We Are
Cytokinetics, Incorporated (NASDAQ:CYTK) has stayed mostly stable since I covered it in June. This is surprising, since CYTK is a $4bn company whose valuation I am unable to justify.
Their lead drug candidate, omecamtiv mecarbil, is an absolute failure, although they have a PDUFA on February 28, 2023, for it and an advisory committee meeting on December 13. Their second drug, aficamten, is in a much more robust position, clinically speaking, however it is still years away from approval. They have a third asset called reldesemtiv in a phase 3 trial targeting ALS, Amyotrophic lateral sclerosis or Lou Gehrig’s Disease. However, not only is this awaiting futility analysis, but ALS has 3 approved medicines as well. So I fail to see on what basis the market is valuing this company north of $4bn.
The reason I called omecamtiv a failure is because it performed poorly in two related trials, GALACTIC-HF and Meteoric-HF. Omecamtiv mecarbil is a selective cardiac myosin activator for the treatment of heart failure with reduced ejection fraction (HFrEF). In the GALACTIC-HF trial, the molecule performed poorly in a key secondary endpoint, cardiovascular death. In a CV trial, if you fail to reduce CV death, that’s pretty abject. Even in the primary endpoint, which was apparently a more lenient outcome – the composite measure of death or heart failure – omecamtiv’s 8% risk reduction was much less than Farxiga’s 26%. Farxiga is developed by AstraZeneca (AZN).
An SGLT2 inhibitor, it is indicated for HFrEF and holds 50% of the U.S. market, along with Eli Lilly and Boehringer Ingelheim’s Jardiance. Jardiance is also indicated for heart failure patients regardless of left ventricular ejection fraction. Farxiga is yet to achieve this milestone. However that may be, the heart failure treatment market looks entrenched by big pharma, and a smallcap even with excellent data would have had a tough time getting in. CYTK doesn’t even have competitive data, even though it beat its primary endpoint.
The other trial, Meteoric-HF, assessed Omecamtiv’s efficacy in improving exercise capacity in heart failure patients. However, here too, omecamtiv turned out no better than the placebo.
So what is the molecule planning with its PDUFA? What data does it have? Well, for one thing, it did technically meet the primary endpoint. More importantly, in a certain subgroup of patients – a set of more severely ill patients with an ejection fraction at or below 30% – the drug did comparatively better. This subgroup is the focus of the PDUFA, although concerns remain about whether the FDA will approve based on post hoc subgroup analysis. My regular readers know what I think of post hoc analyses. So if the market is valuing CYTK based on omecamtiv’s potential, I fail to see how that is correct.
[For those wishing to look at the subgroup data, here’s it from the source:
Results: Among 8232 patients enrolled in the GALACTIC-HF clinical trial, 2258 patients (27.4%; mean [SD] age, 64.5 [11.6] years; 1781 men [78.9%]) met the specified criteria for severe HF. Of those, 1106 patients were randomized to the omecamtiv mecarbil group and 1152 to the placebo group. Patients with severe HF who received omecamtiv mecarbil experienced a significant treatment benefit for the primary end point (hazard ratio [HR], 0.80; 95% CI, 0.71-0.90), whereas patients without severe HF had no significant treatment benefit (HR, 0.99; 95% CI, 0.91-1.08; P = .005 for interaction). For CV death, the results were similar (HR for patients with vs without severe HF: 0.88 [95% CI, 0.75-1.03] vs 1.10 [95% CI, 0.97-1.25]; P = .03 for interaction). Omecamtiv mecarbil therapy was well tolerated in patients with severe HF, with no significant changes in blood pressure, kidney function, or potassium level compared with placebo.
Conclusions and relevance: In this post hoc analysis of data from the GALACTIC-HF clinical trial, omecamtiv mecarbil therapy may have provided a clinically meaningful reduction in the composite end point of time to first HF event or CV death among patients with severe HF. These data support a potential role of omecamtiv mecarbil therapy among patients for whom current treatment options are limited.]
In this regard, aficamten has fared better, having completed a positive phase 2 trial in the rare disease hypertrophic cardiomyopathy (HCM). A near competitor is Camzyos (mavacamten), owned by Bristol-Myers Squibb (BMY) through its $13bn acquisition of MyoKardia. Interestingly, MyoKardia is a spinoff of Cytokinetics, but Cytokinetics thinks it can do better than its spinoff. Not only in terms of certain safety measures, but according to some cross trial comparisons, even some efficacy measures may see aficamten do better than mavacamten. According to Evaluate:
Mizuho analysts pointed out that in cohort 2 – which used the likely phase 3 dosage – 92.9% of patients hit target gradient, a measure of heart pressure, compared with 74% in mavacamten’s HCM pivotal trial.
This may be the key reason for CYTK’S exorbitant valuation; the market thinks, if it could do it once, it can do it again. The asset is now enrolling in the pivotal Sequoia trial, which will topline by the end of this year – per here.
Financials
CYTK has a market cap of $4.33bn and a cash balance of $596mn. This does not include the $383mn in net proceeds from a $450mn convertible debt offering the company made in June. I am a little confused about this amount, because although the PR I linked to above states this amount, the earnings conference call has a different amount – see here. I must be missing something.
Anyway, research and development expenses for the three months ended June 30, 2022 were $57.1 million while general and administrative expenses were $42.7 million. At that rate, the company has funds for more than two years excluding the new funds; almost double that if you include those. The company is very well-financed, and its ability to raise funds from the market is surprisingly strong.
Bottom Line
I have grave doubts whether omecamtiv will be approved easily. A few days before December 13, reading the FDA briefing docs, we will have a better idea. If it fails, the stock will plummet. If it does so, it may come to a price point which is better suited for investors to take advantage of the aficamten profile. I will wait until then to take a call.
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