Cytokinetics
Annual Report 2013

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, 2013or ¨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 Filerequired to 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 shorterperiod that the 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 $331.2 million, computed by reference to the last salesprice of $11.57 as reported by the NASDAQ Market as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 28,2013. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose. The number of shares ofcommon stock held by non-affiliates excluded 58,501 shares of common stock held by directors, officers and affiliates of directors. The number of sharesowned by affiliates of directors was determined based upon information supplied by such persons and upon Schedules 13D and 13G, if any, filed with theSEC. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or causethe 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, 2014 was 36,078,367 shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Proxy Statement for its 2014 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, 2013INDEX Page PART I Item 1. Business 3 Item 1A. Risk Factors 22 Item 1B. Unresolved Staff Comments 44 Item 2. Properties 44 Item 3. Legal Proceedings 45 Item 4. Mine Safety Disclosures 45 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. Selected Financial Data 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 73 Item 8. Financial Statements and Supplementary Data 75 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 111 Item 9A. Controls and Procedures 111 Item 9B. Other Information 111 PART III Item 10. Directors, Executive Officers and Corporate Governance 112 Item 11. Executive Compensation 112 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 112 Item 13. Certain Relationships and Related Transactions, and Director Independence 112 Item 14. Principal Accounting Fees and Services 112 PART IV Item 15. Exhibits and Financial Statement Schedules 113 Signatures 118 Table 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 2014; • 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 partners, Amgen Inc. and Astellas Pharma Inc. (“Astellas”), including the anticipated timing for initiation of clinical trials,anticipated rates of enrollment for clinical trials and anticipated timing of results 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; • the ability of our amendments to the protocol of our BENEFIT-ALS clinical trial to maintain the originally intended statistical power of the trial; • our and our partners’ 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 with Amgen and Astellas; • 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, such as withAmgen or Astellas; • 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 biology of muscle function, and our ability to leverage our experience in muscle contractility to other 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; 1Table of Contents • future payments under loan and lease obligations; • potential competitors and competitive products; • retaining key personnel and recruiting additional key personnel; • expected timing for recognition of compensation cost related to unvested stock options; 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), if supported by the results from our BENEFIT-ALS clinical trial, thatwe expect will be required to obtain marketing approval for tirasemtiv for the treatment of ALS; • Amgen’s decisions with respect to the timing, design and conduct of research and development activities for omecamtiv mecarbil and other relatedcompounds, including decisions to postpone or discontinue research or development activities relating to omecamtiv mecarbil and other relatedcompounds; • Astellas’ decisions with respect to the timing, design and conduct of research and development activities for CK-2127107 and other skeletal muscleactivators, including decisions to postpone or discontinue research or development activities relating to CK-2127107 and other skeletal muscleactivators; • our ability to enter into strategic partnership agreements for any of our programs on acceptable terms and conditions or in accordance with ourplanned timelines; • 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; • difficulties or delays in the development, testing, manufacturing or commercialization of our drug candidates; • difficulties or delays, or slower than anticipated patient enrollment, in our or partners’ 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 orotherwise perform as expected; • results from non-clinical studies that may adversely impact the timing or the further development of our drug candidates and other compounds; • 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; • changing standards of care and the introduction of products by competitors or alternative therapies for the treatment of indications we target that maylimit the commercial potential of our drug candidates; • difficulties or delays in achieving market access and reimbursement for our drug candidates and the potential impacts of health care reform; • 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; • activities and decisions of, and market conditions affecting, current and future strategic partners; • accrual information provided by our contract research organizations and other vendors; 2Table of Contents • potential ownership changes under Internal Revenue Code Section 382; and • the timeliness and accuracy of information filed with the U.S. Securities and Exchange Commission (the “SEC”) by third parties.In 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.Our lead drug candidate from our skeletal muscle contractility program, tirasemtiv (formerly known as CK-2017357), is a fast skeletal muscletroponin activator. Cytokinetics holds the rights to tirasemtiv and is independently developing this drug candidate for the potential treatment of ALS and otherneuromuscular disorders. We are currently conducting a Phase II clinical trials program for tirasemtiv, including an ongoing Phase IIb clinical trial in patientswith ALS, known as BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS). We haveconcluded enrollment in BENEFIT-ALS and we anticipate reporting results from this clinical trial in April 2014. Tirasemtiv has been granted orphan drugdesignation and fast track status by the FDA and orphan medicinal product designation by the European Medicines Agency, in each case for the potentialtreatment of ALS. We anticipate that we will need to conduct at least one confirmatory Phase III clinical trial of tirasemtiv in patients with ALS, if supported bythe results of BENEFIT-ALS, to gain marketing approval.We are also developing CK-2127107, a structurally distinct, fast skeletal muscle troponin activator, under a strategic alliance with Astellas establishedin June 2013. CK-2127107 is being evaluated in Phase I clinical trials for potential non-neuromuscular indications associated with muscle weakness. We alsoare conducting joint research with Astellas directed to next-generation skeletal muscle activators. Further details regarding our strategic alliance with Astellascan be found below in Item 1 of this report under “Research and Development Programs — Skeletal Muscle Contractility Program — CK-2127107 and OtherSkeletal Muscle Activators — Astellas Strategic Alliance.”Our lead drug candidate from our cardiac muscle contractility program, omecamtiv mecarbil (formerly known as CK-1827452), is a novel cardiacmuscle myosin activator that is being developed under a strategic alliance with Amgen. In June 2013, we expanded the collaboration to include Japan. As aresult, Amgen holds an exclusive license to develop and commercialize omecamtiv mecarbil worldwide, subject to our development and commercializationparticipation rights. An intravenous formulation of omecamtiv mecarbil was studied in a Phase IIb clinical trial known as ATOMIC-AHF (Acute Treatmentwith Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure), which was designed to evaluate the safety and efficacy of omecamtiv mecarbil inpatients with left ventricular systolic dysfunction who are hospitalized with acute heart failure. 3Table of ContentsAnother Phase II clinical trial, known as COSMIC-HF (Chronic Oral Study of Myosin Activation to Increase Contractility in Heart Failure), is currentlybeing conducted. The primary objectives of COSMIC-HF are selecting an oral modified release formulation and doses of omecamtiv mecarbil for chronictwice-daily dosing in patients with heart failure and left ventricular systolic dysfunction, and characterizing its pharmacokinetics during 20 weeks oftreatment.We also are conducting joint research with Amgen directed to next-generation compounds in our cardiac muscle contractility program. Further detailsregarding our strategic alliance with Amgen can be found below in Item 1 of this report under “Research and Development Programs — Cardiac MuscleContractility Program — Amgen Strategic Alliance.”Two of our drug candidates have demonstrated pharmacodynamic activity in patients: tirasemtiv in patients with ALS, in patients with myastheniagravis and in patients with claudication associated with peripheral artery disease; and omecamtiv mecarbil in patients with heart failure. Our drug candidateCK-2127107 has demonstrated pharmacological activity in preclinical models. In 2014, we expect to continue to focus on translating the observedpharmacodynamic activity of these compounds into potentially meaningful clinical benefits for patients.Following is a summary of the planned clinical development activities for our drug candidates: DrugCandidate(Mechanism of Action) Mode of Administration PotentialIndication(s) Development Status andPlanned Development ActivitiesSkeletal Muscle Contractility Program Tirasemtiv(fast skeletal muscle troponin activator) oral neuromuscular diseases andconditions associated with muscleweakness • We anticipate reporting results from BENEFIT-ALS at the American Academy of Neurology AnnualMeeting in Philadelphia, PA in April 2014. CK-2127107(fast skeletal muscle troponin activator) oral non-neuromuscular indicationsassociated with muscle weakness • We anticipate conducting additional Phase I studies and certain Phase II readiness activities in 2014pursuant to our collaboration agreement with Astellas. Cardiac Muscle Contractility Program Omecamtiv mecarbil(cardiac muscle myosin activator) oral heart failure • We anticipate the commencement of patient enrollment in the expansion phase of COSMIC-HF to occur inthe first half of 2014 following regulatory authorities’ review of responses relating to information requestsprovided in connection with the protocol submitted for the trial. • We anticipate the enrollment of patients in the expansion phase of COSMIC-HF to be completed in 2014. Omecamtiv mecarbil(cardiac muscle myosin activator) IV/oral heart failure • We anticipate commencement of patient enrollment in CY 1211 to occur in the first half of 2014 followingregulatory authorities’ review of responses relating to information requests provided in connection withthe protocol submitted for the trial. • We anticipate the conduct of CY 1211 to be completed in 2014. 1Independent development by Cytokinetics 2Development pursuant to our strategic alliance with Astellas 3Development pursuant to our strategic alliance with Amgen 41233Table of ContentsAll 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 productive area for drug discovery. We intend to leverage our experience in muscle contractility in order to expandour current pipeline, and expect to identify additional potential drug candidates that may be suitable for clinical development.Our 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 5Table of Contents in concentrated and tractable customer segments, such as hospital specialists and disease-specific centers of excellence, which may be addressed bya smaller, targeted sales force. In preparing for the potential commercialization of our drug candidates directed to these markets, we are focusing ouractivities on a broad range of issues facing patients and payors, including the principal drivers of clinical and economic burdens associated withthese diseases. We also seek to focus on opportunities that the multiple constituencies and stakeholders for these markets may recognize as creatingvalue. Accordingly, targeting unmet medical needs in these areas may provide us competitive opportunities and support development of a franchise indiseases involving muscle weakness, wasting and fatigue. In these markets, we believe that a company with limited resources may be able to competeeffectively against larger, more established companies with greater financial and commercial resources. For these opportunities, we intend to developclinical development and sales and marketing capabilities with the goal of becoming a fully-integrated biopharmaceutical company. • Establishing select strategic alliances to support our drug development programs while preserving significant 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.Research and Development ProgramsOur 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 diseases and medical conditions associated with muscle weakness may be amenable to treatment by enhancing the contractility of skeletal muscle, andheart failure is a disease often characterized by impaired cardiac muscle contractility which may be treated by modulating the contractility 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. We are conducting a Phase II clinical trials program for tirasemtiv, including an ongoing Phase IIbclinical trial. Potential indications for which this drug candidate may be useful include skeletal muscle weakness associated with neuromuscular diseases,such as ALS. CK-2127107, another drug candidate from this program, is partnered with Astellas world-wide, and is in Phase I clinical development for thepotential treatment of non-neuromuscular indications associated with muscle weakness. Omecamtiv mecarbil, a novel cardiac muscle myosin activator, ispartnered with Amgen world-wide. An intravenous formulation of omecamtiv mecarbil has been studied in a Phase IIb clinical trial in patients with acute heartfailure, and oral formulations of omecamtiv mecarbil are being studied in a Phase II clinical trial in patients with heart failure. We are also planning a Phase Istudy comparing the pharmacokinetics of omecamtiv mecarbil between healthy Japanese and Caucasian volunteers. 6Table of ContentsWe 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.Research and Development Expense. Our research and development expenses were $49.5 million, $35.6 million and $37.2 million for 2013, 2012and 2011, respectively.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.We 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 the lead drug candidate from this program, and is in Phase II clinical development. Cytokinetics holds the rights to tirasemtiv. We are alsodeveloping another drug candidate from this program, CK-2127107, which is being evaluated in Phase I clinical trials in collaboration with Astellas forpotential non-neuromuscular indications associated with muscle weakness. Tirasemtiv and CK-2127107 are structurally distinct and selective smallmolecules that activate the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to calcium, leading to an increase in skeletalmuscle contractility. Each of tirasemtiv and CK-2127107 has demonstrated pharmacological activity in preclinical models and tirasemtiv has demonstratedevidence of potentially clinically relevant pharmacodynamic effects in humans. We are evaluating potential indications for which tirasemtiv and CK-2127107may be useful.Tirasemtiv. Tirasemtiv, a fast skeletal troponin activator, is the lead drug candidate from our skeletal muscle contractility program. We haveconducted 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 were intended totranslate the mechanism of action of tirasemtiv into potentially clinically relevant pharmacodynamic effects, which may then form the basis for larger clinicaltrials designed to demonstrate proof of concept and possibly even to support registration. The first of these trials was conducted in patients with ALS, achronic and progressive disease in which the motor neurons die, thus denervating skeletal muscles and causing them to atrophy. This leads to weakness,fatigue, and eventually complete paralysis and death, primarily from respiratory complications. The second of these trials was conducted in patients withmyasthenia gravis, a chronic, autoimmune, neuromuscular disease which is the most common primary disorder of neuromuscular transmission. The third ofthese trials was conducted in patients with symptoms of claudication, which is pain or cramping in the leg muscles due to inadequate blood flow duringexercise, associated with peripheral artery disease. Evidence of potentially clinically relevant pharmacodynamic effects was observed in each of these trials. Weare now conducting BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS), a Phase IIbclinical trial of tirasemtiv in patients with ALS. We anticipate that we will need to conduct at least one confirmatory Phase III clinical trial of tirasemtiv inpatients with ALS, if supported by the results of BENEFIT-ALS, to gain marketing approval. 7Table of ContentsTirasemtiv Clinical DevelopmentBENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS). In October 2012, we initiatedBENEFIT-ALS, a multi-national, double-blind, randomized, placebo-controlled trial originally planned to enroll at least 400 patients and subsequentlyincreased to enroll up to 500 patients. All patients began treatment with open-label tirasemtiv at 125 mg twice daily. Patients who completed a week of open-label tirasemtiv at this starting dose were randomized 1-to-1 to receive 12 weeks of double-blind treatment with tirasemtiv or placebo. Clinical assessments takeplace monthly during double-blinded treatment. Randomized patients also participate in follow-up evaluations at both 7 and 28 days after their final dose ofdouble-blind study drug. The primary analysis of BENEFIT-ALS will compare the mean change from baseline in the ALS Functional Rating Scale in itsrevised form, or ALSFRS-R (a clinically validated instrument designed to measure disease progression and changes in functional status), in patients receivingtirasemtiv versus those receiving placebo. Secondary endpoints will include maximum voluntary ventilation, or MVV (a clinical assessment of pulmonaryfunction and endurance), and measures of skeletal muscle function. Patients will receive tirasemtiv or placebo dosed twice daily. Patients taking riluzole (anapproved treatment for ALS) at the time of enrollment who were randomized to receive double-blind tirasemtiv received riluzole at a reduced dose of 50 mgdaily, in a blinded manner. We are conducting BENEFIT-ALS at over 70 sites across the United States, Canada and several European countries.In July 2013, we were informed by our data management vendor that a programming error in the electronic data capture system controlling study drugassignment caused 58 patients initially randomized to and treated with tirasemtiv to receive placebo instead at a certain study visit and for the remainder of thestudy. No patients randomized to placebo were dispensed incorrect treatment. Cytokinetics and all clinical trial site personnel remain blinded to the specificpatients affected by the error. Following detection of the error, we took steps to ensure that no further incorrect study drug assignments occurred and to correctthe programming error in the electronic data capture system controlling study drug assignment. In addition, we convened an ad hoc meeting of the Data SafetyMonitoring Board (DSMB) for BENEFIT-ALS to assess whether the error in dispensing study drug had impacted the safety of the 58 affected patients. Afterreview of the then-available safety data from BENEFIT-ALS, the DSMB reported no concerns regarding patient safety. Following interactions with regulatoryauthorities, we amended the protocol for BENEFIT-ALS to enable increased enrollment to approximately 680 patients and to update the statistical methodssection, in both cases with the objective to maintain the originally intended statistical power of the trial. We have concluded enrollment in BENEFIT-ALS with711 patients of which over 400 have completed 12 weeks of treatment, and anticipate reporting the results from this clinical trial at the American Academy ofNeurology (AAN) Annual Meeting in Philadelphia, PA in April 2014.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 AAN 64 Annual Meeting, results 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 patients with ALS. Patients in Part A ofthis trial were not taking riluzole; patients in Part B received riluzole at the reduced dose of 50 mg daily. In this trial, tirasemtiv appeared to be generally safeand well-tolerated when dosed daily at 125 mg, 250 mg and 375 mg once daily for two weeks. This trial was not designed or powered to evaluate statisticallythe effects of tirasemtiv on the various 8thTable of Contentsoutcome 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 with riluzole, while riluzole plasma levels were greater when co-administered withtirasemtiv than when not co-administered with tirasemtiv. Adverse events and clinical assessments during treatment with tirasemtiv appeared similar, with orwithout co-administration of riluzole. Dizziness, the most commonly reported adverse event, was mostly mild and generally began and resolved early afterinitiating treatment. The incidence and persistence of dizziness appeared dose-related but was mild in severity in all patients who completed study drugtreatment. Most reports of dizziness began early after initiating treatment and resolved spontaneously within the first week of treatment in all but one patientwho nevertheless completed the trial. No serious adverse events were reported.Also in April 2012 at the AAN 64 Annual Meeting, results 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-daily dose 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.Background on ALS Market. Limited options exist for the treatment of patients with ALS, which affects as many as 30,000 Americans, with anestimated 5,600 new cases diagnosed each year in the U.S. Based on our proprietary research, the per capita prevalence and incidence appears similar in themajor European markets. ALS is 20% more common in men than women; however, with increasing age, the prevalence becomes more equal between men andwomen. The life expectancy of an ALS patient averages two to five years from the time of diagnosis with 90 to 95% of those diagnosed with ALS having thesporadic form. Of the remaining ALS patient population, 5 to 10% have a family history of the disease (familial ALS). In cases of familial ALS, there is anapproximately 50% chance each offspring will develop the disease. Based on our proprietary research, the majority of patients with ALS in the U.S. andEurope receive treatment at multidisciplinary centers that specialize in the unique needs of these patients. In the U.S., there are approximately 90 ALS centersof excellence, according to either the ALS Association or the Muscular Dystrophy Association. For most patients with ALS, death is usually due to respiratoryfailure because of diminished strength in the skeletal muscles responsible for breathing. We are evaluating other market opportunities for our skeletal musclesarcomere activators.CK-2127107 and Other Skeletal Muscle ActivatorsAstellas Strategic Alliance. In June 2013, we entered into a collaboration and license agreement with Astellas (the “Astellas Agreement”). Under theAstellas Agreement, we granted Astellas an exclusive license to co-develop and jointly commercialize CK-2127107 for potential application in non-neuromuscular indications associated with skeletal muscle weakness worldwide. CK-2127107 is being developed jointly by Cytokinetics and Astellas.Cytokinetics is primarily responsible for the conduct of Phase I clinical trials and certain Phase II readiness activities for CK-2127107. Astellas will beprimarily responsible for the conduct of subsequent development and commercialization activities for CK-2127107.The companies are jointly conducting research to identify next-generation skeletal muscle activators to be nominated as potential drug candidates, atAstellas’ expense, over a two-year term, which may be extended by the companies’ mutual consent. Astellas has the exclusive rights to develop andcommercialize fast skeletal troponin activators from this research program in non-neuromuscular indications and to develop and commercialize other novelmechanism skeletal muscle activators from this research program in all indications, 9thTable of Contentssubject to certain Cytokinetics’ co-development and co-promotion rights. Astellas will be responsible for the costs associated with the development of allcollaboration products, including CK-2127107.Under the Astellas Agreement, we retain an option to conduct early-stage development for certain agreed indications at our initial expense, subject toreimbursement if development continues under the collaboration. We also retain an option to co-promote collaboration products in the United States andCanada. Astellas will reimburse us for certain expenses associated with our co-promotion activities.In July 2013, we received an upfront payment of $16 million in connection with the execution of the Astellas Agreement, and we are eligible to potentiallyreceive over $24 million in reimbursement of sponsored research and development activities during the initial two years of the collaboration. Based on theachievement of pre-specified criteria, we may receive over $250 million in milestone payments relating to the development and commercial launch ofcollaboration products, including up to $112 million in development and commercial launch milestones for CK-2127107. We may also receive up to $200million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the Astellas Agreement. If Astellascommercializes any collaboration products, we will also receive royalties on sales of such collaboration products, including royalties ranging from the highsingle digits to the high teens on sales of products containing CK-2127107. In addition to these development, commercial launch and sales milestones, we mayalso receive payments for the achievement of pre-specified milestones relating to the joint research program.CK-2127107 Clinical DevelopmentCY 5011. In April 2013, we announced the initiation of a first-time-in-humans Phase I clinical trial of CK-2127107 in healthy male volunteers,known as CY 5011. CY 5011 was a double-blind, randomized, placebo-controlled study designed to assess the safety, tolerability, and pharmacokinetics ofsingle ascending oral doses of CK-2127107 administered in a three-period crossover design. We announced results from this trial in December 2013 at the 7International Conference of the Society on Sarcopenia, Cachexia and Wasting Disorders in Kobe, Japan. Planned single doses of CK-2127107 up to 4000 mg,the highest dose administered in this trial, were well-tolerated; therefore, a maximum tolerated dose was not defined. The pharmacokinetic profile of CK-2127107 was linear and dose-proportional across the dose range studied, with a mean terminal half-life compatible with once or twice daily dosing.CY 5014. During the fourth quarter of 2013, Cytokinetics completed dosing in CY 5014, a Phase I clinical trial of CK-2127107 in healthy malevolunteers. CY 5014 is a randomized, open-label, two-period crossover study designed to assess the relative oral bioavailability, pharmacokinetics, safety andtolerability of two oral formulations of CK-2127107.In 2014, we expect to conduct additional Phase I studies and certain Phase II readiness activities pursuant to our collaboration agreement with Astellas.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 function with fast skeletal muscle troponin activators to explore the potential clinicalapplications of this novel mechanism in diseases or conditions associated with skeletal muscle dysfunction. We also intend to conduct preclinical research onother chemically and pharmacologically distinct mechanisms to activate the skeletal sarcomere. We are conducting a joint research program with Astellasdirected to the discovery of next-generation skeletal muscle activators. Under the Astellas Agreement, Astellas will reimburse us for certain research activitieswe perform.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 10thTable of Contentscardiac muscle myosin, actin and a set of regulatory proteins. This program is currently directed towards the discovery and development of small moleculecardiac muscle myosin activators with the goal of developing novel drugs to treat acute and chronic heart failure. Cardiac muscle myosin is the cytoskeletalmotor protein in the cardiac muscle cell. It is directly responsible for converting chemical energy into the mechanical force, resulting in cardiac musclecontraction. This program is based on the hypothesis that activators of cardiac muscle myosin may address certain adverse properties of existing positiveinotropic agents. Current positive inotropic agents, such as beta-adrenergic receptor agonists or inhibitors of phosphodiesterase activity, increase theconcentration of intracellular calcium, thereby increasing cardiac sarcomere contractility. The effect on calcium levels, however, also has been linked topotentially life-threatening side effects. In contrast, our novel cardiac muscle myosin activators work by a mechanism that directly stimulates the activity ofthe cardiac muscle myosin motor protein, without increasing the intracellular calcium concentration. They accelerate the rate-limiting step of the myosinenzymatic cycle and shift it in favor of the force-producing state. Rather than increasing the velocity of cardiac contraction, this mechanism instead lengthensthe systolic ejection time, which results in increased cardiac function in a potentially more oxygen-efficient manner.Amgen Strategic Alliance. In December 2006, we entered into a collaboration and option agreement with Amgen to discover, develop andcommercialize novel small molecule therapeutics, including omecamtiv mecarbil, that activate cardiac muscle contractility for potential applications in thetreatment of heart failure (the “Amgen Agreement”). The agreement granted Amgen an option to obtain an exclusive license worldwide, except Japan, to developand commercialize omecamtiv mecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised its option. As a result, Amgenbecame responsible for the development and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan),subject to our development and commercialization participation rights. Amgen will reimburse us for certain research and development activities we performunder the collaboration.In June 2013, Cytokinetics and Amgen executed an amendment to the Amgen Agreement to include Japan, resulting in a worldwide collaboration (the“Amgen Agreement Amendment”). Under the terms of the Amgen Agreement Amendment, we received a non-refundable upfront license fee of $15 million inJune 2013. Under the Amgen Agreement Amendment, we plan to conduct a Phase I pharmacokinetic study intended to support inclusion of Japan in a potentialPhase III clinical development program and potential global registration dossier for omecamtiv mecarbil. Amgen will reimburse us for the costs of this study. Inaddition, we are eligible to receive additional pre-commercialization milestone payments relating to the development of omecamtiv mecarbil in Japan of up to$50 million, and royalties on sales of omecamtiv mecarbil in Japan. In conjunction with the Amgen Agreement Amendment, we also entered into a commonstock purchase agreement which provided for the sale of 1,404,100 shares of our common stock to Amgen at a price per share of $7.12 and an aggregatepurchase price of $10.0 million which was received in June 2013. Pursuant to this agreement, Amgen has agreed to certain trading and other restrictions withrespect to our common stock.Under the Amgen Agreement, as amended, we are eligible for potential pre-commercialization and commercialization milestone payments of up to $650million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration, and royalties that escalate based onincreasing levels of annual net sales of products commercialized under the agreement. The Amgen Agreement also provides for us to receive increased royaltiesby co-funding Phase III development costs of omecamtiv mecarbil and other drug candidates under the collaboration. If we elect to co-fund such costs, wewould be entitled to co-promote the co-funded drug in North America and participate in agreed commercialization activities in institutional care settings, atAmgen’s expense.In July 2013, Amgen announced that it had granted an option to commercialize omecamtiv mecarbil in Europe to Servier.Omecamtiv Mecarbil. Our lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. 