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ANNUAL REPORT 2020
DEAR SHAREHOLDER,
The past year tested us in ways we could
never have imagined, as individuals
and as a nation. At Cytokinetics, we
overcame unexpected challenges with
our own signature agility, ingenuity and
persistence. 2020 awakened us to both
the abuse of power and its use for good.
Our company stood up to be a power
broker intent to convert polarizing
injustices into systemic change, adopting
new initiatives to elevate the voices of
the less powerful amongst us as well as
the patients and caregivers we aim to serve. The pandemic illuminated
what really matters and shined a light on the power of science as a
force for social good. If power is measured by work over time, our
company in the last year was a powerhouse working overtime to
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muscles to empower lives and do so more inclusively and purposefully.
Cytokinetics’ commitment to Empowering Muscle and Empowering
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(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3) (cid:72)(cid:605)(cid:70)(cid:68)(cid:70)(cid:92)(cid:3) (cid:72)(cid:81)(cid:71)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3) (cid:69)(cid:92)(cid:3) (cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3) (cid:70)(cid:82)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:86)(cid:87)(cid:68)(cid:87)(cid:76)(cid:86)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)
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believe this pivotal heart failure trial of omecamtiv mecarbil may
prove transformational to our corporate development plans to
commercialize our novel drug candidate. In 2021, we are preparing
to engage regulatory authorities in advance of our goal to submit a
New Drug Application (NDA) with the U.S. Food and Drug Adminis-
tration (FDA). In parallel, we are continuing conduct of a second
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(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:3)(cid:72)(cid:81)(cid:85)(cid:82)(cid:79)(cid:79)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:564)(cid:85)(cid:86)(cid:87)(cid:3)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:90)(cid:72)(cid:3)(cid:71)(cid:82)
not believe that results of this trial will be required for potential
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omecamtiv mecarbil from other available heart failure therapies.
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In 2020, we announced that we are regaining global rights from Amgen
to omecamtiv mecarbil,(cid:3)(cid:68)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:3)(cid:68)(cid:86)(cid:3)(cid:38)(cid:46)(cid:16)(cid:20)(cid:22)(cid:25)(cid:3)(cid:11)(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:3)(cid:36)(cid:48)(cid:42)(cid:3)(cid:24)(cid:28)(cid:23)(cid:12)(cid:15)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
cardiac troponin activator. In 2021, we proceed independently with
both cardiac muscle activators invigorated and emboldened knowing
that the prevalence of heart failure is itself epidemic and the economic
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powerfully deliver to make a meaningful impact on both in parallel.
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clinical trial in patients with obstructive hypertrophic cardiomyopathy
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(cid:58)(cid:75)(cid:72)(cid:85)(cid:72)(cid:68)(cid:86) omecamtiv mecarbil was engineered to augment cardiac
muscle function in patients with underpowered cardiac function,
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our corporate strategy enabling our establishing a cardiac muscle
R&D and related business franchise for Cytokinetics moving forward.
In 2021, we expect to conclude and read out results from
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To accelerate further development, we executed transactions last
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(cid:68)(cid:909)(cid:82)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:86)(cid:3)(cid:7)(cid:21)(cid:24)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)
(cid:7)(cid:21)(cid:19)(cid:19)(cid:3) (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3) (cid:76)(cid:81)(cid:3) (cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3) (cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
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(cid:58)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:81)(cid:72)(cid:71)(cid:3)(cid:51)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:20)(cid:15)(cid:3)(cid:86)(cid:76)(cid:81)(cid:74)(cid:79)(cid:72)(cid:16)(cid:71)(cid:82)(cid:86)(cid:72)(cid:3)(cid:83)(cid:75)(cid:68)(cid:85)(cid:80)(cid:68)(cid:70)(cid:82)(cid:78)(cid:76)-
(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:3) (cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:82)(cid:79)(cid:72)(cid:85)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:38)(cid:46)(cid:16)(cid:21)(cid:26)(cid:20)(cid:15)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)
second cardiac myosin inhibitor, in healthy volunteers and
determined it to be suitable for potential further development.
In addition, we engaged with regulatory and reimbursement
authorities to prepare a potential registration program for
reldesemtiv, our fast skeletal muscle troponin activator (FSTA) for
the treatment of amyotrophic lateral sclerosis (ALS) and we
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reldesemtiv(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:68)(cid:87)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:47)(cid:54)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:16)(cid:70)(cid:79)(cid:76)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)
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treatment of diseases of impaired muscle function sparking power-
ful new possibilities for an emerging neuromuscular franchise.
v
Cytokinetics’ science shined brightly in 2020 and added horsepow-
(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:57)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:24)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:68)(cid:85)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)
science to both extend our discovery platform in muscle biology
and to expand our development pipeline, at the same time we are
(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:564)(cid:85)(cid:86)(cid:87)(cid:3)(cid:80)(cid:72)(cid:71)(cid:76)(cid:70)(cid:76)(cid:81)(cid:72)(cid:17)
(cid:58)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:519)(cid:3)(cid:86)(cid:70)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:85)(cid:76)(cid:89)(cid:72)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)
(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)-
ted to our goal of transforming patients’ lives and the transfer of
(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:70)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:79)(cid:82)(cid:82)(cid:78)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:88)(cid:83)(cid:71)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)
you on our progress and thank you again for your support.
Robert I. Blum
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
RESEARCH
PRE-CLINICAL
PHASE 1
PHASE 2
PHASE 3
CARDIAC MUSCLE
Omecamtiv Mecarbil (cid:11)(cid:43)(cid:72)(cid:68)(cid:85)(cid:87)(cid:3)(cid:41)(cid:68)(cid:76)(cid:79)(cid:88)(cid:85)(cid:72)(cid:12) †
(cid:38)(cid:46)(cid:16)(cid:21)(cid:26)(cid:23)(cid:3)(cid:11)(cid:82)(cid:43)(cid:38)(cid:48)(cid:15)(cid:3)(cid:81)(cid:43)(cid:38)(cid:48)(cid:15)(cid:3)(cid:43)(cid:41)(cid:83)(cid:40)(cid:41)(cid:12)
(cid:38)(cid:46)(cid:16)(cid:21)(cid:26)(cid:20)
AMGEN COLLABORATION
RTW / JI XING COLLABORATION
(cid:38)(cid:46)(cid:16)(cid:20)(cid:22)(cid:25)(cid:3)(cid:11)(cid:36)(cid:48)(cid:42)(cid:3)(cid:24)(cid:28)(cid:23)(cid:12)(cid:3)(cid:11)(cid:43)(cid:72)(cid:68)(cid:85)(cid:87)(cid:3)(cid:41)(cid:68)(cid:76)(cid:79)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:12)(cid:3)†
AMGEN COLLABORATION
SKELETAL MUSCLE
Reldesemtiv (ALS)
††
v
(cid:38)(cid:46)(cid:16)(cid:25)(cid:19)(cid:20)
Additional Skeletal Muscle Activators
ASTELLAS COLLABORATION
S
OTHER
Muscle Biology Directed Research
Myosin-Targeted
Troponin-Targeted
Research
* Described in the section entitled “Omecamtiv mecarbil: Clinical Development” under Item 1 (Business) of the enclosed Form 10-K.
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†(cid:3)(cid:36)(cid:80)(cid:74)(cid:72)(cid:81)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:79)(cid:79)(cid:68)(cid:69)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:15)(cid:3)(cid:21)(cid:19)(cid:19)(cid:25)(cid:3)(cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:36)(cid:80)(cid:74)(cid:72)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:72)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:79)(cid:79)(cid:68)(cid:69)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)
(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:15)(cid:3)(cid:72)(cid:909)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:48)(cid:68)(cid:92)(cid:3)(cid:21)(cid:19)(cid:15)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:17)(cid:3)(cid:56)(cid:83)(cid:82)(cid:81)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:85)(cid:70)(cid:76)(cid:68)(cid:79)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85) omecamtiv mecarbil(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:46)(cid:16)(cid:20)(cid:22)(cid:25)(cid:3)(cid:11)(cid:36)(cid:48)(cid:42)(cid:3)(cid:24)(cid:28)(cid:23)(cid:12)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:17)
†† Astellas to provide co-funding in exchange for low single-digit royalty.
(cid:36)(cid:79)(cid:79)(cid:3)(cid:71)(cid:85)(cid:88)(cid:74)(cid:3)(cid:70)(cid:68)(cid:81)(cid:71)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72) (cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:68)(cid:73)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:909)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)
l
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
(cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
From the transition period from to
Commission file number: 000-50633
CYTOKINETICS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
280 East Grand Avenue
South San Francisco, CA
(Address of principal executive offices)
94-3291317
(I.R.S. Employer
Identification No.)
94080
(Zip Code)
Title of each class
(650) 624-3000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading symbol
Name of each exchange on which registered
Common Stock, $0.001 par value
CYTK
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:4) No (cid:3)
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 (cid:4) No (cid:3)
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 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes (cid:3) No (cid:4)
Indicate by check mark whether the Registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (cid:3) No (cid:4)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in
Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:3)
Accelerated filer (cid:4)
Non-accelerated filer (cid:4)
Smaller reporting company (cid:4)
Emerging growth company (cid:4)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:3)
Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
(cid:3)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:4) No (cid:3)
As of June 30, 2020, the last business day of the Registrants most recently completed second fiscal quarter, the aggregate market value of common stock held
by non-affiliates of the Registrant was approximately $1,413.0 million (based on a closing price of $23.57 per share as reported by the Nasdaq Global Select Market on
June 30, 2020). For purposes of this calculation, shares of common stock beneficially owned by the Registrants directors, officers and certain stockholders as of June
30, 2020 have been excluded in that such persons may be deemed affiliates. The determination of affiliate status is not necessarily a conclusive determination for other
purposes. The Registrant has no non-voting common equity.
As of February 23, 2021, the number of shares outstanding of the Registrants common stock, par value $0.001 per share, was 71,110,576 shares.
Portions of the Registrants Proxy Statement for its 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission, no later
than 120 days after the end of the fiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
CYTOKINETICS, INCORPORATED
FORM 10-K
YEAR ENDED DECEMBER 31, 2020
INDEX
Forward Looking Statements Private Securities Litigation Reform act of 1995 ...............................................
Summary of Principal Risk Factors....................................................................................................................
PART I
Business..............................................................................................................................................................
Risk Factors ........................................................................................................................................................
Unresolved Staff Comments...............................................................................................................................
Properties............................................................................................................................................................
Legal Proceedings ..............................................................................................................................................
Mine Safety Disclosures.....................................................................................................................................
PART II
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ............................................................................................................................................................
Selected Financial Data ......................................................................................................................................
Managements Discussion and Analysis of Financial Condition and Results of Operations ............................
Quantitative and Qualitative Disclosures About Market Risk ...........................................................................
Financial Statements and Supplementary Data ..................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................
Controls and Procedures.....................................................................................................................................
Other Information...............................................................................................................................................
PART III
Directors, Executive Officers and Corporate Governance .................................................................................
Executive Compensation ....................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..........
Certain Relationships and Related Transactions, and Director Independence...................................................
Principal Accounting Fees and Services ............................................................................................................
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Exhibits and Financial Statement Schedules......................................................................................................
Exhibits...........................................................................................................................................................................................
Form 10-K Summary..........................................................................................................................................
Item 16.
Signatures .......................................................................................................................................................................................
PART IV
Page
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7
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109
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112
112
112
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113
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118
119
FORWARD LOOKING STATEMENTS
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains forward-looking statements indicating expectations about future performance and other forward-looking
statements within the meaning 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 protected by the safe harbor created thereby. Forward-looking
statements involve risks and uncertainties and our actual results and the timing of events may differ significantly 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 2021;
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 conducted by ourselves or our partners, 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, the non-clinical studies and chemistry, manufacturing, and controls
activities of our drug candidates and other compounds, and the significance and utility of such results; anticipated
interactions with regulatory authorities;
our and our partners plans or ability to conduct the continued research and development of our drug candidates and other
compounds;
the timing and likelihood of regulatory approval for omecamtiv mecarbil or any of our other drug candidates;
our expected roles in research, development or commercialization under our strategic alliances with Amgen Inc.
(Amgen), Astellas Pharma Inc. (Astellas) and Ji Xing Pharmaceuticals Limited (Ji Xing);
the properties and potential benefits of, and the potential market opportunities for, our drug candidates and other
compounds, including the potential indications for which they may be developed;
the sufficiency of the clinical trials conducted with our drug candidates to demonstrate that they are safe and efficacious;
our receipt of milestone payments, royalties, reimbursements and other funds from current or future partners under
strategic alliances;
our ability to continue to identify additional potential drug candidates that may be suitable for clinical development;
• market acceptance of our drugs;
•
changes in third party healthcare coverage and reimbursement policies;
•
•
•
•
•
•
•
•
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;
future payments and other obligations under loan, lease agreements, and revenue interest agreement and the convertible
notes;
potential competitors and competitive products;
retaining key personnel and recruiting additional key personnel; the potential impact of recent accounting pronouncements
on our financial position or results of operations; and
the continuing impact of the COVID-19 pandemic on our research and development activities and business operations.
3
Such forward-looking statements involve risks and uncertainties, including, but not limited to:
• Astellas decisions with respect to the timing, design and conduct of research and development activities for those skeletal
muscle activators subject to the License and Collaboration Agreement for Other Skeletal Sarcomere Activators, dated April
23, 2020 (the Astellas OSSA Agreement); and Ji Xings decisions with respect to the timing, design and conduct of
development and commercialization activities for CK-274 in the Peoples Republic of China (including the Hong Kong
SAR and Macau SAR) (together China) and Taiwan;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to complete the transition of the programs related to omecamtiv mecarbil and CK-136 (formerly known as AMG
594) from Amgen to us effectively or efficiently by May 20, 2021;
our ability to receive funds under the Funding Agreement, dated July 14, 2020 (the Funding Agreement) between us and
RTW Royalty Holdings Designated Activity Company (RTW Royalty Holdings), which is subject to certain conditions;
our ability to enroll patients in our clinical trials by any particular date, including our ability to complete enrollment in
Cohort 2 of REDWOOD-HCM by the first quarter of 2021 and complete METEORIC-HF enrollment in the first half of
2021;
our ability to complete our clinical trials by any particular date, including our ability to complete and publish the results of
REDWOOD-HCM by mid-2021;
our ability to enter into strategic partnership agreements for any of our programs on acceptable terms and conditions or in
accordance with our planned 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, in the development,
testing, manufacturing or commercialization of our drug candidates or slower than anticipated patient enrollment, in our or
partners clinical trials, or 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 or otherwise 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 (the FDA) or foreign regulatory agencies may delay or limit
our or our partners ability to conduct 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 may limit the commercial potential of our drug candidates;
difficulties or delays in achieving market access, reimbursement and favorable drug pricing 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 and performance of our contract research organizations (CROs), contract manufacturing
organizations (CMOs), and other vendors;
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. Such statements 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-looking statement to reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events. New factors emerge 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 our business 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.
4
SUMMARY OF PRINCIPAL RISK FACTORS
This summary briefly states the principal risks and uncertainties facing our business that could affect our common stock, which
are only a select portion of those risks. A more complete statement of those risks and uncertainties is set forth in the Section 1A Risk
Factors of this report. This summary is qualified in its entirety by that more complete statement. You should carefully read the entire
statement and Risk Factors when considering the risks and uncertainties as part of your evaluation of an investment in our common
stock.
• Notwithstanding GALACTIC-HF having met its primary efficacy endpoint, there is no guarantee that the FDA or any
other regulatory authority will approve omecamtiv mecarbil.
GALACTIC-HF demonstrated a statistically significant effect of treatment with omecamtiv mecarbil to reduce risk of the
primary composite endpoint of cardiovascular death or heart failure events (heart failure hospitalization and other urgent treatment for
heart failure) compared to placebo in patients treated with standard of care (HR: 0.92; 95% CI: 0.86, 0.99, p-0.025). The trial results,
however, showed that no secondary endpoints were met. In particular, no reduction in the secondary endpoint of time to
cardiovascular death was observed, and the KCCQ total symptom score by randomization setting did not meet the significance
threshold of P=0.002 based upon the multiplicity control testing procedure. No assurances can be given that the primary endpoint
results of GALACTIC-HF alone will be deemed sufficiently safe or efficacious to warrant approval by the FDA or any other
regulatory authority. Although supplemental analyses showed that omecamtiv mecarbil potentially has a greater treatment effect in
certain subgroups of trial patients, no assurance can be given that the FDA or any other regulatory authority will consider any such
subgroup analysis as the basis for an approval of omecamtiv mecarbil without requiring additional clinical trials.
•
Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates, including CK-274 and
reldesemtiv, which could prevent or significantly delay completion of clinical development and regulatory approval.
All of our drug candidates, including CK-274 and reldesemtiv, are prone to the risks of failure inherent in drug development.
Preclinical studies may not yield results that would adequately support the filing of an investigational new drug application with the
FDA (or a foreign equivalent) (IND) with respect to our potential drug candidates. Even if the results of preclinical studies for a
drug candidate are sufficient to support such a filing, the results of preclinical studies do not necessarily predict the results of
subsequent clinical trials. Even if we believe the data collected from clinical trials of our drug candidates are promising, these data
may not be sufficient to support approval of a new drug application (or foreign equivalent) by the FDA or foreign regulatory
authorities (NDA).
•
The transition of responsibilities for manufacturing, development, regulatory, commercial planning and other activities
related to omecamtiv mecarbil and CK-136 (formerly known as AMG 594) from Amgen to us may not be completed
effectively or efficiently and could result in substantial delays to these programs and significant increased costs to us.
No assurance can be made that Amgen will cooperate with us and take such actions required of Amgen under our agreement
with Amgen to transition responsibilities for the manufacturing, development, regulatory, commercial planning and other activities
related to omecamtiv mecarbil and/or CK-136 to us effectively or efficiently. No assurance can be made that we will have or be able
to mobilize the capital, personnel, systems or other recourses required to ensure our ability to meet our legal or regulatory
responsibilities and obligations, to continue the development of the omecamtiv mecarbil and/or CK-136 programs, including the
conduct of clinical trials of omecamtiv mecarbil and/or CK-136, without substantial delays to the timelines previously anticipated
prior to Amgens decision to terminate our agreement or without significant costs as compared to our anticipated costs prior to
Amgens decision to terminate our agreement, or to ensure commercial preparedness for a potential product launch of omecamtiv
mecarbil.
• We currently have limited sales or marketing capabilities and, if we are unable to enter into or maintain strategic
alliances with marketing partners or to develop our own sales and marketing capabilities, we may not be successful in
commercializing omecamtiv mecarbil or our other drug candidates.
To effectively commercialize our drugs, we will need to establish and/or expand our own specialized sales force and marketing
organization with technical expertise and supporting manufacturing and distribution capabilities. Developing such an organization is
expensive and time-consuming and could delay a product launch.
In relation to omecamtiv mecarbil specifically, prior to Amgens notification of its election to terminate the Amgen Agreement,
we expected that, consistent with the terms of such agreement, Amgen would bear primary operational and financial responsibility for
the sales, marketing, manufacturing and distribution activities related to the product launch and commercialization of omecamtiv
mecarbil. As a result of the anticipated termination of the Amgen Agreement, we must now build and/or expand our capabilities
without Amgens operational or financial support, which will result in significantly higher costs to us than what we had expected prior
to Amgens notification of its election to terminate the Amgen Agreement, and we may never be able to successfully build and/or
expand our commercialization capabilities to fully substitute the capabilities of Amgen of which we were reliant upon. Moreover, as a
5
result of Serviers notification of its election to terminate the Servier Agreement, we will need to seek a replacement partner in Europe
with the expertise and resources to successfully launch and commercialize omecamtiv mecarbil in Europe or to establish our own
commercial capabilities in Europe at our own cost and effort.
• We depend on CROs to conduct our clinical trials and have limited control over their performance. If these CROs do
not successfully carry out their contractual duties or meet expected deadlines, or if we lose any of our CROs, we may
not be able to obtain regulatory approval for or commercialize our product candidates on a timely basis, if at all.
• We have no manufacturing capacity and depend on our strategic partners and contract manufacturers to produce our
clinical trial materials, including our drug candidates, and anticipate continued reliance on contract manufacturers for
the development and commercialization of our potential drugs.
• Our success depends substantially upon our ability to obtain and maintain intellectual property protection relating to
our drug candidates, compounds and research technologies.
• Our competitors may develop drugs that are less expensive, safer or more effective than ours, which may diminish or
eliminate the commercial success of any drugs that we may commercialize.
•
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, healthcare payors, patients and the medical community. Even if the clinical safety and efficacy of drugs developed from
our drug candidates are established for purposes of approval, physicians may elect not to recommend these drugs for a variety of
reasons.
•
The commercial success of our products depends on the availability and sufficiency of third-party payor coverage and
reimbursement.
Patients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated
with their prescription drugs. Accordingly, market acceptance of our products is dependent on the extent to which third-party coverage
is available from government health administration authorities (including in connection with government
and reimbursement
healthcare programs, such as Medicare and Medicaid in the United States), private healthcare insurers and other healthcare funding
organizations. Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain
regulatory approval.
• We have a history of significant losses and may not achieve or sustain profitability and, as a result, you may lose part or
all 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 and development activities and general and administrative costs associated with our operations. Our drug candidates are
all in early through late-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 begin commercial sales of our drug candidates.
• We will need substantial additional capital in the future to sufficiently fund our operations.
We have consumed substantial amounts of capital to date, and our operating expenditures will increase over the next several
years if we expand our research and development activities or launch commercial products. To the extent that we raise additional
funds through strategic alliances or licensing or other arrangements with third parties, we will likely have to relinquish valuable rights
to our technologies, research programs or drug candidates, grant licenses on terms that may not be favorable to us. To the extent that
we raise additional funds through debt financing, the financing may involve covenants that restrict our business activities. To the
extent that we raise additional funds by issuing equity securities, our stockholders will experience additional dilution and our share
price may decline.
• Our business is currently adversely affected and could be materially and adversely affected in the future by the effects of
disease outbreaks, epidemics and pandemics, including the ongoing COVID 19 pandemic. The COVID-19 pandemic
continues to adversely impact our business and could materially and adversely affect our operations, as well as the
businesses or operations of our or our partners, manufacturers, CROs or other third parties with whom we or our
partners conduct business.
6
ITEM 1.
BUSINESS
PART I
When used in this report, unless otherwise indicated, Cytokinetics, Company, we, our and us refers to Cytokinetics,
Incorporated. CYTOKINETICS, and our logo used alone and with the mark CYTOKINETICS, are registered service marks and
trademarks of Cytokinetics. Other service marks, trademarks and trade names referred to in this report are the property of their
respective owners.
Overview
We are a late-stage biopharmaceutical company focused on discovering, developing and commercializing first-in-class muscle
activators and next-in-class muscle inhibitors as potential treatments for debilitating diseases in which muscle performance is
compromised and/or declining. We have discovered and are developing muscle-directed investigational medicines that may
potentially improve the health span of people with devastating cardiovascular and neuromuscular diseases of impaired muscle
function. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and
expertise regarding the cytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. As a
leader in muscle biology and the mechanics of muscle performance, we are developing small molecule drug candidates specifically
engineered to impact muscle function and contractility.
Our clinical-stage drug candidates are: omecamtiv mecarbil, a novel cardiac myosin activator, CK-136 (formerly known as
AMG 594), a novel cardiac troponin activator, reldesemtiv, a novel fast skeletal muscle troponin activator (FSTA), CK-3773274
(CK-274), a novel cardiac myosin inhibitor, and CK-3772271 (CK-271), our second novel cardiac myosin inhibitor.
Omecamtiv mecarbil is being evaluated for the potential treatment of heart failure under a strategic alliance with Amgen to
discover, develop, and commercialize novel small molecule therapeutics designed to activate cardiac muscle contractility pursuant to
the collaboration and option agreement dated December 29, 2006, as amended (the Amgen Agreement). Amgen, in collaboration
with Cytokinetics, conducted GALACTIC-HF (Global Approach to Lowering Adverse Cardiac Outcomes Through Improving
Contractility in Heart Failure), a Phase 3 cardiovascular outcomes clinical
in heart failure. In
collaboration with Amgen, we are conducting METEORIC-HF (Multicenter Exercise Tolerance Evaluation of Omecamtiv Mecarbil
Related to Increased Contractility in Heart Failure), a second Phase 3 clinical trial intended to evaluate its potential to increase
exercise performance.
trial of omecamtiv mecarbil
CK-136 (formerly known as AMG 594) was discovered under our joint research program with Amgen. In collaboration with
Cytokinetics, Amgen conducted a randomized, placebo-controlled, double-blind, single and multiple ascending dose, single-center
Phase 1 study to assess the safety and tolerability, pharmacokinetics and pharmacodynamics of CK-136 in healthy subjects.
CK-274 is a novel, oral, small molecule cardiac myosin inhibitor. CK-274 arose from an extensive chemical optimization
program conducted with attention to therapeutic index and pharmacokinetic properties that may translate into next-in-class potential in
clinical development. CK-274 was designed to reduce the hypercontractility that is associated with hypertrophic cardiomyopathy
(HCM).
CK-274 is being evaluated in patients with symptomatic, obstructive HCM in REDWOOD-HCM (Randomized Evaluation of
Dosing With CK-274 in Obstructive Outflow Disease in HCM), a Phase 2 multicenter, randomized, placebo-controlled, double-blind,
dose-finding clinical trial of CK-274.
CK-271 is our second novel, oral, small molecule cardiac myosin inhibitor. CK-271 is an allosteric cardiac myosin inhibitor
that produces reversible dose and plasma concentration-dependent reductions in cardiac contractility without affecting heart rate in
preclinical models. CK-271 reduces compensatory cardiac hypertrophy and cardiac fibrosis in preclinical models of HCM and heart
failure with preserved ejection fraction. CK-271 is the second cardiac myosin inhibitor arising from the Companys extensive
chemical optimization program conducted with careful attention to therapeutic index and pharmacokinetic properties and may be
therapeutically effective by providing rapid relief of excessive hypercontractility such as HCM.
Reldesemtiv selectively activates the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to
calcium, leading to an increase in skeletal muscle contractility. Reldesemtiv was developed under our joint development program with
Astellas.
7
In collaboration with Astellas, we conducted a Phase 2 clinical trial of reldesemtiv in patients with spinal muscular atrophy
(SMA) and a Phase 2 clinical trial of reldesemtiv in patients with amyotrophic lateral sclerosis (ALS), called FORTITUDE-ALS
(Functional Outcomes in a Randomized Trial of Investigational Treatment with CK-2127107 to Understand Decline in Endpoints
in ALS). Astellas, in collaboration with us, conducted a Phase 2 clinical trial of reldesemtiv in patients with chronic obstructive
pulmonary disease (COPD) and a Phase 1b clinical trial of reldesemtiv in elderly subjects with limited mobility. COURAGE-ALS
(Clinical Outcomes Using Reldesemtiv on ALSFRS-R in a Global Evaluation in ALS) is the planned Phase 3 clinical trial of
reldesemtiv in patients with ALS.
Our research continues to drive innovation and leadership in muscle biology. All of our drug candidates have arisen from our
cytoskeletal research activities. Our focus on the biology of the cytoskeleton distinguishes us from other biopharmaceutical
companies, and potentially positions us to discover and develop novel therapeutics that may be useful for the treatment of severe
diseases and medical conditions. Each of our drug candidates has a novel mechanism of action compared to currently marketed drugs,
which we believe validates our focus on the cytoskeleton as a productive area for drug discovery and development. We intend to
leverage our experience in muscle contractility to expand our current pipeline and expect to identify additional potential drug
candidates that may be suitable for clinical development.
Corporate Strategy
We are a late-stage biopharmaceutical company focused on discovering, developing and commercializing first-in-class muscle
activators and next-in-class muscle inhibitors as potential treatments for debilitating diseases in which muscle performance is
compromised and/or declining. As a leader in muscle biology and the mechanics of muscle performance, we are developing small
molecule drug candidates specifically engineered to impact muscle function and contractility. Our goal is to discover, develop and
commercialize novel drug products that modulate muscle function to improve patient healthspan, with the intent of establishing a
fully-integrated biopharmaceutical company.
In 2020, we articulated our five-year strategic plan, Vision 2025: Leading with Science, Delivering for Patients, enabling
Cytokinetics to become the leading muscle biology biopharmaceutical company that meaningfully improves the lives of patients with
diseases of impaired muscle function through access to novel medicines arising from its research.
The key components of our five-year Corporate Strategy are:
•
•
Achieve regulatory approvals for at least two drugs arising from our pipeline. We are committed to fueling a diverse and
expansive pipeline of muscle-directed drug candidates advancing toward regulatory approval. As we advance our drug
candidates into later-stage clinical development, we extensively evaluate previous clinical trial designs and results to assess
key learnings that may be applied to our late-stage clinical development activities. We believe this may result in more
successful later-stage clinical development activities that may increase the likelihood of achieving regulatory success and
deliver effective therapies to patients that can address the needs of people living with devastating diseases of muscle
impairment. Pursuing a broad-based clinical development strategy may afford us the opportunity to not be reliant on the
outcome of a singular clinical program or clinical trial result, thereby potentially mitigating the risk of clinical development
and regulatory hurdles. We or our partners have been conducting extensive clinical trials for our most advanced drug
candidates and we believe that three drug candidates are poised to achieve potential regulatory approval by 2025 and we
strive to develop compelling scientific, clinical and value-driven rationales that may lead to regulatory approvals.
Build commercial capabilities to market and sell our medicines reflective of their innovation and value. With a focus on
disease areas for which there are serious unmet medical needs, we direct our activities to potential commercial
opportunities in concentrated and tractable customer segments, such as hospital specialists and disease-specific centers of
excellence, which may be addressed by smaller, targeted sales forces. In preparing for the potential commercialization of
our drug candidates directed to these markets, we are focusing our activities on the key issues facing, physicians, patients
and payors, including the principal drivers of clinical and economic burdens associated with these diseases. We have
established alliances and collaborations with leading academic institutions and professional societies to analyze clinical and
claims data to better understand the real-world burden of disease from a clinical and economic standpoint. We believe this
approach may inform the value proposition that our potential first-in-class and next-in-class therapies may offer to various
stakeholders within the healthcare ecosystem. Targeting unmet medical needs may provide us competitive advantages and
support our development of a franchises in diseases involving muscle function. In the markets for our potential therapies,
we believe that a company with limited resources may be able to compete effectively against larger, more established
companies with greater financial and commercial resources. For these opportunities, we intend to build sales and marketing
capabilities in North America and Europe with the goal of becoming a fully-integrated biopharmaceutical company.
8
• Generate sustainable and growing revenues from product sales. As we move toward becoming a fully integrated
through a
biopharmaceutical company, we expect
combination of strategic partnerships and equity capital financings to one that is sustained from product generated revenues
that are expected to grow over time. We expect to successfully commercialize at least two of our drug candidates in the
U.S. and Europe and achieve growing profitability. Through prudent investment spending fueled by commercial returns
alongside other potential strategic partnerships and royalty monetization deals, we seek to provide investor returns while
continuing to conduct proprietary research to support future commercial programs. Additionally, we strive to ensure
sustainable growth of product sales and long-term profitability through lifecycle management strategies.
to evolve our corporate development strategies to raise capital
• Double our development pipeline to include ten therapeutic programs. We believe that our extensive understanding of
muscle biology and our proprietary research activities should enable us to discover and potentially to develop additional
muscle directed drug candidates with novel mechanisms of action that may offer potential benefits not provided by existing
drugs and which may have application across a broad array of diseases and medical conditions. Progressing related
programs in parallel may afford us an opportunity to build a broader business that could benefit from multiple products that
serve related clinical and commercial needs associated with impaired muscle function, muscle weakness and fatigue. In
addition, this strategy may enable us to diversify certain technical, financial and operating risks by advancing several drug
candidates in parallel. In 2020 we advanced five potential drug candidates through various stages of clinical development.
Over the next five years, we will expand our research discovery platform beyond muscle contractility to support doubling
our pipeline to ten therapeutic programs.
•
•
Expand our discovery platform to muscle energetics, growth and metabolism. We expect that we may be able to leverage
our expertise in muscle contractility to expand muscle biology research programs related to other areas of muscle function
and which may extend to the potential treatment of other serious, yet adjacent, diseases and conditions. As most muscle-
related diseases are accompanied by defects in metabolism or mitochondrial function, we also anticipate that treatments
that modulate contractility could be additive with therapeutics that boost metabolic capacity. We can augment our industry-
leading expertise in muscle contractility by building similar expertise in mitochondrial biology and technologies. Strategies
toward enhancing our discovery platform into muscle energetics and metabolism include building human and capital
resources for mitochondrial and metabolism research capabilities, expanding strategic academic partnerships, engaging the
mitochondrial research community, engaging the mitochondrial disease advocacy community, and evaluating therapeutic
and technology platforms for potential in-licensing.
Be the science-driven company people want to join and partner with. We build our science around patients and their
families through authentic and ongoing engagement and are committed to transforming patients lives through our
activities. Our goal is to provide employees with an opportunity to contribute to something bigger than any one of the
individuals at the company. We believe that a commitment to a diverse, inclusive and respectful culture goes beyond what
is right to do; it is foundational to building a successful, creative, and science driven company, and essential to develop a
community of colleagues who are impassioned by our purpose to improve the lives of patients. As a patient-centric
organization, we rely on an approach where clinical outcomes, patient experiences and patients goals for care intersect.
We value our partnerships with industry, professional societies, advocacy organizations, vendors and academic institutions
and aim to solicit ongoing feedback to ensure interests are aligned and collaborations are successful
Research and Development Programs
Our long-standing interest in the cytoskeleton has led us to focus our research and development activities on the biology of
muscle function and, in particular, small molecule modulation of muscle contractility. We believe that our expertise in the modulation
of muscle contractility is an important differentiator for us. Our preclinical and clinical experience in muscle contractility may position
us to discover and develop additional novel therapies that have the 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, heart failure is a disease often characterized by impaired cardiac muscle contractility which may be treated
by modulating the contractility of cardiac muscle. Similarly, certain diseases and medical conditions associated with muscle weakness
may be amenable to treatment by enhancing the contractility of skeletal muscle. Because the modulation of the contractility of
different types of muscle, such as cardiac and skeletal muscle, may be relevant to multiple diseases or medical conditions, we believe
we can leverage our expertise in these areas to more efficiently discover and develop potential drug candidates that modulate the
applicable muscle type for multiple indications.
9
We segment our research and development activities related to muscle contractility by our cardiac muscle contractility program
and our skeletal muscle contractility program. We also conduct research and development on novel treatments for disorders involving
muscle function beyond muscle contractility.
Our research and development expenses were $97.0 million for 2020, $86.1 million for 2019 and $89.1 million for 2018.
Cardiac Muscle Program
Our cardiac muscle contractility program is focused on the cardiac sarcomere, the basic unit of muscle contraction in the heart.
The cardiac sarcomere is a highly ordered cytoskeletal structure composed of cardiac myosin, actin and a set of regulatory proteins.
Cardiac myosin is the cytoskeletal motor protein in the cardiac muscle cell. It is directly responsible for converting chemical energy
into the mechanical force, resulting in cardiac muscle contraction. Our most advanced cardiac program is based on the hypothesis that
activators of cardiac myosin may address certain adverse properties of existing positive inotropic agents. Current positive inotropic
agents, such as beta-adrenergic receptor agonists or inhibitors of phosphodiesterase activity, increase the concentration of intracellular
calcium, thereby increasing cardiac sarcomere contractility. The effect on calcium levels, however, also has been linked to potentially
life-threatening side effects. In contrast, our novel cardiac myosin activators work by a mechanism that directly stimulates the activity
of the cardiac myosin motor protein, without increasing the intracellular calcium concentration. They accelerate the rate-limiting step
of the myosin enzymatic cycle and shift it in favor of the force-producing state. Rather than increasing the velocity of cardiac
contraction, this mechanism instead lengthens the systolic ejection time, which results in increased cardiac function in a potentially
more oxygen-efficient manner.
Our earlier stage cardiac program is based on the hypothesis that inhibitors of hyperdynamic contraction and obstruction of left
ventricular blood flow may counteract the pathologic effects of mutations in the sarcomere that lead to hypertrophic cardiomyopathies.
A targeted oral therapy addressing this disease etiology may improve symptoms, exercise capacity and potentially slow disease
progression.
Amgen Strategic Alliance
Our strategic alliance with Amgen to discover, develop, and commercialize novel small molecule therapeutics designed to
activate cardiac muscle, including omecamtiv mecarbil, for the potential treatment of heart failure is governed by the Amgen
Agreement. Currently, Amgen has exclusive, worldwide rights to develop and commercialize omecamtiv mecarbil and related
compounds subject to our specified development and commercial participation rights. Amgen also entered an alliance with Les
Laboratoires Servier and Institut de Recherches Internationales Servier (Servier) for exclusive commercialization rights for
omecamtiv mecarbil in Europe as well as the Commonwealth of Independent States (CIS), including Russia; Servier has contributed
funding for development and provides strategic support to the program.
On October 8, 2020, we, Amgen and Servier announced topline results from GALACTIC-HF. The results of GALACTIC-HF
show that treatment with omecamtiv mecarbil achieved the primary composite efficacy endpoint and demonstrated a statistically
significant effect to reduce cardiovascular (CV) death or heart failure events (heart failure hospitalization and other urgent treatment
for heart failure), compared to placebo in patients treated with standard of care (HR: 0.92; 95% CI: 0.86, 0.99, p-0.025). No reduction
in the secondary endpoint of CV death was observed. Adverse events, including major ischemic cardiac events, were balanced
between treatment arms.
On November 23, 2020, we announced that Amgen has elected to terminate the Amgen Agreement and thereby end its
collaboration with Cytokinetics, effective May 20, 2021, and intends to transition development and commercialization rights
for omecamtiv mecarbil and CK-136 (formerly known as AMG 594) to Cytokinetics.
On December 23, 2020, we announced that Amgen notified us that Servier elected to terminate the sublicense agreement
between Amgen and Servier for the development and commercialization of omecamtiv mecarbil in Europe and the Commonwealth of
Independent States, including Russia (the Servier Agreement). The termination is effective as of March 18, 2021, after which all
development, commercialization and other rights with respect to omecamtiv mecarbil previously granted by Amgen to Servier will
revert to Amgen. Given Serviers notice to Amgen, all worldwide rights related to the development and commercialization of
omecamtiv mecarbil will now return to Cytokinetics commensurate with the effective termination of the Amgen Agreement on May
20, 2021.
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As a result of Amgens and Serviers elections to terminate the Amgen Agreement and the Servier Agreement respectively, we
will dedicate resources to ensure the transition of the programs related to omecamtiv mecarbil and CK-136 (formerly known as AMG
594) to us. In addition, we anticipate engaging with regulatory authorities in 2021 regarding the results of GALACTIC-HF with the
objective to assess potential regulatory paths for an NDA submission for omecamtiv mecarbil and continuing our commercial
planning activities. Finally, we plan to evaluate a wide range of corporate development strategies for potential co-development, co-
commercialization and licensing deals in relation to omecamtiv mecarbil and our other drug candidates in order to mitigate the cost
effects of the termination of the Amgen Agreement and Servier Agreement and enhance our commercial capabilities.
In February 2017, we entered into a Royalty Purchase Agreement (the RPI Royalty Purchase Agreement) with RPI Finance
Trust (RPI). Under the RPI Royalty Purchase Agreement, Cytokinetics sold a portion of its right to receive royalties from Amgen on
future net sales of omecamtiv mecarbil and other compounds with the same mechanism of action as omecamtiv mecarbil that are
subject to the Amgen Agreement (together the Amgen Alliance Compounds) to RPI for a one-time payment of $90 million. The RPI
Royalty Purchase Agreement provides for the sale of a royalty to RPI of 4.5% on worldwide net sales of omecamtiv mecarbil and
other Amgen Alliance Compounds, subject to a potential increase of up to an additional 1% under certain circumstances (delay in US
marketing approval). The RPI Royalty Purchase Agreement further provides that in the event Amgen elects to terminate the Amgen
Agreement, we are obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement,
which includes the payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other Amgen Alliance
Compounds, subject to a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval).
Omecamtiv mecarbil
Our lead drug candidate from our cardiac contractility program is omecamtiv mecarbil, a novel cardiac myosin activator. We
are developing omecamtiv mecarbil as a potential treatment across the continuum of care in heart failure both for use in the hospital
setting and for use in the outpatient setting. Omecamtiv mecarbil is the subject of a Phase 3 clinical trials development program in
patients with heart failure with reduced ejection fraction under our strategic alliance with Amgen.
Omecamtiv mecarbil: Clinical Development
GALACTIC-HF: GALACTIC-HF is a Phase 3 cardiovascular outcomes clinical trial of omecamtiv mecarbil which was
conducted by Amgen, in collaboration with Cytokinetics. The primary objective of this double-blind, randomized, placebo-controlled
multicenter clinical trial is to determine if treatment with omecamtiv mecarbil when added to standard of care is superior to standard
of care plus placebo in reducing the risk of cardiovascular death or heart failure events in patients with high risk chronic heart failure
and reduced ejection fraction. GALACTIC-HF was conducted under a Special Protocol Assessment (SPA) with the FDA.
GALACTIC-HF completed enrollment in mid-2019, having enrolled 8,256 symptomatic chronic heart failure patients with reduced
ejection fraction in over 1,000 sites in 35 countries who were either currently hospitalized for a primary reason of heart failure or had
had a hospitalization or admission to an emergency room for heart failure within one year prior to screening. Patients were
randomized to either placebo or omecamtiv mecarbil with dose titration up to a maximum dose of 50 mg twice daily based on the
plasma concentration of omecamtiv mecarbil after initiation of drug therapy. The primary endpoint is a composite of time to
cardiovascular death or first heart failure event, whichever occurs first, with heart failure event defined as hospitalization, emergency
room visit, or urgent unscheduled clinic visit for heart failure. Secondary endpoints include time to cardiovascular death; patient
reported outcomes as measured by the Kansas City Cardiomyopathy Questionnaire Total Symptom Score; time to first heart failure
hospitalization; and time to all-cause death.
In February 2020, we announced the publication of a manuscript relating to the design of GALACTIC-HF in the Journal of
American College of Cardiology: Heart Failure (JACC: HF).
In March 2020, we announced that patient baseline characteristics and demographics from GALACTIC-HF were published
during the Virtual American College of Cardiology 69th Annual Scientific Session together with the World Congress of Cardiology
(ACC.20/WCC Virtual).
In May 2020, we announced that the FDA granted fast track designation for omecamtiv mecarbil for the potential treatment of
chronic heart failure with reduced ejection fraction. Fast track designation may potentially expedite the review of a drug that is
intended for the treatment of a serious or life-threatening disease or condition and demonstrates the potential to address an unmet
medical need for such a disease or condition.
On October 2, 2020, we announced that a manuscript detailing the baseline characteristics from GALACTIC-HF was published
in the European Journal of Heart Failure.
