Cytokinetics pulls in Royalty Pharma to secure $100M
- Cytokinetics has agreed to sell 4.5% of its potential royalties from partner Amgen on potential global sales of omecamtiv mecarbil — a novel therapy aimed at improving cardiac performance in people with heart failure — to Royalty Pharma, the companies said Feb. 2. The deal is expected to close Feb. 6.
- In return, California-based Cytokinetics is getting a $90 million upfront cash payment from Royalty Pharma. Royalty also has agreed to purchase $10 million worth of Cytokinetics’ common stock.
- At the end of 2016, Amgen, which is developing the cardiac myosin activator, launched an international phase 3 cardiovascular outcomes study, GALACTIC-HF. This triggered a nearly $27 million milestone payment to Cytokinetics.
Cytokinetics, a late-stage biopharma, won’t report fourth-quarter 2016 earnings until Feb. 16, the company said in a Feb. 2 conference call with investment analysts. But its latest deal may indicate cash problems. Cytokinetics already will be splitting royalties with Amgen (its decade-long collaborator on cardiac myosin activators) on omecamtiv mecarbil, if it gets to market. Now it also will be sharing its take with Royalty Pharma.
Yet analysts on the call in general applauded Cytokinetics’ latest move, with one saying it "sounds like a great way to bolster the balance sheet." Another analyst described it as "a great way to monetize while maintaining significant upside for yourself."
During the Feb 2 call, Cytokinetics President and CEO Robert Blum said the transaction with Royalty Pharma "provides us with non-diluted capital to fund phase 3 and to fund additional activities in the company." Later in the call, another company exec described the cash as to be used for general corporate purposes.
One analyst asked whether Cytokinetics could be paying back faster than it’s earning for the drug. Blum replied that Cytokinetics earns substantially more in potential royalties for net sales from Amgen, royalties which could exceed 20%, than it would be paying to Royalty Pharma.
In conjunction with the Royalty Pharma deal, Cytokinetics said Feb. 2 that it will exercise its option to co-invest with Amgen—to the tune of $40 million payable over eight quarters—on Phase 3 development of omecamtiv mecarbil in exchange for increased royalties of up to 4% from Amgen on global sales of the drug outside Japan and co-promotion rights.
Asked by an analyst whether Cytogenetics’ $40 million investment was contingent on the Royalty Pharma deal, Blum said his company "wanted to fund at the highest level" of $40 million and in a way aligned with shareholders’ interest. "So we brought in Royalty Pharma for capital to be deployed in this direction," he said.
Under the deal, a later-than-expected approval on the drug by the Food and Drug Administration would result in a higher royalty rate of up to 1% more to Royalty Pharma. Blum said he couldn’t comment on when Cytokinetics might expect the drug to reach the market, but that it will be the subject of clinical trials "for the next three to four, maybe four to five years."
Cytokinetics retains the right to get more than $600 million in milestone payments from the drug’s sale, the company said.
Blum said the deal underscores his company’s commitment to omecamtiv mecarbil as a potential treatment and to "the prudent advancement of our strategy towards commercialization." He said Cytokinetics and Royalty Pharma have a shared vision of the experimental drug’s value.
The biotech was once a Wall Street darling and investors had increasingly high hopes for its lead product candidate. Yet, clinical trial setbacks have pushed investors to be skeptical.
Cytokinetics lead product candidate is tirasemtiv, a fast skeletal muscle troponin activator that the company is trying to salvage in a phase 3 study. In 2014, a phase 2b study found the drug, compared to placebo, failed to slow the decline of many of amyotrophic lateral sclerosis (ALS) patients’ muscle activities but did seem to slow loss of muscle function that helped them breathe. So the company built a phase 3 trial around this narrower focus; results are expected this summer.
Cytokinetics is partnering on tirasemtiv with Astellas Pharma, which has the option to commercialize the drug based on the results of the VITALITY-ALS study. Astellas has contributed $65 million in funding to Cytokinetics in conjunction with the deal.
- Cytokinetics Statement