Cytokinetics Annual Report 2012

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2012or ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934From the transition period from to Commission 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 No.) 280 East Grand AvenueSouth San Francisco, CA 94080(Address of principal executive offices) (Zip Code)(650) 624-3000(Registrant’s 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 Capital 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 ¨ 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 ¨ 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 Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes  No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, andwill not be contained, 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. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer  Non-accelerated filer ¨ Smaller reporting company ¨(Do not check if a smaller reporting company)Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No The aggregate market value of the voting and non-voting common equity held by non-affiliates was $83.2 million, computed by reference to the last salesprice of $0.64 as reported by the NASDAQ Global Market as of the last business day of the Registrant’s most recently completed second fiscal quarter,June 29, 2012. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose. The number ofshares of common stock held by non-affiliates excluded 3,478,152 shares of common stock held by directors, officers and affiliates of directors. The numberof shares owned by affiliates of directors was determined based upon information supplied by such persons and upon Schedules 13D and 13G, if any, filedwith the SEC. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct orcause the direction of the management or policies of the Registrant, that such person is controlled by or under common control with the Registrant, or that suchpersons are affiliates for any other purpose.The number of shares outstanding of the Registrant’s common stock on February 28, 2013 was 144,463,469 shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Proxy Statement for its 2013 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission, nolater than 120 days after the end of the fiscal year, are incorporated by reference to Part III of this Annual Report on Form 10-K. Table of ContentsCYTOKINETICS, INCORPORATEDFORM 10-KYear Ended December 31, 2012INDEX Page PART I Item 1. Business 3 Item 1A. Risk Factors 21 Item 1B. Unresolved Staff Comments 43 Item 2. Properties 43 Item 3. Legal Proceedings 43 Item 4. Mine Safety Disclosures 43 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. Selected Financial Data 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8. Financial Statements and Supplementary Data 70 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 110 Item 9A. Controls and Procedures 110 Item 9B. Other Information 110 PART III Item 10. Directors, Executive Officers and Corporate Governance 111 Item 11. Executive Compensation 111 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 111 Item 13. Certain Relationships and Related Transactions, and Director Independence 111 Item 14. Principal Accounting Fees and Services 111 PART IV Item 15. Exhibits and Financial Statement Schedules 112 Signatures 117 iTable of ContentsPART IThis report contains forward-looking statements indicating expectations about future performance and other forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We intend that such statements be protectedby the safe harbor created thereby. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differsignificantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to,statements about or relating to: • guidance concerning revenues, research and development expenses and general and administrative expenses for 2013; • 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, conduct, enrollment, progress, timing and scope of clinical trials and development activities for our drug candidates conductedby ourselves or our partner, Amgen Inc., including the anticipated timing for initiation of clinical trials, anticipated rates of enrollment for clinicaltrials and anticipated dates of data becoming available or being announced from clinical trials; • the results from the clinical trials and non-clinical and preclinical studies of our drug candidates and other compounds, and the significance andutility of such results; • our plans to seek one or more strategic partners to develop and commercialize our skeletal sarcomere activators, such as tirasemtiv and CK-2127107; • our and Amgen’s plans or ability to conduct the continued research and development of our drug candidates 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 potentialindications 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 strategic alliances and sponsoredresearch arrangements, such as with Amgen; • 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 marketing capabilities; • the focus, scope and size of our research and development activities and programs; • the utility of our focus on the cytoskeleton and the biology of muscle function, and our ability to leverage our experience in muscle contractility toother muscle functions; • 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; • future payments under loan and lease obligations; 1Table of Contents • potential competitors and competitive products; • retaining key personnel and recruiting additional key personnel; • our monitoring for a potential ownership shift under Internal Revenue Code Section 382; • 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: • our ability to acquire the funding necessary to conduct the one or more confirmatory Phase III clinical trials for tirasemtiv in patients withamyotrophic lateral sclerosis (also known as ALS or Lou Gehrig’s disease) that we expect will be required to obtain marketing approval for tirasemtivfor the treatment of ALS; • Amgen’s decisions with respect to the timing, design and conduct of research and development activities for omecamtiv mecarbil, including decisionsto postpone or discontinue research or development activities relating to omecamtiv mecarbil; • our ability to enter into partnership agreements for any of our programs on acceptable terms and conditions or in accordance with our plannedtimelines; • our ability to obtain additional financing on acceptable terms, if at all; • our receipt of funds and access to other resources under our current or future strategic alliances or sponsored research arrangements; • difficulties or delays in the development, testing, production or commercialization of our drug candidates; • difficulties or delays, or slower than anticipated patient enrollment, in our or Amgen’s clinical trials; • difficulties or delays in the manufacture and supply of clinical trial materials; • failure by our contract research organizations, contract manufacturing organizations and other vendors to properly fulfill their obligations; • results from non-clinical studies that may adversely impact the timing or the further development of our drug candidates and potential drugcandidates; • the possibility that the U.S. Food and Drug Administration (“FDA”) or foreign regulatory agencies may delay or limit our or our partners’ ability toconduct clinical trials or 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 issue and sell shares of our common stock under our At-The-Market Issuance Sales Agreement with McNicoll, Lewis & Vlak LLC; • changing standards of care and the introduction of products by competitors or alternative therapies for the treatment of indications we target that maymake our drug candidates commercially unviable; • changes in laws and regulations applicable to drug development, commercialization or reimbursement; • the uncertainty of protection for our intellectual property, whether in the form of patents, trade secrets or otherwise; • potential infringement or misuse by us of the intellectual property rights of third parties; and • the timeliness and accuracy of information filed with the U.S. Securities and Exchange Commission (the “SEC”) by third parties. 2Table of ContentsIn addition such statements are subject to the risks and uncertainties discussed in the “Risk Factors” section and elsewhere in this document. Suchstatements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-lookingstatement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factorsemerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on ourbusiness or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.Item 1. BusinessOverviewWe were incorporated in Delaware in August 1997 as Cytokinetics, Incorporated. We are a clinical-stage biopharmaceutical company focused on thediscovery and development of novel small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medicalconditions. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and expertise regarding thecytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. Our most advanced research and developmentprograms relate to the biology of muscle function and are directed to small molecule modulators of the contractility of skeletal or cardiac muscle. We are alsoconducting earlier-stage research directed to other compounds with the potential to modulate muscle contractility and other muscle functions, such as growth,energetics and metabolism.Tirasemtiv (formerly known as CK-2017357) is the lead drug candidate from our skeletal sarcomere activator program. The skeletal muscle sarcomereis the basic unit of skeletal muscle contraction. Our skeletal sarcomere activators selectively activate the fast skeletal muscle troponin complex, which is a setof regulatory proteins that modulates the contractility of the fast skeletal muscle sarcomere. We believe tirasemtiv may be useful in treating diseases or medicalconditions associated with skeletal muscle weakness or wasting. We are currently conducting a Phase II clinical trials program for tirasemtiv, including anongoing Phase IIb clinical trial in patients with ALS. This trial is known as BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and FunctionalImprovement with Tirasemtiv in ALS). Tirasemtiv has been granted orphan drug designation and fast track status by the FDA and orphan medicinal productdesignation by the European Medicines Agency, in each case for the potential treatment of ALS. We have conducted Phase II clinical trials of tirasemtiv inpatients with ALS, patients with myasthenia gravis and patients with claudication associated with peripheral artery disease. We are also developing CK-2127107, a structurally distinct, fast skeletal muscle troponin activator, and have filed an investigational new drug application (“IND”) for this drugcandidate. We anticipate initiating a Phase I clinical trial evaluating CK-2127107 in healthy volunteers in the first half of 2013.Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in the heart. Our lead drug candidatefrom this program, omecamtiv mecarbil (formerly known as CK-1827452), is a novel cardiac muscle myosin activator. Amgen holds an exclusive license todevelop and commercialize omecamtiv mecarbil worldwide, except Japan, subject to our development and commercialization participation rights. Anintravenous formulation of omecamtiv mecarbil is being studied in a Phase IIb clinical trial known as ATOMIC-AHF (Acute Treatment with OmecamtivMecarbil to Increase Contractility in Acute Heart Failure), which is designed to evaluate the safety and efficacy of omecamtiv mecarbil in patients with leftventricular systolic dysfunction who are hospitalized with acute heart failure. Another Phase II clinical trial, known as COSMIC-HF (Chronic Oral Study ofMyosin Activation to Increase Contractility in Heart Failure), is being conducted with the primary objectives of selecting an oral modified release formulationand dose of omecamtiv mecarbil for chronic twice-daily dosing in patients with heart failure and left ventricular systolic dysfunction, and characterizing itspharmacokinetics after 12 weeks of treatment. We also are conducting joint research with Amgen directed to next-generation compounds in our cardiac musclecontractility program. 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.” 3Table of ContentsTwo of our drug candidates directed to muscle contractility have now demonstrated pharmacodynamic activity in patients: tirasemtiv in patients withALS, in patients with myasthenia gravis and in patients with claudication associated with peripheral artery disease, and omecamtiv mecarbil in patients withheart failure. In 2013, we expect to continue to focus on translating the observed pharmacodynamic activity of these compounds into potentially meaningfulclinical benefits for patients. Our drug candidate CK-2127107 has demonstrated pharmacological activity in preclinical models.Following is a summary of the planned clinical development activities for our drug candidates directed to muscle contractility: DrugCandidate(Mechanism of Action) Mode ofAdministration PotentialIndication(s) Development Status andPlanned Development ActivitiesSkeletal Muscle Activation Tirasemtiv(fast skeletal muscle troponin activator) oral diseases and conditions associatedwith muscle weakness or wasting* • We anticipate continuing to enroll and dose patients in BENEFIT-ALS. • We anticipate completing enrollment in BENEFIT-ALS by mid-year 2013. • We anticipate reporting data from BENEFIT-ALS by the end of 2013. CK-2127107(fast skeletal muscle troponin activator) oral diseases and conditions associatedwith muscle weakness or wasting* • We anticipate initiating a Phase I clinical trial evaluating CK-2127107 in healthy volunteers by the end ofthe first half of 2013. Cardiac Muscle Activation Omecamtiv mecarbil(cardiac muscle myosin activator) intravenous heart failure • We anticipate the completion of enrollment in ATOMIC-AHF in the first half of 2013. • We anticipate results from ATOMIC-AHF will be reported in mid-year 2013. Omecamtiv mecarbil(cardiac muscle myosin activator) oral heart failure • We anticipate that COSMIC-HF will continue to enroll patients during 2013. *e.g., ALS, claudication, sarcopenia, cachexia, myasthenia gravisAll of our drug candidates have arisen from our cytoskeletal research activities. Our focus on the biology of the cytoskeleton distinguishes us from otherbiopharmaceutical companies, and potentially positions us to discover and develop novel therapeutics that may be useful for the treatment of severe diseasesand medical conditions. We believe that this focus and the resulting knowledge and expertise that we have developed, especially with our proprietarytechnologies that permit us to evaluate the function of cytoskeletal proteins in high information content biological assays, has allowed us to increase theefficiency of our drug discovery activities. Our research and development activities since our inception in 1997 have produced multiple drug candidates thathave progressed into clinical testing. Each of these drug candidates has a novel mechanism of action compared to currently marketed drugs, which we believevalidates our focus on the cytoskeleton as a robust area for drug discovery. We intend to leverage our experience in muscle contractility in order to expand ourcurrent pipeline, and expect to identify additional potential drug candidates that may be suitable for clinical development. 4Table of ContentsOur Corporate StrategyOur goal is to discover, develop and commercialize novel drug products that modulate muscle function in ways that may benefit patients with seriousdiseases or medical conditions, with the intent of establishing a fully integrated biopharmaceutical 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 on the knowledge andexpertise we have acquired in each of our muscle contractility research and development programs. In these programs, we are investigating potentialtreatments for diseases or medical conditions where impaired regulation of the contractile function of muscle plays a key role and such diseases orconditions may be amenable to treatment by modulation of muscle contractility, such as heart failure, and medical conditions associated with skeletalmuscle weakness or wasting. • Leveraging our cytoskeletal expertise and proprietary technologies to increase the speed, efficiency and yield of our drug discovery anddevelopment processes. We believe that our unique understanding of the cytoskeleton and our proprietary research technologies should enable usto discover and potentially to develop drug candidates with novel mechanisms of action that may offer potential benefits not provided by existingdrugs and which may have application across a broad array of diseases and medical conditions. We expect that we may be able to leverage ourexpertise in muscle contractility to expand programs related to other areas of muscle function and which may extend to the potential treatment of otherserious medical diseases and conditions. Progressing related programs in parallel may afford us an opportunity to build a broader business thatcould benefit from multiple products that serve related clinical and commercial needs associated with impaired muscle function, muscle weaknessand fatigue. In addition, this strategy may enable us to diversify certain technical, financial and operating risks by advancing several drugcandidates. • Focusing on comprehensive development programs that may enhance the success of our activities directed to potential registration. Webelieve that by focusing on disease areas with well-organized physician-investigator groups, significant clinical unmet need, and strong patient anddisease advocacy, we may enhance our effectiveness in enrolling and conducting clinical trials that may answer important questions about thedosing, tolerability, pharmacokinetics and pharmacodynamics as well as the potential safety and efficacy of our drug candidates. We believe that ourconsidered clinical trial designs and well-executed development programs can improve our ability to realize value from our clinical developmentactivities. We believe that our investing in these activities may result in more successful later-stage clinical development activities that may increasethe likelihood of our achieving our objectives to develop effective therapeutics that may address the needs of patients with grievous diseases andconditions. • Building development and commercialization capabilities directed at concentrated and growing markets. We focus our drug discovery anddevelopment activities on disease areas for which there are serious unmet medical needs. In particular, we direct our activities to potential commercialopportunities in concentrated and tractable customer segments, such as hospital specialists and disease-specific centers of excellence, which may beaddressed by a smaller, targeted sales force. In preparing for the potential commercialization of our drug candidates directed to these markets, we arefocusing our activities on a broad range of issues facing patients and payors, including the principal drivers of clinical and economic burdensassociated with these diseases. We also seek to focus on opportunities that the multiple constituencies and stakeholders for these markets mayrecognize as creating value. Accordingly, targeting unmet medical needs in these areas may provide us competitive opportunities and supportdevelopment of a franchise in diseases involving muscle weakness, wasting and fatigue. In these markets, we believe that a company with limitedresources may be able to compete 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-integratedbiopharmaceutical company. 5Table of Contents • Establishing select strategic alliances to support our drug development programs while preserving significant development andcommercialization rights. We believe that such alliances may allow us to obtain financial support and to capitalize on the therapeutic area expertiseand resources of our partners that can potentially accelerate the development and commercialization of our drug candidates. Where we deemappropriate, we plan to retain certain rights to participate in the development of drug candidates and commercialization of potential drugs arising fromour programs and alliances, so that we can expand and capitalize on our own internal development capabilities and build our commercializationcapabilities.Muscle Contractility FocusOur long-standing interest in the cytoskeleton has led us to focus our research and development activities on the biology of muscle function, and inparticular, small molecule modulation of muscle contractility. We believe that our expertise in the modulation of muscle contractility is an importantdifferentiator for us. Our preclinical and clinical experience in muscle contractility may position us to discover and develop additional novel therapies that havethe potential to improve the health of patients 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 medical conditions. For example,certain neuromuscular diseases and medical conditions associated with muscle weakness may be amenable to treatment by enhancing the contractility ofskeletal muscle, and heart failure is a disease often characterized by impaired cardiac muscle contractility which may be treated by modulating thecontractility of cardiac muscle.Because the modulation of the contractility of different types of muscle, such as cardiac muscle and skeletal muscle, may be relevant to multiplediseases or medical conditions, we believe we can leverage our expertise in these areas to more efficiently discover and develop as potential drugs compoundsthat modulate the applicable muscle type for multiple indications.We are currently developing a number of small molecule compounds arising from our muscle contractility programs. Tirasemtiv is our lead drugcandidate from our skeletal muscle contractility program, and is the subject of a Phase II clinical trials program, including an ongoing Phase IIb clinical trial.Potential indications for which this drug candidate may be useful include skeletal muscle weakness associated with neuromuscular diseases, such as ALS,and other medical conditions characterized by skeletal muscle weakness or wasting. We have filed an IND for another drug candidate from this program, CK-2127107. This IND has cleared review by the FDA, and we anticipate initiating a Phase I clinical trial for CK-2127107. Omecamtiv mecarbil, a novel cardiacmuscle myosin activator, is partnered with Amgen world-wide, except Japan. An intravenous formulation of omecamtiv mecarbil is being studied in a PhaseIIb clinical trial in patients with acute heart failure. Oral formulations of omecamtiv mecarbil are being studied in a Phase II clinical trial in patients with heartfailure. Amgen is responsible for the clinical development of this drug candidate, subject to Cytokinetics’ development and commercialization participationrights.We are continuing to conduct discovery, characterization and lead optimization activities for other compounds with the potential to modulate musclecontractility and other muscle functions, such as growth, energetics and metabolism.Skeletal Muscle Contractility ProgramOverview. Our skeletal muscle contractility program is focused on the activation of the skeletal sarcomere, the basic unit of skeletal musclecontraction. The skeletal sarcomere is a highly ordered cytoskeletal structure composed of skeletal muscle myosin, actin, and a set of regulatory proteins,which include the troponins and tropomyosin. This program leverages our expertise developed in our ongoing discovery and development of cardiac sarcomereactivators, including the cardiac muscle myosin activator omecamtiv mecarbil. 6Table of ContentsWe believe that our skeletal sarcomere activators may lead to new therapeutic options for diseases and medical conditions associated with aging, muscleweakness and wasting and neuromuscular dysfunction. The clinical effects of muscle weakness and wasting, fatigue and loss of mobility can range fromdecreased quality of life to, in some instances, life-threatening complications. By directly improving skeletal muscle function, a small molecule activator of theskeletal sarcomere potentially could enhance functional performance and quality of life in patients suffering from diseases or medical conditions characterizedor complicated by muscle weakness or wasting. These may include diseases and medical conditions associated with skeletal muscle weakness or wasting,such as ALS, claudication, myasthenia gravis, sarcopenia (general frailty associated with aging), post-surgical rehabilitation and cachexia in connection withheart failure or cancer.Tirasemtiv is our lead drug candidate from this program. We are also advancing another drug candidate from this program, CK-2127107, for which weanticipate initiating a Phase I clinical trial. Tirasemtiv and CK-2127107 are structurally distinct and selective small molecule activators of the fast skeletalsarcomere. These compounds activate the fast skeletal muscle troponin complex by increasing its sensitivity to calcium, leading to an increase in skeletalmuscle contractility. We are evaluating the potential indications for which tirasemtiv and CK-2127107 may be useful.Each of tirasemtiv and CK-2127107 has demonstrated encouraging pharmacological activity in preclinical models.In our Phase I clinical trials of tirasemtiv in healthy volunteers, tirasemtiv appeared well-tolerated and no serious adverse events were reported. In asingle-dose Phase I clinical trial, doses from 250 to 1000 mg of tirasemtiv were shown to produce concentration-dependent, statistically significant increasesversus placebo in the force developed by the tibialis anterior muscles in response to transcutaneous neuronal stimulation. In a multiple-dose Phase I clinicaltrial, tirasemtiv displayed generally dose-proportional pharmacokinetics and only modest accumulation during dosing to steady state.We have conducted three “evidence of effect” Phase IIa clinical trials of tirasemtiv. These evidence of effect clinical trials were randomized, double-blind,placebo-controlled, three-period cross-over studies of single doses of tirasemtiv administered to patients with impaired muscle function. These studies wereintended to translate the mechanism of action of tirasemtiv into potentially clinically relevant pharmacodynamic effects, which may then form the basis forlarger clinical trials designed to demonstrate proof of concept and possibly even to support registration. The first of these trials was conducted in patients withALS, a chronic and progressive disease in which the motor neurons die, thus denervating skeletal muscles and causing them to atrophy. This leads toweakness, fatigue, and eventually complete paralysis and death, primarily from respiratory complications. The second of these trials was conducted inpatients with myasthenia gravis, a chronic, autoimmune, neuromuscular disease which is the most common primary disorder of neuromusculartransmission. The third of these trials was conducted in patients with symptoms of claudication, which is pain or cramping in the leg muscles due toinadequate blood flow during exercise, associated with peripheral artery disease. Evidence of potentially clinically relevant pharmacodynamic effects wasobserved in each of these trials. We are now conducting a Phase IIb clinical trial of tirasemtiv in patients with ALS.In July 2010, we were awarded a grant in the amount of approximately $2.8 million by the National Institute of Neurological Disorders and Stroke(“NINDS”), which was intended to support for up to three years our research and development of tirasemtiv for the potential treatment of myasthenia gravis.The grant was awarded under the American Recovery and Reinvestment Act of 2009. In September 2012, the NINDS awarded us an additional $0.5 millionunder a separate grant.Background on ALS and Myasthenia Gravis Markets. Limited options exist for the treatment of ALS, which affects as many as 30,000 Americans,with an estimated 5,600 new cases diagnosed each year in the U.S. ALS is 20% more common in men than women; however, with increasing age, theprevalence 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 90to 95% of those diagnosed with ALS having the sporadic form. Of the remaining ALS 7Table of Contentspatient population, 5 to 10% have a family history of the disease (familial ALS). In cases of familial ALS, there is an approximately 50% chance eachoffspring will develop the disease. The majority of patients with ALS receive treatment at multidisciplinary centers that specialize in the unique needs of thesepatients. In the U.S., there are approximately 70 ALS centers of excellence, according to either the ALS Association or the Muscular Dystrophy Association.For most patients with ALS, death is usually due to respiratory failure because of diminished strength in the skeletal muscles responsible for breathing.The current prevalence of myasthenia gravis in the U.S. is estimated to be 20 per 100,000 people, i.e., between 53,000 and 60,000 cases. The actualprevalence may be higher because myasthenia gravis is frequently under diagnosed. Approximately 13,600 new cases of myasthenia gravis are diagnosed eachyear.We are evaluating other market opportunities for our skeletal muscle sarcomere activators.Tirasemtiv Clinical DevelopmentALSBENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS): In October 2012, we openedthis Phase IIb clinical trial to enrollment. BENEFIT-ALS is a multi-national, double-blind, randomized, placebo-controlled trial which is designed to enrollapproximately 400 patients who will be randomized to receive 12 weeks of double-blind treatment with tirasemtiv or placebo. All enrolled patients will completeone week of treatment with open-label tirasemtiv at 125 mg twice daily prior to randomization. Clinical assessments will take place monthly during the courseof treatment. Patients will also participate in follow-up evaluations at both 7 and 28 days after their final dose. The primary analysis of this trial will comparethe mean change from baseline in the ALS Functional Rating Scale in its revised form, or ALSFRS-R, a clinically validated instrument designed to measuredisease progression and changes in functional status, for patients receiving tirasemtiv versus those receiving placebo. Secondary endpoints will includemaximum voluntary ventilation, or MVV (a clinical assessment of pulmonary function and endurance), and measures of skeletal muscle function. Patientswill receive tirasemtiv or placebo dosed twice daily. Patients taking riluzole at the time of enrollment who are randomized to receive double-blind tirasemtiv willreceive riluzole at a reduced dose of 50 mg daily, in a blinded manner. We plan to conduct BENEFIT-ALS at over 70 sites across the United States, Canada,and several European countries. We anticipate completing enrollment in BENEFIT-ALS by mid-year 2013, and reporting data from this trial by the end of2013.Prior ALS Clinical Trials. In June 2012, we announced the publication of our Phase IIa evidence of effect clinical trial of tirasemtiv (CY 4021) in theonline edition of the journal Amyotrophic Lateral Sclerosis. In that trial, the single doses of tirasemtiv evaluated appeared generally well-tolerated, withdizziness and general fatigue being the most frequent adverse events. In addition, both patients and investigators perceived a positive change in the patients’overall status, in a dose-dependent fashion, at 6 hours after dosing with tirasemtiv, based on a global assessment in which the patient and the investigator eachindependently assessed patients’ status compared to prior to dosing. There was a clear relationship between improvements in global assessments and theplasma concentrations of tirasemtiv. Also at this 6-hour time point, there was a trend towards decreased muscle fatigability, as evidenced by data from a test ofsub-maximal hand-grip endurance. Data from that clinical trial also demonstrated a statistically significant increase in MVV at both 6 and 24 hours after 500mg of tirasemtiv, and small but statistically significant increases in maximum strength of certain muscle groups tested.In April 2012, at the American Academy of Neurology (AAN) 64 Annual Meeting, data were presented from CY 4024, a Phase II, two-part,randomized, double-blind, placebo-controlled, multiple-dose, safety, tolerability, pharmacokinetic and pharmacodynamic clinical trial of tirasemtiv in patientswith ALS. Patients in Part A of this trial were not taking riluzole; patients in Part B received riluzole at the reduced dose of 50 mg daily. In this trial, tirasemtivappeared to be generally safe and well-tolerated when dosed daily at 125 mg, 250 mg, and 375 mg once daily for two weeks. This trial was not designed orpowered to evaluate statistically the effects of tirasemtiv on the various outcome measures that were assessed during the study. However, encouraging 8thTable of Contentsdose-related trends were observed in measurements of ALSFRS-R and in MVV. Plasma concentrations of tirasemtiv were unaffected by co-administration withriluzole, while riluzole levels increased during co-administration with tirasemtiv. Adverse events and clinical assessments during treatment with tirasemtivappeared similar, with or without co-administration of riluzole. Dizziness, the most commonly reported adverse event, was mostly mild and generally beganand resolved early after initiating treatment. The incidence and persistence of dizziness appeared dose-related but was mild in severity in all patients whocompleted study drug treatment. Most reports of dizziness began early after initiating treatment and resolved spontaneously within the first week of treatmentin all but one patient who nevertheless completed the trial. No serious adverse events were reported.Also in April 2012 at the AAN Annual Meeting, data were presented from a Phase II, randomized, double-blind, placebo-controlled, multiple-dose,clinical trial of tirasemtiv in patients with ALS receiving riluzole at the reduced dose of 50 mg daily (CY 4025). The authors concluded that the twice-dailydose titration regimen evaluated in the trial appeared generally safe and well-tolerated, and that the majority of patients could be titrated successfully to atirasemtiv dose level of 250 mg twice daily. This trial was not designed or powered to evaluate statistically the effects of tirasemtiv on the various outcomemeasures that were assessed during the study. However, encouraging trends toward functional improvements were observed in patients receiving tirasemtivversus those receiving placebo. In this trial, tirasemtiv treatment was associated with increases in measurements of ALSFRS-R that were similar in direction,and in MVV that were similar in both direction and magnitude, to those observed in CY 4024.Myasthenia Gravis. In November 2012, we announced data from our Phase IIa evidence of effect clinical trial of tirasemtiv in patients withgeneralized myasthenia gravis (CY 4023). Patients in this trial received single oral double-blind doses of placebo and tirasemtiv at 250 mg and 500 mg, eachadministered in random order approximately one week apart. The main objectives of this trial were to assess the effects of tirasemtiv on various measures ofmuscle strength, muscle fatigue and pulmonary function. Since CY 4023 was a hypothesis-generating trial, no single primary efficacy endpoint was pre-specified. At six hours after dosing, improvements (i.e., decreases) in the Quantitative MG score (QMG) appeared related to the tirasemtiv dose in astatistically significant manner. The QMG is a validated index of disease severity that is often employed as a primary endpoint in clinical trials of patientswith myasthenia gravis. In addition, decreases in certain components of the QMG and their relationships to dose were statistically significant or borderlinesignificant. Also at six hours after dosing, increases in the percent predicted forced vital capacity were statistically significantly related to the dose level oftirasemtiv, as were the individual comparisons of each dose level of tirasemtiv versus placebo. Both the 250 mg and 500 mg single oral doses of tirasemtivstudied in this trial were well-tolerated by the 32 patients enrolled; there were no premature terminations and no serious adverse events were reported. The mostcommonly reported adverse event was dizziness which increased in frequency with dose and was reported as mild in all but one case that was classified asmoderate. We anticipate presenting final results from CY 4023 in March 2013 at the AAN 65 Annual Meeting. This clinical trial was supported by our grantfrom the NINDS.Claudication. In June 2011, final data were presented from our Phase IIa evidence of effect clinical trial of tirasemtiv in patients with symptoms ofclaudication associated with peripheral artery disease. The primary objective of this trial was to demonstrate an effect of single doses of tirasemtiv on measuresof skeletal muscle function and fatigability in these patients. The secondary objectives of this trial were to evaluate and characterize the relationship, if any,between the doses and plasma concentrations of tirasemtiv and its pharmacodynamic effects, and to evaluate the safety and tolerability of tirasemtivadministered as single doses to these patients. Accordingly, in this hypothesis-generating trial, multiple pharmacodynamic assessments were made withoutspecifying a single primary pharmacodynamic endpoint. 61 patients were enrolled in this trial. Patients were administered single oral doses of placebo and of 2different dose levels of tirasemtiv in a double-blind fashion and in random order, at least 6 days apart. These dose levels were originally 375 mg and 750 mg;however, the protocol was amended to lower the 750 mg dose to 500 mg following reports of serious adverse events by two patients: dizziness and mentalconfusion in one and dizziness and dyskinesia (or abnormal movements) in the other. As evidenced by heel raise testing, tirasemtiv increased calf muscleperformance in these patients. The 9thTable of Contentsincreases in calf muscle performance and the occurrence of adverse events both appeared related to increasing dose and plasma concentrations of tirasemtiv.Conversely, performance on a 6-minute walk test was inversely related to increases in both the dose and plasma concentration of tirasemtiv. Dose-relatedadverse events, particularly dizziness and others related to walking, may explain this negative effect on 6-minute walk performance.CK-2127107 Planned Development. Throughout 2012, we progressed CK-2127107 in studies intended to support an IND or foreign equivalent. Inthe fourth quarter of 2012, we filed an IND for CK-2127107, which has cleared FDA review. We anticipate initiating a Phase I clinical trial of CK-2127107 inhealthy volunteers in the first half of 2013.Ongoing Research in Skeletal Muscle Activators. In March 2012, we announced the publication in the journal Nature Medicine of preclinicalresearch regarding the activation of the troponin complex of fast skeletal muscle by tirasemtiv, and the potential role that this novel mechanism may play forimproving muscle function in patients with neuromuscular disorders. In April 2012, at the 2012 Experimental Biology Annual Conference, we presentedresults from a preclinical study designed to assess the effects of tirasemtiv in two models of running fatigue, one of aerobic exercise and the other of anaerobicexercise. The authors concluded that skeletal muscle troponin activators, such as tirasemtiv, are capable of substantially improving performance in anendurance-type fatigue assay and in an assay that tests motor coordination under moderately fatiguing and increasingly difficult conditions. Also in April2012, at the AAN Annual Meeting, we presented results from a preclinical study designed to examine the effects of tirasemtiv in SOD1 mutant transgenicmice, a model of ALS in humans. The authors concluded that mice treated with tirasemtiv maintained hind limb grip strength during disease progression andthat tirasemtiv increased muscle strength of a nerve-muscle pair in situ.Our research on the direct activation of skeletal muscle continues in two areas. We are conducting translational research in preclinical models of diseaseand muscle function with fast skeletal muscle troponin activators to explore the potential clinical applications of this novel mechanism in diseases orconditions associated with skeletal muscle dysfunction. We also intend to conduct preclinical research on other chemically and pharmacologically distinctmechanisms to activate the skeletal sarcomere.Cardiac Muscle Contractility ProgramOverview. Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in the heart. Thecardiac sarcomere is a highly ordered cytoskeletal structure composed of cardiac muscle myosin, actin and a set of regulatory proteins. This program iscurrently directed towards the discovery and development of small molecule cardiac muscle myosin activators with the goal of developing novel drugs to treatacute and chronic heart failure. Cardiac muscle myosin is the cytoskeletal motor protein in the cardiac muscle cell. It is directly responsible for convertingchemical energy into the mechanical force, resulting in cardiac muscle contraction. This program is based on the hypothesis that activators of cardiac musclemyosin may address certain adverse properties of existing positive inotropic agents. Current positive inotropic agents, such as beta-adrenergic receptor agonistsor inhibitors of phosphodiesterase activity, increase the concentration of intracellular calcium, thereby increasing cardiac sarcomere contractility. The effect oncalcium levels, however, also has been linked to potentially life-threatening side effects. In contrast, our novel cardiac muscle myosin activators work by amechanism that directly stimulates the activity of the cardiac muscle myosin motor protein, without increasing the intracellular calcium concentration. Theyaccelerate the rate-limiting step of the myosin enzymatic cycle and shift it in favor of the force-producing state. Rather than increasing the velocity of cardiaccontraction, this mechanism instead lengthens the systolic ejection time, which results in increased cardiac function in a potentially more oxygen-efficientmanner.Background on Heart Failure Market. Heart failure is a widespread and debilitating syndrome affecting millions of people in the United States. Thehigh and rapidly growing prevalence of heart failure translates into significant hospitalization rates and associated societal costs. About 5.8 million people inthe United States have 10Table of Contentsheart failure, resulting in nearly one million hospital discharges with the primary diagnosis of heart failure and approximately 300,000 deaths each year. Forpeople over 65 years of age, heart failure incidences approach 10 per 1000 and approximately 50% of people diagnosed with heart failure will die within5 years of diagnosis. These numbers are increasing due to the aging of the U.S. population and an increased likelihood of survival following acute myocardialinfarctions. The costs to society attributable to the prevalence of heart failure are high, especially as many chronic heart failure patients suffer repeated acuteepisodes. Despite currently available therapies, readmission rates for heart failure patients remain high. In general, the mortality following hospitalization forpatients with heart failure is 10.4% at 30 days, 22% at one year and 42.3% at 5 years, despite the availability of therapeutic alternatives for treatment of thesepatients. Mortality can be higher in certain patient populations. For instance, in the placebo arm of one clinical trial, 6 month mortality was reported to be28%. In addition, each rehospitalization increases mortality by about 20 to 22%. The high morbidity and mortality in the setting of current therapies points tothe need for novel therapeutics that may offer further reductions in morbidity and mortality. The annual cost of heart failure to the U.S. health care system isestimated to be $39 billion and is predicted to grow to almost $100 billion by the year 2030. Today, a portion of that cost is attributable to drugs used to treateach of chronic and acute heart failure. Approximately 70% of those costs are due to hospitalization, home health and physician care. In the U.S., Medicare isone of the largest payors for heart failure related costs. Approximately 50% of Medicare beneficiaries with heart failure are concentrated in the top 20% of thehospital referral regions in the U.S, which generally include 5 to 10 hospitals in a geographic area. New drug therapies that could reduce the number ofhospitalizations 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 andcommercialize novel small molecule therapeutics that activate cardiac muscle contractility for potential applications in the treatment of heart failure, includingomecamtiv mecarbil. The agreement granted Amgen an option to obtain an exclusive license worldwide, except Japan, to develop and commercialize omecamtivmecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised its option. Amgen is now responsible for the developmentand commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan), subject to our development andcommercialization participation rights.Omecamtiv Mecarbil. Our lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. Prior to Amgen’sexercise of its option, Cytokinetics conducted a clinical trials program for omecamtiv mecarbil comprised of multiple Phase I and Phase IIa clinical trialsdesigned to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetic profiles of both intravenous and oral formulations in a diversity ofpatients, including patients with stable heart failure and patients with ischemic cardiomyopathy. In these trials, omecamtiv mecarbil exhibited generally linear,dose-proportional pharmacokinetics across the dose ranges studied. The adverse effects observed at intolerable doses in humans appeared similar to theadverse findings which occurred in preclinical safety studies at similar plasma concentrations. These effects are believed to be related to the mechanism ofaction 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 iscontracting). 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 an intravenous formulationfor use in the hospital setting and as an oral formulation for use in the outpatient setting.Omecamtiv Mecarbil DevelopmentIntravenous. An international, randomized, double-blind, placebo-controlled, Phase IIb clinical trial of an intravenous formulation of omecamtivmecarbil, known as ATOMIC-AHF (Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure), is being conducted inpatients with left ventricular systolic dysfunction hospitalized with acutely decompensated heart failure. This clinical trial, sponsored by 11Table of ContentsAmgen in collaboration with Cytokinetics, is expected to enroll approximately 600 patients in three sequential, ascending-dose cohorts. In each cohort, patientswill be randomized to receive omecamtiv mecarbil or placebo. The primary objective of this trial is to evaluate the effect of 48 hours of intravenous omecamtivmecarbil compared to placebo on dyspnea (shortness of breath) in patients with left ventricular systolic dysfunction hospitalized for acute heart failure. Thesecondary objectives are to assess the safety and tolerability of three dose levels of intravenous omecamtiv mecarbil compared with placebo and to evaluate theeffects of 48 hours of treatment with intravenous omecamtiv mecarbil on additional measures of dyspnea, patients’ global assessments, change in N-terminalpro brain-type natriuretic peptide (a biomarker associated with the severity of heart failure) and short-term clinical outcomes in these patients. In addition, thetrial will evaluate the relationship between omecamtiv mecarbil plasma concentrations and echocardiographic parameters in patients with acute heart failure.Patient dosing in the third cohort of this trial is continuing. We anticipate the completion of enrollment in ATOMIC-AHF in the first half of 2013. We anticipateresults from ATOMIC-AHF will be reported in mid-year 2013.Oral. In 2012, a randomized, open-label, four-period cross-over Phase I study designed to assess the safety, tolerability and pharmacokinetics ofmultiple oral formulations of omecamtiv mecarbil in healthy volunteers was conducted by Amgen in collaboration with Cytokinetics. Based on the review ofthese data, the companies have selected oral formulations of omecamtiv mecarbil from this Phase I trial that we believe warrant further evaluation in patientswith heart failure.In 2012, Cytokinetics and Amgen collaborated to plan the manufacturing of drug product and to draft regulatory submissions to enable the initiation ofa Phase II double-blind, randomized, placebo-controlled, multicenter, dose escalation study designed to evaluate several modified-release oral formulations ofomecamtiv mecarbil, known as COSMIC-HF (Chronic Oral Study of Myosin Activation to Increase Contractility in Heart Failure) in patients with heartfailure and left ventricular systolic dysfunction. In February 2013, we announced the opening to enrollment of COSMIC-HF, which is sponsored by Amgen incollaboration with Cytokinetics. COSMIC-HF is a double-blind, randomized, placebo-controlled, multicenter, dose escalation study designed to select andevaluate an oral modified-release formulation of omecamtiv mecarbil in patients with heart failure and left ventricular systolic dysfunction. During the doseescalation phase, approximately 40 patients will be randomized 1:1:1:1 to placebo or one of three different oral formulations of omecamtiv mecarbil in each oftwo ascending dose pharmacokinetic (PK) cohorts to enable selection of one of these oral formulations for the planned expansion phase of the trial. The dose ofomecamtiv mecarbil will be 25 mg twice daily in the first PK cohort and 50 mg twice daily in the second PK cohort. Following the dose escalation phase of thetrial, there is a planned expansion phase of the trial in which approximately 300 patients will be randomized 1:1:1 to receive one oral formulation of omecamtivmecarbil selected from the three studied in the prior ascending dose PK cohorts at one of two dose levels or placebo. The two dose levels of omecamtiv mecarbilto be studied in the expansion cohort will be based on the data from the ascending dose PK cohorts. The primary objectives of this study are to select an oralmodified-release formulation and dose of omecamtiv mecarbil for chronic twice daily dosing in patients with heart failure and left ventricular systolicdysfunction and to characterize its safety, tolerability, and pharmacokinetics after 12 weeks of treatment. The secondary objectives are to assess the changesfrom baseline in measures of echocardiographic indices of cardiac function, heart rate and N-terminal pro-brain natriuretic peptide (a biomarker associatedwith the severity of heart failure) after 12 weeks of treatment.During the fourth quarter of 2012, dosing initiated in a Phase I open-label, single-dose clinical trial designed to evaluate the safety, tolerability andpharmacokinetics of omecamtiv mecarbil in patients with various degrees of renal insufficiency and in patients undergoing hemodialysis. This trial issponsored by Amgen in collaboration with Cytokinetics.Prior Clinical Experience with Omecamtiv MecarbilPhase IIa stable heart failure (safety, tolerability, pharmacokinetics and pharmacodynamics): In 2009, we presented final data from our Phase IIaclinical trial evaluating omecamtiv mecarbil administered intravenously to patients with stable heart failure. The final results showed statistically significantincreases in systolic ejection 12Table of Contentstime, and in stroke volume, cardiac output, fractional shortening and ejection fraction (all measures of cardiac function), that occurred across the patientpopulation in a concentration-dependent manner. In addition, the data demonstrated statistically significant correlations between increasing omecamtiv mecarbilplasma concentrations and decreases in left ventricular end-systolic volume, left ventricular end-diastolic volume and heart rate. Omecamtiv mecarbil appearedto be generally well-tolerated in stable heart failure patients over a range of plasma concentrations during continuous intravenous administration. Patients withreduced stroke volumes (<50 ml) at baseline had generally greater pharmacodynamic responses to omecamtiv mecarbil than those in patients with greaterstroke volumes at baseline, demonstrating robust pharmacodynamic activity in this more severely affected sub-population of patients from the trial.Phase IIa ischemic cardiomyopathy and angina (safety and tolerability): In 2009, we presented data from a double-blind, randomized, placebo-controlled Phase IIa clinical trial evaluating the effect of omecamtiv mecarbil on symptom-limited exercise tolerance in heart failure patients with ischemiccardiomyopathy and angina. The primary safety endpoint of this clinical trial was stopping an exercise treadmill test due to angina at a stage earlier than theshorter of two baseline exercise treadmill tests. This endpoint occurred in one patient receiving placebo and in no patients receiving either the lower or higher oftwo dose levels of omecamtiv mecarbil. In heart failure patients with ischemic cardiomyopathy and angina, who theoretically could be most vulnerable to thepossible deleterious consequences of systolic ejection time prolongation, treatment with omecamtiv mecarbil, at doses producing plasma concentrationspreviously demonstrated in other trials to increase cardiac function, did not appear to deleteriously affect a broad range of safety assessments in the setting ofexercise.Phase I clinical trials. We have conducted five Phase I clinical trials of omecamtiv mecarbil in healthy subjects: a first-time-in-humans studyevaluating an intravenous formulation, an oral bioavailability study evaluating both intravenous and oral formulations, and three studies of oral formulations:a drug-drug interaction study, a dose proportionality study and a study evaluating modified-release formulations. Data from each of these trials have beenreported previously.Ongoing Research in Cardiac Muscle Contractility. In the first quarter of 2013, we agreed with Amgen to additional research activities intended tobe conducted through 2014 under the research plan directed to next-generation compounds in our cardiac muscle contractility program. Under our collaborationagreement, Amgen will reimburse us for the agreed research activities we perform.Beyond Muscle ContractilityWe have developed preclinical expertise in the mechanics of skeletal, cardiac and smooth muscle that extends from proteins to tissues to intact animalmodels. Our translational research in muscle contractility has enabled us to better understand the potential impact of small molecule compounds that increaseskeletal or cardiac muscle contractility and to apply those findings to the further evaluation of our drug candidates in clinical populations. In addition tocontractility, the other major functions of muscle include metabolism, growth and energetics, with each of these functions playing a role in certain diseases thatcould benefit from novel mechanism treatments. Accordingly, our knowledge of muscle contractility may serve as an entry point to the discovery of noveltreatments for disorders involving muscle functions other than muscle contractility. We are leveraging our current understandings of muscle biology toinvestigate new ways of modulating these other aspects of muscle function for other potential therapeutic applications. For example, we are conducting researchwith compounds that affect muscle growth and that may have applications for serious diseases and medical conditions such as cachexia. Cachexia is acondition that can be associated with cancer, heart failure, chronic obstructive pulmonary disease or other conditions. This syndrome is characterized by theloss of muscle mass and may lead to weakness and disability. We are performing research on compounds that may increase muscle mass and which mayimpact patient functionality or potentially alter the course of diseases associated with muscle wasting. Similarly, we are performing research on compoundsthat may affect muscle metabolism and that may have application in conditions such as diabetes or obesity as well as other conditions of metabolicdysfunction. 