 2007, we issued 3,484,806 shares ofcommon stock to Amgen for net proceeds of $32.9 million in connection with a common stock purchase agreement with Amgen. In2009, we sold 3,596,728 shares of common stock to Kingsbridge pursuant to the 2007 committed equity financing facility for netproceeds of $6.9 million. In May 2009, we sold 7,106,600 shares of common stock in a registered direct offering for net proceeds ofapproximately $12.9 million. In 2010, we sold 5,339,819 shares of common stock to Kingsbridge pursuant to the 2007 committedequity financing facility for net proceeds of $14.0 million. See Note 13 in the Notes to Financial Statements for further details.(2)Revenues from related parties consisted of revenues recognized under our research and development arrangements with related parties,including Amgen and GSK. See Note 6 in the Notes to Financial Statements for further details.(3)Interest and Other, net consisted of interest income/expense and other income/expense. For the years ended December 31, 2010, 2009and 2008, it also included unrealized gains (losses) on our auction rate securities (“ARS”) and investment put option related to theSeries C-2 ARS Rights issued to us by UBS AG. For the years ended December 31, 2009, it also included warrant expense. SeeNote 15 in the Notes to Financial Statements for further details.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis discussion and analysis should be read in conjunction with our financial statements and accompanying notes includedelsewhere in this report. Operating results are not necessarily indicative of results that may occur in future periods.OverviewWe are a clinical-stage biopharmaceutical company focused on the discovery and development of novel small molecule therapeuticsthat modulate muscle function for the potential treatment of serious diseases and medical conditions. Our research and developmentactivities relating to the biology of muscle function have evolved from our knowledge and expertise regarding the cytoskeleton, a complexbiological infrastructure that plays a fundamental role within every human cell. Our current research and development programs relatingto the biology of muscle function are directed to small molecule modulators of the contractility of cardiac, skeletal and smooth muscle. Wehave, and intend to continue, to leverage our experience in muscle contractility in order to expand our45Table of Contentscurrent pipeline into new therapeutic areas, and expect to continue to be able to identify additional potential drug candidates that may besuitable for clinical development.Our cardiac muscle contractility program is focused on cardiac muscle myosin, a motor protein that powers cardiac musclecontraction. Our lead drug candidate from this program, omecamtiv mecarbil (formerly known as CK-1827452), is a novel cardiacmuscle myosin activator. We have conducted a clinical development program for omecamtiv mecarbil for the potential treatment of heartfailure, comprised of a series of Phase I and Phase IIa clinical trials. In May 2009, Amgen acquired an exclusive license to develop andcommercialize omecamtiv mecarbil worldwide, except Japan, subject to our development and commercialization participation rights.CK-2017357 is the lead drug candidate from our skeletal sarcomere activator program. The skeletal muscle sarcomere is the basicunit of skeletal muscle contraction. CK-2017357 is currently the subject of a Phase IIa clinical trials program. We believe CK-2017357may be useful in treating diseases or medical conditions associated with skeletal muscle weakness or wasting. In March 2010, CK-2017357 received an orphan drug designation from the U.S. Food and Drug Administration (“FDA”) for the treatment of amyotrophiclateral sclerosis (also known as ALS or Lou Gehrig’s disease). We are also advancing a second, structurally distinct, fast skeletal musclesarcomere activator, CK-2066260, in non-clinical studies intended to enable the filing of an investigational new drug application (“IND”)with the FDA in 2011. Both of these compounds selectively activate the fast skeletal muscle troponin complex, which is a set ofregulatory proteins that modulates the contractility of the fast skeletal muscle sarcomere.In our smooth muscle contractility program, we are conducting non-clinical development of compounds that directly inhibit smoothmuscle myosin, the motor protein central to the contraction of smooth muscle, causing the relaxation of contracted smooth muscle.Compounds from this program may be useful as potential treatments for diseases and conditions associated with excessive smoothmuscle contraction, such as bronchoconstriction associated with asthma and chronic obstructive pulmonary disease.Earlier research activities at the company were directed to the inhibition of mitotic kinesins, a family of cytoskeletal motor proteinsinvolved in the process of cell division, or mitosis. This research produced three drug candidates that have progressed into clinical testingfor the potential treatment of cancer: ispinesib, SB-743921 and GSK-923295. Effective February 2010, our strategic alliance withGlaxoSmithKline (“GSK”) relating to our mitotic kinesin inhibitors terminated by mutual agreement. We are currently evaluating strategicalternatives for these drug candidates with third parties.Two of our drug candidates directed to muscle contractility have now demonstrated pharmacodynamic activity in patients:omecamtiv mecarbil in patients with heart failure and CK-2017357 in patients with ALS. Our potential drug candidate CK-2066260 hasdemonstrated pharmacological activity in non-clinical studies. In 2011, we expect to focus on translating the pharmacodynamic activityobserved in these compounds into potentially meaningful clinical benefits for these patients.Muscle Contractility ProgramsCardiac Muscle ContractilityOur lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. In December 2006, weentered into a collaboration and option agreement with Amgen to discover, develop and commercialize novel small molecule therapeuticsthat activate cardiac muscle contractility for potential applications in the treatment of heart failure, including omecamtiv mecarbil. In May2009, Amgen exercised its option under this agreement to obtain an exclusive license worldwide, except Japan, to develop andcommercialize omecamtiv mecarbil and other drug candidates arising from the collaboration, and subsequently paid us an option exercisefee of $50.0 million. As a result, Amgen is now responsible for the development and commercialization of omecamtiv mecarbil and relatedcompounds, at its expense worldwide, except Japan, subject to our development and commercialization participation rights. Under theagreement, Amgen will reimburse us for agreed research and development activities we perform. The agreement provides for potential pre-commercialization and commercialization milestone payments of up to $600.0 million in the aggregate on omecamtiv mecarbil and otherpotential products arising from research under the collaboration, and royalties that escalate based on increasing levels of46Table of Contentsannual net sales of products commercialized under the agreement. The agreement also provides for us to receive increased royalties by co-funding Phase III development costs of drug candidates under the collaboration. If we elect to co-fund such costs, we would be entitled toco-promote omecamtiv mecarbil in North America and participate in agreed commercialization activities in institutional care settings, atAmgen’s expense.We expect omecamtiv mecarbil to be developed as a potential treatment across the continuum of care in heart failure both as anintravenous formulation for use in the hospital setting and as an oral formulation for use in the outpatient setting.In September 2010, Cytokinetics and Amgen announced plans to initiate a Phase IIb clinical trial of an intravenous formulation ofomecamtiv mecarbil in hospitalized patients with acutely decompensated heart failure prior to initiating further clinical trials of oralformulations of omecamtiv mecarbil. We anticipate that, in the first half of 2011, Amgen will initiate this trial, which will be conductedby Amgen in collaboration with Cytokinetics.We and Amgen are discussing the development strategy for oral formulations of omecamtiv mecarbil. We anticipate that these plansmay include studies designed to investigate the safety, tolerability and pharmacokinetics of multiple oral formulations of omecamtivmecarbil. We have agreed with Amgen upon a research plan focused on joint research activities in 2011 that will be directed to potentialnext-generation compounds in our cardiac muscle contractility program.The clinical trials program for omecamtiv mecarbil may proceed for several years, and we will not be in a position to generate anyrevenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval isachieved, and the drug is commercialized. Omecamtiv mecarbil is at too early a stage of development for us to predict if or when this mayoccur. We funded all research and development costs associated with this program prior to Amgen’s option exercise in May 2009. Werecorded research and development expenses for activities relating to our cardiac muscle contractility program of approximately$1.6 million, $9.9 million and $20.9 million in the years ended December 31, 2010, 2009 and 2008, respectively. We recognizedresearch and development revenue from Amgen of $1.5 million in 2010, consisting of reimbursements of full-time employee equivalent(“FTE”) and other expenses. We recognized research and development revenue from Amgen of $7.1 million in the 2009, consisting of$4.0 million for the transfer of our existing inventories of omecamtiv mecarbil and related reference materials to Amgen and $3.1 millionfor reimbursements of FTEs and other costs.We anticipate that our expenditures relating to the research and development of compounds in our cardiac muscle contractilityprogram will increase if we participate in the future advancement of omecamtiv mecarbil through clinical development. Our expenditureswill also increase if Amgen terminates development of omecamtiv mecarbil or related compounds and we elect to develop themindependently, or if we elect to co-fund later-stage development of omecamtiv mecarbil or other compounds in our cardiac musclecontractility program under our collaboration and option agreement with Amgen.Skeletal Muscle ContractilityCK-2017357 is the lead potential drug candidate from this program. We are also advancing another compound from this program,CK-2066260, in non-clinical studies intended to enable the filing of an IND in 2011. CK-2017357 and CK-2066260 are structurallydistinct and selective small molecule activators of the fast skeletal sarcomere. These compounds act on fast skeletal muscle troponin.Activation of troponin increases its sensitivity to calcium, leading to an increase in skeletal muscle contractility.Each of CK-2017357 and CK-2066260 has demonstrated encouraging pharmacological activity in preclinical models and, withrespect to CK-2017357, in healthy volunteers and ALS patients. In a recent Phase IIa clinical trial of CK-2017357 in ALS patients,evidence of potentially clinically relevant pharmacodynamic effects was observed. We are evaluating the potential indications for whichCK-2017357 and CK-2066260 may be useful. In March 2010, CK-2017357 received an orphan drug designation from the FDA for thetreatment of ALS. In July 2010, we were awarded a grant in the amount of $2.8 million by the National Institute of NeurologicalDisorders and Stroke, which is intended to support research and development of CK-2017357 for the potential treatment of myastheniagravis for three years. The grant was awarded under the American Recovery and Reinvestment Act of 2009. We recognized47Table of Contentsrevenue of $0.4 million under this grant arrangement in 2010, which we recorded as research and development, grant and other revenues.Early in 2010, we announced data from two Phase I clinical trials evaluating CK-2017357 in healthy volunteers. The first trialestablished a maximum tolerated single dose of CK-2017357 of 2000 mg. Also in this trial, CK-2017357 produced concentration-dependent, statistically significant increases versus placebo in the force developed by the tibialis anterior muscle. CK-2017357 was well-tolerated and no serious adverse events were reported. The second Phase I trial was a study of multiple doses of CK-2017357. At steadystate, both the maximum plasma concentration and the area under the CK-2017357 plasma concentration versus time curve from beforedosing until 24 hours after dosing were generally dose-proportional. In general, systemic exposure to CK-2017357 in this trial was highand inter-subject variability was low. In addition, these multiple-dose regimens of CK-2017357 were well-tolerated, and no seriousadverse events were reported.We have initiated three “evidence of effect” Phase IIa clinical trials of CK-2017357: one trial in patients with ALS, which wascompleted in December 2010, one ongoing trial in patients with symptoms of claudication associated with peripheral artery disease(“PAD”), and one ongoing trial in patients with generalized myasthenia gravis. Our evidence of effect clinical trials are randomized,double-blind, placebo-controlled, three-period cross-over studies of single doses of CK-2017357 intended to translate the mechanism ofaction of CK-2017357, as demonstrated pharmacodynamically in healthy volunteers, to patients with impaired muscle function andpotentially to establish statistically significant and clinically relevant evidence of pharmacodynamic effects. These trials may then formthe basis for larger clinical trials designed to demonstrate proof of concept.In April 2010, we initiated and in December 2010, we completed a Phase IIa evidence of effect clinical trial of CK-2017357 in ALSpatients. 67 patients were enrolled in this trial. Results from this trial were presented in December 2010 at the Clinical Trials Session atthe 21st International Symposium on ALS/Motor Neurone Diseases. Increases in multiple clinically relevant pharmacodynamicassessments were observed, and the two doses of CK-2017357 administered (250 mg and 500 mg) exhibited dose-proportionalpharmacokinetics. The investigators also concluded that these single doses of CK-2017357 appeared to be safe and generally well-tolerated by the patients in this trial. There were no serious adverse events judged to have been drug-related, and most adverse events wereclassified by the investigators as mild. Most reports of dizziness, the most frequent and most clearly dose-related adverse event in thetrial, were classified as mild and none were determined to be severe. We plan to present additional analyses of the data from this trialduring a Plenary Session at the 63rd Annual Meeting of the American Academy of Neurology in April 2011 in Honolulu, Hawaii.In June 2010, we initiated a Phase IIa evidence of effect clinical trial of CK-2017357 in patients with symptoms of claudicationassociated with PAD. At least 36 and up to 72 patients may be enrolled in this trial. The dose levels originally administered in this trialwere 375 mg and 750 mg. In October 2010, we conducted an interim review of data from this trial that suggested potentialpharmacodynamic activity of CK-2017357 to increase skeletal muscle performance in these patients. In addition, this review suggestedthat single oral doses of CK-2017357 were generally well-tolerated by most patients in this trial. However, serious adverse events werereported by two patients: dizziness and mental confusion in one and dizziness and dyskinesia (or abnormal movements) in the other.Both patients required inpatient observation until their symptoms resolved. These events were not life-threatening and appeared to resolvespontaneously and completely without any additional treatment. Following these observations, the protocol was amended to lower the750 mg dose to 500 mg. We are continuing to conduct this trial and anticipate that data will be available from this trial in the first half of2011.In January 2011, we initiated our third Phase IIa evidence of effect clinical trial of CK-2017357 in patients with generalizedmyasthenia gravis. At least 36 and up to 78 patients may be enrolled in this trial. Patients receive a single oral doses of placebo or 250 mgor 500 mg of CK-2017357. The primary objective of this trial is to assess the effects of CK-2017357 on measures of muscle strength,muscle fatigue and pulmonary function. The secondary objectives of this clinical trial are to evaluate and characterize the relationship, ifany, between the doses and plasma concentrations of CK-2017357 and its pharmacodynamic effects; to evaluate the safety andtolerability of CK-2017357 administered as single doses to patients with myasthenia gravis; and to evaluate the effect of CK-2017357 oninvestigator- and patient-determined global functional assessment and the Modified MG Symptom Score, an assessment combiningpatient reports and physician evaluations to assess the severity of symptoms due to48Table of Contentsmyasthenia gravis. We are continuing to conduct this trial, and anticipate that data will be available from this trial by the end of 2011.In the first half of 2011, we anticipate initiating a Phase I drug-drug interaction clinical trial of CK-2017357 administered orally tohealthy volunteers. This trial is intended to evaluate the effects of CK-2017357 on the pharmacokinetics of riluzole and other drugs aswell as the pharmacokinetics of CK-2017357 when administered after a meal and when fasting.In the first half of 2011, we anticipate initiating a Phase II multi-dose, safety, tolerability, pharmacokinetic and pharmacodynamicclinical trial of CK-2017357 in ALS patients. This trial is expected to evaluate patients receiving daily oral doses of CK-2017357 for upto 14 days. The primary objective of this trial will be to evaluate the safety and tolerability of multiple doses of CK-2017357 in patientswith ALS. In addition, patients will be asked to report their ALS symptoms using the ALS Functional Rating Scale-Revised (ALSFRS-R). Patients will also undergo tests of muscle fatigability, certain indices of pulmonary function, and patients’ and investigators’ globalstatus assessments. This Phase II trial may be initiated after we have completed the initial part of the Phase I drug-drug interaction trial,which will focus on drug-drug interaction between riluzole and CK-2017357.We anticipate that, in the first half of 2011, we will file an IND with the FDA to perform a Phase I, first-time-in humans clinicaltrial CK-2066260. We also anticipate initiating a first-in-humans Phase I clinical trial of CK-2066260 in healthy volunteers in thesecond half of 2011.CK-2017357 and CK-2066260 are at too early a stage of development for us to predict if or when we will be in a position to generateany revenues or material net cash flows from its commercialization. We currently fund all research and development costs associated withthis program. We recorded research and development expenses for activities relating to our skeletal muscle contractility program ofapproximately $29.1 million, $17.5 million and $10.5 million in the years ended December 31, 2010, 2009 and 2008, respectively. Weanticipate that our expenditures relating to the research and development of compounds in our skeletal muscle contractility program willincrease significantly if and as we advance CK-2017357, CK-2066260 or other compounds from this program into and throughdevelopment.Smooth Muscle ContractilityOur smooth muscle contractility program is focused on the discovery and development of small molecule smooth muscle myosininhibitors which may be useful as potential treatments for diseases and conditions associated with excessive smooth muscle contraction,and leverages our expertise in muscle function and its application to drug discovery. Our inhaled smooth muscle myosin inhibitors havedemonstrated pharmacological activity in preclinical models of bronchoconstrictive diseases and may have applications for indicationssuch as asthma or chronic obstructive pulmonary disease. Our smooth muscle myosin inhibitors, administered orally or intravenously,have also demonstrated pharmacological activity in preclinical models of vascular constriction. We intend to continue to conduct non-clinical development of compounds from this program.In May 2010, a poster summarizing non-clinical data regarding our smooth muscle contractility program was presented at theAmerican Thoracic Society’s 2010 International Conference.Our smooth muscle myosin inhibitors are at too early a stage of development for us to predict if or when we will be in a position togenerate any revenues or material net cash flows from their commercialization. We currently fund all research and development costsassociated with this program. We recorded research and development expenses for activities relating to our smooth muscle contractilityprogram of approximately $1.9 million, $5.0 million and $7.3 million in the years ended December 31, 2010, 2009 and 2008,respectively. We anticipate that our expenditures relating to the research and development of compounds in our smooth muscle contractilityprogram will increase significantly if and as we advance compounds from this program into and through development.Mitotic Kinesin InhibitorsWe currently have three drug candidates for the potential treatment of cancer: ispinesib, SB-743921 and GSK-923295. All of thesearose from our earlier research activities directed to the role of the cytoskeleton in cell division49Table of Contentsand were progressed under our strategic alliance with GSK. This strategic alliance was established in 2001 to discover, develop andcommercialize novel small molecule therapeutics targeting mitotic kinesins for applications in the treatment of cancer and other diseases.Mitotic kinesins are a family of cytoskeletal motor proteins involved in the process of cell division, or mitosis. Under this strategicalliance, we focused primarily on two mitotic kinesins: kinesin spindle protein (“KSP”) and centromere-associated protein E (“CENP-E”). Inhibition of KSP or CENP-E interrupts cancer cell division, causing cell death. Ispinesib and SB-743921 are structurally distinctsmall molecules that specifically inhibit KSP. GSK-923295 specifically inhibits CENP-E.In November 2006, we amended our strategic alliance with GSK and assumed responsibility, at our expense, for the continuedresearch, development and commercialization of inhibitors of KSP, including ispinesib and SB-743921, and other mitotic kinesins,other than CENP-E. GSK retained an option to resume responsibility for the development and commercialization of either or both ofispinesib and SB-743921. This option expired at the end of 2008. We agreed with GSK to terminate our strategic alliance effectiveFebruary 28, 2010. We have retained all rights to ispinesib, SB-743921 and GSK-923295, subject to certain royalty obligations toGSK. GSK remains responsible for completing its Phase I clinical trial of GSK-923295 in cancer patients, at its expense. FollowingGSK’s completion of its Phase I clinical trial of GSK-923295, we will be responsible for any further research and development costsassociated with GSK-923295.Each of ispinesib, SB-743921 and GSK-923295 is at too early a stage of development for us to predict if or when we will be in aposition to generate any revenues or material net cash flows from its commercialization. We currently are responsible for all research anddevelopment costs associated with ispinesib and SB-743921. We recorded research and development expenses for activities relating to ourmitotic kinesins oncology program of approximately $1.0 million, $3.6 million and $7.0 million in the years ended December 31, 2010,2009 and 2008, respectively. We received and recognized as revenue, reimbursements from GSK for patent expenses related to our mitotickinesins oncology program of zero, $45,000 and $0.2 million for the years ended December 31, 2010, 2009 and 2008, respectively. Wehave completed the Phase I portion of each of the Phase I/II clinical trials for ispinesib and SB-743921. GSK is completing the currentPhase I clinical trial of GSK-923295. We do not currently intend to conduct any further development of these drug candidates ourselves.We are evaluating strategic alternatives for the future development and commercialization of ispinesib, SB-743921 and GSK-923295with third parties. We may not be able to enter into an agreement regarding such a strategic alternative on acceptable terms, if it all.Development RisksThe successful development of any of our drug candidates is highly uncertain. We cannot estimate with certainty or know the exactnature, timing and costs of the activities necessary to complete the development of any of our drug candidates or the date of completion ofthese development activities due to numerous risks and uncertainties, including, but not limited to: • decisions made by Amgen with respect to the development of omecamtiv mecarbil; • the uncertainty of the timing of the initiation and completion of patient enrollment and treatment in our clinical trials; • the possibility of delays in the collection of clinical trial data and the uncertainty of the timing of the analyses of our clinical trialdata after these trials have been initiated and completed; • our potential inability to obtain additional funding and resources for our development activities on acceptable terms, if at all,including, but not limited to, our potential inability to obtain or retain partners to assist in the design, management, conduct andfunding of clinical trials; • delays or additional costs in manufacturing of our drug candidates for clinical trial use, including developing appropriateformulations of our drug candidates; • the uncertainty of clinical trial results, including variability in patient response; • the uncertainty of obtaining FDA or other foreign regulatory agency approval required for the clinical investigation of our drugcandidates;50Table of Contents • the uncertainty related to the development of commercial scale manufacturing processes and qualification of a commercial scalemanufacturing facility; and • possible delays in the characterization, formulation and manufacture of potential drug candidates.If we fail to complete the development of any of our drug candidates in a timely manner, it could have a material adverse effect onour operations, financial position and liquidity. In addition, any failure by us or our partners to obtain, or any delay in obtaining,regulatory approvals for our drug candidates could have a material adverse effect on our results of operations. A further discussion of therisks and uncertainties associated with completing our programs on schedule, or at all, and certain consequences of failing to do so arediscussed further in the risk factors entitled “We have never generated, and may never generate, revenues from commercial sales of ourdrugs and we may not have drugs to market for at least several years, if ever,” “Clinical trials may fail to demonstrate the desired safetyand efficacy of our drug candidates, which could prevent or significantly delay completion of clinical development and regulatoryapproval” and “Clinical trials are expensive, time-consuming and subject to delay,” and other risk factors.RevenuesOur current revenue sources are limited, and we do not expect to generate any revenue from product sales for several years, if at all.We have recognized revenues from our strategic alliances with Amgen and GSK for license fees and agreed research activities.In December 2006, we entered into our collaboration and option agreement with Amgen, under which we received an upfront, non-refundable, non-exclusive license and technology access fee of $42.0 million. In connection with entering into the agreement, we alsoentered into a common stock purchase agreement with Amgen. In January 2007, we issued 3,484,806 shares of our common stock toAmgen for net proceeds of $32.9 million, of which the $6.9 million purchase premium was recorded as deferred revenue. Through May2009, we amortized the upfront non-exclusive license and technology access fee and stock purchase premium to license revenue ratablyover the maximum term of the non-exclusive license, which was four years. In June 2009, we recognized as revenue the remaining balanceof $21.4 million of the related deferred revenue when Amgen exercised its option, triggering the end of the non-exclusive license period. InJune 2009, we received a non-refundable option exercise fee from Amgen of $50.0 million, which we recognized in revenue as license feesfrom a related party. We may receive additional payments from Amgen upon achieving certain pre-commercialization andcommercialization milestones. Milestone payments are non-refundable and are recognized as revenue when earned, as evidenced by theachievement of the specified milestones and the absence of ongoing performance obligations.We have received reimbursements from Amgen for agreed research and development activities, which we recorded as revenue as therelated expenses were incurred. We may be eligible to receive further reimbursements from Amgen for agreed research and developmentactivities, which we will record as revenue if and when the related expenses are incurred. We record amounts received in advance ofperformance as deferred revenue. Revenues related to the reimbursement of FTEs were based on negotiated rates intended to approximatethe costs for our FTEs.Revenues from GSK in 2006 were based on negotiated rates intended to approximate the costs for our FTEs performing researchunder the strategic alliance and our out-of-pocket expenses, which we recorded as the related expenses were incurred. GSK paid us anupfront licensing fee, which we recognized ratably over the strategic alliance’s initial five-year research term, which ended in June 2006.In 2007, we received a $1.0 million milestone payment from GSK relating to its initiation of a Phase I clinical trial of GSK-923295.Milestone payments are non-refundable and are recognized as revenue when earned, as evidenced by achievement of the specifiedmilestones and the absence of ongoing performance obligations. We record amounts received in advance of performance as deferredrevenue. The revenues recognized to date are non-refundable, even if the relevant research effort is not successful. In December 2008,GSK’s option to license ispinesib and SB-743291 expired and all rights to these drug candidates remain with us under the collaborationand license agreement, subject to our royalty obligations to GSK. We agreed with GSK to terminate this strategic alliance, effectiveFebruary 28, 2010. We have retained all rights to develop and commercialize ispinesib, SB-743921 and GSK-923295, subject to certainroyalty obligations to GSK.51Table of ContentsBecause a substantial portion of our revenues for the foreseeable future will depend on achieving development and other pre-commercialization milestones under our strategic alliance with Amgen, our results of operations may vary substantially from year to year.If one or more of our drug candidates is approved for sale as a drug, we expect that our future revenues will most likely be derivedfrom royalties on sales from drugs licensed to Amgen under our strategic alliance and from those licensed to future partners, and fromdirect sales of our drugs. We retain a product-by-product option to co-fund certain Phase III development activities under our strategicalliance with Amgen, thereby potentially increasing our royalties and affording us co-promotion rights in North America. If we exerciseour co-promotion rights under this strategic alliance, we are entitled to receive reimbursement for certain sales force costs we incur insupport of our commercial activities.Research and DevelopmentWe incur research and development expenses associated with both partnered and unpartnered research activities. We expect to incurresearch and development expenses for omecamtiv mecarbil for the potential treatment of heart failure in accordance with agreed uponresearch and development plans with Amgen. We expect to incur research and development expenses for the continued conduct ofpreclinical studies and non-clinical and clinical development for CK-2017357, CK-2066260 and other skeletal sarcomere activators forthe potential treatment of diseases and medical conditions associated with muscle weakness or wasting, preclinical studies and non-clinical development of our smooth muscle myosin inhibitor compounds for the potential treatment of diseases and medical conditionsassociated with bronchoconstriction, vascular constriction, or both, and our research programs in other disease areas.Research and development expenses related to our strategic alliance with GSK consisted primarily of costs related to research andscreening, lead optimization and other activities relating to the identification of compounds for development as mitotic kinesin inhibitorsfor the treatment of cancer. Prior to June 2006, certain of these costs were reimbursed by GSK on an FTE basis. From 2001 throughNovember 2006, GSK funded the majority of the costs related to the clinical development of ispinesib and SB-743921. In November2006, under our amended collaboration and license agreement with GSK, we assumed responsibility for the continued research,development and commercialization of inhibitors of KSP, including ispinesib and SB-743921, and other mitotic kinesins other thanCENP-E, at our sole expense.Research and development expenses related to any development and commercialization activities we elect to fund consist primarily ofemployee compensation, supplies and materials, costs for consultants and contract research and manufacturing, facilities costs anddepreciation of equipment. From our inception through December 31, 2010, we incurred costs of approximately $136.4 million forresearch and development activities relating to our cardiac muscle contractility program, $65.0 million for our skeletal musclecontractility program, $28.3 million for our smooth muscle contractility program, $71.9 million for our mitotic kinesin inhibitorsprogram, $53.7 million for our proprietary technologies and $60.0 million for other research programs.General and Administrative ExpensesGeneral and administrative expenses consist primarily of compensation for employees in executive and administrative functions,including, but not limited to, finance, human resources, legal, business and commercial development and strategic planning. Othersignificant costs include facilities costs and professional fees for accounting and legal services, including legal services associated withobtaining and maintaining patents and regulatory compliance. We expect that general and administrative expenses will increase in 2011.RestructuringIn September 2008, we announced a restructuring plan to realign our workforce and operations in line with a strategic reassessmentof our research and development activities and corporate objectivesWe completed all restructuring activities and recognized all anticipated restructuring charges by December 31, 2009.52Table of ContentsStock CompensationThe following table summarizes stock-based compensation related to stock options, restricted stock awards and employee stockpurchases for 2010, 2009 and 2008 (in thousands): Years Ended December 31, 2010 2009 2008 Research and development $1,871 $2,345 $2,794 General and administrative 2,146 2,561 2,812 Stock-based compensation included in operating expenses $4,017 $4,906 $5,606 As of December 31, 2010, there was $4.8 million of total unrecognized compensation cost related to non-vested stock options grantedunder our stock plans. We expect to recognize that cost over a weighted-average period of 2.5 years. In addition, through 2008, wecontinued to amortize deferred stock-based compensation recorded for stock options granted prior to our initial public offering. Theremaining balance became fully amortized in 2008.Income TaxesWe account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined basedon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year inwhich the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce the deferred taxassets to the amounts expected to be realized. We did not record an income tax provision in the year ended December 31, 2008 because wehad a net taxable loss in that period. We recorded an income tax provision of $150,000 in 2009 due to alternative minimum tax (“AMT”).However, due to the Department of the Treasury’s further guidance clarifying that utilization of the AMT net operating loss (“NOL”) wasnot limited to 90% as part of the 5-year NOL carryback provision brought about by the Worker, Homeownership, and BusinessAssistance Act of 2009, the 2009 AMT liability was reversed in 2010. In addition to the $150,000 benefit related to the AMT liability, wealso recognized a $26,000 benefit related to the monetization of the federal research tax credit for a total benefit of approximately $176,000in 2010.Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net lossessince inception and difficulty in accurately forecasting our future results, we maintained a full valuation allowance on the net deferred taxassets as of December 31, 2010, 2009 and 2008. The valuation allowance was determined pursuant to the accounting guidance for incometaxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not thatdeferred tax assets are recoverable. We intend to maintain a full valuation allowance on the U.S. deferred tax assets until sufficient positiveevidence exists to support reversal of the valuation allowance. The valuation allowance increased by $15.6 million in 2010, decreased by$9.56 million in 2009, and increased by $23.9 million in 2008.We also follow the accounting guidance that defines the threshold for recognizing the benefits of tax return positions in the financialstatements as “more-likely-than-not” to be sustained by the taxing authorities based solely on the technical merits of the position. If therecognition threshold is met, the tax benefit is measured and recognized as the largest amount of tax benefit that, in our judgment, isgreater than 50% likely to be realized. We are currently not undergoing any income tax examinations. In general, the statute of limitationsfor tax liabilities for these years remains open for the purpose of adjusting the amounts of the losses and credits carried forward fromthose years.We had federal net operating loss carryforwards of approximately $329.7 million and state net operating loss carryforwards ofapproximately $174.8 million before federal benefit at December 31, 2010. If not utilized, the federal and state operating losscarryforwards will begin to expire in various amounts beginning 2020 and 2011, respectively. The net operating loss carryforwardsinclude deductions for stock options. When utilized, the portion related to stock option deductions will be accounted for as a credit tostockholders’ equity rather than as a reduction of the income tax provision.We had research credit carryforwards of approximately $9.7 million and $9.5 million for federal and California state income taxpurposes, respectively, at December 31, 2010. If not utilized, the federal carryforwards will expire in various amounts beginning in 2021.The California state credit can be carried forward indefinitely.53Table of ContentsIn general, under Section 382 of the Internal Revenue Code, a corporation that undergoes an ‘ownership change‘ is subject tolimitations on its ability to utilize its pre-change net operating losses and tax credits to offset future taxable income. Our existing netoperating losses and tax credits are subject to limitations arising from previous ownership changes. Future changes in our stockownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Internal Revenue Codeand result in additional limitations. During the year ended December 31, 2007, we conducted a study and determined that we would notbe able to utilize a portion of our federal research credit as a result of such a restriction. Accordingly, we reduced our deferred tax assetsand the corresponding valuation allowance by $0.8 million. As a result, the research credit amount as of December 31, 2007 reflects therestriction on our ability to use the credit.Accounting guidance for income taxes provides that a tax benefit from an uncertain tax position may be recognized when it is morelikely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes,based on the technical merits. It also provides guidance on measurement, derecognition, classification, interest and penalties, accountingin interim periods, disclosure and transition.The unrecognized tax benefits on our research credits are based on our evaluation of the underlying research expenditures. We havereduced the respective deferred tax assets and valuation allowance to reflect the unrecognized tax benefits. These adjustments did not haveany impact on the income tax expense.Interest accrued related to unrecognized tax benefits and penalties were zero for 2010 and 2009. We account for interest related tounrecognized tax benefits and penalties by classifying both as income tax expense in the financial statements in accordance with theaccounting guidance for uncertainty in income taxes. We do not expect our unrecognized tax benefits to change materially over the nexttwelve months.Results of OperationsYears ended December 31, 2010, 2009 and 2008Revenues Increase Years Ended December 31, (Decrease) 2010 2009 2008 2009 2008 (In millions) Research and development revenues from related parties $1.5 $7.1 $0.2 $(5.6) $6.9 Research and development, grant and other revenues 1.1 — — 1.1 — License revenues from related parties — 74.4 12.2 (74.4) 62.2 Total revenues $2.6 $81.5 $12.4 $(78.9) $69.1 We recorded total revenues of $2.6 million, $81.5 million and $12.4 million for the years ended December 31, 2010, 2009 and2008, respectively.Research and development revenues from related parties refers to research and development revenues from our strategic alliances withAmgen and, through 2009, GSK. Research and development revenues from Amgen were $1.5 million in 2010, $7.1 million in 2009 andzero in 2008. Research and development revenues of $1.5 million from Amgen in 2010 represented reimbursements of FTE and out ofpocket expenses. Research and development revenues of $7.1 million from Amgen in 2009 consisted of $4.0 million for the transfer of themajority of our existing inventories of omecamtiv mecarbil and related reference materials, and $3.1 million for FTE and out of pocketexpense reimbursements.Research and development revenues from GSK were zero, $45,000 and $0.2 million in 2010, 2009 and 2008, respectively. Researchand development revenues from GSK in 2009 and 2008 consisted of patent expense reimbursements. In December 2008, GSK’s option tolicense each of ispinesib and SB-743921 as provided under the parties’ collaboration and license agreement expired. Accordingly, weretain all rights to both ispinesib and SB-743921, subject to certain royalty obligations to GSK. In December 2009, we and GSK agreedto terminate the54Table of Contentscollaboration and license agreement, effective February 28, 2010. We have retained all rights to ispinesib, SB-743921, and GSK-923295, subject to certain royalty obligations to GSK.In July 2010, the National Institute of Neurological Disorders and Strokes awarded us a grant to support research and developmentof CK-2017357 directed to the potential treatment for myasthenia gravis for a period of up to three years. We recognized grant revenue of$0.4 million under this grant arrangement in 2010. We are eligible to receive additional funds of up to $2.4 million through 2013 underthis grant.In November 2010, we were notified by the Internal Revenue Service that we would receive total cash grants of $0.7 million based onour applications for certain investments in qualified therapeutic discovery projects under Section 48D of the Internal Revenue Code. Thegrants relate to certain research and development costs we incurred in 2009 in connection with our cardiac, skeletal and smooth musclecontractility programs. We received and recognized as grant revenue $0.7 million under this grant in 2010.License revenues from related parties refers to license revenues from our strategic alliance with Amgen. License revenues were zero,$74.4 million and $12.2 million in 2010, 2009 and 2008, respectively. License revenues for 2009 consisted of the May 2009$50.0 million option exercise fee from Amgen and the recognition of deferred revenue of the remaining $24.4 million related to the 2006upfront non-exclusive license and technology access fee and stock purchase premium from Amgen. License revenue of $12.2 million in2008 consisted of amortization of the 2006 upfront non-exclusive license and technology access fee and stock purchase premium fromAmgen.Deferred revenue related to the Amgen strategic alliance was zero and $0.8 million at December 31, 2010 and 2009, respectively. Thedeferred revenue balance at December 31, 2009 related to Amgen’s prepayment of FTE reimbursements.Research and development expenses Increase Years Ended December 31, (Decrease) 2010 2009 2008 2010 2009 (In millions)Research and development expenses $38.0 $39.8 $54.0 $(1.8) $(14.2)Research and development expenses decreased $1.8 million in 2010 compared to 2009, and decreased $14.2 million in 2009compared to 2008. The decrease in 2010 was primarily due to a decrease of $2.3 million in personnel expenses, partially offset byincreases of $0.3 million in outsourcing costs related to our muscle contractility clinical trial programs and $0.3 million in laboratoryexpenses. The decrease in 2009 was primarily due to decreases in clinical and preclinical outsourcing costs of $9.8 million related to ourcardiac muscle contractility and mitotic kinesin inhibitors clinical trial programs and preclinical outsourcing costs, $2.2 million forpersonnel-related costs and $2.0 million for laboratory and facility related costs.From a program perspective, the decline in research and development spending in 2010 compared to 2009 was due to decreases of$8.3 million for our cardiac muscle contractility program, $3.1 million for our smooth muscle contractility program, $2.6 million forour mitotic kinesin inhibitors program and $1.0 million for our proprietary technologies, partially offset by increases of $11.6 millionfor our skeletal muscle contractility program and $1.6 million for our other research and preclinical programs. The decline in researchand development spending in 2009 compared to 2008 was due to decreases of $11.0 million for our cardiac muscle contractility program,$2.3 million for our smooth muscle contractility program, $3.4 million for our mitotic kinesin inhibitors program, $1.9 million for ourproprietary technologies and $2.6 million for our other research and preclinical programs, partially offset by an increase of $7.0 millionfor our skeletal muscle contractility program.55Table of Contents Increase Years Ended December 31, (Decrease) 2010 2009 2008 2010 2009 (In millions) Cardiac muscle contractility $1.6 $9.9 $20.9 $(8.3) $(11.0)Skeletal muscle contractility 29.1 17.5 10.5 11.6 7.0 Smooth muscle contractility 1.9 5.0 7.3 (3.1) (2.3)Mitotic kinesin inhibitors 1.0 3.6 7.0 (2.6) (3.4)Proprietary technologies — 1.0 2.9 (1.0) (1.9)All other research programs 4.4 2.8 5.4 1.6 (2.6)Total research and development expenses $38.0 $39.8 $54.0 $(1.8) $(14.2)Clinical development timelines, likelihood of success and total completion costs vary significantly for each drug candidate and aredifficult to estimate. We anticipate that we will determine on an ongoing basis which research and development programs to pursue andhow much funding to direct to each program, taking into account the scientific and clinical success of each drug candidate. The lengthyprocess of seeking regulatory approvals and subsequent compliance with applicable regulations requires the expenditure of substantialresources. Any failure by us to obtain and maintain, or any delay in obtaining, regulatory approvals could cause our research anddevelopment expenditures to increase and, in turn, could have a material adverse effect on our results of operations.We expect our research and development expenditures to increase in 2011 compared to 2010. As part of our strategic alliance withAmgen, we expect to continue development of our drug candidate omecamtiv mecarbil for the potential treatment of heart failure. We expectto continue development of our drug candidate CK-2017357 and our potential drug candidate CK-2066260 for the potential treatment ofdiseases and medical conditions associated with muscle weakness or wasting. We expect to continue research and development of oursmooth muscle myosin inhibitor compounds, which may be useful for the potential treatment of diseases and medical conditionsassociated with bronchoconstriction or vasoconstriction. We anticipate that research and development expenses for 2011 will be in therange of $42.0 million to $47.0 million. Non-cash expenses such as stock-based compensation and depreciation of approximately$2.5 million are included in our estimate of 2011 research and development expenses.General and administrative expenses Increase Years Ended December 31, (Decrease) 2010 2009 2008 2010 2009 (In millions)General and administrative expenses $14.2 $15.6 $15.1 $(1.4) $0.5 General and administrative expenses decreased $1.4 million in 2010 compared with 2009, and increased $0.5 million in 2009compared with 2008. The decrease in 2010 was primarily due to lower personnel expenses of $1.3 million. The increase in 2009 wasprimarily due to an increase in personnel expenses of $1.2 million, partially offset by a decrease in legal expenses of $0.7 million. The$1.2 million increase in personnel expense in 2009 was primarily due to no employee bonuses being paid for 2008 and a special bonustotaling $1.5 million being paid to all employees in July 2009 in recognition of our employees’ contributions which resulted both inAmgen exercising its option for an exclusive license to omecamtiv mecarbil and related compounds and in our closing of the registereddirect equity offering in 2009, partially offset by decreases in salaries and stock-based compensation.We expect that general and administrative expenses will increase in 2011. We anticipate general and administrative expenses to be inthe range of $15.0 million to $17.0 million. Non-cash expenses such as stock-based compensation and depreciation of approximately$2.3 million are included in our estimate of 2011 general and administrative expenses.56Table of ContentsInterest and Other, netComponents of Interest and Other, net are as follows: Increase (Decrease) in Interest and Other Years Ended December 31, Income, Net 2010 2009 2008 2010 2009 (In millions) Unrealized gain (loss) on auction rate securities (“ARS”) (Note 3 and Note 4) $2.4 $1.0 $(3.4) $1.4 $4.4 Unrealized gain (loss) on investment put option related to ARS Rights (Note 3and Note 4) (2.4) (1.0) 3.4 (1.4) (4.4)Warrant expense — (1.6) — 1.6 (1.6)Interest income and other income 0.4 0.6 3.2 (0.2) (2.6)Interest expense and other expense (0.2) (0.4) (0.5) 0.2 0.1 Interest and Other, net $0.2 $(1.4) $2.7 $1.6 $(4.1)Investments that we designate as trading securities are reported at fair value, with gains or losses resulting from changes in fair valuerecognized in earnings and included in Interest and Other, net. We classified our investments in ARS as trading securities as ofDecember 31, 2009 and 2008.Warrant expense of $1.6 million for 2009 is related to the change in the fair value of the warrant liability in connection with ourregistered direct equity offering in May 2009.Interest income and other income consists primarily of interest income generated from our cash, cash equivalents and investments.Interest income and other income decreased in 2010 compared to 2009, and in 2009 compared to 2008, primarily due to lower marketinterest rates earned on our investments.Interest expense and other expense primarily consists of interest expense on borrowings under our equipment financing lines and, for2009 and 2010, interest expense on our loan with UBS Bank USA that originated in January 2009. The decreases in interest and otherexpense in 2010 compared to 2009, and in 2009 compared to 2008, were primarily due to lower outstanding balances on our equipmentfinancing lines, partially offset by interest on our loan with UBS.Liquidity and Capital ResourcesFrom August 5, 1997, our date of inception, through December 31, 2010, we funded our operations through the sale of equitysecurities, equipment financings, non-equity payments from collaborators, government grants and interest income.Our cash, cash equivalents and investments, excluding restricted cash, totaled $72.8 million at December 31, 2010, down from$114.7 million including ARS and the investment put option related to ARS Rights at December 31, 2009. See Note 3, “Cash Equivalentsand Investments” in the Notes to Financial Statements for further discussion of Investments in Auction Rate Securities and InvestmentPut Option Related to Auction Rate Securities Rights. The decrease of $41.9 million primarily resulted from our net loss of $49.3 millionand the repayment of $10.2 million on our loan with UBS, partially offset by $14.0 million net proceeds from the 2007 committed equityfinancing facility with Kingsbridge.We have received net proceeds from the sale of equity securities of $350.3 million from August 5, 1997, the date of our inception,through December 31, 2010, excluding sales of equity to GSK and Amgen. Included in these proceeds are $94.0 million received uponclosing of the initial public offering of our common stock in May 2004. In connection with execution of our collaboration and licenseagreement in 2001, GSK made a $14.0 million equity investment in Cytokinetics. GSK made additional equity investments inCytokinetics in 2003 and 2004 of $3.0 million and $7.0 million, respectively.57Table of ContentsIn 2005, we entered into our first committed equity financing facility with Kingsbridge pursuant to which Kingsbridge committed tofinance up to $75.0 million of capital for a three-year period. Subject to certain conditions and limitations, from time to time under thiscommitted equity financing facility, at our election, Kingsbridge purchased newly-issued shares of our common stock at a price between90% and 94% of the volume weighted average price on each trading day during an eight-day, forward-looking pricing period.We received gross proceeds from draw downs and sales of our common stock to Kingsbridge under this facility as follows: 2005 —gross proceeds of $5.7 million from the sale of 887,576 shares, before offering costs of $178,000; 2006 — gross proceeds of$17.0 million from the sale of 2,740,735 shares; and 2007 — gross proceeds of $9.5 million from the sale of 2,075,177 shares. Nofurther draw downs are available to us under the 2005 Kingsbridge committed equity financing facility.In October 2007, we entered into a new committed equity financing facility with Kingsbridge, pursuant to which Kingsbridgecommitted to finance up to $75.0 million of capital for a three-year period. In October 2010, the 2007 committed equity financing facilitywas amended to extend its expiration date until the first to occur of March 31, 2011 or the purchase by Kingsbridge of the maximumnumber of shares under the CEFF. Subject to certain conditions and limitations, which include a minimum volume-weighted averageprice of $2.00 for our common stock, from time to time under this facility, at our election, Kingsbridge is committed to purchase newly-issued shares of our common stock at a price between 90% and 94% of the volume- weighted average price on each trading day during aneight-day, forward-looking pricing period. The maximum number of shares we may issue in any pricing period is the lesser of 2.5% ofour market capitalization immediately prior to the commencement of the pricing period or $15.0 million. As part of this arrangement, weissued a warrant to Kingsbridge to purchase 230,000 shares of our common stock at a price of $7.99 per share, which represents apremium over the closing price of our common stock on the date we entered into this facility. This warrant became exercisable beginningsix months after the October 2007 issuance date and will remain exercisable for a period of three years thereafter. We may sell a maximumof 9,779,411 shares under this facility (exclusive of the shares underlying the warrant). Under the rules of the NASDAQ Stock MarketLLC, this is approximately the maximum number of shares we may sell to Kingsbridge without our stockholders’ approval. Thisrestriction limits the amount of proceeds we are able to obtain from this committed equity financing facility. We are not obligated to sellany of the $75.0 million of common stock available under this facility and there are no minimum commitments or minimum usepenalties. The committed equity financing facility does not contain any restrictions on our operating activities, any automatic pricingresets or any minimum market volume restrictions. In 2009, we received gross proceeds of $6.9 million by selling 3,596,728 shares ofour common stock to Kingsbridge under the 2007 committed equity financing facility, before offering costs of $0.1 million. In 2010, wereceived gross proceeds of $14.0 million by selling 5,339,819 shares of our common stock to Kingsbridge under the facility. As ofMarch 10, 2011, up to 842,864 shares of our common stock remain available for sale under the 2007 committed equity financingfacility.In January 2007, we received a $42.0 million upfront license fee from Amgen in connection with our entry into our collaboration andoption agreement in December 2006. Contemporaneously with entering into this agreement, we entered into a common stock purchaseagreement with Amgen under which Amgen purchased 3,484,806 shares of our common stock at a price per share of $9.47, including apremium of $1.99 per share, and an aggregate purchase price of approximately $33.0 million. After deducting the offering costs, wereceived net proceeds of approximately $32.9 million. These shares were issued, and the related proceeds received, in January 2007. InJune 2009, we received a $50.0 million option exercise fee from Amgen.In May 2009, pursuant to a registered direct equity offering, we entered into subscription agreements with selected institutionalinvestors to sell an aggregate of 7,106,600 units for a price of $1.97 per unit. Each unit consisted of one share of our common stock andone warrant to purchase 0.50 shares of our common stock. Accordingly, a total of 7,106,600 shares of common stock and warrants topurchase 3,553,300 shares of common stock were issued and sold in this offering. The gross proceeds of the offering were $14.0 million.In connection with the offering, we paid placement agent fees to two registered broker-dealers totaling $0.8 million. After deducting theplacement agent fees and the offering costs, we received net proceeds of approximately $12.9 million from the offering.As of December 31, 2010, we have received $100.6 million in non-equity payments from Amgen and $54.5 million in non-equitypayments from GSK.58Table of ContentsUnder equipment financing arrangements, we received $23.7 million from August 5, 1997, the date of our inception, throughDecember 31, 2010. Interest earned on investments, excluding non-cash amortization/accretion of purchase premiums/discounts, was$1.4 million, $1.6 million and $2.9 million in 2010, 2009 and 2008, respectively, and $29.3 million from August 5, 1997, the date ofour inception, through December 31, 2010.Net cash used in operating activities was $44.8 million in 2010 and primarily resulted from our net loss of $49.3 million less$4.0 million of non-cash stock-based compensation expense. Net cash provided by operations was $8.4 million in 2009 and primarilyresulted from net income of $24.5 million, partially offset by a $23.7 million decrease in deferred revenue. Net income in the periodprimarily resulted from the recognition of $74.4 million of license revenue and $7.1 million of research and development revenue fromAmgen, partially offset by cash operating expenses. We had no deferred revenue at December 31, 2010, compared to a balance of$0.8 million as of December 31, 2009. The balance of deferred revenue at December 31, 2009 consisted of Amgen’s prepayments of FTEreimbursements. Net cash used by operating activities in 2008 was $61.3 million and primarily resulted from our net loss of$56.4 million. Deferred revenue decreased $12.1 million in 2008 to $24.5 million at December 31, 2008 from $36.6 million atDecember 31, 2007. The decrease was primarily due to the $12.2 million amortization of deferred Amgen license revenue.Net cash provided by investing activities in 2010 was $34.2 million and primarily consisted of proceeds from sales and maturitiesof investments (including ARS), net of cash used to purchase investments, of $33.8 million. Net cash used in investing activities was$53.5 million in 2009 and primarily represented cash used to purchase investments, net of proceeds from the maturity of investments(including ARS), of $54.1 million. Restricted cash totaled $0.8 million at December 31, 2010, down from $1.7 million at December 31,2009, with the decrease due to the contractual semi-annual reductions in the amount of security deposit required by General ElectricCapital Corporation (“GE Capital”) in connection with our equipment financing credit lines. Net cash used in investing activities was$10.0 million in 2008 and primarily represented cash used in purchase of investments, net of proceeds from the maturity of investments,of $11.9 million. Restricted cash totaled $2.8 million at December 31, 2008, down from $5.2 million at December 31, 2007. Thisdecrease was due to the contractual semi-annual reduction in the amount of security deposit required by GE Capital in connection withour equipment financing credit lines.Net cash provided by financing activities was $2.5 million in 2010 and primarily consisted of proceeds from drawdowns under our2007 committed equity financing facility with Kingsbridge of $14.0 million, net of issuance costs, partially offset by repayments of ourloan with UBS of $10.2 million. Net cash provided by financing activities was $28.8 million in 2009 and primarily consisted of netproceeds from our May 2009 registered direct equity offering of $12.9 million, proceeds from our loan from UBS Bank USA of$12.4 million, and drawdowns under our 2007 committed equity financing facility with Kingsbridge of $6.8 million, net of issuancecosts. Net cash used in financing activities was $3.5 million in 2008 and primarily represented principal payments of $4.1 million onour equipment financing credit lines with GE Capital.Auction Rate Securities (“ARS”). Our short-term investments at December 31, 2009 included (at par value) $17.9 million ofARS. These ARS were intended to provide liquidity via an auction process that reset the applicable interest rate at predetermined calendarintervals, allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests. With the liquidityissues experienced in global credit and capital markets, these ARS experienced multiple failed auctions beginning in February 2008, as theamount of securities submitted for sale exceeded the amount of purchase orders. As a result, the ARS ceased to be liquid.The fair values of the ARS as of December 31, 2009 were estimated utilizing a discounted cash flow analysis. The fair value of ourinvestments in ARS as of December 31, 2009 was determined to be $15.5 million. Changes in the fair value of the ARS, excluding thesale of ARS, were recognized in current period earnings in Interest and Other, net. Accordingly, in the year ended December 31, 2010, werecognized unrealized gains of $2.4 million on our ARS to reflect the change in fair value, and the sale of $17.9 million of our ARS at parvalue. In the year ended December 31, 2009, we recognized unrealized gains of $1.0 million on our ARS to reflect the change in fair valueand the sale of $2.1 million of ARS at par value.In connection with the failed auctions of our ARS, which were marketed and sold by UBS AG and its affiliates, in October 2008,we accepted a settlement with UBS AG pursuant to which UBS AG issued to us the Series C-2 Auction Rate Securities Rights (the “ARSRights”). The ARS Rights provided us the right to receive the par value of59Table of Contentsour ARS, i.e., the liquidation preference of the ARS plus accrued but unpaid interest at any time between June 30, 2010 and July 2, 2012.The enforceability of the ARS Rights resulted in a put option, which we recognized as a separate freestanding instrument that wasaccounted for separately from the ARS. As of December 31, 2009, we recorded $2.4 million as the fair value of the investment put optionrelated to the ARS Rights, classified in short-term assets on the balance sheet. On June 30, 2010, we exercised the ARS Rights, requiringthat UBS AG purchase our remaining outstanding ARS at par value of $7.5 million. Accordingly, on the settlement date of July 1, 2010,UBS AG deposited the proceeds of $7.5 million into our money market account. The investment put option related to the ARS Rights wasextinguished at that time.In connection with the settlement with UBS AG relating to our ARS, we entered into a loan agreement with UBS Bank USA andUBS Financial Services Inc. On January 5, 2009, we borrowed approximately $12.4 million under the loan agreement, with our ARSheld in accounts with UBS Financial Services, Inc. as collateral. As of June 2010, the remaining balance of the loan with UBS was fullyrepaid.See Note 3, “Cash Equivalents and Investments” and Note 4, “Fair Value Measurements” in the Notes to Financial Statements forfurther discussion of Investments in Auction Rate Securities and Investment Put Option Related to Auction Rate Securities Rights.Shelf Registration Statement. In November 2008, we filed a shelf registration statement with the SEC, which was declared effectivein November 2008. The shelf registration statement allows us to issue shares of our common stock from time to time for an aggregateinitial offering price of up to $100 million. As of March 10, 2011, $76.2 million remains available to us under this shelf registrationstatement, assuming all outstanding warrants are exercised in cash. The specific terms of offerings, if any, under the shelf registrationstatement would be established at the time of such offerings.As of December 31, 2010, future minimum payments under our loan and lease obligations were as follows (in thousands): Within One to Three to After One Year Three Years Five Years Five Years Total Operating lease(1) $2,950 $5,890 $6,555 $8,826 $24,221 Equipment financing line 833 152 — — 985 Total $3,783 $6,042 $6,555 $8,826 $25,206 (1)Our long-term commitment under operating lease relates to payments under our facility lease in South San Francisco, California,which expires in 2018.In future periods, we expect to incur substantial costs as we continue to expand our research programs and related research anddevelopment activities. We plan to continue to support the clinical development of our cardiac muscle myosin activator omecamtivmecarbil for the potential treatment of heart failure and research of potential next-generation compounds as part of our strategic alliancewith Amgen. We plan to continue clinical development of our fast skeletal troponin activator CK-2017357 for the potential treatment ofdiseases and conditions related to skeletal muscle weakness or wasting. We plan to continue to conduct non-clinical development of ourfast skeletal troponin activator CK-2066260 and, following clearance of an IND, clinical development. We plan to progress one or moreof our smooth muscle myosin inhibitor compounds through non-clinical and clinical development. We expect to incur significant researchand development expenses as we advance the research and development of our other compounds from our muscle contractility programsthrough research to candidate selection.Our future capital uses and requirements depend on numerous factors. These factors include, but are not limited to, the following: • the initiation, progress, timing, scope and completion of preclinical research, non-clinical development and clinical trials for ourdrug candidates and potential drug candidates; • the time and costs involved in obtaining regulatory approvals;60Table of Contents • delays that may be caused by requirements of regulatory agencies; • Amgen’s decisions with regard to funding of development and commercialization of omecamtiv mecarbil or other compounds forthe potential treatment of heart failure under our collaboration; • our level of funding for the development of current or future drug candidates; • the number of drug candidates we pursue; • the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims; • our ability to establish and maintain selected strategic alliances required for the development of drug candidates andcommercialization of our potential drugs; • our plans or ability to expand our drug development capabilities, including our capabilities to conduct clinical trials for our drugcandidates; • our plans or ability to establish sales, marketing or manufacturing capabilities and to achieve market acceptance for potentialdrugs; • the expansion and advancement of our research programs; • the hiring of additional employees and consultants; • the expansion of our facilities; • the acquisition of technologies, products and other business opportunities that require financial commitments; and • our revenues, if any, from successful development of our drug candidates and commercialization of potential drugs.We believe that our existing cash and cash equivalents, investments and interest earned on investments will be sufficient to meet ourprojected operating requirements for at least the next 12 months.If, at any time, our prospects for internally financing our research and development programs decline, we may decide to reduceresearch and development expenses by delaying, discontinuing or reducing our funding of development of one or more of our drugcandidates or potential drug candidates or of other research and development programs. Alternatively, we might raise funds throughstrategic relationships, public or private financings or other arrangements. There can be no assurance that funding, if needed, will beavailable on attractive terms, or at all, or in accordance with our planned timelines. Furthermore, financing obtained through futurestrategic relationships may require us to forego certain commercialization and other rights to our drug candidates. Similarly, anyadditional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Ourfailure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our businessstrategy.Off-balance Sheet ArrangementsAs of December 31, 2010, we did not have any relationships with unconsolidated entities or financial partnerships, such as entitiesoften referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involvingnon-exchange traded contracts. Therefore, we are not materially exposed to financing, liquidity, market or credit risk that could arise if wehad engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from theirnon-independent relationship with us or our related parties.61Table of ContentsCritical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations are based on our financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financialstatements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and relateddisclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experienceand on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimatesunder different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to ourfinancial statements included in this Form 10-K, we believe the following accounting policies to be critical to the judgments and estimatesused in the preparation of our financial statements.InvestmentsAvailable-for-sale and trading investments. Our investments have consisted of ARS, municipal and government agency bonds,commercial paper, U.S. government treasury securities, and money market funds. We designated all investments, except for our ARSheld by UBS, as available-for-sale. Therefore, they are reported at fair value, with unrealized gains and losses recorded in accumulatedother comprehensive income. During the fourth quarter of fiscal year 2008, we reclassified our ARS held by UBS from available-for-saleto trading securities. Investments that we designate as trading assets are reported at fair value, with gains or losses resulting from changesin fair value recognized in earnings. See “Notes to Financial Statements — Note 3 — Cash Equivalents and Investments” for furtherdetailed discussion. Investments with original maturities greater than three months and remaining maturities less than one year areclassified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments.Other-than-temporary impairment. All of our available-for-sale investments are subject to a periodic impairment review. Werecognize an impairment charge when a decline in the fair value of our investments below the cost basis is judged to beother-than-temporary. Factors considered by management in assessing whether an other-than-temporary impairment has occurred include:the nature of the investment; whether the decline in fair value is attributable to specific adverse conditions affecting the investment; thefinancial condition of the investee; the severity and the duration of the impairment; and whether we have the intent and ability to hold theinvestment to maturity. When we determine that an other-than-temporary impairment has occurred, the investment is written down to itsmarket value at the end of the period in which we determine that an other-than-temporary decline occurred. The amortized cost of debtsecurities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is includedin interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-salesecurities are included in other income or expense. The cost of securities sold is based on the specific identification method. Interest anddividends on securities classified as available-for-sale are included in Interest and Other, net.Revenue RecognitionWe recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists; delivery has occurredor services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. Determination of whetherpersuasive evidence of an arrangement exists and whether delivery has occurred or services have been rendered are based onmanagement’s judgments regarding the fixed nature of the fee charged for research performed and milestones met, and the collectability ofthose fees. Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenuerecognized for any reporting period could be adversely affected.Research and development revenues, which are earned under agreements with third parties for agreed research and developmentactivities, may include non-refundable license fees, research and development funding, cost reimbursements and contingent milestonesand royalties. Our revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met,including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of thefair value of the undelivered items. The consideration we receive is allocated among the separate units based on their respective fair62Table of Contentsvalues, and the applicable revenue recognition criteria are applied to each of the separate units. Non-refundable license fees are recognizedas revenue as we perform under the applicable agreement. Where the level of effort is relatively consistent over the performance period, werecognize total fixed or determined revenue on a straight-line basis over the estimated period of expected performance.We recognize milestone payments as revenue upon achievement of the milestone, provided the milestone payment is non-refundable,substantive effort and risk is involved in achieving the milestone and the amount of the milestone is reasonable in relation to the effortexpended or risk associated with the achievement of the milestone. If these conditions are not met, we defer the milestone payment andrecognize it as revenue over the estimated period of performance under the contract as we complete our performance obligations.Research and development revenues and cost reimbursements are based upon negotiated rates for our FTEs and actual out-of-pocketcosts. FTE rates are negotiated rates that are based upon our costs, and which we believe approximate fair value. Any amounts received inadvance of performance are recorded as deferred revenue. None of the revenues recognized to date are refundable if the relevant researcheffort is not successful. In revenue arrangements in which both parties make payments to each other, we evaluate the payments todetermine whether payments made by us will be recognized as a reduction of revenue or as expense. Revenue we recognize may be reducedby payments made to the other party under the arrangement unless we receive a separate and identifiable benefit in exchange for thepayments and we can reasonably estimate the fair value of the benefit received.Funds received from third parties under grant arrangements are recorded as revenue if we are deemed to be the principal participantin the grant arrangement as the activities under the grant are part of our development programs. If we are not the principal participant, thegrant funds are recorded as a reduction to research and development expense. Grant funds received are not refundable and are recognizedwhen the related qualified research and development costs are incurred and when there is reasonable assurance that the funds will bereceived. Funds received in advance are recorded as deferred revenue.Preclinical Study and Clinical Trial AccrualsA substantial portion of our preclinical studies and all of our clinical trials have been performed utilizing third-party contractresearch organizations (“CROs”) and other vendors. For preclinical studies, the significant factors used in estimating accruals include thepercentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used inestimating accruals include the number of patients enrolled, duration of enrollment and percentage of work completed to date. We monitorpatient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings withCROs and review of contractual terms. Our estimates are dependent on the timeliness and accuracy of data provided by our CROs andother vendors. If we have incomplete or inaccurate data, we may under-or overestimate activity levels associated with various studies orclinical trials at a given point in time. In this event, we could record adjustments to research and development expenses in future periodswhen the actual activity levels become known. No material adjustments to preclinical study and clinical trial expenses have beenrecognized to date.Stock-Based CompensationWe apply the accounting guidance for stock compensation, which establishes the accounting for share-based payment awards madeto employees and directors, including employee stock options and employee stock purchases. Under this guidance, stock-basedcompensation cost is measured at the grant date based on the calculated fair value of the award, and is recognized as an expense on astraight-line basis over the employee’s requisite service period, generally the vesting period of the award.Under the guidance for stock compensation for non-employees, we measure the fair value of the award each period until the award isfully vested.As required under the accounting rules, we review our valuation assumptions at each grant date and, as a result, from time to timewe will likely change the valuation assumptions we use to value stock based awards granted in future periods. The assumptions used incalculating the fair value of share-based payment awards represent management’s best estimates at the time, but these estimates involveinherent uncertainties and the application of63Table of Contentsmanagement judgment. As a result, if conditions change and we use different assumptions, our stock-based compensation expense couldbe materially different in the future. