Cytokinetics Inc (CYTK) 2008 Q3 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Cytokinetics third quarter 2008 conference call.

(Operator Instructions)

I will now turn the call over to Sharon Barbari, Cytokinetics' Senior Vice President of Finance and CFO. Please go ahead.

Good afternoon and thank you for joining the Cytokinetics senior management team on this conference call to discuss our third quarter 2008 results.

Also present during this call are Robert Blum, our President and Chief Executive Officer, Senior Vice President of Clinical Research and Development and Chief Medical Officer.

Following the forward-looking statement disclaimer, Robert will provide an overview of the past quarter. Andy will then provide highlights and details on the progress of the company's clinical developments, and, afterwards, I will review the company's financial performance for the third quarter, as well as an update on our guidance for the remainder of the year.

Robert will then discuss the recent company restructuring and then finish with a summary of our projected company milestones for the remainder of 2008. We will then open the call for a brief question-and-answer session.

The following discussion, including our responses to questions, contain certain statements that constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Examples of such statements include, but are not limited to statements relating to our financial guidance for 2008 and our committed equity financing facility with Kingsbridge Capital, Limited, the expected focus, conduct, initiation, design, timing, scope, enrollment, progress and completion of our and our partners' research and development activities, the results of such activities, including the timing of availability of and planned presentations of data from our development program and the possible significance of such results, the anticipated benefits of our restructuring, our provision of data to Amgen to inform its potential exercise of its option, and the properties and potential benefits of our drug candidates and potential drug candidates.

These statements involve a number of risks and uncertainties that are affected by a variety of factors and could cause actual results and the timing of events to differ materially from those anticipated by these statements. These forward-looking statements speak only as of today. You should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

For a more detailed description of the risk factors that may affect our results, please refer to our SEC filings, including our recent quarterly report on Form 10-Q. Copies of these documents may be obtained from the SEC or by visiting the investor relations section of our Website. I'll now turn the call over to Robert.

Thank you, Sharon. During the quarter, Cytokinetics presented clinical results relating to our novel drug candidates from each of our heart failure and our oncology clinical trial programs.

Importantly, we also executed a strategic restructuring aimed at reducing our 2009 financial expenditures and leveraging our expertise in the area of muscle biology in order to better position the company for the future.

In the second quarter, we announced results from key clinical trials from our heart failure clinical development program or CK-1827452 or CK-452, our novel cardiac myosin activator.

As Andy will soon elaborate, at each of three major heart failure scientific meetings over the last several months, we announced interim Phase II-A data from an ongoing clinical trial of CK-452 in stable heart failure patients.

These data showed that CK-452 produced statistically significant and clinically relevant increases in multiple measures of cardiac function in this patient population.

The interim results from this trial, together with other results previously presented, provide additional data that this novel drug candidate may be a useful therapeutic advance for patients with acute or chronic heart failure.

Now that our third Phase II-A clinical trial of CK-452 in stable heart failure payments undergoing clinically indicated coronary angiography in the cardiac catheterization laboratory has been initiated, all of our currently planned Phase I and Phase II-A trials for CK-452 have been completed or are underway. We look forward to more data to follow in the fourth quarter from our continuing clinical trials.

In our oncology program, additional data was presented for Ispinesib, one of our two novel kinesin protein or KSP inhibitors, showing that the drug candidate continues to demonstrate a favorable safety profile and, as Andy will discuss, encouraging objective responses in treatment naive breast cancer patients.

We also recently presented data on our second KSP inhibitor, SB-743921, or SB-921, at the triple meeting, EORTC-NCI -- AACR's international symposium that provided the preclinical basis for our oncology ongoing Phase I clinical trial.

Also at that meeting, our partner, GlaxoSmithKline, or GSK, presented three posters relating to our anticancer compound, GSK-923295, or GSK-295, an inhibitor of centromere-associated protein E, or CENP-E. Andy will speak to these data momentarily.

During the quarter, with priority to reducing operating expenditures, while also focusing the company's research activities to our expertise in muscle biology, Cytokinetics executed on an important restructuring. As I will outline to you later in the call, this action defines a key turning point for the company. Going forward, we plan on focusing our research activities on advancing our skeletal and smooth muscle programs, while continuing to progress our cardiovascular and oncology clinical trials.