11Table of ContentsWe 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 Clinical DevelopmentCurrent Clinical Trials. In March 2013, we announced the initiation of dosing of patients in COSMIC-HF (Chronic Oral Study of Myosin Activationto Increase Contractility in Heart Failure). COSMIC-HF is a Phase II, double-blind, randomized, placebo-controlled, multicenter, dose escalation studydesigned to evaluate several modified-release oral formulations of omecamtiv mecarbil in patients with heart failure and left ventricular systolic dysfunction.COSMIC-HF is being conducted by Amgen in collaboration with Cytokinetics. The primary objectives of this trial are to select an oral modified releaseformulation and doses of omecamtiv mecarbil for chronic twice-daily dosing in patients with heart failure and left ventricular systolic dysfunction and tocharacterize its pharmacokinetics during 20 weeks of treatment. The secondary objective is to evaluate the safety and tolerability of oral omecamtiv mecarbil.In addition, we will have an opportunity to evaluate the potential for sustained pharmacodynamic effects and their relationship to the pharmacokinetics of thisdrug candidate. During the third quarter of 2013, the second cohort of the dose escalation phase of COSMIC-HF completed enrollment. We and Amgen recentlyreviewed results from COSMIC-HF and selected an oral formulation of omecamtiv mecarbil for evaluation in the planned expansion phase of the trial. We andAmgen have agreed to amend the protocol to evaluate a plasma concentration-guided dose titration strategy in the expansion phase of COSMIC-HF. The size ofthe expansion phase has been increased with the objective to provide greater statistical power for the planned evaluation of several pharmacodynamicparameters during oral dosing with omecamtiv mecarbil. This trial is being conducted by Amgen in collaboration with Cytokinetics.Recently, Cytokinetics and Amgen agreed on the protocol and budget for the planned Phase I pharmacokinetic study, CY 1211, in healthy volunteers ofboth Japanese and non-Japanese ethnicity. The trial will be conducted by Cytokinetics in collaboration with Amgen. The costs of the trial will be reimbursedby Amgen.We are collaborating with Amgen to respond to information requests received from regulatory authorities relating to their ongoing review of the protocolssubmitted for COSMIC-HF and CY 1211. We anticipate commencement of patient enrollment in both the expansion phase of COSMIC-HF and in CY 1211 tooccur in the first half of 2014 following regulatory authorities’ review of responses relating to these information requests. We expect both the enrollment ofpatients in the expansion phase of COSMIC-HF and the conduct of CY 1211 to be completed in 2014.ATOMIC-AHF. In September 2013, results from ATOMIC-AHF (Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute HeartFailure) were presented at the European Society of Cardiology Congress and the Heart Failure Society of America Annual Scientific Meeting. ATOMIC-AHFwas an international, randomized, double-blind, placebo-controlled, Phase IIb clinical trial of intravenous omecamtiv mecarbil in patients with left ventricularsystolic dysfunction hospitalized with acutely decompensated heart failure. ATOMIC-AHF was conducted by Amgen in collaboration with Cytokinetics. Thisclinical trial enrolled over 600 patients in three sequential, ascending-dose cohorts. In each cohort, patients were randomized to receive omecamtiv mecarbil orplacebo. The primary efficacy objective of this trial was to evaluate the effect of 48 hours of intravenous omecamtiv mecarbil compared to placebo on dyspnea(shortness of breath). The secondary objectives were to assess the safety and tolerability of three dose levels of intravenous omecamtiv mecarbil compared withplacebo and to evaluate the effects of 48 hours of treatment with intravenous omecamtiv mecarbil on additional measures of dyspnea, patients’ globalassessments, change in N-terminal pro brain-type natriuretic peptide (a biomarker associated with the severity of heart failure) and short-term clinicaloutcomes in these patients. In addition, the trial evaluated the relationship between plasma concentrations of omecamtiv mecarbil and echocardiographicparameters in patients with acute heart failure. 12Table of ContentsThe omecamtiv mecarbil treatment groups were not statistically different in their 7-point Likert scale dyspnea symptom response rates compared to thepooled placebo group (p=0.33); therefore, the primary endpoint was not met. Omecamtiv mecarbil demonstrated favorable dose- and concentration-relatedtrends (nominal p=0.025 and nominal p=0.007, respectively) on dyspnea response. Improvement in dyspnea was observed in the highest omecamtiv mecarbildose group when compared against its paired placebo group in the third cohort (dyspnea symptom response in 51 percent of subjects on omecamtiv mecarbilversus 37 percent on placebo, nominal p=0.03). The incidence of worsening heart failure within seven days of initiating treatment was 17 percent in the pooledplacebo group and was 13 percent, 8 percent and 9 percent on omecamtiv mecarbil in the first, second and third cohorts, respectively. Systolic ejection time,the echocardiographic signature of omecamtiv mecarbil, increased in a concentration-dependent manner similar to that previously reported in healthyvolunteers and stable heart failure patients.Rates of adverse events (AEs), serious AEs, adjudicated deaths and hospitalizations were similar between omecamtiv mecarbil and placebo groups.There were seven post-randomization myocardial infarctions in the treatment groups receiving omecamtiv mecarbil compared with three in the placebo groups(2.3 percent vs. 1.0 percent, respectively). However, there was no relationship between the maximum increase from the baseline troponin (a biomarker specificfor cardiac muscle damage) and increasing plasma concentrations of omecamtiv mecarbil. Four of the myocardial infarctions occurred more than seven daysfollowing termination of the 48-hour drug infusion. The estimated plasma concentrations near the time of these events were zero. Three of these events occurredin patients who received omecamtiv mecarbil and one occurred in a patient who received placebo. One myocardial infarction occurred subsequent to apercutaneous coronary intervention in a patient who received omecamtiv mecarbil. One myocardial infarction occurred in a patient with sepsis who receivedplacebo. Omecamtiv mecarbil was not associated with an increased incidence of tachyarrhythmias nor were heart rate or blood pressure adversely affected.Prior Clinical Experience with Omecamtiv Mecarbil. Prior to Amgen’s exercise of its option, Cytokinetics conducted a clinical trials program foromecamtiv mecarbil comprised of multiple Phase I and Phase IIa clinical trials designed to evaluate the safety, tolerability, pharmacodynamic andpharmacokinetic profiles of both intravenous and oral formulations in a diversity of patients, including patients with stable heart failure and patients withischemic 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 the adverse findings which occurred in preclinical safety studies at similarplasma concentrations. These effects are believed to be related to the mechanism of action of this drug candidate which, at intolerable doses, resulted in anexcessive prolongation of the systolic ejection time (i.e., the time in which the heart is contracting). However, these effects resolved promptly withdiscontinuation of the infusions of omecamtiv mecarbil.Phase IIa stable heart failure (safety, tolerability, pharmacokinetics and pharmacodynamics). In 2009, we presented final results 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 time, and in stroke volume, cardiac output, fractional shortening and ejection fraction (all measures of cardiac function), thatoccurred across the patient population in a concentration-dependent manner. In addition, the results demonstrated statistically significant correlations betweenincreasing omecamtiv mecarbil plasma concentrations and decreases in left ventricular end-systolic volume, left ventricular end-diastolic volume and heartrate. Omecamtiv mecarbil appeared to be generally well-tolerated in stable heart failure patients over a range of plasma concentrations during continuousintravenous administration. Patients with reduced stroke volumes (<50 ml) at baseline had generally greater pharmacodynamic responses to omecamtivmecarbil than those in patients with greater stroke 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 results from a double-blind, randomized, placebo-controlled Phase IIa clinical trial evaluating the effect of omecamtiv 13Table of Contentsmecarbil on symptom-limited exercise tolerance in heart failure patients with ischemic cardiomyopathy and angina. The primary safety endpoint of thisclinical trial was stopping an exercise treadmill test due to angina at a stage earlier than the shorter of two baseline exercise treadmill tests. This endpointoccurred in one patient receiving placebo and in no patients receiving either the lower or higher of two dose levels of omecamtiv mecarbil. In heart failurepatients with ischemic cardiomyopathy and angina, who theoretically could be most vulnerable to the possible deleterious consequences of systolic ejectiontime prolongation, treatment with omecamtiv mecarbil, at doses producing plasma concentrations previously demonstrated in other trials to increase cardiacfunction, did not appear to deleteriously affect a broad range of safety assessments in the setting of exercise.Phase I Clinical Trials. Seven Phase I clinical trials of omecamtiv mecarbil have been conducted in healthy subjects: five conducted by Cytokineticsand two conducted by Amgen in collaboration with Cytokinetics. Results from these trials were reported previously.Ongoing Research in Cardiac Muscle Contractility. In 2013, we agreed with Amgen to additional research activities intended to be conductedthrough 2014 under the research plan directed to next-generation compounds in our cardiac muscle contractility program. Under the Amgen Agreement, Amgenwill reimburse us for certain research activities we perform.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 heart failure, resulting in nearly one million hospital discharges with the primary diagnosis of heart failure and approximately 300,000deaths each year. For people over 65 years of age, heart failure incidences approach 10 per 1000 and approximately 50% of people diagnosed with heart failurewill die within 5 years of diagnosis. These numbers are increasing due to the aging of the U.S. population and an increased likelihood of survival followingacute myocardial infarctions. The costs to society attributable to the prevalence of heart failure are high, especially as many chronic heart failure patientssuffer repeated acute episodes. Despite currently available therapies, readmission rates for heart failure patients remain high. In general, the mortality followinghospitalization for patients 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 fortreatment of these patients. These poor outcomes in the setting of current therapies points to the need for novel therapeutics that may offer further reductions inmorbidity and mortality. The annual cost of heart failure to the U.S. health care system is estimated to be $32 billion and is predicted to grow 120% to almost$70 billion by the year 2030. Today, a portion of that cost is attributable to drugs used to treat each of chronic and acute heart failure. Approximately 70% ofthose costs are due to hospitalization, home health and physician care. In the U.S., Medicare is one of the largest payors for heart failure related costs.Approximately 50% of Medicare beneficiaries with heart failure are concentrated in the top 20% of the hospital referral regions in the U.S, which generallyinclude 5 to 10 hospitals in a geographic area. New drug therapies that could reduce the number of hospitalizations could decrease the cost to the health caresystem.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 14Table of Contentsaspects of muscle function for other potential therapeutic applications. For example, we are conducting research with compounds that affect muscle growth andthat may have applications for serious diseases and medical conditions such as cachexia. Cachexia is a condition that can be associated with cancer, heartfailure, chronic obstructive pulmonary disease or other conditions. This syndrome is characterized by the loss of muscle mass and may lead to weakness anddisability. We are performing research on compounds that may increase muscle mass and which may impact patient functionality or potentially alter thecourse of diseases associated with muscle wasting.Our 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, 2013, we owned or controlled 119 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; 15Table of Contents • 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; • 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 16Table of Contentsdrugs. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control,labeling, storage, record keeping, approval, advertising and promotion of our drug candidates and drugs.In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act and implementing regulations. 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.Similar regulatory procedures generally apply in countries outside of the United States. This testing and approval process requires substantial time,effort and financial resources, and we cannot be certain that any approvals for our drug candidates will be granted on a timely basis, if at all.Nonclinical tests include laboratory evaluation of product chemistry, formulation and stability, and studies to evaluate toxicity and pharmacokinetics inanimals. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND application to theFDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises concerns or questionsabout the conduct of the clinical trial, including concerns that human research subjects may be exposed to unreasonable health risks. In such a case, the INDsponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Our submission of an IND or a foreign equivalent, or those ofour collaborators, may not result in authorization from the FDA or its foreign equivalent to commence a clinical trial. A separate submission to an existing INDmust also be made for each successive clinical trial conducted during product development. Further, an independent institutional review board (“IRB”) or itsforeign equivalent for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences atthat center and it must monitor the clinical trial until completed. The FDA, the IRB or their foreign equivalents, or the clinical trial sponsor may suspend aclinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.Clinical Trials. For purposes of an NDA or equivalent submission and approval, clinical trials are typically conducted in the following threesequential phases, which may overlap: • Phase I: Phase I includes the initial introduction of a drug candidate into humans. These studies are closely monitored and may be conducted inpatients, but are usually conducted in healthy volunteer subjects. These studies are designed to determine the metabolic and pharmacologic actions ofthe drug candidate in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. DuringPhase I, sufficient information about the drug candidate’s pharmacokinetics and pharmacological effects should be obtained to permit the design ofwell-controlled, scientifically valid, Phase II studies. 17Table of Contents • Phase II: Phase II includes the early controlled clinical studies conducted to obtain some preliminary data on the effectiveness of the drug for aparticular indication or indications in patients with the disease or condition. This phase of testing also helps determine the common short-term sideeffects and risks associated with the drug candidate. These clinical trials are generally conducted in a limited patient population to identify possibleadverse effects and safety risks, to make an initial determination of potential efficacy of the drug candidate for specific targeted indications and todetermine dose tolerance and optimal dosage. Multiple Phase II clinical trials may be conducted by the sponsor to obtain information prior tobeginning larger and more expensive Phase III clinical trials. Phase IIa clinical trials generally are designed to study the pharmacokinetic orpharmacodynamic properties and to conduct a preliminary assessment of safety of the drug candidate over a measured dose response range. In somecases, a sponsor may decide to conduct a Phase IIb clinical trial, which is a second, typically larger, confirmatory Phase II trial that could, ifpositive and accepted by a regulatory authority, serve as a pivotal clinical trial in the approval of a drug candidate. • Phase III: These clinical trials are commonly referred to as pivotal clinical trials. If the Phase II clinical trials demonstrate that 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. Phase III trials are also intended to provide an adequate basis for extrapolating the results tothe general population and transmitting that information in the drug labeling. Phase III studies usually include several hundred to several thousandpeople.At any time during the conduct of a clinical trial, the FDA or a foreign equivalent can impose a clinical hold on the trial if it believes the trial is unsafe orthat the protocol is clearly deficient in design in meeting its stated objectives, which requires the conduct of the trial to cease until the clinical hold is removed.In some cases, the FDA or foreign equivalent may condition approval of marketing approval for a drug candidate on the sponsor’s agreement to conductadditional clinical trials to further assess the drug’s safety and effectiveness after marketing 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/Marketing Approval Application. The results of drug candidate development, preclinical testing and clinical trials are submitted to theFDA as part of an NDA. The NDA also must contain extensive manufacturing information. In addition, the FDA may require that a proposed RiskEvaluation 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 thebenefits of the drug outweigh its risks. Similar, and in some cases additional, requirements apply in foreign jurisdictions for marketing approval applicationsfor drugs in those jurisdictions. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether theapplication 18Table of Contentsshould be approved. The FDA often, but not always, follows the advisory committee’s recommendations. The FDA may deny approval of an NDA byissuance of a complete response letter if the applicable regulatory criteria are not satisfied, or it may require additional clinical data, including data in apediatric population, or an additional pivotal 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, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are notalways conclusive and the FDA may interpret data differently than we or our partners do. Once issued, the FDA or foreign equivalent may withdraw a drugapproval if ongoing regulatory requirements are not met or if safety problems occur after the drug reaches the market. In addition, the FDA or its foreigncounterparts may require further testing, including Phase IV clinical trials, and surveillance or restrictive distribution programs to monitor the effect ofapproved drugs which have been commercialized. The FDA and its foreign counterparts have the power to prevent or limit further marketing of a drug basedon the results of these post-marketing programs. Drugs may be marketed only for the approved indications and in accordance with the provisions of theapproved label. Further, if there are any modifications to a drug, including changes in indications, labeling or manufacturing processes or facilities, we maybe required to submit and obtain prior FDA approval of a new NDA or NDA supplement, or the foreign equivalent, which may require us to developadditional data or conduct additional preclinical studies and clinical trials.Satisfaction of FDA regulations and requirements or similar requirements of state, local and foreign regulatory agencies 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 19Table of Contentsdevelopment plans, the option of submitting an NDA in sections rather than all components simultaneously, and the option of requesting evaluation of studiesusing surrogate endpoints, which are laboratory measurements or physical signs used as an indirect or substitute measurement representing a clinicallymeaningful 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.For 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; 20Table of Contents • 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 tirasemtiv is approved for marketing by the FDA or other regulatory authorities for the treatment of ALS, it may then compete with other potential newtherapies for ALS that are currently being developed by companies such as Mitsubishi Tanabe Pharma Corporation, Eisai Inc., Trophos SA, NeuraltusPharmaceuticals, Inc., Isis Pharmaceuticals, Inc. and GlaxoSmithKline plc. In addition, BrainStorm Cell Therapeutics and Neuralstem, Inc. are eachconducting clinical development of stem cell therapies for the potential treatment of ALS. If CK-2127107 is approved by the FDA for the potential treatment ofnon-neuromuscular indications associated with muscle weakness, potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033,a selective androgen receptor modulator, for muscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancercachexia and potentially other indications. Novartis (in collaboration with Morphosys AG), is conducting clinical development with an activin type-IIBreceptor antagonist, bimagrumab, to evaluate its ability to treat diseases involving the loss of muscle mass, strength and function. Drugs that could competewith CK-2127107 could also compete against tirasemtiv in ALS or other neuromuscular diseases, should the appropriate clinical trials be conducted.If omecamtiv mecarbil is approved for marketing by the FDA or other regulatory authorities for the treatment of heart failure, it would compete againstother drugs used for the treatment of acute and chronic heart failure. These include generic drugs, such as milrinone, dobutamine or digoxin and brandeddrugs such as Natrecor (nesiritide) and Procoralan (ivabradine). Omecamtiv mecarbil could also potentially compete against other novel drug candidates andtherapies in development, such as bucindolol, which is being developed by ARCA biopharma, Inc.; Reasanz (serelaxin) and LCZ-696, which are beingdeveloped by Novartis; cenderitide (CD-NP), which is being developed by Carpicor Therapeutics, Inc., TRV-027, which is being developed by Trevena;ularitide, which is being developed by Cardiorentis Ltd.; aladorian, which is being developed by ARMGO Pharma, Inc; certain cardioprotectants which arebeing developed by Cardioxyl Pharmaceuticals, Inc.; glial growth factor (GGF-2) which is being developed by Acorda Therapeutics, Inc.; Neurocardin, whichis being developed by Zensun Sci & Tech, Ltd; Mydicar, a genetically-targeted enzyme replacement therapy for advanced heart failure which is beingdeveloped by Celladon Corporation; and levosimendan, which was acquired for development by Oxygen Biotherapeutics, Inc. In addition, there are a numberof medical devices being developed 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, 2013, our workforce consisted of 85 full-time employees, 28 of whom hold Ph.D. or M.D. degrees, or both, and 16 of whom holdother advanced degrees. Of our total full-time employees, 64 are engaged in research and development and 21 are engaged in business development, financeand administration functions. 21Table of ContentsIn 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.Investor 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 650-624-3060. The information found on our website is not part of this or any other report filed with or furnished to the SEC.Item 1A. Risk FactorsIn evaluating our business, you should carefully consider the following risks in addition to the other information in 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. 22Table of ContentsWe 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, Astellas and others, equipment financings, interest on investments and government grants. We believe that ourexisting cash and cash equivalents, short-term investments and interest earned on investments should be sufficient to meet our projected operating requirementsfor at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resourcessooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our drug candidates and other researchand development activities, including risks and uncertainties that could impact the rate of progress of our development activities, we are unable to estimatewith certainty the amounts of capital outlays and operating expenditures associated with these activities.For the foreseeable future, our operations will require significant additional funding, in large part due to our research 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, if supported by the results, in order to obtain marketing approval for tirasemtiv for the potential treatment of ALS. We will requiresignificant additional funding to enable us to conduct any such Phase III clinical trials. Until we can generate a sufficient amount of product revenue, weexpect to raise future capital through strategic alliance and licensing arrangements, public or private equity offerings and debt financings. We do not currentlyhave any commitments for future funding other than reimbursements, milestone and royalty payments that we may receive under our collaboration agreementswith Amgen and Astellas. We may not receive any further funds under those agreements. Our ability to raise funds may be adversely impacted by currenteconomic conditions. As a result of these and other factors, we do not know whether additional financing will be available when needed, or that, if available,such financing would be on terms favorable to our stockholders or us.To the extent that we raise additional funds through strategic alliances or licensing and other arrangements with third parties, we 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 and our share price may decline. To the extentthat we raise additional funds through debt financing, the financing may involve covenants that restrict our business activities. In addition, funding from anyof 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 delay or discontinue certain research and development activities. Forexample, if we cannot raise the funds necessary to enable the conduct of the one or more Phase III clinical trials for tirasemtiv for the potential treatment ofALS, if supported by the results of BENEFIT-ALS, that we anticipate will be required for marketing approval, our ability to complete the development oftirasemtiv will be delayed or suspended. If we delay or discontinue research and development activities, our stock price may be negatively affected.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 23Table of Contentscandidates in clinical development are omecamtiv mecarbil for the potential treatment of heart failure, tirasemtiv for the potential treatment of ALS and otherneuromuscular disorders and CK-2127107 for the potential treatment of non-neuromuscular indications associated with muscle weakness. We cannot becertain that the clinical development of these or any future drug candidates will be successful, that they will receive the regulatory approvals required tocommercialize them, that they will ultimately be accepted by prescribers or reimbursed by insurers or that any of our other research programs will yield a drugcandidate suitable for clinical testing or commercialization. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to becommercially marketed for at least several years, if at all. The development of any one or all of these drug candidates may be discontinued at any stage of ourclinical trials programs and we may not generate 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 investigational new drug application (“IND”) to the FDA, or an equivalent application in foreign jurisdictions, that would allow us toadvance that compound into clinical trials. Furthermore, we or our partners may need to submit separate INDs (or foreign equivalent) to different divisionswithin the FDA (or foreign regulatory authorities) in order to pursue clinical trials in different therapeutic areas. Each new IND (or foreign equivalent) must bereviewed by the new division before the clinical trial under its jurisdiction can proceed, entailing all the risks of delay inherent to regulatory review. If our orour partners’ current or future preclinical studies or clinical trials are unsuccessful, our business will be significantly harmed and our stock price could benegatively 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 in a particular animal species will result in similar findings in other animal species or in humans. Forany of our drug candidates, the results from Phase I clinical trials in healthy volunteers and clinical results from Phase I and II trials in patients are notnecessarily indicative of the results of larger Phase III clinical trials that are necessary to establish whether the drug candidate is safe and effective for theapplicable indication. Likewise, interim results from a clinical 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, such information may notaccurately predict what actually occurs during the course of the trial itself, which may have consequences for the conduct of an ongoing clinical trial or for theeventual results of that trial. For example, the number of patients planned to be enrolled in a placebo-controlled clinical trial is determined in part by estimatesrelating to expected treatment effect and variability about the primary endpoint. These estimates are based upon earlier nonclinical and clinical studies of thedrug candidate itself and clinical trials of other drugs thought to have similar effects in a similar patient population. If information gained during the conductof the trial shows these estimates to be inaccurate, we may elect to adjust the enrollment accordingly, which may cause delays in completing the trial,additional expense or a statistical penalty to apply to the evaluation of the trial results. 24Table of ContentsFurthermore, in view of the uncertainties inherent in drug development, such clinical trials may not be designed with focus on indications, patientpopulations, dosing regimens, safety, efficacy or pharmacokinetic parameters or other variables that will provide the necessary safety or efficacy data tosupport regulatory approval to commercialize the resulting drugs. Clinical trials of our drug candidates are designed based on guidance or advice fromregulatory agencies, which is subject to change during the development of the drug candidate at any time. Such a change in a regulatory agency’s guidance oradvice may cause that agency to deem results from trials to be insufficient to support approval of the drug candidate and require further clinical trials of thatdrug candidate to be conducted. In addition, individual patient responses to the dose administered of a drug may vary in a manner that is difficult to predict.Also, the methods we select to assess particular safety, efficacy or pharmacokinetic parameters may not yield the same statistical precision in estimating ourdrug candidates’ effects as may other methodologies. Even if we believe the data collected from clinical trials of our drug candidates are promising, these datamay 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 different ways from us or our partners, which could delay, limit or preventregulatory approval.Administering any of our drug candidates or potential drug candidates may produce undesirable side effects, also known as 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, our partners or the FDA or foreign regulatory authorities to modify, suspend or terminate clinical trialswith respect to any drug candidate at any time during the development program. Further, the administration of two or more drugs contemporaneously can leadto interactions between them, and our drug candidates may interact with other drugs that trial subjects are taking. For example, in a Phase I drug-druginteraction study of tirasemtiv administered orally to healthy volunteers, co-administration of tirasemtiv and riluzole (an approved treatment for ALS)approximately doubled the average maximum riluzole plasma level, although it also appeared to reduce the variability of the riluzole plasma levels of the studysubjects. If the adverse effects are severe or frequent enough to outweigh the potential efficacy of a drug candidate, the FDA or other regulatory authorities coulddeny approval of that drug candidate for any or all targeted indications. Even if one or more of our drug candidates were approved for sale as drugs, theoccurrence of even a limited number of toxicities or adverse effects when used in large populations may cause the FDA or foreign regulatory authorities toimpose restrictions on, or stop, the further marketing of those drugs. Indications of potential adverse effects or toxicities which do not seem significant duringthe course of clinical trials may later turn out to actually constitute serious adverse effects or toxicities when a drug is used in large populations or for extendedperiods 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, dizzinessand feeling hot, increases in heart rate, declines in blood pressure, electrocardiographic changes consistent with acute myocardial ischemia and transient risesin 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 25Table of Contentscandidates. In such circumstances, it may not be possible to exclude with certainty a causal relationship to our drug candidate, even though the responsibleclinical investigator may view such an event as not study drug-related.