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for thoseshares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense couldbe significantly different from what we have recorded in the current period.Income taxesWe account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined basedon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year inwhich the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce the deferred taxassets to the amounts expected to be realized. We did not record an income tax provision in the year ended December 31, 2008 because wehad a net taxable loss in that period. We recorded an income tax provision of $150,000 in 2009 due to alternative minimum tax (“AMT”).However, due to the Department of the Treasury’s further guidance clarifying that utilization of the AMT net operating loss (“NOL”) wasnot limited to 90% as part of the 5-year NOL carryback provision brought about by the Worker, Homeownership, and BusinessAssistance Act of 2009, the 2009 AMT liability was reversed in 2010. In addition to the $150,000 benefit related to the AMT liability, wealso recognized a $26,000 benefit related to the monetization of the federal research tax credit for a total benefit of approximately $176,000in 2010.Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net lossessince inception and difficulty in accurately forecasting our future results, we maintained a full valuation allowance on the net deferred taxassets as of December 31, 2010, 2009 and 2008. The valuation allowance was determined pursuant to the accounting guidance for incometaxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not thatdeferred tax assets are recoverable. We intend to maintain a full valuation allowance on the U.S. deferred tax assets until sufficient positiveevidence exists to support reversal of the valuation allowance. The valuation allowance increased by $15.6 million in 2010, decreased by$9.56 million in 2009, and increased by $23.9 million in 2008.We also follow the accounting guidance that defines the threshold for recognizing the benefits of tax return positions in the financialstatements as “more-likely-than-not” to be sustained by the taxing authorities based solely on the technical merits of the position. If therecognition threshold is met, the tax benefit is measured and recognized as the largest amount of tax benefit that, in our judgment, isgreater than 50% likely to be realized. We are currently not undergoing any income tax examinations. In general, the statute of limitationsfor tax liabilities for these years remains open for the purpose of adjusting the amounts of the losses and credits carried forward fromthose years.Interest accrued related to unrecognized tax benefits and penalties were zero for 2010 and 2009. We account for interest related tounrecognized tax benefits and penalties by classifying both as income tax expense in the financial statements in accordance with theaccounting guidance for uncertainty in income taxes. We do not expect our unrecognized tax benefits to change materially over the nexttwelve months.Recent Accounting PronouncementsSee “Recent Accounting Pronouncements” in Note 1, “Organization and Significant Accounting Policies” in the Notes to FinancialStatements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and theirexpected impact on our financial position and results of operations.Item 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate and Market RiskOur exposure to market risk is limited to interest rate sensitivity, which is affected by changes in the general level of U.S. interestrates, particularly because the majority of our investments are in short-term debt securities. The primary objective of our investmentactivities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We areexposed to the impact of interest rate changes and changes in the market values of our investments. Our interest income is sensitive tochanges in the general level of64Table of ContentsU.S. interest rates. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have notused derivative financial instruments in our investment portfolio. We invest the majority of our excess cash in U.S. Treasuries and, bypolicy, limit the amount of credit exposure in any one issuer and investment class, with the exception of obligations of the U.S. Treasuryand federal agencies, for which there are no such limits. We protect and preserve our invested funds by attempting to limit default, marketand reinvestment risk. Investments in both fixed-rate and floating-rate interest-earning instruments carry a degree of interest rate risk.Fixed-rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating-rate securities mayproduce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short ofexpectations due to changes in interest rates.To minimize risk, we maintain our portfolio of cash and cash equivalents and short- and long-term investments in a variety ofinterest-bearing instruments, including U.S. government and agency securities, high grade municipal and U.S. bonds and money marketfunds. Our investment portfolio of short- and long-term investments is subject to interest rate risk, and will fall in value if market interestrates increase.Our cash and cash equivalents are invested in highly liquid securities with maturities of three months or less at the time of purchase.Consequently, we do not consider our cash and cash equivalents to be subject to significant interest rate risk and have therefore excludedthem from the table below. On the liability side, our equipment financing lines carry fixed interest rates and therefore also may be subjectto changes in fair value if market interest rates fluctuate. We do not have any foreign currency or derivative financial instruments.The table below presents the principal amounts and weighted average interest rates by year of maturity for our equipment financinglines and investment portfolio (dollars in thousands): Fair Value at December 31, 2011 2012 2013 Beyond 2013 Total 2010 Assets: Investments $54,125 $1,206 — — $55,331 $55,331 Average interest rate 0.28% 0.42% — — 0.29% Liabilities: Equipment financing lines $833 $152 — — $985 $947 Average interest rate 7.31% 7.25% — — 7.30% 65Table of ContentsItem 8. Financial Statements and Supplementary DataCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 67 Balance Sheets 68 Statements of Operations 69 Statements of Stockholders’ Equity (Deficit) 70 Statements of Cash Flows 74 Notes to Financial Statements 75 66Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Cytokinetics, Incorporated:In our opinion, the accompanying balance sheets and the related statement of operations, stockholders’ equity (deficit) and cashflows present fairly, in all material respects, the financial position of Cytokinetics, Incorporated at December 31, 2010 and December 31,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010 andcumulatively, for the period from August 5, 1997 (date of inception) to December 31, 2010 in conformity with accounting principlesgenerally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effectiveinternal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s managementis responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control overFinancial Reporting under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internalcontrol over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement and whether effective internal control over financialreporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also includedperforming such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basisfor our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financialstatements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ PRICEWATERHOUSECOOPERS LLPSan Jose, CAMarch 10, 201167Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)BALANCE SHEETS December 31, 2010 2009 (In thousands, except share and per share data) ASSETSCurrent assets: Cash and cash equivalents $17,514 $25,561 Short-term investments 54,125 71,266 Investments in auction rate securities — 15,542 Investment put option related to auction rate securities rights — 2,358 Related party accounts receivable 46 180 Related party notes receivable — 9 Prepaid and other current assets 1,813 2,005 Total current assets 73,498 116,921 Long-term investments 1,206 — Property and equipment, net 2,321 3,713 Restricted cash 788 1,674 Other assets 179 291 Total assets $77,992 $122,599 LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities: Accounts payable $1,119 $1,683 Accrued liabilities 5,372 5,935 Short-term portion of equipment financing lines 833 1,616 Deferred revenue — 751 Loan with UBS — 10,201 Total current liabilities 7,324 20,186 Long-term portion of equipment financing lines 152 985 Total liabilities 7,476 21,171 Commitments and contingencies (Note 11) Stockholders’ equity: Convertible preferred stock: Authorized: 10,000,000 shares in 2010 and 2009 Issued and outstanding: zero shares in 2010 and 2009 — — Common stock, $0.001 par value: Authorized: 170,000,000 shares in 2010 and 2009 Issued and outstanding: 66,907,600 shares in 2010 and 61,275,036 shares in 2009 67 61 Additional paid-in capital 431,103 412,729 Accumulated other comprehensive income (4) 1 Deficit accumulated during the development stage (360,650) (311,363)Total stockholders’ equity 70,516 101,428 Total liabilities and stockholders’ equity $77,992 $122,599 The accompanying notes are an integral part of these financial statements.68Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF OPERATIONS Period from August 5, 1997 (Date of Inception) to Years Ended December 31, December 31, 2010 2009 2008 2010 (In thousands, except per share data) Revenues: Research and development revenues from related parties $1,487 $7,171 $186 $49,096 Research and development, grant and other revenues 1,090 — — 4,045 License revenues from related parties — 74,367 12,234 112,935 Total revenues 2,577 81,538 12,420 166,076 Operating expenses: Research and development 38,013 39,840 53,950 415,290 General and administrative 14,199 15,626 15,076 130,362 Restructuring charges (reversals) — (23) 2,473 2,450 Total operating expenses 52,212 55,443 71,499 548,102 Operating income (loss) (49,635) 26,095 (59,079) (382,026)Interest and other, net 172 (1,401) 2,705 21,350 Income (loss) before income taxes (49,463) 24,694 (56,374) (360,676)Income tax provision (benefit) (176) 150 — (26)Net income (loss) $(49,287) $24,544 $(56,374) $(360,650)Net income (loss) per common share: Basic $(0.77) $0.43 $(1.14) Diluted $(0.77) $0.42 $(1.14) Weighted-average number of shares used in computing net income (loss) per commonshare: Basic 64,165 57,390 49,392 Diluted 64,165 57,961 49,392 The accompanying notes are an integral part of these financial statements.69Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Accumulated Deficit Other Accumulated Additional Deferred Comprehensive During the Total Common Stock Paid-In Stock-Based Income Development Stockholders’ Shares Amount Capital Compensation (Loss) Stage Equity (Deficit) (In thousands, except share and per share data) Issuance of common stock upon exercise of stock options for cash at $0.015per share 147,625 $— $2 $— $— $— $2 Issuance of common stock to founders at $0.015 per share in exchange forcash in January 1998 563,054 1 7 — — — 8 Net loss — — — — — (2,015) (2,015)Balances, December 31, 1998 710,679 1 9 — — (2,015) (2,005)Issuance of common stock upon exercise of stock options for cash at$0.015-$0.58 per share 287,500 — 69 — — — 69 Issuance of warrants, valued using Black-Scholes model — — 41 — — — 41 Deferred stock-based compensation — — 237 (237) — — — Amortization of deferred stock-based compensation — — — 123 — — 123 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — (8) — (8)Net loss — — — — — (7,341) (7,341)Total comprehensive loss — — — — — — (7,349)Balances, December 31, 1999 998,179 1 356 (114) (8) (9,356) (9,121)Issuance of common stock upon exercise of stock options for cash at$0.015-$0.58 per share 731,661 1 194 — — — 195 Deferred stock-based compensation — — 93 (93) — — — Amortization of deferred stock-based compensation — — — 101 — — 101 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — 86 — 86 Net loss — — — — — (13,079) (13,079)Total comprehensive loss — — — — — — (12,993)Balances, December 31, 2000 1,729,840 2 643 (106) 78 (22,435) (21,818)Issuance of common stock upon exercise of stock options for cash at$0.015-$1.20 per share 102,480 — 56 — — — 56 Repurchase of common stock (33,334) — (19) — — — (19)Compensation expense for acceleration of options — — 20 — — — 20 Deferred stock-based compensation — — 45 (45) — — — Amortization of deferred stock-based compensation — — — 93 — — 93 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — 190 — 190 Net loss — — — — — (15,874) (15,874)Total comprehensive loss — — — — — — (15,684)Balances, December 31, 2001 1,798,986 2 745 (58) 268 (38,309) (37,352)Issuance of common stock upon exercise of stock options for cash at$0.015-$1.20 per share 131,189 — 68 — — — 68 Repurchase of common stock (3,579) — (2) — — — (2)Deferred stock-based compensation — — (2) 2 — — — Amortization of deferred compensation — — — 6 — — 6 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — (228) — (228)Net loss — — — — — (23,080) (23,080)Total comprehensive loss — — — — — — (23,308)70Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) Accumulated Deficit Other Accumulated Additional Deferred Comprehensive During the Total Common Stock Paid-In Stock-Based Income Development Stockholders’ Shares Amount Capital Compensation (Loss) Stage Equity (Deficit) (In thousands, except share and per share data) Balances, December 31, 2002 1,926,596 $2 $809 $(50) $40 $(61,389) $(60,588)Issuance of common stock upon exercise of stock options for cash at$0.20-$1.20 per share 380,662 — 310 — — — 310 Stock-based compensation — — 158 — — — 158 Deferred stock-based compensation — — 4,369 (4,369) — — — Amortization of deferred stock-based compensation — — — 768 — — 768 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — 6 — 6 Net loss — — — — — (32,685) (32,685)Total comprehensive loss — — — — — — (32,679)Balances, December 31, 2003 2,307,258 2 5,646 (3,651) 46 (94,074) (92,031)Issuance of common stock upon initial public offering at $13.00 pershare, net of issuance costs of $9,151 7,935,000 8 93,996 — — — 94,004 Issuance of common stock to related party for $13.00 per share 538,461 1 6,999 — — — 7,000 Issuance of common stock to related party 37,482 — — — — — — Conversion of preferred stock to common stock upon initial public offering 17,062,145 17 133,155 — — — 133,172 Issuance of common stock upon cashless exercise of warrants 115,358 — — — — — — Issuance of common stock upon exercise of stock options for cash at$0.20-$6.50 per share 404,618 — 430 — — — 430 Issuance of common stock pursuant to ESPP at $8.03 per share 69,399 — 557 — — — 557 Stock-based compensation — 278 — — — 278 Deferred stock-based compensation — — 2,198 (2,198) — — — Amortization of deferred stock-based compensation — — — 1,598 — — 1,598 Repurchase of unvested stock (16,548) — (20) — — — (20)Components of comprehensive loss: Change in unrealized gain (loss) on investments — — (234) — (234)Net loss — — (37,198) (37,198)Total comprehensive loss — — — — — — (37,432)Balances, December 31, 2004 28,453,173 28 243,239 (4,251) (188) (131,272) 107,556 Issuance of common stock upon exercise of stock options for cash at$0.58-$7.10 per share 196,703 1 370 — — — 371 Issuance of common stock pursuant to ESPP at $4.43 per share 179,520 — 763 — — — 763 Issuance of common stock upon cashless exercise of warrants 14,532 — — — — — — Issuance of common stock upon drawdown of committed equityfinancing facility at $6.13-$7.35 per share, net of issuance costs of $178 887,576 1 5,546 — — — 5,547 Stock-based compensation — — 67 — — — 67 Amortization of deferred stock-based compensation, net of cancellations — — (439) 1,799 — — 1,360 Repurchase of unvested stock (20,609) — (25) — — — (25)Components of comprehensive loss: Change in unrealized gain (loss) on investments — — 174 — 174 Net loss — — (42,252) (42,252)Total comprehensive loss — — — — — — (42,078)71Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) Accumulated Deficit Other Accumulated Additional Deferred Comprehensive During the Total Common Stock Paid-In Stock-Based Income Development Stockholders’ Shares Amount Capital Compensation (Loss) Stage Equity (Deficit) (In thousands, except share and per share data) Balances, December 31, 2005 29,710,895 $30 $249,521 $(2,452) $(14) $(173,524) $73,561 Issuance of common stock upon exercise of stock options for cash at$0.20-$7.10 per share 354,502 — 559 — — — 559 Issuance of common stock pursuant to ESPP at a weighted price of$4.43 per share 193,248 — 856 — — — 856 Issuance of common stock pursuant to registered direct offerings at$6.60 and $7.00 per share, net of issuance costs of $3,083 10,285,715 10 66,907 — — — 66,917 Issuance of common stock upon drawdown of committed equityfinancing facility at $5.53-$7.02 per share 2,740,735 3 16,954 — — — 16,957 Stock-based compensation — — 3,421 — — — 3,421 Amortization of deferred stock-based compensation, net of cancellations — — (138) 1,358 — — 1,220 Repurchase of unvested stock (1,537) — (2) — — — (2)Components of comprehensive loss: Change in unrealized gain (loss) on investments — — (61) — (61)Net loss — — (57,115) (57,115)Total comprehensive loss — — — — — — (57,176)Balances, December 31, 2006 43,283,558 43 338,078 (1,094) (75) (230,639) 106,313 Issuance of common stock upon exercise of stock options for cash at$0.58-$7.10 per share 259,054 1 511 — — — 512 Issuance of common stock pursuant to ESPP at a weighted price of$4.49 per share 179,835 — 807 — — — 807 Issuance of common stock upon drawdown of committed equityfinancing facility at $4.43-$4.81 per share 2,075,177 2 9,540 — — — 9,542 Issuance of common stock to related party for $9.47 per share, net ofissuance costs of $57 3,484,806 3 26,006 — — — 26,009 Stock-based compensation — — 4,833 — — — 4,833 Amortization of deferred stock-based compensation, net of cancellations — — (45) 765 — — 720 Repurchase of unvested stock (68) — — — — — — Components of comprehensive loss: Change in unrealized gain (loss) on investments — — 74 — 74 Net loss — — (48,894) (48,894)Total comprehensive loss — — — — — — (48,820)Balances, December 31, 2007 49,282,362 49 379,730 (329) (1) (279,533) 99,916 Issuance of common stock upon exercise of stock options for cash at$0.58-$3.37 per share 95,796 — 131 — — — 131 Issuance of common stock pursuant to ESPP at a weighted price of$2.85 per share 164,451 — 468 — — — 468 Issuance of restricted stock at a price of $0.001 per share 397,960 1 (1) — — — — Cancellation of restricted stock (1,500) — — — — — — Stock-based compensation — — 5,277 — — — 5,277 Amortization of deferred stock-based compensation, net of cancellations — — — 329 — — 329 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — 19 — 19 Net loss — — (56,374) (56,374)Total comprehensive loss — — — — — — (56,355)72Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) Accumulated Deficit Other Accumulated Additional Deferred Comprehensive During the Total Common Stock Paid-In Stock-Based Income Development Stockholders’ Shares Amount Capital Compensation (Loss) Stage Equity (Deficit) (In thousands, except share and per share data) Balances, December 31, 2008 49,939,069 $50 $385,605 $— $18 $(335,907) $49,766 Issuance of common stock upon exercise of stock options for cash at$0.20-$4.95 per share 492,003 — 588 — — — 588 Issuance of common stock pursuant to ESPP at a weighted price of$1.66 per share 149,996 — 249 — — — 249 Issuance of common stock and warrants pursuant to registered directoffering at $1.97 per share, net of issuance costs of $1,062 7,106,600 7 14,515 — — — 14,522 Issuance of common stock upon drawdown of committed equityfinancing facility at $1.80-$2.29 per share, net of issuance costs of $98 3,596,728 4 6,846 — — — 6,850 Cancellation of restricted stock (9,360) — — — — — — Stock-based compensation — — 4,906 — — — 4,906 Tax benefit from stock based compensation — — 20 — — — 20 Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — (17) — (17)Net income — — — — — 24,544 24,544 Total comprehensive income — — — — — — 24,527 Balances, December 31, 2009 61,275,036 61 412,729 — 1 (311,363) 101,428 Issuance of common stock upon exercise of stock options for cash at$0.58-$2.00 per share 176,433 1 197 — — — 198 Issuance of common stock pursuant to ESPP at a weighted price of$1.70 per share 134,237 — 228 — — — 228 Issuance of common stock upon drawdown of committed equityfinancing facility at $2.05-$3.15 per share, net of issuance costs of $1) 5,339,819 5 13,952 — — — 13,957 Cancellation of restricted stock (17,925) — — — — — — Stock-based compensation — — 4,017 — — — 4,017 Reversal of tax benefit from stock based compensation — — (20) — — — (20)Components of comprehensive loss: Change in unrealized gain (loss) on investments — — — — (5) — (5)Net loss — — — — — (49,287) (49,287)Total comprehensive loss — — — — — — (49,292)Balances, December 31, 2010 66,907,600 $67 $431,103 $— $(4) $(360,650) $70,516 The accompanying notes are an integral part of these financial statements.73Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF CASH FLOWS Period from August 5, 1997 (Date of Inception) to Years Ended December 31, December 31, 2010 2009 2008 2010 (In thousands) Cash flows from operating activities: Net income (loss) $(49,287) $24,544 $(56,374) $(360,650)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 1,900 2,021 2,456 27,366 (Gain) loss on disposal of equipment (13) (40) 3 298 Non-cash impairment charges — 103 — 103 Non-cash restructuring expenses, net of reversals — 22 476 498 Non-cash interest expenses — — 77 504 Non-cash forgiveness of loan to officers 9 10 51 434 Stock-based compensation 4,017 4,906 5,606 29,276 Tax benefit from stock-based compensation 20 (20) — — Non-cash warrant expense — 1,585 — 1,626 Other non-cash expenses — — 7 141 Changes in operating assets and liabilities: Related party accounts receivable 134 41 (145) (397)Prepaid and other assets 304 (166) 192 (2,020)Accounts payable (536) 334 (6) 1,186 Accrued liabilities (627) (1,183) (1,540) 5,172 Related party payables and accrued liabilities — — (22) — Deferred revenue (751) (23,741) (12,109) — Net cash provided by (used in) operating activities (44,830) 8,416 (61,328) (296,463)Cash flows from investing activities: Purchases of investments (109,860) (132,205) (24,462) (911,430)Proceeds from sales and maturities of investments 125,790 75,970 12,607 836,153 Proceeds from sales of auction rate securities 17,900 2,125 — 20,025 Purchases of property and equipment (493) (550) (658) (30,593)Proceeds from sales of property and equipment 14 74 — 138 (Increase) decrease in restricted cash 886 1,076 2,417 (788)Issuance of related party notes receivable — — — (1,146)Proceeds from repayments of notes receivable — 30 130 859 Net cash provided by (used in) investing activities 34,237 (53,480) (9,966) (86,782)Cash flows from financing activities: Proceeds from initial public offering, sale of common stock to related party, and public offerings, netof issuance costs — 12,937 — 206,871 Proceeds from draw down of committed equity financing facilities, net of issuance costs 13,958 6,850 — 52,854 Proceeds from other issuances of common stock 425 837 599 7,419 Proceeds from issuance of preferred stock, net of issuance costs — — — 133,172 Repurchase of common stock — — — (68)Proceeds from loan with UBS — 12,441 — 12,441 Repayment of loan with UBS (10,201) (2,240) — (12,441)Proceeds from equipment financing lines — — — 23,696 Repayment of equipment financing lines (1,616) (2,039) (4,050) (23,185)Tax (expense) benefit from stock-based compensation (20) 20 — — Net cash provided by (used in) financing activities 2,546 28,806 (3,451) 400,759 Net increase (decrease) in cash and cash equivalents (8,047) (16,258) (74,745) 17,514 Cash and cash equivalents, beginning of period 25,561 41,819 116,564 — Cash and cash equivalents, end of period $17,514 $25,561 $41,819 $17,514 The accompanying notes are an integral part of these financial statements.74Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTSNote 1 —Organization and Significant Accounting PoliciesOrganizationCytokinetics, Incorporated (the “Company”, “we” or “our”) was incorporated under the laws of the state of Delaware on August 5,1997. The Company is a clinical-stage biopharmaceutical company focused on the discovery and development of novel small moleculetherapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions. The Company is adevelopment stage enterprise and has been primarily engaged in conducting research, developing drug candidates and technologies, andraising capital. The Company has never generated revenues from commercial sales of its drugs and it may not have drugs to market for atleast several years, if ever.The Company’s registration statement for its initial public offering (“IPO”) was declared effective by the Securities and ExchangeCommission (“SEC”) on April 29, 2004. The Company’s common stock commenced trading on the NASDAQ National Market, nowthe NASDAQ Global Market, on April 29, 2004 under the trading symbol “CYTK”.The Company’s consolidated financial statements contemplate the conduct of the Company’s operations in the normal course ofbusiness. The Company has incurred an accumulated deficit since inception and there can be no assurance that the Company will attainprofitability. The Company had a net loss of $49.3 million and net cash used in operations of $44.8 million for the year endedDecember 31, 2010, and an accumulated deficit of approximately $360.7 million as of December 31, 2010. Cash, cash equivalents andinvestments decreased to $72.8 million at December 31, 2010 from $114.7 million at December 31, 2009. The Company anticipates thatit will continue to have operating losses and net cash outflows in future periods. If sufficient additional capital is not available on termsacceptable to the Company, its liquidity will be impaired.The Company has funded its operations primarily through sales of common stock and convertible preferred stock, contractpayments under its collaboration agreements, debt financing arrangements, government grants and interest income. Until it achievesprofitable operations, the Company intends to continue to fund operations through payments from strategic collaborations, additionalsales of equity securities, government grants and debt financings. Based on the current status of its development plans, the Companybelieves that its existing cash, cash equivalents and investments at December 31, 2010 will be sufficient to fund its cash requirements forat least the next 12 months. If, at any time, the Company’s prospects for financing its research and development programs decline, theCompany may decide to reduce research and development expenses by delaying, discontinuing or reducing its funding of one or more ofits research or development programs. Alternatively, the Company might raise funds through strategic collaborations, public or privatefinancings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.Basis of PresentationThe financial statements include all adjustments (consisting only of normal recurring adjustments) that management believes arenecessary for the fair statement of the balances and results for the periods presented.75Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Concentration of Credit Risk and Other Risks and UncertaintiesFinancial instruments that potentially subject the Company to concentrations of risk consist principally of cash and cashequivalents, investments and accounts receivable. The Company’s cash, cash equivalents and investments are invested in deposits withthree major financial institutions in the U.S. Deposits in these banks may exceed the amount of insurance provided on such deposits. TheCompany has not experienced any realized losses on its deposits of cash, cash equivalents or investments.The economic turmoil in the United States in recent years, the extraordinary volatility in the stock markets and other currentnegative macroeconomic indicators could negatively impact the Company’s ability to raise the funds necessary to support its businessand may materially adversely affect its business, operating results and financial condition.The Company performs an ongoing credit evaluation of its strategic partners’ financial conditions and generally does not requirecollateral to secure accounts receivable from its strategic partners. The Company’s exposure to credit risk associated with non-paymentwill be affected principally by conditions or occurrences within Amgen Inc. (“Amgen”), its strategic partner. Approximately 58%, 100%and 99% of total revenues for the years ended December 31, 2010, 2009 and 2008, respectively, were derived from Amgen. Accountsreceivable due from Amgen was $41,000 and $175,000 at December 31, 2010 and 2009, respectively and were included in related partyaccounts receivable. See also Note 6, “Related Party Transactions,” below regarding collaboration agreements with Amgen and GSK.Drug candidates developed by the Company may require approvals or clearances from the U.S. Food and Drug Administration(“FDA”) or international regulatory agencies prior to commercialized sales. There can be no assurance that the Company’s drugcandidates will receive any of the required approvals or clearances. If the Company were to be denied approval or clearance or any suchapproval or clearance were to be delayed, it would have a material adverse impact on the Company.The Company’s operations and employees are located in the United States. In the years ended December 31, 2010, 2009 and 2008,all of the Company’s revenues were received from entities located in the United States or from United States affiliates of foreigncorporations.Restricted CashIn accordance with the terms of the Company’s line of credit agreement with General Electric Capital Corporation (“GE Capital”),the Company is obligated to maintain a certificate of deposit with the lender. The balance of the certificate of deposit was $0.8 million and$1.7 million at December 31, 2010 and 2009, respectively, and was classified as restricted cash.Cash and Cash EquivalentsThe Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cashequivalents.InvestmentsAvailable-for-sale and trading investments. The Company’s investments have consisted of auction rate securities (“ARS”),U.S. municipal and government agency bonds, commercial paper, U.S. government treasury securities, and money market funds. TheCompany designates all investments, except for its ARS that were held by UBS AG (“UBS”), as available-for-sale and therefore reportsthem at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. The Company reclassified itsARS held by UBS from available-for-sale to trading securities. Investments that the Company designates as trading assets are reported at76Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)fair value, with gains or losses resulting from changes in fair value recognized in net income (loss). See Note 3 for further detaileddiscussion. Investments with original maturities greater than three months and remaining maturities of one year or less are classified asshort-term investments. Investments with remaining maturities greater than one year are classified as long-term investments.Other-than-temporary impairment. All of the Company’s available-for-sale investments are subject to a periodic impairmentreview. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judgedto be other-than-temporary. Factors considered by management in assessing whether an other-than-temporary impairment has occurredinclude: the nature of the investment; whether the decline in fair value is attributable to specific adverse conditions affecting theinvestment; the financial condition of the investee; the severity and the duration of the impairment; and whether the Company has theintent and ability to hold the investment to maturity. When it is determined that an other-than-temporary impairment has occurred, theinvestment is written down to its market value at the end of the period in which it is determined that an other-than-temporary decline hasoccurred. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts tomaturity. Such amortization is included in interest income. Recognized gains and losses and declines in value judged to beother-than-temporary, if any, on available-for-sale securities are included in other income or expense. The cost of securities sold is basedon the specific identification method. Interest and dividends on securities classified as available-for-sale are included in Interest and Other,net.Property and EquipmentProperty and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimateduseful lives of the related assets, which are generally three years for computer equipment and software, five years for laboratoryequipment and office equipment, and seven years for furniture and fixtures. Amortization of leasehold improvements is computed usingthe straight-line method over the shorter of the remaining lease term or the estimated useful life of the related assets, typically ranging fromthree to seven years. Upon sale or retirement of assets, the costs and related accumulated depreciation and amortization are removed fromthe balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.Impairment of Long-lived AssetsIn accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company reviews long-livedassets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that thecarrying amount of the assets may not be fully recoverable. Under the accounting guidance, an impairment loss would be recognizedwhen estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than itscarrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fairvalue.Revenue RecognitionThe accounting guidance for revenue recognition requires that certain criteria must be met before revenue can be recognized:persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; andcollectability is reasonably assured. Determination of whether persuasive evidence of an arrangement exists and whether delivery hasoccurred or services have been rendered are based on management’s judgments regarding the fixed nature of the fee charged for researchperformed and milestones met, and the collectability of those fees. Should changes in conditions cause management to determine thesecriteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.77Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Research and development revenues, which are earned under agreements with third parties for agreed research and developmentactivities, may include non-refundable license fees, research and development funding, cost reimbursements and contingent milestonesand royalties. The Company’s revenue arrangements with multiple elements are evaluated under the accounting guidance for revenuearrangements with multiple deliverables, and are divided into separate units of accounting if certain criteria are met, including whether thedelivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of theundelivered items. The consideration the Company receives is allocated among the separate units based on their respective fair values, andthe applicable revenue recognition criteria are applied to each of the separate units. Non-refundable license fees are recognized as revenue asthe Company performs under the applicable agreement. Where the level of effort is relatively consistent over the performance period, theCompany recognizes total fixed or determined revenue on a straight-line basis over the estimated period of expected performance.The Company recognizes milestone payments as revenue upon achievement of the milestone, provided the milestone payment is non-refundable, substantive effort and risk is involved in achieving the milestone and the amount of the milestone is reasonable in relation tothe effort expended or risk associated with the achievement of the milestone. If these conditions are not met, the Company defers themilestone payment and recognizes it as revenue over the estimated period of performance under the contract as the Company completes itsperformance obligations.Research and development revenues and cost reimbursements are based upon negotiated rates for the Company’s full time employeeequivalents (“FTE”) and actual out-of-pocket costs. FTE rates are negotiated rates that are based upon the Company’s costs, and whichthe Company believes approximate fair value. Any amounts received in advance of performance are recorded as deferred revenue. None ofthe revenues recognized to date are refundable if the relevant research effort is not successful. In revenue arrangements in which bothparties make payments to each other, the Company evaluates the payments in accordance with the accounting guidance for arrangementsunder which consideration is given by a vendor to a customer, including a reseller of the vendor’s products, to determine whetherpayments made by us will be recognized as a reduction of revenue or as expense. In accordance with this guidance, revenue recognized bythe Company may be reduced by payments made to the other party under the arrangement unless the Company receives a separate andidentifiable benefit in exchange for the payments and the Company can reasonably estimate the fair value of the benefit received. Theapplication of the accounting guidance for consideration given to a customer has had no material impact to the Company.Funds received from third parties under grant arrangements are recorded as revenue if the Company is deemed to be the principalparticipant in the grant arrangement as the activities under the grant are part of the Company’s development program. If the Company isnot the principal participant, the grant funds are recorded as a reduction to research and development expense. Grant funds received arenot refundable and are recognized when the related qualified research and development costs are incurred and when there is reasonableassurance that the funds will be received. Funds received in advance are recorded as deferred revenue.Preclinical Studies and Clinical Trial AccrualsA substantial portion of the Company’s preclinical studies and all of the Company’s clinical trials have been performed by third-party contract research organizations (“CROs”) and other vendors. For preclinical studies, the significant factors used in estimatingaccruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significantfactors used in estimating accruals include the number of patients enrolled, duration of enrollment and percentage of work completed todate. The Company monitors patient enrollment levels and related activities to the extent practicable through internal reviews,correspondence and status meetings with CROs, and review of contractual terms. The Company’s estimates are dependent on thetimeliness and accuracy of data provided by its CROs and other vendors. If the Company has incomplete or inaccurate data, it mayunder- or overestimate activity levels associated with various studies or trials78Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)at a given point in time. In this event, it could record adjustments to research and development expenses in future periods when the actualactivity level becomes known. No material adjustments to preclinical study and clinical trial expenses have been recognized to date.Research and Development ExpendituresResearch and development costs are charged to operations as incurred.Retirement PlanThe Company sponsors a 401(k) defined contribution plan covering all employees. There have been no employer contributions to theplan since inception.Income TaxesThe Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities aredetermined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effectfor the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reducedeferred tax assets to the amounts expected to be realized.The Company also follows the accounting guidance that defines the threshold for recognizing the benefits of tax return positions inthe financial statements as “more-likely-than-not” to be sustained by the taxing authorities based solely on the technical merits of theposition. If the recognition threshold is met, the tax benefit is measured and recognized as the largest amount of tax benefit that, in theCompany’s judgment, is greater than 50% likely to be realized.Comprehensive Income/(Loss)The Company follows the accounting standards for the reporting and presentation of comprehensive income (loss) and itscomponents. Comprehensive income (loss) includes all changes in stockholders’ equity during a period from non-owner sources.Comprehensive income (loss) for each of the years ended December 31, 2010, 2009 and 2008 was equal to net income (loss) adjusted forunrealized gains and losses on investments.Segment ReportingThe Company has determined that it operates in only one segment.Net Loss Per Common ShareBasic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of