ANNUAL REPORT 2023
REACHING
NEW HEIGHTS
DEAR SHAREHOLDER,
The seeds of possibility that we planted
over 25 years ago with the founding of
(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:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:81)(cid:82)(cid:90)(cid:3) (cid:565)(cid:82)(cid:88)(cid:85)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:87)(cid:82)(cid:3)
towering giants of progress that have
exceeded even our high aspirations. In
2023, our company reached impressive
new heights. Today, like the majestic trees
that lend their names to the clinical trials in
our development program for (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81),
(cid:90)(cid:72)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:3)(cid:564)(cid:85)(cid:80)(cid:79)(cid:92)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:71)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:71)(cid:72)(cid:72)(cid:83)(cid:3)(cid:85)(cid:82)(cid:82)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:76)(cid:564)(cid:70)(cid:3)(cid:76)(cid:81)(cid:81)(cid:82)(cid:89)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)
and an unwavering mission and culture of compassionate
commitment, reaching higher and higher in service to our mission.
In a year punctuated with positives, most notable among our
achievements was our sharing positive results from
SEQUOIA-HCM, the pivotal Phase 3 clinical trial of (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81), our
cardiac myosin inhibitor, in patients with symptomatic obstructive
hypertrophic cardiomyopathy (HCM). The results surpassed
already high expectations and represented a transformational
(cid:76)(cid:81)(cid:565)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:17)(cid:3)(cid:918)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:23)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:80)(cid:82)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)
regulatory submissions in both the U.S. and Europe, and have
activated our next phase of commercial readiness ahead of the
potential approval and commercial launch of (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)in 2025.
At the same time, as patients from SEQUOIA-HCM enroll in
FOREST-HCM, the open-label extension clinical study of
(cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:15)(cid:3)(cid:90)(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:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:605)(cid:70)(cid:68)(cid:70)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
safety of longer-term treatment with (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:17)(cid:3)(cid:918)(cid:81)(cid:3)(cid:72)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:23)(cid:15)(cid:3)
we shared data from FOREST-HCM showing that treatment with
(cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)resulted in favorable cardiac structural remodeling,
suggesting that our potential medicine may be able to alter the
architecture of the heart in patients with obstructive HCM.
Building on SEQUOIA-HCM, last year we expanded the development
program for (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)with two additional Phase 3 clinical trials:
MAPLE-HCM, evaluating (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)as monotherapy compared to
metoprolol as monotherapy in patients with obstructive HCM, and
ACACIA-HCM, a pivotal trial evaluating (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3) in patients
with non-obstructive HCM. Each of these clinical trials holds
opportunity for (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)as a next-in-class cardiac myosin inhibitor
to potentially support additional patient populations with HCM
potentially underserved by currently available treatment options.
Alongside progress made with (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)in 2023, we also advanced
our earlier-stage pipeline. During the year, we started a Phase 1
study of CK-586, our cardiac myosin inhibitor with a mechanism of
action distinct from (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81), that we intend to develop for the
potential treatment of a subgroup of patients with heart failure
with preserved ejection fraction, or HFpEF. Despite available
therapies, patients with HFpEF remain at high risk of cardiovascular
(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:81)(cid:72)(cid:72)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:68)(cid:83)(cid:76)(cid:72)(cid:86)(cid:17)(cid:3)(cid:918)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:23)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)
complete the Phase 1 study and subsequently share data in the
second quarter, with the goal of starting a Phase 2 clinical trial of
CK-586 in patients with HFpEF in the second half of this year.
In 2023, unfortunately, we also experienced setbacks, including
our receipt of a Complete Response Letter from the U.S. Food &
Drug Administration regarding our New Drug Application for
(cid:82)(cid:80)(cid:72)(cid:70)(cid:68)(cid:80)(cid:87)(cid:76)(cid:89)(cid:3)(cid:80)(cid:72)(cid:70)(cid:68)(cid:85)(cid:69)(cid:76)(cid:79) for the potential treatment of heart failure
with reduced ejection fraction (HFrEF), as well as the termination
of development of (cid:85)(cid:72)(cid:79)(cid:71)(cid:72)(cid:86)(cid:72)(cid:80)(cid:87)(cid:76)(cid:89)(cid:3)after COURAGE-ALS, the Phase 3
clinical trial of (cid:85)(cid:72)(cid:79)(cid:71)(cid:72)(cid:86)(cid:72)(cid:80)(cid:87)(cid:76)(cid:89)(cid:3)in patients with ALS, showed it had no
(cid:72)(cid:909)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:72)(cid:76)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:82)(cid:81)(cid:71)(cid:68)(cid:85)(cid:92)(cid:3)(cid:72)(cid:81)(cid:71)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)
setbacks were disappointing, inspired by the patients we aim to
serve, we push forward with learnings in support of our mission.
We also commemorated our 25th anniversary throughout last year.
We honored our history, spotlighted our longstanding commitment
(cid:87)(cid:82)(cid:3)(cid:85)(cid:76)(cid:74)(cid:82)(cid:85)(cid:82)(cid:88)(cid:86)(cid:3)(cid:86)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:76)(cid:564)(cid:70)(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:85)(cid:72)(cid:565)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)
Just as Ralph Waldo Emerson wrote of “the creation of a thousand
forests is in one acorn,” we now look ahead to a future for
Cytokinetics coalesced by our science and guided by our Vision
2025. Pivoting on (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)as our most advanced program, we are
on our way to building an uncommon specialty cardiology company
that can stand tall amongst other sustaining peer group companies
(cid:83)(cid:82)(cid:90)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:72)(cid:81)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:81)(cid:82)(cid:89)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:68)(cid:87)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)
(cid:49)(cid:82)(cid:90)(cid:15)(cid:3) (cid:76)(cid:81)(cid:3) (cid:21)(cid:19)(cid:21)(cid:23)(cid:15)(cid:3) (cid:90)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:90)(cid:72)(cid:79)(cid:79)(cid:3) (cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:72)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)
(cid:58)(cid:72)(cid:3)(cid:69)(cid:72)(cid:74)(cid:68)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:564)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:73)(cid:82)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:90)(cid:82)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
cash runway. As more programs mature from our laboratories
and into the clinic, we look forward to expanding our pipeline
beyond the mechanics of muscle contractility to also extend
to other areas of muscle biology, including metabolism and
energetics of muscle, as may further unlock shareholder value.
(cid:36)(cid:86)(cid:3)(cid:90)(cid:72)(cid:3)(cid:85)(cid:72)(cid:565)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:75)(cid:88)(cid:80)(cid:69)(cid:79)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:85)(cid:78)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)
resilience that characterizes both our company and the towering
trees of the forest that shelter and exhilarate us. Our mission is
(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:70)(cid:68)(cid:85)(cid:71)(cid:76)(cid:68)(cid:70)(cid:3) (cid:80)(cid:92)(cid:82)(cid:86)(cid:76)(cid:81)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:88)(cid:81)(cid:71)(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:86)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:76)(cid:564)(cid:70)(cid:3)
expertise and the engine that powers our muscles. Cytokinetics
remains grounded in the integrity of science as we continue
(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:75)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:68)(cid:87)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:75)(cid:82)(cid:83)(cid:72)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87)(cid:17)
We look forward to keeping you updated on our continued
progress at Cytokinetics and are indeed grateful 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)
Protein Target
Therapeutic Area
Drug Candidate
Research
Pre-Clinical
Phase 1
Phase 2
Phase 3
Approval
Myosin
oHCM
(cid:36)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)
oHCM
(First-line*)
Myosin-Targeted
Therapy
nHCM
(cid:36)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)
(cid:36)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)
HFpEF
CK-586
HFrEF
(cid:50)(cid:80)(cid:72)(cid:70)(cid:68)(cid:80)(cid:87)(cid:76)(cid:89)
(cid:48)(cid:72)(cid:70)(cid:68)(cid:85)(cid:69)(cid:76)(cid:79)
Troponin
Troponin-
Targeted Therapy
Heart Failure,
other
CK-136
Other Biology
Muscle Biology
Directed
(cid:53)(cid:72)(cid:86)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)
Preparing for regulatory
submissions in 2H 2024
EMA review pending
(cid:13)(cid:51)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(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:48)(cid:36)(cid:51)(cid:47)(cid:40)(cid:16)(cid:43)(cid:38)(cid:48)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:51)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:22)(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:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(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:86)(cid:88)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)(cid:68)(cid:86)(cid:3)(cid:80)(cid:82)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:68)(cid:83)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:72)(cid:87)(cid:82)(cid:83)(cid:85)(cid:82)(cid:79)(cid:82)(cid:79)(cid:3)(cid:68)(cid:86)(cid:3)(cid:80)(cid:82)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:68)(cid:83)(cid:92)(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:82)(cid:69)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:43)(cid:38)(cid:48)(cid:17)
(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:3)(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)
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, 2023
or
☐ 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)
350 Oyster Point Boulevard
South San Francisco, CA
(Address of principal executive offices)
94-3291317
(I.R.S. Employer
Identification No.)
94080
(Zip Code)
(650) 624-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001 par value
Trading symbol
CYTK
Name of each exchange on which registered
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:3) No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No (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
☐
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 ☐
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 ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
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 management’s 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)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive o(cid:31)cers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No (cid:3)
The approximate aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant was $2.0 billion as of June 30, 2023.(A)
(A) Excludes 36.1 million shares of common stock held by directors and executive officers, and any stockholders whose ownership exceeds ten percent of the shares outstanding, at June 30, 2023.
Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, directly or indirectly, to direct or cause the direction of the management or policies of the
registrant, or that such person is controlled by or under common control with the registrant.
As of February 27, 2024, the number of shares outstanding of the Registrant’s common stock, par value $0.001 per share, was 103,004,710 shares.
Portions of the Registrant’s Proxy Statement for its 2024 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
Table of Contents
CYTOKINETICS, INCORPORATED
FORM 10-K
YEAR ENDED DECEMBER 31, 2023
INDEX
Glossary of Terms ............................................................................................................................................
Forward Looking Statements Private Securities Litigation Reform Act of 1995 ............................................
Summary of Principal Risk Factors..................................................................................................................
PART I
Business............................................................................................................................................................
Risk Factors ......................................................................................................................................................
Unresolved Staff Comments.............................................................................................................................
Cybersecurity....................................................................................................................................................
Properties..........................................................................................................................................................
Legal Proceedings ............................................................................................................................................
Mine Safety Disclosures...................................................................................................................................
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ..........................................................................................................................................................
[Reserved].........................................................................................................................................................
Management’s 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.............................................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .............................................................
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 Accountant Fees and Services...........................................................................................................
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
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
3
7
9
11
30
60
60
62
62
62
63
64
65
74
75
106
106
108
108
109
109
109
109
109
110
110
114
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GLOSSARY OF TERMS
Unless the context requires otherwise, references to “Cytokinetics,” “the Company,” “we,” “us” or “our” in this Form 10-K
(defined below) refer to Cytokinetics, Incorporated and its subsidiaries. References to “Notes” in this Form 10-K are to the Notes to the
Consolidated Financial Statements in this Form 10-K. We also have used other specific terms in this Form 10-K, most of which are
explained or defined below:
Term/Abbreviation
Definition
2004 Plan
2020 RTW Transactions
2021 RTW Transactions
2022 RPI Transactions
2026 Notes
2027 Indenture
2027 Notes
ACA
ACACIA-HCM
ACC
AHA
ALS
ALSFRS-R
Amended ATM Facility
Amgen Agreement
ARR
Astellas Agreement
Astellas FSRA Agreement
Astellas OSSA Agreement
ASU 2020-06
cGMP
Cantor
China
CMC
CMO
Cytokinetics’ Amended and Restated 2004 Equity Incentive Plan
The transactions contemplated by the RTW Royalty Purchase Agreement, Ji Xing
Aficamten License Agreement and the Common Stock Purchase Agreements, dated
July 14, 2020, by and between Cytokinetics and the RTW Investors
The transactions contemplated by the Ji Xing OM License Agreement and the
Common Stock Purchase Agreements, dated December 20, 2021 by and between
Cytokinetics and the RTW Investors
The transactions contemplated by the RP Loan Agreement and the RP Aficamten
RPA
Cytokinetics’ 4% convertible senior notes due 2026
Indenture Agreement, dated July 6, 2022, between Cytokinetics and U.S. Bank Trust
Company, as trustee
Cytokinetics’ 3.50% convertible senior notes due 2027
Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act
Assessment Comparing Aficamten to Placebo on Cardiac Endpoints In Adults with
Non-Obstructive HCM
American College of Cardiology
American Heart Association
amyotrophic lateral sclerosis (also known as Lou Gehrig’s Disease)
ALS Functional Rating Scale – Revised
amended and restated Controlled Equity Offering Sales Agreement
Collaboration and Option Agreement, dated December 29, 2006, as amended,
between Cytokinetics and Amgen
absolute risk reductions
License and Collaboration Agreement, dated June 21, 2013, between Cytokinetics and
Astellas
Fast Skeletal Regulatory Activator Agreement, dated April 23, 2020 between
Cytokinetics and Astellas
License and Collaboration Agreement for Other Skeletal Sarcomere Activators, dated
April 23, 2020, as amended, between Cytokinetics and Astellas
ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
current Good Manufacturing Practice
Cantor Fitzgerald & Co.
People's Republic of China (including the Hong Kong and Macau SARs)
Chemistry, Manufacturing and Controls
Contract Manufacturing Organizations
Common Stock
Compensation Committee
Convertible Notes
COURAGE-ALS
our common stock, par value $0.001 per share
Compensation and Talent Committee of Cytokinetics’ Board of Directors
2026 Notes and 2027 Notes
Clinical Outcomes Using Reldesemtiv on ALSFRS-R in a Global Evaluation in ALS
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CPET
CRL
CRO
CV
E.U. or EU
EEA
EMA
ESPP
Exchange Act
FDA
Final Payment Amount
FOREST-HCM
FSRA
FSTA
Fundamental Change
GAAP
GALACTIC-HF
GCP
GDPR
HCM
HFpEF
HFrEF
HFSA
HHS
HIPAA
ICER
IND
IRA
IRB
Ji Xing
Ji Xing Aficamten License Agreement
Ji Xing Agreements
Ji Xing OM License Agreement
KCCQ
KCCQ-OSS
Lenders
LVEF
LVOT
LVOT-G
cardiopulmonary exercise testing
Complete Response Letter
Contract Research Organization
cardiovascular
European Union
European Economic Area
European Medicines Agency
employee stock purchase plan
Securities Exchange Act of 1934, as amended
U.S. Food and Drug Administration
As defined in Part II, Item 7 (Management’s Discussion and Analysis of Financial
Conditions and Results of Operations) of this Annual Report on Form 10-K – Sources
and Uses of Cash, Royalty Pharma Transactions
Five-Year, Open-Label, Research Evaluation of Sustained Treatment with Aficamten
in HCM
fast skeletal regulatory activator
fast skeletal muscle troponin activator
As defined in the 2027 Indenture
Generally Accepted Accounting Principles in the U.S.
Global Approach to Lowering Adverse Cardiac Outcomes Through Improving
Contractility in Heart Failure
Good Clinical Practice
General Data Protection Regulation ((EU) 2016/679)
hypertrophic cardiomyopathy
heart failure with preserved ejection fraction
heart failure with reduced ejection fraction
Heart Failure Society of America
U.S. Department of Health and Human Services
The federal Health Insurance Portability and Accountability Act of 1996, as amended
by the Health Information Technology for Economic and Clinical Health Act
Institute for Clinical and Economic Review
Investigational New Drug
Inflation Reduction Act of 2022
Institutional Review Board
Ji Xing Pharmaceuticals Limited and/or its affiliates, including Ji Xing
Pharmaceuticals Hong Kong Limited
License and Collaboration Agreement, dated July 14, 2020, by and between
Cytokinetics and Ji Xing Pharmaceuticals Limited
Ji Xing Aficamten License Agreement and Ji Xing OM License Agreement
License and Collaboration Agreement, dated December 20, 2021, by and between
Cytokinetics and Ji Xing Pharmaceuticals Limited
Kansas City Cardiomyopathy Questionnaire
KCCQ Overall Summary Score
Silicon Valley Bank and Oxford Finance LLC
left ventricular ejection fraction
left ventricular outflow tract
left ventricular outflow tract gradient
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MAA
MAPLE-HCM
Mavacamten Royalty
NDA
nHCM
NOLs
NYHA
oHCM
OLE
Ownership Change
Oxford
Oyster Point Lease
Partial Redemption Limitation
PSU
Radnor Lease
REDWOOD-HCM
REDWOOD-HCM OLE
REMS
RP Aficamten RPA
RP Loan Agreement
RP OM Liability
RP OM RPA
RPDF
RPFT
RPI ICAV
RSU
RTW ICAV
RTW Investors
RTW Royalty Holdings
RTW Royalty Purchase Agreement
Section 382
Marketing Authorization Application
Metoprolol vs Aficamten in Patients with LVOT Obstruction on Exercise Endpoints
Capacity in HCM
certain payments on the net sales of products containing the compound mavacamten
pursuant to the Research Collaboration Agreement, dated August 24, 2012, between
Cytokinetics and MyoKardia, Inc.
New Drug Application
non-obstructive HCM
net operating loss carryforward
New York Heart Association
obstructive HCM
Open-Label Extension
As defined in Part 1, Item 1A (Risk Factors) of this Annual Report on Form 10-K,
Financial Risks
Oxford Finance LLC
Lease, dated July 24, 2019, by and between Cytokinetics and KR Oyster Point 1,
LLC, as amended
As defined in the 2027 Indenture
Performance Stock Unit
As defined in Part II, Item 8 (Financial Statements and Supplementary Data), Notes to
Consolidated Financial Statements of this Annual Report on Form 10-K - Note 9
(Commitments and Contingencies) – Operating Leases
Randomized Evaluation of Dosing With CK-274 in Obstructive Outflow Disease in
HCM
Randomized Evaluation of Dosing With CK-274 in Obstructive Outflow Disease in
HCM Open Label Extension
Risk Evaluation and Mitigation Strategy
Revenue Participation Right Purchase Agreement, dated January 7, 2022, by and
between Cytokinetics and Royalty Pharma Investments 2019 ICAV
Development Funding Loan Agreement, dated January 7, 2022, by and among
Royalty Pharma Development Funding, LLC and Cytokinetics
As defined in Part II, Item 8 (Financial Statements and Supplementary Data), Notes to
Consolidated Financial Statements of this Annual Report on Form 10-K - Note 6
(Agreements with Royalty Pharma) – 2017 RP Omecamtiv Mecarbil Royalty Purchase
Agreement
Royalty Purchase Agreement, dated February 1, 2017, by and between the
Cytokinetics and RPI Finance Trust, as amended by Amendment No. 1, dated January
7, 2022
Royalty Pharma Development Funding, LLC
RPI Finance Trust
Royalty Pharma Investments 2019 ICAV
Restricted Stock Unit
RTW Investments ICAV for RTW Fund 1
RTW Master Fund, Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund
Limited
RTW Royalty Holdings Designated Activity Company
Royalty Purchase Agreement, dated July 14, 2020, between Cytokinetics and RTW
Royalty Holdings
Section 382 of the Internal Revenue Code
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Securities Act
SEQUOIA-HCM
SGLT2
SMA
SPA
Tax Act
Term Loan Agreement
U.S. or US
Securities Act of 1933, as amended
Safety, Efficacy, and Quantitative Understanding of Obstruction Impact of Aficamten
in HCM
sodium-glucose cotransporter-2
spinal muscular atrophy
Special Protocol Assessment
Tax Cuts and Jobs Act
Loan and Security Agreement, dated as of October 19, 2015, by and among
Cytokinetics, Oxford Finance LLC and Silicon Valley Bank and Loan and Security
Agreement, dated as of May 17, 2019, by and among Cytokinetics, Oxford Finance
LLC and Silicon Valley Bank
United States
This Form 10-K includes discussion of certain clinical studies relating to various in-line products and/or product candidates.
These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein
should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing interpretations, and,
even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line
product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.
CYTOKINETICS and our C-shaped logo are registered trademarks of Cytokinetics in the U.S. and certain other countries.
Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.
The information contained on our website, our Facebook, Instagram, YouTube and LinkedIn pages or our Twitter accounts, or
any third-party website, is not incorporated by reference into this Form 10-K.
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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, Section 21E of 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
the timing of submissions and potential approvals of marketing authorization applications to FDA, EMA and other foreign
regulatory authorities;
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 completion and announcement
of results of our clinical trials, and anticipated rates of enrollment for clinical trials;
guidance concerning revenues and net cash use for 2024;
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 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 ability to ensure commercial availability of an antibody-based immunoassay for the dose optimization of omecamtiv
mecarbil;
our and our partners’ plans or ability to conduct the continued research and development of our drug candidates and other
compounds;
our expected roles in research, development or commercialization under our strategic alliances with our partners and
collaborators;
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 or commercialized;
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 and commercial viability 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 and execute on commercial plans;
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 the research and development of drug candidates directed to other areas of muscle biology and 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, and revenue interest agreements and the Convertible Notes;
potential competitors and competitive products;
retaining key personnel and recruiting additional key personnel; and
the potential impact of recent accounting pronouncements on our financial position or results of operations.
7
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Such forward-looking statements involve risks and uncertainties, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
decisions by Ji Xing with respect to the timing, design and conduct of development and commercialization activities for
aficamten or omecamtiv mecarbil in China and Taiwan;
our ability to meet any of the conditions for disbursement and our receipt of any loan disbursements under the RP Loan
Agreement;
our ability to enroll patients in our clinical trials by any particular date;
our ability to complete our clinical trials by any particular date;
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 or regulatory approvals of
our drug candidates and other compounds;
the possibility 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 drug candidates;
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 products and the potential
impacts of health care reform;
changes in laws and regulations applicable to drug development, commercialization, pricing 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, contract manufacturing
organizations, 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 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.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These
statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such
information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not
be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These
statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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SUMMARY OF PRINCIPAL RISK FACTORS
Risks Specific to our Research and Development Activities
•
The regulatory approval and marketing authorization 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, including aficamten and
omecamtiv mecarbil.
• We received a CRL from FDA in response to our NDA for omecamtiv mecarbil. The CRL stated that results from an
additional clinical trial of omecamtiv mecarbil are required to establish substantial evidence of effectiveness for the treatment
of HFrEF, with benefits that outweigh the risks. No assurance can be given that we will be able to address any of the
deficiencies noted in the CRL and/or obtain FDA approval of our NDA for omecamtiv mecarbil.
•
Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates which could prevent or
significantly delay completion of clinical development and regulatory approval.
• Our clinical trials, including FOREST-HCM, MAPLE-HCM and ACACIA-HCM, are expensive, time-consuming and may
be subject to delay.
•
•
If we encounter difficulties enrolling patients in our clinical trials, including FOREST-HCM, MAPLE-HCM and ACACIA-
HCM, our clinical development activities in relation to aficamten and our other drug candidates could be delayed or otherwise
adversely affected.
The failure to successfully develop, manufacture and obtain regulatory clearance or approval of an antibody-based
immunoassay for blood concentrations of omecamtiv mecarbil by Microgenics Corporation, a subsidiary of Thermo Fisher,
could harm our development and commercialization strategy for omecamtiv mecarbil in key markets. In addition, if required
by regulatory authorities as part of any approved label for omecamtiv mecarbil, we will be dependent on Microgenics to
manufacture and commercialize such an immunoassay in sufficient quantities in all key markets in which we may seek to
commercialize omecamtiv mecarbil.
• We depend on CROs to conduct our clinical trials as well as other third parties to manufacture drug candidates for use in
clinical trial and we 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.
Risks Specific to our Commercial Operations
•
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 such as an ETASU or other form of REMS, all of which may result in significant expense and limit
commercialization of our potential drugs.
• Our competitors may develop drugs that are less expensive, safer and/or more effective than ours, which may diminish or
eliminate the commercial success of any drugs that we may commercialize.
•
•
Even if our drug candidates are approved, we may experience difficulties or delays in achieving market access,
reimbursement and favorable drug pricing for our drug products.
The commercial success of our products depends on the availability and sufficiency of third party payor coverage and
reimbursement.
• We have no manufacturing capabilities and depend on contract manufacturers to produce our clinical trial materials,
including our drug candidates, and will have continued reliance on contract manufacturers for the development and
commercialization of our potential drugs.
• 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 approved drug products, if any.
•
•
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.
If physicians and patients do not accept our drugs, we may be unable to generate significant revenue, if any.
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Risks Specific to our Intellectual Property
• Our success depends substantially upon our ability to obtain and maintain intellectual property protection relating to our drug
candidates, compounds and research technologies.
•
•
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.
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.
• 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.
• 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.
• 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.
Financial Risks
• 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 will need substantial additional capital in the future to sufficiently fund and maintain our operations.
• We have never generated, and may never generate, revenues from commercial sales of our drugs, and we may not have drugs
to commercialize for at least several years, if ever.
• We may not be entitled to obtain additional loan disbursements under the RP Loan Agreement.
• 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, the 2027 Notes and the RP Loan Agreement.
Legal and Compliance Risks
•
Recently enacted laws, including the Inflation Reduction Act, or IRA, and potential future legislation may increase the
difficulty and cost for us to obtain regulatory approval of, and to commercialize our products and affect the prices we may
obtain upon commercialization.
• 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.
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ITEM 1. BUSINESS
Overview
PART I
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 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 represents a first or next in class molecule 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
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 health span, 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,” designed to
enable 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 our research.
The key components of our five-year Corporate Strategy are:
•
•
Achieve regulatory approvals for drugs arising from our pipeline. We are committed to fueling a diverse and expansive
pipeline of muscle-directed drug candidates advancing toward regulatory approvals. 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 successes 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.
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 franchise 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
potentially in Europe with the goal of becoming a fully-integrated biopharmaceutical company.
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• Generate sustainable and growing revenues from product sales. As we move toward becoming a fully integrated
biopharmaceutical company, we expect to evolve our corporate development strategies to raise capital through a combination
of strategic partnerships and equity capital financings to one that is sustained from product generated revenues that are
expected to grow over time. Through prudent investment spending fueled by commercial returns alongside other potential
strategic partnerships and structured finance and royalty monetization deals, we seek to provide investor returns while
continuing to conduct proprietary research to support future research, development and commercial programs. Additionally,
we strive to ensure sustainable growth of product sales and long-term profitability through lifecycle management strategies.
•
•
•
Expand our development pipeline. 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.
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, regeneration 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.