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On October 5, 2020, we announced that new data were presented at the Heart Failure Society of America (HFSA) Virtual
Annual Scientific Meeting 2020. The first presentation provided analyses of outcomes research in patients with heart failure with heart
failure with reduced ejection fraction whose characteristics were similar to those patients who met eligibility criteria for GALACTIC-
HF. The second presentation provided post hoc analyses of effects of omecamtiv mecarbil on right ventricular function arising from
COSMIC-HF.
On October 8, 2020 we announced the topline results from GALACTIC-HF and on November 13, 2020 we announced the
primary results from GALACTIC-HF. The results of GALACTIC-HF show that after a median duration of follow-up of 21.8 months,
the trial demonstrated a statistically significant effect of treatment with omecamtiv mecarbil to reduce risk of the primary composite
endpoint of cardiovascular (CV) death or heart failure events (heart failure hospitalization and other urgent treatment for heart
failure) compared to placebo in patients treated with standard of care. A first primary endpoint event occurred in 1,523 of 4,120
patients (37.0%) in the omecamtiv mecarbil group and in 1,607 of 4,112 patients (39.1%) in the placebo group (hazard ratio, 0.92;
95% confidence interval [CI] 0.86, 0.99; p=0.025). This effect was observed without evidence of an increase in the overall rates of
myocardial ischemic events, ventricular arrhythmias or death from cardiovascular or all causes.
The statistically significant reduction in the composite of heart failure events or CV deaths, without significant imbalances in
the overall incidence of adverse events across treatment arms, was observed in one of the broadest and most diverse range of patients
enrolled in a contemporary heart failure trial. GALACTIC-HF included both inpatients and outpatients, and with a high representation
of participants with moderate to severe heart failure symptoms as well as lower ejection fraction, systolic blood pressure and renal
function.
No reduction in the secondary endpoint of time to CV death was observed. Death from cardiovascular causes occurred in 808
(19.6%) patients treated with omecamtiv mecarbil and 798 patients (19.4%) assigned to placebo (hazard ratio, 1.01; 95% CI, 0.92 to
1.11; p=0.86). The pre-specified analysis of change from baseline to week 24 in the KCCQ total symptom score by randomization
setting (inpatient mean difference [95% CI]: 2.50 [0.54, 4.46], outpatient mean difference: -0.46 [-1.40, 0.48], joint P = 0.028) did not
meet the significance threshold of P=0.002 based upon the multiplicity control testing procedure. No other secondary endpoints were
met in accordance with the prespecified statistical analysis.
The effect of omecamtiv mecarbil was consistent across most prespecified subgroups and with a potentially greater treatment
effect suggested in patients with a lower left ventricular ejection fraction (LVEF (cid:3)28%, n=>4,000, hazard ratio, 0.84; 95% CI 0.77,
0.92; interaction p=0.003). Omecamtiv mecarbil also significantly decreased NT-proBNP concentrations by 10% (95% CI 6-14%) at
Week 24 compared to placebo.
The overall safety profile of omecamtiv mecarbil in GALACTIC-HF appeared to be consistent with data from previous trials.
Adverse events and treatment discontinuation of study drug were balanced between the treatment arms. In general, the overall rates of
myocardial ischemia, ventricular arrhythmias and death were similar between treatment and placebo groups. Additionally, there was
no significant difference in the change in systolic blood pressure between baseline and at 24 or 48 weeks between the omecamtiv
mecarbil and placebo groups. There was a small but significant decrease in heart rate in participants assigned to omecamtiv mecarbil
compared to placebo at both timepoints. Median cardiac troponin I concentration increased 4 ng/L (95% CI 3-5; limit of detection, 6
ng/L) from baseline with omecamtiv mecarbil compared to placebo.
On December 7, 2020, we announced additional results from GALACTIC-HF. These results of GALACTIC-HF showed that
the effect of omecamtiv mecarbil on the primary composite endpoint in GALACTIC-HF was consistent across most prespecified
subgroups and with a potentially greater treatment effect suggested in patients with a lower left ventricular ejection fraction (LVEF
(cid:3)28%, n=4,456, hazard ratio, 0.84; 95% CI 0.77, 0.92; interaction p=0.003). Supplemental analyses of this lower ejection fraction
subgroup in GALACTIC-HF showed that this potentially greater treatment effect in patients who received omecamtiv mecarbil was
consistently observed in patients with characteristics that may indicate advanced heart failure status, such as being hospitalized within
the last 3 months (HR 0.83, 95% CI 0.74 0.93, p=0.001), having New York Association Class III or IV heart failure (HR 0.80, 95%
CI 0.71 0.90, p<0.001), higher N-terminal-pro brain natriuretic peptide levels (HR 0.77, 95% CI 0.69 0.87, p<0.001), and lower
blood pressures (HR 0.81, 95% CI 0.70 0.92, p=0.002). The absolute risk reductions (ARR) ranged from 5.2% to 8.1% in these
subgroups as compared to the ARR of 2.1% observed in the overall population.
Additionally, a supplemental analysis of the continuous relationship between ejection fraction and the hazard ratio for the
primary composite endpoint in GALACTIC-HF suggested a potentially stronger treatment effect of omecamtiv mecarbil in patients
with increasingly lower ejection fractions.
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We are continuing to review prespecified analyses and supplemental analyses of results of GALACTIC-HF. In addition, we
plan on engaging regulatory authorities in 2021 with the objective to assess potential regulatory paths and continuing our commercial
planning activities. As a consequence of Amgens election to terminate the Amgen Agreement, we are engaging with Amgen to
transition development and commercialization activities with respect to omecamtiv mecarbil to us by May 20, 2021.
METEORIC-HF: In collaboration with Amgen, we are conducting METEORIC-HF, a second Phase 3 clinical trial intended to
evaluate its potential to increase exercise performance. Patients are being randomized in a 2:1 fashion to omecamtiv mecarbil, which
is started at 25 mg twice daily and titrated to 25, 37.5 or 50 mg twice daily based on the same pharmacokinetics-guided dosing
regimen as is used in GALACTIC-HF, or to placebo. METEORIC-HF is planned to enroll approximately 270 symptomatic chronic
heart failure patients in nine countries. The primary endpoint of METEORIC-HF is change in peak oxygen uptake on Cardio-
Pulmonary Exercise Testing (CPET) from baseline to Week 20. Secondary endpoints include change in total workload during CPET
from baseline to Week 20, change in ventilatory efficiency during CPET from baseline to Week 20 and change in the average daily
activity units measured over 2 weeks from baseline to Week 18-20. After temporarily suspending enrollment in METEORIC-HF due
to the COVID-19 pandemic earlier this year, we resumed enrollment in June. We believe enrollment may be completed in the first half
of 2021. After the effective termination of the Amgen Agreement, we will be solely responsible for the conduct of METEORIC-HF.
Omecamtiv mecarbil: Microgenics Immunoassay Development
Amgen and Microgenics Corporation (Microgenics) are parties
to that certain Collaborative Development and
Commercialization Agreement, dated July 26, 2012 (as amended from time to time, the Assay Agreement), for the development of
an antibody-based immunoassay (the OM Assay) used for the in vitro measurement of concentrations of omecamtiv mecarbil in
human blood and other bodily fluids, as well as related calibrator and controls, based on immunoassay technologies developed by
Microgenics and its affiliates suitable for application on automated chemistry analyzers. The OM Assay is intended to ensure
personalized dose optimization of omecamtiv mecarbil in patients being treated.
Following Amgens notification of its decision to terminate the Amgen Agreement, we have commenced discussions with
Microgenics related to the potential assignment of the Assay Agreement from Amgen to us and the continued development of the OM
Assay and related regulatory filings and commercial planning activities by Microgenics such that the OM Assay may be approved by
the FDA and other regulatory authorities and deployed for commercialization upon commercial launch of omecamtiv mecarbil.
CK-136 (formerly known as AMG 594)
CK-136 is a novel, selective, oral, small molecule cardiac troponin activator which was discovered under our joint research
program with Amgen. In preclinical models, CK-136 increases myocardial contractility by binding to cardiac troponin through an
allosteric mechanism that sensitizes the cardiac sarcomere to calcium, facilitating more actin-myosin cross bridge formation during
each cardiac cycle thereby resulting in increased myocardial contractility. Similar to cardiac myosin activation, preclinical research
has shown that cardiac troponin activation does not change the calcium transient of cardiac myocytes.
In March 2020, we announced that preclinical data were presented at the Keystone Symposium Charting a New Course for
Heart Failure: From Discovery to Data, demonstrating that CK-136 selectively increases calcium sensitivity of cardiac muscle fibers
and increases cardiac contractility.
CK-136: Clinical Development
In collaboration with Cytokinetics, Amgen conducted a randomized, placebo-controlled, double-blind, single and multiple
ascending dose, single-center Phase 1 study to assess the safety and tolerability, pharmacokinetics and pharmacodynamics of CK-136
in healthy subjects. As a consequence of Amgens election to terminate the Amgen Agreement, we are engaging with Amgen to
transition development activities with respect to CK-136 to us by May 20, 2021.
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CK-274
CK-274 is a novel, oral, small molecule cardiac myosin inhibitor that our company scientists discovered. CK-274 arose from an
extensive chemical optimization program conducted with attention to therapeutic index and pharmacokinetic properties that may
translate into next-in-class potential in clinical development. CK-274 was purposely designed to reduce the hypercontractility that is
associated with HCM. In preclinical models, CK-274 reduces myocardial contractility by binding directly to cardiac myosin at a
distinct and selective allosteric binding site, thereby preventing myosin from entering a force producing state. CK-274 reduces the
number of active actin-myosin cross bridges during each cardiac cycle and consequently reduces myocardial contractility. This
mechanism of action may be therapeutically effective in conditions characterized by excessive hypercontractility, such as HCM. The
preclinical pharmacokinetics of CK-274 were characterized evaluated and optimized for potential rapid onset, ease of titration and
rapid symptom relief in the clinical setting. The initial focus of the development program for CK-274 will include an extensive
characterization of its pharmacokinetics/pharmacodynamic (PK/PD) relationship as has been a hallmark of Cytokinetics industry-
leading development programs in muscle pharmacology. The overall development program will assess the potential of CK-274 to
improve exercise capacity and relieve symptoms in patients with hyperdynamic ventricular contraction due to HCM.
CK-274: Clinical Development
We conducted a Phase 1 double-blind, randomized, placebo-controlled, multi-part, single and multiple ascending dose clinical
trial of CK-274 to assess the safety and tolerability, pharmacokinetics and pharmacodynamics of CK-274 in healthy subjects. In
September 2019 we presented data from the Phase 1 study of CK-274 at the HFSA 23rd Annual Scientific Meeting in Philadelphia.
The study met its primary and secondary objectives to assess the safety and tolerability of single and multiple oral doses of CK-274,
describe the pharmacokinetics of CK-274 and its pharmacodynamic effects as measured by echocardiography, as well as to
characterize the PK/PD relationship with regards to cardiac function. These data support the advancement of CK-274 into a Phase 2
clinical trial in patients with obstructive HCM (REDWOOD-HCM), which started in the first quarter of 2020 and will continue to be
conducted in 2021.
In February 2020, we announced that preclinical data were presented at the Biophysical Society 64th Annual Meeting
demonstrating that CK-274 has a distinct binding site on cardiac myosin, and selectively reduces cardiac myosin activity in vitro.
On October 27, 2020, we presented preclinical data at the American Association of Pharmaceutical Scientists (AAPS) 2020
PharmSci 360 showing that CK-274 demonstrated desirable pharmacokinetics in vivo, supporting the intended pharmacokinetic
profile of once daily oral dosing and steady state plasma concentrations reached within two weeks of dosing onset in humans and
steady state plasma concentrations achieved within two weeks of initiation of dosing.
On December 9, 2020, we announced that interim analysis of data from Cohort 1 of REDWOOD-HCM showed patients
experienced substantial reductions in the average resting left ventricular outflow tract gradient (LVOT-G) as well as the post-Valsalva
LVOT-G (defined as resting gradient <30 mmHg and post-Valsalva gradient <50 mmHg). These clinically relevant decreases in
pressure gradients were achieved with only modest decreases in average left ventricular ejection fraction (LVEF); there were no dose
interruptions due to LVEF falling below 50%, the prespecified safety threshold. Pharmacokinetic data were similar to those observed
in Phase 1. In addition, the safety and tolerability data were supportive of continued dose escalation with no serious adverse events
attributed to study treatment reported by the investigators.
Based on the interim analysis of data from Cohort 1 of REDWOOD-HCM, the steering committee and the data monitoring
committee of REDWOOD-HCM recommended that the trial proceed to Cohort 2. Cohort 2 of REDWOOD-HCM is expected to enroll
patients at centers in North America and Europe. Enrollment in Cohort 2 of REDWOOD-HCM is expected to complete in the first
quarter of 2021 and full results from REDWOOD-HCM across both Cohort 1 and Cohort 2 are expected in mid-2021.
On January 11, 2021, we announced that the FDA granted orphan drug designation to CK-274 for the treatment of symptomatic
HCM.
On January 13, 2021, we announced that the first patient had been dosed in Cohort 2 of REDWOOD-HCM, thereby earning a
$2.5 million milestone payment to us under our agreement with Ji Xing.
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Ji Xing Strategic Alliance
On July 14, 2020, we entered into that certain License and Collaboration Agreement with Ji Xing (the Ji Xing License
Agreement), pursuant to which we granted to Ji Xing an exclusive license to develop and commercialize CK-274 in China and
Taiwan. Under the terms of the Ji Xing License Agreement, we received from Ji Xing an upfront payment of $25.0 million. We may
be eligible to receive from Ji Xing milestone payments totaling up to $200.0 million for the achievement of certain development and
commercial milestone events in connection to CK-274 in the field of obstructive hypertrophic cardiomyopathy, or oHCM, and/or non-
obstructive hypertrophic cardiomyopathy, or nHCM, and other indications. In addition, Ji Xing will pay us tiered royalties in the low-
to-high teens range on the net sales of CK-274 in China and Taiwan, subject to certain reductions for generic competition, patent
expiration and payments for licenses to third party patents. The Ji Xing License Agreement, unless terminated earlier, will continue on
a market-by-market basis until expiration of the relevant royalty term.
CK-271
In the first quarter of 2020, we submitted an IND for CK-271, a second cardiac myosin inhibitor, and we were notified by the
FDA that the IND was accepted. One of the hallmarks of Cytokinetics research and development approach has been to advance
multiple compounds to enable potential expansion of a drug development program into different indications and patient populations.
On September 23, 2020, we announced that the first participants have been dosed in a Phase 1 placebo-controlled, single ascending
dose clinical study of CK-271. The primary objective of this Phase 1 placebo-controlled, single ascending dose clinical study in
healthy adults is to assess the safety and tolerability of CK-271. The secondary objective is to evaluate the pharmacokinetic profile of
CK-271 following single oral ascending doses. The study design includes three cohorts, with 8 adults per cohort randomized (6:2) in a
blinded fashion to CK-271 or placebo. Dose escalation decisions were made after review of the available safety, pharmacokinetic, and
echocardiography data. In 2020, we completed our planned Phase 1, single-dose pharmacokinetic evaluation and tolerability
assessments of CK-271 in healthy volunteers and determined it to be suitable for further development. We are evaluating its potential
for its further development in connection with our plans to conduct a broad development program for our cardiac myosin inhibitor(s)
in HCM and potentially other indications.
Skeletal Muscle Contractility Program
Our skeletal muscle contractility program is focused on the activation of the skeletal sarcomere, the basic unit of skeletal
muscle contraction. 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 sarcomere activators, including the cardiac myosin activator, omecamtiv mecarbil.
We believe that our skeletal sarcomere activators may lead to new therapeutic options for diseases and medical conditions
associated with neuromuscular dysfunction and potentially also conditions associated with aging and muscle weakness and wasting.
The clinical effects of muscle weakness and wasting, fatigue and loss of mobility can range from decreased quality of life to, in some
instances, life-threatening complications. By directly improving skeletal muscle function, a small molecule activator of the skeletal
sarcomere potentially could enhance functional performance and quality of life in patients suffering from diseases or medical
conditions associated with skeletal muscle weakness or wasting, such as ALS, SMA, COPD or sarcopenia (general frailty associated
with aging).
Astellas Strategic Alliance
Our strategic alliance with Astellas to advance novel therapies for diseases and medical conditions associated with muscle
impairment and weakness commenced in 2013 under the License and Collaboration Agreement, dated June 21, 2013 between the
parties (the Astellas Agreement). Initially we exclusively licensed to Astellas rights to co-develop and potentially co-commercialize
reldesemtiv and other FSTAs in non-neuromuscular indications and to develop and commercialize other novel mechanism skeletal
muscle activators in all indications, subject to certain Cytokinetics development and commercialization rights. Subsequently, in 2014,
we and Astellas expanded the strategic alliance to include certain neuromuscular indications, including SMA, for reldesemtiv and
other FSTAs and to advance reldesemtiv into Phase 2 clinical development, initially in SMA. In 2016, we and Astellas further
expanded the strategic alliance to include the development of reldesemtiv for the potential treatment of ALS, as well as the possible
development in ALS of other FSTAs previously licensed by us to Astellas.
On April 23, 2020, Cytokinetics and Astellas entered into two agreements, which, taken together, amend and restate our
research, development and commercialization collaboration with Astellas under the Astellas Agreement, as set out below.
15
Cytokinetics and Astellas signed a Fast Skeletal Regulatory Activator Agreement dated April 23, 2020 (the Astellas FSRA
Agreement). As a result of the FSRA Agreement, Cytokinetics will now have exclusive control and responsibility for Cytokinetics
future development and commercialization of reldesemtiv, CK-601 and other fast skeletal regulatory activator (collectively FSRA)
compounds and products, and accordingly, Astellas agreed to terminate its license to all FSRA compounds and related products.
Under the Astellas FSRA Agreement, Astellas agreed to pay one-third of the out-of-pocket clinical development costs which may be
incurred in connection with Cytokinetics potential Phase 3 clinical trial of reldesemtiv in ALS up to a maximum contribution by
Astellas of $12 million. In addition, Astellas agreed to non-cash contributions to Cytokinetics, which include the transfer of its
existing inventories of active pharmaceutical ingredient of reldesemtiv and CK-601. Astellas also agreed to the continued conduct of
ongoing stability studies pertaining to such existing inventories of active pharmaceutical ingredient, at Astellas cost. In exchange,
Cytokinetics will pay Astellas a low- to mid- single digit royalty on sales of reldesemtiv in the United States, Canada, United
Kingdom and the European Union until the later of (i) ten years following the first commercial sale of such product in a major market
country, or (ii) December 31, 2034, subject to certain royalty reduction provisions. Cytokinetics would not owe Astellas royalties on
sales of reldesemtiv in any other country, or on the sale of any FSRA compounds or related products other than reldesemtiv.
Cytokinetics and Astellas also signed the Astellas OSSA Agreement. The Astellas OSSA Agreement is an amendment and
restatement of the Astellas Agreement and removes the FSRA compounds and related products from the collaboration.
Under the Astellas OSSA Agreement, Astellas extended the joint research program at Cytokinetics focused on the discovery of
additional next-generation skeletal muscle activators (other than FSRAs) through December 31, 2020, with a minimum of fifteen (15)
research FTEs being supported by Astellas. The parties have subsequently agreed to extend this joint research program through
March 31, 2021, with up to five (5) research FTEs at Cytokinetics being supported by Astellas.
than FSRA compounds and products)
In addition, under the Astellas OSSA Agreement, Astellas has exclusive rights to co-develop and commercialize skeletal
sarcomere activators (other
to certain development and
commercialization rights of Cytokinetics; Cytokinetics may co-promote and conduct certain commercial activities in the U.S., Canada
and/or Europe under agreed scenarios. Astellas will be responsible for the costs associated with the development of all collaboration
products under the Astellas OSSA Agreement, subject to Cytokinetics option to co-fund certain development costs as described
below. Cytokinetics retains an option to conduct early-stage development for certain agreed indications at its initial expense, subject to
reimbursement if development continues under the collaboration. Astellas will reimburse Cytokinetics for certain expenses associated
with its co-promotion activities. The Astellas OSSA Agreement also provides for Cytokinetics to lead certain activities relating to the
commercialization of collaboration products for neuromuscular indications in the U.S., Canada and Europe under particular scenarios.
indications, subject
in all
If development candidates are identified and advance in clinical research, the Astellas OSSA Agreement contains provisions
related to shared development roles between Cytokinetics and Astellas, and opportunities for Cytokinetics to co-invest and/or co-
promote under certain conditions. In the case of molecules taken forward solely by Astellas, Cytokinetics would receive development
and regulatory milestones of $25 to $35 million per product, up to $250 million for all products, except under certain scenarios,
commercial milestones of up to $200 million, and royalties that range from a mid-single digit level to low double-digits. In the event
of co-investment by Cytokinetics and approvals in certain indications, Cytokinetics would receive royalties ranging from mid-to-high
double digits (not to exceed an incremental rate in the mid-twenties).
Astellas may terminate the Astellas OSSA Agreement as to any particular product or territory, or in its entirety, upon 180 days
advance written notice following expiration of the research term.
Reldesemtiv
Reldesemtiv selectively activates the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to
calcium, leading to an increase in skeletal muscle contractility. Reldesemtiv has demonstrated pharmacological activity in preclinical
models and evidence of potentially clinically relevant pharmacodynamic effects in humans. The FDA granted reldesemtiv orphan drug
designation for the potential treatment of SMA in 2017 and for the potential treatment of ALS in 2019. The European Medicines
Agency (EMA) granted orphan medicinal product designation to reldesemtiv for the potential treatment of SMA in July 2019 and
for the potential treatment of ALS in March 2020.
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Reldesemtiv: Clinical Development
SMA: In 2018, we announced data from a hypothesis-generating, Phase 2 double-blind, randomized, placebo-controlled clinical
study in patients with SMA which was designed to determine potential pharmacodynamic effects of a suspension formulation of
reldesemtiv following 8 weeks of oral dosing in each of two cohorts of 36 patients with Type II, Type III, or Type IV disease.
Secondary objectives were to evaluate the safety, tolerability and pharmacokinetics of reldesemtiv. The study showed statistically
significant concentration-dependent increases in changes from baseline in Six Minute Walk Distance (6MWD), a sub-maximal
exercise test of aerobic capacity and endurance. The study also showed statistically significant increases for Maximal Expiratory
Pressure (MEP), a measure of strength of respiratory muscles. Other assessments, including the Hammersmith Functional Motor
Score Extended, Revised Upper Limb Module, Timed Up-and-Go, Forced Vital Capacity, and the SMA Health Index (SMA-HI),
a patient reported outcome measure (PROM) developed to comply with FDA standards for PROMs, did not demonstrate differences
between reldesemtiv versus placebo. Adverse events were similar between groups receiving reldesemtiv and placebo.
Additional results presented in 2018 showed sustained increases in 6MWD and MEP four weeks after discontinuation of study
drug (i.e., follow-up). A post-hoc analysis also showed that changes from baseline in the 6MWD at 450 mg twice daily were
significantly correlated with changes from baseline on certain domains of the SMA-HI intended to reflect improved endurance,
especially Fatigue and Activity Participation. Decreases in SMA-HI scores reflect reduced disease burden as measured by that PROM,
suggesting that as 6MWD increased, disease burden assessed by that domain of the SMA-HI was reduced.
In 2019, we announced that we received feedback from the FDA that the 6MWD is an acceptable primary efficacy endpoint for
a potential registration program for reldesemtiv in patients with SMA who have maintained ambulatory function. The FDA also
recommended adding a global function scale as a secondary endpoint.
In 2019, we announced that data from two preclinical studies of reldesemtiv showed that the addition of reldesemtiv to
treatment with SMN upregulators (nusinersen and SMN-C1, an analogue to risdiplam) significantly increased muscle force in a mouse
model of SMA.
ALS: In collaboration with Astellas, we conducted FORTITUDE-ALS. This trial enrolled 458 eligible ALS patients who were
randomized (1:1:1:1) to receive either 150 mg, 300 mg or 450 mg of reldesemtiv or placebo dosed orally twice daily for 12 weeks.
The primary efficacy endpoint of FORTITUDE-ALS was the change from baseline in the percent predicted slow vital capacity
(SVC) at 12 weeks. Secondary endpoints included slope of the change from baseline in the mega-score of muscle strength measured
by hand held dynamometry and handgrip dynamometry in patients on reldesemtiv; change from baseline in the ALS Functional Rating
Scale Revised (ALSFRS-R); incidence and severity of treatment-emergent adverse events; and plasma concentrations of
reldesemtiv at the sampled time points during the study. Exploratory endpoints measured included the effect of reldesemtiv versus
placebo on self-assessments of respiratory function made at home by the patient with help as needed by the caregiver; disease
progression through quantitative measurement of speech production characteristics over time; disease progression through quantitative
measurement of handwriting abilities over time; and the change from baseline in quality of life (as measured by the ALS Assessment
Questionnaire-5) in patients on reldesemtiv.
In 2019, we announced that results of FORTITUDE-ALS. FORTITUDE-ALS did not achieve statistical significance for a pre-
specified dose-response relationship in its primary endpoint of change from baseline in SVC after 12 weeks of dosing (p=0.11).
Similar analyses of ALSFRS-R and slope of the Muscle Strength Mega-Score yielded p-values of 0.09 and 0.31, respectively.
However, patients on all dose groups of reldesemtiv declined numerically less than patients on placebo for SVC and ALSFRS-R, with
larger differences emerging over time.
While the dose-response analyses for the primary and secondary endpoints did not achieve statistical significance at the level of
0.05, in a post-hoc analysis pooling the doses together, patients who received reldesemtiv in FORTITUDE-ALS declined less than
patients who received placebo. The trial showed numerical effects favoring reldesemtiv across dose levels and timepoints with
clinically meaningful magnitudes of effect observed at 12 weeks for the primary and secondary endpoints. The differences between
reldesemtiv and placebo in SVC and ALSFRS-R total score observed after 12 weeks of treatment were still evident at follow-up, four
weeks after the last dose of study drug.
The incidence of early treatment discontinuations, serious adverse events and clinical adverse events in FORTITUDE-ALS
were similar between placebo and active treatment arms. The most common clinical adverse effects in the trial included fatigue,
nausea and headache. The leading cause for early termination from FORTITUDE-ALS for patients who received placebo was
progressive disease; the leading cause for early termination for patients who received reldesemtiv was a decline in cystatin C based
estimated glomerular filtration rate (eGFR), a measure of renal function. Elevations in transaminases and declines in cystatin C
eGFR were dose-related.
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In 2019, post-hoc analyses from FORTITUDE-ALS were presented. The analyses demonstrated that, in the combined middle
and faster progressing tertiles of patients, the decline in the ALSFRS-R total score from baseline to week 12 in patients who received
any dose of reldesemtiv was significantly smaller than the decline on placebo, while no significant difference between reldesemtiv and
placebo was observed in slower progressing patients.
In 2019, we presented subgroup analyses of FORTITUDE-ALS showing that the effect of reldesemtiv on patients with ALS
was similar whether or not patients were also receiving edaravone and/or riluzole.
On December 14, 2020, we announced that additional post-hoc analyses from FORTITUDE-ALS evaluating how baseline
patient characteristics impacted the effect of treatment with reldesemtiv versus placebo. When patients were divided into faster,
middle and slower progressing tertiles based on pre-study ALSFRS-R progression rates, the middle and fastest progressing tertiles of
patients combined showed a 27% difference at 12 weeks between patients receiving reldesemtiv versus placebo (1.15 ALSFRS-R
points, p=0.011), compared to 18% (0.4 points; p=0.43) in the slowest progressing tertile. In general, patients with a longer symptom
duration were slower progressors; 59% of those with SD >24 months were in the slowest tertile. Most patients who were minimally
affected with an ALSFRS-R (cid:8)45 at baseline were also slow progressors. In comparing the treatment effect of slow progressing
patients with symptoms (cid:3)24 months and a baseline ALSFRS-R score of (cid:3)44 to the original primary analysis population, the effect size
and statistical significance increased, despite reducing the number of analyzed patients. In an analysis of the total study population
(n=458), combining all patients who received reldesemtiv and comparing to those who received placebo, the change from baseline to
week 12 in the ALSFRS-R total score showed a least square mean (LSM) difference of 0.87 (p=0.013). However, limiting the analysis
population to patients with symptoms (cid:3)24 months and a baseline ALSFRS-R score of (cid:3)44 (n=272), the LSM difference was 1.84
(p=0.0002). Together, these post-hoc analyses indicate that the impact of treatment with reldesemtiv was more apparent in patients
with faster pre-study rates of progression, which include patients with short symptom duration and lower baseline ALSFRS-R scores.
Also on December 14, 2020, we announced the design of COURAGE-ALS (Clinical Outcomes Using Reldesemtiv on
ALSFRS-R in a Global Evaluation in ALS), the planned Phase 3 clinical trial of reldesemtiv in patients with ALS. COURAGE-ALS
is expected to enroll approximately 555 patients with ALS. Patients will be randomized 2:1 to receive 300 mg of reldesemtiv or
matching placebo dosed orally twice daily for 24 weeks, followed by a 24-week period in which all patients will receive 300 mg of
reldesemtiv twice daily. Eligible patients will be within the first two years of their first symptom of muscle weakness, have a vital
capacity of (cid:8)65% predicted, and a screening ALS Functional Rating Scale Revised (ALSFRS-R) (cid:3)44. Patients currently taking
stable doses of Radicava® (edaravone) and/or Rilutek® (riluzole) will be permitted and randomization stratified accordingly. The
primary efficacy endpoint will be change from baseline to 24 weeks in ALSFRS-R. Secondary endpoints include combined
assessment of ALSFRS-R total score; time to onset of respiratory insufficiency and survival time up to week 24 using a joint rank test;
change from baseline to 24 weeks for vital capacity; ALSAQ-40; and bilateral handgrip strength. Two unblinded interim analyses by
the Data Monitoring Committee are planned. The first will assess for futility, 12 weeks after approximately one-third or more of the
planned sample size is randomized. A second interim analysis will also assess for futility, and there will be an option for a fixed
increase in total enrollment if necessary to augment the statistical power of the trial. This Phase 3 clinical trial design builds on
insights gained from FORTITUDE-ALS, the Phase 2 clinical trial of reldesemtiv in patients with ALS, further exploring the
hypothesis that fast skeletal muscle activation with reldesemtiv may be an important therapeutic strategy in ALS.
Next Generation Fast Skeletal Muscle Troponin Activators
In 2018, we announced the advancement of CK-601, a next-generation FSTA, into IND-enabling studies, which triggered a
$2.0 million milestone payment from Astellas to us. CK-601 was designed in a joint research program conducted by the companies
scientists to have different pharmacokinetics and physicochemical properties than reldesemtiv which may inform its development for
the treatment of diseases and conditions associated with both neuromuscular and non-neuromuscular etiology and pathogenesis.
Ongoing Research in Skeletal Muscle Activators
Currently our research on the direct activation of skeletal muscle continues in two areas. We are conducting translational
research in preclinical models of disease and muscle function with FSTAs to explore the potential clinical applications of this novel
mechanism in diseases or conditions associated with skeletal muscle dysfunction. We also are conducting preclinical research on other
chemically and pharmacologically distinct skeletal sarcomere activators in our continued joint research program with Astellas, which
was extended through March 31, 2021.
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Beyond Muscle Contractility
We developed preclinical expertise in the mechanics of skeletal, cardiac and smooth muscle that extends from proteins to
tissues to intact animal models. Our translational research in muscle contractility has enabled us to better understand the potential
impact of small molecule compounds that increase skeletal or cardiac muscle contractility and to apply those findings to the further
evaluation of our drug candidates in clinical populations. In addition to contractility, other major functions of muscle play a role in
certain diseases that could benefit from novel mechanism treatments. Accordingly, our knowledge of muscle contractility may serve
as an entry point to the discovery of novel treatments for disorders involving muscle functions other than muscle contractility. We are
leveraging our current understandings of muscle biology to investigate new ways of modulating these other aspects of muscle function
for other potential therapeutic applications.
Manufacturing Resources
Our drug candidates require precise high-quality manufacturing that is compliant with good manufacturing processes (or
foreign equivalent) and other applicable laws. We have no manufacturing capabilities and rely on third party sources for the supply or
sourcing of raw materials, the manufacture of active pharmaceutical ingredients and the manufacture and packaging of finished drug
products for both clinical trial materials and commercial supply.
We have established relationships with leading contract manufacturers for the manufacture and supply of active pharmaceutical
ingredients and finished drug product for use in our clinical trials. Clinical trial materials sourced from contract manufacturers
generally have longer lead times than commercial product, have a higher cost per unit as a result of smaller batch sizes, and may be
more difficult to manufacture to necessary specifications. As a result, we endeavor to seek contract manufacturers with proven
manufacturing capabilities and quality standards whom we can rely on for timely supply.
In the event any of our drug candidates were to be approved for commercial marketing by the FDA or any other regulatory
authorities, we would need to enter into contractual arrangements with contract manufacturers for the manufacture of active
pharmaceutical ingredients and packaging of finished drug product for commercial use. Currently, we have no supply agreements for
the commercial supply of active pharmaceutical ingredients or finished drug product.
Prior to Amgens election to terminate the Amgen Agreement, we relied on Amgen for the supply of omecamtiv mecarbil for
use in clinical trials of omecamtiv mecarbil, including the on-going Phase 3 clinical trial, METEORIC-HF. In furtherance to Amgens
transition obligations arising as a result of its election to terminate the Amgen Agreement, Amgen shall transfer to us certain requested
quantities of the active pharmaceutical ingredient and finished drug product that we believe will be sufficient for use in METEORIC-
HF. In addition, we are in discussions with Amgen and the contract manufacturers that Amgen has historically utilized for the
manufacture and supply of omecamtiv mecarbil active pharmaceutical ingredient and finished drug product in view of enabling our
ability to utilize such contract manufacturers and their existing manufacturing processes and capabilities for the potential manufacture
and supply of omecamtiv mecarbil active pharmaceutical ingredient and finished drug product for commercial use.
We have contract manufacturing arrangements in place with leading contract manufacturers for the development and supply of
CK-274 active pharmaceutical ingredient and finished drug product for use in our clinical trials, including REDWOOD-HCM.
Historically, we have relied on Astellas for the supply of reldesemtiv. As a result of our entry into the Astellas FSRA
Agreement, we are in the process of completing the transfer of manufacture of reldesemtiv active pharmaceutical ingredient and
finished drug product to leading contract manufacturers with whom we have existing supply agreements.
Intellectual Property Resources
Our policy is to seek patent protection for the technologies, inventions and improvements that we develop that we consider
important to the advancement of our business. As of December 31, 2020, we owned, co-owned or licensed 71 issued U.S. patents,
over 550 issued patents in various foreign jurisdictions, and over 280 additional pending U.S. and foreign patent applications. We also
rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. Our
commercial success will depend on obtaining and maintaining patent protection and trade secret protection for our drug candidates and
technologies and our successfully defending these patents against third-party challenges. We will only be able to protect our
technologies from unauthorized use by third parties to the extent that valid and enforceable patents cover them or we maintain them as
trade secrets.
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With regard to our drug candidates directed to muscle biology targets, we have a U.S. patent covering omecamtiv mecarbil,
U.S. patents covering our skeletal muscle sarcomere activators including, but not limited to reldesemtiv, and a U.S. patent covering
CK-274, which expire in 2027, 2031 and 2039, respectively, unless extended or otherwise adjusted. We also have issued patents in
various foreign jurisdictions and additional U.S. and foreign patent applications pending for these drug candidates. It is not known or
determinable whether other patents will issue from any of our other pending applications or what the expiration dates would be for any
other patents that do issue.
In relation to our collaborations, our partners may develop or have developed, solely or with us, intellectual property rights in
connection with our drug candidates. Our collaboration agreements generally contain provisions regarding ownership, prosecution and
maintenance, assignment and license rights to enable us to protect and benefit from intellectual property rights that are developed with
or by our partners. For example, with respect to the Amgen Agreement, as a result of Amgens election to terminate the Amgen
Agreement, (i) licenses granted to Amgen under Cytokinetics controlled intellectual property under the Amgen Agreement shall
terminate and all rights to exploit and practice such intellectual property rights shall revert to us, (ii) Amgen shall transfer and assign
to us all rights in and to any trademarks specific to omecamtiv mecarbil and other compounds subject to the Amgen Agreement, (iii)
Amgen shall grant to us an exclusive worldwide license to Amgen-controlled patent rights relating to omecamtiv mecarbil and other
compounds subject to the Amgen Agreement and (iv) Amgen shall grant to us a non-exclusive worldwide license with respect to
Amgens trade secrets that were developed or utilized by Amgen in connection with omecamtiv mecarbil and other compounds
subject to the Amgen Agreement solely to develop, manufacture and commercialize omecamtiv mecarbil and such other compounds.
Our drug candidates are still in clinical development and have not yet been approved by the FDA. If any of these drug
candidates are 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 of the 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 or keep our competitive advantage. Due to evolving legal standards relating to the patentability, validity and
enforceability of patents covering pharmaceutical inventions 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 pending or future patent applications is uncertain and involves
complex legal, scientific and factual questions. The standards that the U.S. Patent and Trademark Office and its foreign counterparts
use to grant patents are not always applied predictably or uniformly and are subject to change. To date, no consistent policy has
emerged regarding the breadth of claims allowed in biotechnology and pharmaceutical patents. Thus, we cannot be sure that any
patents will issue from any pending or future patent applications owned by, co-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 or enforceable by a court of law, will provide us with any
significant protection against competitive products, or will afford us a commercial advantage over competitive products. For example:
• we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications
or 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 or issued patents;
•
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our intellectual property rights;
some or all of our or our licensors pending patent applications may not result in issued patents or the claims that issue may
be narrow in scope and not provide us with competitive advantages;
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•
•
our and our licensors issued patents may not provide a basis for commercially viable drugs or therapies or may be
challenged and invalidated by third parties;
our or our licensors patent applications or patents may be subject to interference, post-grant proceedings, opposition or
similar legal and administrative proceedings that may result in a reduction in their scope or their loss altogether;
• we may not develop additional proprietary technologies or drug candidates that are patentable; or
•
the patents of others may prevent us or our partners from discovering, developing or commercializing our drug candidates.
The defense and prosecution of intellectual property infringement suits, interferences, post-grant proceedings, oppositions and
related legal and administrative proceedings are costly, time-consuming to pursue and divert resources. The outcome of these types of
proceedings is uncertain and could significantly harm our business. For example, an unknown third party has filed an opposition
against a granted European patent relating to compositions of omecamtiv mecarbil. Although we are defending the patent, we cannot
be certain that the patent will be upheld as valid. If our European patent is invalidated, our intellectual property position in Europe
could be weakened and it could have a negative impact 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 proprietary rights of third parties. U.S. and foreign issued patents and pending patent applications owned by third
parties exist that may be relevant to the therapeutic areas and chemical compositions of our drug candidates. While we are aware of
certain relevant patents and patent applications owned by third parties, there may be issued patents or pending applications of which
we are not aware that could cover our drug candidates. Because patent applications are often not published immediately after filing,
there may be currently pending applications, unknown to us, which could later result in issued patents that our activities with our 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 in competitive 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, trade secrets are often difficult to protect, especially outside of the United States. While we believe that we use
reasonable efforts to protect our trade secrets, our employees, consultants, contractors, partners and other advisors may unintentionally
or willfully disclose our trade secrets to competitors. Enforcing a claim that a third party had illegally obtained and is using our trade
secrets would be expensive and time-consuming, and the outcome would be unpredictable. Even if we are able to maintain our trade
secrets as confidential, our competitors may independently develop information that is equivalent or similar to our trade secrets.
We seek to protect our intellectual property by requiring our employees, consultants, contractors and other advisors to execute
nondisclosure and invention 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 confidentiality agreements 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 drug candidates and research technologies and If we are sued for infringing third-
party intellectual property rights, it will be costly and time-consuming, and an unfavorable outcome would have a significant adverse
effect on our business.
Compliance with Government Regulation
The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial
requirements upon the clinical development, manufacture, marketing and distribution of drugs. 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 by the FDA before our drug candidates may be marketed in the United States generally involves the following:
•
completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies, all performed in
accordance with the FDAs good laboratory practice regulations;
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•
•
•
•
•
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 in accordance with good clinical practices;
submission of a 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 with current good manufacturing practice (cGMP) regulations and FDA audits of select clinical
investigator sites to assess compliance with good clinical practices (GCP); and
FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
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.
Non-clinical tests include laboratory evaluation of product chemistry, formulation and stability, and studies to evaluate toxicity
and pharmacokinetics in animals. The results of non-clinical tests, together with manufacturing information and analytical data, are
submitted as part of an IND application to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA,
unless the FDA, within the 30-day period, raises concerns or questions about the conduct of the proposed clinical trial, including
concerns that human research subjects may be exposed to unreasonable health risks. In such a case, the IND sponsor 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
of our collaborators, may not result in authorization from the FDA or its foreign equivalent to commence a clinical trial. A separate
submission to an existing IND must also be made for each successive clinical trial conducted during product development. Further, an
independent institutional review board (IRB) or its foreign equivalent for each medical center proposing to conduct the clinical trial
must review and approve the plan for any clinical trial before it commences at that 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 a clinical 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 three sequential phases, which may overlap:
•
•
•
Phase 1: Phase 1 trials include the initial introduction of a drug candidate into humans. These studies may be conducted in
patients, but are usually conducted in healthy volunteer subjects. These studies are designed to determine the metabolic and
pharmacologic actions of the drug candidate in humans, the side effects associated with increasing doses, and, if possible,
to gain early evidence on effectiveness.
Phase 2: Phase 2 trials include the early controlled clinical studies conducted to obtain some preliminary data on the
effectiveness of the drug candidate for a particular indication or indications in patients with the disease or condition. This
phase of testing also helps determine the common short-term side effects and risks associated with the drug candidate.
These clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety
risks, to make an initial determination of potential efficacy of the drug candidate for specific targeted indications and to
determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain
information prior to beginning larger and more expensive Phase 3 clinical trials. Phase 2a clinical trials generally are
designed to study the pharmacokinetic or pharmacodynamic properties and to conduct a preliminary assessment of safety
of the drug candidate over a measured dose response range. In some cases, a sponsor may decide to conduct a Phase 2b
clinical trial, which is a second, typically larger, confirmatory Phase 2 trial that could, if positive and accepted by a
regulatory authority, support approval of a drug candidate.
Phase 3: Phase 3 clinical trials are then undertaken in large patient populations to further evaluate dosage, to provide
substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at
multiple, geographically dispersed clinical trial sites. Phase 3 trials are also intended to provide an adequate basis for
extrapolating the results to the general population and transmitting that information in the drug labeling. Phase 3 studies
usually include several hundred to several thousand people, and are usually longer in duration than Phase 2 trials.
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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 or that 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 sponsors agreement to conduct additional clinical trials to further assess the drugs
safety and effectiveness after marketing approval, known as Phase 4 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 be included 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 clinical trial database registry could subject us to significant civil monetary penalties.