vestedcommon shares outstanding during the period. Diluted net income (loss) per common share is computed by giving effect to all potentialdilutive common shares, including outstanding stock options, unvested restricted stock, warrants, and shares issuable under theEmployee Stock Purchase Plan (“ESPP”), by applying the79Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)treasury stock method. The following is the calculation of basic and diluted net income (loss) per common share (in thousands except pershare data): Years Ended December 31, 2010 2009 2008 Net income (loss) $(49,287) $24,544 $(56,374)Weighted-average common shares outstanding 64,286 57,717 49,477 Unvested restricted stock (121) (327) (85)Weighted-average shares used in computing net income (loss) per share — basic 64,165 57,390 49,392 Dilutive effect of stock options, unvested restricted stock and warrants — 571 — Weighted-average shares used in computing net income (loss) per share — diluted 64,165 57,961 49,392 Net income (loss) per common share: Basic $(0.77) $0.43 $(1.14)Diluted $(0.77) $0.42 $(1.14)The following instruments were excluded from the computation of diluted net income (loss) per common share for the periodspresented because their effect would have been antidilutive (in thousands): December 31, 2010 2009 2008 Options to purchase common stock 8,096 5,960 5,975 Unvested restricted stock — — 396 Warrants to purchase common stock 4,027 474 474 Shares issuable related to the ESPP 40 80 43 Total shares 12,163 6,514 6,888 Stock-Based CompensationThe Company applies the accounting guidance for stock compensation, which establishes accounting for share-based paymentawards made to employees and directors, including employee stock options and employee stock purchases. Under this guidance, stock-based compensation cost is measured at the grant date based on the calculated fair value of the award, and is recognized as an expense ona straight-line basis over the employee’s requisite service period, generally the vesting period of the award.The following table summarizes stock-based compensation related to stock options, restricted stock awards and employee stockpurchases, including, for 2008, amortization of deferred compensation recognized (in thousands): Years Ended December 31, 2010 2009 2008 Research and development $1,871 $2,345 $2,794 General and administrative 2,146 2,561 2,812 Stock-based compensation included in operating expenses $4,017 $4,906 $5,606 80Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and employee stockpurchase plan shares. The key input assumptions used to estimate fair value of these awards include the exercise price of the award, theexpected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over theoption’s expected term, and the Company’s expected dividend yield, if any.The fair value of share-based payments was estimated on the date of grant using the Black-Scholes option pricing model based onthe following weighted average assumptions: Year Ended Year Ended Year Ended December 31, 2010 December 31, 2009 December 31, 2008 Employee Employee Employee Stock Options ESPP Stock Options ESPP Stock Options ESPP Risk-free interest rate 2.8% 0.29% 2.7% 0.58% 2.98% 2.15%Volatility 73% 72% 76% 74% 64% 68%Expected term (in years) 6.12 1.25 6.07 1.25 6.08 1.25 Expected dividend yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%The risk-free interest rate that the Company uses in the option pricing model is based on the U.S. Treasury zero-coupon issues withremaining terms similar to the expected terms of the options. The Company does not anticipate paying dividends in the foreseeable futureand therefore uses an expected dividend yield of zero in the option pricing model. The Company is required to estimate forfeitures at thetime of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data is used toestimate pre-vesting option forfeitures and record stock-based compensation expense only on those awards that are expected to vest.The Company uses its own historical exercise activity and extrapolates the life cycle of options outstanding to arrive at its estimatedexpected term for new option grants.The Company uses its own volatility history based on its stock’s trading history for the period subsequent to the Company’s IPO inApril 2004. Prior to the second quarter of 2010, because its outstanding options had an expected term of approximately six years, theCompany supplemented its own volatility history by using comparable companies’ volatility history for the relevant period preceding theCompany’s IPO. Starting the second quarter of 2010, the Company solely uses its own volatility history because it now has sufficienthistory to approximate the expected term of options granted.The Company measures compensation expense for restricted stock awards at fair value on the date of grant and recognizes theexpense over the expected vesting period. The fair value for restricted stock awards is based on the closing price of the Company’scommon stock on the date of grant.As of December 31, 2010, there was $4.8 million of unrecognized compensation cost related to non-vested stock options, which isexpected to be recognized over a weighted-average period of 2.5 years.Recent Accounting PronouncementsRecently Adopted Accounting PronouncementsThe Company has adopted the new accounting guidance for improving disclosures about fair value measurements. The newguidance adds a requirement to disclose transfers in and out of Level 3 and fair value measurements, and clarifies existing guidance aboutthe level of disaggregation of fair value measurements and disclosures regarding inputs and valuation techniques. The Company’sadoption of the new guidance did not have a material impact on its financial position or results of operations.81Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Accounting Pronouncements Not Yet AdoptedIn October 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance for recognizing revenue formultiple-deliverable revenue arrangements. The new guidance amends the existing guidance for separately accounting for individualdeliverables in a revenue arrangement with multiple deliverables, and removes the criterion that an entity must use objective and reliableevidence of fair value to separately account for the deliverables. The new guidance also establishes a hierarchy for determining the value ofeach deliverable and establishes the relative selling price method for allocating consideration when vendor specific objective evidence orthird party evidence of value does not exist. The Company will adopt the new guidance prospectively for new revenue arrangementsentered into or materially modified beginning in the first quarter of 2011. The Company does not believe adoption of the new guidance willhave a significant impact on its financial position or results of operations; however, it is currently evaluating the impact that the guidancemay have on the timing of revenue recognition for future arrangements.In January 2010, the FASB issued new accounting guidance for improving disclosures about fair value measurements, whichrequires a gross presentation of Level 3 fair value rollforwards. The guidance is effective for the Company beginning in the first quarter of2011. The Company does not expect that its adoption of the new fair value guidance will have a material impact on its financial positionor results of operations.In April 2010, the FASB issued new accounting guidance on the milestone method of revenue recognition. The new guidance codifiesthe milestone method as an acceptable revenue recognition model when a milestone is deemed to be substantive. The guidance is effectivefor the Company beginning in the first quarter of 2011, and the Company will apply the guidance prospectively for milestones achievedafter the effective date. The Company does not expect that its adoption of the guidance will have a material impact on its financial positionor results of operations.Note 2 —Supplementary Cash Flow DataSupplemental cash flow information was as follows (in thousands): Period from August 5, 1997 Years Ended December 31, (Date of Inception) to 2010 2009 2008 December 31, 2010 Cash paid for interest $170 $399 $412 $4,568 Cash paid for income taxes 1 1 1 11 Significant non-cash investing and financing activities: Deferred stock-based compensation — — — 6,940 Purchases of property and equipment through accounts payable 141 126 127 141 Purchases of property and equipment through trade in value of disposedproperty and equipment — — — 258 Penalty on restructuring of equipment financing lines — — — 475 Conversion of convertible preferred stock to common stock — — — 133,172 Warrants issued in registered direct equity financing — 1,585 — 1,585 82Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Note 3 —Cash Equivalents and InvestmentsCash Equivalents and InvestmentsThe amortized cost and fair value of cash equivalents and available for sale investments at December 31, 2010 and 2009 were asfollows (in thousands): December 31, 2010 Amortized Unrealized Unrealized Fair Maturity Cost Gains Losses Value Dates Cash equivalents — money market funds $16,966 — — $16,966 Short-term investments — U.S. Treasurysecurities $54,129 $4 $(8) $54,125 1/2011 — 12/2011 Long-term investments — U.S. Treasurysecurities $1,207 $— $(1) $1,206 1/2012 December 31, 2009 Amortized Unrealized Unrealized Fair Maturity Cost Gains Losses Value Dates Cash equivalents — money market funds $23,773 — — $23,773 Short-term investments — U.S. Treasury securities $71,265 $1 $— $71,266 1/2010 — 6/2010 As of December 31, 2010, the Company’s cash equivalents had no unrealized losses, and its U.S. Treasury securities classified inshort- and long-term investments had unrealized losses totaling approximately $9,000. The unrealized losses were primarily caused byslight increases in short-term interest rates subsequent to the purchase date of the related securities. The Company collected the contractualcash flows on its U.S. Treasury securities that matured from January 1, 2011 through March 10, 2011 and expects to be able to collectall contractual cash flows on the remaining maturities of its U.S. Treasury securities. As of December 31, 2009, the Company’s cashequivalents and short-term investments had no unrealized losses.Interest income was $0.3 million, $0.6 million and $3.2 million for the years ended December 31, 2010, 2009 and 2008,respectively, and $28.4 million for the period August 5, 1997 (inception) through December 31, 2010.Investments in Auction Rate Securities and Investment Put Option Related to Auction Rate Securities RightsThe Company’s short-term investments in ARS as of December 31, 2009 refer to securities that were structured with short-terminterest reset dates every 28 days but with maturities generally greater than 10 years. At the end of each reset period, investors couldattempt to sell the securities through an auction process or continue to hold the securities. In February 2008, auctions began to fail forthese securities and each auction since then failed. Consequently, the ARS ceased to be liquid and the Company was not able to accessthese funds at that time. Because there ceased to be an active market for ARS, they therefore did not have a readily determinable marketvalue.In connection with the failed auctions of the Company’s ARS, which were marketed and sold by UBS AG and its affiliates, inOctober 2008, the Company accepted a settlement with UBS AG pursuant to which UBS AG issued to the Company Series C-2 AuctionRate Securities Rights (the “ARS Rights”). The ARS Rights provided the83Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Company the right to receive the par value of its ARS, i.e., the liquidation preference of the ARS plus accrued but unpaid interest fromUBS at any time between June 30, 2010 and July 2, 2012.At December 31, 2009, the Company held approximately $17.9 million in par value, $15.5 million carrying value, of ARSclassified as short-term investments based on its intention to liquidate the investments on June 30, 2010, the earliest date it could exercisethe ARS Rights. On June 30, 2010, the Company exercised its ARS Rights, requiring that UBS AG purchase the Company’s remainingoutstanding ARS at par value of $7.5 million. Accordingly, on the settlement date of July 1, 2010, UBS AG deposited the proceeds of$7.5 million into the Company’s money market account. The Company had recorded the ARS Rights as an investment put option,which was extinguished at the time that the ARS Rights were exercised.The fair value of the Company’s investments in its ARS as of December 31, 2009 was determined to be $15.5 million. Changes inthe fair value of the ARS, excluding the sale of ARS, were recognized in current period earnings in Interest and Other, net. Accordingly, inthe year ended December 31, 2010, the Company recognized unrealized gains of $2.4 million on its ARS to reflect the change in fairvalue, and the sale of $17.9 million of its ARS at par value. In the year ended 2009, the Company recognized unrealized gains of$1.0 million on its ARS to reflect the change in fair value, and the sale of $2.1 million of ARS at par value.The ARS Rights represented a firm agreement in accordance with the accounting guidance for derivatives and hedging, whichdefines a firm agreement as an agreement with an unrelated party, binding on both parties and usually legally enforceable, with thefollowing characteristics: a) the agreement specifies all significant terms, including the quantity to be exchanged, the fixed price and thetiming of the transaction; and b) the agreement includes a disincentive for nonperformance that is sufficiently large to make performanceprobable. The enforceability of the ARS Rights resulted in a put option that was recognized as a separate freestanding instrument that wasaccounted for separately from the ARS investments. The investment put option related to the ARS Rights did not meet the definition of aderivative instrument. Therefore, the Company elected to measure the investment put option related to the ARS Rights at fair value, inaccordance with the fair value option permitted under fair value accounting guidance for financial instruments, to mitigate volatility inreported earnings due to their linkage to the ARS. The Company valued the investment put option related to the ARS Rights using aBlack-Scholes option pricing model that included estimates of interest rates, based on data available, and was adjusted for any bearerrisk associated with UBS’s financial ability to repurchase the ARS beginning June 30, 2010. As of December 31, 2009, the Companyrecorded $2.4 million as the fair value of the investment put option related to the ARS Rights, classified in short-term assets on thebalance sheet. Changes in the fair value of the investment put option were recognized in current period earnings in Interest and Other, net.Accordingly, the Company recorded unrealized losses on the ARS Rights of $2.4 million in 2010 and unrealized losses of $1.0 million in2009 in Interest and Other, net, in the statement of operations to reflect the change in fair value of the investment put option.Note 4 —Fair Value MeasurementsThe Company adopted the fair value accounting guidance to value its financial assets and liabilities. Fair value is defined as theprice that would be received for assets when sold or paid to transfer a liability in an orderly transaction between market participants at themeasurement date (exit price). The Company utilizes market data or assumptions that the Company believes market participants woulduse in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.These inputs can be readily observable, market corroborated or generally unobservable.The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the bestinformation reasonably available. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs andminimize the use of unobservable inputs to the extent possible, and considers the security issuers’ and the third-party insurers’ creditrisk in its assessment of fair value.84Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)The Company classifies the determined fair value based on the observability of those inputs. Fair value accounting guidanceestablishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority tounadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservableinputs (Level 3 measurement). The three defined levels of the fair value hierarchy are as follows:Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities;Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or through corroboration withobservable market data; andLevel 3 — Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-developedvaluation models.Financial assets measured at fair value on a recurring basis as of December 31, 2010 and 2009 are classified in the table below inone of the three categories described above (in thousands): December 31, 2010 Fair Value Measurements Using Assets Level 1 Level 2 Level 3 At Fair Value Money market funds $16,966 $— $— $16,966 U.S. Treasury securities 55,331 — — 55,331 Total $72,297 $— $— $72,297 Amounts included in: Cash and cash equivalents $16,966 $— $— $16,966 Short-term investments 54,125 — — 54,125 Long-term investments 1,206 — — 1,206 Total $72,297 $— $— $72,297 December 31, 2009 Fair Value Measurements Using Assets Level 1 Level 2 Level 3 At Fair Value Money market funds $23,773 $— $— $23,773 U.S. Treasury securities 71,266 — — 71,266 Investments in ARS — — 15,542 15,542 Investment put option related to ARS Rights — — 2,358 2,358 Total $95,039 $— $17,900 $112,939 Amounts included in: Cash and cash equivalents $23,773 $— $— $23,773 Short-term investments 71,266 — — 71,266 Investments in ARS — — 15,542 15,542 Investment put option related to ARS Rights — — 2,358 2,358 Total $95,039 $— $17,900 $112,939 The valuation technique used to measure fair value for the Company’s Level 1 assets is a market approach, using prices and otherrelevant information generated by market transactions involving identical assets. The85Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)valuation technique used to measure fair value for Level 3 assets is an income approach, where, in most cases, the expected future cashflows are discounted back to present value for each asset, except for the investment put option related to the ARS Rights at December 31,2009, for which the valuation was based on the Black-Scholes option pricing model and approximated the difference in value between thepar value and the fair value of the associated ARS.At December 31, 2009, the Company held approximately $15.5 million in fair value of ARS classified as short-term investments.The assets underlying the ARS were student loans which are substantially backed by the federal government. The fair value of thesesecurities as of December 31, 2009 was estimated utilizing a discounted cash flow (“DCF”) model. The Company classified its ARS inthe Level 3 category, as some of the inputs used in the DCF model were unobservable. The assumptions used in preparing the DCF modelincluded estimates of interest rates, timing and amount of cash flows, credit and liquidity premiums and expected holding periods of theARS, based on data that was available as of December 31, 2009. The significant assumptions of the DCF model were discount marginsthat were based on industry recognized student loan sector indices, an additional liquidity discount and an estimated term to liquidity.Other items that this analysis considered were the collateralization underlying the security investments, the creditworthiness of thecounterparty and the timing of expected future cash flows. The Company’s ARS were also compared, when possible, to other observablemarket data for securities with similar characteristics as the ARS.As of December 31, 2010, the Company had no financial assets measured at fair value on a recurring basis using significantLevel 3 inputs. As of December 31, 2009, the Company’s financial assets measured at fair value on a recurring basis using significantLevel 3 inputs consisted solely of the ARS and the investment put option related to the ARS Rights. The following table provides arollforward of all assets measured at fair value using significant Level 3 inputs for the twelve months ended December 31, 2009 and 2010(in thousands): Investment Put Option Related to ARS ARS Rights Balance as of December 31, 2008 $16,636 $3,389 Unrealized gain on ARS, included in Interest and Other, net 1,031 — Unrealized loss on the investment put option related to ARS Rights, included in Interest andOther, net — (1,031)Sale of ARS (2,125) — Balance as of December 31, 2009 $15,542 $2,358 Unrealized gain on ARS, included in Interest and Other, net 2,358 — Unrealized loss on the investment put option related to ARS Rights, included in Interest andOther, net — (2,358)Sale of ARS (17,900) — Balance as of December 31, 2010 $— $— The Company’s equipment financing line debt is not recorded at fair value, but the Company is required to disclose its fair value.The Company determined the fair value of the equipment financing line debt using a DCF model. The major inputs to the model areexpected cash flows, which equal the contractual payments, and86Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)borrowing rates available to the Company for similar debt as of the applicable balance sheet dates. The fair value and the carrying valueof the equipment financing line debt were as follows (in thousands): December 31, December 31, 2010 2009 Carrying value — equipment financing line $985 $2,601 Fair value — equipment financing line $947 $2,425 The carrying amount of the Company’s loan with UBS as of December 31, 2009 approximated its fair value due to the loan’s short-term nature and because the interest rate charged on the loan approximated the market rate.The carrying amount of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximates fairvalue due to the short-term nature of these instruments.Note 5 —Balance Sheet ComponentsProperty and equipment balances were as follows (in thousands): December 31, 2010 2009 Property and equipment, net: Laboratory equipment $17,130 $16,238 Computer equipment and software 3,098 3,699 Office equipment, furniture and fixtures 556 431 Leasehold improvements 3,313 3,293 24,097 23,661 Less: Accumulated depreciation and amortization (21,776) (19,948) $2,321 $3,713 Property and equipment pledged as collateral against outstanding borrowings under the Company’s equipment financing lines totaled$7.3 million, less accumulated depreciation of $6.5 million, at December 31, 2010, and $8.8 million, less accumulated depreciation of$6.5 million, at December 31, 2009. Depreciation expense was $1.9 million, $2.0 million and $2.5 million for the years endedDecember 31, 2010, 2009 and 2008, respectively.Accrued liabilities were as follows (in thousands): December 31, 2010 2009 Accrued liabilities: Clinical and pre-clinical costs $2,199 $2,396 Consulting and professional fees 633 360 Bonus 1,408 1,902 Vacation pay 864 792 Other payroll related 104 132 Other accrued expenses 164 223 Income tax payable — 130 $5,372 $5,935 87Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Interest receivable on cash equivalents and investments of $285,000 and $378,000 is included in prepaid and other current assets atDecember 31, 2010 and 2009, respectively.Note 6 —Related Party TransactionsResearch and Development ArrangementsAmgenOn December 29, 2006, the Company entered into a collaboration and option agreement with Amgen (the “Amgen Agreement”) todiscover, develop and commercialize novel small-molecule therapeutics that activate cardiac muscle contractility for potential applicationsin the treatment of heart failure, including omecamtiv mecarbil, formerly known as CK-1827452. The Amgen Agreement providedAmgen a non-exclusive license and access to certain technology, and an option to obtain an exclusive license to omecamtiv mecarbil andrelated compounds worldwide, except Japan. Under the agreement, the Company received an upfront, non-refundable license andtechnology access fee of $42.0 million from Amgen, which the Company was recognizing as revenue ratably over the maximum term ofthe non-exclusive license, which was four years. Management determined that the obligations under the non-exclusive license did not meetthe requirement for separate units of accounting and therefore should be recognized as a single unit of accounting.In connection with entering into the Amgen Agreement, the Company contemporaneously entered into a common stock purchaseagreement (the “CSPA”) with Amgen, which provided for the sale of 3,484,806 shares of the Company’s common stock at a price pershare of $9.47 and an aggregate purchase price of approximately $33.0 million. On January 2, 2007, the Company issued3,484,806 shares of common stock to Amgen under the CSPA. After deducting the offering costs, the Company received net proceeds ofapproximately $32.9 million in January 2007. The common stock was valued using the closing price of the common stock onDecember 29, 2006, the last trading day of the common stock prior to issuance. The difference between the price paid by Amgen of$9.47 per share and the stock price of $7.48 per share of common stock totaled $6.9 million. This premium was recorded as deferredrevenue in January 2007 and was being recognized as revenue ratably over the maximum term of the non-exclusive license granted toAmgen under the collaboration and option agreement, which was four years.Prior to Amgen’s exercise of its option, the Company conducted research and development activities at its own expense foromecamtiv mecarbil in accordance with an agreed upon plan. In May 2009, Amgen exercised its option. In connection with the exercise ofthe option, Amgen paid the Company a non-refundable option exercise fee of $50.0 million in June 2009. At that time, Amgen assumedresponsibility for the development and commercialization of omecamtiv mecarbil and related compounds, at Amgen’s expense, subject tothe Company’s specified development and commercial participation rights. Amgen’s exclusive license extends for the life of the intellectualproperty that is the subject of the license, and the Company has no further performance obligations related to research and developmentunder the program, except as defined by the annual joint research and development plans as the parties may mutually agree. Accordingly,the Company recognized the $50.0 million option exercise fee as license revenues from related parties in 2009.Upon Amgen’s exercise of the option, the Company was required to transfer all data and know-how necessary to enable Amgen toassume responsibility for development and commercialization of omecamtiv mecarbil and related compounds. Under the AmgenAgreement, the Company may be eligible to receive pre-commercialization and commercialization milestone payments of up to$600.0 million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration androyalties that escalate based on increasing levels of the annual net sales of products commercialized under the agreement. The agreementalso provides for the Company to receive increased royalties by co-funding Phase III development costs of drug candidates under thecollaboration. If the Company elects to co-fund such costs, it would be entitled to co-promote products in North America and participatein agreed commercial activities in institutional care settings, at Amgen’s expense.88Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Prior to Amgen’s exercise of its option in May 2009, the Company was amortizing the 2006 non-exclusive license and technologyaccess fee from Amgen and related stock purchase premium over the maximum term of the non-exclusive license, which was four years.The non-exclusive license period ended upon the exercise of Amgen’s option in May 2009. The Company has no further performanceobligations related to the non-exclusive license. Accordingly, the Company recognized as revenue the balance of the deferred Amgenrevenue at the time Amgen exercised its option.Subsequent to Amgen obtaining the exclusive license to omecamtiv mecarbil and related compounds, the Company is providingresearch and development support of the program, as and when agreed to by both parties. Under the Amgen Agreement, Amgenreimburses the Company for such activities at predetermined rates per FTE, and for related out of pocket expenses at cost, includingpurchases of clinical trial material at manufacturing cost. The FTE rates are negotiated rates that are based upon the Company’s costs,and which the Company believes approximate fair value. In 2009, pursuant to the Amgen Agreement, the Company transferred to Amgenthe majority of the Company’s existing inventories of omecamtiv mecarbil and related reference materials. The $4.0 million purchase pricefor these materials was a negotiated price and represented the fair value of the materials transferred. The Company’s out of pocket costsfor the transferred materials were incurred and recorded as research and development expense in prior periods.Revenue from Amgen was as follows (in thousands): Years Ended December 31, 2010 2009 2008 FTE reimbursements $910 $2,107 $— Reimbursements of other costs 577 1,018 5 Transfer of omecamtiv mecarbil materials — 4,000 — Total research and development revenues from Amgen 1,487 7,125 5 Nonrefundable option exercise fee — 50,000 — Deferred license revenue recognized — 24,367 12,234 Total license revenue from Amgen — 74,367 12,234 Total revenue from Amgen $1,487 $81,492 $12,239 In the period from August 5, 1997 (inception) through December 31, 2010, the Company has recognized as related party researchand development revenues from Amgen $8.6 million of reimbursements for FTE, material transfers and other costs, and $50.0 millionfor performance milestone payments.Deferred revenue and related party accounts receivable related to Amgen were as follows (in thousands): December 31, December 31, 2010 2009 Deferred revenue — Amgen $— $751 Related party accounts receivable — Amgen $41 $175 The deferred revenue at December 31, 2009 resulted from Amgen’s prepayment of FTE reimbursements.GSKIn 2001, the Company entered into a collaboration and license agreement with GSK (the “GSK Agreement”), establishing a strategicalliance to discover, develop and commercialize small molecule drugs for the treatment of cancer and other diseases. Under thisagreement, GSK paid the Company an upfront license fee for rights to certain89Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)technologies and milestone payments regarding performance and developments within agreed-upon projects. In conjunction with theseprojects, GSK agreed to reimburse the Company’s costs associated with the strategic alliance. In connection with the agreement, in 2001GSK made a $14.0 million equity investment in the Company. GSK made additional equity investments in the Company in 2003 and2004 of $3.0 million and $7.0 million, respectively. In 2001, the Company also received $14.0 million for the upfront license fee, whichwas recognized ratably over the initial five-year research term of the agreement.Under the November 2006 amendment to the GSK Agreement, the Company assumed responsibility, at its expense, for thecontinued research, development and commercialization of inhibitors of kinesin spindle protein (“KSP”), including ispinesib and SB-743921, and other mitotic kinesins, other than centromere-associated protein E (“CENP-E”). Under the November 2006 amendment, theCompany’s development of ispinesib and SB-743921 were subject to GSK’s option to resume responsibility for the development andcommercialization of either or both drug candidates. In December 2008, GSK’s option to ispinesib and SB-743921 expired.Consequently, all rights to these drug candidates remain with the Company, subject to certain royalty obligations to GSK.In December 2009, the Company and GSK agreed to terminate the collaboration and license agreement, effective February 28, 2010.As a result, all rights for GSK-923295 reverted to the Company at that time, subject to certain royalty obligations to GSK. GSK remainsresponsible for all activities and costs associated with completing and reporting on the ongoing Phase I clinical trial of GSK-923295.Revenue from GSK was as follows (in thousands): Years Ended December 31, 2010 2009 2008 Patent expense reimbursements $— $45 $181 The Company has recognized as related party revenue $32.5 million of reimbursements from GSK of patent, FTE and otherexpenses in the period from August 5, 1997 (inception) through December 31, 2010. During this period, the Company also received andrecognized as revenue $8.0 million for performance milestone payments under the agreement, as no ongoing performance obligationsexisted with respect to this aspect of the agreement.There were no related party accounts receivable due from GSK at December 31, 2010 or 2009.OtherRelated Party Notes ReceivableIn 2001 and 2002, the Company extended loans for $200,000 and $100,000, respectively, to certain officers of the Company. Theloans accrued interest at 5.18% and 5.75% and were scheduled to mature on November 12, 2010 and July 12, 2008, respectively. In2002 the Company extended loans totaling $650,000 to various certain officers and employees of the Company. The loans accruedinterest at rates ranging from 4.88% to 5.80% and had scheduled maturities on various dates between 2005 and 2011. Certain of the loanswere collateralized by the common stock of the Company owned by the officers and by stock options and were repaid in full withineighteen months after the Company’s IPO date of April 29, 2004. Certain of the loans were forgiven if the officers remained with theCompany through the maturation of their respective loans. As of December 31, 2010, these loans were fully repaid or forgiven. TheCompany has not extended any loans to officers or employees of the Company since 2002.Activity under these loans was as follows (in thousands).90Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Years Ended December 31, 2010 2009 2008 Principal repayments $— $30 $130 Principal forgiven $9 $9 $47 Balances outstanding under these loans, which were classified as related party notes receivable, were as follows (in thousands): December 31, December 31, 2010 2009 Notes receivable from officers $— $9 Note 7 —Grant ArrangementsIn 2010, the National Institute of Neurological Disorders and Strokes (“NINDS”) awarded to the Company a $2.8 million grant tosupport research and development of CK-2017357 directed to the potential treatment for myasthenia gravis for a period of up to threeyears. Management has determined that the Company is the principal participant in the grant arrangement, and, accordingly, theCompany records amounts earned under the arrangement as revenueIn November 2010, the Company was notified by the Internal Revenue Service that it would receive total cash grants of $0.7 millionbased on its applications for certain investments in qualified therapeutic discovery projects under Section 48D of the Internal RevenueCode. The grants related to certain research and development costs the Company incurred in 2009 in connection with its cardiac, skeletaland smooth muscle contractility programs. The Company received and recognized as grant revenue $0.7 million under this grant in 2010.Total grant revenues were as follows (in thousands): Years Ended December 31, 2010 2009 2008 NINDS myasthenia gravis $356 $— $— U.S. Treasury 734 — — Total grant revenue $1,090 $— $— Note 8 —Equipment Financing LinesIn January 2004, the Company entered into an equipment financing agreement with GE Capital under which the Company couldborrow up to $4.5 million through a line of credit expiring December 31, 2006. The Company executed draws on this line of credittotaling $2.0 million, $1.3 million and $0.9 million during 2006, 2005 and 2004, respectively, at interest rates ranging from 4.56% to7.44%. In October 2006, the Company was informed by GE Capital that the amounts available under this equipment line had beenreduced by approximately $0.3 million. As of December 31, 2010, the balance of equipment loans outstanding under this line was$30,000, and no additional borrowings are available to the Company under it.In April 2006, the Company entered into an equipment financing agreement with GE Capital under which the Company couldborrow $4.6 million through a line of credit expiring April 28, 2007. In 2007 and 2006, the Company executed draws on this line ofcredit totaling approximately $4.1 million at interest rates ranging from 7.24% to 7.68%. As of December 31, 2010, the balance ofequipment loans outstanding under this line was $1.0 million and no additional borrowings are available to the Company under it.91Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Borrowings under the equipment lines had financing terms ranging from 48 to 60 months. All lines are subject to the master securityagreement between the Company and GE Capital and their respective term sheets, and are collateralized by property and equipment of theCompany purchased by such borrowed funds and other collateral as agreed to be the Company. In connection with the lines of credit withGE Capital, the Company is obligated to maintain a certificate of deposit with the lender (see Note 1 “Organization and SignificantAccounting Policies — Restricted Cash”).As of December 31, 2010, future minimum lease payments under equipment lease lines were as follows (in thousands):2011 $833 2012 152 Total $985 Total interest expense was $0.2 million, $0.4 million and $0.5 million for the years ended December 31, 2010, 2009 and 2008,respectively, and $5.3 million for the period from August 5, 1997 (date of inception) through December 31, 2010.Note 9 —Loan with UBSIn connection with the settlement with UBS AG relating to the Company’s ARS, in October 2008, the Company entered into a loanagreement with UBS Bank USA and UBS Financial Services Inc. On January 5, 2009, the Company borrowed approximately$12.4 million under the loan agreement, with its ARS held in accounts with UBS Financial Services Inc. as collateral. Proceeds of salesof the ARS were first applied to repayment of the loan with the balance, if any, for the Company’s account. The Company repaid theremaining balance of the loan in full during the second quarter of 2010.Activity related to this loan was as follows (in thousands): Years Ended December 31, 2010 2009 2008 Beginning balance $10,201 $— $— Proceeds from loan 12,441 Interest expense incurred 56 158 — Interest income from ARS applied to loan balance (140) (273) — Proceeds from sales of ARS applied to loan balance (10,117) (2,125) — Ending balance $— $10,201 $— Note 10 —RestructuringIn September 2008, the Company announced a restructuring plan to realign its workforce and operations in line with a strategicreassessment of its research and development activities and corporate objectives. The Company communicated to affected employees aplan of organizational restructuring through involuntary terminations. Pursuant to the accounting guidance for exit or disposal costobligations, the Company recorded a charge of approximately $2.5 million in 2008. The Company had completed all restructuringactivities and recognized all anticipated restructuring charges by December 31, 2009.92Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)The following table summarizes the accrual balances and utilization by cost type for the restructuring plan (in thousands): Employee Severance Impairment of and Related Benefits Fixed Assets Total Restructuring liability at December 31, 2007 $— $— $— 2008 charges 2,190 283 2,473 Cash payments (1,997) — (1,997)Non-cash settlement — (283) (283)Restructuring liability at December 31, 2008 $193 $— $193 2009 charges (reversals of charges) (58) 35 (23)Cash payments (135) 45 (90)Non-cash settlement — (80) (80)Restructuring liability at December 31, 2009 and 2010 $— $— $— Note 11 —Commitments and ContingenciesLeasesThe Company leases office space and equipment under a non-cancelable operating lease that expires in 2018. The lease termsprovide for rental payments on a graduated scale and the Company’s payment of certain operating expenses. The Company recognizesrent expense on a straight-line basis over the lease period.Rent expense was as follows (in thousands): Period from August 5, 1997 (Date of Inception) to Years Ended December 31, December 31, 2010 2009 2008 2010 Rent expense $2,964 $3,003 $3,039 $27,300 As of December 31, 2010, future minimum lease payments under noncancelable operating leases were as follows (in thousands):2011 $2,950 2012 2,906 2013 2,984 2014 3,224 2015 3,331 Thereafter 8,826 Total $24,221 In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors,business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’sbreach of such agreements, services to be provided by or on behalf of the Company, or from intellectual property infringement claimsmade by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officersand employees that will require93Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service asdirectors, officers or employees. The Company maintains director and officer insurance, which may cover certain liabilities arising fromits obligation to indemnify its directors and certain of its officers and employees, and former officers and directors in certaincircumstances. The Company maintains product liability insurance and comprehensive general liability insurance, which may covercertain liabilities arising from its indemnification obligations. It is not possible to determine the maximum potential amount of exposureunder these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstancesinvolved in each particular indemnification obligation. Such indemnification obligations may not be subject to maximum loss clauses.Note 12 —Convertible Preferred StockEffective upon the closing of the initial public offering on April 29, 2004, all outstanding shares of the Company’s convertiblepreferred stock converted into 17,062,145 shares of common stock. In January 2004, the Board of Directors approved an amendment tothe Company’s amended and restated certificate of incorporation changing the authorized number of shares of preferred stock to10,000,000, effective upon the closing of the initial public offering. As of December 31, 2010 and 2009, there were 10,000,000 shares ofconvertible preferred stock authorized and no shares outstanding.Note 13 —Stockholders’ Equity (Deficit)Common StockThe Company’s Registration Statement (SEC File No. 333-112261) for its initial public offering was declared effective by the SECon April 29, 2004 and the Company’s common stock commenced trading on the NASDAQ National Market, now the NASDAQ GlobalMarket, on that date under the trading symbol “CYTK.” The Company sold 7,935,000 shares of common stock in the offering,including shares that were issued upon the full exercise by the underwriters of their over-allotment option, at $13.00 per share for aggregategross proceeds of $103.2 million. In connection with this offering, the Company paid underwriters’ commissions of $7.2 million andincurred offering expenses of $2.0 million. After deducting the underwriters’ commissions and the offering expenses, the Companyreceived net proceeds of approximately $94.0 million from the offering. In addition, pursuant to an agreement with an affiliate of GSK,the Company sold 538,461 shares of its common stock to GSK immediately prior to the closing of the initial public offering at apurchase price of $13.00 per share, for a total of approximately $7.0 million in net proceeds.In October 2005, the Company entered into a committed equity financing facility (the “2005 CEFF”) with Kingsbridge Capital Ltd.