Building a Specialty Cardiology Franchise
We believe that we are well positioned to build a specialty cardiology business franchise anchored by our late-stage development
program for aficamten, complemented by earlier stage drug candidates that have arisen from our industry leading research and leadership
in muscle biology and the mechanics of contractility. We anticipate that aficamten, the first product in our potential franchise opportunity
will help serve unmet needs in the growing hypertrophic cardiomyopathy market. If aficamten is approved and indicated for the
treatment of patients with oHCM (based upon the positive results of SEQUOIA-HCM, and assuming positive results from MAPLE-
HCM), it could be followed by a subsequent approval and indication for the treatment of patients with HCM (assuming positive results
from ACACIA-HCM). We further believe that our pioneering leadership and research activities directed to the same biology and
emerging pharmacology could result in an expansion of our business franchise with the development and potential approval of CK-586
for the potential treatment of a subset of patients with HFpEF whose hypercontractility resembles that of patients with nHCM.
Our commercial business franchise is focused to the advancement of potential medicines that may address high unmet needs of
patients primarily treated by a concentrated segment of cardiologists. Our focus is in contrast to other biopharmaceutical companies
focused to cardiology, but whose potential medicines may be targeted to a greater number, and more diffuse geographical base of,
primary care physicians. Specifically, HCM is primarily diagnosed with initiation of treatment by approximately 10,000 cardiologists
in the U.S., including in centers of excellence and targeted community hospitals. We aim to achieve similar if not higher return on
investments relative to comparable biopharmaceutical companies with a relatively limited sales and marketing infrastructure focused to
key prescribers and with a specialty distribution model. We aim to achieve commercial returns from our franchise business strategies as
would be enabled by experienced sales representatives who bring established rapport with their potential customers and appropriately
couple their selling activities with high touch customer support services designed to benefit prescribers and patients alike.
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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.
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 $330.1 million for 2023, $240.8 million for 2022, and $159.9 million for 2021.
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
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.
We also have a late stage program based on the hypothesis that activators of cardiac myosin may address certain adverse properties
of existing positive inotropic agents. 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.
Aficamten
Aficamten is a novel, oral, small molecule cardiac myosin inhibitor that our company scientists discovered. Aficamten 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. Aficamten was purposely designed to reduce the hypercontractility that is
associated with HCM. In preclinical models, aficamten 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. Aficamten 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 aficamten 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 aficamten will include an extensive
characterization of its pharmacokinetics/pharmacodynamic (“PK/PD”) relationship as has been a hallmark of Cytokinetics’ development
programs in muscle pharmacology. The overall development program will assess the potential of aficamten to improve exercise capacity
and relieve symptoms in patients with hyperdynamic ventricular contraction due to HCM.
HCM is a disease in which the heart muscle (myocardium) becomes abnormally thick (hypertrophied). The thickening of cardiac
muscle leads to the inside of the left ventricle becoming smaller and stiffer, and thus the ventricle becomes less able to relax and fill
with blood. This ultimately limits the heart’s pumping function, resulting in symptoms including chest pain, dizziness, shortness of
breath, or fainting during physical activity.
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HCM is the most common monogenic inherited cardiovascular disorder, with approximately 280,000 patients diagnosed in the
U.S., however, there are an estimated 400,000-800,000 additional patients who remain undiagnosed, a rate that is growing at the same
rate as the population. Two-thirds of patients with HCM have obstructive HCM (oHCM), in which the thickening of the cardiac muscle
leads to left ventricular outflow tract (LVOT) obstruction, while one-third have non-obstructive HCM (nHCM), in which blood flow
isn’t impacted, but the heart muscle is still thickened. HCM is fairly evenly split across gender and while patients are typically diagnosed
in their early 40s, the average age of an oHCM patient is in the early 60s. People with HCM are at high risk of also developing
cardiovascular complications including atrial fibrillation, stroke and mitral valve disease. People with HCM are at risk for potentially
fatal ventricular arrhythmias and it is one of the leading causes of sudden cardiac death in younger people or athletes. A subset of patients
with HCM are at high risk of progressive disease leading to dilated cardiomyopathy and heart failure necessitating cardiac
transplantation.
FDA has granted aficamten orphan drug designation for the treatment of symptomatic HCM and Breakthrough Therapy
Designation for aficamten for the treatment of oHCM.
SEQUOIA-HCM
SEQUOIA-HCM was a Phase 3 randomized, placebo-controlled, double-blind, multi-center clinical trial designed to evaluate
aficamten in patients with symptomatic oHCM on background medical therapy for 24 weeks. The primary objective was to assess the
effect of aficamten on change in peak oxygen uptake (pVO2) measured by CPET from baseline to week 24. Secondary objectives
included change in KCCQ score from baseline to week 12 and week 24, the proportion of patients with ≥1 class improvement in NYHA
Functional Class from baseline to week 12 and week 24, change in post-Valsalva LVOT-G to week 12 and week 24, the proportion of
patients with post-Valsalva LVOT-G <30 mmHg, and change in total workload during CPET to week 24.
On December 27, 2023, we announced positive topline results of SEQUOIA-HCM. The results of SEQUOIA-HCM show that
treatment with aficamten significantly improved exercise capacity compared to placebo, increasing peak oxygen uptake (pVO2)
measured by cardiopulmonary exercise testing (CPET) by a least square mean difference (95% CI) of 1.74 (1.04 - 2.44) mL/kg/min
(p=0.000002). The treatment effect with aficamten was consistent across all prespecified subgroups reflective of patient baseline
characteristics and treatment strategies, including patients receiving or not receiving background beta-blocker therapy.
Statistically significant (p<0.0001) and clinically meaningful improvements were also observed in all 10 prespecified secondary
endpoints, including Kansas City Cardiomyopathy Questionnaire Clinical Summary Score (KCCQ-CSS) at weeks 12 and 24, the
proportion of patients with ≥1 class improvement in New York Heart Association (NYHA) functional class at weeks 12 and 24, change
in provoked left ventricular outflow tract gradient (LVOT-G) and proportion <30 mmHg at weeks 12 and 24, as well as exercise
workload and guideline-eligibility for septal reduction therapy.
Aficamten was well-tolerated in SEQUOIA-HCM with an adverse event profile comparable to placebo. Treatment emergent
serious adverse events occurred in 8 (5.6%) and 13 (9.3%) patients on aficamten and placebo, respectively. Core echocardiographic left
ventricular ejection fraction (LVEF) was observed to be <50% in 5 patients (3.5%) on aficamten compared to 1 patient (0.7%) on
placebo. There were no instances of worsening heart failure or treatment interruptions due to low LVEF.
The full results of SEQUOIA-HCM will be presented at an upcoming medical conference and published in a peer-reviewed
medical journal.
MAPLE-HCM
MAPLE-HCM (Metoprolol vs Aficamten in Patients with LVOT Obstruction on Exercise Endpoints in HCM) is our second
Phase 3 clinical trial of aficamten as monotherapy in patients with oHCM. It is a Phase 3, multi-center, randomized, double-blind, active-
comparator trial in patients with symptomatic oHCM and elevated LVOT gradient, which is expected to enroll approximately 170
patients. The primary endpoint is change in peak oxygen uptake (pVO2), assessed by CPET from baseline to Week 24. Secondary
endpoints include change in NYHA class, KCCQ, N-terminal prohormone brain natriuretic peptide (NT-proBNP), and measures of
structural remodeling.
On August 3, 2023, we announced that we had initiated patient enrollment in MAPLE-HCM.
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ACACIA-HCM
ACACIA-HCM (Assessment Comparing Aficamten to Placebo on Cardiac Endpoints in Adults with Non-Obstructive HCM) is
a Phase 3, multi-center, randomized, double-blind, placebo-controlled clinical trial. The trial is expected to enroll approximately 420
patients with symptomatic nHCM. The primary endpoint is the change in KCCQ Clinical Summary Score from baseline to Week 36.
Secondary endpoints include change from baseline to Week 36 in the following: exercise capacity as measured by CPET, proportion of
patients with an improvement of at least 1 NYHA Functional Class, NT-proBNP, and left atrial volume index. Additionally, while the
primary analysis will take place at 36 weeks, patients will continue treatment with aficamten or placebo for up to 72 weeks in order to
evaluate additional secondary and exploratory analyses including the time to first cardiovascular event.
On September 6, 2023, we announced that ACACIA-HCM is open to enrollment of patients.
FOREST-HCM (formerly REDWOOD-HCM OLE)
In May 2021, we announced that the first site had been activated to enroll patients in REDWOOD-HCM OLE, an open-label
extension clinical study designed to assess the long-term safety and tolerability of aficamten in patients with symptomatic oHCM.
Eligible patients were initially to have completed participation in REDWOOD-HCM. However, since initiation of the open-label
extension clinical study, we expanded eligibility to include patients having participated in SEQUOIA-HCM, our first Phase 3 clinical
trial of aficamten for the treatment of oHCM, and as a result, the trial has been renamed FOREST-HCM.
On March 4, 2023, we announced 48-week data from FOREST-HCM at the American College of Cardiology 72nd Annual
Scientific Session. Specifically, we announced that new data through 48 weeks of treatment showed that aficamten was associated with
significant reductions in the average resting LVOT-G (mean change from baseline (SD) = -32 (28) mmHg, p<0.0002) and Valsalva
LVOT-G (mean change from baseline (SD) = -47 (28) mmHg, p<0.0001). Treatment with aficamten also resulted in significant
improvements in NYHA class, with 88% of patients experiencing a ≥1 NYHA Functional Class improvement, and significant
improvements in NT-proBNP, with an average decrease of 70% from baseline to Week 48 (p<0.0001). At baseline, 19 patients met
eligibility criteria for septal reduction therapy (SRT), defined as NYHA Class III and peak LVOT-G ≥50 mmHg, but treatment with
aficamten eliminated SRT eligibility in all 19 patients at 48 weeks. Aficamten was safe and well-tolerated, with no treatment-related
serious adverse events (SAEs). There were no instances of LVEF <50% attributed to aficamten. One dose reduction and one temporary
dose interruption occurred, neither of which were attributed to treatment with aficamten.
On October 19, 2023, we announced new long-term efficacy and safety data from FOREST-HCM. Specifically, we announced
that more than 200 patients had been enrolled in FOREST-HCM as of such date and 143 patients were available for this analysis. Of the
94 patients who had completed the titration period (by Week 12), approximately two-thirds were receiving the 15 mg or 20 mg doses of
aficamten. During the titration period, there had been no treatment-related instances of left ventricular ejection fraction (LVEF) <50%.
During the maintenance phase, there had been no instances of LVEF <40%, which would have required dose interruption, and only
three instances of LVEF <50% that required a dose down-titration. Therefore, of the 579 monitoring echocardiograms completed during
the maintenance phase of treatment, 99.5% of them did not result in a dose reduction. Additionally, after prolonged treatment for more
than two years in some patients, the mean resting left ventricular outflow tract gradients (LVOT-G) and mean Valsalva LVOT-Gs
remained reduced and below the diagnostic threshold for oHCM. As of such date, patients had also experienced sustained reductions in
cardiac biomarkers and improved symptoms. As of such date, the KCCQ increased by ≥5 points in 71% of patients, 30% of whom had
an improvement of ≥10 points. Approximately half of patients were, as of such date, asymptomatic at one year by NYHA Functional
Class assessment, and 80% of patients improved by one or more Functional Class at every visit after starting treatment with aficamten.
Of patients eligible for septal reduction therapy (SRT) at baseline, 90% were no longer SRT-eligible at the time of the analysis. In
addition, as of the date of the analysis, aficamten had been generally well-tolerated, with 60% of patients experiencing at least one
treatment emergent adverse event (TEAE) but no treatment-related serious adverse events (SAEs) as assessed by investigators, and no
patient deaths.
FOREST-HCM continues to enroll patients.
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Ji Xing Collaboration for Greater China
On July 14, 2020, we entered into the Ji Xing Aficamten License Agreement, pursuant to which we granted to Ji Xing an exclusive
license to develop and commercialize aficamten in China and Taiwan. Under the terms of the Ji Xing Aficamten License Agreement,
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 aficamten in the field of oHCM, and/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 pharmaceutical products containing aficamten in
China and Taiwan, subject to certain reductions for generic competition, patent expiration and payments for licenses to third party
patents. The Ji Xing Aficamten License Agreement, unless terminated earlier, will continue on a market-by-market basis until expiration
of the relevant royalty term.
Royalty Pharma Revenue Interest
On January 7, 2022, we entered into a Revenue Participation Right Purchase Agreement, which we refer to as the RP Aficamten
RPA, with Royalty Pharma Investments 2019 ICAV, which we refer to as RPI ICAV, pursuant to which RPI ICAV purchased rights to
certain revenue streams from net sales of pharmaceutical products containing aficamten by us, our affiliates and our licensees in
exchange for up to $150.0 million in consideration, $50.0 million of which was paid on the closing date, $50.0 million of which was
paid to us on March 10, 2022 following the initiation of the first pivotal trial in oHCM for aficamten and $50.0 million of which was
paid to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten. The RP Aficamten RPA
also provides that the parties will negotiate terms for additional funding if we achieve proof of concept results in certain other indications
for aficamten, with a reduction in the applicable royalty if we and RPI ICAV fail to agree on such terms in certain circumstances.
Pursuant to the RP Aficamten RPA, RPI ICAV purchased the right to receive a percentage of net sales equal to 4.5% for annual
worldwide net sales of pharmaceutical products containing aficamten up to $1 billion and 3.5% for annual worldwide net sales of
pharmaceutical products containing aficamten in excess of $1 billion, subject to reduction in certain circumstances.
Omecamtiv mecarbil
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 a selective, small molecule cardiac myosin activator, the first of a novel class of myotropes designed to
directly target the contractile mechanisms of the heart, binding to and recruiting more cardiac myosin heads to interact with actin during
systole. Omecamtiv mecarbil is designed to increase the number of active actin-myosin cross bridges during each cardiac cycle and
consequently augment the impaired contractility that is associated with heart failure with reduced ejection fraction, or HFrEF.
Heart failure is a grievous condition that is estimated to affect more than 64 million people worldwide an estimated half of whom
have reduced left ventricular function. It is the leading cause of hospitalization and readmission in people age 65 and older. Despite
broad use of standard treatments and advances in care, the prognosis for patients with heart failure is generally poor. An estimated one
in five people over the age of 40 are at risk of developing heart failure, and approximately 50% of people diagnosed with heart failure
will die within five years of initial hospitalization. Approximately 2 million people in the U.S. are estimated to have an ejection fraction
<30%, indicating they may have worsening heart failure.
GALACTIC-HF
GALACTIC-HF was 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
was 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 an 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 was 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
included time to cardiovascular death; patient reported outcomes as measured by the KCCQ Total Symptom Score; time to first heart
failure hospitalization; and time to all-cause death.
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GALACTIC-HF: Primary Results
The results of GALACTIC-HF showed 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. 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 LVEF (LVEF ≤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.
GALACTIC-HF: Further Analyses
Since our release of the primary results, we have conducted and announced supplemental and subgroup analyses suggesting that
certain subgroups of patients treated with omecamtiv mecarbil in GALACTIC-HF may have benefited more than the general patient
population in such trial.
For example, additional results 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
LVEF (LVEF ≤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 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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Another analysis assessed the effect of omecamtiv mecarbil on clinical outcomes in relationship to patient baseline ejection
fraction by evaluating the effect of patient treatment with omecamtiv mecarbil based on quartiles of baseline EF defined as EF ≤22%,
EF 23-28%, EF 29-32% and EF ≥33% as well as considering baseline EF as a continuous variable. The incidence of the primary outcome
of first heart failure event or cardiovascular death increased with decreasing ejection fraction; in the lowest LVEF quartile (EF ≤22%)
the incidence (35.6 per 100 patient-years) was almost 80% greater than in the highest EF quartile (EF ≥33%; 20 per 100 patient-years).
Treatment with omecamtiv mecarbil demonstrated a 15% (HR 0.85; 95% CI 0.74-0.97; p = 0.016) and 17% (HR 0.83; 95% CI 0.73-
0.95; p = 0.005) relative risk reduction in the lower two quartiles, respectively, compared to no difference in the upper two quartiles.
Analysis of ejection fraction as a continuous variable demonstrated a progressively larger treatment effect of omecamtiv mecarbil
with decreasing ejection fraction. Accordingly, the absolute treatment effect on the primary composite endpoint also increased between
the patients treated with placebo and omecamtiv mecarbil as baseline ejection fraction decreased such that in the lowest ejection fraction
quartile, there was an absolute reduction of 7.4 events per 100 patient-years, with a number-needed-to-treat of 11.8 patients necessary
to prevent an event over three years.
An analysis of patients with low blood pressure showed that there was a greater treatment effect from omecamtiv mecarbil on the
primary composite endpoint of cardiovascular death or first heart failure event than in patients without low blood pressure such that
there was an absolute risk reduction of 9.8 events per 100 patient-years (hazard ratio, 0.81; 95% confidence interval [CI] 0.70, 0.94;
interaction p=0.051). Patients with low blood pressure treated with omecamtiv mecarbil also experienced improvements in blood
pressure over time as did those treated with placebo. Additionally, the incidence of treatment-emergent serious adverse events in patients
with low blood pressure who received omecamtiv mecarbil (RR 0.88; 95% CI 0.82, 0.95; p<0.001) and adjudicated first stroke (RR
0.31; 95% CI 0.12, 0.79; p=0.009) was lower compared to placebo.
An analysis of Black patients participating in GALACTIC-HF showed that treatment with omecamtiv mecarbil resulted in a trend
towards reduction in the primary endpoint by 18% (HR=0.82, 95% CI 0.64-1.04), corresponding to a reduction in the primary event rate
of 7.7/100 patient-years with a number-needed-to-treat of 13 patients. This result, like the overall study results, was driven primarily by
a reduction in HF hospitalizations (HR=0.80) and HF events (HR=0.82), with no effect on cardiovascular mortality (HR=1.03). There
were no significant differences in adverse events in Black patients between the groups treated with omecamtiv mecarbil and placebo.
A further analysis indicated that the rate of the primary outcome in GALACTIC-HF was higher in hospitalized patients in the
placebo group (38.3/100 person-years [PY]) than in outpatients (23.1/100 PY) with an adjusted hazard ratio (HR) of 1.21 (95% CI 1.12,
1.31). There was a stepwise gradient in risk, with those randomized as outpatients in the placebo group within 3 months of a heart failure
event at the highest risk (26.6/100 patient years (PY)) as compared with those 9-12 months post-event (19.0/100 PY) with an adjusted
hazard ratio (HR) of 1.20 (95% CI 1.01, 1.42), p for trend = 0.008). The effect of omecamtiv mecarbil versus placebo on the primary
outcome was similar in hospitalized patients (HR 0.89, 95% CI 0.78, 1.01) and outpatients (HR 0.94, 95% CI 0.86, 1.02), indicating
that omecamtiv mecarbil similarly reduced the risk of the primary outcome both when initiated in hospitalized patients and in outpatients.
In both hospitalized patients and outpatients, the initiation of omecamtiv mecarbil was safe and well tolerated. Treatment-emergent
serious adverse events occurred more frequently in patients randomized during hospitalization but did not differ significantly between
the treatment groups.
New Drug Application/Regulatory
On February 28, 2023, we announced that we received a CRL from the FDA’s Division of Cardiology and Nephrology regarding
our NDA for omecamtiv mecarbil for the treatment of HFrEF. According to the CRL, GALACTIC-HF is not sufficiently persuasive to
establish substantial evidence of effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic
heart failure with HFrEF, in lieu of evidence from at least two adequate and well-controlled clinical investigations. In addition, FDA
stated that results from an additional clinical trial of omecamtiv mecarbil are required to establish substantial evidence of effectiveness
for the treatment of HFrEF, with benefits that outweigh the risks. FDA’s decision to issue a CRL followed an FDA Cardiovascular and
Renal Drugs Advisory Committee’s vote of 8 to 3 in December 2022 that the benefits of omecamtiv mecarbil do not outweigh its risks
for the treatment of HFrEF.
In 2023, we participated in a Type A meeting with FDA in order to understand FDA’s views regarding the CRL and what may
be required to support potential approval of omecamtiv mecarbil in the United States, and subsequently submitted a formal dispute
resolution request to FDA, with the objective to appeal the FDA's conclusion, as stated in the CRL, that substantial evidence of
effectiveness had not been established to support approval of omecamtiv mecarbil. FDA subsequently denied our appeal in November
2023 and reaffirmed its decision in the CRL that GALACTIC-HF is not sufficiently persuasive to establish substantial evidence of
effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic heart failure with HFrEF, in
lieu of evidence from at least two adequate and well-controlled clinical investigations.
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In December 2022, the EMA accepted for review our MAA seeking approval of omecamtiv mecarbil for the treatment of HFrEF
in the E.U. and the other states of the EEA. We continue to support reviews and address questions related to the marketing application
for omecamtiv mecarbil for the treatment of HFrEF with the EMA.
In November 2022, our partner, Ji Xing announced that the Center for Drug Evaluation of the National Medical Products
Administration of the People’s Republic of China had accepted the submission of the NDA for omecamtiv mecarbil for the treatment
of HFrEF. Subsequently, Ji Xing submitted a request for voluntary withdrawal of the NDA for omecamtiv mecarbil to the Center for
Drug Evaluation of the National Medical Products Administration of the People’s Republic of China, subject to potential re-submission
upon receipt of favorable feedback from EMA or FDA with regard to potential drug approval for omecamtiv mecarbil in the EU or US,
respectively.
Ji Xing Collaboration for Greater China
On December 20, 2021, we entered into the Ji Xing OM License Agreement, pursuant to which we granted to Ji Xing an exclusive
license to develop and commercialize omecamtiv mecarbil in China and Taiwan. Under the terms of the Ji Xing OM License Agreement,
we may be eligible to receive from Ji Xing additional payments totaling up to $330.0 million for the achievement of certain commercial
milestone events in China in connection to omecamtiv mecarbil. In addition, Ji Xing will pay us tiered royalties in the mid-teens to the
low twenties range on the net sales of pharmaceutical products containing omecamtiv mecarbil in China and Taiwan, subject to certain
reductions for generic competition, patent expiration and payments for licenses to third party patents. The Ji Xing OM License
Agreement, unless terminated earlier, will continue on a market-by-market basis until expiration of the relevant royalty term.
Royalty Pharma Revenue Interest
In 2017, we entered into a Royalty Purchase Agreement, which we refer to as the RP OM RPA, with Royalty Pharma
Development Funding, LLC, or RPFT, and amended the RP OM RPA on January 7, 2022. Pursuant to the RP OM RPA, as amended,
RPFT has a revenue interest entitling it to up to 5.5% of our and our affiliates’ and licensees’ worldwide net sales of omecamtiv mecarbil.
If FDA or EMA approves omecamtiv mecarbil in the future, the royalty rate at which payments are owed to RPFT will be 5.5%.
CK-586
CK-586 is a novel, selective, oral, small molecule cardiac myosin inhibitor designed to reduce the hypercontractility associated
with heart failure with preserved ejection fraction, or HFpEF. In preclinical models, CK-586 reduced cardiac hypercontractility by
decreasing the number of active myosin cross-bridges during cardiac contraction thereby reducing the contractile force, without effect
on calcium transients.
Dosing of patients in a Phase 1 clinical trial of CK-586 commenced in May 2023. The primary objective of this Phase 1
randomized, double-blind, placebo-controlled, double-blind, multi-part single and multiple ascending dose clinical study is to evaluate
the safety, tolerability and pharmacokinetics of CK-586 when administered orally as single or multiple doses to healthy participants.
The study design includes single ascending dose and multiple ascending dose cohorts. We proceeded to begin the multiple ascending
dose cohorts. The study is ongoing.
CK-136
CK-136 is a novel, selective, oral, small molecule cardiac troponin activator. 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.
Dosing of patients in a Phase 1 clinical trial of CK-136 commenced in December 2022. The primary objective of this Phase 1
randomized, double-blind, placebo-controlled, single and multiple ascending dose trial is to assess the safety, tolerability and
pharmacokinetics of CK-136 when administered orally as single or multiple doses to healthy participants. The study design, as amended,
includes five groups of at least eight participants in single ascending dose cohorts and four groups of at least eight participants in
multiple-dose ascending cohorts. A final optional cohort will include eight participants in an open-label, 2-period crossover arm to
investigate the effect of food on CK-136. We have completed the single ascending dose cohorts in the Phase 1 study of CK-136 in
healthy participants and have begun analyses of the data.
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Skeletal Muscle 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.
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, chronic obstructive pulmonary disease (COPD) or sarcopenia
(general frailty associated with aging).
We currently have no clinical stage drug candidates arising from our skeletal muscle contractility program.
Ongoing Research in Skeletal Muscle Activators
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.
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 cardiac or skeletal 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.
Commercial Readiness
We began building our commercial capabilities in the U.S. prior to the potential FDA approval and launch of omecamtiv mecarbil,
our cardiac myosin activator. Upon receipt of the CRL from FDA in response to our NDA for omecamtiv mecarbil, we maintained the
infrastructure that had been built and further refined the team and activities in anticipation of what may now be our first commercial
launch with aficamten, our cardiac myosin inhibitor, as early as 2025. We had hired a number of headquarter and other positions,
including our field sales leadership team with substantial cardiovascular experience, as well as market access team that includes filed
payer professionals and other professionals with experience in HEOR, pricing, market analyses and commercial strategies, systems, and
operational execution. We plan to expand the team with customer-facing positions as we near potential FDA approval in 2025.
Additionally, we have established our field-based medical affairs team, inclusive of medical directors, medical education and medical
communications functions, as well as medical science liaisons in key geographies across the U.S.. In Europe, we have filled key
leadership positions in medical affairs and market access and hired an experienced executive as Head of Europe.
Our go-to-market approach will include three phases; learn, design, and build. Our focus in 2023 was on learning. We have
commissioned market research with nearly 850 healthcare professionals and more than 160 individuals suffering from HCM. Market
research and clinical data has informed our target product profile, positioning, potential customer profiles and anticipated differentiators
for a proposed REMS program. Based on our market research, we have learned the overall journey to diagnosis is complex and
challenging due to the unique symptoms present in each patient along with limited disease awareness across the broader health care
system, leading to confusion and complexity for patients and the healthcare professionals who treat them. HCM patients experience
many complications, and, in addition to the physical impact, patients experience profound psychological effects that impact social
involvement and other aspects of everyday life.