Health care providers in the United States, including research institutions from which we or our partners obtain patient
information, are subject to privacy rules under the Health Insurance Portability and Accountability Act of 1996 and state and local
privacy laws. In the European Union (the E.U.), these entities are 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 individual E.U. member states implementing additional
legislation. The General Data Protection Regulation (E.U.) 2016/679 is a regulation in E.U. law on data protection and privacy for all
individuals within the E.U. and the European Economic Area. Other countries have similar privacy legislation. We could face
substantial penalties if we knowingly 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 and dissemination 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 the FDA as part of an NDA. The NDA also must contain extensive manufacturing information. In addition, the FDA
may require that a proposed Risk Evaluation and Mitigation Strategy, also known as a REMS, be submitted as part of the NDA if the
FDA determines that it is necessary to ensure that the benefits of the drug outweigh its risks. Similar, and in some cases additional,
requirements apply in foreign jurisdictions for marketing approval applications for drugs in those jurisdictions. The FDA may refer the
NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The
FDA often, but not always, follows the advisory committees recommendations. The FDA may deny approval of an NDA by issuing a
complete response letter if the applicable regulatory criteria are not satisfied, or it may require additional clinical data, including data
in a pediatric population, or an additional Phase 3 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 not always conclusive and the FDA may interpret data differently than we or our partners do. Once issued, the
FDA or foreign equivalent may withdraw a drug approval if ongoing regulatory requirements are not met or if safety problems occur
after the drug reaches the market. In addition, the FDA or its foreign counterparts may require further testing, including Phase 4
clinical trials, and surveillance or restrictive distribution programs to monitor the effect of approved drugs which have been
commercialized. The FDA and its foreign counterparts have the power to prevent or limit further marketing of a drug based on the
results of these post-marketing programs. Drugs may be marketed only for the approved indications and in accordance with the
provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of
off-label uses, and a company that is found to have improperly promoted off-label may be subject to significant liability. However,
physicians may, in their independent medical judgment, prescribe legally available products for off-label uses. The FDA does not
regulate the behavior of physicians in their choice of treatments but the FDA does restrict manufacturers communications on the
subject of off-label use of their products. Further, if there are any modifications to a drug, including changes in indications, labeling or
manufacturing processes or facilities, we may be required to submit and obtain prior FDA approval of a new NDA or NDA
supplement, or the foreign equivalent, which may require us to develop additional data or conduct additional preclinical studies and
clinical trials.
Satisfaction of FDA regulations and requirements or similar regulations and 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. Government regulation may delay or prevent marketing of drug candidates for a considerable period of
time and impose costly procedures upon our activities. 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 a drug candidate receives regulatory approval, the approval may
be significantly limited to specific disease states, patient populations and dosages or restrictive distribution programs. Further, even
after regulatory approval is obtained, later discovery of previously unknown problems with a drug may result in restrictions on the
drug or even complete withdrawal of the drug from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any
of our drug candidates would harm our business. In addition, we cannot predict what future U.S. or foreign governmental regulations
may be implemented.
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Orphan Drug Designation. Some jurisdictions, including the United States, may designate drugs for relatively small patient
populations as orphan drugs. The FDA grants orphan drug designation to drugs intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000 individuals in the United States.
An FDA orphan drug designation does not shorten the duration of the regulatory review and approval process. If a drug
candidate that has an orphan drug designation receives the first FDA marketing approval for the indication for which the designation
was granted, then the approved drug is entitled to orphan drug exclusivity. This means that the FDA may not approve another
companys application to market the same drug for the same indication for a period 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 the orphan drug designation cannot
assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which
the designation was granted. Competitors may receive approval of different drugs or biologics for the indications for which the orphan
drug has exclusivity.
Special Protocol Assessment. A sponsor may request a Special Protocol Assessment, or SPA, agreement with FDA on the
Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim. Even if the FDA agrees to the
design, execution and analyses proposed in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement if
public health concerns emerge that were unrecognized at the time of the SPA agreement, or a substantial scientific issue essential to
determining safety or efficacy is identified after testing has begun. An SPA does not guarantee that an NDA will be approved.
Other Regulatory Requirements. Any drugs manufactured or distributed by us or our partners pursuant to FDA approvals or
their foreign counterparts are subject to continuing regulation by the applicable regulatory authority, including recordkeeping
requirements and reporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required
to register their establishments with the FDA and other applicable regulatory authorities, and are subject to periodic unannounced
inspections by these regulatory authorities for compliance with ongoing regulatory requirements, including cGMPs, which impose
certain procedural and documentation requirements upon us and our third-party manufacturers. Failure to comply with the statutory
and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of
manufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future
third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA and other regulatory
requirements. If our present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA
or its foreign counterparts may halt our or our partners clinical trials, require us to recall a drug from distribution, or withdraw
approval of the NDA for that drug.
For further details on the risks relating to government regulation of our business, please see the risk factors under Item 1A of
this report, including, but not limited to, the risk factor entitled The regulatory approval process is expensive, time-consuming and
uncertain and may prevent our partners or us from obtaining approvals to commercialize some or all of our drug candidates.
Other Healthcare Laws. We are currently or will in the future be subject to healthcare regulation and enforcement by the
federal government and the states in which we will conduct our business once our product candidates are approved by the FDA and
commercialized in the United States. In addition to the FDAs restrictions on marketing of pharmaceutical products, the U.S.
healthcare laws and regulations that may affect our ability to operate include: the federal fraud and abuse laws, including the federal
anti-kickback and false claims laws; federal data privacy and security laws; and federal transparency laws related to payments and/or
other transfers of value made to physicians and other healthcare professionals and teaching hospitals. Many states have similar laws
and regulations that may differ from each other and federal law in significant ways, thus complicating compliance efforts. For
example, states have anti-kickback and false claims laws that may be broader in scope than analogous federal laws and may apply
regardless of payer. In addition, state data privacy laws that protect the security of health information may differ from each other and
may not be preempted by federal law. Moreover, several states have enacted legislation requiring pharmaceutical manufacturers to,
among other things, establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on
sales and marketing activities, report information related to drug pricing, require the registration of sales representatives, and prohibit
certain other sales and marketing practices. If our operations are found to be in violation of these laws, we may be subject to
significant civil, criminal, and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from
participation in government healthcare programs, additional reporting obligations and oversight if we become subject to a corporate
integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring
of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Additionally, in the United States and some foreign jurisdictions there have been, and continue to be, several legislative and
regulatory changes and proposed reforms of the healthcare system in an effort to contain costs, improve quality, and expand access to
care. These reform initiatives may, among other things, result in modifications to the aforementioned laws and/or the implementation
of new laws affecting the healthcare industry. Similarly, a significant trend in the healthcare industry is cost containment. Third-party
payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Our ability
to commercialize any of our products successfully will depend in part on the extent to which coverage and adequate reimbursement
for these products and will be available from third-party payors. Even if we obtain coverage for a given drug product, the associated
reimbursement rate may not be adequate to cover our costs, including research, development, intellectual property, manufacture, sale
and distribution expenses, or may require co-payments that patients find unacceptably high. Coverage and reimbursement policies for
drug products can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for drug
products among third-party payors in the United States. There may be significant delays in obtaining coverage and reimbursement as
the process of determining coverage and reimbursement is often time-consuming and costly.
Cytokinetics Human Capital
As of December 31, 2020, we had 184 employees and 51 consultants. 27 of those employees have more than 10 years tenure
with us and 53 have over 5 years of service. In 2020 our turnover was 3.4%, which we believe is a lower attrition rate compared to the
industry. Notwithstanding the historic low turnover in 2020, we routinely have lower attrition than our industry average.
We are committed to fostering and maintaining an environment
that engenders collaboration and teamwork, respect,
transparency and candor. Furthermore, we endeavor to provide our employees with the tools, training and resources they need to
successful grow their careers and experience development opportunities.
Our compensation and benefit programs are designed to enable us to attract and retain the best employees in a very competitive
life science sector in a high cost of living geography of the Northern California Bay Area. We benchmark and survey the market to
ensure we maintain competitive programs for our employees.
We have a rigorous annual goal setting and goal evaluation process under the supervision of our Board of Directors and senior
management to assist our employees in understanding what is expected of them individually and as an organization.
In 2020 the Company implemented a formal Diversity & Inclusion program to, among other things, evaluate our recruiting and
hiring practices and metrics.
We routinely survey our employees and transparently share the full results, take action our areas identified as needing
improvement and look to augment those emphasized as important to our employees.
Our Compensation and Talent Committee of the Board of Directors reviews employee engagement, reward programs, human
resource metrics, including attrition, retention and staffing on an on-going basis.
COVID-19 Business Update
We are continuing to closely monitor the impact of the global COVID-19 pandemic on our business and continue to take
proactive efforts designed to protect the health and safety of our employees, patients, study investigators and clinical research staff,
and to maintain business continuity. We believe that the measures we are implementing are appropriate and are helping to reduce the
transmission of COVID-19, and we will continue to monitor and seek to comply with guidance from governmental authorities and
adjust our activities as appropriate.
Based on guidance issued by federal, state and local authorities, we transitioned to a remote work model for a vast majority of
our employees effective March 16, 2020, while maintaining certain essential in-person laboratory functions in order to advance key
research and development initiatives, supported by the implementation of updated onsite procedures. We have since implemented a
voluntary return to work for our employees subject to precautionary measures such as mandatory temperature checks for those
employees that do work on site from time to time.
In the conduct of our business activities, we are also taking actions designed to protect the safety of patients and healthcare
professionals. For patients already enrolled in our clinical trials, we and our partners are working closely with study investigators and
clinical trial site staff to continue treatment in compliance with trial protocols and to uphold trial integrity, while working to observe
government and institutional guidelines designed to safeguard the health and safety of patients and site staff.
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After temporarily suspending enrollment in METEORIC-HF and REDWOOD-HCM due to the COVID-19 pandemic in the
second quarter of 2020, we resumed enrollment in both trials by mid year 2020. We believe enrollment in METEORIC-HF may be
completed in the first half of 2021.Enrollment in Cohort 2 of REDWOOD-HCM is expected to complete in the first quarter of 2021
and full results from REDWOOD-HCM across both Cohort 1 and Cohort 2 are expected in mid-2021.
While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or
predict, the pandemic could result in significant and prolonged disruption of global financial markets, reducing our ability to access
capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread
of COVID-19 could materially affect our business and the value of our common stock.
While we expect the COVID-19 pandemic to continue to affect our business operations, the extent of the impact on our clinical
development and regulatory efforts and the value of and market for our common stock will depend on future developments that are
highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel
restrictions, quarantines, social distancing and business closure requirements in the U.S. and in other countries, and the effectiveness
of actions taken globally to contain and treat COVID-19. For additional information about risks and uncertainties related to the
COVID-19 pandemic that may impact our business, our financial condition and our results of operations, see the section titled Risk
Factors under Part I, Item 1A in this Annual Report on Form 10-K.
Investor Information
We 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 to Section 13 or 15(d) of the Exchange Act. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is
www.sec.gov.
You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K and amendments to those 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 corporate offices 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.
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ITEM 1A.
RISK FACTORS
In evaluating our business, you should carefully consider the following risks in addition to the other information in this report.
Any of the following risks could materially and adversely affect our business, results of operations, financial condition or your
investment in our securities, and many are beyond our control. The risks and uncertainties described below are not the only ones
facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also adversely
affect our business.
Risks Related to Our Business
We have a history of significant losses and may not achieve or sustain profitability and, as a result, you may lose part or all 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 and development activities and general and administrative costs associated with our operations. Our drug candidates are
all in early through late-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 begin commercial sales of our drugs. We expect to incur increasing losses
for at least several more years, as we continue our research activities and conduct development of, and seek regulatory approvals for,
our drug candidates, and commercialize any approved drugs. If our drug candidates fail or do not gain regulatory approval, or if our
drugs do not achieve market acceptance, we will not be profitable. If we fail to become and remain profitable, or if we are unable to
fund our continuing losses, you could lose part or all of your investment.
We will need substantial additional capital in the future to sufficiently fund our operations.
We have consumed substantial amounts of capital to date, and our operating expenditures will increase over the next several
years if we expand our research and development activities. We have funded our operations and capital expenditures with proceeds
primarily from private and public sales of our equity securities, royalty monetization agreements, a revenue interest agreement,
strategic alliances, long-term debt, other financings, interest on investments and grants. We believe that our existing cash and cash
equivalents, short-term investments and interest earned on investments should be sufficient
to meet our projected operating
requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could
utilize our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated
with the development of our drug candidates and other research and development activities, including risks and uncertainties that
could impact the rate of progress of our development activities, we are unable to estimate with certainty the amounts of capital outlays
and operating expenditures associated with these activities.
For the foreseeable future, our operations will require significant additional funding, in large part due to our research and
development expenses and the absence of any revenues from product sales. For example, we will require significant additional
funding to enable us to conduct further development of our product candidates. Until we can generate a sufficient amount of product
revenue, we expect to raise future capital through strategic alliance and licensing arrangements, public or private equity offerings and
debt financings. We do not currently have any commitments for future funding other than through our Funding Agreement with RTW
Royalty Holdings, and reimbursements, milestone and royalty payments that we may receive under our collaboration agreements with
Amgen, Astellas and Ji Xing. We may not receive any further funds under those agreements. Our ability to raise funds may be
adversely impacted by current economic 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.
For example, under the Funding Agreement, we have the right to exercise an option to receive up to $90.0 million in cash upon
initiation of a global registration program for CK-274 in each of oHCM and nHCM if certain conditions are met. No assurance can be
given that any of such conditions will be fulfilled prior to expiration of our ability to exercise our option pursuant to the Funding
Agreement, and all or part of the proceeds made available to us, may need to be utilized for the prepayment or repayment of other
outstanding indebtedness at the time under our Loan and Security Agreement, dated as of May 17, 2019 (the Term Loan
Agreement) with Oxford Finance LLC (Oxford), as collateral agent, and Silicon Valley Bank and Oxford as lenders party thereto
(the Lenders), pursuant to which the Lenders made available to us a $45.0 million loan (the Term Loan) or any other indebtedness
we have outstanding at that time. Moreover, in the event we were to exercise our option pursuant to the Funding Agreement, we
would be obligated to make royalty payments to RTW Royalty Holdings of up to 4% of our net sales of CK-274 in the United States,
the European Union, Switzerland, the United Kingdom and certain other countries in Europe (collectively referred to as the CK-274
Territory), which may or may not be more favorable to us than prevailing interest rates at the time of exercising such option.
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To the extent that we raise additional funds through strategic alliances or licensing or other arrangements with third parties, we
will likely have to relinquish valuable rights to our technologies, research programs or drug candidates, grant licenses on terms that
may not be favorable to us, or, as in the case of the Funding Agreement, incur obligations to pay amounts based on future sales of our
product candidate CK-274. To the extent that we raise additional funds by issuing equity securities, our stockholders will experience
additional dilution and our share price may decline. To the extent that we raise additional funds through debt financing, the financing
may involve covenants that restrict our business activities. In addition, funding from any of these sources, if needed, may not be
available to us on favorable terms, or at all, or in accordance with our planned timelines.
If we cannot raise the funds we need to operate our business, we will need to delay or discontinue certain research and
development activities, and our stock price may be negatively affected.
Our business is currently adversely affected and could be materially and adversely affected in the future by the effects of
disease outbreaks, epidemics and pandemics, including the ongoing COVID 19 pandemic. The COVID-19 pandemic continues
to adversely impact our business and could materially and adversely affect our operations, as well as the businesses or
operations of our or our partners, manufacturers, CROs or other third parties with whom we or our partners conduct
business.
Disease outbreaks and epidemics in regions where we, our partners or other third parties on which we rely have manufacturing
facilities, clinical trial sites or other important operations or pandemics such as the COVID-19 pandemic could adversely affect our
business, including by causing significant disruptions in our operations and/or in the operations of third-party manufacturers and
CROs upon whom we rely. For example, in March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic, and the pandemic has presented a substantial public health and economic challenge around the world and is affecting
employees, patients, communities and business operations, as well as the U.S. economy and financial markets. In this regard, the
COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on business
and commerce, as significant reductions in business-related activities have occurred, supply chains have been disrupted and
manufacturing and clinical development activities have been curtailed or suspended.
Remote work policies, quarantines, shelter-in-place and similar governmental orders, shutdowns or other restrictions on the
conduct of business operations related to the COVID-19 pandemic could materially and adversely affect our operations. Based on
guidance issued by federal, state and local authorities, we have implemented a voluntary work-from-home policies for our employees.
The effects of the safer community order and our work-from-home and voluntary work-on-site policies may negatively impact
productivity, disrupt our, or our partners to which we rely, business and delay clinical programs and timelines, the magnitude of which
will depend, in part, on the length and severity of the restrictions and other limitations on the ability to conduct business in the
ordinary course. In connection with these measures, we may be subject to claims based upon, arising out of, or related to COVID-19
and our actions and responses thereto, including any determinations that we have made and may in the future make with respect to our
onsite operations. These and similar, and perhaps more severe, disruptions in operations could negatively impact our business,
operating results and financial condition.
In addition, our clinical trials or those conducted by our partners may continue to be adversely affected by the COVID-19
pandemic. For example, in 2020 we temporarily suspended enrollment in METEORIC-HF and REDWOOD-HCM due to the COVID-
19 pandemic, although we have since resumed enrollment in both trials. Clinical site initiation, conduct, and patient enrollment has
been and may continue to be delayed due to prioritization of medical resources toward the COVID-19 pandemic and restrictions on
the ability to travel. It may not be possible to carry out some aspects of clinical trial protocols if quarantines or other restrictions
impede patient movement or interrupt healthcare services. It may be necessary to suspend enrollment at some or all clinical trial sites
to comply with shelter in place orders, and to reduce the risk to patients, their caretakers, and healthcare providers from contracting
COVID-19. Patients may be forced to quarantine or comply with shelter-in-place orders or may refuse home healthcare visits,
particularly in medically vulnerable patient populations. Similarly, principal investigators and site staff who, as healthcare providers,
may have heightened exposure to COVID-19 but also may be pulled into clinical care and away from clinical research, may adversely
impact our or our partners clinical trial operations. Further, our clinical trial patients who contract COVID-19 may (i) experience
unexpected adverse medical events that could be wrongfully attributable to our investigational drugs, and (ii) experience endpoint
events because of COVID-19 that could confound the interpretation of data and results relating to our investigational drugs arising
from our clinical trials. Other key clinical trial activities, such as clinical trial site data monitoring and site inspections, may also be
adversely affected due to limitations on travel imposed or recommended by governmental authorities, which may impact the integrity
of subject data and clinical study endpoints. Finally, disruptions in our supply chain due to loss of the ability of sites to dispense study
drug, travel and import/export restrictions or lack of raw materials may result in an interruption, or delays in receiving, supplies of our
drug candidates from our contract manufacturing organizations or study sites, which in turn may also adversely affect our clinical
trials.
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The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the
potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic
could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future
negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially
affect our business and the value of our common stock.
The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do
not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global
economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the
COVID-19 situation closely.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely
affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the
2026 Notes and our Term Loan.
As of December 31, 2020, we had $183.0 million aggregate principal amount of indebtedness, comprised of $45.0 million
under our Term Loan, on a senior secured basis, and $138.0 million under our convertible senior notes due 2026, or the 2026 Notes.
Additionally, we have the ability to exercise an option for up to $90.0 million in cash under the Funding Agreement, which, if utilized,
will result in additional payment obligations of up to 4% of our net sales of CK-274 in the CK-274 Territory. Finally, under our RPI
Royalty Purchase Agreement, we will have a payment obligation of 4.5% on worldwide net sales of omecamtiv mecarbil and other
Amgen Alliance Compounds, subject to a potential increase of up to an additional 1% under certain circumstances (delay in US
marketing approval). We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have
significant negative consequences for our security holders and our business, results of operations and financial condition by, among
other things:
•
•
•
•
•
•
increasing our vulnerability to adverse economic and industry conditions;
limiting our ability to obtain additional financing;
requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will
reduce the amount of cash available for other purposes;
limiting our flexibility to plan for, or react to, changes in our business;
diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the
notes; and
placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to
capital.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay
amounts due under our indebtedness, including the 2026 Notes, and our cash needs may increase in the future. In addition, any
required repurchase of the 2026 Notes for cash as a result of a fundamental change would lower our current cash on hand such that we
would not have those funds available for us in our business. Further any future indebtedness that we may incur may contain financial
and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other
indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in
default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.
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Covenants in our Term Loan Agreement, the indenture related to the 2026 Notes and the Funding Agreement restrict our
business and operations in many ways and if we do not effectively manage our covenants, our financial conditions and results
of operations could be adversely affected. Our operations may not provide sufficient cash to meet the repayment obligations of
our debt incurred under the Term Loan Agreement.
The Term Loan Agreement and the indenture related to the 2026 Notes requires that we comply with certain covenants
applicable to us, including among other things, covenants restricting dispositions, changes in business, management, ownership or
business locations, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and
subordinated debt, any of which could restrict our business and operations, particularly our ability to respond to changes in our
business or to take specified actions to take advantage of certain business opportunities that may be presented to us. In addition,
should we exercise our option pursuant to the Funding Agreement, such agreement contains certain covenants applicable to us,
including among other things, development and commercialization diligence obligations in connection to CK-274, use of proceeds,
reporting and encumbrances, which could also restrict our business and operations, particularly in connection to our development and
commercialization of CK-274.
Our failure to comply with any of the covenants could result in a default under the Term Loan Agreement, the indenture related
to the 2026 Notes, or the Funding Agreement which could permit the creditors to declare all or part of any outstanding borrowings or
other payment obligations to be immediately due and payable and/or enforce any outstanding liens against our assets.
In addition, certain provisions in the 2026 Notes and the related indenture could make a third party attempt to acquire us more
difficult or expensive. For example, if a takeover constitutes a fundamental change under our indenture, then noteholders will have the
right to require us to repurchase their notes for cash. In addition, if a takeover constitutes a make-whole fundamental change under our
indenture, then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations
under the notes and the Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or
removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
If we are unable to repay those amounts, the relevant creditors could proceed against the collateral granted to them to secure
that debt (if any), which would seriously harm our business. In addition, should we be unable to comply with these covenants or if we
default on any portion of our outstanding borrowings, the Lenders in connection to the Term Loan can also impose a 5.0% penalty. In
addition, the Term Loan has interest only payments through December 31, 2021.
We have never generated, and may never generate, revenues from commercial sales of our drugs and we will not have drugs to
market for at least several years, if ever.
We currently have no drugs for sale and we cannot guarantee that we will ever develop or obtain approval to market any drugs.
To receive marketing approval for any drug candidate, we must demonstrate that the drug candidate satisfies rigorous standards of
safety and efficacy to the FDA in the United States and other regulatory authorities abroad. We and our partners will need to conduct
significant additional research and preclinical and clinical testing before 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 compete effectively, our drugs must be easy to use,
cost-effective, covered by insurance or government sponsored medical plans, and economical to manufacture on a commercial scale,
compared to other therapies available for the treatment of the same conditions. We may not achieve any of these objectives. Currently,
our clinical-stage drug candidates include omecamtiv mecarbil for the potential treatment of heart failure, reldesemtiv for the potential
treatment of ALS and potentially other indications associated with muscle weakness, and CK-274 for the potential treatment of HCM
and potentially other indications. We cannot be certain that the clinical development of our current or any future drug candidates will
be successful, that they will receive the regulatory approvals required to commercialize them, that they will ultimately be accepted by
prescribers or reimbursed by insurers or that any of our other research programs will yield a drug candidate suitable for clinical testing
or commercialization. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially
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 our clinical trials programs and we may not generate revenue from any of these drug candidates.
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Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates, including CK-274 and
reldesemtiv, which could prevent or significantly delay completion of clinical development and regulatory approval.
Prior to receiving approval to commercialize any of our drug candidates, we or our partners must adequately demonstrate to the
satisfaction of FDA and foreign regulatory authorities that the drug candidate is sufficiently safe and effective with substantial
evidence from well-controlled clinical trials. We or our partners will need to demonstrate efficacy in clinical trials for the treatment of
specific indications and monitor safety throughout the clinical development process and following approval. None of our drug
candidates have yet met the safety and efficacy standards required for regulatory approval for commercialization and they may never
do so. In addition, for each of our preclinical compounds, we or our partners must adequately demonstrate satisfactory chemistry,
formulation, quality, stability and toxicity in order to submit an IND to the FDA, or an equivalent application in foreign jurisdictions,
that would allow us to advance that compound into clinical trials. Furthermore, we or our partners may need to submit separate INDs
(or foreign equivalent) to different divisions within the FDA (or foreign regulatory authorities) in order to pursue clinical trials in
different therapeutic areas. Each new IND (or foreign equivalent) must be reviewed by the new regulatory division before the clinical
trial under its jurisdiction can proceed, entailing all the risks of delay inherent to regulatory review. If our or our partners current or
future preclinical studies or clinical trials are unsuccessful, our business will be significantly harmed and our stock price could be
negatively affected.
All of our drug candidates, including CK-274 and reldesemtiv, are prone to the risks of failure inherent in drug development.
Preclinical studies may not yield results that would adequately support 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 drug candidate 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 difficult to 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. For any of our drug candidates, the results from Phase 1 clinical trials in healthy volunteers and clinical results from Phase 1
and 2 trials in patients are not necessarily indicative of the results of later and larger clinical trials that are necessary to establish
whether the drug candidate is safe and effective for the applicable indication. Likewise, interim results from a clinical trial may not be
indicative of the final results from that trial, and results from early Phase 2 clinical trials may not be indicative of the results from later
clinical trials. For example, early Phase 2 clinical trials of our first-generation FSTA, tirasemtiv, in patients with ALS showed
encouraging dose-related trends in measurements of the ALSFRS-R, a clinically validated instrument designed to measure disease
progression and changes in functional status, for patients receiving tirasemtiv compared to those receiving placebo. However,
BENEFIT-ALS, a Phase 2b clinical trial of tirasemtiv in patients with ALS, did not achieve its primary efficacy endpoint, the mean
change from baseline in the ALSFRS-R for patients receiving tirasemtiv compared to those receiving placebo, and in November 2017,
we announced that VITALITY-ALS did not achieve its primary endpoint or secondary endpoints. Following the results of
VITALITY-ALS, we suspended development of tirasemtiv.
Moreover, the Phase 2 clinical trial of reldesemtiv in COPD and Phase 1b clinical trial of reldesemtiv in elderly subjects with
limited mobility did not show efficacy, and there can be no assurance that reldesemtiv will demonstrate efficacy in other indications,
regardless of the phase of development.
In addition, while the clinical trials of our drug candidates are designed based on the available relevant information, such
information may not accurately 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 the eventual 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 estimates relating to expected treatment effect and variability about the
primary endpoint. These estimates are based upon earlier non-clinical and clinical studies of the drug candidate itself and clinical trials
of other drugs thought to have similar effects in a similar patient population. If information gained during the conduct of 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.
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Furthermore, in view of the uncertainties inherent in drug development, such clinical trials may not be designed with focus on
indications, patient populations, dosing regimens, endpoints, safety, efficacy or pharmacokinetic parameters or other variables that
will provide the necessary safety or efficacy data to support regulatory approval to commercialize the resulting drugs. For example,
we believe that effects on respiratory function, including SVC, may be appropriate as a clinical endpoint for reldesemtiv; however,
regulatory authorities may not accept these effects as a clinical endpoint to support registration of reldesemtiv for the treatment of
ALS. Clinical trials of our drug candidates are designed based on guidance or advice from regulatory agencies, which is subject to
change during the development of the drug candidate at any time. Such a change in a regulatory agencys guidance or advice 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 that drug 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 our drug candidates effects as may other methodologies. Even if we believe the
data collected from clinical trials of our drug candidates are promising, these data may not be sufficient to support approval by the
FDA or foreign regulatory authorities. Non-clinical 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 prevent
regulatory approval.
Furthermore, while planned interim analyses in clinical trials can enable early terminations for futility or for overwhelming
efficacy, the timing, which can be based on accrual of events, enrollment or other factors, and the results of such analyses, is
unpredictable.
GALACTIC-HF was conducted under an SPA agreement with FDA. However, even where the FDA agrees to the design,
execution and analysis proposed in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement in certain
circumstances, and the FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and
results from any study that is subject to the SPA agreement. The existence of an SPA agreement in respect of GALACTIC-HF or any
other trial does not guarantee that FDA would approve any resulting NDA in respect of any product that is the subject of any clinical
trial subject to an SPA agreement.
Administering any of our drug candidates or potential drug candidates may produce undesirable side effects, also known as
adverse events. Toxicities and adverse events observed in preclinical studies for some compounds in a particular research and
development program may also occur in preclinical studies or clinical trials of other compounds from the same program. Potential
toxicity issues may arise from the effects of the active pharmaceutical ingredient itself or from impurities or degradants that are
present in the active pharmaceutical ingredient or could form over time in the formulated drug candidate or the active pharmaceutical
ingredient. These toxicities or adverse events could delay or prevent the filing of an IND (or a foreign equivalent) with respect to our
drug candidates or potential drug candidates or cause us, our partners or the FDA or foreign regulatory authorities to modify, suspend
or terminate clinical trials with respect to any drug candidate at any time during the development program. Further, the administration
of two or more drugs contemporaneously can lead to interactions between them, and our drug candidates may interact with other drugs
that trial subjects are taking. If the adverse events are severe or frequent enough to outweigh the potential efficacy of a drug candidate,
the FDA or other regulatory authorities could deny approval of that drug candidate for any or all targeted indications. Even if one or
more of our drug candidates were approved for sale as drugs, the occurrence of even a limited number of adverse events or toxicities
when used in large populations may cause the FDA or foreign regulatory authorities to impose restrictions on, or stop, the further
marketing of those drugs. Indications of potential adverse events or toxicities which do not seem significant during the course of
clinical trials may later turn out to actually constitute serious adverse events or toxicities when a drug is used in large populations or
for extended periods of time.
We have observed certain adverse events in the clinical trials conducted with our drug candidates. For example, in clinical trials
of omecamtiv mecarbil, adverse events of chest discomfort, palpitations, dizziness and feeling hot, increases in heart rate, declines in
blood pressure, electrocardiographic changes consistent with acute myocardial ischemia and transient rises in the MB fraction of
creatine kinase and cardiac troponins I and T, which are indicative of myocardial infarction were observed during treatment with
omecamtiv mecarbil.
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In addition, clinical trials of reldesemtiv and omecamtiv mecarbil enroll patients who typically suffer from serious diseases
which put them at increased risk of death. These patients may die while receiving our drug candidates. In such circumstances, it may
not be possible to exclude with certainty a causal relationship to our drug candidate, even though the responsible clinical 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 regulatory approval for the sale of any resulting drugs, may significantly harm our business and negatively affect our
stock price.
The failure of a number of Phase 3 clinical trials evaluating other compounds as potential treatments for patients with ALS
may suggest an increased risk that our clinical development program of reldesemtiv in patients with ALS will also fail.
In recent years, a number of Phase 3 clinical trials of potential treatments for ALS have failed to demonstrate the requisite
efficacy for regulatory approval or for their continued development. These include our trial of tirasemtiv known as VITALITY-ALS,
Biogens trial of dexpramipexole, known as EMPOWER, the National Institute of Neurological Disorders and Strokes trial of
ceftriaxone, and Trophos SAs trial of olesoxime. Reldesemtiv, like these compounds, may fail in clinical development if it does not
show a statistically significant level of clinical efficacy or if the adverse event profile is too great compared to its benefits. Further,
even if we believe the data collected from the planned clinical development program of reldesemtiv are promising and should support
approval, the FDA or other regulatory authorities may not deem these data to be sufficient to support approval.
Notwithstanding GALACTIC-HF having met its primary efficacy endpoint, there is no guarantee that the FDA or any other
regulatory authority will approve omecamtiv mecarbil.
In November 2020, we announced the primary results from GALACTIC-HF, the Phase 3 trial of omecamtiv mecarbil. The
results of GALACTIC-HF show that after a median duration of follow-up of 21.8 months, the trial demonstrated a statistically
significant effect of treatment with omecamtiv mecarbil to reduce risk of the primary composite endpoint of CV death or heart failure
events (heart failure hospitalization and other urgent treatment for heart failure) compared to placebo in patients treated with standard
of care (HR: 0.92; 95% CI: 0.86, 0.99, p-0.025). The trial results, however, showed that no secondary endpoints were met. In
particular, no reduction in the secondary endpoint of time to CV death was observed, and the KCCQ total symptom score by
randomization setting did not meet the significance threshold of P=0.002 based upon the multiplicity control testing procedure. No
assurances can be given that the primary endpoint results of GALACTIC-HF alone will be deemed sufficiently safe or efficacious to
warrant approval by the FDA or any other regulatory authority.
In December 2020, we announced that supplemental analyses of this lower ejection fraction subgroup in GALACTIC-HF
showed that this potentially greater treatment effect in patients who received omecamtiv mecarbil was consistently observed in
patients with characteristics that may indicate advanced heart failure status, such as being hospitalized within the last 3 months (HR
0.83, 95% CI 0.74 0.93, p=0.001), having New York Association Class III or IV heart failure (HR 0.80, 95% CI 0.71 0.90,
p<0.001), higher N-terminal-pro brain natriuretic peptide levels (HR 0.77, 95% CI 0.69 0.87, p<0.001), and lower blood pressures
(HR 0.81, 95% CI 0.70 0.92, p=0.002). The absolute risk reductions (ARR) ranged from 5.2% to 8.1% in these subgroups as
compared to the ARR of 2.1% observed in the overall population. Although the supplemental analyses showed that omecamtiv
mecarbil potentially has a greater treatment effect in these subgroups of trial patients, no assurance can be given that the FDA or any
other regulatory authority will consider any such subgroup analysis as the basis for an approval of omecamtiv mecarbil without
requiring additional clinical trials.
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 length of time and number of trial sites and patients required for clinical trials vary substantially based on the
type, complexity, novelty, intended use of the drug candidate and safety concerns. Clinical trials of our current drug candidates can
each continue for several more years. However, the clinical trials for all or any of our drug candidates may take significantly longer to
complete. The commencement and completion of our or our partners clinical trials could be delayed or prevented by many factors,
including, but not limited to:
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delays in obtaining, or inability to obtain, regulatory or other approvals to commence and conduct clinical trials in the
manner we or our partners deem 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 sites and other entities involved in the conduct of our or our partners clinical trials;
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delays or additional costs in developing, or inability to develop, appropriate formulations of our drug candidates for clinical
trial use;
slower than expected rates of patient recruitment and enrollment;
for those drug candidates that are the subject of a strategic alliance, delays in reaching agreement with our partner as to
appropriate development strategies;
a regulatory authority may require changes to a protocol for a clinical trial that then may require approval from regulatory
agencies in other jurisdictions where the trial is being conducted;
an institutional review board (IRB) or its foreign equivalent may require changes to a protocol that then require approval
from regulatory agencies and other IRBs and their foreign equivalents, or regulatory authorities may require changes to a
protocol that then require approval from the IRBs or their foreign equivalents;
for clinical trials conducted in foreign countries, the time and resources required to identify, interpret and comply with
foreign regulatory requirements 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 good clinical practices and other applicable laws and regulations, including those concerning informed
consent;
inability or unwillingness of investigators or their staffs to follow clinical protocols;
failure by our clinical research organizations, clinical manufacturing organizations and other third parties supporting our or
our partners clinical trials to fulfill their obligations;
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 trial endpoints obsolete; and
results from non-clinical studies that may adversely impact the timing or further development of our drug candidates.
We do not know whether planned clinical trials will begin on time, or whether planned or currently ongoing clinical trials will
need to be restructured or will be completed on schedule, if at all. Significant delays in clinical trials will impede our ability to
commercialize our drug candidates and generate revenue and could significantly increase our development costs.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or
otherwise adversely affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll
a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in
clinical trials for a variety of reasons. The enrollment of patients depends on many factors, including:
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the patient eligibility criteria defined in the protocol;
the size of the patient population required for analysis of the trials primary endpoints;
the proximity of patients to study sites;
the design of the trial;
the ability to recruit clinical trial investigators with the appropriate competencies and experience;
clinicians and patients perceptions as to the potential advantages of the product candidate being studied in relation to
other available therapies or clinical trials, including any new drugs that may be approved for the indications we are
investigating or clinical trial results;
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the ability to obtain and maintain patient consents; and
the risk that patients enrolled in clinical trials will drop out of the trials before completion.
In addition, our and our partners clinical trials will compete with other clinical trials for product candidates that are in the same
therapeutic areas as our and our partners product candidates, and this competition will reduce the number and types of patients
available to us, because some patients who might have opted to enroll in our or our partners trials may instead opt to enroll in a trial
being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some
of our or our partners clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of
patients who are available for our clinical trials in such clinical trial site.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials,
which could prevent completion of these trials and adversely affect our and our partners ability to advance the development of
product candidates.
The transition of responsibilities for manufacturing, development, regulatory, commercial planning and other activities
related to omecamtiv mecarbil and CK-136 (formerly known as AMG 594) from Amgen to us may not be completed effectively
or efficiently and could result in substantial delays to these programs and significant increased costs to us.
On November 23, 2020, we announced that Amgen elected to terminate the Amgen Agreement and thereby end its
collaboration with Cytokinetics, effective May 20, 2021, and that it intends to transition development and commercialization rights
for omecamtiv mecarbil and CK-136 to us. Pursuant to the terms of the Amgen Agreement, upon the effective date of Amgens
termination, research, development and commercialization rights for compounds, including omecamtiv mecarbil and CK-136, will
transition to us. In addition, Amgen will have certain obligations set forth in the Amgen Agreement, including: cooperating with
Cytokinetics and its designee(s) to facilitate a reasonably smooth, orderly and prompt transition of the programs, including transfer
and assignment to us of specified regulatory filings, data and other information; if requested by us, transferring inventory of
compounds to us at our expense; to the extent possible and requested by us, assigning relevant third-party manufacturing agreements
to us; and granting to us exclusive and non-exclusive licenses to certain intellectual property rights.
No assurance can be made that Amgen will cooperate with us and take such actions required of Amgen under the Amgen
Agreement to transition the omecamtiv mecarbil and/or CK-136 programs to us effectively or efficiently. Amgen may not dedicate
sufficient resources to enable a prompt and efficient transition; it could reallocate and not make available to us key personnel who are
aware of vital program information; it could provide information and take actions in a uncoordinated and inefficient manner that is
difficult for our personnel to receive, understand and/or utilize; it could fail to identify program information that we are unaware of
and thereby denying us the benefits of such information; it could immediately halt its regulatory interactions and other development
activities and/or obstruct us from undertaking such regulatory interactions and other development activities prior to the effective date
of termination of the Amgen Agreement; and it could take a narrow interpretation of its transition obligations under the Amgen
Agreement and thereby denying us the ability to continue the development activities of omecamtiv mecarbil or CK-136 without
duplicative work, all of which could result in substantial delays in the development and/or commercialization programs related to
omecamtiv mecarbil and/or CK-136.
No assurance can be made that we will have the full benefit of all contracts between Amgen and various third parties under
which such third parties may have provided Amgen with relevant services and/or materials (including drug product and drug
substance) for the benefit of the omecamtiv mecarbil and/or CK-136 programs. Certain contracts may not be assignable to us without
the cooperation and consent of third parties, and third parties may be unwilling to enter into replacement contracts with us on
acceptable terms or at all. In such cases, we would be forced to seek alternative third party service providers and/or CMOs, potentially
leading to substantial delays in the omecamtiv mecarbil and/or CK-136 programs and significant costs to us.
No assurance can be made that Amgen will not develop products, or enable its partners to develop products, that compete with
omecamtiv mecarbil and/or CK-136 and use the information and experience gained in developing omecamtiv mecarbil and/or CK-136
to its or its partners competitive advantage, thereby substantially diminishing the commercial prospects for omecamtiv mecarbil
and/or CK-136.
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Finally, no assurance can be made that we will have or be able to mobilize the capital, personnel, systems or other recourses
required by the effective termination of the Amgen Agreement to ensure our ability to meet our legal or regulatory responsibilities and
obligations, to continue the development of the omecamtiv mecarbil and/or CK-136 programs, including the design and conduct of
clinical trials of omecamtiv mecarbil and/or CK-136, without substantial delays to the timelines previously anticipated prior to
Amgens decision to terminate the Amgen Agreement or without significant costs as compared to our anticipated costs prior to
Amgens decision to terminate the Amgen Agreement, or to ensure commercial preparedness for a potential product launch of
omecamtiv mecarbil. In such cases, we would have to seek a new partner for development or commercialization, curtail or abandon
that development or commercialization, or undertake and fund the development of omecamtiv mecarbil or CK-136 or
commercialization of the resulting drugs 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 commercialization of omecamtiv mecarbil ourselves, we would have to
curtail or abandon that development or commercialization of omecamtiv mecarbil and/or CK-136, which could harm our business.
The transition of omecamtiv mecarbil from Servier to Amgen may not be completed effectively or efficiently and could result
in substantial delays to the omecamtiv mecarbil development program in Europe and significant increased costs to us.
On December 23, 2020, we announced that Amgen notified us that Servier a elected to terminate the Servier Agreement. The
termination of the Servier Agreement is effective as of March 18, 2021, after which all development, commercialization and other
rights with respect to omecamtiv mecarbil previously granted by Amgen to Servier will revert to Amgen. Given Serviers notice to
Amgen to terminate the Servier Agreement and given Amgens decision to terminate the Amgen Agreement, all worldwide rights
related to the development and commercialization of omecamtiv mecarbil will now return to Cytokinetics commensurate with the
effective termination of the Amgen Agreement on May 20, 2021.
As we are not a party to the Servier Agreement, we are wholly dependent on Amgen and Servier to ensure that all development
and pre-commercial activities of Servier in Europe and the Commonwealth of Independent States, including Russia, are properly
transitioned to Amgen, so as to enable Amgen to facilitate a reasonably smooth, orderly and prompt transition of the programs in such
territories to us.
The failure to successfully develop, validate and obtain regulatory clearance or approval of the OM Assay by Microgenics
could harm our development and commercialization strategy for omecamtiv mecarbil.
An important element of our development and commercialization strategy for omecamtiv mecarbil is the development of the
OM Assay used for the in vitro measurement of concentrations of omecamtiv mecarbil in human blood and other bodily fluids, which
is intended to ensure personalized dose optimization of omecamtiv mecarbil. The Assay Agreement is not assignable without the
consent of Microgenics, and although we have commenced discussions with Microgenics in connection with the potential assignment
of the Assay Agreement from Amgen to us and the continued development of the OM Assay by Microgenics such that the OM Assay
may be approved by the FDA and other regulatory authorities and ready for commercialization upon commercial launch of omecamtiv
mecarbil, there is no guarantee that Microgenics will agree to such assignment or that we will be able to conclude an agreement with
Microgenics on terms that are favorable to us.
