Cytokinetics Inc. (CYTK) filed Quarterly Report for the period ended 2009-09-30.
CYTOKINETCS is a different kind of company. It is increasingly unusual that an emerging growth biotechnology company would be dedicated to the discovery development and commercialization of therapeutics. Similarly it is more and more uncommon for a biopharmaceutical company to tackle the pursuit of new treatments for multiple disease areas including cancer and cardiovascular diseases. However the most important distinguishing feature of Cytokinetics is instead found in our commitment to innovation that has translated our focus on the cytoskeleton into a Research and Development pipeline of multiple first-in-class compounds. All of the programs we are pursuing offer entirely novel therapeutic approaches to severe unmet clinical needs. The reason is simple. Innovative therapeutics are much more likely to bring substantial benefits to patients. Cytokinetics Inc. has a market cap of $199.4 million; its shares were traded at around $3.28 with a P/E ratio of 8 and P/S ratio of 16.1.
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In December 2006, we entered into a collaboration and option agreement with Amgen Inc. to discover, develop and commercialize novel small molecule therapeutics that activate cardiac muscle contractility for potential applications in the treatment of heart failure, including omecamtiv mecarbil. The agreement provided Amgen with a non-exclusive license and access to certain technology. The agreement also granted Amgen an option to obtain an exclusive license worldwide, except Japan, to develop and commercialize omecamtiv mecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised this option and subsequently paid us an exercise fee of $50.0 million. Amgen is now responsible for the development and commercialization of omecamtiv mecarbil and related compounds, at its expense, subject to our development and commercialization participation rights. The agreement provides for potential pre-commercialization and commercialization milestone payments of up to $600.0 million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration, and royalties that escalate based on increasing levels of annual net sales of products commercialized under the agreement. The agreement also provides for us to receive increased royalties by co-funding Phase III development costs of drug candidates under the collaboration. If we elect to co-fund such costs, we would be entitled to co-promote omecamtiv mecarbil in North America and participate in agreed commercialization activities in institutional care settings, at Amgen’s expense.
The clinical trials program for omecamtiv mecarbil may proceed for several years, and we will not be in a position to generate any revenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and the drug is commercialized. Omecamtiv mecarbil is at too early a stage of development for us to predict when or if this may occur. We funded all research and development costs associated with this program prior to Amgen’s option exercise. We recorded research and development expenses for activities relating to our cardiac muscle contractility program of approximately $9.1 million and $15.7 million in the nine months ended September 30, 2009 and 2008, respectively. We anticipate that our expenditures relating to the research and development of compounds in our cardiac muscle contractility program will increase if we participate in the future advancement of omecamtiv mecarbil through clinical development. Our expenditures will also increase if Amgen terminates development of omecamtiv mecarbil or related compounds and we elect to develop them independently or if we elect to co-fund later-stage development of omecamtiv mecarbil or other compounds in our cardiac muscle contractility program under our collaboration and option agreement with Amgen.
CK-2017357 is at too early a stage of development for us to predict if or when we will be in a position to generate any revenues or material net cash flows from its commercialization. We currently fund all research and development costs associated with this program. We recorded research and development expenses for activities relating to our skeletal muscle contractility program of approximately $10.6 million and $7.5 million in the nine months ended September 30, 2009 and 2008, respectively. We anticipate that our expenditures relating to the research and development of compounds in our skeletal muscle contractility program will increase significantly if and as we advance CK-2017357, its back-up compound or other compounds from this program into and through development.
The clinical trials program for each of ispinesib, SB-743921 and GSK-923295 may proceed for several years, and we will not be in a position to generate any revenues or material net cash flows from sales of any of these drug candidates until its clinical trials program is successfully completed, regulatory approval is achieved and the drug is commercialized. Each of these drug candidates is at too early a stage of development for us to predict when or if this may occur. We currently fund all research and development costs associated with ispinesib and SB-743921. If we continue to conduct our Phase I/II clinical trials for either or both of ispinesib and SB-743921, our expenditures relating to research and development of these drug candidate will increase significantly. We recorded research and development expenses for activities relating to our mitotic kinesin inhibitors program of approximately $3.2 million and $5.9 million for the nine months ended September 30, 2009 and 2008, respectively. We received and recognized as revenue reimbursements from GSK of full-time employee equivalent (“FTE”) and other expenses related to our mitotic kinesin inhibitors program of $45,000 and $93,000 for the nine months ended September 30, 2009 and 2008, respectively.
Under our collaboration and option agreement with Amgen, we received an upfront, non-refundable non-exclusive license and technology access fee of $42.0 million in 2006. In connection with entering into the agreement, we also entered into a common stock purchase agreement with Amgen. In January 2007, we issued 3,484,806 shares of our common stock to Amgen for net proceeds of $32.9 million, of which the $6.9 million purchase premium was recorded as deferred revenue. Through the first quarter of 2009, we were amortizing the upfront non-exclusive license and technology access fee and stock purchase premium to license revenue ratably over the maximum term of the non-exclusive license, which was four years. In the second quarter of 2009, we recognized as revenue the remaining balance of $21.4 million of the related deferred revenue when Amgen exercised its option, triggering the end of the non-exclusive license period. In the second quarter of 2009, we received a non-refundable option exercise fee from Amgen of $50.0 million, which we recognized in revenue as license fees from related party. We may receive additional payments from Amgen upon achieving certain precommercialization and commercialization milestones. Milestone payments are non-refundable and are recognized as revenue when earned, as evidenced by the achievement of the specified milestones and the absence of ongoing performance obligations.
Research and development expenses related to any development and commercialization activities we elect to fund would consist primarily of employee compensation, supplies and materials, costs for consultants and contract research, facilities costs and depreciation of equipment. From our inception through September 30, 2009, we incurred costs of approximately $129.0 million for research and development activities relating to our cardiac muscle contractility program, $29.0 million for our skeletal muscle contractility program, $30.8 million for our smooth muscle contractility program, $70.5 million for our mitotic kinesin inhibitors, $53.5 million for our proprietary technologies and $54.7 million for other research programs.
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