With a refined understanding of the patient experience, we have also begun to design a comprehensive patient and HCP support
program to help address patient needs to facilitate ease of transitioning to therapy with a cardiac myosin inhibitor. The program design
will include reimbursement support, affordability programs and patient education resources to support the patient journey.
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Market research has revealed challenges that have impacted the adoption and uptake of another cardiac myosin inhibitor related
to the ETASU REMs program, including echo monitoring, pharmacy certification, drug-drug interactions, down titration challenges and
overall REMS process complexity. We believe aficamten may have attributes that could impact differentiation, including time to onset
and reversibility, predictable dose response, no clinically meaningful P450 liabilities resulting in REMS related drug-drug interaction
monitoring and frequency of echo monitoring. We have also begun development of a market development and education campaign,
building out the field commercial training modules, starting to engage with payers with compliant, pre-approval information planning
and planning to build out the necessary technologies to optimize customer engagement.
We recognize the critical importance of market access; critical to contracting with payers is our experienced account team with
established relationships with key payer customers. We have hired a seasoned account management team that covers over 100 plans that
represent greater than 90% of covered lives for our priority segment. The team has interacted with every major payer in introducing our
company and will engage further in 2024 to share results from SEQUOIA-HCM with the goal to educate payers on the potential clinical
meaningfulness of the results thereof, as well as health economic data and the anticipated launch timeline for aficamten. We maintain a
strong commitment to health economics research, which is intended to facilitate us in effectively conveying the potential value
proposition of aficamten to a broad range of stakeholders. The two platforms that we expect to generate this value include the results of
SEQUOIA-HCM and the clinical attributes of aficamten. Our customer-facing strategy and deployment has been informed by insights
gathered from potential health care professional customers through market research, focus groups and advisory boards. This strategy
and deployment, coupled with secondary data, patient diagnosis data, prescriptions and treatment data, have identified a universe of
approximately 10,000 treaters across 500 to 700 healthcare organizations, which represent approximately 75% of HCM patient volume,
a focused group covering the vast majority of patients, enabling the design of an efficient and impactful customer-facing structure.
Manufacturing Resources and Product Supply
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 in North America and Western Europe 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. For our portfolio
of small molecules, we continue to expand our network through well-established and reputable third-party contract manufacturers for
our CMC development and manufacturing that have good regulatory standing, suitable manufacturing capabilities and capacities. These
third parties must comply with applicable regulatory requirements, including FDA’s cGMP, the E.U.’s Guidelines on Good Distribution
Practice (cGDP), as well as other stringent regulatory requirements enforced by the FDA or foreign regulatory agencies, as applicable,
and are subject to routine inspections by such regulatory agencies. In addition, through our third-party contract manufacturers and data
service providers, we continue to provide serialized commercial products as required to comply with the Drug Supply Chain Security
Act.
We monitor and evaluate the performance of our third-party contract manufacturers on an ongoing basis for compliance with
these requirements and to affirm their continuing capabilities to meet both our commercial and clinical needs. We employ highly skilled
personnel with both technical and manufacturing experience to diligently manage the activities at our third-party contract manufacturers
and other supply chain partners, and our quality department audits them on a periodic basis.
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.
We have contract manufacturing arrangements in place with leading contract manufacturers for the development and supply of
the active pharmaceutical ingredient and finished drug product for aficamten for use in our clinical trials.
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Competition
There are many companies focused on the development of small molecules for the treatment HCM, HFrEF and other diseases
that our drug candidates are intended to treat. Our competitors and potential competitors include major pharmaceutical and
biotechnology companies, as well as academic research institutions, clinical reference laboratories and government agencies that are
pursuing research activities similar to ours. Many of the organizations competing with us have greater capital resources, larger research
and development staff and facilities, deeper regulatory expertise and more extensive product manufacturing and commercial capabilities
than we do, which may afford them a competitive advantage.
Competition for Aficamten
If aficamten is approved for sales and marketing by the FDA or other regulatory authorities for the treatment of HCM, we
believe it will likely compete with Camzyostm (mavacamten), a first in class cardiac myosin inhibitor marketed by Bristol Myers
Squibb. In addition to Camzyostm, other companies, including but not limited to Edgewise Therapeutics, Tenaya Therapeutics,
Novartis AG, Eli Lilly, Boehringer Ingelheim, Gilead and Imbria are conducting clinical trials and pre-clinical activities in HCM and
could complete with aficamten.
As a condition to its FDA approval, Camzyostm is subject to a REMS program that may be slowing its market uptake. We
cannot predict whether FDA will impose a similar REMS program as a condition to a potential, future approval of aficamten or
whether the FDA will alter or lessen the REMS program for CAMZYOSTM altering the competitive landscape. Despite the challenges
associated with a REMS program, Bristol Myers Squibb has been able to enroll many physicians in its training program and has been
able to start new patients on therapy. We expect that this will increase over time with more experience with this class of drugs.
We believe that our ability to successfully compete will depend on, among other things:
efficacy, safety and reliability of aficamten, both alone and in combination with other therapies;
the timing and scope of regulatory approval;
our ability to obtain regulatory approvals and marketing authorizations for aficamten;
the imposition by FDA or other regulatory authorities of a REMS program that is differentiated and less burdensome to
healthcare providers, pharmacists and patients than the REMS program to which CAMZYOSTM is subject;
our ability to manufacture and sell commercial quantities of aficamten product to the market;
our ability to gain market access, successfully commercialize aficamten and secure coverage and adequate reimbursement in
approved indications;
product acceptance by physicians and other health care providers;
protection of our intellectual property, including our ability to enforce our intellectual property rights against potential generic
competition; and
the availability of substantial capital resources to fund development and commercialization activities.
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Competition for Omecamtiv Mecarbil
We believe the principal competition for omecamtiv mecarbil, if ultimately approved for sales and marketing by FDA and/or
other regulatory agencies for the treatment of HFrEF includes generic drugs, such as milrinone, dobutamine or digoxin, categories of
generic therapies, including beta-blockers, angiotensin-converting enzyme (ACE) inhibitors, angiotensin receptor blockers (ARBs),
Mineralocorticoid receptor antagonists (MRAs), 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 inhibitor class, that have either expanded or are planning to expand their labels to include treatment of patients
with heart failure, including FORXIGA® (dapagliflozin), INVOKANA® (canagliflozin), and JARDIANCE® (empagliflozin). The
competitive landscape for HFrEF is already crowded and evolving rapidly, especially given the addition of SGLT2 inhibitors as
AHA/ACC/HFSA guideline directed medical therapy for HFrEF. SGLT2 inhibitors have steadily gained market share over the previous
two years. In addition, there are a number of medical devices both marketed and in development for the potential treatment of patients
living with heart failure.
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We believe that our ability to successfully compete will depend on, among other things:
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efficacy, safety and reliability of omecamtiv mecarbil, both alone and in combination with other therapies;
in the U.S., the ability to fund and successfully complete an additional confirmatory phase 3 clinical trial of omecamtiv
mecarbil in HFrEF and resolve to the satisfaction of FDA the other deficiencies stipulated in the CRL we received in response
to our initial NDA submission for omecamtiv mecarbil;
in the E.U. and other jurisdictions outside of the U.S., the timing and scope of regulatory approval by EMA and other
regulatory bodies;
our ability to manufacture and sell commercial quantities of omecamtiv mecarbil product to the market;
our ability to successfully commercialize omecamtiv mecarbil and secure coverage and adequate reimbursement with
affordable patient copay in approved indications;
product acceptance by physicians and other health care providers;
if required in connection to regulatory approval by FDA, EMA and/or other regulatory authorities, the availability of an
antibody-based immunoassay to timely and properly perform blood tests for omecamtiv mecarbil concentration levels on
patients to whom omecamtiv mecarbil is prescribed;
price competition, particularly of generic products;
protection of our intellectual property, including our ability to enforce our intellectual property rights against potential generic
competition; and
the availability of substantial capital resources to fund development and commercialization activities.
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, 2023, we owned, co-owned or licensed 76 issued U.S. patents, over
700 issued patents in various foreign jurisdictions, and over 480 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.
We have a U.S. patent covering aficamten, which expires in 2039 unless extended or otherwise adjusted. We also have a U.S.
patent covering omecamtiv mecarbil, which expires in 2027, inclusive of 605 days of Patent Term Adjustment, unless extended or
otherwise adjusted. A recent U.S. Federal Circuit decision could have implications for patents whose expiration dates include Patent
Term Adjustment, including the U.S. patent covering omecamtiv mecarbil. The implications of this decision may lead to loss of the
portion of the patent term that is due to Patent Term Adjustment. 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.
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.
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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;
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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
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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.
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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:
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completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies, all performed in
accordance with the FDA’s good laboratory practice regulations;
submission to the FDA of an IND, which must become effective before clinical trials may begin;
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the drug candidate for each
proposed indication in accordance with GCP;
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 cGMP regulations and FDA audits of select clinical investigator sites to assess compliance with
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 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.
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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.
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 sponsor’s agreement to conduct additional clinical trials to further assess the drug’s 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 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 EEA. 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 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 committee’s
recommendations. The FDA may also require preapproval inspections of manufacturing operations and clinical trial sites during the
course of NDA review, and findings arising from any of these inspections may delay or prevent the approval of the NDA. The FDA
may deny approval of an NDA by issuing a CRL 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.
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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 manufacturer’s 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.
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 company’s 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 an 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.
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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 FDA’s 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. Such federal and state healthcare laws and
regulations, including, but are not limited to, the following:
•
•
•
•
•
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.
HIPAA 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.
In addition, HIPAA, as amended by Health Information Technology for Economic and Clinical Health Act of 2009
(“HITECH”), imposes certain requirements on covered entities, which include certain healthcare providers, health plans
and healthcare clearinghouses, and their business associates and covered subcontractors that receive or obtain protected
health information in connection with providing a service on behalf of a covered entity relating to the privacy, security and
transmission of individually identifiable health information.
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), other health care professionals (such as
physician assistants and nurse practitioners), and teaching hospitals, as well as information regarding ownership and
investment interests held by physicians and their immediate family members. Payments made to physicians and research
institutions for clinical trials are included within the ambit of this law.
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 payor. 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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Health Care Reform. 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. In particular, in March 2010, the ACA, was enacted, which
substantially changed the way health care is financed by both governmental and private insurers, and continues to significantly impact
the U.S. pharmaceutical 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. Moreover, in the United
States, there have been several recent Congressional inquiries, presidential executive orders 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. For example, in August 2022,
the IRA was signed into law, which, among other things, includes prescription drug provisions that may impact product pricing including
the potential for net price reductions and/or the ability to increase price beyond the level of inflation over the lifecycle of our products,
and/or may increase our rebate obligation to Medicare. Provisions include a requirement that the HHS negotiate drug prices for single-
source brand-name drugs and biologics that are among the 50 drugs with the highest total Medicare Part D spending. The law establishes
a maximum fair price, outlines the process by which the Secretary of HHS will identify drugs for negotiations, and establishes non-
compliance penalties for manufacturers. The Act implements inflation rebates in Medicare when a drug’s Average Manufacturer Price
(AMP, in Part D) or Average Sale Price (ASP, in Part B) rises faster than the inflation index (CPI-U). In addition, the Part D drug benefit
caps beneficiary spending at $2,000, eliminates the coverage gap for patients, and modifies, beginning in 2025, liabilities for drug
manufacturers by replacing the 70% discount in the Coverage gap with a 10% discount in the Initial Coverage phase and a 20% discount
in the Catastrophic phase. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation,
for the initial years. These provisions take effect progressively starting in fiscal year 2023. On August 29, 2023, HHS announced the
list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently
subject to legal challenges. In response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released
a report outlining three new models for testing by the Centers for Medicare & Medicaid Services Innovation Center which will be
evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models
will be utilized in any health reform measures in the future. Further, on December 7, 2023, the Biden administration announced an
initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act. On December 8, 2023,
the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering
the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding
to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new
framework. 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. For example, on January 5, 2024, the FDA approved Florida’s Section 804 Importation Program (SIP)
proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented,
including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states
have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may
result in lower drug prices for products covered by those programs.
Coverage and Reimbursement. 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 U.S. Reimbursement by a third-party
payor may depend upon a number of factors, including the third-party payor’s determination that a product is safe, effective and
medically necessary; and neither cosmetic, experimental nor investigational. To support securing coverage and reimbursement for any
product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the
medical necessity and cost-effectiveness of our approved products. There may be significant delays in obtaining coverage and
reimbursement as the process of determining coverage and reimbursement is often time-consuming and costly. Further, coverage policies
and third party reimbursement rates may change at any time. Additionally, we or our partners may develop companion diagnostic tests
for use with our product candidates. Companion diagnostic tests require coverage and reimbursement separate and apart from the
coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and
reimbursement, applicable to pharmaceutical products, will apply to companion diagnostics.
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Cytokinetics Human Capital
As of December 31, 2023, we had 423 employees and 141 consultants. 28 of those employees have more than 10 years tenure
with us and 75 have over 5 years of service. In 2023, employee turnover was 10.6%, which we believe is a lower attrition rate compared
to the industry.
We are committed to fostering and maintaining a culture that engenders collaboration and teamwork, inclusion, respect,
transparency and candor. We provide our employees with an array of professional development resources and tools to support their
learning, growth and development opportunities. We were honored to be recognized as a San Francisco Times Best Place to Work and
Great Places to Work in 2023.
Our compensation and benefit programs are designed to enable us to attract and retain the best employees in a very competitive
life science sector and regularly benchmark and survey the market to ensure we maintain competitive programs. In addition, we routinely
survey our employees to measure engagement, identify and take action on opportunities for improvement, and share these results with
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.
We are going into our third year of implementing a Diversity, Equity, Inclusion and Respect program and are fully committed
across all aspects of our organization including recruiting and hiring, development and promotion practices. Employees identifying as
ethnic or racial minorities held 43% of director-level and above positions. Employees identifying as women held 43% of director-level
and above positions.
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.
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.
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 Specific to our Company in connection with our Research and Development Activities
The regulatory approval and marketing authorization 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, including aficamten and
omecamtiv mecarbil.
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 an NDA from the FDA. Neither we nor our
partners have ever 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.
Although we have announced positive results from SEQUOIA-HCM for aficamten and GALACTIC-HF for omecamtiv mecarbil,
regulatory approval of an NDA or NDA supplement is never guaranteed, and the approval process typically takes several years and is
extremely expensive. For example, our NDA for omecamtiv mecarbil for the treatment of HFrEF resulted in a CRL notwithstanding the
fact that GALACTIC-HF met its primary efficacy endpoint. 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. For example, the CRL we received from FDA in connection with our NDA for
omecamtiv mecarbil stated that results from an additional clinical trial of omecamtiv mecarbil are required to establish substantial
evidence of effectiveness for the treatment of HFrEF, with benefits that outweigh the risks. 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 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 partner’s or the contract manufacturer’s processes or facilities; or
they might change their approval policies or adopt new regulations.
Even if we receive regulatory approval to manufacture and sell a drug in a particular regulatory jurisdiction, other jurisdictions’
regulatory authorities may not approve that drug for manufacture and sale. Moreover, the refusal of one regulatory authority to approve
one of our drug candidates may influence the decision-making of another regulatory authority in a different jurisdiction in a manner that
is adverse to us. For example, FDA's recent CRL in response to our NDA for omecamtiv mecarbil may influence EMA to decline to
approve our MAA for omecamtiv mecarbil in the E.U. or other regulatory authorities in other jurisdictions to decline to approve our
potential marketing applications for omecamtiv mecarbil in such other jurisdictions.
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.
We received a CRL from FDA in response to our NDA for omecamtiv mecarbil. The CRL stated that results from an additional
clinical trial of omecamtiv mecarbil are required to establish substantial evidence of effectiveness for the treatment of HFrEF,
with benefits that outweigh the risks. No assurance can be given that we will be able to address any of the deficiencies noted
in the CRL and/or obtain FDA approval of our NDA for omecamtiv mecarbil.
On February 28, 2023, we announced that we received a CRL from the FDA’s Division of Cardiology and Nephrology regarding
our NDA for omecamtiv mecarbil for the treatment of HFrEF. According to the CRL, GALACTIC-HF is not sufficiently persuasive to
establish substantial evidence of effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic
heart failure with HFrEF, in lieu of evidence from at least two adequate and well-controlled clinical investigations. In addition, FDA
stated that results from an additional clinical trial of omecamtiv mecarbil are required to establish substantial evidence of effectiveness
for the treatment of HFrEF, with benefits that outweigh the risks. FDA’s decision to issue a CRL followed an FDA Cardiovascular and
Renal Drugs Advisory Committee’s vote of 8 to 3 in December 2022 that the benefits of omecamtiv mecarbil do not outweigh its risks
for the treatment of HFrEF. No assurance can be given that we will be able to address any of the deficiencies noted in the CRL and/or
obtain FDA approval of our NDA for omecamtiv mecarbil.
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In 2023, we participated in a Type A meeting with FDA in order to understand FDA’s views regarding the CRL and what may
be required to support potential approval of omecamtiv mecarbil in the United States, and subsequently submitted a formal dispute
resolution request to FDA, with the objective to appeal the FDA's conclusion, as stated in the CRL, that substantial evidence of
effectiveness had not been established to support approval of omecamtiv mecarbil. FDA subsequently denied our appeal in November
2023 and reaffirmed its decision in the CRL that GALACTIC-HF is not sufficiently persuasive to establish substantial evidence of
effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic heart failure with HFrEF, in
lieu of evidence from at least two adequate and well-controlled clinical investigations.
Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates, 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. For example,
the CRL we received on February 28, 2023 in connection to our NDA for omecamtiv mecarbil stated the results of GALACTIC-HF are
not sufficiently persuasive to establish substantial evidence of effectiveness for reducing the risk of heart failure events and
cardiovascular death in adults with chronic heart failure with HFrEF, and on March 31, 2023, we announced the discontinuation of
COURAGE-ALS, our Phase 3 clinical trial of reldesemtiv in patients with ALS, due to futility.
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 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.
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. 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 agency’s 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.
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. Moreover, clinical trials of our
drug candidates 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.
Our clinical trials, including FOREST-HCM, MAPLE-HCM and ACACIA-HCM, are expensive, time-consuming and may be
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. In addition, as is the case for omecamtiv mecarbil given the CRL requirement to perform an additional Phase 3 clinical trial,
the time and expense associated with an additional clinical trial may limit the commercial returns given the eventual loss of market
exclusivity. 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;
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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;
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;
a regulatory authority in one jurisdiction may not accept a clinical trial design that is acceptable in another jurisdiction;
an 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, including FOREST-HCM, MAPLE-HCM and ACACIA-
HCM, 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 trial’s 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;
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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;
the ability to obtain and maintain patient consents;
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 failure to successfully develop, manufacture and obtain regulatory clearance or approval of an antibody-based
immunoassay for blood concentrations of omecamtiv mecarbil by Microgenics Corporation, a subsidiary of Thermo Fisher,
could harm our development and commercialization strategy for omecamtiv mecarbil in key markets. In addition, if required
by FDA and/or EMA as part of any approved label for omecamtiv mecarbil, we will be dependent on Microgenics to
manufacture and commercialize such an immunoassay in sufficient quantities in all key markets in which we may seek to
commercialize omecamtiv mecarbil.
In connection with our NDA and our MAA for omecamtiv mecarbil, FDA and/or EMA may require that patients treated with
omecamtiv mecarbil have their blood monitored during titration for concentrations of the drug in order to ensure optimized dosing that
maximizes benefits without undue increased risk. We have recently contracted with Microgenics Corporation, a subsidiary of Thermo
Fisher, to develop and eventually commercialize an antibody-based immunoassay for blood concentrations of omecamtiv mecarbil. The
development, manufacture and regulatory approval of an antibody-based immunoassay, however, may be complex and/or time
consuming. Such an immunoassay could require regulatory clearance by FDA as a companion diagnostic device or similar regulatory
clearance by EMA, and there is no assurance that such regulatory clearance will be obtained. In addition, if required by FDA and/or
EMA as part of any approved label for omecamtiv mecarbil, we will be dependent on Microgenics Corporation to successfully
manufacture and commercialize its immunoassay in sufficient quantities in all key markets in which we may seek to commercialize
omecamtiv mecarbil, failing which, our potential sales of omecamtiv mecarbil could be materially adversely affected.
We depend on CROs to conduct our clinical trials as well as other third parties to manufacture drug candidates for use in
clinical trials and we 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.
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Our CROs’ failure to carry out development activities on our behalf as agreed and in accordance with our and the FDA’s or other
regulatory agencies’ requirements and applicable U.S. and foreign laws, or our failure to properly coordinate and manage these activities,
could increase the cost of our operations and delay or prevent the development, approval and commercialization of our drug candidates.
In addition, if a CRO fails to perform as agreed, our ability to collect damages may be 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.
The mechanisms of action of certain 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. 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 competitor's 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.
We have been granted orphan designation by the FDA for aficamten for the potential treatment of symptomatic HCM;
however, there can be no guarantee that we will receive approval for aficamten for this indication, nor that we will be able to
prevent third parties from developing and commercializing products that are competitive to aficamten.
We have been granted orphan drug designation in the U.S. by the FDA for aficamten for the 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.
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.
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We are not guaranteed to maintain orphan status from the FDA for aficamten or to receive orphan status for aficamten 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 aficamten 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 company’s 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.
We have been granted Breakthrough Therapy Designation for aficamten by the FDA and we may seek additional special
designations from regulatory authorities to expedite the review and approval process for our product candidates. However,
these designations may not lead to a faster development or regulatory review or approval process, and it does not increase the
likelihood that our product candidates will receive marketing approval.
We have been granted Breakthrough Therapy Designation for aficamten for oHCM by the FDA and may seek these and/or
additional special designations from regulatory authorities to expedite the review and approval process for our product candidates. A
breakthrough therapy is defined as a drug candidate that is intended, alone or in combination with one or more other products, to treat a
serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial
improvement over existing therapies on one or more clinically important endpoints, such as substantial treatment effects observed early
in clinical development. For products that have been designated as breakthrough therapies, interaction and communication between the
FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of
patients placed in ineffective control regimens. Drug candidates designated as breakthrough therapies by the FDA can also be eligible
for accelerated approval. If a drug candidate is intended for the treatment of a serious or life-threatening condition and the product
demonstrates the potential to address unmet medical needs for this condition, the drug candidate sponsor may apply for Fast Track
Designation.
Fast Track Designation is an FDA process designed to facilitate the development and expedite the review of drugs to treat serious
conditions and fill an unmet medical need. The purpose of the program is to make important new drugs available to the patient earlier.
Filling an unmet medical need is defined as providing a therapy where none exists or providing a potential improvement upon the current
standard of care. Once a drug candidate receives Fast Track Designation, early and frequent communication between the FDA and the
sponsor is encouraged throughout the entire drug development and review process. The frequency of communication assures that
questions and issues are resolved quickly, often leading to earlier drug approval and access by patients.
The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular drug candidate is
eligible for a particular designation, we cannot assure you that the FDA would decide to grant it. Accordingly, even if we believe one
of our drug candidates meets the criteria for a designation, the FDA may disagree and instead determine not to make such designation.
In any event, the receipt of a particular designation for a product candidate may not result in a faster development process, review or
approval compared to drug candidates considered for approval under conventional FDA procedures and does not assure ultimate
approval by the FDA. In addition, even if one or more of our drug candidates qualify as breakthrough therapies, the FDA may later
decide that the products no longer meet the conditions for qualification and rescind the breakthrough designation. Further, the FDA may
withdraw Fast Track Designation if it believes that the designation is no longer supported by data from a clinical development program.
If we are unable to maintain any existing Breakthrough Therapy Designation or Fast Track Designation or fail to secure such
designation for any additional product candidates, this would have an adverse impact on our development timelines and our ability to
obtain approval for and commercialize our product candidates.
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Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder
their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being
developed or commercialized in a timely manner, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget
and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy
changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other
government agencies that fund research and development activities is subject to the political process, which is inherently fluid and
unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by
necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35
days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the
FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could
significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse
effect on our business.
Separately, in response to the global COVID-19 pandemic, the FDA had a period during which manufacturing inspections were
not conducted, leading to delay, and has resumed on-site inspections of domestic manufacturing facilities subject to a risk-based
prioritization system. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other
regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the
ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
Risks Specific to our Company in connection with our Commercial Operations
Our competitors may develop drugs that are less expensive, safer and/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.
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;
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take advantage of acquisition or other opportunities more readily than we can;
develop drug candidates and market drugs that increase the levels of safety or efficacy that our drug candidates will need to
show in order to 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 and/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.
Even if our drug candidates are approved, we may experience difficulties or delays in achieving market access, reimbursement
and favorable drug pricing for our drug products.
We currently have limited interactions and relationships with payors. Over time, we anticipate that our drugs will be adopted by
our patients as indicated by the labels once they are approved by regulatory authorities. To achieve this adoption, our drugs will need to
be covered and listed in formularies of major pharmacy benefit managers and payors in the U.S. These major pharmacy benefit managers
and payors include Medicare, Medicaid, VA, DoD, TriCare, and other commercial payors with whom we have had limited interactions.
The process to achieve coverage with pharmacy benefit managers and payors can be time consuming, is not guaranteed and if achieved
can impact profitability given the level of rebates often required.
Specifically in relation to aficamten and omecamtiv mecarbil, even if such drug candidates are ultimately approved by the FDA
or other regulatory authorities for commercialization, they may not become a guideline-directed medical therapy for oHCM or HFrEF
respectively or they may not reach such status in a timely manner upon commercialization, which may adversely impact its sales
prospects. Furthermore, we assume omecamtiv mecarbil will have a disproportionally larger share of Medicare patients relative to
commercial and other payors. Overall coverage could be delayed given Medicare’s defined bid timelines for inclusion in the Medicare
Part D formulary. In addition, the rebate levels we may have to offer to pharmacy benefit managers and payors to be included in their
formularies may also impact the profitability of omecamtiv mecarbil.
Moreover, pricing of our drug candidates, if approved by the FDA or other regulatory authorities for commercialization, may be
impacted by cost-effectiveness and economic analyses by a Health Technology Assessment organization such as the Institute for Clinical
and Economic Review, or ICER, an independent non-profit research institute that produces reports analyzing the evidence underlying
the effectiveness and value of drugs and other medicinal services. ICER assessments and recommended pricing based on cost-
effectiveness may affect our ability to obtain favorable pricing terms with Medicare, Medicaid, VA, DoD, TriCare, and other commercial
payors. For example, in November 2021, ICER published its final evidence report and policy recommendations related to CAMZYOSTM
(mavacamten), a small molecule myosin inhibitor developed formerly by MyoKardia, Inc. and commercialized by Bristol-Myers Squibb
Company that has a similar mechanism of action to aficamten. The report concluded that a majority of contributing panelists found that
current evidence was not adequate to demonstrate a net health benefit for CAMZYOSTM (mavacamten) added to background therapy
when compared to background therapy alone or a net health benefit of CAMZYOSTM (mavacamten) when compared to disopyramide.