13Table of ContentsResearch and Development ExpenseOur research and development expenses were $35.6 million, $37.2 million and $38.0 million for 2012, 2011 and 2010, respectively, and $488.1million for the period from August 5, 1997 (date of inception) through December 31, 2012.Our Patents and Other Intellectual PropertyOur policy is to seek patent protection for the technologies, inventions and improvements that we develop that we consider important to the advancementof our business. As of December 31, 2012, we owned or controlled 111 issued U.S. patents and over 150 additional pending U.S. and foreign patentapplications. We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. Our commercialsuccess will depend on obtaining and maintaining patent protection and trade secret protection for our drug candidates and technologies and our successfullydefending these patents against third-party challenges. We will only be able to protect our technologies from unauthorized use by third parties to the extent thatvalid and enforceable patents cover them or we maintain them as trade secrets.With regard to our drug candidates directed to muscle biology targets, we have a U.S. patent covering omecamtiv mecarbil and a U.S. patent coveringour skeletal muscle sarcomere activators including, but not limited to, tirasemtiv, each of which will expire in 2027 unless extended. We also have additionalU.S. and foreign patent applications pending for each of our drug candidates. It is not known or determinable whether other patents will issue from any of ourother pending applications or what the expiration dates would be for any other patents that do issue.All of our drug candidates are still in clinical development and have not yet been approved by the FDA. If any of these drug candidates is approved,then pursuant to federal law, we may apply for an extension of the U.S. patent term for one patent covering the approved drug, which could extend the term ofthe applicable patent by up to a maximum of five additional years.The degree of future protection of our proprietary rights is uncertain because legal means may not adequately protect our rights or permit us to gain orkeep our competitive advantage. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceuticalinventions and the claim scope of these patents, our ability to enforce our existing patents and to obtain and enforce patents that may issue from any pendingor future patent applications is uncertain and involves complex legal, scientific and factual questions. The standards that the U.S. Patent and TrademarkOffice and its foreign counterparts use to grant patents are not always applied predictably or uniformly and are subject to change. To date, no consistent policyhas emerged regarding the breadth of claims allowed in biotechnology and pharmaceutical patents. Thus, we cannot be sure that any patents will issue fromany pending or future patent applications owned by or licensed to us. Even if patents do issue, we cannot be sure that the claims of these patents will be heldvalid or enforceable by a court of law, will provide us with any significant protection against competitive products, or will afford us a commercial advantageover 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 and issued patents; • we or our licensors might not have been the first to file patent applications for the inventions covered by our pending patent applications and issuedpatents; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual propertyrights; • some or all of our or our licensors’ pending patent applications may not result in issued patents or the claims that issue may be narrow in scope andnot 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 challenged and invalidated bythird parties; 14Table of Contents • our or our licensors’ patent applications or patents may be subject to interference, opposition or similar administrative proceedings that may result ina 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 and administrative proceedings arecostly, time-consuming to pursue and result in diversion of resources. The outcome of these types of proceedings is uncertain and could significantly harm ourbusiness.Our ability to commercialize drugs depends on our ability to use, manufacture and sell those drugs without infringing the patents or other proprietaryrights of third parties. U.S. and foreign issued patents and pending patent applications owned by third parties exist that may be relevant to the therapeuticareas and chemical compositions of our drug candidates. While we are aware of certain relevant patents and patent applications owned by third parties, theremay be issued patents or pending applications of which we are not aware that could cover our drug candidates. Because patent applications are often notpublished immediately after filing, there may be currently pending applications, unknown to us, which could later result in issued patents that our activitieswith our drug candidates could infringe.The development of our drug candidates and the commercialization of any resulting drugs may be impacted by patents of companies engaged incompetitive programs with significantly greater resources. This could result in the expenditure of significant legal fees and management resources.We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, tradesecrets are often difficult to protect, especially outside of the United States. While we believe that we use reasonable efforts to protect our trade secrets, ouremployees, consultants, contractors, partners and other advisors may unintentionally or willfully disclose our trade secrets to competitors. Enforcing a claimthat a third party illegally obtained and is using our trade secrets would be expensive and time-consuming, and the outcome would be unpredictable. Even ifwe are able to maintain our trade secrets as confidential, our competitors may independently develop information that is equivalent or similar to our tradesecrets.We seek to protect our intellectual property by requiring our employees, consultants, contractors and other advisors to execute nondisclosure andinvention assignment agreements upon commencement of their employment or engagement, through which we seek to protect our intellectual property.Agreements with our employees also preclude them from bringing the proprietary information or materials of third parties to us. We also require confidentialityagreements or material transfer agreements from third parties that receive our confidential 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 intellectual property protection relating to our drugcandidates and research technologies” and “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.”Government RegulationThe FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinicaldevelopment, manufacture, marketing and distribution of drugs. These agencies and other federal, state and local entities regulate research and developmentactivities and the testing, manufacture, quality control, labeling, storage, record keeping, approval, advertising and promotion of our drug candidates anddrugs. 15Table of ContentsIn the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act and implementing regulations. The process required bythe 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 in accordance with the FDA’sgood laboratory practice regulations; • submission to the FDA of an IND, which must become effective before clinical trials may begin; • performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the drug candidate for each proposed indication inaccordance with good clinical practices; • submission of a new drug application (“NDA”) to the FDA, which must usually be accompanied by payment of a substantial user fee; • satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance withcurrent good manufacturing practice (“cGMP”) regulations and FDA audits of select clinical investigator sites to assess compliance with good clinicalpractices (“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 any approvals for our drugcandidates will be granted on a timely basis, if at all.Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, and studies to evaluate toxicity and pharmacokinetics inanimals. The results of preclinical tests, together with manufacturing information and analytical data, are submitted as 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 theconduct of the clinical trial, including concerns that human research subjects may be exposed to unreasonable health risks. In such a case, the IND sponsorand the FDA must resolve any outstanding concerns before the clinical trial can begin. Similar regulatory procedures generally apply in those countries outsideof the United States where 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 be made for eachsuccessive clinical trial conducted during product development. Further, an independent institutional review board (“IRB”) or its foreign equivalent for eachmedical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center and it mustmonitor the clinical trial until completed. The FDA, the IRB or their foreign equivalents, or the clinical trial sponsor may suspend a clinical trial at any time onvarious grounds, including a finding that the subjects or 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 three sequential 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 may decide to conduct a “Phase Ib”clinical trial, which is a second, safety-focused Phase I trial typically designed to evaluate the pharmacokinetics and tolerability of the drug candidatein combination with currently approved drugs. • Phase II: These clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, to makean initial determination of potential efficacy of the drug candidate for specific targeted indications and to determine dose tolerance and optimal dosage.Multiple Phase II clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase III clinicaltrials. Phase IIa clinical trials generally are designed to study the pharmacokinetic or pharmacodynamic properties and to conduct a preliminaryassessment of safety of the 16Table of Contents drug candidate over a measured dose response range. In some cases, a sponsor may decide to conduct a Phase IIb clinical trial, which is a second,typically larger, confirmatory Phase II trial that could, if positive and accepted by the FDA, serve as a pilot or pivotal clinical trial in the approval ofa drug candidate. • Phase III: These clinical trials are commonly referred to as pivotal clinical trials. If the Phase II clinical trials demonstrate that a dose range of thedrug candidate is potentially effective and has an acceptable safety profile, Phase III clinical trials are then undertaken in large patient populations tofurther evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient populationat 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 additional clinical trials tofurther 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 generally required to beincluded in a clinical trials registry database that is available and accessible to the public via the internet. A failure by us to properly participate in the clinicaltrial 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 toprivacy rules under the Health Insurance Portability and Accountability Act of 1996 and state and local privacy laws. In the European Union, these entitiesare subject to the Directive 95/46-EC of the European Parliament on the protection of individuals with regard to the processing of personal data and individualEuropean Union member states implementing additional legislation. Other countries have similar privacy legislation. We could face substantial penalties if weknowingly receive individually identifiable health information from a health care provider that has not satisfied the applicable privacy laws. In addition,certain privacy laws and genetic testing laws may apply directly to our operations and/or those of our partners and may impose restrictions on the use anddissemination of 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 FDA as part of an NDA.The NDA also must contain extensive manufacturing information. In addition, the FDA may require that a proposed Risk Evaluation and Mitigation Strategy,also known as a REMS, be submitted as part of the NDA if the FDA determines that it is necessary 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. TheFDA often, but not always, follows the advisory committee’s recommendations. The FDA may deny approval of an NDA by issuance of a complete responseletter if the applicable regulatory 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 data are submitted, theFDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA mayinterpret data differently than we or our partners do. Once issued, the FDA may withdraw a drug approval if ongoing regulatory requirements are not met or ifsafety problems occur after the drug reaches the market. In addition, the FDA may require further testing, including Phase IV clinical trials, and surveillanceor restrictive distribution programs to monitor the effect of approved drugs which have been commercialized. The FDA has the power to prevent or limitfurther marketing of a drug based on the results of these post-marketing programs. Drugs may be marketed only for the approved indications and inaccordance with the provisions 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 requireus to develop additional data or conduct additional preclinical studies and clinical trials. 17Table of ContentsSatisfaction of FDA regulations and requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years.The actual time required may vary substantially based upon the type, complexity and novelty of the drug candidate or disease. Typically, if a drug candidateis intended to treat a chronic disease, as is the case with some of our drug candidates, safety and efficacy data must be gathered over an extended period oftime. Government regulation may delay or prevent marketing of drug candidates for a considerable period of time and impose costly procedures upon ouractivities. The FDA or any other regulatory agency may not grant approvals for new indications for our drug candidates on a timely basis, if at all. Even if adrug candidate receives regulatory 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 drug may result inrestrictions on the drug or even complete withdrawal of the drug from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any ofour drug candidates would harm our business. In addition, we cannot predict what future U.S. or foreign governmental regulations may be implemented.Orphan Drug Designation. Some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphandrugs. The FDA grants orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affectsfewer than 200,000 individuals in the United States. For example, the FDA has granted tirasemtiv an orphan drug designation for the treatment of ALS. Inaddition, the European Medicines Agency has granted tirasemtiv orphan medicinal product status for the treatment of ALS.An FDA orphan drug designation does not shorten the duration of the regulatory review and approval process. If a drug candidate which has an orphandrug designation receives the first FDA marketing approval for the indication for which the designation was granted, then the approved drug is entitled toorphan drug exclusivity. This means that the FDA may not approve another company’s application to market the same drug for the same indication for aperiod of seven years, except in certain circumstances, such as a showing of clinical superiority to the drug with orphan exclusivity or if the holder of theorphan drug designation cannot assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition forwhich the designation was granted. Competitors may receive approval of different drugs or biologics for the indications for which the orphan drug hasexclusivity.Fast Track Designation. Fast track is a process designed by the FDA to facilitate the development and expedite the review of drugs to treat seriousdiseases and fill an unmet medical need. Tirasemtiv has been granted fast track designation by the FDA for the treatment of ALS. Although fast trackdesignation does not affect the standards for approval, the benefits of this designation include scheduled meetings to seek FDA input into development plans,the option of submitting an NDA in sections rather than all components simultaneously, and the option of requesting evaluation of studies using surrogateendpoints, which are laboratory measurements or physical signs used as an indirect or substitute measurement representing a clinically meaningful outcome.Other Regulatory Requirements. Any drugs manufactured or distributed by us or our partners pursuant to FDA approvals or their foreigncounterparts are subject to continuing regulation by the applicable regulatory authority, including recordkeeping requirements and reporting of adverseexperiences associated with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and otherapplicable regulatory authorities, and are subject to periodic unannounced inspections by these regulatory authorities for compliance with ongoing regulatoryrequirements, including cGMPs, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Failure tocomply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension ofmanufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturersor suppliers will be able to comply with the cGMP regulations and other ongoing FDA and other regulatory requirements. If our present or future third-partymanufacturers or suppliers are not able to comply with these requirements, the FDA or its foreign counterparts may halt our clinical trials, require us to recalla drug from distribution, or withdraw approval of the NDA for that drug. 18Table of ContentsFor further details on the risks relating to government regulation of our business, please see the risk factors under Item 1A of this report, including, butnot limited to, the risk factor entitled “The 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.”CompetitionWe compete in the segments of the pharmaceutical, biotechnology and other related markets that address neuromuscular and cardiovascular diseasesand other diseases relating to muscle dysfunction, each of which is highly competitive. We face significant competition from most pharmaceutical companiesand biotechnology companies that are also researching and selling products designed to address cardiovascular diseases and diseases and medical conditionsassociated with skeletal muscle weakness and wasting. Many of our competitors have significantly greater financial, manufacturing, marketing and drugdevelopment resources than we do. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatoryapprovals for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and publicresearch institutes are active in research of neuromuscular and cardiovascular diseases and other diseases where there is muscle dysfunction, some in directcompetition with us.We believe that our ability to successfully compete will depend on, among other things: • our drug candidates’ efficacy, safety and tolerability; • the speed and cost-effectiveness with 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.Our competitors may develop drug candidates and market drugs that are less expensive and more effective than our future drugs or that may render ourdrugs obsolete. Our current or future competitors may also commercialize competing drugs before we or our partners can launch any drugs developed from ourdrug candidates. These organizations also compete with us to attract qualified personnel and potential parties for acquisitions, joint ventures or other strategicalliances.If any of our skeletal muscle troponin activators (such as tirasemtiv and CK-2127107) are approved by the FDA for the treatment of ALS, they maythen compete with other potential new therapies for ALS that are currently being developed by companies such as Mitsubishi Tanabe Pharma Corporation,Eisai Inc., Trophos SA, Neuraltus Pharmaceuticals, Inc., Isis Pharmaceuticals, Inc. and GlaxoSmithKline plc. In addition, BrainStorm Cell Therapeuticsand Neuralstem, Inc. are each conducting clinical development of stem cell therapies for the potential treatment of ALS. With respect to diseases and conditionsrelating to muscle weakness and wasting, other potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033, a selective 19Table of Contentsandrogen receptor modulator, for muscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancer cachexia.Acceleron Pharma, Inc. and Shire plc are collaboratively conducting clinical development with ramatercept (ACE-031), a myostatin inhibitor, and relatedcompounds to evaluate their ability to treat diseases involving the loss of muscle mass, strength and function.If omecamtiv mecarbil is approved for marketing by the FDA for heart failure, it would compete against other drugs used for the treatment of heartfailure. These include generic 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 ARCA biopharma, Inc.; relaxin andLC7-696, which are being developed by Novartis; cenderitide (CD-NP), which is being developed by Nile Therapeutics, Inc., TRV-027, which is beingdeveloped by Trevena; aladorian, which is being developed by Armgo Pharma, Inc; certain cardioprotectants which are being developed by CardioxylPharmaceuticals, Inc.; and glial growth factor (GGF-2) which is being developed by Acorda Therapeutics, Inc. In addition, there are a number of medicaldevices being developed and commercialized for the potential treatment of heart failure.For further details on the risks relating to our competitors, please see the risk factors under Item 1A of this report, including, but not limited to, the riskfactor entitled “Our competitors may develop drugs that are less expensive, safer or more effective than ours, which may diminish or eliminate the commercialsuccess of any drugs that we may commercialize.”EmployeesAs of December 31, 2012, our workforce consisted of 70 full-time employees, 19 of whom hold Ph.D. or M.D. degrees, or both, and 15 of whom holdother advanced degrees. Of our total full-time employees, 52 are engaged in research and development and 18 are engaged in business development, financeand administration functions.In October 2011, we announced a restructuring plan intended to align our workforce and operations in connection with our commitment to focusresources primarily on our later-stage development programs for tirasemtiv and omecamtiv mecarbil, and on our follow-on skeletal muscle troponin activatorprogram and joint research with Amgen directed to next-generation compounds in our cardiac muscle contractility program. As a result, we reduced ourworkforce by approximately 18%, or 18 employees, to 83 employees. We provided severance, employee benefit continuation and career transition assistance tothe employees directly affected by the restructuring.We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We believe that our relations withour employees are good.Available InformationWe file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant toSection 13 or 15(d) of the Exchange 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 at 1-800-SEC-0330. TheSEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with theSEC. 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-K and amendments tothose reports on the day of filing with the SEC on our website at www.cytokinetics.com or by contacting the Investor Relations Department at our corporateoffices by calling 650-624-3000. The information found on our website is not part of this or any other report filed with or furnished to the SEC. 20Table of ContentsItem 1A. Risk FactorsIn evaluating our business, you should carefully consider the following risks in addition to the other information in this report. Any of thefollowing risks could materially and adversely affect our business, results of operations, financial condition or your investment in our securities, andmany are beyond our control. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties notpresently known to us, or that we currently see as immaterial, may also adversely affect our business.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 part of your investment.We have generally incurred operating losses in each year since our inception in 1997, due to costs incurred in connection with our research anddevelopment activities and general and administrative costs associated with our operations. Our drug candidates are all in early and mid-stage clinical testing,and we and our partners must conduct significant additional clinical trials before we and our partners can seek the regulatory approvals necessary to begincommercial sales of our drugs. We expect to incur increasing losses for at least several more years, as we continue our research activities and conductdevelopment of, and seek regulatory approvals for, our drug candidates, and commercialize any approved drugs. If our drug candidates fail or do not gainregulatory approval, or if our drugs do not achieve market acceptance, we will not be profitable. If we fail to become and remain profitable, or if we are unableto 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 if we expand ourresearch and development activities. We have funded all of our operations and capital expenditures with proceeds from private and public sales of our equitysecurities, strategic alliances with Amgen, GlaxoSmithKline and others, equipment financings, interest on investments and government grants. We believe thatour existing cash and cash equivalents, short-term investments and interest earned on investments should be sufficient to meet our projected operatingrequirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our availablecapital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our drug candidates andother research and development activities, including risks and uncertainties that could impact the rate of progress of our development activities, we are unableto estimate with 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 and development expenses and theabsence of any revenues from product sales. For example, we anticipate that we will need to conduct at least one Phase III clinical trial for tirasemtiv followingthe BENEFIT-ALS trial in order to obtain marketing approval for tirasemtiv for the potential treatment of ALS. We will require significant additional fundingto enable us to conduct any such Phase III clinical trials. Until we can generate a sufficient amount of product revenue, we expect to raise future capital throughstrategic alliance and licensing arrangements, public or private equity offerings and debt financings. We do not currently have any commitments for futurefunding other than reimbursements, milestone and royalty payments that we may receive under our collaboration agreement with Amgen, and payments andreimbursements we may receive under our collaboration agreement with MyoKardia, Inc. We may not receive any further funds under that agreement. Ourability to raise funds may be adversely impacted by current economic conditions, including the effects of the recent disruptions to the credit and financialmarkets in the United States and worldwide. In particular, the pool of third-party capital that in the past has been available to development-stage companiessuch as ours has decreased significantly in recent years, and such decreased availability may continue for a prolonged period. As a result of these and otherfactors, we do not know whether additional financing will be available when needed, or that, if available, such financing would be on terms favorable to ourstockholders or us. 21Table of ContentsTo the extent that we raise additional funds through strategic alliances or licensing and other arrangements with third parties, we will likely have torelinquish valuable rights to our technologies, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. To the extentthat we raise additional funds by issuing equity securities, our stockholders will experience additional dilution. To the extent that we raise additional fundsthrough debt financing, the financing may involve covenants that restrict our business activities. In addition, funding from any of these sources, if needed,may not be available to us on favorable terms, or at all, or in accordance with our planned timelines.If we cannot raise the funds we need to operate our business, we will need to discontinue certain research and development activities. For example, inOctober 2011, we announced a restructuring plan to focus resources primarily on the later-stage development programs for tirasemtiv and omecamtiv mecarbiland certain other research and development programs also directed to muscle biology. As a result, we reduced our workforce by approximately eighteen percent,and discontinued our research and development activities outside these areas of focus. If we discontinue research and development activities, our stock pricemay be negatively affected.We depend on Amgen for the conduct, completion and funding of the clinical development and commercialization of omecamtiv mecarbil.In May 2009, Amgen exercised its option to acquire an exclusive license to our drug candidate omecamtiv mecarbil worldwide, except for Japan. As aresult, Amgen is responsible for the clinical development and obtaining and maintaining regulatory approval of omecamtiv mecarbil for the potential treatmentof 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, thetiming of initiation, termination or completion of clinical trials, the analysis of data arising out of those clinical trials or the timing of release of data concerningthose clinical trials, which may impact our ability to report on Amgen’s results. Amgen may conduct these activities more slowly or in a different manner thanwe would if we controlled the clinical development of omecamtiv mecarbil. Amgen is responsible for filing future applications with the FDA or other regulatoryauthorities for approval 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 the marketing and sale of theresulting drug, subject to our right to co-promote omecamtiv mecarbil in North America if we exercise our option to co-fund Phase III development costs ofomecamtiv mecarbil under the collaboration. However, we cannot control whether Amgen will devote sufficient attention and resources to the clinicaldevelopment of omecamtiv mecarbil or will proceed in an expeditious manner, even if we do exercise our option to co-fund the development of omecamtivmecarbil. Even if the FDA or other regulatory agencies approve omecamtiv mecarbil, Amgen may elect not to proceed with the commercialization of theresulting drug in one or more countries.If the results of one or more clinical trials with omecamtiv mecarbil do not meet Amgen’s expectations at any time, Amgen may elect to terminate furtherdevelopment of omecamtiv mecarbil or certain of the potential clinical trials for omecamtiv mecarbil, even if the actual number of patients treated at that time isrelatively small. In addition, Amgen generally has discretion to elect whether to pursue or abandon the development of omecamtiv mecarbil and may terminateour strategic alliance for any reason upon six months prior notice. If Amgen abandons omecamtiv mecarbil, it would result in a delay in or could prevent usfrom commercializing omecamtiv mecarbil, and would delay and could prevent us from obtaining revenues for this drug candidate. Disputes may arisebetween us and Amgen, which may delay or cause the termination of any omecamtiv mecarbil clinical trials, result in significant litigation or cause Amgen toact in a manner that is not in our best interest. If development of omecamtiv mecarbil does not progress for these or any other reasons, we would not receivefurther milestone payments or royalties on product sales from Amgen with respect to omecamtiv mecarbil. If Amgen abandons development of omecamtivmecarbil prior to regulatory approval or if it elects not 22Table of Contentsto proceed with commercialization of the resulting drug following regulatory approval, we would have to seek a new partner for clinical development orcommercialization, curtail or abandon that clinical development or commercialization, or undertake and fund the clinical development of omecamtiv mecarbilor commercialization of the resulting drug ourselves. If we seek a new partner but are unable to do so on acceptable terms, or at all, or do not have sufficientfunds to conduct the development or commercialization of omecamtiv mecarbil ourselves, we would have to curtail or abandon that development orcommercialization, 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 drugs to market for atleast 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. To receive marketingapproval for any drug candidate, we must demonstrate that the drug candidate satisfies rigorous standards of safety and efficacy to the FDA in the UnitedStates and other regulatory authorities abroad. We and our partners will need to conduct significant additional research and preclinical and clinical testingbefore we or our partners can file applications with the FDA or other regulatory authorities for approval of any of our drug candidates. In addition, to competeeffectively, our drugs must be easy to use, cost-effective and economical to manufacture on a commercial scale, compared to other therapies available for thetreatment of the same conditions. We may not achieve any of these objectives. Currently, our only drug candidates in clinical development are omecamtivmecarbil for the potential treatment of heart failure and tirasemtiv for the potential treatment of diseases associated with aging, muscle wasting andneuromuscular dysfunction. We cannot be certain that the clinical development of these or any future drug candidates will be successful, that they will receivethe regulatory approvals required to commercialize them, or that any of our other research programs will yield a drug candidate suitable for clinical testing orcommercialization. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially marketed for at least severalyears, if at all. The development 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 or significantly delaycompletion 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 satisfaction of FDA andforeign regulatory authorities that the drug candidate is sufficiently safe and effective with substantial evidence from well-controlled clinical trials. We or ourpartners will need to demonstrate efficacy in clinical trials for the treatment of specific indications and monitor safety throughout the clinical developmentprocess and following approval. None of our drug candidates have yet been demonstrated to be safe and effective in clinical trials and they may never be. Inaddition, for each of our preclinical compounds, we or our partners must adequately demonstrate satisfactory chemistry, formulation, stability and toxicity inorder to submit an IND to the FDA, or an equivalent application in foreign jurisdictions, that would allow us to advance that compound into clinical trials.Furthermore, we or our partners may need to submit separate INDs (or foreign equivalent) to different divisions within the FDA (or foreign regulatoryauthorities) in order to pursue clinical trials in different therapeutic areas. Each new IND (or foreign equivalent) must be reviewed by the new division beforethe clinical trial under its jurisdiction can proceed, entailing all the risks of delay inherent to regulatory review. If our or our partners’ current or futurepreclinical studies or clinical trials are unsuccessful, our business will be significantly harmed and our stock price 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 results that would adequatelysupport the filing of an IND (or a foreign equivalent) with respect to our potential drug candidates. Even if the results of preclinical studies for a drugcandidate are sufficient to support such a filing, the results of preclinical studies do not necessarily predict the results of clinical trials. As an example,because the physiology of animal species used in preclinical studies may vary substantially from other animal species and from humans, it may be difficultto assess with certainty whether a finding from a study 23Table of Contentsin 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 Iclinical trials in healthy volunteers and clinical results from Phase I and II trials in patients are not necessarily indicative of the results of larger Phase IIIclinical trials that are necessary to establish whether the drug candidate is safe and effective for the applicable indication. Likewise, interim results from aclinical trial may not be indicative of 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 the uncertainties inherentin drug development, such clinical trials may not be designed with focus on indications, patient populations, dosing regimens, safety or efficacy parametersor other variables that will provide the necessary safety or efficacy data to support regulatory approval to commercialize the resulting drugs. Clinical trials ofour drug candidates are designed based on guidance or advice from regulatory agencies, which is subject to change during the development of the drugcandidate at any time. Such a change in a regulatory agency’s guidance or advice may cause that agency to deem results from trials to be insufficient tosupport approval of the drug candidate and require further clinical trials of that drug candidate to be conducted. In addition, individual patient responses to thedose administered of 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 methodologies. Even if we believe the data collected fromclinical trials of our drug candidates are promising, these data may not be sufficient to support approval by the FDA or foreign regulatory authorities.Preclinical and clinical data can be interpreted in different ways. Accordingly, the FDA or foreign regulatory authorities could interpret these data in differentways from us or our partners, which could delay, limit or prevent regulatory approval.Administering any of our drug candidates or potential drug candidates may produce undesirable side effects, also known as adverse effects. Toxicitiesand adverse effects observed in preclinical studies for some compounds in a particular research and development program may also occur in preclinicalstudies or clinical trials of other compounds from the same program. Potential toxicity issues may arise from the effects of the active pharmaceutical ingredientitself or from impurities or degradants that are present in the active pharmaceutical ingredient or could form over time in the formulated drug candidate or theactive pharmaceutical ingredient. These toxicities or adverse effects could delay or prevent the filing of an IND (or a foreign equivalent) with respect to our drugcandidates or potential drug candidates or cause us or our partners to modify, suspend or terminate clinical trials with respect to any drug candidate at anytime during the development program. Further, the administration of two or more drugs contemporaneously can lead to interactions between them, and ourdrug candidates may interact with other drugs that trial subjects are taking. For example, in a Phase I drug-drug interaction study of tirasemtiv administeredorally to healthy volunteers, co-administration of tirasemtiv and riluzole approximately doubled the average maximum riluzole plasma level, although it alsoappeared to reduce the variability of the riluzole plasma levels of the study subjects. The FDA, other regulatory authorities, our partners or we may modify,suspend or terminate clinical 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 targeted indications. Even if oneor more of our drug candidates were approved for sale as drugs, the occurrence of even a limited number of toxicities or adverse effects when used in largepopulations may cause the FDA to impose restrictions on, or stop, the further marketing of those drugs. Indications of potential adverse effects or toxicitieswhich do not seem significant during the course of clinical trials may later turn out to actually constitute serious adverse effects or toxicities when a drug isused 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 Phase II clinical trials of tirasemtiv,adverse events of dizziness, fatigue, headache, somnolence (sleepiness), euphoric mood, muscle spasms, gait disturbance, pain in extremity, feeling drunk,blurred vision, muscular weakness, nausea, balance disorder, asthenia (loss of strength and energy), abnormal coordination and dysarthria (difficultyspeaking) occurred more frequently during treatment with tirasemtiv than with placebo, with a possible trend for their frequencies to increase with increasingdoses of tirasemtiv. In clinical trials of omecamtiv mecarbil, dose-limiting effects were associated with complaints of chest discomfort, palpitations, 24Table of Contentsdizziness and feeling hot, increases in heart rate, declines in blood pressure, electrocardiographic changes consistent with acute myocardial ischemia andtransient rises in the MB fraction of creatine kinase and cardiac troponins I and T, which are indicative of myocardial infarction.In addition, clinical trials of tirasemtiv and omecamtiv mecarbil enroll patients who typically suffer from serious diseases which put them at increasedrisk of death. These patients may die while receiving our drug candidates. In such circumstances, it may not be possible to exclude with certainty a causalrelationship to our drug candidate, even though the responsible clinical investigator may view such an event as not study drug-related. For example, in a PhaseIIa clinical trial designed to evaluate and compare the oral pharmacokinetics of both modified and immediate release formulations of omecamtiv mecarbil inpatients with stable heart failure, a patient died suddenly after receiving the immediate release formulation of omecamtiv mecarbil, without having reported anypreceding adverse events. The clinical investigator assessed the patient’s death as not related to omecamtiv mecarbil. However, the event was reported to theappropriate regulatory authorities as possibly related to omecamtiv mecarbil because the immediate cause of the patient’s death could not be determined, andtherefore, 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 and maintaining regulatoryapproval for the sale of any resulting drugs, may significantly harm our business and negatively affect our stock price.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 and implement. The lengthof time and number of trial sites and patients required for clinical trials vary substantially based on the type, complexity, novelty, intended use of the drugcandidate and safety concerns. We estimate that the clinical trials of our current drug candidates will each continue for several more years. However, theclinical trials for all or any of these drug candidates may take significantly longer to complete. The commencement and completion of our clinical trials couldbe 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 we or our partnersdeem necessary for the appropriate and timely development of our drug candidates and commercialization of any resulting drugs; • delays in identifying and reaching agreement, or inability to identify and reach agreement, on acceptable terms, with prospective clinical trial sitesand 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 trial use, including anappropriate 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 other clinical trials; limitednumbers of patients that meet the enrollment criteria; patients’, investigators’ or trial sites’ reluctance to agree to the requirements of a protocol; or theintroduction 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 to appropriate developmentstrategies; • a regulatory authority may require changes to a protocol for a clinical trial that then may require approval from regulatory agencies in otherjurisdictions 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 from regulatory agenciesand other IRBs and their foreign equivalents, or regulatory authorities may require changes to a protocol that then require approval from the IRBs ortheir foreign equivalents; 25Table of Contents • for clinical trials conducted in foreign countries, the time and resources required to identify, interpret and comply with foreign regulatoryrequirements or changes in those requirements, and political instability or natural disasters occurring in those countries; • lack of effectiveness of our drug candidates during clinical trials; • unforeseen safety issues; • inadequate supply, or delays in the manufacture or 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 to comply with goodclinical practices and other applicable laws and regulations, including those concerning informed consent; • inability or unwillingness of investigators or their staffs to follow clinical protocols; • failure by our clinical research organizations, clinical manufacturing organizations and other third parties supporting our clinical trials to fulfill theirobligations; • 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 their clinical trialendpoints 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 to be restructured orwill be completed on schedule, if at all. Significant delays in clinical trials will impede our ability to commercialize our drug candidates and generate revenueand could significantly increase our development costs.If we fail to enter into and maintain successful strategic alliances for our drug candidates, potential drug candidates or research anddevelopment programs, we will have to reduce, delay or discontinue our advancement of those drug candidates, potential drug candidates andprograms or expand our research and development capabilities and increase our expenditures.Drug development is complicated and expensive. We currently have limited financial and operational resources to carry out drug development. Ourstrategy for developing, manufacturing and commercializing our drug candidates and potential drug candidates currently requires us to enter into andsuccessfully maintain strategic alliances with pharmaceutical companies or other industry participants to advance our programs and reduce our expenditureson each program. Accordingly, the success of our development activities depends in large part on our current and future strategic partners’ performance, overwhich we have little or no control.We have retained all rights to develop and commercialize tirasemtiv and CK-2127107. We currently do not have a strategic partner for these drugcandidates. We are seeking one or more strategic partners or other arrangements with third parties to advance and develop compounds from our skeletal musclecontractility program. However, we may not be able to negotiate and enter into such strategic alliances or arrangements on acceptable terms, if at all, or inaccordance with our planned timelines. If we are unable to enter into a strategic alliance for tirasemtiv, we will be unable to conduct the one or more Phase IIIclinical trials we believe will be necessary to obtain marketing approval for tirasemtiv for the potential treatment of ALS unless we are able to acquire thefunding to do so from another source. If we are unable to enter into a strategic alliance for CK-2127107, we will be unable to conduct a clinical trials programfor CK-2127107 unless we are able to acquire the funding to do so from another source. 