The development of the OM Assay for novel therapeutic such as omecamtiv mecarbil can be complex from an operational and
regulatory perspective because of the need for both the drug and the diagnostic to receive regulatory clearance or approval. Should the
regulatory clearance or approval process for the OM Assay be delayed, it could impact our ability to successfully commercialize
omecamtiv mecarbil. Moreover, the OM Assay may not be readily or economically available in all territories where omecamtiv
mecarbil could ultimately be commercialized.
We will depend on Ji Xing for the development and commercialization of CK-274 in China and Taiwan.
Under the terms of the Ji Xing License Agreement, Ji Xing will be responsible for the development and commercialization of
CK-274 in China and Taiwan. The timing and amount of any milestone and royalty payments we may receive under the Ji Xing
License Agreement will depend in part on the efforts and successful commercialization of CK-274 by Ji Xing. We do not control the
individual efforts of Ji Xing, and any failure by Ji Xing to devote sufficient time and effort to the development and commercialization
of CK-274 or to meet its obligations to us, including for future milestone and royalty payments; or to adequately deploy business
continuity plans in the event of a crisis, or to satisfactorily resolve significant disagreements with us could each have an adverse
impact on our financial results and operations. We will also depend on Ji Xing to comply with all applicable laws relative to the
development and commercialization of CK-274 in China and Taiwan. If Ji Xing were to violate, or was alleged to have violated, any
laws or regulations during the performance of its obligations for us, it is possible that we could suffer financial and reputational harm
or other negative outcomes, including possible legal consequences.
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Any termination, breach or expiration of the Ji Xing License Agreement could have a material adverse effect on our financial
position by reducing or eliminating the potential for us to receive milestones and royalties. In such an event, we may be required to
devote additional efforts and to incur additional costs associated with pursuing the development and commercialization of CK-274 in
China and Taiwan. Alternatively, we may attempt to identify and transact with a new sub-licensee, but there can be no assurance that
we would be able to identify a suitable sub-licensee or transact on terms that are favorable to us.
If we do not enter into strategic alliances for our unpartnered drug candidates or research and development programs or fail
to successfully maintain our current or future strategic alliances, we may have to reduce, delay or discontinue our
advancement of our drug candidates and programs 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. Our strategy for developing, manufacturing and commercializing our drug candidates currently requires us to enter
into and successfully maintain strategic alliances 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 no control.
Our ability to commercialize drugs that we develop with our partners and that generate royalties from product sales depends on
our partners abilities to assist us in establishing the safety and efficacy of our drug candidates, obtaining and maintaining regulatory
approvals and achieving market acceptance of the drugs once commercialized. Our partners may elect to delay or terminate
development of one or more drug candidates, independently develop drugs that could 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 of other
priorities they face. In addition, new business combinations or changes in a partners business strategy may adversely affect its
willingness or ability to carry 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 will have 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 these programs ourselves. Alternatively, if we elect to continue to conduct any of these
drug development programs or research programs on our own, we will need to expand our capability to conduct clinical development
by bringing additional skills, technical expertise and resources into our organization. This would require 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, or the commercialization 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 or the commercialization of a drug, we will need to raise additional capital to:
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fund clinical trials and seek regulatory approvals;
expand our development capabilities;
engage third-party manufacturers for such drug candidate or drug;
build or access commercialization capabilities;
implement additional internal systems and infrastructure;
• maintain, defend and expand the scope of our intellectual property; and
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hire and support additional management and scientific personnel.
Our future funding requirements will depend on many factors, including, but not limited to:
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the rate of progress and costs of our or our partners 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;
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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 may establish.
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 finance our future cash needs primarily through strategic alliances and other financings. We cannot be certain
that additional funding 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 of or eliminate one or more of our clinical trials or research and development programs or future
commercialization initiatives.
We depend on CROs to conduct our clinical trials and have limited control over their performance. If these CROs do not
successfully carry out their contractual duties or meet expected deadlines, or if we lose any of our CROs, we may not be able to
obtain regulatory approval for or commercialize our product candidates on a timely basis, if at all.
We have used and intend to continue to use a limited number of CROs within and outside of the United States to conduct
clinical trials of our drug candidates and related activities. We do not have control over many aspects of our CROs activities, and
cannot fully control the amount, timing or quality of resources that they devote to our programs. CROs may not assign as high a
priority to our programs or pursue them as diligently as we would if we were undertaking these programs ourselves. The activities
conducted by our CROs therefore may not be completed on schedule or in a satisfactory manner. CROs may also give higher priority
to relationships with our competitors and potential competitors than to their relationships with us. Outside of the United States, we are
particularly dependent on our CROs expertise in communicating with clinical 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 FDAs 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 operations and delay or prevent the development, approval and commercialization of our drug
candidates. For example, in June 2013, we learned from our data management vendor for our Phase 2b clinical trial of tirasemtiv in
patients with ALS, BENEFIT-ALS, that a programming error in the electronic data capture system controlling study drug assignment
caused 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 order to maintain the originally intended statistical power of the trial, we amended the protocol to permit
enrollment of approximately 680 patients, or 180 patients in addition to the 500 patients allowed under the existing protocol. This
protocol amendment resulted in additional costs and delays in conducting BENEFIT-ALS. Further, for the quarter ended
September 30, 2016, we determined that there was an error in the accounting for the recognition of clinical research and development
expenses related to the information received from one of our CROs, which resulted in a restatement of our clinical research and
development expenses, related clinical accrual accounts and related financial disclosures as of and for the three and nine month
periods ended September 30, 2016. 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 CROs carrying 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 or prevented. In many cases, our CROs have
the right to terminate their agreements with us in the event of an uncured material breach. Identifying, qualifying and managing
performance of third-party service providers can be difficult, time consuming and cause delays in our development programs. In
addition, there is a natural transition period when a new CRO commences work and the new CRO may not provide the same type or
level of services as the original provider. If any of our relationships with our third-party CROs terminate, we may not be able to enter
into arrangements with alternative CROs or to do so timely or on commercially reasonable terms.
We have no manufacturing capacity and depend on our strategic partners and contract manufacturers to produce our clinical
trial materials,
including our drug candidates, and anticipate continued reliance on contract manufacturers for the
development and commercialization of our potential drugs.
We do not currently operate manufacturing facilities for clinical or commercial production of our drug candidates. We have
limited experience in drug formulation and manufacturing, and we lack the resources and the capabilities to manufacture any of our
drug candidates on a clinical or commercial scale.
Amgen had assumed responsibility to conduct these activities for the ongoing development of omecamtiv mecarbil worldwide.
Now that Amgen has elected to terminate the Amgen Agreement, we will need to engage with Amgens existing contract
manufacturers for the manufacture and packaging of omecamtiv mecarbil, and if we are unable to enter into new agreements on
acceptable terms therewith, we may need to transfer the manufacturing to new contract manufacturers and incur delays and incur
additional costs in doing so.
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Prior to entry into the Astellas FSRA Agreement, Astellas had primary responsibility for the manufacturing for the ongoing
development of reldesemtiv worldwide. Now that we have assumed responsibility for the ongoing development of reldesemtiv
worldwide, we will need to effect a transfer of manufacturing of reldesemtiv to one or more contract manufacturers and to rely on
such contract manufacturers for future supply.
Under the Ji Xing License Agreement, we have committed to providing Ji Xing with supply of CK-274 for development and
commercialization of CK-274 in China and Taiwan, which we will have to source from our contract manufacturers. We expect to rely
on contract manufacturers to supply all future drug candidates for which we conduct development, as well as other materials required
to conduct our clinical trials, and to fulfil our obligations under the Ji Xing License Agreement.
If any of our existing or future contract manufacturers fail to perform satisfactorily, it could delay development or regulatory
approval of our drug candidates or commercialization of our drugs, producing additional losses and depriving us of potential product
revenues, and also lead to our breach of the Ji Xing License Agreement, giving rise to the ability to terminate such agreement and
other adverse consequences as stipulated in the Ji Xing License Agreement. In addition, if a contract manufacturer fails to perform as
agreed, our ability to collect damages may be contractually limited.
Our drug candidates require precise high-quality manufacturing. The failure to achieve and maintain high manufacturing
standards, including failure to detect 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 withdrawals and other problems that could seriously hurt our business. Contract
drug manufacturers often encounter difficulties involving production yields, quality control and quality assurance and shortages of
qualified personnel. These manufacturers are subject to stringent regulatory requirements, including the FDAs current good
manufacturing practices regulations and similar foreign laws and standards. Each contract manufacturer must pass a pre-approval
inspection before we can obtain marketing approval for any of our drug candidates and following approval will be subject to ongoing
periodic unannounced inspections by the FDA, the U.S. Drug Enforcement Agency and other regulatory agencies, to ensure strict
compliance with current good manufacturing practices and other applicable government regulations and corresponding foreign laws
and standards. We seek to ensure that our contract manufacturers comply fully with all applicable regulations, laws and standards.
However, we do not have control over our contract manufacturers compliance with these regulations, laws and standards. If one of
our contract manufacturers fails to pass its pre-approval inspection or maintain ongoing compliance at any time, the production of our
drug 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 good manufacturing practice requirements of the FDA or other comparable regulatory agencies,
could result in sanctions being imposed on us. These sanctions could include fines, injunctions, civil penalties, failure of regulatory
authorities to grant marketing approval of our products, delay, suspension or withdrawal of approvals, license revocation, product
seizures or recalls, operational restrictions and criminal prosecutions, any of which could significantly and adversely affect 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 the time required to successfully produce, store and distribute our drug candidates. If a natural disaster,
business failure, strike or other difficulty occurs, we may be unable to replace these contract manufacturers in a timely or cost-
effective manner and the production of our drug candidates would be interrupted, resulting in delays, loss of customers and additional
costs.
Switching manufacturers or manufacturing sites would be difficult and time-consuming because the number of potential
manufacturers is limited. In addition, before a drug from any replacement manufacturer or manufacturing site can be commercialized,
the FDA and, in some cases, foreign regulatory agencies, must approve that site. These approvals would require regulatory testing and
compliance inspections. A new manufacturer or manufacturing site also would have to be educated in, or develop substantially
equivalent processes for, production of our drugs and drug candidates. It may be difficult or impossible to transfer certain elements of
a manufacturing process to a new manufacturer or for us to find a replacement manufacturer on acceptable terms quickly, or at all,
either of which would delay or prevent our ability to develop drug candidates and commercialize any resulting drugs.
39
We may not be able to successfully manufacture our drug candidates in sufficient quality and quantity, which would delay or
prevent us from developing our drug candidates and commercializing resulting approved drugs, if any.
To date, our drug candidates have been manufactured in quantities adequate for preclinical studies and early through late-stage
clinical trials. In order to conduct large scale 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 some drug candidates in larger quantities. We may not be able to
successfully repeat or 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 makes improvements in the
manufacturing process for our drug candidates, we may not own, or may have to share, the intellectual property rights to those
improvements. Significant changes or scale-up of manufacturing may require additional validation studies, which are costly and which
regulatory authorities must review and approve. In addition, quality issues may arise during those changes or scale-up activities
because of the inherent properties of a drug candidate itself or of a drug candidate in combination with other components added during
the manufacturing and packaging process, or during shipping and storage of the finished product or active pharmaceutical ingredients.
If we are unable to successfully manufacture of any of our drug candidates in sufficient quality and quantity, the development of that
drug candidate and regulatory approval or commercial launch for any resulting drugs may be delayed or there may be a shortage in
supply, which could significantly harm our business. In addition, data demonstrating the stability of both drug substance and drug
product, using the commercial manufacturing process and at commercial scale, are required for marketing applications. Failure to
produce drug substance and drug products in a timely manner and obtain stability data could result in delay of submission of
marketing applications.
The mechanisms of action of our drug candidates are unproven, and we do not know whether we will be able to develop any
drug of commercial value.
We have discovered and develop drug candidates that have what we believe are novel mechanisms of action directed against
cytoskeletal targets. Because no currently-approved drugs appear to operate via the same biochemical mechanisms as our compounds,
we cannot be certain that our drug candidates will result in commercially viable drugs that safely and effectively treat the indications
for which we intend to develop them. The results we have seen for our compounds in preclinical models may not translate into similar
results in humans, and results of early clinical trials in humans may not be predictive of the results of larger clinical trials that may
later be conducted with our drug candidates. Even if we are successful in developing and receiving regulatory approval for a drug
candidate for the treatment of a particular disease, we cannot be certain that it will be accepted by prescribers 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 the treatment of
other diseases. If we or our partners are unable to successfully develop and commercialize our drug candidates, our business will be
materially harmed.
Moreover, in the event any of our competitors were to develop their own drug candidates that have a similar mechanism of
action to any of our drug candidates and compounds, any efficacy or safety concerns identified during the development of such similar
drug candidates may have an adverse impact on the development of our own drug candidates. For example, if a competitors drug
candidate having a similar mechanism of action as any of our own drug candidates is shown in clinical trials to give rise to serious
safety concerns or have poor efficacy when administered to the target patient population, the FDA or other regulatory bodies may
subject our drug candidates to increased scrutiny, leading to additional delays in development and potentially decreasing the chance of
ultimate approval of our own drug candidates.
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, co-own or hold exclusive licenses to a number of U.S. and foreign patents and patent applications directed to our drug
candidates, compounds and research 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 or infringing 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, we, our licensors 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 our competitive
advantage. If we are unable to obtain and maintain sufficient intellectual property protection for our technologies and drug candidates,
or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and
commercialize drug candidates similar or identical to ours, and our ability to successfully commercialize product candidates that we
may pursue may be impaired.
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Obtaining and enforcing biopharmaceutical patents is costly, time consuming and complex, and we may not be able to file and
prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent
applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our
research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation,
filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical
inventions 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 pending or future patent applications is uncertain and involves complex legal, scientific and factual questions. The
standards which the U.S. Patent and Trademark Office and its foreign counterparts use to grant patents are not always applied
predictably or uniformly and are subject to change. To date, no consistent policy has emerged regarding the breadth of claims allowed
in biotechnology and pharmaceutical patents. Thus, we cannot be sure that any patents will issue from any pending or future patent
applications owned by, co-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 or enforceable by a court of law, will provide us with any significant protection against competitive products, or will
afford us a commercial advantage over competitive 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
or 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 or issued patents;
•
•
•
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our intellectual property rights;
some or all of our or our licensors pending patent applications may not result in issued patents or the claims that issue may
be narrow in scope and not provide us with competitive advantages;
our and our licensors issued patents may not provide a basis for commercially viable drugs or therapies or may be
challenged and invalidated by third parties;
our or our licensors patent applications or patents may be subject to interference, post-grant proceedings, derivation,
reexamination, inter partes review, opposition or similar legal and administrative proceedings that may result in a reduction
in their scope or their loss altogether;
• we may not develop additional proprietary technologies or drug candidates that are patentable; or
•
the patents of others may prevent us or our partners from discovering, developing or commercializing our drug candidates.
We may not be able to protect our intellectual property rights throughout the world. Patent protection is afforded on a country-
by-country basis. Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be
prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than
those in the 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 effectively monitor and assess intellectual property developed by these contractors. We
therefore may not be able to effectively protect this intellectual property and could lose potentially valuable intellectual property
rights. In addition, the legal protection afforded to inventors and owners of intellectual property in countries outside 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
protect intellectual property developed by these contractors to the same extent as if these development activities were being conducted
in the United States. If we encounter difficulties in protecting our intellectual property rights in foreign jurisdictions, our business
prospects could be substantially harmed.
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Patent terms may be inadequate to protect our competitive position on our technologies and drug candidates for an adequate
amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a
patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a
patent, and the protection it affords, is limited. Even if patents covering our technologies and drug candidates are obtained, once the
patent life has expired, we may be open to competition from competitive products, including generics or biosimilars. Given the
amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates
might expire before or shortly after such candidates are commercialized. As a result, our owned, co-owned and licensed patent
portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or our
partners.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental
fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the
United States in several stages over the lifetime of the patents and/or applications. Non-compliance could result in abandonment or
lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an
event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property. We rely
on intellectual property assignment agreements with our corporate partners, employees, consultants, scientific advisors and other
collaborators to grant us ownership of new intellectual property that is developed. These agreements may not result in the effective
assignment to us of that intellectual property. As a result, our ownership of key intellectual property could be compromised.
We or our licensors may be subject to claims that former employees, collaborators, consultants or other third parties have an
interest in our owned, co-owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For
example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, collaborators,
consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and
other claims challenging inventorship or our or our licensors ownership of our owned, co-owned or in-licensed patents, trade secrets
or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we
may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to
our product candidates. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a
distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We are a party to license agreements and may need to obtain additional licenses from others to advance our research and
development activities or allow the commercialization of our drug candidates and future drug candidates we may identify and pursue.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or
these agreements are terminated or we otherwise experience disruptions to our business relationships with our licensors, we could lose
intellectual property rights that are important to our business. Our licensors might conclude that we have materially breached our
obligations under such license agreements and might therefore terminate, or seek to terminate, the license agreements, thereby
removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If our
license agreements are terminated, we may be required to cease our development and commercialization of our product candidates.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of
operations and prospects. Moreover, disputes may arise regarding intellectual property subject to a licensing agreement. The
resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the
relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the agreement,
either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing
arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product
candidates. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions,
results of operations and prospects.
Changes in either the patent laws or their interpretation in the United States or other countries may diminish the value of our
intellectual property or our ability to obtain patents. For example, the America Invents Act of 2011 may affect the scope, strength and
enforceability of our patent rights in the United States or the nature of proceedings which may be brought by us related to our patent
rights in the United States.
42
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 protection for those products, competitors could duplicate them for approval and sale in the United States without
repeating the extensive testing required of us or our partners to obtain FDA approval. Regardless of any patent protection, under
current law, an application for a generic version of a new chemical entity cannot be 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 could approve 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 conduct a
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 that we or our partners conducted to demonstrate that the product is safe and effective. In the absence of
adequate patent protection for our products in other countries, competitors may similarly be able to obtain regulatory approval in those
countries of generic versions of our products.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely
affected and our business would be harmed.
We also rely on trade secrets to protect our technology, particularly where we believe patent protection is not appropriate or
obtainable. However, trade secrets are often difficult to protect, especially outside of the United States. While we endeavor to use
reasonable efforts to protect our trade secrets, our or our partners employees, consultants, contractors or scientific and other advisors
may unintentionally or willfully disclose our information to competitors. In addition, confidentiality agreements, if any, executed by
those individuals may not be enforceable or provide meaningful protection for our trade secrets or other proprietary information in the
event of unauthorized use or disclosure. We cannot be certain that such agreements have been entered into with all relevant parties,
and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors
will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Pursuing a claim that a third party had illegally obtained and was using our trade secrets would be expensive and time-consuming, and
the outcome would be unpredictable. Even if we are able to maintain our trade secrets as confidential, if our competitors lawfully
obtain or 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 exclude competitors from developing or marketing competing drugs, and we may not generate enough revenue from
product sales to justify the cost of development of our drugs or to achieve or maintain profitability.
If we are sued for infringing third-party intellectual property rights, it will be costly and time-consuming, and an unfavorable
outcome could have a significant adverse effect on our business.
Our ability to commercialize drugs depends on our ability to use, manufacture and sell those drugs without infringing the
patents or other proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications owned
by third parties exist in the therapeutic areas in which we are developing drug candidates and seeking new potential drug candidates.
In addition, because patent applications can take several years to issue, there may be currently pending applications, unknown to us,
which could later result in issued patents that our activities with our drug candidates could infringe. 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. Further development of these products could be impacted by these patents and result in significant legal fees.
If a third party claims that our actions infringe its patents or other proprietary rights, we could face a number of issues that
could seriously harm our competitive position, including, but not limited to:
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•
•
•
infringement and other intellectual property claims that, even if meritless, can be costly and time-consuming to litigate,
delay the regulatory approval process and divert managements attention from our core business operations;
substantial damages for past infringement which we may have to pay if a court determines that our drugs or technologies
infringe a third partys patent or other proprietary rights;
a court prohibiting us from selling or licensing our drugs or technologies unless the holder licenses the patent or other
proprietary rights to us, which it is not required to do; and
if a license is available from a holder, we may have to pay substantial royalties or grant cross-licenses to our patents or
other proprietary rights.
If any of these events occur, it could significantly harm our business and negatively affect our stock price.
43
We may undertake infringement or other legal proceedings against third parties, causing us to spend substantial resources on
litigation and exposing our own intellectual property portfolio to challenge.
Third parties may infringe our patents. To prevent infringement or unauthorized use, we may need to file infringement suits,
which are expensive and time-consuming. In an infringement proceeding, a court may decide that one or more of our patents is
invalid, unenforceable, or both. In such case third parties may 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 other party from using the technology at issue on the
ground that the other partys activities are not covered by our patents. Policing unauthorized use of our intellectual property is
difficult, and we may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may
not 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, our patent rights.
The uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to
conduct clinical trials, continue our research programs, license necessary technology from third parties, or enter into development
partnerships that would help us bring our drug candidates or other product candidates that we may identify to market. Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type of litigation. There could also be public
announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
We may become involved in disputes with our strategic partners over intellectual property ownership, and publications by our
research collaborators and clinical investigators could impair our ability to obtain patent protection or protect our proprietary
information, either of which would have a significant impact on our business.
Inventions discovered under our current or future strategic alliance agreements may become jointly owned by our strategic
partners and us in some cases, 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 or whether it is jointly owned, and disputes could arise regarding ownership or use of those
inventions. These disputes could be costly and time-consuming, and an unfavorable outcome could have a significant adverse effect
on our 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 research collaborators and
clinical investigators relating to our research and development programs, either with or without our consent, could benefit our current
or potential competitors and may impair our ability to obtain patent protection or protect our proprietary information, which could
significantly harm our business.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties or 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 or potential competitors. Although no legal proceedings against us are currently pending, we may be subject
to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending these claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their
work product could hamper or prevent our ability to develop and commercialize certain potential drugs, which could significantly
harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and distract
management.
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Our competitors may develop drugs that are less expensive, safer or more effective than ours, which may diminish or eliminate
the commercial success of any drugs that we may commercialize.
We compete with companies that have developed drugs or are developing drug candidates for cardiovascular diseases, diseases
and conditions associated with muscle weakness or wasting and other diseases for which our drug candidates may be useful
treatments. For example, if omecamtiv mecarbil is approved for marketing by the FDA or other regulatory authorities for the treatment
of heart failure, it would compete against other drugs used for the treatment of acute and chronic heart failure. These include generic
drugs, such as milrinone, dobutamine or digoxin and branded drugs such as Corlanor® (ivabradine), Entresto® (sacubitril/valsartan)
and Verquvo® (vericiguat). Omecamtiv mecarbil could also potentially compete against other novel drug candidates and therapies in
development, such as those being developed by, but not limited to, Novartis AG, Merck & Co., Inc., Bayer AG, AstraZeneca PLC and
Bristol-Myers Squibb Company. Omecamtiv mecarbil may also compete with currently approved drugs, such as in the SGLT2 class,
that may expand their labels to include treatment of patients with heart failure, including Forxiga® (dapagliflozin), Invokana®
(canagliflozin), and Jardiance® (empagliflozin). In addition, there are a number of medical devices both marketed and in development
for the potential treatment of heart failure.
If reldesemtiv is approved for marketing by the FDA or other regulatory authorities for the treatment of ALS, it will then
compete with RADICAVATM (edaravone), the first FDA approved drug for the treatment of ALS since riluzole in 1995, and may then
compete with other potential new therapies for ALS that are currently being developed by companies including, but not limited to, AB
Science, Alexion Pharmaceuticals, Amylyx Pharmaceuticals Inc, BrainStorm Cell Therapeutics, Medicinova, Inc., Mitsubishi Tanabe
Pharma Corporation, Orphazyme, and Revalesio Corporation. Also, if reldesemtiv is approved by the FDA or other regulatory
authorities for the treatment of SMA, it may be used in combination with or compete with SPINRAZA® (nusinersen), Zolgensma®
(onasemnogene abeparvovec-xioi) and/or Evrysdi (risdiplam) or any other potential new therapies being developed by companies
including, but not limited to, F. Hoffman-La Roche Ltd. (in collaboration with PTC Therapeutics, Inc.). If reldesemtiv is approved by
the FDA or other regulatory authorities for the treatment of non-neuromuscular indications associated with muscle weakness, it may
then compete with other potential new therapies being developed by companies including, but not
limited to, Regeneron
Pharmaceuticals, Inc. (in collaboration with Sanofi), Eli Lilly and Company, Stealth BioTherapeutics, and Novartis (in collaboration
with MorphoSys AG).
If CK-274 is approved for marketing by the FDA or other regulatory authorities for the treatment of HCM, it may compete with
mavacamten, a drug candidate being developed by Bristol-Myers Squibb Company.
Our competitors may:
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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;
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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 obtain regulatory approval; or
introduce therapies or market drugs that render the market opportunity for our potential drugs obsolete.
We will compete for market share against large pharmaceutical and biotechnology companies and smaller companies that are
collaborating with larger pharmaceutical companies, new companies, academic institutions, government agencies and other public and
private research organizations. Many of these competitors, either alone or together with their partners, may develop new drug
candidates that will compete with ours. Many of these competitors have larger research and development programs or substantially
greater financial resources than we do. Our competitors may also have significantly greater experience in:
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developing drug candidates;
undertaking preclinical testing and clinical trials;
building relationships with key customers and opinion-leading physicians;
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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 our potential drugs, we may not achieve commercial success. In addition, the life sciences industry is characterized
by rapid technological change. If we fail to stay at the forefront of technological change, we may be unable to compete effectively.
Our competitors may render our technologies obsolete by improving existing technological approaches or developing new or different
approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research
approach and proprietary technologies.
We have been granted orphan designation by the FDA and EMA for reldesemtiv for the potential treatment of SMA and ALS
and orphan designation by the FDA for CK-274 for the potential treatment of symptomatic HCM; however, there can be no
guarantee that we will receive orphan approval for reldesemtiv or CK-274, nor that we will be able to prevent third parties
from developing and commercializing products that are competitive to reldesemtiv or CK-274.
We have been granted orphan drug designation in the U.S. by the FDA for reldesemtiv for the potential treatment of SMA and
the potential treatment of ALS and for CK-274 for the potential treatment of symptomatic HCM. In the U.S., upon approval from the
FDA of an NDA, products granted orphan drug designation are generally provided with seven years of marketing exclusivity in the
U.S., meaning the FDA will generally not approve applications for other product candidates that contain the same active ingredient for
the same orphan indication. Even if we are the first to obtain approval of an orphan product and are granted such exclusivity in the
U.S., there are limited circumstances under which a later competitor product may be approved for the same indication during the
seven-year period of marketing exclusivity, such as if the later product is shown to be clinically superior to our product or due to an
inability to assure a sufficient quantity of the orphan drug.
EMA has granted orphan medicinal product designation to reldesemtiv for the potential treatment of SMA and the potential
treatment of ALS. Orphan medicinal product status in the E.U. can provide up to 10 years of marketing exclusivity, meaning that
another application for marketing authorization of a later similar medicinal product for the same therapeutic indication will generally
not be approved in the E.U. Although we may have drug candidates that may obtain orphan drug exclusivity in Europe, the orphan
approval and associated exclusivity period may be modified for several reasons, including a significant change to the orphan
medicinal product designations or approval criteria after-market authorization of the orphan product (e.g., product profitability
exceeds the criteria for orphan drug designation), problems with the production or supply of the orphan drug or a competitor drug,
although similar, is safer, more effective or otherwise clinically superior than the initial orphan drug.
We are not guaranteed to maintain orphan status for reldesemtiv or CK-274 or to receive orphan status for reldesemtiv or CK-
274 for any other indication or for any of our other drug candidates for any indication. We are not guaranteed to be granted orphan
designation in the E.U. for CK-274 by the EMA. If our drug candidates that are granted orphan status were to lose their status as
orphan drugs or the marketing exclusivity provided for them in the U.S. or the E.U., our business and results of operations could be
materially adversely affected. While orphan status for any of our products, if granted or maintained, would provide market exclusivity
in the U.S. and the E.U. for the time periods specified above, we would not be able to exclude other companies from manufacturing
and/or selling products using the same active ingredient for the same indication beyond the exclusivity period applicable to our
product on the basis of orphan drug status. Moreover, we cannot guarantee that another company will not receive approval before we
do of an orphan drug application in the U.S. or the E.U. for a product candidate that has the same active ingredient or is a similar
medicinal product for the same indication as any of our drug candidates for which we plan to file for orphan designation and status. If
that were to happen, our orphan drug applications for our drug candidate for that indication may not be approved until the competing
companys period of exclusivity has expired in the U.S. or the E.U., as applicable. Further, application of the orphan drug regulations
in the U.S. and Europe is uncertain, and we cannot predict how the respective regulatory bodies will interpret and apply the
regulations to our or our competitors products.
46
Our failure to attract and retain skilled personnel could impair our drug development, commercialization and financial
reporting activities.
Our business depends on the performance of our senior management and key scientific and technical personnel. The loss of the
services of any member of our senior management or key scientific, technical or financial reporting staff may significantly delay or
prevent the achievement of drug development and other business objectives by diverting managements attention to transition matters
and identifying suitable replacements. For example, our management concluded that our internal controls over financial reporting
were not effective as of December 31, 2018 because an unremediated material weakness existed in our internal control over financial
reporting related to employee turnover resulting in a temporary lack of resources in financial reporting roles with the appropriate skills
to perform effective review during our financial statement close process. We also rely on consultants and advisors to assist us in
formulating our research and development strategy. All of our consultants and advisors are either self-employed or employed by other
organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other
organizations, that may affect their ability to contribute to us. In addition, if and as our business grows, we will need to recruit
additional executive management and scientific, technical and financial reporting personnel. There is intense competition for skilled
executives and employees with relevant scientific and technical expertise, and this competition is likely to continue. Our inability to
attract and retain sufficient scientific, technical and managerial personnel could limit or delay our product development activities,
which would adversely affect the development of our drug candidates and commercialization of our potential drugs and growth of 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 drug candidates that we elect to develop or commercialize independently or together with a partner. To manage our
anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our
facilities and continue to recruit and train additional qualified personnel. Due to our limited resources, we may not be able to
effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our
operations may lead to significant costs and may divert our management and business development resources. Any inability to manage
growth could delay the execution of our business plans or disrupt our operations.
We currently have limited sales or marketing capabilities and, if we are unable to enter into or maintain strategic alliances
with marketing partners or to develop our own sales and marketing capabilities, we may not be successful in commercializing
omecamtiv mecarbil or our other potential drugs.
We currently have limited sales, marketing or distribution capabilities. We plan to commercialize drugs that can be effectively
marketed and sold in concentrated markets that do not require a large sales force to be competitive. To achieve this goal, we will need
to establish and/or expand our own specialized sales force and marketing organization with technical expertise and supporting
distribution capabilities. Developing such an organization is expensive and time-consuming and 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 to
commercialize our drugs. If we determine not to market our drugs on our own, we will depend on strategic alliances with third parties
which have established distribution systems and direct sales forces to commercialize them. If we are unable to enter into such
arrangements on acceptable terms, we may not be able to successfully commercialize these drugs. To the extent that we are not
successful in commercializing any drugs ourselves or through a strategic alliance, our product revenues and business will suffer and
our stock price would decrease.
In relation to omecamtiv mecarbil specifically, prior to Amgens notification of its election to terminate the Amgen Agreement,
we expected that, consistent with the terms of such agreement, Amgen would bear primary operational and financial responsibility for
the sales, marketing, manufacturing and distribution activities related to the product launch and commercialization of omecamtiv
mecarbil. As a result of the anticipated termination of the Amgen Agreement, we must now build and/or expand our capabilities
without Amgens operational or financial support, which will result in significantly higher costs to us than what we had expected prior
to Amgens notification of its election to terminate the Amgen Agreement, and we may never be able to successfully build and/or
expand our commercialization capabilities to fully substitute the capabilities of Amgen of which we were reliant upon. Moreover, as a
result of Serviers notification of its election to terminate the Servier Agreement, we will need to seek a replacement partner in Europe
with the expertise and resources to successfully launch and commercialize omecamtiv mecarbil in Europe or to establish our own
commercial capabilities in Europe at our own cost and effort.
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Our internal computer systems, or those of our CROs, CMOs, supply chain partners, collaboration partners or other
contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our drug
development programs.
Despite the implementation of security measures, our internal computer systems and those of our third-party CROs, CMOs,
supply chain partners, collaboration partners and other contractors and consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and
cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss
of clinical study data from completed or ongoing clinical studies for any of our drug candidates could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security
breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur liability, our operations could be compromised and the further development of our product candidates
could be delayed.
Significant disruptions of information technology systems or breaches of data security could adversely affect our business.
Our business is increasingly dependent on complex and interdependent information technology systems, including internet-
based systems, databases and programs, to support our business processes as well as internal and external communications. As use of
information technology systems has increased, deliberate attacks and attempts to gain unauthorized access to computer systems and
networks have increased in frequency and sophistication. Our information technology, systems and networks are potentially
vulnerable to breakdown, malicious intrusion and computer viruses which may result in the impairment of production and key
business processes or loss of data or information. We are also potentially vulnerable to data security breacheswhether by employees
or otherswhich may expose sensitive data to unauthorized persons. We have in the past and may in the future be subject to security
breaches. For example, in February 2018, we discovered that our e-mail server suffered unauthorized intrusions in which proprietary
business information was accessed. In addition, in December 2019, one of our employees email account suffered an unauthorized
intrusion, leading to the submission and inadvertent payment of a fraudulent invoice in the amount of approximately one hundred
thousand dollars. In December 2019, our IT systems were exposed to a ransomware attack, which partially impaired certain IT
systems for a short period of time. Finally, in September 2020, one of our employees email account suffered unauthorized access as
result of a phishing incident, but the Company believes no sensitive information was accessed. Although we do not believe that we
have experienced any material losses related to security breaches, including in three recent email phishing incidents or the
ransomware attack, there can be no assurance that we will not suffer such losses in the future. Breaches and other inappropriate access
can be difficult to detect and any delay in identifying them could increase their harm. While we have implemented measures to protect
our data security and information technology systems, such measures may not prevent these events. Any such breaches of security and
inappropriate access could disrupt our operations, harm our reputation or otherwise have a material adverse effect on our business,
financial condition and results of operations.
Our revenue to date has been primarily derived from our research and license agreements, which can result in significant
fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily indicative of our future
revenue.
Our revenue is primarily derived from our research and license agreements, from which we receive upfront fees, contract
research payments, milestone and other contingent payments based on clinical progress, regulatory progress or net sales achievements
and royalties. Significant variations in the timing of receipt of cash payments and our recognition of revenue can result from
significant payments based on the execution of new research and license agreements, the timing of clinical outcomes, regulatory
approval, commercial launch or the achievement of certain annual sales thresholds. The amount of our revenue derived from research
and license agreements in any given period will depend on a number of unpredictable factors, including our ability to find and
maintain suitable collaboration partners, the timing of the negotiation and conclusion of collaboration agreements with such partners,
whether and when we or our collaboration partners achieve clinical, regulatory and sales milestones, the timing of regulatory
approvals in one or more major markets, reimbursement levels by private and government payers, and the market introduction of new
drugs or generic versions of the approved drug, as well as other factors. Our past revenue generated from these agreements is not
necessarily indicative of our future revenue. If any of our existing or future collaboration partners fails to develop, obtain regulatory
approval for, manufacture or ultimately commercialize any product candidate under our collaboration agreement, our business,
financial condition, and results of operations could be materially and adversely affected.
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Indebtedness under our Term Loan agreement bears interest at variable interest rates based on LIBOR. Changes in the
method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest
rates on our current or future indebtedness and may otherwise adversely affect our financial condition and results of
operations.
In July 2017, the Financial Conduct Authority, the authority that regulates LIBOR, announced that it intended to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (ARRC) in
the U.S. has proposed that the Secured Overnight Financing Rate (SOFR) is the rate that represents best practice as the alternative to
the U.S. dollar LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. ARRC has proposed a
paced market transition plan to SOFR from U.S. dollar LIBOR and organizations are currently working on industry-wide and
company-specific transition plans as relating to derivatives and cash markets exposed to U.S. dollar LIBOR. We have certain financial
contracts, including the Term Loan agreement, that are indexed to U.S. dollar LIBOR. Changes in the method of determining LIBOR,
or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future
indebtedness. Any transition process may involve, among other things, increased volatility or illiquidity in markets for instruments
that rely on LIBOR, reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased
borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. We are monitoring this
activity and evaluating the related risks, and any such effects of the transition away from LIBOR may result in increased expenses,
may impair our ability to refinance our indebtedness or hedge our exposure to floating rate instruments, or may result in difficulties,
complications or delays in connection with future financing efforts, any of which could adversely affect our financial condition and
results of operations.
Conversion of our outstanding 2026 Notes may result in the dilution of existing stockholders, create downward pressure on
the price of our common stock, and restrict our ability to take advantage of future opportunities.
The 2026 Notes may be converted into cash and shares of our common stock (subject to our right or obligation to pay cash in
lieu of all or a portion of such shares). If shares of our common stock are issued to the holders of the 2026 Notes upon conversion,
there will be dilution to our stockholders equity and the market price of our shares may decrease due to the additional selling pressure
in the market. Any downward pressure on the price of our common stock caused by the sale or potential sale of shares issuable upon
conversion of the 2026 Notes could also encourage short sales by third parties, creating additional selling pressure on our stock. The
existence of the 2026 Notes and the obligations that we incurred by issuing them may restrict our ability to take advantage of certain
future opportunities, such as engaging in future debt or equity financing activities.
The accounting method for the 2026 Notes could adversely affect our reported financial condition and results.
The accounting method for reflecting the 2026 Notes on our balance sheet, accruing interest expense for the notes and
reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported
earnings and financial condition.
Under applicable accounting principles, the initial liability carrying amount of the 2026 Notes will be the fair value of a similar
debt instrument that does not have a conversion feature, valued using our cost of capital for straight, unconvertible debt. We currently
reflect the difference between the net proceeds from the sale of the 2026 Notes and the initial carrying amount as a debt discount for
accounting purposes, which is amortized into interest expense over the term of the 2026 Notes. As a result of this amortization, the
interest expense recognized for the 2026 Notes for accounting purposes is greater than the cash interest payments we will pay on the
2026 Notes, which results in lower reported net income. The lower reported income resulting from this accounting treatment could
depress the trading price of our common stock and the 2026 Notes.
In addition, under certain circumstances we may be eligible to use the treasury stock method to reflect the shares underlying the
2026 Notes in our diluted earnings per share. Under this method, if the conversion value of the 2026 Notes exceeds their principal
amount for a reporting period, then we will calculate our diluted earnings per share assuming that all the 2026 Notes were converted
and that we issued shares of our common stock to settle the excess. However, if reflecting the 2026 Notes in diluted earnings per share
in this manner is anti-dilutive, or if the conversion value of the 2026 Notes does not exceed their principal amount for a reporting
period, then the shares underlying the 2026 Notes will not be reflected in our diluted earnings per share. In addition, if accounting
standards change in the future and we are not permitted to use the treasury stock method, then our diluted earnings per share may
decline. For example, in July 2019, the Financial Accounting Standards Board published an exposure draft proposing to amend these
accounting standards to eliminate the treasury stock method for convertible instruments and instead require application of the if-
converted method. Under that method, if it is adopted, diluted earnings per share would generally be calculated assuming that all the
2026 Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be
anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share.
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Furthermore, if any of the conditions to the convertibility of the notes is satisfied, then we may be required under applicable
accounting standards to reclassify the liability carrying value of the 2026 Notes as a current, rather than a long-term, liability. This
reclassification could be required even if no noteholders convert their 2026 Notes and could materially reduce our reported working
capital.
The capped call transactions may affect the value of the 2026 Notes and our common stock.
In connection with the issuance of the 2026 Notes, we entered into certain capped call transactions (the Capped Call
Transactions) with the capped call counterparty. The Capped Call Transactions are generally expected to reduce the potential dilution
as a result of conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount
of converted notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing its initial hedge of the Capped Call Transactions, the capped call counterparty or its affiliates
purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock. This
activity could have increased (or reduced the size of any decrease in) the market price of our common stock or the 2026 Notes at that
time.
In addition, the capped call counterparty or its affiliates may modify their hedge positions by entering into or unwinding
various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in
secondary market transactions (and are likely to do so on each exercise date of the Capped Call Transactions, which are expected to
occur during the 60 trading day period beginning on the 61st scheduled trading day prior to the maturity date of the 2026 Notes, or
following any termination of any portion of the Capped Call Transaction in connection with any repurchase, redemption or early
conversion of the 2026 Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common
stock or the 2026 Notes.
We are subject to counterparty risk with respect to the Capped Call Transactions.
The capped call counterparty to the agreement related to the Capped Call Transactions (the Capped Call Agreements) is a
financial institution, and we will be subject to the risk that the capped call counterparty may default or otherwise fail to perform, or
may exercise certain rights to terminate, its obligations under the Capped Call Agreements. Our exposure to the credit risk of the
capped call counterparty will not be secured by any collateral. If the capped call counterparty becomes subject to insolvency
proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such
transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of
our common stock increases. In addition, upon a default or other failure to perform, or a termination of obligations, under the Capped
Call Agreements by the capped call counterparty, we may suffer adverse tax consequences and more dilution than we currently
anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the capped call
counterparty.
We may not be able to complete our relocation to our new facility as scheduled prior to expiry of the lease to our existing
facility.
On July 24, 2019, we entered into a lease agreement with KR Oyster Point 1, LLC (the Kilroy), a subsidiary of Kilroy Realty
Corporation, relating to the lease of approximately 234,892 square feet of office and laboratory space at a facility (currently under
construction) located in South San Francisco, California (the New Facility). Kilroy is expected to deliver possession of the New
Facility in the fourth quarter of 2021, while the lease (the Current Lease) to our existing facility at 280 E Grand Avenue, South San
Francisco (the Old Facility) expires on June 30, 2021. In the event that the New Facility is not delivered to us in sufficient time to
allow us to move our operations to the New Facility as anticipated, whether as a result of potential construction delays attributable to
the COVID 19 pandemic or otherwise, we may be required to holdover the Old Facility past expiry of its term, leading to: (i)
additional costs (including holdover rent at 150% of our current rent); (ii) liability under our indemnification obligations owed to our
current landlord under the Current Lease; and (iii) disruption to our business.
Risks Related to Our Industry
The regulatory approval process is expensive, time-consuming and uncertain and may prevent our partners or us from
obtaining approvals to commercialize some or all of our drug candidates.
The research, testing, manufacturing, selling and marketing of drugs are subject to extensive regulation by the FDA and other
regulatory authorities in the United States and other countries, and regulations differ from country to country. Neither we nor our
partners are permitted to market our potential drugs in 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 other marketing approval for any of our drug candidates.
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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 to approved NDAs.