Moreover, ICER’s final report concluded that modeling short-term clinical benefits of CAMZYOSTM (mavacamten) over a longer time
period produces a health-benefit price benchmark index for CAMZYOSTM (mavacamten) between $12,000-$15,000 per year,
significantly lower than Bristol-Myers Squibb Company's current annual list price in the U.S. Whilst not binding on Medicare, Medicaid,
VA, DoD, TriCare, and other commercial payors, or indicative of the net health benefits, ICER could conclude for aficamten a similar
conclusion that could adversely impact our ability to obtain favorable pricing and/or reimbursement.
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 timeframe from approval to coverage could be lengthy, inadequate, and/or 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.
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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. Coverage policies and third party reimbursement rates may change at any time. Even
if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future.
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.
Additionally, we or our partners may develop companion diagnostic tests for use with our product candidates. Companion
diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion
pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical
products, will apply to companion diagnostics.
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.
We have no manufacturing capabilities and depend on contract manufacturers to produce our clinical trial materials,
including our drug candidates, and will have 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 and rely on
CMOs for the manufacture of finished drug product and active pharmaceutical ingredient. 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.
In addition, under the Ji Xing Agreements, we have committed to providing Ji Xing with supply of aficamten and omecamtiv
mecarbil for development and commercialization of aficamten and omecamtiv mecarbil 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
Agreements.
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 one or both of the Ji Xing Agreements, giving rise to the ability to terminate such agreements
and other adverse consequences as stipulated in the Ji Xing Agreements. In addition, if a contract manufacturer fails to perform as
agreed, our ability to collect damages may be contractually limited.
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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 FDA’s 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.
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 approved drug products, 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.
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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 such as an ETASU or other form of REMS, 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.
For example, CAMZYOSTM (mavacamten), a small molecule myosin inhibitor developed formerly by MyoKardia, Inc. and
commercialized by Bristol-Myers Squibb Company that has a similar mechanism of action to aficamten, is subject to an ETASU REMS,
an FDA imposed program designed to reinforce medication use behaviors and actions that support the safe use of certain medication
with serious safety concerns to help ensure the benefits of the medication outweigh its risks. The CAMZYOSTM (mavacamten) ETASU
REMS program requires, among other things, restrictions and qualifications on pharmacies that dispense the drug and certification,
record-keeping and patient counselling obligations on physicians who prescribe the drug. The requirements of an ETASU REMS
program may limit the commercial success of a drug due by making it more difficult for physicians to prescribe a drug and patients to
obtain and subsequently use a drug. Since aficamten is a small molecule myosin inhibitor with a similar mechanism of action to
CAMZYOSTM (mavacamten), it is possible that FDA or other regulatory bodies may condition aficamten’s marketing approval on the
implementation of a similar ETASU REMS program to that of CAMZYOSTM (mavacamten).
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:
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introduction of competitive drugs to the market;
clinical safety and efficacy of alternative drugs or treatments;
cost-effectiveness;
availability of coverage and reimbursement from health maintenance organizations and other third-party payors;
convenience and ease of administration;
prevalence and severity of adverse events;
other potential disadvantages relative to alternative treatment methods; or
insufficient patient support;
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.
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Risks Specific to our Company in connection with our Intellectual Property
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.
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;
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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.
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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.
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 of 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.
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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.
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.
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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 management’s attention from our core business operations;
substantial damages for past infringement which we may have to pay if a court determines that our drugs or technologies
infringe a third party’s patent or other proprietary rights;
a court prohibiting us from selling or licensing our drugs or technologies unless the holder licenses the patent or other
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.
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 party’s 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.
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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.
Financial Risks
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 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 and maintain our operations.
We have consumed substantial amounts of capital to date, and our operating expenditures will increase over the next several
years as we expand our research and development activities and expand our organization to prepare for commercialization of any
approved drug. We have funded our operations and capital expenditures with proceeds primarily from private and public sales of our
equity securities, royalty monetization agreements, revenue interest agreements, 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, the organizational scale up and associated expenditures with commercial readiness activities to launch approved
drugs combined with the absence of any revenues from product sales. Until we can generate a sufficient amount of product revenue, we
expect to raise future capital through strategic alliance and licensing arrangements, public or private equity offerings and debt financings.
We do not currently have any commitments for future funding other than through loans under the RP Loan Agreement with RPDF and
reimbursements, milestone and royalty payments that we may receive under our agreements with Ji Xing. We may not receive any
further funds under any of these agreements. Our ability to raise funds may be adversely impacted by worsening economic conditions
and the recent disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide resulting from the effects of
inflationary pressures, potential future bank failures, global geopolitical factors including war or other hostilities, or otherwise. 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, and 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.
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We have never generated, and may never generate, revenues from commercial sales of our drugs and we may not have drugs
to commercialize 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
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 late clinical-stage drug
candidates include omecamtiv mecarbil for the potential treatment of heart failure, and aficamten 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. For example, our NDA for omecamtiv mecarbil for the treatment of HFrEF resulted in a CRL notwithstanding
the fact that GALACTIC-HF met its primary efficacy endpoint, and that the results from an additional clinical trial of omecamtiv
mecarbil are required to establish substantial evidence of effectiveness for the treatment of HFrEF, with benefits that outweigh the risks.
Our commercial revenues, if any, will be derived from sales of drugs that may not be commercially marketed for 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.
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, the 2027 Notes and the RP Loan Agreement.
As of December 31, 2023, we had $617.5 million of debt recorded on the balance sheet comprised of the RP Loan Agreement
and the 2026 and 2027 Convertible Notes.
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
Convertible 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 and our cash needs may increase in the future. In addition, any required repurchase of the
Convertible 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 the RP Loan Agreement, the RP Aficamten RPA, the RP OM RPA, and the indentures related to our Convertible
Notes 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 our
debt repayment obligations.
The RP Loan Agreement, the RP Aficamten RPA, the RP OM RPA, and the indentures related to the Convertible Notes require
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, the RP Aficamten RPA and the RP OM RPA contain certain covenants applicable to us, including among
other things, development and commercialization diligence obligations in connection to aficamten and omecamtiv mecarbil and
reporting obligations, which could also restrict our business and operations, particularly in connection to our development and
commercialization of aficamten and omecamtiv mecarbil.
Our failure to comply with any of the covenants could result in a default under the RP Loan Agreement, the RP Aficamten RPA,
the RP OM RPA, or the indentures related to the Convertible Notes, which could permit the counterparties 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.
We have no rights to repurchase the revenue interests in omecamtiv mecarbil or aficamten sold to RPFT or RPI ICAV
respectively, thereby limiting our ability to eliminate future applicability of the covenants contained in the RP OM RPA and the RP
Aficamten RPA, and although we do have voluntary prepayment rights under the RP Loan Agreement, any voluntary prepayment rights
will require that we pay RPDF 190% of the principal amount of amounts disbursed to us as tranche 1, tranche 4 and tranche 5 loans and
200% for tranche 2 and tranche 3 loans, thereby making it potentially disadvantageous to voluntarily prepay RPDF prior to the final
maturity date applicable to loans outstanding under the RP Loan Agreement.
In addition, certain provisions in the 2026 Notes, the 2027 Notes and the related indentures 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 Convertible Notes and the related Indentures 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.
Finally, should we be unable to comply with our covenants or if we default on any portion of our outstanding borrowings under
the RP Loan Agreement, in addition to its rights to accelerate and demand for immediate repayment of amounts outstanding under the
RP Loan Agreement, we would be liable for default interest at a rate of 4% over the prime rate.
We may not be entitled to obtain additional loan disbursements under the RP Loan Agreement.
On January 7, 2022, we announced that we had entered into the RP Loan Agreement with RPDF, such entity being affiliated with
Royalty Pharma International plc. The RP Loan Agreement makes available to us up to $300.0 million in loans, of which a $50.0 million
loan was paid to us at the closing of such transaction. With the positive results of SEQUOIA-HCM, we have satisfied the conditions
related to tranche 4 of the RP Loan Agreement and thus an additional $75 million in loans are currently available to us for disbursement.
Tranche 5 of the RP Loan Agreement would be available to us upon acceptance for filing by FDA of an NDA for aficamten. Should we
not satisfy such condition for tranche 5 by March 31, 2025, or in the event we fail to meet our obligations or default under the agreement,
the actual amount of additional loan disbursements could be substantially less than the maximum amounts available thereunder. For
example, as a result of FDA's CRL in response to our NDA for omecamtiv mecarbil, we have not satisfied the conditions for the
availability of disbursement of the $50 million tranche 2 and $25 million tranche 3 term loans under the RP Loan Agreement.
We are subject to counterparty risk under the RP Loan Agreement
We are subject to counterparty risk in the event that RPDF defaults on its obligations under the RP Loan Agreement. In such
event, we have no recourse against Royalty Pharma International plc or any of its other affiliated or controlled entities, and in the event
of an RPDF insolvency, we would have no rights to additional loan disbursements from RPDF.
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Conversion of our outstanding Convertible 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 Convertible 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 Convertible 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 Convertible Notes could also encourage short sales by third parties, creating additional selling pressure
on our stock. The existence of the Convertible 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.
We will depend on Ji Xing for the development and commercialization of aficamten and omecamtiv mecarbil in China and
Taiwan.
Under the terms of the Ji Xing Agreements, Ji Xing will be responsible for the development and commercialization of aficamten
and omecamtiv mecarbil in China and Taiwan. The timing and amount of any milestone and royalty payments we may receive under
the Ji Xing Agreements will depend in part on the efforts and successful commercialization of aficamten and omecamtiv mecarbil 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 aficamten or omecamtiv mecarbil 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 aficamten and omecamtiv mecarbil 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.
Any termination, breach or expiration of the Ji Xing Agreements 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 aficamten and
omecamtiv mecarbil 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.
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 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 our 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.
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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. 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. The impact of the 2017 tax legislation on holders of our common stock is also uncertain and could be adverse.
We are obligated to 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 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 our annual or interim financial statements will not be prevented or detected
on a timely basis.
If 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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Legal and Compliance Risks
Recently enacted laws, including the Inflation Reduction Act, or IRA, and potential future legislation may increase the
difficulty and cost for us to obtain regulatory approval of, and to commercialize our products and affect the prices we may
obtain upon commercialization.
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 ACA was enacted, which substantially changed the way health
care is financed by both governmental and private insurers, and continues to 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 government’s comparative effectiveness research and established a new Medicare Part
D coverage gap discount program.
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 legislation’s 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 until 2032 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 executive, judicial and Congressional challenges to numerous elements of the ACA, as well
as efforts to repeal or replace certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge
on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by
Congress. It is possible that the ACA will be subject to executive, judicial, and Congressional challenges in the future. It is unclear how
any such challenges will impact the ACA and our business. 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.
In August 2022, the Inflation Reduction Act, or IRA, was signed into law, which, among other things, includes prescription drug
provisions that may impact product pricing including the potential for net price reductions and/or the ability to increase price beyond
the level of inflation over the lifecycle of our products, and/or may increase our rebate obligation to Medicare. Provisions include a
requirement that the HHS negotiate drug prices for single-source brand-name drugs and biologics that are among the 50 drugs with the
highest total Medicare Part D spending. The law establishes a maximum fair price, outlines the process by which the Secretary of HHS
will identify drugs for negotiations, and establishes non-compliance penalties for manufacturers. The IRA implements inflation rebates
in Medicare when a drug’s Average Manufacturer Price (AMP, in Part D) or Average Sale Price (ASP, in Part B) rises faster than the
inflation index (CPI-U). In addition, the Part D drug benefit caps beneficiary spending at $2,000, eliminates the coverage gap for patients,
and modifies, beginning in 2025, liabilities for drug manufacturers by replacing the 70% discount in the Coverage gap with a 10%
discount in the Initial Coverage phase and a 20% discount in the Catastrophic phase. The IRA permits HHS to implement many of these
provisions through guidance, as opposed to regulation, for the initial years. These provisions take effect progressively starting in fiscal
year 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the
Medicare drug price negotiation program is currently subject to legal challenges.
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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. However, we cannot predict the timing or
substance of proposals that may be adopted in the future, particularly in light of the difficulty of advancing legislation through Congress.
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 and/or potential sales 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.
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 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. For example, on January 5, 2024, the FDA
approved Florida’s Section 804 Importation Program (SIP) proposal to import certain drugs from Canada for specific state healthcare
programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to
legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA.
Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs In
addition to the enactment of the IRA, in response to the Biden administration’s October 2022 executive order, on February 14, 2023,
HHS released a report outlining three new models for testing by the Centers for Medicare & Medicaid Services Innovation Center which
will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the
models will be utilized in any health reform measures in the future. Further, on December 7, 2023, the Biden administration announced
an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act. On December 8,
2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for
Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use
when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue
under the new framework. 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.
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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.
• HIPAA 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.
•
•
In addition, HIPAA, as amended by Health Information Technology for Economic and Clinical Health Act of 2009
(“HITECH”), imposes certain requirements on covered entities, which include certain healthcare providers, health plans and
healthcare clearinghouses, and their business associates and covered subcontractors that receive or obtain protected health
information in connection with providing a service on behalf of a covered entity relating to the privacy, security and
transmission of individually identifiable health information.
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), other health care professionals (such as physician
assistants and nurse practitioners), and teaching hospitals, as well as information regarding ownership and investment
interests held by physicians and their immediate family members. Payments made to physicians and research institutions for
clinical trials are included within the ambit of this law.
• 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
industry’s 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.
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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.
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 party’s
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 drug’s developer
or manufacturer.
We may be required to indemnify third parties against damages and other liabilities arising out of our development,
commercialization and 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.
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 E.U. in connection with our business,
including in connection with conducting clinical trials in the E.U. Additionally, if any of our product candidates are approved, we may
seek to commercialize those products in the E.U. The collection and use of personal health data in the E.U. are governed by the provisions
of the 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 EEA, including to the U.S., 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 E.U. 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.
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European data protection laws, including the GDPR, generally restrict the transfer of personal information from Europe, including
the EEA, 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 Commission’s 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 EEA, 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.
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.
General Risk Factors
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, commercial and technical personnel. The
loss of the services of any member of our senior management or key scientific, technical, commercial or financial reporting staff may
significantly delay or prevent the achievement of drug development and other business objectives by diverting management’s attention
to transition matters and identifying suitable replacements. 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, commercial and managerial personnel could limit or delay our product development or commercialization
activities, which would adversely affect the development of our drug candidates and commercialization of our potential drugs and growth
of our business.
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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 breaches—whether by employees or others—which
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 employee’s 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. 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 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.
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. For example, in 2023, the closing price of our common stock on the Nasdaq Global Select Market ranged from
$25.98 to $87.58. Factors that have caused and could cause in the future volatility in the market price of our common stock include, but
are not limited to:
•
•
•
announcements concerning any of the clinical trials for our drug candidates (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;
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•
•
•
failure or discontinuation of any of our research programs;
issuance of new or changed securities analysts’ reports or recommendations;
failure or delay in establishing new strategic alliances, or the terms of those alliances;
• market conditions in the pharmaceutical, biotechnology and other healthcare-related sectors;
•
•
•
•
actual or anticipated fluctuations in our quarterly financial and operating results;
developments or disputes concerning our intellectual property or other proprietary rights;
introduction of technological innovations or new products by us or our competitors;
issues in manufacturing, packaging, labeling and distribution of our drug candidates or drugs;
• market acceptance of our drugs;
•
•
•
•
•
•
•
•
third-party healthcare coverage and reimbursement policies;
FDA or other U.S. or foreign regulatory actions affecting us or our industry;
litigation or public concern about the safety of our drug candidates or drugs;
additions or departures of key personnel;
substantial sales of our common stock by our existing stockholders, whether or not related to our performance;
automated trading activity by algorithmic and high-frequency trading programs;
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.
These and other external factors have caused and 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 management’s 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.
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.
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.
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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:
•
•
•
•
•
•
•
•
•
•
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;
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 acquirer’s 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:
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• 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 person’s
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk management and strategy
Cytokinetics recognizes the critical importance of developing, implementing, and maintaining cybersecurity measures designed
to safeguard our information systems and protect the confidentiality, integrity, and availability of our critical data.
Managing Material Risks & Integrated Overall Risk Management
Our cybersecurity team, led by our CISO, identifies and assesses risks from cybersecurity threats by monitoring and evaluating
our threat environment and the Company’s risk profile using various methods including, for example, through manual and automated
tools, internal and external audits, third-party threat assessments and third-party conducted red/blue team testing and tabletop incident
response exercises and by subscribing to reports and services that identify cybersecurity threats, analyzing reports of threats and actors,
conducting scans of the threat environment, evaluating our and our industry’s risk profile, evaluating threats reported to us, conducting
threat assessments for internal and external threats and conducting vulnerability assessments.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes,
standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data,
including, for example: maintaining an incident response plan, a vulnerability management policy, disaster recovery and business
continuity plans and a vendor risk management program; conducting employee training, systems monitoring and penetration testing;
implementing security standards, network security controls, access controls and physical security; encrypting and segregating data;
though asset management, tracking and disposal; and maintaining cybersecurity insurance.
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a
culture of cybersecurity risk management. This integration is designed to make cybersecurity considerations an integral part of our
decision-making processes. Our risk management team works closely with our IT department and cybersecurity team to evaluate and
address cybersecurity risks connected with our business objectives and operational needs.
Engage Third-parties on Risk Management
Recognizing the complexity and evolving nature of cybersecurity threats, Cytokinetics engages with a range of external experts,
including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships
enable us to leverage specialized knowledge and insights. Our collaboration with these third parties includes periodic audits, threat
assessments, and consultation on security enhancements.
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Oversee Third Party Risk
Because we are aware of the potentially material risks from cybersecurity threats associated with third-party service providers,
Cytokinetics implements processes to oversee and manage these risks. Depending on the nature of the services provided and the identity
of the service provider, we may conduct security assessments of the provider before engagement and may monitor their compliance
with our cybersecurity policies after engagement. The monitoring includes periodic assessments by our Chief Information Security
Officer (“CISO”) and on an ongoing basis by our security specialists. This approach is designed to mitigate risks related to data breaches
or other security incidents originating from third parties.
Risks from Cybersecurity Threats
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our
risk factors under Part I. Item 1A. Risk Factors in this Annual Report on Form 10-K, including the discussion under the headings “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” and
“Significant disruptions of information technology systems or breaches of data security could adversely affect our business”.
Governance
Cytokinetics’ Board of Directors is aware of the critical nature of managing risks associated with cybersecurity threats. Our Board
has established oversight mechanisms designed to ensure effective governance in managing material risks associated with cybersecurity
threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence.
Board of Directors Oversight
The Audit Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this
domain. The Audit Committee is composed of board members with diverse expertise, including, risk management, technology, and
finance. The Audit Committee reports to the Board of Directors periodically regarding cybersecurity topics presented to the Audit
Committee, and all materials made available to the Audit Committee are available to rest of the Board of Directors.
Management’s Role Managing Risk
The CISO, the Vice President, Information Technology (“VP of IT”), the Chief Executive Officer (“CEO”) and the Chief
Financial Officer (“CFO”) play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide cybersecurity
briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad
range of topics, including as applicable: the current cybersecurity landscape and emerging threats, the status of ongoing cybersecurity
initiatives and strategies, incident reports and learnings from any cybersecurity events, and compliance with regulatory requirements
and industry practices.
In addition to our scheduled meetings, the Audit Committee, CISO, VP of IT, CEO and CFO maintain an ongoing dialogue
regarding emerging or potential cybersecurity risks. Together, they receive updates from one another, as appropriate, on any significant
developments in the cybersecurity domain, ensuring the Board’s oversight is proactive and responsive. The Audit Committee actively
participates in strategic decisions related to cybersecurity, offering guidance and approval for major initiatives. This involvement ensures
that cybersecurity considerations are integrated into the broader strategic objectives of Cytokinetics. The Audit Committee conducts an
annual review of the company’s cybersecurity posture and the effectiveness of its risk management strategies. This review helps in
identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk management framework.
Management Personnel in Cybersecurity
Primary responsibility for assessing, monitoring and managing our risks from cybersecurity threats rests with the CISO, Mr. Eric
Brown. With over 10 years of experience in the field of cybersecurity and over 20 years of experience in IT more broadly, Mr. Brown
brings a wealth of expertise to his role. His background includes extensive experience as an enterprise CISO. His in-depth knowledge
and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our governance programs,
tests our compliance with standards, remediates known risks, and leads our employee training program.
Mr. Brown reports to the VP of IT, Mr. Daniel Casper. With over 20 years of experience in IT leadership roles in biopharma and
industry services, Mr. Casper brings expertise in leading the effective business use of technology solutions and services to our industry.
Our VP of IT has overall responsibility for the Company’s IT department and operations, including oversight over the CISO and
cybersecurity team to ensure efforts to contain and remediate security incidents are sufficient and effective.
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Monitor Cybersecurity Incidents
The CISO is responsible for informing himself from appropriate sources about the latest developments in cybersecurity, including
potential threats and innovative risk management techniques. The CISO implements and oversees processes for the monitoring of our
information systems. This includes the deployment of security measures and system audits to identify potential vulnerabilities. In the
event of a cybersecurity incident, the CISO is equipped with a well-defined incident response plan. This plan includes immediate actions
designed to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
Reporting to Board of Directors
The CISO, in his capacity, regularly informs the VP of IT, the CFO, the CEO, and the General Counsel or Head of Legal of
material cybersecurity risks and incidents. This is how executive management is kept abreast of our cybersecurity posture and potentially
material cybersecurity risks facing Cytokinetics. Furthermore, significant cybersecurity matters, and strategic risk management
decisions are escalated by any of the CEO, the CFO and the General Counsel or Head of Legal to the Audit Committee, so that the Audit
Committee can oversee and provide guidance on critical cybersecurity issues.
ITEM 2. PROPERTIES
Our material facilities consist of 234,892 square feet of leased office and laboratory space at 350 Oyster Point, South San
Francisco, California. Our lease over this property expires in 2033.
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.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S 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 27, 2024, the last
reported sale price for our common stock was $80.99 per share.
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 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, 2018 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.
$100 investment in stock or
index
Cytokinetics, Inc.
Nasdaq Composite Index
Nasdaq Biotechnology Index
12/31/2018
12/31/2019
12/30/2020
12/30/2021
12/31/2022
12/31/2023
$
$
100.00
100.00
100.00
$
167.88
135.23
124.41
$
328.80
194.24
156.36
$
721.20
235.78
155.37
725.00
157.74
138.42
$ 1,321.04
226.24
143.60
Holders of Record
As of February 27, 2024, we had 45 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.
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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.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S 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: aficamten, a next-in-class cardiac myosin inhibitor, omecamtiv mecarbil, a novel cardiac
myosin activator, CK-586, an additional cardiac myosin inhibitor.and CK-136, a novel cardiac troponin activator.
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.
Accrued Research and Development Expenditures
Clinical trial costs are a component of research and development expense. We accrue and expense clinical trial activities
performed by third parties based upon actual work completed in accordance with agreements established with clinical research and
manufacturing organizations and clinical sites. We determine the actual costs through monitoring patient enrollment, communications
with internal personnel and external service providers regarding the progress or stage of completion of trials or services and the agreed-
upon fee to be paid for such services.
Revenue Participation Right Purchase Agreements
We have entered into certain revenue participation right purchase agreements for omecamtiv mecarbil and aficamten with
affiliates of Royalty Pharma, pursuant to which such affiliates purchased rights to royalties from certain revenue streams in exchange
for consideration. We typically account for such agreements as liabilities to be amortized under the effective interest rate method over
the life of the related royalty stream, when we have continuing involvement with the underlying R&D. We typically account for such
agreements as deferred income to be amortized under the units-of-revenue method, when there is no continuing involvement with the
underlying R&D. We are required to update our estimates, each reporting period, related to the amount and timing of future royalty
payments to be paid to the counterparties of the revenue participation right purchase agreements. The estimates of the future royalty
payment determine the measurement of the non-cash interest expense and the carrying value of the liability.
Revenue participation right purchase agreements are measured using significant unobservable inputs. The estimates of future
royalties requires the use of several assumptions such as: the probability of clinical success, the probability of regulatory approval, the
estimated date of a product launch, estimates of eligible patient populations, estimates of prescribing behavior and patient behavior,
estimates of pricing, payor reimbursement and coverage, and sales ramp. As products containing aficamten and omecamtiv mecarbil
have not yet been commercialized, the estimates are highly subjective.
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The carrying amount of the liabilities are based on our estimate of the future royalties to be paid over the life of the arrangements
as discounted using an imputed rate of interest. The imputed rate of interest on the RP Aficamten Liability was approximately 24.8% as
of December 31, 2023 and 22.4% as of December 31, 2022. In 2023, the change in estimate increased our non-cash interest expense and
net loss by $2.0 million. The imputed rate of interest on the RP OM Liability was approximately 0.2% as of December 31, 2023 and
8.5% as of December 31, 2022. In 2023, the change in estimate decreased our non-cash interest expense and net loss by $12.8 million.
We periodically assess the amount and timing of expected royalty payments and account for any changes in such estimates on a
prospective basis.
As of December 31, 2023, we have a total carrying value of approximately $380.0 million of liabilities related to revenue
participation right purchase agreements.
Results of Operations
A discussion of our results of operations for the year ended December 31, 2021 and year-to-year comparisons between 2022 and
2021 can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022
Annual Report on Form 10-K under the heading "Results of Operations."
Revenues
Our revenues since inception were primarily from our strategic alliances. We have not generated any revenue from commercial
product sales to date.
