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Barry Cohen
Barry Cohen
Articles (224) 

Amgen, Cytokinetcs Shares Punished on Disappointing Test Results

Companies' heart drug failed to help patients live longer

October 12, 2020 | About:

Amgen Inc. (NASDAQ:AMGN) and its partner, Cytokinetics Inc. (NASDAQ:CYTK), took a punch to the gut last week when the heart drug they were collaborating on failed to meet expectations. Thousand Oaks, California-based Amgen saw its share price drop about 8% to under $237, while Cytokinetics nearly halved its market value—to just more than $1 billion-- when the South San Francisco biopharma's stock plunged to $15.26.

Both stocks pared last week's losses on Monday, with Amgen gaining $2.81 to close at $239.51, while Ctyokenitcs ended the session up 39 cents to $15.65.

Unquestionably, Amgen took less of a hit on last week's news because of its rich portfolio of approved drugs. Meanwhile, Cytokinetics has yet to bring a product to market. The company has chewed through $945 million in its 23 years.

The companies' drug in question, omecamtiv mecarbil, failed to help phase 3 study patients live longer, even though it did outdo the placebo in cutting hospitalizations and other interventions in participants with a type of chronic heart failure, reported FierceBiotech.

In a note to clients, JPMorgan analyst Cory Kasimov called the study results underwhelming and disappointing, adding that the outlook for the product is up in the air. The risk reduction "appears unimpressive (esp. without a mortality benefit)," he noted.

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Amgen and Cytokinetics didn't disagree with Kasimov's assessment, but were less than sanguine about the drug's potential. The said they would be analyzing study data and plan to present next month at the American Heart Association meeting. But even if the drug secures the Food and Drug Administration's approval, it would face competition from Novartis' (NYSE:NVS) Entresto and AstraZeneca's (NASDAQ:AZN) Farxiga, both of which showed greater benefit in heart failure patients.

Omecamtiv mecarbil was developed at Cytokinetics, which teamed up with Amgen in 2006 to develop heart failure drugs; Amgen later licensed the global rights to the drug. In 2013. French pharma Servier obtained European marketing rights.

Cytokinetics is testing several other treatments, but none have reached phase 3. Reldesemtiv is in phase 2 trials for amyotrophic lateral sclerosis and spinal muscular atrophy. It also has another phase 2 drug for heart disease. CEO Robert Blum tried to reassure investors, emphasizing that the Cytokinetics wasn't built on one drug.

The company recorded a net loss for the second quarter of $40.8 million, or 68 cents per share, compared to net loss for the second quarter of 2019 of $32.1 million, or 56 cents per share. Cash, cash equivalents and investments totaled $213.1 million as of June 30.

After the quarter, Cytokinetics executed a series of transactions that contributed up to $250 million in cash plus committed cash, as well as up to $200 million in potential milestone payments plus royalties, according to a company news release. The company also raised $189 million through a public offering of common stock. Cytokinetics expects to end 2020 with more than $500 million in cash plus committed cash, subject to closing conditions.

Amgen revenues for the second quarter were up 6% year over year $6.20 billion, while earnings per share climbed 7% to $4.25, beating consensus estimates by more than 11%. Wall Street expects the company's revenue to grow 10.7% in the current quarter and 7.1% in the current year. Earnings per share growth is expected to be 3.8% in the current quarter and 6.4% in the current year. Longer term, earnings per share is forecast to increase 7% annually over the next five years.

Amgen, whose stock hit its 52-week high of nearly $265 in July, has dozens of drugs in various phases of testing.

The failure of omecamtiv mecarbil isn't Amgen's only issue. The company also faces the prospect of biosimilar versions of top drugs Epogen and Neulasta, and the loss of exclusivity on its top-selling medication, anti-inflammatory Enbrel. So far, Amgen has been able to fight off patent threats to Enbrel, which is on pace to become one of the best-selling drugs of all time.

After this latest setback, Amgen investors will be looking for good news in January, when the company releases data on its promising cancer drug sotorasib.

Disclosure: The author has a position in Amgen.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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