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 our drug candidates may take significantly longer to complete. The commencement and completion of our clinical trials could bedelayed 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; • 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; 26Table of Contents • 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.We depend on Amgen for the conduct, completion and funding of the development and commercialization of omecamtiv mecarbil.Under our strategic alliance, Amgen holds an exclusive license to our drug candidate omecamtiv mecarbil worldwide. As a result, Amgen is responsiblefor the clinical development and obtaining and maintaining regulatory approval of omecamtiv mecarbil for the potential treatment of heart failure worldwide.We do not control the development activities being conducted or that may be conducted in the future by Amgen, including, but not limited to, the timingof initiation, termination or completion of clinical trials, the analysis of data arising out of those clinical trials or the timing of release of data concerning thoseclinical trials, which may impact our ability to report on Amgen’s results. Amgen may conduct these activities more slowly or in a different manner than wewould if we controlled the development of omecamtiv mecarbil. Amgen is responsible for filing future applications with the FDA or other regulatory authoritiesfor approval of omecamtiv mecarbil and will be the owner of any marketing approvals issued by the FDA or other regulatory authorities for omecamtivmecarbil. If the FDA or other regulatory authorities approve omecamtiv mecarbil, Amgen will also be responsible for the marketing and sale of the resultingdrug, subject to our right to co-promote omecamtiv mecarbil in North America if we exercise our option to co-fund Phase III development costs of omecamtivmecarbil under the collaboration. However, we cannot control whether Amgen will devote sufficient attention and resources to the development of omecamtivmecarbil or will proceed in an expeditious manner, even if we do exercise our option to co-fund the development of omecamtiv mecarbil. Even if the FDA orother regulatory agencies approve omecamtiv mecarbil, Amgen may elect not to proceed with the commercialization of the resulting drug in one or morecountries.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 to proceed with commercialization of the resulting drug following regulatory approval, we would have toseek a 27Table of Contentsnew partner for development or commercialization, curtail or abandon that development or commercialization, or undertake and fund the development ofomecamtiv mecarbil or 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 donot have sufficient funds to conduct the development or commercialization of omecamtiv mecarbil ourselves, we would have to curtail or abandon thatdevelopment or commercialization, which could harm our business.We will depend on Astellas for the conduct, completion and funding of the development and commercialization of CK-2127107.In June 2013, we entered into a strategic alliance with Astellas focused on the research, development and commercialization of skeletal muscle activators,other than tirasemtiv and certain related compounds. The primary objective of the strategic alliance is to advance novel therapies for indications associatedwith muscle weakness.As part of the strategic alliance, we granted Astellas an exclusive license to co-develop and commercialize CK-2127107 for potential application in non-neuromuscular indications worldwide. Following Cytokinetics’ conduct of Phase I clinical trials and certain Phase II readiness activities for CK-2127107,Astellas will be primarily responsible for the conduct of subsequent development and commercialization activities for CK-2127107. Astellas may elect not tocontinue development of CK-2127107 following Cytokinetics’ completion of these activities. In such event, we would need significant additional funding tocontinue the development of CK-2127107 on our own, which may not be available on attractive or acceptable terms, if at all, and we would be limited in theindications that we could pursue with this drug candidate.We do not control the development activities that may be conducted by Astellas, including, but not limited to, the timing of initiation, termination orcompletion of clinical trials, the analysis of data arising out of those clinical trials or the timing of release of data concerning those clinical trials, which mayimpact our ability to report on Astellas’ results. Astellas may conduct these activities more slowly or in a different manner than we would. Astellas isresponsible for filing future applications with the FDA or other regulatory authorities for approval of CK-2127107 and will be the owner of any marketingapprovals issued by the FDA or other regulatory authorities for CK-2127107. If the FDA or other regulatory authorities approve CK-2127107, Astellas willalso be responsible for the marketing and sale of the resulting drug, subject to our right to co-promote the drug in the United States and Canada. However, wecannot control whether Astellas will devote sufficient attention and resources to the development of CK-2127107 or will proceed in an expeditious manner.Even if the FDA or other regulatory agencies approve CK-2127107, Astellas may elect not to proceed with the commercialization of the resulting drug in one ormore countries.If the results of one or more clinical trials with CK-2127107 do not meet Astellas’ expectations at any time, Astellas may elect to terminate furtherdevelopment of CK-2127107 or certain of the potential clinical trials for CK-2127107, even if the actual number of patients treated at that time is relativelysmall. In addition, Astellas generally has discretion to elect whether to pursue or abandon the development of CK-2127107. Astellas may terminate ourstrategic alliance in whole or in part for any reason upon six months prior notice at any time following expiration of the strategic alliance’s two-year researchterm. If Astellas abandons CK-2127107, it would result in a delay in or could prevent us from further developing or commercializing CK-2127107, andwould delay and could prevent us from obtaining revenues for this drug candidate. Disputes may arise between us and Astellas, which may delay or cause thetermination of any CK-2127107 clinical trials, result in significant litigation or cause Astellas to act in a manner that is not in our best interest. If developmentof CK-2127107 does not progress for these or any other reasons, we would not receive further milestone payments or royalties on product sales from Astellaswith respect to CK-2127107. If Astellas abandons development of CK-2127107 prior to regulatory approval or if it elects not to proceed withcommercialization of the resulting drug following regulatory approval, we would have to seek a new partner for development or commercialization, curtail orabandon that development or commercialization, or undertake and fund the development of CK-2127107 or 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 sufficient funds to conduct the development or commercializationof CK-2127107 ourselves, we would have to curtail or abandon that development or commercialization, which could harm our business. 28Table of ContentsIf we do not enter into strategic alliances for our unpartnered drug candidates or research and development programs or fail to successfullymaintain our current or future strategic alliances, we may have to reduce, delay or discontinue our advancement of our 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 currently requires us to enter into and successfully maintain strategicalliances with pharmaceutical companies or other industry participants to advance our programs and reduce our expenditures on each program. Accordingly,the success of our development activities depends in large part on our current and future strategic partners’ performance, over which we have little or nocontrol.We have retained the rights to develop and commercialize tirasemtiv. We currently do not have a strategic partner for this drug candidate. We may seekone or more strategic partners or other arrangements with third parties to support Phase III clinical development, if supported by the results of BENEFIT-ALS,and commercialization of tirasemtiv. However, we may not be able to negotiate and enter into such strategic alliances or arrangements on acceptable terms, if atall, or in accordance 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 morePhase III clinical trials we believe will be necessary to obtain marketing approval for tirasemtiv for the potential treatment of ALS unless we are able to acquirethe funding to do so from another source.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 omecamtiv mecarbil, tirasemtiv or CK-2127107, or thecommercialization of a drug at our expense, 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 omecamtiv mecarbil, tirasemtiv or CK-2127107, 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; 29Table of Contents • 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.Until 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, CK-2127107 and omecamtiv mecarbil, and related activities. We do not have control over many aspects of ourCROs’ activities, and cannot fully control the amount, timing or quality of resources that they devote to our programs. CROs may not assign as high apriority to our programs or pursue them as diligently as we would if we were undertaking these programs ourselves. The activities conducted by our CROstherefore may not be completed on schedule or in a satisfactory manner. CROs may also give higher priority to relationships with our competitors and potentialcompetitors than to their relationships with us. Outside of the United States, we are particularly dependent on our CROs’ expertise in communicating withclinical trial sites and regulatory authorities and ensuring that our clinical trials and related activities and regulatory filings comply with applicable laws.Our CROs’ failure to carry out development activities on our behalf as agreed and in accordance with our and the FDA’s or other regulatory agencies’requirements and applicable U.S. and foreign laws, or our failure to properly coordinate and manage these activities, could increase the cost of our operationsand delay or prevent the development, approval and commercialization of our drug candidates. For example, in June 2013 we learned from our datamanagement vendor for our BENEFIT-ALS clinical trial that a programming error in the electronic data capture system controlling study drug assignmentcaused 58 patients initially randomized to and treated with tirasemtiv to receive placebo instead at a certain trial visit and for the remainder of the trial. In orderto maintain the originally intended statistical power of the trial, we amended the protocol to permit enrollment of approximately 680 patients, or 180 patients inaddition to the 500 patients allowed under the existing protocol. This protocol amendment will result in additional costs and delays in conducting BENEFIT-ALS. In addition, if a CRO fails to perform as agreed, our ability to collect damages may be contractually limited. If we fail to effectively manage the CROscarrying out the development of our drug candidates or if our CROs fail to perform as agreed, the commercialization of our drug candidates will be delayed orprevented. 30Table of ContentsWe 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. Following our conduct ofthe Phase I clinical trials for CK-2127107, Astellas will assume responsibility to conduct these activities for the ongoing clinical development of CK-2127107worldwide. For tirasemtiv, we rely on a limited number of contract manufacturers. In particular, we rely on single-source contract manufacturers for the activepharmaceutical ingredient and the drug product supply for our clinical trials, as well as other materials required to conduct our clinical trials. We expect to relyon contract manufacturers to supply all future drug candidates for which we conduct clinical development, as well as other materials required to conduct ourclinical trials. If any of our existing or future contract manufacturers fail to perform satisfactorily, it could delay clinical development or regulatory approval ofour drug candidates or commercialization of our drugs, producing additional losses and depriving us of potential product revenues. In addition, if a contractmanufacturer 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 qualified personnel. These manufacturers are subject to stringent regulatory requirements, including the FDA’scurrent good manufacturing practices regulations and similar foreign laws and standards. Each contract manufacturer must pass a pre-approval inspectionbefore we can obtain marketing approval for any of our drug candidates and following approval will be subject to ongoing periodic unannounced inspectionsby the FDA, the U.S. Drug Enforcement Agency and other regulatory agencies, to ensure strict compliance with current good manufacturing practices andother applicable government regulations and corresponding foreign laws and standards. We seek to ensure that our contract manufacturers comply fully withall applicable regulations, laws and standards. However, we do not have control over our contract manufacturers’ compliance with these regulations, laws andstandards. If one of our contract manufacturers fails to pass its pre-approval inspection or maintain ongoing compliance at any time, the production of ourdrug candidates could be interrupted, resulting in delays or discontinuance of our clinical trials, additional costs and potentially lost revenues. In addition,failure of any third party manufacturers or us to comply with applicable regulations, including pre-or post-approval inspections and the current goodmanufacturing practice requirements of the FDA or other comparable regulatory agencies, could result in sanctions being imposed on us. These sanctionscould include fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delay, suspension or withdrawalof approvals, license revocation, product seizures or recalls, operational restrictions and criminal prosecutions, any of which could significantly andadversely affect our business.In addition, our existing and future contract manufacturers may not perform as agreed or may not remain in the 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 31Table of Contentsmanufacturer or manufacturing site also would have to be educated in, or develop substantially equivalent processes for, production of our drugs and drugcandidates. It may be difficult or impossible to transfer certain elements of a manufacturing process to a new manufacturer or for us to find a replacementmanufacturer on acceptable terms quickly, or at all, either of which would delay or prevent our ability to develop drug candidates and commercialize anyresulting 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.The 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 it will be accepted byprescribers or be reimbursed by insurers or that we will also be able to develop and receive regulatory approval for that or other drug candidates for thetreatment of other diseases. If we or our partners are unable to successfully develop and commercialize our drug candidates, our business will be materiallyharmed.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, 32Table of Contentstirasemtiv 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 future protection of our proprietary rights is uncertain because legal means may not adequately protect our rights or permit us to gain or keep ourcompetitive advantage.Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical 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; • 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. 33Table of ContentsChanges 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.If 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; 34Table of Contents • 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.We 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. 35Table of ContentsOur 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 tirasemtiv isapproved for marketing by the FDA or other regulatory authorities for the treatment of ALS, it may then compete with other potential new therapies for ALSthat 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. are each conducting clinicaldevelopment of stem cell therapies for the potential treatment of ALS. If CK-2127107 is approved by the FDA for the potential treatment of non-neuromuscularindications associated with muscle weakness, potential competitors include Ligand Pharmaceuticals, Inc., which is developing LGD-4033, a selectiveandrogen receptor modulator, for muscle wasting; and GTx, Inc., which is developing ostarine, a selective androgen receptor modulator, for cancer cachexiaand potentially other indications. Novartis (in collaboration with Morphosys AG), is conducting clinical development with an activin type-IIB receptorantagonist, bimagrumab, to evaluate its ability to treat diseases involving the loss of muscle mass, strength and function. Drugs that could compete with CK-2127107 could also compete against tirasemtiv in ALS or other neuromuscular diseases, should the appropriate clinical trials be conducted.If omecamtiv mecarbil is approved for marketing by the FDA for heart failure, it would compete against other drugs used for the treatment of acute andchronic heart failure. These include generic drugs, such as milrinone, dobutamine or digoxin and branded drugs such as Natrecor (nesiritide). Omecamtivmecarbil could also potentially compete against other novel drug candidates and therapies in development, such as bucindolol, which is being developed byARCA biopharma, Inc.; Reasanz (serelaxin) and LCZ-696, which are being developed by Novartis; cenderitide (CD-NP), which is being developed byCarpicor Therapeutics, Inc., TRV-027, which is being developed by Trevena; ularitide, which is being developed by Cardiorentis Ltd.; aladorian, which isbeing developed by Armgo Pharma, Inc; certain cardioprotectants which are being developed by Cardioxyl Pharmaceuticals, Inc.; glial growth factor (GGF-2)which is being developed by Acorda Therapeutics, Inc.; Neurocardin, which is being developed by Zensun Sci & Tech, Ltd; Mydicar, a genetically-targetedenzyme replacement therapy for advanced heart failure which is being developed by Celladon Corporation; and levosimendan, which was recently acquiredfor development by Oxygen Biotherapeutics, 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. 36Table of ContentsWe 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 diverting management’s attention to transition matters and identifying suitable replacements. We also rely on consultants and advisors to assistus in formulating our research and development strategy. All of our consultants and advisors are either self-employed or employed by other organizations, andthey may 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.Any future workforce and expense reductions may have an adverse impact on our internal programs and our ability to hire and retain skilledpersonnel.Our future success will depend in large part upon our ability to attract and retain highly skilled personnel. In light of our continued need for funding andcost control, we may be required to implement future workforce and expense reductions, which could further limit our research and development activities. Forexample, 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. We may have difficulty retaining and attracting such personnel as a result of a perceived 37Table of Contentsrisk of future workforce reductions. In addition, the implementation of any additional workforce or expense reduction programs may divert the efforts of ourmanagement team and other key employees, which could adversely affect our business.We may expand our development and clinical research capabilities and, as a result, we may encounter difficulties 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 andAstellas, which have established distribution systems and direct sales forces to commercialize them. If we are unable to enter into such arrangements onacceptable terms, we may not be able to successfully commercialize these drugs. To the extent that we are not successful in commercializing any drugsourselves or through a strategic alliance, our product revenues and business will suffer and our stock price would decrease.Risks Related To Our IndustryThe regulatory approval process is expensive, time-consuming and uncertain and may prevent our partners or us 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 a new drug application (“NDA”) from the FDA. Neither we nor our partners have received NDA or othermarketing approval for any of Cytokinetics’ drug candidates.Obtaining NDA approval is a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and 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 38Table of Contentsthat cause us to abandon clinical trials or to repeat or perform additional preclinical testing and clinical trials. The number and focus of preclinical studies andclinical trials that will be required for approval by the FDA and foreign regulatory agencies varies depending on the drug candidate, the disease or conditionthat the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. In addition, the FDA may require that aproposed Risk Evaluation and Mitigation Strategy, also known as a REMS, be submitted as part of an NDA if the FDA determines that it is necessary toensure that the benefits of the drug outweigh its risks. The FDA and foreign regulatory agencies can delay, limit or deny approval of a drug candidate formany 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 the discovery that adverse effects or toxicities observed in preclinical research or clinical trials that were believed to beminor actually constitute much more serious 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; 39Table of Contents • 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.We may be subject to costly product liability or other liability claims and may not be able to obtain adequate insurance.The use of our drug candidates in clinical trials may result in adverse effects. We cannot predict all the possible harms or 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, 40Table of Contentsproduct recalls may be issued at our discretion or at the direction of the FDA and foreign regulatory agencies, other governmental agencies or other companieshaving regulatory control for drug sales. Product recalls are generally expensive and often have an adverse effect on the reputation of the drugs being recalledand 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-fraud and abuse laws, 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.Responding 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 41Table of Contentssignificant business interruption. Our partners and other third parties on which we rely may also be subject to business interruptions from such events. Inaddition, California from time to time has experienced shortages of water, electric power and natural gas. Future shortages and conservation measures coulddisrupt our operations and cause expense, thus adversely affecting our 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 drug candidates, such as tirasemtiv for the potential treatment of ALS, CK-2127107 forthe potential treatment of non-neuromuscular indications associated with muscle weakness and omecamtiv mecarbil for the potential treatment ofheart failure (including, but not limited to, the timing of initiation or completion of such trials and the results of such trials, and delays ordiscontinuations of such trials, including delays resulting from slower than expected or suspended patient enrollment or discontinuations resultingfrom a failure to meet pre-defined clinical end points); • announcements concerning our strategic alliance with Amgen or Astellas or future strategic alliances; • failure or delays in entering additional drug candidates into clinical trials; • failure or discontinuation of any of our research programs; • issuance of new or changed securities analysts’ reports or recommendations; • failure or delay in establishing new strategic alliances, or the terms of those alliances; • market conditions in the pharmaceutical, biotechnology and other healthcare-related sectors; • actual or anticipated fluctuations in our quarterly financial and operating results; • developments or disputes concerning our intellectual property or other proprietary rights; • introduction of technological innovations or new products by us or our competitors; • issues in manufacturing our drug candidates or drugs; • market acceptance of our drugs; • third-party healthcare coverage and reimbursement policies; • FDA or other U.S. or foreign regulatory actions affecting us or our industry; • litigation or public concern about the safety of our drug candidates or drugs; • additions or departures of key personnel; • substantial sales of our common stock by our existing 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 42Table of Contentsotherwise negatively affect the liquidity of our common stock. In addition, when the market price of a stock has been volatile, holders of that stock haveinstituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incursubstantial costs defending the lawsuit. Such a lawsuit could also divert our management’s time and attention.If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders from influencingsignificant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.As of February 28, 2014, our executive officers, directors and their affiliates beneficially owned or controlled approximately 5.6% 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 clinical stage life sciences companies. These broad market and industry factors mayseriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market priceof a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs,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 shares quickly or at the latest market price if trading in our stock is not active or iftrading volume is limited. In addition, if trading volume in our common stock is limited, trades of relatively small numbers of shares may have adisproportionate effect on the market price of our common stock.Our stockholders will experience substantial additional dilution if outstanding options or warrants are exercised for common stock.As of February 28, 2014, there were 7,691,096 shares of common stock issuable upon the exercise of warrants, having a weighted average exerciseprice of $5.95 per share, and 1,699,603 shares of common stock issuable upon the exercise of stock options outstanding, having a weighted average exerciseprice of $18.96 per share. The exercise of outstanding options or warrants for common stock would be substantially dilutive to the outstanding shares ofcommon stock. Any dilution or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in thestock 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 43Table of Contentscredits to offset future taxable income. We have performed a Section 382 analysis and do not believe that we have experienced an ownership change since2006. A portion of our existing net operating losses and tax credits are subject to limitations arising from previous ownership changes. Future changes in ourstock ownership, some of which are outside of our control, could result in an ownership change under Section 382 and result in additional limitations. Weintend to continue to monitor public filings made by third parties with the SEC to assess whether an ownership change under Section 382 has occurred. Ourability to accurately assess any such ownership change is limited by the timeliness and accuracy of these 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.These 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. 44Table of ContentsItem 3. Legal ProceedingsWe are not a party to any material legal proceedings.Item 4. Mine Safety DisclosuresNot applicable. 45Table of ContentsPART II Item 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 (as adjusted for the one-for-six reverse split of our common stock whichbecame effective June 24, 2013). Closing Sale Price High Low 2012: First Quarter $7.26 $5.88 Second Quarter $7.20 $3.60 Third Quarter $5.52 $3.72 Fourth Quarter $5.20 $3.60 2013: First Quarter $7.14 $4.02 Second Quarter $12.96 $6.42 Third Quarter $13.82 $7.57 Fourth Quarter $7.47 $6.01 On February 28, 2014, the last reported sale price for our common stock on the NASDAQ Capital Market was $9.85 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, 2014, there were 73 holders of record of our common stock. 46Table of ContentsEquity Compensation InformationInformation regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in Part III, Item 12.Comparison of Historical Cumulative Total Return Among Cytokinetics, Incorporated, the NASDAQ Stock Market (U.S.) Index and theNASDAQ Biotechnology Index(*) (*)The above graph shows the cumulative total stockholder return of an investment of $100 in cash from December 31, 2009 through December 31, 2013for: (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. 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 Cytokinetics, Incorporated $100.00 $102.11 $73.33 $33.68 $23.16 $38.01 NASDAQ Composite Index $100.00 $143.89 $168.22 $165.19 $191.47 $264.84 NASDAQ Biotechnology Index $100.00 $115.63 $132.98 $148.69 $196.12 $324.80 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 SecuritiesOn June 14, 2013, we sold 1,404,100 shares of our common stock at a price per share of $7.12 and an aggregate purchase price of $10.0 million toAmgen.We relied on the exemption from registration contained in Section 4(2) of the Securities Act, and Regulation D, Rule 506 thereunder, in connection withthe issuance and sale of the common stock to Amgen. 47Table 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, 2013 2012 2011 2010 2009 (In thousands, except per share amounts) Statement of Operations Data: Revenues: Research and development revenues from relatedparties(1) $2,019 $4,177 $2,054 $1,487 $7,171 Research and development, grant and other revenues 7,547 3,382 1,946 1,090 — License revenues from related parties(1) 17,230 — — — 74,367 License revenues 3,852 — — — — Total revenues 30,648 7,559 4,000 2,577 81,538 Operating expenses: Research and development 49,450 35,643 37,182 38,013 39,840 General and administrative 15,092 12,429 13,590 14,199 15,626 Restructuring charges (reversals) — (56) 1,192 — (23) Total operating expenses 64,542 48,016 51,964 52,212 55,443 Operating income (loss) (33,894) (40,457) (47,964) (49,635) 26,095 Interest and other, net(2) 177 87 104 172 (1,401) Income (loss) before income taxes (33,717) (40,370) (47,860) (49,463) 24,694 Income tax provision (benefit) — — — (176) 150 Net income (loss) (33,717) (40,370) (47,860) (49,287) 24,544 Deemed dividend related to beneficial conversion featureof convertible preferred stock — (1,307) (2,857) — — Net income (loss) allocable to common stockholders: $(33,717) $(41,677) $(50,717) $(49,287) $24,544 Net income (loss) per share allocable to commonstockholders:(3) Basic $(1.24) $(2.30) $(4.30) $(4.61) $2.57 Diluted $(1.24) $(2.30) $(4.30) $(4.61) $2.54 Weighted average shares used in computing net income(loss) per share allocable to common stockholders:(4) Basic 27,275 18,107 11,800 10,694 9,565 Diluted 27,275 18,107 11,800 10,694 9,660 48Table of Contents As of December 31, 2013 2012 2011 2010 2009 (In thousands) Balance Sheet Data: Cash and cash equivalents, investments, auction ratesecurities (“ARS”) and investment put option related toARS $80,230 $74,000 $49,023 $72,845 $114,727 Restricted cash — — 196 788 1,674 Working capital 52,634 69,322 46,548 66,174 96,735 Total assets 83,188 77,551 52,773 77,992 122,599 Long-term portion of equipment financing lines — — — 152 985 Accumulated deficit (482,597) (448,880) (408,510) (360,650) (311,363) Total stockholders’ equity(3) 54,442 70,085 48,178 70,516 101,428 (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, and 2009, 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)On June 24, 2013, we effected a one-for-six reverse stock split of our common stock through an amendment to our amended and restated certificate ofincorporation (the “COI Amendment”). As of the effective time of the reverse stock split, every six shares of our issued and outstanding common stockwere converted into one issued and outstanding share of common stock, without any change in par value per share. The reverse stock split affected allshares of our common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of commonstock available for issuance under equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of commonstock issuable upon the conversion of shares of preferred stock or upon the exercise of stock options or warrants outstanding immediately prior to theeffectiveness of the reverse stock split. No fractional shares were issued as a result of the reverse stock split. Stockholders who would otherwise havebeen entitled to receive a fractional share received cash payments in lieu thereof. In addition, the COI Amendment reduced the number of authorizedshares of common stock to 81.5 million.All references to shares of common stock and per share data for all periods presented in the accompanying selected financial data have been adjusted toreflect the reverse stock split on a retroactive basis. (4)In 2009, we sold 599,455 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 1,184,433 shares of common stock in a registered direct offering for net proceeds ofapproximately $12.9 million. In 2010, we sold 889,970 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 883,333 shares of common stock, 8,070 shares of Series A convertible preferred stockand warrants to purchase 1,114,168 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 $19.9 million. Inthe fourth quarter of 2011, we sold 429,868 shares of common stock through McNicoll, Lewis & Vlak LLC (“MLV”) for net proceeds of $2.4million. In June 2012, we issued to various investors (i) 9,320,176 shares of common stock for a purchase price of $4.56 per share, (ii) 23,026 sharesof Series B convertible preferred stock for a purchase price of $760.00 per share, and (iii) warrants to purchase 7,894,704 shares of the Company’scommon stock at an exercise price of $5.28 per share, for aggregate gross proceeds of approximately $60.0 million. In 2012, we sold 432,724 shares ofcommon stock through MLV for net proceeds of $2.8 million. In June 2013, we sold 1,404,100 49Table of Contents shares of common stock to Amgen at a price per share of $7.12 and an aggregate purchase price of $10.0 million, pursuant to the Amgen AgreementAmendment. In 2013, we sold 1,170,583 shares of common stock through MLV for net proceeds of $7.5 million. See Note 13, “Stockholders’ Equity(Deficit)” in the Notes to Financial Statements for further details.