(“Kingsbridge”), pursuant to which Kingsbridge committed to purchase, subject to certain conditions of the 2005 CEFF, up to$75.0 million of the Company’s newly-issued common stock during the next three years. Subject to certain conditions and limitations,from time to time under the 2005 CEFF, the Company could require Kingsbridge to purchase newly-issued shares of the Company’scommon stock at a price between 90% and 94% of the volume weighted average price on each trading day during an eight day, forward-looking pricing period. The maximum number of shares the Company could issue in any pricing period was the lesser of 2.5% of theCompany’s market capitalization immediately prior to the commencement of the pricing period or $15.0 million. The minimumacceptable volume weighted average price for determining the purchase price at which the Company’s stock could be sold in any pricingperiod was the greater of $3.50 or 85% of the closing price for the Company’s common stock on the day prior to the commencement ofthe pricing period. In 2007, the Company received gross proceeds of $9.5 million from the drawdown of 2,075,177 shares of commonstock pursuant to the 2005 CEFF. In 2006, the Company received gross proceeds of $17.0 million from the drawdown of2,740,735 shares of common stock pursuant to the 2005 CEFF. In 2005, the Company received gross proceeds of $5.7 million from94Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)the draw down and sale of 887,576 shares of common stock before offering costs of $178,000. No further draw downs are available tothe Company under the 2005 CEFF.In January 2006, the Company entered into a stock purchase agreement with certain institutional investors relating to the issuanceand sale of 5,000,000 shares of its common stock at a price of $6.60 per share, for gross offering proceeds of $33.0 million. Inconnection with this offering, the Company paid an advisory fee to a registered broker-dealer of $1.0 million. After deducting the advisoryfee and the offering costs, the Company received net proceeds of approximately $32.0 million from the offering. The offering was madepursuant to the Company’s shelf registration statement on Form S-3 (SEC File No. 333-125786) filed on June 14, 2005.In December 2006, the Company entered into stock purchase agreements with selected institutional investors relating to the issuanceand sale of 5,285,715 shares of our common stock at a price of $7.00 per share, for gross offering proceeds of $37.0 million. Inconnection with this offering, the Company paid placement agent fees to three registered broker-dealers totaling $1.85 million. Afterdeducting the placement agent fees and the offering costs, the Company received net proceeds of approximately $34.9 million from theoffering. The offering was made pursuant to the Company’s shelf registration statements on Form S-3 (SEC File No. 333-125786) filedon June 14, 2005 and October 31, 2006 (SEC File No. 333-138306).In connection with entering into the collaboration and option agreement, the Company also entered into a CSPA with Amgen, whichprovided for the sale of 3,484,806 shares of the Company’s common stock at a price per share of $9.47 and an aggregate purchase priceof approximately $33.0 million. On January 2, 2007, the Company issued 3,484,806 shares of common stock to Amgen under theCSPA. After deducting the offering costs, the Company received net proceeds of approximately $32.9 million in January 2007. Thecommon stock was valued using the closing price of the common stock on December 29, 2006, the last trading day of the common stockprior to issuance. The difference between the price paid by Amgen of $9.47 per share and the stock price of $7.48 per share of commonstock totaled $6.9 million. This premium was recorded as deferred revenue in January 2007 and through May 2009, was recognized asrevenue ratably over the maximum term of the non-exclusive license granted to Amgen under the collaboration and option agreement,which was approximately four years.In October 2007, the Company entered into a new committed equity financing facility (the “2007 CEFF”) with Kingsbridge,pursuant to which Kingsbridge committed to finance up to $75.0 million of capital over a three-year period. In October 2010, the 2007CEFF was amended to extend it until the first to occur of March 31, 2011 or the purchase by Kingsbridge of the maximum number ofshares under the CEFF. Subject to certain conditions and limitations, including a minimum volume-weighted average price of $2.00 forthe Company’s common stock, from time to time under the 2007 CEFF, at the Company’s election, Kingsbridge is committed topurchase newly-issued shares of the Company’s common stock at a price between 90% and 94% of the volume weighted average price oneach trading day during an eight day, forward-looking pricing period. The maximum number of shares the Company can issue in anypricing period is the lesser of 2.5% of its market capitalization immediately prior to the commencement of the pricing period or$15.0 million. As part of the 2007 CEFF arrangement, the Company issued a warrant to Kingsbridge to purchase 230,000 shares of theCompany’s common stock at a price of $7.99 per share, which represents a premium over the closing price of its common stock on thedate the Company entered into the 2007 CEFF. This warrant is exercisable beginning six months after the date of grant and for a period ofthree years thereafter. The Company can sell a maximum of 9,779,411 shares (exclusive of the shares underlying the warrant) under the2007 CEFF. Under the rules of the NASDAQ Stock Market LLC, this is approximately the maximum number of shares the Companymay sell to Kingsbridge without its stockholders’ approval. This restriction may further limit the amount of proceeds the Company isable to obtain from the 2007 CEFF. The Company is not obligated to sell any of the $75.0 million of common stock available under the2007 CEFF and there are no minimum commitments or minimum use penalties. The 2007 CEFF does not contain any restrictions on theCompany’s operating activities, any automatic pricing resets or any minimum market volume restrictions. In 2009, the Company sold3,596,728 shares of its common stock to Kingsbridge under the 2007 CEFF for gross proceeds of95Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)$6.9 million, before issuance costs of $98,000. In 2010, the Company sold 5,339,819 shares of its common stock to Kingsbridgeunder the 2007 CEFF for gross proceeds of $14.0 million, before issuance costs of $1,000. As of December 31, 2010, 842,864 sharesremained available to the Company for sale under the 2007 CEFF.In May 2009, pursuant to a registered direct equity offering, the Company entered into subscription agreements with selectedinstitutional investors to sell an aggregate of 7,106,600 units for a price of $1.97 per unit. Each unit consisted of one share of theCompany’s common stock and one warrant to purchase 0.50 shares of common stock. Accordingly, a total of 7,106,600 shares ofcommon stock and warrants to purchase 3,553,300 shares of common stock were issued and sold in this offering. The gross proceeds ofthe offering were $14.0 million. In connection with the offering, the Company paid placement agent fees to two registered broker-dealerstotaling $0.8 million. After deducting the placement agent fees and the other offering costs, the Company received net proceeds ofapproximately $12.9 million from the offering. The offering was made pursuant to the Company’s shelf registration statement onForm S-3 (SEC File No.: 333-155259) declared effective by the SEC on November 19, 2008. The difference of $9.7 million between thetotal offering proceeds of $12.9 million and the valuation of the warrants of $3.2 million was allocated to the common stock issued andwas recorded as such in stockholders’ equity.WarrantsThe Company has issued warrants to purchase convertible preferred stock, which became exercisable for common stock upon theconversion of the outstanding shares of preferred stock into common stock in conjunction with the Company’s initial public offering. InSeptember 1998, in connection with an equipment line of credit financing, the Company issued warrants to the lender. The Companyvalued the warrants by using the Black-Scholes option pricing model in fiscal 1999 when the line was drawn, and the fair value of$30,000 was recorded as a discount to the debt and amortized to interest expense over the life of the equipment line. In August 2005, thesewarrants were exercised by the lender in a cashless exercise, yielding 13,199 shares of common stock on a net basis. In connection with aconvertible preferred stock financing in August 1999, the Company issued warrants to the preferred stockholders. The warrants werevalued at $467,000 using the Black-Scholes option pricing model and the value was recorded as issuance cost as an offset to convertiblepreferred stock. These warrants expired unexercised on August 30, 2006. In connection with an equipment line of credit, the Companyissued warrants to the lender in December 1999. The value of the warrants was calculated using the Black-Scholes option pricing modeland was deemed insignificant. In August 2005, these warrants were exercised by the lender in a cashless exercise, yielding 1,333 shares ofcommon stock on a net basis.The Company issued warrants to purchase 244,000 of common stock to Kingsbridge in connection with the 2005 CEFF. Thewarrants are exercisable at a price of $9.13 per share beginning six months after the date of grant and for a period of five years thereafter.The warrants were valued at $920,000 using the Black-Scholes option pricing model and the following assumptions: a contractual termof five years, risk-free interest rate of 4.3%, volatility of 67%, and the fair value of our stock price on the date of performancecommitment, October 28, 2005, of $7.02. The warrant value was recorded as an issuance cost in additional paid-in capital on the initialdraw down of the CEFF in December 2005. These warrants are vested and fully exercisable as of December 31, 2010.The Company issued warrants to purchase 230,000 shares of common stock to Kingsbridge in connection with the 2007 CEFF. Thewarrants are exercisable at a price of $7.99 per share beginning six months after the date of grant and for a period of three years thereafter.The warrants were valued at $594,000 using the Black-Scholes option pricing model and the following assumptions: a contractual termof three years, risk-free interest rate of 4.275%, volatility of 73%, and the fair value of the Company’s stock price on the date ofperformance commitment, October 15, 2007, of $6.00. The warrant value was recorded as an issuance cost in additional paid-in capitalon the initial draw down of the 2007 CEFF. These warrants are vested and fully exercisable as of December 31, 2010.The Company issued warrants to purchase 3,553,300 shares of common stock to selected institutional investors in connection withthe May 2009 registered direct equity offering. The initial exercise price of the warrants96Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)was $2.75 per share. If Amgen did not elect to exercise its option to obtain an exclusive, worldwide (excluding Japan) license to omecamtivmecarbil for the potential treatment for heart failure by June 30, 2009, then the exercise price of the warrants would be changed to equal thevolume-weighted average price of the Company’s common stock for the five days prior to June 30, 2009. In such case, the exercise priceof the warrants could not exceed $2.75 or be less than $1.50 per share. If Amgen did exercise its option to obtain the exclusive license,then the warrant exercise price would remain at $2.75 per share. Because Amgen exercised its option to obtain the exclusive license prior toJune 30, 2009, the exercise price of the warrants remained at $2.75 per share. The warrants are exercisable from the date of issuance andfor 30 months thereafter. The warrants may not be exercised by a net cash exercise without the Company’s consent. Failure to maintain aneffective registration statement is not considered within the Company’s control, and there is no circumstance that would require theCompany to net cash settle the warrant in the event the Company does not have an effective registration statement.On the May 2009 date of issuance, the warrants were valued at $3.2 million using the Black-Scholes option pricing model,assigning probabilities to different assumed outcomes regarding whether Amgen would or would not exercise its option and obtain theexclusive license and to the resulting impact on the Company’s stock price. The assumptions were as follows: a contractual term of30 months; a risk-free interest rate of 1.16%; volatility of 89%; the fair value of the Company’s common stock price on the issuancedate, May 18, 2009, of $1.97 per share; a 90% probability that Amgen would obtain the exclusive license and a resulting stock price of$2.75 per share; and a 10% probability that Amgen would not obtain the exclusive license, with a resulting stock price of $1.97 pershare. The assumed stock price of $2.75 upon Amgen obtaining the exclusive license approximated the per-share impact of an increase inthe Company’s market capitalization of $50.0 million, the amount the Company would receive from Amgen for the exclusive license. Theassumed stock price of $1.97 if Amgen did not obtain the license assumed no change to the Company’s market capitalization or stockprice if Amgen did not obtain the exclusive license. The resulting valuation of $3.2 million for the warrants was recorded as a liability inthe balance sheet on the date of issuance.On May 21, 2009, the date that the provision for repricing of warrants lapsed when Amgen exercised its option to obtain the license,the exercise price of the warrants became known, and the warrants were re-valued at $4.8 million using the Black-Scholes option pricingmodel and the following assumptions: a contractual term of 30 months; a risk-free interest rate of 1.12%; volatility of 89%; theCompany’s enterprise value on the valuation date, May 21, 2009, factoring in the $50 million proceeds from Amgen; and the contractualwarrant exercise price of $2.75. The $1.6 million difference between the original valuation of the warrants and the subsequent valuationon May 21, 2009, was charged to Interest and Other, net, in the statement of operations for 2009. The resulting valuation amount of$4.8 million for the warrants was reclassified from liabilities to additional paid-in capital in stockholders’ equity.Outstanding warrants were as follows at December 31, 2010:Number Exercise Expiration of Shares Price Date 244,000 $9.13 04/28/11 230,000 $7.99 04/15/11 3,553,300 $2.75 11/18/11 4,027,300 Stock Option Plans2004 PlanIn January 2004, the Board of Directors adopted the 2004 Equity Incentive Plan (the “2004 Plan”), which was approved by thestockholders in February 2004. The 2004 Plan provides for the granting of incentive stock options,97Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)nonstatutory stock options, restricted stock, stock appreciation rights, stock performance units and stock performance shares toemployees, directors and consultants. Under the 2004 Plan, options may be granted at prices not lower than 100% of the fair market valueof the common stock on the date of grant for nonstatutory stock options and incentive stock options and may be granted for terms of upto ten years from the date of grant. Options granted to new employees generally vest 25% after one year and monthly thereafter over aperiod of four years. Options granted to existing employees generally vest monthly over a period of four years. At the May 2010 AnnualMeeting of Stockholders, the number of shares of common stock authorized for issuance under the 2004 Plan was increased by2,300,000. As of December 31, 2010, 12,736,504 shares of common stock were authorized for issuance under the 2004 Plan.1997 PlanIn 1997, the Company adopted the 1997 Stock Option/Stock Issuance Plan (the “1997 Plan”). The Plan provides for the grantingof stock options to employees and consultants of the Company. Options granted under the 1997 Plan may be either incentive stockoptions or nonstatutory stock options. Incentive stock options may be granted only to Company employees (including officers anddirectors who are also employees). Nonstatutory stock options may be granted to Company employees and consultants. Options under thePlan may be granted for terms of up to ten years from the date of grant as determined by the Board of Directors, provided, however, that(i) the exercise price of an incentive stock option and nonstatutory stock option shall not be less than 100% and 85% of the estimated fairmarket value of the shares on the date of grant, respectively, and (ii) with respect to any 10% shareholder, the exercise price of anincentive stock option or nonstatutory stock option shall not be less than 110% of the estimated fair market value of the shares on the dateof grant and the term of the grant shall not exceed five years. Options may be exercisable immediately and are subject to repurchaseoptions held by the Company which lapse over a maximum period of ten years at such times and under such conditions as determined bythe Board of Directors. Options granted under the 1997 Plan generally vested over four or five years (generally 25% after one year andmonthly thereafter). As of December 31, 2010, the Company had reserved 487,667 shares of common stock for issuance related tooptions outstanding under the 1997 Plan, and there were no shares available for future grants under the 1997 Plan.98Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Activity under the two stock option plans was as follows: Shares Weighted Available for Average Exercise Grant of Option Stock Options Price per Share - or Award Outstanding Stock Options Options authorized 1,000,000 — $— Options granted (833,194) 833,194 0.20 Options exercised — (147,625) 0.20 Options forfeited — — — Balance at December 31, 1998 166,806 685,569 0.12 Increase in authorized shares 461,945 — — Options granted (582,750) 582,750 0.39 Options exercised — (287,500) 0.24 Options forfeited 50,625 (50,625) 0.20 Balance at December 31, 1999 96,626 930,194 0.25 Increase in authorized shares 1,704,227 — — Options granted (967,500) 967,500 0.58 Options exercised — (731,661) 0.27 Options forfeited 68,845 (68,845) 0.30 Balance at December 31, 2000 902,198 1,097,188 0.52 Options granted (525,954) 525,954 1.12 Options exercised — (102,480) 0.55 Options forfeited 109,158 (109,158) 0.67 Balance at December 31, 2001 485,402 1,411,504 0.73 Increase in authorized shares 1,250,000 — — Options granted (932,612) 932,612 1.20 Options exercised — (131,189) 0.64 Options forfeited 152,326 (152,326) 0.78 Balance at December 31, 2002 955,116 2,060,601 0.95 Options granted (613,764) 613,764 1.39 Options exercised — (380,662) 1.02 Options forfeited 49,325 (49,325) 0.89 Balance at December 31, 2003 390,677 2,244,378 1.06 Increase in authorized shares 1,600,000 — — Options granted (863,460) 863,460 7.52 Options exercised — (404,618) 1.12 Options forfeited 74,025 (58,441) 3.64 Options retired (36,128) — — Balance at December 31, 2004 1,165,114 2,644,779 3.10 Increase in authorized shares 995,861 — — Options granted (996,115) 996,115 7.23 Options exercised — (196,703) 1.48 Options forfeited 182,567 (161,958) 5.89 Balance at December 31, 2005 1,347,427 3,282,233 4.31 Increase in authorized shares 1,039,881 — — Options granted (1,250,286) 1,250,286 7.04 Options exercised — (354,502) 1.47 Options forfeited 146,854 (145,317) 7.16 Balance at December 31, 2006 1,283,876 4,032,700 5.31 Increase in authorized shares 1,500,000 — — Options granted (1,647,570) 1,647,570 6.65 Options exercised — (259,054) 1.95 Options forfeited 360,990 (360,922) 6.94 Balance at December 31, 2007 1,497,296 5,060,294 5.80 Increase in authorized shares 3,500,000 — — 99Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Shares Weighted Available for Average Exercise Grant of Option Stock Options Price per Share - or Award Outstanding Stock Options Options granted (1,731,594) 1,731,594 3.41 Restricted stock awards granted (397,960) — — Options exercised — (95,796) 1.36 Options forfeited 720,876 (720,876) 5.79 Restricted stock awards forfeited 1,500 — — Balance at December 31, 2008 3,590,118 5,975,216 5.18 Increase in authorized shares 2,000,000 — — Options granted (1,792,750) 1,792,750 1.91 Options exercised — (492,003) 1.19 Options forfeited 291,500 (291,500) 6.06 Restricted stock awards forfeited 9,360 — — Balance at December 31, 2009 4,098,228 6,984,463 4.58 Increase in authorized shares 2,300,000 — — Options granted (2,040,737) 2,040,737 2.97 Options exercised — (176,433) 1.12 Options forfeited/expired 752,279 (752,291) 3.89 Restricted stock awards forfeited 17,925 — — Balance at December 31, 2010 5,127,695 8,096,476 $4.32 The options outstanding and currently exercisable by exercise price at December 31, 2010 were as follows: Options Outstanding Vested and Exercisable Weighted Weighted Average Weighted Number of Average Remaining Contractual Number of Average Range of Exercise Price Options Exercise Price Life (Years) Options Exercise Price $1.00 — $1.75 351,128 $1.25 2.35 347,769 $1.25 $1.85 1,372,516 $1.85 7.95 679,187 $1.85 $1.86 — $3.02 592,425 $2.44 8.26 242,115 $2.48 $3.08 1,428,842 $3.08 9.03 302,323 $3.08 $3.11 — $3.33 153,412 $3.19 8.55 90,468 $3.15 $3.37 1,013,407 $3.37 6.96 722,823 $3.37 $3.45 — $6.59 833,680 $5.75 4.55 795,273 $5.83 $6.61 — $6.67 28,200 $6.66 6.39 25,400 $6.66 $6.81 911,096 $6.81 5.92 856,691 $6.81 $6.96 — $10.12 1,411,770 $7.81 4.46 1,409,114 $7.81 8,096,476 $4.32 6.62 5,471,163 $5.04 The weighted-average grant-date fair value of options granted during the year ended December 31, 2010 was $1.97 per share. Thetotal intrinsic value of options exercised during the year ended December 31, 2010 was $0.3 million. The aggregate intrinsic value ofoptions outstanding and options exercisable as of December 31, 2010 was $0.6 million and $0.5 million, respectively. The intrinsic valueis calculated as the difference between the market value as of December 31, 2010 and the exercise price of shares. The market value as ofDecember 31, 2009 was $2.09 per share as reported by NASDAQ. As of December 31, 2010 the total number of options vested andexpected to vest was 7,991,673 with a weighted average exercise price of $4.34 per share, aggregate intrinsic value of $0.6 million andweighted average remaining contractual life of 6.6 years.100Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)As of December 31, 2009, there were 4,472,677 options outstanding, exercisable and vested at a weighted average exercise price of$5.37 per share. As of December 31, 2008, there were 3,676,233 options outstanding, exercisable and vested at a weighted averageexercise price of $5.32 per share. The weighted average grant date fair value of options granted in the years ended December 31, 2009 and2008 was $1.30 and $2.06, respectively.Restricted stock award activity was as follows: Weighted Average Award Number of Date Fair Value per Shares Share Restricted stock awards outstanding at December 31, 2007 — $— Awards granted 397,960 2.37 Awards forfeited (1,500) 2.37 Unvested restricted stock awards outstanding at December 31, 2008 396,460 2.37 Awards released (195,470) 2.37 Awards forfeited (9,360) 2.37 Unvested restricted stock awards outstanding at December 31, 2009 191,630 2.37 Awards released (173,705) 2.37 Awards forfeited (17,925) 2.37 Unvested restricted stock awards outstanding at December 31, 2010 — $— The Company measures compensation expense for restricted stock awards at fair value on the date of grant and recognizes theexpense over the expected vesting period. The fair value for restricted stock awards is based on the closing price of the Company’scommon stock on the date of grant. Unvested restricted stock awards are subject to repurchase at no cost to the Company.Stock-Based CompensationDeferred Employee Stock-Based CompensationIn anticipation of its 2004 IPO, the Company determined that, for financial reporting purposes, the estimated value of its commonstock was in excess of the exercise prices of its stock options. Accordingly, for stock options issued to employees prior to its IPO, theCompany recorded deferred stock-based compensation and amortized the related expense on a straight line basis over the service period,which was generally four years. The Company recorded deferred employee stock compensation of $6.2 million for the period fromAugust 5, 1997 (date of inception) through December 31, 2010. The Company recorded no deferred stock compensation during the yearsended December 31, 2010, 2009 or 2008. The Company recorded amortization of deferred stock-based compensation of zero, zero and$0.3 million for the years ended December 31, 2010, 2009 and 2008, respectively, in connection with options granted to employees. Theremaining balance of deferred compensation became fully amortized in 2008.Non-employee Stock-Based CompensationThe Company records stock option grants to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to adjustment as the underlying equity instruments vest.101Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)There were no stock option grants to non-employees in the years ended December 31, 2010, 2009 or 2008. When terminating, ifemployees continue to provide service to the Company as consultants and their grants are permitted to continue to vest, the expenseassociated with the continued vesting of the related stock options is classified as non-employee stock compensation expense after thestatus change.In connection with services rendered by non-employees, the Company recorded stock-based compensation expense of $0.1 million,$0.1 million and $27,000 in 2010, 2009 and 2008, respectively, and $1.6 million for the period from August 5, 1997 (date of inception)through December 31, 2010.Employee Stock Purchase Plan (“ESPP”)In January 2004, the Board of Directors adopted the ESPP, which was approved by the stockholders in February 2004. Under theESPP, statutory employees may purchase common stock of the Company up to a specified maximum amount through payrolldeductions. The stock is purchased semi-annually at a price equal to 85% of the fair market value at certain plan-defined dates. TheCompany issued 134,327, 149,996 and 164,451 shares of common stock during 2010, 2009 and 2008, respectively, pursuant to theESPP at an average price of $1.70, $1.66 and $2.85 per share, in 2010, 2009 and 2008, respectively. At December 31, 2010 theCompany had 429,314 shares of common stock reserved for issuance under the ESPP.Note 14 —Income TaxesThe Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities aredetermined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effectfor the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reducethe deferred tax assets to the amounts expected to be realized. The Company did not record an income tax provision in the year endedDecember 31, 2008 because the Company had a net taxable loss in that period.The Company recorded the following income tax provision as follows (in thousands): Years Ended December 31, 2010 2009 2008 Current: Federal $(176) $150 $— State — — — Total $(176) $150 $— Deferred: Federal $— $— $— State — — — Total $— $— $— The Company recorded an income tax provision of $150,000 in 2009 due to alternative minimum tax (“AMT”). However, due to theDepartment of the Treasury’s further guidance clarifying that utilization of the AMT net operating loss (“NOL”) was not limited to 90%as part of the 5-year NOL carryback provision brought about by the Worker, Homeownership, and Business Assistance Act of 2009,the 2009 AMT liability was reversed in 2010. In addition to the $150,000 benefit related to the AMT liability, The Company alsorecognized a $26,000 benefit related to the monetization of the federal research tax credit for a total benefit of $176,000 in 2010.102Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred taxassets and liabilities were as follows (in thousands): As of December 31, 2010 2009 2008 Deferred tax assets: Depreciation and amortization $9,151 $10,458 $11,855 Reserves and accruals 3,632 2,784 11,343 Net operating losses 121,603 103,166 104,891 Tax credits 16,249 18,632 16,511 Total deferred tax assets 150,635 135,040 144,600 Less: Valuation allowance (150,635) (135,040) (144,600)Net deferred tax assets $— $— $— Based upon the weight of available evidence, which includes the Company’s historical operating performance, reported cumulativenet losses since inception and difficulty in accurately forecasting the Company’s future results, the Company maintained a full valuationallowance on the net deferred tax assets as of December 31, 2010 and 2009. The valuation allowance was determined pursuant to theaccounting guidance for income taxes, which requires an assessment of both positive and negative evidence when determining whether itis more likely than not that deferred tax assets are recoverable. The Company intends to maintain a full valuation allowance on theU.S. deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowanceincreased by $15.6 million in 2010, decreased by $9.56 million in 2009, and increased by $23.9 million in 2008.As a result of certain realization requirements of accounting guidance for Stock Compensation, the table of deferred tax assets andliabilities shown above does not include certain deferred tax assets at December 31, 2010, 2009 and 2008 that arose directly from taxdeductions related to equity compensation in excess of compensation recognized for financial reporting. Equity will be increased by$0.6 million if and when such benefits are ultimately realized and reduce taxes payable.The following are the Company’s valuation and qualifying accounts (in thousands): Balance at Beginning of Charged to Charged to Balance at Period Expenses Other Accounts Deductions End of Period Year Ended December 31, 2008: Deferred tax valuation allowance $120,653 23,947 — — $144,600 Year Ended December 31, 2009: Deferred tax valuation allowance $144,600 (9,560) — — $135,040 Year Ended December 31, 2010: Deferred tax valuation allowance $135,040 15,595 — — $150,635 103Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate: Years Ended December 31, 2010 2009 2008 Tax at federal statutory tax rate (34)% 34% (34)%State income tax, net of federal tax benefit (6)% 6% (6)%Research and development credits (4)% (8)% (5)%Adjustment to prior year research and development credits due to results of research and developmentcredit study 0% 0% 0%Adjustment due to Section 383 limitation 0% 0% 0%Deferred tax assets (utilized) not benefited 42% (37)% 43%Stock-based compensation 1% 4% 2%Warrant expense 0% 2% 0%Total (1)% 1% 0%The Company had federal net operating loss carryforwards of approximately $329.7 million and state net operating losscarryforwards of approximately $174.8 million before federal benefit at December 31, 2010. If not utilized, the federal and state operatingloss carryforwards will begin to expire in various amounts beginning 2020 and 2011, respectively. The net operating loss carryforwardsinclude deductions for stock options.The Company had research credit carryforwards of approximately $9.7 million and $9.5 million for federal and California stateincome tax purposes, respectively, at December 31, 2010. If not utilized, the federal carryforwards will expire in various amountsbeginning in 2021. The California state credit can be carried forward indefinitely.In general, under Section 382 of the Internal Revenue Code, a corporation that undergoes an ‘ownership change‘ is subject tolimitations on its ability to utilize its pre-change net operating losses and tax credits to offset future taxable income. The Company’sexisting net operating losses and tax credits are subject to limitations arising from previous ownership changes. Future changes in theCompany’s stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of theInternal Revenue Code and result in additional limitations. During the year ended December 31, 2007, the Company conducted a studyand determined that the Company would not be able to utilize a portion of its federal research credit as a result of such a restriction.Accordingly, the Company reduced its deferred tax assets and the corresponding valuation allowance by $0.8 million. As a result, theresearch credit amount as of December 31, 2007 reflects the restriction on the Company’s ability to use the credit.The Company follows the accounting guidance that prescribes a comprehensive model for how companies should recognize,measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Taxpositions are initially recognized in the financial statements when it is more likely than not that the position will be sustained uponexamination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that isgreater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position andrelevant facts.The cumulative effect of adopting the current guidance on uncertain tax positions on January 1, 2007 resulted in no liability on thebalance sheet. The total amount of unrecognized tax benefits as of the date of adoption was $3.1 million. The Company is currently notsubject to income tax examinations. In general, the statute of limitations for tax liabilities for these years remains open for purpose ofadjusting the amounts of the losses and credits carried forward from those years.104Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (“UTBs”) (in thousands): Federal Federal Tax Benefit Unrecognized Income Tax and State of State Income Tax Benefits - Net of Federal Tax UTBs Benefit of State UTBs Unrecognized tax benefits balance at January 1, 2008 $3,541 $792 $2,749 Reduction for tax positions of prior years — — — Addition for tax positions related to the current year 694 137 557 Unrecognized tax benefits balance at December 31, 2008 $4,235 $929 $3,306 Addition for tax positions of prior years — — — Addition for tax positions related to the current year 507 104 403 Unrecognized tax benefits balance at December 31, 2009 $4,742 $1,033 $3,709 Addition for tax positions of prior years 103 20 83 Addition for tax positions related to the current year 503 101 402 Unrecognized tax benefits balance at December 31, 2010 $5,348 $1,154 $4,149 Included in the balance of unrecognized tax benefits as of December 31, 2010, 2009 and 2008 are $4.2 million, $3.7 million and$3.3 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to theunrecognized tax benefits noted above, the Company did not accrue any penalties or interest during 2010, 2009 or 2008. The Companydoes not expect its unrecognized tax benefit to change materially over the next twelve months.Note 15 —Interest and Other, NetComponents of Interest and Other, net were as follows (in thousands): Period from August 5, 1997 (Date of Inception) to Years Ended December 31, December 31, 2010 2009 2008 2010 Unrealized gain (loss) on ARS (Note 3 and Note 4) $2,358 $1,031 $(3,389) $— Unrealized gain (loss) on investment put options related to ARS Rights(Note 3 and Note 4) (2,358) (1,031) 3,389 — Warrant expense — (1,585) — (1,585)Interest income and other income 335 593 3,196 28,868 Interest expense and other expense (163) (409) (491) (5,933)Interest and Other, net $172 $(1,401) $2,705 $21,350 105Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued)Investments that the Company designates as trading securities are reported at fair value, with gains or losses resulting from changesin fair value recognized in earnings and included in Interest and Other, net. The Company classified its investments in ARS as tradingsecurities as of December 31, 2009 and 2008. The Company sold its remaining outstanding ARS on June 30, 2010, pursuant to itsexercise of the ARS Rights and the transaction settled on July 1, 2010.The Company elected to measure the investment put option related to the ARS Rights at fair value to mitigate volatility in reportedearnings due to its linkage to the ARS. The Company recorded $2.4 million as the fair value of the investment put option related to theARS Rights as of December 31, 2009, classified as a short-term asset on the balance sheet with a corresponding credit to Interest andOther, net. Changes in the fair value of the ARS are recognized in current period earnings in Interest and Other, net. The investment putoption related to the ARS rights was extinguished on July 1, 2010, the settlement date of the sale of the remaining ARS.Warrant expense for 2009 related to the change in the fair value of the warrant liability that was recorded in connection with theCompany’s registered direct equity offering in May 2009.Interest income and other income consists primarily of interest income generated from the Company’s cash, cash equivalents andinvestments. Interest expense and other expense primarily consists of interest expense on borrowings under the Company’s equipmentfinancing lines and, for 2009 and the first six months of 2010, interest expense on its loan agreement with UBS Bank USA and UBSFinancial Services Inc.Note 16 —Quarterly Financial Data (Unaudited)Quarterly results were as follows (in thousands, except per share data): First Second Third Fourth Quarter Quarter Quarter Quarter 2010 Total revenues $621 $462 $394 $1,099 Net loss (12,189) (13,144) (12,341) (11,613)Net loss per share — basic and diluted $(0.20) $(0.21) $(0.19) $(0.17)2009 Total revenues $3,078 $71,930 $5,506 $1,023 Net income (loss) (10,685) 55,959 (8,202) (12,529)Net income (loss) per share — basic $(0.21) $0.99 $(0.14) $(0.21)Net income (loss) per share — diluted $(0.21) $0.98 $(0.14) $(0.21)Note 17 —Subsequent EventsRestricted cash. In January 2011, GE Capital approved a $0.3 million reduction in the amount of the Company’s certificate ofdeposit. (See Note 8 “Equipment Financing Line” and Note 1 “Organization and Significant Accounting Policies — Restricted Cash.”)106Table of ContentsItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures. Our management evaluated, with the participation of our Chief ExecutiveOfficer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) underthe Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief ExecutiveOfficer and our Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing andmaintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our managementassessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, ourmanagement used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2010, our internal control over financial reporting iseffective based on these criteria.Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of our internalcontrol over financial reporting as of December 31, 2010, as stated in their report, which is included herein.Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting thatoccurred during the quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.Inherent Limitations on Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief FinancialOfficer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A controlsystem, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controlsystem are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controlsmust be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any, within Cytokinetics have been detected.Item 9B. Other InformationNone.PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information regarding our directors and executive officers, our director nominating process and our audit committee isincorporated by reference from our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders, where it appears under theheadings “Board of Directors” and “Executive Officers.”Section 16(a) Beneficial Ownership Reporting ComplianceThe information regarding our Section 16 beneficial ownership reporting compliance is incorporated by reference from our definitiveProxy Statement described above, where it appears under the headings “Section 16(a) Beneficial Ownership Reporting Compliance.”107Table of ContentsCode of EthicsWe have adopted a Code of Ethics that applies to all directors, officers and employees of the Company. We publicize the Code ofEthics through posting the policy on our website, http://www.cytokinetics.com. We will disclose on our website any waivers of, oramendments to, our Code of Ethics.Item 11. Executive CompensationThe information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above,where it appears under the headings “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation.”Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item regarding security ownership of certain beneficial owners and management is incorporated byreference from our definitive Proxy Statement referred to in Item 10 above, where it appears under the heading “Security Ownership ofCertain Beneficial Owners and Management.”The following table summarizes the securities authorized for issuance under our equity compensation plans as of December 31,2010: Number of Securities Number of Securities to be Issued Weighted Average Remaining Available Upon Exercise of Exercise Price of for Future Issuance Outstanding Options, Outstanding Options, Under Equity Plan Category Warrants and Rights Warrants and Rights Compensation Plans Equity compensation plans approved by stockholders 8,096,476 $4.32 5,557,009(1)Equity compensation plans not approved bystockholders — — — Total 8,096,476 $4.32 5,557,009 (1)Includes 429,314 shares of common stock reserved for issuance under the Employee Stock Purchase Plan.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 abovewhere it appears under the headings “Certain Business Relationships and Related Party Transactions” and “Board of Directors.”Item 14. Principal Accounting Fees and ServicesThe information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above,where it appears under the heading “Principal Accountant Fees and Services.”108Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a) The following documents are filed as part of this Form 10-K:(1) Financial Statements (included in Part II of this report): • Report of Independent Registered Public Accounting Firm • Balance Sheets • Statements of Operations • Statements of Stockholders’ Equity (Deficit) • Statements of Cash Flows • Notes to Financial Statements(2) Financial Statement Schedules:None — All financial statement schedules are omitted because the information is inapplicable or presented in the notes tothe financial statements.(3) Exhibits:Exhibit Number Description 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Amended and Restated Bylaws.(1) 4.1 Specimen Common Stock Certificate.(2) 4.2 Warrant for the purchase of shares of common stock, dated October 28, 2005, issued by the Company to KingsbridgeCapital Limited.(3) 4.3 Registration Rights Agreement, dated October 28, 2005, by and between the Company and Kingsbridge Capital Limited.(3) 4.4 Registration Rights Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(4) 4.5 Warrant for the purchase of shares of common stock, dated October 15, 2007, issued by the Company to KingsbridgeCapital Limited.(5) 4.6 Registration Rights Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(5) 10.1 1997 Stock Option/Stock Issuance Plan.(1) 10.2 2004 Equity Incentive Plan, as amended.(20) 10.3 2004 Employee Stock Purchase Plan.(1) 10.4 Build-to-Suit Lease, dated May 27, 1997, by and between Britannia Pointe Grand Limited Partnership and Metaxen,LLC.(1) 10.5 First Amendment to Lease, dated April 13, 1998, by and between Britannia Pointe Grand Limited Partnership andMetaxen, LLC.(1) 10.6 Sublease Agreement, dated May 1, 1998, by and between the Company and Metaxen, LLC.(1) 10.7 Sublease Agreement, dated March 1, 1999, by and between Metaxen, LLC and Exelixis Pharmaceuticals, Inc.(1) 10.8 Assignment and Assumption Agreement and Consent, dated July 11, 1999, by and among Exelixis Pharmaceuticals,Metaxen, LLC, Xenova Group PLC and Britannia Pointe Grande Limited Partnership.(1) 10.9 Second Amendment to Lease, dated July 11, 1999, by and between Britannia Pointe Grand Limited Partnership andExelixis Pharmaceuticals, Inc.(1)109Table of ContentsExhibit Number Description 10.10 First Amendment to Sublease Agreement, dated July 20, 1999, by and between the Company and Metaxen, LLC.(1) 10.11 Agreement and Consent, dated July 20, 1999, by and among Exelixis Pharmaceuticals, Inc., the Company and BritanniaPointe Grand Limited Partnership.(1) 10.12 Amendment to Agreement and Consent, dated July 31, 2000, by and between the Company, Exelixis, Inc., and BritanniaPointe Grande Limited Partnership.(1) 10.13 Assignment and Assumption of Lease, dated September 28, 2000, by and between the Company and Exelixis, Inc.(1) 10.14 Sublease Agreement, dated September 28, 2000, by and between the Company and Exelixis, Inc.(1) 10.15 Sublease Agreement, dated December 29, 1999, by and between the Company and COR Therapeutics, Inc.(1) 10.16 Series D Preferred Stock Purchase Agreement, dated June 20, 2001, by and between the Company and Glaxo WellcomeInternational B.V.(1) 10.17 Amendment No. 1 to Series D Preferred Stock Purchase Agreement, dated April 2, 2003, by and among the Company,Glaxo Wellcome International B.V. and Glaxo Group Limited.(1) *10.18 Collaboration and License Agreement, dated June 20, 2001, by and between the Company and Glaxo Group Limited.(1) *10.19 Memorandum, dated June 20, 2001, by and between the Company and Glaxo Group Limited.(1) *10.20 Letter Amendment, dated October 28, 2002, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.21 Letter Amendment, dated November 5, 2002, to the Collaboration and License Agreement by and between the Companyand Glaxo Group Limited.(1) *10.22 Letter Amendment, dated December 13, 2002, to the Collaboration and License Agreement by and between the Companyand Glaxo Group Limited.(1) *10.23 Letter Amendment, dated July 11, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.24 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.25 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.26 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) 10.27 Common Stock Purchase Agreement, dated March 10, 2004, by and between the Company and Glaxo Group Limited.(24) 10.28 David J. Morgans and Sandra Morgans Promissory Note, dated May 20, 2002.(1) *10.29 Amendment, dated September 21, 2005, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(9) 10.30 Common Stock Purchase Agreement, dated October 28, 2005, by and between the Company and Kingsbridge CapitalLimited.(3) 10.31 Sublease, dated November 29, 2005, by and between the Company and Millennium Pharmaceuticals, Inc.(10) 10.32 Stock Purchase Agreement dated January 18, 2006, by and among the Company, Federated Kaufmann Fund, Red AbbeyVenture Partners, LP, Red Abbey Venture Partners (QP), LP and Red Abbey CEO’s Fund, LP.(11) 10.33 Loan Proposal, executed January 18, 2006, by and between the Company and General Electric Capital Corporation.(3) 10.34 Loan Proposal, executed March 16, 2006, by and between the Company and General Electric Capital Corporation.(12)110Table of ContentsExhibit Number Description *10.35 Letter Amendment, dated June 16, 2006, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(13) *10.36 Amendment, dated November 27, 2006, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(14) 10.37 Common Stock Purchase Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(4) *10.38 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(15) *10.39 Letter Amendment, dated June 18, 2007, to Collaboration and License Agreement by and between the Company and GlaxoGroup Limited.(16) 10.40 Loan Proposal, executed August 28, 2007, by and between the Company and General Electric Capital Corporation.(17) 10.41 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge CapitalLimited.(5) *10.42 Letter Amendment, dated March 11, 2008, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(22) *10.43 Letter Amendment, dated June 18, 2008, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(18) 10.44 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(6) *10.45 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H.Sabry.(19) 10.46 Executive Employment Agreement, dated March 31, 2008, by and between the Company and Michael Rabson.(19) 10.47 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and RobertBlum.(6) 10.48 Form of Executive Employment Agreement between the Company and its executive officers.(6) *10.49 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company andAmgen Inc.(22) *10.50 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Companyand Amgen Inc.(22) 10.51 Acceptance of UBS AG Settlement Offer Relating to Auction Rate Securities dated October 27, 2008.(22) *10.52 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company andAmgen Inc.(22) 10.53 Credit Line Agreement, effective December 30, 2008, by and among the Company, UBS Bank USA and UBS FinancialServices Inc.(22) *10.54 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Company andAmgen Inc.(22) 10.55 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(22) 10.56 Form of Subscription Agreement, dated May 18, 2009, between the Company and the investor signatories thereto.(21) 10.57 Form of Warrant, dated May 18, 2009, between the Company and the investor signatories thereto.(21) *10.58 Letter Amendment, dated April 16, 2009, to the Collaboration and License Agreement between the Company and GlaxoGroup Limited.(20) 10.59 Master Security Agreement, dated February 2, 2001, by and between the Company and General Electric CapitalCorporation.(1)111Table of ContentsExhibit Number Description 10.60 Amendment No. 1, effective January 1, 2005, to Master Security Agreement by and between the Company and GeneralElectric Capital Corporation.(20) *10.61 Consent and Amendment No. 2, effective May 18, 2009, to Master Security Agreement by and between the Company andGeneral Electric Capital Corporation.(20) 10.62 Cross-Collateral and Cross-Default Agreement by and between the Company and General Electric Capital Corporation.(1) *10.63 Mutual Termination of Collaboration and License Agreement Dated June 20, 2001 between the Company and Glaxo GroupLimited, dated December 4, 2009.(25) 10.64 Amendment No. 1 to Common Stock Purchase Agreement, dated October 15, 2010, by and between the Company andKingsbridge Capital Limited.(23) 10.65 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand LimitedPartnership. * 10.66 Amendment No. 5, dated November 1, 2011, to the Collaboration and Option Agreement by and between the Companyand Amgen Inc. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (see page 114). 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certifications of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).(1)Incorporated by reference from our Registration Statement on Form S-1, registration number 333-112261, declared effective by theSecurities and Exchange Commission on April 29, 2004.(2)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9,2007.(3)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January20, 2006.(4)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 3,2007.(5)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October15, 2007.(6)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August5, 2008(7)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission onNovember 12, 2004, as amended February 16, 2005.(8)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May12, 2005.(9)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission onNovember 10, 2005.(10)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on December5, 2005, as amended on December 13, 2005.(11)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January18, 2006.(12)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 22,2006.(13)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 19,2006.112Table of Contents(14)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November27, 2006.(15)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12,2007.(16)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 19,2007.(17)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 29,2007.(18)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20,2008, as amended June 20, 2008.(19)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 2,2008.(20)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August6, 2009.(21)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19,2009.(22)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12,2009.(23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October26, 2010.(24)Incorporated by reference from our Registration Statement on Form S-1/A, registration number 333-112261, filed with the Securitiesand Exchange Commission on March 11, 2004.(25)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11,2010.* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document andhave been furnished separately to the Securities and Exchange Commission as required by Rule 406 under the Securities Act of1933 or Rule 24b-2 under the Securities Exchange Act of 1934, as applicable.(b) ExhibitsThe exhibits listed under Item 15(a)(3) hereof are filed as part of this Form 10-K, other than Exhibit 32.1 which shall be deemedfurnished.(c) Financial Statement SchedulesNone — All financial statement schedules are omitted because the information is inapplicable or presented in the notes to thefinancial statements.113Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized.CYTOKINETICS, INCORPORATED By: /s/ Robert I. BlumRobert I. BlumPresident, Chief Executive Officer and DirectorDated: March 10, 2011POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appointsRobert I. Blum and Sharon A. Barbari, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, forhim in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto andother documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each ofsaid attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following personson behalf of the registrant and in the capacities and on the dates indicated.Signature Title Date /s/ Robert I. BlumRobert I. Blum President, Chief Executive Officer and Director(Principal Executive Officer) March 10, 2011 /s/ Sharon A. BarbariSharon A. Barbari Executive Vice President, Finance and ChiefFinancial Officer (Principal Financial andAccounting Executive) March 10, 2011 /s/ L. Patrick Gage, Ph.D.L. Patrick Gage, Ph.D. Chairman of the Board of Directors March 10, 2011 /s/ Santo J. CostaSanto J. Costa Director March 10, 2011 /s/ Stephen DowStephen Dow Director March 10, 2011 /s/ Denise M. Gilbert, Ph.D.Denise M. Gilbert, Ph.D. Director March 10, 2011 /s/ John T. Henderson, M.B. Ch.B.John T. Henderson, M.B. Ch.B. Director March 10, 2011 /s/ James A. Spudich, Ph.DJames A. Spudich, Ph.D Director March 10, 2011 /s/ Wendell Wieranga, Ph.D.Wendell Wieranga, Ph.D. Director March 10, 2011114Table of ContentsExhibit Number Description 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Amended and Restated Bylaws.(1) 4.1 Specimen Common Stock Certificate.(2) 4.2 Warrant for the purchase of shares of common stock, dated October 28, 2005, issued by the Company to KingsbridgeCapital Limited.(3) 4.3 Registration Rights Agreement, dated October 28, 2005, by and between the Company and Kingsbridge Capital Limited.(3) 4.4 Registration Rights Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(4) 4.5 Warrant for the purchase of shares of common stock, dated October 15, 2007, issued by the Company to KingsbridgeCapital Limited.(5) 4.6 Registration Rights Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(5) 10.1 1997 Stock Option/Stock Issuance Plan.(1) 10.2 2004 Equity Incentive Plan, as amended.(20) 10.3 2004 Employee Stock Purchase Plan.(1) 10.4 Build-to-Suit Lease, dated May 27, 1997, by and between Britannia Pointe Grand Limited Partnership and Metaxen,LLC.(1) 10.5 First Amendment to Lease, dated April 13, 1998, by and between Britannia Pointe Grand Limited Partnership andMetaxen, LLC.(1) 10.6 Sublease Agreement, dated May 1, 1998, by and between the Company and Metaxen, LLC.(1) 10.7 Sublease Agreement, dated March 1, 1999, by and between Metaxen, LLC and Exelixis Pharmaceuticals, Inc.(1) 10.8 Assignment and Assumption Agreement and Consent, dated July 11, 1999, by and among Exelixis Pharmaceuticals,Metaxen, LLC, Xenova Group PLC and Britannia Pointe Grande Limited Partnership.(1) 10.9 Second Amendment to Lease, dated July 11, 1999, by and between Britannia Pointe Grand Limited Partnership andExelixis Pharmaceuticals, Inc.(1) 10.10 First Amendment to Sublease Agreement, dated July 20, 1999, by and between the Company and Metaxen, LLC.(1) 10.11 Agreement and Consent, dated July 20, 1999, by and among Exelixis Pharmaceuticals, Inc., the Company and BritanniaPointe Grand Limited Partnership.(1) 10.12 Amendment to Agreement and Consent, dated July 31, 2000, by and between the Company, Exelixis, Inc., and BritanniaPointe Grande Limited Partnership.(1) 10.13 Assignment and Assumption of Lease, dated September 28, 2000, by and between the Company and Exelixis, Inc.(1) 10.14 Sublease Agreement, dated September 28, 2000, by and between the Company and Exelixis, Inc.(1) 10.15 Sublease Agreement, dated December 29, 1999, by and between the Company and COR Therapeutics, Inc.(1) 10.16 Series D Preferred Stock Purchase Agreement, dated June 20, 2001, by and between the Company and Glaxo WellcomeInternational B.V.(1) 10.17 Amendment No. 1 to Series D Preferred Stock Purchase Agreement, dated April 2, 2003, by and among the Company,Glaxo Wellcome International B.V. and Glaxo Group Limited.(1) *10.18 Collaboration and License Agreement, dated June 20, 2001, by and between the Company and Glaxo Group Limited.(1) *10.19 Memorandum, dated June 20, 2001, by and between the Company and Glaxo Group Limited.(1) *10.20 Letter Amendment, dated October 28, 2002, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.21 Letter Amendment, dated November 5, 2002, to the Collaboration and License Agreement by and between the Companyand Glaxo Group Limited.(1)Table of ContentsExhibit Number Description *10.22 Letter Amendment, dated December 13, 2002, to the Collaboration and License Agreement by and between the Companyand Glaxo Group Limited.(1) *10.23 Letter Amendment, dated July 11, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.24 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.25 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) *10.26 Letter Amendment, dated July 28, 2003, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(1) 10.27 Common Stock Purchase Agreement, dated March 10, 2004, by and between the Company and Glaxo Group Limited.(24) 10.28 David J. Morgans and Sandra Morgans Promissory Note, dated May 20, 2002.(1) *10.29 Amendment, dated September 21, 2005, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(9) 10.30 Common Stock Purchase Agreement, dated October 28, 2005, by and between the Company and Kingsbridge CapitalLimited.(3) 10.31 Sublease, dated November 29, 2005, by and between the Company and Millennium Pharmaceuticals, Inc.(10) 10.32 Stock Purchase Agreement dated January 18, 2006, by and among the Company, Federated Kaufmann Fund, Red AbbeyVenture Partners, LP, Red Abbey Venture Partners (QP), LP and Red Abbey CEO’s Fund, LP.(11) 10.33 Loan Proposal, executed January 18, 2006, by and between the Company and General Electric Capital Corporation.(3) 10.34 Loan Proposal, executed March 16, 2006, by and between the Company and General Electric Capital Corporation.(12) *10.35 Letter Amendment, dated June 16, 2006, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(13) *10.36 Amendment, dated November 27, 2006, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(14) 10.37 Common Stock Purchase Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(4) *10.38 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(15) *10.39 Letter Amendment, dated June 18, 2007, to Collaboration and License Agreement by and between the Company and GlaxoGroup Limited.(16) 10.40 Loan Proposal, executed August 28, 2007, by and between the Company and General Electric Capital Corporation.(17) 10.41 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge CapitalLimited.(5) *10.42 Letter Amendment, dated March 11, 2008, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(22) *10.43 Letter Amendment, dated June 18, 2008, to the Collaboration and License Agreement by and between the Company andGlaxo Group Limited.(18) 10.44 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(6) *10.45 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H.Sabry.(19) 10.46 Executive Employment Agreement, dated March 31, 2008, by and between the Company and Michael Rabson.(19)Table of ContentsExhibit Number Description 10.47 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and RobertBlum.(6) 10.48 Form of Executive Employment Agreement between the Company and its executive officers.(6) *10.49 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company andAmgen Inc.(22) *10.50 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Companyand Amgen Inc.(22) 10.51 Acceptance of UBS AG Settlement Offer Relating to Auction Rate Securities dated October 27, 2008.(22) *10.52 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company andAmgen Inc.(22) 10.53 Credit Line Agreement, effective December 30, 2008, by and among the Company, UBS Bank USA and UBS FinancialServices Inc.(22) *10.54 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Companyand Amgen Inc.(22) 10.55 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(22) 10.56 Form of Subscription Agreement, dated May 18, 2009, between the Company and the investor signatories thereto.(21) 10.57 Form of Warrant, dated May 18, 2009, between the Company and the investor signatories thereto.(21) *10.58 Letter Amendment, dated April 16, 2009, to the Collaboration and License Agreement between the Company and GlaxoGroup Limited.(20) 10.59 Master Security Agreement, dated February 2, 2001, by and between the Company and General Electric CapitalCorporation.(1) 10.60 Amendment No. 1, effective January 1, 2005, to Master Security Agreement by and between the Company and GeneralElectric Capital Corporation.(20) *10.61 Consent and Amendment No. 2, effective May 18, 2009, to Master Security Agreement by and between the Company andGeneral Electric Capital Corporation.(20) 10.62 Cross-Collateral and Cross-Default Agreement by and between the Company and General Electric Capital Corporation.(1) *10.63 Mutual Termination of Collaboration and License Agreement Dated June 20, 2001 between the Company and Glaxo GroupLimited, dated December 4, 2009.(25) 10.64 Amendment No. 1 to Common Stock Purchase Agreement, dated October 15, 2010, by and between the Company andKingsbridge Capital Limited.(23) 10.65 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand LimitedPartnership. * 10.66 Amendment No. 5, dated November 1, 2011, to the Collaboration and Option Agreement by and between the Companyand Amgen Inc. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (see page 114). 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certifications of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).(1)Incorporated by reference from our Registration Statement on Form S-1, registration number 333-112261, declared effective by theSecurities and Exchange Commission on April 29, 2004.(2)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9,2007.(3)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January20, 2006.Table of Contents(4)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 3,2007.(5)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October15, 2007.(6)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August5, 2008(7)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission onNovember 12, 2004, as amended February 16, 2005.(8)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May12, 2005.(9)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission onNovember 10, 2005.(10)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on December5, 2005, as amended on December 13, 2005.(11)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January18, 2006.(12)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 22,2006.(13)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 19,2006.(14)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November27, 2006.(15)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12,2007.(16)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 19,2007.(17)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 29,2007.(18)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20,2008, as amended June 20, 2008.(19)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 2,2008.(20)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August6, 2009.(21)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19,2009.(22)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12,2009.(23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October26, 2010.(24)Incorporated by reference from our Registration Statement on Form S-1/A, registration number 333-112261, filed with the Securitiesand Exchange Commission on March 11, 2004.(25)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11,2010.* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document andhave been furnished separately to the Securities and Exchange Commission as required by Rule 406 under the Securities Act of1933 or Rule 24b-2 under the Securities Exchange Act of 1934, as applicable.Exhibit 10.65THIRD AMENDMENT TO LEASE This THIRD AMENDMENT TO LEASE (“Amendment”) is made and entered into as of the 10th day of December, 2010 (the “Effective Date”), byand between BRITANNIA POINTE GRAND LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and CYTOKINETICS, INC., aDelaware corporation (“Tenant”).R E C I T A L S : A. Landlord and Tenant are parties to that certain Lease dated May 27, 1997 (the “Original Lease”), as amended by that certain First Amendment toLease dated April 13, 1998, and that certain Second Amendment to Lease dated July 11, 1999 (the Original Lease as so amended shall be collectively referredto herein as the “Lease”), whereby Tenant leases approximately 50,195 rentable square feet of space (the “Existing Premises”) comprised of the entire 2-story building (the “280 Building”) located at 280 East Grand Avenue, South San Francisco, California 94080, which Building is located in that certain officeproject currently known as “Britannia Pointe Grand Business Park” (the “Center”). B. Tenant is the successor in interest to MetaXen, LLC, the original tenant under the Lease, and to Exelixis, Inc., successor-in-interest to MetaXen, LLC,by operation of (i) that certain Assignment and Assumption Agreement and Consent dated July 11, 1999, and (ii) that certain Assignment and Assumption ofLease dated September 28, 2000. C. Tenant is presently occupying approximately 31,392 rentable square feet of space (the “Expansion Premises”), as more particularly set forth onExhibit A attached hereto, in the building located at 256 East Grand Avenue, South San Francisco, California (the “256 Building”), as a subtenant underthat certain Sublease between Tenant and Millennium Pharmaceuticals, Inc. (the “Master Tenant”) dated November 23, 2005 (the “Sublease”). MasterTenant currently leases the Expansion Premises as the tenant under that certain Lease between Landlord and COR Therapeutics, Inc., predecessor-in-interest toMaster Tenant, dated July 1, 2001 (the “Millennium Lease”). D. Tenant desires to amend the lease to (i) expand the Existing Premises to include the Expansion Premises, (ii) extend the Term of the Lease with respect tothe Existing Premises and the Expansion Premises, and (iii) to make other modifications to the Lease on the terms and conditions set forth in this Amendment.A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] [Third Amendment]  1. Capitalized Terms. All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease unless expresslysuperseded by the terms of this Amendment. 2. Modification of Premises. 2.1. Addition of Expansion Premises. Effective as of July 1, 2011 (the “Expansion Commencement Date”), Tenant shall lease from Landlord andLandlord shall lease to Tenant the Expansion Premises. Consequently, effective upon the Expansion Commencement Date, the Existing Premises shall beincreased to include the Expansion Premises. Landlord and Tenant hereby acknowledge that such addition of the Expansion Premises to the Existing Premisesshall, effective as of the Expansion Commencement Date, increase the size of the Premises to approximately 81,587 rentable square feet of space. The ExistingPremises and the Expansion Premises may hereinafter collectively be referred to as the “Premises”, in appropriate contexts. 2.2. Improvement of Expansion Premises. Tenant hereby acknowledges that Tenant is presently occupying the Expansion Premises as a subtenantpursuant to the Sublease. Master Tenant currently leases the Expansion Premises as the tenant under the Millennium Lease. Therefore, except as specificallyset forth in this Amendment and in the Tenant Work Letter attached hereto as Exhibit B (the “Tenant Work Letter”), Tenant shall, on and after theExpansion Commencement Date, continue to accept the Expansion Premises in its then existing “as-is” condition and Landlord shall not be obligated toprovide or pay for any improvement work or services related to the improvement of the Expansion Premises (other than in connection with its maintenance andrepair obligations under the Original Lease). Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation orwarranty regarding the condition of the Expansion Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conductof Tenant’s business, except as specifically set forth in this Amendment and the Tenant Work Letter. 2.3. Early Termination of Millennium Lease. 2.3.1 Early Termination. In the event the Millennium Lease is terminated for any reason prior to the Expansion Commencement Date, (i) theSublease shall terminate simultaneously with the Millennium Lease, and (ii) Tenant shall be deemed to have taken possession of the Expansion Premisesimmediately upon such early termination and Tenant shall thereafter lease such Expansion Premises from Landlord pursuant to the terms of the Lease, asamended hereby, as if the Expansion Commencement Date had occurred; provided, however, that during the period commencing on the date the MillenniumLease terminates (the “Early Possession Date”) and ending on the day immediately preceding the Expansion Commencement Date, the amount of MinimumRental and Tenant’s Operating Cost Share of the Operating Expenses that Tenant shall pay to Landlord with respect to the Expansion Premises shall be thesame amount that Tenant would have paid as “Base Rent” and “Additional Rent,” respectively, pursuant to the terms of the Sublease, as if the Subleaseremained in full force and effect (although all other terms and conditions relating to Tenant’s lease of the Expansion Premises shall be governed by the terms ofthe Lease, as amended hereby). BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -2- [Third Amendment]  2.3.2 Surrender/Restoration. Landlord acknowledges and agrees that, from and after the natural expiration or earlier termination of the MillenniumLease, Tenant shall not be obligated to vacate the Expansion Premises, nor to perform any surrender or restoration obligations with respect to the ExpansionPremises imposed on “Subtenant” or “Tenant” by the Sublease or the Millennium Lease. 2.3.3 Subtenant’s Property. Landlord agrees that, from and after the natural expiration or earlier termination of the Millennium Lease, Tenantshall be permitted to continue to use the “Subtenant’s Property”, as defined in Section 10 of the Sublease, as security for third-party financing during the Termof the Lease, as amended hereby. 2.3.4 Waiver of Option. Landlord hereby waives Landlord’s option to purchase the Option Property (defined in 9.2(b) of the Millennium Lease)pursuant to the provisions Section 9.2(g) of the Millennium Lease, and from and after the Effective Date the option shall be of no further force or effect. 2.4. Expiration of Option to Extend. Landlord hereby represents and warrants for the benefit of Tenant that the options to extend granted to Master Tenantpursuant to Section 2.6 of the Master Lease are of no further force or effect. 3. Term of Lease. 3.1. Extension of Term of Lease. Landlord and Tenant acknowledge that Tenant’s lease of the Existing Premises is scheduled to expire on August 14,2013 (the “Original Expiration Date”), pursuant to the terms of the Lease. Notwithstanding the foregoing or anything to the contrary in the Lease, Landlordand Tenant hereby agree to extend the Term to June 30, 2018 (the “New Expiration Date”), unless sooner terminated as provided in the Lease, as herebyamended. Notwithstanding the Original Expiration Date, Landlord and Tenant hereby agree to revise the rent paid by Tenant with respect to the ExistingPremises effective as of July 1, 2011, as set forth in Section 4 of this Amendment, below. Therefore, for purposes of this Amendment, the period of timecommencing on July 1, 2011, and ending on the New Expiration Date shall be referred to herein as the “Extended Term.” The term of Tenant’s lease of theExpansion Premises (the “Expansion Term”) shall commence, as set forth in Section 2 above, on the Expansion Commencement Date and shall expirecoterminously with the term of Tenant’s lease of the Existing Premises on the New Expiration Date, unless sooner terminated as provided in the Lease, ashereby amended. 3.2. Option Term. 3.2.1 Option Right. Landlord hereby grants to (i) the Tenant originally named herein (the “Original Tenant”), (ii) any assignee of Original Tenant’sentire interest in the Lease that is approved by Landlord pursuant to Article 13 of the Original Lease, or (iii) an assignee of Tenant’s entire interest in the Leasepursuant to a Permitted Transfer (each, an “Approved Assignee”), one (1) option to extend the Term for a period of three (3) years (the “Option Term”). Theoption to extend shall be exercisable only by notice delivered by Tenant to Landlord as provided in Section 3.2.3, below, provided that, as of the date ofdelivery of such notice, Tenant is not in default under the Lease, beyond the expiration of any applicable notice BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -3- [Third Amendment]  and cure period expressly set forth in the Lease, and has not been in default under the Lease, beyond the expiration of any applicable notice and cure periodexpressly set forth in the Lease, at any time during the immediately preceding twelve (12) month period. Upon the proper exercise of the option to extend, andprovided that as of the end of the Term, Tenant is not in default under the Lease (beyond the expiration of any applicable notice and cure period expressly setforth in the Lease), the Term shall be extended for a period of three (3) years with respect to the entire Premises (i.e., the Existing Premises and the ExpansionPremises). The rights contained in this Section 3.2 shall be personal to the Original Tenant and any Approved Assignee and may only be exercised by theOriginal Tenant or an Approved Assignee (and not any other assignee or sublessee or transferee of Tenant’s interest in the Lease) if the Original Tenant or anApproved Assignee, as applicable, occupies the entire Premises. In the event that Tenant fails to timely and appropriately exercise its option to extend inaccordance with the terms of this Section 3.2, then the option to extend granted to Tenant pursuant to the terms of this Section 3.2 shall automatically terminateand shall be of no further force or effect. Any such exercise of the option to extend shall be with respect to all of the Existing Premises and Expansion Premises,and not just to either or any portion thereof. 3.2.2 Option Rent. The minimum rental payable by Tenant during the Option Term (the “Option Rent”) shall be equal to one hundred percent(100%) of the fair market rental value of the Premises, with the fair market rental value to be determined in accordance with the provisions of Section 3.1(c) ofthe Original Lease (provided that “one hundred percent (100%) of the fair market rental value” shall be substituted for “eighty-five percent (85%) of fairmarket rental value” in such Section 3.1(c)). 3.2.3 Exercise of Option. The option contained in this Section 3.2 shall be exercised by Tenant, if at all, by Tenant’s delivery of written notice (the“Option Interest Notice”) to Landlord not more than twelve (12) months nor less than nine (9) months prior to the then scheduled expiration of the Term,stating that Tenant is irrevocably exercising its option. Upon Landlord’s receipt of the Option Interest Notice, the parties shall determine the Option Rentpursuant to the provisions of Section 3.1(c) of the Original Lease (with “one hundred percent (100%) of the fair market rental value” substituted for “eighty-five percent (85%) of fair market rental value” in such Section 3.1(c)). 3.2.4 Deletion of Prior Option Right. Section 2.6 of the Original Lease is hereby deleted in its entirety and is of no further force or effect. 