Regulatory approval of an NDA or NDA supplement is never guaranteed, and the approval process typically takes several years
and is extremely expensive. The FDA and foreign regulatory agencies also have substantial discretion in the drug approval process,
and the guidance and advice issued by such agencies is subject to change at any time. Despite the time and efforts exerted, failure can
occur at any stage, and we may encounter problems that cause us to abandon clinical trials or to repeat or perform additional
preclinical testing and clinical trials. The number and focus of preclinical studies and clinical trials that will be required for approval
by the FDA and foreign regulatory agencies varies depending on the drug candidate, the disease or condition that the drug candidate is
designed to address, and the regulations applicable to any particular drug candidate. In addition, the FDA may require that a proposed
Risk Evaluation and Mitigation Strategy (REMS) be submitted as part of an NDA if the FDA determines that it is necessary to
ensure 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 for many reasons, including, but not limited to:
•
•
•
•
they might determine that a drug candidate is not safe or effective;
they might not find the data from non-clinical testing and clinical trials sufficient and could request that additional trials be
performed;
they might not approve our, our partners or the contract manufacturers processes or facilities; or
they might change their approval policies or adopt new regulations.
Even if we receive regulatory approval to manufacture and sell a drug in a particular regulatory jurisdiction, other jurisdictions
regulatory authorities may not approve that drug for manufacture and sale. If we or our partners fail to receive and maintain regulatory
approval for the sale of any drugs resulting from 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 continued regulatory review by the FDA and foreign regulatory agencies, and may be subject to additional post-marketing
obligations, all of which may result in significant expense and limit commercialization of our potential drugs.
Any regulatory approvals that we or our partners receive for our drug candidates may be subject to limitations on the indicated
uses for which the drug may be marketed or require potentially costly post-marketing follow-up studies or compliance with a REMS.
In addition, if the FDA or foreign regulatory agencies approves any of our drug candidates, the labeling, packaging, adverse event
reporting, storage, advertising, promotion and record-keeping for the drug will be subject to extensive regulatory requirements. The
subsequent discovery of previously unknown problems with the drug, including adverse events of unanticipated severity or frequency,
or the discovery that adverse events or toxicities observed in preclinical research or clinical trials that were believed to be minor
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 delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or extent of adverse
government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are
not able to maintain regulatory compliance, we might not be permitted to market our drugs and our business would suffer.
If physicians and patients do not accept our drugs, we may be unable to generate significant revenue, if any.
Even if our drug candidates obtain regulatory approval, the resulting drugs, if any, may not gain market acceptance among
physicians, healthcare payors, patients and the medical community. Even if the clinical safety and efficacy of drugs developed from
our drug candidates are established for purposes of approval, physicians may elect not to recommend these drugs for a variety of
reasons including, but not limited to:
•
•
•
•
introduction of competitive drugs to the market;
clinical safety and efficacy of alternative drugs or treatments;
cost-effectiveness;
availability of coverage and reimbursement from health maintenance organizations and other third-party payors;
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•
•
•
•
convenience and ease of administration;
prevalence and severity of adverse events;
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 commercial success of our products depends on the availability and sufficiency of third-party payor coverage and
reimbursement.
Patients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated
with their prescription drugs. Accordingly, market acceptance of our products is dependent on the extent to which third-party coverage
and reimbursement
is available from government health administration authorities (including in connection with government
healthcare programs, such as Medicare and Medicaid in the United States), private healthcare insurers and other healthcare funding
organizations. Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain
regulatory approval. Even if we obtain coverage for a given drug product, the associated reimbursement rate may not be adequate to
cover our costs, including research, development, intellectual property, manufacture, sale and distribution expenses, or may require
co-payments that patients find unacceptably high.
Coverage and reimbursement policies for drug products can differ significantly from payor to payor as there is no uniform
policy of coverage and reimbursement for drug products among third-party payors in the United States. There may be significant
delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time-consuming
and costly which will require us to provide scientific and clinical support for the use of our products to each payor separately, with no
assurance that coverage or adequate reimbursement will be obtained. It is difficult to predict at this time what third-party will decide
with respect to coverage and reimbursement for our products.
In addition, there is significant uncertainty regarding the reimbursement status of newly approved healthcare products. We may
need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. If third-party
payors do not consider our products to be cost-effective compared to other therapies, the payors may not cover our products as a
benefit under their plans, or if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
We expect that increased emphasis on cost containment measures in the United States by third-party payors to continue and will
place pressure on pharmaceutical pricing and coverage. Coverage policies and third-party reimbursement rates may change at any
time. Therefore, even if favorable coverage and reimbursement status is attained for one or more drug products for which we receive
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. If we are unable to
obtain and maintain sufficient third-party coverage and adequate reimbursement for our products, the commercial success of our drug
products may be greatly hindered and our financial condition and results of operations may be materially and adversely affected.
Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform
initiatives, may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product
candidates and affect the prices we may obtain.
The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug
products vary widely from country to country. In the United States and some foreign jurisdictions, there have been a number of
legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory
approval of our product candidates, restrict or regulate post-approval activities and affect our ability to successfully sell any product
candidates for which we obtain regulatory approval. In particular, in March 2010, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act (collectively, the ACA) was enacted, which substantially changes
the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical
industry. The ACA and its implementing regulations, among other things, addressed a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product
candidates that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers
under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals
enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded
prescription drugs, provided incentives to programs that increase the federal governments comparative effectiveness research and
established a new Medicare Part D coverage gap discount program.
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Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the
Budget Control Act of 2011, among other things, created measures for spending reductions by the U.S. Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby triggering the legislations automatic reduction to several government
programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April
2013, and, due to subsequent legislative amendments, will remain in effect through 2030, except for a temporary suspension from
May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken. In January
2013, the American Taxpayer Relief Act of 2012 was enacted which, among other things, further reduced Medicare payments to
several providers, including hospitals and outpatient clinics, and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years.
Since its enactment, there have been judicial and Congressional challenges to numerous elements of the ACA, as well as efforts
by the Trump administration to repeal or replace certain aspects of the ACA. For example, former President Trump signed Executive
Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for
health insurance mandated by the ACA. In addition, the U.S. Congress has considered legislation that would repeal or repeal and
replace all or part of the ACA. While the U.S. Congress has not passed comprehensive repeal legislation, it has enacted laws that
modify certain provisions of the ACA, such as removing penalties, starting January 1, 2019, for not complying with the ACAs
individual mandate to carry health insurance, eliminating the implementation of certain mandated fees, and increasing the point-of-
sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. In December 2018, a Texas U.S.
District Court Judge ruled that the ACA is unconstitutional in its entirety because the individual mandate was repealed by Congress
as part of the Tax Cuts and Jobs Act of 2017 (the Tax Act). Additionally, on December 18, 2019, the U.S. Court of Appeals for the
5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the
District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently
reviewing this case, although it is unclear when a decision will be made. It is also unclear how such litigation will impact the ACA and
our business. The U.S. Congress may consider and adopt other legislation to repeal and replace all or certain elements of the ACA.
Policy changes, including potential modification or repeal of all or parts of the ACA or the implementation of new health care
legislation, could result in significant changes to the health care system which may adversely affect our business in unpredictable
ways.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels
directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives
that may be adopted in the future, particularly in light of the new Presidential administration. The continuing efforts of governments,
insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare,
including by imposing price controls, may adversely affect the demand for our product candidates for which we obtain regulatory
approval and our ability to set a price that we believe is fair for our products. Any reduction in reimbursement from Medicare or other
government programs may result in a similar reduction in payments from private payors.
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Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional
activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA
or foreign regulations, guidance or interpretations will be changed, or what the impact of these changes on the regulatory approvals of
our product candidates, if any, may be. In the United States, the E.U. and other potentially significant markets for our product
candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products
and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. For
example, in the United States, there have been several recent Congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the
Trump administrations budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking
to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost
generic and biosimilar drugs. On March 10, 2020, the Trump administration sent principles for drug pricing to Congress, calling for
legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to
cap Medicare Part D beneficiary monthly out-of-pocket expenses and place limits on pharmaceutical price increases. Additionally, in
May 2018, the Trump administration previously laid out a Blueprint to lower drug prices and reduce out of pocket costs of drugs
that contained proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs,
incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by
consumers. On July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders relating to
prescription drug pricing that seek to implement several of the administrations proposals. As a result, several federal agencies have
issued regulations to address these initiatives. For example, on November 2020, the Centers for Medicare & Medicaid Services issued
an interim rule implementing President Trumps Most Favored Nation executive order, which would tie Medicare Part B payments for
certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On
December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against
implementation of the interim final rule. Although some of these and other measures may require additional authorization to become
effective, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. At the
state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures, and, in some cases, to encourage importation from other countries and bulk
purchasing. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and
reimbursement controls in the E.U. will put additional pressure on product pricing, reimbursement and usage, which may adversely
affect our future product sales. These pressures can arise from rules and practices of managed care groups, judicial decisions and
governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and
pricing in general.
We cannot predict the likelihood, nature, or extent of health reform initiatives that may arise from future legislation or
administrative action, particularly as a result of the new Biden presidential administration. Furthermore, it is possible that additional
governmental action is taken in respect to the COVID-19 pandemic.
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 events. We cannot predict all the possible harms or
adverse events that may result from our clinical trials. We currently maintain limited product liability insurance. We may not have
sufficient resources to pay for any liabilities resulting from a personal injury or other claim excluded from, or beyond the limit of, our
insurance coverage. Our insurance does not cover third parties negligence or malpractice, and our clinical investigators and sites may
have inadequate insurance or none at all. In addition, in order to conduct clinical trials or otherwise carry 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 insurance or a third
partys insurance 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 risk exists even with respect to those drugs that are approved for commercial sale by the FDA and foreign
regulatory agencies and manufactured in licensed and regulated facilities. We intend to secure additional limited product liability
insurance coverage for drugs that we commercialize, but may not be able to obtain such insurance on acceptable terms with adequate
coverage, or at reasonable costs. Even if we are ultimately successful in product liability litigation, the litigation would consume
substantial amounts of our financial and managerial resources and may create adverse publicity, all of which would impair our ability
to generate sales of the affected product and our other potential drugs. Moreover, product recalls may be issued at our discretion or at
the direction of the FDA and foreign regulatory agencies, other governmental agencies or companies having regulatory control for
drug sales. Product recalls are generally expensive and often have an adverse effect on the reputation of the drugs being recalled and
of the drugs developer or manufacturer.
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We may be required to indemnify third parties against damages and other liabilities arising out of our development,
commercialization and other business activities, which could be costly and time-consuming and distract management. If third parties
that have agreed to indemnify us against damages and other liabilities arising from their activities do not fulfill their obligations, then
we may be held responsible for those damages and other liabilities.
Our relationships with customers, healthcare providers, clinical trial sites and professionals and third-party payors will be
subject to applicable anti-kickback, fraud and abuse and other laws and regulations. If we fail to comply with federal, state
and foreign laws and regulations, including healthcare, privacy and data security laws and regulations, we could face criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, including physicians and third-party payors play a primary role in the recommendation and prescription
of any drug candidates for which we may obtain marketing approval. Our arrangements with customers, healthcare providers and
third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through which we develop, and may market, sell and distribute, our products
for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include, but
are not limited to, the following:
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The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the
referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be
made under federally funded healthcare programs such as Medicare and Medicaid. This statute has been broadly
interpreted to apply to manufacturer arrangements with prescribers, purchasers and formulary managers, among others.
Several other countries,
including the United Kingdom, have enacted similar anti-kickback, fraud and abuse, and
healthcare laws and regulations.
The federal false claims laws, including the False Claims Act, which can be enforced through whistleblower or qui tam
actions, imposes penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an
obligation to pay money to the federal government. The government and qui tam relators have brought False Claims Act
actions against pharmaceutical companies on the theory that their practices have caused false claims to be submitted to the
government.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme
to defraud any healthcare benefit program. HIPAA also imposes obligations, including mandatory contractual terms, with
respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also
imposes criminal liability for knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
The federal Physician Payments Sunshine Act requires manufacturers of drugs, devices, biologics and medical supplies to
report to the HHS information related to payments and other transfers of value made to or at the request of physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and physician
ownership and investment interests in such manufacturers. Payments made to physicians and research institutions for
clinical trials are included within the ambit of this law. Beginning January 1, 2022, applicable manufacturers will also be
required to report information regarding payments and other transfers of value provided during the previous year to
physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists,
and certified nurse-midwives.
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• Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors,
including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical
industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government
in addition to requiring drug manufacturers to report information related to payments to physicians and other health care
providers or marketing expenditures and state and local laws that require the registration of sales representatives.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations
will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply
with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If
our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare
programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. Exclusion, suspension and
debarment from government funded healthcare programs would significantly impact our ability to commercialize, sell or distribute
any drug. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance
with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded
healthcare programs.
European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border
transfer of personal information.
We may collect, process, use or transfer personal information from individuals located in the EU in connection with our
business, including in connection with conducting clinical trials in the EU. Additionally, if any of our product candidates are
approved, we may seek to commercialize those products in the EU. The collection and use of personal health data in the EU are
governed by the provisions of the General Data Protection Regulation ((EU) 2016/679) (GDPR). This legislation imposes
requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring
such information outside of the European Economic Area, including to the United States, providing details to those individuals
regarding the processing of their personal information, keeping personal information secure, having data processing agreements with
third parties who process personal information, responding to individuals requests to exercise their rights in respect of their personal
information, reporting security breaches involving personal data to the competent national data protection authority and affected
individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. The GDPR
imposes additional responsibilities and liabilities in relation to personal data that we process and we may be required to put in place
additional mechanisms ensuring compliance with the new data protection rules. Failure to comply with the requirements of the GDPR
and related national data protection laws of the member states of the EU may result in substantial fines, other administrative penalties
and civil claims being brought against us, which could have a material adverse effect on our business, financial condition and results
of operations.
European data protection laws, including the GDPR, generally restrict the transfer of personal information from Europe,
including the European Economic Area, United Kingdom and Switzerland, to the United States and most other countries unless the
parties to the transfer have implemented specific safeguards to protect the transferred personal information. One of the primary
safeguards allowing United States companies to import personal information from Europe has been certification to the EU-U.S.
Privacy Shield and Swiss-U.S. Privacy Shield frameworks administered by the United States Department of Commerce. However, the
Court of Justice of the EU recently invalidated the EU-U.S. Privacy Shield. The same decision also raised questions about whether
one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the European Commissions Standard Contractual Clauses, can
lawfully be used for personal information transfers from Europe to the United States or most other countries. At present, there are few,
if any, viable alternatives to the EU-U.S. Privacy Shield and the Standard Contractual Clauses. Although we rely primarily on
individuals explicit consent to transfer their personal information from Europe to the United States and other countries, in certain
cases we have relied or may rely on the Standard Contractual Clauses. Authorities in the United Kingdom and Switzerland, whose
data protection laws are similar to those of the EU, may similarly invalidate use of the EU-U.S. Privacy Shield and Swiss-U.S. Privacy
Shield, respectively, as mechanisms for lawful personal information transfers from those countries to the United States. As such, if we
are unable to rely on explicit consent to transfer individuals personal information from Europe, which can be revoked, or implement
another valid compliance solution, we will face increased exposure to substantial fines under European data protection laws as well as
injunctions against processing personal information from Europe. Inability to import personal information from the European
Economic Area, United Kingdom or Switzerland may also restrict our clinical trial activities in Europe; limit our ability to collaborate
with CROs, service providers, contractors and other companies subject to European data protection laws; and require us to increase
our data processing capabilities in Europe at significant expense. Additionally, other countries outside of Europe have enacted or are
considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the
cost and complexity of delivering our services and operating our business.
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Responding to any claims relating to improper handling, storage or disposal of the hazardous chemicals and radioactive and
biological materials we use in our business could be time-consuming and costly.
Our research and development processes involve the controlled use of hazardous materials, including chemicals and radioactive
and biological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination
or discharge and any resultant injury from those materials. Federal, state and local laws and regulations govern the use, manufacture,
storage, handling and disposal of hazardous materials. We may be sued for any injury or contamination that results from our or third
parties use of these materials. Compliance with environmental laws and regulations is expensive, and current or future environmental
regulations may impair our research, development and production activities.
Generic Risk Factors
We are obligated to develop and maintain proper and effective internal control over financial reporting. In the future, we may
not complete our execution of our internal control over financial reporting in a timely manner, or these internal controls may
not be determined to be effective, which may result in additional material misstatements in our consolidated financial
statements and may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other
things, the effectiveness of our internal control over financial reporting.
Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources. We may not be
able to complete our internal control evaluation, testing and any required remediation in a timely fashion. Additionally, if we identify
one or more material weaknesses in our internal control over financial reporting, we will not be able to assert that our internal controls
are effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be
prevented or detected on a timely basis. As of December 31, 2019, we have remediated the material weakness related to our internal
controls over financial reporting that were determined to be ineffective as of December 31, 2018. As of December 31, 2018, we
identified a material weakness related to the ineffective review and verification of internally prepared reports and analyses utilized in
our financial statement closing process. The material weakness related to employee turnover resulting in a temporary lack of resources
in financial reporting roles with the appropriate skills to perform effective review during our financial statement close process. This
material weakness did not result in the restatement of prior quarterly or annually filed financial statements. During 2019, management
conducted a remediation plan to address its material weakness, which included increasing the quality and level of resources with the
accounting department and other enhancements and design improvements to our processes to improve the level of review of financial
information.
Even though we remediated this material weakness as of December 31, 2019, we cannot be certain that other material
weaknesses and control deficiencies will not be discovered in the future. If our efforts are not successful or other material weaknesses
are identified in the future or we are not able to comply with the requirements of Section 404 in a timely manner, our reported
financial results could be materially misstated, we would receive an adverse opinion regarding our internal controls over financial
reporting from our independent registered public accounting firm, and we could be subject to investigations or sanctions by regulatory
authorities, which would require additional financial and management resources, and the value of our common stock could decline. To
the extent we identify future weaknesses or deficiencies, there could be material misstatements in our consolidated financial
statements and we could fail to meet our financial reporting obligations. As a result, our ability to obtain additional financing, or
obtain additional financing on favorable terms, could be materially and adversely affected which, in turn, could materially and
adversely affect our business, our financial condition and the value of our common stock. If we are unable to assert that our internal
control over financial reporting is effective in the future, or if our independent registered public accounting firm is unable to express
an opinion or expresses an adverse opinion on the effectiveness of our internal controls in the future, investor confidence in the
accuracy and completeness of our financial reports could be further eroded, which would have a material adverse effect on the price of
our common stock.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.
We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting
principles are subject to interpretation by the FASB and the SEC. A change in these policies or interpretations could have a significant
effect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting
fluctuations, and may require us to make costly changes to our operational processes and accounting systems.
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Our ability to use net operating loss carryforwards and tax credit carryforwards to offset future taxable income may be subject
to certain limitations, and ownership changes may limit our ability to use our net operating losses and tax credits in the future.
Our ability to use our federal and state net operating loss carryforwards (NOLs) to offset potential future taxable income and
reduce related income taxes depends upon our generation of future taxable income. We cannot predict with certainty when, or
whether, we will generate sufficient taxable income to use our NOLs.
Our federal NOLs generated in taxable years beginning prior to 2018 will continue to be governed by tax rules in effect prior to
the Tax Act, with unused NOLs expiring 20 years after we report a tax loss. These NOLs could expire unused and be unavailable to
offset future taxable income. We cannot predict if and to what extent various states will conform to the Tax Act, as modified by
additional tax legislation enacted in 2020.
In addition, generally, if one or more stockholders or groups of stockholders who owns at least 5% of stock increases its
ownership by more than 50% over its lowest ownership percentage within a three-year testing period, an ownership change occurs (an
Ownership Change). Our ability to utilize our NOLs and tax credit carryforwards to reduce taxes payable in a year we have taxable
income may be limited if there has been an Ownership Change in our stock. Similar rules may apply under state tax laws. We may
experience Ownership Changes in the future as a result of future stock sales or other changes in the ownership of our stock, some of
which are beyond our control and, as a result, NOLs generated in taxable years beginning 2017 and before, may expire unused.
Any material limitation or expiration of our NOLs and tax credit carryforwards may harm our future net income by effectively
increasing our future effective tax rate, which could result in a reduction in the market price of our common stock.
Comprehensive U.S. tax reform legislation could increase the tax burden on our orphan drug programs and adversely affect
our business and financial condition.
In 2017, the U.S. government enacted the Tax Act that includes significant changes to the taxation of business entities, which
was modified by additional federal tax legislation in 2020. These changes include, among others, (i) a permanent reduction to the
limitation on the deductibility of business interest expense and net operating loss
corporate income tax rate, (ii) a partial
carryforwards, (iii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system
(along with certain rules designed to prevent erosion of the U.S. income tax base) and (iv) a one-time tax on accumulated offshore
earnings held in cash and illiquid assets, with the latter taxed at a lower rate. Further, the comprehensive tax legislation, among other
things, reduces the orphan drug tax credit from 50% to 25% of qualifying expenditures. When and if we become profitable, this
reduction in tax credits may result in an increased federal income tax burden on our orphan drug programs as it may cause us to pay
federal income taxes earlier under the revised tax law than under the prior law and, despite being partially off-set by a reduction in the
corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, may increase our total federal tax liability attributable to such
programs.
Notwithstanding the reduction in the corporate income tax rate, the overall impact of this comprehensive tax legislation resulted
in an overall reduction in our deferred tax assets, and our business and financial condition could still be adversely affected as
additional guidance and regulations are issued with respect to the original tax law change. In addition, it is uncertain if and to what
extent various states will conform to this comprehensive tax legislation, and states may enact suspensions or limitations on the use of
net operating losses and tax credits (including, without limitation, California legislation enacted in 2020 that suspends the use of
California NOLs and limits the use of certain California tax credits for certain periods). The impact of this comprehensive tax
legislation on holders of our common stock is also uncertain and could be adverse. Investors should consult with their legal and tax
advisors with respect to this comprehensive tax legislation and the potential tax consequences of investing in or holding our common
stock.
Our facilities in California are located near an earthquake fault, and an earthquake or other types of natural disasters,
catastrophic events or resource shortages could disrupt our operations and adversely affect our results.
All our facilities and our important documents and records, such as hard and electronic copies of our laboratory books and
records for our drug candidates and compounds and our electronic business records, are located in our corporate headquarters at a
single location in South San Francisco, California near active earthquake zones. If a natural disaster, such as an earthquake, fire or
flood, a catastrophic event such as a disease pandemic or terrorist attack, or a localized extended outage of critical utilities or
transportation systems occurs, we could experience a significant business interruption. Our partners and other third parties on which
we rely may also be subject to business interruptions from such events. In addition, California from time to time has experienced
shortages of water, electric power and natural gas. Future shortages and conservation measures could disrupt our operations and cause
expense, thus adversely affecting our business and financial results.
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We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above your
investment price.
The stock market, particularly in recent years, has experienced significant volatility, particularly with respect to pharmaceutical,
biotechnology and other life sciences company stocks, which often does not relate to the operating performance of the companies
represented by the stock. Factors that could cause volatility in the market price of our common stock include, but are not limited to:
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announcements concerning any of the clinical trials for our drug candidates (including, but not limited to, the timing of
initiation or completion of such trials and the results of such trials, and delays or discontinuations of such trials, including
delays resulting from slower than expected or suspended patient enrollment or discontinuations resulting from a failure to
meet pre-defined clinical end points);
announcements concerning our 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;
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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;
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actual or anticipated fluctuations in our quarterly financial and operating results;
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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, packaging, labeling and distribution of our drug candidates or drugs;
• market acceptance of our drugs;
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third-party healthcare coverage and reimbursement policies;
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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;
volatility in the stock prices of other companies in our industry or in the stock market generally; and
other factors described in this Risk Factors section.
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These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which
may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of
our common stock. In addition, when the market price of a stock has been volatile, holders of that stock have instituted securities class
action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur
substantial costs defending the lawsuit. Such a lawsuit could also divert our managements time and attention.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and trading
volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish
about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable
research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to
publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to
decline.
In addition, as required by the revenue recognition standard, ASC 606, we disclose the aggregate unsatisfied amount of
transaction price allocated to performance obligations as of the end of the reporting period. Market practices surrounding the
calculation of this measure are still evolving. It is possible that analysts and investors could misinterpret our disclosure or that the
terms of our research or license agreements or other circumstances could cause our methods for preparing this disclosure to differ
significantly from others, which could lead to inaccurate or unfavorable forecasts by analysts and investors.
Regardless of accuracy, unfavorable interpretations of our financial information and other public disclosures could have a
negative impact on our stock price. If our financial performance fails to meet analyst estimates, for any of the reasons discussed above
or otherwise, or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock,
our stock price would likely decline.
If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders from
influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.
Our executive officers, directors and their affiliates beneficially own or control some of the outstanding shares of our common
stock. Accordingly, these executive officers, directors and their affiliates, acting as a group, may have substantial influence over the
outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of
all or substantially all our assets or any other significant corporate transactions. These stockholders may also delay or prevent a change
of control of us, even if such a change of control would benefit our other stockholders. The significant concentration of stock
ownership may adversely affect the trading price of our common stock due to investors perception that 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 significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance
of those companies. Further, there has been particular volatility in the market prices of securities of early stage and clinical stage life
sciences companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of
our operating performance. In the past, following periods of volatility in the market price of a companys 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 managements attention and resources and could harm our reputation and business.
Our common stock is not heavily 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 be sufficient 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 if trading volume is limited. In addition, if trading volume in our common stock is limited, trades
of relatively small numbers of shares may have a disproportionate effect on the market price of our common stock.
Our stockholders will experience substantial additional dilution if outstanding equity awards are exercised or settled for
common stock.
The exercise of stock options or settlement of equity awards for common stock would be substantially dilutive to the
outstanding shares of common stock. Any dilution or potential dilution may cause our stockholders to sell their shares, which would
contribute to a downward movement in the market price of our common stock.
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Evolving regulation of corporate governance and public disclosure may result in additional expenses, use of resources and
continuing uncertainty.
We regularly evaluate and monitor developments with respect to new and proposed laws, regulations and standards. For
example, we spend significant financial and human resources to document and test the adequacy of our internal control over financial
reporting to comply with the internal control requirements the Sarbanes-Oxley Act.
We intend to maintain high standards of corporate governance and public disclosure and to invest the resources necessary to
comply with evolving laws, regulations and standards. This investment may result in increased general and administrative expenses
and a diversion of management time and attention from revenue-generating activities to compliance activities.
Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public
companies. In many cases, changes lack specificity and compliance with these changes may evolve over time as new guidance is
provided by regulatory and governing bodies. We cannot accurately predict or estimate the amount or timing of the additional effort or
expense we may incur complying with changes in these laws, regulations and standards. Therefore, we can provide no assurance as to
conclusions of management or by our independent registered public accounting firm with respect to the effectiveness of our internal
control over financial reporting in the future. If our efforts to comply with new or changed laws, regulations and standards differ from
the activities intended by regulatory or governing bodies, due to ambiguities related to practice or otherwise, regulatory authorities
may initiate legal proceedings against 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 the development and growth of our businesses. In addition, the terms of existing or any future debts may
preclude us from paying these dividends.
A rating agency may not rate the notes or may assign a rating that is lower than expected.
We do not intend to seek to have the 2026 Notes rated by any rating agency. However, if one or more rating agencies rates the
notes and assigns a rating that is lower than the rating that investors expect, or reduces their rating in the future, then the trading price
of our common stock and the 2026 Notes could significantly decline.
In addition, market perceptions of our creditworthiness will directly affect the trading price of our common stock and the 2026
Notes. Accordingly, if a ratings agency rates any of our indebtedness in the future or downgrades or withdraws the rating, or puts us
on credit watch, then the trading price of our common stock and the 2026 Notes will likely decline.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider
favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may discourage,
delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions
in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be
willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition,
because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or
prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to
replace members of our board of directors. Among other things, these provisions:
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establish a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to
change the membership of a majority of our board of directors;
eliminate cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director
candidates;
establish the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the
board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill
vacancies on our board of directors;
prohibit removal of directors without cause;
61
•
•
•
•
•
•
authorize our board of directors to issue preferred stock and to determine the price and other terms of those shares,
including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the
ownership of a hostile acquirer;
authorize our board of directors to alter our bylaws without obtaining stockholder approval;
require the approval of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal
our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and
removal of directors;
prohibit stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting
of our stockholders;
require that a special meeting of stockholders be called only by the chairman of the board of directors, the chief executive
officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a
proposal or to take action, including the removal of directors; and
provide for advance notice procedures that stockholders must comply with in order to nominate candidates to our board of
directors or to propose matters to be acted upon at a stockholders meeting, which may discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to
obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under
Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock
unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They
could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be
in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay
for our stock.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party
claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our
directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our
indemnification agreements that we have entered into with our directors and officers provide that:
• we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at
our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such
person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the
best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such
persons conduct was unlawful;
• we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by
applicable law;
• we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding,
except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person
is not entitled to indemnification;
• we will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings
initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of
directors or brought to enforce a right to indemnification;
•
the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into
indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such
persons; and
• we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to
directors, officers, employees and agents.
62
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our facilities consist of 81,587 square feet of leased office and laboratory space in South San Francisco, California. Our current
lease expires in June 2021. In July 2019, we amended the lease agreement for an additional 9,350 square feet within the same office
location (the Expansion Lease). The Expansion Lease has an initial term of 39 months and commenced in January 2020.
In July 2019, we entered into a lease agreement for 234,892 square feet of office and laboratory space at a facility in South San
Francisco (the Oyster Point Lease). The Oyster Point Lease has an initial term of 12 years and is expected to commence in the third
quarter of 2021.
We believe that these facilities are suitable and adequate for our current needs.
ITEM 3.
LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
63
PART II
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market information for common stock
Our common stock is listed on the Nasdaq Global Select Market under the symbol CYTK. On February 23, 2021, the last
reported sale price for our common stock was $20.26 per share. We currently expect to retain 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 paying any cash dividends.
Performance Graph
The comparisons in the table below are required by the SEC and are not intended to forecast or be indicative of possible future
performance of our common stock. This graph shall not be deemed soliciting material or be deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities under that
Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, whether made before
or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent we specifically
incorporate it by reference into such filing.
The following graph compares cumulative total return of our common stock with the cumulative total return of (i) The
NASDAQ Composite Index, and (ii) The NASDAQ Biotechnology Index. The graph assumes (a) $100 was invested on December 31,
2015 in each of our common stock, the stocks comprising the NASDAQ Composite Index and the stocks comprising the NASDAQ
Biotechnology Index, and (b) the reinvestment of dividends into shares of common stock; however, no dividends have been declared
on our common stock to date.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
among Cytokinetics, Inc., the Nasdaq Composite index
and the Nasdaq Biotechnology Index
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
(cid:18)(cid:455)(cid:410)(cid:381)(cid:364)(cid:349)(cid:374)(cid:286)(cid:415)(cid:272)(cid:400)(cid:853)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)(cid:894)(cid:18)(cid:122)(cid:100)(cid:60)(cid:895)
(cid:69)(cid:258)(cid:400)(cid:282)(cid:258)(cid:395)(cid:3)(cid:18)(cid:381)(cid:373)(cid:393)(cid:381)(cid:400)(cid:349)(cid:410)(cid:286)(cid:3)(cid:47)(cid:374)(cid:282)(cid:286)(cid:454)(cid:3)(cid:894)(cid:47)(cid:121)(cid:47)(cid:18)(cid:895)
(cid:69)(cid:258)(cid:400)(cid:282)(cid:258)(cid:395)(cid:3)(cid:17)(cid:349)(cid:381)(cid:410)(cid:286)(cid:272)(cid:346)(cid:3)(cid:894)(cid:69)(cid:17)(cid:47)(cid:895)
$100 investment in stock or
index
Cytokinetics, Inc.
Nasdaq Composite Index
Nasdaq Biotechnology Index
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
$
$
$
100.00
100.00
100.00
$
$
$
116.16
107.50
78.32
$
$
$
77.92
137.86
94.81
$
$
$
60.42
132.51
85.97
$
$
$
101.43
179.19
106.95
$
$
$
198.66
257.38
134.42
Holders of Record
As of February 23, 2021, we had 49 holders of record of common stock. The number of holders of record is based upon the
actual number of holders registered as of such date and does not include holders of shares in street name or persons, partnerships,
associates, corporations or other entities in security position listings maintained by depositories.
64
Dividends
We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our
capital stock. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to
applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions
and other factors that our board of directors may deem relevant.
Equity Compensation Information
Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth in
Part III, Item 12.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
ITEM 6.
SELECTED FINANCIAL DATA
(Not required)
65
ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This 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.
Overview
We are a late-stage biopharmaceutical company focused on discovering, developing and commercializing first-in-class muscle
activators and next-in-class muscle inhibitors as potential treatments for debilitating diseases in which muscle performance is
compromised and/or declining. We have discovered and are developing muscle-directed investigational medicines that may
potentially improve the health span of people with devastating cardiovascular and neuromuscular diseases of impaired muscle
function. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and
expertise regarding the cytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. As a
leader in muscle biology and the mechanics of muscle performance, we are developing small molecule drug candidates specifically
engineered to impact muscle function and contractility.
Our clinical-stage drug candidates are: omecamtiv mecarbil, a novel cardiac myosin activator, CK-136 (formerly known as
AMG 594), a novel cardiac troponin activator, reldesemtiv, a novel fast skeletal muscle troponin activator, CK-274, a novel cardiac
myosin inhibitor, and CK-3772271 (CK-271), our second novel cardiac myosin inhibitor.
For further information regarding our business, refer to Part I, Item 1 (Business) of this Annual Report on Form 10-K.
Critical Accounting Policies and Significant Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses
and related disclosure of contingent assets and liabilities. We review our estimates on 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 more
detail in the notes to our financial statements included in this Annual Report on Form 10-K, we believe the following accounting
policies to be critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration
for those goods or services. To recognize revenue from a contract with a customer, we:
identify our contracts with our customers;
(i)
(ii) identify our distinct performance obligations in each contract;
(iii) determine the transaction price of each contract;
(iv) allocate the transaction price to the performance obligations; and
(v) recognize revenue as we satisfy our performance obligations.
At contract inception, we assess the goods or services promised within each contract and assess whether each promised good or
service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the transaction
price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Collaborative Arrangements
We enter into collaborative arrangements with partners that typically include payment to us for one of more of the following: (i)
license fees; (ii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; and (iii) royalties
on net sales of licensed products. Each of these payments results in collaboration or other revenues. Where a portion of non-refundable
up-front fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative
arrangement, they are recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is
satisfied.
66
As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to
determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is
allocated among the performance obligation. The stand-alone selling price may include such items as, forecasted revenues,
development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success,
to determine the transaction price to allocate to each performance obligation.
For our collaboration agreements that include more than one performance obligation, such as a license combined with a
commitment to perform research and development services, we make judgments to assess the nature of the combined performance
obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate our
progress each reporting period and, if necessary, adjust the measure of a performance obligation and related revenue recognition.
License Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is
transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other
promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined
performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for
purposes of recognizing revenue from non-refundable, up-front license fees. We evaluate the measure of progress each reporting
period and, if necessary, adjust the measure of performance and related revenue recognition.
Milestone Payments: We use judgement to determine whether a milestone is considered probable of being reached. Using the
most likely amount method, we include the value of a milestone payment in the consideration for a contract at inception if we then
conclude achieving the milestone is more likely than not. Otherwise, we exclude the value of a milestone payment from contract
consideration at inception and recognize revenue for a milestone at a later date, when we judge that it is more likely than not that the
milestone will be achieved. If we conclude it is probable that a significant revenue reversal would not occur, the associated milestone
is included in the transaction price. We then allocate the transaction price to each performance obligation on a relative stand-alone
selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end
of each subsequent reporting period, we re-evaluate the probability of achievement of such milestones and any related constraint, and
if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis,
which would affect license, collaboration and other revenues and earnings in the period of adjustment.
Royalties: For contracts that include sales-based royalties, we recognize revenue at the later of (i) when the related sales occur,
or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. To date, we have not
recognized any royalty revenues resulting from contracts.
Research and Development Cost Reimbursements: Our Astellas and Amgen agreements include promises of research and
development services. We have determined that these services collectively are distinct from the licenses provided to Astellas and
Amgen and as such, these promises are accounted for as a separate performance obligation to be recognized over time. We recognize
revenue for these services as the performance obligations are satisfied, which we estimate using internal development costs incurred.
Accrued Research and Development Expenditures
A substantial portion of our preclinical studies and all of our clinical trials have been performed by third-party CROs and other
vendors and our accruals for expenses for preclinical studies and clinical trials may be significant. For preclinical studies, the
significant factors used in estimating accruals include the percentage of work completed to 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, milestones achieved and percentage of work completed to date. We monitor patient enrollment levels and related activities
to the extent practicable through internal reviews, correspondence and status meetings with CROs, and review of contractual terms.
We depend on the timeliness and accuracy of data provided by our CROs and other vendors to accrue expenses. If we receive and rely
on incomplete or inaccurate data, accruals and expenses may be too high or too low at a given point in time and corresponding
adjustments to accruals and expenses would be made in future periods when the actual expense becomes known.
Liability Related to Sale of Future Royalties to RPI
We treat our liability to RPI related to sale of future royalties under the RPI Royalty Purchase Agreement as a debt financing, to
be amortized under the effective interest rate method over the life of the related royalty stream.
67
Our liability to RPI related to sale of future royalties under the RPI Royalty Purchase Agreement (the RPI Liability) and
related amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement.
Concurrently with our entry into the RPI Royalty Purchase Agreement, we entered into a common stock purchase agreement with
RPI. We allocated the consideration and issuance costs on a relative fair value basis to the RPI Liability and the common stock.
The RPI Royalty Purchase Agreement further provides that in the event Amgen elects to terminate the Amgen Agreement, we
are obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement, which includes
the payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other compounds with the same
mechanism of action as omecamtiv mecarbil that are subject to the Amgen Agreement (together the Amgen Alliance Compounds),
subject to a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval). Our obligation
to enter into a new agreement with RPI does not impact our accounting treatment of the RPI Liability or our estimates.
The RPI Liability will be recognized using significant unobservable inputs. These inputs are derived using internal management
estimates developed based on third party data and reflect managements judgements, current market conditions surrounding competing
products, and forecasts. The significant unobservable inputs include the estimated patient population, estimated selling price,
estimated peak sales and sales ramp, the expected term of the royalty stream, timing of the expected launch and its impact on the
royalty rate. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of
the RPI Liability.
We will periodically assess the amount and timing of expected royalty payments using a combination of internal projections
and forecasts from external sources. To the extent our future estimates of future royalty payments are greater or less than previous
estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the amortization of
the RPI Liability related to sale of future royalties and prospectively recognize the related non-cash interest expense. We have updated
the analysis to include the data released on October 8, 2020 relating to GALACTIC-HF. Our estimates regarding the amount and
timing of future royalty payments have not changed as a result of Amgens election to terminate the Amgen Agreement or Serviers
election to terminate the Servier Agreement.
Results of Operations
A discussion of our results of operations for the year ended December 31, 2018 can be found in Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Annual Report.
Revenues
Our revenues since inception were primarily from our strategic alliances. Under our agreements with Amgen and Astellas, we
received payments including upfront license fees, reimbursements of internal costs of certain FTEs and costs to support research and
development programs, and milestone payments. We have not generated any revenue from commercial product sales to date.
License revenues for 2020 were the result of a series of transactions we entered into with RTW Royalty Holdings and Ji Xing
related to Cytokinetics proprietary small molecule cardiac myosin inhibitor product referred to as CK-274 and other assets (together,
the RTW Transactions).
We may also be entitled to additional milestone payments and other contingent payments upon the occurrence of specific
events. We expect that our revenue will continue to fluctuate in future periods.
2020
Years Ended December 31,
2019
(In millions)
$
$
2018
Change
2020-2019
2019-2018
Research and development revenues
License revenues
Milestone revenues
Total revenues
$
$
16.5
36.5
2.8
55.8
26.9
26.9
$
$
26.4
5.1
31.5
$
$
(10.4) $
36.5
2.8
28.9
$
0.5
(5.1)
(4.6)
Research and development revenues in 2020 and 2019 were primarily from our strategic alliances with Astellas and Amgen.
Research and development revenues from Astellas were $6.6 million and $13.1 million in 2020 and 2019, respectively, for
reimbursements.
68
Research and development revenues from Amgen were $10.0 million and $13.8 million in 2020 and 2019, respectively, for
reimbursements.
License revenues for 2020 was $36.5 million and consisted of the residual allocation of consideration from the RTW
Transactions.
Milestone revenues for 2020 were $2.8 million and consisted primarily of the milestone earned from Ji Xing for the first patient
dosed in Cohort 2 of REDWOOD-HCM.
We do expect future revenues from Amgen to decline due to the termination of the Amgen Agreement effective May 20, 2021.
Research and development expenses
We incur research and development expenses associated with both partnered and our own research activities.
Research and development expenses related to any development we elect to fund consist primarily of employee compensation,
supplies and materials, costs for consultants and contract research and manufacturing, facilities costs and depreciation of equipment.
Research and development expenses increased to $97.0 million in 2020 from $86.1 million in 2019 primarily due to higher
expenses for METEORIC-HF, for our cardiac myosin inhibitor program, and for reldesemtiv related to COURAGE-ALS offset by
decreased spending for the Phase 2 clinical trial of reldesemtiv (FORTITUDE-ALS) which was completed in 2019.
Research and development expenses by program for 2020, 2019 and 2018 were:
2020
Years Ended December 31,
2019
(In millions)
$
$
2018
Change
2020-2019
2019-2018
Cardiac muscle contractility
Skeletal muscle contractility
All other research programs
Total research and development
expenses
$
$
53.0
17.1
26.9
45.8
14.6
25.7
$
19.0
50.9
19.2
$
7.2
2.5
1.2
26.8
(36.3)
6.5
97.0
$
86.1
$
89.1
$
10.9
$
(3.0)
We may continue to develop reldesemtiv to treat ALS and SMA. Under the Astellas FSRA Agreement, Astellas has agreed to
pay one-third of the out-of-pocket clinical development costs which may be incurred in connection with Cytokinetics potential Phase
3 clinical trial of reldesemtiv in ALS up to a maximum contribution by Astellas of $12 million. On December 14, 2020, we announced
the design of COURAGE-ALS (Clinical Outcomes Using Reldesemtiv on ALSFRS-R in a Global Evaluation in ALS), the planned
Phase 3 clinical trial of reldesemtiv in patients with ALS. In addition, Astellas agreed to non-cash contributions to Cytokinetics, which
include the transfer of its existing inventories of active pharmaceutical ingredient of reldesemtiv and CK-601. Astellas has also agreed
to the continued conduct of ongoing stability studies pertaining to such existing inventories of active pharmaceutical ingredient, at its
cost.
Under our strategic alliance with Amgen, Amgen is responsible for the development of omecamtiv mecarbil until the effective
termination of the Amgen Agreement (expected May 20, 2021). Following the effective termination of the Amgen Agreement, we
expect to continue the Phase 3 development of omecamtiv mecarbil for the potential treatment of heart failure, at our own cost. We
expect to continue the development of CK-274 to assess the potential of CK-274 to improve exercise capacity and relieve symptoms
in patients with hyperdynamic ventricular contraction due to HCM. Under our strategic alliance with Ji Xing, Ji Xing is responsible
for the development of CK-274 in China and Taiwan, and we may be entitled to receive milestone payments upon the achievement of
certain development and commercial milestones.