Revenues in 2023, 2022, and 2021 were as follows (in thousands):
Research and development revenues
License revenues
Milestone revenues
Realization of revenue participation
right purchase agreement
Total revenues
$
$
2023
Years Ended December 31,
2022
(In millions)
$
$
2021
4.0
—
3.5
6.6
—
1.0
—
7.5
$
87.0
94.6
$
Change
2023-2022
2022-2021
10.6
54.9
5.0
—
70.4
$
$
(2.6) $
0.0
2.5
(87.0)
(87.1) $
(4.0)
(54.9)
(4.0)
87.0
24.2
Research and development revenues in 2023 were primarily from Astellas for reimbursements under the Astellas FSRA
Agreement and from Ji Xing under the Ji Xing Agreements. In 2022, research and development revenues were primarily from Astellas
for reimbursements under the Astellas FSRA Agreement.
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 the Company’s Phase 3 clinical trial of reldesemtiv in ALS, up to a maximum contribution by Astellas
of $12 million. On March 31, 2023, we announced that we would be discontinuing COURAGE-ALS, our Phase 3 clinical trial of
reldesemtiv in patients with ALS, and COURAGE-ALS OLE. As of December 31, 2023 we have billed and collected from Astellas up
to the maximum contribution of $12.0 million, and no further revenue is expected under this arrangement.
Milestone revenues for 2023 consist primarily of a $2.5 mllion milestone payment from Ji Xing for the initiation of our Phase 3
clinical trial of aficamten in patients with nHCM (ACACIA-HCM).
In 2022, we recognized revenues of $87.0 million related to the RTW Royalty Purchase Agreement. On July 14, 2020, we entered
the RTW Royalty Purchase Agreement with RTW Royalty Holdings, pursuant to which we sold our 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. On March 31, 2021, RTW
Royalty Holdings assigned its rights and obligations under the RTW Royalty Purchase Agreement to its affiliate, RTW ICAV. We
understand that on April 18, 2022, RTW ICAV and MyoKardia, Inc. entered into agreements, which purported to assign all of RTW
ICAV's rights, title and interest to the Mavacamten Royalty to MyoKardia, Inc., and on April 25, 2022, we entered into a tripartite
agreement with RTW ICAV and MyoKardia, Inc. acknowledging the release and discharge of any further obligations by us or
MyoKardia, Inc. in connection to the Mavacamten Royalty. As a result of the full extinguishment of the Mavacamten Royalty, we
recognized revenue of $87.0 million in 2022.
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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 by program for 2023, 2022, and 2021 were as follows (in thousands):
Cardiac muscle contractility
Skeletal muscle contractility
All other research programs
Total research and development
expenses
$
$
2023
Years Ended December 31,
2022
(In millions)
$
$
2021
231.9
52.4
45.8
125.6
67.1
48.1
$
102.5
27.9
29.5
$
106.3
(14.7)
(2.3)
Change
2023-2022
2022-2021
330.1
$
240.8
$
159.9
$
89.3
$
23.1
39.2
18.6
80.9
Research and development expenses increased to $330.1 million in 2023 from $240.8 million in 2022, primarily due to higher
expenses for our clinical development activities for our cardiac muscle contractility (i.e.SEQUOIA-HCM) and skeletal muscle
contractility (i.e. COURAGE-ALS) and for early research activities.
On March 31, 2023, we announced that we would be discontinuing COURAGE-ALS and COURAGE-ALS OLE. Research and
development expenses for COURAGE-ALS and COURAGE-ALS OLE was $42.9 million in 2023. We expect the related expenses will
decrease in 2024.
We continue to develop aficamten to treat both oHCM and nHCM in two phase 3 clinical trials. MAPLE-HCM is our Phase 3
clinical trial of aficamten as a monotherapy for patients with oHCM and ACACIA-HCM is a Phase 3 clinical trial for patients with
symptomatic nHCM. Additionally we have FOREST-HCM which is an open label extension study designed to assess the long term
safety and tolerability of aficamten in patients with symptomatic oHCM.
On February 28, 2023, we received a CRL from FDA in connection with our NDA for omecamtiv mecarbil for the treatment of
HFrEF. With the CRL, FDA communicated that GALACTIC-HF is not sufficiently persuasive to establish substantial evidence of
effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic heart failure with HFrEF, in
lieu of evidence from at least two adequate and well-controlled clinical investigations. FDA stated that results from an additional clinical
trial of omecamtiv mecarbil are required to establish substantial evidence of effectiveness for the treatment of HFrEF, with benefits that
outweigh the risks. In 2023, we participated in a Type A meeting with FDA in order to understand FDA’s views regarding the CRL and
what may be required to support potential approval of omecamtiv mecarbil in the United States, and subsequently submitted a formal
dispute resolution request to FDA, with the objective to appeal the FDA's conclusion, as stated in the CRL, that substantial evidence of
effectiveness had not been established to support approval of omecamtiv mecarbil. FDA subsequently denied our appeal in November
2023 and reaffirmed its decision in the CRL that GALACTIC-HF is not sufficiently persuasive to establish substantial evidence of
effectiveness for reducing the risk of heart failure events and cardiovascular death in adults with chronic heart failure with HFrEF, in
lieu of evidence from at least two adequate and well-controlled clinical investigations.
Under our strategic alliances with Ji Xing, Ji Xing is responsible for the development of aficamten and omecamtiv mecarbil in
China and Taiwan.
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.
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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 by program for 2023, 2022, and 2021 were as follows (in thousands):
Total general and administrative expenses
$
173.6
$
2023
2022
(In millions)
178.0
2021
2023-2022
2022-2021
$
96.8
$
(4.4) $
81.2
Years Ended December 31,
Change
General and administrative expenses decreased to $173.6 million in 2023 from $178.0 million in 2022, primarily due to lower
outside service spend related to commercial activities, offset by an increase in personnel related costs including stock-based
compensation recorded in 2023.
We expect that general and administrative expenses will increase in the future, depending in part on the timing of and investments
in commercial readiness.
Interest Expense
Interest expense for 2023, 2022, and 2021 were as follows (in thousands):
2023
Years Ended December 31,
2022
(In millions)
$
$
2021
Change
2023-2022
2022-2021
Term loan
2026 Notes
2027 Notes
Other
Total interest expense
$
$
5.1
1.0
22.0
0.2
28.3
4.8
3.6
10.7
0.3
19.4
$
$
4.8
11.5
—
0.1
16.4
$
$
0.3
(2.6)
11.3
(0.1)
8.9
$
$
—
(7.9)
10.7
0.2
3.0
Interest expense in 2023 consists primarily of interest expense related to the RP Loan Agreement between us and RPDF and
interest expense related to the 2026 Notes and 2027 Notes. Commensurate with our entry into the RP Loan Agreement, we terminated
the Term Loan Agreement with Silicon Valley Bank and Oxford Finance LLC and repaid all amounts outstanding thereunder in January
2022. The RP Loan Agreement effectively replaced the Term Loan Agreement. In July 2022, we issued the 2027 Notes and used the
net proceeds and common stock to partially repurchase the 2026 Notes.
Non-cash interest expense on liabilities related to revenue participation right purchase agreements
Non-cash interest expense results from the accretion of our liabilities to RPFT and RP ICAV related to the sale of future royalties
under the RP OM RPA and the RP Aficamten RPA, respectively.
On January 7, 2022, we entered into the RP Aficamten RPA with RPI ICAV. Pursuant to the RP Aficamten RPA, RPI ICAV
purchased the right to receive a percentage of net sales equal to 4.5% for annual worldwide net sales of pharmaceutical products
containing aficamten up to $1 billion and 3.5% for annual worldwide net sales of pharmaceutical products containing aficamten in
excess of $1 billion, subject to reduction in certain circumstances (the “RP Aficamten Liability”). The carrying amount of the RP
Aficamten Liability is based on our estimate of the future royalties to be paid to RPI ICAV over the life of the arrangement as discounted
using an imputed rate of interest. The imputed rate of interest on the unamortized portion of the RP Aficamten Liability was
approximately 24.8% as of December 31, 2023.
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In 2023, we updated our analyses of the RP Aficamten RPA to reflect our assumptions resulting from ongoing global market
research and to reflect other adjustments in connection with our anticipated commercialization, including the additional consideration
of $50.0 million which was paid to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten.
Our estimates regarding the amount of future royalty payments under the RP Aficamten RPA changed from the fourth quarter of 2022
due to changes in management’s estimates of unobservable inputs related to market conditions and timing to include projections of
future royalty payments. The resulting sales forecast for aficamten has increased year over year mainly due to the receipt of positive
topline results from SEQUOIA-HCM, the Phase 3 trial for aficamten, in December 2023. The adjustment is accounted for on a
prospective basis in our liability calculation and resulted in changes in our imputed interest rate and non-cash interest expense from
22.4% and $5.2 million in the fourth quarter of 2022, 22.4% and $5.4 million in the first quarter of 2023, 19.0% and $4.9 million in the
second quarter of 2023, 18.0% and $5.4 million in the third quarter of 2023, to 24.8% and $9.8 million in the fourth quarter of 2023.
The non-cash interest expense was $25.5 million and $15.5 million in 2023 and 2022, respectively. In 2023, the change in estimate
increased our non-cash interest expense and net loss by $2.0 million. The change in accounting estimate increased the net loss per share
by $0.02 in 2023.
In 2023, we updated our analyses of the RP OM RPA to reflect our current assumptions resulting from ongoing global market
research and to reflect other adjustments in connection with our anticipated commercialization, including the result of our receipt of a
CRL in connection to our NDA for omecamtiv mecarbil. As a consequence of our receipt of the CRL from FDA, the royalty rate under
the RP OM RPA will increase to no more than 5.5%. The resulting sales forecast for omecamtiv mecarbil has decreased year over year
because commercialization and sales of omecamtiv mecarbil will be delayed. The adjustment is accounted for on a prospective basis in
our liability calculation and resulted in changes in our imputed interest rate and non-cash interest expense from 8.5% and $4.0 million
in the fourth quarter of 2022, 1.9% and $0.9 million in the first quarter of 2023, 2.9% and $1.4 million in the second and third quarter
of 2023, and to 0.1% and $0.1 million in the fourth quarter of 2023, respectively. The non-cash interest expense was $3.9 million, $16.2
million, and $12.9 million in 2023, 2022, and 2021, respectively. In 2023, the change in estimate decreased our non-cash interest expense
and net loss by $12.8 million. The change in accounting estimate reduced the net loss per share by $0.13 in 2023.
We review our assumptions on a regular basis and our estimates may change in the future as we refine and reassess our
assumptions.
Non-cash interest expense on liability related to the RP OM RPA and the RP Aficamten RPA for 2023, 2022, and 2021 were as
follows (in thousands):
RP OM Liability
RP Aficamten Liability
Total non-cash interest expense
recognized
$
$
Interest and Other Income, net
2023
Years Ended December 31,
2022
(In millions)
$
$
2021
3.9
25.5
16.2
15.5
$
12.9
—
(12.3) $
10.0
Change
2023-2022
2022-2021
29.4
$
31.7
$
12.9
$
(2.3) $
3.3
15.5
18.8
Interest and other income, net for 2023, 2022, and 2021 consisted primarily of interest income generated from our cash, cash
equivalents and investments.
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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
Long-term investments
Total cash, cash equivalents, and marketable securities
Borrowings:
Term loan, net
2026 Notes, net
2027 Notes, net
Total borrowings
Working capital:
Current assets
Current liabilities
Working capital
December 31, 2023
December 31, 2022
(In millions)
$
$
$
$
$
$
113.0
501.8
40.5
655.3
58.4
20.8
528.2
607.4
628.1
102.7
525.4
$
$
$
$
$
$
65.6
717.0
46.7
829.3
63.8
20.7
525.1
609.6
795.2
84.6
710.6
The following table shows a summary of our cash flows for the periods set forth below:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
$
Net increase (decrease) in cash, cash equivalents, and
restricted cash
$
Sources and Uses of Cash
2023
Years Ended December 31,
2022
(In millions)
2021
(414.3) $
239.3
221.3
(299.5) $
(262.1)
516.2
(142.5)
(147.8)
320.0
46.3
$
(45.4) $
29.7
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.
Cash Flows Used in Operating Activities
Net cash used in operating activities of $414.3 million and $299.5 million for 2023 and 2022, respectively, was largely due to
ongoing research and development activities and general and administrative expenses to support those activities. In 2022, the net cash
used in operating activities was offset by collection of receivables primarily from our 2021 RTW Transactions. Net loss for 2023 and
2022 included, among other items: non-cash stock-based compensation, non-cash interest expense on liabilities related to revenue
participation right purchase agreements, and non-cash interest expense related to debt.
Cash Flows Used in Investing Activities
Net cash provided by investing activities of $239.3 million for 2023 was primarily due to sales and maturities of investments
offset by purchases of investments.
Net cash used in investing activities of $262.1 million for 2022 was primarily due to purchases of investments and property and
equipment offset by proceeds from maturity of investments.
Cash Flows Provided by Financing Activities
Net cash provided by financing activities of $221.3 million in 2023 was due to proceeds from public offerings of common stock
of $164.2 million under the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co discussed below and $50.0 million
of additional consideration associated with the 2022 RP Aficamten Royalty Purchase Agreement which was paid to us in September
2023 and stock-based award activities.
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Net cash provided by financing activities of $516.2 million in 2022 was primarily due to proceeds related to RP Aficamten RPA
and the RP Loan Agreement and offset by the repayment of amounts owed under our Term Loan Agreement and stock-based award
activities.
Royalty Pharma Transactions
On January 7, 2022, we announced that we had entered into that certain RP Loan Agreement and the RP Aficamten RPA with
RPDF and RPI ICAV respectively, each of which were at the time of our entry into such agreements affiliated with Royalty Pharma
International plc.
Under the RP Loan Agreement, we were initially entitled to receive up to $300.0 million in term loans, $50.0 million of which
was disbursed to us on closing and the remaining $250.0 million scheduled to have been available to us upon our satisfaction of
customary disbursement conditions and certain development conditions by specific deadlines, as follows:
•
•
•
•
$50.0 million of tranche 2 term loans during the one year period following the receipt on or prior to March 31, 2023 of
marketing approval from FDA of omecamtiv mecarbil;
$25.0 million of tranche 3 term loans during the one year period following the commercial availability of a diagnostic test
measuring levels of omecamtiv mecarbil to support the final FDA label language applicable to such drug, subject to such
commercial availability and the conditions to the tranche 2 term loans having occurred on or prior to March 31, 2023;
$75.0 million of tranche 4 term loans during the one year period following the receipt on or prior to September 30, 2024 of
positive results from SEQUOIA-HCM, the Phase 3 trial for aficamten; and
$100.0 million of tranche 5 term loans during the one year period following the acceptance by the FDA on or prior to March
31, 2025 of an NDA for aficamten, subject to the conditions to the tranche 4 term loans having occurred on or prior to
September 30, 2024.
As a result of our receipt of a CRL in connection to our NDA for omecamtiv mecarbil, we have not satisfied the conditions to the
availability of the tranche 2 and tranche 3 loans under the RP Loan Agreement.
In December 2023, we announced positive topline results from SEQUOIA-HCM, the Phase 3 trial for aficamten. This entitled us
to receive $75.0 million under tranche 4 during the one year period following the receipt of the positive results and requires us to draw
a minimum of at least $50.0 million of the $75.0 million available under tranche 4.
The remaining $100.0 million under tranche 5 remains available for disbursement to us, subject to satisfaction of the conditions
described above.
Each term loan under the RP Loan Agreement matures on the 10 year anniversary of the funding date for such term loan and is
repayable in quarterly installments of principal, interest and fees commencing on the last business day of the seventh full calendar
quarter following the calendar quarter of the applicable funding date for such term loan, with the aggregate amount payable in respect
of each term loan (including interest and other applicable fees) equal to 190% of the principal amount of the tranche 1, tranche 4 and
tranche 5 term loans and 200% of the principal amount of the tranche 2 and tranche 3 loans (such amount with respect to each term loan,
“Final Payment Amount”). We have made our first payment in the fourth quarter of 2023.
We may prepay the term loans in full (but not in part) at any time at our option by paying an amount equal to the unpaid portion
of Final Payment Amount for the outstanding term loans under the RP Loan Agreement; provided that if the conditions for either the
tranche 4 term loans or the tranche 5 term loans have been met, we must have borrowed at least $50 million principal amount of the
tranche 4 or 5 term loans. In addition, the term loans under the RP Loan Agreement are repayable in full at the option of either us or the
lender in an amount equal to the unpaid portion of Final Payment Amount for the outstanding term loans upon a change of control of
Cytokinetics.
In addition, on January 7, 2022, we entered into the RP Aficamten RPA with RPI ICAV, pursuant to which RPI ICAV purchased
rights to certain revenue streams from net sales of pharmaceutical products containing aficamten by us, our affiliates and our licensees
in exchange for up to $150.0 million in consideration, $50.0 million of which was paid on the closing date, $50.0 million of which was
paid to us in March 2022 following the initiation of the first pivotal trial in oHCM for aficamten, and $50.0 million of which was paid
to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten.
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The RP Aficamten RPA also provides that the parties will negotiate terms for additional funding if we achieve proof of concept
results in certain other indications for aficamten, with a reduction in the applicable royalty if we and RPI ICAV fail to agree on such
terms in certain circumstances.
Pursuant to the RP Aficamten RPA, RPI ICAV purchased the right to receive a percentage of net sales equal to 4.5% for annual
worldwide net sales of pharmaceutical products containing aficamten up to $1 billion and 3.5% for annual worldwide net sales of
pharmaceutical products containing aficamten in excess of $1 billion, subject to reduction in certain circumstances.
Convertible Notes
On November 13, 2019, we issued $138.0 million aggregate principal amount of 2026 Notes. On July 6, 2022, we issued $540.0
million aggregate principal amount of 2027 Notes and used approximately $140.3 million of the net proceeds from the offering of 2027
Notes and issued 8,071,343 shares of common stock to repurchase approximately $116.9 million aggregate principal amount of the 2026
Notes pursuant to privately negotiated exchange agreements entered into with certain holders of the 2026 Notes concurrently with the
pricing of the offering of the 2027 Notes. As a result of the partial repurchase of the 2026 Notes, we recorded an inducement loss of
$22.2 million, consisting of the difference between the consideration to the holders pursuant to the exchange agreements and the if-
converted value of the 2026 Notes under the original terms. As of December 31, 2023, there remains $21.1 million aggregate principal
amount of 2026 Notes outstanding and $540.0 million of aggregate principal amount of 2027 Notes outstanding. The 2026 Notes are
redeemable, in whole or in part, at our option at any time, and from time to time, 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 our 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 we may send the related
redemption notice; and (2) the trading day immediately before the date we may send such notice.
2021 Ji Xing and RTW Transactions
On December 20, 2021, we entered into the Ji Xing OM License Agreement, pursuant to which we granted to Ji Xing an exclusive
license to develop and commercialize omecamtiv mecarbil in China and Taiwan. Under the terms of the Ji Xing OM License Agreement,
we received a $50.0 million nonrefundable payment from Ji Xing comprised of a $40.0 million payment as consideration for the rights
granted by us to Ji Xing and $10.0 million attributable to our having submitted to FDA an NDA for omecamtiv mecarbil. We may be
eligible to receive from Ji Xing additional payments totaling up to $330.0 million for the achievement of certain commercial milestone
events in China in connection to omecamtiv mecarbil. In addition, Ji Xing will pay us tiered royalties in the mid-teens to the low twenties
range on the net sales of pharmaceutical products containing omecamtiv mecarbil in China and Taiwan, subject to certain reductions for
generic competition, patent expiration and payments for licenses to third party patents. The Ji Xing OM License Agreement, unless
terminated earlier, will continue on a market-by-market basis until expiration of the relevant royalty term. We recognized a $2.5 million
milestone from Ji Xing in 2023 for the initiation of a phase 3 clinical trial for aficamten in nHCM, which was collected in the fourth
quarter of 2023.
In addition to the Ji Xing OM License Agreement, we entered into common stock purchase agreements with each of the RTW
Investors, pursuant to which we sold and issued an aggregate of 0.5 million shares of our common stock at a price per share of $39.125
and an aggregate purchase price of $20.0 million.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.
On March 1, 2023, we entered into the Amended ATM Facility, with Cantor, under which we may offer and sell, from time to
time at our sole discretion, shares of the Common Stock having an aggregate offering price of up to $300.0 million through Cantor, as
sales agent. The Amended ATM Facility amends, restates and supersedes the Controlled Equity Offering Sales Agreement dated as of
March 6, 2019 between the Company and Cantor.
Cantor may sell the Common Stock by any method that is deemed to be an “at the market offering” as defined in Rule 415 of the
Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or any other trading market for
our common stock. Cantor will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions
from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay Cantor a
commission of up to 3.0% of the aggregate gross sales proceeds of any common stock sold through Cantor under the Amended ATM
Facility, and also have provided Cantor with customary indemnification rights.
In 2023, we issued 5,016,170 shares of our common stock for net proceeds of $164.2 million pursuant to the Amended ATM
Facility.
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Future Uses of Cash
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, and we plan to
file one to two investigational new drug applications in 2023. We may also incur significant sales and marketing expenses in anticipation
of regulatory approval of one of our drug candidates.
Our future capital uses and requirements depend on numerous factors. These factors include, but are not limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the initiation, progress, timing, scope and completion of preclinical research, non-clinical development, CMC, and clinical
trials for our drug candidates and other compounds;
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;
our revenues, if any, from successful development of our drug candidates and commercialization of potential drugs;
the cost of additional construction to expand our headquarters in South San Francisco and in relation to our leased office
facilities in Radnor, Pennsylvania; and
the payments due for interest on the term loan and convertible debt;
We have incurred an accumulated deficit of approximately $2.1 billion 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. Therefore, 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.
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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.
Segment Information
We have one primary business activity and operate in one reportable segment.
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.
Market Risk and Interest Rate Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2023, we had cash and investments of
$655.4 million, which consist of U.S. Treasury securities, U.S. and non-U.S. government agency bonds, commercial paper, global
portfolio of corporate debt, money market fund, and repurchase agreements backed by U.S. Treasury securities. 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. We have not been exposed to, nor do we anticipate being exposed to,
material risks due to changes in interest rates. A 1% increase or decrease in current interest rates would not have a material effect on our
financial results.
We had $21.1 million under 2026 Notes with a fixed rate of 4.0% and $540.0 million under 2027 Notes with a fixed rate of 3.5%
outstanding as of December 31, 2023. The convertible notes issued at fixed interest rates are exposed to fluctuations in fair value
resulting from changes in market price and interest rates. We do not record our convertible debt at fair value but present the fair value
for disclosure purposes (see Note 7 to our Consolidated Financial Statements). As of December 31, 2022, the fair value of the 2026
Notes and 2027 Notes was estimated at $168.4 million and $990.4 million using quoted market prices.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 42) ............................................................................
Consolidated Balance Sheets .......................................................................................................................................................
Consolidated Statements of Operations and Comprehensive Loss..............................................................................................
Consolidated Statements of Stockholders’ (Deficit) Equity ........................................................................................................
Consolidated Statements of Cash Flows......................................................................................................................................
Notes to Consolidated Financial Statements................................................................................................................................
Page
76
78
79
80
81
82
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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,
2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit) equity, and cash
flows for each of the three years in the period ended December 31, 2023, 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 at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2023, 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 Company’s internal control over financial reporting as of December 31, 2023, 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 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s 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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the
critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
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Description of the
Matter
How We Addressed
the Matter in Our
Audit
Measurement of Revenue Participation Right Purchase Agreements
As of December 31, 2023, the liabilities related to revenue participation right purchase agreements, net were
$380.0 million. The Company recognized non-cash interest expense on the liabilities related to revenue
participation right purchase agreements of $29.4 million for the year ended December 31, 2023. As described
in Note 6 to the consolidated financial statements, the Company has entered into agreements, pursuant to which
counterparties purchased rights to receive royalty streams from the net sales of pharmaceutical products
containing Aficamten and Omecamtiv Mecarbil. The cash received by the Company from these royalty purchase
agreements was initially recognized as a liability related to revenue participation right purchase agreements.
The Company is required to update its estimate, each reporting period, related to the amount and timing of future
royalty payments to be paid to the counterparties of the revenue participation right purchase agreements. The
estimates of the future royalty payment determine the measurement of the non-cash interest expense and the
carrying value of the liability.
Auditing the Company’s measurement of the revenue participation right purchase agreements was complex due
to the significant estimation uncertainty in projecting future royalty payments to be paid to the counterparties
of the revenue participation right purchase agreements. The estimates of future royalties requires the use of
several assumptions such as: the probability of clinical success, the probability of regulatory approval, the
estimated date of a product launch, estimates of eligible patient populations, estimates of prescribing behavior
and patient behavior, estimates of pricing and payor reimbursement and coverage, and sales ramp. As products
containing Aficamten and Omecamtiv Mecarbil have not yet been commercialized, the estimates are highly
subjective.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the
Company’s processes for estimating the amount and timing of future royalty payments.
To test the amount and timing of future royalty payments to be paid to the counterparties of the revenue
participation right purchase agreements, our audit procedures included, among others, evaluating the
reasonableness of significant assumptions used by management. Evaluating the reasonableness of
management’s assumptions included consideration of (i) relevant industry forecasts and data, (ii) consistency
with observable data for competitor products, and (iii) whether the assumptions were consistent with evidence
obtained in other areas of the audit.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
San Jose, California
February 28, 2024
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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
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable
Accrued liabilities
Short-term operating lease liabilities
Current portion of long-term debt
Other current liabilities
Total current liabilities
Term loan, net
Convertible notes, net
Liabilities related to revenue participation right purchase agreements, net
Long-term operating lease liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies
Stockholders’ 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: 101,637,922 shares at December 31, 2023
and 94,833,975 shares at December 31, 2022
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ deficit
Total liabilities and stockholders’ deficit
December 31,
2023
2022
$
$
$
113,024
501,800
1,283
11,944
628,051
40,534
68,748
78,987
7,996
824,316
21,507
42,641
17,891
10,080
10,559
102,678
58,384
548,989
379,975
120,427
186
1,210,639
65,582
716,995
147
12,462
795,186
46,708
80,453
82,737
9,691
1,014,775
25,611
44,096
12,829
958
1,123
84,617
63,810
545,808
300,501
126,895
1,044
1,122,675
—
—
102
1,725,823
(10)
(2,112,238)
(386,323)
824,316
$
94
1,481,590
(3,590)
(1,585,994)
(107,900)
1,014,775
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
CYTOKINETICS, INCORPORATED
(In thousands, except per share data)
Revenues:
Research and development revenues
License revenues
Milestone revenues
Realization of revenue participation right purchase agreement
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Interest expense
Loss on extinguishment of debt
Non-cash interest expense on liabilities related to revenue
participation right purchase agreements
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 gain (loss):
Unrealized gain (loss) on available-for-sale securities, net
Foreign currency translation adjustments
Comprehensive loss
2023
Years Ended December 31,
2022
2021
$
$
$
$
4,030
—
3,500
—
7,530
330,123
173,612
503,735
(496,205)
(28,306)
—
(29,362)
27,629
(526,244)
(5.45)
96,524
3,600
(20)
(522,664)
$
$
$
$
6,588
—
1,000
87,000
94,588
240,813
177,977
418,790
(324,202)
(19,414)
(24,939)
(31,742)
11,342
(388,955)
(4.33)
89,825
(2,721)
—
(391,676)
$
$
$
$
10,572
54,856
5,000
—
70,428
159,938
96,803
256,741
(186,313)
(16,440)
—
(12,892)
331
(215,314)
(2.80)
76,886
(1,018)
—
(216,332)
The accompanying notes are an integral part of these consolidated financial statements.