26Table of ContentsWe rely on Amgen to conduct non-clinical and clinical development for omecamtiv mecarbil for the potential treatment of heart failure. If Amgen elects toterminate its development activities with respect to omecamtiv mecarbil, we currently do not have an alternative strategic 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 our partners’ abilities toassist us in establishing the safety and efficacy of our drug candidates, obtaining and maintaining regulatory approvals and achieving market acceptance ofthe drugs once commercialized. Our partners may elect to delay or terminate development of one or more drug candidates, independently develop drugs thatcould compete with ours or fail to commit sufficient resources to the marketing and distribution of drugs developed through their strategic alliances with us.Our partners may not proceed with the development and commercialization of our drug candidates with the same degree of urgency as we would because ofother priorities they face. In addition, new business combinations or changes in a partner’s business strategy may adversely affect its willingness or ability tocarry out its obligations under a strategic alliance.If we are not able to successfully maintain our existing strategic alliances or establish and successfully maintain additional strategic alliances, we willhave to limit the size or scope of, or delay or discontinue, one or more of our drug development programs or research programs, or undertake and fund theseprograms ourselves. Alternatively, if we elect to continue to conduct any of these drug development programs or research programs on our own, we will need toexpand our capability to conduct clinical development by bringing additional skills, technical expertise and resources into our organization. This wouldrequire significant additional funding, which may not be available to us on acceptable terms, or at all.To the extent we elect to fund the development of a drug candidate, such as tirasemtiv or CK-2127107, or the commercialization of a drug at ourexpense, we will need substantial additional funding.The discovery, development and commercialization of new drugs is costly. As a result, to the extent we elect to fund the development of a drug candidate,such as tirasemtiv, or the commercialization of a drug, we will need to raise additional capital to: • fund clinical trials and seek regulatory approvals; • expand our development capabilities; • engage third party manufacturers for such drug candidate or drug; • build or access 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.Our 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 entered into or mayestablish. 27Table of ContentsUntil we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to continue to financeour future cash needs primarily through strategic alliances, public or private equity offerings and debt financings. We cannot be certain that additionalfunding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope ofor eliminate one or more of our clinical trials or research and development programs or future commercialization initiatives.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 to conduct clinical trials ofour drug candidates, such as tirasemtiv and CK-2127107, and related activities. We do not have control over many aspects of our CROs’ activities, andcannot fully control the amount, timing or quality of resources that they devote to our programs. CROs may not assign as high a priority to our programs orpursue them as diligently as we would if we were undertaking these programs ourselves. The activities conducted by our CROs therefore may not be completedon schedule or in a satisfactory manner. CROs may also give higher priority to relationships with our competitors and potential competitors than to theirrelationships with us. Outside of the United States, we are particularly dependent on our CROs’ expertise in communicating with clinical trial sites andregulatory authorities and ensuring that our clinical trials and related activities and regulatory filings comply with applicable laws. Our CROs’ failure to carryout development activities on our behalf according to our and the FDA’s or other regulatory agencies’ requirements and in accordance with applicable U.S. andforeign laws, or our failure to properly coordinate and manage these activities, could increase the cost of our operations and delay or prevent the development,approval and commercialization of our drug candidates. In addition, if a CRO fails to perform as agreed, our ability to collect damages may be contractuallylimited. If we fail to effectively manage the CROs carrying out the development of our drug candidates or if our CROs fail to perform as agreed, thecommercialization of our drug candidates will be delayed or prevented.We have no manufacturing capacity and depend on our strategic partners and contract manufacturers to produce our clinical trial materials,including our drug candidates, and anticipate continued reliance on contract manufacturers for the development and commercialization of ourpotential drugs.We do not currently operate manufacturing facilities for clinical or commercial production of our drug candidates. We have limited experience in drugformulation and manufacturing, and we lack the resources and the capabilities to manufacture any of our drug candidates on a clinical or commercial scale.Amgen has assumed responsibility to conduct these activities for the ongoing clinical development of omecamtiv mecarbil worldwide, except Japan. Fortirasemtiv and CK-2127107, we rely on a limited number of contract manufacturers. In particular, we rely on single-source contract manufacturers for theactive pharmaceutical ingredient and the drug product supply for our clinical trials, as well as other materials required to conduct our clinical trials. We expectto rely on contract manufacturers to supply all future drug candidates for which we conduct clinical development, as well as other materials required toconduct our clinical trials. If any of our existing or future contract manufacturers fail to perform satisfactorily, it could delay clinical development orregulatory approval of our drug candidates or commercialization of our drugs, producing additional losses and depriving us of potential product revenues. Inaddition, if a contract manufacturer fails to perform as agreed, our ability to collect damages may be contractually limited.Our drug candidates require precise high-quality manufacturing. The failure to achieve and maintain high manufacturing standards, including failure todetect or control anticipated or unanticipated manufacturing errors or the frequent occurrence of such errors, could result in patient injury or death,discontinuance or delay 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 production yields, qualitycontrol and quality assurance and shortages of 28Table of Contentsqualified personnel. These manufacturers are subject to stringent regulatory requirements, including the FDA’s current good manufacturing practicesregulations and similar foreign laws and standards. Each contract manufacturer must pass a pre-approval inspection before we can obtain marketing approvalfor any of our drug candidates and following approval will be subject to ongoing periodic unannounced inspections by the FDA, the U.S. Drug EnforcementAgency and other regulatory agencies, to ensure strict compliance with current good manufacturing practices and other applicable government regulations andcorresponding foreign laws and standards. We seek to ensure that our contract manufacturers comply fully with all applicable regulations, laws andstandards. However, we do not have control over our contract manufacturers’ compliance with these regulations, laws and standards. If one of our contractmanufacturers fails to pass its pre-approval inspection or maintain ongoing compliance at any time, the production of our drug candidates could beinterrupted, resulting in delays or discontinuance of our clinical trials, additional costs and potentially lost revenues. In addition, failure of any third partymanufacturers or us to comply with applicable regulations, including pre-or post-approval inspections and the current good manufacturing practicerequirements of the FDA or other comparable regulatory agencies, could result in sanctions being imposed on us. These sanctions could include fines,injunctions, civil penalties, 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 and adversely affect ourbusiness.In addition, our existing and future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for thetime required to successfully produce, store and distribute our drug candidates. If a natural disaster, business failure, strike or other difficulty occurs, wemay be unable to replace these contract manufacturers in a timely or cost-effective manner 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 potential manufacturers is limited. Inaddition, before a drug from any replacement manufacturer or manufacturing site can be commercialized, the FDA and, in some cases, foreign regulatoryagencies, must approve that site. These approvals would require regulatory testing and compliance inspections. A new manufacturer or manufacturing site alsowould have to be educated in, or develop substantially equivalent processes for, production of our drugs and drug candidates. It may be difficult orimpossible to transfer certain elements of a manufacturing process to a new manufacturer or for us to find a replacement manufacturer on acceptable termsquickly, or at all, either of 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, which would delay orprevent 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 and mid-stage clinical trials. In order toconduct larger scale or late-stage clinical trials for a drug candidate and for commercialization of the resulting drug if that drug candidate is approved for sale,we will need to manufacture it in larger quantities. We may not be able to successfully increase the manufacturing capacity for any of our drug candidates,whether in collaboration with third-party manufacturers or on our own, in a timely or cost-effective manner or at all. If a contract manufacturer makesimprovements in the manufacturing process for our drug candidates, we may not own, or may have to share, the intellectual property rights to thoseimprovements. Significant scale-up of manufacturing may require additional validation studies, which are costly and which the FDA must review andapprove. In addition, quality issues may arise during those scale-up activities because of the inherent properties of a drug candidate itself or of a drugcandidate in combination with other components added during the manufacturing and packaging process, or during shipping and storage of the finishedproduct or active pharmaceutical ingredients. If we are unable to successfully scale-up manufacture of any of our drug candidates in sufficient quality andquantity, the development of that drug candidate and regulatory approval or commercial launch for any resulting drugs may be delayed or there may be ashortage in supply, which could significantly harm our business. 29Table of ContentsThe mechanisms of action of our drug candidates are unproven, and we do not know whether we will be able to develop any drug ofcommercial value.We have discovered and are currently developing drug candidates that have what we believe are novel mechanisms of action directed against cytoskeletaltargets, and intend to continue to do so. Because no currently approved drugs appear to operate via the same biochemical mechanisms as our compounds, wecannot be certain that our drug candidates will result in commercially viable drugs that safely and effectively treat the indications for which we intend todevelop them. The results we have seen for our compounds in preclinical models may not translate into similar results in humans, and results of early clinicaltrials 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 indeveloping and receiving regulatory approval for a drug candidate for the treatment of a particular disease, we cannot be certain that we will also be able todevelop and receive regulatory approval for that or other drug candidates for the treatment of other diseases. If we or our partners are unable to successfullydevelop and commercialize our drug candidates, our business will be materially harmed.Our success depends substantially upon our ability to obtain and maintain intellectual property protection relating to our drug candidates,compounds 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, compounds andresearch technologies. Our success depends on our ability to obtain patent protection both in the United States and in other countries for our drug candidates,their methods of manufacture and use, and our technologies. Our ability to protect our drug candidates, compounds and technologies from unauthorized orinfringing use by third parties depends substantially on our ability to obtain and enforce our patents. If our issued patents and patent applications, if granted,do not adequately describe, enable or otherwise provide coverage of our technologies and drug candidates, including omecamtiv mecarbil, tirasemtiv and CK-2127107, we or our licensees would not be able to exclude others from developing or commercializing these drug candidates. Furthermore, the degree of futureprotection of our proprietary rights is uncertain because legal means may not adequately protect our rights or permit us to gain or keep our competitiveadvantage.Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the claimscope of these patents, our ability to enforce our existing patents and to obtain and enforce patents that may issue from any pending or future patentapplications is uncertain and involves complex legal, scientific and factual questions. The standards which the U.S. Patent and Trademark Office and itsforeign counterparts use to 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 issue from any pending orfuture patent applications owned by or licensed to us. Even if patents do issue, we cannot be sure that the claims of these patents will be held valid orenforceable by a court of law, 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 and issued patents; • we or our licensors might not have been the first to file patent applications for the inventions covered by our pending patent applications and issuedpatents; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual propertyrights; • some or all of our or our licensors’ pending patent applications may not result in issued patents or the claims that issue may be narrow in scope andnot 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 challenged and invalidated bythird parties; 30Table of Contents • our or our licensors’ patent applications or patents may be subject to interference, opposition or similar administrative proceedings that may result ina 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 to the same extent as inthe United States. Many companies have encountered significant difficulties in protecting and defending intellectual property rights in foreign jurisdictions.Some of our development efforts are performed in countries outside of the United States through third party contractors. We may not be able to effectivelymonitor and assess intellectual property developed by these contractors. We therefore may not be able to effectively protect this intellectual property and couldlose potentially valuable intellectual property rights. In addition, the legal protection afforded to inventors and owners of intellectual property in countriesoutside of the United States may not be as protective of intellectual property rights as in the United States. Therefore, we may be unable to acquire and protectintellectual property developed 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 substantially harmed.We rely on intellectual property assignment agreements with our corporate partners, employees, consultants, scientific advisors and other collaboratorsto grant us ownership of new intellectual property that is developed. These agreements may not result in the effective assignment to us of that intellectualproperty. 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 our intellectual property or ourability to obtain patents. For example, the America Invents Act of 2011 may affect the scope, strength and enforceability of our patent rights in the UnitedStates or the nature of proceedings which may be brought by us related to our patent rights 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 intellectual property protectionfor those products, competitors could duplicate them for approval and sale in the United States without repeating the extensive testing required of us or ourpartners to obtain FDA approval. Regardless of any patent protection, under current law, an application for a generic version of a new chemical entity cannotbe approved until at least five years after the FDA has approved the original product. When that period expires, or if that period is altered, the FDA couldapprove a generic version of our product regardless of our patent protection. An applicant for a generic version of our product may only be required to conducta relatively inexpensive study to show that its product is bioequivalent to our product, and may not have to repeat the lengthy and expensive clinical trials thatwe or our partners conducted to demonstrate that the product is safe and effective. In the absence of adequate patent protection for our products in othercountries, 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, tradesecrets are often difficult to protect, especially outside of the United States. While we endeavor to use reasonable efforts to protect our trade secrets, our or ourpartners’ employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our information to competitors. Inaddition, confidentiality agreements, if any, executed by those individuals may not be enforceable or provide meaningful protection for our trade secrets orother proprietary information in the event of unauthorized use or disclosure. Pursuing a claim that a third party had illegally obtained and was using our tradesecrets would be expensive and time-consuming, and the outcome would be unpredictable. Even if we are able to maintain our trade secrets as confidential, ifour competitors independently develop information equivalent or similar to our trade secrets, our business could be harmed. 31Table 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 be able to excludecompetitors from developing or marketing competing drugs, and we may not generate enough revenue from product sales to justify the cost of development ofour 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 an unfavorable outcome couldhave 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 or other proprietaryrights of third parties. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the therapeutic areas inwhich 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 could later result in issued patents that our activities with our drug candidates couldinfringe. There may also be existing patents, unknown to us, that our activities with our drug candidates could infringe.Other future products of ours may be impacted by patents of companies engaged in competitive programs with significantly greater resources. Furtherdevelopment 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 could seriously harm ourcompetitive 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 the regulatory approvalprocess 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 infringe a third party’spatent or other proprietary rights; • a court prohibiting us from selling or licensing our drugs or technologies unless the holder licenses the patent or other proprietary rights to us, whichit 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 other proprietary rights.If any of these events occur, it could significantly harm our business and negatively affect our stock price.We may undertake infringement or other legal proceedings against third parties, causing us to spend substantial resources on litigation andexposing 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, which are expensive andtime-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 partiesmay be able to use our technology without paying licensing fees or royalties. Even if the validity of our patents is upheld, a court may refuse to stop the otherparty from using the technology at issue on the ground that the other party’s activities are not covered by our patents. Policing unauthorized use of ourintellectual property is difficult, and we may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws maynot protect such rights as fully as in the United States. In addition, third parties may affirmatively challenge our rights to, or the scope or validity of, ourpatent rights. 32Table of ContentsWe may become involved in disputes with our strategic partners over intellectual property ownership, and publications by our researchcollaborators and clinical investigators could impair our ability to obtain patent protection or protect our proprietary information, either ofwhich 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 partners and us in somecases, and the exclusive property of one of us in other cases. Under some circumstances, it may be difficult to determine who owns a particular invention orwhether it is jointly owned, and disputes could arise regarding ownership or use of those inventions. These disputes could be costly and time-consuming, andan unfavorable outcome could have a significant adverse effect on our business if we were not able to protect or license rights to these inventions. In addition,our research collaborators and clinical investigators generally have contractual rights to publish data arising from their work. Publications by our researchcollaborators and clinical investigators relating to our research and development programs, either with or without our consent, could benefit our current orpotential competitors and may impair our ability to obtain patent protection or protect our proprietary information, which could significantly harm ourbusiness.We may be subject to claims that we or our employees have wrongfully used or disclosed trade secrets of their former employers.Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently orotherwise 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 keyresearch personnel or their work product could hamper or prevent our ability to develop and commercialize certain potential drugs, which could significantlyharm our business. Even if we are successful 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 or eliminate the commercialsuccess of any drugs that we may commercialize.We compete with companies that have developed drugs or are developing drug candidates for cardiovascular diseases, diseases and conditionsassociated with muscle weakness or wasting and other diseases for which our drug candidates may be useful treatments. For example, if any of our skeletalmuscle sarcomere activators (such as tirasemtiv and CK-2127107) are approved by the FDA for the treatment of ALS, they may then compete with otherpotential new therapies for ALS that are currently being developed by companies such as Mitsubishi Tanabe Pharma Corporation, Eisai Inc., Trophos SA,Neuraltus Pharmaceuticals, Inc., Isis Pharmaceuticals, Inc. and GlaxoSmithKline plc. In addition, BrainStorm Cell Therapeutics and Neuralstem, Inc. areeach conducting clinical development of stem cell therapies for the potential treatment of ALS. With respect to diseases and conditions relating to muscleweakness and wasting, other potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033, a selective androgen receptormodulator, for muscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancer cachexia. Acceleron Pharma,Inc. and Shire plc are collaboratively conducting clinical development with ramatercept (ACE-031), a myostatin inhibitor, and related compounds to evaluatetheir ability to treat diseases involving the loss of muscle mass, strength and function.If omecamtiv mecarbil is approved for marketing by the FDA for heart failure, it would compete against other drugs used for the treatment of heartfailure. These include generic 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 ARCA biopharma, Inc.; relaxin andLC7-696, which are being developed by Novartis; cenderitide (CD-NP), which is 33Table of Contentsbeing developed by Nile Therapeutics, Inc., TRV-027, which is being developed by Trevena; aladorian, which is being developed by Armgo Pharma, Inc;certain cardioprotectants which are being developed by Cardioxyl Pharmaceuticals, Inc.; and glial growth factor (GGF-2) which is being developed by AcordaTherapeutics, Inc. In addition, there are a number of medical devices being developed for the potential treatment of heart failure.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 show in order to obtainregulatory 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 are collaborating with largerpharmaceutical companies, new companies, academic institutions, government agencies and other public and private research organizations. Many of thesecompetitors, either alone or together with their partners, may develop new drug candidates that will compete with ours. Many of these competitors have largerresearch and development programs or substantially greater financial resources than we do. Our competitors may also have significantly greater experience in: • developing drug candidates; • undertaking preclinical testing and clinical trials; • 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 market sooner than ourpotential drugs, we may not achieve commercial success. In addition, the life sciences industry is characterized by rapid technological change. If we fail tostay at the forefront of technological change, we may be unable to compete effectively. Our competitors may render our technologies obsolete by improvingexisting technological approaches or developing new or different approaches, potentially eliminating the advantages in our drug discovery process that webelieve we derive from our research approach and proprietary technologies.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 the services of any memberof our senior management or key scientific or technical staff may significantly delay or prevent the achievement of drug development and other businessobjectives by 34Table of Contentsdiverting management’s attention to transition matters and identifying suitable replacements. We also rely on consultants and advisors to assist us informulating our research and development strategy. All of our consultants and advisors are either self-employed or employed by other organizations, and theymay have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability tocontribute to us. In addition, if and as our business grows, we will need to recruit additional executive management and scientific and technical personnel.There is intense competition for skilled executives and employees with relevant scientific and technical expertise, and this competition is likely to continue. Ourinability to attract and retain sufficient scientific, technical and managerial personnel could limit or delay our product development activities, which wouldadversely affect the development of our drug candidates and commercialization of our potential drugs and growth of our business.Our workforce reductions in October 2011 and any future workforce and expense reductions may have an adverse impact on our internalprograms and our ability to hire and retain skilled personnel.In October 2011, we reduced our workforce by approximately 18% in order to reduce expenses and to focus resources primarily on our later-stagedevelopment programs for tirasemtiv and omecamtiv mecarbil and certain other research and development programs also directed to muscle biology. Theseheadcount reductions and the cost control measures we have implemented may negatively affect our productivity and limit our research and developmentactivities. Our future success will depend in large part upon our ability to attract and retain highly skilled personnel. We may have difficulty retaining andattracting such personnel as a result of a perceived risk of future workforce reductions. In light of our continued need for funding and cost control, we may berequired to implement future workforce and expense reductions, which could further limit our research and development activities. In addition, theimplementation of any additional workforce or expense reduction programs may divert the efforts of our management team and other key employees, whichcould adversely affect our business.We may expand our development and clinical research capabilities and, as a result, we may encounter difficulties in managing 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 to those drugcandidates that we elect to develop or commercialize independently or together with a partner. To manage our anticipated future growth, we must continue toimplement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualifiedpersonnel. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualifiedpersonnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Anyinability to manage growth could delay the execution of our business plans or disrupt our operations.We currently have no sales or marketing capabilities and, if we are unable to enter into or maintain strategic alliances with marketing partnersor to develop our own sales and marketing capabilities, we may not be successful in commercializing our potential drugs.We currently have no sales, marketing or distribution capabilities. We plan to commercialize drugs that can be effectively marketed and sold inconcentrated markets that do not require a large sales force to be competitive. To achieve this goal, we will need to establish our own specialized sales force andmarketing organization with technical expertise and supporting distribution capabilities. Developing such an organization is expensive and time-consumingand could delay a product launch. In addition, we may not be able to develop this capacity efficiently, cost-effectively or at all, which could make us unable tocommercialize our drugs. If we determine not to market our drugs on our own, we will depend on strategic alliances with third parties, such as Amgen, whichhave established distribution systems and direct sales forces to commercialize them. If we are unable to enter into such arrangements on acceptable terms, wemay not be able to successfully 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. 35Table of ContentsRisks Related To Our IndustryThe regulatory approval process is expensive, time-consuming and uncertain and may prevent our partners or us from obtaining approvals tocommercialize 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 other regulatory authorities inthe United States and other countries, and regulations differ from country to country. Neither we nor our partners are permitted to market our potential drugsin the United States until we receive approval of an NDA from the FDA. Neither we nor our partners have received NDA or other marketing approval for anyof Cytokinetics’ drug candidates.Obtaining NDA approval is a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable foreign and U.S.regulatory requirements may subject us to administrative or judicially imposed sanctions. These include warning letters, civil and criminal penalties,injunctions, product seizure or detention, product recalls, total or partial suspension of production, and refusal to approve pending NDAs or supplements toapproved NDAs.Regulatory approval of an NDA or NDA supplement is never guaranteed, and the approval process typically takes several years and is extremelyexpensive. The FDA and foreign regulatory agencies also have substantial discretion in the drug approval process, and the guidance and advice issued bysuch agencies is subject to change at any time. Despite the time and efforts exerted, failure can occur at any stage, and we may encounter problems that causeus to abandon clinical trials 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 or condition that thedrug candidate is designed to address, and the regulations applicable to any particular drug candidate. In addition, the FDA may require that a proposed RiskEvaluation and Mitigation Strategy, also known as a REMS, be submitted as part of an NDA if the FDA determines that it is necessary to ensure that thebenefits of the drug outweigh its risks. The FDA and foreign regulatory agencies can 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 be performed; • 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 authoritiesmay not approve that drug for manufacture and sale. If we or our partners fail to receive and maintain regulatory approval for the sale of any drugs resultingfrom our drug candidates, it would significantly harm our business and negatively affect our stock price.If we or our partners receive regulatory approval for our drug candidates, we or they will be subject to ongoing obligations to and continuedregulatory review by the FDA and foreign regulatory agencies, and may be subject to additional post-marketing obligations, all of which mayresult 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 uses for which the drugmay be marketed or require potentially costly post-marketing follow-up studies or compliance with a REMS. In addition, if the FDA or foreign regulatoryagencies approves any of our drug candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping for thedrug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the drug, including adverse eventsof unanticipated severity or frequency, or 36Table of Contentsthe discovery that adverse effects or toxicities observed in preclinical research or clinical trials that were believed to be minor actually constitute much moreserious problems, may result in restrictions on the marketing of the drug or withdrawal of the drug from the market.The FDA and foreign regulatory agencies may change their policies and additional government regulations may be enacted that could prevent or delayregulatory approval of our drug candidates. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from futurelegislation or administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we might not be permitted tomarket 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 among physicians, healthcarepayors, patients and the medical community. Even if the clinical safety and efficacy of drugs developed from our drug candidates are established for purposesof approval, physicians may elect not to recommend these drugs for a variety of reasons including, 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 and reimbursementcould 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 and international markets will besubstantially dependent on whether third-party coverage and reimbursement is available for our drugs by the medical profession for use by their patients,which is highly uncertain. Medicare, Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to containhealthcare costs by limiting both coverage and the level of reimbursement of new drugs. As a result, they may not cover or provide adequate payment for ourdrugs. They may not view our drugs as cost-effective and reimbursement may not be available to consumers or may be insufficient to allow our drugs to bemarketed on a competitive basis. If we are unable to obtain adequate coverage and reimbursement for our drugs, our ability to generate revenue will beadversely affected. Likewise, current and future legislative or regulatory efforts to control or reduce healthcare costs or reform government healthcare programs,such as the Patient Protection Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, could result in lower prices or rejection ofcoverage and reimbursement for our potential drugs. Changes in coverage and reimbursement policies or healthcare cost containment initiatives that limit orrestrict reimbursement for any of our drug candidates that are approved could cause our potential future revenues to decline. 37Table of ContentsWe 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 adverse effects that may resultfrom our clinical trials. We currently maintain limited product liability insurance. We may not have sufficient resources to pay for any liabilities resultingfrom a personal injury or other claim excluded from, or beyond the limit of, our insurance coverage. Our insurance does not cover third parties’ negligence ormalpractice, and our clinical investigators and sites may have inadequate insurance or none at all. In addition, in order to conduct clinical trials or otherwisecarry out our business, we may have to contractually assume liabilities for which we may not be insured. If we are unable to look to our own or a third party’sinsurance to pay claims 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 liability claims. This riskexists even with respect to those drugs that are approved for commercial sale by the FDA and foreign regulatory agencies and manufactured in licensed andregulated facilities. We intend to secure additional limited product liability insurance coverage for drugs that we commercialize, but may not be able to obtainsuch insurance on acceptable terms with adequate coverage, or at reasonable costs. Even if we are ultimately successful in product liability litigation, thelitigation would consume substantial amounts of our financial and managerial resources and may create adverse publicity, all of which would impair ourability to generate sales of the affected product and our other potential drugs. Moreover, product recalls may be issued at our discretion or at the direction of theFDA and foreign regulatory agencies, other governmental agencies or other companies having regulatory control for drug sales. Product recalls are generallyexpensive and often have an adverse effect on the reputation of the drugs being recalled and of the drug’s developer or manufacturer.We may be required to indemnify third parties against damages and other liabilities arising out of our development, commercialization and otherbusiness activities, which could be costly and time-consuming and distract management. If third parties that have agreed to indemnify us against damagesand other liabilities arising from their activities do not fulfill their obligations, then we may be held responsible for those damages and other liabilities.Our employees or contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards andrequirements, anti-bribery laws and insider trading.We are exposed to the risk of fraud or other misconduct by our employees or contractors. Such misconduct could include failures to comply with theregulations of the FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with anti-bribery laws (such as theForeign Corrupt Practice Act) or healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or dataaccurately or disclose unauthorized activities to us. In particular, business arrangements in the healthcare industry are subject to extensive laws andregulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit awide range of pricing, marketing and promotion, sales commission, incentive programs and other business arrangements and practices. Such misconductcould also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harmto our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter misconduct, and the precautions we take to detect andprevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or otheractions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successfulin defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines orother sanctions. 38Table of ContentsResponding to any claims relating to improper handling, storage or disposal of the hazardous chemicals and radioactive and biologicalmaterials 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 and biological materials.Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from thosematerials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. We may be suedfor any injury or contamination that results from our or third parties’ use of these materials. Compliance with environmental laws and regulations isexpensive, and current or future environmental regulations 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 orresource 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 drug candidates andcompounds and our electronic business records, are located in our corporate headquarters at a single location in South San Francisco, California near activeearthquake zones. If a natural disaster, such as an earthquake or flood, a catastrophic event such as a disease pandemic or terrorist attack, or a localizedextended outage of critical utilities or transportation systems occurs, we could experience a significant business interruption. Our partners and other thirdparties on which we rely may also be subject to business interruptions from such events. In addition, California from time to time has experienced shortages ofwater, electric power and natural gas. Future shortages and conservation measures could disrupt our operations and cause expense, thus adversely affectingour business and 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 your investment price.The stock market, particularly in recent years, has experienced significant volatility, particularly with respect to pharmaceutical, biotechnology andother life sciences company stocks, which often does not relate to the operating performance of the companies represented by the stock. Factors that couldcause volatility in the market price of our common stock include, but are not limited to: • announcements concerning any of the clinical trials for our compounds, such as tirasemtiv and CK-2127107 for the potential treatment of diseasesassociated with muscle weakness or wasting or neuromuscular dysfunction and omecamtiv mecarbil for heart failure (including, but not limited to,the timing of initiation or completion of such trials and the results of such trials, and delays or discontinuations of such trials, including delaysresulting from slower than expected or suspended patient enrollment or discontinuations resulting from a failure to meet pre-defined clinical endpoints); • 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; 39Table of Contents • 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 stockholders, whether or not related to our performance; • automated trading activity by algorithmic and high-frequency trading programs; and • 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, which may limit or preventinvestors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, when themarket price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. Ifany of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert ourmanagement’s time and attention.If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders from influencingsignificant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.As of February 28, 2013, our executive officers, directors and their affiliates beneficially owned or controlled approximately 6.5% of the outstandingshares of our common stock (after giving effect to the exercise of all outstanding vested and unvested options, restricted stock units and warrants).Accordingly, these executive officers, directors and their affiliates, acting as a group, will have substantial influence over the outcome of corporate actionsrequiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any othersignificant corporate transactions. These stockholders may also delay or prevent a change of control of us, even if such a change of control would benefit ourother stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perceptionthat conflicts of interest may exist 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 stock exchanges and the market for technology companies in particular, have experienced significantprice and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has beenparticular volatility in the market prices of securities of early stage and development stage life sciences companies. These broad market and industry factorsmay seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the marketprice of a company’s securities, 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 of trading will besufficient to allow for timely trades. Investors may not be able to sell their 40Table of Contentsshares quickly or at the latest market price if trading in our stock is not active or if trading volume is limited. In addition, if trading volume in our commonstock is limited, trades of relatively small numbers of shares may have a disproportionate effect on the market price of our common stock.Our common stock may be at risk for delisting from NASDAQ in the future, which could adversely affect the liquidity and the market price ofour common stock could decrease.Our common stock is currently listed on the NASDAQ Capital Market. If we fail to adhere to the market’s listing criteria, our common stock may bedelisted. Previously, our common stock was listed on the NASDAQ Global Market, and on June 18, 2012, we received a letter from the NASDAQ indicatingthat we had failed to comply with NASDAQ Listing Rule 5450(a)(1), which requires that we maintain a minimum closing bid price of $1.00 per share, andindicating that we had 180 calendar days to regain compliance. Anticipating that we would not regain compliance with this requirement within the 180-dayperiod, we applied to transfer our common stock to the NASDAQ Capital Market, which became effective on December 20, 2012. Based on our ability tocomply with all listing requirements of the NASDAQ Capital Market other than the minimum bid price rule, the NASDAQ also granted us an additional 180days, or until June 17, 2013, to regain compliance with the minimum bid price rule. On January 24, 2013, we received written notification from theNASDAQ that we had regained compliance with the minimum bid price rule, and the matter was closed. Although we are currently in compliance with thisrequirement, we may again fail to comply. If we fail again in the future to meet this requirement and are unable to regain compliance within the time periodsprovided by NASDAQ, then our common stock may be delisted from NASDAQ.If our common stock were to be delisted, the liquidity of our common stock would be adversely affected and the market price of our common stockcould decrease. In addition, if delisted we would no longer be subject to NASDAQ rules, including rules requiring us to have a certain number of independentdirectors and to meet other corporate governance standards. Our failure to be listed on NASDAQ or another established securities market would have amaterial adverse effect on the value of your investment in us.If our common stock is not listed on NASDAQ or another national exchange, the trading price of our common stock is below $5.00 per share and wehave net tangible assets of $6,000,000 or less, the open-market trading of our common stock will be subject to the “penny stock” rules promulgated under theExchange Act. If our shares become subject to the “penny stock” rules, broker-dealers may find it difficult to effectuate customer transactions and tradingactivity in our securities may be adversely affected. Under these rules, broker-dealers who recommend such securities to persons other than institutionalaccredited investors must: • make a special written suitability determination for the purchaser; • receive the purchaser’s written agreement to the transaction prior to sale; • provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describethe market for these “penny stocks” as well as a purchaser’s legal remedies; and • obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosuredocument before a transaction in a “penny stock” can be completed.As a result of these requirements, the market price of our securities may be adversely impacted, and current stockholders may find it more difficult tosell our securities.Our stockholders will experience substantial additional dilution if shares of our preferred stock are converted into, or outstanding options orwarrants are exercised for, common stock.As of February 28, 2013, there were 21,026 shares of our Series B convertible preferred stock outstanding, which are convertible, without payment ofadditional consideration, into 21,026,000 shares of our common stock. As of February 28, 2013, there were 54,047,225 shares of common stock issuableupon the exercise of warrants, 41Table of Contentshaving a weighted average exercise price of $0.98 per share, and 12,618,726 shares of common stock issuable upon the exercise of stock optionsoutstanding, having a weighted average exercise price of $3.02 per share. The conversion of the outstanding shares of our Series B convertible preferred stockinto, or exercise of outstanding options or warrants for, common stock would be substantially dilutive to the outstanding shares of common stock. Anydilution or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in the stock price of ourcommon stock.If we raise additional capital by issuing securities in the future, it will cause dilution to existing stockholders and may cause our share price todecline.We may raise additional funds through the issuance and sale of additional shares of our common stock or other securities convertible into orexchangeable for our common stock. For example, in June 2011, we entered into an At-the-Market Issuance Sales Agreement (the “ATM Agreement”) withMcNicoll, Lewis & Vlak LLC (“MLV”), pursuant to which we may issue and sell shares of our common stock having an aggregate offering price up to$20.0 million or 14,383,670 shares, whichever occurs first, from time to time, through MLV as our sales agent. It is anticipated that these additional sharesmay be sold through MLV over a period of up to 36 months from June 2011. The number of shares ultimately offered for sale by MLV is dependent upon thenumber of shares that we elect to sell through MLV under the ATM Agreement, subject to the terms and conditions of the ATM Agreement. Depending uponmarket liquidity at the time, sales of shares of our common stock through MLV under the ATM Agreement may cause the trading price of our common stockto decline.To the extent that we raise additional capital by issuing equity securities under the ATM Agreement or otherwise, our stockholders will experienceadditional dilution, and any such issuances may result in downward pressure on the price of our common stock.Ownership changes may limit our ability to use our net operating losses and tax credits in the future.In general, under Section 382 of the Internal Revenue Code (“Section 382”), a corporation that undergoes an ‘ownership change’ is subject to limitationson its ability to utilize its pre-change net operating losses and tax credits to offset future taxable income. We have performed a Section 382 analysis and do notbelieve that we have experienced an ownership change since 2006. A portion of our existing net operating losses and tax credits are subject to limitations arisingfrom previous ownership changes. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership changeunder Section 382 and result in additional limitations. We intend to continue to monitor public filings made by third parties with the SEC to assess whether anownership change under Section 382 has occurred. Our ability to accurately assess any such ownership change is limited by the timeliness and accuracy ofthese public filings.Evolving regulation of corporate governance and public disclosure may result in additional expenses, use of resources and continuinguncertainty.Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and new SEC regulations and NASDAQ Stock Market LLC rules create uncertainty forpublic companies. We regularly evaluate and monitor developments with respect to new and proposed laws, regulations and standards. We cannot accuratelypredict or estimate the amount of the additional costs we may incur in connection with complying with such laws, regulations and standards or the timing ofthese costs. For example, compliance with the internal control requirements of Section 404 of the Sarbanes-Oxley Act has to date required us to commitsignificant resources to document and test the adequacy of our internal control over financial reporting. We can provide no assurance as to conclusions ofmanagement or by our independent registered public accounting firm with respect to the effectiveness of our internal control over financial reporting in thefuture. In addition, the SEC has adopted regulations that require us to file corporate financial statement information in an interactive data format known asXBRL. We may incur significant costs and need to invest considerable resources to remain in compliance with these regulations. 42Table of ContentsThese new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as aresult, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuinguncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to maintainhigh standards of corporate governance and public disclosure. As a result, we intend to invest the resources necessary to comply with evolving laws,regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attentionfrom revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from theactivities intended by regulatory 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.We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.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 thedevelopment and growth of our businesses. In addition, the terms of existing or any future debts may preclude us from paying these dividends.Item 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 280 East Grand Avenue,and 31,392 square feet at 256 East Grand Avenue, in South San Francisco, California until 2018 with an option to renew the lease for an additional threeyears. 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. Mine Safety DisclosuresNot applicable. 43Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesPrior to our initial public offering on April 29, 2004, there was no public market for our common stock. Our common stock was quoted under thesymbol “CYTK” on the NASDAQ Global Market from the date of our initial public offering through December 19, 2012, and has since been quoted on theNASDAQ Capital Market. The following table sets forth the high and low closing sales price per share of our common stock as reported on the NASDAQGlobal Market or NASDAQ Capital Market, as applicable, for the periods indicated. Closing Sale Price High Low 2011: First Quarter $2.16 $1.25 Second Quarter $1.55 $1.14 Third Quarter $1.38 $0.98 Fourth Quarter $1.23 $0.96 2012: First Quarter $1.21 $0.98 Second Quarter $1.20 $0.60 Third Quarter $0.92 $0.62 Fourth Quarter $0.87 $0.60 On February 28, 2013, the last reported sale price for our common stock on the NASDAQ Capital Market was $1.00 per share. We currently expect toretain future earnings, if any, for use in the operation and expansion of our business and have not paid and do not in the foreseeable future anticipate payingany cash dividends. As of February 28, 2013, there were 97 holders of record of our common stock. 44Table 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 theNASDAQ Biotechnology Index(*) (*)The above graph shows the cumulative total stockholder return of an investment of $100 in cash from December 31, 2007 through December 31, 2012for: (i) our common stock; (ii) the NASDAQ Stock Market (U.S.) Index; and (iii) the NASDAQ Biotechnology Index. All values assume reinvestmentof the full amount of all dividends. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 Cytokinetics, Incorporated $100.00 $60.25 $61.52 $44.19 $20.30 $13.95 NASDAQ Composite Index $100.00 $59.46 $85.55 $100.02 $98.22 $116.90 NASDAQ Biotechnology Index $100.00 $87.37 $101.03 $116.19 $129.91 $177.22 The information contained under this caption “Comparison of Historical Cumulative Total Return Among Cytokinetics, Incorporated, the NASDAQStock Market (U.S.) Index and the NASDAQ Biotechnology Index” shall not be deemed to be soliciting material or to be filed with the SEC, nor shall suchinformation be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporateit by reference into such filing.Sales of Unregistered SecuritiesNone. 45Table of ContentsItem 6. Selected Financial DataThe following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition andResults of Operations” and Item 8, “Financial Statements and Supplemental Data” of this report on Form 10-K. Year Ended December 31, 2012 2011 2010 2009 2008 (In thousands, except per share amounts) Statement of Operations Data: Revenues: Research and development revenues from relatedparties(1) $4,177 $2,054 $1,487 $7,171 $186 Research and development, grant and other revenues 3,382 1,946 1,090 — — License revenues from related parties(1) — — — 74,367 12,234 Total revenues 7,559 4,000 2,577 81,538 12,420 Operating expenses: Research and development 35,643 37,182 38,013 39,840 53,950 General and administrative 12,429 13,590 14,199 15,626 15,076 Restructuring charges (reversals) (56) 1,192 — (23) 2,473 Total operating expenses 48,016 51,964 52,212 55,443 71,499 Operating income (loss) (40,457) (47,964) (49,635) 26,095 (59,079) Interest and other, net(2) 87 104 172 (1,401) 2,705 Income (loss) before income taxes (40,370) (47,860) (49,463) 24,694 (56,374) Income tax provision (benefit) — — (176) 150 — Net income (loss) (40,370) (47,860) (49,287) 24,544 (56,374) Deemed dividend related to beneficial conversion featureof convertible preferred stock (1,307) (2,857) — — — Net income (loss) allocable to common stockholders: $(41,677) $(50,717) $(49,287) $24,544 $(56,374) Net income (loss) per share allocable to commonstockholders: Basic $(0.38) $(0.72) $(0.77) $0.43 $(1.14) Diluted $(0.38) $(0.72) $(0.77) $0.42 $(1.14) Weighted average shares used in computing net income(loss) per share allocable to common stockholders:(3) Basic 108,642 70,800 64,165 57,390 49,392 Diluted 108,642 70,800 64,165 57,961 49,392 46Table of Contents As of December 31, 2012 2011 2010 2009 2008 (In thousands) Balance Sheet Data: Cash and cash equivalents, investments, auction ratesecurities (“ARS”) and investment put option related toARS $74,000 $49,023 $72,845 $114,727 $76,892 Restricted cash — 196 788 1,674 2,750 Working capital 69,322 46,548 66,174 96,735 36,033 Total assets 77,551 52,773 77,992 122,599 87,454 Long-term portion of equipment financing lines — — 152 985 2,615 Deficit accumulated during the development stage (448,880) (408,510) (360,650) (311,363) (335,907) Total stockholders’ equity(3) 70,085 48,178 70,516 101,428 49,766 (1)Revenues from related parties consisted of revenues recognized under our research and development arrangements with related parties, including Amgen.See Note 7 in the Notes to Financial Statements for further details. (2)Interest and Other, net consisted of interest income/expense and other income/expense. For the years ended December 31, 2010, 2009 and 2008, it alsoincluded unrealized gains (losses) on ARS and investment put option related to the Series C-2 ARS Rights issued to us by UBS AG. For the year endedDecember 31, 2009, it also included warrant expense. See Note 15 in the Notes to Financial Statements for further details. (3)In 2009, we sold 3,596,728 shares of common stock to Kingsbridge Capital Limited (“Kingsbridge”) pursuant to the 2007 committed equity financingfacility for net proceeds 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 committed equity financingfacility for net proceeds of $14.0 million. In April 2011, we sold 5,300,000 shares of common stock, 8,070 shares of Series A convertible preferredstock and warrants to purchase 6,685,000 shares of common stock to Deerfield Private Design Fund II, L.P., Deerfield Private Design International II,L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited for net proceeds of approximately $19.9million. In the fourth quarter of 2011, we sold 2,579,208 shares of common stock through McNicoll, Lewis & Vlak LLC for net proceeds of $2.4million. In June 2012, we issued to various investors (i) 55,921,054 shares of common stock for a purchase price of $0.76 per share, (ii) 23,026shares of Series B convertible preferred stock for a purchase price of $760.00 per share, and (iii) warrants to purchase 47,368,225 shares of theCompany’s common stock at an exercise price of $0.88 per share, for aggregate gross proceeds of approximately $60.0 million. See Note 13 in the Notesto 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 included elsewhere in this report.Operating results are not necessarily indicative of results that may occur in future periods.We were incorporated in Delaware in August 1997 as Cytokinetics, Incorporated. We are a clinical-stage biopharmaceutical company focused on thediscovery and development of novel small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medicalconditions. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and expertise regarding thecytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. Our most advanced research and developmentprograms relate to the biology of muscle 47Table of Contentsfunction and are directed to small molecule modulators of the contractility of skeletal or cardiac muscle. We are also conducting earlier-stage research directedto other compounds with the potential to modulate muscle contractility and other muscle functions, such as growth, energetics and metabolism.Our drug candidates currently in clinical development include tirasemtiv, a fast skeletal muscle troponin activator, for the potential treatment of diseasesor medical conditions associated with skeletal muscle weakness or wasting and omecamtiv mecarbil, a cardiac muscle myosin activator, for the potentialtreatment of heart failure. We plan to initiate clinical development of our drug candidate CK-2127107, a second fast skeletal muscle troponin activator, in thefirst half of 2013.Muscle Contractility ProgramsSkeletal Muscle ContractilityTirasemtiv is the lead drug candidate from this program. We are also advancing another drug candidate from this program, CK-2127107, for which weanticipate initiating a Phase I clinical trial. Tirasemtiv and CK-2127107 are structurally distinct and selective small molecule activators of the fast skeletalmuscle sarcomere. These compounds activate the fast skeletal muscle troponin complex by increasing its sensitivity to calcium, leading to an increase inskeletal muscle contractility. We are evaluating the potential indications for which tirasemtiv and CK-2127107 may be useful.Each of tirasemtiv and CK-2127107 has demonstrated encouraging pharmacological activity in preclinical models. In our Phase I clinical trials oftirasemtiv in healthy volunteers, tirasemtiv appeared well-tolerated and no serious adverse events were reported. In a single-dose Phase I clinical trial, dosesfrom 250 to 1000 mg of tirasemtiv were shown to produce concentration-dependent, statistically significant increases versus placebo in the force developed bythe tibialis anterior muscles in response to transcutaneous neuronal stimulation. In a multiple-dose Phase I clinical trial, tirasemtiv displayed generally dose-proportional pharmacokinetics and only modest accumulation during dosing to steady state.We have conducted three “evidence of effect” Phase IIa clinical trials of tirasemtiv. These evidence of effect clinical trials were randomized, double-blind,placebo-controlled, three-period cross-over studies of single doses of tirasemtiv administered to patients with impaired muscle function. These studies wereintended to translate the mechanism of action of tirasemtiv into potentially clinically relevant pharmacodynamic effects, which may then form the basis forlarger clinical trials designed to demonstrate proof of concept and possibly even to support registration. The first of these trials was conducted in patients withamyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease, a chronic and progressive disease in which the motor neurons die, thusdenervating skeletal muscles and causing them to atrophy. This leads to weakness, fatigue, and eventually complete paralysis and death, primarily fromrespiratory complications. The second of these trials was conducted in patients with myasthenia gravis, a chronic, autoimmune, neuromuscular diseasewhich is the most common primary disorder of neuromuscular transmission. The third of these trials was conducted in patients with symptoms ofclaudication, which is pain or cramping in the leg muscles due to inadequate blood flow during exercise, associated with peripheral artery disease. Evidence ofpotentially clinically relevant pharmacodynamic effects was observed in each of these trials. We are now conducting a Phase IIb clinical trial of tirasemtiv inpatients with ALS. We anticipate that we will need to conduct a least one confirmatory Phase III clinical trial of tirasemtiv is patients with ALS to gainmarketing approval.The National Institute of Neurological Disorders and Stroke (“NINDS”) grant was awarded to us in 2010 under the American Recovery andReinvestment Act of 2009, and was intended to support for three years our research and development of tirasemtiv for the potential treatment of myastheniagravis. We recognized revenue under this grant arrangement of $1.3 million, $1.7 million and $0.4 million in 2012, 2011 and 2010, respectively, which werecorded as research and development, grant and other revenues. In September 2012, the NINDS awarded to us an additional $0.5 million under a separategrant. 48Table of ContentsTirasemtiv Clinical DevelopmentALSBENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS): In October 2012, we openedthis Phase IIb clinical trial to enrollment. BENEFIT-ALS is a multi-national, double-blind, randomized, placebo-controlled trial which is designed to enrollapproximately 400 patients who will be randomized to receive 12 weeks of double-blind treatment with tirasemtiv or placebo. All enrolled patients will completeone week of treatment with open-label tirasemtiv at 125 mg twice daily prior to randomization. Clinical assessments will take place monthly during the courseof treatment. Patients will also participate in follow-up evaluations at both 7 and 28 days after their final dose. The primary analysis of this trial will comparethe mean change from baseline in the ALS Functional Rating Scale in its revised form, or ALSFRS-R, a clinically validated instrument designed to measuredisease progression and changes in functional status, for patients receiving tirasemtiv versus those receiving placebo. Secondary endpoints will includemaximum voluntary ventilation, or MVV (a clinical assessment of pulmonary function and endurance), and measures of skeletal muscle function. Patientswill receive tirasemtiv or placebo dosed twice daily. Patients taking riluzole at the time of enrollment who are randomized to receive double-blind tirasemtiv willreceive riluzole at a reduced dose of 50 mg daily, in a blinded manner. We plan to conduct BENEFIT-ALS at over 70 sites across the United States, Canada,and several European countries. We anticipate completing enrollment in BENEFIT-ALS by mid-year 2013, and reporting data from this trial by the end of2013.Prior ALS Clinical Trials. In June 2012, we announced the publication of our Phase IIa evidence of effect clinical trial of tirasemtiv (CY 4021) in theonline edition of the journal Amyotrophic Lateral Sclerosis. In that trial, the single doses of tirasemtiv evaluated appeared generally well-tolerated, withdizziness and general fatigue being the most frequent adverse events. In addition, both patients and investigators perceived a positive change in the patients’overall status, in a dose-dependent fashion, at 6 hours after dosing with tirasemtiv, based on a global assessment in which the patient and the investigator eachindependently assessed patients’ status compared to prior to dosing. There was a clear relationship between improvements in global assessments and theplasma concentrations of tirasemtiv. Also at this 6-hour time point, there was a trend towards decreased muscle fatigability, as evidenced by data from a test ofsub-maximal hand-grip endurance. Data from that clinical trial also demonstrated a statistically significant increase in MVV at both 6 and 24 hours after 500mg of tirasemtiv, and small but statistically significant increases in maximum strength of certain muscle groups tested.In April 2012, at the American Academy of Neurology (AAN) 64 Annual Meeting, data were presented from CY 4024, a Phase II, two-part,randomized, double-blind, placebo-controlled, multiple-dose, safety, tolerability, pharmacokinetic and pharmacodynamic clinical trial of tirasemtiv in patientswith ALS. Patients in Part A of this trial were not taking riluzole; patients in Part B received riluzole at the reduced dose of 50 mg daily. In this trial, tirasemtivappeared to be generally safe and well-tolerated when dosed daily at 125 mg, 250 mg, and 375 mg once daily for two weeks. This trial was not designed orpowered to evaluate statistically the effects of tirasemtiv on the various outcome measures that were assessed during the study. However, encouraging dose-related trends were observed in measurements of ALSFRS-R and in MVV. Plasma concentrations of tirasemtiv were unaffected by co-administration withriluzole, while riluzole levels increased during co-administration with tirasemtiv. Adverse events and clinical assessments during treatment with tirasemtivappeared similar, with or without co-administration of riluzole. Dizziness, the most commonly reported adverse event, was mostly mild and generally beganand resolved early after initiating treatment. The incidence and persistence of dizziness appeared dose-related but was mild in severity in all patients whocompleted study drug treatment. Most reports of dizziness began early after initiating treatment and resolved spontaneously within the first week of treatmentin all but one patient who nevertheless completed the trial. No serious adverse events were reported.Also in April 2012 at the AAN Annual Meeting, data were presented from a Phase II, randomized, double-blind, placebo-controlled, multiple-dose,clinical trial of tirasemtiv in patients with ALS receiving riluzole at the reduced dose of 50 mg daily (CY 4025). The authors concluded that the twice-dailydose titration regimen 49thTable of Contentsevaluated in the trial appeared generally safe and well-tolerated, and that the majority of patients could be titrated successfully to a tirasemtiv dose level of 250mg twice daily. This trial was not designed or powered to evaluate statistically the effects of tirasemtiv on the various outcome measures that were assessedduring the study. However, encouraging trends toward functional improvements were observed in patients receiving tirasemtiv versus those receiving placebo.In this trial, tirasemtiv treatment was associated with increases in measurements of ALSFRS-R that were similar in direction, and in MVV that were similar inboth direction and magnitude, to those observed in CY 4024.Myasthenia Gravis. In November 2012, we announced data from our Phase IIa evidence of effect clinical trial of tirasemtiv in patients withgeneralized myasthenia gravis (CY 4023). Patients in this trial received single oral double-blind doses of placebo and tirasemtiv at 250 mg and 500 mg, eachadministered in random order approximately one week apart. The main objectives of this trial were to assess the effects of tirasemtiv on various measures ofmuscle strength, muscle fatigue and pulmonary function. Since CY 4023 was a hypothesis-generating trial, no single primary efficacy endpoint was pre-specified. At six hours after dosing, improvements (i.e., decreases) in the Quantitative MG score (QMG) appeared related to the tirasemtiv dose in astatistically significant manner. The QMG is a validated index of disease severity that is often employed as a primary endpoint in clinical trials of patientswith myasthenia gravis. In addition, decreases in certain components of the QMG and their relationships to dose were statistically significant or borderlinesignificant. Also at six hours after dosing, increases in the percent predicted forced vital capacity were statistically significantly related to the dose level oftirasemtiv, as were the individual comparisons of each dose level of tirasemtiv versus placebo. Both the 250 mg and 500 mg single oral doses of tirasemtivstudied in this trial were well-tolerated by the 32 patients enrolled; there were no premature terminations and no serious adverse events were reported. The mostcommonly reported adverse event was dizziness which increased in frequency with dose and was reported as mild in all but one case that was classified asmoderate. We anticipate presenting results from CY 4023 in March 2013 at the American Academy of Neurology 65 Annual Meeting. This clinical trial wassupported by our grant from the NINDS.Claudication. In June 2011, final data were presented from our Phase IIa evidence of effect clinical trial of tirasemtiv in patients with symptoms ofclaudication associated with peripheral artery disease. The primary objective of this trial was to demonstrate an effect of single doses of tirasemtiv on measuresof skeletal muscle function and fatigability in these patients. The secondary objectives of this trial were to evaluate and characterize the relationship, if any,between the doses and plasma concentrations of tirasemtiv and its pharmacodynamic effects, and to evaluate the safety and tolerability of tirasemtivadministered as single doses to these patients. Accordingly, in this hypothesis-generating trial, multiple pharmacodynamic assessments were made withoutspecifying a single primary pharmacodynamic endpoint. 61 patients were enrolled in this trial. Patients were administered single oral doses of placebo and of 2different dose levels of tirasemtiv in a double-blind fashion and in random order, at least 6 days apart. These dose levels were originally 375 mg and 750 mg;however, the protocol was amended to lower the 750 mg dose to 500 mg following reports of serious adverse events by two patients: dizziness and mentalconfusion in one and dizziness and dyskinesia (or abnormal movements) in the other. As evidenced by heel raise testing, tirasemtiv increased calf muscleperformance in these patients. The increases in calf muscle performance and the occurrence of adverse events both appeared related to increasing dose andplasma concentrations of tirasemtiv. Conversely, performance on a 6-minute walk test was inversely related to increases in both the dose and plasmaconcentration of tirasemtiv. Dose-related adverse events, particularly dizziness and others related to walking, may explain this negative effect on 6-minute walkperformance.CK-2127107 Planned Development. Throughout 2012, we progressed CK-2127107 in studies intended to support an IND. In the fourth quarter of2012, we filed an IND for CK-2127107, which has cleared FDA review. We anticipate initiating a Phase I clinical trial of CK-2127107 in healthy volunteersin the first half of 2013.Ongoing Research in Skeletal Muscle Activators. Our research on the direct activation of skeletal muscle continues in two areas. We are conductingtranslational research in preclinical models of disease and muscle 50thTable of Contentsfunction with fast skeletal muscle troponin activators to explore the potential clinical applications of this novel mechanism to skeletal muscle dysfunction. Wealso intend to conduct preclinical research on other chemically and pharmacologically distinct mechanisms to activate the skeletal sarcomere.We recorded research and development expenses for activities relating to our skeletal muscle contractility program of approximately $24.9 million, $24.0million and $29.1 million in the years ended December 31, 2012, 2011 and 2010, respectively. We anticipate that our expenditures relating to the research anddevelopment of compounds in our skeletal muscle contractility program will increase significantly if and as we advance tirasemtiv, CK-2127107 or othercompounds from this program into and through development.Cardiac Muscle ContractilityOur lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. In December 2006, we entered into acollaboration and option agreement with Amgen to discover, develop and commercialize novel small molecule therapeutics that activate cardiac musclecontractility for potential applications in the treatment of heart failure, including omecamtiv mecarbil. The agreement granted Amgen an option to obtain anexclusive license worldwide, except Japan, to develop and commercialize 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 responsible for the development and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excludingJapan), subject to our development and commercialization participation rights. Under the agreement, Amgen will reimburse us for agreed research anddevelopment 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 other potential products arising from research under the collaboration, and royalties that escalatebased on increasing levels of annual net sales of products commercialized under the agreement. The agreement also provides for us to receive increasedroyalties 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 to co-promote omecamtiv mecarbil in North America and participate in agreed commercialization activities in institutional care settings, at Amgen’s expense.Prior to Amgen’s exercise of its option, Cytokinetics conducted a clinical trials program for omecamtiv mecarbil comprised of multiple Phase I andPhase IIa clinical trials designed to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetic profiles of both intravenous and oralformulations in a diversity of patients, including patients with stable heart failure and patients with ischemic cardiomyopathy. In these trials, omecamtivmecarbil exhibited generally linear, dose-proportional pharmacokinetics across the dose ranges studied. The adverse effects observed at intolerable doses inhumans appeared similar to the adverse findings which occurred in preclinical safety studies at similar plasma concentrations. These effects are believed to berelated 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., thetime 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 an intravenous formulationfor use in the hospital setting and as an oral formulation for use in the outpatient setting.Omecamtiv Mecarbil DevelopmentIntravenous. An international, randomized, double-blind, placebo-controlled, Phase IIb clinical trial of an intravenous formulation of omecamtivmecarbil, known as ATOMIC-AHF (Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure), is being conducted inpatients with left ventricular systolic dysfunction hospitalized with acutely decompensated heart failure. This clinical trial, sponsored by 51Table of ContentsAmgen in collaboration with Cytokinetics, is expected to enroll approximately 600 patients in three sequential, ascending-dose cohorts. In each cohort, patientswill be randomized to receive omecamtiv mecarbil or placebo. The primary objective of this trial is to evaluate the effect of 48 hours of intravenous omecamtivmecarbil compared to placebo on dyspnea (shortness of breath) in patients with left ventricular systolic dysfunction hospitalized for acute heart failure. Thesecondary objectives are to assess the safety and tolerability of three dose levels of intravenous omecamtiv mecarbil compared with placebo and to evaluate theeffects of 48 hours of treatment with intravenous omecamtiv mecarbil on additional measures of dyspnea, patients’ global assessments, change in N-terminalpro brain-type natriuretic peptide (a biomarker associated with the severity of heart failure) and short-term clinical outcomes in these patients. In addition, thetrial will evaluate the relationship between omecamtiv mecarbil plasma concentrations and echocardiographic parameters in patients with acute heart failure.Patient dosing in the third cohort of this trial is continuing. We anticipate the completion of enrollment in ATOMIC-AHF in the first half of 2013. We anticipateresults from ATOMIC-AHF will be reported in mid-year 2013.Oral. In 2012, a randomized, open-label, four-period cross-over Phase I study designed to assess the safety, tolerability and pharmacokinetics ofmultiple oral formulations of omecamtiv mecarbil in healthy volunteers was conducted by Amgen in collaboration with Cytokinetics. Based on the review ofthese data, the companies have selected oral formulations of omecamtiv mecarbil from this Phase I trial that we believe warrant further evaluation in patientswith heart failure.In 2012, Cytokinetics and Amgen collaborated to plan the manufacturing of drug product and to draft regulatory submissions to enable the initiation ofa Phase II double-blind, randomized, placebo-controlled, multicenter, dose escalation study designed to evaluate several modified-release oral formulations ofomecamtiv mecarbil, known as COSMIC-HF (Chronic Oral Study of Myosin Activation to Increase Contractility in Heart Failure) in patients with heartfailure and left ventricular systolic dysfunction. In February 2013, we announced the opening to enrollment of COSMIC-HF. The primary objectives of thistrial are to select an oral modified release formulation and dose of omecamtiv mecarbil for chronic twice-daily dosing in patients with heart failure and leftventricular systolic dysfunction and to characterize its pharmacokinetics after 12 weeks of treatment. The secondary objective is to evaluate the safety andtolerability of oral omecamtiv mecarbil. We expect that over 400 patients will be enrolled in this clinical trial.During the fourth quarter of 2012, dosing initiated in a Phase I open-label, single-dose clinical trial designed to evaluate the safety, tolerability andpharmacokinetics of omecamtiv mecarbil in patients with various degrees of renal insufficiency and in patients undergoing hemodialysis. This trial issponsored by Amgen in collaboration with Cytokinetics.Ongoing Research in Cardiac Muscle Contractility. In the first quarter of 2013, we agreed with Amgen to additional research activities intended tobe conducted through 2014 under the research plan directed to next-generation compounds in our cardiac muscle contractility program. Under our collaborationagreement, Amgen will reimburse us for the agreed research activities we perform.The clinical trials program for omecamtiv mecarbil may proceed for several years, and we will not be in a position to generate any revenues or materialnet cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and the drug is commercialized.Omecamtiv mecarbil is at too early a stage of development for us to predict if or when this may occur. We funded all research and development costsassociated with this program prior to Amgen’s option exercise in May 2009. We recorded research and development expenses for activities relating to ourcardiac muscle contractility program of approximately $4.5 million, $2.8 million and $1.6 million in the years ended December 31, 2012, 2011 and 2010,respectively. We recognized research and development revenue from Amgen of $4.2 million in 2012, $2.1 million in 2011 and $1.5 million in 2010,consisting of reimbursements of full-time employee equivalent (“FTE”) and other expenses. 52Table of ContentsWe anticipate that our expenditures relating to the research and development of compounds in our cardiac muscle contractility program will increase ifwe participate in the future advancement of omecamtiv mecarbil through clinical development. Our expenditures will also increase if Amgen terminatesdevelopment of omecamtiv mecarbil or related compounds and we elect to develop them independently, or if we elect to co-fund later-stage development ofomecamtiv mecarbil or other compounds in our cardiac muscle contractility program under our collaboration and option agreement with Amgen.Beyond Muscle ContractilityWe have developed preclinical expertise in the mechanics of skeletal, cardiac and smooth muscle that extends from proteins to tissues to intact animalmodels. Our translational research in muscle contractility has enabled us to better understand the potential impact of small molecule compounds that increasecardiac or skeletal muscle contractility and to apply those findings to the further evaluation of our drug candidates in clinical populations. In addition tocontractility, the other major functions of muscle include metabolism, growth and energetics, with each of these functions playing a role in certain diseases thatcould benefit from novel mechanism treatments. Accordingly, our knowledge of muscle contractility may serve as an entry point to the discovery of noveltreatments for disorders involving muscle functions other than muscle contractility. We are leveraging our current understandings of muscle biology toinvestigate new ways of modulating these other aspects of muscle function for other potential therapeutic applications. For example, we are conducting researchwith compounds that affect muscle growth and that may have applications for serious diseases and medical conditions such as cachexia. Cachexia is acondition that can be associated with cancer, heart failure, chronic obstructive pulmonary disease or other conditions. This syndrome is characterized by theloss of muscle mass and may lead to weakness and disability. We are performing research on compounds that may increase muscle mass and which mayimpact patient functionality or potentially alter the course of diseases associated with muscle wasting. Similarly, we are performing research on compoundsthat may affect muscle metabolism and that may have application in conditions such as diabetes or obesity as well as other conditions of metabolicdysfunction.Development RisksThe successful development of any of our drug candidates is highly uncertain. We cannot estimate with certainty or know the exact nature, timing andcosts of the activities necessary to complete the development of any of our drug candidates or the date of completion of these development activities due tonumerous risks and uncertainties, including, but not limited to: • decisions made by Amgen with respect to the development of omecamtiv mecarbil; • our potential inability to obtain the additional funding necessary for us to conduct the one or more confirmatory Phase III clinical trials for tirasemtivin patients with ALS that we anticipate will be required to obtain marketing approval for this indication; • 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 trial data after these trialshave 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 notlimited to, our potential inability to obtain or retain partners to assist in the design, management, conduct and funding of clinical trials; • delays or additional costs in manufacturing of our drug candidates for clinical trial use, including developing appropriate formulations of our drugcandidates; • the uncertainty of clinical trial results, including variability in patient response; 53Table of Contents • the uncertainty of obtaining FDA or other foreign regulatory agency approval required for the clinical investigation of our drug candidates; • the uncertainty related to the development of commercial scale manufacturing processes and qualification of a commercial scale manufacturingfacility; • the possibility that results from non-clinical studies may adversely impact the timing or further development of our drug candidates; 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 on our 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 drugcandidates could have a material adverse effect on our results of operations. A further discussion of the risks and uncertainties associated with completing ourprograms as planned, or at all, and certain consequences of failing to do so are discussed further in the risk factors entitled “We will need substantialadditional capital in the future to sufficiently fund our operations,” “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 safety and efficacy of ourdrug candidates, which could prevent or significantly delay completion of clinical development and regulatory approval” 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 recognizedrevenues from our strategic alliances with Amgen, Global Blood Therapeutics, Inc., formerly known as Global Blood Targeting, Inc. (“Global Blood”) andMyoKardia, Inc. (“MyoKardia”) and grant revenues from NINDS.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 also entered into a common stock purchaseagreement with Amgen. In January 2007, we issued 3,484,806 shares of our common stock to Amgen for net proceeds of $32.9 million, of which the$6.9 million purchase premium was recorded as deferred revenue. Through May 2009, we amortized the upfront non-exclusive license and technology accessfee and stock purchase premium to license revenue ratably over the maximum term of the non-exclusive license, which was four years. In June 2009, werecognized as revenue the remaining balance of $21.4 million of the related deferred revenue when Amgen exercised its option, triggering the end of the non-exclusive license period. In June 2009, we received a non-refundable option exercise fee from Amgen of $50.0 million, which we recognized in revenue aslicense fees from a related party. We may receive additional payments from Amgen upon achieving certain pre-commercialization and commercializationmilestones. None of the future contingent milestone payments pursuant to this arrangement as of January 1, 2011 are considered substantive as they are theresults of Amgen’s performance. Therefore, they are not considered milestones under Accounting Standard Codification Topic 605-28, Revenue Recognition— Milestone Method (“ASC 605-28”).We have received reimbursements from Amgen for agreed research and development activities, which we recorded as revenue as the related expenses wereincurred. We may be eligible to receive further reimbursements from Amgen for agreed research and development activities, which we will record as revenue ifand when the related expenses are incurred. We record amounts received in advance of performance as deferred revenue. Revenues related to the reimbursementof FTEs were based on negotiated rates intended to approximate the costs for our FTEs. 54Table of ContentsBecause a substantial portion of our revenues for the foreseeable future will depend on achieving development and other pre-commercialization milestonesunder 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 derived from royalties onsales from drugs licensed to Amgen under our strategic alliance and from those licensed to future partners, and from direct sales of our drugs. We retain aproduct-by-product option to co-fund certain Phase III development activities under our strategic alliance with Amgen, thereby potentially increasing ourroyalties and affording us co-promotion rights in North America. If we exercise our co-promotion rights under this strategic alliance, we are entitled to receivereimbursement for certain sales force costs we incur in support of our commercial activities.As part of an initiative to seek certain smaller collaborations intended to allow us to offset our research costs, during 2011 and 2012, we entered intocollaborative research agreements with two early-stage biopharmaceutical companies. In October 2011, we entered into an agreement with Global Blood. Underan agreed research plan, scientists from Global Blood and our FTEs conducted research focused on small molecule therapeutics that target the blood. Weprovided to Global Blood access to certain research facilities, FTEs and other resources at agreed reimbursement rates that approximated our costs. We were theprimary obligor in the collaboration arrangement, and accordingly, we recorded expense reimbursements from Global Blood as research and developmentrevenue. In April 2012, we extended this agreement through December 2012.In August 2012, we entered into a collaboration agreement with MyoKardia. Under an agreed research plan, scientists from MyoKardia and our FTEsconduct research focused on small molecule therapeutics that inhibit cardiac sarcomere proteins. We provided to MyoKardia access to certain researchfacilities, and continue to provide FTEs and other resources at agreed reimbursement rates that approximate our costs. We are the primary obligor in thecollaboration arrangement, and accordingly, we record expense reimbursements from MyoKardia as research and development revenue.In July 2010 and in September 2012, the NINDS awarded us grants to support research and development of tirasemtiv directed to the potential treatmentfor myasthenia gravis for a period of up to three years.Research and DevelopmentWe incur research and development expenses associated with both partnered and unpartnered research activities. We expect to incur research anddevelopment expenses for the clinical development of tirasemtiv and CK-2127107 and pre-clinical research of other skeletal sarcomere activators for thepotential treatment of diseases and medical conditions associated with muscle weakness or wasting. We expect to incur research and development expenses foromecamtiv mecarbil for the potential treatment of heart failure in accordance with agreed upon research and development plans with Amgen.Research and development expenses related to any development and commercialization activities we elect to fund consist primarily of employeecompensation, supplies and materials, costs for consultants and contract research and manufacturing, facilities costs and depreciation of equipment. Fromour inception through December 31, 2012, we incurred costs of approximately $143.6 million for research and development activities relating to our cardiacmuscle contractility program, $113.9 million for our skeletal muscle contractility program, $35.7 million for our smooth muscle contractility program,$72.0 million for our mitotic kinesin inhibitors program, $53.7 million for our proprietary technologies and $69.2 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 notlimited to, finance, human resources, legal, business and commercial development and strategic planning. Other significant costs include facilities costs andprofessional fees for accounting and legal services, including legal services associated with obtaining and maintaining patents and regulatory compliance. 55Table of ContentsRestructuringIn October 2011, we announced a restructuring plan to realign our workforce and operations in line with our continued commitment to focus primarilyon the development of our key later-stage development programs for tirasemtiv and omecamtiv mecarbil and on our follow-on skeletal muscle troponinactivator program and joint research with Amgen directed to next-generation compounds in our cardiac muscle contractility program. As a result, we reducedour workforce by 18 employees, or approximately 18%, to 83 employees. We provided severance, employee benefit continuation and career transitionassistance to the employees directly affected by the restructuring. We incurred restructuring charges of $1.2 million in the fourth quarter of 2011, primarilypersonnel-related termination costs. We completed all restructuring activities and recognized all anticipated restructuring charges by December 31, 2012.Stock CompensationThe following table summarizes stock-based compensation related to stock options, restricted stock awards, restricted stock units, and employee stockpurchases for 2012, 2011 and 2010 (in thousands): Years Ended December 31, 2012 2011 2010 Research and development $1,801 $1,331 $1,871 General and administrative 1,982 1,738 2,146 Stock-based compensation included in operating expenses $3,783 $3,069 $4,017 As of December 31, 2012, there was $2.9 million of unrecognized compensation cost related to unvested stock options, which we expect to recognizeover a weighted-average period of 2.26 years. As of December 31, 2012, there was $1.1 million of unrecognized compensation cost related to unvestedrestricted stock units, which we expect to recognize over a weighted-average period of 0.67 years.Income TaxesWe account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the differencebetween the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affecttaxable income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. We recorded anincome tax provision of $150,000 in 2009 due to alternative minimum tax (“AMT”). However, due to the Department of the Treasury’s further guidanceclarifying 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 theWorker, Homeownership, and Business Assistance Act of 2009, the 2009 AMT liability was reversed in 2010. In addition to the $150,000 benefit related tothe AMT liability, we also recognized a $26,000 benefit related to the monetization of the federal research tax credit for a total benefit of approximately$176,000 in 2010. We did not record an income tax provision in the years ended December 31, 2012 and 2011 because we had a net taxable loss in theseperiods.Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses since inception anddifficulty in accurately forecasting our future results, we maintained a full valuation allowance on the net deferred tax assets as of December 31, 2012, 2011and 2010. The valuation allowance was determined pursuant to the accounting guidance for income taxes, which requires an assessment of both positive andnegative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. We intend to maintain a full valuation allowanceon the U.S. deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowance increased by$21.1 million in 2012, by $18.5 million in 2011 and by $15.6 million in 2010. 56Table of ContentsWe also follow the accounting guidance that defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authorities based solely on the technical merits of the position. If the recognition threshold is met, the tax benefit ismeasured and recognized as the largest amount of tax benefit that, in our judgment, is greater than 50% likely to be realized. In 2011, we made adjustments toour deferred balances for NOL carryforwards, research and development credits, and charitable contribution carryovers as a result of information obtainedfrom the U.S. Internal Revenue Service (“IRS”) audit of tax year 2009. As we maintained a full valuation allowance against our deferred tax assets, theadjustments resulted in no additional tax expense in the current period. We have also adjusted our unrealized tax benefits accordingly. The IRS’s LargeBusiness and International Division recently concluded its audit of the 2009 tax year with no material adjustments. However, in general, the statute oflimitations for tax liabilities for these years remains open for the purpose of adjusting the amounts of the losses and credits carried forward from those years.We had federal NOL carryforwards of approximately $400.2 million and state NOL carryforwards of approximately $296.9 million before federalbenefit at December 31, 2012. If not utilized, the federal and state NOL carryforwards will begin to expire in various amounts beginning 2020 and 2013,respectively. The NOL carryforwards include deductions for stock options. When utilized, the portion related to stock option deductions will be accounted foras a credit to stockholders’ equity rather than as a reduction of the income tax provision.We had general business credits of approximately $21.5 million and $13.0 million for federal and California state income tax purposes, respectively, atDecember 31, 2012. Amounts are comprised of research and development credits and orphan drug credits. If not utilized, the federal carryforwards will expirein various amounts beginning in 2021. The California state credit can be carried forward indefinitely. With the filing of our 2011 tax return, we adjusted ourgeneral business credit to account for qualifying orphan drug credits. For qualifying expenses, the orphan drug credit offers an increased benefit relative to theresearch and development credit taken in previous years.On January 2, 2013, the federal American Taxpayer Relief Act of 2012 was signed into law. As part of the act, the research and development credit wasretroactively extended. Accordingly, we did not record a federal research and development credit for 2012. While the applicable research and development creditavailable for 2012 will be considered in 2013, no financial statement benefit is expected as we expect to record a valuation allowance against the creditgenerated.In general, under section 382 of the Internal Revenue Code (“Section 382”), a corporation that undergoes an ‘ownership change’ is subject to limitationson its ability to utilize its pre-change NOLs and tax credits to offset future taxable income. We have performed a Section 382 analysis and do not believe thatwe have experienced an ownership change since 2006. A portion of our existing NOLs and tax credits are subject to limitations arising from previousownership changes. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382and result in additional limitations.Accounting guidance for income taxes provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not thatthe position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. It alsoprovides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.The unrecognized tax benefits on our research credits are based on our evaluation of the underlying research expenditures. We have reduced the respectivedeferred tax assets and valuation allowance to reflect the unrecognized tax benefits. These adjustments did not have an impact on the income tax expense as wemaintained a full valuation allowance on our deferred tax assets. 