Clinical development timelines, the 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 each program, taking into account the potential scientific and clinical success of each drug
candidate. The lengthy process of seeking regulatory approvals and subsequent compliance 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 of
operations.
69
General and administrative expenses
General and administrative expenses consist primarily of compensation for employees in executive and administrative
functions, including, but not limited to, finance, human resources, legal, business and commercial development and strategic planning.
Other significant costs include facilities costs, consulting costs and professional fees for accounting and legal services, including legal
services associated with obtaining and maintaining patents and regulatory compliance.
General and administrative expenses increased to $52.8 million in 2020 from $39.6 million in 2019, primarily due to an
increase in personnel related costs including stock-based compensation and higher outside service spend.
General and administrative expenses by program for 2020, 2019 and 2018 were:
2020
Years Ended December 31,
2019
(In millions)
2018
Change
2020-2019
2019-2018
Total general and administrative
expenses
$
52.8
$
39.6
$
31.3
$
13.2
$
8.3
We expect that general and administrative expenses will fluctuate in the future, depending in part on the timing of and
investments in commercial readiness.
Interest expense
Interest expense for 2020, 2019 and 2018 were:
2020
Years Ended December 31,
2019
(In millions)
$
$
2018
Term loan
Convertible notes
Warrants
Other
Total interest expense
$
$
4.9
10.8
0.2
0.1
16.0
5.2
1.4
6.6
$
$
Change
2020-2019
2019-2018
3.8
3.8
$
$
(0.3) $
9.4
0.2
0.1
9.4
$
1.4
1.4
2.8
Interest expense in 2020 and 2019 consists of interest expense related to the Term Loan Agreement and respective warrants by
and among the Company, Oxford and Silicon Valley Bank and interest expense related to the 2026 Notes. Approximately half of the
2026 Notes interest expense is due to the amortization of the discount associated with the equity component of the 2026 Notes.
Interest expense increased in 2020 compared to 2019 primarily due to the convertible notes that were issued in November 2019
and offset by the decline in the term loan interest rate year over year.
Non-cash interest expense on Liability related to sale of future royalties
Non-cash interest expense related to the RPI Liability related to sale of future royalties in 2020, 2019 and 2018 results from
accretion of the liability related to sale of future royalties. This non-cash interest expense will continue to increase until omecamtiv
mecarbil is commercialized and we start paying royalties to RPI in excess of the interest being accreted.
The RPI Royalty Purchase Agreement provides that in the event Amgen elects to terminate the Amgen Agreement, we are
obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement, which includes the
payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other Amgen Alliance Compounds, subject to
a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval). Our obligation to enter
into a new agreement with RPI does not impact our accounting treatment of the RPI Liability or our estimates.
Interest and Other Income, net
Interest and other income, net for 2020, 2019 and 2018 consisted primarily of interest income generated from our cash, cash
equivalents and investments.
70
We divested an equity investment in fiscal 2020 (classified as a Level 1 investment in our short-term investments) with a fair
value of $3.0 million for the year ended December 31, 2020, which resulted in an increase in interest income of $2.6 million in 2020.
In 2019, this equity investment resulted in a $0.3 million increase in interest income.
Liquidity and Capital Resources
Our cash, cash equivalents and investments and a summary of our borrowings and working capital is summarized as follows:
Financial assets:
Cash and cash equivalents
Short-term investments
Total cash, cash equivalents and marketable securities
Borrowings:
Term loan, net
Convertible notes, net
Total borrowings
Working capital:
Current assets
Current liabilities
Working capital
December 31, 2020
December 31, 2019
(In millions)
$
$
$
$
$
$
83.0
381.1
464.1
46.2
89.5
135.7
474.2
31.2
443.0
$
$
$
$
$
$
36.4
188.7
225.1
45.1
84.2
129.3
233.8
26.0
207.8
The following table shows a summary of our cash flows for the periods set forth below:
Net cash provided by (used in) operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Sources and Uses of Cash in 2020
2020
Years Ended December 31,
2019
(In millions)
2018
$
$
8.9
(196.5)
234.1
46.5
$
$
(90.9) $
(74.7)
159.8
(5.8) $
(101.2)
5.1
13.1
(83.0)
We have funded our operations and capital expenditures with proceeds primarily from private and public sales of our equity
securities, a royalty monetization agreement, strategic alliances, long-term debt, other financings and interest on investments. We have
generated significant operating losses since our inception. Our expenditures are primarily related to research and development
activities.
Net cash provided by operating activities was $8.9 million for 2020 which include a net loss of $127.3 million largely due to
ongoing research and development activities, and general and administrative expenses to support those activities. Net loss for
2020 included, among other items: non-cash stock-based compensation, non-cash interest expense related to sale of future royalties
and non-cash interest expense related to debt. The net loss was offset by $87.0 million in deferred revenues with respect to an
agreement to sell to RTW Royalty Holdings our interest in certain future royalties on net sales of products containing the compound
mavacamten that is being developed by Bristol-Myers Squibb Company. These funds were collected in 2020.
Net cash used in investing activities was $196.5 million in 2020 and was primarily due to purchases of investments offset by
proceeds from maturity of investments. Cash purchases of property plant and equipment was also included for $11.1 million which
will be primarily be utilized in our new building.
Net cash provided by financing activities was $234.1 million in 2020 and was primarily due to $188.9 million proceeds related
to issuance of common stock in an underwritten public offering, proceeds from RTW private placement, stock based activities, and
claims settlement with certain institutional investors that were beneficial owners of our common stock related to the disgorgement of
short swing profits pursuant to Section 16(b) of the Exchange Act.
71
Public Offering of Common Stock
In July 2020, we closed an underwritten public offering of 8.4 million shares of our common stock at a public offering price per
share of $24.00, which included the exercise in full by the underwriters of their option to purchase up to 1,093,750 shares of our
common stock at the same price. The gross proceeds were $201.3 million and net proceeds were approximately $188.9 million, after
deducting underwriting discounts, commissions and offering costs.
RTW Transactions
On July 14, 2020, we entered into the RTW Transactions with RTW Royalty Holdings and Ji Xing. The RTW Transactions
include entering into a licensing and collaboration agreement with Ji Xing, the sale of Cytokinetics common stock to the RTW
Investors (as defined below), an agreement to sell to RTW Royalty Holdings our interest in certain future royalties on net sales of
products containing the compound mavacamten that is being developed by Bristol-Myers Squibb Company (formerly by MyoKardia,
Inc.) and the ability for the Company to obtain additional funding in the future from RTW Royalty Holdings, upon the achievement of
certain clinical trial milestones, in exchange for future royalty payments as further discussed below. As a result, we have or expect to
receive a combination of committed capital, funding and sale proceeds from the RTW Investors, RTW Royalty Holdings and Ji Xing.
On July 14, 2020, we entered into Common Stock Purchase Agreements (each, a CSPA) with each of RTW Master Fund,
Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund Limited (collectively, the RTW Investors). The CSPAs provide
for the sale and issuance of an aggregate of 2.0 million shares of common stock of Cytokinetics (the Shares) at a price per share of
$25.00 and an aggregate purchase price of $50.0 million. The closing occurred on July 14, 2020. The RTW Investors have agreed to
certain trading and other restrictions with respect to the Shares, including a restriction on sales or other transfers of the Shares, subject
to certain exceptions, for a period of two years from the closing date, which period will be extended if certain conditions are met.
As of December 31, 2020, we have received $25.0 million related to the licensing and collaboration agreement with Ji Xing,
$50.0 million associated with the sale of Cytokinetics common stock to the RTW Investors and $85.0 million associated with the
agreement to sell RTW Royalty Holdings our interest in certain future royalties on net sales of products containing the compound
mavacamten that is being developed by Bristol-Myers Squibb Company (formerly by MyoKardia Inc).
Funding Agreement
We entered into a Funding Agreement (the Funding Agreement) with RTW Royalty Holdings. Pursuant to the Funding
Agreement, RTW Royalty Holdings has committed to provide up to $90.0 million (the Funding Commitment), to fund our
development and commercialization of CK-274 in nHCM and oHCM. Half of the Funding Commitment will be available, at our
option, if certain clinical trial milestones of CK-274 for oHCM are achieved by January 14, 2023, and the remaining $45.0 million of
the Funding Commitment will be available, at our option, if certain clinical trial milestones of CK-274 for nHCM are achieved by
January 14, 2024. If we develop CK-274 in another indication, we will negotiate an additional funding commitment from RTW to
fund our development and commercialization of CK-274 in such other indication (other than oHCM or nHCM).
In exchange for the Funding Commitment and upon receipt of such funding from RTW Royalty Holdings, we have agreed to
make payments to RTW Royalty Holdings equal to 2%, if RTW Royalty Holdings funds $45.0 million of the Funding Commitment,
or 4%, if RTW Royalty Holdings funds the full $90.0 million of the Funding Commitment, in each case in respect of net sales of CK-
274 by us and any of our licensees in the CK-274 Territory. In addition, should we exercise our option draw borrowings pursuant to
the Funding Agreement, such agreement contains certain covenants applicable to us, including, among other things, development and
commercialization diligence obligations in connection to the CK-274 Territory, use of proceeds, reporting and encumbrances. There
are no performance obligations related to the Funding Agreement, as access to the Funding Commitment is at the option of the
Company and based upon the achievement of certain development milestones.
The Funding Agreement contains customary conditions to disbursement, which may include the consent of our senior secured
lenders, Oxford and SVB, at the time of disbursement. On July 16, 2020, we entered into an amendment to the Term Loan Agreement,
as defined in Financial Statement Note 6 Debt, which permits, subject to entry into an intercreditor agreement between Oxford and
RTW Royalty Holdings in form.
Sources and Uses of Cash in 2019
At December 31, 2019, our cash, cash equivalents and short-term investments totaled $225.1 million.
Net cash used in operating activities was $90.9 million for 2019 and was largely due to our net loss for 2019, offset by non-cash
expenses included in net loss.
72
Net cash used in investing activities was $74.7 million in 2019 and was primarily due to purchases of investments of $277.9
million, offset by sales and maturities of investments of $205.8 million.
Net cash provided by financing activities was $159.8 million in 2019 and was primarily due to proceeds from public offerings
of common stock of $36.2 million under the facility discussed below, proceeds from the convertible notes of $133.9 million as
discussed below, offset by the purchase of the capped call options related to the convertible notes of $13.4 million as discussed below.
On November 13, 2019, the Company issued $138.0 million aggregate principal amount of 4.0% convertible senior notes due
2026 (the 2026 Notes). The 2026 Notes are unsecured obligations and bear interest at an annual rate of 4.0% per year, payable semi-
annually on May 15 and December 15 of each year, beginning May 15, 2020. The 2026 Notes are governed by an indenture between
the Company and U.S. Bank National Association, as trustee. The 2026 Notes will mature on November 15, 2026, unless earlier
repurchased or redeemed by the Company or converted at the option of the holders. The Company may redeem the 2026 Notes prior
to the maturity date but is not required to and no sinking fund is provided for the 2026 Notes. The 2026 Notes may be converted,
under certain circumstances as described below, based on an initial conversion rate of 94.7811 shares of common stock per
$1,000 principal amount (which represents an initial conversion price of $10.55 per share). The conversion rate for the 2026 Notes
will be subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole
fundamental change (as defined in the indenture), the Company will, in certain circumstances, increase the conversion rate by a
number of additional shares for a holder that elects to convert its notes in connection with such make-whole fundamental change. The
Company received approximately $133.9 million in net proceeds, after deducting the initial purchasers discount, from the issuance of
the 2026 Notes.
In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call transactions with
one of the underwriters in the offering or its affiliate. The Company used approximately $13.4 million of the net proceeds from the
offering of the 2026 Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to
reduce potential dilution to the Companys common stock upon any conversion of the 2026 Notes and/or offset any cash payments the
Company is required to make in excess of the principal amount of converted 2026 Notes, as the case may be, in the event that the
market value per share of the Companys common stock, as measured under the terms of the capped call transactions at the time of
exercise, is greater than the strike price of the capped call transactions (which initially corresponds to the initial conversion price of the
2026 Notes, and is subject to certain adjustments), with such reduction and/or offset subject to a cap initially equal to approximately
$14.07 (which represents a premium of approximately 70% over the last reported sale price of the Companys common stock on
November 7, 2019), subject to certain adjustments. The capped call transactions are separate transactions, entered into by the
Company and are not part of the terms of the 2026 Notes.
In 2019, we terminated the original Controlled Equity OfferingSM Sales Agreement (the ATM Facility) with Cantor
Fitzgerald & Co. (Cantor) for the sale, in our sole discretion, of shares of our common stock, having an aggregate offering price of
up to $75.0 million through Cantor and we entered into a new sales agreement (the New ATM Facility) with Cantor, which provides
for the sale, in our sole discretion, of shares of our common stock having an aggregate offering price of up to $85.0 million through
Cantor, as our sales agent. The issuance and sale of these shares by us pursuant to the New ATM Facility are deemed at the market
offerings and are registered under the Securities Act of 1933, as amended. We pay a commission of up to 3.0% of gross sales proceeds
of any common stock sold under the New ATM Facility. In 2019, we issued 3,984,849 shares of common stock for net proceeds of
$36.2 million under the New ATM Facility.
Future Sources and Uses of Cash
In 2021, in addition to the costs and expenses of our research and development activities, we expect to incur an increase in costs
and expenses as compared to previous annual periods as a result of advancement of our pipeline, and our commercial planning
activities in view of the potential commercial launch of omecamtiv mecarbil in the U.S. and potentially elsewhere. Such costs and
expenses are likely to include an increase in headcount, particularly in our sales and marketing functions, and the procurement of
omecamtiv mecarbil drug product for commercial launch. These costs and expenses will be greater than what they would have been
had Amgen not elected to terminate the Amgen Agreement and Servier not elected to terminate the Servier Agreement. We may
explore potential strategic transactions and/or structured financing transactions to finance the increase costs and expenses. We will
also incur expenses in connection to our relocation from our Old Facilities to our New Facilities during the fourth quarter of 2021,
including holdover rent payable to our current landlord.
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 incur significant research and development expenses as we advance the research and
development of compounds from our other muscle biology programs through research to candidate selection to clinical development.
We may also incur significant sales and marketing expenses if and when one or more of our molecules receive regulatory approvals.
73
Our future capital uses and requirements depend on numerous factors. These factors include, but are not limited to, the
following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the initiation, progress,
manufacturing, and controls (CMC), and clinical trials for our drug candidates and other compounds;
timing, scope and completion of preclinical research, non-clinical development, chemistry,
the time and costs involved in obtaining regulatory approvals;
the jurisdictions in which we are granted regulatory approvals and thus are able to successfully launch our products for
commercial sale;
delays that may be caused by requirements of regulatory agencies;
our level of funding for the development of current or future drug candidates;
the number of drug candidates we pursue and the stage of development that they are in;
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 our potential 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 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.
On November 23, 2020, we announced that Amgen has elected to terminate the Amgen Agreement and thereby end its
collaboration with Cytokinetics, effective May 20, 2021, and intends to transition development and commercialization rights
for omecamtiv mecarbil and CK-136 (formerly known as AMG 594) to Cytokinetics.
On December 23, 2020, we announced that Amgen notified us that Servier elected to terminate the Servier Agreement. The
termination is effective as of March 18, 2021, after which all development, commercialization and other rights with respect to
omecamtiv mecarbil previously granted by Amgen to Servier will revert to Amgen. Given Serviers notice to Amgen, all worldwide
rights related to the development and commercialization of omecamtiv mecarbil will now return to Cytokinetics commensurate with
the effective termination of the Amgen Agreement on May 20, 2021.
As a result of Amgens and Serviers elections to terminate the Amgen Agreement and the Servier Agreement respectively, we
will dedicate resources to ensure the transition of the programs related to omecamtiv mecarbil and CK-136 (formerly known as AMG
594) to us. In addition, we anticipate engaging with regulatory authorities in 2021 regarding the results of GALACTIC-HF with the
objective to assess potential regulatory paths for an NDA submission for omecamtiv mecarbil and continuing our commercial
planning activities. Finally, we plan to evaluate a wide range of corporate development strategies for potential co-development, co-
commercialization and licensing deals in relation to omecamtiv mecarbil and our other drug candidates in order to mitigate the cost
effects of the termination of the Amgen Agreement and Servier Agreement and enhance our commercial capabilities. These cost
effects of termination include forfeiture of potential milestone payments from Amgen to us, as well as additional costs to us relating to
clinical studies, regulatory filing, and commercialization of omecamtiv mecarbil.
The RPI Royalty Purchase Agreement provides that in the event Amgen elects to terminate the Amgen Agreement, we are
obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement, which includes the
payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other Amgen Alliance Compounds, subject to
a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval). Our obligation to enter
into a new agreement with RPI does not impact our accounting treatment of the RPI Liability or our estimates.
74
Future uses of cash also include capital purchases of equipment and tenant improvements to build out the Oyster Point Lease
totaling approximately $35.0 million. We intend to occupy the Oyster Point building late 2021.
We have incurred an accumulated deficit of $992.3 million since inception and there can be no assurance that we will attain
profitability. We are subject to risks common to clinical-stage companies including, but not limited to, development of new drug
candidates, dependence on key personnel, and the ability to obtain additional capital as needed to fund our future plans. Our liquidity
will be impaired if sufficient additional capital is not available on terms acceptable to us, if at all. Until we achieve profitable
operations, we intend to continue to fund operations through payments from strategic collaborations, additional sales of equity
securities, grants and other financings. 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. Our success is dependent on our ability to obtain additional capital by entering into new
strategic collaborations and/or through financings, and ultimately on our and our collaborators ability to successfully develop and
market one or more of our drug candidates. We cannot be certain that sufficient funds will be available from such collaborators or
financings when needed or on satisfactory terms. Additionally, there can be no assurance that any of our drug candidates will be
accepted in the marketplace or that any future products can be developed or manufactured at an acceptable cost. These factors could
have a material adverse effect on our future financial results, financial position and cash flows.
Based on the current status of our development plans, we believe that our existing cash and cash equivalents, investments and
interest earned on investments will be sufficient to meet our projected operating requirements for at least the next 12 months. If, at any
time, our prospects for internally financing our research and development programs decline, we may decide to reduce research and
development expenses by delaying, discontinuing or reducing our funding of development of one or more of our 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 strategic relationships may require us to
forego certain commercialization and other rights to our drug candidates. Similarly, any additional equity financing may be dilutive to
stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital as and when needed could
have a negative impact on our financial condition and our ability to pursue our business strategy.
Contractual Obligations and Other Commitments
The following table summarizes our contractual obligations as of December 31, 2020:
Operating lease obligations(1)
Long-term debt obligations(2)
Convertible notes(3)
Purchase obligations(4)
Total contractual obligations
Payment Due by Period
Total
Less than
One Year
$
$
221.1
57.1
33.0
3.7
314.9
$
$
4.6
3.7
5.5
3.2
17.0
1-3 Years
(In millions)
28.9
53.4
11.0
0.5
93.8
$
$
$
$
3-5 Years
More than 5
Years
33.9
11.0
44.9
$
$
153.7
5.5
159.2
(1) Represents undiscounted future non-cancellable lease payments for our operating leases.
(2) Represents future minimum payments for our term loan, including interest payable and final payment.
(3) Represents interest payable for our convertible notes.
(4) Represents payments for materials and software licenses that are firm commitments.
The above table does not include $43.8 million of cancellable purchase orders for the construction of the Oyster Point Lease.
The above table does not include the RPI Liability payments due to the uncertain nature and timing.
The obligations in the above table are as of December 31, 2020. We expect the amount of these obligations to change materially
over time as new contracts are initiated and existing contracts are completed, terminated, or modified.
Segment Information
We have one primary business activity and operate in one reportable segment.
75
Off-balance Sheet Arrangements
We 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 financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recent Accounting Pronouncements
The information required by this item is included in Item 8, Note 1, Organization and Accounting Policies, in our Consolidated
Financial Statements included in this Annual Report on Form 10-K.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest
rate sensitivities.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash and short-term
investments of $464.1 million, which consisted of consist of U.S. Treasury securities, agency bonds, commercial paper, corporate debt
and money market fund. To reduce the volatility relating to these exposures, we have put investment and risk management policies
and procedures in place. The primary objective of our investment activities is to preserve capital to fund our operations. We do not
enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our
interest rate risk exposure. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. A
hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material impact on our
consolidated financial statements.
Foreign Currency Risk
The majority of our transactions occur in U.S. dollars. However, we do have certain transactions that are denominated in
currencies other than the U.S. dollar, primarily Euro and GBP and we therefore are subject to foreign currency exchange risk. The
fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of expenses, assets and liabilities
primarily associated with a limited number of operating activities. Foreign currency transaction gains and losses have not been
material to our financial statements for the year ended December 31, 2020. A 10% increase or decrease in current exchange rates
would not have a material effect on our financial results.
76
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm .........................................................................................................
Consolidated Balance Sheets.........................................................................................................................................................
Consolidated Statements of Operations and Comprehensive Loss ...............................................................................................
Consolidated Statements of Stockholders Equity (Deficit) .........................................................................................................
Consolidated Statements of Cash Flows .......................................................................................................................................
Notes to Consolidated Financial Statements .................................................................................................................................
Page
78
81
82
83
84
85
77
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Cytokinetics, Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cytokinetics, Incorporated (the Company) as of December 31,
2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders equity (deficit), and cash
flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Companys internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
Framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the
Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved especially challenging, subjective or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
78
Description of the
Matter
Estimates Related to the Sale of Future Royalties
As described in Note 7 to the consolidated financial statements, the Company has entered into agreements
with counterparties to monetize future royalty payments that the Company is entitled to receive upon
commercialization of certain products that were previously licensed to others. Cash is received upon execution
of such royalty monetization agreements, which are then accounted for as either a liability if the Company has
significant continuing involvement in the related royalty stream or as deferred revenue if there is no
significant continuing involvement. Regardless of whether there is significant continuing involvement, the
Company is required to estimate the amount and timing of future royalty payments to be received from
licensors and paid to the counterparties of the royalty monetization agreements. The Company periodically
assesses the amount and timing of expected royalty payments using a combination of internal projections and
forecasts from external sources.
There are a number of factors that could materially affect the amount and timing of royalty payments, most of
which are not within the Companys control and managements estimates of the amount and timing of royalty
payments to be received require the use of significant unobservable inputs. These inputs are derived using
internal management estimates developed based on third party data and reflect managements judgements,
current market conditions surrounding competing products, and forecasts. The significant unobservable inputs
can include, to the extent applicable, estimates of patient populations, selling price, peak sales and sales ramp,
the expected term of the related royalty streams, the timing of expected product launch and its impact on
royalty rates, as well as the overall probability of clinical success and regulatory approval. A significant
change in unobservable inputs could result in a material increase or decrease to the amount and timing of
future cash flows. The Company recognized non-cash interest expense on the liability related to the sale of
future royalties of $22.7 million for the year ended December 31, 2020 and the liability related to the sale of
future royalties, net was $166.1 million as of December 31, 2020. During 2020, the Company also recognized
$87.0 million of deferred revenue related to the sale of a royalty stream to a third party as discussed in Note 3.
Auditing managements estimates of future royalty payments was especially challenging due to the significant
judgment used by management in estimating the amount and timing of future royalty payments, which
required the use of subjective inputs.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over
the Companys processes for estimating the amount and timing of future royalty payments.
Our audit procedures included, among others, testing managements process for estimating the amount and
timing of future royalty payments and evaluating the reasonableness of significant assumptions used by
management when developing the estimate of expected future royalties to be paid, including estimates of
patient populations, selling price, peak sales and sales ramp, the expected term of the related royalty streams,
the timing of expected product launch and its impact on royalty rates, as well as the overall probability of
clinical success and regulatory approval. Evaluating the reasonableness of managements assumptions
included, among others, consideration of (i) relevant industry forecasts, (ii) consistency with external market
research and industry data, and (iii) whether the assumptions were consistent with evidence obtained in other
areas of the audit.
79
Revenue from Collaborative and Licensing Arrangements
Description of the
Matter
As described in Note 3, collaboration arrangements may include multiple elements such as license fees,
milestone payments, royalties, and research and development cost reimbursement. Further, collaborations may
include the delivery of various goods or services to the collaboration partner such as licenses to intellectual
property or research and development services. The Company recognized $36.5 million as license revenue
during 2020 under the agreement with Ji Xing Pharmaceuticals Limited (the Ji Xing License Agreement).
Auditing the Companys accounting for revenues from this collaboration arrangement was especially
challenging due to the complex and highly judgmental nature of evaluating the terms of the related
agreements, identifying performance obligations, and determining and allocating the transaction price to the
performance obligations.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over
the Companys processes for assessing the accounting treatment of any new collaboration agreements or
modifications to existing collaboration agreements, including assessing the identification of and effort to
satisfy performance obligations.
To test the accounting for revenue from the Ji Xing License Agreement, we tested and evaluated, among other
things, the performance obligation identified, the estimates and assumptions used to determine the transaction
price, and the allocation of the transaction price to the performance obligation. We also assessed whether the
accounting conclusions for the Ji Xing License Agreement were appropriate.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2018.
Redwood City, California
February 26, 2021
80
CYTOKINETICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Long-term investments
Property and equipment, net
Operating lease right-of-use assets and other assets
Total assets
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued liabilities
Short-term lease liability
Other current liabilities
Total current liabilities
Term loan, net
Convertible notes, net
Liability related to the sale of future royalties, net
Long-term deferred revenue
Long-term lease and other non-current liabilities
Total liabilities
Commitments and contingencies
Stockholders equity (deficit):
Preferred stock, $0.001 par value:
Authorized: 10,000,000 shares; Issued and outstanding: none
Common stock, $0.001 par value:
Authorized: 163,000,000 shares
Issued and outstanding: 71,015,183 shares at December 31, 2020
and 59,172,124 shares at December 31, 2019
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders equity (deficit)
Total liabilities and stockholders equity (deficit)
December 31,
2020
2019
$
$
$
82,985
381,075
4,420
5,741
474,221
36,954
13,346
9,282
533,803
8,050
19,315
2,785
1,049
31,199
46,209
89,504
166,068
87,000
440
420,420
36,433
188,679
5,163
3,477
233,752
42,650
4,530
8,882
289,814
8,160
12,123
4,616
1,124
26,023
45,052
84,205
143,276
2,195
300,751
70
1,105,470
149
(992,306)
113,383
533,803
$
59
853,341
679
(865,016)
(10,937)
289,814
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
81
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
CYTOKINETICS, INCORPORATED
(in thousands, except per share data)
Revenues:
Research and development revenues
License revenues
Milestone revenues
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Interest expense
Non-cash interest expense on liability related to sale of future royalties
Interest and other income, net
Net loss
Net loss per share basic and diluted
Weighted-average number of shares used in computing net loss per
share basic and diluted
Other comprehensive loss:
Unrealized (losses) gains on available-for-sale securities, net
Comprehensive loss
Years Ended December 31,
2019
2018
2020
$
$
$
$
16,527
36,501
2,800
55,828
96,951
52,820
149,771
(93,943)
(15,963)
(22,713)
5,329
(127,290)
(1.97)
64,524
(530)
(127,820)
$
$
$
$
26,868
26,868
86,125
39,610
125,735
(98,867)
(6,623)
(20,737)
4,535
(121,692)
(2.11)
57,575
179
(121,513)
$
$
$
$
26,368
5,133
31,501
89,135
31,282
120,417
(88,916)
(3,797)
(17,767)
4,191
(106,289)
(1.95)
54,420
157
(106,132)
The accompanying notes are an integral part of these consolidated financial statements.
82
CYTOKINETICS, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(in thousands, except shares)
Common Stock
Shares
53,960,832
422,819
Amount
54
$
1
Additional
Paid-In
Capital
$ 755,526
3,172
Balance, December 31, 2017
Exercise of stock options
Issuance under Employee Stock Purchase
Plan
Vesting of restricted stock units, net of
taxes withheld
Issuance of warrants
Stock-based compensation
ASC 606 Adoption
Other comprehensive loss
Net loss
Balance, December 31, 2018
Exercise of stock options
Issuance of common stock under at-the-
market offering, net of issuance costs
Issuance under Employee Stock Purchase
Plan
Vesting of restricted stock units, net of
taxes withheld
Issuance of warrants
Equity component of convertible notes
Capped call options associated with
convertible notes
Stock-based compensation
Other comprehensive loss
Net loss
Balance, December 31, 2019
Exercise of stock options
Exercise of warrants
Claims settlement under Section 16(b)
Underwritten public offering of common
stock, net of discounts, commissions and
offering cost
Issuance of common stock upon private
placement
Issuance under Employee Stock Purchase
Plan
Vesting of restricted stock units, net of
taxes withheld
Issuance of warrants
Stock-based compensation
Other comprehensive loss
Net loss
Balance, December 31, 2020
144,822
189,433
54,717,906
131,909
3,984,849
172,113
165,347
59,172,124
943,505
104,890
8,385,417
2,000,000
134,684
274,563
71,015,183
$
55
4
59
1
8
2
70
Accumulated
Other
Comprehensive
Income
$
343
157
500
179
679
Accumulated
Deficit
$ (646,081) $
9,046
(106,289)
(743,324)
(121,692)
(865,016)
928
(866)
182
9,761
768,703
1,017
36,210
1,108
(732)
185
49,477
(13,386)
10,759
853,341
7,610
2,151
188,875
36,435
1,509
(2,255)
184
17,620
$1,105,470
$
(530)
149
(127,290)
$ (992,306) $
Total
Stockholders
Equity (Deficit)
109,842
3,173
928
(866)
182
9,761
9,046
157
(106,289)
25,934
1,017
36,214
1,108
(732)
185
49,477
(13,386)
10,759
179
(121,692)
(10,937)
7,611
2,151
188,883
36,437
1,509
(2,255)
184
17,620
(530)
(127,290)
113,383
The accompanying notes are an integral part of these consolidated financial statements.
83
CYTOKINETICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Non-cash interest expense on liability related to sale of future royalties
Non-cash stock-based compensation expense
Depreciation and amortization of property and equipment
Gain on investment, net
Interest receivable and amortization on investments
Non-cash interest expense related to debt
Changes in operating assets and liabilities:
Accounts receivable
Contract assets
Prepaid and other current assets
Operating lease right-of-use assets and other assets
Accounts payable
Accrued and other liabilities
Contract liabilities
Operating lease liabilities
Deferred revenue
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of investments
Maturities of investments
Sales of investments
Purchases of property and equipment
Sales of property and equipment
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Proceeds from public offerings of common stock, net of discounts,
commissions and offering cost
Proceeds from private placement, net
Proceeds from issuance under Employee Stock Purchase Plan
Proceeds from stock-based award activities, net
Claims settlement under Section 16(b)
Net proceeds from long-term debt, net of debt discount and issuance costs
Net proceeds from convertible notes, net of debt discount and issuance costs
Issuance of common stock under at-the-market offering, net of issuance costs
Purchase of capped call options associated with convertible notes
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
Years Ended December 31,
2019
2018
2020
$
(127,290) $
(121,692) $
(106,289)
22,792
17,620
1,831
(573)
(1,194)
6,640
743
(2,183)
1,242
(110)
7,117
(4,692)
87,000
8,943
(435,825)
247,301
3,061
(11,052)
(196,515)
188,883
36,225
1,509
5,356
2,151
234,124
46,552
36,433
82,985
$
20,737
10,759
1,293
(2,587)
919
(2,932)
4,554
(3,862)
3,552
4,396
(2,168)
(3,876)
(90,907)
(277,883)
202,599
3,196
(2,619)
(74,707)
1,393
1,710
133,860
36,214
(13,386)
159,791
(5,823)
42,256
36,433
$
17,767
9,761
1,239
(1,677)
920
(1,119)
5,154
1,817
(1,490)
(2,063)
(18,750)
(6,485)
(101,215)
(240,224)
246,232
(889)
14
5,133
3,234
9,898
13,132
(82,950)
125,206
42,256
Supplemental cash flow disclosures:
Cash paid for interest
Right-of-use assets recognized in exchange for lease obligations
9,620
1,106
4,059
10,687
2,877
The accompanying notes are an integral part of these consolidated financial statements.
84
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Organization and Accounting Policies
Organization
Cytokinetics, Incorporated (the Company, we or our) was incorporated under the laws of the state of Delaware on
August 5, 1997. We are a late-stage biopharmaceutical company focused on the discovery and development of novel small molecule
therapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions.
Our financial statements contemplate the conduct of our operations in the normal course of business. We have incurred an
accumulated deficit of $992.3 million since inception and there can be no assurance that we will attain profitability. We had a net loss
of $127.3 million and net cash provided by operations of $8.9 million for the year ended December 31, 2020. Cash, cash equivalents
and investments increased to $501.0 million as of December 31, 2020 from $267.8 million as of December 31, 2019. We anticipate
that we will have operating losses and net cash outflows in future periods.
We are subject to risks common to late stage biopharmaceutical companies including, but not limited to, development of new
drug candidates, dependence on key personnel, and the ability to obtain additional capital as needed to fund our future plans. Our
liquidity will be impaired if sufficient additional capital is not available on terms acceptable to us. To date, we have funded operations
primarily through sales of our common stock, contract payments under our collaboration agreements, sale of future royalties, debt
financing arrangements, government grants and interest income. Until we achieve profitable operations, we intend to continue to fund
operations through payments from strategic collaborations, additional sales of equity securities, grants and debt financings. 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. Our
success is dependent on our ability to enter into new strategic collaborations and/or raise additional capital and to successfully develop
and market one or more of our drug candidates. As a result, we may choose to raise additional capital through equity or debt
financings to continue to fund operations in the future. We cannot be certain that sufficient funds will be available from such a
financing or through a collaborator when required or on satisfactory terms. Additionally, there can be no assurance that our drug
candidates will be accepted in the marketplace or that any future products can be developed or manufactured at an acceptable cost.
These factors could have a material adverse effect on our future financial results, financial position and cash flows.
Based on the current status of our research and development plans, we believe that our existing cash, cash equivalents and
investments will be sufficient to fund our cash requirements for at least the next 12 months after the issuance of the consolidated
financial statements. If, at any time, our prospects for financing our research and development programs decline, we may decide to
reduce research and development expenses by delaying, discontinuing or reducing our funding of one or more of our research or
development programs. Alternatively, we might raise funds through strategic collaborations, public or private financings or other
arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Presentation
The consolidated financial statements include the accounts of Cytokinetics, Incorporated and its wholly-owned subsidiary and
have been prepared in accordance with U.S. generally accepted accounting principles (US GAAP). Intercompany transactions and
balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform the prior period
presentation to the current year.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject us to concentrations of risk consist principally of cash and cash equivalents,
investments, and accounts receivable.
Our cash, cash equivalents and investments are invested in deposits with two major financial institutions in the United
States. Deposits in these banks may exceed the amount of insurance provided on such deposits.
85
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our exposure to credit risk associated with non-payment is limited to our strategic partners Amgen Inc. (Amgen), Astellas
Pharma Inc. (Astellas) and Ji Xing Pharmaceuticals Limited (Ji Xing) and any material non-payment from our partners would
result in a material breach of the agreements underlying our strategic partnerships.
Drug candidates we develop may require approvals or clearances from the U.S. Food and Drug Administration (FDA) or
other regulatory agencies prior to commercial sales. There can be no assurance that our drug candidates will receive any of the
required approvals or clearances. If we were to be denied approval, or clearance or any such approval or clearance was to be delayed,
it would have a material adverse impact on us.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.
Investments
Available-for-sale investments. Our investments consist of U.S. Treasury securities, agency bonds, commercial paper,
corporate debt and money market funds. We designate all investments as available-for-sale and report them at fair value, based on
quoted market prices, with unrealized gains and losses recorded in accumulated other comprehensive income and loss. The cost of
securities sold is based on the specific-identification method. Investments with original maturities greater than three months and
remaining maturities of one year or less are classified as short-term investments. Investments with remaining maturities greater than
one year are classified as long-term investments. The amortized cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included in Interest and other income, net. Recognized gains
and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in Interest and
other income, net. Interest and dividends on securities classified as available-for-sale are included in Interest and other income, net.
All of our available-for-sale investments are subject to a periodic impairment review. If an impairment is the result of a credit
loss, we recognize an allowance for credit losses (ACL). ACLs reflect managements current estimate of credit losses that are
expected to occur over the remaining life of a financial asset. We recognize an impairment charge when a decline in the fair value of
investments below the cost basis is judged to be other-than-temporary. Factors we consider in assessing whether an other-than-
temporary impairment has occurred include: the nature of the investment; whether the decline in fair value is attributable to specific
adverse conditions affecting the investment; the financial condition of the investee; the severity and the duration of the impairment;
and whether we have the intent and ability to hold the investment to maturity. When we determine that 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.
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the
estimated useful lives of the related assets, which are generally three years for computer equipment and software, five years for
laboratory equipment and office equipment, and seven years for furniture and fixtures. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related assets,
typically ranging from three to seven years. Upon sale or retirement of assets, the costs and related accumulated depreciation and
amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations.
86
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impairment of Long-lived Assets
We review long-lived assets, including property and equipment, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully recoverable. Impairment is measured as the amount by
which the carrying amount of a long-lived asset exceeds its fair value. We would recognize an impairment loss when estimated
undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are materially less than its
carrying amount.
Leases
We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) on January 1, 2019 using the modified
retrospective approach. In adopting Topic 842, we recognized a right-of-use asset and a short-term and long-term lease liability on our
consolidated balance sheets for our existing facilities leases with Britannia Pointe Grand Limited Partnership (the Britannia Leases).
The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. We determined the lease term at the
commencement date by considering whether renewal options and termination options are reasonably assured of exercise. In
determining the present value of lease payments, we estimated our incremental borrowing rate based on information available when
we adopted Topic 842. We base the Britannia Leases liability on the present value of remaining lease payments over the remaining
terms of the Britannia Leases, using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized
basis at the lease commencement date. We evaluated our other contracts and determined that, except for the Britannia Leases, none of
our contracts contained a lease as defined in Topic 842.
We elected the package of practical expedients permitted under the transition guidance within Topic 842, which among other
things, allowed us to carry forward the historical lease classification of those leases in place as of January 1, 2019. We also elected to
exclude from our consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected
to not separate lease components and non-lease components for Britannia Leases.
We recorded a lease liability of $10.7 million and a corresponding right-of-use asset of $9.6 million upon adoption of the new
lease standard on January 1, 2019.
We recognize rent expense for operating leases on a straight-line basis over the lease term in operating expenses on the
consolidated statements of operations.
Prior period amounts continue to be reported in accordance with our historic accounting under previous lease guidance, ASC
840, Leases (Topic 840).
Revenue Recognition
We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration
for those goods or services. To recognize revenue from a contract with a customer, we:
(i)
identify our contracts with our customers;
(ii) identify our distinct performance obligations in each contract;
(iii) determine the transaction price of each contract;
(iv) allocate the transaction price to the performance obligations; and
(v) recognize revenue as we satisfy our performance obligations.
At contract inception, we assess the goods or services promised within each contract and assess whether each promised good or
service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the transaction
price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Collaborative Arrangements
We enter into collaborative arrangements with partners that typically include payment to us for one of more of the following: (i)
license fees; (ii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; (iii) royalties on
net sales of licensed products; and (iv) research and development cost reimbursements. Each of these payments results in collaboration
or other revenues. Where a portion of non-refundable up-front fees or other payments received are allocated to continuing
performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as
revenue when (or as) the underlying performance obligation is satisfied.
87
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to
determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is
allocated among the performance obligations. The stand-alone selling price may include such items as, forecasted revenues,
development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success,
to determine the transaction price to allocate to each performance obligation.
For our collaboration agreements that include more than one performance obligation, such as a license combined with a
commitment to perform research and development services, we make judgments to assess the nature of the combined performance
obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate our
progress each reporting period and, if necessary, adjust the measure of a performance obligation and related revenue recognition.
License Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is
transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other
promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined
performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for
purposes of recognizing revenue from non-refundable, up-front license fees. We evaluate the measure of progress each reporting
period and, if necessary, adjust the measure of performance and related revenue recognition.
Milestone Payments: We use judgment to determine whether a milestone is considered probable of being reached. Using the
most likely amount method, we include the value of a milestone payment in the consideration for a contract at inception if we then
conclude achieving the milestone is more likely than not. Otherwise, we exclude the value of a milestone payment from contract
consideration at inception and recognize revenue for a milestone at a later date, when we judge that it is probable the milestone will be
achieved. If we conclude it is probable that a significant revenue reversal would not occur, the associated milestone is included in the
transaction price. We then allocate the transaction price to each performance obligation on a relative stand-alone selling price basis,
for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent
reporting period, we re-evaluate the probability of achievement of such milestones and any related constraint, and if necessary, adjust
our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect
license, collaboration and other revenues and earnings in the period of adjustment.
Royalties: For contracts that include sales-based royalties, we recognize revenue at the later of (i) when the related sales occur,
or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. To date, we have not
recognized any royalty revenues resulting from contracts.
Research and Development Cost Reimbursements: Our joint programs with Astellas under that certain License and
Collaboration Agreement for Other Skeletal Sarcomere Activators, dated April 23, 2020, as amended (the Astellas OSSA
Agreement), and with Amgen under that certain Collaboration and Option Agreement, dated December 29, 2006, as amended (the
Amgen Agreement), include promises of research and development services. We have determined that these services collectively
are distinct from the licenses provided to Astellas and Amgen under such agreements, and as such, these promises are accounted for as
a separate performance obligation recorded over time. We recognize revenue for these services as the performance obligations are
satisfied, which we estimate using internal research and development costs incurred.
Accrued Research and Development Expenditures
A substantial portion of our preclinical studies and all of our clinical trials have been performed by third-party contract research
organizations (CROs) and other vendors and our accruals for expenses for preclinical studies and clinical trials may be significant.
For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to 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, milestones achieved and percentage of work completed to date. We monitor patient
enrollment levels and related activities to the extent practicable through internal reviews, correspondence and status meetings with
CROs, and review of contractual terms. We depend on the timeliness and accuracy of data provided by our CROs and other vendors to
accrue expenses. If we receive and rely on incomplete or inaccurate data, accruals and expenses may be too high or too low at a given
point in time and corresponding adjustments to accruals and expenses would be made in future periods when the actual expense
becomes known.
88
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Liability Related to Sale of Future Royalties
We treat our liability to RPI Finance Trust (RPI) related to sale of future royalties under that certain Royalty Purchase
Agreement, dated February 1, 2017 (the RPI Royalty Purchase Agreement) pursuant to which we sold a portion of our right to
receive royalties from Amgen on potential net sales of omecamtiv mecarbil as a debt financing, to be amortized under the effective
interest rate method over the life of the related royalty stream.
Our liability to RPI related to sale of future royalties under the RPI Royalty Purchase Agreement (the RPI Liability) and
related amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement.