79
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
(Deficit) Equity
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CYTOKINETICS, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(In thousands, except shares)
Balance, December 31, 2020
Exercise of stock options
Vesting of restricted stock units,
net of taxes withheld
Net share settlement
Underwritten public offering of
common stock, net of discounts,
commissions and offering cost
Issuance of common stock upon private placement
Issuance of common stock under
Employee Stock Purchase Plan
Stock-based compensation
Other comprehensive loss
Net loss
Balance, December 31, 2021
ASU 2020-06 adoption
Exercise of stock options
Issuance of common stock under restricted stock
units
Shares withheld related to net share settlement of
equity awards
Issuance of common stock under
Employee Stock Purchase Plan
Induced conversion of convertible notes
Exercise of warrants
Settlement of capped call on 2026 Notes
Stock-based compensation
Other comprehensive loss
Net loss
Balance, December 31, 2022
Exercise of stock options
Vesting of restricted stock units
Shares withheld related to net share settlement of
equity awards
Issuance of common stock under
Employee Stock Purchase Plan
Issuance of common stock under at-the-market
offering, net of issuance costs
Stock-based compensation
Other comprehensive income
Net loss
Balance, December 31, 2023
Common Stock
Shares
71,015,183
1,304,347
Amount
70
$
3
Additional
Paid-In
Capital
$ 1,105,470
11,017
360,050
—
11,500,000
511,182
108,780
—
—
—
84,799,542
—
1,389,031
707,772
(260,172)
98,153
8,071,343
28,306
—
—
—
—
94,833,975
1,193,325
721,216
(262,829)
136,065
—
—
11
—
—
—
—
—
84
—
2
—
—
—
8
—
—
—
—
—
94
2
1
—
—
(4,449)
(418)
296,894
15,144
1,778
26,832
—
—
1,452,268
(49,476)
14,314
—
(9,602)
3,227
(3,386)
—
26,392
47,853
—
—
1,481,590
14,317
—
(10,517)
4,140
$
$
149
—
(992,306)
—
$
—
—
—
—
—
—
(1,018)
—
(869)
—
—
—
—
—
—
—
—
—
(2,721)
—
(3,590)
—
—
—
—
—
—
—
—
—
—
—
(215,314)
(1,207,620)
10,581
—
—
—
—
—
—
—
—
—
(388,955)
(1,585,994)
—
—
—
—
5,016,170
—
—
—
101,637,922
$
5
—
—
—
102
164,228
72,065
—
—
$ 1,725,823
$
—
—
3,580
—
(10)
—
—
—
(526,244)
$ (2,112,238)
$
113,383
11,020
(4,449)
(418)
296,905
15,144
1,778
26,832
(1,018)
(215,314)
243,863
(38,895)
14,316
—
(9,602)
3,227
(3,378)
—
26,392
47,853
(2,721)
(388,955)
(107,900)
14,319
1
(10,517)
4,140
164,233
72,065
3,580
(526,244)
(386,323)
The accompanying notes are an integral part of these consolidated financial statements.
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CYTOKINETICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2023
Years Ended December 31,
2022
2021
$
(526,244)
$
(388,955)
$
(215,314)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense on liabilities related to revenue participation right purchase
agreement
Stock-based compensation expense
Non-cash lease expense
Impairment of right-of-use assets
Depreciation of property and equipment
Realized gain on investment, net
Interest receivable and amortization on investments
Non-cash interest expense related to debt
Loss on extinguishment of debt
Loss on inducement of convertible debt
Changes in operating assets and liabilities:
Accounts receivable
Prepaid and other assets
Accounts payable
Accrued and other liabilities
Deferred revenue
Operating lease liabilities
Other non-current liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of investments
Maturities of investments
Sales of investments
Purchases of property and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Repayment of finance lease liabilities
Repayment of term loan
Debt extinguishment costs
Repayment of convertible debt
Proceeds from issuance of convertible debt, net
Proceeds from public offerings of common stock, net of discounts, commissions and
offering cost
Proceeds from private placement, net
Proceeds from 2022 RPI Transactions, net
Proceeds from issuance of common stock related to at-the-market offering, net of
issuance costs
Proceeds from issuance of common stock under equity incentive and stock purchase
plans
Taxes paid related to net share settlement of equity awards
Cash settlement of capped call options associated with 2026 Notes
Net cash provided by financing activities
Effect of exchange rate changes
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Supplemental cash flow disclosures:
Cash paid for interest
Non-cash investing and financing activities:
Right-of-use assets recognized in exchange for operating lease obligations
Right-of-use assets recognized in exchange for finance lease obligations
Amounts unpaid for purchases of property and equipment
Issuance of common stock in connection with repurchase of convertible note
$
$
$
$
$
$
29,474
72,065
3,750
—
11,892
35
(15,735)
7,341
—
—
(1,136)
1,596
(3,483)
17,103
—
(1,406)
(9,585)
(414,333)
(635,211)
870,905
4,975
(1,416)
239,253
(858)
—
—
—
—
—
—
50,000
164,233
18,459
(10,517)
—
221,317
(20)
46,217
67,182
113,399
10,295
$
$
— $
— $
— $
— $
31,858
47,853
2,585
—
5,814
107
(4,710)
5,697
2,693
22,246
56,672
(7,414)
4,524
10,844
(87,000)
1,728
(4,058)
(299,516)
(855,393)
604,594
—
(11,335)
(262,134)
(944)
(47,651)
(2,409)
(140,330)
523,586
—
—
149,581
—
17,543
(9,602)
26,392
516,166
—
(45,484)
112,666
67,182
15,165
10,904
1,055
621
317,123
$
$
$
$
$
$
13,004
26,832
7,361
2,844
2,276
—
4,894
7,125
—
—
(47,399)
(7,381)
1,055
15,060
—
43,472
3,649
(142,522)
(525,042)
422,837
3,300
(48,872)
(147,777)
—
—
—
—
—
296,905
15,144
—
—
12,380
(4,449)
—
319,980
—
29,681
82,985
112,666
9,175
80,395
1,294
11,982
—
The accompanying notes are an integral part of these consolidated financial statements.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 approximately $2.1 billion since inception and there can be no assurance that we will attain profitability. We had
a net loss of $526.2 million and net cash used in operations of $414.3 million for the year ended December 31, 2023. Cash, cash
equivalents, and investments decreased to $655.4 million as of December 31, 2023 from $829.3 million as of December 31, 2022. 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, sales of future revenues and
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 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. 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 activities, we believe that our existing cash, cash equivalents, and
investments will be sufficient to fund cash requirements for at least the next 12 months after the issuance of these 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 GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods. We evaluate our estimates on an ongoing basis. We base
our estimates on our historical experience and also on assumptions that we believe are reasonable; however, actual results could
significantly differ from those estimates.
Basis of Presentation
The consolidated financial statements include the accounts of Cytokinetics, Incorporated and its wholly-owned subsidiaries and
have been prepared in accordance with 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, cash equivalents, restricted
cash, investments, and accounts receivable.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our cash, cash equivalents, restricted cash, and investments held with large financial institutions in the United States and deposits
may exceed the Federal Deposit Insurance Corporation’s insurance limit.
Drug candidates we develop may require approvals or clearances from the 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, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents,
which consist of money market funds and repurchase agreements backed by U.S. Treasury securities. Repurchase agreements are
collateralized by US Treasury securities for an amount not less than 102% of their value and are reported at a carrying value which
approximates fair value due to their short duration.
A reconciliation of cash, cash equivalents, and restricted cash reported in our consolidated balance sheets to the amount reported
within our consolidated statements of cash flows was as follows (in thousands):
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash as reported
within our consolidated statement of cash flows
December 31,
2023
2022
$
$
113,024
375
113,399
$
$
65,582
1,600
67,182
As of December 31, 2023, our restricted cash balance of $0.4 million is used to collateralize letters of credit.
Investments
Our investments consist of U.S. Treasury securities, U.S. government agency securities, commercial paper, corporate obligations,
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 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.
All of our available-for-sale investments are subject to a periodic impairment review. For each available-for-sale investment
whose fair value is below its amortized cost, we determine if the impairment is a result of a credit-related loss or other factors using both
quantitative and qualitative factors. If the impairment is a result of a credit-related loss, we recognize an allowance for credit losses. If
the impairment is not a result of a credit loss, we recognize the loss in other comprehensive loss.
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 and
finance lease right-of-use assets are 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 twelve 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.
Impairment of Long-lived Assets
We review long-lived assets, including property, equipment and right-of-use assets, 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 less than its carrying
amount.
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Leases
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We determine if the arrangement contains a lease at inception based on whether the contract conveys the right to control the use
of an identified asset. The lease classification is determined at lease commencement, which is the date the underlying asset is available
for use by the Company, and preliminary based on whether the arrangement is effectively a financed purchase of the underlying asset
(finance lease) or not (operating lease). We determined the lease term at the commencement date by considering whether renewal options
and termination options are reasonably assured of exercise. In addition to the fixed minimum lease payments required under the lease
arrangements, certain leases include payments of operating expenses that may be revised based on the landlord’s estimate. These variable
payments are excluded from the lease payments used to determine the right-of-use asset and lease liability and are recognized when the
associated activity occurs.
We recognize right-of-use assets and short-term and long-term lease liabilities on our consolidated balance sheets for operating
leases. The right-of-use asset and short-term and long-term lease liabilities for finance leases are recognized in property and equipment,
other current liabilities, and other non-current liabilities, respectively, on the consolidated balance sheets.
In determining the present value of lease payments, we estimated our incremental borrowing rate based on information available
upon commencement. We base the lease liabilities on the present value of remaining lease payments over the remaining terms of the
leases using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized basis at the lease
commencement date. The initial right-of-use asset, for both operating and finance leases, is measured based on the lease liability adjusted
for any initial direct costs, lease prepayments, and lease incentives.
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. Finance lease right-of-use assets are amortized on a straight-line basis over the shorter of the
expected useful life or the lease term, and the carrying amount of the lease liability is adjusted to reflect interest, which is recorded in
interest expense.
We exclude from our consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases).
We account for lease and non-lease components as a single component for our operating leases.
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.
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. For example, a license to our intellectual property is determined
to be distinct from other performance obligations if licensee is able to use and benefit from the license on its own. Otherwise, licenses
are bundled with other promises, such as ongoing research and development services, as combined performance obligation.
We enter into collaborative arrangements with partners that typically include payment to us for one of more of the following: (i)
up-front 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. Up-front license fees are included
in the transaction price. Development and regulatory milestone payments are included in the transaction price using the most likely
amount method, if we conclude it is probable that a significant revenue reversal would not occur. For contracts that include sales-based
royalties or sales-based milestones, 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 or sales-based milestone has been allocated has been satisfied.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our joint programs with Astellas under the Astellas OSSA Agreement, and with Amgen under the Amgen Agreement (both of
the Astellas OSSA Agreement and the Amgen Agreement having now been terminated), included promises of research and development
services. We also entered into the Astellas FSRA Agreement on April 23, 2020. 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 the Company’s Phase 3
clinical trial of reldesemtiv in ALS, up to a maximum contribution by Astellas of $12.0 million. We determined that these services
collectively were distinct from any licenses provided to Astellas and Amgen under such agreements, and as such, these services were
accounted for as a separate performance obligation recorded over time. We recognized revenue for these services as the performance
obligations were satisfied, which we estimated using internal research and development costs incurred.
When a collaborative agreement has more than one performance obligation, 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 performance obligations that consist of the delivery of an intellectual property license, the revenue is recognized at the point
in time that the license is delivered. For combined performance obligations consisting of an intellectual property license and research
and development services, we recognize the combined performance obligation over time, using an input method, as the research and
development services are performed.
We are required to make estimates related to the determination of the transaction price and our measurement of how revenue is
recognized over time, using the input method. Any changes in these estimates are recorded on a cumulative catch-up basis, which would
affect license, collaboration and other revenues and earnings in the period of adjustment.
Accrued Research and Development Expenditures
Clinical trial costs are a component of research and development expense. We accrue and expense clinical trial activities
performed by third parties based upon actual work completed in accordance with agreements established with clinical research and
manufacturing organizations and clinical sites. We determine the actual costs through monitoring patient enrollment, discussions with
internal personnel and external service providers regarding the progress or stage of completion of trials or services and the agreed-upon
fee to be paid for such services.
Revenue Participation Right Purchase Agreements
We have entered into certain revenue participation right purchase agreements with certain investors, pursuant to which such
investors purchased rights to royalties from certain revenue streams in exchange for consideration. We typically account for such
agreements as liabilities to be amortized under the effective interest rate method over the life of the related royalty stream, when we
have continuing involvement with the underlying R&D. We typically account for such agreements as deferred income to be amortized
under the units-of-revenue method, when there is no continuing involvement with the underlying R&D. We are required to update our
estimates, at each reporting period, related to the amount and timing of future royalty payments to be paid to the counterparties of the
revenue participation right purchase agreements. The estimates of the future royalty payment determine the measurement of the non-
cash interest expense and the carrying value of the liability.
Revenue participation right purchase agreements are measured using significant unobservable inputs. The estimates of future
royalties requires the use of several assumptions such as: the probability of clinical success, the probability of regulatory approval, the
estimated date of a product launch, estimates of eligible patient populations, estimates of prescribing behavior and patient compliance
behavior, estimates of pricing, payor reimbursement and coverage, and sales ramp. As products containing aficamten and omecamtiv
mecarbil have not yet been commercialized, the estimates are highly subjective.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In 2020, we entered into a royalty purchase agreement, pursuant to which we sold our right to receive certain payments on the
net sales of products containing the compound mavacamten. The consideration received was deferred income to be amortized under the
units-of-revenue method, as there was no continuing involvement with the underlying R&D. In 2022, we entered into a tripartite
agreement with RTW ICAV and MyoKardia, Inc. acknowledging the release and discharge of any further obligations by us or
MyoKardia, Inc. in connection to the Mavacamten Royalty and consequently we recognized the deferred revenue as Realization of
revenue participation right purchase agreement on the income statement.
As of December 31, 2023, we have a total carrying value of approximately $380.0 million of liabilities related to revenue
participation right purchase agreements.
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.
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, performance-based stock units and stock appreciation rights may be granted to employees, directors,
consultants and advisors. In addition, we maintain an 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 performance-based 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 when the underlying
performance conditions are deemed probable.
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.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 2026 Notes
Shares issuable upon conversion of 2027 Notes
Total shares
Note 3 — Research and Development Arrangements
2021 Ji Xing and RTW Transactions
2023
Years Ended December 31,
2022
2021
11,780
13
1,375
16
2,003
10,572
25,759
10,992
13
1,260
13
2,003
10,572
24,853
9,373
48
1,415
8
16,675
—
27,519
In December 2021, we entered into the 2021 RTW Transactions as described below, related to omecamtiv mecarbil.
Ji Xing Omecamtiv Mecarbil License and Collaboration Agreement
On December 20, 2021, we entered into the Ji Xing OM License Agreement, pursuant to which we granted to Ji Xing an exclusive
license to develop and commercialize omecamtiv mecarbil in China and Taiwan. Under the terms of the Ji Xing OM License Agreement,
we are the beneficiary of a nonrefundable $50.0 million payment obligation from Ji Xing comprised of a $40.0 million payment as
consideration for the rights granted by us to Ji Xing and $10.0 million attributable to our having submitted to the FDA an NDA for
omecamtiv mecarbil. The $50.0 million payment was received by the Company in January 2022. We may be eligible to receive from Ji
Xing additional payments totaling up to $330.0 million for the achievement of certain commercial milestone events in connection to
omecamtiv mecarbil. In addition, Ji Xing will pay us tiered royalties in the mid-teens to the low twenties range on the net sales of
pharmaceutical products containing omecamtiv mecarbil 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 omecamtiv mecarbil at its own cost and is required to
use diligent efforts to develop and commercialize omecamtiv mecarbil in China and Taiwan. The development of omecamtiv mecarbil
will be initially focused on HFrEF, and Ji Xing will have the opportunity to participate in Cytokinetics’ global clinical trials of
omecamtiv mecarbil. Cytokinetics will supply omecamtiv mecarbil to Ji Xing either as a finished product or as an active pharmaceutical
ingredient. Ji Xing may reimburse Cytokinetics for certain costs related to development and supply activities that we perform on their
behalf.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Ji Xing OM 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 OM License Agreement for convenience. Each party may terminate
the Ji Xing OM License Agreement for the other party’s uncured material breach, insolvency, or failure to perform due to extended
force majeure events. Cytokinetics may also terminate the Ji Xing OM License Agreement if Ji Xing challenges Cytokinetics’ patents
or undergoes certain change of control transactions. Rights granted to Ji Xing in relation to omecamtiv mecarbil 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 omecamtiv mecarbil in China and Taiwan. 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 $54.9 million in 2021. 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 excluded any potential 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.
Common Stock Purchase Agreements
On December 20, 2021, as part of the 2021 RTW Transactions, we entered into common stock purchase agreements with each
of the RTW Investors. These common stock purchase agreements provided for the sale and issuance of an aggregate of 511,182 shares
of our common stock at a price per share of $39.125 and an aggregate purchase price of $20.0 million. The closing occurred on December
20, 2021. The RTW Investors have agreed to certain trading and other restrictions with respect to the shares of common stock they
purchased pursuant to these agreements, including a restriction on sales or other transfers of the shares, subject to certain exceptions,
for a period of one year from the closing date. The restrictions resulted in a premium paid by the RTW Investors of $4.9 million, which
represents the excess amount paid over the fair value of the shares of common stock purchased. The premium was determined by
analyzing the restrictions discount applied to the closing stock price as of December 20, 2021, which is a Level 2 fair value input. The
cash received less the calculated premium is the $15.1 million fair value of the common stock recorded.
2020 Ji Xing and RTW Transactions
On July 14, 2020, we entered in the 2020 RTW Transactions, as described below, with RTW Royalty Holdings and Ji Xing,
related to aficamten, our proprietary small molecule cardiac myosin inhibitor product, a novel cardiac myosin inhibitor, and other assets.
Ji Xing Aficamten License and Collaboration Agreement
On July 14, 2020, we entered into the Ji Xing Aficamten License Agreement with Ji Xing, pursuant to which we granted to Ji
Xing an exclusive license to develop and commercialize aficamten in China and Taiwan. Under the terms of the Ji Xing Aficamten
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 aficamten in the field of oHCM and/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 the products containing aficamten 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 aficamten at its own cost and is required to use diligent
efforts to develop and commercialize aficamten in China and Taiwan. The development of aficamten will be initially focused on HCM,
and Ji Xing will have the opportunity to participate in Cytokinetics’ global pivotal clinical trials of aficamten. Cytokinetics or a
designated supplier will supply aficamten to Ji Xing either as a finished product or as an active pharmaceutical ingredient.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Ji Xing Aficamten 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 Aficamten License Agreement for convenience. Each party
may terminate the Ji Xing Aficamten License Agreement for the other party’s uncured material breach, insolvency, or failure to perform
due to extended force majeure events. Cytokinetics may also terminate the Ji Xing Aficamten License Agreement if Ji Xing challenges
Cytokinetics’ patents or undergoes certain change of control transactions. Rights granted to Ji Xing in relation to aficamten 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 aficamten in China and Taiwan.
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 of ASC 606 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 recognized a $2.5 million milestone from Ji Xing in 2023 for the initiation of a phase 3 clinical trial for aficamten in nHCM
which was collected in the fourth quarter of 2023.
We recognized a $5.0 million milestone from Ji Xing during the third quarter of 2021 for initiation of a phase 3 clinical trial for
aficamten in oHCM. Although our contractual right to payment had not arisen under the Ji Xing Aficamten License Agreement, we
determined recognition of the milestone in 2021 was appropriate based on our expected initiation of a phase 3 clinical trial of aficamten
in oHCM and was recorded as a corresponding contract asset in other current assets in our consolidated balance sheet as of December
31, 2021.
Research and development revenue from Ji Xing for 2023 and 2022 was $1.3 million and $0.9 million, respectively, related to
certain development cost reimbursements. We had no research and development revenue from Ji Xing in 2021.
We had accounts receivable from Ji Xing of $0.3 million as of December 31, 2023 and $0.1 million as of December 31, 2022.
Royalty Purchase Agreement
On July 14, 2020, we entered the RTW Royalty Purchase Agreement with RTW Royalty Holdings, pursuant to which we sold
our 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. On March 31, 2021, RTW Royalty Holdings assigned its rights and obligations under the RTW Royalty Purchase
Agreement to its affiliate, RTW ICAV. We understand that on April 18, 2022, RTW ICAV and MyoKardia, Inc. entered into agreements,
which purported to assign all of RTW ICAV's rights, title and interest to the Mavacamten Royalty to MyoKardia, Inc., and on April 25,
2022, we entered into a tripartite agreement with RTW ICAV and MyoKardia, Inc. acknowledging the release and discharge of any
further obligations by us or MyoKardia, Inc. in connection to the Mavacamten Royalty.
The allocation of the consideration for the 2020 RTW Transactions resulted in $87.0 million being allocated to the RTW Royalty
Purchase Agreement representing its fair value. The $87.0 million was initially recorded as deferred revenue. On April 25, 2022, as
discussed above, we entered into a tripartite agreement with RTW ICAV and MyoKardia, Inc. acknowledging the release and discharge
of any further obligations by us or MyoKardia, Inc. in connection to the Mavacamten Royalty. As a result of the full extinguishment of
the Mavacamten Royalty, we recognized revenue of $87.0 million in 2022.
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Astellas
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our strategic alliance with Astellas to advance novel therapies for diseases and medical conditions associated with skeletal muscle
impairment and weakness commenced in 2013 under the Astellas Agreement.
On April 23, 2020, we and Astellas entered into the two agreements referenced below which, taken together, amend and restate
the Company’s research, development and commercialization collaboration with Astellas under the Astellas Agreement.
Fast Skeletal Regulatory Activator Agreement
The Company and Astellas entered into the Astellas FSRA Agreement on April 23, 2020. 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 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 agreed to pay one-third of the out-of-pocket clinical development costs which may
be incurred in connection with the Company’s Phase 3 clinical trial of reldesemtiv in ALS, up to a maximum contribution by Astellas
of $12 million. Astellas also agreed to non-cash contributions to the Company, which included the transfer of its existing inventories of
active pharmaceutical ingredient of reldesemtiv and CK-601. As of December 31, 2023, we have billed and collected from Astellas up
to the maximum contribution of $12.0 million. On March 31, 2023, we announced that we discontinued COURAGE-ALS, our Phase 3
clinical trial of reldesemtiv in patients with ALS, and COURAGE-ALS OLE.
Research and development revenue from Astellas for 2023, 2022, and 2021 was $2.7 million, $5.7 million, and $3.2 million,
respectively.
We had no accounts receivable from Astellas as of December 31, 2023 and 2022.
Amgen
On November 23, 2020, we received written notice of termination from Amgen of the Amgen Agreement pertaining to the
discovery, development and commercialization of novel small molecule therapeutics, including omecamtiv mecarbil, a novel cardiac
myosin activator, and CK-136 (formerly AMG 594), a novel cardiac troponin activator. The termination of the Amgen Agreement was
effective May 20, 2021.
We recognized 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 terminated effective May 20, 2021. Research and
development revenue from Amgen was $7.4 million in 2021 and consisted of reimbursement of costs we incurred related to
METEORIC-HF. There was no research and development revenue from Amgen in 2023 and 2022.
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.
We primarily apply the market approach for recurring fair value measurements and endeavor 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.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
U.S. Government agency securities
Commercial paper
Corporate obligations
Money market funds
U.S. Treasury securities
U.S. Treasury securities backed
repurchase agreements
U.S. Government agency securities
Foreign government agency securities
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
Level 2
Level 2
$
$
$
$
December 31, 2023
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
77,429
34,625
175,301
252,956
92,384
632,695
$
$
— $
13
87
156
103
359
$
Fair
Value
77,429
— $
34,623
(15)
175,255
(133)
253,053
(59)
(142)
92,345
(349) $ 632,705
December 31, 2022
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
45,887
172,568
16,003
129,174
7,599
329,359
128,594
829,184
$
$
Fair
Value
45,887
171,466
— $
—
— $
(1,102)
—
12
—
28
—
40
$
—
16,003
128,366
(820)
7,530
(69)
328,956
(431)
(1,209)
127,385
(3,631) $ 825,593
No credit losses on debt securities were recognized in 2023 or 2022. 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.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
Right-of-use assets, finance lease
Total property and equipment
Less: Accumulated depreciation
December 31,
2023
2022
$
$
18,839
3,263
6,061
66,874
220
1,839
97,096
(28,348)
68,748
$
$
18,490
3,900
6,056
65,912
741
2,448
97,547
(17,094)
80,453
Depreciation expense was $11.9 million, $5.8 million, and $2.3 million for 2023, 2022, and 2021, respectively.
Our accrued liabilities were as follows (in thousands):
Accrued liabilities:
Clinical and preclinical costs
Compensation related
Other accrued expenses
Total accrued liabilities
December 31,
2023
2022
$
$
5,880
29,255
7,506
42,641
$
$
16,105
21,767
6,224
44,096
We sponsor a 401(k) defined contribution plan covering all employees and contributed $2.5 million, $1.8 million, and $1.1 million
to this plan in 2023, 2022, and 2021, respectively.
Note 6 — Agreements with Royalty Pharma
On January 7, 2022, we announced that we had entered into the 2022 RPI Transactions with affiliates of Royalty Pharma
International plc.