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis discussion and analysis should be read in conjunction with our financial statements and accompanying notes 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 function and are directed to small molecule modulators of the contractility of skeletal or cardiac muscle. We are alsoconducting or may conduct earlier-stage research directed to 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 are our skeletal muscle activators tirasemtiv and CK-2127107, and our cardiac muscle activatoromecamtiv mecarbil. Tirasemtiv is being evaluated for the potential treatment of ALS and other neuromuscular disorders. CK-2127107 is being evaluated forthe potential treatment of non-neuromuscular indications associated with skeletal muscle weakness. Omecamtiv mecarbil is being evaluated for the potentialtreatment of heart failure.Muscle Contractility ProgramsSkeletal Muscle Contractility ProgramTirasemtiv is the lead drug candidate from this program, and is in Phase II clinical development. Cytokinetics holds the rights to tirasemtiv. We are alsodeveloping another drug candidate from this program, CK-2127107, which is being evaluated in Phase I clinical trials in collaboration with Astellas PharmaInc. (“Astellas”) for potential non-neuromuscular indications associated with muscle weakness. Tirasemtiv and CK-2127107 are structurally distinct andselective small molecules that activate the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to calcium, leading to an increasein skeletal muscle contractility. Each of tirasemtiv and CK-2127107 has demonstrated pharmacological activity in preclinical models and tirasemtiv hasdemonstrated evidence of potentially clinically relevant pharmacodynamic effects in humans. We are evaluating potential indications for which tirasemtiv andCK-2127107 may be useful.Tirasemtiv. 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. Thesestudies were intended to translate the mechanism of action of tirasemtiv into potentially clinically relevant pharmacodynamic effects, which may then form thebasis for larger clinical trials designed to demonstrate proof of concept and possibly even to support registration. The first of these trials was conducted inpatients with amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease, a chronic and progressive disease in which the motor neurons die,thus denervating 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 50Table of Contentsexercise, associated with peripheral artery disease. Evidence of potentially clinically relevant pharmacodynamic effects was observed in each of these trials. Weare now conducting BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS), a Phase IIbclinical trial of tirasemtiv in patients with ALS. We anticipate that we will need to conduct at least one confirmatory Phase III clinical trial of tirasemtiv inpatients with ALS, if supported by the results of BENEFIT-ALS, to gain marketing approval.In 2010, the National Institute of Neurological Disorders and Stroke (“NINDS”) awarded us a grant of $2.8 million under the American Recovery andReinvestment Act of 2009, which was intended to support three years of research and development of tirasemtiv for the potential treatment of myastheniagravis. In September 2012, the NINDS awarded us an additional $0.5 million for this program under a separate grant. We recognized revenue under this grantin 2013, 2012 and 2011 of $0.1 million, $1.3 million and $1.7 million, respectively, which we recorded as research and development grant and otherrevenues. The project period for both of these grants ended June 30, 2013, and no additional funds are available to us under these grants.Tirasemtiv Clinical DevelopmentALSBENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS): In October 2012, weinitiated BENEFIT-ALS, a multi-national, double-blind, randomized, placebo-controlled trial originally planned to enroll at least 400 patients andsubsequently increased to enroll up to 500 patients. All patients began treatment with open-label tirasemtiv at 125 mg twice daily. Patients who completed aweek of open-label tirasemtiv at this starting dose were randomized 1-to-1 to receive 12 weeks of double-blind treatment with tirasemtiv or placebo. Clinicalassessments take place monthly during double-blinded treatment. Randomized patients also participate in follow-up evaluations at both 7 and 28 days aftertheir final dose of double-blind study drug. The primary analysis of BENEFIT-ALS will compare the mean change from baseline in the ALS FunctionalRating Scale in its revised form, or ALSFRS-R (a clinically validated instrument designed to measure disease progression and changes in functional status), inpatients receiving tirasemtiv versus those receiving placebo. Secondary endpoints will include maximum voluntary ventilation, or MVV (a clinical assessmentof pulmonary function and endurance), and measures of skeletal muscle function. Patients will receive tirasemtiv or placebo dosed twice daily. Patients takingriluzole at the time of enrollment who are randomized to receive double-blind tirasemtiv will receive riluzole at a reduced dose of 50 mg daily, in a blindedmanner. We are conducting BENEFIT-ALS at over 70 sites across the United States, Canada and several European countries.In July 2013, we were informed by our data management vendor that a programming error in the electronic data capture system controlling study drugassignment caused 58 patients initially randomized to and treated with tirasemtiv to receive placebo instead at a certain study visit and for the remainder of thestudy. No patients randomized to placebo were dispensed incorrect treatment. Cytokinetics and all clinical trial site personnel remain blinded to the specificpatients affected by the error. Following detection of the error, we took steps to ensure that no further incorrect study drug assignments occurred and to correctthe programming error in the electronic data capture system controlling study drug assignment. In addition, we convened an ad hoc meeting of the Data SafetyMonitoring Board (DSMB) for BENEFIT-ALS to assess whether the error in dispensing study drug had impacted the safety of the 58 affected patients. Afterreview of the then-available safety data from BENEFIT-ALS, the DSMB reported no concerns regarding patient safety. Following interactions with regulatoryauthorities, we amended the protocol for BENEFIT-ALS to enable increased enrollment to approximately 680 patients and to update the statistical methodssection, in both cases with the objective to maintain the originally intended statistical power of the trial. We have completed enrollment in BENEFIT-ALS with711 patients, of which over 400 have completed 12 weeks of treatment, and anticipate reporting the results from this clinical trial at the American Academy ofNeurology (AAN) Annual Meeting in Philadelphia, PA in April 2014.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 51Table of Contentstrial, the single doses of tirasemtiv evaluated appeared generally well-tolerated, with dizziness and general fatigue being the most frequent adverse events. Inaddition, both patients and investigators perceived a positive change in the patients’ overall status, in a dose-dependent fashion, at 6 hours after dosing withtirasemtiv, based on a global assessment in which the patient and the investigator each independently assessed patients’ status compared to prior to dosing.There was a clear relationship between improvements in global assessments and the plasma concentrations of tirasemtiv. Also at this 6-hour time point, therewas a trend towards decreased muscle fatigability, as evidenced by data from a test of sub-maximal hand-grip endurance. Data from that clinical trial alsodemonstrated a statistically significant increase in MVV at both 6 and 24 hours after 500 mg of tirasemtiv, and small but statistically significant increases inmaximum strength of certain muscle groups tested.In April 2012, at the AAN 64 Annual Meeting, results 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 patients with ALS. Patients in Part A ofthis trial were not taking riluzole; patients in Part B received riluzole at the reduced dose of 50 mg daily. In this trial, tirasemtiv appeared to be generally safeand well-tolerated when dosed daily at 125 mg, 250 mg and 375 mg once daily for two weeks. This trial was not designed or powered to evaluate statisticallythe effects of tirasemtiv on the various outcome measures that were assessed during the study. However, encouraging dose-related trends were observed inmeasurements of ALSFRS-R and in MVV. Plasma concentrations of tirasemtiv were unaffected by co-administration with riluzole, while riluzole plasma levelswere greater when co-administered with tirasemtiv than when not co-administered with tirasemtiv. Adverse events and clinical assessments during treatmentwith tirasemtiv appeared similar, with or without co-administration of riluzole. Dizziness, the most commonly reported adverse event, was mostly mild andgenerally began and resolved early after initiating treatment. The incidence and persistence of dizziness appeared dose-related but was mild in severity in allpatients who completed study drug treatment. Most reports of dizziness began early after initiating treatment and resolved spontaneously within the first weekof treatment in all but one patient who nevertheless completed the trial. No serious adverse events were reported.Also in April 2012 at the AAN 64 Annual Meeting, results 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-daily dose 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.CK-2127107 and Other Skeletal Muscle ActivatorsAstellas Strategic Alliance. In June 2013, we entered into a collaboration and license agreement with Astellas (the “Astellas Agreement”). Under theAstellas Agreement, we granted Astellas an exclusive license to co-develop and jointly commercialize CK-2127107 for potential application in non-neuromuscular indications associated with skeletal muscle weakness worldwide. CK-2127107 is being developed jointly by Cytokinetics and Astellas.Cytokinetics is primarily responsible for the conduct of Phase I clinical trials and certain Phase II readiness activities for CK-2127107. Astellas will beprimarily responsible for the conduct of subsequent development and commercialization activities for CK-2127107.The companies are jointly conducting research to identify next-generation skeletal muscle activators to be nominated as potential drug candidates, atAstellas’ expense. Astellas has the exclusive rights to develop and commercialize fast skeletal troponin activators from this research program in non-neuromuscular indications and to develop and commercialize other novel mechanism skeletal muscle activators from this research program in 52ththTable of Contentsall indications, subject to certain Cytokinetics’ co-development and co-promotion rights. Astellas will be responsible for the costs associated with thedevelopment of all collaboration products, including CK-2127107.Under the Astellas Agreement, we retain an option to conduct early-stage development for certain agreed indications at our initial expense, subject toreimbursement if development continues under the collaboration. We also retain an option to co-promote collaboration products in the United States andCanada. Astellas will reimburse us for certain expenses associated with our co-promotion activities.In July 2013, we received an upfront payment of $16 million in connection with the execution of the Astellas Agreement, and we are eligible to potentiallyreceive over $24 million in reimbursement of sponsored research and development activities during the initial two years of the collaboration. Based on theachievement of pre-specified criteria, we may receive over $250 million in milestone payments relating to the development and commercial launch ofcollaboration products, including up to $112 million in development and commercial launch milestones for CK-2127107. We may also receive up to $200million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the Astellas Agreement. If Astellascommercializes any collaboration products, we will also receive royalties on sales of such collaboration products, including royalties ranging from the highsingle digits to the high teens on sales of products containing CK-2127107. In addition to these development, commercial launch and sales milestones, we mayalso receive payments for the achievement of pre-specified milestones relating to the joint research program.CK-2127107 Clinical DevelopmentCY 5011. In April 2013, we announced the initiation of a first-time-in-humans Phase I clinical trial of CK-2127107 in healthy male volunteers,known as CY 5011. CY 5011 was a double-blind, randomized, placebo-controlled study designed to assess the safety, tolerability, and pharmacokinetics ofsingle ascending oral doses of CK-2127107 administered in a three-period crossover design. We announced results from this trial in December 2013 at the 7International Conference of the Society on Sarcopenia, Cachexia and Wasting Disorders in Kobe, Japan. Planned single doses of CK-2127107 up to 4000 mg,the highest dose administered in this trial, were well-tolerated; therefore, a maximum tolerated dose was not defined. The pharmacokinetic profile of CK-2127107 was linear and dose-proportional across the dose range studied, with a mean terminal half-life compatible with once or twice daily dosing.CY 5014. During the fourth quarter of 2013, Cytokinetics completed dosing in CY 5014, a Phase I clinical trial of CK-2127107 in healthy malevolunteers. CY 5014 is a randomized, open-label, two-period crossover study designed to assess the relative oral bioavailability, pharmacokinetics, safety andtolerability of two oral formulations of CK-2127107.Other Development. We expect to conduct additional Phase I studies and certain Phase II readiness activities pursuant to our collaboration agreementwith Astellas.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 function with fast skeletal muscle troponin activators to explore the potential clinicalapplications of this novel mechanism in diseases or conditions associated with skeletal muscle dysfunction. We also intend to conduct preclinical research onother chemically and pharmacologically distinct mechanisms to activate the skeletal sarcomere. We are conducting a joint research program with Astellasdirected to the discovery of next-generation skeletal muscle activators. Under the Astellas Agreement, Astellas will reimburse us for certain research activitieswe perform.The clinical trials programs for each of tirasemtiv and CK-2127107 may proceed for several years, and we will not be in a position to generate anyrevenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and thedrug is commercialized. 53thTable of ContentsTirasemtiv and CK-2127107 are each at too early a stage of development for us to predict if or when this may occur. Our expenditures will increase if and aswe move tirasemtiv into later development. Our expenditures will also increase if Astellas terminates development of CK-2127107 or related compounds andwe elect to develop them independently, or if we conduct early-stage development for certain agreed indications at our initial expense, subject to reimbursementif development continues under the collaboration.We recorded research and development expenses for activities relating to our skeletal muscle contractility program of approximately $40.8 million, $24.9million and $24.0 million in the years ended December 31, 2013, 2012 and 2011 respectively. We recognized research and development revenue from Astellasof $6.4 million in 2013, consisting of reimbursements of full-time employee equivalents (“FTEs”) and other expenses. We anticipate that our expendituresrelating to the research and development of compounds in our skeletal muscle contractility program will increase significantly if and as we advance tirasemtiv,CK-2127107 or other compounds from this program into and through development.Cardiac Muscle Contractility ProgramOur lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. We expect omecamtiv mecarbil to bedeveloped as a potential treatment across the continuum of care in heart failure both as an intravenous formulation for use in the hospital setting and as an oralformulation for use in the outpatient setting.Amgen Agreement. In December 2006, we entered into a collaboration and option agreement with Amgen Inc. to discover, develop and commercializenovel small molecule therapeutics, including omecamtiv mecarbil, that activate cardiac muscle contractility for potential applications in the treatment of heartfailure (the “Amgen Agreement”). The agreement granted Amgen an option to obtain an exclusive license worldwide, except Japan, to develop and commercializeomecamtiv mecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised its option. As a result, Amgen becameresponsible for the development and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan), subject toour development and commercialization participation rights. Amgen will reimburse us for certain research and development activities we perform under thecollaboration.In June 2013, Cytokinetics and Amgen executed an amendment to the Amgen Agreement to include Japan, resulting in a worldwide collaboration (the“Amgen Agreement Amendment”). Under the terms of the Amgen Agreement Amendment, we received a non-refundable upfront license fee of $15 million inJune 2013. Under the Amgen Agreement Amendment, we plan to conduct a Phase I pharmacokinetic study intended to support inclusion of Japan in a potentialPhase III clinical development program and potential global registration dossier for omecamtiv mecarbil. Amgen will reimburse us for the costs of this study. Inaddition, we are eligible to receive additional pre-commercialization milestone payments relating to the development of omecamtiv mecarbil in Japan of up to$50 million, and royalties on sales of omecamtiv mecarbil in Japan. In conjunction with the Amgen Agreement Amendment, we also entered into a commonstock purchase agreement which provided for the sale of 1,404,100 shares of our common stock to Amgen at a price per share of $7.12 and an aggregatepurchase price of $10.0 million which was received in June 2013. Pursuant to this agreement, Amgen has agreed to certain trading and other restrictions withrespect to our common stock.Under the Amgen Agreement, as amended, we are eligible for potential pre-commercialization and commercialization milestone payments of up to $650million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration, and royalties that escalate based onincreasing levels of annual net sales of products commercialized under the agreement. The Amgen Agreement also provides for us to receive increased royaltiesby co-funding Phase III development costs of omecamtiv mecarbil and other drug candidates under the collaboration. If we elect to co-fund such costs, wewould be entitled to co-promote the co-funded drug in North America and participate in agreed commercialization activities in institutional care settings, atAmgen’s expense. 54Table of ContentsIn July 2013, Amgen announced that it had granted an option to commercialize omecamtiv mecarbil in Europe to Servier.Omecamtiv Mecarbil Clinical DevelopmentCurrent Clinical Trials. In March 2013, we announced the initiation of dosing of patients in COSMIC-HF (Chronic Oral Study of Myosin Activationto Increase Contractility in Heart Failure). COSMIC-HF is a Phase II, double-blind, randomized, placebo-controlled, multicenter, dose escalation studydesigned to evaluate several modified-release oral formulations of omecamtiv mecarbil in patients with heart failure and left ventricular systolic dysfunction.COSMIC-HF is being conducted by Amgen in collaboration with Cytokinetics. The primary objectives of this trial are to select an oral modified releaseformulation and doses of omecamtiv mecarbil for chronic twice-daily dosing in patients with heart failure and left ventricular systolic dysfunction and tocharacterize its pharmacokinetics during 20 weeks of treatment. The secondary objective is to evaluate the safety and tolerability of oral omecamtiv mecarbil.In addition, we will have an opportunity to evaluate the potential for sustained pharmacodynamic effects and their relationship to the pharmacokinetics of thisdrug candidate. During the third quarter of 2013, the second cohort of the dose escalation phase of COSMIC-HF completed enrollment. We and Amgen recentlyreviewed results from COSMIC-HF and selected an oral formulation of omecamtiv mecarbil for evaluation in the planned expansion phase of the trial. We andAmgen have agreed to amend the protocol to evaluate a plasma concentration-guided dose titration strategy in the expansion phase of COSMIC-HF. The size ofthe expansion phase has been increased with the objective to provide greater statistical power for the planned evaluation of several pharmacodynamicparameters during oral dosing with omecamtiv mecarbil. This trial is being conducted by Amgen in collaboration with Cytokinetics.Recently, Cytokinetics and Amgen agreed on the protocol and budget for the planned Phase I pharmacokinetic study, CY 1211, in healthy volunteers ofboth Japanese and non-Japanese ethnicity. The trial will be conducted by Cytokinetics in collaboration with Amgen. The costs of the trial will be reimbursedby Amgen.We are collaborating with Amgen to respond to information requests received from regulatory authorities relating to their ongoing review of the protocolssubmitted for COSMIC-HF and CY 1211. We anticipate commencement of patient enrollment in both the expansion phase of COSMIC-HF and in CY 1211 tooccur in the first half of 2014 following regulatory authorities’ review of responses relating to these information requests. We expect both the enrollment ofpatients in the expansion phase of COSMIC-HF and the conduct of CY 1211 to be completed in 2014.ATOMIC-AHF. In September 2013, results from ATOMIC-AHF (Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute HeartFailure) were presented at the European Society of Cardiology Congress and the Heart Failure Society of America Annual Scientific Meeting. ATOMIC-AHFwas an international, randomized, double-blind, placebo-controlled, Phase IIb clinical trial of intravenous omecamtiv mecarbil in patients with left ventricularsystolic dysfunction hospitalized with acutely decompensated heart failure. ATOMIC-AHF was conducted by Amgen in collaboration with Cytokinetics. Thisclinical trial enrolled over 600 patients in three sequential, ascending-dose cohorts. In each cohort, patients were randomized to receive omecamtiv mecarbil orplacebo. The primary efficacy objective of this trial was to evaluate the effect of 48 hours of intravenous omecamtiv mecarbil compared to placebo on dyspnea(shortness of breath). The secondary objectives were to assess the safety and tolerability of three dose levels of intravenous omecamtiv mecarbil compared withplacebo and to evaluate the effects of 48 hours of treatment with intravenous omecamtiv mecarbil on additional measures of dyspnea, patients’ globalassessments, change in N-terminal pro brain-type natriuretic peptide (a biomarker associated with the severity of heart failure) and short-term clinicaloutcomes in these patients. In addition, the trial evaluated the relationship between plasma concentrations of omecamtiv mecarbil and echocardiographicparameters in patients with acute heart failure.The omecamtiv mecarbil treatment groups were not statistically different in their 7-point Likert scale dyspnea symptom response rates compared to thepooled placebo group (p=0.33); therefore, the primary endpoint 55Table of Contentswas not met. Omecamtiv mecarbil demonstrated favorable dose- and concentration-related trends (nominal p=0.025 and nominal p=0.007, respectively) ondyspnea response. Improvement in dyspnea was observed in the highest omecamtiv mecarbil dose group when compared against its paired placebo group inthe third cohort (dyspnea symptom response in 51 percent of subjects on omecamtiv mecarbil versus 37 percent on placebo, nominal p=0.03). The incidenceof worsening heart failure within seven days of initiating treatment was 17 percent in the pooled placebo group and was 13 percent, 8 percent and 9 percent onomecamtiv mecarbil in the first, second and third cohorts, respectively. Systolic ejection time, the echocardiographic signature of omecamtiv mecarbil,increased in a concentration-dependent manner similar to that previously reported in healthy volunteers and stable heart failure patients.Rates of adverse events (AEs), serious AEs, adjudicated deaths and hospitalizations were similar between omecamtiv mecarbil and placebo groups.There were seven post-randomization myocardial infarctions in the treatment groups receiving omecamtiv mecarbil compared with three in the placebo groups(2.3 percent vs. 1.0 percent, respectively). However, there was no relationship between the maximum increase from the baseline troponin (a biomarker specificfor cardiac muscle damage) and increasing plasma concentrations of omecamtiv mecarbil. Four of the myocardial infarctions occurred more than seven daysfollowing termination of the 48-hour drug infusion. The estimated plasma concentrations near the time of these events were zero. Three of these events occurredin patients who received omecamtiv mecarbil and one occurred in a patient who received placebo. One myocardial infarction occurred subsequent to apercutaneous coronary intervention in a patient who received omecamtiv mecarbil. One myocardial infarction occurred in a patient with sepsis who receivedplacebo. Omecamtiv mecarbil was not associated with an increased incidence of tachyarrhythmias nor were heart rate or blood pressure adversely affected.Prior Clinical Experience with Omecamtiv Mecarbil. Prior to Amgen’s exercise of its option, Cytokinetics conducted a clinical trials program foromecamtiv mecarbil comprised of multiple Phase I and Phase IIa clinical trials designed to evaluate the safety, tolerability, pharmacodynamic andpharmacokinetic profiles of both intravenous and oral formulations in a diversity of patients, including patients with stable heart failure and patients withischemic 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 the adverse findings which occurred in preclinical safety studies at similarplasma concentrations. These effects are believed to be related to the mechanism of action of this drug candidate which, at intolerable doses, resulted in anexcessive prolongation of the systolic ejection time (i.e., the time in which the heart is contracting). However, these effects resolved promptly withdiscontinuation of the infusions of omecamtiv mecarbil.Phase IIa stable heart failure (safety, tolerability, pharmacokinetics and pharmacodynamics). In 2009, we presented final results 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 time, and in stroke volume, cardiac output, fractional shortening and ejection fraction (all measures of cardiac function), thatoccurred across the patient population in a concentration-dependent manner. In addition, the data demonstrated statistically significant correlations betweenincreasing omecamtiv mecarbil plasma concentrations and decreases in left ventricular end-systolic volume, left ventricular end-diastolic volume and heartrate. Omecamtiv mecarbil appeared to be generally well-tolerated in stable heart failure patients over a range of plasma concentrations during continuousintravenous administration. Patients with reduced stroke volumes (<50 ml) at baseline had generally greater pharmacodynamic responses to omecamtivmecarbil than those in patients with greater stroke 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 results 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 56Table of Contentsstage earlier than the shorter of two baseline exercise treadmill tests. This endpoint occurred in one patient receiving placebo and in no patients receiving eitherthe lower or higher of two dose levels of omecamtiv mecarbil. In heart failure patients with ischemic cardiomyopathy and angina, who theoretically could bemost vulnerable to the possible deleterious consequences of systolic ejection time prolongation, treatment with omecamtiv mecarbil, at doses producing plasmaconcentrations previously demonstrated in other trials to increase cardiac function, did not appear to deleteriously affect a broad range of safety assessments inthe setting of exercise.Phase I Clinical Trials. Seven Phase I clinical trials of omecamtiv mecarbil have been conducted in healthy subjects: five conducted by Cytokineticsand two conducted by Amgen in collaboration with Cytokinetics. Results from these trials were reported previously.Ongoing Research in Cardiac Muscle Contractility. In 2013, we agreed with Amgen to additional research activities intended to be conductedthrough 2014 under the research plan directed to next-generation compounds in our cardiac muscle contractility program. Under the Amgen Agreement, Amgenwill reimburse us for certain 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 $3.4 million, $4.5 million and $2.8 million in the years ended December 31, 2013, 2012 and 2011,respectively. We recognized research and development revenue from Amgen of $2.0 million in 2013, $4.2 million in 2012 and $2.1 million in 2011, consistingof reimbursements of FTEs and other expenses.We 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 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. 57Table of ContentsDevelopment 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 and by Astellas with respect to the development of CK-2127107; • 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, if supported by the results of BENEFIT-ALS, that we anticipate will be required to obtain marketing approval for thisindication; • the uncertainty of the timing of the initiation and completion of patient enrollment and treatment in our or our partners’ 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; • failure by our clinical trial sites, clinical research organizations, clinical manufacturing organizations and other third parties supporting our or ourpartners’ clinical trials to fulfill their obligations or otherwise perform as expected. • 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; • 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 drug candidates and other compounds.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. 