4. Minimum Rental.Prior to July 1, 2011, Tenant shall continue to pay minimum rental (“Minimum Rental”) with respect to the Existing Premises in accordance with the termsof the Lease. Notwithstanding anything to the contrary contained in the Lease as hereby amended, commencing as of July 1, 2011, and continuing throughoutthe Extended Term, Tenant shall pay to Landlord monthly installments of Minimum Rental for the Premises (i.e., the Existing Premises and ExpansionPremises) as follows: BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -4- [Third Amendment]  Existing Premises Minimum Rental Period During Annualized Monthly Installment Monthly Rental Rate perExtended Term Minimum Rental of Minimum Rental Rentable Square FootJuly 1, 2011 — August 31, 2011 $1,560,060.60 $130,005.05 $2.59 September 1, 2011 — August 31, 2012 $1,614,271.20 $134,522.60 $2.68 September 1, 2012 — August 31, 2013 $1,475,733.00 $122,977.75 $2.45 September 1, 2013 — August 31, 2014 $1,626,318.00 $135,526.50 $2.70 September 1, 2014 — August 31, 2015 $1,674,505.20 $139,542.10 $2.78 September 1, 2015 — August 31, 2016 $1,722,692.40 $143,557.70 $2.86 September 1, 2016 — August 31, 2017 $1,776,903.00 $148,075.25 $2.95 September 1, 2017 — June 30, 2018 $1,831,113.60 $152,592.80 $3.04 Expansion Premises Minimum Rental Period During Annualized Monthly Installment Monthly Rental Rate perExtended Term Minimum Rental of Minimum Rental Rentable Square FootJuly 1, 2011 — August 31, 2011 $809,913.60 $67,492.80 $2.15 September 1, 2011 — August 31, 2012 $809,913.60 $67,492.80 $2.15 September 1, 2012 — August 31, 2013 $885,254.40 $73,771.20 $2.35 September 1, 2013 — August 31, 2014 $1,017,100.80 $84,758.40 $2.70 September 1, 2014 — August 31, 2015 $1,047,237.12 $87,269.76 $2.78 BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -5- [Third Amendment]  Period During Annualized Monthly Installment Monthly Rental Rate perExtended Term Minimum Rental of Minimum Rental Rentable Square FootSeptember 1, 2015 — August 31, 2016 $1,077,373.44 $89,781.12 $2.86 September 1, 2016 — August 31, 2017 $1,111,276.80 $92,606.40 $2.95 September 1, 2017 — June 30, 2018 $1,145,180.16 $95,431.68 $3.04 5. Tenant’s Operating Costs Share of Operating Expenses. Notwithstanding any contrary provision contained in the Lease, as hereby amended,Tenant shall continue to pay Tenant’s Operating Costs Share of Operating Expenses in connection with the Existing Premises which arise or accrue prior toExpansion Commencement Date, in accordance with the terms of the Lease. Effective as of the Expansion Commencement Date, and continuing throughout theExtended Term, Tenant shall pay Tenant’s Operating Costs Share of Operating Expenses in connection with the Premises (i.e., the Existing Premises and theExpansion Premises), in accordance with the terms of the Lease, provided that with respect to the calculation of Tenant’s Operating Costs Share of OperatingExpenses, Tenant’s Operating Costs Share shall equal twelve and ninety-four hundredths percent (12.94%), based upon an estimated area of 81,587 rentablesquare feet for the Premises and an estimated 630,528 rentable square feet for the Center. 6. Condition of Premises. Tenant acknowledges and agrees that, except as specifically set forth in the Tenant Work Letter, it currently occupies and isfully aware of the condition of, and shall continue to accept, the Existing Premises in its presently existing, “as-is” condition, and Landlord shall not beobligated to provide or pay for any improvement work or services related to the improvement of the Existing Premises (other than in connection with itsmaintenance and repair obligations under the Original Lease). Tenant also acknowledges that, except as specifically set forth in the Tenant Work Letter, itcurrently occupies (pursuant to the Sublease) and is fully aware of the condition of, and shall accept, the Expansion Premises in its then existing, “as-is”condition as of the Expansion Commencement Date and Landlord shall not be obligated to provide or pay for any improvement work or services related to theimprovement of the Expansion Premises (other than in connection with its maintenance and repair obligations under the Original Lease). Tenant furtheracknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Existing Premises, theExpansion Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenant’s business. Notwithstandinganything to the contrary contained in this Amendment or the Lease, Landlord acknowledges and agrees that, upon the expiration or early termination of theLease, as amended hereby, Tenant shall not remove from the Existing Premises or the Expansion Premises (nor shall Landlord have the right to require removalof) any alterations, additions or improvements (including, without limitation, the Tenant Improvements installed pursuant to Exhibit C of the Original Leaseand any tenant improvements installed pursuant to Section 2.3 of the Millennium Lease) installed by or on BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -6- [Third Amendment]  behalf of Tenant or any predecessor in interest to Tenant prior to the Effective Date of this Amendment. 7. Right of First Offer. Landlord hereby grants to Original Tenant an ongoing right of first offer (the “First Offer Right”) with respect to the buildinglocated in the Center at 250 East Grand (the “First Offer Space”) on the terms of this Section 7. Notwithstanding the foregoing, such First Offer Right shallcommence only following the expiration or earlier termination of any existing leases or subleases in the First Offer Space (the “Existing Offer SpaceLeases”), and shall be subordinate to (i) all rights set forth in any Existing Offer Space Lease, including any renewal, extension or expansion rights set forthin such leases, regardless of whether such renewal, extension or expansion rights are executed strictly in accordance with their terms, or pursuant to a leaseamendment or a new lease with any tenant or subtenant under an Existing Offer Space Lease, and (ii) any expansion by Alios BioPharma, or its successors,into Suites 70 or 90 of the First Offer Space prior to July 1, 2014 (collectively, the “Superior Rights”) with respect to such First Offer Space. In addition,regardless of whether there exists a Superior Right, Landlord shall have the right to extend any of the Existing Offer Space Leases (or convert any sublease to adirect lease and extend such direct lease) through December 31, 2012, without such extension being subject to the First Offer Right. 7.1. Procedure for Offer. Landlord shall notify Tenant (the “First Offer Notice”) from time to time when the First Offer Space or any portion thereofbecomes available and Landlord intends to market the same for lease to third parties, other than through a Superior Right. Pursuant to such First Offer Notice,Landlord shall offer to lease to Tenant the then available First Offer Space. The First Offer Notice shall describe the space so offered to Tenant and shall setforth the “First Offer Rent,” as that term is defined in Section 7.3 below, and the other economic terms upon which Landlord is willing to lease such space toTenant. 7.2. Procedure for Acceptance. If Tenant wishes to exercise its First Offer Right with respect to the space described in the First Offer Notice, thenwithin ten (10) business days of delivery of the First Offer Notice to Tenant, Tenant shall deliver notice to Landlord of Tenant’s election to exercise its FirstOffer Right with respect to the entire space described in the First Offer Notice on the terms contained in such notice. If Tenant does not so notify Landlordwithin the ten (10) business day period, then Landlord shall be free to lease the space described in the First Offer Notice to anyone to whom Landlord desireson any terms Landlord desires. Notwithstanding the foregoing, prior to leasing such space to a third party on net economic terms which are more than sevenand one-half percent (7.5%) more favorable to a tenant than those contained in the First Offer Notice, Landlord shall first deliver another First Offer Notice toTenant on such more favorable terms. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its First Offer Right, if at all,with respect to all of the space offered by Landlord to Tenant at any particular time, and Tenant may not elect to lease only a portion thereof. 7.3. Construction In First Offer Space. Except for any improvement allowance provided in the applicable First Offer Notice, Tenant shall take theFirst Offer Space in its “as is” condition, and the construction of improvements in the First Offer Space shall comply with the applicable terms of the Lease. BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -7- [Third Amendment]  7.4. Amendment to Lease. If Tenant timely exercises Tenant’s right to lease the First Offer Space as set forth herein, Landlord and Tenant shallpromptly thereafter execute an amendment to the Lease adding such First Offer Space upon the terms and conditions as set forth in the First Offer Notice andthis Section 7. Tenant shall commence payment of Rent for the First Offer Space, and the term of the First Offer Space shall commence upon the date ofdelivery of the First Offer Space to Tenant (the “First Offer Commencement Date”) and terminate on the date set forth in the First Offer Notice. 7.5. Termination of Right of First Offer. The rights contained in this Section 7 shall be personal to the Original Tenant and any Approved Assignee(as defined in Section 3.2.1, above), and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the OriginalTenant’s interest in the Lease) if the Original Tenant occupies the entire Premises. The right of first offer granted herein shall terminate as to any particularportion of the First Offer Space upon the failure by Tenant to exercise its right of first offer with respect to such portion of the First Offer Space as offered byLandlord; provided, however, that Tenant’s rejection (or deemed rejection) of any particular First Offer Space shall not relieve Landlord of its obligation toagain offer any First Offer Space to Tenant at any time that the First Offer Space subsequently becomes available. Tenant shall not have the right to lease FirstOffer Space, as provided in this Section 7, if, as of the date of the attempted exercise of any right of first offer by Tenant, or as of the scheduled date ofdelivery of such First Offer Space to Tenant, Tenant is in default under the Lease after expiration of any applicable notice and cure periods. Notwithstandinganything to the contrary contained in this Section 7, throughout the Term of the Lease Landlord and Tenant shall use commercially reasonable good faithefforts to advise the other party about its intentions regarding the First Offer Space. Landlord’s good faith efforts shall include providing Tenant with informalupdates regarding the status of leasing activity with respect to the First Offer Space upon request by Tenant. 7.6. Parking and Transportation Demand Management. Landlord has advised Tenant that the City of South San Francisco has institutedTransportation Demand Management (“TDM”) ordinances pursuant to which Landlord will be required to undertake various measures to try to reduce thevolume of traffic generated by the Project. Tenant and Landlord will use reasonable efforts to try to reduce the volume of traffic generated by the Project, ascontemplated by the TDM, including (but not limited to) by substantially complying with any specific measures required by the City of South San Franciscoor any of its departments or agencies. Tenant hereby agrees (at no additional direct cost to Tenant, except as may be included in Operating Expenses payable byTenant under the Lease) (i) to designate one of its employees to act as a liaison with Landlord’s designated transportation coordinator in facilitating andcoordinating such programs as may be required from time to time by governmental agencies and/or by the terms of any such TDMP to reduce the trafficgenerated by the Project and to facilitate and encourage the use of public transportation, (ii) to use reasonable efforts to encourage cooperation and participationby Tenant’s employees in the programs implemented from time to time pursuant to any such TDMP, including (but not limited to) any applicable programs ofthe kind described in this Section, (iii) to cooperate reasonably with Landlord’s designated transportation coordinator in identifying an appropriate area withinthe Building where an information kiosk or bulletin board can be maintained for the dissemination of transportation-related information, to be updated fromtime to time by Landlord’s designated BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -8- [Third Amendment]  transportation coordinator, and (iv) to cooperate reasonably with Landlord in providing any information, reports or surveys as required in connection with theTDM. 8. Notices. Notwithstanding any provision contained in the Lease to the contrary, effective as of the date of this Amendment, any notices to Landlord orTenant shall be sent, transmitted, or delivered, as the case may be, in accordance with the terms of Section 19.1 of the Original Lease to the followingaddresses: If to Landlord: Britannia Pointe Grand Limited Partnership c/o o HCP, Inc. 400 Oyster Point Blvd, Suite 409South San Francisco, California 94080Attention: Jon Bergschneider with a copy to: Britannia Pointe Grand Limited Partnership c/o HCP, Inc. 3760 Kilroy Airport Way, Suite 300Long Beach, CA 90806-2473Attn: Legal Department and with courtesy copies to: CB Richard Ellis Asset Services Group 101 California Street, 44th Floor San Francisco, California 94111Attention: Asset Services Managing Director Fax: (415) 772-0459 and BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -9- [Third Amendment]  Allen Matkins Leck Gamble Mallory & Natsis LLP 1901 Avenue of the Stars, Suite 1800Los Angeles, California 90067Attention: Anton N. Natsis, Esq. If to Tenant: Cytokinetics, Inc. 280 East Grand Ave. South San Francisco, CA 94577Attention: Chief Financial Officer with a copy to: Cytokinetics, Inc. 280 East Grand Ave. South San Francisco, CA 94577Attention: Legal Department 9. Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with thenegotiation of this Amendment other than CB Richard Ellis, Inc., representing Landlord, and GVA Kidder Mathews, representing Tenant (the “Brokers”),and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Amendment. Each party agrees to indemnifyand defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costsand expenses (including, without limitation, reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owingon account of the indemnifying party’s dealings with any real estate broker or agent, other than the Brokers. Landlord shall be responsible to pay anybrokerage commission due in connection with this transaction pursuant to a separate written agreement. The terms of this Section 8 shall survive the expirationor earlier termination of this Amendment. 10. Conflict; No Further Modification. In the event of any conflict between the terms and provisions of the Lease, Sublease, and/or the Master Lease, andthe terms and provisions of this Amendment, the terms and provisions of this Amendment shall prevail. Except as specifically set forth in this Amendment,all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. 11. Final Agreement; Further Amendment. This Amendment, together with the Exhibits attached hereto, sets forth the complete, final and exclusiveagreement between the parties with respect to its subject matter, and supersedes all prior agreements and understandings between the parties, oral or written,with respect to such subject matter. No subsequent modification to this Amendment will be binding upon the parties unless reduced to writing and signed byan authorized representative of each party. 12. SNDA. Landlord will use commercially reasonable efforts to cause the existing lender at the Project (“Lender”) to acknowledge, whether by separateletter, amendment, or otherwise, that the terms of the subordination, non-disturbance and attornment agreement entered into by Lender and Tenant with respectto the Lease will apply to the Expansion Premises and BRITANNIA POINTE GRAND BUSINESSPARK [Cytokinetics, Inc.] -10- [Third Amendment]  this Amendment and to inform Landlord of Lender’s reasonable estimate of the costs and fees to prepare Lender’s acknowledgment. Landlord shall relayLender’s estimate to Tenant for Tenant’s approval, which Tenant shall approve or disapprove within two (2) business days after receipt from Landlord. IfTenant approves the estimate, Landlord shall so notify Lender and request that Lender prepare the documentation. If Tenant does not approve the estimate,Tenant shall rescind its request for the Lender’s acknowledgment, and Landlord shall be deemed to have complied with the provisions of this Section 12.Tenant shall not be responsible for payment of Lender’s costs and fees in excess of the estimate approved by Tenant. IN WITNESS WHEREOF, this Amendment has been executed as of the day and year first above written. “LANDLORD” BRITANNIA POINTE GRAND LIMITED PARTNERSHIP,a Delaware limited partnership By: /s/ Jonathan M. Bergschneider Name: Jonathan M. Bergschneider Its: SVP “TENANT” CYTOKINETICS, INC.,a Delaware corporation By: /s/ Sharon A. Barbari Name: Sharon A. Barbari Its: EVP Finance and CFO BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -11- [Third Amendment]  EXHIBIT ABRITANNIA POINTE GRAND BUSINESS PARKOUTLINE OF EXPANSION PREMISES BRITANNIA POINTE GRAND BUSINESS PARK EXHIBIT A [Cytokinetics, Inc.] -1- [Third Amendment]  EXHIBIT BBRITANNIA POINTE GRAND BUSINESS PARKTENANT WORK LETTER This Tenant Work Letter shall set forth the terms and conditions relating to the initial improvement of the Premises for Tenant following the date of thisAmendment. This Tenant Work Letter is essentially organized chronologically and addresses the issues of construction, in sequence, as such issues will ariseduring construction in the Premises. All references in this Tenant Work Letter to Articles or Sections of “this Lease” shall mean the relevant portions of Articles1 through 19 of the Original Lease, all references to “this Amendment” shall mean the relevant portions of Sections 1 through 12 of the Amendment to whichthis Tenant Work Letter is attached as Exhibit B, and all references in this Tenant Work Letter to Sections of “this Tenant Work Letter” shall mean therelevant portions of Sections 0 through 5 of this Tenant Work Letter. As used in the Tenant Work Letter, all references to the “Premises” shall mean theExisting Premises and the Expansion Premises. Landlord hereby acknowledges and agrees that Tenant may construct Tenant Improvements (defined below) inthe Premises in phases between January 1, 2011 and December 31, 2013, and that, depending upon the scope of work for the Tenant Improvementconstruction at issue, certain provisions of this Tenant Work Letter will not be applicable to a particular construction phase. At the time Tenant commencesany such particular phase, Landlord and Tenant shall mutually and reasonably agree upon which provisions of this Work Letter will not apply to suchphase.SECTION 0CONSENT OF MASTER TENANT If Tenant desires the construction of the “Tenant Improvements”, as defined in Section 2.1, below, in all or any portion of the Expansion Premises tocommence prior to the Expansion Commencement Date, then, prior to such commencement, and prior to any obligation on the part of Landlord to disburseany portion of the Tenant Improvement Allowance with respect to the Expansion Premises, other than such portion thereof that relates to the fees of Architectand Engineers as provided in Section 2.2.1.1 of this Tenant Work Letter, and plan check, permit and license fees as provided in Section 2.2.1.2 of thisTenant Work Letter, Landlord shall use reasonable efforts (but with no obligation to make any payment or other monetary or other concession to MasterTenant) to obtain the express written consent of Master Tenant, in accordance with the terms of the Sublease, to proceed with the construction of the TenantImprovements prior to the expiration of the term of the Millennium Lease. Landlord shall obtain Tenant’s prior written consent (which shall not beunreasonably withheld, conditioned or delayed) to Master Tenant’s written consent to Tenant’s construction of the Tenant Improvements; provided, however,that Tenant shall not withhold its consent to any disclaimer by Master Tenant of responsibility for the cost to construct or for the removal of all or any portionof the Tenant Improvements. Landlord shall deliver a copy of such consent to Tenant promptly upon Landlord’s receipt of the same. Once such writtenconsent is so obtained, the provisions of this Tenant Work Letter shall supersede any provisions of the Millennium BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] [Third Amendment]  Lease relating to Master Tenant obtaining the consent of Landlord to the construction of the Tenant Improvements.SECTION 1LANDLORD WORK Notwithstanding anything to the contrary set forth in this Tenant Work Letter, Landlord shall, at Landlord’s sole cost and expense (which costs shall notbe passed through to Tenant as Operating Expenses), replace certain AC units, air-handlers, fan units and boilers on the roof of the Expansion Premises aslisted on Schedule 1 attached hereto, which are located as set forth on Schedule 2 attached hereto, and make the associated electrical connections and anyrequired structural or other repair work to the roof of the Expansion Premises (collectively, the “Landlord Work”). The Landlord Work shall not include anywork or improvements to any HVAC ducting or distribution. Each portion of the Landlord Work shall be completed by Landlord in the calendar year as towhich such portion of the Landlord Work is associated as shown on Schedule 1,provided that at Landlord’s option, Landlord may accelerate any such work,or, with the prior approval of Tenant, adjust the sequence of such work. The plans and specifications for the Landlord Work, as well as the contractorretained by Landlord to perform the Landlord Work, shall be determined by Landlord in its reasonable discretion. The Landlord Work shall be completed toLandlord’s “Building standards,” as generally applied by Landlord on a uniform basis in the Project, and otherwise in accordance with the Schedules and incompliance with all applicable law, in a good and workmanlike manner, free of defects and using new Building standard materials and equipment of goodquality. Within thirty (30) days after completion of any particular phase of the Landlord’s Work, Tenant shall have the right to submit a written punch list toLandlord, setting forth any defective item of Landlord’s Work, and Landlord shall promptly cause such items to be corrected. Notwithstanding anything tothe contrary contained herein or in the Lease, Tenant’s submission of a punch list with respect to the Landlord’s Work shall not be deemed a waiver ofTenant’s right to have defects in the Landlord’s Work repaired at no cost to Tenant during the period of any applicable warranty from Landlord’scontractor(s). During such period Tenant shall give notice to Landlord whenever any such defect becomes reasonably apparent, and Landlord shall have suchdefect repaired as soon as practicable. Landlord and Tenant shall work together in good faith in order to coordinate the construction of the Landlord Workconcurrently with the construction of the Tenant Improvements. Prior to Landlord’s commencement of any particular portion of the Landlord Work, Tenantshall have the right to request reasonable changes to the scope of the Landlord Work, provided that Tenant shall bear all costs related to any such change inscope. Each party shall use commercially reasonable efforts to minimize any unnecessary interference with the other during such simultaneous construction.Tenant shall inform Landlord within thirty (30) days after Landlord’s completion of the Landlord Work whether of any portion thereof is defective orincomplete, and Landlord shall promptly remedy the same.SECTION 2TENANT IMPROVEMENTS 2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant improvement allowance (the “Tenant Improvement Allowance”) inthe amount of BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -2- [Third Amendment]  $1,631,740.00 (i.e., $20.00 per rentable square foot of the Premises) for the costs relating to the initial design and construction of Tenant’s improvementswhich are permanently affixed to the Premises or which are “Tenant Improvement Allowance Items,” as that term is defined in Section 2.2.1, below(collectively, the “Tenant Improvements”), which shall be available for disbursement under this Tenant Work Letter commencing on January 1, 2011.Except with respect to the Landlord Work, in no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a totalamount which exceeds the Tenant Improvement Allowance. Tenant hereby acknowledges and agrees that any portion of the Tenant Improvement Allowance asto which Tenant has not requested disbursement pursuant to the terms of this Tenant Work Letter as of December 31, 2013, shall revert to Landlord andTenant shall have no further right thereto. All Tenant Improvements for which the Tenant Improvement Allowance has been made available shall be deemedLandlord’s property under the terms of the Lease; provided, however, Landlord may, by written notice to Tenant given concurrently with Landlord’s approvalof the “Final Working Drawings”, as that term is defined in Section 3.3, below, require Tenant, not later than the end of the Lease Term, or given followingany earlier termination of this Lease, at Tenant’s expense, to remove any Tenant Improvements and to repair any damage to the Premises and Building causedby such removal and return the affected portion of the Premises to their condition existing prior to the installation of such removed Tenant Improvements. 2.2 Disbursement of the Tenant Improvement Allowance. 2.2.1 Tenant Improvement Allowance Items. Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall bedisbursed by Landlord only for the following items and costs (collectively the “Tenant Improvement Allowance Items”): 2.2.1.1 Payment of all reasonable fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter,project management fees, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants inconnection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.2 of this Tenant Work Letter; 2.2.1.2 The payment of plan check, permit and license fees relating to construction of the Tenant Improvements; 2.2.1.3 The cost of construction of the Tenant Improvements, including, without limitation, testing and inspection costs, costs incurred for removalof existing furniture, fixtures or equipment in the Premises, hoisting and trash removal costs, costs to purchase and install in the Premises equipmentcustomarily incorporated into laboratory improvements or laboratory utility systems, including, without limitation, UPS, DI Systems, boilers, aircompressors, glass/cage washers and autoclaves, painting, and contractors’ fees and general conditions; 2.2.1.4 The cost of any changes in the base building shell and building systems in either the Existing Premises or the Expansion Premises (hereafter,the “Base Building”) when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is preparedon an unoccupied basis), such cost to BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -3- [Third Amendment]  include all direct architectural and/or engineering fees and expenses incurred in connection therewith; 2.2.1.5 The cost of any changes to the Construction Drawings or Tenant Improvements required by all applicable building codes (the “Code”); 2.2.1.6 Sales and use taxes; 2.2.1.7 All other actual, documented out-of-pocket costs expended by Landlord in connection with the construction of the Tenant Improvements,including, without limitation, costs expended by Landlord pursuant to Section 4.1.1 of this Tenant Work Letter, below, provided, however, that in no eventshall Landlord’s out-of-pocket costs exceed three percent (3%) of the Tenant Improvement Allowance. 2.2.2 Disbursement of Tenant Improvement Allowance. During the construction of the Tenant Improvements, but in no event prior to January 1,2011, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenantand shall authorize the release of monies for the benefit of Tenant as follows. 2.2.2.1 Monthly Disbursements. On or before the tenth (10th) day of each calendar month, during the design and construction of the TenantImprovements (or such other date as Landlord may designate), Tenant shall deliver to Landlord: (i) a request for reimbursement of amounts paid to the“Contractor,” as that term is defined in Section 4.1.1 of this Tenant Work Letter, approved by Tenant, in a commercially reasonable form to be provided byLandlord, showing the schedule, by trade, of percentage of completion of the Tenant Improvements in the Premises, detailing the portion of the work completedand the portion not completed; (ii) invoices from all of “Tenant’s Agents,” as that term is defined in Section 4.1.2 of this Tenant Work Letter, for laborrendered and materials for the Premises; (iii) executed mechanic’s lien releases, as applicable, from all of Tenant’s Agents which shall comply with theappropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requestedby Landlord. Within forty-five (45) days thereafter, Landlord shall deliver a check to Tenant made payable to Tenant in payment of the lesser of: (A) theamounts so requested by Tenant as set forth in this Section 2.2.2.1, above (or, subject to the terms of Section 4.2.1, below, a percentage thereof), and (B) thebalance of any remaining available portion of the Tenant Improvement Allowance, provided that Landlord does not dispute any request for payment based onnon-compliance of any work with the “Approved Working Drawings,” as that term is defined in Section 3.5 below, or due to any substandard work (asreasonably determined by Landlord). Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished ormaterials supplied as set forth in Tenant’s payment request. 2.2.2.2 Final Deliveries. Following the completion of construction of the Tenant Improvements, Tenant shall deliver to Landlord properly executedfinal mechanic’s lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4) from allof Tenant’s Agents, and a certificate certifying that the construction of the Tenant Improvements in the Premises has been substantially completed. Tenant shallrecord a valid Notice of Completion in accordance with the requirements of Section 4.3 of this Tenant Work Letter. BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -4- [Third Amendment]  2.2.2.3 Other Terms. Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance to the extent costs areincurred by Tenant for Tenant Improvement Allowance Items. All Tenant Improvement Allowance Items for which the Tenant Improvement Allowance has beenmade available shall be deemed Landlord’s property under the terms of this Lease. 2.3 Building Standards. The quality of Tenant Improvements shall be in keeping with the existing improvements in the Premises.SECTION 3CONSTRUCTION DRAWINGS 3.1 Selection of Architect. Tenant shall retain an architect/space planner approved in advance by Landlord (the “Architect”) to prepare the Final SpacePlan and Final Working Drawings as provided in Section 3.2 and 3.3, below. Landlord’s approval of the Architect shall not be unreasonably withheld,conditioned or delayed. Tenant shall retain the engineering consultants or design/build subcontractors designated by Tenant and reasonably approved inadvance by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing,HVAC, lifesafety, and sprinkler work in the Premises, which work is not part of the Base Building. All such plans and drawings shall comply with thedrawing format and specifications reasonably determined by Landlord, and shall be subject to Landlord’s reasonable approval. Tenant and Architect shallverify, in the field, the dimensions and conditions as shown on the relevant portions of the Base Building plans, and Tenant and Architect shall be solelyresponsible for the same, and Landlord shall have no responsibility in connection therewith. Upon Tenant’s request, Landlord shall provide Tenant with anyapplicable existing drawings or plans relating to the Expansion Premises that are in Landlord’s possession and control. Landlord’s review of any plans ordrawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review thesame, for quality, design, Code compliance or other like matters. 3.2 Final Space Plan. Tenant shall supply Landlord with four (4) copies signed by Tenant of its final space plan for the Premises before any architecturalworking drawings or engineering drawings have been commenced. The final space plan (the “Final Space Plan”) shall include a layout and designation of alloffices, labs, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord may request clarification or more specificdrawings for special use items not included in the Final Space Plan. Landlord shall advise Tenant within five (5) business days after Landlord’s receipt of theFinal Space Plan for the Premises if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly cause the FinalSpace Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require. In the event of a dispute relating to the Final Space Plan,the parties shall promptly meet and confer and negotiate in good faith to resolve the dispute. 3.3 Final Working Drawings. After the Final Space Plan has been approved by Landlord, Tenant shall supply the Engineers with a complete listing ofstandard and non-standard equipment and specifications, including, without limitation, Title 24 calculations, electrical requirements and special electricalreceptacle requirements for the Premises, to enable the BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -5- [Third Amendment]  Engineers and the Architect to complete the “Final Working Drawings” (as that term is defined below) in the manner as set forth below. Upon the approval ofthe Final Space Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers to complete the architectural and engineeringdrawings for the Premises, and Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing workingdrawings in a form which is sufficiently complete to allow all of Tenant’s Agents to bid on the work and to obtain all applicable permits (collectively, the“Final Working Drawings”) and shall submit the same to Landlord for Landlord’s approval, which shall not be unreasonably withheld, conditioned, ordelayed. Tenant shall supply Landlord with four (4) copies signed by Tenant of such Final Working Drawings. Landlord shall advise Tenant within ten(10) business days after Landlord’s receipt of the Final Working Drawings for the Premises if the same is unsatisfactory or incomplete in any respect. IfTenant is so advised, Tenant shall promptly cause the Final Working Drawings to be revised in accordance with such review and any disapproval ofLandlord in connection therewith. In the event of any dispute relating to the Final Working Drawings, the parties shall promptly meet and confer and negotiatein good faith to resolve the dispute. In addition, if the Final Working Drawings or any amendment thereof or supplement thereto shall require alterations in theBase Building (as contrasted with the Tenant Improvements), and if Landlord in its reasonable discretion agrees to any such alterations, and notifies Tenant ofthe need and cost for such alterations, then Tenant shall have the right to review and approve the cost thereof (which approval shall not be unreasonablywithheld, conditioned or delayed), and shall pay the approved cost of such required changes once completed by Landlord (provided, however, that Tenantmay use the Tenant Improvement Allowance to pay such cost). 3.4 Approved Working Drawings. The Final Working Drawings shall be approved by Landlord pursuant to Section 3.3, above (the “ApprovedWorking Drawings”) prior to the commencement of construction of the Premises by Tenant. Concurrently with Tenant’s delivery of the Final WorkingDrawings to Landlord for Landlord’s approval, Tenant may submit the same to the appropriate municipal authorities for all applicable building permits.Tenant hereby agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any building permit or certificate of occupancy forthe Premises and that obtaining the same shall be Tenant’s responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permitapplications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes,modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which shall not be unreasonablywithheld, conditioned, or delayed.SECTION 4CONSTRUCTION OF THE TENANT IMPROVEMENTS 4.1 Tenant’s Selection of Contractors. 4.1.1 The Contractor; Landlord’s Project Manager. Tenant shall retain a contractor to construct the Tenant Improvements (“Contractor”) whichshall be approved in advance by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall retain ProjectManagement Advisors, Inc. (“PMA”) as a third party project manager to coordinate the construction of the Tenant Improvements on behalf of BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -6- [Third Amendment]  Landlord, and Tenant shall pay to Landlord the actual out-of-pocket costs paid by Landlord to PMA in connection with the construction of the TenantImprovements (subject to the terms of Section 2.2.1.7, above). 4.1.2 Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers used by Tenant, and the Contractor are referred to collectively as“Tenant’s Agents”. The subcontractors used by Tenant, but not any laborers, materialmen, and suppliers, must be approved in writing by Landlord, whichapproval shall not be unreasonably withheld, conditioned, or delayed; provided, however, Landlord may nevertheless reasonably designate and require the useof particular mechanical, engineering, plumbing, fire life-safety and other Base Building subcontractors. If Landlord does not approve any of Tenant’sproposed subcontractors, Tenant shall submit other proposed subcontractors for Landlord’s written approval. 4.2 Construction of Tenant Improvements by Tenant’s Agents. 4.2.1 Construction Contract; Cost Budget. Tenant shall engage the Contractor under a commercially reasonable construction contract (the“Contract”). Prior to the commencement of the construction of the Tenant Improvements, and after Tenant has accepted all bids for the Tenant Improvements,Tenant shall provide Landlord with a detailed breakdown, by trade, of the final costs to be incurred or which have been incurred, as set forth moreparticularly in Sections 2.2.1.1 through 2.2.1.7, above, in connection with the design and construction of the Tenant Improvements to be performed by or atthe direction of Tenant or the Contractor, which costs form a basis for the estimated total costs of the work of the Tenant Improvement project (the “FinalBudget”). Prior to the commencement of construction of the Tenant Improvements, Tenant shall inform Landlord of the amount, if any, by which the amountof the Final Budget exceeds the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process ofbeing disbursed by Landlord, on or before the commencement of construction of the Tenant Improvements) (the “Over-Allowance Amount”). Tenant shall beresponsible to pay a percentage of each disbursement under this Tenant Work Letter, which percentage shall be equal to the amount of the Over-AllowanceAmount, divided by the amount of the Final Budget, and such payment by Tenant shall be a condition to Landlord’s obligation to pay any further amounts ofthe Tenant Improvement Allowance. In the event that, after the Final Budget has been delivered by Tenant to Landlord, the costs relating to the design andconstruction of the Tenant Improvements shall exceed, or further exceed, as applicable, the Tenant Improvement Allowance, any such additional costsnecessary for such design and construction in excess of the Tenant Improvement Allowance, shall be added to the Over-Allowance Amount and paid by Tenantpursuant to the terms of this Section 4.2.1 (provided that Landlord and Tenant shall promptly reconcile any amount owed to Landlord by Tenant as a result ofsuch additional costs in order to effectuate the intent of this Section 4.2.1). For the avoidance of doubt, changes in the Final Budget that do not exceed theamount of the Tenant Improvement Allowance shall not affect Landlord’s responsibility to reimburse Tenant for such non-excess costs. 4.2.2 Tenant’s Agents. 4.2.2.1 Compliance with Drawings and Schedule. Tenant’s and Tenant’s Agent’s construction of the Tenant Improvements shall comply with thefollowing: (i) the Tenant Improvements shall be constructed in strict accordance with the Approved Working BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -7- [Third Amendment]  Drawings; and (ii) Tenant’s Agents shall submit schedules of all work relating to the Tenant’s Improvements to Contractor and Contractor shall, within ten(10) business days of receipt thereof, inform Tenant’s Agents of any changes which are necessary thereto, and Tenant’s Agents shall adhere to such correctedschedule. 