The RP Loan Agreement and the RP Aficamten RPA described below, are determined to be debt instruments subsequently
measured at amortized cost and were entered into with parties that were at the time of our entry into the 2022 RPI Transactions affiliated
and in contemplation of one another. We used the relative fair value method and made separate estimates of the fair value of each
freestanding financial instrument and then allocated the proceeds in proportion to those fair value amounts. Arrangement consideration
for the RP Loan Agreement and the RP Aficamten RPA totaled $150 million, consisting of the two $50 million upfront payments for
the signing of the RP Loan Agreement and the RP Aficamten RPA and milestone of $50 million for initiation of the first pivotal trial in
oHCM for aficamten that was deemed probable at the signing of the agreements.
The initial consideration was allocated as follows (in thousands):
Fair Value
Proceeds
Allocation
Units of Accounting:
Revenue Participation Right Purchase
Agreement
Development Funding Loan
Agreement
Total consideration
$
$
69,498
46,887
116,385
$
$
92
100,000
50,000
150,000
$
$
89,571
60,429
150,000
Table of Contents
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2022 RP Loan Agreement
Under the RP Loan Agreement, we were initially entitled to receive up to $300.0 million in term loans, $50.0 million of which
was disbursed to us on closing and the remaining $250.0 million scheduled to have been available to us upon our satisfaction of
customary disbursement conditions and certain development conditions by specific deadlines, as follows:
•
•
•
•
$50.0 million of tranche 2 term loans during the one year period following the receipt on or prior to March 31, 2023 of
marketing approval from FDA of omecamtiv mecarbil;
$25.0 million of tranche 3 term loans during the one year period following the commercial availability of a diagnostic test
measuring levels of omecamtiv mecarbil to support the final FDA label language applicable to such drug, subject to such
commercial availability and the conditions to the tranche 2 term loans having occurred on or prior to March 31, 2023;
$75.0 million of tranche 4 term loans during the one year period following the receipt on or prior to September 30, 2024 of
positive results from SEQUOIA-HCM, the Phase 3 trial for aficamten; and
$100.0 million of tranche 5 term loans during the one year period following the acceptance by the FDA on or prior to March
31, 2025 of an NDA for aficamten, subject to the conditions to the tranche 4 term loans having occurred on or prior to
September 30, 2024.
As a result of our receipt of a CRL on February 28, 2023, in connection to our NDA for omecamtiv mecarbil, we have not satisfied
the conditions to the availability of the tranche 2 and tranche 3 loans under the RP Loan Agreement.
In December 2023, we announced positive topline results from SEQUOIA-HCM, the Phase 3 trial for aficamten. This entitled us
to receive $75.0 million under tranche 4 during the one year period following the receipt of the positive results and requires us to
complete a minimum mandatory draw of at least $50.0 million of the $75.0 million available.
The remaining $100.0 million under tranche 5 remains available for disbursement to us, subject to satisfaction of the conditions
described above.
Each term loan under the RP Loan Agreement matures on the 10 year anniversary of the funding date for such term loan and is
repayable in quarterly installments of principal, interest and fees commencing on the last business day of the seventh full calendar
quarter following the calendar quarter of the applicable funding date for such term loan, with the aggregate amount payable in respect
of each term loan (including interest and other applicable fees) equal to 190% of the principal amount of the term loan for the tranche
1, tranche 4 and tranche 5 term loans and 200% of the principal amount of the term loan for tranche 2 and tranche 3 term loans (such
amount with respect to each term loan, “Final Payment Amount”). We accounted for amounts initially drawn under the RP Loan
Agreement using the effective interest method which resulted in an effective interest rate of 7.65% over the ten-year term. As of the date
of the prepayment or maturity of the term loan (or the date such prepayment or repayment is required to be paid), we will be required to
pay an additional amount equal to $34.6 million accreted over the term of the loan. We have made our first payment in the fourth quarter
of 2023.
We may prepay the term loans in full (but not in part) at any time at our option by paying an amount equal to the unpaid portion
of Final Payment Amount for the outstanding term loans under the RP Loan Agreement; provided that if the conditions for either the
tranche 4 term loans or the tranche 5 term loans have been met, we must have borrowed at least $50 million principal amount of the
tranche 4 or 5 term loans. In addition, the term loans under the RP Loan Agreement are repayable in full at the option of either us or the
lender in an amount equal to the unpaid portion of Final Payment Amount for the outstanding term loans upon a change of control of
Cytokinetics.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Future minimum payments under the existing borrowing under RP Loan Agreement are (in thousands):
Years ending December 31:
2024
2025
2026
2027
2028
Thereafter
Future minimum payments
Less: Unamortized interest and loan costs
Term Loan, net
$
$
10,080
11,520
11,520
11,520
11,520
37,440
93,600
(25,136)
68,464
As of December 31, 2023, the estimated fair value of our RP Loan Agreement was $59.9 million. The fair value was estimated
based on Level 3 inputs.
Concurrent with our entry into the RP Loan Agreement discussed above, we terminated the Term Loan Agreement with Silicon
Valley Bank and Oxford Finance LLC and repaid all amounts outstanding thereunder as further described in Note 7.
2022 RP Aficamten Royalty Purchase Agreement
In addition, on January 7, 2022, we entered into the RP Aficamten RPA with RPI ICAV, pursuant to which RPI ICAV purchased
rights to certain revenue streams from net sales of pharmaceutical products containing aficamten by us, our affiliates and our licensees
in exchange for up to $150.0 million in consideration, $50.0 million of which was paid on the closing date, $50.0 million of which was
paid to us in March 2022 following the initiation of the first pivotal trial in oHCM for aficamten, and $50.0 million of which was paid
to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten. The RP Aficamten RPA also
provides that the parties will negotiate terms for additional funding if we achieve proof of concept results in certain other indications for
aficamten, with a reduction in the applicable royalty if we and RPI ICAV fail to agree on such terms in certain circumstances.
Pursuant to the RP Aficamten RPA, RPI ICAV purchased the right to receive a percentage of net sales equal to 4.5% for annual
worldwide net sales of pharmaceutical products containing aficamten up to $1 billion and 3.5% for annual worldwide net sales of
pharmaceutical products containing aficamten in excess of $1 billion, subject to reduction in certain circumstances. Our liability to RPI
ICAV is referred to as the “RP Aficamten Liability”.
We account for the RP Aficamten Liability as a liability primarily because we have significant continuing involvement in
generating the related revenue stream from which the liability will be repaid. If and when aficamten is commercialized and royalties
become due, we will recognize the portion of royalties paid to RPI ICAV as a decrease to the RP Aficamten Liability and a corresponding
reduction in cash.
The carrying amount of the RP Aficamten Liability is based on our estimate of the future royalties to be paid to RPI ICAV over
the life of the arrangement as discounted using an imputed rate of interest. The imputed rate of interest on the carrying value of the RP
Aficamten Liability was approximately 24.8% as of December 31, 2023 and 22.4% as of December 31, 2022.
In 2023, we updated our analyses of the RP Aficamten RPA to reflect our assumptions resulting from ongoing global market
research and to reflect other adjustments in connection with our anticipated commercialization, including the additional consideration
of $50.0 million which was paid to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten.
Our estimates regarding the amount of future royalty payments under the RP Aficamten RPA changed from the fourth quarter of 2022
due to changes in management’s estimates of unobservable inputs related to market conditions and timing to include projections of
future royalty payments. The resulting probability-adjusted sales forecast for aficamten has increased year over year mainly due to the
receipt of positive topline results from SEQUOIA-HCM, the Phase 3 trial for aficamten, in December 2023.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The change in estimates are accounted for on a prospective basis in our liability calculation and resulted in changes in our imputed
interest rate and non-cash interest expense from 22.4% and $5.2 million in the fourth quarter of 2022, 22.4% and $5.4 million in the
first quarter of 2023, 19.0% and $4.9 million in the second quarter of 2023, 18.0% and $5.4 million in the third quarter of 2023, to 24.8%
and $9.8 million in the fourth quarter of 2023. The non-cash interest expense was $25.5 million and $15.5 million in 2023 and 2022,
respectively. In 2023, the change in estimate increased our non-cash interest expense and net loss by $2.0 million. The change in
accounting estimate increased the net loss per share by $0.02 in 2023.
2017 RP Omecamtiv Mecarbil Royalty Purchase Agreement
In February 2017, we entered into the RP OM RPA pursuant to which we sold a portion of our right to receive royalties from
Amgen on future net sales of omecamtiv mecarbil to RPFT for a one-time payment of $90 million, which is non-refundable even if
omecamtiv mecarbil is never commercialized. Concurrently, we entered into a common stock purchase agreement with RPFT through
which RPFT purchased 875,656 shares of the Company’s common stock for $10.0 million. We allocated the consideration and issuance
costs on a relative fair value basis to our liability to RPFT related to sale of future royalties under the RP OM RPA (the “RP OM
Liability”) and the common stock sold to RPFT, which resulted in the RP OM Liability being initially recognized at $92.3 million. The
RP OM RPA provides for the sale of a royalty to RPFT of 4.5% on worldwide net sales of omecamtiv mecarbil, subject to a potential
increase of up to an additional 1% under certain circumstances. As a result of our receipt of a CRL on February 28, 2023 in connection
to our NDA for omecamtiv mecarbil, pursuant to the terms of the RP OM RPA, the applicable royalty rate will increase to a maximum
of 5.5% if omecamtiv approval obtains FDA approval at any time after June 30, 2023.
As a result of the termination of the Amgen Agreement and pursuant to our obligations under the RP OM RPA, we and RPFT
amended the RP OM RPA on January 7, 2022 to preserve RPFT’s rights under the RP OM RPA by providing for direct payments by us
to RPFT of up to 5.5% of our and our affiliates and licensees worldwide net sales of omecamtiv mecarbil. The RP OM RPA, as amended,
had no impact on the original accounting for the $92.3 million associated with the RP OM Liability established in February 2017.
We account for the RP OM Liability as a liability primarily because we have significant continuing involvement in generating
the related revenue stream from which the liability will be repaid. If and when omecamtiv mecarbil is commercialized and royalties
become due, we will recognize the portion of royalties paid to RPFT as a decrease to the RP OM Liability and a corresponding reduction
in cash.
The carrying amount of the RP OM Liability is based on our estimate of the future royalties to be paid to RPFT 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 carring value of the RP OM Liability was approximately 0.1% as of December 31, 2023 and 8.5% as of
December 31, 2022.
In 2023, we updated our analyses of the RP OM RPA to reflect our current assumptions resulting from ongoing global market
research and to reflect other adjustments in connection with our anticipated commercialization, including the result of our receipt of a
CRL in connection to our NDA for omecamtiv mecarbil. As a consequence of our receipt of the CRL from FDA, the royalty rate under
the RP OM RPA will increase to no more than 5.5%. The resulting probability-adjusted sales forecast for omecamtiv mecarbil has
decreased year over year because commercialization and sales of omecamtiv mecarbil will be delayed.
Changes in estimates are accounted for on a prospective basis in our liability calculation and resulted in changes in our imputed
interest rate and non-cash interest expense from 8.5% and $4.0 million in the fourth quarter of 2022, 1.9% and $0.9 million in the first
quarter of 2023, 2.9% and $1.4 million in the second and third quarter of 2023, and to 0.1% and $0.1 million in the fourth quarter of
2023, respectively. The non-cash interest expense was $3.9 million, $16.2 million, and $12.9 million in 2023, 2022, and 2021,
respectively. In 2023, the change in estimate decreased our non-cash interest expense and net loss by $12.8 million. The change in
accounting estimate reduced the net loss per share by $0.13 in 2023.
95
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Accounting for the Royalty Pharma Royalty Purchase Agreements
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 RP OM Liability and the RP
Aficamten Liability and the effective interest rate.
There are a number of factors that could materially affect the amount and timing of royalty payments, a number of which are not
within our control. The RP OM Liability and the RP Aficamten Liability are recognized using significant unobservable inputs. The
estimates of future royalties requires the use of several assumptions such as: the probability of clinical success, the probability of
regulatory approval, the estimated date of a product launch, estimates of eligible patient populations, estimates of prescribing behavior
and patient compliance behavior, estimates of pricing, payor reimbursement and coverage, and sales ramp. A significant change in
unobservable inputs could result in a material increase or decrease to the effective interest rate of the RP OM Liability and the RP
Aficamten Liability.
We recorded $50.0 million of additional consideration associated with the 2022 RP Aficamten Royalty Purchase Agreement upon
receipt of the cash in the third quarter of 2023.
We review our assumptions on a regular basis and our estimates may change in the future as we refine and reassess our
assumptions.
Changes to the RP Aficamten Liability and the RP OM Liability are as follows (in thousands):
Beginning balance, January
1
Initial carrying value
Additional consideration
Interest accretion
Amortization of issuance
costs
Ending balance, December
31
RP Aficamten Liability
2022
2023
2023
RP OM Liability
2022
2021
$
105,117
$
— $
195,384
$
179,072
$
166,068
—
50,000
25,474
—
89,571
—
15,546
—
—
—
3,888
112
—
—
16,196
116
—
—
12,892
112
$
180,591
$
105,117
$
199,384
$
195,384
$
179,072
Note 7 — Debt
Silicon Valley Bank and Oxford Finance Term Loans
Prior to January 7, 2022, we maintained $45.0 million aggregate principal amount of the Term Loan Agreement with Silicon
Valley Bank and Oxford Finance LLC.
The Term Loan Agreement was terminated, and all amounts thereunder repaid in connection to our entry into that certain RP
Loan Agreement, between us and RPDF, as further described above.
As a result of the termination of the Term Loan Agreement and the repayment to the Lenders, in 2022, we recorded $2.7 million
in loss on debt extinguishment in the consolidated statements of operations and comprehensive loss, consisting of the premium on debt
repayments and the write-off of the remaining term loan fees and debt issuance costs.
Interest expense for the Term Loan Agreement was immaterial for 2022 because it represented approximately one week of interest
before extinguishment. Interest expense for the Term Loan Agreement was $4.8 million for 2021.
96
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Convertible Notes
CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On November 13, 2019, we issued $138.0 million aggregate principal amount of 2026 Notes. On July 6, 2022, we issued $540.0
million aggregate principal amount of 2027 Notes and used approximately $140.3 million of the net proceeds from the offering of 2027
Notes and issued 8,071,343 shares of common stock to repurchase approximately $116.9 million aggregate principal amount of the 2026
Notes pursuant to privately negotiated exchange agreements entered into with certain holders of the 2026 Notes concurrently with the
pricing of the offering of the 2027 Notes. As a result of the partial repurchase of the 2026 Notes, the Company recorded an inducement
loss of $22.2 million, consisting of the difference between the consideration to the holders pursuant to the exchange agreements and the
if-converted value of the 2026 Notes under the original terms. As of December 31, 2023, there remain $21.1 million aggregate principal
amount of 2026 Notes outstanding.
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 we entered into with U.S. Bank
National Association, as trustee. The 2026 Notes will mature on November 15, 2026, unless earlier repurchased or redeemed by us or
converted at the option of the holders. We may redeem the 2026 Notes prior to the maturity date but we are 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), we 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 2026 Notes are convertible at December 31, 2023 at the option of the holder.
The 2026 Notes will be redeemable, in whole or in part, at our 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 our 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 we may send the related redemption notice; and (2) the trading day immediately before the
date we may send such notice. If a “fundamental change” (as defined in the indenture agreement, dated November 13, 2019 between us
and U.S. Bank National Association, as trustee, as supplemented by the first supplemental indenture dated as of November 13, 2019
between us and such trustee) occurs, then, subject to certain exceptions, holders may require us 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.
The following table presents the total amount of interest cost recognized relating to the 2026 Notes (in thousands):
Contractual interest expense
Accretion of debt discount
Amortization of debt issuance costs
Total interest expense recognized
2023
Years Ended December 31,
2022
2021
844
—
108
952
$
$
3,265
—
355
3,620
$
$
5,520
5,907
59
11,486
$
$
The effective interest rate of the 2026 Notes was 4.6% as of December 31, 2023 and 2022 and 12.5% as of December 31, 2021.
As of December 31, 2023. the unamortized debt issuance cost for the 2026 Notes was $0.3 million and will be amortized over
approximately 2.9 years.
97
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The 2027 Notes ($540.0 million of aggregate principal) are our senior, unsecured obligations and are (i) senior in right of payment
to our future indebtedness that is expressly subordinated to the 2027 Notes in right of payment; (ii) equal in right of payment with all of
our indebtedness that is not so subordinated (including the 2026 Notes); (iii) effectively subordinated to our existing and future secured
indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and
future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any,
of our subsidiaries. The net proceeds of the 2027 Notes were approximately $523.6 million after deducting issuance costs related to the
2027 Notes. The 2027 Notes bear interest at a rate of 3.5% per year, payable semiannually in arrears on January 1 and July 1 of each
year, beginning on January 1, 2023. The 2027 Notes will mature on July 1, 2027, unless earlier converted, redeemed or repurchased.
The 2027 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock,
at our election, based on the applicable conversion rate(s). The initial conversion rate for the 2027 Notes is 19.5783 shares of our
common stock per $1,000 principal amount of such Notes, which is equivalent to an initial conversion price of approximately $51.08
per share. Holders of the 2027 Notes may convert all or any portion of their convertible notes at their option only in the following
circumstances: (i) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on
September 30, 2022, if the last reported sale price per share of our common stock, $0.001 par value per share, exceeds 130% of the
conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and
including, the last trading day of the immediately preceding calendar quarter; (ii) during the five 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 2027 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 our common stock on such trading day and the conversion rate on such trading day; (iii) upon the
occurrence of certain corporate events or distributions on our common stock, as described in the 2027 Indenture; (iv) if we call such
2027 Notes for redemption; and (v) at any time from, and including, March 1, 2027 until the close of business on the scheduled trading
day immediately before the maturity date.
We may not redeem the 2027 Notes at our option at any time before July 7, 2025. The 2027 Notes will be redeemable, in whole
or in part (subject to the “Partial Redemption Limitation” (as defined in the 2027 Indenture)), at our option at any time, and from time
to time, on or after July 7, 2025 and, in the case of a partial redemption, on or before the 60th scheduled trading day immediately before
the maturity date, at a cash redemption price equal to the principal amount of the 2027 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 our common stock exceeds
130% of the conversion price on (i) 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 we may send the related redemption notice; and (ii) the trading
day immediately before the date we may send such notice. In addition, calling any of the 2027 Notes for redemption will constitute a
Make-Whole Fundamental Change with respect to that convertible note, in which case the conversion rate applicable to the conversion
of that Note will be increased in certain circumstances if it is converted after it is called for redemption. The conversion rate for the 2027
Notes shall not exceed 25.4517 shares per $1,000 principal amount of such Notes, subject to certain customary anti-dilution adjustments
(as defined in the 2027 indenture). Pursuant to the Partial Redemption Limitation, we may not elect to redeem less than all of the
outstanding 2027 Notes unless at least $75.0 million aggregate principal amount of 2027 Notes are outstanding and not subject to
redemption as of the time we may send the related redemption notice.
If a “Fundamental Change” (as defined in the 2027 Indenture) occurs, then, subject to a limited exception for certain cash mergers,
noteholders may require us to repurchase their 2027 Notes at a cash repurchase price equal to the principal amount of the 2027 Notes to
be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of
Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our
common stock.
The following table presents the total amount of interest cost recognized relating to the 2027 Notes (in thousands):
Contractual interest expense
Amortization of debt issuance costs
Total interest expense recognized
$
$
2023
2022
18,900
3,074
21,974
$
$
9,188
1,542
10,730
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The effective interest rate of the 2027 Notes was 4.2% as of December 31, 2023 and 2022. As of December 31, 2023, the
unamortized debt issuance cost for the 2027 Notes was $11.8 million and will be amortized over approximately 3.6 years. In 2023, the
conditions allowing holders of the Notes to convert were not met. As a result, the 2027 Notes are not convertible at December 31, 2023.
Future minimum payments under the 2027 Notes and 2026 Notes are (in thousands):
Years ending December 31:
2024
2025
2026
2027
Future minimum payments
Less: Interest
Convertible notes, principal amount
Less: Debt issuance costs on the convertible notes
Net carrying amount of the convertible notes
$
$
2027 Notes
2026 Notes
Total
18,900
18,900
18,900
558,900
615,600
(75,600)
540,000
(11,799)
528,201
$
$
845
845
21,978
—
23,668
(2,536)
21,132
(344)
20,788
$
$
19,745
19,745
40,878
558,900
639,268
(78,136)
561,132
(12,143)
548,989
As of December 31, 2023, the estimated fair value of the 2027 Notes and 2026 Notes was $990.4 million and $168.4 million,
respectively, and was based upon observable, Level 2 inputs, including pricing information from recent trades of the convertible notes.
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. On October 24, 2022, we entered into a termination agreement in connection to
the capped call transactions and thereby released the capped call counterparties of any further obligations in relation to the capped call
transactions. As a result of the termination agreement and unwinding of the capped call transactions, we received gross proceeds of
$26.4 million in cash.
Note 8 — Stockholders’ Equity
Equity Incentive Plan
Our 2004 Plan provides for us to grant incentive stock options, non-statutory 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.
In May 2022, our stockholders approved an amendment to the 2004 Plan to increase the number of authorized shares reserved
for issuance under the 2004 Plan by an additional 6.0 million shares. In May 2022 and February 2023, our 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 an additional
1.6 million shares and 1.0 million shares, respectively, for inducement grants to new employees. As of December 31, 2023, the total
authorized shares under the 2004 Plan available for grant was 7.6 million.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our annual grant of stock-based compensation takes place during the first quarter of each year. Stock option activity in 2023,
2022, and 2021 was as follows:
Stock Options
Outstanding
Weighted
Average Exercise
Price per Share
Weighted
Average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic Value
(in millions)
Balance at December 31, 2020
Granted
Exercised
Forfeited
Balance at December 31, 2021
Granted
Exercised
Forfeited
Balance at December 31, 2022
Granted
Exercised
Forfeited
Balance at December 31, 2023
Exercisable at December 31, 2023
8,501,949
2,513,350
(1,346,194)
(296,146)
9,372,959
3,424,150
(1,389,031)
(415,675)
10,992,403
2,447,225
(1,200,895)
(458,503)
11,780,230
7,279,310
$
$
$
$
$
10.02
22.43
9.01
14.56
13.35
39.79
10.13
28.94
22.13
38.59
12.13
35.01
26.07
19.29
6.8
5.7
$
$
676.4
467.3
We have elected to account for forfeitures as they occur. 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 $33.8 million for 2023, $46.3 million for 2022,
and $29.3 million for 2021. The intrinsic value of stock options outstanding at December 31, 2023 was $676.4 million.
RSU, including PSU, activity in 2023, 2022, and 2021 was as follows:
Balance at December 31, 2020
Granted
Exercised
Forfeited
Balance at December 31, 2021
Granted
Exercised
Forfeited
Balance at December 31, 2022
Granted
Exercised
Forfeited
Balance at December 31, 2023
Number of
Restricted
Stock Units
Weighted
Average Award
Date Fair Value
per Share
1,116,642
1,093,450
(606,240)
(189,025)
1,414,827
780,519
(707,772)
(273,310)
1,214,264
965,863
(721,215)
(84,290)
1,374,622
$
$
$
$
11.88
21.69
11.13
21.32
18.52
37.69
16.72
26.65
30.07
39.09
27.40
35.46
37.47
RSUs generally vest annually over two to three years. For 2023, 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 $28.6 million.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Performance Stock Units
In May 2021, the Compensation Committee granted a total of 375,000 PSUs to certain employees with a weighted average grant
date fair value of $25.32 per unit. The fair value of the PSUs was determined on the grant date based on the fair value of the Company’s
common stock at such time. The PSUs consist of two equal tranches with 50% of each tranche vesting upon achieving certain
performance criteria and 50% vesting at the one-year anniversary of such achievement provided the recipient has been continuously
employed by the Company. The first tranche vests upon certification by the Compensation Committee that the NDA for omecamtiv
mecarbil has been filed and accepted by the FDA by December 31, 2021 or June 30, 2022 and the second tranche vests upon certification
by the Compensation Committee that the FDA approval of the NDA is with an approved label that is consistent with the expectations
underlying the Company’s commercial launch plans for omecamtiv mecarbil in effect immediately prior to such approval by June 30,
2022 or December 31, 2022.
In 2022, the performance target for the first tranche of PSUs was met. As a result, the Company recognized expense of $0.7
million in 2022 for the first tranche of PSUs. The performance target for the second tranche of PSUs was not met, and therefore, such
second tranche of PSUs consisting of 182,500 PSUs were deemed forfeited as of December 31, 2022. No expense was recognized for
the second tranche.
Employee Stock Purchase Plan
Under our 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 Company’s 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 136,065 shares at an average price of $30.43 per share during 2023, 98,153 shares at an average price of $32.89 per
share in 2022, and 108,780 shares at an average price of $16.33 per share in 2021 pursuant to the ESPP. At December 31, 2023, we
have 103,822 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:
Year Ended December
31, 2023
Year Ended December
31, 2022
Year Ended December
31, 2021
Risk-free interest rate
Volatility
Expected term in years
Expected dividend yield
Options
3.57% to
4.6%
67%
6.3
0%
ESPP
5.33% to
5.44%
Options
1.41% to
4.01%
ESPP
1.63% to
4.65%
49% to 50% 66% to 67% 64% to 65% 66% to 67% 66% to 67%
0.5
0%
Options
0.58% to
1.28%
6.3 to 6.4
0%
6.4 to 6.5
0%
0.5
0%
0.5
0%
0.05%
ESPP
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 our stock trading history and our own historical exercise 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.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock-based compensation expense for 2023, 2022, and 2021 was as follows (in thousands):
Research and development
General and administrative
2023
Years Ended December 31,
2022
2021
$
$
32,134
39,931
72,065
$
$
19,100
28,753
47,853
$
$
10,463
16,369
26,832
As of December 31, 2023, we expect to recognize $102.2 million of unrecognized compensation cost related to unvested stock
options over a weighted-average period of 2.5 years, $29.2 million of unrecognized compensation cost related to unvested restricted
stock over a weighted-average period of 1.6 years.
Warrants
In May 2022, Silicon Valley Bank exercised 16,901 warrants issued pursuant to the Term Loan Agreement with a strike price of
$7.10 per share and elected the cashless settlement method. In June 2022, Silicon Valley Bank exercised additional 9,226 warrants and
8,638 warrants with a strike price of $9.76 per share and $10.42 per share, respectively. Accordingly, in 2022, we issued to Silicon
Valley Bank a total of 28,306 shares of our common stock.