57Table of ContentsInterest accrued related to unrecognized tax benefits and penalties were zero for 2012, 2011 and 2010. We account for interest related to unrecognized taxbenefits and penalties by classifying both as income tax expense in the financial statements in accordance with the accounting guidance for uncertainty inincome taxes. We do not expect our unrecognized tax benefits to change materially over the next twelve months.Results of OperationsYears ended December 31, 2012, 2011 and 2010Revenues Years Ended December 31, Increase(Decrease) 2012 2011 2010 2012 2011 (In millions) Research and development revenues from related parties $4.2 $2.1 $1.5 $2.1 $0.6 Research and development, grant and other revenues 3.4 1.9 1.1 1.5 0.8 Total revenues $7.6 $4.0 $2.6 $3.6 $1.4 We recorded total revenues of $7.6 million, $4.0 million and $2.6 million for the years ended December 31, 2012, 2011, and 2010, respectively.Research and development revenues from related parties refers to research and development revenues from our strategic alliance with Amgen. Revenuesfrom Amgen were $4.2 million, $2.1 million and $1.5 million in 2012, 2011 and 2010, respectively. Revenues of $4.2 million from Amgen in 2012 consistedof $4.2 million for reimbursement of FTE expenses. Revenues of $2.1 million from Amgen in 2011 consisted of $2.0 million for reimbursement of FTEexpenses and $0.1 million for other research and development expenses. Revenues of $1.5 million from Amgen in 2010 consisted of $0.9 million for FTEexpenses and $0.6 million for other research and development expenses.Research and development, grant and other revenues in 2012, 2011 and 2010 included grant revenue from the NINDS, grant revenue from the U.S.Department of the Treasury (“DOT”), revenue from Global Blood and revenue from MyoKardia.In July 2010, the NINDS awarded us a grant to support research and development of tirasemtiv directed to the potential treatment for myasthenia gravisfor a period of up to three years. We recognized grant revenue of $1.3 million, $1.7 million and $0.4 million under this grant arrangement in 2012, 2011 and2010, respectively.In November 2010, we were notified by the DOT that we would receive total cash grants of $0.7 million based on our applications for certaininvestments in qualified therapeutic discovery projects under Section 48D of the Internal Revenue Code. The grants relate to certain research and developmentcosts we incurred in 2009 in connection with our cardiac, skeletal and smooth muscle contractility programs. We received and recognized as grant revenue$0.7 million under this grant in 2010.As part of an initiative to seek certain smaller collaborations intended to allow us to offset our research costs, during 2011 and 2012, we entered intocollaborative research agreements with two early-stage biopharmaceutical companies. We recognized revenue from Global Blood of $1.5 million in 2012 and$0.3 million in 2011. We recognized revenue from Myokardia of $0.6 million in 2012.Research and development expenses Years Ended December 31, Increase(Decrease) 2012 2011 2010 2012 2011 (In millions) Research and development expenses $35.6 $37.2 $38.0 $(1.6) $(0.8) 58Table of ContentsResearch and development expenses decreased $1.6 million in 2012 compared to 2011 and decreased $0.8 million in 2011 compared to 2010. Thedecrease in 2012 was primarily due to decreases of $2.1 million in laboratory expenses and $1.0 million in personnel-related costs, partially offset by anincrease of $1.3 million in outsourced clinical and pre-clinical costs and $0.2 million in facilities costs. The decrease in 2011 was primarily due to decreasesof $1.3 million in personnel expenses and $0.6 million in facility costs, partially offset by an increase of $1.2 million in outsourced clinical and preclinicalcosts.From a program perspective, the $1.6 million decline in research and development spending in 2012 compared to 2011 was due to decreases of $3.8million for our smooth muscle contractility program and $0.4 million for our other research programs, partially offset by increased spending of $0.9 millionfor our skeletal muscle contractility program and $1.7 million for our cardiac muscle contractility program. The decline in research and development spendingin 2011 compared to 2010 was due to decreases of $5.1 million for our skeletal muscle contractility program and $1.0 million for our mitotic kinesininhibitors program, partially offset by increases of $3.7 million for our smooth muscle contractility program, $1.2 million for our cardiac muscle contractilityprogram and $0.4 million for our other research and preclinical programs. Years Ended December 31, Increase(Decrease) 2012 2011 2010 2012 2011 (In millions) Cardiac muscle contractility $4.5 $2.8 $1.6 $1.7 $1.2 Skeletal muscle contractility 24.9 24.0 29.1 0.9 (5.1) Smooth muscle contractility 1.8 5.6 1.9 (3.8) 3.7 Mitotic kinesin inhibitors — — 1.0 — (1.0) All other research programs 4.4 4.8 4.4 (0.4) 0.4 Total research and development expenses $35.6 $37.2 $38.0 $(1.6) $(0.8) Clinical development timelines, likelihood of success and total completion costs vary significantly for each drug candidate and are difficult to estimate.We anticipate that we will determine on an ongoing basis which research and development programs to pursue and how much funding to direct to eachprogram, taking into account the scientific and clinical success of each drug candidate. The lengthy process of seeking regulatory approvals and subsequentcompliance with applicable regulations requires the expenditure of substantial resources. Any failure by us to obtain and maintain, or any delay in obtaining,regulatory approvals could cause our research and development expenditures to increase and, in turn, could have a material adverse effect on our results ofoperations.We expect our research and development expenditures to increase in 2013 compared to 2012. We expect to continue development of our drug candidatestirasemtiv and CK-2127107 for the potential treatment of diseases and medical conditions associated with muscle weakness or wasting. As part of ourstrategic alliance with Amgen, we expect to continue development of our drug candidate omecamtiv mecarbil for the potential treatment of heart failure. Weanticipate that research and development expenses in 2013 will increase compared to 2012 and will be in the range of $43 million to $47 million. Non-cashexpenses such as stock-based compensation and depreciation of approximately $2.8 million are included in our estimate of 2013 research and developmentexpenses.General and administrative expenses Years Ended December 31, Increase(Decrease) 2012 2011 2010 2012 2011 (In millions) General and administrative expenses $12.4 $13.6 $14.2 $(1.2) $(0.6) 59Table of ContentsGeneral and administrative expenses decreased $1.2 million in 2012 compared to 2011, and decreased $0.6 million in 2011 compared with 2010. Thedecrease in 2012 compared to 2011 was primarily due to decreases of $0.4 million in financial services costs, $0.3 million in personnel expenses, and $0.5million in facilities costs. The decrease in 2011 compared to 2010 was primarily due to decreases in personnel expenses of $1.2 million, legal expenses of $0.1million and facilities costs of $0.1 million, partially offset by an increase in financial services costs of $0.8 million.We expect that general and administrative expenses in 2013 will increase compared to 2012. We anticipate that general and administrative expenses willbe in the range of $14 million to $15 million. Non-cash expenses such as stock-based compensation and depreciation of approximately $2.0 million areincluded in our estimate of 2013 general and administrative expenses.Interest and Other, netComponents of Interest and Other, net are as follows: Years Ended December 31, Increase(Decrease) 2012 2011 2010 2012 2011 (In millions) Interest income and other income $0.1 $0.2 $0.4 $(0.1) $(0.2) Interest expense and other expense — (0.1) (0.2) 0.1 0.1 Interest and Other, net $0.1 $0.1 $0.2 $— $(0.1) Interest income and other income consisted primarily of interest income generated from our cash, cash equivalents and investments. Interest income andother income decreased in 2012 compared to 2011 primarily due to lower average effective interest rates and lower average invested balances. Interest and otherincome decreased in 2011 compared to 2010 primarily due to lower average invested balances and lower average effective interest rates.Interest expense and other expense primarily consist of interest expense on borrowings under our equipment financing lines, and for 2010, interestexpense on our loan with UBS Bank USA. Interest expense and other expense decreased in 2012 compared to the same periods in 2011, due to lower interestexpense on our equipment financing debt. We repaid the remaining outstanding equipment financing debt in March 2012. The decreases in interest and otherexpense in 2011 compared to 2010 were primarily due to lower outstanding balances on our equipment financing lines and decreases in the interest on our loanwith UBS.Liquidity and Capital ResourcesFrom August 5, 1997, our date of inception, through December 31, 2012, we funded our operations through the sale of equity securities, equipmentfinancings, non-equity payments from collaborators, government grants and interest income.Our cash, cash equivalents and investments, excluding restricted cash, totaled $74.0 million at December 31, 2012, up from $49.0 million atDecember 31, 2011. The increase of $25.0 million was primarily due to net proceeds from equity issuances in 2012, partially offset by cash used to fundoperations.We have received net proceeds from the sale of equity securities of $431.6 million from August 5, 1997, the date of our inception, throughDecember 31, 2012, excluding sales of equity to GlaxoSmithKline (“GSK”) and Amgen. Included in these proceeds are $94.0 million received upon closing ofthe initial public offering of our common stock in May 2004. In connection with execution of our collaboration and license agreement in 2001, GSK made a$14.0 million equity investment in Cytokinetics. GSK made additional equity investments in 60Table of ContentsCytokinetics in 2003 and 2004 of $3.0 million and $7.0 million, respectively. In January 2007, in connection with the execution of our collaboration agreementwith Amgen, we received net proceeds of $32.9 million from a stock purchase agreement with Amgen.In April 2011, we entered into a securities purchase agreement with Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P.,Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited (collectively,“Deerfield”). In April 2011, pursuant to theagreement, we issued to Deerfield (i) 5,300,000 shares of common stock for a purchase price of $1.50 per share, (ii) 8,070 shares of Series A convertiblepreferred stock (the “Series A Preferred Stock”) for a purchase price of $1,500.00 per share, and (iii) warrants to purchase 6,685,000 shares of our commonstock at an initial exercise price of $1.65 per share, for aggregate gross proceeds of approximately $20.1 million. After issuance costs of approximately $0.2million, the net proceeds were approximately $19.9 million. The offering was made pursuant to a shelf registration statement that we filed with the SEC onNovember 10, 2008, which became effective on November 19, 2008 (File No. 333-155259).On September 26, 2012, 8,070 shares of Series A Preferred Stock were converted into 8,070,000 shares of our common stock. The conversion was inaccordance with the terms of the agreement with Deerfield under which the Series A Preferred Stock was issued in 2011.In June 2011, we entered into an At-The-Market Issuance Sales Agreement (the “MLV Agreement”) with McNicoll, Lewis & Vlak LLC (“MLV”),pursuant to which we may issue and sell shares of common stock having an aggregate offering price of up to $20.0 million or 14,383,670 shares, whicheveroccurs first, from time to time through MLV as the sales agent. The issuance and sale of these shares by us under the MLV Agreement, if any, are subject tothe continued effectiveness of its registration statement on Form S-3, which was declared effective by the SEC on June 23, 2011 (File No. 333-174869).Sales of our common stock through MLV are made by means of ordinary brokers’ transactions at market prices or as otherwise agreed to by us andMLV. Subject to the terms and conditions of the MLV Agreement, MLV uses commercially reasonable efforts to sell our common stock from time to time,based upon our instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). We are notobligated to make any sales of common stock under the MLV Agreement. The offering of shares of common stock pursuant to the MLV Agreement willterminate upon the earlier of (i) the sale of all common stock subject to the MLV Agreement or (ii) termination of the MLV Agreement. We or MLV mayterminate the agreement at any time upon ten days notice to the other party, or MLV may terminate it at any time in certain circumstances, including theoccurrence of a material adverse change in our business. We pay MLV a commission rate equal to 3.0% of the gross sales price per share of any common stocksold under the MLV Agreement. We have provided MLV with customary indemnification and contribution rights. In 2011, we sold 2,579,208 shares throughMLV for net proceeds of $2.4 million after commissions and other offering costs of $160,000, which includes $82,000 associated with establishing the MLVAgreement. As of February 28, 2013, we have sold 5,175,549 shares of common stock through MLV for net proceeds of approximately $5.3 million, and9,208,121 shares remain available to us for sale through MLV subject to the terms and conditions of the MLV Agreement.On June 20, 2012, we entered into underwriting agreements for two separate, concurrent offerings of our securities (the “June 2012 Public Offerings”).On June 25, 2012, pursuant to the underwriting agreements, in aggregate we issued to various investors (i) 55,921,054 shares of common stock for apurchase price of $0.76 per share, (ii) 23,026 shares of Series B convertible preferred stock (the “Series B Preferred Stock”) for a purchase price of $760.00per share, and (iii) warrants to purchase 47,368,225 shares of our common stock at an exercise price of $0.88 per share, for aggregate gross proceeds ofapproximately $60.0 million. After issuance costs of approximately $4.0 million, the net proceeds from the June 2012 Public Offerings were approximately$56.0 million. 61Table of ContentsThe warrants issued in the June 2012 Public Offerings became exercisable upon issuance and will remain exercisable for five years until June 25, 2017.The warrant holders are prohibited from exercising the warrants and obtaining shares of common stock if, as a result of such exercise, the holder and itsaffiliates would own more than 9.98% of the total number of shares of our common stock then issued and outstanding. We valued the warrants as of the dateof issuance at $16.2 million using the Black-Scholes option pricing model and the following assumptions: a contractual term of five years, a risk-free interestrate of 0.73%, volatility of 76%, and the fair value of our common stock on the issuance date of $0.63. As of December 31, 2012, all of the warrants wereoutstanding and exercisable.Each share of Series B Preferred Stock is convertible into 1,000 shares of common stock at any time at the holder’s option. However, the holder isprohibited from converting the Series B Preferred Stock into shares of common stock if, as a result of such conversion, the holder and its affiliates would ownmore than 9.98% of the total number of shares of common stock then issued and outstanding. In the event of our liquidation, dissolution, or winding up,holders of Series B Preferred Stock will receive a payment equal to $0.001 per share before any proceeds are distributed to the common stockholders. Shares ofSeries B Preferred Stock generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstandingSeries B Preferred Stock is required to amend the terms of the Series B Preferred Stock. Holders of Series B Preferred Stock are not entitled to receive anydividends, unless and until specifically declared by our board of directors. The Series B Preferred Stock ranks senior to our common stock as todistributions of assets upon our liquidation, dissolution or winding up, whether voluntarily or involuntarily. The Series B Preferred Stock may rank seniorto, on parity with or junior to any class or series of the our stock created in the future depending upon the specific terms of such future stock issuance.The June 2012 Public Offerings were made pursuant to a shelf registration statement that we filed with the SEC on November 25, 2011, which becameeffective on December 8, 2011 (File No. 333-178189) and a supplemental shelf registration statement on Form S-3MEF that we filed with the SEC on June 20,2012, which became effective on June 20, 2012 (File No. 333-182226). The closing of the June 2012 Public Offerings took place on June 25, 2012.The fair value of the common stock into which the Series B Preferred Stock is convertible exceeded the allocated purchase price of the Series B PreferredStock by $1.3 million on the date of issuance, resulting in a beneficial conversion feature. We recognized the beneficial conversion feature as a one-time, non-cash, deemed dividend to the holders of Series B Preferred Stock on the date of issuance, which is the date the stock first became convertible.On January 25, 2013, 2,000 shares of Series B Preferred Stock were converted into 2,000,000 shares of our common stock. The conversion was inaccordance with the terms of the original agreement under which the Series B Preferred Stock was issued in 2012.On February 8, 2013, warrants to purchase 6,000 shares of our common stock at an exercise price of $0.88 per share were exercised in accordance withthe June 2012 Public Offerings underwriting agreements.On a cumulative basis through December 31, 2012, we have received $106.8 million in non-equity payments from Amgen and $54.5 million in non-equity payments from GSK.Under equipment financing arrangements, we received $23.7 million from August 5, 1997, the date of our inception, through December 31, 2012.Interest earned on investments, excluding non-cash amortization/accretion of purchase premiums/discounts, was $0.8 million, $1.1 million and $1.4 millionin 2012, 2011 and 2010, respectively, and $31.2 million from August 5, 1997, the date of our inception, through December 31, 2012. 62Table of ContentsNet cash used in operating activities in 2012 was $33.4 million and primarily resulted from the net loss of $40.4 million. Net cash used in operatingactivities in 2011 was $45.6 million and primarily resulted from our net loss of $47.9 million. Net cash used in operating activities in 2010 was$44.8 million and primarily resulted from our net loss of $49.3 million less $4.0 million of non-cash stock-based compensation expense.Net cash used in investing activities was $28.8 million in 2012 and primarily consisted of cash used to purchase investments, net of proceeds from thematurity of investments, of $28.9 million. Net cash provided by investing activities in 2011 was $25.3 million and primarily consisted of proceeds frommaturities of investments, net of cash used to purchase investments, of $25.1 million. Net cash provided by investing activities in 2010 was $34.2 millionand primarily consisted of proceeds from sales and maturities of investments (including auction rate securities), net of cash used to purchase investments, of$33.8 million. Restricted cash was zero at December 31, 2012. Restricted cash totaled $0.2 million at December 31, 2011, down from $0.8 million atDecember 31, 2010, with the decrease due to the contractual semi-annual reductions in the amount of security deposit required by General Electric CapitalCorporation (“GE Capital”) in connection with our equipment financing credit lines.Net cash provided by financing activities was $58.3 million in 2012 and primarily consisted of net proceeds of $56.0 million from the sale of55,921,054 shares of common stock and 23,026 shares of Series B Preferred Stock in the June 2012 Public Offerings and net proceeds of $2.8 million fromour sale of 2,596,341 shares of common stock through MLV. We repaid the remaining balance of our equipment financing line debt in the March 2012 andno further funds are available to us under this line. Net cash provided by financing activities was $21.6 million in 2011 and primarily consisted of netproceeds of $19.9 million from our financing with Deerfield and $2.4 million from sales of our common stock through MLV. Net cash provided by financingactivities in 2010 was $2.5 million and primarily consisted of proceeds from drawdowns under our 2007 committed equity financing facility withKingsbridge of $14.0 million, net of issuance costs, partially offset by repayments of our loan with UBS of $10.2 million.Shelf Registration Statement. In November 2011, we filed a shelf registration statement with the SEC, which was declared effective in December2011 (the “December 2011 Shelf”). The December 2011 Shelf allowed us to issue shares of our common stock from time to time for an aggregate offering priceof up to $100.0 million. In June 2012, we filed a supplemental shelf registration statement with the SEC, which was declared effective in June 2012 (the“Supplemental Shelf”). The Supplemental Shelf allows us to issue additional securities from time to time for an aggregate offering price of up to $20.0 million,and for a total aggregate offering price under the December 2011 Shelf and the Supplemental Shelf of up to $120.0 million. As of February 28, 2013,$18.3 million remains available to us under this shelf registration statement. The specific terms of offerings, if any, under the shelf registration statementwould be established at the time of such offerings.As of December 31, 2012, future minimum payments under our lease obligations were as follows (in thousands): WithinOne Year One toThree Years Three toFive Years AfterFive Years Total Operating lease(1) $3,110 $6,826 $7,301 $1,906 $19,143 (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 and development activities.We plan to continue clinical development of our fast skeletal muscle troponin activator tirasemtiv for the potential treatment of diseases and conditions relatedto skeletal muscle weakness or wasting. We plan to initiate and conduct clinical development of our fast skeletal muscle troponin 63Table of Contentsactivator CK-2127107 for the potential treatment of diseases and conditions related to skeletal muscle weakness or wasting. We plan to continue to support theclinical development of our cardiac muscle myosin activator omecamtiv mecarbil for the potential treatment of heart failure and research of potential next-generation compounds as part of our strategic alliance with Amgen. We expect to incur significant research and development expenses as we advance theresearch and development of compounds from our other muscle contractility programs through 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 our drug candidates andother compounds; • the time and costs involved in obtaining regulatory approvals; • 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 for the potentialtreatment 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 and commercialization of ourpotential drugs; • our plans or ability to expand our drug development capabilities, including our capabilities to conduct clinical trials for our drug candidates; • our plans or ability to engage third party manufacturers for our drug candidates and potential drugs; • our plans or ability to build or access sales and marketing capabilities and to achieve market acceptance for potential drugs; • 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 have incurred an accumulated deficit of $448.9 million since inception and there can be no assurance that we will attain profitability. We are subjectto risks common to development stage companies including, but not limited to, development of new drug candidates, dependence on key personnel, and theability to obtain additional capital as needed to fund our future plans. Our liquidity will be impaired if sufficient additional capital is not available on termsacceptable to us, if at all. To date, we have funded our operations primarily through sales of our common stock and convertible preferred stock, contractpayments under our collaboration agreements, debt financing arrangements, government grants and interest income. Until we achieve profitable operations, weintend to continue to fund operations through payments from strategic collaborations, additional sales of equity securities, government grants and debtfinancings. We have never generated revenues from commercial sales of our drugs and may not have drugs to market for at least several years, if ever. Oursuccess is dependent on our ability to obtain additional capital by entering into new strategic collaborations and/or through 64Table of Contentsequity or debt financings, and ultimately on our and our collaborators’ ability to successfully develop and market one or more of our drug candidates. Wecannot be certain that sufficient funds will be available from such collaborators or financings when needed or on satisfactory terms. Additionally, there can beno assurance that any of drugs based on our drug candidates will be accepted in the marketplace or that any future products can be developed ormanufactured at an acceptable cost. These factors could have a material adverse effect on our future financial results, financial position and cash flows.Based on the current status of our development plans, we believe that our existing cash and cash equivalents, investments and interest earned oninvestments will be sufficient to meet our projected operating requirements for at least the next 12 months. If, at any time, our prospects for internallyfinancing our research and development programs decline, we may decide to reduce research and development expenses by delaying, discontinuing or reducingour funding of development of one or more of our drug candidates or potential drug candidates or of other research and development programs. Alternatively,we might raise funds through strategic relationships, public or private financings or other arrangements. There can be no assurance that funding, if needed,will be available on attractive terms, or at all, or in accordance with our planned timelines. Furthermore, financing obtained through future strategicrelationships may require us to forego certain commercialization and other rights to our drug candidates. Similarly, any additional equity financing may bedilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital as and when needed could have anegative impact on our financial condition and our ability to pursue our business strategy.Off-balance Sheet ArrangementsWe are not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financialcondition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.Critical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. We review our estimateson an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in moredetail in the notes to our financial statements included in this Form 10-K, we believe the following accounting policies to be critical to the judgments andestimates used in the preparation of our financial statements.InvestmentsAvailable-for-sale investments. Our investments consist of municipal and government agency bonds, commercial paper, U.S. Treasury securities,and money market funds. We designate all investments as available-for-sale. Therefore, they are reported at fair value, with unrealized gains and lossesrecorded in accumulated other comprehensive income. 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 are classified as short-terminvestments. 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. We recognize an impairmentcharge when a decline in the fair value of our investments below the cost basis is judged to be other-than-temporary. Factors considered by management inassessing whether an other-than-temporary impairment has occurred include: the nature of the investment; whether the decline in fair value is attributable tospecific adverse conditions affecting the investment; the financial condition of the investee; 65Table of Contentsthe severity and the duration of the impairment; and whether we have the intent and ability to hold the investment to maturity. When we determine that another-than-temporary impairment has occurred, the investment is written down to its market value at the end of the period in which we determine that an other-than-temporary decline occurred. 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. Realized gains and losses and declines in value judged to be other-than-temporary, if any, onavailable-for-sale securities 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 occurred or services havebeen rendered; the fee is fixed or determinable; and collectability is reasonably assured. Determination of whether persuasive evidence of an arrangement existsand whether delivery has occurred or services have been rendered are based on management’s judgments regarding the fixed nature of the fee charged forresearch performed and milestones met, and the collectability of those fees. Should changes in conditions cause management to determine these criteria are notmet for certain future transactions, revenue recognized for any reporting period could be adversely affected.Revenue under our license and collaboration arrangements is recognized based on the performance requirements of the contract. Research anddevelopment revenues, which are earned under agreements with third parties for agreed research and development activities, may include non-refundablelicense fees, research and development funding, cost reimbursements and contingent milestones and royalties. Our collaborations prior to January 1, 2011with multiple elements were evaluated and divided into separate units of accounting if certain criteria are met, including whether the delivered element hasstand-alone value to the customer and whether there was vendor-specific objective and reliable evidence (“VSOE”) of the fair value of the undelivered items.The consideration we received was allocated among the separate units based on their respective fair values, and the applicable revenue recognition criteria wereapplied to each of the separate units. The consideration we received was combined and recognized as a single unit of accounting when criteria for separationwere not met. On January 1, 2011, Accounting Standard Codification (“ASC”) Topic 605-25, Revenue Recognition — Multiple-Element Arrangements(“ASC 605-25”) on the recognition of revenues for agreements with multiple deliverables became effective and applies to any agreements we may enter into onor after January 1, 2011. Under this updated guidance, revenue will be allocated to each element using a selling price hierarchy, where the selling price for anelement is based on VSOE if available; third-party evidence (“TPE”), if available and VSOE is not available; or the best estimate of selling price, if neitherVSOE nor TPE is available.Non-refundable license fees are recognized as revenue as we perform under the applicable agreement. Where the level of effort is relatively consistent overthe performance period, we recognize total fixed or determined revenue on a straight-line basis over the estimated period of expected performance.ASC 605-28 established the milestone method as an acceptable method of revenue recognition for certain contingent event-based payments underresearch and development arrangements. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone isrecognized in its entirety in the period in which the milestone is achieved. A milestone is an event (i) that can be achieved based in whole or in part on either ourperformance or on the occurrence of a specific outcome resulting from our performance, (ii) for which there is substantive uncertainty at the date thearrangement is entered into that the event will be achieved, and (iii) that would result in additional payments being due to us. The determination that amilestone is substantive is based on management’s judgment and is made at the inception of the arrangement. Milestones are considered substantive when theconsideration earned from the achievement of the milestone is (i) commensurate with either our performance to achieve the milestone or the enhancement ofvalue of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) relates solely to past performance and(iii) is reasonable relative to all deliverables and payment terms in the arrangement. 66Table of ContentsOther contingent event-based payments received for which payment is either contingent solely upon the passage of time or the results of a collaborativepartner’s performance are not considered milestones under ASC 605-28. In accordance with ASC 605-25, such payments will be recognized as revenue whenall of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; price is fixed ordeterminable; and collectability is reasonably assured.Prior to January 1, 2011, we recognized 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 effort expended orrisk associated with the achievement of the milestone. If these conditions were not met, we deferred the milestone payment and recognized it as revenue over theestimated period of performance under the contract as we completed our performance obligations. We have concluded that all of the future contingent milestonepayments pursuant to our research and development arrangements entered into as of January 1, 2011 are not considered substantive as they are the results of acollaborative partner’s performance. Therefore, they are not considered milestones under ASC 605-28.Research and development revenues and cost reimbursements are based upon negotiated rates for our FTEs and actual out-of-pocket costs. FTE rates arenegotiated rates that are based upon our costs, and which we believe approximate fair value. Any amounts received in advance of performance are recorded asdeferred revenue. None of the 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, we evaluate the payments to determine whether payments made by us will be recognized as a reduction of revenue or asexpense. Revenue we recognize may be reduced by payments made to the other party under the arrangement unless we receive a separate and identifiable benefitin exchange for the payments 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 participant in the grantarrangement as the activities under the grant are part of our development programs. If we are not the principal participant, the grant funds are recorded as areduction to research and development expense. Grant funds received are not refundable and are recognized when the related qualified research and developmentcosts are incurred and when there is reasonable assurance that the funds will be received. 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 contract research organizations(“CROs”) and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date andcontract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration ofenrollment and percentage of work completed to date. We monitor patient enrollment levels and related activities to the extent possible through internal reviews,correspondence and status meetings with CROs and review of contractual terms. Our estimates are dependent on the timeliness and accuracy of data providedby our CROs and other 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 periods when the actualactivity levels become known. No material adjustments to preclinical study and clinical trial expenses have been recognized to date.Stock-Based CompensationWe apply the accounting guidance for stock compensation, which establishes the accounting for share-based payment awards made to employees anddirectors, including employee stock options and employee stock purchases. Under this guidance, stock-based compensation cost is measured at the grant datebased on the calculated fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite service period, generallythe vesting period of the award. 67Table of ContentsUnder the guidance for stock compensation for non-employees, we measure the fair value of the award each period until the award is fully vested.As required under the accounting rules, we review our valuation assumptions at each grant date and, as a result, from time to time we will likely changethe valuation assumptions we use to value stock based awards granted in future periods. The assumptions used in calculating the fair value of share-basedpayment awards represent management’s best estimates at the time, but these estimates involve inherent uncertainties and the application of managementjudgment. As a result, if conditions change and we use different assumptions, our stock-based compensation expense could be materially different in thefuture. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiturerate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the currentperiod.Income TaxesWe account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the differencebetween the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affecttaxable income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. We recorded anincome tax provision of $150,000 in 2009 due to AMT. However, due to the Department of the Treasury’s further guidance clarifying that utilization of theAMT NOL was not limited to 90% as part of the 5-year NOL carryback provision brought about by the Worker, Homeownership, and Business AssistanceAct of 2009, the 2009 AMT liability was reversed in 2010. In addition to the $150,000 benefit related to the AMT liability, we also recognized a $26,000benefit related to the monetization of the federal research tax credit for a total benefit of approximately $176,000 in 2010. We did not record an income taxprovision in the years ended December 31, 2012 and 2011 because we had a net taxable loss in these periods.Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses since inception anddifficulty in accurately forecasting our future results, we maintained a full valuation allowance on the net deferred tax assets as of December 31, 2012, 2011and 2010. The valuation allowance was determined pursuant to the accounting guidance for income taxes, which requires an assessment of both positive andnegative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. We intend to maintain a full valuation allowanceon the U.S. deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowance increased by$21.1 million in 2012, $18.5 million in 2011 and $15.6 million in 2010.We also follow the accounting guidance that defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authorities based solely on the technical merits of the position. If the recognition threshold is met, the tax benefit ismeasured and recognized as the largest amount of tax benefit that, in our judgment, is greater than 50% likely to be realized. We file income tax returns with theIRS and the state of California. For jurisdictions in which tax filings are made, we are subject to income tax examination for all fiscal years since inception.The IRS’s Large Business and International Division concluded its audit of the 2009 tax year with no material adjustments. However, in general, the statute oflimitations for tax liabilities for these years remains open for the purpose of adjusting the amounts of the losses and credits carried forward from those years.Interest accrued related to unrecognized tax benefits and penalties were zero for 2012, 2011 and 2010. We account for interest related to unrecognized taxbenefits and penalties by classifying both as income tax expense in the financial statements in accordance with the accounting guidance for uncertainty inincome taxes. We do not expect our unrecognized tax benefits to change materially over the next twelve months.In general, under Section 382 a corporation that undergoes an ‘ownership change’ is subject to limitations on its ability to utilize its pre-change NOLsand tax credits to offset future taxable income. We have performed a Section 382 analysis and do not believe that we have experienced an ownership changesince 2006. A portion of 68Table of Contentsour existing NOLs and tax credits are subject to limitations arising from previous ownership changes. Future changes in our stock ownership, some of whichare outside of our control, could result in an ownership change under Section 382 and result in additional limitations.Recent Accounting PronouncementsSee “Recent Accounting Pronouncements” in Note 1, “Organization and Significant Accounting Policies” in the Notes to Financial Statements for adiscussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financialposition 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. interest rates, particularlybecause the majority of our investments are in short-term debt securities. The primary objective of our investment activities is to preserve principal while at thesame time maximizing the income we receive without significantly increasing risk. We are exposed to the impact of interest rate changes and changes in themarket values of our investments. Our interest income is sensitive to changes in the general level of U.S. interest rates. Our exposure to market rate risk forchanges in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We investthe majority of our excess cash in U.S. Treasuries and, by policy, limit the amount of credit exposure in any one issuer and investment class, with theexception of obligations of the U.S. Treasury and federal agencies, for which there are no such limits. We protect and preserve our invested funds byattempting to limit default, market and reinvestment risk. Investments in both fixed-rate and floating-rate interest-earning instruments carry a degree of interestrate risk. Fixed-rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating-rate securities may produce lessincome than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interestrates. To minimize risk, we maintain our portfolio of cash and cash equivalents and short- and long-term investments in a variety of interest-bearinginstruments, including U.S. government and agency securities, high grade municipal and U.S. bonds and money market funds. Our investment portfolio ofshort- and long-term investments is subject to interest rate risk, and will fall in value if market interest rates 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, wedo not consider our cash and cash equivalents to be subject to significant interest rate risk and have therefore excluded them from the table below. We do nothave 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 investment portfolio (dollars inthousands): 2013 Beyond 2013 Total Fair Value atDecember 31,2012 Assets: Investments $59,093 — $59,093 $59,093 Average interest rate 0.18% — 0.18% 69Table of ContentsItem 8. Financial Statements and Supplementary DataCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 71 Balance Sheets 72 Statements of Comprehensive Loss 73 Statements of Stockholders’ Equity (Deficit) 74 Statements of Cash Flows 79 Notes to Financial Statements 80 70Table 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 statements of comprehensive loss, of stockholders’ equity (deficit) and of cash flowspresent fairly, in all material respects, the financial position of Cytokinetics, Incorporated at December 31, 2012 and December 31, 2011, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2012 and cumulatively, for the period from August 5, 1997 (date ofinception) to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, theCompany maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’smanagement is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reportingunder Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based onour integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatementand whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements includedexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made 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, and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.As described in Note 1 to the financial statements, the Company is in the development stage and is dependent on its ability to raise additional capital.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PRICEWATERHOUSECOOPERS LLPSan Jose, CAMarch 15, 2013 71Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)BALANCE SHEETS December 31, 2012 2011 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $14,907 $18,833 Short-term investments 59,093 30,190 Related party accounts receivable 4 14 Prepaid and other current assets 2,423 2,103 Total current assets 76,427 51,140 Property and equipment, net 997 1,310 Restricted cash — 196 Other assets 127 127 Total assets $77,551 $52,773 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $2,002 $1,196 Accrued liabilities 4,877 3,232 Related party payables and accrued liabilities 150 12 Short-term portion of equipment financing lines — 152 Short-term portion of deferred rent 76 — Total current liabilities 7,105 4,592 Long-term portion of deferred rent 361 3 Total liabilities 7,466 4,595 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock, $0.001 par value: — — Authorized: 10,000,000 shares ; Issued and outstanding: Series A Convertible Preferred Stock — zero shares at December 31, 2012 and 8,070 shares at December 31,2011 Series B Convertible Preferred Stock — 23,026 shares at December 31, 2012 and zero shares at December 31,2011 Common stock, $0.001 par value: Authorized: 245,000,000 shares; Issued and outstanding: 142,457,469 shares at December 31, 2012 and 74,915,739 shares at December 31,2011 143 75 Additional paid-in capital 518,804 456,610 Accumulated other comprehensive income 18 3 Deficit accumulated during the development stage (448,880) (408,510) Total stockholders’ equity 70,085 48,178 Total liabilities and stockholders’ equity $77,551 $52,773 The accompanying notes are an integral part of these financial statements. 72Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF COMPREHENSIVE LOSS Years Ended December 31, Period fromAugust 5, 1997(Date ofInception) toDecember 31,2012 2012 2011 2010 (In thousands, except per share data) Revenues: Research and development revenues from related parties $4,177 $2,054 $1,487 $55,328 Research and development, grant and other revenues 3,382 1,946 1,090 9,372 License revenues from related parties — — — 112,935 Total revenues 7,559 4,000 2,577 177,635 Operating expenses: Research and development 35,643 37,182 38,013 488,115 General and administrative 12,429 13,590 14,199 156,381 Restructuring charges (reversals) (56) 1,192 — 3,586 Total operating expenses 48,016 51,964 52,212 648,082 Operating loss (40,457) (47,964) (49,635) (470,447) Interest and other, net 87 104 172 21,541 Loss before income taxes (40,370) (47,860) (49,463) (448,906) Income tax benefit — — (176) (26) Net loss (40,370) (47,860) (49,287) (448,880) Deemed dividend related to beneficial conversion feature of convertible preferred stock (1,307) (2,857) — (4,164) Net loss allocable to common stockholders $(41,677) $(50,717) $(49,287) $(453,044) Net loss per share allocable to common stockholders — basic and diluted $(0.38) $(0.72) $(0.77) Weighted-average number of shares used in computing net loss per share allocable tocommon stockholders — basic and diluted 108,642 70,800 64,165 Comprehensive Loss: Net loss $(40,370) $(47,860) $(49,287) $(448,880) Change in unrealized gain (loss) on investments 15 7 (5) 18 Comprehensive loss $(40,355) $(47,853) $(49,292) $(448,862) The accompanying notes are an integral part of these financial statements. 73Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) DeficitAccumulatedDuring theDevelopmentStage TotalStockholders’Equity (Deficit) Common Stock Preferred Stock Shares Amount Shares Amount (In thousands, except share and per share data) Issuance of common stock upon exercise of stock options forcash at $0.015 per share 147,625 $— — $— $2 $— $— $— $2 Issuance of common stock to founders at $0.015 per share inexchange for cash in January 1998 563,054 1 — — 7 — — — 8 Net loss — — — — — — — (2,015) (2,015) Balance, December 31, 1998 710,679 1 — — 9 — — (2,015) (2,005) Issuance of common stock upon exercise of stock options forcash 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 Other comprehensive loss — — — — — — (8) — (8) Net loss — — — — — — — (7,341) (7,341) Balance, December 31, 1999 998,179 1 — — 356 (114) (8) (9,356) (9,121) Issuance of common stock upon exercise of stock options forcash 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 Other comprehensive income — — — — — — 86 — 86 Net loss — — — — — — — (13,079) (13,079) Balance, December 31, 2000 1,729,840 2 — — 643 (106) 78 (22,435) (21,818) Issuance of common stock upon exercise of stock options forcash 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 Other comprehensive income — — — — — — 190 — 190 Net loss — — — — — — — (15,874) (15,874) Balance, December 31, 2001 1,798,986 2 — — 745 (58) 268 (38,309) (37,352) Issuance of common stock upon exercise of stock options forcash 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 Other comprehensive loss — — — — — — (228) — (228) Net loss — — — — — — — (23,080) (23,080) 74Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) DeficitAccumulatedDuring theDevelopmentStage TotalStockholders’Equity (Deficit) Common Stock Preferred Stock Shares Amount Shares Amount (In thousands, except share and per share data) Balance, 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 Other comprehensive income — — — — — — 6 — 6 Net loss — — — — — — — (32,685) (32,685) Balance, 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 publicoffering 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) Other comprehensive loss — — (234) — (234) Net loss — — (37,198) (37,198) Balance, 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 ofcancellations — — — — (439) 1,799 — — 1,360 Repurchase of unvested stock (20,609) — — — (25) — — — (25) Other comprehensive income — — — — — — 174 — 174 Net loss — — (42,252) (42,252) 75Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) DeficitAccumulatedDuring theDevelopmentStage TotalStockholders’Equity (Deficit) Common Stock Preferred Stock Shares Amount Shares Amount (In thousands, except share and per share data) Balance, 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 cashat $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 ofcancellations — — — — (138) 1,358 — — 1,220 Repurchase of unvested stock (1,537) — — — (2) — — — (2) Other comprehensive loss — — — — — — (61) — (61) Net loss — — (57,115) (57,115) Balance, 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 cashat $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, netof issuance 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 ofcancellations — — — — (45) 765 — — 720 Repurchase of unvested stock (68) — — — — — — — — Other comprehensive income — — — — — — 74 — 74 Net loss — — — — — — — (48,894) (48,894) Balance, 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 cashat $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 ofcancellations — — — — — 329 — — 329 Other comprehensive income — — — — — — 19 — 19 Net loss — — — — — — — (56,374) (56,374) 76Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) DeficitAccumulatedDuring theDevelopmentStage TotalStockholders’Equity (Deficit) Common Stock Preferred Stock Shares Amount Shares Amount (In thousands, except share and per share data) Balance, 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 Other comprehensive loss — — — — — (17) — (17) Net income — — — — — — 24,544 24,544 Balance, 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) Other comprehensive loss — — — — — — (5) — (5) Net loss — — — — — — — (49,287) (49,287) Balance, December 31, 2010 66,907,600 67 — — 431,103 — (4) (360,650) 70,516 Issuance of common stock upon exercise of stock options for cash at$1.00-$1.20 per share 16,000 — — — 17 — — — 17 Issuance of common stock pursuant to ESPP at a weighted price of$1.11 per share 112,931 — — — 125 — — — 125 Issuance of common stock to Deerfield at $1.50 per share, net ofissuance costs of $53 5,300,000 5 — — 6,122 — — — 6,127 Issuance of Series A convertible preferred stock to Deerfield at $1,500per share, net of issuance costs of $81 — — 8,070 — 9,329 — — — 9,329 Beneficial conversion feature of Series A convertible preferred stock — — — — — — — — 0 Deemed dividend to holders of Series A convertible preferred stock — — — — — — — — 0 77Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) DeficitAccumulatedDuring theDevelopmentStage TotalStockholders’Equity (Deficit) Common Stock Preferred Stock Shares Amount Shares Amount (In thousands, except share and per share data) Issuance of warrants to Deerfield, net of issuance costs of $38 — $— — $— $4,427 $— $— $— $4,427 Issuance of common stock to MLV at $1.00-$1.02 per share, net ofcommission and issuance costs of $160 2,579,208 3 — 2,418 — — — 2,421 Stock-based compensation — — — — 3,069 — — — 3,069 Other comprehensive income — — — — — — 7 — 7 Net loss — — — — — — — (47,860) (47,860) Balance, December 31, 2011 74,915,739 75 8,070 — 456,610 — 3 (408,510) 48,178 Issuance of common stock pursuant to ESPP at a weightedprice of $0.72 per share 90,062 — — — 65 — — — 65 Issuance of common stock upon exercise of restricted stock units 864,273 1 — — (402) — — — (401) Issuance of common stock pursuant to June 2012 publicofferings at $0.76 per share, net of issuance costs of $2,139 55,921,054 56 — — 29,860 — — — 29,916 Issuance of Series B convertible preferred stock pursuant to June2012 public offerings at $760 per share, net of issuance costsof $881 — — 23,026 — 12,318 — — — 12,318 Beneficial conversion feature of Series B convertible preferredstock — — — — — — — — 0 Deemed dividend to holders of Series B convertible preferredstock — — — — — — — — 0 Issuance of warrants pursuant to June 2012 public offerings, netof issuance costs of $984 — — — — 13,761 — — — 13,761 Issuance of common stock to MLV at $1.05-$1.20 per share,net of commission and issuance costs of $89 2,596,341 3 — — 2,817 — — — 2,820 Conversion of Series A convertible preferred stock to commonstock at $1,000 per share 8,070,000 8 (8,070) — (8) — — — — Stock-based compensation — — — — 3,783 — — — 3,783 Other comprehensive income — — — — — — 15 — 15 Net loss — — — — — — — (40,370) (40,370) Balance, December 31, 2012 142,457,469 $143 23,026 $— $518,804 $— $18 $(448,880) $70,085 The accompanying notes are an integral part of these financial statements. 78Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)STATEMENTS OF CASH FLOWS Years Ended December 31, Period fromAugust 5,1997(Date ofInception) toDecember 31,2012 2012 2011 2010 (In thousands) Cash flows from operating activities: Net loss $(40,370) $(47,860) $(49,287) $(448,880) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 591 1,297 1,900 29,254 (Gain) loss on disposal of equipment (2) 3 (13) 299 Non-cash impairment charges — — — 103 Non-cash restructuring expenses, net of reversals (56) 194 — 636 Non-cash interest expense — — — 504 Non-cash forgiveness of loan to officers — — 9 434 Stock-based compensation 3,783 3,069 4,017 36,128 Tax benefit from stock-based compensation — — 20 — Non-cash warrant expense — — — 1,626 Other non-cash expenses — — — 141 Changes in operating assets and liabilities: Related party accounts receivable 10 32 134 (355) Prepaid and other assets (320) (238) 304 (2,578) Accounts payable 690 162 (536) 2,038 Accrued and other liabilities 2,098 (2,266) (627) 5,004 Related party payables and accrued liabilities 138 12 — 150 Deferred revenue — — (751) — Net cash used in operating activities (33,438) (45,595) (44,830) (375,496) Cash flows from investing activities: Purchases of investments (92,788) (48,025) (109,860) (1,052,243) Proceeds from sales and maturities of investments 63,900 73,174 125,790 973,227 Proceeds from sales of auction rate securities — — 17,900 20,025 Purchases of property and equipment (125) (443) (493) (31,161) Proceeds from sales of property and equipment 2 3 14 143 Decrease in restricted cash 196 592 886 — Issuance of related party notes receivable — — — (1,146) Proceeds from repayments of notes receivable — — — 859 Net cash provided by (used in) investing activities (28,815) 25,301 34,237 (90,296) Cash flows from financing activities: Proceeds from initial public offering, sale of common stock to related party, and public offerings, net of issuance costs 43,677 — — 250,548 Proceeds from draw down of committed equity financing facilities and at-the-market facility, net of commission and issuance costs 2,820 2,421 13,958 58,095 Proceeds from other issuances of common stock and warrants, net (336) 10,696 425 17,779 Proceeds from issuance of preferred stock, net of issuance costs 12,318 9,329 — 154,819 Repurchase of common stock — — — (68) Proceeds from loan with UBS — — — 12,441 Repayment of loan with UBS — — (10,201) (12,441) Proceeds from equipment financing lines — — — 23,696 Repayment of equipment financing lines (152) (833) (1,616) (24,170) Tax expense from stock-based compensation — — (20) — Net cash provided by financing activities 58,327 21,613 2,546 480,699 Net increase (decrease) in cash and cash equivalents (3,926) 1,319 (8,047) 14,907 Cash and cash equivalents, beginning of period 18,833 17,514 25,561 — Cash and cash equivalents, end of period $14,907 $18,833 $17,514 $14,907 The accompanying notes are an integral part of these financial statements. 79Table 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. TheCompany is a clinical-stage biopharmaceutical company focused on the discovery and development of novel small molecule therapeutics that modulate musclefunction for the potential treatment of serious diseases and medical conditions. The Company is a development stage enterprise and has been primarily engagedin conducting research, developing drug candidates and technologies, and raising capital.The Company’s financial statements contemplate the conduct of the Company’s operations in the normal course of business. The Company hasincurred an accumulated deficit of $448.9 million since inception and there can be no assurance that the Company will attain profitability. The Company hada net loss of $40.4 million and net cash used in operations of $33.4 million for the year ended December 31, 2012. Cash, cash equivalents and investmentsincreased to $74.0 million at December 31, 2012 from $49.0 million at December 31, 2011. The Company anticipates that it will continue to have operatinglosses and net cash outflows in future periods.The Company is subject to risks common to development stage companies including, but not limited to, development of new drug candidates,dependence on key personnel, and the ability to obtain additional capital as needed to fund its future plans. The Company’s liquidity will be impaired ifsufficient additional capital is not available on terms acceptable to the Company. To date, the Company has funded its operations primarily through sales ofits common stock and convertible preferred stock, contract payments under its collaboration agreements, debt financing arrangements, government grants andinterest income. Until it achieves profitable operations, the Company intends to continue to fund operations through payments from strategic collaborations,additional sales of equity securities, government grants and debt financings. The Company has never generated revenues from commercial sales of its drugsand may not have drugs to market for at least several years, if ever. The Company’s success is dependent on its ability to enter into new strategiccollaborations and/or raise additional capital and to successfully develop and market one or more of its drug candidates. As a result, the Company may chooseto raise additional capital through equity or debt financings to continue to fund its operations in the future. The Company cannot be certain that sufficientfunds will be available from such a financing or through a collaborator when required or on satisfactory terms. Additionally, there can be no assurance that theCompany’s drug candidates will be accepted in the marketplace or that any future products can be developed or manufactured at an acceptable cost. Thesefactors could have a material adverse effect on the Company’s future financial results, financial position and cash flows.Based on the current status of its development plans, the Company believes that its existing cash, cash equivalents and investments at December 31,2012 will be sufficient to fund its cash requirements for at least the next 12 months. If, at any time, the Company’s prospects for financing its research anddevelopment programs decline, the Company may decide to reduce research and development expenses by delaying, discontinuing or reducing its funding ofone or more of its 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.The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets 80Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expensesduring 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 are necessary for the fairpresentation of the balances and results for the periods presented.Concentration of Credit Risk and Other Risks and UncertaintiesFinancial instruments that potentially subject the Company to concentrations of risk consist principally of cash and cash equivalents, investments andaccounts receivable. The Company’s cash, cash equivalents and investments are invested in deposits with three major financial institutions in theU.S. Deposits in these banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any realized losses on itsdeposits 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 current negative macroeconomicindicators could negatively impact the Company’s ability to raise the funds necessary to support its business and may materially adversely affect itsbusiness, operating results and financial condition.The Company performs an ongoing credit evaluation of its strategic partners’ financial conditions and generally does not require collateral to secureaccounts receivable from its strategic partners. The Company’s exposure to credit risk associated with non-payment will be affected principally by conditionsor occurrences within Amgen Inc. (“Amgen”), its strategic partner. Approximately 55%, 51% and 58% of total revenues for the years ended December 31,2012, 2011 and 2010, respectively, were derived from Amgen. Accounts receivable due from Amgen were zero and $14,000 at December 31, 2012 and 2011,respectively and were included in related party accounts receivable. See also Note 7, “Related Party Transactions,” below regarding collaboration agreementswith Amgen.Drug candidates developed by the Company may require approvals or clearances from the U.S. Food and Drug Administration (“FDA”) or internationalregulatory agencies prior to commercialized sales. There can be no assurance that the Company’s drug candidates will receive any of the required approvals orclearances. If the Company were to be denied approval or clearance or any such approval or clearance were to be delayed, it would have a material adverseimpact on the Company.The Company’s operations and employees are located in the United States. In the years ended December 31, 2012, 2011 and 2010, all of the Company’srevenues were received from entities located in the United States or from United States affiliates of foreign corporations.Restricted CashIn accordance with the terms of the Company’s former line of credit agreement with General Electric Capital Corporation (“GE Capital”), the Companywas obligated to maintain a certificate of deposit with the lender. In January 2012, GE Capital reduced the amount of the Company’s certificate of deposit. InApril 2012, following the Company’s final payment of the remaining loan balance in March 2012, GE Capital returned the remaining balance of the certificateof deposit to the Company. 81Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) The balance of the certificate of deposit, which the Company classifies as restricted cash, was as follows (in thousands): December 31,2012 December 31,2011 Certificate of deposit classified as restricted cash $— $196 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 cash equivalents.InvestmentsAvailable-for-sale investments. The Company’s investments consist of U.S. Treasury securities, money market funds, U.S. municipal andgovernment agency bonds, and commercial paper. The Company designates all investments as available-for-sale and therefore reports them at fair value, withunrealized gains and losses recorded in accumulated other comprehensive loss. Investments with original maturities greater than three months and remainingmaturities of one year or less are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-terminvestments.Other-than-temporary impairment. All of the Company’s available-for-sale investments are subject to a periodic impairment review. The Companyrecognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factorsconsidered by management in assessing whether an other-than-temporary impairment has occurred include: the nature of the investment; whether the decline infair value is attributable to specific adverse conditions affecting the investment; the financial condition of the investee; the severity and the duration of theimpairment; and whether the Company has the intent and ability to hold the investment to maturity. When the Company determines that an other-than-temporary impairment has occurred, the investment is written down to its market value at the end of the period in which it is determined that an other-than-temporary decline has occurred. 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 be other-than-temporary, if any, onavailable-for-sale securities 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.Property and EquipmentProperty and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of therelated assets, which are generally three years for computer equipment and software, five years for laboratory equipment and office equipment, and sevenyears for furniture and fixtures. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease termor the estimated useful life of the related assets, typically ranging from three to seven years. Upon sale or retirement of assets, the costs and relatedaccumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairsare charged to operations as incurred. 82Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Impairment of Long-lived AssetsIn accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company reviews long-lived assets, includingproperty and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not befully recoverable. Under the accounting guidance, an impairment loss would be recognized when estimated undiscounted future cash flows expected to resultfrom the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is measured as the amount by which the carryingamount of a long-lived asset exceeds its fair value.Revenue RecognitionThe accounting guidance for revenue recognition requires that certain criteria must be met before revenue can be recognized: persuasive evidence of anarrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured.Determination of whether persuasive 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 of those fees. Shouldchanges in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognized for any reporting periodcould be adversely affected.Revenue under our license and collaboration arrangements is recognized based on the performance requirements of the contract. Research anddevelopment revenues, which are earned under agreements with third parties for agreed research and development activities, may include non-refundablelicense fees, research and development funding, cost reimbursements and contingent milestones and royalties. The Company’s collaborations prior toJanuary 1, 2011 with multiple elements were evaluated and divided into separate units of accounting if certain criteria are met, including whether the deliveredelement has stand-alone value to the customer and whether there was vendor-specific objective and reliable evidence (“VSOE”) of the fair value of theundelivered items. The consideration the Company receives was allocated among the separate units based on their respective fair values, and the applicablerevenue recognition criteria were applied to each of the separate units. The consideration the Company received was combined and recognized as a single unit ofaccounting when criteria for separation were not met. On January 1, 2011, Accounting Standard Codification (“ASC”) Topic 605-25, Revenue Recognition— Multiple-Element Arrangements (“ASC 605-25”) on the recognition of revenues for agreements with multiple deliverables became effective and applies toany agreements the Company may enter into on or after January 1, 2011. Under this updated guidance, revenue will be allocated to each element using aselling price hierarchy, where the selling price for an element is based on VSOE if available; third-party evidence (“TPE”), if available and VSOE is notavailable; or the best estimate of selling price, if neither VSOE nor TPE is available.Non-refundable license fees are recognized as revenue as the Company performs under the applicable agreement. Where the level of effort is relativelyconsistent over the performance period, the Company recognizes total fixed or determined revenue on a straight-line basis over the estimated period of expectedperformance.ASC Topic 605-28, Revenue Recognition — Milestone Method (“ASC 605-28”), established the milestone method as an acceptable method ofrevenue recognition for certain contingent event-based payments under research and development arrangements. Under the milestone method, a payment that iscontingent upon the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is 83Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) achieved. A milestone is an event (i) that can be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specificoutcome resulting from the Company’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event willbe achieved, and (iii) that would result in additional payments being due to the Company. The determination that a milestone is substantive is judgmental andis made at the inception of the arrangement. Milestones are considered substantive when the consideration earned from the achievement of the milestone is(i) commensurate with either the Company’s performance to achieve the milestone or the enhancement of value of the item delivered as a result of a specificoutcome resulting from the Company’s performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to alldeliverables and payment terms in the arrangement.Other contingent event-based payments received for which payment is either contingent solely upon the passage of time or the results of a collaborativepartner’s performance are not considered milestones under ASC 605-28. In accordance with ASC 605-25, such payments will be recognized as revenue whenall of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; price is fixed ordeterminable; and collectability is reasonably assured.Prior to January 1, 2011, the Company recognized milestone payments as revenue upon achievement of the milestone, provided the milestone payment isnon-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 were not met, the Company deferred the milestone payment andrecognized it as revenue over the estimated period of performance under the contract as the Company completed its performance obligations. The Company hasconcluded that all of the future contingent milestone payments pursuant to its research and development arrangements entered into as of January 1, 2011 arenot considered substantive as they are the results of a collaborative partner’s performance. Therefore, they are not considered milestones under ASC 605-28.Research and development revenues and cost reimbursements are based upon negotiated rates for the Company’s full-time employee equivalents (“FTE”)and actual out-of-pocket costs. FTE rates are negotiated rates that are based upon the Company’s costs, and which the Company believes approximate fairvalue. Any amounts received in advance of performance are recorded as deferred revenue. None of the revenues recognized to date are refundable if the relevantresearch effort is not successful. In revenue arrangements in which both parties make payments to each other, the Company evaluates the payments inaccordance with the accounting guidance for arrangements under which consideration is given by a vendor to a customer, including a reseller of the vendor’sproducts, to determine whether payments made by us will be recognized as a reduction of revenue or as expense. In accordance with this guidance, revenuerecognized by the 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. The application of theaccounting 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 principal participant in the grantarrangement as the activities under the grant are part of the Company’s development program. If the Company is not the principal participant, the grant fundsare recorded as a reduction to research and development expense. Grant funds received are not refundable and are recognized when the related qualified researchand development costs are incurred and when there is reasonable assurance that the funds will be received. Funds received in advance are recorded as deferredrevenue. 84Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) 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 researchorganizations (“CROs”) and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completedto date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled,duration of enrollment and percentage of work completed to date. The Company monitors patient enrollment levels and related activities to the extent practicablethrough 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 may under- or overestimateactivity levels associated with various studies or trials at a given point in time. In this event, it could record adjustments to research and development expensesin future periods when the actual activity level becomes known. No material adjustments to preclinical study and clinical trial expenses have been recognizedto 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 the plan sinceinception.Income TaxesThe Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on thedifference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences areexpected to affect taxable income. Valuation allowances are established when necessary to reduce deferred 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 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 the recognition threshold ismet, the tax benefit is measured and recognized as the largest amount of tax benefit that, in the Company’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 its components. In June 2011,the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that revised the manner in which entities present comprehensive incomein their financial statements. The new guidance requires entities to present comprehensive income either in a continuous statement of comprehensive income,which replaces the statement of operations, or in two separate, consecutive statements. The new guidance does not change the items that must be reported inother comprehensive income, nor does it require new disclosures. On January 1, 2012 The Company adopted new accounting guidance and presentscomprehensive income (loss) in a continuous statement of comprehensive income (loss) which replaced the 85Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) statement of operations. Comprehensive loss includes all changes in stockholders’ equity during a period from non-owner sources. Comprehensive loss foreach of the years ended December 31, 2012, 2011, and 2010 was equal to net loss adjusted for unrealized gains and losses on investments.Segment ReportingThe Company has determined that it operates in only one segment.Recent Accounting PronouncementsRecently Adopted Accounting PronouncementsIn June 2011, the FASB issued new accounting guidance that revised the manner in which entities present comprehensive income in their financialstatements. The new guidance requires entities to present comprehensive income either in a continuous statement of comprehensive income, which replaces thestatement of operations, or in two separate, consecutive statements. The new guidance does not change the items that must be reported in other comprehensiveincome, nor does it require new disclosures. The Company’s adoption of the new guidance on January 1, 2012 did not have a material impact on its financialposition or results of operations.In May 2011, the FASB issued updated accounting guidance on fair value measurements and disclosures. The new guidance primarily includesclarifications of existing guidance and certain changes to conform to International Financial Reporting Standards. The Company’s adoption of the newguidance on January 1, 2012 did not have a material impact on its financial position or results of operations.Accounting Pronouncements Not Yet AdoptedIn February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This updaterequires entities to disclose items reclassified out of accumulated other comprehensive income and into net income in a single location within the financialstatements. This new guidance is effective for the Company beginning January 1, 2013, with early adoption permitted. The adoption of ASU 2013-02 will nothave a material impact on the Company’s consolidated financial position or results of operations. 86Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Note 2 — Net Loss Per ShareBasic net loss per share allocable to common stockholders is computed by dividing net loss allocable to common stockholders by the weighted averagenumber of vested common shares outstanding during the period. Diluted net income loss per share allocable to common stockholders is computed by givingeffect to all potentially dilutive common shares, including outstanding stock options, unvested restricted stock, warrants, convertible preferred stock andshares issuable under the Company’s Employee Stock Purchase Plan (“ESPP”), by applying the treasury stock method. The following is the calculation ofbasic and diluted net loss per share allocable to common stockholders (in thousands except per share data): Years Ended December 31, 2012 2011 2010 Net loss $(40,370) $(47,860) $(49,287) Deemed dividend related to beneficial conversion feature of convertible preferred stock (1,307) (2,857) — Net loss allocable to common stockholders $(41,677) $(50,717) $(49,287) Weighted-average common shares outstanding 108,642 70,800 64,286 Unvested restricted stock — — (121) Weighted-average shares used in computing net loss per share allocable to commonstockholders — basic and diluted 108,642 70,800 64,165 Net loss per share allocable to common stockholders — basic and diluted $(0.38) $(0.72) $(0.77) The following instruments were excluded from the computation of diluted net loss per common share allocable to common stockholders for the periodspresented because their effect would have been antidilutive (in thousands): December 31, 2012 2011 2010 Options to purchase common stock 10,744 9,592 8,096 Warrants to purchase common stock 54,053 6,685 4,027 Series A convertible preferred stock (as converted to common stock) — 8,070 — Series B convertible preferred stock (as converted to common stock) 23,026 — — Restricted stock units 1,302 3,106 — Shares issuable related to the ESPP 66 48 40 Total shares 89,191 27,501 12,163 87Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Note 3 — Supplementary Cash Flow DataSupplemental cash flow information was as follows (in thousands): Years EndedDecember 31, Period fromAugust 5, 1997(Date of Inception) toDecember 31, 2012 2012 2011 2010 Cash paid for interest $3 $41 $170 $4,612 Cash paid for income taxes 1 1 1 13 Significant non-cash investing and financing activities: Deferred stock-based compensation — — — 6,940 Purchases of property and equipment through accounts payable 116 13 141 116 Purchases of property and equipment through accrued liabilities 37 — — 37 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 equity financing — — — 1,585 Note 4 — Cash Equivalents and InvestmentsCash Equivalents and Available for Sale InvestmentsThe amortized cost and fair value of cash equivalents and available for sale investments at December 31, 2012 and 2011 were as follows (inthousands): December 31, 2012 AmortizedCost UnrealizedGains UnrealizedLosses FairValue MaturityDates Cash equivalents — money market funds $10,655 $— $— $10,655 Short-term investments — U.S. Treasury securities $59,075 $18 $— $59,093 1/2013 — 11/2013 December 31, 2011 AmortizedCost UnrealizedGains UnrealizedLosses FairValue MaturityDates Cash equivalents — money market funds $13,650 $— $— $13,650 Short-term investments — U.S. Treasury securities $30,187 $4 $(1) $30,190 1/2012 — 6/2012 As of December 31, 2012 and December 31, 2011, the Company’s U.S. Treasury securities classified as short-term investments had unrealized lossesof approximately zero and $1,000, respectively. The unrealized losses in 2011 were primarily caused by slight increases in short-term interest rates subsequentto the purchase 88Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) date of the related securities. The Company collected the contractual cash flows on its U.S. Treasury securities that matured from January 1, 2012 throughFebruary 28, 2013 and expects to be able to collect all contractual cash flows on the remaining maturities of its U.S. Treasury securities.Interest income was as follows (in thousands): Years EndedDecember 31, Period fromAugust 5, 1997(Date of Inception) toDecember 31, 2012 2012 2011 2010 Interest income $83 $132 $318 $28,608 Note 5 — Fair Value MeasurementsThe Company adopted the fair value accounting guidance to value its financial assets and liabilities. Fair value is defined as the price that would bereceived for assets when sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). TheCompany utilizes market data or assumptions that the Company believes market participants would use in pricing the asset or liability, includingassumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated orgenerally unobservable.The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best information reasonablyavailable. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs tothe extent possible, and considers the security issuers’ and the third-party insurers’ credit risk in its assessment of fair value.The Company classifies the determined fair value based on the observability of those inputs. Fair value accounting guidance establishes a fair valuehierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets foridentical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three defined levels of the fairvalue 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 with observable marketdata; andLevel 3 — Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-developed valuation models. 89Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Financial assets measured at fair value on a recurring basis as of December 31, 2012 and 2011 are classified in the table below in one of the threecategories described above (in thousands): December 31, 2012 Fair Value Measurements Using AssetsAt Fair Value Level 1 Level 2 Level 3 Money market funds $10,655 $— $— $10,655 U.S. Treasury securities 59,093 — — 59,093 Total $69,748 $— $— $69,748 Amounts included in: Cash and cash equivalents $10,655 $— $— $10,655 Short-term investments 59,093 — — 59,093 Total $69,748 $— $— $69,748 December 31, 2011 Fair Value Measurements Using AssetsAt Fair Value Level 1 Level 2 Level 3 Money market funds $13,650 $— $— $13,650 U.S. Treasury securities 30,190 — — 30,190 Total $43,840 $— $— $43,840 Amounts included in: Cash and cash equivalents $13,650 $— $— $13,650 Short-term investments 30,190 — — 30,190 Total $43,840 $— $— $43,840 The valuation technique used to measure fair value for the Company’s Level 1 assets is a market approach, using prices and other relevant informationgenerated by market transactions involving identical assets. As of December 31, 2012 and 2011, the Company had no financial assets measured at fair valueon a recurring basis using significant Level 2 or Level 3 inputs.The Company’s equipment financing line debt as of December 31, 2011 was not recorded at fair value, but the Company is required to disclose its fairvalue. The Company determined the fair value of the equipment financing line debt using a discount cash flow model. The major inputs to the model areexpected cash flows, which equal the contractual payments, and borrowing rates available to the Company for similar debt as of the applicable balance sheetdates. We repaid the remaining balance of our equipment financing line debt in the March 2012 and no further funds are available to us under this line. Thefair value and the carrying value of the equipment financing line debt as of December 31, 2012 and 2011 were as follows (in thousands): December 31,2012 December 31,2011 Carrying value — equipment financing line $— $152 Fair value — equipment financing line $— $138 90Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) The carrying amount of the Company’s accounts receivable and accounts payable approximates fair value due to the short-term nature of theseinstruments.Note 6 — Balance Sheet ComponentsProperty and equipment balances were as follows (in thousands): December 31, 2012 2011 Property and equipment, net: Laboratory equipment $17,064 $17,016 Computer equipment and software 3,190 3,105 Office equipment, furniture and fixtures 638 623 Leasehold improvements 3,393 3,358 24,285 24,102 Less: Accumulated depreciation and amortization (23,288) (22,792) $997 $1,310 Property and equipment pledged as collateral against outstanding borrowings under the Company’s equipment financing lines totaled zero atDecember 31, 2012 and $5.2 million, less accumulated depreciation of $5.1 million, at December 31, 2011. Depreciation expense was $0.6 million, $1.3million and $1.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.Accrued liabilities were as follows (in thousands): December 31, 2012 2011 Accrued liabilities: Clinical and preclinical costs $2,170 $1,664 Consulting and professional fees 312 427 Bonus 1,355 — Vacation pay 696 739 Other payroll related 87 107 Other accrued expenses 257 295 $4,877 $3,232 Interest receivable on cash equivalents and investments of $187,000 and $206,000 is included in prepaid and other current assets at December 31, 2012and 2011, respectively.Note 7 — Related Party TransactionsResearch and Development ArrangementsAmgenOn December 29, 2006, the Company entered into a collaboration and option agreement with Amgen (the “Amgen Agreement”) to discover, develop andcommercialize novel small-molecule therapeutics that activate cardiac muscle contractility for potential applications in the treatment of heart failure, includingomecamtiv 91Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) mecarbil, formerly known as CK-1827452. The Amgen Agreement provided Amgen a non-exclusive license and access to certain technology, and an option toobtain an exclusive license to omecamtiv mecarbil and related compounds worldwide, except Japan. Under the agreement, the Company received an upfront,non-refundable license and technology access fee of $42.0 million from Amgen, which the Company was recognizing as revenue ratably over the maximumterm of the non-exclusive license, which was four years. Management determined that the obligations under the non-exclusive license did not meet therequirement 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 purchase agreement (the “CSPA”)with Amgen, which provided 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 the CSPA. After deducting theoffering costs, the Company received net proceeds of approximately $32.9 million in January 2007. The common stock was valued using the closing price ofthe common stock on December 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 deferred revenue in January2007 and was being recognized as revenue ratably over the maximum term of the non-exclusive license granted to Amgen under the collaboration and optionagreement, which was four years.Prior to Amgen’s exercise of its option, the Company conducted research and development activities at its own expense for omecamtiv mecarbil inaccordance with an agreed upon plan. In May 2009, Amgen exercised its option. In connection with the exercise of the option, Amgen paid the Company a non-refundable option exercise fee of $50.0 million in June 2009. At that time, Amgen assumed responsibility for the development and commercialization ofomecamtiv mecarbil and related compounds, at Amgen’s expense, subject to the Company’s specified development and commercial participation rights.Amgen’s exclusive license extends for the life of the intellectual property that is the subject of the license, and the Company has no further performanceobligations related to research and development under the program, except as defined by the annual joint research and development plans as the parties maymutually 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 to assume responsibilityfor development and commercialization of omecamtiv mecarbil and related compounds. Under the Amgen Agreement, the Company may be eligible to receivepre-commercialization and commercialization milestone payments of up to $600.0 million in the aggregate on omecamtiv mecarbil and other potential productsarising from research under the collaboration and royalties that escalate based on increasing levels of the annual net sales of products commercialized under theagreement. None of the future contingent milestone payments pursuant to this arrangement as of January 1, 2011 are considered substantive as they are theresults of Amgen’s performance. Therefore, they are not considered milestones under ASC 605-28. The agreement also provides for the Company to receiveincreased royalties by co-funding Phase III development costs of drug candidates under the collaboration. If the Company elects to co-fund such costs, it wouldbe entitled to co-promote products in North America and participate in agreed commercial activities in institutional care settings, at Amgen’s expense.Prior to Amgen’s exercise of its option in May 2009, the Company was amortizing the 2006 non-exclusive license and technology access fee from Amgenand related stock purchase premium over the maximum term of the non-exclusive license, which was four years. The non-exclusive license period ended uponthe exercise of 92Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Amgen’s option in May 2009. The Company has no further performance obligations related to the non-exclusive license. Accordingly, the Company recognizedas revenue the balance of the deferred Amgen revenue at the time Amgen exercised its option.Subsequent to Amgen obtaining the exclusive license to omecamtiv mecarbil and related compounds, the Company is providing research anddevelopment support of the program, as and when agreed to by both parties. Under the Amgen Agreement, Amgen reimburses the Company for such activitiesat predetermined rates per FTE, and for related out of pocket expenses at cost, including purchases of clinical trial material at manufacturing cost. The FTErates are negotiated rates that are based upon the Company’s costs, and which the Company believes approximate fair value. In 2009, pursuant to the AmgenAgreement, the Company transferred to Amgen the majority of the Company’s existing inventories of omecamtiv mecarbil and related reference materials. The$4.0 million purchase price for these materials was a negotiated price and represented the fair value of the materials transferred. The Company’s out of pocketcosts for 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, 2012 2011 2010 FTE reimbursements $4,174 $1,988 $910 Reimbursements of other costs 3 66 577 Total research and development revenues from Amgen 4,177 2,054 1,487 In the period from August 5, 1997 (inception) through December 31, 2012, the Company has recognized as related party research and developmentrevenues from Amgen $14.8 million of reimbursements for FTE, material transfers and other costs, and $50.0 million for the option exercise fee.Related party accounts receivable from Amgen was as follows (in thousands): December 31,2012 December 31,2011 Related party accounts receivable — Amgen $— $14 Note 8 — Other Research and Development Revenue ArrangementsGrantsIn 2010, the National Institute of Neurological Disorders and Strokes (“NINDS”) awarded to the Company a $2.8 million grant to support research anddevelopment of tirasemtiv directed to the potential treatment for myasthenia gravis for a period of up to three years. In September 2012, the NINDS awarded tous an additional $0.5 million under a separate grant. Management has determined that the Company is the principal participant in the grant arrangement, and,accordingly, the Company records amounts earned under the arrangement as revenue.In November 2010, the Company was notified by the U.S. Department of the Treasury that it would receive total cash grants of $0.7 million based onits applications for certain investments in qualified therapeutic discovery projects under Section 48D of the Internal Revenue Code. The grants related to certainresearch and development costs the Company incurred in 2009 in connection with its cardiac, skeletal and smooth muscle contractility programs. 93Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Total grant revenues were as follows (in thousands): Years Ended December 31, 2012 2011 2010 NINDS myasthenia gravis $1,308 $1,680 $356 U.S. Department of the Treasury — — 734 Total grant revenue $1,308 $1,680 $1,090 Other Research and Development ArrangementsAs part of an initiative to seek certain more focused collaborations intended to allow us to offset our research costs, the Company entered into agreementswith two early-stage biopharmaceutical companies during 2011 and 2012.In October 2011, the Company entered into a collaboration agreement with Global Blood Therapeutics, Inc. (formerly called Global Blood Targeting,Inc.) (“Global Blood”). Under an agreed research plan, scientists from Global Blood and our FTEs conducted research focused on small molecule therapeuticsthat target the blood. The Company provided to Global Blood access to certain research facilities, FTEs and other resources at agreed reimbursement rates thatapproximated our costs. In April 2012, the Company extended this agreement through December 2012. The Company was the primary obligor in thecollaboration arrangement, and accordingly, the Company recorded expense reimbursements from Global Blood as research and development revenue.Research and development revenue from Global Blood was as follows (in thousands): Years Ended December 31, 2012 2011 2010 Expense reimbursements from Global Blood $1,479 $266 $— In August 2012, the Company entered into a collaboration agreement with MyoKardia, Inc. Under an agreed research plan, scientists from MyoKardiaand our FTEs conduct research focused on small molecule therapeutics that inhibit cardiac sarcomere proteins. The Company provided to MyoKardia accessto certain research facilities, and continues to provide FTEs and other resources at agreed reimbursement rates that approximate our costs. The Company is theprimary obligor in the collaboration arrangement, and accordingly, the Company records expense reimbursements from MyoKardia as research anddevelopment revenue.Research and development revenue from MyoKardia was as follows (in thousands): Years Ended December 31, 2012 2011 2010 Expense reimbursements from MyoKardia $595 $— $— 94Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Note 9 — DebtEquipment Financing LinesIn April 2006, the Company entered into an equipment financing agreement with GE Capital under which the Company could borrow $4.6 millionthrough a line of credit expiring April 28, 2007. In 2007 and 2006, the Company executed draws on this line of credit totaling approximately $4.1 million atinterest rates ranging from 7.24% to 7.68%. As of December 31, 2011, the balance of equipment loans outstanding under this line was $152,000. We repaidthe remaining outstanding equipment financing debt in March 2012 and no further funds are available to us under this line.Interest ExpenseTotal interest expense incurred by the Company was as follows (in thousands): Years Ended December 31, Period fromAugust 5, 1997(Date ofInception) toDecember 31,2012 2012 2011 2010 Interest expense $3 $35 $176 $5,376 Note 10 — RestructuringIn October 2011, the Company announced a restructuring plan to realign its workforce and operations in line with its continued commitment to focusprimarily on the development of its key later-stage development programs for tirasemtiv and omecamtiv mecarbil and on its follow-on skeletal muscle troponinactivator program and joint research with Amgen directed to next-generation compounds in its cardiac muscle contractility program. As a result, the Companyreduced its workforce by 18 employees, or approximately 18%, to 83 employees. The Company provided severance, employee benefit continuation and careertransition assistance to the employees directly affected by the restructuring. The Company incurred restructuring charges of $1.2 million in the fourth quarterof 2011, primarily personnel-related termination costs.The following table summarizes the activity for the restructuring plan (in thousands): Employee Severanceand Related Benefits Restructuring liability at December 31, 2010 $— 2011 charges 1,192 Cash payments (998) Restructuring liability at December 31, 2011 194 2012 reversals (58) Cash payments (136) Restructuring liability at December 31, 2012 $— 95Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Note 11 — Commitments and ContingenciesLeasesThe Company leases office space and equipment under a non-cancelable operating lease that expires in 2018. The lease terms provide for rentalpayments on a graduated scale and the Company’s payment of certain operating expenses. The Company recognizes rent expense on a straight-line basis overthe lease period.Rent expense was as follows (in thousands): Years Ended December 31, Period fromAugust 5, 1997(Date ofInception) toDecember 31,2012 2012 2011 2010 Rent expense $3,375 $2,990 $2,964 $33,666 As of December 31, 2012, future minimum lease payments under noncancelable operating leases were as follows (in thousands): 2013 $3,110 2014 3,357 2015 3,470 2016 3,587 2017 3,713 Thereafter 1,906 Total $19,143 In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners andother parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to beprovided by or on behalf of the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered intoindemnification agreements with its directors and certain of its officers and employees that will require the Company, among other things, to indemnify themagainst certain liabilities that may arise by reason of their status or service as directors, officers or employees. The Company maintains director and officerinsurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and formerofficers and directors in certain circumstances. The Company maintains product liability insurance and comprehensive general liability insurance, whichmay cover certain liabilities arising from its indemnification obligations. It is not possible to determine the maximum potential amount of exposure under theseindemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particularindemnification obligation. Such indemnification obligations may not be subject to maximum loss clauses.Note 12 — Convertible Preferred StockAs of December 31, 2010 there were 10,000,000 shares of preferred stock authorized and no shares outstanding. 96Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) On April 18, 2011, the Company entered into a securities purchase agreement (the “Deerfield Agreement”) with Deerfield Private Design Fund II, L.P.,Deerfield Private Design International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited(collectively, “Deerfield”). On April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield 8,070 shares of Series A convertiblepreferred stock (the “Series A Preferred Stock”) for a purchase price of $1,500.00 per share for net proceeds of approximately $9.3 million, as well ascommon stock and warrants that are discussed in Note 13 — Stockholders’ Equity (Deficit).Each share of Series A Preferred Stock was convertible into 1,000 shares of common stock at any time at the holder’s option. However, the holder wasprohibited from converting the Series A Preferred Stock into shares of common stock if, as a result of such conversion, the holder and its affiliates would ownmore than 9.98% of the total number of shares of common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution, orwinding up, holders of Series A Preferred Stock would receive a payment equal to $0.001 per share before any proceeds are distributed to the commonstockholders. Shares of Series A Preferred Stock generally had no voting rights, except as required by law and except that the consent of holders of a majorityof the outstanding Series A Preferred Stock was required to amend the terms of the Series A Preferred Stock. Holders of Series A Preferred Stock were notentitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. The Series A Preferred Stock ranked senior tothe Company’s common stock as to distributions of assets upon the Company’s liquidation, dissolution or winding up, whether voluntarily or involuntarily.The Series A Preferred Stock may have ranked senior to, on parity with or junior to any class or series of the Company’s capital stock created in the futuredepending upon the specific terms of such future stock issuance.The fair value of the common stock into which the Series A Preferred Stock was convertible exceeded the allocated purchase price of the Series APreferred Stock by $2.9 million on the date of issuance, resulting in a beneficial conversion feature. The Company recognized the beneficial conversion featureas a one-time, non-cash, deemed dividend to the holders of Series A Preferred Stock on the date of issuance, which is the date the stock first becameconvertible.On September 26, 2012, all 8,070 shares of Series A Preferred Stock were converted into 8,070,000 shares of our common stock. The conversion wasin accordance with the terms of the agreement with Deerfield under which the Series A Preferred Stock was issued in 2011.On June 20, 2012, the Company entered into underwriting agreements for two separate, concurrent public offerings of the Company’s securities (the“June 2012 Public Offerings”). On June 25, 2012, pursuant to the underwriting agreements, in aggregate the Company issued to certain investors 23,026shares of Series B convertible preferred stock (the “Series B Preferred Stock”) for a purchase price of $760.00 per share, for net proceeds of approximately$12.3 million.Each share of Series B Preferred Stock is convertible into 1,000 shares of common stock at any time at the holder’s option. However, the holder isprohibited from converting the Series B Preferred Stock into shares of common stock if, as a result of such conversion, the holder and its affiliates would ownmore than 9.98% of the total number of shares of common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution, orwinding up, holders of Series B Preferred Stock will receive a payment equal to $0.001 per share before any proceeds are distributed to the commonstockholders. Shares of Series B Preferred Stock generally have no voting rights, except as required by law and except that the consent of holders of a majorityof the outstanding Series B Preferred Stock is required to amend the terms of the Series B Preferred Stock. Holders of Series B Preferred Stock are not entitledto receive any dividends, unless and until specifically declared by the 97Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Company’s board of directors. The Series B Preferred Stock ranks senior to the Company’s common stock as to distributions of assets upon the Company’sliquidation, dissolution or winding up, whether voluntarily or involuntarily. The Series B Preferred Stock may rank senior to, on parity with or junior to anyclass or series of the Company’s capital stock created in the future depending upon the specific terms of such future stock issuance.The fair value of the common stock into which the Series B Preferred Stock is convertible exceeded the allocated purchase price of the Series B PreferredStock by $1.3 million on the date of issuance, resulting in a beneficial conversion feature. The Company recognized the beneficial conversion feature as a one-time, non-cash, deemed dividend to the holders of Series B Preferred Stock on the date of issuance, which is the date the stock first became convertible.On January 25, 2013, 2,000 shares of Series B Preferred Stock were converted into 2,000,000 shares of our common stock. The conversion was inaccordance with the terms of the original agreement under which the Series B Preferred Stock was issued in 2012.Note 13 — Stockholders’ Equity (Deficit)Authorized SharesOn May 18, 2011, the stockholders approved an increase in the number of authorized shares of common stock from 170,000,000 to 245,000,000. Theincrease became effective in August 2011, when the Company filed the Certificate of Amendment of Amended and Restated Certificate of Incorporation with theSecretary of State of the State of Delaware.Common Stock OutstandingOn April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield (i) 5,300,000 shares of common stock for a purchase price of$1.50 per share, (ii) 8,070 shares of Series A convertible preferred stock (the “Series A Preferred Stock”) for a purchase price of $1,500.00 per share, and(iii) warrants to purchase 6,685,000 shares of the Company’s common stock at an initial exercise price of $1.65 per share, for aggregate gross proceeds ofapproximately $20.1 million. After issuance costs of approximately $0.2 million, the net proceeds were approximately $19.9 million.The offering was made pursuant to a shelf registration statement that the Company filed with the SEC on November 10, 2008, which became effectiveon November 19, 2008 (File No. 333-155259). The closing of the offering took place on April 20, 2011.In accordance with the accounting guidance for valuing stock and warrants when preferred stock, common stock and warrants are issued in a singletransaction and all are to be accounted for as equity, the Company allocated the gross purchase proceeds using the relative fair value method. The fair value ofthe common stock issued to Deerfield was calculated based on the closing price of the stock on the commitment date as quoted on The NASDAQ GlobalMarket. The Series A Preferred Stock was valued based on the fair value of the Company’s common stock on the commitment date times the conversion ratioof one share of preferred to one thousand shares of common stock. The fair value of the Series A Preferred Stock was determined to be essentially equivalent tothe fair value of the common stock into which it is convertible, based on the preferred holders’ ability to immediately convert the Series A Preferred Stock tocommon stock and the fact that the liquidation preference of the Series A Preferred Stock is only $0.001 per share. The fair value of the warrants was 98Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) determined using the Black-Scholes pricing model, as discussed above. The relative fair value ratio of each of the instruments issued was then applied to thetotal gross proceeds of $20.1 million, resulting in allocated purchase prices of $6.2 million for the common stock, $9.4 million for the Series A PreferredStock and $4.5 million for the warrants.On September 26, 2012, all 8,070 shares of Series A Convertible Preferred Stock were converted into 8,070,000 shares of our common stock. Theconversion was in accordance with the terms of the original agreement under which the Series A Convertible Preferred Stock was issued in 2011.On June 10, 2011, the Company entered into an At-The-Market Issuance Sales Agreement (the “MLV Agreement”) with McNicoll, Lewis & Vlak LLC(“MLV”), pursuant to which the Company may issue and sell shares of common stock having an aggregate offering price of up to $20.0 million or14,383,670 shares, whichever occurs first, from time to time through MLV as the sales agent. The issuance and sale of shares by the Company under theMLV Agreement, if any, are subject to the continued effectiveness of its registration statement on Form S-3, which was declared effective by the SEC onJune 23, 2011 (File No. 333-174869).Sales of the Company’s common stock through MLV are made by means of ordinary brokers’ transactions at market prices or as otherwise agreed toby the Company and MLV. Subject to the terms and conditions of the MLV Agreement, MLV uses commercially reasonable efforts to sell the Company’scommon stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters orconditions the Company may impose). The Company is not obligated to make any sales of common stock under the MLV Agreement. The offering of sharesof common stock pursuant to the MLV Agreement will terminate upon the earlier of (1) the sale of all common stock subject to the MLV Agreement or(2) termination of the MLV Agreement. The MLV Agreement may be terminated by MLV or the Company at any time upon ten days notice to the other party,or by MLV at any time in certain circumstances, including the occurrence of a material adverse change in the Company’s business. The Company pays MLVa commission rate equal to 3.0% of the gross sales price per share of any common stock sold under the MLV Agreement. The Company has provided MLVwith customary indemnification and contribution rights. The Company incurred approximately $0.1 million of issuance costs associated with this offering.As of December 31, 2012, the Company has sold 5,175,549 shares of common stock through MLV for net proceeds of approximately $5.3 million.On June 25, 2012, pursuant to the June 2012 Public Offerings, in aggregate the Company issued to various investors (i) 55,921,054 shares ofcommon stock for a purchase price of $0.76 per share, (ii) 23,026 shares of the Series B Preferred Stock for a purchase price of $760.00 per share, and(iii) warrants to purchase 47,368,225 shares of the Company’s common stock at an exercise price of $0.88 per share, for aggregate gross proceeds ofapproximately $60.0 million. After issuance costs of approximately $4.0 million, the net proceeds from the June 2012 Public Offerings were approximately$56.0 million.The offerings were made pursuant to a shelf registration statement that the Company filed with the SEC on November 25, 2011, which became effectiveon December 8, 2011 (File No. 333-178189) and a supplemental shelf registration statement on Form S-3MEF that the Company filed with the SEC onJune 20, 2012, which became effective on June 20, 2012 (File No. 333-182226). The closing of the offerings took place on June 25, 2012.In accordance with the accounting guidance for valuing stock and warrants when stock is issued in conjunction with other securities, and the stock andother securities are to be accounted for as equity, the Company allocated the gross purchase proceeds using the relative fair value method. For accountingpurposes, 99Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) the June 2012 Public Offerings were considered to be one transaction. The fair value of the common stock issued in the June 2012 Public Offerings wascalculated based on the closing price of the stock on the commitment date as quoted on The NASDAQ Global Market. The Series B Preferred Stock wasvalued based on the fair value of the Company’s common stock on the commitment date times the conversion ratio of one share of preferred stock to onethousand shares of common stock. The fair value of the Series B Preferred Stock was determined to be essentially equivalent to the fair value of the commonstock into which it is convertible, based on the preferred holders’ ability to immediately convert the Series B Preferred Stock to common stock and the factthat the liquidation preference of the Series B Preferred Stock is only $0.001 per share. The fair value of the warrants was determined using the Black-Scholespricing model, as discussed above. The relative fair value ratio of each of the instruments issued was then applied to the total gross proceeds of $60.0 million,resulting in allocated purchase prices of $32.1 million for the common stock, $13.2 million for the Series B Preferred Stock, and $14.7 million for thewarrants.WarrantsOn April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield warrants to purchase 6,685,000 shares of the Company’scommon stock at an initial exercise price of $1.65 per share, for aggregate gross proceeds of approximately $4.5 million. After issuance costs ofapproximately $0.1 million, the net proceeds were approximately $4.4 million. The warrants issued to Deerfield became exercisable on October 20, 2011 andwill remain exercisable until April 20, 2015. The warrant holders are prohibited from exercising the warrants and obtaining shares of common stock if, as aresult of such exercise, the holder and its affiliates would own more than 9.98% of the total number of shares of the Company’s common stock then issuedand outstanding. The Company valued the warrants as of the date of issuance at $5.8 million using the Black-Scholes option pricing model and the followingassumptions: a contractual term of four years, a risk-free interest rate of 1.66%, volatility of 80%, and the fair value of the Company’s common stock on theissuance date of $1.52.On June 25, 2012, pursuant to the June 2012 Public Offerings, the Company issued warrants to purchase 47,368,225 shares of the Company’scommon stock at an exercise price of $0.88 per share, for an aggregate gross proceeds of approximately $14.7 million. The warrant holders are prohibitedfrom exercising the warrants and obtaining shares of common stock if, as a result of such exercise, the holder and its affiliates would own more than 9.98%of the total number of shares of the Company’s common stock then issued and outstanding. The Company valued the warrants as of the date of issuance at$16.2 million using the Black-Scholes option pricing model and the following assumptions: a contractual term of five years, a risk-free interest rate of 0.73%,volatility of 76%, and the fair value of the Company’s common stock on the issuance date of $0.63. As of December 31 2012, all of the warrants wereoutstanding and exercisable.Outstanding warrants as of December 31, 2012 were as follows: Numberof Shares ExercisePrice ExpirationDate Issued 4/20/2011 6,685,000 $1.65 04/20/15 Issued 6/25/2012 47,368,225 $0.88 06/25/17 On February 8, 2013, warrants to purchase 6,000 shares of our common stock at an exercise price of $0.88 per share were exercised in accordance withthe June 2012 Public Offerings underwriting agreements. 100Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Stock Option Plans2004 PlanIn January 2004, the Board of Directors adopted the 2004 Equity Incentive Plan (the “2004 Plan”), which was approved by the stockholders in February2004. The 2004 Plan provides for the granting of incentive stock options, nonstatutory stock options, restricted stock, stock appreciation rights, stockperformance units and stock performance shares to employees, directors and consultants. Under the 2004 Plan, options may be granted at prices not lowerthan 100% of the fair market value of the common stock on the date of grant for nonstatutory stock options and incentive stock options and may be grantedfor terms of up to ten years from the date of grant. Options granted to new employees generally vest 25% after one year and monthly thereafter over a period offour years. Options granted to existing employees generally vest monthly over a period of four years. At the May 2012 Annual Meeting of Stockholders, thenumber of shares of common stock authorized for issuance under the 2004 Plan was increased by 2,500,000. As of December 31, 2012, there were17,044,970 shares of common stock reserved 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 granting of stock options toemployees and consultants of the Company. Options granted under the 1997 Plan may be either incentive stock options or nonstatutory stock options.Incentive stock options may be granted only to Company employees (including officers and directors who are also employees). Nonstatutory stock optionsmay be granted to Company employees and consultants. Options under the Plan may be granted for terms of up to ten years from the date of grant asdetermined by the Board of Directors, provided, however, that (i) the exercise price of an incentive stock option and nonstatutory stock option shall not be lessthan 100% and 85% of the estimated fair market value of the shares on the date of grant, respectively, and (ii) with respect to any 10% stockholder, theexercise price of an incentive 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 repurchase options held by theCompany which lapse over a maximum period of ten years at such times and under such conditions as determined by the Board of Directors. Options grantedunder the 1997 Plan generally vested over four or five years (generally 25% after one year and monthly thereafter). As of December 31, 2012, the Companyhad reserved 271,451 shares of common stock for issuance related to options outstanding under the 1997 Plan, and there were no shares available for futuregrants under the 1997 Plan. 101Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Activity under the two stock option plans was as follows: SharesAvailable forGrant of Optionor Award Stock OptionsOutstanding WeightedAverage ExercisePrice per Share -Stock Options WeightedAverage remainingcontractual Life AggregateIntrinsicValue 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 Increase in authorized shares 3,000,000 — — Options granted (2,552,756) 2,552,756 1.59 Restricted stock units granted (3,190,500) — — Options exercised — (16,000) 1.09 Options forfeited/expired 1,041,568 (1,041,568) 3.77 Restricted stock units forfeited 85,000 — — Balance at December 31, 2011 3,511,007 9,591,664 3.66 Increase in authorized shares 2,500,000 — — Options granted (2,418,857) 2,418,857 1.02 Options forfeited/expired 1,266,203 (1,266,203) 2.83 Restricted stock units forfeited 412,250 — — Balance at December 31, 2012 5,270,603 10,744,318 $3.15 6.39 $679.23 Exercisable at December 31, 2012 7,713,591 $3.82 5.54 $0.00 Vested and expected to vest as of December 31,2012 10,744,318 $3.15 6.39 $679.23 Total intrinsic value of options exercised was zero, $8,000 and $0.3 million during the years ended December 31, 2012, 2011 and 2010, respectively.The weighted average grant date fair value of stock options granted was $1.02, $1.04 and $1.97 per share during the years ended December 31, 2012, 2011and 2010, respectively. The intrinsic value is calculated as the difference between the market value as of December 31, 2012 and the exercise price of shares.The market value as of December 31, 2012 was $0.66 per share based on market value as of December 31, 2012 as reported by NASDAQ.Restricted stock unit activity was as follows: Number ofShares WeightedAverage AwardDate Fair Valueper Share Restricted stock units outstanding at December 31, 2010 — $— Restricted stock units granted 3,190,500 1.13 Restricted stock units forfeited (85,000) 1.13 Restricted stock units outstanding at December 31, 2011 3,105,500 1.13 Restricted stock units vested (1,391,750) 1.13 Restricted stock units forfeited (412,250) 1.13 Unvested restricted stock units outstanding at December 31, 2012 1,301,500 $1.13 102Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) The total fair value of restricted stock units vested during the years ended December 31, 2012, 2011 and 2010 was $1.6 million, zero and zero,respectively. The Company measures compensation expense for restricted stock units at fair value on the grant date and recognizes the expense over theexpected vesting period. The fair value for restricted stock units is based on the closing price of the Company’s common stock on the grant date. Unvestedrestricted stock awards are subject to repurchase at no cost to the Company.Stock-Based CompensationThe Company applies the accounting guidance for stock compensation, which establishes accounting for share-based payment awards made toemployees and directors, including employee stock options and employee stock purchases. Under this guidance, stock-based compensation cost is measuredat the grant date based on the calculated fair value of the award, and is recognized as an expense on a straight-line basis over the employee’s requisite serviceperiod, generally the vesting period of the award.The following table summarizes stock-based compensation related to stock options, restricted stock awards, restricted stock unit, and employee stockpurchases (in thousands): Years Ended December 31, 2012 2011 2010 Research and development $1,801 $1,331 $1,871 General and administrative 1,982 1,738 2,146 Stock-based compensation included in operating expenses $3,783 $3,069 $4,017 The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and employee stock purchase plan shares. Thekey input assumptions used to estimate fair value of these awards include the exercise price of the award, the expected option term, the expected volatility of theCompany’s stock over the option’s expected term, the risk-free interest rate over the option’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 on the following weightedaverage assumptions: Year EndedDecember 31, 2012 Year EndedDecember 31, 2011 Year EndedDecember 31, 2010 EmployeeStock Options ESPP EmployeeStock Options ESPP EmployeeStock Options ESPP Risk-free interest rate 1.1% 0.2% 2.4% 0.3% 2.8% 0.3% Volatility 71.1% 72.0% 72.0% 72.0% 73.0% 72.0% Expected term in years 6.13 1.25 6.10 1.25 6.12 1.25 Expected dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% The risk-free interest rate that the Company uses in the option pricing model is based on the U.S. Treasury zero-coupon issues with remaining termssimilar to the expected terms of the options. The Company does not anticipate paying dividends in the foreseeable future and therefore uses an expecteddividend yield of zero in the option pricing model. The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequentperiods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record stock-based compensationexpense only on those awards that are expected to vest. 103Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) The Company uses its own historical exercise activity and extrapolates the life cycle of options outstanding to arrive at its estimated expected term fornew option grants. The Company uses its own volatility history based on its stock’s trading history for the period subsequent to the Company’s initial publicoffering in April 2004. Prior to the second quarter of 2010, because its outstanding options had an expected term of approximately six years, the Companysupplemented its own volatility history by using comparable companies’ volatility history for the relevant period preceding the Company’s initial publicoffering. Starting the second quarter of 2010, the Company solely uses its own volatility history because it now has sufficient history to approximate theexpected term of options granted.The Company measures compensation expense for awards of restricted stock and restricted stock units at fair value on the date of grant and recognizesthe expense over the expected vesting period. The fair value for restricted stock and restricted stock unit awards is based on the closing price of the Company’scommon stock on the date of grant.As of December 31, 2012, there was $2.9 million of unrecognized compensation cost related to unvested stock options, which is expected to berecognized over a weighted-average period of 2.26 years. As of December 31, 2012, there was $1.1 million of unrecognized compensation cost related tounvested restricted stock units, which is expected to be recognized over a weighted-average period of 0.67 years.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 compensationis subject to adjustment as the underlying equity instruments vest.There were no stock option grants to non-employees in the years ended December 31, 2012, 2011 or 2010. When terminating, if employees continue toprovide service to the Company as consultants and their grants are permitted to continue to vest, the expense associated with the continued vesting of the relatedstock options is classified as non-employee stock compensation expense after the status change.In connection with services rendered by non-employees, the Company recorded stock-based compensation expense of $56,000, $18,000 and$0.1 million in 2012, 2011 and 2010, respectively, and $1.7 million for the period from August 5, 1997 (date of inception) through December 31, 2012.ESPPIn January 2004, the Board of Directors adopted the ESPP, which was approved by the stockholders in February 2004. Under the ESPP, statutoryemployees may purchase common stock of the Company up to a specified maximum amount through payroll deductions. The stock is purchased semi-annually at a price equal to 85% of the fair market value at certain plan-defined dates. The Company issued 90,062, 112,931 and 134,327 shares ofcommon stock during 2012, 2011 and 2010, respectively, pursuant to the ESPP at an average price of $0.72, $1.11 and $1.70 per share, in 2012, 2011 and2010, respectively. At December 31, 2012 the Company had 226,321 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 are determined based on thedifference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences areexpected to affect taxable 104Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. The Company did notrecord an income tax provision in the years ended December 31, 2012 and 2011 because the Company had a net taxable loss in the period.For financial statement purposes, income before taxes includes the following components (in thousands): Years EndedDecember 31, 2012 2011 2010 United States $(40,370) $(47,860) $(49,463) Foreign — — — Total $(40,370) $(47,860) $(49,463) The Company recorded the following income tax provision as follows (in thousands): Years EndedDecember 31, 2012 2011 2010 Current: Federal $— $— $(176) State — — — Total $— $— $(176) 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 the Department of theTreasury’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 carrybackprovision brought about by the Worker, Homeownership, and Business Assistance Act of 2009, the 2009 AMT liability was reversed in 2010. In addition tothe $150,000 benefit related to the AMT liability, The Company also recognized a $26,000 benefit related to the monetization of the federal research tax creditfor a total benefit of $176,000 in 2010. 105Table 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 for financial reportingpurposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities were as follows (inthousands): As of December 31, 2012 2011 2010 Deferred tax assets: Depreciation and amortization $5,956 $7,579 $9,151 Reserves and accruals 5,101 3,524 3,632 Net operating losses 153,193 141,226 121,603 Tax credits 25,943 16,778 16,249 Total deferred tax assets 190,193 169,107 150,635 Less: Valuation allowance (190,193) (169,107) (150,635) Net deferred tax assets $— $— $— Based upon the weight of available evidence, which includes the Company’s historical operating performance, reported cumulative net losses sinceinception and difficulty in accurately forecasting the Company’s future results, the Company maintained a full valuation allowance on the net deferred taxassets as of December 31, 2012, 2011 and 2010. The valuation allowance was determined pursuant to the accounting guidance for income taxes, whichrequires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. TheCompany intends to maintain a full valuation allowance on the U.S. deferred tax assets until sufficient positive evidence exists to support reversal of thevaluation allowance. The valuation allowance increased by $21.1 million in 2012, $18.5 million in 2011 and $15.6 million in 2010.As a result of certain realization requirements of accounting guidance for stock compensation, the table of deferred tax assets and liabilities shown abovedoes not include certain deferred tax assets at December 31, 2012, 2011 and 2010 that arose directly from tax deductions related to equity compensation inexcess of compensation recognized for financial reporting. Equity will be increased by $1.8 million if and when such benefits are ultimately realized andreduce taxes payable.The following are the Company’s valuation and qualifying accounts (in thousands): Balance atBeginning ofPeriod Charged toExpenses Charged toOther Accounts Deductions Balance atEnd of Period Year Ended December 31, 2010: Deferred tax valuation allowance $135,040 $15,595 — — $150,635 Year Ended December 31, 2011: Deferred tax valuation allowance 150,635 18,472 — — 169,107 Year Ended December 31, 2012: Deferred tax valuation allowance $169,107 $21,086 — — $190,193 106Table 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 EndedDecember 31, 2012 2011 2010 Tax at federal statutory tax rate (34)% (34)% (34)% State income tax, net of federal tax benefit (6)% (6)% (6)% Tax credits (19)% (1)% (4)% Deferred tax assets (utilized) not benefited 56% 39% 42% Stock-based compensation 0% 1% 1% NOL expiration 2% — — Other 1% 1% 0% Total 0% 0% (1)% The Company had federal NOL carryforwards of approximately $400.2 million and state NOL carryforwards of approximately $296.9 million beforefederal benefit at December 31, 2012. If not utilized, the federal and state NOL carryforwards will begin to expire in various amounts beginning 2020 and2013, respectively. The NOL carryforwards include deductions for stock options.The Company had general business credits of approximately $21.5 million and $13.0 million for federal and California state income tax purposes,respectively, at December 31, 2012. Amounts are comprised of research and development credits and orphan drug credits. If not utilized, the federalcarryforwards will expire in various amounts beginning in 2021. The California state credit can be carried forward indefinitely. With the filing of its 2011 taxreturn, the Company adjusted its general business credit to account for qualifying orphan drug credits. For qualifying expenses, the orphan drug credit offersan increased benefit relative to the research and development credit taken in previous years.On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law. As part of the act, the research and development credit wasretroactively extended. Accordingly, the Company did not record a federal research and development credit for 2012. While the applicable research anddevelopment credit available for 2012 will be considered in 2013, no financial statement benefit is expected as the Company will record a valuation allowanceagainst the credit generated.In general, under section 382 of the Internal Revenue Code (“Section 382”), a corporation that undergoes an ‘ownership change’ is subject to limitationson its ability to utilize its pre-change NOLs and tax credits to offset future taxable income. The Company has performed a Section 382 analysis and does notbelieve that it has experienced an ownership change since 2006. A portion of the Company’s existing NOLs and tax credits are subject to limitations arisingfrom previous ownership changes. Future changes in the Company’s stock ownership, some of which are outside of our control, could result in an ownershipchange under Section 382 and result in additional limitations.The Company follows the accounting guidance that prescribes a comprehensive model for how companies should recognize, measure, present, anddisclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Tax positions are initially recognized in the financialstatements when it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially andsubsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authorityassuming full knowledge of the position and relevant facts. 107Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) The Company files income tax returns for federal and California state purposes. In 2011, the Company made adjustments to its deferred balances forNOL carryforwards, research and development credits, and charitable contribution carryovers as a result of information obtained from the IRS audit of taxyear 2009. As we maintained a full valuation allowance against our deferred tax assets, the adjustments resulted in no additional tax expense in the currentperiod. We also adjusted our unrealized tax benefits accordingly. We recently closed our audit by the IRS for the tax year 2009. There were no additionaladjustments; however, in general, the statute of limitations for tax liabilities for these years remains open for the purpose of adjusting the amounts of the lossesand credits carried forward from those years.The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (“UTBs”) (in thousands): Federaland StateTax Federal Tax Benefitof State Income TaxUTBs Unrecognized Income TaxBenefits - Net of FederalBenefit of State UTBs Unrecognized tax benefits balance at December 31, 2010 $5,348 $1,154 $4,194 Reduction for tax positions of prior years (244) (53) (191) Addition for tax positions related to the current year 387 73 314 Unrecognized tax benefits balance at December 31, 2011 5,491 1,174 4,317 Addition for tax positions of prior years 547 — 547 Reduction for tax positions of prior years (1,059) (16) (1,043) Addition for tax positions related to the current year 361 — 361 Unrecognized tax benefits balance at December 31, 2012 $5,340 $1,158 $4,182 Included in the balance of unrecognized tax benefits as of December 31, 2012, 2011 and 2010 are $4.2 million, $4.3 million and $4.2 million of taxbenefits, respectively, 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 the unrecognized taxbenefits noted above, the Company did not accrue any penalties or interest during 2012, 2011 or 2010. The Company does not expect its unrecognized taxbenefit to change materially over the next twelve months. 108Table of ContentsCYTOKINETICS, INCORPORATED(A Development Stage Enterprise)NOTES TO FINANCIAL STATEMENTS — (Continued) Note 15 — Interest and Other, NetComponents of Interest and Other, net were as follows (in thousands): Years EndedDecember 31, Period fromAugust 5, 1997(Date ofInception) toDecember 31,2012 2012 2011 2010 Warrant expense $— $— $— $(1,585) Interest income and other income 89 143 335 29,100 Interest expense and other expense (2) (39) (163) (5,975) Interest and Other, net $87 $104 $172 $21,540 Warrant expense for the period from inception to December 31, 2012 was related to the change in the fair value of the warrant liability that was recordedin connection with the Company’s registered direct equity offering in May 2009.Interest income and other income primarily consisted of interest income generated from the Company’s cash, cash equivalents and investments. Interestexpense and other expense primarily consisted of interest expense on borrowings under the Company’s equipment financing lines and, through June 30, 2010,interest expense on its loan agreement with UBS Bank USA and UBS Financial Services Inc.Note 16 — Quarterly Financial Data (Unaudited)Quarterly results were as follows (in thousands, except per share data): FirstQuarter SecondQuarter ThirdQuarter FourthQuarter 2012 Total revenues $1,820 $1,841 $1,714 $2,184 Net loss (9,928) (8,943) (10,044) (11,455) Net loss allocable to common stockholders (9,928) (10,250) (10,044) (11,455) Net loss per share allocable to common stockholders — basic and diluted $(0.13) $(0.13) $(0.07) $(0.08) 2011 Total revenues $763 $1,053 $1,427 $757 Net loss (11,712) (13,632) (10,639) (11,877) Net loss allocable to common stockholders (11,712) (16,489) (10,639) (11,877) Net loss per share allocable to common stockholders — basic and diluted $(0.18) $(0.23) $(0.15) $(0.16) Note 17 — Subsequent EventsOn January 25, 2013, 2,000 shares of Series B Preferred Stock were converted into 2,000,000 shares of our common stock. The conversion was inaccordance with the terms of the original agreement under which the Series B Preferred Stock was issued in 2012.On February 8, 2013, warrants to purchase 6,000 shares of our common stock that had been issued in connection with the June 2012 Public Offeringswere exercised, in accordance with their terms, at a price of $0.88 per share. 109Table 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 Executive Officer and our ChiefFinancial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the periodcovered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that theCompany’s disclosure controls and procedures are effective.Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequateinternal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2012. In making this assessment, our management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of December 31,2012, our internal control over financial reporting is effective based on these criteria.Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of our internal control over financialreporting as of December 31, 2012, 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 that occurred during thequarter ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Inherent Limitations on Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial Officer, does notexpect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceivedand operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control systemmust reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitationsin all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Cytokinetics havebeen detected.Item 9B. Other InformationNone. 110Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information regarding our directors and executive officers, our director nominating process and our audit committee is incorporated by referencefrom our definitive Proxy Statement for our 2013 Annual Meeting of Stockholders, where it appears under the headings “Board of Directors” and “ExecutiveOfficers.”Section 16(a) Beneficial Ownership Reporting ComplianceThe information regarding our Section 16 beneficial ownership reporting compliance is incorporated by reference from our definitive Proxy Statementdescribed above, where it appears under the headings “Section 16(a) Beneficial Ownership Reporting Compliance.”Code of EthicsWe have adopted a Code of Ethics that applies to all directors, officers and employees of the Company. We publicize the Code of Ethics through postingthe policy on our website, www.cytokinetics.com. We will disclose on our website any waivers of, or amendments to, our Code of Ethics within four businessdays following the date of such amendment or waiver.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 appearsunder 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 by reference from ourdefinitive Proxy Statement referred to in Item 10 above, where it appears under the heading “Security Ownership of Certain Beneficial Owners andManagement.”The following table summarizes the securities authorized for issuance under our equity compensation plans as of December 31, 2012: Plan Category Number of Securitiesto be IssuedUpon Exercise ofOutstanding Options,Warrants and Rights Weighted AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans Equity compensation plans approved by stockholders 7,713,591 $3.82 5,496,924(1) Equity compensation plans not approved by stockholders — — — Total 7,713,591 $3.82 5,496,924 (1)Includes 226,321 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 above where it appearsunder 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 appearsunder the heading “Principal Accountant Fees and Services.” 111Table 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 Comprehensive Loss • 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 to the financialstatements. (3) Exhibits: ExhibitNumber Description 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation.(17) 3.3 Amended and Restated Bylaws.(2) 3.4 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock.(3) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.(20) 4.1 Specimen Common Stock Certificate.(4) 4.2 Registration Rights Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(5) 4.3 Form of Warrant to Purchase Common Stock of Cytokinetics, Inc.(3) 4.4 Form of Common Stock Warrant Agreement(18) 4.5 Form of Preferred Stock Warrant Agreement(18) 4.6 Form of Warrant (21)10.1 1997 Stock Option/Stock Issuance Plan.(2)10.2 2004 Equity Incentive Plan, as amended.(17)10.3 2004 Employee Stock Purchase Plan.10.4 Build-to-Suit Lease, dated May 27, 1997, by and between Britannia Pointe Grand Limited Partnership and Metaxen, LLC.(2)10.5 First Amendment to Lease, dated April 13, 1998, by and between Britannia Pointe Grand Limited Partnership and Metaxen, LLC.(2) 112Table of ContentsExhibitNumber Description 10.6 Sublease Agreement, dated May 1, 1998, by and between the Company and Metaxen, LLC.(2) 10.7 Sublease Agreement, dated March 1, 1999, by and between Metaxen, LLC and Exelixis Pharmaceuticals, Inc.(2) 10.8 Assignment and Assumption Agreement and Consent, dated July 11, 1999, by and among Exelixis Pharmaceuticals, Metaxen, LLC, XenovaGroup PLC and Britannia Pointe Grande Limited Partnership.(2) 10.9 Second Amendment to Lease, dated July 11, 1999, by and between Britannia Pointe Grand Limited Partnership and ExelixisPharmaceuticals, Inc.(2) 10.10 First Amendment to Sublease Agreement, dated July 20, 1999, by and between the Company and Metaxen, LLC.(2) 10.11 Agreement and Consent, dated July 20, 1999, by and among Exelixis Pharmaceuticals, Inc., the Company and Britannia Pointe GrandLimited Partnership.(2) 10.12 Amendment to Agreement and Consent, dated July 31, 2000, by and between the Company, Exelixis, Inc., and Britannia Pointe GrandeLimited Partnership.(2) 10.13 Assignment and Assumption of Lease, dated September 28, 2000, by and between the Company and Exelixis, Inc.(2) 10.14 Sublease Agreement, dated September 28, 2000, by and between the Company and Exelixis, Inc.(2) 10.15 Sublease Agreement, dated December 29, 1999, by and between the Company and COR Therapeutics, Inc.(2) 10.16 Loan Proposal, executed January 18, 2006, by and between the Company and General Electric Capital Corporation.(7) 10.17 Loan Proposal, executed March 16, 2006, by and between the Company and General Electric Capital Corporation.(10)*10.18 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(11) 10.19 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(8) 10.20 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(9)*10.21 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H. Sabry.(12) 10.22 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and Robert Blum.(9) 10.23 Form of Executive Employment Agreement between the Company and its executive officers.(9)*10.24 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15)*10.25 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.26 Acceptance of UBS AG Settlement Offer Relating to Auction Rate Securities dated October 27, 2008.(15) 113Table of ContentsExhibitNumber Description*10.27 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.28 Credit Line Agreement, effective December 30, 2008, by and among the Company, UBS Bank USA and UBS Financial Services Inc.(15)*10.29 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.30 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(15) 10.31 Form of Subscription Agreement, dated May 18, 2009, between the Company and the investor signatories thereto.(14) 10.32 Form of Warrant, dated May 18, 2009, between the Company and the investor signatories thereto.(14) 10.33 Master Security Agreement, dated February 2, 2001, by and between the Company and General Electric Capital Corporation.(2) 10.34 Amendment No. 1, effective January 1, 2005, to Master Security Agreement by and between the Company and General Electric CapitalCorporation.(13)*10.35 Consent and Amendment No. 2, effective May 18, 2009, to Master Security Agreement by and between the Company and General ElectricCapital Corporation.(13) 10.36 Cross-Collateral and Cross-Default Agreement by and between the Company and General Electric Capital Corporation.(2) 10.37 Amendment No. 1 to Common Stock Purchase Agreement, dated October 15, 2010, by and between the Company and Kingsbridge CapitalLimited.(16) 10.38 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand Limited Partnership.(19)*10.39 Amendment No. 5, dated November 1, 2010, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(19) 10.40 Securities Purchase Agreement, dated April 18, 2011, between the Company and Deerfield Private Design Fund II, L.P., Deerfield PrivateDesign International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited.(3) 10.41 At the Market Issuance Sales Agreement, dated June 10, 2011, between the Company and McNicoll, Lewis & Vlak LLC.(6)*10.42 Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, dated November 1, 2011. (19)*10.43 Amendment No. 1, dated May 1, 2012, to Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, dated November 1,2011.(22)*10.44 Amendment No. 2, dated October 30, 2012 to Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, dated November 1,2011. 10.45 Compensation Information for the Company’s Named Executive Officers.(23) 10.46 Form of Option Agreement. 10.47 Form of Restricted Stock Unit Award Agreement. 23.1 Consent of Independent registered public accounting firm. 24.1 Power of Attorney (included in the signature page to this report). 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 114Table of ContentsExhibitNumber Description 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 the Sarbanes-Oxley Actof 2002 (18 U.S.C. Section 1350).101.INS † XBRL Instance Document.101.SCH † XBRL Taxonomy Extension Schema Document.101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF† XBRL Taxonomy Extension Definition Linkbase Document101.LAB† XBRL Taxonomy Extension Label Linkbase Document101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document. (1)Incorporated by reference from our registration statement on Form S-3, registration number 333-174869, filed with the Securities and ExchangeCommission on June 13, 2011. (2)Incorporated by reference from our registration statement on Form S-1, registration number 333-112261, declared effective by the Securities andExchange Commission on April 29, 2004. (3)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2011. (4)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Security and Exchange Commission on May 9, 2007. (5)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 3, 2007. (6)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 13, 2011. (7)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 20, 2006. (8)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 15, 2007. (9)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 5, 2008 (10)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 22, 2006. (11)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2007. (12)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 2, 2008. (13)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2009. (14)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2009. (15)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2009. 115Table of Contents(16)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 26, 2010. (17)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (18)Incorporated by reference from our registration statement on Form S-3, registration number 333-178189, filed with the Securities and ExchangeCommission on November 25, 2011. (19)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2011. (20)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012. (21)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (22)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 4, 2012. (23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 11, 2013. *Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnishedseparately to the Securities and Exchange Commission as required by Rule 406 under the Securities Act or Rule 24b-2 under the Exchange Act, asapplicable. †Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes ofSection 18 of the Exchange Act, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statementor other document filed under the Securities Act, except as expressly set forth by specific reference in such filing. (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 deemed furnished. (c) Financial Statement SchedulesNone — All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements. 116Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. CYTOKINETICS, INCORPORATEDBy: /s/ ROBERT I. BLUM Robert I. BlumPresident, Chief Executive Officer and DirectorDated: March 15, 2013POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert I. Blum andSharon A. Barbari, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign anyamendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securitiesand Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be doneby virtue hereof.Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/s/ ROBERT I. BLUM Robert I. Blum President, Chief Executive Officer andDirector (Principal Executive Officer) March 15, 2013/s/ SHARON A. BARBARI Sharon A. Barbari Executive Vice President, Finance and Chief FinancialOfficer (PrincipalFinancial and Accounting Executive) March 15, 2013/s/ L. PATRICK GAGE, PH.D. L. Patrick Gage, Ph.D. Chairman of the Board of Directors March 15, 2013/s/ SANTO J. COSTA Santo J. Costa Director March 15, 2013/s/ STEPHEN DOW Stephen Dow Director March 15, 2013/s/ DENISE M. GILBERT, PH.D. Denise M. Gilbert, Ph.D. Director March 15, 2013/s/ JOHN T. HENDERSON, M.B. CH.B. John T. Henderson, M.B. Ch.B. Director March 15, 2013/s/ B. LYNNE PARSHALL, ESQ. Lynne Parshall, Esq. Director March 15, 2013/s/ SANDFORD D. SMITH Sandford D. Smith Director March 15, 2013/s/ WENDELL WIERENGA, PH.D. Wendell Wierenga, Ph.D. Director March 15, 2013 117Table of ContentsExhibitNumber Description 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation.(17) 3.3 Amended and Restated Bylaws.(2) 3.4 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock.(3) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.(20) 4.1 Specimen Common Stock Certificate.(4) 4.2 Registration Rights Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(5) 4.3 Form of Warrant to Purchase Common Stock of Cytokinetics, Inc.(3) 4.4 Form of Common Stock Warrant Agreement(18) 4.5 Form of Preferred Stock Warrant Agreement(18) 4.6 Form of Warrant (21) 10.1 1997 Stock Option/Stock Issuance Plan.(2) 10.2 2004 Equity Incentive Plan, as amended.(17) 10.3 2004 Employee Stock Purchase Plan. 10.4 Build-to-Suit Lease, dated May 27, 1997, by and between Britannia Pointe Grand Limited Partnership and Metaxen, LLC.(2) 10.5 First Amendment to Lease, dated April 13, 1998, by and between Britannia Pointe Grand Limited Partnership and Metaxen, LLC.(2) 10.6 Sublease Agreement, dated May 1, 1998, by and between the Company and Metaxen, LLC.(2) 10.7 Sublease Agreement, dated March 1, 1999, by and between Metaxen, LLC and Exelixis Pharmaceuticals, Inc.(2) 10.8 Assignment and Assumption Agreement and Consent, dated July 11, 1999, by and among Exelixis Pharmaceuticals, Metaxen, LLC, XenovaGroup PLC and Britannia Pointe Grande Limited Partnership.(2) 10.9 Second Amendment to Lease, dated July 11, 1999, by and between Britannia Pointe Grand Limited Partnership and ExelixisPharmaceuticals, Inc.(2) 10.10 First Amendment to Sublease Agreement, dated July 20, 1999, by and between the Company and Metaxen, LLC.(2) 10.11 Agreement and Consent, dated July 20, 1999, by and among Exelixis Pharmaceuticals, Inc., the Company and Britannia Pointe GrandLimited Partnership.(2) 10.12 Amendment to Agreement and Consent, dated July 31, 2000, by and between the Company, Exelixis, Inc., and Britannia Pointe GrandeLimited Partnership.(2) 10.13 Assignment and Assumption of Lease, dated September 28, 2000, by and between the Company and Exelixis, Inc.(2) 10.14 Sublease Agreement, dated September 28, 2000, by and between the Company and Exelixis, Inc.(2) 118Table of ContentsExhibitNumber Description 10.15 Sublease Agreement, dated December 29, 1999, by and between the Company and COR Therapeutics, Inc.(2) 10.16 Loan Proposal, executed January 18, 2006, by and between the Company and General Electric Capital Corporation.(7) 10.17 Loan Proposal, executed March 16, 2006, by and between the Company and General Electric Capital Corporation.(10)*10.18 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(11) 10.19 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(8) 10.20 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(9)*10.21 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H. Sabry.(12) 10.22 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and Robert Blum.(9) 10.23 Form of Executive Employment Agreement between the Company and its executive officers.(9)*10.24 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15)*10.25 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.26 Acceptance of UBS AG Settlement Offer Relating to Auction Rate Securities dated October 27, 2008.(15)*10.27 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.28 Credit Line Agreement, effective December 30, 2008, by and among the Company, UBS Bank USA and UBS Financial Services Inc.(15)*10.29 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(15) 10.30 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(15) 10.31 Form of Subscription Agreement, dated May 18, 2009, between the Company and the investor signatories thereto.(14) 10.32 Form of Warrant, dated May 18, 2009, between the Company and the investor signatories thereto.(14) 10.33 Master Security Agreement, dated February 2, 2001, by and between the Company and General Electric Capital Corporation.(2) 10.34 Amendment No. 1, effective January 1, 2005, to Master Security Agreement by and between the Company and General Electric CapitalCorporation.(13)*10.35 Consent and Amendment No. 2, effective May 18, 2009, to Master Security Agreement by and between the Company and General ElectricCapital Corporation.(13) 119Table of ContentsExhibitNumber Description 10.36 Cross-Collateral and Cross-Default Agreement by and between the Company and General Electric Capital Corporation.(2) 10.37 Amendment No. 1 to Common Stock Purchase Agreement, dated October 15, 2010, by and between the Company and KingsbridgeCapital Limited.(16) 10.38 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand LimitedPartnership.(19)*10.39 Amendment No. 5, dated November 1, 2010, to the Collaboration and Option Agreement by and between the Company and AmgenInc.(19) 10.40 Securities Purchase Agreement, dated April 18, 2011, between the Company and Deerfield Private Design Fund II, L.P., DeerfieldPrivate Design International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund InternationalLimited.(3) 10.41 At the Market Issuance Sales Agreement, dated June 10, 2011, between the Company and McNicoll, Lewis & Vlak LLC.(6)*10.42 Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, dated November 1, 2011.(19)*10.43 Amendment No. 1, dated May 1, 2012, to Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, dated November 1,2011.(22)*10.44 Amendment No. 2, dated October 30, 2012, to Consulting Agreement between Cytokinetics, Inc. and David J. Morgans, datedNovember 1, 2011. 10.45 Compensation Information for the Company’s Named Executive Officers.(23) 10.46 Form of Option Agreement. 10.47 Form of Restricted Stock Unit Award Agreement. 23.1 Consent of Independent registered public accounting firm. 24.1 Power of Attorney (included in the signature page to this report). 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 the Sarbanes-Oxley Actof 2002 (18 U.S.C. Section 1350).101.INS † XBRL Instance Document.101.SCH † XBRL Taxonomy Extension Schema Document.101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF† XBRL Taxonomy Extension Definition Linkbase Document101.LAB† XBRL Taxonomy Extension Label Linkbase Document101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document. (1)Incorporated by reference from our registration statement on Form S-3, registration number 333-174869, filed with the Securities and ExchangeCommission on June 13, 2011. (2)Incorporated by reference from our registration statement on Form S-1, registration number 333-112261, declared effective by the Securities andExchange Commission on April 29, 2004. (3)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2011. (4)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Security and Exchange Commission on May 9, 2007. 120Table of Contents (5)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 3, 2007. (6)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 13, 2011. (7)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 20, 2006. (8)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 15, 2007. (9)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 5, 2008 (10)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 22, 2006. (11)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2007. (12)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 2, 2008. (13)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2009. (14)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2009. (15)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2009. (16)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 26, 2010. (17)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (18)Incorporated by reference from our registration statement on Form S-3, registration number 333-178189, filed with the Securities and ExchangeCommission on November 25, 2011. (19)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2011. (20)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012. (21)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (22)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 4, 2012. (23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 11, 2013. *Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have beenfurnished separately to the Securities and Exchange Commission as required by Rule 406 under the Securities Act or Rule 24b-2 under the SecuritiesExchange Act, as applicable. †Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposesof Section 18 of the Exchange Act, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registrationstatement or other document filed under the Securities Act, except as expressly set forth by specific reference in such filing. 