4.2.2.2 Indemnity. Tenant’s indemnity of Landlord as set forth in this Lease shall also apply with respect to any and all costs, losses, damages,injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of them, or inconnection with Tenant’s non-payment of any amount arising out of the Tenant Improvements and/or Tenant’s disapproval of all or any portion of any requestfor payment. The foregoing indemnity shall not apply to claims caused by the negligence or willful misconduct of Landlord, its member partners,shareholders, officers, directors, agents, employees, and/or contractors. 4.2.2.3 Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of theTenant Improvements for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year fromthe date of substantial completion of the work under the Contract (“Substantial Completion”). Each of Tenant’s Agents shall be responsible for thereplacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) yearafter Substantial Completion. The correction of such work shall include, without additional charge, all additional expenses and damages incurred inconnection with such removal or replacement of all or any part of the Tenant Improvements, and/or the Building and/or common areas that may be damaged ordisturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Tenant Improvements shall be contained in theContract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respectiveinterests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may benecessary to effect such right of direct enforcement. 4.2.2.4 Insurance Requirements. 4.2.2.4.1 General Coverages. All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees,and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenantas set forth in this Lease. 4.2.2.4.2 Special Coverages. Tenant shall carry “Builder’s All Risk” insurance in an amount reasonably approved by Landlord covering theconstruction of the Tenant Improvements, and such other insurance as Landlord may reasonably require, it being understood and agreed that the TenantImprovements shall be insured by Tenant pursuant to this Lease immediately upon completion thereof. Such insurance shall be in amounts and shall includesuch extended coverage endorsements as may be reasonably required by Landlord including, but not limited to, the requirement that all of Tenant’s Agents,including all contractors, shall carry general liability, including Products and Completed Operation Coverage insurance, each in amounts not less than$2,000,000 per incident, $2,000,000 in aggregate, as well as workers compensation insurance and in form and with companies as are required to be carried byTenant as set forth in this Lease, or such commercially reasonable lesser amounts as BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -8- [Third Amendment]  reasonably approved by Landlord based on the scope of any particular phase of construction of the Tenant Improvements. 4.2.2.4.3 General Terms. Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before thecommencement of construction of the Tenant Improvements and before any equipment of Tenant’s Agents is moved onto the site. All such policies of insurancemust contain a provision that the company writing said policy will endeavor to give Landlord thirty (30) days prior written notice of any cancellation or lapseof the effective date or any reduction in the amounts of such insurance. Tenant shall provide Landlord notice of any cancellation or lapse of the effective date orreduction in the amounts of such insurance promptly following Tenant’s receipt of such notice from its insurer. In the event that the Tenant Improvements aredamaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Tenant’sAgents shall maintain all of the foregoing insurance coverage in force until the Tenant Improvements are fully completed and accepted by Landlord, except forProducts and Completed Operations Coverage insurance required by Landlord, which is to be maintained for a commercially reasonable period followingcompletion of the Tenant Improvements and acceptance by Landlord and Tenant. The builders risk policy carried under this Section 4.2.2.4 shall nameLandlord as an additional insured. All insurance maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insuredthereunder, and the public liability insurance shall name Landlord, HCP, Inc., Project Management Advisors, Inc., CB Richard Ellis, or other manager of theProject, as an additional insured or loss payee, as applicable. Such insurance shall provide that it is primary insurance and that any other insurancemaintained by Landlord is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not serve tolimit the indemnification of Landlord by Tenant under Section 4.2.2.2 of this Tenant Work Letter. 4.2.3 Governmental Compliance. The Tenant Improvements shall comply in all respects with the following: (i) all state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person;(ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and(iii) building material manufacturer’s specifications. 4.2.4 Inspection by Landlord. Landlord shall have the right to inspect the Tenant Improvements at all reasonable times upon reasonable prior notice,provided however, that Landlord’s failure to inspect the Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder norshall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the same. Should Landlord reasonably disapprove any portion ofthe Tenant Improvements, on the grounds that the construction is defective or fails to comply with the Approved Working Drawings, Landlord shall notifyTenant in writing of such disapproval and shall specify the items disapproved. Any such defects or deviations shall be rectified by Tenant at no expense toLandlord, provided however, that in the event Landlord determines that a defect or deviation exists that might adversely affect the mechanical, electrical,plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any othertenant’s use of such other tenant’s leased premises, Landlord may, take such action as Landlord reasonably BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -9- [Third Amendment]  deems necessary, at Tenant’s expense and without incurring any liability on Landlord’s part, to correct any such defect, deviation and/or matter, including,without limitation, causing the cessation of performance of the construction of the Tenant Improvements until such time as the defect, deviation and/or matteris corrected to Landlord’s reasonable satisfaction. 4.2.5 Meetings. During periods of substantial Tenant Improvement construction activity in the Premises, Tenant shall hold weekly meetings, or on aless frequent basis as reasonably agreed upon by Landlord based on the scope of a particular phase of construction of the Tenant Improvements. Any suchmeetings shall be held at a reasonable time, and shall include the Architect and the Contractor and shall address the progress of the construction of the TenantImprovements, and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings, and, upon Landlord’sreasonable request, certain of Tenant’s Agents shall attend such meetings. At Landlord’s request, a copy of any minutes taken at such meetings shall bepromptly delivered to Landlord. One such meeting each month may include the review of Contractor’s current request for payment. 4.3 Notice of Completion; Copy of Record Set of Plans. Within ten (10) business days after completion of construction of the Tenant Improvements,Tenant shall cause a valid Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance withSection 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. IfTenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At theconclusion of construction, (i) Tenant shall cause the Architect and Contractor (x) to update the Approved Working Drawings as necessary to reflect allchanges made to the Approved Working Drawings during the course of construction, (y) to certify to the best of their knowledge that the “record-set” of as-builtdrawings are true and correct, which certification shall survive the expiration or termination of this Lease, and (z) to deliver to Landlord two (2) sets of copiesof such record set of drawings (hard copy and CAD files) within ninety (90) days following issuance of a certificate of occupancy for the Premises, and (ii)Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, andsystems in the Premises. Within fifteen (15) days after request by Tenant following the Substantial Completion of the Tenant Improvements, Landlord willacknowledge its approval of the Tenant Improvements (provided that such approval has been granted) by placing its signature on a Contractor’s Certificate ofSubstantial Completion fully executed by the Architect, Contractor and Tenant. Landlord’s approval shall not create any contingent liabilities for Landlordwith respect to any latent quality, design, Code compliance or other like matters that may arise subsequent to Landlord’s approval.SECTION 5MISCELLANEOUS 5.1 Tenant’s Representative. Tenant has designated Robert McCollough as its sole representative with respect to the matters set forth in this TenantWork Letter, who shall each have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter. Tenant may replace itsrepresentative by written notice to Landlord. BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -10- [Third Amendment]  5.2 Landlord’s Representative. Landlord has designated Bernie Baker and/or Jeff Marcowitz with PMA, as its sole representatives with respect to thematters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord asrequired in this Tenant Work Letter. 5.3 Time is of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer tocalendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall berepeated until the document is approved by Landlord. 5.4 Tenant’s Lease Default. Notwithstanding any provision to the contrary contained in the Lease or this Tenant Work Letter, if any default by Tenantunder the Lease or this Tenant Work Letter (including, without limitation, any failure by Tenant to fund any portion of the Over-Allowance Amount) occurs atany time on or before the substantial completion of the Tenant Improvements and such default remains uncured ten (10) business days following Landlord’snotice of such default to Tenant, then in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right towithhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may, without any liability whatsoever, cause the cessation ofconstruction of the Tenant Improvements (in which case, Tenant shall be responsible for any delay in the substantial completion of the Tenant Improvementsand any costs occasioned thereby). 5.5 Occupancy of the Existing Premises During Construction of the Tenant Improvements. Tenant hereby acknowledges that Tenant shall beoccupying the Premises during the construction of the Landlord Work. Tenant hereby acknowledges that, notwithstanding Tenant’s occupancy of the Premisesduring the construction of the Landlord Work, Landlord shall be permitted to construct the Landlord Work during normal business hours, provided,however, that Landlord provides Tenant with at least five (5) business days’ prior notice of Landlord’s intent to commence construction of any phase of theLandlord Work. Tenant hereby agrees that the construction of the Landlord Work shall in no way constitute a constructive eviction of Tenant nor entitleTenant to any abatement of rent or damages of any kind. Furthermore, in no event shall Tenant be entitled to any compensation or damages from Landlord forloss of the use of the whole or any part of the Premises or of Tenant’s personal property or improvements resulting from the construction of the Landlord Workor Landlord’s actions in connection with the construction of the Landlord Work, or for any inconvenience or annoyance occasioned by the Landlord inconnection with the construction of the Landlord Work, except to the extent caused by the gross negligence or willful misconduct of Landlord, its members,partners, shareholders, officers, directors, agents, employees and/or contractors. Landlord shall use commercially reasonable efforts to minimize anyinterference with Tenant’s access to and use of the Premises during the construction of the Landlord Work. BRITANNIA POINTE GRAND BUSINESS PARK [Cytokinetics, Inc.] -11- [Third Amendment]  SCHEDULE 1LANDLORD WORK ITEMS AND SCHEDULE OF COMPLETION 2011 2012 2013Air conditioning units: Air conditioning units: Air handlers nos. 1 & 2AC-1 AC-6 AC-2 AC-7 Boiler B-1AC-3 AC-8 AC-5 AC-9 4 exhaust fans8 exhaust fans AC-10AC-11 AC-12 Boiler B-3 6 exhaust fans BRITANNIA POINTE GRAND BUSINESS PARK SCHEDULE 1 [Cytokinetics, Inc.] -1- [Third Amendment]  SCHEDULE 2LOCATION OF LANDLORD WORK SCHEDULE 2 LOCATION OF BRITANNIA POINTE GRAND BUSINESS PARK LANDLORD WORK [Cytokinetics, Inc.] -1- [Third Amendment] Exhibit 10.66AMENDMENT NO. 5 TO COLLABORATIONAND OPTION AGREEMENTThis Amendment No. 5 to the Agreement (this “Amendment No. 5”) is entered into as of November 1, 2010 (the “Amendment Effective Date”) by andbetween Cytokinetics, Incorporated (“CK”), a Delaware corporation, having its principal place of business at 280 East Grand Ave., South San Francisco,California 94080 and Amgen Inc., a Delaware corporation having its principal place of business at One Amgen Center Drive, Thousand Oaks, California91320 (“Amgen”). WHEREAS, CK and Amgen are parties to that certain Collaboration and Option Agreement dated December 29, 2006, as amended (the “Agreement”); WHEREAS, in May, 2009, Amgen exercised its option to obtain an exclusive, worldwide license (excluding Japan) to certain compounds that [****],including CK-452, as further described in the Agreement; WHEREAS, the Agreement provides that the Parties will conduct a research program subsequent to Amgen exercising its option; NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receiptand sufficiency of which is hereby acknowledged, CK and Amgen, intending to be legally bound, agree to amend the Agreement as set forth below.1. Capitalized terms used herein and not otherwise defined have the meaning ascribed in the Collaboration Agreement. The following definitions are added tothe Agreement:“1.68 “Amgen Field” means the Field other than the CK Field.1.70 “Amgen Research Patent Rights” shall mean all Research Patent Rights other than the CK Research Patent Rights.1.71 “Cardiac Development Compound” shall mean any Research Program Compound that has been selected to be advanced from the Research Programinto the Development Program.1.72 “CK Field” shall mean any research, development, or commercialization activities and the related use of compounds that [****].1.73 “CK Research Patent Rights” shall mean all patent applications and patents within the Research Patent Rights containing one or more pending orissued claims directed to Research Program Compounds whose primary utility is within the CK Field.1.74 “Research Patent Right” means any Patent Right arising from (i) work conducted in connection with the Research Program (a) by CK [****] of theAmgen Contract No. 200625165-017 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Agreement and [****] or (b) by the Parties pursuant to the Research Plan following the Amendment Effective Date; or (ii) any [****] of the ResearchProgram, or a [****] of the Research Program (including, but not limited to, [****]), in each case made pursuant to the activities undertaken by or onbehalf of a Party under this Agreement; in each case, that includes within a pending or issued claim [****]. “[****]” means: (a) the [****], (b) the[****], and (c) any other [****] agreed by the JRC at the [****] agreed by the JRC at the time it approves the [****], as may later be adjusted by JRC.For the avoidance of doubt, Research Patent Rights will not include any [****] (including in the case of CK, [****]) or any portion thereof. ResearchPatent Rights will be deemed included in the Amgen Joint Patent Rights and the CK Joint Patent Rights, respectively.For ease of reference, the Research Plan in effect as of the Amendment Effective Date is attached as Exhibit A to this Amendment.1.75 “Research Program Compound” means any compound within the scope of a pending or issued claim within the Research Patent Rights. EachResearch Program Compound that meets the requirements of Section 1.21 will be deemed to be a Compound for all purposes under the Agreement.1.76 “Research Program Eligible Compound” means a Research Program Compound that satisfies the criteria of a Research Eligible Compound.2. A new Section 3.6 entitled “[****] Research Patent Rights” is added immediately after Section 3.5 (Extended Research Term): “3.6 [****]Research Patent Rights. In [****] of the [****] the Parties in conducting the Research Program, all Research Patent Rights [****].Accordingly: (a) To the extent that Amgen [****] Research Patent Rights, Amgen [****] and to [****] and to [****], and (b) To the extent that CK [****] the Research Patent Rights, CK[***] and to [****] and to [****].”3. A new Section 3.7 entitled “Licenses to Research Program Compounds in the Territory” is added immediately after Section 3.6 ([****] Research PatentRights): “3.7 Licenses to Research Program Compounds in the Territory. During the Term and in the Territory: Amgen Contract No. 200625165-017 Page 2 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  (a) All Research Program Compounds that are also Compounds will be subject to the licenses set forth in Sections 9.1.1, 9.1.2, 9.2.1 and 9.2.2. (b) With respect to Research Program Compounds that are not Compounds (“[****] Compounds”): (i) CK hereby grants to Amgen an exclusive, [****] license, [****], under CK’s interest in the Research Patent Rights, solely to make, havemade, use, sell, offer for sale and import [****] Compounds within the Amgen Field during the Term in the Territory. (ii) Amgen hereby grants to CK an exclusive, [****] license, [****], under Amgen’s interest in the Research Patent Rights, solely to make, havemade, use, sell, offer for sale and import [****] Compounds within the CK Field during the Term in the Territory.”4. This Amendment supersedes and replaces Section [****] of the Agreement, which is deemed deleted in its entirety.5. A new Section 8.5.1 entitled “Prosecution and Maintenance of the Research Patent Rights” is added immediately after Section 8.5 (Prosecution andMaintenance — Post Option Exercise): “8.5.1 Prosecution and Maintenance of the Research Patent Rights. (a) During the Term, the filing, prosecution and maintenance of all Research Patent Rights in the Territory will be subject to Section 8.5 of theAgreement. (b) Subject to Section 8.3 of the Agreement, [****] shall, through outside counsel mutually acceptable to the Parties and directed by [****] controlthe filing for, prosecution and maintenance (including defending or prosecuting office actions, prosecutions or interferences) of the Research PatentRights [****], at [****] expense, in consultation with [****], as well as filing for any patent term extensions or similar protections. [****] shallprovide [****] copies of and an opportunity to review and comment upon the text of the applications relating to such Research Patent Rights[****] before filing. [****] shall provide [****] with a copy of each application for a Research Patent Right as filed, together with notice of itsfiling date and application number. [****] shall keep [****] advised of the status of all material communications, actual and prospective filingsor submissions regarding the Research Patent Rights, and shall give [****] copies of and an opportunity to review and comment on any suchcommunications, filings and submissions proposed to be sent to any patent office or judicial body. [****] shall reasonably consider in good faith[****] comments on the communications, filings and submission for the Research Patent Rights. (c) The Parties intend that all filings for the Research Patent Rights shall be Amgen Contract No. 200625165-017 Page 3 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  [****] with the goals of the Collaboration to [****] Compounds. At the request of either Party during or following the Term, the Parties will worktogether in good faith to [****] the Research Patent Rights, to the extent practicable without [****] Patent Right with respect to Compounds, inorder to [****] to Research Program Compounds [****] relating to Research Program Compounds [****].”6. A new Section 3.8 entitled “Research Program Compounds [****]” is added immediately after Section 3.7 (Licenses to Research Program Compounds inthe Territory): “3.8 Research Program Compounds [****]. (a) [**** hereby grants to [****] an exclusive right and license [****], with the [****], (i) under the [****] Patent Rights and [****] Joint PatentRights solely to [****] Research Program Eligible Compounds; and (ii) [****] interest in the Research Patent Rights [****] Research ProgramCompounds, in each case within [****] the Territory, and with respect to Research Program Eligible Compounds, subject to the [****]provisions of Section [****], as modified by subsection 3.8(e) below. [****] under the [****] with respect to Research Program EligibleCompounds [****] as expressly permitted pursuant to Section [****] of the Agreement. Without limiting Article [****] of the Agreement, [****]shall not seek to [****] provided to [****] in the course of the Collaboration to conduct the activities expressly permitted pursuant to Section[****] of the Agreement or to [****] Research Program Eligible Compounds [****]. (b) [****] hereby grants to [****] an exclusive right and license [****], with the [****] under [****] interest in the Research Patent Rights solelyto [****] Research Program Compounds [****]. (c) [****] shall have the right to [****] the Territory with respect to those Cardiac Development Compounds for which [****] pursuant to Section[****] for [****] the Territory for the purposes of [****] of such Cardiac Development Compounds [****]. Amgen Contract No. 200625165-017 Page 4 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  (d) From the Amendment Effective Date and continuing until the [****] of a Compound, [****] shall have a [****] with respect to [****] withrespect to the [****] Compound or [****] Compound (the “[****] Compounds”) [****] (each, a “[****]”), but not including [****] and thelike. Should [****], upon such [****] will give prompt written notice to [****] thereof (the “[****] Notice”). Should [****] within receipt ofthe [****] Notice, notify [****] in writing that [****] involving the [****], then CK and Amgen will discuss in good faith such a [****] willnot discuss a [****] with respect to such [****] Compounds with any Third Party until at least [****] days after [****] provides the [****]Notice to [****] (the “Exclusive Discussion Period”). No such [****] the Parties will be [****] either Party unless and until [****] by bothParties. Neither Party will have any obligation to [****] such terms and conditions [****] such Party [****]. If [****] does not so notify[****] within [****] days of its receipt of the [****] Notice, or if the Parties do not [****] within the [****] day period from [****] receivingthe [****] Notice from [****], then [****] regarding such [****] Compounds and/or any other [****] Compound or [****] Compound witha [****] obligation to [****]. [****] the Amendment Effective Date, [****] with a [****] regarding the [****] Compounds in [****], and thatnothing in this paragraph is intended to [****]; provided, however, in the event [****] for a [****] shall provide [****] with the [****] Noticeand shall not [****] regarding the [****] for a [****] with such [****] during the [****]. (e) In the event [****] does not [****] pursuant to clause [****], or upon the [****] this Agreement, whichever occurs first, [****] all applicable[****] set forth in Section [****] with respect to any particular [****] Compound only if: (i) Such [****] Compound is a [****] Compound and [****] is using Reasonably Diligent Efforts to [****] Compound in the [****]; or (ii) Such [****] Compound is a [****] Compound, for which such Compound a [****] has been Amgen Contract No. 200625165-017 Page 5 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  [****] that would [****], and [****] Compound or [****] Compound [****]; or (iii) [****] in Section [****] above, the [****] of such [****] Compound in [****] within the [****]. (f) Sections [****] shall apply to [****] Compounds to the same extent as to [****] Compounds. (g) The last sentence of Section 3.8(a) above, the last sentence of Section 9.2.3 of the Agreement, and Section 3.8(e) above shall survive termination ofthe Agreement.”7. The following sections of Article 18, Term and Termination, are revised in their entirety as follows. (a) Section 18.3.6 of the Agreement is revised to provide in its entirety as follows: “18.3.6 Technology Licenses. (i) Amgen hereby grants to CK, effective upon the notice of such termination, an exclusive, worldwide, [****] license, with the right to grant andauthorize sublicenses, as and to the extent Amgen has the right to grant such license as of such termination, (a) under the Amgen Patent Rightsand Amgen Joint Patent Rights solely to make, have made, use, sell, offer for sale and import Research Eligible Compounds (other thanResearch Program Eligible Compounds), including, without limitation, CK-452 and CK [****]; (b) under the Amgen Patent Rights andAmgen Joint Patent Rights solely to make, have made, use, sell, offer for sale and import Research Program Eligible Compounds for use in theCK Field; and (c) under Amgen’s interest in the Research Patent Rights solely to make, have made, use, sell, offer for sale and importResearch Program Compounds (other than Research Program Eligible Compounds) for use in the CK Field; provided, however if any subjectmatter covered by such license is subject to [****], Amgen shall promptly disclose such [****] to CK in writing and CK shall not have theright to exercise the foregoing license with respect to such subject matter, unless CK agrees in writing to [****] as a result of CK’s exercise ofsuch license. Amgen hereby grants to CK, effective upon the notice of such termination, a non-exclusive, worldwide license with respect toAmgen’s trade secrets to the extent that the same were [****] under this Agreement or [****] in connection with the Research EligibleCompounds, Amgen Contract No. 200625165-017 Page 6 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  (ii) solely to make, have made, use, sell, offer for sale and import Research Eligible Compounds. (iii) CK hereby grants to Amgen, effective upon the notice of such termination, an exclusive, worldwide, [****] license, with the right to grant andauthorize sublicenses, under CK’s interest in the Research Patent Rights, solely to make, have made, use, sell, offer for sale and importResearch Program Compounds for use in the Amgen Field, as and to the extent CK has the right to grant such license as of such termination,solely to make, have made, use, sell, offer for sale and import Research Program Compounds for use in the Amgen Field; provided, however ifany subject matter covered by such license is subject to [****], CK shall promptly disclose such [****] to Amgen in writing and Amgenshall not have the right to exercise the foregoing license with respect to such subject matter, unless Amgen agrees in writing to [****] as a resultof Amgen’s exercise of such license. (iv) Notwithstanding the license grants above: (A) CK retains the non-exclusive right to evaluate (itself or through one or more Third Parties)Research Program Compounds solely to determine whether such Research Program Compounds may have utility within the CK Field, and(B) Amgen retains the non-exclusive right to evaluate (itself or through one or more Third Parties) Research Program Compounds solely todetermine whether such Research Program Compounds may have utility within the Amgen Field.” (b) The following is added as Section 18.3.11 of the Agreement: “18.3.11 Prosecution, Maintenance, Enforcement and Defense of Research Patent Rights Post-Termination. (i) CK Research Patent Rights. (A) Following any termination of this Agreement, CK shall, through outside counsel mutually acceptable to the Parties and directed by CK,control the filing for, prosecution and maintenance (including defending or prosecuting office actions, prosecutions or interferences) ofthe CK Research Patent Rights on a worldwide basis at CK’s expense, in consultation with Amgen, as well as filing for any patent termextensions or similar protections. CK shall provide Amgen copies of and an opportunity to review and comment upon the text of theapplications relating to the CK Research Patent Rights at least [****] before filing. CK shall provide Amgen with a copy of eachapplication for a CK Research Patent Right as filed, together with notice of its filing date and application number. CK shall keep Amgenadvised of the Amgen Contract No. 200625165-017 Page 7 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  status of all material communications, actual and prospective filings or submissions regarding the CK Research Patent Rights, and shallgive Amgen copies of and an opportunity to review and comment on any such communications, filings and submissions proposed to besent to any patent office or judicial body. CK shall reasonably consider in good faith Amgen’s comments on the communications, filingsand submission for the CK Research Patent Rights. (B) Following any termination of this Agreement, CK shall have the sole right, but not the obligation, to bring and control the enforcement ofthe CK Research Patent Rights against any infringement in the CK Field on a worldwide basis, at its own cost and expense and usingcounsel of its choice, in consultation with Amgen. In the event Amgen would like to bring enforcement of the CK Research Patent Rightsagainst any infringement in the Amgen Field, the Parties will discuss such potential enforcement action in good faith so long as suchenforcement action would not adversely affect any CK Research Patent Right with respect to any Research Program Compound in theCK Field. Amgen shall reasonably cooperate, as requested by CK, with respect to such enforcement actions, including by joinder as aparty if required by law, and CK shall reimburse Amgen any [****] costs incurred in connection therewith. CK shall keep Amgeninformed of the progress of any such enforcement action. Without limiting the foregoing, CK shall keep Amgen advised of all materialcommunications, actual and prospective filings or submissions regarding such action, and shall provide Amgen copies of and anopportunity to review and comment on any such communications, filings and submissions. CK shall not [****], in any action orproceeding to enforce such CK Research Patent Rights without Amgen’s prior written consent, not to be unreasonably withheld ordelayed. All cash amounts (plus the fair market value of all non-cash consideration) received by CK from a Third Party in connectionwith the final judgment, award or settlement of any infringement in the CK Field with respect to any CK Research Patent Right as aresult of any such litigation (“CK Recoveries") shall first be applied to reimbursement of the unreimbursed legal fees and expensesincurred by the Parties. Any CK Recoveries left over after such reimbursement shall be [****]. (C) In the event that any Third Party brings any action for declaratory relief with respect to the invalidity or unenforceability of any CKResearch Patent Right, the Parties shall promptly confer to agree Amgen Contract No. 200625165-017 Page 8 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  on a plan for defending any such action and the sharing of costs and responsibilities with respect thereto. If the Parties are unable toagree, CK may conduct such defense, at its own expense, and in such event, CK shall keep Amgen advised of all materialcommunications, actual and prospective filings or submissions regarding such action, and shall provide to Amgen copies of and anopportunity to review and comment on any such communications, filings and submissions. CK shall not [****], without Amgen’sprior written consent, not to be unreasonably withheld or delayed. (D) CK will have the exclusive right to [****] and [****], provided that Amgen may [****] and [****] with CK’s prior written consent,not to be unreasonably withheld or delayed. (E) Promptly following the date of termination of the Agreement, with respect to the CK Research Patent Rights, Amgen shall (i) provide CKwith copies of any relevant communications, filings, drafts and documents not previously provided to CK as well as written notice ofany pending deadlines or communications applicable thereto, and (ii) execute and deliver any legal papers reasonably requested by CK toeffectuate transfer of control of the filing, prosecution and maintenance of such CK Research Patent Rights (excluding papers thattransfer any right, title or interest in or to the CK Research Patent Rights other than such control). (ii) Amgen Research Patent Rights. (A) Section 8.5 of the Agreement will survive termination of the Agreement solely with respect to Amgen Research Patent Rights on aworldwide basis. (B) Following any termination of this Agreement, Amgen shall have the sole right, but not the obligation, to bring and control the enforcementof the Amgen Research Patent Rights against any infringement in the Amgen Field on a worldwide basis, at its own cost and expense andusing counsel of its choice, in consultation with CK. In the event CK would like to bring enforcement of the Amgen Research PatentRights against any infringement in the CK Field, the Parties will discuss such potential enforcement action in good faith so long as suchenforcement action would not adversely Amgen Contract No. 200625165-017 Page 9 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  affect any Amgen Research Patent Right with respect to any Research Program Compound in the Amgen Field. CK shall reasonablycooperate, as requested by Amgen, with respect to such enforcement actions, including by joinder as a party if required by law, andAmgen shall reimburse CK any [****] costs incurred in connection therewith. Amgen shall keep CK informed of the progress of anysuch enforcement action. Without limiting the foregoing, Amgen shall keep CK advised of all material communications, actual andprospective filings or submissions regarding such action, and shall provide CK copies of and an opportunity to review and comment onany such communications, filings and submissions. Amgen shall not [****], in any action or proceeding to enforce such Amgenresearch Program Patent Rights without CK’s prior written consent, not to be unreasonably withheld or delayed. All cash amounts (plusthe fair market value of all non-cash consideration) received by Amgen from a Third Party in connection with the final judgment, awardor settlement of any infringement in the Amgen Field with respect to any Research Patent Right as a result of any such litigation (“AmgenRecoveries") shall first be applied to reimbursement of the unreimbursed legal fees and expenses incurred by the Parties. Any AmgenRecoveries left over after such reimbursement shall be [****]. (C) In the event that any Third Party brings any action for declaratory relief with respect to the invalidity or unenforceability of any AmgenResearch Patent Right, the Parties shall promptly confer to agree on a plan for defending any such action and the sharing of costs andresponsibilities with respect thereto. If the Parties are unable to agree, Amgen may conduct such defense, at its own expense, and in suchevent, Amgen shall keep CK advised of all material communications, actual and prospective filings or submissions regarding suchaction, and shall provide to CK copies of and an opportunity to review and comment on any such communications, filings andsubmissions. Amgen shall not [****] without CK’s prior written consent, not to be unreasonably withheld or delayed. (D) Amgen will have the exclusive right to [****] and [****], provided that CK may [****] and [****] with Amgen’s prior writtenconsent, not to be unreasonably withheld or delayed. Amgen Contract No. 200625165-017 Page 10 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  (iii) Section 8.3 (with the exception of [****]) of the Agreement will survive termination of the Agreement.”Except as expressly set forth herein, all of the terms and conditions of the Agreement will remain in full force and effect.IN WITNESS WHEREOF, the Parties have executed this Amendment No. 5 as of the Amendment Effective Date. Cytokinetics, Inc. Amgen Inc. By: Name: /s/ Robert I. BlumRobert I. Blum By:Name: /s/ Roger M. PerlmutterRoger M. Perlmutter, M.D., Ph.D. Title: President and CEO Title: Executive Vice President, Research and Development Amgen Contract No. 200625165-017 Page 11 of 12 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  EXHIBIT AResearch Plan(adopted November 1, 2010)[attached] Amgen Contract No. 200625165-017 Page 12 of 12  Cytokinetics/Amgen Collaborative 2011 Research PlanApproved by the JRC: November 1, 2010[****] AMGEN/CYTOKINETICS CONFIDENTIAL Page 1 of 5 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Cytokinetics/Amgen Collaborative 2011 Research Plan[****] AMGEN/CYTOKINETICS CONFIDENTIAL Page 2 of 5 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Cytokinetics/Amgen Collaborative 2011 Research Plan[****] AMGEN/CYTOKINETICS CONFIDENTIAL Page 3 of 5 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Cytokinetics/Amgen Collaborative 2011 Research Plan[****] AMGEN/CYTOKINETICS CONFIDENTIAL Page 4 of 5 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Cytokinetics/Amgen Collaborative 2011 Research Plan[****] AMGEN/CYTOKINETICS CONFIDENTIAL Page 5 of 5 **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions.  Page 1[****]CYTOKINETICS CONFIDENTIAL **** Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect toomitted portions. Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-125786, 333-129786,333-138306, 333-146814 and 333-155259) and Form S-8 (Nos. 333-115146, 333-125973, 333-133323, 333-136524, 333-140963,333-149713, 333-152850, 333-161116, and 333-168520) of Cytokinetics, Incorporated of our report dated March 10, 2011 relatingto the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPSan Jose, CAMarch 10, 2011Exhibit 31.1PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert I. Blum, certify that:1. I have reviewed this Annual Report on Form 10-K of Cytokinetics, Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-(f) and 15d-15(f)) for the registrantand have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. By: /s/ Robert I. Blum Robert I. Blum, President, Chief Executive Officer and Director(Principal Executive Officer) Date: March 10, 2011 Exhibit 31.2PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Sharon A. Barbari, certify that:1. I have reviewed this Annual Report on Form 10-K of Cytokinetics, Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-(f) and 15d-15(f)) for the registrantand have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. By: /s/ Sharon A. Barbari Sharon A. Barbari, Executive Vice President, Finance and ChiefFinancial Officer (Principal Financial Officer) Date: March 10, 2011 Exhibit 32.1CEO and CFO CERTIFICATIONS PURSUANT TORULE 13a-14(b) AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. Section 1350)Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Robert I. Blum, President,Chief Executive Officer and Director, and Sharon A. Barbari, Chief Financial Officer, of Cytokinetics, Incorporated (the “Company”), hereby certify that tothe best of our knowledge:1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and to which this certification is attached as Exhibit 32.1 (the“Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and2. The information contained in this Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ Robert I. Blum Robert I. Blum, President, Chief Executive Officer and Director(Principal Executive Officer) By: /s/ Sharon A. Barbari Sharon A. Barbari, Executive Vice President, Finance and ChiefFinancial Officer (Principal Financial Officer) Date: March 10, 2011 

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