Concurrently with our entry into the RPI Royalty Purchase Agreement, we entered into a common stock purchase agreement with
RPI. We allocated the consideration and issuance costs on a relative fair value basis to the RPI Liability and the common stock.
The RPI Royalty Purchase Agreement further provides that in the event Amgen elects to terminate the Amgen Agreement, we
are obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement, which includes
the payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other compounds with the same
mechanism of action as omecamtiv mecarbil that are subject to the Amgen Agreement (together the Amgen Alliance Compounds),
subject to a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval). Our obligation
to enter into a new agreement with RPI does not impact our accounting treatment of the RPI Liability or our estimates.
The RPI Liability will be recognized using significant unobservable inputs. These inputs are derived using internal management
estimates developed based on third party data and reflect managements judgements, current market conditions surrounding competing
products, and forecasts. The significant unobservable inputs include the estimated patient population, estimated selling price,
estimated peak sales and sales ramp, the expected term of the royalty stream, timing of the expected launch and its impact on the
royalty rate. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of
the RPI Liability.
We will periodically assess the amount and timing of expected royalty payments using a combination of internal projections
and forecasts from external sources. To the extent our future estimates of future royalty payments are greater or less than previous
estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the amortization of
the RPI Liability related to sale of future royalties and prospectively recognize the related non-cash interest expense. We have updated
the analysis to include the data released on October 8, 2020 relating to GALACTIC-HF. Our estimates regarding the amount and
timing of future royalty payments have not changed as a result of Amgens election to terminate the Amgen Agreement or Serviers
election to terminate the sublicense agreement (the Servier Agreement) between Amgen and Les Laboratoires Servier and Institut de
Recherches Internationales Servier (Servier) respectively.
We account for the RPI Liability, as a liability primarily because we have significant continuing involvement in generating the
royalty stream. If and when omecamtiv mecarbil is commercialized and royalties become due, we will recognize the portion of
royalties paid to RPI as a decrease to the RPI Liability and a corresponding reduction in cash.
Research and Development Expenditures
Research and development costs are charged to operations as incurred. Research and development expenses consist primarily of
clinical manufacturing costs, preclinical study expenses, consulting and other third-party costs, employee compensation, supplies and
materials, allocation of overhead and occupancy costs, facilities costs and depreciation of equipment.
Income Taxes
We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are
determined based on the difference between 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 affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
We recognize uncertain tax positions taken or expected to be taken on a tax return. Tax positions are initially recognized when
it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and
subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and relevant facts.
We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.
89
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), as part of
its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain
exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period
and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of Topic 740,
Income Taxes, to help simplify and promote consistent application of US GAAP. The guidance is effective for interim and annual
periods beginning after December 15, 2020, with early adoption permitted. We early adopted ASU 2019-12 in 2019 and it did not
have a material impact on the Consolidated Financial Statements.
The only aspect of ASU 2019-12 that had a material impact on our consolidated financial statements was the removal of the
exception related to intraperiod tax allocation. Starting in 2019, we followed the general intraperiod allocation of tax expense. We
have a loss from continuing operations and subsequent to the adoption of ASU 2019-12, we determined the amount attributable to
continuing operations without regard to the tax effect of other items. We prospectively applied the ASU 2019-12 amendment related
to intraperiod tax allocation.
Had the Company not adopted ASU 2019-12, upon issuance of the convertible notes in 2019 (see Note 6 Debt) a $12.0
million deferred tax benefit would have been recognized along with corresponding decreases to net loss and accumulated deficit. The
Company had no intraperiod tax allocation items in prior years.
Due to our net loss position, the income tax benefit generated without the adoption of ASU 2019-12 was a non-cash
benefit. The adoption of ASU 2019-12 did not impact our cash flows.
Stock-Based Compensation
We maintain equity incentive plans under which incentive stock options may be granted to employees and nonqualified stock
options, restricted stock awards, restricted stock units and stock appreciation rights may be granted to employees, directors,
consultants and advisors. In addition, we maintain an employee stock purchase plan (ESPP) under which employees may purchase
shares of our common stock through payroll deductions.
Stock-based compensation expense related to stock options granted to employees and directors is recognized based on the grant
date estimated fair values using the Black Scholes option pricing model. The value of the portion of the award that is ultimately
expected to vest is recognized as expense ratably over the requisite service period.
Stock-based compensation expense related to restricted stock units granted to employees is recognized based on the grant-date
fair value of each award and recorded as expense over the vesting period using the ratable method.
Stock-based compensation expense related to the ESPP is recognized based on the fair value of each award estimated on the
first day of the offering period using the Black Scholes option pricing model and recorded as expense over the service period using the
straight-line method.
Amortization of Debt Discount and Issuance Costs
Debt discount and issuance costs, consisting of legal and other fees directly related to the debt as well as the discount created by
the bifurcation of the equity component and the debt component of the convertible senior notes due 2026 (the 2026 Notes), are
offset against gross proceeds from the issuance of debt and are amortized to interest expense over the estimated life of the debt based
on the effective interest method.
Recent Accounting Standards
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments Credit
Losses Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires that financial assets measured at
amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on
historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also
eliminates the concept of other-than-temporary impairment when evaluating available-for-sale debt securities and instead focuses on
determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses
on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU
2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019. We adopted ASU 2016-13 as of
January 1, 2020 and the adoption did not have a material impact on the Consolidated Financial Statements.
90
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which
expands the scope of costs associated with cloud computing arrangements that must be capitalized. Under the new guidance, costs
associated with implementing a cloud computing arrangement that is a service contract must be capitalized and expensed over the
term of the hosting arrangement. This guidance should be applied either retrospectively or prospectively to all implementation costs
incurred after the date of adoption. We adopted ASU 2018-15 on January 1, 2020 and the adoption did not have a material impact on
the Consolidated Financial Statements.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction
between Topic 808 and Topic 606, Revenue from Contracts with Customers, (ASU 2018-18), which makes targeted improvements
to clarify the interaction between Topic 808, Collaborative Arrangements, and Topic 606, Revenue from Contracts with Customers.
ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We
adopted ASU 2018-18 on January 1, 2020 and the adoption did not have a material impact on the Consolidated Financial Statements.
In November 2019, the FASB issued ASU 2019-08, Compensation-Stock Compensation (Topic 718) and Revenue from
Contracts with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer, which
requires that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718.
The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the
share-based payment award. We have adopted ASU 2019-08 as of January 1, 2020 and the adoption did not have any impact on the
Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting (ASU 2020-04). ASU 2020-04 provides optional guidance for a limited period of time to ease
the potential burden associated with the expected market transition from the London Inter-Bank Offer Rate ("LIBOR") to alternative
reference rates. Companies can apply ASU 2020-04 immediately, however the guidance will only be available until December 31,
2022. The Companys term loan utilizes LIBOR as the reference rate and we are currently evaluating the impact that adopting this
new accounting standard will have on our Consolidated Financial Statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entitys Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entitys Own Equity (ASU 2020-06). ASU 2020-06 amends the guidance on convertible instruments and the derivatives scope
exception for contracts in an entity's own equity, and also improves and amends the related earnings per share guidance. ASU 2020-06
will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early
adoption is permitted. We are currently evaluating the impact
that adopting this new accounting standard will have on our
Consolidated Financial Statements and related disclosures.
Note 2 Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of vested common shares outstanding
during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common shares, including
outstanding stock options, unvested restricted stock, warrants, convertible preferred stock and shares issuable under our ESPP, during
the period using the treasury stock method and convertible notes using the if-converted method.
The following instruments were excluded from the computation of diluted net loss per share for the periods presented because
their effect would have been antidilutive (in thousands):
Options to purchase common stock
Warrants to purchase common stock
Restricted stock and performance units
Shares issuable related to the ESPP
Shares issuable upon conversion of convertible notes
Total shares
Years Ended December 31,
2019
2018
2020
8,510
48
1,117
12
16,675
26,362
7,759
165
839
27
16,675
25,465
5,476
116
547
107
6,246
91
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3 Research and Development Arrangements
Our contract assets changed during the period, as follows (in thousands):
2020
December 31,
2019
2018
Contract asset from the 2016 Astellas Amendment
Balance at beginning of period
Services performed
Cash received for services
Balance at end of period
$
$
$
$
$
4,554
(4,554)
$
9,708
11,713
(16,867)
4,554
Amgen
We and Amgen continue activities related to novel small molecule therapeutics, including omecamtiv mecarbil, that activate
cardiac muscle contractility for potential applications in the treatment of heart failure under the Amgen Agreement.
On November 23, 2020, we announced that Amgen has elected to terminate the Amgen Agreement and thereby end its
collaboration with Cytokinetics, effective May 20, 2021, and Amgen intends to transition development and commercialization rights
for omecamtiv mecarbil and CK-136 (formerly known as AMG 594) to Cytokinetics.
On December 23, 2020, we announced that Amgen notified us that Servier elected to terminate the Servier Agreement. The
termination is effective as of March 18, 2021, after which all development, commercialization and other rights with respect to
omecamtiv mecarbil previously granted by Amgen to Servier will revert to Amgen.
Omecamtiv mecarbil is an investigational cardiac myosin activator, developed for the potential treatment of heart failure with
reduced ejection fraction (HFrEF), and was recently studied in GALACTIC-HF (Global Approach to Lowering Adverse Cardiac
Outcomes Through Improving Contractility in Heart Failure), a positive Phase 3 cardiovascular outcomes clinical trial, and is the
subject of an ongoing Phase 3 clinical trial, METEORIC-HF (Multicenter Exercise Tolerance Evaluation of Omecamtiv Mecarbil
Related to Increased Contractility in Heart Failure), a Phase 3 clinical trial intended to evaluate the potential of omecamtiv mecarbil
to increase exercise performance. CK-136, a novel mechanism cardiac troponin activator, was recently studied in a Phase 1 clinical
study.
We recognize research and development revenue for reimbursements from Amgen of both internal costs of certain full-time
employee equivalents and other costs related to the Amgen Agreement, which will terminate effective as of May 20, 2021. Research
and development revenue from Amgen of $10.0 million in 2020, $13.8 million in 2019 and $1.9 million in 2018 consists of
reimbursement of costs we incurred related to METEORIC-HF.
We had accounts receivable of $1.7 million from Amgen as of December 31, 2020 and $3.3 million as of December 31, 2019.
Astellas
Our strategic alliance with Astellas to advance novel therapies for diseases and medical conditions associated with muscle
impairment and weakness commenced in 2013 under the License and Collaboration Agreement, dated June 21, 2013 between the
parties (the Astellas Agreement).
In 2014, we and Astellas amended and restated the Astellas Agreement (the 2014 Astellas Amendment) and expanded the
objective of the collaboration to include spinal muscular atrophy (SMA) and potentially other neuromuscular indications for
reldesemtiv and other fast skeletal muscle troponin activators (FSTAs). License revenues in 2018 related to our performance
obligations under the 2014 Astellas Amendment. In 2018, we completed all our deliverables for the 2014 Astellas Amendment.
92
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2016, we and Astellas amended the Astellas Agreement (the 2016 Astellas Amendment) to expand the collaboration to
include the development of reldesemtiv for the potential treatment of amyotrophic lateral sclerosis (ALS), as well as the possible
development in ALS of other FSTAs previously licensed by us to Astellas, and Astellas paid us a $35.0 million non-refundable
upfront amendment fee and an accelerated $15.0 million milestone payment for the initiation of the first Phase 2 clinical trial of
reldesemtiv in ALS that was otherwise provided for in the Astellas Agreement, as if such milestone had been achieved upon the
execution of the 2016 Astellas Amendment, and committed research and development consideration of $44.2 million, for total
consideration of $94.2 million.
On April 23, 2020, we and Astellas entered into the two agreements referenced below which, taken together, amend and restate
the Companys research, development and commercialization collaboration with Astellas under the Astellas Agreement.
Fast Skeletal Regulatory Activator Agreement
The Company and Astellas entered into that certain Fast Skeletal Regulatory Activator Agreement, dated April 23, 2020 (the
Astellas FSRA Agreement). As a result of the Astellas FSRA Agreement, the Company will now have exclusive control and
responsibility for the Company's future development and commercialization of reldesemtiv, CK-601 and other fast skeletal regulatory
activator (collectively FSRA) compounds and products, and accordingly, Astellas has agreed to terminate its license to all FSRA
compounds and related products.
Under the Astellas FSRA Agreement, Astellas has agreed to pay one-third of the out-of-pocket clinical development costs
which may be incurred in connection with the Companys potential Phase 3 clinical trial of reldesemtiv in ALS, up to a maximum
contribution by Astellas of $12 million. In addition, Astellas has agreed to non-cash contributions to the Company, which include the
transfer of its existing inventories of active pharmaceutical ingredient of reldesemtiv and CK-601. Astellas has also agreed to the
continued conduct of ongoing stability studies pertaining to such existing inventories of active pharmaceutical ingredient, at Astellas
cost. In exchange, the Company will pay Astellas a low- to mid- single digit royalty on sales of reldesemtiv in the United States,
Canada, United Kingdom and the European Union until the later of (i) ten years following the first commercial sale of such product in
a major market country, or (ii) December 31, 2034, subject to certain royalty reduction provisions. The Company would not owe
Astellas royalties on sales of reldesemtiv in any other country, or on the sale of any FSRA compounds or related products other than
reldesemtiv.
License and Collaboration Agreement for Other Skeletal Sarcomere Activators
Under the Astellas OSSA Agreement, we are eligible to receive additional research and early and late stage development
milestone payments for research and clinical milestones, including the initiation of certain clinical studies, the submission of an
application for marketing authorization for a drug candidate to certain regulatory authorities and the commercial
launch of
collaboration products, which could total up to $250.0 million, except under certain scenarios. Additionally, $200.0 million in
commercial milestones could be received under the Astellas OSSA Agreement provided certain sales targets are met. We are eligible
to receive $1.0 million in research milestone payments under this collaboration for each future potential drug candidate. Due to the
nature of drug development, including the inherent risk of development and approval of drug candidates by regulatory authorities, it is
not possible to estimate if and when these milestone payments could be achieved or become due.
We continue to recognize research revenue for reimbursements from Astellas of internal costs of certain full-time employee
equivalents, supporting collaborative research and development programs, and of other costs related to those programs.
License revenues and research and development revenues from Astellas for 2020, 2019 and 2018 were as follows (in
thousands):
License revenues
Reimbursements
Milestone fees
2020
Years Ended December 31,
2019
2018
$
$
$
6,555
6,555
$
$
13,106
13,106
$
5,133
22,253
2,000
29,386
We had accounts receivable from Astellas of $2.7 million as of December 31, 2020 and $1.9 million as of December 31, 2019.
93
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RTW Transactions
On July 14, 2020, we entered into a series of transactions as described below with RTW Royalty Holdings Designated Activity
Company (RTW Royalty Holdings) and Ji Xing, related to Cytokinetics proprietary small molecule cardiac myosin inhibitor
the RTW
product referred to as CK-3773274 (CK-274), a novel cardiac myosin inhibitor, and other assets (together,
Transactions). The RTW Transactions include entering into a licensing and collaboration agreement with Ji Xing, the sale of
Cytokinetics common stock to the RTW Investors (as defined below), an agreement to sell to RTW Royalty Holdings our interest in
certain future royalties on net sales of products containing the compound mavacamten that is being developed by Bristol-Myers
Squibb Company (formerly by MyoKardia, Inc.), and the ability for the Company to obtain additional funding in the future from RTW
Royalty Holdings, upon the achievement of certain clinical trial milestones, in exchange for future royalty payments as further
discussed below. As a result, we have or expect to receive a combination of committed capital, funding and sale proceeds from the
RTW Investors, RTW Royalty Holdings and Ji Xing.
The RTW Transactions were entered into with parties that are affiliated and in contemplation of one another and, accordingly,
we have assessed the accounting for these transactions in the aggregate. We concluded that there were three units of accounting in the
RTW Transactions as further described below. The Company allocated the total consideration in accordance with ASC 820, Fair
Value Measurement, and ASC 606, Revenue from Contracts with Customers, as follows (in thousands):
Units of Accounting:
License and collaboration (residual)
Royalty (fair value)
Common stock (fair value)
Total consideration
License and Collaboration Agreement
Allocated
Consideration
$
$
36,501
87,000
36,499
160,000
We entered into a License and Collaboration Agreement (the Ji Xing License Agreement) with Ji Xing, pursuant to which we
granted to Ji Xing an exclusive license to develop and commercialize CK-274 in Peoples Republic of China (including the Hong
Kong SAR and Macau SAR) (together China) and Taiwan. Under the terms of the Ji Xing License Agreement, we received from Ji
Xing a nonrefundable upfront payment of $25.0 million. We may be eligible to receive from Ji Xing milestone payments totaling up to
$200.0 million for the achievement of certain development and commercial milestone events in connection to CK-274 in the field of
obstructive hypertrophic cardiomyopathy (oHCM) and/or non-obstructive hypertrophic cardiomyopathy (nHCM) and other
indications. In addition, Ji Xing will pay us tiered royalties in the low-to-high teens range on the net sales of the products containing
CK-274 in China and Taiwan, subject to certain reductions for generic competition, patent expiration and payments for licenses to
third party patents.
Ji Xing will be responsible for the development and commercialization of CK-274 at its own cost and is required to use diligent
efforts to develop and commercialize CK-274 in China and Taiwan. The development of CK-274 will be initially focused on
hypertrophic cardiomyopathy, and Ji Xing will have the opportunity to participate in Cytokinetics global pivotal clinical trials of CK-
274. Cytokinetics or a designated supplier will supply CK-274 to Ji Xing either as a finished product or as an active pharmaceutical
ingredient.
The Ji Xing License Agreement, unless terminated earlier, will continue on a market-by-market basis until expiration of the
relevant royalty term. Ji Xing has the right to terminate the Ji Xing License Agreement for convenience. Each party may terminate the
Ji Xing License Agreement for the other partys uncured material breach, insolvency, or failure to perform due to extended force
majeure events. Cytokinetics may also terminate the Ji Xing License Agreement if Ji Xing challenges Cytokinetics patents or
undergoes certain change of control transactions. Rights granted to Ji Xing in relation to CK-274 will revert to Cytokinetics upon
termination, and, under certain circumstances, subject to a low single digit royalty payment by the Company to Ji Xing on the net sales
of the products containing the compound CK-274 in China and Taiwan.
94
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
License revenues and milestone revenues for 2020, 2019 and 2018 were as follows (in thousands):
License revenues
Milestone revenues
2020
Years Ended December 31,
2019
2018
$
$
36,501
2,500
39,001
$
$
$
$
-
We assessed this arrangement in accordance with ASC 606 and concluded that there is one performance obligation relating to
the license of functional intellectual property. The performance obligation was satisfied, and we recognized the residual allocation of
arrangement consideration as revenue of $36.5 million for 2020. Due to the nature of development, including the inherent risk of
development and approval by regulatory authorities, we are unable to estimate if and when the development milestone payments could
be achieved or become due and, accordingly, we consider the milestone payments to be fully constrained and exclude the milestone
payments from the initial transaction price.
The consideration related to sales-based milestone payments, including royalties, will be recognized when the related sales
occur under the sales- and usage-based royalty exception as these amounts have been determined to relate predominantly to the
license.
We re-evaluate the probability of achievement of development milestones and any related constraints each reporting period. We
will include consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the
amount of cumulative revenue recognized will not occur.
We earned a $2.5 million milestone from Ji Xing as of December 31, 2020 for the first patient dosed in Cohort 2 of
REDWOOD-HCM (Randomized Evaluation of Dosing With CK-274 in Obstructive Outflow Disease in HCM). We determined
recognition of the milestone during 2020 based on clinical trial progress. Our determination that we expected to earn the $2.5 million
milestone resulted in a change in the overall transaction price of the collaboration agreement, as it was probable that a significant
reversal of cumulative revenue would not occur. A corresponding contract asset was recorded in other current assets in our
consolidated balance sheet as of December 31, 2020.
Royalty Purchase Agreement
We entered into a Royalty Purchase Agreement (the RTW Royalty Purchase Agreement) with RTW Royalty Holdings,
pursuant to which we sold our right to receive certain payments on the net sales of products containing the compound mavacamten, a
cardiac myosin inhibitor (the Mavacamten Royalty), under the Research Collaboration Agreement, dated August 24, 2012, between
us and MyoKardia, Inc. to RTW Royalty Holdings for a one-time payment of $85.0 million. The RTW Royalty Purchase Agreement
transaction closed on November 13, 2020.
We accounted for the sale of our rights to the Mavacamten Royalty as deferred revenue under ASC 470, Debt, since the
arrangement is a sale of our future right to receive royalties and not a sale of the underlying patents or related intangibles. Further, we
do not have any significant continuing involvement in the further development, commercialization or sale of mavacamten, the one-
time payment is not required to be paid back to RTW Royalty Holdings, the investors return is not limited and will be driven by net
sales, and RTW Royalty Holdings does not have any recourse to the Companys assets.
The allocation of the consideration for the RTW Transactions resulted in $87.0 million being allocated to the RTW Royalty
Purchase Agreement representing its fair value. The fair value was determined using an income approach method based on
managements estimates of the discounted cash flows to be received over the term of the related royalty agreement, which are Level 3
fair value inputs. Managements estimates included significant unobservable inputs. These inputs are derived using internal
management estimates developed based on third party data and reflect managements judgements, current market conditions
surrounding competing products, and forecasts. The significant unobservable inputs include the estimated patient population,
estimated selling price, estimated peak sales and sales ramp, the expected term of the royalty stream, and timing of the expected
launch. The $87.0 million recorded as deferred revenue will be amortized using the units-of-revenue method.
95
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We will recognize revenue related to the sale of the Mavacamten Royalty using the units-of-revenue method. Under the units-
of-revenue method, the revenue to be recognized for a period is calculated by computing a ratio of the Mavacamten Royalty paid to
RTW Royalty Holdings for a given period to the total payments expected to be made to RTW Royalty Holdings over the term of the
agreement, and then applying that ratio to the period's cash payment. We will record any adjustments due to changes in the underlying
royalties on a cumulative catch-up basis.
Common Stock Purchase Agreement
On July 14, 2020, we entered into Common Stock Purchase Agreements (each, a CSPA) with each of RTW Master Fund,
Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund Limited (collectively, the RTW Investors). The CSPAs provided
for the sale and issuance of an aggregate of 2.0 million shares of common stock of Cytokinetics (the Shares) at a price per share of
$25.00 and an aggregate purchase price of $50.0 million. The closing occurred on July 14, 2020. The RTW Investors have agreed to
certain trading and other restrictions with respect to the Shares, including a restriction on sales or other transfers of the Shares, subject
to certain exceptions, for a period of two years from the closing date, which period will be extended if certain conditions are met. The
restrictions resulted in a premium paid by RTW investors of $13.5 million which represents the excess amount paid over the fair value
of the Shares. The premium was determined by analyzing the holding period discount applied to the 30-day average stock price as of
July 14, 2020, which is a Level 2 fair value inputs. The cash received less the calculated premium is the $36.5 million fair value of the
common stock recorded.
Funding Agreement
We entered into a Funding Agreement (the Funding Agreement) with RTW Royalty Holdings. Pursuant to the Funding
Agreement, RTW Royalty Holdings has committed to provide up to $90.0 million (the Funding Commitment) to fund our
development and commercialization of CK-274 in nHCM and oHCM. Half of the Funding Commitment will be available, at our
option, if certain clinical trial milestones of CK-274 for oHCM are achieved by January 14, 2023, and the remaining $45.0 million of
the Funding Commitment will be available, at our option, if certain clinical trial milestones of CK-274 for nHCM are achieved by
January 14, 2024. If we develop CK-274 in another indication, we will negotiate an additional funding commitment from RTW to
fund our development and commercialization of CK-274 in such other indication (other than oHCM or nHCM).
In exchange for the Funding Commitment and upon receipt of such funding from RTW Royalty Holdings, we have agreed to
make payments to RTW Royalty Holdings equal to 2%, if RTW Royalty Holdings funds $45.0 million of the Funding Commitment,
or 4%, if RTW Royalty Holdings funds the full $90.0 million of the Funding Commitment, in each case in respect of net sales of CK-
274 by us and any of our licensees in the United States, the European Union, Switzerland, the United Kingdom and certain other
countries in Europe (collectively referred to as the CK-274 Territory). In addition, should we exercise our option draw borrowings
pursuant to the Funding Agreement, such agreement contains certain covenants applicable to us, including, among other things,
development and commercialization diligence obligations in connection to the CK-274 Territory, use of proceeds, reporting and
encumbrances. There are no performance obligations related to the Funding Agreement, as access to the Funding Commitment is at
the option of the Company and based upon the achievement of certain development milestones.
The Funding Agreement contains customary conditions to disbursement, which may include the consent of our Lenders at the
time of disbursement. On July 16, 2020, we entered into an amendment to the Term Loan Agreement, which permits, subject to entry
into an intercreditor agreement between Oxford (as security agent for the Lenders) and RTW Royalty Holdings in form and substance
reasonably satisfactory to the Lenders and RTW Royalty Holdings, the draw of funding under the Funding Agreement and the grant of
a security interest to RTW Royalty Holdings in the intellectual property located in the United States and accounts receivable related to
CK-274 thereunder.
The Company granted RTW Royalty Holdings a security interest in all of its rights, title and interest in, to certain intellectual
property, accounts receivable and any proceeds from such collateral. The security interest will automatically terminate when total net
payments made to RTW Royalty Holdings exceed a certain agreed threshold.
Note 4 Fair Value Measurements
We value our financial assets and liabilities at fair value, defined as the price that would be received for assets when sold or
paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market
data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk
and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or
generally unobservable.
96
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We primarily apply the market approach for recurring fair value measurements and endeavors to utilize the best information
reasonably available. Accordingly, we use valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible and consider the security issuers and the third-party issuers credit risk in our assessment of
fair value.
We classify fair value based on the observability of those inputs using a hierarchy that prioritizes the inputs used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurement) and the lowest priority to unobservable inputs (Level 3 measurement):
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 market data; and
Level 3 Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-
developed valuation models.
Fair Value of Financial Assets
The follow tables set forth the fair value of our financial assets, which consists of cash equivalents and investments classified as
available-for-sale securities, that were measured on a recurring basis (in thousands):
Money market funds
U.S. Treasury securities
Agency bonds
Commercial paper
Corporate obligations
Money market funds
U.S. Treasury securities
Agency bonds
Commercial paper
Corporate obligations
Fair Value
Hierarchy Level
Level 1
Level 1
Level 2
Level 2
Level 2
Fair Value
Hierarchy Level
Level 1
Level 1
Level 2
Level 2
Level 2
$
$
$
$
December 31, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
80,050
274,407
51,581
49,500
42,392
497,930
$
$
$
147
15
3
7
172
$
80,050
$
274,546
(8)
51,593
(3)
49,502
(1)
(11)
42,388
(23) $ 498,079
December 31, 2019
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
31,535
134,845
47,024
10,435
40,426
264,265
$
$
$
72
23
4
24
123
$
31,535
$
134,916
(1)
47,038
(9)
10,439
(7)
40,443
(17) $ 264,371
Interest income was $5.3 million and $4.5 million in 2020 and 2019, respectively.
Investments available for sale exclude an investment in equity classified as a Level 1 investment in our short-term investments
with a fair value of $1.0 million and an unrealized gain of $0.3 million at December 31, 2019. As of December 31, 2020, the Level 1
investment had been divested. Unrealized losses were not due to changes in credit risk and we believe investments with an unrealized
loss would be held until maturity.
No credit losses on debt securities were recognized in either 2020 or 2019. In its evaluation to determine expected credit losses,
management considered all available historical and current information, expectations of future economic conditions, the type of
security, the credit rating of the security, and the size of the loss position, as well as other relevant information. The Company does not
intend to sell, and is unlikely to be required to sell, any of these available-for-sale investments before their effective maturity or
market price recovery.
The carrying amount of our accounts receivable and accounts payable approximates fair value due to the short-term nature of
these instruments.
97
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair value of financial liabilities:
As of December 31, 2020 and 2019, the fair value of our term loan approximated its carrying value of $46.2 million and $45.1
million, respectively, because it is carried at a market observable interest rate, which is a Level 2 input (see Note 6 Debt).
As of December 31, 2020, the estimated fair value of our convertible notes was $638.7 million and was based upon observable,
Level 2 inputs, including pricing information from recent trades of the convertible notes (see Note 6 Debt).
As of December 31, 2020 and 2019, the fair value of the RPI Liability related to the sale of future royalties is based on our
current estimates of future royalties expected to be paid to RPI, over the life of the arrangement, which are considered Level 3 inputs
(see Note 7 Liability Related to Sale of Future Royalties).
There were no transfers between Level 1, Level 2, and Level 3 during the periods presented.
Note 5 Balance Sheet Components
Our property and equipment consisted of (in thousands):
Property and equipment, net:
Laboratory equipment
Computer equipment and software
Office equipment, furniture and fixtures
Leasehold improvements
Construction in progress
Total property and equipment
Less: Accumulated depreciation and amortization
December 31,
2020
2019
$
$
18,160
2,940
1,885
5,872
9,130
37,987
(24,641)
13,346
$
$
18,741
2,940
1,823
5,221
28,725
(24,195)
4,530
Depreciation expense was $1.8 million for 2020 and $1.3 million for 2019.
Our accrued liabilities were (in thousands):
Accrued liabilities:
Clinical and preclinical costs
Compensation related
Other accrued expenses
Total accrued liabilities
December 31,
2020
2019
$
$
6,124
11,787
1,404
19,315
$
$
2,215
8,343
1,565
12,123
98
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We sponsor a 401(k) defined contribution plan covering all employees and contributed $0.9 million and $0.6 million to this
plan in 2020 and 2019, respectively.
Note 6 Debt
Term Loan
Prior to May 17, 2019 we maintained a loan and security agreement dated as of October 19, 2015, as amended (the Original
Loan Agreement) with the Lenders to fund our working capital and other general corporate needs.
On May 17, 2019, we entered into a new loan and security agreement (the Term Loan Agreement) with the Lenders for $45.0
million (the Term Loan) and terminated the Original Loan Agreement. The proceeds of the Term Loan were used in part to repay in full
all of the outstanding term loans under the Original Loan Agreement in an aggregate principal amount of $42.0 million. On November 6,
2019 and November 7, 2019, the Company entered into a First Amendment and a Second Amendment to the Term Loan Agreement. The
Term Loan Agreement, as amended, permits the issuance of the Convertible Notes and Capped Call Transactions discussed below. On
July 16, 2020, the Company and the Lenders entered into the Third Amendment to the Term Loan Agreement, which amended the Term
Loan Agreement to permit (i) the sale of the Mavacamten Royalty under the RTW Royalty Purchase Agreement and (ii) subject to
entry into an intercreditor agreement between Oxford (as security agent for the Lenders) and RTW Royalty Holdings in form and
substance reasonably satisfactory to the Lenders and RTW Royalty Holdings, permits the draw of funding under the Funding
Agreement and the grant of a security interest to RTW Royalty Holdings in the intellectual property located in the United States and
accounts receivable related to CK-274.
The Term Loan was accounted for as a debt modification in a non-troubled debt restructuring based on a comparison of the present
value of the cash flows under the terms of the debt immediately before and after the effective date of the Term Loan, which resulted in a
change of less than 10%. As a result, issuance costs paid to the lender in connection with the Term Loan were recorded as a reduction of
the carrying amount of the debt liability and were not significant. Unamortized issuance costs as of the date of the modification were
amortized to interest expense over the repayment term of Term Loan.
Both borrowings under the Original Loan Agreement and Term Loan bear interest at an annual rate equal to the greater of (a)
8.05% or (b) the sum of 6.81% plus the 30-day U.S. LIBOR rate. The borrowing under the Original Loan Agreement was repayable in
monthly interest-only payments through November 2019 followed by 35 months of monthly payments of interest and principal. The
borrowing under the Term Loan is repayable in monthly interest-only payments through December 31, 2020. The interest-only period
was automatically extended until July 1, 2021 as a result of the Companys initiation of a Phase 2 trial for CK-274 in cardiomyopathy
and has been extended through December 31, 2021 as a result of the achievement of positive results in GALACTIC-HF, the trial of
omecamtiv mecarbil in chronic heart failure as announced on October 8, 2020. The ultimate interest-only period will be followed by
equal monthly payments of principal and interest to the maturity date in December 2023. The ultimate interest-only period will be
followed by equal monthly payments of principal and interest to the maturity date in December 2023. We are required to make a final
payment upon loan maturity of 6.00% of the notes payable, which we accrete over the life of the Term Loan. Our obligations under the
Term Loan Agreement are secured by substantially all our current and future assets, other than our intellectual property.
Interest expense for the Term Loan was $4.9 million, $5.2 million and $3.8 million for 2020, 2019 and 2018 respectively. As of
December 31, 2020, the interest rate applicable to borrowings under the Term Loan was 8.05%.
The Term Loan Agreement contains customary representations and warranties and customary affirmative and negative
covenants applicable to us and includes customary events of default, including but not limited to the nonpayment of principal or
interest, violations of covenants and material adverse changes. Upon an event of default, the Lenders may, among other things,
accelerate the loans and foreclose on the collateral. Our obligations under the Term Loan Agreement are secured by substantially all
our current and future assets, other than our intellectual property. If the Term Loan becomes subject to mandatory prepayment under
these provisions, we are subject to certain prepayment premiums of 3.00% in the first year, 2.00% in the second year and 1.00% in the
third year and thereafter. We determined that these contingent prepayment provisions were an embedded component that qualified as a
derivative which should be bifurcated from the Term Loan and accounted for separately from the host contract. As of December 31,
2020, the fair value of this embedded derivative was immaterial.
99
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future minimum payments under the Term Loan Agreement are (in thousands):
Years ending December 31:
2021
2022
2023
Future minimum payments
Less: Interest and final payment
Term Loan, gross
Convertible Notes
3,673
25,330
28,079
57,082
(12,082)
45,000
$
On November 13, 2019, the Company issued $138.0 million aggregate principal amount of 4.0% convertible senior notes due
2026 (the 2026 Notes). The 2026 Notes are unsecured obligations and bear interest at an annual rate of 4.0% per year, payable semi-
annually on May 15 and December 15 of each year, beginning May 15, 2020. The 2026 Notes are governed by an indenture between
the Company and U.S. Bank National Association, as trustee. The 2026 Notes will mature on November 15, 2026, unless earlier
repurchased or redeemed by the Company or converted at the option of the holders. The Company may redeem the 2026 Notes prior
to the maturity date but is not required to and no sinking fund is provided for the 2026 Notes. The 2026 Notes may be converted,
under certain circumstances as described below, based on an initial conversion rate of 94.7811 shares of common stock per
$1,000 principal amount (which represents an initial conversion price of $10.55 per share). The conversion rate for the 2026 Notes
will be subject to adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole
fundamental change (as defined in the indenture), the Company will, in certain circumstances, increase the conversion rate by a
number of additional shares for a holder that elects to convert its notes in connection with such make-whole fundamental change. The
Company received approximately $133.9 million in net proceeds, after deducting the initial purchasers discount, from the issuance of
the 2026 Notes.
The 2026 Notes may be converted at the option of the holder under any of the following circumstances: (1) during any calendar
quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported
sale price of the Companys common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive
trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 127.5% of the last
reported sale price of the Companys common stock on November 7, 2019; (2) during the 5 consecutive business days immediately
after any 10 consecutive trading day period (such 10 consecutive trading day period, the measurement period) if the trading price
per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the
last reported sale price per share of the Companys common stock on such trading day and the conversion rate on such trading day;
(3) upon the occurrence of certain corporate events or distributions on the Companys common stock; (4) if the Company calls the
2026 Notes for redemption; and (5) at any time from, and including, July 15, 2026 until the close of business on the scheduled trading
day immediately before the maturity date, November 15, 2026. The Company will settle conversions by paying or delivering, as
applicable, cash, shares of the Companys common stock, or a combination of cash and shares of the Companys common stock, at the
Companys election, based on the applicable conversion rate.
The 2026 Notes will be redeemable, in whole or in part, at the Companys option at any time, and from time to time, on or after
November 20, 2023 and, in the case of any partial redemption, on or before the 60th scheduled trading day before the maturity date, at
a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to,
but excluding, the redemption date but only if the last reported sale price per share of the Companys common stock exceeds 130% of
the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending
on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading
day immediately before the date the Company sends such notice. If a fundamental change (as defined in the indenture) occurs, then,
subject to certain exceptions, holders may require the Company to repurchase their 2026 Notes at a cash repurchase price equal to the
principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental
change repurchase date.
100
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In accounting for the issuance of the 2026 Notes, the Company separated the 2026 Notes into liability and equity components.
The carrying amount of the liability component of approximately $84.2 million was calculated by using a discount rate of 12.0%,
which was estimated to be the Companys borrowing rate on the date of the issuance of the notes for a similar debt instrument without
the conversion feature. The carrying amount of the equity component of approximately $49.5 million, representing the conversion
option, was determined by deducting the fair value of the liability component from the par value of the 2026 Notes. The equity
component of the 2026 Notes is included in additional paid-in capital in the consolidated balance sheets and is not remeasured as long
as it continues to meet the conditions for equity classification. The difference between the principal amount of the 2026 Notes and the
liability component (the debt discount) is amortized to interest expense using the effective interest method over the term of the 2026
Notes.
Debt issuance costs for the issuance of the 2026 Notes were approximately $5.0 million, consisting of initial purchasers'
discount and other issuance costs. In accounting for the transaction costs, the Company allocated the total amount incurred to the
liability and equity components using the same proportions as the proceeds from the 2026 Notes. Transaction costs attributable to the
liability component were approximately $3.1 million, were recorded as debt issuance cost (presented as contra debt in the consolidated
balance sheet) and are being amortized to interest expense over the term of the 2026 Notes. The transaction costs attributable to the
equity component were approximately $1.9 million and were netted with the equity component in stockholders equity. As of
December 31, 2020, the unamortized debt issuance cost for the 2026 Notes was $2.8 million.
The following table presents the total amount of interest cost recognized relating to the 2026 Notes for 2020 and 2019 (in
thousands):
Contractual interest expense
Accretion of debt discount
Accretion of debt issuance costs
Total interest costs recognized
Years Ended December 31,
2019
2020
$
$
5,520
5,246
52
10,818
$
$
721
673
6
1,400
The effective interest rate on the liability component of the 2026 Notes was 12.5% for the year ended December 31, 2020,
which remains unchanged from the date of issuance. The remaining unamortized debt discount was $45.7 million as of December 31,
2020 and will be amortized over approximately 6.0 years.
Capped Call Transactions
In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call transactions with
one of the underwriters in the offering or its affiliate. The Company used approximately $13.4 million of the net proceeds from the
offering of the 2026 Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to
reduce potential dilution to the Companys common stock upon any conversion of the 2026 Notes and/or offset any cash payments the
Company is required to make in excess of the principal amount of converted 2026 Notes, as the case may be, in the event that the
market value per share of the Companys common stock, as measured under the terms of the capped call transactions at the time of
exercise, is greater than the strike price of the capped call transactions (which initially corresponds to the initial conversion price of the
2026 Notes, and is subject to certain adjustments), with such reduction and/or offset subject to a cap initially equal to approximately
$14.07 per share (which represents a premium of approximately 70% over the last reported sale price of the Companys common
stock on November 7, 2019), subject to certain adjustments. The capped call transactions are separate transactions, entered into by the
Company and are not part of the terms of the 2026 Notes.
Given that the transactions meet certain accounting criteria, the convertible note capped call transactions are recorded in
stockholders equity, and they are not accounted for as derivatives and are not remeasured each reporting period. As of December 31,
2020, the Company had not purchased any shares under the convertible note capped call transactions.
Note 7 Liability Related to Sale of Future Royalties to RPI
In February 2017, we entered into the RPI Royalty Purchase Agreement with RPI under which we sold a portion of our right to
receive royalties on potential net sales of omecamtiv mecarbil (and potentially other compounds with the same mechanism of action)
under the Amgen Agreement to RPI for a payment of $90.0 million, which is non-refundable even if omecamtiv mecarbil is never
commercialized. Concurrently, we entered into a common stock purchase agreement with RPI through which RPI purchased 875,656
101
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
shares of the Companys common stock for $10.0 million. We allocated the consideration and issuance costs on a relative fair value
basis to the RPI Liability and the common stock, which resulted in the RPI Liability being initially recognized at $92.3 million.
The RPI Royalty Purchase Agreement further provides that in the event Amgen elects to terminate the Amgen Agreement, we
are obliged to enter into an agreement with RPI to preserve RPIs rights under the RPI Royalty Purchase Agreement, which includes
the payment by Cytokinetics of 4.5% of its worldwide net sales of omecamtiv mecarbil and other Amgen Alliance Compounds,
subject to a potential increase of up to an additional 1% under certain circumstances (delay in US marketing approval). Our obligation
to enter into a new agreement with RPI does not impact our accounting treatment of the RPI Liability or our estimates.
We account for the RPI Liability as a liability primarily because we have significant continuing involvement in generating the
royalty stream. If and when omecamtiv mecarbil is commercialized and royalties become payable, we will recognize the portion of
royalties paid to RPI as a decrease to the RPI Liability with a corresponding reduction in cash.
The carrying amount of the RPI Liability is based on our estimate of the future royalties to be paid to RPI over the life of the
arrangement as discounted using an imputed rate of interest. The excess of future estimated royalty payments over the $92.3 million of
allocated proceeds, less issuance costs, is recognized as non-cash interest expense using the effective interest method. The imputed
rate of interest on the unamortized portion of the RPI Liability was approximately 15% as of December 31, 2020 and 17% as of
December 31, 2019.
We periodically assess the amount and timing of expected royalty payments using a combination of internal projections and
forecasts from external sources. To the extent such payments are greater or less than our initial estimates or the timing of such
payments is materially different than its original estimates, we will prospectively adjust the amortization of the RPI Liability and the
effective interest rate.
There are a number of factors that could materially affect the amount and timing of royalty payments, most of which are not
within our control. The RPI Liability is recognized using significant unobservable inputs. These inputs are derived using internal
management estimates developed based on third party data, including data historically provided by Amgen, and reflect managements
judgements, current market conditions surrounding competing products, and forecasts. The significant unobservable inputs include the
estimated patient population, estimated selling price, estimated peak sales and sales ramp, the expected term of the royalty stream,
timing of the expected launch and its impact on the royalty rate as well as the overall probability of a success. A significant change in
unobservable inputs could result in a material increase or decrease to the effective interest rate of the RPI Liability.
We have updated the analysis to include the data released on October 8, 2020 relating to GALACTIC-HF. Our estimates
regarding the amount and timing of future royalty payments have not changed as a result of Amgens election to terminate the Amgen
Agreement or Serviers election to terminate the Servier Agreement.