58Table of ContentsRevenuesOur 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, Astellas, Global Blood Therapeutics, Inc., formerly known as Global Blood Targeting, Inc. (“GlobalBlood”) and MyoKardia, Inc. (“MyoKardia”) and grant revenues from NINDS.In June 2013, we and Amgen executed an amendment to the Amgen Agreement to include Japan, resulting in a worldwide collaboration. (See Note 7 tofinancial statements.) Under the terms of the Amgen Agreement Amendment, we received a non-refundable upfront license fee of $15 million in June 2013.Under the Amgen Agreement Amendment, we plan to conduct a Phase I pharmacokinetic study intended to support inclusion of Japan in a potential Phase IIIclinical development program and potential global registration dossier for omecamtiv mecarbil. Amgen will reimburse us for the costs of this study. Inaddition, we are eligible to receive additional pre-commercialization milestone payments relating to the development of omecamtiv mecarbil in Japan of up to$50 million, and royalties on sales of omecamtiv mecarbil in Japan. In the fourth quarter of 2013, we determined that all conditions necessary for revenuerecognition of the non-refundable upfront license fee under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)Topic 605-10 had been met and accordingly, in the fourth quarter of 2013, we recognized a total of $17.2 million in license revenue attributable to the AmgenAgreement Amendment.We have received reimbursements from Amgen for certain 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 certain 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.In July 2013, we received an upfront payment of $16 million in connection with the execution of the Astellas Agreement, and we are eligible to potentiallyreceive over $24 million in reimbursement of sponsored research and development activities during the initial two years of the collaboration. Based on theachievement of pre-specified criteria, we may receive over $250 million in milestone payments relating to the development and commercial launch ofcollaboration products, including up to $112 million in development and commercial launch milestones for CK-2127107. We may also receive up to $200million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the Agreement. If Astellascommercializes any collaboration products, we will also receive royalties on sales of such collaboration products, including royalties ranging from the highsingle digits to the high teens on sales of products containing CK-2127107. In addition to these development, commercial launch and sales milestones, we mayalso receive payments for the achievement of pre-specified milestones relating to the joint research program. We determined the license and the research anddevelopment services relating to the Astellas Agreement are a single unit of accounting as the license was determined to not have stand-alone value. Accordingly,we are recognizing this revenue using the proportional performance model. In 2013, we recognized $3.9 million of the $16 million upfront license fee as licenserevenue and as of December 31, 2013, we deferred the remaining $12.1 million. We also recognized $6.4 million in revenue in 2013 for reimbursement ofsponsored research and development activities under the Astellas Agreement.Because a substantial portion of our revenues for the foreseeable future will depend on achieving development and other pre-commercialization milestonesunder our strategic alliances with Amgen and Astellas, 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 and Astellas under our respective strategic alliances and from those licensed to future partners, and from direct sales of ourdrugs. We retain a 59Table of Contentsproduct-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 the Amgen strategic alliance, we are entitled toreceive reimbursement for certain sales force costs we incur in support of our commercial activities. Under our strategic alliance with Astellas, we retain anoption to co-promote collaboration products in the United States and Canada. Astellas will reimburse us for certain expenses associated with our co-promotionactivities.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. Research and development revenue of $14,000 in 2013 from Global Blood waspursuant to a separate agreement.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. The research planended as planned in August 2013.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. The grants were completed in June of 2013.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.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.RestructuringIn 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 60Table of Contentstirasemtiv and omecamtiv mecarbil and on our follow-on skeletal muscle troponin activator program and joint research with Amgen directed to next-generationcompounds in our cardiac muscle contractility program. As a result, we reduced our workforce by 18 employees, or approximately 18%, to 83 employees. Weprovided severance, employee benefit continuation and career transition assistance to the employees directly affected by the restructuring. We incurredrestructuring charges of $1.2 million in the fourth quarter of 2011, primarily personnel-related termination costs. We completed all restructuring activities andrecognized 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 2013, 2012 and 2011 (in thousands): Years Ended December 31, 2013 2012 2011 Research and development $1,538 $1,801 $1,331 General and administrative 2,059 1,982 1,738 Stock-based compensation included in operating expenses $3,597 $3,783 $3,069 As of December 31, 2013, there was $3.2 million of unrecognized compensation cost related to unvested stock options, which is expected to berecognized over a weighted-average period of 2.54 years and $149,000 of unrecognized compensation cost related to unvested restricted stock units, which isexpected to be recognized over a weighted-average period of 1.18 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 did not recordan income tax provision in the years ended December 31, 2013, 2012 or 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, 2013, 2012and 2011. 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$13.7 million in 2013, $21.1 million in 2012 and $18.5 million in 2011.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. Historically, we have filed incometax returns with the federal Internal Revenue Service (“IRS”) and the state of California. For jurisdictions in which tax filings are made, we are subject toincome tax examination for all fiscal years since inception. In general, the statute of limitations for tax liabilities for these years remains open for the purpose ofadjusting the amounts of the losses and credits carried forward from those years. 61Table of ContentsInterest accrued related to unrecognized tax benefits and penalties was zero for 2013, 2012 and 2011. 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 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 (“NOLs”) and tax credits to offset future taxable income. We have performed a Section 382 analysisand do not believe that we have experienced an ownership change since 2006. A portion of our existing NOLs 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.Results of OperationsYears ended December 31, 2013, 2012 and 2011Revenues Years Ended December 31, Increase(Decrease) 2013 2012 2011 2013 2012 (In millions) Research and development revenues from related parties $2.0 $4.2 $2.1 $(2.2) $2.1 Research and development, grant and other revenues 7.5 3.4 1.9 4.1 1.5 License revenues from related parties 17.2 — — 17.2 — License revenues 3.9 — — 3.9 — Total revenues $30.6 $7.6 $4.0 $23.0 $3.6 Research and development revenues from related parties refers to research and development revenues from our strategic alliance with Amgen. Revenuesfrom Amgen were $2.0 million, $4.2 million and $2.1 million in 2013, 2012 and 2011, respectively. Revenues from Amgen in 2013 and 2012 consisted ofreimbursement of FTE expenses. Revenues from Amgen in 2011 consisted of $2.0 million for reimbursement of FTE expenses and $0.1 million for otherresearch and development expenses.Research and development, grant and other revenues in 2013 included $6.4 million of research program reimbursement revenues from our collaborationwith Astellas. Research and development, grant and other revenues in 2013, 2012 and 2011 also included grant revenue from the NINDS, revenue fromGlobal Blood and revenue from MyoKardia. In July 2010 and in September 2012, the NINDS awarded us grants to support research and development oftirasemtiv directed to the potential treatment for myasthenia gravis for a period of up to three years. We recognized grant revenue of $69,000, $1.3 million and$1.7 million under this grant arrangement in 2013, 2012 and 2011, respectively. As part of an initiative to seek certain smaller collaborations intended to allowus to offset our research costs, during 2011 and 2012, we entered into collaborative research agreements with two early-stage biopharmaceutical companies. Werecognized revenue from Global Blood of $14,000 in 2013, $1.5 million in 2012 and $0.3 million in 2011. We recognized revenue from Myokardia of$42,000 in 2013 and $0.6 million in 2012.License revenues from related parties refers to license revenues from our strategic alliance with Amgen. Revenues from Amgen of $17.2 million in 2013included recognition of an upfront license fee of $15 million, along with additional license revenues of $2.2 million, resulting from the allocation of a portionof the excess of the cash received over the fair value of the common stock issued to Amgen as part of that transaction. In conjunction with the AmgenAmendment Agreement, we sold 1,404,100 shares of our common stock to Amgen 62Table of Contentsfor $10.0 million, which was received in June 2013. We determined the fair value of the stock issued to Amgen to be $7.5 million. A portion of the excess ofcash received over fair value of $2.5 million was also allocated to the services performed and was deferred and will be recognized as revenue as services areperformed. At December 31, 2013, deferred revenue relating to the Amgen Amendment Agreement was approximately $300,000.License revenues in 2013 refers to license revenues from our collaboration with Astellas. Revenues included $3.9 million of the $16 million upfrontlicense fee received from Astellas in July 2013 in connection with the execution of the Astellas Agreement. We are recognizing this revenue over time using theproportional performance model.Research and development expenses Years Ended December 31, Increase(Decrease) 2013 2012 2011 2013 2012 (In millions) Research and development expenses $49.5 $35.6 $37.2 $13.9 $(1.6) The increase in research and development expenses in 2013 was primarily due to increased spending for outsourced clinical costs and laboratory coststotaling $14.0 million, partially offset by decreased spending for outsourced preclinical expense. The decrease in 2012 was primarily due to decreases of $2.1million in laboratory expenses and $1.0 million in personnel-related costs, partially offset by an increase of $1.3 million in outsourced clinical and pre-clinicalcosts and $0.2 million in facilities costs.From a program perspective, the $13.9 million increase in research and development spending in 2013 compared to 2012 was primarily due to increasedspending of $15.9 million for our skeletal muscle contractility program. The $1.6 million decline in research and development spending in 2012 compared to2011 was primarily due to decreases of $3.8 million for our smooth muscle contractility program and $0.4 million for our other research programs, partiallyoffset by increased spending of $0.9 million for our skeletal muscle contractility program and $1.7 million for our cardiac muscle contractility program. Years Ended December 31, Increase(Decrease) 2013 2012 2011 2013 2012 (In millions) Cardiac muscle contractility $3.4 $4.5 $2.8 $(1.1) $1.7 Skeletal muscle contractility 40.8 24.9 24.0 15.9 0.9 Smooth muscle contractility 0.2 1.8 5.6 (1.6) (3.8) All other research programs 5.1 4.4 4.8 0.7 (0.4) Total research and development expenses $49.5 $35.6 $37.2 $13.9 $(1.6) 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 2014 compared to 2013 and that they will be in the range of $52 million to$55 million. We expect to continue development of our drug candidate 63Table of Contentstirasemtiv for the potential treatment of neuromuscular diseases and medical conditions associated with muscle weakness or wasting. As part of our strategicalliance with Astellas, we expect to continue development of our drug candidate CK-2127107 for the potential treatment of non-neuromuscular diseases andmedical conditions associated with muscle weakness or wasting. As part of our strategic alliance with Amgen, we expect to continue development of our drugcandidate omecamtiv mecarbil for the potential treatment of heart failure. Non-cash expenses such as stock-based compensation and depreciation ofapproximately $1.5 million are included in our estimate of 2014 research and development expenses.General and administrative expenses Years Ended December 31, Increase(Decrease) 2013 2012 2011 2013 2012 (In millions) General and administrative expenses $15.1 $12.4 $13.6 $2.7 $(1.2) General and administrative expenses increased in 2013 compared to 2012 and decreased in 2012 compared to 2011. The increase in 2013 was primarilydue to increased spending of $1.7 million for personnel-related costs, $1.4 million for outside services and $0.2 million for legal expenses. The decrease in2012 compared to 2011 was primarily due to decreases of $0.4 million in financial services costs, $0.3 million in personnel expenses, and $0.5 million infacilities costs. We expect that general and administrative expenses in 2014 will increase compared to 2013 and will be in the range of $16 million to$18 million. Non-cash expenses such as stock-based compensation and depreciation of approximately $1.5 million are included in our estimate of 2014general and administrative expenses.Interest and Other, netComponents of Interest and Other, net are as follows: Years Ended December 31, Increase(Decrease) 2013 2012 2011 2013 2012 (In millions) Interest income and other income $0.1 $0.1 $0.2 $— $(0.1) Interest expense and other expense 0.1 — (0.1) 0.1 0.1 Interest and Other, net $0.2 $0.1 $0.1 $0.1 $— Interest income and other income consisted primarily of interest income generated from our cash, cash equivalents and investments. Interest income andother income was $0.1 million in both 2013 and 2012 as the effect upon interest income of higher average cash balances was offset by lower average interestrates. Interest income and other income decreased in 2012 compared to 2011 primarily due to lower average effective interest rates and lower average investedbalances.Interest expense and other expense in 2013 consisted solely of net gains realized upon disposal of equipment. Interest expense and other expense in 2011primarily consisted of interest expense on borrowings under our equipment financing lines. We repaid the remaining outstanding equipment financing debt inMarch 2012.Liquidity and Capital ResourcesFrom August 5, 1997, our date of inception, through December 31, 2013, we funded our operations through the sale of equity securities, non-equitypayments from collaborators, equipment financings, government grants and interest income. 64Table of ContentsWe have received net proceeds from the sale of equity securities of $449.2 million from August 5, 1997, the date of our inception, throughDecember 31, 2013, 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 Cytokinetics in 2003 and 2004 of $3.0 million and $7.0 million,respectively. In January 2007, in connection with the execution of our collaboration agreement with Amgen, we received net proceeds of $32.9 million from astock purchase agreement with Amgen. In June 2013, in conjunction with the Amgen Agreement Amendment, we sold 1,404,100 shares of common stock toAmgen for an aggregate purchase price of $10.0 million, which we received in June 2013.On a cumulative basis through December 31, 2013, we have received $126.1 million in non-equity payments from Amgen and $54.5 million in non-equity payments from GSK.Amgen Agreement AmendmentIn June 2013, we entered into the Amgen Agreement Amendment, which expanded our strategic alliance to include Japan (see Note 7, “Related PartyTransactions” in the Notes to Financial Statements). Under the terms of the Amgen Agreement Amendment, we received an upfront, non-refundable licensepayment of $15 million in June 2013. In conjunction with the Amgen Agreement Amendment, we also entered into a common stock purchase agreementpursuant to which we sold 1,404,100 shares common stock to Amgen at a price per share of $7.12. The aggregate purchase price of $10.0 million wasreceived in June 2013. We determined the fair value of the stock issued to Amgen to be $7.5 million. The excess of cash received over fair value of $2.5million was deferred and will be recognized as revenue as services are performed over approximately 12 months.Astellas AgreementIn June 2013, we entered into the Astellas Agreement (see Note 8 to Financial Statements). In July 2013, we received an upfront, non-refundable licensepayment of $16 million in connection with the execution of the Astellas Agreement. We are eligible to potentially receive over $24 million in reimbursement ofsponsored research and development activities during the initial two years of the collaboration. In addition, we may also receive payments for the achievementof pre-specified milestones relating to the joint research program.April 2011 Private OfferingIn 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) 833,333 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 1,114,168 shares of our commonstock at an initial exercise price of $9.90 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 1,345,000 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. 65Table of ContentsMLVIn 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 sold, through January 2014, an aggregate of 2,397,278 shares of common stock through MLV for net proceeds of approximately $15.1million. No shares remain available to us for sale through the MLV Agreement. (See Note 17, “Subsequent Events” in the Notes to Financial Statements.)June 2012 Public OfferingsOn 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) 9,320,176 shares of common stock for a purchaseprice of $4.56 per share, (ii) 23,026 shares of Series B convertible preferred stock (the “Series B Preferred Stock”) for a purchase price of $760.00 per share,and (iii) warrants to purchase 7,894,704 shares of our common stock at an exercise price of $5.28 per share, for aggregate gross proceeds of approximately$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 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 $3.78. In February 2013, warrants to purchase 1,000 sharesof our common stock at an exercise price of $5.28 per share were exercised in accordance with the June 2012 Public Offerings underwriting agreements. InApril 2013, we issued 358,460 shares of common stock related to cashless exercise of warrants. As of December 31, 2013, warrants to purchase 6,577,928shares of our common stock were outstanding and exercisable.In the first quarter of 2013, 4,000 shares of Series B convertible preferred stock were converted into 666,667 shares of our common stock. In thesecond quarter of 2013, 15,026 shares of Series B convertible preferred stock were converted into 2,504,333 shares of our common stock. In July, 2013,4,000 shares of Series B convertible preferred stock, which represented all remaining shares of Series B convertible preferred stock, were converted into666,681 shares of our common stock. The conversions were in accordance with the June 2012 Public Offerings underwriting agreements.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 was convertible exceeded the allocated purchase price of the Series BPreferred Stock 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.February 2014 Public OfferingOn February 25, 2014, the Company closed an underwritten public offering for the issuance and sale of 5,031,250 shares of its common stock. Thegross public offering proceeds were approximately $40.3 million. The 66Table of Contentsnet proceeds from the sale of the shares were approximately $37.4 million, after deducting the underwriting discount and estimated offering expenses. (See Note17, “Subsequent Events” in the Notes to Financial Statements.)Sources and Uses of CashOur cash, cash equivalents and investments totaled $80.2 million at December 31, 2013, up from $74.0 million at December 31, 2012. The increase of$6.2 million in 2013 was primarily due to upfront license fees received of $31.0 million and $14.5 million in net proceeds from equity issuances, partiallyoffset by cash used to fund operations.Net cash used in operating activities in 2013 was $7.7 million and resulted principally from the net loss of $33.7 million less $16.2 million of deferredrevenue, $3.6 million of non-cash stock compensation expense and increased payables and accruals of $5.1 million. Net cash used in operating activities in2012 was $33.4 million and primarily resulted from the net loss of $40.4 million. Net cash used in operating activities in 2011 was $45.6 million andprimarily resulted from our net loss of $47.9 million.Net cash used in investing activities was $1.5 million in 2013 and primarily consisted of cash used to purchase investments, net of proceeds from thematurity of investments, of $1.0 million and equipment purchases of $0.5 million. Net cash used in investing activities was $28.8 million in 2012 andprimarily consisted of cash used to purchase investments, net of proceeds from the maturity of investments, of $28.9 million. Net cash provided by investingactivities in 2011 was $25.3 million and primarily consisted of proceeds from maturities of investments, net of cash used to purchase investments, of $25.1million.Net cash provided by financing activities was $14.5 million in 2013 and primarily consisted of the purchase of common stock by Amgen totaling $7.5million (See Note 7, “Related Party Transactions” in the Notes to Financial Statements) and common stock sold pursuant to the MLV agreement totaling $7.5million. Repurchases of common stock in 2013 to satisfy employee withholding obligations totaled $0.6 million. Net cash provided by financing activitieswas $58.3 million in 2012 and primarily consisted of net proceeds of $56.0 million from the sale of 55,921,054 shares of common stock and 23,026shares of Series B Preferred Stock in the June 2012 Public Offerings and net proceeds of $2.8 million from our sale of 2,596,341 shares of common stockthrough MLV. We repaid the remaining balance of our equipment financing line debt in March 2012 and no 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 net proceeds of $19.9 million from our financing withDeerfield and $2.4 million from sales of our common stock through MLV.Shelf Registration Statements. 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, 2014,$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.In November 2013 we filed a shelf registration statement with the SEC, which was declared effective in December 2013 (the “December 2013 Shelf”).The December 2013 Shelf allows us to issue common stock and preferred stock, and/or warrants to purchase any of such securities with a total value of up to$150.0 million. As of February 28, 2014, $109.8 million remains available to us under the December 2013 Shelf. The specific terms of offerings, if any,under the December 2013 Shelf would be established at the time of such offerings. 67Table of ContentsAs of December 31, 2013, 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) $3,357 $7,057 $5,619 $— $16,033 (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 expect to continue development of our drug candidate tirasemtiv for the potential treatment of neuromuscular diseases and medical conditions associatedwith muscle weakness or wasting. As part of our strategic alliance with Astellas, we expect to continue development of our drug candidate CK-2127107 for thepotential treatment of non-neuromuscular diseases and medical conditions associated with muscle weakness or wasting. As part of our strategic alliance withAmgen, we expect to continue development of our drug candidate omecamtiv mecarbil for the potential treatment of heart failure.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; • Astellas’ decisions with regard to funding of development and commercialization of CK-2127107 and other skeletal muscle activators; • 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. 68Table of ContentsWe have incurred an accumulated deficit of $482.6 million since inception and there can be no assurance that we will attain profitability. We are subjectto risks common to clinical stage companies including, but not limited to, development of new drug candidates, dependence on key personnel, and the abilityto 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 equity or debt financings, andultimately on our and our collaborators’ ability to successfully develop and market one or more of our drug candidates. We cannot be certain that sufficientfunds will be available from such collaborators or financings when needed or on satisfactory terms. Additionally, there can be no assurance that any of drugsbased on our 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 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. 69Table of ContentsInvestmentsAvailable-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 Note 3, “Cash Equivalents and Investments” in the Notes to Financial Statements 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; the severity and the duration of the impairment; and whether wehave the intent and ability to hold the investment to maturity. When we determine that an other-than-temporary impairment has occurred, the investment iswritten 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 debtsecurities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income.Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income orexpense. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale areincluded 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 were met, including whether the delivered element hadstand-alone value to the customer and whether there were 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, ASC Topic 605-25, Revenue Recognition — Multiple-Element Arrangements (“ASC 605-25”) on the recognition of revenuesfor agreements with multiple deliverables became effective and applies to any agreements we entered into on or after January 1, 2011. Under this updatedguidance, revenue will be allocated to each element using a selling price hierarchy, where the selling price for an element 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 neither VSOE nor TPE is available. 70Table of ContentsUpfront, non-refundable licensing payments are assessed to determine whether or not the licensee is able to obtain stand-alone value from the license.Where stand-alone value is indicated, revenue from the license is recognized upon delivery once all terms of the arrangement are finalized. Where this is not thecase, we do not consider the license deliverable to be a separate unit of accounting, and we defer revenue with revenue recognition for the license fee beingrecognized in conjunction with the other deliverables that constitute the combined unit of accounting over the estimated performance period for noncontingentdeliverables, following the pattern of performance.Also on January 1, 2011, ASC Topic 605-28, Revenue Recognition — Milestone Method (“ASC 605-28”) became effective and established themilestone method as an acceptable method of revenue recognition for certain contingent event-based payments under research and development arrangements.Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone is recognized in its entirety in the period in whichthe milestone is achieved. A milestone is an event (i) that can be achieved based in whole or in part on either our performance or on the occurrence of a specificoutcome resulting from our performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will beachieved, and (iii) that would result in additional payments being due to us. The determination that a milestone is substantive is based on management’sjudgment and is made at the inception of the arrangement. Milestones are considered substantive when the consideration earned from the achievement of themilestone is (i) commensurate with either our performance to achieve the milestone or the enhancement of value of the item delivered as a result of a specificoutcome resulting from our performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverables andpayment 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.For our collaborations entered into prior to January 1, 2011, we recognized and will continue to recognize milestone payments as revenue uponachievement of the milestone, provided the milestone payment was non-refundable, substantive effort and risk was involved in achieving the milestone and theamount of the milestone was reasonable in relation to the effort expended or risk associated with the achievement of the milestone. If these conditions were notmet, we deferred the milestone payment and recognized it as revenue over the estimated period of performance under the contract as we completed ourperformance obligations. We have concluded that all of the future contingent milestone payments pursuant to our research and development arrangementsentered into prior to January 1, 2011 are not considered substantive as they are the results of a collaborative partner’s performance. Therefore, they are notconsidered milestones under ASC 605-28.With respect to milestones related to our collaboration and license agreement entered into with Astellas in 2013, we believe the milestones related toresearch and early development are substantive as there is uncertainty that the milestones will be met, the milestones can only be achieved with our past andcurrent performance and the achievement of the milestone will result in additional payments to us. Therefore, they are considered milestones under ASC 605-28. We believe that the milestones related to later development and commercialization are not substantive as they are primarily the result of the collaborativepartner’s performance and therefore will be recognized as we complete our performance obligations under the agreement, if any.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 71Table of Contentspayments made by us will be recognized as a reduction of revenue or as expense. Revenue we recognize may be reduced by payments made to the other partyunder the arrangement unless we receive a separate and identifiable benefit in exchange for the payments and we can reasonably estimate the fair value of thebenefit 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.Under 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 72Table of Contentsincome. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. We did not record anincome tax provision 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, 2013, 2012and 2011. 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$13.7 million in 2013, $21.1 million in 2012 and $18.5 million in 2011.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. Historically, we have filed incometax returns with the IRS and the state of California. For jurisdictions in which tax filings are made, we are subject to income tax examination for all fiscal yearssince inception. The IRS’s Large Business and International Division concluded its audit of the 2009 tax year with no material adjustments. However, ingeneral, the statute of limitations for tax liabilities for these years remains open for the purpose of adjusting the amounts of the losses and credits carriedforward from those years.Interest accrued related to unrecognized tax benefits and penalties were zero for 2013, 2012 and 2011. 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 our existing NOLs and tax credits are subject to limitations arising from previous ownership changes. Future changes in our stockownership, some of which are outside of our control, could result in an ownership change under Section 382 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 invest 73Table of Contentsthe 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): 2014 2015 Total Fair Value atDecember 31,2013 Assets: Investments $57,570 $2,502 $60,072 $60,072 Average interest rate 0.12% 0.20% 0.13% 74Table of ContentsItem 8. Financial Statements and Supplementary DataCYTOKINETICS, INCORPORATEDINDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 76 Balance Sheets 77 Statements of Comprehensive Loss 78 Statements of Stockholders’ Equity (Deficit) 79 Statements of Cash Flows 81 Notes to Financial Statements 82 75Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Cytokinetics, Incorporated:In our opinion, the accompanying balance sheets and the related 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, 2013 and December 31, 2012, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted inthe United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2013, based on criteria established in Internal Control — Integrated Framework 1992 issued by the Committee of Sponsoring Organizationsof the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal controlover financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sReport on Internal Control over Financial Reporting under Item 9A. Our responsibility is to express opinions on these financial statements and on theCompany’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all materialrespects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statementpresentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessingthe risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Ouraudits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basisfor our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the 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 7, 2014 76Table of ContentsCYTOKINETICS, INCORPORATEDBALANCE SHEETS December 31, 2013 2012 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $20,158 $14,907 Short-term investments 57,570 59,093 Related party accounts receivable 5 4 Prepaid and other current assets 1,605 2,423 Total current assets 79,338 76,427 Property and equipment, net 1,221 997 Long-term investments 2,502 — Other assets 127 127 Total assets $83,188 $77,551 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $3,709 $2,002 Accrued liabilities 8,272 4,877 Deferred revenue, current 14,701 — Related party payables and accrued liabilities — 150 Short-term portion of deferred rent 22 76 Total current liabilities 26,704 7,105 Deferred revenue, non-current 1,500 — Long-term portion of deferred rent 542 361 Total liabilities 28,746 7,466 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, 2013 and December 31, 2012 Series B Convertible Preferred Stock — zero shares at December 31, 2013 and 23,026 shares at December 31,2012 Common stock, $0.001 par value: Authorized: 81,500,000 shares; Issued and outstanding: 30,681,624 shares at December 31, 2013 and 23,742,911 shares at December 31,2012 31 24 Additional paid-in capital 537,001 518,923 Accumulated other comprehensive income 7 18 Accumulated deficit (482,597) (448,880) Total stockholders’ equity 54,442 70,085 Total liabilities and stockholders’ equity $83,188 $77,551 The accompanying notes are an integral part of these financial statements. 