As of December 31, 2023 and 2022, we had the following warrants outstanding to purchase shares of our common stock:
Issuance Date
January 2020
Expiration Date
January 2030
Exercise Price
$
10.42
Warrants
Outstanding at
December 31, 2022
12,957
Warrants
Outstanding at
December 31, 2023
12,957
The remaining 12,957 warrants outstanding at December 31, 2023 were exercised in January 2024.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.
On March 1, 2023, we entered into the Amended ATM Facility, with Cantor, under which we may offer and sell, from time to
time at our sole discretion, shares of the Common Stock having an aggregate offering price of up to $300.0 million through Cantor, as
sales agent. The Amended ATM Facility amends, restates and supersedes the Controlled Equity Offering Sales Agreement dated as of
March 6, 2019 between the Company and Cantor.
Cantor may sell the Common Stock by any method that is deemed to be an “at the market offering” as defined in Rule 415 of the
Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or any other trading market for
our common stock. Cantor will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions
from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay Cantor a
commission of up to 3.0% of the aggregate gross sales proceeds of any common stock sold through Cantor under the Amended ATM
Facility, and also have provided Cantor with customary indemnification rights.
In 2023, we issued 5,016,170 shares of our common stock for net proceeds of $164.2 million under the Amended ATM Facility.
Note 9 — Commitments and Contingencies
Operating Leases
In July 2019, we entered into the Oyster Point Lease of office and laboratory space at a facility located in South San Francisco,
California, and we entered into amendments to the Oyster Point Lease in 2020, 2021, 2022, and 2023. The Oyster Point Lease
commenced on March 31, 2021 and has an expiration date of October 31, 2033.
In January 2022, we entered into a series of lease agreements with the sub-landlord and landlord and leased an office space at a
facility located in Radnor, Pennsylvania (the "Radnor Lease"). The Radnor Lease commenced on September 1, 2022, when the leasehold
improvements were substantially completed, and we gained control over the use of the underlying assets. The Radnor Lease has an
expiration date of July 31, 2027 with one five-year option to extend the lease.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The weighted-average remaining lease term of the operating leases was 9.7 years, 10.7 years, and 11.7 years as of December 31,
2023, 2022, and 2021, respectively. The weighted-average discount rate used to determine the related operating lease liabilities was
8.7% as of December 31, 2023 and 2022, and 10.0% as of December 31, 2021.
Cash paid for operating leases for the years ended December 31, 2023, 2022, and 2021 was $17.8 million, $24.1 million, and
$6.1 million, respectively, and was included in net cash used in operating activities in our consolidated statements of cash flows.
Finance Leases
During the third quarter of 2021, we entered into a master lease agreement for laboratory equipment leases that commenced in
the fourth quarter of 2021. The leases have an initial term of 3 years, commenced through the second quarter of 2022 and expire in 2025.
The master lease agreement provides a purchase option with a bargain purchase price, which we expect to exercise at the end of the
term. The Company classified the leases as finance leases.
Finance leases are accounted for on the consolidated balance sheets with right-of-use assets and lease liabilities recognized in
property and equipment, other current liabilities, and other non-current liabilities, respectively. The finance lease cost is recognized as
a combination of the amortization expense for the right-of-use assets calculated on a straight-line basis over the five-year estimated
useful life for laboratory equipment and interest expense for the outstanding lease liabilities using the determined discount rates. As of
December 31, 2023, we have recognized finance lease right-of-use assets of $1.8 million, short-term finance lease liabilities of $1.0
million, and long-term finance lease liabilities of $0.2 million.
As of December 31, 2023, 2022, and 2021, the weighted average remaining lease term for the finance leases is 3.0 years, 4.0
years, and 4.9 years, respectively. The weighted average discount rate used to determine the finance lease liabilities is 9.5% as of
December 31, 2023, 2022, and 2021.
The cash paid for finance lease for the years ended December 31, 2023 and 2022 was $0.9 million and was included in financing
activities in our consolidated statement of cash flows. No cash was paid for finance lease in 2021.
Future minimum lease payments under non-cancellable leases as of December 31, 2023 is as follows (in thousands):
Years ending December 31:
2024
2025
2026
2027
2028
Thereafter
Total future minimum lease payments
Less: Imputed interest
Total lease liability
Operating Leases
18,738
$
19,563
20,180
20,514
20,738
109,981
209,714
(71,396)
138,318
$
$
$
Finance Leases
990
204
-
—
—
—
1,194
(51)
1,143
Rent expense for operating and finance leases was $22.1 million, $21.6 million, and $23.1 million for 2023, 2022, and 2021,
respectively.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 10 — Income Taxes
We did not record an income tax provision in 2023, 2022, and 2021 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
2023
Years Ended December 31,
2022
2021
21%
1%
0%
4%
(24)%
1%
(3)%
0%
21%
1%
0%
4%
(26)%
2%
(2)%
0%
21%
0%
(1)%
3%
(24)%
2%
(1)%
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
Total noncurrent deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Operating lease right-of-use assets
Unrealized Loss
Total noncurrent deferred tax liabilities
Less: Valuation allowance
Net deferred tax assets
As of December 31,
2023
2022
$
231,915
119,815
85,501
35,466
95,437
28,634
596,768
(6,842)
(17,392)
(6)
(24,240)
(572,528)
— $
202,459
98,292
68,366
23,950
48,047
28,901
470,015
(7,909)
(18,192)
—
(26,101)
(443,914)
—
$
$
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, 2023 and 2022. The valuation allowance increased by $128.6
million in 2023 and increased by $116.5 million in 2022.
At December 31, 2023 federal NOL carryforwards were $955.7 million, apportioned state NOL carryforwards before federal
benefits were $423.7 million, and foreign NOL carryforwards were $0.8 million. If not utilized, federal and state net operating loss
carryforwards incurred prior to 2018 will begin to expire in various amounts beginning 2024 and 2028, respectively, and the foreign net
operating loss carryforwards will begin to expire in 2030.
At December 31, 2023, tax credits of $126.3 million and $22.8 million for federal and California 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 2024. California based credit carryforwards do not expire.
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CYTOKINETICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In general, under 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
Increase related to prior year tax positions
Decrease related to prior year tax positions
Increase related to current year tax positions
Balance at the end of the year
$
$
18,355
—
(97)
6,974
25,232
$
$
11,295
4,438
(1,804)
4,426
18,355
$
$
10,522
—
(29)
802
11,295
2023
Years Ended December 31,
2022
2021
We are subject to federal and various state & local and foreign income tax examinations for all fiscal years with unutilized NOLs
and tax credit carryforwards. Included in the balance of unrecognized tax benefits as of December 31, 2023, 2022, and 2021 are $24.5
million, $17.7 million, and $10.3 million of tax benefits, respectively, that, if recognized, would result in adjustments to other tax
accounts, primarily deferred taxes.
The Inflation Reduction Act of 2022, or IRA, was signed into law on August 16, 2022. The bill was meant to address the high
inflation rate in the United States through various climate, energy, healthcare, and other incentives. These incentives are meant to be
paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a 1 percent new excise tax on stock
buybacks, additional IRS funding to improve taxpayer compliance, and others. The IRA provisions are effective for tax years beginning
after December 31, 2022. At this time, none of the IRA tax provisions are expected to have a material impact to our consolidated tax
provision for the year ending December 31, 2023. The Company will continue to closely monitor any effects from future legislation.
In October 2021, the Organization for Economic Co-operation and Development (“OECD”)/G20 finalized the significant
components of a two-pillar global tax reform plan, which has now been agreed to by the majority of OECD members. Pillar Two requires
multinational enterprises with annual global revenue exceeding €750 million to pay a global minimum tax of 15%. The Company does
not currently expect to meet the €750 million revenue threshold. The Company will continue to evaluate the potential impact on future
periods of the Pillar Two framework and the implementation of the Pillar Two rules in the jurisdictions in which it operates.
Note 11 — Subsequent Events
During the period January 1, 2024 through and inclusive of February 27, 2024, we sold 1,237,460 shares of our common stock
for net proceeds of $93.6 million under the Amended ATM Facility.
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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 SEC’s rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer, and interim principal 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 interim 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, 2023. Based on such evaluation, our principal executive officer and interim principal financial officer has concluded that,
as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s 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, and interim principal financial officer and Chief Accounting Officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of December 31, 2023 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, 2023.
Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements included in this
Annual Report and has issued an attestation 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 changes in our internal control 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, 2023 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the fourth quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the
Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms
are defined in Item 408 of Regulation S-K.
Interim Principal Financial Officer
As previously disclosed, effective February 23, 2024 (the “Resignation Date”), Ching W. Jaw resigned from the office of Senior
Vice President & Chief Financial Officer and from his employment with the Company. Effective as of the Resignation Date, Robert I.
Blum, the Company’s Chief Executive Officer, assumed the duties and responsibilities of the Company’s principal financial officer on
an interim basis while the Company conducts a search for a Chief Financial Officer. Mr. Blum, age 60, joined the Company in 1998 and
has served as the Company’s Chief Executive Officer and a member of the Company’s Board of Directors since January 2007. Additional
biographical information for Mr. Blum may be found in the Company’s definitive proxy statement on Schedule 14A filed with the
Securities and Exchange Commission on April 7, 2023.
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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, Incorporated’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control—Integrated 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, 2023, 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 2023 consolidated financial statements of the Company and our report dated February 28, 2024 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s 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 Management’s Annual Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s 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 company’s 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 company’s 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 company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any 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
San Jose, California
February 28, 2024
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ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
108
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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 2024 Annual Meeting of Stockholders, where it appears under
the headings “Board of Directors,” “Executive Officers,” and, if applicable, “Delinquent Section 16(a) Reports.”
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 investor relations website, ir.cytokinetics.com. We will disclose on our investor relations website any
waivers of, or amendments to, our Code of Ethics that applies to the Company's principal executive officer, principal financial officer,
principal accounting officer or any person performing similar functions within four business days following the date of such amendment
or waiver rather than filing a Current Report on Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2024 Annual
Meeting of Stockholders, where it appears under the heading “Executive Compensation” and “Director 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 2024 Annual
Meeting of Stockholders, where it appears under the headings “Security Ownership of Certain Beneficial Owners and Management”
and “Executive Compensation – Equity Compensation Plans at December 31, 2023.”
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 2024 Annual
Meeting of Stockholders, where it appears under the headings “Certain Business Relationships and Related Party Transactions” and
“Board of Directors – Independence of Directors.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2024 Annual
Meeting of Stockholders, where it appears under the headings “Proposal Three – Ratification of Selection of Ernst & Young LLP as our
Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2024.
109
Table of Contents
ITEM 15. EXHIBITS 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-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.
Exhibits
3.1
3.2
3.3
3.4
3.5
3.6
4.1
4.2
4.3
4.4
4.5
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
Certificate of Amendment of Amended
and Restated Certificate of Incorporation
Amended and Restated Bylaws.
Specimen Common Stock Certificate.
Form of Warrant Issuable to Oxford
Finance LLC pursuant to that certain Loan
and Security Agreement, dated as of May
17, 2019, by and among the Company,
Oxford Finance LLC and 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)
Indenture, dated July 6, 2022, between the
Company and U.S. Bank Trust Company,
National Association, as Trustee (including
the form of 3.50% Convertible Senior
Notes due 2027)
Filed
Herewith
Form
S-3
Incorporated by Reference
File No.
Filing Date
333-174869
June 13, 2011
10-Q
000-50633
August 4, 2011
8-K
8-K
000-50633
June 25, 2013
000-50633
May 20, 2016
10-Q
000-50633
August 3, 2023
8-K
10-Q
10-Q
000-50633 November 17, 2023
000-50633
May 9, 2007
000-50633
August 9, 2019
Exh.
No.
3.1
3.2
5.1
3.1
3.5
3.1
4.1
4.2
8-K
000-50633
November 13, 2019
4.1
8-K
000-50633
November 13, 2019
4.2
8-K
000-50633
July 6, 2022
4.1
110
Table of Contents
4.6
4.7
4.8
4.9
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+
10.14+
10.15+
10.16+
Description of Securities
Certificate of Designation
Certificate of Designation
Certificate of Change of Registered Agent
Lease, dated July 24, 2019, by and between
the Company and KR Oyster Point 1, LLC
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
Third Amendment
to Lease, dated
November 12, 2021, by and between the
Company and KR Oyster Point 1, LLC
Fourth Amendment to Lease, dated October
12, 2022, by and between the Company and
KR Oyster Point 1, LLC
Fifth Amendment to Lease, dated
November 27, 2023, by and between the
Company and KR Oyster Point 1, LLC
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
Form of Amendment No. 1 to Amended
and Restated Executive Employment
Agreements
Amended and Restated 2004 Equity
Incentive Plan
Amended and Restated 2015 Employee
Stock Purchase Plan
Form of Option Agreement (Employee
Annual Grant)
Form of Option Agreement (New Hire
Inducement)
Form of Option Agreement (Director
Annual Grant)
Form of Option Agreement (Director
Onboarding)
Form of Restricted Stock Unit Award
Agreement (Employee Annual Grant)
10-K
8-K
8-K
10-K
10-Q
000-50633
March 1, 2023
000-50633
April 18, 2011
000-50633
June 30, 2012
000-50633
March 1, 2023
4.6
4.5
4.1
4.9
000-50633
November 1, 2019
10.52
10-K
000-50633
February 26, 2021
10.59
10-K
000-50633
February 26, 2021
10.60
10-K
000-50633
February 25, 2022
10.4
10-K
000-50633
March 1, 2023
10.5
X
10-Q
000-50633
August 5, 2008
10.1
10-Q
000-50633
August 5, 2008
10.69
10-K
000-50633
March 12, 2009
10.68
10-K
000-50633
March 1, 2023
10.9
DEF 14A
000-50633
March 26, 2020
Appendix
A
10-K
000-50633
March 1, 2023
10.11
10-K
000-50633
March 1, 2023
10.12
10-K
000-50633
March 1, 2023
10.13
10-K
000-50633
March 1, 2023
10.14
10-K
000-50633
March 1, 2023
10.15
111
Table of Contents
10.17+
10.18+
10.19+
10.20#†
10.21#†
10.22#
10.23
10.24
10.25#†
10.26#
10.27#
Form of Restricted Stock Unit Award
Agreement (Employee Key Performer)
Form of Restricted Stock Unit Award
Agreement (Director Annual Grant)
Form of Executive Employment
Agreement between the Company and its
executive officers
License and Collaboration Agreement,
dated July 14, 2020, by and between the
Company and Ji Xing Pharmaceuticals
Limited
License and Collaboration Agreement,
dated December 20, 2021, by and between
the Company and Ji Xing Pharmaceuticals
Limited
Development Funding Loan Agreement,
dated January 7, 2022, by and among
Royalty Pharma Development Funding,
LLC and the Company
First Amendment to Development Funding
Loan Agreement, dated July 6, 2022, by
and among Royalty Pharma Development
Funding, LLC and the Company
Second Amendment to Development
Funding Loan Agreement, dated December
8, 2022, by and among Royalty Pharma
Development Funding, LLC and the
Company
Royalty Purchase Agreement, dated
February 1, 2017, by and between the
Company and RPI Finance Trust
Amendment No. 1 to Royalty Purchase
Agreement, dated January 7, 2022, by and
between the Company and RPI Finance
Trust
Revenue Participation Right Purchase
Agreement, dated January 7, 2022, by and
between the Company and Royalty Pharma
Investments 2019 ICAV
10.28+
Description of Director Compensation
10.29
10.30
23.1
Amended and Restated Controlled Equity
OfferingSM Sales Agreement, dated as of
March 1, 2023, by and between the
Company and Cantor Fitzgerald & Co.
Cytokinetics, Incorporated Executive
Severance Plan and Summary Plan
Description
Consent of independent registered public
accounting firm
10-K
000-50633
March 1, 2023
10.16
10-K
000-50633
March 1, 2023
10.17
10-K
000-50633
March 7, 2014
10.39
10-Q/A
000-50633
March 11, 2021
10.1
10-K
000-50633
February 25, 2022
10.14
10-K
000-50633
February 25, 2022
10.18
10-K
000-50633
March 1, 2023
10.22
10-K
000-50633
March 1, 2023
10.23
10-K
000-50633
March 6, 2017
10.44
10-K
000-50633
February 25, 2022
10.20
10-K
000-50633
February 25, 2022
10.21
10-Q
10-K
000-50633
November 4, 2022
10.1
000-50633
March 1, 2023
10.28
8-K
000-50633
October 3, 2023
10.1
112
X
Table of Contents
24.1
31.1
31.2
32.1
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
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 Accounting
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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)
Incentive Compensation Recoupment
Policy
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)
Inline XBRL Taxonomy Extension
Schema Document
Inline XBRL Taxonomy Extension
Calculation Linkbase Document
Inline XBRL Taxonomy Extension
Definition Linkbase Document
Inline XBRL Taxonomy Extension Label
Linkbase Document
Inline XBRL Taxonomy Extension
Presentation Linkbase Document
Cover Page Interactive Data File
(formatted as Inline XBRL in Exhibit 101)
X
X
X
X
X
X
X
X
X
X
X
X
# Portions of this Exhibit have been omitted as being immaterial and would be competitively harmful if publicly disclosed or is of the
type of information Cytokinetics treats as confidential.
† 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.
(1)
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.
113
Table of Contents
(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.
114
Table of Contents
SIGNATURES
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.
CYTOKINETICS, INCORPORATED
By:
/ S / ROBERT I. BLUM
Robert I. Blum
President, Chief Executive Officer and Director
Dated: February 28, 2024
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Robert I. Blum and Robert Wong, and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution,
for him or her 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/ ROBERT C. WONG
Robert C. Wong
/s/ JOHN T. HENDERSON
John T. Henderson, M.B. Ch.B.
/s/ MUNA BHANJI
Muna Bhanji
/s/ SANTO J. COSTA
Santo J. Costa
/s/ ROBERT A. HARRINGTON
Robert A. Harrington, M.D.
/s/ EDWARD M. KAYE
Edward M. Kaye, M.D.
/s/ B. LYNNE PARSHALL
B. Lynne Parshall
/s/ SANDFORD D. SMITH
Sandford D. Smith
/s/ WENDELL WIERENGA
Wendell Wierenga, Ph.D.
/s/ NANCY J. WYSENSKI
Nancy J. Wysenski
Date
February 28, 2024
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial
Officer)
Vice President, Chief Accounting Officer (Principal
Accounting Officer)
February 28, 2024
Chairman of the Board of Directors
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
Director
Director
Director
Director
Director
Director
Director
Director
115
[THIS PAGE INTENTIONALLY LEFT BLANK]
EXECUTIVE MANAGEMENT
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)
Prodromos Anthopoulos, M.D.
(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:43)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:73)(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)(cid:3)(cid:40)(cid:88)(cid:85)(cid:82)(cid:83)(cid:72)
Andrew Callos
Executive Vice President, Chief Commercial
(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
Daniel R. Casper
Vice President, Information Technology
Ajay Chawla, M.D., Ph.D.
Vice President, Translational Sciences
Steven M. Cook
Senior Vice President, Global Supply Chain and
Technical Operations
Joseph Dagher
Senior Vice President, Head of Europe
YulyMae DiNapoli
Vice President, Human Resources
Erin Donnelly
Vice President, Portfolio and Project
Management
Genie Dubuk
Vice President, Customer Experience
and Insights
John O. Faurescu, Esq.
Vice President, Associate General Counsel
and Corporate Secretary
Katia Finck
Vice President, Head of Market Access Europe
Stephen B. Heitner, M.D.
Vice President, Clinical Research and
Therapeutic Area Lead, Cardiovascular
John Jacoppi
Vice President, (cid:36)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)U.S. Marketing
Scott R. Jordan
Senior Vice President, Global Marketing
and Commercial Strategy
Daniel E. Kates, M.D., M.B.A.
(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: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)
Kari K. Loeser, J.D.
(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:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
(cid:45)(cid:72)(cid:909)(cid:3)(cid:47)(cid:82)(cid:87)(cid:93)
Vice President, Sales and Operations
Fady I. Malik, M.D., Ph.D., F.A.C.C.
Executive Vice President, Research and
Development
Lisa Meng, Ph.D.
Vice President, Biometrics
Bradley P. Morgan, Ph.D.
Senior Vice President, Research and
Non-Clinical Development
Anne M. Murphy, Ph.D.
Vice President, Biology
CORPORATE PROFILE
Christine Murray
Senior Vice President, Regulatory and Quality
Richey Neuman, M.D., M.P.H.
(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)
Stacy A. Rudnicki, M.D.
Vice President, Clinical Research and
Therapeutic Area Lead, Neuromuscular
Elisabeth A. Schnieders, Ph.D.
Senior Vice President, Business Development
Eric Terhaerdt
Senior Vice President, Development Operations
Norma Tom, Ph.D.
Vice President, Chemistry, Manufacturing
and Control
Megan Truong
Vice President, Quality
Diane Weiser
(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)(cid:3)(cid:36)(cid:909)(cid:68)(cid:76)(cid:85)(cid:86)
Robert C. Wong
(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)
Matt Yang
Vice President, Corporate Finance and
Financial Planning and Analysis
BOARD OF DIRECTORS
John T. Henderson, M.B., Ch.B.
Chairman, Cytokinetics, Incorporated, Former
(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:564)(cid:93)(cid:72)(cid:85)(cid:3)(cid:51)(cid:75)(cid:68)(cid:85)(cid:80)(cid:68)(cid:70)(cid:72)(cid:88)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:86)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)
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)(cid:3)
Cytokinetics, Incorporated
Muna Bhanji
Former Senior Vice President, Global Market
Access and Policy, Merck & Co., Inc.
Santo J. Costa
(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:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
Quintiles Transnational Corporation
Robert A. Harrington, M.D.
Cardiologist, Stephen and Suzanne Weiss Dean
of Weill Cornell Medicine and Provost for
(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)(cid:15)(cid:3)(cid:38)(cid:82)(cid:85)(cid:81)(cid:72)(cid:79)(cid:79)(cid:3)(cid:56)(cid:81)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:87)(cid:92)
Edward M. Kaye, M.D.
(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)(cid:3)(cid:54)(cid:87)(cid:82)(cid:78)(cid:72)(cid:3)(cid:55)(cid:75)(cid:72)(cid:85)(cid:68)(cid:83)(cid:72)(cid:88)(cid:87)(cid:76)(cid:70)(cid:86)(cid:15)(cid:3)(cid:918)(cid:81)(cid:70)(cid:17)
B. Lynne Parshall, Esq.
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:605)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
Ionis Pharmaceuticals
Sandford D. Smth
Former Executive Vice President,
Genzyme Corporation
Wendell Wierenga, Ph.D.
Former Executive Vice President,
Research and Development, Santarus, Inc.
Nancy Wysenski
Former Executive Vice President and Chief
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CORPORATE SECRETARY
John O. Faurescu, Esq.
Cytokinetics, Incorporated
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
Redwood City, California
CORPORATE COUNSEL
Cooley LLP
Palo Alto, California
REGISTRAR AND TRANSFER AGENT
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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Phone (800) 837-8091
Foreign Shareholders (201) 680-6578
computershare.com/investor
ANNUAL MEETING
The annual meeting of stockholders will be held
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Cytokinetics, Incorporated
350 Oyster Point Blvd.
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:54)(cid:68)(cid:81)(cid:3)(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:76)(cid:86)(cid:70)(cid:82)(cid:15)(cid:3)(cid:38)(cid:36)(cid:3)(cid:28)(cid:23)(cid:19)(cid:27)(cid:19)
COMMON STOCK
The company’s common stock is traded on the
NASDAQ Exchange, symbol: CYTK
STOCKHOLDER INQUIRIES
Stockholder and investor inquiries and requests
for information should be directed to:
Investor Relations
Cytokinetics, Incorporated
350 Oyster Point Blvd.
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(cid:11)(cid:25)(cid:24)(cid:19)(cid:12)(cid:3)(cid:25)(cid:21)(cid:23)(cid:16)(cid:22)(cid:19)(cid:25)(cid:19)
investor@cytokinetics.com
CORPORATE INFORMATION
Cytokinetics, Incorporated
350 Oyster Point Blvd.
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:54)(cid:68)(cid:81)(cid:3)(cid:41)(cid:85)(cid:68)(cid:81)(cid:70)(cid:76)(cid:86)(cid:70)(cid:82)(cid:15)(cid:3)(cid:38)(cid:36)(cid:3)(cid:28)(cid:23)(cid:19)(cid:27)(cid:19)
(cid:48)(cid:68)(cid:76)(cid:81)(cid:3)(cid:87)(cid:72)(cid:79)(cid:72)(cid:83)(cid:75)(cid:82)(cid:81)(cid:72)(cid:29)(cid:3)(cid:11)(cid:25)(cid:24)(cid:19)(cid:12)(cid:3)(cid:25)(cid:21)(cid:23)(cid:16)(cid:22)(cid:19)(cid:19)(cid:19)(cid:3)(cid:82)(cid:85)(cid:3)
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cytokinetics.com
FORWARD-LOOKING STATEMENTS
This letter contains forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995 (the “Act”). Cytokinetics claims the protection
of the Act’s Safe Harbor for forward-looking statements. Examples of such statements include, but not limited to, statements, express or implied, relating to our
or our partners’ research and development and commercial readiness activities, including the initiation, conduct, design, enrollment, progress, continuation,
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of our other drug candidates; our ability to obtain regulatory approval from FDA or any other regulatory body for (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81), CK-586 or any of our other drug
candidates in 2025 or at any other time, our ability to launch (cid:68)(cid:564)(cid:70)(cid:68)(cid:80)(cid:87)(cid:72)(cid:81)(cid:3)in 2025 or at any other time, and our ability to commence a Phase 2 clinical trial of CK-586
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uncertainties, including, but not limited to Cytokinetics’ need for additional funding and such additional funding may not be available on acceptable terms,
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or production of Cytokinetics’ drug candidates that could slow or prevent clinical development or product approval; patient enrollment for or conduct of clinical
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may incur unanticipated research and development and other costs; standards of care may change, rendering Cytokinetics’ drug candidates obsolete; and
competitive products or alternative therapies may be developed by others for the treatment of indications Cytokinetics’ drug candidates and potential drug
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the Securities and Exchange Commission, particularly under the caption “Risk Factors” in Cytokinetics’ 2023 Annual Report on Form 10-K enclosed herewith.
350 Oyster Point Blvd.
South San Francisco, CA 94080
650 624 3000 tel
cytokinetics.com