Changes to the RPI Liability related to the sale of future royalties are as follows (in thousands):
Beginning balance, January 1
Interest accretion
Amortization of issuance costs
Ending balance, December 31
Note 8 Stockholders Equity
Common Stock Purchase Agreements
2020
2019
$
$
143,276
22,713
79
166,068
$
$
122,473
20,737
66
143,276
On July 14, 2020, we entered into a CSPA with each of the RTW Investors. The CSPAs provide for the sale and issuance of an
aggregate of 2.0 million shares of common stock of Cytokinetics (the Shares) at a price per share of $25.00 and an aggregate
purchase price of $50.0 million (see Note 3 Research and Development Arrangements). The cash adjusted for the calculated
premium is the $36.5 million fair value of the common stock recorded.
102
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Public Offering of Common Stock
In July 2020, we closed an underwritten public offering of 8.4 million shares of our common stock at a public offering price per
share of $24.00, which included the exercise in full by the underwriters of their option to purchase up to 1,093,750 shares of our
common stock at the same price. The gross proceeds were $201.3 million and net proceeds were approximately $188.9 million, after
deducting underwriting discounts, commissions and offering costs.
Equity Incentive Plan
Our amended and restated 2004 Equity Incentive Plan (the 2004 Plan) provides for us to grant incentive stock options,
nonstatutory stock options, restricted stock, stock appreciation rights, restricted stock units, performance shares and performance units
to employees, directors and consultants. We may grant options for terms of up to ten years at prices not lower than 100% of the fair
market value of our common stock on the date of grant. Options granted to new employees generally vest 25% after one year and
monthly thereafter over a period of four years. Options granted to existing employees generally vest monthly over a period of four
years. As of December 31, 2020, we have 2.6 million shares of common stock reserved and available for issuance under the 2004
Plan.
In May 2019, the Companys stockholders approved an amendment to the Amended and the 2004 Plan to increase the number
of authorized shares reserved for issuance under the 2004 Plan by 4.1 million shares. In May 2020, the Companys board of directors
approved an amendment to the 2004 Plan to increase the number of authorized shares reserved for issuance under the 2004 Plan by 0.8
million shares for inducement grants to new employees. We started granting inducement grants in September 2020. As of
December 31, 2020, an insignificant number of stock options were granted and 2.6 million authorized shares were available for grant
under the 2004 Plan.
Stock option activity in 2020 was as follows:
Balance at December 31, 2018
Granted
Exercised
Forfeited
Balance at December 31, 2019
Granted
Exercised
Forfeited
Balance at December 31, 2020
Exercisable at December 31, 2020
Stock Options
Outstanding
6,454,037
1,785,673
(126,793)
(353,905)
7,759,012
1,944,562
(967,571)
(234,054)
8,501,949
5,704,396
Weighted
Average Exercise
Price per Share
8.72
$
8.41
7.78
10.44
8.59
15.59
8.27
16.06
10.02
8.91
$
$
$
Weighted
Average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic Value
(in millions)
6.6
5.6
$
$
91.9
67.8
We expect all outstanding options to vest. The intrinsic value of stock options exercised, calculated based on the difference
between the market value at the date of exercise and the exercise price, was $14.0 million for 2020, $0.5 million for 2019 and $0.7
million for 2018. The intrinsic value of stock options outstanding at December 31, 2020 was $91.9 million.
103
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted stock unit (RSU) activity in 2020 was as follows:
Balance at December 31, 2018
Granted
Released
Forfeited
Balance at December 31, 2019
Granted
Released
Forfeited
Balance at December 31, 2020
Number of
Restricted
Stock Units
Weighted
Average Award
Date Fair Value
per Share
546,500
607,150
(266,500)
(48,075)
839,075
731,225
(435,450)
(18,208)
1,116,642
$
$
$
8.53
7.14
8.84
7.34
7.49
14.40
7.72
10.37
11.88
RSUs generally vest annually over two to three years. For 2020, the fair value of RSUs vested, calculated based on the units
vested multiplied by the closing price of our common stock on the date of vesting, was $6.1 million.
Employee Stock Purchase Plan
Under our 2015 Employee Stock Purchase Plan (the ESPP), employees may purchase common stock up to a specified
maximum amount at a price equal to 85% of the fair market value at certain plan-defined dates. In May 2020, the Companys
stockholders approved an amendment to the ESPP to increase the number of common stock shares reserved for issuance under the
ESPP by 0.5 million shares.
We issued 11,565 shares at an average price of $14.64 per share during 2020, 172,113 shares at an average price of $6.43 per
share in 2019, and 144,822 shares at an average price of $6.40 per share in 2018 pursuant to the ESPP. At December 31, 2020, we
have 446,820 shares of common stock reserved for issuance under the ESPP.
Stock-Based Compensation Expense
We use the Black-Scholes option pricing model to determine the fair value of stock option grants to employees and directors
and employee stock purchase plan shares. The fair value of share-based payments was estimated on the date of grant based on the
following assumptions:
Risk-free interest rate
Volatility
Expected term in years
Expected dividend yield
Year Ended December
31, 2020
Year Ended December
31, 2019
Year Ended December
31, 2018
Options
0.42% to
1.8%
74% to
75%
6.5 to 6.6
0%
ESPP
0.11% to
1.8%
74% to
75%
0.5
0%
Options
1.6% to
3.0%
73% to
76%
6.5
0%
ESPP
1.8% to
2.4%
73% to
76%
0.6
0%
Options
2.3% to
3.0%
73% to
74%
6.5
0%
ESPP
1.5% to
2.5%
73% to
74%
0.5
0%
We use U.S. Treasury zero-coupon issues with remaining terms similar to the expected terms of the options for the risk-free
interest rate. We use our own volatility history based on its stocks trading history and our own historical exercise and forfeiture
activity to estimate expected term for option grants. We do not anticipate paying dividends in the foreseeable future and use an
expected dividend yield of zero. We do not estimate forfeitures in our stock-based compensation.
We measure compensation expense for restricted stock units at fair value on the date of grant and recognize the expense over
the expected vesting period. We recognize stock-based compensation expense on a ratable basis over the requisite service period,
generally the vesting period of the award for share-based awards.
104
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-based compensation expense for 2020 and 2019 was as follows (in thousands):
Research and development
General and administrative
2020
Years Ended December 31,
2019
2018
$
$
6,949
10,671
17,620
$
$
4,260
6,499
10,759
$
$
5,101
4,660
9,761
Stock-based compensation expense for share-based awards to non-employees was $0.2 million in 2020, $0.2 million in 2019
and $0.1 million in 2018.
As of December 31, 2020, we expect to recognize $22.2 million of unrecognized compensation cost related to unvested stock
options over a weighted-average period of 2.5 years and $7.9 million of unrecognized compensation cost related to unvested restricted
stock over a weighted-average period of 1.7 years.
Warrants
Pursuant to the Term Loan agreement described in Note 6 - Debt, we issued a warrant with an exercise price of $9.76 per share
to purchase 23,065 shares of our common stock in 2019. The warrant was fully exercisable and expires in May 2029. As of December
31, 2019, warrants to purchase 165,424 shares of our common stock with a weighted average exercise price of $7.25 per share were
outstanding. All outstanding warrants are fully exercisable and expire ten years after issuance.
During the first quarter of 2020, in connection with the Term Loan Agreement further described in Note 6 - Debt, we issued a
warrant with an exercise price of $10.42 per share to purchase 21,595 shares of our common stock. The warrant was issued in
connection with achieving the interest-only extension milestone 1 in the Term Loan Agreement. The warrant was fully exercisable and
expires in January 2030. The $0.2 million fair value of the warrant related to the Term Loan was recorded as interest expense in the
period.
In July 2020, OTA LLC, an assignee of Oxford, exercised 51,214 warrants with a strike price of $6.59 per share, 48,892
warrants with a strike price of $6.903 per share, and 25,352 warrants with a strike price of $7.10 per share and elected the cashless
settlement method. Accordingly, in July 2020, we issued to OTA LLC a total of 95,932 shares of our common stock.
In October 2020, OTA LLC exercised 13,839 warrants with a strike price of $9.755 per share and elected cashless settlement
method. Accordingly, in October 2020, we issued OTA LLC a total of 8,958 shares of our common stock.
As of December 31, 2020, we had outstanding warrants issued pursuant to the Original Loan Agreement and Term Loan
Agreement with a weighted average exercise price of $9.12 per share to purchase 47,722 shares of our common stock.
Committed Equity Offering
In 2019, we terminated our original Controlled Equity OfferingSM Sales Agreement (the ATM Facility) with Cantor
Fitzgerald & Co. (Cantor) for the sale, in our sole discretion, of shares of our common stock, having an aggregate offering price of
up to $75.0 million through Cantor and we entered into a new sales agreement (the New ATM Facility) with Cantor, which provides
for the sale, in our sole discretion, of shares of our common stock having an aggregate offering price of up to $85.0 million through
Cantor, as our sales agent. The issuance and sale of these shares by us pursuant to the New ATM Facility are deemed at the market
offerings and are registered under the Securities Act of 1933, as amended. We pay a commission of up to 3.0% of gross sales proceeds
of any common stock sold under the New ATM Facility. As of 2019, we issued 3,984,849 shares of common stock for net proceeds of
$36.2 million under the New ATM Facility.
Claims Settlement
In the first quarter of 2020, we received $2.2 million from a claims settlement with certain institutional investors that were
beneficial owners of our common stock related to the disgorgement of short swing profits pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended. This settlement was recognized in equity as additional paid-in capital.
105
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9 Commitments and Contingencies
Leases
Our lease for 280 and 256 East Grand Avenue, South San Francisco, California for our existing facilities expires in 2021 and
includes rental payments on a graduated scale and payment of certain operating expenses. As of December 31, 2020, the remaining
lease term is 0.5 years and the discount rate used to determine the related operating lease liability was 9.0%.
In July 2019, we amended the lease agreement in connection with our leasing of additional premises at 250 East Grand Avenue,
South San Francisco, California (the Expansion Lease) for 9,530 square feet of office space. The Expansion Lease has an initial
term of 39 months, and commenced in January 2020. As of December 31, 2020, the remaining lease term of the Expansion Lease is
2.3 years and the discount rate used to determine the related operating lease liability was 11.5%.
In July 2019, we entered into a lease agreement for approximately 234,892 square feet of office and laboratory space at a
facility located in South San Francisco, California (the Oyster Point Lease). The Oyster Point Lease has an initial term of twelve
years, and is expected to commence in September 2021 and we have two consecutive five-year options to extend the lease. Subject to
rent abatement for the first two months of the Oyster Point Lease, we will be required to pay $5.45 per square foot for 159,891 square
feet for the first twelve months of the lease term, which will increase at a rate of 3.5% per year. After the first twelve months of the
Oyster Point Lease, rent will be payable on the entire leased square footage. We paid fifty percent of the security deposit amount on
December 31, 2019 and the remaining fifty percent was paid in December 2020. The landlord will provide a tenant improvement
allowance of $35.3 million for costs relating to the initial design and construction of the improvements. We will pay certain operating
costs of the facility and have certain rights to sublease under the related lease agreement. The total commitment of undiscounted lease
payments for the Oyster Point Lease was $217.7 million at December 31, 2020.
While we had $9.1 million in construction in progress related to the Oyster Point Lease as of December 31, 2020, the Company
has not recognized a right-of-use asset or aggregate lease liability as of December 31, 2020 for the Oyster Point Lease as the
underlying assets were unavailable to use by the Company at any time in the period ended December 31, 2020.
The undiscounted future non-cancellable lease payments under the lease agreements as of December 31, 2020 is as follows (in
thousands):
Years ending December 31:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted future lease payments
Less: Undiscounted lease payments related to Oyster Point
Lease
Less: Present value adjustments
Total lease liability
$
$
4,616
12,694
16,194
16,648
17,231
153,689
221,072
(217,667)
(180)
3,225
As of December 31, 2020, future minimum lease payments under noncancelable operating leases were $4.6 million in 2021,
$12.7 million in 2022 and $16.2 million in 2023.
Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2020 and 2019 was
$6.7 million and $5.0 million, respectively, and was included in net cash provided by operating activities in our consolidated
statements of cash flows.
Rent expenses were $5.7 million, $5.1 million and $5.0 million for 2020, 2019 and 2018, respectively.
106
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10 Income Taxes
We did not record an income tax provision in 2020, 2019 and 2018 because we had net taxable losses. Our significant
jurisdictions are the United States and California.
The following reconciles the statutory federal income tax rate to our effective tax rate:
Tax at federal statutory tax rate
State tax, net of federal benefits
Change in state effected rates
Tax credits, net
Change in valuation allowance
Stock-based compensation
Other
Total
2020
Years Ended December 31,
2019
2018
21%
1%
(2)%
3%
(23)%
1%
(1)%
0%
21%
3%
4%
3%
(30)%
(1)%
0%
(0)%
21%
0%
(4)%
1%
(17)%
(1)%
0%
(0)%
Deferred tax assets, net, reflecting the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes, were as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Tax credits
Liability related to sale of future royalties
Reserves and accruals
Capitalized R&D
Long-term lease liability
Depreciation and amortization
Other
Total noncurrent deferred tax assets
Deferred tax liabilities:
Accounting method change
Operating lease right-of-use assets
Convertible notes
Total noncurrent deferred tax liabilities
Less: Valuation allowance
Net deferred tax assets
As of December 31,
2020
2019
$
$
162,514
71,976
36,989
10,876
2,370
718
746
286,189
(927)
(651)
(9,832)
(11,410)
(274,779)
$
$
143,228
67,892
35,213
8,690
3,949
1,674
722
58
261,426
(2,047)
(1,484)
(12,011)
(15,542)
(245,884)
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses
since inception, expected future losses, and difficulty in accurately forecasting our future results and an assessment of both positive
and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable, we maintained a
full valuation allowance on the net deferred tax assets as of December 31, 2020 and 2019. The valuation allowance increased by $28.9
million in 2020 and increased by $24.8 million in 2019.
At December 31, 2020 federal NOL carryforwards were $662.9 million and apportioned state NOL carryforwards before
federal benefits were $317.0 million. If not utilized, federal and state operating loss carryforwards incurred prior to 2018 will begin to
expire in various amounts beginning 2022 and 2028, respectively.
At December 31, 2020, tax credits of $68.4 million and $16.6 million for federal and state income tax purposes, respectively
consisted of Research and Development Credits and Orphan Drug Credits. If not utilized, the federal carryforwards will expire in
various amounts beginning in 2021. California based credit carryforwards do not expire.
107
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an ownership
change is subject to limitations on its ability to utilize its pre-change net operating losses and tax credits to offset future taxable
income. We do not believe it has experienced an ownership change since 2006, however, a portion of its NOLs and tax credits prior to
2007 will be subject to limitations under Section 382.
Activity related to our gross unrecognized tax benefits were (in thousands):
Balance at the beginning of the year
Decrease related to prior year tax positions
Increase related to current year tax positions
Balance at the end of the year
$
$
9,922
(3)
603
10,522
$
$
9,475
447
9,922
$
$
9,365
110
9,475
2020
Years Ended December 31,
2019
2018
We are subject to income tax examination for all fiscal years with unutilized NOLs and tax credit carryforwards. Included in the
balance of unrecognized tax benefits as of December 31, 2020, 2019 and 2018 are $9.6 million, $9.1 million and $8.6 million of tax
benefits, respectively, that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several
changes to the Internal Revenue Code. We continue to evaluate the impact of the Employee Retention Credit and will consider future
guidance from the IRS to determine any potential benefit given our specific facts and circumstances. The tax law changes in the
CARES Act did not have a material impact on the Company's income tax provision.
Note 11 Subsequent Events
In January 2021, we entered into a Second Amendment to the Oyster Point Lease. The Second Amendment increases the tenant
improvement allowance by $8.2 million, to cover the construction obligations of the improvements on the Oyster Point Lease. In
addition, subject to rent abatement for the two months commencing in October 2021, the base rent for the initial lease term will be
increased by $0.1 million per month, commencing in September 2021, to repay the additional tenant improvement allowance to the
landlord with interest at a rate of 8%. We will pay certain operating costs of the facility under the amended agreement.
108
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated
to our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to
allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we
recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and in reaching a reasonable level of assurance, we are required to apply our judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of
our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December
31, 2020. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of
December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.
Managements Annual Report on Internal Control Over Financial Reporting:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management,
including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the
COSO criteria). Based on the above evaluation, our management concluded that our internal control over financial reporting was
effective as of December 31, 2020.
Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements included in this
Annual Report and has issued a report on the effectiveness of our internal control over financial reporting. The report of Ernst &
Young LLP is included below.
Changes in Internal Control over Financial Reporting
There were no other changes in our internal controls over financial reporting identified in connection with the evaluation
required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended December 31, 2020 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
109
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Cytokinetics, Incorporated
Opinion on Internal Control Over Financial Reporting
We have audited Cytokinetics, Incorporateds internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Cytokinetics, Incorporated (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2020 consolidated financial statements of the Company and our report dated February 26, 2021 expressed an
unqualified opinion thereon.
Basis for Opinion
The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Managements Annual Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys 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 evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Redwood City, California
February 26, 2021
110
ITEM 9B.
OTHER INFORMATION
None.
111
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding our directors and executive officers, our director nominating process and our audit committee is
incorporated by reference from our definitive Proxy Statement for our 2020 Annual Meeting of Stockholders, where it appears under the
headings Board of Directors and Executive Officers.
Section 16(a) Beneficial Ownership Reporting Compliance
The information regarding our Section 16 beneficial ownership reporting compliance is incorporated by reference from our
definitive Proxy Statement described above, where it appears under the headings Section 16(a) Beneficial Ownership Reporting
Compliance.
Code of Ethics
We have adopted a Code of Ethics that applies to all our directors, officers and employees. We publicize the Code of Ethics
through posting the 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 business days following the date of such amendment or waiver.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2020 Annual
Meeting of Stockholders, where it appears under the heading Executive Compensation.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2020 Annual
Meeting of Stockholders, where it appears under the headings Certain Business Relationships and Related Party Transactions and
Corporate Governance.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2020 Annual
Meeting of Stockholders, where it appears under the headings Certain Business Relationships and Related Party Transactions and
Board of Directors.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2020 Annual
Meeting of Stockholders, where it appears under the headings Independent Registered Public Accounting Firm Services and Fees.
112
ITEM 15.
EXHIBTS AND FINANCIAL STATEMENT SCHEDULES
a) The following documents are filed as part of this Form 10-K:
(1) Financial Statements:
PART IV
Our Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements under Part II.
Item 8 of this Annual Report on Form 10(cid:15)K.
(2) Financial Statement Schedules:
Financial statement schedules have been omitted in this report because they are not applicable, not required under
the instructions, or the information requested is set forth in the consolidated financial statements or related notes
thereto.
b) Exhibits:
EXHIBIT INDEX
Exhibit
No.
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Exhibits
Amended and Restated
Certificate of Incorporation.
Certificate of Amendment of Amended and
Restated Certificate of Incorporation.
Certificate of Amendment of
Amended and Restated Certificate of
Incorporation.
Certificate of Amendment of Amended and
Restated Certificate of Incorporation
Amended and Restated Bylaws.
Specimen Common Stock Certificate.
Form of Warrant
Form of Common Stock Warrant Issued
Pursuant to that certain Loan and Security
Agreement, dated as of October 19, 2015,
by and among the Company, Oxford
Finance LLC and Silicon Valley Bank
Form of Warrant Issuable to Oxford
Finance LLC
Form of Warrant Issuable to Silicon Valley
Bank
Base Indenture, dated November 13, 2019,
between the Company and U.S. Bank
National Association, as Trustee
First Supplemental Indenture, dated
November 13, 2019, between the Company
and U.S. Bank National Association, as
Trustee (including the form of 4.00%
Convertible Senior Note due 2026)
Filed
Herewith
Incorporated by Reference
Form
S-3
File No.
Filing Date
333-174869
June 13, 2011
10-Q
000-50633
August 4, 2011
8-K
000-50633
June 25, 2013
8-K
000-50633
May 20, 2016
S-1
10-Q
10-Q
10-K
333-112261
January 27, 2004
000-50633
May 9, 2007
000-50633
August 6, 2012
000-50633
March 3, 2016
10-Q
000-50633
August 9, 2019
10-Q
000-50633
August 9, 2019
Exh.
No.
3.1
3.2
5.1
3.1
3.2
4.1
4.6
4.6
4.2
4.3
8-K
000-50633
November 13, 2019
4.1
8-K
000-50633
November 13, 2019
4.2
113
Exhibit
No.
4.8
10.1+
10.2+
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Exhibits
Description of Securities
Amended and Restated 2004 Equity
Incentive Plan
Amended and Restated 2015 Employee
Stock Purchase Plan
Build-to-Suit Lease, dated May 27, 1997,
by and between Britannia Pointe Grand
Limited Partnership and Metaxen, LLC
First Amendment to Lease, dated April 13,
1998, by and between Britannia Pointe
Grand Limited Partnership and Metaxen,
LLC
Sublease Agreement, dated May 1, 1998,
by and between the Company and Metaxen,
LLC
Sublease Agreement, dated March 1, 1999,
by and between Metaxen, LLC and
Exelixis Pharmaceuticals, Inc.
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
Second Amendment to Lease, dated
July 11, 1999, by and between Britannia
Pointe Grand Limited Partnership and
Exelixis Pharmaceuticals, Inc.
First Amendment to Sublease Agreement,
dated July 20, 1999, by and between the
Company and Metaxen
Agreement and Consent, dated July 20,
1999, by and among Exelixis
Pharmaceuticals, Inc., the Company and
Britannia Pointe Grand Limited Partnership
Amendment to Agreement and Consent,
dated July 31, 2000, by and between the
Company, Exelixis, Inc., and Britannia
Pointe Grande Limited Partnership
Assignment and Assumption of Lease,
dated September 28, 2000, by and between
the Company and Exelixis, Inc.
Sublease Agreement, dated September 28,
2000, by and between the Company and
Exelixis, Inc.
Incorporated by Reference
Form
10-K
S-8
File No.
000-50633
Filing Date
March 4, 2020
333-238786
May 29, 2020
DEF 14A
000-50633
March 26, 2020
Filed
Herewith
Exh.
No.
4.8
99.1
Appendix
A
S-1
333-112261
January 27, 2004
10.5
S-1
333-112261
January 27, 2004
10.6
S-1
333-112261
January 27, 2004
10.7
S-1
333-112261
January 27, 2004
10.8
S-1
333-112261
January 27, 2004
10.9
S-1
333-112261
January 27, 2004
10.10
S-1
333-112261
January 27, 2004
10.11
S-1
333-112261
January 27, 2004
10.12
S-1
333-112261
January 27, 2004
10.13
S-1
333-112261
January 27, 2004
10.14
S-1
333-112261
January 27, 2004
10.15
10.14*
Collaboration and Option Agreement, dated
as of December 29, 2006, by and between
the Company and Amgen Inc.
10-K
000-50633
March 12, 2007
10.63
114
Exhibit
No.
10.15
10.17+
10.18*
10.19*
10.20*
10.21*
10.22+
10.23
10.24*
Exhibits
Form of Indemnification Agreement
between the Company and each of its
directors and executive officers
Amended and Restated Executive
Employment Agreement, dated May 21,
2007, by and between the Company and
Robert Blum
Amendment No. 1, dated June 17, 2008, to
the Collaboration and Option Agreement
by and between the Company and Amgen
Inc.
Amendment No. 2, dated September 30,
2008, to the Collaboration and Option
Agreement by and between the Company
and Amgen Inc.
Amendment No. 3, dated October 31, 2008,
to the Collaboration and Option Agreement
by and between the Company and Amgen
Inc.
Amendment No. 4, dated February 20,
2009, to the Collaboration and Option
Agreement by and between the Company
and Amgen Inc.
Form of Amendment No. 1 to Amended
and Restated Executive Employment
Agreements
Third Amendment to Lease, dated
December 10, 2010, by and between the
Company and Britannia Pointe Grand
Limited Partnership
Amendment No. 5, dated November 1,
2010, to the Collaboration and Option
Agreement by and between the Company
and Amgen Inc.
10.26+
Form of Option Agreement
10.27+
10.29*
10.30+
10.33*
Form of Restricted Stock Unit Award
Agreement
Amendment No. 6, dated June 11, 2013, to
the Collaboration and Option Agreement
by and between the Company and Amgen
Inc.
Form of Executive Employment Agreement
between the Company and its executive
officers
Amendment No. 7, dated March 19, 2015,
to the Collaboration and Option Agreement
by and between the Company and Amgen
Inc.
Incorporated by Reference
Form
10-Q
File No.
000-50633
Filing Date
August 5, 2008
Exh.
No.
10.1
Filed
Herewith
10-Q
000-50633
August 5, 2008
10.69
10-K
000-50633
March 12, 2009
10.62
10-K
000-50633
March 12, 2009
10.63
10-K
000-50633
March 12, 2009
10.65
10-K
000-50633
March 12, 2009
10.67
10-K
000-50633
March 12, 2009
10.68
10-K
000-50633
March 11, 2011
10.65
10-K
000-50633
March 11, 2011
10.66
10-K
10-K
000-50633
March 15, 2013
000-50633
March 15, 2013
10.46
10.47
10-Q
000-50633
August 7, 2013
10.46
10-K
000-50633
March 7, 2014
10.39
10-Q
000-50633
May 4, 2015
10.41
10.34
Amendment to Collaboration Agreement:
Joint Development Committee Membership
10-Q
000-50633
August 7, 2018
10.1
115
Exhibit
No.
10.36
10.37#
10.38#
10.43
10.44
10.47*
10.48
10.49
10.50
10.51
10.52#
10.53#
Exhibits
Fourth Amendment to Build to Suit Lease,
dated March 1, 2016, by and between the
Company and Britannia Pointe Grand
Limited Partnership
Fast Skeletal Regulatory Activator
Agreement, dated April 23, 2020, by and
between the Company and Astellas Pharma
Inc.
License and Collaboration Agreement for
Other Skeletal Sarcomere Activators, dated
April 23, 2020, by and between the
Company and Astellas Pharma Inc.
Second Amendment to Loan and Security
Agreement by and among the Company,
Oxford Finance LLC and Silicon Valley
Bank, dated as of October 27, 2017
Fifth Amendment to Lease, dated
December 18, 2017, by and between the
Company and Britannia Pointe Grand
Limited Partnership
Amendment No. 8, dated November 30,
2016, to the Collaboration and Option
Agreement by and between the Company
and Amgen Inc.
Amendment No. 9, dated February 6, 2019,
to the Collaboration and Option Agreement
by and between the Company and Amgen
Inc.
Loan and Security Agreement, dated as of
May 17, 2019, by and among the Company,
Oxford Finance LLC and Silicon Valley
Bank
Seventh Amendment to Lease, dated July
11, 2019, by and between the Company and
Britannia Pointe Grand Limited Partnership
Lease, dated July 24, 2019, by and between
the Company and KR Oyster Point 1, LLC
First Amendment to Loan and Security
Agreement, dated as of November 6, 2019,
by and among the Company, Oxford
Finance LLC and Silicon Valley Bank
Second Amendment to Loan and Security
Agreement, dated as of November 7, 2019,
by and among the Company, Oxford
Finance LLC and Silicon Valley Bank
Incorporated by Reference
Form
10-Q
File No.
Filing Date
000-50633
May 5, 2016
Filed
Herewith
Exh.
No.
10.41
10-Q
000-50633
August 7, 2020
10.3
10-Q
000-50633
August 7, 2020
10.4
10-K
000-50633
March 5, 2018
10.45
10-K
000-50633
March 5, 2018
10.47
10-K
000-50633
March 7, 2019
10.49
10-K
000-50633
March 7, 2019
10.50
10-Q
000-50633
August 9, 2019
10.1
10-Q
000-50633
November 1, 2019
10.51
10-Q
000-50633
November 1, 2019
10.52
8-K
000-50633
November 13, 2019
10.1
8-K
000-50633
November 13, 2019
10.2
116
Exhibit
No.
10.54
10.55#
10.56#
10.57#
10.58#
10.59
10.60
10.61#
23.1
24.1
31.1
31.2
31.3
Exhibits
Third Amendment to Loan and Security
Agreement, dated July 16, 2020, by and
among the Company, Oxford Finance LLC
and Silicon Valley Bank
License and Collaboration Agreement,
dated July 14, 2020, by and between the
Company and Ji Xing Pharmaceuticals
Limited
Funding Agreement, dated July 14, 2020,
by and between the Company and RTW
Royalty Holdings Designated Activity
Company (f/k/a/ Dolya Holdco 19
Designated Activity Company)
Royalty Purchase Agreement, dated July
14, 2020, by and between the Company and
RTW Royalty Holdings Designated
Activity Company (f/k/a/ Dolya Holdco 19
Designated Activity Company)
Form of Common Stock Purchase
Agreement, dated July 14, 2020
First Amendment to Lease, dated May 12,
2020, by and between the Company and
KR Oyster Point 1, LLC
Second Amendment to Lease, dated
January 26, 2021, by and between the
Company and KR Oyster Point 1, LLC
Letter Agreement, dated December 23,
2020, by and between Company and
Astellas amending the License and
Collaboration Agreement for Other Skeletal
Sarcomere Activators, dated April 23,
2020, by and between the Company and
Astellas Pharma Inc.
Consent of independent registered public
accounting firm
Power of Attorney (included in the
signature page to this report)
Certification of Principal Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Principal Financial Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Principal Accounting
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Incorporated by Reference
File No.
Filing Date
000-50633
November 6, 2020
Filed
Herewith
Exh.
No.
10.5
Form
10-Q
10-Q
000-50633
November 6, 2020
10.1
10-Q
000-50633
November 6, 2020
10.2
10-Q
000-50633
November 6, 2020
10.3
10-Q
000-50633
November 6, 2020
10.4
X
X
X
X
X
X
X
X
117
X
X
X
X
X
X
X
X
Exhibits
Form
File No.
Filing Date
Exh.
No.
Filed
Herewith
Incorporated by Reference
Exhibit
No.
32.1
101.INS
Certifications of the Principal Executive
Officer, the Principal Financial Officer, and
the Principal Accounting Officer pursuant
to Section 906 of the Sarbanes-Oxley Act
of 2002 (18 U.S.C. Section 1350) (1)
Inline XBRL Instance Document (the
Instance Document does not appear in the
Interactive Data File because its XBRL tags
are embedded within the Inline XBRL
document)
101.SCH Inline XBRL Taxonomy Extension Schema
Document
101.CAL Inline XBRL Taxonomy Extension
Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension
Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document
101.PRE Inline XBRL Taxonomy Extension
Presentation Linkbase Document
104
*
#
+
(1)
Cover Page Interactive Data File (formatted
as Inline XBRL in Exhibit 101)
Portions of this Exhibit are subject to a confidential treatment order.
Portions of this Exhibit have been omitted as being immaterial and would be competitively harmful if publicly disclosed
Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be furnished on a supplemental basis to the
Securities and Exchange Commission upon request
Management contract or compensatory plan.
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange
Commission and is not to be incorporated by reference into any filing of the Registrant 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.
(b) Exhibits
The 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 Schedules
None All financial statement schedules are omitted because the information is inapplicable or presented in the notes to
the financial statements.
ITEM 16.
FORM 10-K SUMMARY
None.
118
Pursuant 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 signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
CYTOKINETICS, INCORPORATED
By: / S / ROBERT I. BLUM
Robert I. Blum
President, Chief Executive Officer and Director
Dated: February 26, 2021
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Robert I. Blum, Ching Jaw, Mark A. Schlossberg and Robert Wong, 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 any amendments to this Annual Report on Form 10-K and to file
the same, with exhibits thereto and other documents in connection therewith, with the Securities and 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 done by virtue
hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ ROBERT I. BLUM
Robert I. Blum
/s/ CHING W. JAW
Ching W. Jaw
/s/ ROBERT C. WONG
Robert C. Wong
/s/ L. PATRICK GAGE, PHD.
L. Patrick Gage, Ph.D.
/s/ ROBERT M. CALIFF, M.D.
Robert M. Califf, M.D.
/s/ SANTO J. COSTA
Santo J. Costa
JOHN T. HENDERSON, M.B. CH.B.
/s/
John T. Henderson, M.B. Ch.B.
/s/ EDWARD M. KAYE, M.D.
Edward M. Kaye, M.D.
/s/ B. LYNNE PARSHALL, ESq.
B. Lynne Parshall, Esq.
/s/ SANDFORD D. SMITH
Sandford D. Smith
/s/ WENDELL WIERENGA, PH.D.
Wendell Wierenga, Ph.D.
/s/ NANCY J. WYSENSKI
Nancy J. Wysenski
/s/ MUNA BHANJI
Muna Bhanji
President, Chief Executive Officer and
Director (Principal Executive Officer)
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
Date
February 26, 2021
February 26, 2021
Vice President, Chief Accounting Officer (Principal
Accounting Officer)
February 26, 2021
Chairman of the Board of Directors
February 26, 2021
Director
Director
Director
Director
Director
Director
Director
Director
Director
119
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
REGISTRAR AND TRANSFER AGENT
CORPORATE PROFILE
Robert I. Blum
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
Durga Bobba
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:75)(cid:76)(cid:86)(cid:72)(cid:3)(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)
Manager, Cardiovascular
Daniel R. Casper
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:918)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)
(cid:37)(cid:82)(cid:81)(cid:81)(cid:76)(cid:72)(cid:3)(cid:36)(cid:17)(cid:3)(cid:38)(cid:75)(cid:68)(cid:85)(cid:83)(cid:72)(cid:81)(cid:87)(cid:76)(cid:72)(cid:85)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3)(cid:36)(cid:909)(cid:68)(cid:76)(cid:85)(cid:86)(cid:3)
and Compliance
(cid:39)(cid:68)(cid:89)(cid:76)(cid:71)(cid:3)(cid:58)(cid:17)(cid:3)(cid:38)(cid:85)(cid:68)(cid:74)(cid:74)
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)(cid:53)(cid:72)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)
(cid:36)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
Erin Donnelly
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:51)(cid:82)(cid:85)(cid:87)(cid:73)(cid:82)(cid:79)(cid:76)(cid:82)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:38)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:58)(cid:17)(cid:3)(cid:45)(cid:68)(cid:90)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
(cid:54)(cid:70)(cid:82)(cid:87)(cid:87)(cid:3)(cid:53)(cid:17)(cid:3)(cid:45)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:49)(cid:72)(cid:90)(cid:3)(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)
and Commercial Development
Daniel E. Kates, M.D, M.B.A.
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:48)(cid:72)(cid:71)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:36)(cid:909)(cid:68)(cid:76)(cid:85)(cid:86)
Stuart Kupfer, M.D.
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:48)(cid:72)(cid:71)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
(cid:41)(cid:68)(cid:71)(cid:92)(cid:3)(cid:918)(cid:17)(cid:3)(cid:48)(cid:68)(cid:79)(cid:76)(cid:78)(cid:15)(cid:3)(cid:48)(cid:17)(cid:39)(cid:17)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)(cid:15)(cid:3)(cid:41)(cid:17)(cid:36)(cid:17)(cid:38)(cid:17)(cid:38)(cid:17)
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)
Research and Development
(cid:37)(cid:85)(cid:68)(cid:71)(cid:79)(cid:72)(cid:92)(cid:3)(cid:51)(cid:17)(cid:3)(cid:48)(cid:82)(cid:85)(cid:74)(cid:68)(cid:81)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:53)(cid:72)(cid:86)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
Non-Clinical Development
(cid:36)(cid:81)(cid:81)(cid:72)(cid:3)(cid:48)(cid:17)(cid:3)(cid:48)(cid:88)(cid:85)(cid:83)(cid:75)(cid:92)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:37)(cid:76)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)
Mark A. Schlossberg, Esq.
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:47)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)
(cid:40)(cid:79)(cid:76)(cid:86)(cid:68)(cid:69)(cid:72)(cid:87)(cid:75)(cid:3)(cid:36)(cid:17)(cid:3)(cid:54)(cid:70)(cid:75)(cid:81)(cid:76)(cid:72)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)
Eric Terhaerdt
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
(cid:39)(cid:76)(cid:68)(cid:81)(cid:72)(cid:3)(cid:58)(cid:72)(cid:76)(cid:86)(cid:72)(cid:85)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)
Communications and Investor Relations
(cid:36)(cid:81)(cid:71)(cid:85)(cid:72)(cid:90)(cid:3)(cid:36)(cid:17)(cid:3)(cid:58)(cid:82)(cid:79)(cid:909)(cid:15)(cid:3)(cid:48)(cid:17)(cid:39)(cid:17)(cid:15)(cid:3)(cid:41)(cid:17)(cid:36)(cid:17)(cid:38)(cid:17)(cid:38)(cid:17)
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:41)(cid:72)(cid:79)(cid:79)(cid:82)(cid:90)(cid:15)
Clinical Research and Development
(cid:53)(cid:82)(cid:69)(cid:72)(cid:85)(cid:87)(cid:3)(cid:38)(cid:17)(cid:3)(cid:58)(cid:82)(cid:81)(cid:74)
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
(cid:47)(cid:17)(cid:3)(cid:51)(cid:68)(cid:87)(cid:85)(cid:76)(cid:70)(cid:78)(cid:3)(cid:42)(cid:68)(cid:74)(cid:72)(cid:15)(cid:3)(cid:51)(cid:75)(cid:17)(cid:39)(cid:17)
Chairman, Cytokinetics, Incorporated
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:58)(cid:92)(cid:72)(cid:87)(cid:75)(cid:3)(cid:53)(cid:72)(cid:86)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)
Robert I. Blum
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)(cid:15)
Cytokinetics, Incorporated
Muna Bhanji
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)
(cid:36)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:15)(cid:3)(cid:48)(cid:72)(cid:85)(cid:70)(cid:78)(cid:3)(cid:9)(cid:3)(cid:38)(cid:82)(cid:17)(cid:15)(cid:3)(cid:918)(cid:81)(cid:70)(cid:17)
(cid:53)(cid:82)(cid:69)(cid:72)(cid:85)(cid:87)(cid:3)(cid:38)(cid:68)(cid:79)(cid:76)(cid:909)(cid:15)(cid:3)(cid:48)(cid:17)(cid:39)(cid:17)
(cid:43)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:79)(cid:76)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:15)(cid:3)(cid:57)(cid:72)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:42)(cid:82)(cid:82)(cid:74)(cid:79)(cid:72)(cid:3)(cid:43)(cid:72)(cid:68)(cid:79)(cid:87)(cid:75)
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Quintiles Transnational Corporation
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Edward M. Kaye, M.D.
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Sandford D. Smith
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Corporation
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and Development, Santarus, Inc.
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Incorporated
CORPORATE SECRETARY
Mark A. Schlossberg, Esq.
Cytokinetics, Incorporated
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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Redwood City, California
CORPORATE COUNSEL
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Inquiries regarding change of address, lost stock
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other matters related to stock ownership should
be directed to the transfer agent.
Computershare
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computershare.com/investor
ANNUAL MEETING
The annual meeting of stockholders will be
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Cytokinetics, Incorporated
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COMMON STOCK
The company’s common stock is traded on the
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FORM 10-K AND ADDITIONAL
INFORMATION
A copy of the Company’s Annual Report on Form
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Commission, is available without charge by
calling or writing the Investor Relations
Department as listed under Stockholder Inquiries.
STOCKHOLDER INQUIRIES
Stockholder and investor inquiries and requests
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Investor Relations
Cytokinetics, Incorporated
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investor@cytokinetics.com
CORPORATE INFORMATION
Cytokinetics, Incorporated
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cytokinetics.com
FORWARD-LOOKING STATEMENTS
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clinical results; our ability to obtain FDA or other regulatory approval for omecamtiv mecarbil and the timing of our potential submission of a New Drug Application for
omecamtiv mecarbil;(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:88)(cid:87)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:53)(cid:40)(cid:39)(cid:58)(cid:50)(cid:50)(cid:39)(cid:16)(cid:43)(cid:38)(cid:48)(cid:3)(cid:69)(cid:92)(cid:3)(cid:80)(cid:76)(cid:71)(cid:16)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:68)(cid:3)(cid:51)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:22)(cid:3)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:38)(cid:46)(cid:16)(cid:21)(cid:26)(cid:23)(cid:3)(cid:69)(cid:92)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:30)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:76)(cid:83)(cid:72)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)
(cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)omecamtiv mecarbil, reldesemtiv,(cid:3)(cid:38)(cid:46)(cid:16)(cid:21)(cid:26)(cid:23)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:71)(cid:85)(cid:88)(cid:74)(cid:3)(cid:70)(cid:68)(cid:81)(cid:71)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:86)(cid:17)(cid:3)(cid:54)(cid:88)(cid:70)(cid:75)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)-
(cid:80)(cid:72)(cid:81)(cid:87)(cid:10)(cid:86)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:71)(cid:76)(cid:909)(cid:72)(cid:85)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:15)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:71)(cid:76)(cid:605)(cid:70)(cid:88)(cid:79)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:72)(cid:79)(cid:68)(cid:92)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)
development, testing, regulatory approvals for trial commencement, progression or product sale or manufacturing, or production of Cytokinetics’ drug candidates that could
slow or prevent clinical development or product approval, including risks that current and past results of clinical trials or preclinical studies may not be indicative of future
(cid:70)(cid:79)(cid:76)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:15)(cid:3)(cid:83)(cid:68)(cid:87)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:81)(cid:85)(cid:82)(cid:79)(cid:79)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:79)(cid:76)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:76)(cid:605)(cid:70)(cid:88)(cid:79)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:72)(cid:79)(cid:68)(cid:92)(cid:72)(cid:71)(cid:15)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:519)(cid:3)(cid:71)(cid:85)(cid:88)(cid:74)(cid:3)(cid:70)(cid:68)(cid:81)(cid:71)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3)(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)(cid:72)(cid:909)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:85)(cid:68)(cid:83)(cid:72)(cid:88)(cid:87)(cid:76)(cid:70)(cid:3)(cid:72)(cid:605)(cid:70)(cid:68)(cid:70)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:39)(cid:36)(cid:3)(cid:82)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:71)(cid:72)(cid:79)(cid:68)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:519)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:519)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:70)(cid:79)(cid:76)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:88)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)
obtain or maintain patent or trade secret protection for its intellectual property, Astellas’ decisions with respect to the design, initiation, conduct, timing and continuation of
development activities for reldesemtiv, Amgen’s decisions with respect to the design, initiation, conduct, timing and continuation of development activities for omecamtiv
mecarbil, (cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:76)(cid:81)(cid:70)(cid:88)(cid:85)(cid:3)(cid:88)(cid:81)(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:69)(cid:72)(cid:3)(cid:88)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:564)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)
its products; standards of care may change, rendering Cytokinetics’ drug candidates obsolete, competitive products or alternative therapies may be developed by others for
the treatment of indications Cytokinetics’ drug candidates and potential drug candidates may target, and risks and uncertainties relating to the timing and receipt of payments
from its partners, including milestones and royalties on future potential product sales under Cytokinetics’ collaboration agreements with such partners. For further informa-
(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:519)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3) (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:3) (cid:38)(cid:92)(cid:87)(cid:82)(cid:78)(cid:76)(cid:81)(cid:72)(cid:87)(cid:76)(cid:70)(cid:86)(cid:519)(cid:3) (cid:564)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:17)
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