77Table of ContentsCYTOKINETICS, INCORPORATEDSTATEMENTS OF COMPREHENSIVE LOSS Years Ended December 31, 2013 2012 2011 (In thousands, except per share data) Revenues: Research and development revenues from related parties $2,019 $4,177 $2,054 Research and development, grant and other revenues 7,547 3,382 1,946 License revenues from related parties 17,230 — — License revenues 3,852 — — Total revenues 30,648 7,559 4,000 Operating expenses: Research and development 49,450 35,643 37,182 General and administrative 15,092 12,429 13,590 Restructuring charges (reversals) — (56) 1,192 Total operating expenses 64,542 48,016 51,964 Operating loss (33,894) (40,457) (47,964) Interest and other, net 177 87 104 Loss before income taxes (33,717) (40,370) (47,860) Income tax benefit — — — Net loss (33,717) (40,370) (47,860) Deemed dividend related to beneficial conversion feature of convertible preferred stock — (1,307) (2,857) Net loss allocable to common stockholders $(33,717) $(41,677) $(50,717) Net loss per share allocable to common stockholders — basic and diluted $(1.24) $(2.30) $(4.30) Weighted-average number of shares used in computing net loss per share allocable to common stockholders —basic and diluted 27,275 18,107 11,800 Comprehensive loss $(33,728) $(40,355) $(47,853) The accompanying notes are an integral part of these financial statements. 78Table of ContentsCYTOKINETICS, INCORPORATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Common Stock Preferred Stock AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Shares Amount (In thousands, except share and per share data) Balance, December 31, 2010 11,151,267 $11 — $— $431,159 $— $(4) $(360,650) $70,516 Issuance of common stock upon exercise of stock options for cash at$6.00-$7.20 per share 2,667 — — — 17 — — — 17 Issuance of common stock pursuant to ESPP at a weighted price of$6.66 per share 18,822 — — — 125 — — — 125 Issuance of common stock to Deerfield at $9.00 per share, net ofissuance costs of $53 883,333 1 — — 6,126 — — — 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 Issuance of warrants to Deerfield, net of issuance costs of $38 — — — — 4,427 — — — 4,427 Issuance of common stock to MLV at $6.00-$6.12 per share, net ofcommission and issuance costs of $160 429,868 1 — 2,420 — — — 2,421 Stock-based compensation — — — — 3,069 — — — 3,069 Other comprehensive income — — — — — — 7 — 7 Net loss — — — — — — — (47,860) (47,860) Balance, December 31, 2011 12,485,957 13 8,070 — 456,672 — 3 (408,510) 48,178 Issuance of common stock pursuant to ESPP at a weighted priceof $4.32 per share 15,010 — — — 65 — — — 65 Issuance of common stock upon exercise of restricted stock units 144,045 — — — (401) — — — (401) Issuance of common stock pursuant to June 2012 publicofferings at $4.56 per share, net of issuance costs of $2,139 9,320,176 9 — — 29,907 — — — 29,916 Issuance of Series B convertible preferred stock pursuant to June2012 public offerings at $760 per share, net of issuance costs of$881 — — 23,026 — 12,318 — — — 12,318 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 $6.30-$7.20 per share, netof commission and issuance costs of $89 432,724 1 — — 2,819 — — — 2,820 Conversion of Series A convertible preferred stock to commonstock at $1,000 per share 1,345,000 1 (8,070) — (1) — — — — Stock-based compensation — — — — 3,783 — — — 3,783 Other comprehensive income — — — — — — 15 — 15 Net loss — — — — — — — (40,370) (40,370) 79Table of ContentsCYTOKINETICS, INCORPORATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued) Common Stock Preferred Stock AdditionalPaid-InCapital DeferredStock-BasedCompensation AccumulatedOtherComprehensiveIncome(Loss) AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Shares Amount (In thousands, except share and per share data) Balance, December 31, 2012 23,742,912 24 23,026 — $518,923 — 18 (448,880) 70,085 Issuance of common stock upon exercise of stock options for cash at$4.02-$11.10 per share 21,397 — — — 114 — — — 114 Issuance of common stock pursuant to ESPP at a weighted price of$3.66 per share 14,985 — — — 55 — — — 55 Issuance of common stock upon exercise of restricted stock units 130,534 — — — (623) — — — (623) Issuance of common stock to related party for $7.12 per share, net ofissuance costs of $21 1,404,100 2 — — 7,448 — — — 7,450 Issuance of common stock upon exercise of warrants 359,460 — — — 5 — — — 5 Conversion of Series B convertible preferred stock to common stock at$1,000 per share 3,837,681 4 (23,026) — (4) — — — — Fractional shares settlement pursuant to reverse stock split (28) — — — — — — — — Issuance of common stock to MLV at $6.50-$6.79 per share, net ofcommission and issuance costs of $232 1,170,583 1 — — 7,486 — — — 7,487 Stock-based compensation — — — — 3,597 — — — 3,597 Other comprehensive loss — — — — — — (11) — (11) Net loss — — — — — — — (33,717) (33,717) Balance, December 31, 2013 30,681,624 $31 — $— $537,001 $— $7 $(482,597) $54,442 The accompanying notes are an integral part of these financial statements. 80Table of ContentsCYTOKINETICS, INCORPORATEDSTATEMENTS OF CASH FLOWS Years Ended December 31, 2013 2012 2011 (In thousands) Cash flows from operating activities: Net loss $(33,717) $(40,370) $(47,860) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 433 591 1,297 (Gain) loss on disposal of equipment (79) (2) 3 Non-cash restructuring expenses, net of reversals — (56) 194 Stock-based compensation 3,597 3,783 3,069 Changes in operating assets and liabilities: Related party accounts receivable — 10 32 Prepaid and other assets 818 (320) (238) Accounts payable 1,656 690 162 Accrued and other liabilities 3,523 2,098 (2,266) Related party payables and accrued liabilities (150) 138 12 Deferred revenue 16,201 — — Net cash used in operating activities (7,718) (33,438) (45,595) Cash flows from investing activities: Purchases of investments (79,434) (92,788) (48,025) Proceeds from sales and maturities of investments 78,444 63,900 73,174 Purchases of property and equipment (542) (125) (443) Proceeds from sales of property and equipment 13 2 3 Decrease in restricted cash — 196 592 Net cash provided by (used in) investing activities (1,519) (28,815) 25,301 Cash flows from financing activities: Proceeds from initial public offering, sale of common stock to related party, and public offerings, net ofissuance costs 7,450 43,677 — Proceeds from draw down of committed equity financing facilities and at-the-market facility, net ofcommission and issuance costs — 2,820 2,421 Proceeds from other issuances of common stock and warrants, net 7,038 (336) 10,696 Proceeds from issuance of preferred stock, net of issuance costs — 12,318 9,329 Repayment of equipment financing lines — (152) (833) Net cash provided by financing activities 14,488 58,327 21,613 Net increase (decrease) in cash and cash equivalents 5,251 (3,926) 1,319 Cash and cash equivalents, beginning of period 14,907 18,833 17,514 Cash and cash equivalents, end of period $20,158 $14,907 $18,833 The accompanying notes are an integral part of these financial statements. 81Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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 was in the development stage at December 31, 2012, as defined in Financial Accounting Standards Board (“FASB”) AccountingStandards Codification (“ASC”) Topic 915, “Development Stage Entities.” During the year ended December 31, 2013, the Company exited the developmentstage with the execution of the Amgen Agreement Amendment and the Astellas Agreement (See Note 7 and Note 8), from which the Company receivedsignificant revenues from its principal operations, indicative that the Company was no longer in the development stage.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 $482.6 million since inception and there can be no assurance that the Company will attain profitability. The Company hada net loss of $33.7 million and net cash used in operations of $7.8 million for the year ended December 31, 2013. Cash, cash equivalents and investmentsincreased to $80.2 million at December 31, 2013 from $74.0 million at December 31, 2012. 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 clinical stage biopharmaceutical companies including, but not limited to, development of new drugcandidates, dependence on key personnel, and the ability to obtain additional capital as needed to fund its future plans. The Company’s liquidity will beimpaired if sufficient additional capital is not available on terms acceptable to the Company. To date, the Company has funded its operations primarilythrough sales of its common stock and convertible preferred stock, contract payments under its collaboration agreements, debt financing arrangements,government grants and interest income. Until it achieves profitable operations, the Company intends to continue to fund operations through payments fromstrategic collaborations, additional sales of equity securities, government grants and debt financings. The Company has never generated revenues fromcommercial sales of its drugs and may not have drugs to market for at least several years, if ever. The Company’s success is dependent on its ability to enterinto new strategic collaborations and/or raise additional capital and to successfully develop and market one or more of its drug candidates. As a result, theCompany may choose to raise additional capital through equity or debt financings to continue to fund its operations in the future. The Company cannot becertain that sufficient funds will be available from such a financing or through a collaborator when required or on satisfactory terms. Additionally, there canbe no assurance that the Company’s drug candidates will be accepted in the marketplace or that any future products can be developed or manufactured at anacceptable cost. These factors 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 31,2013 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. 82Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) 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 and liabilities and disclosures of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Basis of PresentationThe financial statements include all adjustments (consisting only of normal recurring adjustments) that management believes 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”) and Astellas Pharma Inc. (“Astellas”), its strategic partners. Approximately 63%, 55% and 51% of totalrevenues for the years ended December 31, 2013, 2012 and 2011, respectively, were derived from Amgen. Accounts receivable due from Amgen were zero atDecember 31, 2013 and 2012. See also Note 7, “Related Party Transactions,” regarding the collaboration agreement with Amgen. Approximately 34% of totalrevenues for the year ended December 31, 2013 was derived from Astellas. Accounts receivable due from Astellas were zero at December 31, 2013. See alsoNote 8, “Other Research and Development Revenue Arrangements” regarding collaboration agreement with Astellas.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 was to be denied approval or clearance or any such approval or clearance was 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 year ended December 31, 2013, 66% of the Company’s revenues werereceived from entities located in the United States and 34% were received from a Japanese entity. In the years ended 2012 and 2011, all of the Company’srevenues were received from entities located in the United States or from United States affiliates of foreign corporations.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. 83Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) 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, basedon quoted marked prices, with unrealized gains and losses recorded in accumulated other comprehensive loss. The cost of securities sold is based on thespecific-identification method. Investments with original maturities greater than three months and remaining maturities of one year or less are classified asshort-term investments. Investments with remaining maturities greater than one year are classified as long-term investments.Other-than-temporary impairment. All of the Company’s available-for-sale investments are subject to a periodic 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.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 84Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) rendered; the fee is fixed or determinable; and collectability is reasonably assured. Determination of whether persuasive evidence of an arrangement exists andwhether delivery has occurred or services have been rendered are based on management’s judgments regarding the fixed nature of the fee charged for researchperformed and milestones met, and the collectability of those fees. Should changes in conditions cause management to determine these criteria are not met forcertain 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. 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 received 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, 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 the Company enteredinto on or after January 1, 2011. Under this updated guidance, revenue is allocated to each element using a selling price hierarchy, where the selling price foran element 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 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 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 specific outcome resulting from theCompany’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, and (iii) thatwould result in additional payments being due to the Company. The determination that a milestone is substantive is judgmental and is made at the inception ofthe arrangement. Milestones are considered substantive when the consideration earned from the achievement of the milestone is (i) commensurate with either theCompany’s performance to achieve the milestone or the enhancement of value of the item delivered as a result of a specific outcome resulting from theCompany’s performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverables and payment terms inthe 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. 85Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) Prior to January 1, 2011, the Company recognized and will continue to recognize milestone payments as revenue upon achievement of the milestone,provided the milestone payment was non-refundable, substantive effort and risk were involved in achieving the milestone and the amount of the milestone wasreasonable in relation to the effort expended or risk associated with the achievement of the milestone. If these conditions were not met, the Company deferred themilestone payment and recognized it as revenue over the estimated period of performance under the contract as the Company completed its performanceobligations. The Company has concluded that all of the future contingent milestone payments pursuant to its research and development arrangements enteredinto prior to January 1, 2011 are not considered substantive as they are the results of a collaborative partner’s performance. Therefore, they are not consideredmilestones under ASC 605-28.With respect to milestones related to the collaboration and license agreement entered into in 2013 with Astellas, Inc., the Company believes the milestonesrelated to research and early development are substantive as there is uncertainty that the milestones will be met, the milestones can only be achieved with ourpast and current performance and the achievement of the milestone will result in additional payments to us. Therefore, they are considered milestones underASC 605-28. The Company believes the milestones related to later development and commercialization are not substantive as they are primarily the result ofthe collaborative partner’s performance and therefore will be recognized as the Company completes its performance obligations under the agreement, if any.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.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 86Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) dependent on the timeliness and accuracy of data provided by its CROs and other vendors. If the Company has incomplete or inaccurate data, it may under-or overestimate activity levels associated with various studies or trials at a given point in time. In this event, it could record adjustments to research anddevelopment expenses in future periods when the actual activity level becomes known. No material adjustments to preclinical study and clinical trial expenseshave been recognized to date.Research and Development ExpendituresResearch and development costs are charged to operations as incurred.Retirement PlanThe Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan from inceptionthrough December 31, 2013.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 LossThe 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 statement of operations. Comprehensive lossincludes all changes in stockholders’ equity during a period from non-owner sources. Comprehensive loss for each of the years ended December 31, 2013,2012, and 2011 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.Reverse Stock SplitOn June 24, 2013, the Company effected a one-for-six reverse stock split of its common stock through an amendment to its amended and restatedcertificate of incorporation (the “COI Amendment”). As of the 87Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) effective time of the reverse stock split, every six shares of the Company’s issued and outstanding common stock were converted into one issued andoutstanding share of common stock, without any change in par value per share. The reverse stock split affected all shares of the Company’s common stockoutstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under theCompany’s equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of common stock issuable upon theconversion of shares of preferred stock or upon the exercise of stock options or warrants outstanding immediately prior to the effectiveness of the reverse stocksplit. No fractional shares were issued as a result of the reverse stock split. Stockholders who would otherwise have been entitled to receive a fractional sharereceived cash payments in lieu thereof. In addition, the COI Amendment reduced the number of authorized shares of common stock to 81.5 million.As the par value per share of the Company’s common stock remained unchanged at $0.001 per share, a total of $139,000 was reclassified fromcommon stock to additional paid-in capital. All references to shares of common stock and per share data for all periods presented in the accompanyingfinancial statements and notes thereto have been adjusted to reflect the reverse stock split on a retroactive basis.Recent Accounting PronouncementsRecently Adopted Accounting PronouncementsIn February 2013, the FASB issued Accounting Statement Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated OtherComprehensive Income. This update requires entities to disclose items reclassified out of accumulated other comprehensive income and into net income in asingle location within the financial statements. On January 1, 2013, the Company adopted this new accounting guidance and discloses reclassifications out ofaccumulated other comprehensive income and into net income in the footnotes to the financial statements.Accounting Pronouncements Not Yet AdoptedIn July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a SimilarTax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 amends accounting guidance on the presentation of an unrecognized tax benefit when a netoperating loss carryforward, a similar tax loss, or tax credit carryforward exists. This new guidance requires entities, if certain criteria are met, to present anunrecognized tax benefit, or portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating losscarryforward, a similar tax loss, or a tax credit carryforward when such items exist in the same taxing jurisdiction. The provisions of ASU 2013-11 areeffective for fiscal years and interim periods beginning after December 15, 2013, which corresponds to the Company’s first quarter of fiscal year 2014. TheCompany does not expect the adoption of ASU 2013-11 will have a material effect on its financial statements. 88Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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, 2013 2012 2011 Net loss $(33,717) $(40,370) $(47,860) Deemed dividend related to beneficial conversion feature of convertible preferred stock — (1,307) (2,857) Net loss allocable to common stockholders $(33,717) $(41,677) $(50,717) Weighted-average shares used in computing net loss per share allocable to commonstockholders — basic and diluted 27,275 18,107 11,800 Net loss per share allocable to common stockholders — basic and diluted $(1.24) $(2.30) $(4.30) 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, 2013 2012 2011 Options to purchase common stock 2,449 1,791 1,599 Warrants to purchase common stock 7,692 9,009 1,114 Series A convertible preferred stock (as converted to common stock) — — 1,345 Series B convertible preferred stock (as converted to common stock) — 3,838 — Restricted stock units 42 217 518 Shares issuable related to the ESPP 14 11 8 Total shares 10,200 14,866 4,584 Note 3 — Supplementary Cash Flow DataSupplemental cash flow information was as follows (in thousands): Years EndedDecember 31, 2013 2012 2011 Cash paid for interest $— $3 $41 Cash paid for income taxes 1 1 1 Significant non-cash investing and financing activities: Purchases of property and equipment through accounts payable 193 116 13 Purchases of property and equipment through accrued liabilities (2) 37 — Purchases of property and equipment through trade in value of disposed property and equipment 81 — — 89Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) 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, 2013 and 2012 were as follows (in thousands): December 31, 2013 AmortizedCost UnrealizedGains UnrealizedLosses FairValue MaturityDates Cash equivalents — money market funds $15,858 $— $— $15,858 Short-term investments — U.S. Treasury securities $57,564 $7 $(1) $57,570 1/2014 — 12/2014 Long-term investments — U.S. Treasury securities $2,502 $— $— $2,502 1/2015 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 As of December 31, 2013 and December 31, 2012, the Company’s U.S. Treasury securities classified as short-term investments had unrealized lossesof approximately $1 and zero, respectively. The unrealized losses in 2013 were primarily caused by slight increases in short-term interest rates subsequent tothe purchase date of the related securities. The Company collected the contractual cash flows on its U.S. Treasury securities that matured from January 1,2014 through February 28, 2014 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, 2013 2012 2011 Interest income $792 $83 $132 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 90Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) maximize the use of observable inputs and minimize the use of unobservable inputs to the 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.Financial assets measured at fair value on a recurring basis as of December 31, 2013 and 2012 are classified in the table below in one of the threecategories described above (in thousands): December 31, 2013 Fair Value Measurements Using AssetsAt Fair Value Level 1 Level 2 Level 3 Money market funds $15,858 $— $— $15,858 U.S. Treasury securities 60,072 — — 60,072 Total $75,930 $— $— $75,930 Amounts included in: Cash and cash equivalents $15,858 $— $— $15,858 Short-term investments 57,570 — — 57,570 Long-term investments 2,502 — — 2,502 Total $75,930 $— $— $75,930 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 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, 2013 and 2012, the Company had no financial assets measured at fair valueon a recurring basis using significant Level 2 or Level 3 inputs. 91Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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, 2013 2012 Property and equipment, net: Laboratory equipment $15,317 $17,064 Computer equipment and software 2,549 3,190 Office equipment, furniture and fixtures 1,050 638 Leasehold improvements 3,297 3,393 22,213 24,285 Less: Accumulated depreciation and amortization (20,992) (23,288) $1,221 $997 Depreciation expense was $0.4 million, $0.6 million and $1.3 million for the years ended December 31, 2013, 2012 and 2011 respectively.Accrued liabilities were as follows (in thousands): December 31, 2013 2012 Accrued liabilities: Clinical and preclinical costs $4,975 $2,170 Consulting and professional fees 697 312 Bonus 1,614 1,355 Vacation pay 778 696 Other payroll related 93 87 Other accrued expenses 115 257 $8,272 $4,877 Interest receivable on cash equivalents and investments of $215,000 and $187,000 is included in prepaid and other current assets at December 31, 2013and 2012, respectively.Note 7 — Related Party TransactionsResearch and Development ArrangementsAmgenIn December 2006, the Company entered into a collaboration and option agreement with Amgen to discover, develop and commercialize novel smallmolecule therapeutics, including omecamtiv mecarbil, that activate cardiac muscle contractility for potential applications in the treatment of heart failure (the“Amgen 92Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) Agreement”). 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. As a result, Amgen became responsible for thedevelopment and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan), subject to the Company’sdevelopment and commercialization participation rights. Amgen will reimburse the Company for certain research and development activities it performs underthe collaboration.In June 2013, Cytokinetics and Amgen announced an amendment to the Amgen Agreement to include Japan, resulting in a worldwide collaboration (the“Amgen Agreement Amendment”). Under the terms of the Amgen Agreement Amendment, the Company received a non-refundable upfront license fee of $15million in June 2013. Under the Amgen Agreement Amendment, the Company plans to conduct a Phase I pharmacokinetic study intended to support inclusionof Japan in a potential Phase III clinical development program and potential global registration dossier for omecamtiv mecarbil. Amgen will reimburse theCompany for the costs of this study. In addition, the Company is eligible to receive additional pre-commercialization milestone payments relating to thedevelopment of omecamtiv mecarbil in Japan of up to $50 million, and royalties on sales of omecamtiv mecarbil in Japan.In conjunction with the Amgen Agreement Amendment, the Company also entered into a common stock purchase agreement which provided for the saleof 1,404,100 shares of its common stock to Amgen at a price per share of $7.12 and an aggregate purchase price of $10.0 million which was received in June2013. The Company determined the fair value of the stock issued to Amgen to be $7.5 million. The excess of cash received over fair value of $2.5 millionwas deferred and is being allocated between the license and services based on their relative selling prices using best estimate of selling price. Allocatedconsideration will be recognized as revenue as revenue criteria is satisfied, or as services are performed over approximately 12 months. Pursuant to thisagreement, Amgen has agreed to certain trading and other restrictions with respect to the Company’s common stock.Under the Amgen Agreement, as amended, the Company is eligible for potential pre-commercialization and commercialization milestone payments of upto $650 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. None of the future contingent milestone payments pursuant tothis arrangement as of January 1, 2011 are considered substantive as they are the results of Amgen’s performance. Therefore, they are not consideredmilestones under ASC 605-28. The Amgen Agreement also provides for the Company to receive increased royalties by co-funding Phase III development costsof omecamtiv mecarbil and other drug candidates under the collaboration. If the Company elects to co-fund such costs, it would be entitled to co-promote theco-funded drug in North America and participate in agreed commercialization activities in institutional care settings, at Amgen’s expense.In October 2013, the Company determined that all conditions necessary for revenue recognition under ASC 605-10 had been satisfied and accordingly,recognized a total of $17.2 million in license revenue attributable to the Amgen Agreement Amendment in the fourth quarter of 2013.At December 31, 2013, the Company had $300,000 of deferred revenue under the Amgen Agreement Amendment.Pursuant to the Amgen Agreement, the Company has recognized research and development revenue from Amgen for reimbursements of its costs ofcertain full-time employee equivalents (“FTEs”) supporting a collaborative research program directed to the discovery of next-generation cardiac sarcomereactivator 93Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) compounds and of other costs related to that research program. These reimbursements were recorded as research and development revenues from relatedparties. Revenue from Amgen was as follows (in thousands):Revenue from Amgen was as follows (in thousands): Years Ended December 31, 2013 2012 2011 License revenues $17,230 $— $— FTE reimbursements 2,019 4,174 1,988 Reimbursements of other costs — 3 66 Total research and development revenues from Amgen $19,249 $4,177 $2,054 Note 8 — Other Research and Development Revenue ArrangementsAstellas Pharma Inc. (“Astellas”)In June 2013, the Company entered into a collaboration and license agreement (the “Astellas Agreement”) with Astellas. The primary objective of thecollaboration to be conducted under the Astellas Agreement is to advance novel therapies for diseases and medical conditions associated with muscle weakness.Under the Astellas Agreement, the Company granted Astellas an exclusive license to co-develop and jointly commercialize CK-2127107, a fast skeletaltroponin activator, for potential application in non-neuromuscular indications worldwide. CK-2127107, which is currently in Phase I clinical development, isbeing developed jointly by the Company and Astellas. The Company is primarily responsible for the conduct of Phase I clinical trials and certain Phase IIreadiness activities for CK-2127107 and Astellas will be primarily responsible for the conduct of subsequent development and commercialization activities forCK-2127107.The companies are jointly conducting research to identify next-generation skeletal muscle activators to be nominated as potential drug candidates, atAstellas’ expense, over a two-year term, which may be extended by the companies’ mutual consent. Astellas has the exclusive rights to develop andcommercialize fast skeletal troponin activators from this research program in non-neuromuscular indications and to develop and commercialize other novelmechanism skeletal muscle activators from this research program in all indications, subject to certain co-development and co-promotion rights of theCompany under the Astellas Agreement. Astellas will be responsible for the costs associated with the development of all collaboration products, including CK-2127107.The Company retains an option to conduct early-stage development for certain agreed upon indications at its initial expense, subject to reimbursement ifdevelopment continues under the collaboration. The Company also retains an option to co-promote collaboration products in the United States and Canada.Astellas will reimburse the Company for certain expenses associated with its co-promotion activities.In July 2013, the Company received an upfront, non-refundable license fee of $16 million in connection with the execution of the Astellas Agreement,and is eligible to potentially receive over $24 million in reimbursement of sponsored research and development activities during the initial two years of thecollaboration. Based on the achievement of pre-specified criteria, the Company may receive over $250 million in milestone payments relating to thedevelopment and commercial launch of collaboration products, including up to $112 million in development and commercial launch milestones for CK-2127107. The Company may also receive up to $200 million in payments for achievement of pre-specified sales milestones related to net sales of allcollaboration products under the Astellas Agreement. In the event Astellas commercializes any collaboration 94Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) products, the Company will also receive royalties on sales of such collaboration products, including royalties ranging from the high single digits to the highteens on sales of products containing CK-2127107. In addition to the foregoing development, commercial launch and sales milestones, the Company may alsoreceive payments for the achievement of pre-specified milestones relating to the joint research program.The Company retains the exclusive right to develop and commercialize tirasemtiv for the potential treatment of amyotrophic lateral sclerosis and otherneuromuscular disorders independently from the Astellas Agreement.As of June 30, 2013, the Company deferred revenue related to the Astellas Agreement in accordance with ASC 605-25. The Company evaluated whetherthe delivered elements under the arrangement have value on a stand-alone basis. Upfront, non-refundable licensing payments are assessed to determine whetheror not the licensee is able to obtain stand-alone value from the license. Where this is not the case, the Company does not consider the license deliverable to be aseparate unit of accounting, and the revenue is deferred with revenue recognition for the license fee being recognized in conjunction with the other deliverablesthat constitute the combined unit of accounting.The Company determined that the license and the research and development services are a single unit of accounting as the license was determined to nothave stand-alone value. Accordingly, the Company is recognizing this revenue using the proportional performance model. As of December 31, 2013, theCompany has recognized $3.9 million of the $16 million upfront license fee as license revenue and deferred the remaining $12.1 million.The Company recognizes milestone payments utilizing the milestone method of revenue recognition. The Company believes the milestones related toresearch and early development under the Astellas Agreement are substantive as there is uncertainty that the milestones will be met, the milestone can only beachieved with the Company’s past and current performance and the achievement of the milestone will result in additional payment to the Company. TheCompany believes that the milestones related to later development and commercialization are not substantive as they are primarily the result of the collaborativepartner’s performance and therefore will be recognized as the Company completes its performance obligations under the agreement, if any. To date, theCompany has not recognized any milestone revenue from its collaboration with Astellas.Research and development revenue from Astellas was as follows (in thousands): Year EndedDecember 31,2013 License revenues $3,852 FTE reimbursements 3,285 Reimbursements of other costs 3,130 Total revenue from Astellas $10,267 At December 31, 2013, the Company had $15.9 million of deferred revenue under the Astellas Agreement, reflecting the unrecognized portion of thelicense revenue and prepayment on expenses expected to be incurred in the first quarter of 2014.GrantsIn 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 95Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) myasthenia gravis for a period of up to three years. In September 2012, the NINDS awarded to us an additional $0.5 million under a separate grant.Management determined that the Company was the principal participant in the grant arrangements, and, accordingly, the Company recorded amounts earnedunder the arrangements as revenue. The grants were completed in June of 2013.