121Exhibit 10.3CYTOKINETICS, INCORPORATED2004 EMPLOYEE STOCK PURCHASE PLAN(As amended by the Board of Directors on March 15, 2006 and approved by the Stockholders May 25, 2006, as amended by the Board of Directors onJuly 19, 2006, January 17, 2007, May 19, 2011 and May 23, 2012)The following constitutes the provisions of the 2004 Employee Stock Purchase Plan of Cytokinetics, Incorporated:1. Purpose. The purpose of the Plan is to provide Employees with an opportunity to purchase Common Stock through accumulated payroll deductions. It isthe intention of the Company to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the Plan,accordingly, shall be construed so as to extend and limit Plan participation in a manner that is consistent with the requirements of that section of the Code.2. Definitions.(a) “Administrator” means the Board or any committee thereof designated by the Board in accordance with Section 14.(b) “Board” means the Board of Directors of the Company.(c) “Change of Control” means the occurrence of any of the following events:(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power representedby the Company’s then outstanding voting securities; or(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or(iii) The consummation of a merger or consolidation of the Company, with any other corporation, other than a merger or consolidation whichwould result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the votingsecurities of the Company, or such surviving entity or its parent outstanding immediately after such merger or consolidation.(iv) A change in the composition of the Board, as a result of which fewer than a majority of the Directors are Incumbent Directors. “IncumbentDirectors” means Directors who either (A) are Directors as of the effective date of the Plan (pursuant to Section 23), or (B) are elected, or nominated forelection, to the Board with the affirmative votes of at least a majority of those Directors whose election or nomination was not in connection with anytransaction describedin subsections (i), (ii) or (iii) or in connection with an actual or threatened proxy contest relating to the election of Directors of the Company.(d) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein shall be a reference to any successor oramended section of the Code.(e) “Common Stock” means the common stock of the Company.(f) “Company” means Cytokinetics, Incorporated, a Delaware corporation.(g) “Compensation” means an Employee’s base straight time gross earnings, commissions (to the extent such commissions are an integral, recurring partof compensation), overtime and shift premium, but exclusive of payments for incentive compensation, bonuses and other compensation.(h) “Designated Subsidiary” means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible toparticipate in the Plan.(i) “Director” means a member of the Board.(j) “Employee” means any individual who is a common law employee of an Employer and is customarily employed for more than twenty (20) hours perweek and more than five (5) months in any calendar year by the Employer. For purposes of the Plan, the employment relationship shall be treated ascontinuing intact while the individual is on sick leave or other leave of absence approved by the Employer. Where the period of leave exceeds ninety (90) daysand the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminatedon the 91 day of such leave.(k) “Employer” means any one or all of the Company and its Designated Subsidiaries.(l) “Enrollment Date” means the first Trading Day of each Offering Period.(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.(n) “Exercise Date” means April 30 and October 31 of each year or, if such date is not a Trading Day, then the first Trading Day occurring immediatelyprior to such date. The first Exercise Date under the Plan shall be November 1, 2004.(o) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the NasdaqNational Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for theCommon Stock (or the closing bid, if no sales were reported) as quoted on such exchange or -2-stsystem on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable, or;(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shallbe the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal orsuch other source as the Administrator deems reliable, or;(iii) In the absence of an established market for the Common Stock, its Fair Market Value shall be determined in good faith by theAdministrator, or;(iv) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to thepublic as set forth in the final prospectus deemed to be included within the registration statement on Form S-1 filed with the Securities andExchange Commission for the initial public offering of the Common Stock (the “Registration Statement”).(p) “Offering Periods” means the periods of approximately twenty-four (24) months during which an option granted pursuant to the Plan may beexercised, commencing on May 1 and November 1 of each year (provided that if such date is not a Trading Day, such Offering Period will commence on thefirst Trading Day occurring after such date), and terminating on the April 30 or October 31 occurring approximately 24 months thereafter, respectively(provided that if such date is not a Trading Day, such Offering Period will terminate on the first Trading Day occurring immediately prior to such date).Notwithstanding the foregoing, the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securitiesand Exchange Commission declares the Company’s Registration Statement effective and ending on the first Trading Day on or after the earlier of (i) May 1,2006 or (ii) twenty-seven (27) months from the beginning of the first Offering Period; and provided, further, that the second Offering Period under the Planshall commence on November 1, 2004. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.(q) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.(r) “Plan” means this 2004 Employee Stock Purchase Plan, as amended.(s) “Purchase Period” means the approximately six (6) month period commencing on one Exercise Date and ending with the next Exercise Date, exceptthat the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the next Exercise Date.(t) “Purchase Price” means an amount equal to eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Enrollment Dateor on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Administrator pursuant to Section 20.(u) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. -3-(v) “Trading Day” means a day on which the U.S. national stock exchanges and the Nasdaq System are open for trading.3. Eligibility.(a) First Offering Period. Any individual who is an Employee immediately prior to the first Offering Period under the Plan shall be automatically enrolledin the first Offering Period.(b) Subsequent Offering Periods. Any individual who is an Employee as of the Enrollment Date of any future Offering Period shall be eligible toparticipate in such Offering Period, subject to the requirements of Section 5.(c) Limitations. Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that,immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code)would own capital stock of the Company or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessingfive percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of theCompany, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of theCompany or any Parent or Subsidiary of the Company accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined atthe Fair Market Value of the stock on the Enrollment Date of the Offering Period) for each calendar year in which such option is outstanding at any time.4. Offering Periods. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first TradingDay on or after May 1 and November 1 of each year, or on such other date as the Administrator shall determine, and continuing thereafter until terminated inaccordance with Section 20; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date onwhich the Securities and Exchange Commission declares the Company’s Registration Statement effective and ending on the first Trading Day on or after theearlier of (i) May 1, 2006 or (ii) twenty-seven (27) months from the beginning of the first Offering Period; and provided, further, that the second OfferingPeriod under the Plan shall commence on November 1, 2004. The Administrator shall have the power to change the duration of Offering Periods (including thecommencement dates thereof) with respect to future offerings without stockholder approval if such change is announced prior to the scheduled beginning of thefirst Offering Period to be affected thereafter.5. Participation.(a) First Offering Period. An Employee who has become a participant in the first Offering Period under the Plan pursuant to Section 3(a) shall be entitledto continue his or her participation in such Offering Period only if he or she submits to the Company’s payroll office (or its designee) a properly completedsubscription agreement authorizing payroll deductions in the form provided by the Administrator for such purpose (i) no earlier than the effective date of thefiling of the Company’s Registration Statement on Form S-8 with respect to the shares of Common Stock issuable under the Plan (the “Effective Date”) and(ii) no later than five (5) business days from the -4-Effective Date or such other period of time as the Administrator may determine (the “Enrollment Window”). A participant’s failure to submit the subscriptionagreement during the Enrollment Window pursuant to this Section 5(a) shall result in the automatic termination of his or her participation in the first OfferingPeriod under the Plan.(b) Subsequent Offering Periods. An Employee who is eligible to participate in the Plan pursuant to Section 3(b) may become a participant by(i) submitting to the Company’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an applicable Enrollment Date, aproperly completed subscription agreement authorizing payroll deductions in the form provided by the Administrator for such purpose, or (ii) following anelectronic or other enrollment procedure prescribed by the Administrator.6. Payroll Deductions.(a) At the time a participant enrolls in the Plan pursuant to Section 5, he or she shall elect to have payroll deductions made on each payday during theOffering Period in an amount not exceeding 15% of the Compensation which he or she receives on each such payday. Effective for Purchase Periods andOffering Periods commencing on or after November 1, 2006, eligible Employees who wish to enroll in the Plan, and participants then participating in the Planwho are subscribing at a rate of 0% of Compensation, may elect prior to the commencement of a Purchase Period or Offering Period, as applicable, to havepayroll deductions made on each payday during the Offering Period in an amount not to exceed 15% of Compensation, but with a minimum contribution rateof 1% of Compensation, subject to Sections 3(c) and 6(e). Effective only for Offering Periods commencing on or after November 1, 2012, a participant mayelect prior to the commencement of an Offering Period (or a Purchase Period within such an Offering Period, as applicable) to have payroll deductions made oneach payday during the Offering Period in an amount not to exceed 15% of Compensation, but with a minimum contribution rate of 0.1% of Compensation,subject to Sections 3(c) and 6(e). Participants will not be permitted to subscribe at a rate of 0% of Compensation, except as required by Sections 3(c) and 6(e).(b) Payroll deductions authorized by a participant shall commence on the first payday following the Enrollment Date and shall end on the last payday inthe Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10; provided, however, thatfor the first Offering Period under the Plan, payroll deductions shall commence on the first payday on or following the end of the Enrollment Window.(c) All payroll deductions made for a participant shall be credited to his or her account under the Plan. A participant may not make any additionalpayments into such account.(d) A participant may discontinue his or her participation in the Plan as provided in Section 10, or may change the rate of his or her payroll deductionsduring the Offering Period by (i) properly completing and submitting to the Company’s payroll office (or its designee), on or before a date prescribed by theAdministrator prior to an applicable Exercise Date, a new subscription agreement authorizing the change in payroll deduction rate in the form provided by theAdministrator for such purpose, or (ii) following an electronic or other procedure prescribed by the Administrator; provided, however, that a participant mayonly make one payroll deduction change during each Purchase Period. If a participant has not followed such procedures to change the rate of -5-payroll deductions, the rate of his or her payroll deductions shall continue at the originally elected rate throughout the Offering Period and future OfferingPeriods (unless terminated as provided in Section 10). The Administrator may, in its sole discretion, limit the nature and/or number of payroll deduction ratechanges that may be made by participants during any Offering Period. Any change in payroll deduction rate made pursuant to this Section 6(d) shall beeffective as of the first full payroll period following five (5) business days after the date on which the change is made by the participant (unless theAdministrator, in its sole discretion, elects to process a given change in payroll deduction rate more quickly). Effective for Purchase Periods and the OfferingPeriods commencing on or after November 1, 2006, a subscription agreement authorizing a decrease in the rate of payroll deductions may be submitted at anytime during a Purchase Period, but a subscription agreement authorizing an increase in the rate of payroll deductions must be, and will only be processed if itis, received by the Company’s payroll office (or its designee) at least five (5) days prior to the commencement of a Purchase Period to which it relates. Asubscription agreement authorizing an increase in the rate of payroll deductions will not be processed and will have no effect after the commencement of aPurchase Period to which it relates.(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(c), or if the Administratorreasonably anticipates a participant has contributed a sufficient amount to purchase a number of shares of Common Stock equal to or in excess of theapplicable limit for such Purchase or Offering Period (as set forth in Section 7 or as established by the Administrator), a participant’s payroll deductions maybe decreased to zero percent (0%) at any time during a Purchase Period. Subject to Section 423(b)(8) of the Code and Section 3(c) hereof, payroll deductionswill recommence at the rate originally elected by the participant effective as of the beginning of the first Purchase Period which is scheduled to end in thefollowing calendar year, or, for participants who have had their contributions reduced due to the applicable limits on the maximum number of shares that maybe purchased in any Purchase or Offering Period, the immediately following Purchase Period, unless terminated by the participant as provided in Section 10.(f) At the time the option is exercised, in whole or in part, or at the time some or all of the Company’s Common Stock issued under the Plan is disposedof, the participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exerciseof the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant’scompensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to theCompany any tax deductions or benefits attributable to the sale or early disposition of Common Stock by the Employee.7. Grant of Option. On the Enrollment Date of each Offering Period, each Employee participating in such Offering Period shall be granted an option topurchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined bydividing such participant’s payroll deductions accumulated prior to such Exercise Date and retained in the participant’s account as of the Exercise Date by theapplicable Purchase Price; provided that in no event shall a participant be permitted to purchase during each Purchase Period more than 1,250 shares ofCommon Stock (subject to any adjustment pursuant to Section 19), and provided further that such purchase shall be subject to the limitations set forth inSections 3(c) and 13. The Employee may accept the grant of such option (i) with respect to the first -6-Offering Period under the Plan, by submitting a properly completed subscription agreement in accordance with the requirements of Section 5(a) on or beforethe last day of the Enrollment Window, and (ii) with respect to any future Offering Period under the Plan, by electing to participate in the Plan in accordancewith the requirements of Section 5(b). The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximumnumber of shares of Common Stock that a participant may purchase during each Purchase Period of such Offering Period. Exercise of the option shall occuras provided in Section 8, unless the participant has withdrawn pursuant to Section 10. The option shall expire on the last day of the Offering Period.8. Exercise of Option.(a) Unless a participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock shall beexercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at theapplicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares of Common Stock shall be purchased; anypayroll deductions accumulated in a participant’s account which are not sufficient to purchase a full share shall be retained in the participant’s account for thesubsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as provided in Section 10. Any other monies left over in aparticipant’s account after the Exercise Date shall be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shareshereunder is exercisable only by him or her.(b) Notwithstanding any contrary Plan provision, if the Administrator determines that, on a given Exercise Date, the number of shares of CommonStock with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on theEnrollment Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the Plan on such Exercise Date, theAdministrator may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchaseon such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to beequitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or(y) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or ExerciseDate, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participantsexercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20. TheCompany may make pro rata allocation of the shares of Common Stock available on the Enrollment Date of any applicable Offering Period pursuant to thepreceding sentence, notwithstanding any authorization of additional shares of Common Stock for issuance under the Plan by the Company’s shareholderssubsequent to such Enrollment Date.9. Delivery. As soon as administratively practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company shallarrange the delivery to each participant, as appropriate, the shares purchased upon exercise of his or her option in a form determined by the Administrator (inits sole discretion) and pursuant to rules established by the Administrator. No participant shall have any voting, dividend, or other shareholder rights with -7-respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the participant asprovided in this Section 9.10. Withdrawal.(a) Under procedures established by the Administrator, a participant may withdraw all but not less than all the payroll deductions credited to his or heraccount and not yet used to exercise his or her option under the Plan at any time by (i) submitting to the Company’s payroll office (or its designee) a writtennotice of withdrawal in the form prescribed by the Administrator for such purpose, or (ii) following an electronic or other withdrawal procedure prescribed bythe Administrator. All of the participant’s payroll deductions credited to his or her account shall be paid to such participant as promptly as practicable after theeffective date of his or her withdrawal and such participant’s option for the Offering Period shall be automatically terminated, and no further payrolldeductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall notresume at the beginning of the succeeding Offering Period unless the participant re-enrolls in the Plan in accordance with the provisions of Section 5.(b) A participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which mayhereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which theparticipant withdraws.11. Termination of Employment. Upon a participant’s ceasing to be an Employee, for any reason, he or she shall be deemed to have elected to withdraw fromthe Plan and the payroll deductions credited to such participant’s account during the Offering Period but not yet used to purchase shares of Common Stockunder the Plan shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and suchparticipant’s option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice oftermination of employment shall be treated as continuing to be an Employee for the participant’s customary number of hours per week of employment duringthe period in which the participant is subject to such payment in lieu of notice.12. Interest. No interest shall accrue on the payroll deductions of a participant in the Plan.13. Stock.(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19, the maximum number of shares of Common Stockwhich shall be made available for sale under the Plan shall be 1,500,000 shares of Common Stock.(b) Shares of Common Stock to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of theparticipant and his or her spouse.14. Administration. The Board or a committee of members of the Board who shall be appointed from time to time by, and shall serve at the pleasure of, theBoard, shall administer the Plan. The Administrator shall have full and exclusive discretionary authority to construe, interpret and apply the terms of thePlan, to determine eligibility, to adjudicate all disputed claims filed under -8-the Plan and to establish such procedures that it deems necessary for administration of the Plan (including, without limitation, to adopt such procedures andsub-plans as are necessary or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the United States).The Administrator, in its sole discretion and on such terms and conditions as it may provide, may delegate to one or more individuals all or any part of itsauthority and powers under the Plan. Every finding, decision and determination made by the Administrator (or its designee) shall, to the full extent permittedby law, be final and binding upon all parties.15. Designation of Beneficiary.(a) A participant may designate a beneficiary who is to receive any shares of Common Stock and cash, if any, from the participant’s account under thePlan in the event of such participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of suchshares and cash. In addition, a participant may designate a beneficiary who is to receive any cash from the participant’s account under the Plan in the event ofsuch participant’s death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall berequired for such designation to be effective.(b) Such designation of beneficiary may be changed by the participant at any time. In the event of the death of a participant and in the absence of abeneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such shares and/or cash to theexecutor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), theCompany, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse,dependent or relative is known to the Company, then to such other person as the Company may designate.(c) All beneficiary designations under this Section 15 shall be made in such form and manner as the Administrator may prescribe from time to time.16. Transferability. Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares ofCommon Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent anddistribution or as provided in Section 15) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect,except that the Company may treat such act as an election to withdraw from an Offering Period in accordance with Section 10.17. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and theCompany shall not be obligated to segregate such payroll deductions. Until shares of Common Stock are issued under the Plan (as evidenced by theappropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a participant shall only have the rights of anunsecured creditor with respect to such shares.18. Reports. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at leastannually, which statements -9-shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, ifany.19. Adjustments, Dissolution, Liquidation or Change of Control.(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property),recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of CommonStock or other securities of the Company, or other change in the corporate structure of the Company affecting the Common Stock the Administrator, in orderto prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall, in such manner as it may deemequitable, adjust the number and class of Common Stock which may be delivered under the Plan, the Purchase Price per share and the number of shares ofCommon Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 7 and 13.(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall beshortened by setting a new Exercise Date (the “New Exercise Date”), and shall terminate immediately prior to the consummation of such proposed dissolutionor liquidation, unless provided otherwise by the Board. The New Exercise Date shall be before the date of the Company’s proposed dissolution or liquidation.The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’soption has been changed to the New Exercise Date and that the participant’s option shall be exercised automatically on the New Exercise Date, unless prior tosuch date the participant has withdrawn from the Offering Period as provided in Section 10.(c) Change of Control. In the event of a Change of Control, each outstanding option shall be assumed or an equivalent option substituted by thesuccessor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for theoption, any Purchase Periods then in progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”) and any Offering Periods then inprogress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company’s proposed Change of Control. The Board shallnotify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has beenchanged to the New Exercise Date and that the participant’s option shall be exercised automatically on the New Exercise Date, unless prior to such date theparticipant has withdrawn from the Offering Period as provided in Section 10.20. Amendment or Termination.(a) The Administrator may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19, no such termination canaffect options previously granted under the Plan, provided that an Offering Period may be terminated by the Administrator on any Exercise Date if theAdministrator determines that the termination or suspension of the Plan is in the best interests of the Company and its stockholders. Except as provided inSection 19 and this Section 20, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant.To the extent necessary to comply with Section 423 of the Code -10-(or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such amanner and to such a degree as required.(b) Without stockholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” theAdministrator shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an OfferingPeriod, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amountdesignated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establishreasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stockfor each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures asthe Administrator determines in its sole discretion advisable which are consistent with the Plan.(c) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, theBoard may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including,but not limited to:(i) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;(ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of theBoard action; and(iii) allocating shares.Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants.21. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been dulygiven when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.22. Conditions Upon Issuance of Shares. Shares of Common Stock shall not be issued with respect to an option under the Plan unless the exercise of suchoption and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including,without limitation, the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder, the Exchange Act and the requirementsof any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to suchcompliance.As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any suchexercise that the shares are being purchased only for investment and without any present intention to sell or distribute such -11-shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.23. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. Itshall continue in effect until terminated under Section 20.24. Automatic Transfer to Low Price Offering Period. To the extent permitted by any applicable laws, regulations, or stock exchange rules if the Fair MarketValue of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment Date ofsuch Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exerciseof their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period. -12-SAMPLE SUBSCRIPTION AGREEMENTCYTOKINETICS, INCORPORATED2004 EMPLOYEE STOCK PURCHASE PLANSUBSCRIPTION AGREEMENT _____ Original Application_____ Change in Payroll Deduction Rate_____ Change of Beneficiary(ies) Offering Date:___________ 1.____________________ hereby elects to participate in the Cytokinetics, Incorporated 2004 Employee Stock Purchase Plan (the “Plan”) and subscribesto purchase shares of the Company’s Common Stock in accordance with this Subscription Agreement and the Plan. Capitalized terms not otherwisedefined herein will have the meanings given to them in the Plan. 2.I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 0.1% to 15%) duringthe Offering Period in accordance with the Plan. I acknowledge and agree that I may not increase the payroll deduction rate for a Purchase Period after ithas commenced and may only increase payroll deductions for future Purchase Periods in accordance with the terms of the Plan or as otherwisedetermined by the Administrator. 3.I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determinedin accordance with the Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used toautomatically exercise my option. 4.I have received a copy of the complete Plan. I understand that my participation in the Plan is in all respects subject to the terms of the Plan. I understandthat my ability to exercise the option under this Subscription Agreement is subject to shareholder approval of the Plan. 5.Shares of Common Stock purchased for me under the Plan should be issued in the name(s) of Employee or Employee and Spouse only. 6.I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Offering Date (the first day of the OfferingPeriod during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes as having receivedordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares werepurchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares and I will make adequate provision forFederal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not beobligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessaryto make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of suchshares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes ashaving received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equalto the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or(2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such dispositionwill be taxed as capital gain. 7.I hereby agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate inthe Plan. 8.In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and/or shares due me under the Plan: NAME: (Please print) (First) (Middle) (Last) Relationship Percentage Benefit (Address) NAME: (please print) (First) (Middle) (Last) Relationship Percentage of Benefit (Address) -2-Employee’s SocialSecurity Number: Employee’s Address: I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERINGPERIODS UNLESS TERMINATED BY ME. Dated:_________________________ Signature of Employee Spouse’s Signature (If beneficiary other than spouse) -3-SAMPLE WITHDRAWAL NOTICECYTOKINETICS, INCORPORATED2004 EMPLOYEE STOCK PURCHASE PLANNOTICE OF WITHDRAWALThe undersigned participant in the Offering Period of the Cytokinetics, Incorporated 2004 Employee Stock Purchase Plan which began on____________, ______ (the “Offering Date”) hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she herebydirects the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such OfferingPeriod. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned understandsfurther that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible toparticipate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. Name and Address of Participant: Signature: Date: -4-Exhibit 10.44CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED ANDFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24b-2 OF THESECURITIES EXCHANGE ACT OF 1934, AS AMENDED.ConfidentialAMENDMENT NO. 2 TO CONSULTING AGREEMENTCytokinetics, Inc. (“Cytokinetics”) and David J. Morgans, Jr., PhD (“Consultant”) have entered into that certain Consulting Agreement dated November 1,2011, as amended (the “Agreement”) . Cytokinetics and Consultant now wish to amend the Agreement, as set forth below in this “Amendment”, effectiveNovember 1, 2012. Capitalized terms used herein and not otherwise defined herein will have the meaning ascribed in the Agreement.Cytokinetics and Consultant hereby agree as follows:1. The Agreement is extended for an additional term to expire on October 31, 2013.2. Section 1.3 of the Agreement is revised to read as follows:“Consultant will provide the Services over the telephone or through written or electronic correspondence as requested by the Company for 24 hours per month,which may include in-person meetings at the Company’s offices or other agreed locations at mutually agreeable times.”3. Section 3.1 of the Agreement is hereby revised to read as follows:“From November 1, 2012 through October 31, 2013, for services provided by Consultant under this Agreement, the Company will pay to Consultant amonthly retainer of $5,820 as compensation for the 24 hours of consulting described in Section 1.3. Payment of the retainer will be paid monthly in advanceon the first AP run of the month. In addition the Company will pay Consultant for additional Services at a rate of $242.50 per hour. These additional hoursmust be approved by Cytokinetics (which may be provided by e-mail) in advance and in no calendar month may Consultant charge the Company for morethan $10,000 (inclusive of the retainer) without the further express written consent of Company (which may be provided by e-mail). Consultant shall providethe Company with a written invoice semi-monthly, which shall described the activities performed and the time spent by Consultant on such activities. Properinvoices shall be paid by Cytokinetics within (30) days of receipt. Time spent by the Consultant on travel is not compensable. Invoices will be sent to theattention of Accounts Payable.4. Exhibit A of the Agreement is replaced with Exhibit A attached to this Amendment.5. Except as expressly set forth herein, all of the terms of the Agreement will remain in full force and effect. Page 1 of 3Accepted and agreed: CYTOKINETICS, INC. CONSULTANTBy: /s/ Robert I. Blum By: /s/ David J. Morgans, Jr., Ph.DPrint Name: Robert I. Blum Print Name: David J. Morgans, Jr., Ph.DTitle: President & CEO Date: 10/30/12 Date: 10/30/12 Page 2 of 3ConfidentialEXHIBIT ASERVICES AND DELIVERABLES[***] ***Certain information on the page has been omitted and filed separately with the Commission. Confidential treatment has been requestedwith respect to the omitted portions. Page 3 of 3Exhibit 10.46CYTOKINETICS, INCORPORATED2004 EQUITY INCENTIVE PLAN, AS AMENDEDFORM OF OPTION AGREEMENTA. Grant of Option.The Administrator hereby grants to the individual named in the Notice of Grant (the “Participant”) an option (the “Option”) to purchase the number ofShares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms andconditions of the Plan, which is incorporated herein by reference. Subject to Section 19(c) of the Plan, in the event of a conflict between the terms andconditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan will prevail.If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option underSection 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of CodeSection 422(d) it will be treated as a Nonstatutory Stock Option (“NSO”).B. Exercise of Option.(a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicableprovisions of the Plan and this Option Agreement.(b) Method of Exercise. This Option is exercisable (1) on-line, using the website of the captive broker selected by the Company (an “On-line Notice”); or(2) by delivery of a completed written exercise notice, the form of which is attached as Exhibit A (an “Exercise Notice”) identifying the date of this OptionAgreement, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”) and the purchase price of the Shares. Any ExerciseNotice will be completed by the Participant and delivered in person, by certified mail, or by such other method as determined from time to time by theAdministrator of the Company. Any Exercise Notice must be accompanied by payment of the aggregate exercise price as to all Exercised Shares together withfull payment for any applicable withholding taxes. Upon the delivery of (i) an Online Notice, or (ii) an Exercise Notice to the Company, with any requiredpayments, this Option will be deemed to be exercised as to the Exercised Shares.No Shares will be issued pursuant to the exercise of this Option unless such issuance and exercise comply with Applicable Laws. Assuming suchcompliance, for income tax purposes the Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to suchExercised Shares.C. Method of Payment.Payment of the aggregate Exercise Price may be made by any of the following methods at the election of Participant, subject to the limitations described inthis section:1. cash deposited in the Participant’s account at the captive broker selected by the Company;2. consideration received by the Company under a formal cashless option exercise program (e.g., in sell-to-cover or same-day sale transactions) initiatedon-line through the website of the Company’s capative broker adopted by the Company in connection with the Plan including the on-line electronictransmission; or3. for any written Exercise Notice delivered to Cytokinetics, a check made out to Cytokinetics, Inc. for the full exercise price and the full amount of anytaxes that must be withheld by the company.D. Non-Transferability of Option.This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during thelifetime of Participant only by Participant. The terms of the Plan and this Option Agreement will be binding upon the executors, administrators, heirs,successors and assigns of Participant.E. Term of Option.This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with thePlan and the terms of this Option Agreement.F. Termination Period.This Option shall be exercisable for three months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s deathor Disability, in which case this Option shall be exercisable for one (1) year after Participant ceases to be Service Provider. Notwithstanding the foregoing, inno event may this Option be exercised after the Term/Expiration Date as provided above.G. Tax Obligations.1. Withholding Taxes. In those cases where taxes are required to be withheld at the time of Option exercise, Participant is responsible to make, andhereby agrees to make, appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the full satisfaction ofall Federal, state, and local income and employment tax withholding requirements applicable to the Option exercise. Participant acknowledges and agrees thatthe Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. Participantacknowledges that the Company cannot provide tax advice, and that it is the responsibility of Participant to determine any withholding tax or other tax liabilitythat may arise from the exercise of the Option. Participant further acknowledges that the Company has recommended that Participant seek the advice of a taxadvisor before exercising the Option, in whole or in part.2. Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposesof any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Grant Date, or (2) the date one year after the date ofexercise, the Participant must immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income taxwithholding by the Company on the compensation income recognized by Participant.H. Entire Agreement; Governing Law.The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subjectmatter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof,and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement isgoverned by the laws of the State of California, as applied to residents of California with regard to transactions occurring within California, and withoutregard to principles of conflicts laws.I. NO GUARANTEE OF CONTINUED SERVICE.PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULEHEREOF IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE, CONSULTANT OR NON-EMPLOYEE DIRECTOR AT THE WILL OF THECOMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATEDHEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OFCONTINUED ENGAGEMENT AS AN EMPLOYEE, CONSULTANT OR NON-EMPLOYEE DIRECTOR FOR THE VESTING PERIOD, FOR ANYPERIOD, OR AT ALL, AND WILL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATEPARTICIPANT’S RELATIONSHIP AS AN EMPLOYEE, CONSULTANT OR NON-EMPLOYEE DIRECTOR AT ANY TIME, WITH OR WITHOUTCAUSE.[Remainder of Page Intentionally Left Blank]EXHIBIT ACYTOKINETICS INCORPORATED2004 EQUITY INCENTIVE PLAN, AS AMENDEDEXERCISE NOTICECytokinetics Incorporated280 East Grand AvenueSouth San Francisco, CA 94080Attention: Stock Plan Administrator1. Exercise of Option. Effective as of today, ______________________, __________, the undersigned (“Purchaser”) hereby elects to purchase_________________ shares (the “Shares”) of the Common Stock of Cytokinetics, Inc. (the “Company”) under and pursuant to the 2004 Equity IncentivePlan (the “Plan”) and the Option Agreement dated, _____________________ (the “Option Agreement”). The purchase price for the Shares will be $ , asrequired by the Option Agreement.2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares and any required withholding taxes to be paidin connection with the exercise of the Option.3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement andagrees to abide by and be bound by their terms and conditions.4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agentof the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Optioned Stock,notwithstanding the exercise of the Option. The Shares so acquired will be issued to Participant as soon as practicable after exercise of the Option. Noadjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition ofthe Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase ordisposition of the Shares and that Purchaser is not relying on the Company for any tax advice.6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the OptionAgreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety allprior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to thePurchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but notthe choice of law rules, of California. Submitted by: Accepted by: PURCHASER: CYTOKINETICS, INC. Signature By Print Name Its Address: Address: Date ReceivedExhibit 10.47CYTOKINETICS, INCORPORATED2004 EQUITY INCENTIVE PLAN, AS AMENDEDFORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT1. Grant of Restricted Stock Unit. The Company hereby grants to the Participant named in the Notice of the Grant of Restricted Stock Units (“Notice ofGrant”) an award of RSUs, as set forth in the Notice of Grant and subject to the terms and conditions in this Agreement and the Plan.2. Company’s Obligation. Each RSU represents the right to receive a Share on the vesting date. Unless and until the RSUs vest, the Participant willhave no right to receive Shares under such RSUs. Prior to actual distribution of Shares pursuant to any vested RSUs, such RSUs will represent an unsecuredobligation of the Company, payable (if at all) only from the general assets of the Company.3. Vesting Schedule. The RSUs awarded by this Agreement will vest in the Participant and be delivered according to the vesting schedule specified in theNotice of Grant.4. Forfeiture upon Termination as Service Provider. Notwithstanding any contrary provision of this Agreement or the Notice of Grant, if the Participantterminates as a Service Provider for any or no reason prior to vesting, the unvested RSUs awarded by this Agreement will thereupon be forfeited at no cost tothe Company.5. Payment after Vesting. Any RSUs that vest in accordance with paragraph 3 will be paid to the Participant (or in the event of the Participant’s death, tohis or her estate) in Shares, provided that to the extent determined appropriate by the Company, the minimum statutorily required federal, state and localwithholding taxes with respect to such RSUs will be paid by reducing the number of vested RSUs actually paid to the Participant.6. Payments after Death. Any distribution or delivery to be made to the Participant under this Agreement will, if the Participant is then deceased, bemade to the administrator or executor of the Participant’s estate. Any such administrator or executor must furnish the Company with (a) written notice of his orher status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulationspertaining to said transfer.7. Rights as Stockholder. Neither the Participant nor any person claiming under or through the Participant will have any of the rights or privileges of astockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued,recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant or Participant’s broker.8. No Effect on Employment. The Participant’s employment with the Company and its Subsidiaries is on an at-will basis only. Accordingly, the termsof the Participant’s employment with the Company and its Subsidiaries will be determined from time to time by the Company or the Subsidiary employing theParticipant (as the case may be), and the Company or the Subsidiary will have the right, which is hereby expressly reserved, to terminate or change the termsof the employment of the Participant at any time for any reason whatsoever, with or without good cause or notice.9. Grant is Not Transferable. Except to the limited extent provided in paragraph 6, this grant and the rights and privileges conferred hereby will not betransferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution,attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferredhereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediatelywill become null and void.10. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure tothe benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.11. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration or qualificationof the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority is necessaryor desirable as a condition to the issuance of Shares to the Participant (or his or her estate), such issuance will not occur unless and until such listing,registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. The Company willmake all reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of anysuch governmental authority.12. Plan Governs. This Agreement and the Notice of Grant are subject to all terms and provisions of the Plan. In the event of a conflict between one ormore provisions of this Agreement or the Notice of Grant and one or more provisions of the Plan, the provisions of the Plan will govern.13. Section 409A. Notwithstanding anything in the Plan or this Agreement to the contrary, if the vesting of these Restricted Stock Units is accelerated inconnection with the Participant’s termination of employment (provided that such termination is a “separation from service” within the meaning ofSection 409A, as determined by the Company), other than due to death, and if (x) you are a “specified employee” within the meaning of Section 409A at thetime of such termination and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of additional tax under Section 409A ifpaid to you on or within the six (6) month period following your termination of employment, then the payment of such accelerated Restricted Stock Unitsotherwise payable to you during such six (6) month period will accrue and will be paid to you on the date six (6) months and one (1) day following the date ofyour termination of employment, unless you die following your termination of employment, in which case, the Restricted Stock Units will be paid in shares ofCommon Stock to your estate as soon as practicable following your death. It is the intent of this Agreement to comply with, or be exempt from, therequirements of Section 409A so that none of the Restricted Stock Units provided under this Agreement or shares of Common Stock issuable hereunder will besubject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be exempt. For purposes of thisAgreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and any proposed, temporary or final TreasuryRegulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.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. 333-174869, 333-178189, and 333-182226) and Form S-8 (Nos. 333-115146, 333-125973, 333-133323, 333-136524, 333-140963, 333-149713, 333-152850, 333-161116, 333-168520, 333-176089 and 333-183091) of Cytokinetics, Incorporated of our report dated March 15, 2013 relating to the financial statements and the effectiveness of internal control overfinancial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLPSan Jose, CAMarch 15, 2013Exhibit 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,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. 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 likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; andb. 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 15, 2013Exhibit 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,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. 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 likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; andb. 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 15, 2013Exhibit 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, 2012, 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 Chief Financial Officer (Principal Financial Officer)Date: March 15, 2013This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of Cytokinetics, Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

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