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.Total grant revenues were as follows (in thousands): Years Ended December 31, 2013 2012 2011 NINDS myasthenia gravis $69 $1,308 $1,680 U.S. Department of the Treasury 25 — — Total grant revenue $94 $1,308 $1,680 Global Blood Therapeutics, Inc. (“Global Blood”)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, 2013 2012 2011 Expense reimbursements from Global Blood $14 $1,479 $266 MyoKardia, Inc.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. The research plan terminated as planned in August 2013. 96Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) Research and development revenue from MyoKardia was as follows (in thousands): Years Ended December 31, 2013 2012 2011 Expense reimbursements from MyoKardia $1,024 $595 $— Note 9 — DebtIn April 2006, the Company entered into an equipment financing agreement with GE Capital. As of December 31, 2011, the balance of equipment loansoutstanding under this line was $152,000. The Company repaid the remaining outstanding equipment financing debt in March 2012 and no further funds areavailable under this line of credit.Interest ExpenseTotal interest expense incurred by the Company was as follows (in thousands): Years Ended December 31, 2013 2012 2011 Interest expense $— $3 $35 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, 2011 $194 2012 reversals (58) Cash payments (136) Restructuring liability at December 31, 2012 $— There was no activity in the restructuring liability subsequent to December 31, 2012 and the balance of the restructuring liability at December 31, 2013was zero. 97Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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, with an option to extend the lease for anadditional three-year period. The lease terms provide for rental payments on a graduated scale and the Company’s payment of certain operating expenses. TheCompany recognizes rent expense on a straight-line basis over the lease period.Rent expense was as follows (in thousands): Years Ended December 31, 2013 2012 2011 Rent expense $3,306 $3,375 $2,990 As of December 31, 2013, future minimum lease payments under noncancelable operating leases were as follows (in thousands): 2014 $3,357 2015 3,470 2016 3,587 2017 3,713 2018 1,906 Thereafter — Total $16,033 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.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 98Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield 8,070 shares of Series A convertible preferred stock (the “Series APreferred Stock”) for a purchase price of $1,500.00 per share for net proceeds of approximately $9.3 million, as well as common stock and warrants that arediscussed in Note 13 — Stockholders’ Equity (Deficit).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 1,345,000 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 was convertible into common stock at any time at the holder’s option. However, the holder was prohibited fromconverting the Series B Preferred Stock into shares of common stock if, as a result of such conversion, the holder and its affiliates would own more than9.98% of the total number of shares of common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution, or winding up,holders of Series B Preferred Stock would receive a payment equal to $0.001 per share before any proceeds are distributed to the common stockholders. Sharesof Series 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 were not entitled to receive anydividends, unless and until specifically declared by the Company’s board of directors. The Series B Preferred Stock ranked senior to the Company’scommon stock as to distributions of assets upon the Company’s liquidation, dissolution or winding up, whether voluntarily or involuntarily. The Series BPreferred 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 future depending uponthe specific terms of such future stock issuance. As a result of the one-for-six reverse stock split effected in June 2013, the conversion ratio for Series Bconvertible preferred stock changed from 1,000 shares of common stock per share of Series B convertible preferred stock to 166.67 shares of common stockper share of Series B convertible preferred stock.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.In the first quarter of 2013, 4,000 shares of Series B convertible preferred stock were converted into 666,667 shares of common stock. In the secondquarter of 2013, 15,026 shares of Series B convertible preferred stock were converted into 2,504,334 shares of common stock. On July 2, 2013, 4,000 sharesof Series B convertible preferred stock, which represented all remaining shares of Series B convertible preferred stock, were converted into 666,681 shares ofcommon stock. The conversions were in accordance with the terms of the original agreement under which the Series B convertible preferred stock was issuedin 2012. 99Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) Note 13 — Stockholders’ Equity (Deficit)Accumulated Other Comprehensive LossIn 2013, the Company reclassified insignificant amounts of unrealized gains (losses) in investments out of accumulated other comprehensive incomeinto net loss.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. In June 2013, upon the stockholder approval of the one-for-six reverse stock split and the amendment to theCompany’s amended and restated certificate of incorporation, the number of authorized shares of common stock was reduced to 81,500,000 (See Note 1).Common Stock OutstandingOn April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield (i) 883,333 shares of common stock for a purchase price of$9.00 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 1,114,168 shares of the Company’s common stock at an initial exercise price of $9.90 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 wasdetermined 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 1,345,000 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.In June 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 sold, through December 31, 2013, 2,033,175 shares of common stock through MLV for net proceeds ofapproximately $12.7 million. (See Note 17.) 100Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) On June 25, 2012, pursuant to the June 2012 Public Offerings, in aggregate the Company issued to various investors (i) 9,320,176 shares of commonstock for a purchase price of $4.56 per share, (ii) 23,026 shares of the Series B Preferred Stock for a purchase price of $760.00 per share, and (iii) warrantsto purchase 7,894,704 shares of the Company’s common stock at an exercise price of $5.28 per share, for aggregate gross proceeds of approximately $60.0million. 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, the June 2012 Public Offerings were considered to be one transaction. The fair value of the common stock issued in the June 2012 Public Offeringswas calculated 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.In conjunction with the Amgen Agreement Amendment (see Note 7), in June 2013, Amgen purchased 1,404,100 shares of the Company’s common stockat a price per share of $7.12 and an aggregate purchase price of $10.0 million which was received in June 2013. Under the terms of this agreement, Amgenagreed to certain trading and other restrictions with respect to the Company’s common stock. The Company determined the fair value of the stock issued toAmgen to be $7.5 million. The excess of cash received over fair value of $2.5 million was deferred and is being allocated between the license and servicesbased on their relative selling prices using best estimate of selling price.In February 2014, the Company closed an underwritten public offering for the issuance and sale of 5,031,250 shares of its common stock. The grosspublic offering proceeds were approximately $40.3 million. The net proceeds from the sale of the shares were approximately $37.4 million, after deducting theunderwriting discount and estimated offering expenses. (See Note 17.)WarrantsOn April 20, 2011, pursuant to the Deerfield Agreement, the Company issued to Deerfield warrants to purchase 1,114,168 shares of the Company’scommon stock at an initial exercise price of $9.90 per share, for aggregate gross proceeds of approximately $4.5 million. After issuance costs of approximately$0.1 million, the net proceeds were approximately $4.4 million. The warrants issued to Deerfield became exercisable on October 20, 2011 and will remainexercisable until April 20, 2015. The warrant holders are prohibited from exercising the warrants and obtaining shares of common stock if, as a result of suchexercise, the holder and its 101Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) 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 thewarrants as of the date of issuance at $5.8 million using the Black-Scholes option pricing model and the following assumptions: a contractual term of fouryears, a risk-free interest rate of 1.66%, volatility of 80%, and the fair value of the Company’s common stock on the issuance date of $9.12 ($1.52 beforeadjustment for the Company’s 2013 reverse stock split, see Note 1).On June 25, 2012, pursuant to the June 2012 Public Offerings, the Company issued warrants to purchase 7,894,704 shares of the Company’scommon stock at an exercise price of $5.28 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 $3.78 ($0.63 before adjustment for the Company’s 2013 reversestock split, see Note 1).In February 2013, warrants to purchase 1,000 shares of our common stock at an exercise price of $5.28 per share were cash exercised in accordancewith the June 2012 Public Offerings underwriting agreements.In April 2013, the Company issued 358,460 shares of common stock related to cashless exercises of warrants in accordance with the June 2012 PublicOfferings.Outstanding warrants as of December 31, 2013 were as follows: Numberof Shares ExercisePrice ExpirationDate Issued 4/20/2011 1,114,168 $9.90 04/20/15 Issued 6/25/2012 6,577,928 $5.28 06/25/17 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 2013 Annual Meeting of Stockholders, thenumber of shares of common stock authorized for issuance under the 2004 Plan was increased by 2,000,000. As of December 31, 2013, there were 2,161,829shares 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 102Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) granted only to Company employees (including officers and directors who are also employees). Nonstatutory stock options may be granted to Companyemployees and consultants. Options under the Plan may be granted for terms of up to ten years from the date of grant as determined by the Board of Directors,provided, however, that (i) the exercise price of an incentive stock option and nonstatutory stock option shall not be less than 100% and 85% of the estimatedfair market value of the shares on the date of grant, respectively, and (ii) with respect to any 10% stockholder, the exercise price of an incentive stock option ornonstatutory stock option shall not be less than 110% of the estimated fair market value of the shares on the date of grant and the term of the grant shall notexceed five years. Options may be exercisable immediately and are subject to repurchase options held by the Company which lapse over a maximum period often years at such times and under such conditions as determined by the Board of Directors. Options granted under the 1997 Plan generally vested over four orfive years (generally 25% after one year and monthly thereafter). As of December 31, 2013, the Company had reserved 11,504 shares of common stock forissuance related to options outstanding under the 1997 Plan, and there were no shares available for future grants under the 1997 Plan.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, 2010 854,862 1,349,223 $25.89 Increase in authorized shares 500,000 — — Options granted (425,420) 425,420 9.56 Restricted stock units granted (531,701) — — Options exercised — (2,667) 6.56 Options forfeited/expired 173,569 (173,568) 22.63 Restricted stock units forfeited 14,166 — — Balance at December 31, 2011 585,476 1,598,408 21.93 Increase in authorized shares 416,667 — — Options granted (403,108) 403,108 6.14 Options forfeited/expired 210,989 (210,989) 17.00 Restricted stock units forfeited 68,702 — — Balance at December 31, 2012 878,726 1,790,527 18.96 Increase in authorized shares 2,000,000 — — Options granted (797,629) 797,629 5.95 Restricted stock units granted (41,661) — — Options exercised — (21,397) 5.32 Options forfeited/expired 117,394 (117,394) 12.55 Restricted stock units forfeited 4,999 — — Balance at December 31, 2013 2,161,829 2,449,365 $15.15 6.67 $589,077 Exercisable at December 31, 2013 1,622,205 $19.49 5.60 $288,844 Vested and expected to vest as of December 31,2013 2,428,631 $15.22 6.65 $580,858 Total intrinsic value of stock options exercised was $107,000, zero and $8,000 during the years ended December 31, 2013, 2012 and 2011,respectively. The intrinsic value is calculated as the difference between the market value as of December 31, 2013 and the exercise price of shares. The marketvalue as of December 31, 2013 was $6.50 per share as reported by NASDAQ. The weighted average grant date fair value of stock options granted was$3.85, $3.89 and $6.25 per share during the years ended December 31, 2013, 2012 and 2011, 103Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) respectively. The number of option shares vested was 937,994, 245,946 and 225,622 in 2013, 2012 and 2011, respectively. The fair value of option sharesvested was $3.5 million, $1.5 million and $2.0 million in 2013, 2012 and 2011, respectively.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 531,701 6.78 Restricted stock units forfeited (14,166) 6.78 Restricted stock units outstanding at December 31, 2011 517,535 6.78 Restricted stock units vested (231,935) 6.78 Restricted stock units forfeited (68,702) 6.78 Restricted stock units outstanding at December 31, 2012 216,898 6.78 Restricted stock units granted 41,661 6.00 Restricted stock units vested (211,897) 6.78 Restricted stock units forfeited (4,999) 6.78 Unvested restricted stock units outstanding at December 31, 2013 41,663 $6.00 The total fair value of restricted stock units vested during the years ended December 31, 2013, 2012 and 2010 was $1.4 million, $1.6 million 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, 2013 2012 2011 Research and development $1,538 $1,801 $1,331 General and administrative 2,059 1,982 1,738 Stock-based compensation included in operating expenses $3,597 $3,783 $3,069 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 104Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-freeinterest 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, 2013 Year EndedDecember 31, 2012 Year EndedDecember 31, 2011 EmployeeStock Options ESPP EmployeeStock Options ESPP EmployeeStock Options ESPP Risk-free interest rate 1.1% 0.2% 1.1% 0.2% 2.4% 0.3% Volatility 73.2% 74.6% 71.1% 72.0% 72.0% 72.0% Expected term in years 6.20 1.25 6.13 1.25 6.10 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.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. The Company measures compensation expense for awards of restricted stock and restricted stock units at fair value on the date of grantand recognizes the expense over the expected vesting period. The fair value for restricted stock and restricted stock unit awards is based on the closing price ofthe Company’s common stock on the date of grant.As of December 31, 2013, there was $3.2 million of unrecognized compensation cost related to unvested stock options, which is expected to berecognized over a weighted-average period of 2.54 years and $149,000 of unrecognized compensation cost related to unvested restricted stock units, which isexpected to be recognized over a weighted-average period of 1.18 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, 2013, 2012 or 2011. 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 $104,000, $56,000, and $18,000in 2013, 2012 and 2011, respectively. 105Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) 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 14,985, 15,010 and 18,822 shares of commonstock during 2013, 2012 and 2011, respectively, pursuant to the ESPP at an average price of $3.66, $4.32 and $6.66 per share, in 2013, 2012 and 2011,respectively. At December 31, 2013 the Company had 189,896 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 income. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized.The Company did not record an income tax provision in the years ended December 31, 2013, 2012, or 2011 because the Company had a net taxable loss inthe period.For financial statement purposes, income before taxes includes the following components (in thousands): Years EndedDecember 31, 2013 2012 2011 United States $(33,717) $(40,370) $(47,860) Foreign — — — Total $(33,717) $(40,370) $(47,860) The Company recorded the following income tax provision as follows (in thousands): Years EndedDecember 31, 2013 2012 2011 Current: Federal $— $— $— State — — — Total $— $— $— Deferred: Federal $— $— $— State — — — Total $— $— $— 106Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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, 2013 2012 2011 Deferred tax assets: Depreciation and amortization $918 $1,024 $997 Capitalized R&D 20,702 4,932 6,582 Reserves and accruals 4,946 5,101 3,524 Net operating losses 144,254 153,193 141,226 Tax credits 33,043 25,943 16,778 Total deferred tax assets 203,863 190,193 169,107 Less: Valuation allowance (203,863) (190,193) (169,107) 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, 2013, 2012 and 2011. 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 $13.7 million in 2013, $21.1 million in 2012, and $18.5 million in 2011.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, 2013, 2012 and 2011 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, 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 Year Ended December 31, 2013: Deferred tax valuation allowance $190,193 $13,670 — — $203,863 107Table of ContentsCYTOKINETICS, INCORPORATEDNOTES 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, 2013 2012 2011 Tax at federal statutory tax rate (34)% (34)% (34)% State income tax, net of federal tax benefit (4)% (6)% (6)% State Apportionment 7% 0% 0% Tax credits (net) (14)% (19)% (1)% Deferred tax assets (utilized) not benefited 41% 56% 39% Stock-based compensation 2% 0% 1% NOL Expiration 1% 2% 0% Other 1% 1% 1% Total 0% 0% 0% The Company had federal net operating loss carryforwards of approximately $375.2 million and apportioned state net operating loss carryforwards ofapproximately $286.0 million before federal benefit at December 31, 2013. If not utilized, the federal and state operating loss carryforwards will begin to expirein various amounts beginning 2020 and 2014, respectively. The net operating loss carryforwards include deductions for stock options.The Company had general business credit of approximately $29.1 million and $13.6 million for federal and California state income tax purposes,respectively, at December 31, 2013. 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. Since its filing of its 2011 taxreturn, the Company has claimed the orphan drug credit. For qualifying expenses, the orphan drug credit offers an increased benefit relative to the researchand development credit taken in years prior.As required by California state law, the Company apportions income to California based on a “market-based” sourcing approach. Accordingly, theCompany’s California apportionment formula is sensitive to changes in the source of the Company’s mix of revenue. As a result of agreements in place in2013, the Company adjusted deferred tax assets to reflect these changes.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. The Company has performed a section 382 analysisfor the year ended December 31, 2013 and has not experienced an ownership change since 2006. A portion of the Company’s existing net operating losses andtax credits are subject to limitations arising from previous ownership changes. Future changes in the Company’s stock ownership, some of which are outsideof our control, could result in an ownership change under Section 382 and result in additional limitations.Section 59(e) of the Internal Revenue Code allows a Company to capitalize R&D expenses. The Company elected to capitalize R&D expenses on its2012 tax returns after completing a reverse stock split in the second quarter of 2013. The Company anticipates doing the same in its 2013 tax return.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 108Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlementwith the tax authority assuming full knowledge of the position and relevant facts.The Company historically files income tax returns for federal and California purposes. In general, the statute of limitations for tax liabilities for all yearsremains open for the purpose of adjusting the amounts of the losses and 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, 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 Addition for tax positions of prior years 24 8 16 Addition for tax positions related to the current year 807 43 764 Unrecognized tax benefits balance at December 31, 2013 $6,171 $1,209 $4,962 Included in the balance of unrecognized tax benefits as of December 31, 2013, 2012 and 2011 are $5.0 million, $4.2 million and $4.3 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 2013, 2012 or 2011. The Company does not expect its unrecognized taxbenefit to change materially over the next twelve months.Note 15 — Interest and Other, NetComponents of Interest and Other, Net were as follows (in thousands): Years EndedDecember 31, 2013 2012 2011 Warrant expense $— $— $— Interest income and other income 98 89 143 Interest expense and other expense 79 (2) (39) Interest and Other, net $177 $87 $104 Warrant expense for the period from inception to December 31, 2013 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. 109Table of ContentsCYTOKINETICS, INCORPORATEDNOTES TO FINANCIAL STATEMENTS — (Continued) Interest income and other income primarily consisted of interest income generated from the Company’s cash, cash equivalents and investments.Interest expense and other expense in 2013 consisted solely of net gains realized upon disposal of equipment. Interest expense and other expense in 2011primarily consisted of interest expense on borrowings under equipment financing lines.Note 16 — Quarterly Financial Data (Unaudited)Quarterly results were as follows (in thousands, except per share data): FirstQuarter SecondQuarter ThirdQuarter FourthQuarter 2013 Total revenues $821 $1,009 $4,469 $24,349 Net income (loss) (12,619) (15,041) (12,588) 6,531 Net income (loss) allocable to common stockholders (12,619) (15,041) (12,588) 6,531 Net income (loss) per share allocable to common stockholders — basic $(0.53) $(0.58) $(0.43) $0.22 Net income (loss) per share allocable to common stockholders — diluted $(0.53) $(0.58) $(0.43) $0.21 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 $(0.78) $(0.76) $(0.45) $(0.48) Note 17 — Subsequent EventsIn January 2014, the Company sold 364,103 shares of common stock through MLV for net proceeds of approximately $2.4 million. As of January 8,2014, the Company had sold 2,397,278 shares, the maximum allowable under the MLV Agreement and therefore, no shares remain available to the Companyfor sale through MLV.On February 25, 2014, the Company closed an underwritten public offering for the issuance and sale of 5,031,250 shares of its common stock. Thegross public offering proceeds were approximately $40.3 million. The net proceeds from the sale of the shares were approximately $37.4 million, afterdeducting the underwriting discount and estimated offering expenses. 110Table of ContentsItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures. Our management evaluated, with the participation of our Chief 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, 2013. 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 31,2013, 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, 2013, 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, 2013 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. 111Table 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 2014 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, 2013: 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 1,622,205 $19.49 2,351,725(1) Equity compensation plans not approved by stockholders — — — Total 1,622,205 $19.49 2,351,725 (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.” 112Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a) The following documents are filed as part of this Form 10-K: (1) Financial Statements (included in Part II of this report): • Report of Independent Registered Public Accounting Firm • Balance Sheets • Statements of 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.(18) 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation.(21) 3.4 Amended and Restated Bylaws.(2) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock.(3) 3.6 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.(17) 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(15) 4.5 Form of Preferred Stock Warrant Agreement(15) 4.6 Form of Warrant(10) 4.7 Form of Common Stock Warrant and Warrant Certificate(22) 4.8 Form of Preferred Stock Warrant and Warrant Certificate(22)10.1 1997 Stock Option/Stock Issuance Plan.(2)10.2 2004 Equity Incentive Plan, as amended.(14)10.3 2004 Employee Stock Purchase Plan.(14)10.4 Build-to-Suit Lease, dated May 27, 1997, by and between Britannia Pointe Grand Limited Partnership and Metaxen, LLC.(2) 113Table of ContentsExhibitNumber Description 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,Xenova Group 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 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(11) 10.16 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(8) 10.17 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(9)*10.18 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H. Sabry.(12) 10.19 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and Robert Blum.(9) 10.20 Form of Executive Employment Agreement between the Company and its executive officers.(9)*10.21 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(13)*10.22 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Company and AmgenInc.(13)*10.23 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company and AmgenInc.(13)*10.24 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Company and AmgenInc.(13) 10.25 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(13) 10.26 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand LimitedPartnership.(16) 114Table of ContentsExhibitNumber Description*10.27 Amendment No. 5, dated November 1, 2010, to the Collaboration and Option Agreement by and between the Company and AmgenInc.(16) 10.28 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) 10.29 At the Market Issuance Sales Agreement, dated June 10, 2011, between the Company and McNicoll, Lewis & Vlak LLC.(6)*10.30 Consulting Agreement between the Company and David J. Morgans, dated November 1, 2011.(24)*10.31 Amendment No. 1, dated May 1, 2012, to Consulting Agreement between the Company and David J. Morgans, dated November 1,2011.(19)*10.32 Amendment No. 2, dated October 30, 2012 to Consulting Agreement between the Company and David J. Morgans, datedNovember 1, 2011.(20) 10.33 Compensation Information for the Company’s Named Executive Officers.(23) 10.34 Form of Option Agreement.(20) 10.35 Form of Restricted Stock Unit Award Agreement.(20) 10.36 Common Stock Purchase Agreement dated June 11, 2013, by and between the Company and Amgen, Inc.(25)*10.37 Amendment No. 6, dated June 11, 2013, to the Collaboration and Option Agreement by and between the Company and Amgen,Inc.(14)*10.38 Collaboration and License Agreement, dated June 21, 2013, by and between the Company and Astellas Pharma, Inc.(14) 10.39 Form of Executive Employment Agreement between the Company and its executive officers. 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-OxleyAct of 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. 115Table of Contents(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 Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2009. (14)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 7, 2013. (15)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. (16)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2011. (17)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012. (18)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 4, 2011. (19)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 4, 2012. (20)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 15, 2013. (21)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 25, 2013. (22)Incorporated by reference from our registration statement on Form S-3, registration number 333-192125, filed with the Securities and ExchangeCommission on November 6, 2013. 116Table of Contents(23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 27, 2014.(24)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 13, 2012.(25)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 12, 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. (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. 117Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused 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 7, 2014POWER 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 7, 2014/s/ SHARON A. BARBARI Sharon A. Barbari Executive Vice President, Finance and Chief FinancialOfficer (PrincipalFinancial and Accounting Executive) March 7, 2014/s/ L. PATRICK GAGE, PH.D. L. Patrick Gage, Ph.D. Chairman of the Board of Directors March 7, 2014/s/ SANTO J. COSTA Santo J. Costa Director March 7, 2014/s/ DENISE M. GILBERT, PH.D. Denise M. Gilbert, Ph.D. Director March 7, 2014/s/ JOHN T. HENDERSON, M.B. CH.B. John T. Henderson, M.B. Ch.B. Director March 7, 2014/s/ B. LYNNE PARSHALL, ESQ. B. Lynne Parshall, Esq. Director March 7, 2014/s/ SANDFORD D. SMITH Sandford D. Smith Director March 7, 2014/s/ WENDELL WIERENGA, PH.D. Wendell Wierenga, Ph.D. Director March 7, 2014 118Table of ContentsExhibitNumber Description 3.1 Amended and Restated Certificate of Incorporation.(1) 3.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation.(18) 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation.(21) 3.4 Amended and Restated Bylaws.(2) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock.(3) 3.6 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock.(17) 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(15) 4.5 Form of Preferred Stock Warrant Agreement(15) 4.6 Form of Warrant(10) 4.7 Form of Common Stock Warrant and Warrant Certificate(22) 4.8 Form of Preferred Stock Warrant and Warrant Certificate(22)10.1 1997 Stock Option/Stock Issuance Plan.(2)10.2 2004 Equity Incentive Plan, as amended.(14)10.3 2004 Employee Stock Purchase Plan.(14)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,Xenova Group 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) 119Table of ContentsExhibitNumber Description 10.14 Sublease Agreement, dated September 28, 2000, by and between the Company and Exelixis, Inc.(2)*10.15 Collaboration and Option Agreement, dated as of December 29, 2006, by and between the Company and Amgen Inc.(11) 10.16 Common Stock Purchase Agreement, dated October 15, 2007, by and between the Company and Kingsbridge Capital Limited.(8) 10.17 Form of Indemnification Agreement between the Company and each of its directors and executive officers.(9)*10.18 Scientific Advisory Board Consulting Agreement, dated April 1, 2008, by and between the Company and James. H. Sabry.(12) 10.19 Amended and Restated Executive Employment Agreement, dated May 21, 2007, by and between the Company and Robert Blum.(9) 10.20 Form of Executive Employment Agreement between the Company and its executive officers.(9)*10.21 Amendment No. 1, dated June 17, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(13)*10.22 Amendment No. 2, dated September 30, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(13)*10.23 Amendment No. 3, dated October 31, 2008, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(13)*10.24 Amendment No. 4, dated February 20, 2009, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(13) 10.25 Form of Amendment No. 1 to Amended and Restated Executive Employment Agreements.(13) 10.26 Third Amendment to Lease, dated December 10, 2010, by and between the Company and Britannia Pointe Grand Limited Partnership.(16)*10.27 Amendment No. 5, dated November 1, 2010, to the Collaboration and Option Agreement by and between the Company and Amgen Inc.(16) 10.28 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) 10.29 At the Market Issuance Sales Agreement, dated June 10, 2011, between the Company and McNicoll, Lewis & Vlak LLC.(6)*10.30 Consulting Agreement between the Company and David J. Morgans, dated November 1, 2011.(24)*10.31 Amendment No. 1, dated May 1, 2012, to Consulting Agreement between the Company and David J. Morgans, dated November 1, 2011.(19)*10.32 Amendment No. 2, dated October 30, 2012 to Consulting Agreement between the Company and David J. Morgans, dated November 1,2011.(20) 10.33 Compensation Information for the Company’s Named Executive Officers.(23) 10.34 Form of Option Agreement.(20) 10.35 Form of Restricted Stock Unit Award Agreement.(20) 120Table of ContentsExhibitNumber Description 10.36 Common Stock Purchase Agreement dated June 11, 2013, by and between the Company and Amgen, Inc.(25)*10.37 Amendment No. 6, dated June 11, 2013, to the Collaboration and Option Agreement by and between the Company and Amgen, Inc.(14)*10.38 Collaboration and License Agreement, dated June 21, 2013, by and between the Company and Astellas Pharma, Inc.(14) 10.39 Form of Executive Employment Agreement between the Company and its executive officers. 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 Act of2002 (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 121Table of Contents(10)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2012. (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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2009. (14)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 7, 2013. (15)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. (16)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2011. (17)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 20, 2012. (18)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 4, 2011. (19)Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 4, 2012. (20)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 15, 2013. (21)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 25, 2013. (22)Incorporated by reference from our registration statement on Form S-3, registration number 333-192125, filed with the Securities and ExchangeCommission on November 6, 2013. (23)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 27, 2014. (24)Incorporated by reference from our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 13, 2012. (25)Incorporated by reference from our Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 12, 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. (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. 122Table of Contents (c) Financial Statement SchedulesNone — All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements. 123Exhibit 10.39CYTOKINETICS, INCORPORATEDEXECUTIVE EMPLOYMENT AGREEMENTThis Executive Employment Agreement (this “Agreement”) is made and entered into by and between (“Executive”) and Cytokinetics,Incorporated, a Delaware corporation (the “Company”), effective as of (the “Effective Date”).BACKGROUNDA. It is expected that the Company from time to time will consider a possible acquisition by another company or other change of control. The Board ofDirectors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternativeemployment opportunities. The Board has determined that it is in the Company’s and its stockholders’ best interests to assure that the Company will have thecontinued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a change of control of the Company.B. The Board believes that it is in the Company’s and its stockholders’ best interests to provide Executive with an incentive to continue his or heremployment and to motivate Executive to maximize the value of the Company upon a change of control for the benefit of its stockholders.C. The Board believes that it is in the Company’s and its stockholders’ best interests to provide Executive with certain severance benefits uponExecutive’s termination of employment following a change of control. These benefits will provide Executive with enhanced financial security and incentive andencouragement to remain with the Company notwithstanding a possible change of control.AGREEMENTThe parties hereby agree as follows:1. Definition of Terms. The following capitalized terms referred to in this Agreement will have the following meanings:(a) “Arbitration Agreement” means the Arbitration Agreement by and between the Company and Executive, as may be amended from time to time,and any successor agreement thereto.(b) “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior toExecutive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental,and/or vision benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirementbenefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfiedunless the coverage is no less favorable, taken as a whole, than that provided to other Officers at the same time during the period Executive is entitled to receiveseverance pursuant to this Agreement.(c) “Cause” means any of the following:(i) Executive’s failure to substantially perform Executive’s duties with the Company (other than due to Executive’s incapacity as a resultof physical or mental illness for a period not to exceed 90 days);(ii) Executive’s engaging in conduct which is materially injurious to the Company, its business or reputation, or which constitutes grossmisconduct;(iii) Executive’s material breach of this Agreement, the Invention Agreement or any other agreements between Executive and the Company;(iv) Executive’s material breach, or act or omission in material contravention of, the Company’s policies adopted by the Board or anycommittee thereof, including, without limitation, the Company’s Code of Ethics, Insider Trading Compliance Program, Disclosure Process and Proceduresand Corporate Governance Guidelines;(v) Executive’s conviction for or admission or plea of no contest with respect to a felony; or(vi) Executive’s act of fraud against the Company, misappropriation of material property belonging to the Company, or act of violenceagainst an officer, director, employee, contractor, agent or representative of the Company;provided, however, that if any of the foregoing events in (i), (iii) or (iv) are reasonably capable of being cured, such event will only be deemed tobe “Cause” if the Company has provided written notice to Executive describing the nature of such event, and Executive fails to cure such event to theCompany’s reasonable satisfaction within thirty (30) days of his or her receipt of such notice.(d) “Change of Control” means the occurrence of any of the following:(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 inRule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting powerrepresented by the Company’s then outstanding voting securities; or(ii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation thatwould result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (eitherby remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power representedby the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;(iii) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets; or(iv) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors of the Company areIncumbent Directors. “Incumbent Director” means a director of the Board who either (A) is a director of the Board as of the Effective Date, or (B) is elected, ornominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination did not occur in connectionwith any transaction described in subsection (d)(i), (d)(ii) or (d)(iii) above.(e) “Code” means the Internal Revenue Code of 1986, as amended.(f) “Disability” means that Executive has been unable to perform his or her Company duties as the result of his or her incapacity due to physicalor mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selectedby the Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative. Termination resulting from Disability may only beeffected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. If Executive resumes theperformance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent toterminate will automatically be deemed to have been revoked.(g) “Exchange Act” means the Securities Exchange Act of 1934, as amended.(h) “Good Reason” means the occurrence of any one or more of the following conditions, unless agreed to by Executive in writing or as set forthbelow: (i)A material diminution in the Executive’s base compensation; (ii)A material diminution in the Executive’s authority, duties or responsibilities; (iii)A material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report, e.g.,a requirement that the Executive report to a corporate officer or employee instead of reporting directly to the board of directors of acorporation (or similar governing body with respect to an entity other than a corporation); (iv)A material diminution in the budget over which the Executive retains authority prior to such change; (v)A material change in the geographic location at which the Executive must perform the services (i.e., the relocation of Executive’s place of employment to a location that increases Executive’s one-way commute by more than 50 miles from theCompany’s office location at the time of the Change of Control); or (vi)Any other action or inaction that constitutes a material breach by the Company or a successor entity of this Agreement;provided that, to establish “Good Reason,” (A) Executive must give written notice of the occurrence of the applicable event to the Company within ninety(90) days after the initial existence of the condition; (B) the Company does not reasonably cure the event within thirty (30) days from the Company’s receipt ofsuch notice; and (C) Executive resigns for Good Reason and his or her Separation from Service occurs within forty-five (45) days after the end of the noticeperiod.(i) “Invention Agreement” means the Proprietary Information and Invention Assignment Agreement by and between the Company and Executive,as may be amended from time to time, and any successor agreement thereto.(j) “Officer” means an “officer” of the Company, as defined in Rule 16a-1(f) under the Exchange Act.(k) “Section 409A” means Section 409A of the Code and the final regulations and any guidance promulgated thereunder.(l) “Section 409A Limit” means the limit necessary for compliance with Treasury Regulation 1.409A-1(b)(9)(iii), which, as of the date hereof, istwo (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Company’s taxable yearpreceding the Company’s taxable year of Executive’s termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and anyInternal Revenue Service guidance issued with respect thereto; and (ii) the maximum amount that may be taken into account under a qualified plan pursuant toSection 401(a)(17) of the Code for the year in which Executive’s employment is terminated.(m) “Separation from Service” means a “separation from service” within the meaning of Treasury Regulation 1.409A-1(h), without regard to anyalternative definition thereunder.(n) “Treasury Regulations” means Title 26 of the U.S. Code of Federal Regulations.2. Term of Agreement. This Agreement will terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have beensatisfied.3. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will, as defined underapplicable law. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executivewill not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or by law.4. Duties and Scope of Employment.(a) Positions and Duties. As of the Effective Date, Executive will serve as of the Company. Executive will render suchbusiness and professional services in the performance of his or her duties, consistent with Executive’s position within the Company, as will reasonably beassigned to him or her by the Board.(b) Obligations. While Executive is employed by the Company, Executive will (i) perform his or her duties faithfully and to the best of his or herability and will devote his or her full business efforts and time to the Company, and (ii) not engage in any other employment, occupation or consulting activityfor any material direct or indirect remuneration without the Board’s prior approval.5. Compensation.(a) Base Salary. While Executive is employed by the Company, the Company will pay Executive an annual salary as determined in the discretionof the Board or any committee thereof. The base salary will be paid periodically in accordance with the Company’s normal payroll practices and will besubject to the usual, required withholding. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normalperformance review practices.(b) Performance Bonus. Executive will be eligible to receive an annual bonus and other bonuses, less applicable withholding taxes, as determinedby the Board or any committee thereof in the Board’s or such committee’s sole discretion. Any earned bonus is payable no later than March 15 of the yearfollowing the year in which it is no longer subject to a substantial risk of forfeiture.(c) Equity Compensation. Executive will be eligible to receive stock option grants, and other equity compensation awards, as determined by theBoard or any committee thereof in the Board’s or such committee’s sole discretion.6. Employee Benefits. While Executive is an employee of the Company, Executive will be entitled to participate in the Benefit Plans currently andhereafter maintained by the Company of general applicability to other Officers, subject to any eligibility or other terms of such Benefit Plans. The Companyreserves the right to cancel or change the Benefit Plans it offers to its employees at any time.7. Vacation. Executive will be entitled to vacation in accordance with the Company’s vacation policy, with the timing and duration of specific vacationsmutually and reasonably agreed to by the parties hereto.8. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of orin connection with the performance of Executive’s duties as an employee of the Company, in accordance with the Company’s expense reimbursement policy asin effect from time to time.th9. Severance Benefits.(a) Involuntary Termination Following a Change of Control. If on or within eighteen (18) months following a Change of Control: (X)(i) Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason,or (ii)the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause (and otherthan as a result of Executive’s death or Disability); (Y)Executive delivers to the Company an effective, general release of all claims in favor of the Company, in a form reasonablyacceptable to the Company, which release is effective not later than fifty-two (52) days following the date of Executive’s Separationfrom Service; and (Z)provided that Executive’s termination constitutes a Separation from Service;then Executive will receive the following severance from the Company (the “Severance Benefits”):(i) Severance Payment. Executive will be entitled to (A) receive continuing payments of severance pay (less applicable withholding taxes) ata rate equal to Executive’s base salary rate, as then in effect (but ignoring any reduction in base salary rate that forms the basis for Good Reason), for a periodof eighteen (18) months following Executive’s Separation from Service; and (B) a lump-sum payment on the fifty-third (53) day following the Separationfrom Service equal to 100% of Executive’s target annual bonus as of the date of such termination.(ii) Equity Awards. All of Executive’s then-outstanding equity awards, including, without limitation, stock options, restricted stockawards and restricted stock unit awards, will immediately vest on the date of the Separation from Service and, if applicable, become exercisable, as to 100%of such award.(iii) Continued Employee Benefits. If Executive is participating in the Company’s Benefit Plans at the time of his or her Separation fromService and Executive timely elects continued coverage under Title X of the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”),Executive will receive Company-paid coverage for Executive and Executive’s eligible dependents under the Company’s Benefit Plans from the date ofExecutive’s Separation from Service until the earliest of (A) eighteen (18) months following Executive’s Separation from Service, (B) the expiration ofExecutive’s eligibility for the continuation coverage under COBRA, or (C) such time as Executive secures employment with benefits substantially similar,taken as a whole, to those provided under the COBRA coverage at that time (the period from the date of Executive’s Separation from Service through theearliest of (A) through (C), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time therdCompany determines, in its sole discretion, that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules ofSection 105(h)(2) of the Code or any statute or regulation of similar effect (including, without limitation, the 2010 Patient Protection and Affordable Care Act,as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of providing the COBRA premiums, the Company will instead payExecutive, on the first day of each month of the remainder of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums forthat month, subject to applicable tax withholdings and deductions. If Executive becomes eligible for coverage under another employer’s group health plan orotherwise ceases to be eligible for COBRA during the Severance Period, Executive must immediately notify the Company of such event, and all payments andobligations under this Section will cease.(b) Timing of Severance Payments.(i) General. No Severance Benefits shall be paid or provided until the release described in Section 9(a)(Y) becomes effective. AnySeverance Benefits to which Executive otherwise would have been entitled under Section 9(a) during the fifty-two (52) day period referred to in Section 9(a)(Y)shall be paid or provided, as applicable, by the Company to Executive in full arrears on the fifty-third (53) day following Executive’s Separation fromService in accordance with Section 409A. Any other Severance Benefits will be paid or provided, as applicable, by the Company to the Executive inaccordance with normal payroll policies as provided in Section 9(a). If Executive should die before all amounts have been paid, such unpaid amounts will bepaid in a lump-sum payment to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.(ii) Section 409A.(A) Amounts paid under this Agreement are intended to satisfy the requirements of the “short-term deferral” rule set forth inTreasury Regulation 1.409A-1(b)(4) of the Treasury Regulations to the greatest extent possible, and to the extent not so exempt, such amounts are intended to beexempt under Treasury Regulation 1.409A-1(b)(9).(B) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning ofSection 409A at the time of Executive’s termination (other than due to death), and if any of the severance payable to Executive pursuant to this Agreement,together with any other severance payments or separation benefits, are considered “deferred compensation” under Section 409A (together, the “DeferredCompensation Separation Benefits”), any such Deferred Compensation Separation Benefits that would otherwise be payable within the first six (6) monthsfollowing Executive’s termination of employment will not be paid as scheduled, and will instead become payable on the first payroll date that occurs on or afterthe date six (6) months and one (1) day following the date of Executive’s Separation from Service. All subsequent Deferred Compensation Separation Benefits,if any, will be payable thereafter in accordance with the original payment schedule applicable to each payment or benefit. Notwithstanding anything herein tothe contrary, if Executive dies following his or her Separation from Service but prior to the six (6) month anniversary of his or her termination, then anypayments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date ofrdExecutive’s death and all other Deferred Compensation Separation Benefits will be payable thereafter in accordance with the original payment scheduleapplicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes ofSection 1.409A-2(b)(2) of the Treasury Regulations.(C) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance paymentsand benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to socomply.(c) Voluntary Resignation; Termination for Cause. If Executive’s employment terminates within eighteen (18) months following a Change ofControl (i) voluntarily by Executive other than for Good Reason or (ii) for Cause by the Company, then Executive will not be entitled to receive severance orother benefits, except for those as may then be established under the Company’s then existing severance plans and Benefits Plans or pursuant to other writtenagreements with the Company.(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employmentterminates due to his or her death, then Executive will not be entitled to receive severance or other benefits, except for those as may then be established under theCompany’s then existing written severance and Benefits Plans or pursuant to other written agreements with the Company.(e) Termination Apart from Change of Control. If Executive’s employment terminates for any reason, either prior to the occurrence of a Change ofControl or after the eighteen (18) month period following a Change of Control, then Executive will be entitled to receive severance and any other benefits only asmay then be established under the Company’s existing written severance plans and Benefits Plans, if any, or pursuant to any other written agreements with theCompany.(f) Exclusive Remedy. If Executive’s employment terminates within eighteen (18) months following a Change of Control, the provisions of thisSection 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whetherat law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon terminationof employment following a Change of Control other than those benefits expressly set forth in this Section 9.10. Conditional Nature of Severance Payments.(a) Invention Agreement. If Executive is in material breach of the Invention Agreement, including, without limitation, Executive’s obligations ofconfidentiality and of non-solicitation contained in the Invention Agreement, then upon such breach by Executive: (i) Executive will refund to the Company allcash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severance benefits pursuant to this Agreement will immediately cease.(b) Non-Competition. Executive acknowledges that the nature of the Company’s business is such that if Executive were to become employed by,or substantiallyinvolved in, the business of a competitor of the Company during the eighteen (18) months following the termination of Executive’s employment, it would bevery difficult for Executive not to rely on or use the Company’s trade secrets and confidential information. Accordingly, to avoid the inevitable disclosure ofthe Company’s trade secrets and confidential information, Executive agrees and acknowledges that Executive’s right to receive the severance payments set forthin this Agreement (to the extent Executive is otherwise entitled to such payments and to the extent permitted by law) will be conditioned upon Executive notdirectly or indirectly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director orotherwise), nor having any ownership interest in or participating in the financing, operation, management or control of, any person, firm, corporation orbusiness that directly competes with the Company or is a customer of the Company during such 18-month period. Notwithstanding the foregoing, Executivemay own, directly or indirectly, up to 2% of the capital stock of a company that directly competes with the Company, provided such capital stock is tradedon a national securities exchange or through the automated quotation system of a registered securities association. Upon any breach of this Section and to theextent permitted by law, (i) Executive will refund to the Company all cash paid to Executive pursuant to Section 9 of this Agreement; and (ii) all severancepayments pursuant to this Agreement will immediately cease.11. Limitation on Payments. If the severance, payments and other benefits provided for in this Agreement or otherwise payable to Executive (a“Payment”) would (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Section 11, would be subject tothe excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then Executive’s severance benefits will be equal to the Reduced Amount. The“Reduced Amount” will be either:(a) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or(b) the largest portion, up to and including the total, of the Payment, whichever amount ((a) or (b)), after taking into account all applicablefederal, state, provincial, foreign, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), resultsin Executive’s receipt, on an after-tax basis, of the greatest economic benefit notwithstanding that all or some portion of the Payment may be subject to theExcise Tax.If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction will occur inthe following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of stock awards other than stock options; (3) cancellation ofaccelerated vesting of stock options; and (4) reduction of other benefits paid to Executive. Within any such category of Payments (that is, (1), (2), (3) or (4)), areduction will occur first with respect to amounts that are not “deferred compensation” within the meaning of Section 409A of the Code and then with respectto amounts that are. In the event that acceleration of vesting of stock award compensation is to be reduced, the acceleration of vesting will be cancelled in thereverse order of the date of grant of Executive’s applicable type of stock award (i.e., earliest granted stock awards are cancelled last).12. Invention and Arbitration Agreements. Executive agrees and acknowledges that the Invention Agreement and the Arbitration Agreement will continuein full force and effect and Executive agrees to abide by the terms thereof.13. Successors.(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation,liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations and rights under this Agreement andagree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform suchobligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s businessand/or assets that executes and delivers an agreement setting forth the assumption described above or that becomes bound by this Agreement by operation oflaw.(b) Executive’s Successors. This Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’spersonal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.14. Notice.(a) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly givenwhen personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailednotices will be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of theCompany, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its Chief Executive Officer (or, ifExecutive holds the position of Chief Executive Officer, then to the Company’s General Counsel).(b) Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason or as a result of a voluntary resignationwill be communicated by a notice of termination to the other party hereto given in accordance with Section 14(a). Such notice will indicate the specifictermination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for terminationunder the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).15. Miscellaneous Provisions.(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor, except asotherwise contemplated in this Agreement, will any such payment be reduced by any earnings that Executive may receive from any other source.(b) Waiver and Modification. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or dischargeis agreed to inwriting and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the samecondition or provision at another time.(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.(d) Entire Agreement. This Agreement, the Invention Agreement and the Arbitration Agreement constitute the entire agreement of the parties heretowith respect to their respective subject matter, and supersede in their entirety all prior representations, understandings, undertakings or agreements (whetheroral or written and whether expressed or implied) of the parties with respect to such subject matter.(e) Choice of Law. The laws of the State of California (without reference to its choice of laws provisions that would lead to the application of thelaws of another State) will govern the validity, interpretation, construction and performance of, and any disputes in connection with, this Agreement.(f) Severability. If any provisions herein are found to be unenforceable on the grounds that they conflict with applicable laws, the parties intendthat such provisions be replaced, reformed or narrowed so that their original business purpose can be accomplished to the extent permitted by law, and that theremaining provisions will not in any way be affected or impaired thereby.(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.(h) Advice of Counsel; Understanding of Obligations. Each party acknowledges that, in executing this Agreement, such party has had theopportunity to seek the advice of independent legal counsel. This Agreement will not be construed against any party by reason of the drafting or preparationhereof. Executive represents that he or she has read and understood all of his or her obligations under this Agreement, the Invention Agreement and theArbitration Agreement, and hereby confirms the reasonableness of the duration, scope and geographic coverage of such obligations.(i) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together willconstitute one and the same instrument.[The remainder of this page is intentionally left blank. The signature page follows.]IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and yearset forth below, to be effective as of the Effective Date. COMPANY CYTOKINETICS, INCORPORATED By: Name: Title: EXECUTIVE By: Name: Title: 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, 333-182226, and 333-192125) 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, 333-183091 and 333-190458 ) of Cytokinetics, Incorporated of our report dated March 7, 2014 relating to the financial statements and theeffectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLPSan Jose, CAMarch 7, 2014Exhibit 31.1PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert I. Blum, certify that:1. I have reviewed this Annual Report on Form 10-K of Cytokinetics, Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-(f) and 15d-15(f)) for the registrantand have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,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 7, 2014Exhibit 31.2PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Sharon A. Barbari, certify that:1. I have reviewed this Annual Report on Form 10-K of Cytokinetics, Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-(f) and 15d-15(f)) for the registrantand have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,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 7, 2014Exhibit 32.1CEO and CFO CERTIFICATIONS PURSUANT TORULE 13a-14(b) AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. Section 1350)Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Robert I. Blum, President,Chief Executive Officer and Director, and Sharon A. Barbari, Chief Financial Officer, of Cytokinetics, Incorporated (the “Company”), hereby certify that tothe best of our knowledge:1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, 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 7, 2014This 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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