As you will hear throughout our call today, we feel we had another solid quarter and are continuing into the final months of 2008 with renewed commitment, heightened discipline, and a prudent and practical focus to advancing our pipeline and building our business. With that, I'll now turn the call over to Andy.

Thank you, Robert. This was indeed a busy quarter for Cytokinetics' clinical group, as we continue to advance multiple clinical trials at international sites across both our oncology and cardiovascular programs.

The highlights of the past quarter were the announcements of data pertaining to CK-452 in August, at the European Society of Cardiology Congress, in September at the 2008 annual Heart Failure Society of America, or HFSA conference, and in October at the annual meeting of the Japanese Heart Failure Society.

We believe the most recent interim results from our Phase II-A clinical trial evaluating CK-452 administered intravenously to patients with stable heart failure present an encouraging picture for this novel drug candidate. To remind you, this trial is designed to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetic profile of CK-452 in this patient population.

The pharmacodynamic and pharmacokinetic analyses, which included 28 patients, eight patients from each of the completed cohorts one, two and three, and four patients from cohort four, showed that when compared to placebo, CK-452 was well tolerated over a range of plasma concentrations during continuous intravenous administration and produced statistically significant correlation between CK-452 plasma concentration and increases in systolic ejection time, stroke volume, fractional shortening, cardiac output, and injection fraction. These correlations between CK-452 plasma concentration and increases in parameters of cardiac systolic function remained evident after 24 hours of intravenous infusion.

In addition, there were statistically significant correlations between CK-452 plasma concentration and decreases in heart rate and in less ventricular and systolic volume. More recently, we have completed enrollment and continue to dose patients in the fourth cohort in this first Phase II-A trial and have now initiated dosing of patients in the fifth cohort. Cohort five is similar to cohorts three and four in that we examine doses of CK-452 that target the plasma concentration of 650 nanograms per ML.

To remind you, in cohorts one and two, the protocol called for study drug infusion for a duration of two hours. In cohorts three and four, the duration of infusion was extended to 24 hours. And now, in cohort five, patients are receiving randomized infusions of CK-452 or placebo out to 72 hours.

Also in the third quarter, we announced the progression from cohort one to cohort two in the double blind randomized placebo controlled study designed to evaluate the safety and tolerability of both an intravenous and an oral formulation of CK-452 in patients with ischemic cardiomyopathy.

This step forward followed a protocol defined interim safety analysis. Patients in cohort two are randomized in a two-to-one ratio either to CK-452 at a dose level intended to target a plasma concentration of 550 nanograms per ML during the infusion period and a maximum concentration of 368 nanograms per ML during the oral dosing period. As an update to the progress of this study, I am pleased to report that Cytokinetics recently completed enrollment and continues to dose patients in the second and last cohort of this trial.

As Robert also mentioned, also, during the quarter, we initiated the treatment of patients in a third Phase II-A clinical trial of CK-452, an open label, nonrandomized trial designed to evaluate an intravenous formulation of CK-452 administered to patients with stable heart failure undergoing clinically indicated coronary angiography in the cardiac catheterization laboratory.

The primary objective of this trial is to evaluate the potential effects of CK-452 on myocardial oxygen efficiency, defined as the ratio of ventricular performance to myocardial oxygen consumption. The secondary objective of this trial is to measure the potential effects of CK-452 on ventricular performance, myocardial oxygen consumption, hemodynamics, pressure-volume relationship, and systolic ejection time.

At this year's HFSA conference, a Cytokinetics investigator presented a poster on the design of this trial, which is intended to test the hypothesis that CK-452 may improve cardiac function and hemodynamics without significantly altering myocardial oxygen consumption and, thus, may improve cardiac efficiency. This trial is currently underway at sites in the US and Canada and we anticipate data from this trial will be available in 2009. In summary, we continue to be pleased with the progress of this program, as well as the data emerging from the Phase I-A and II-A trials of CK-452. We plan to update you further about results from these trials in the coming months.

Now, moving to our oncology clinical development program. In September, at the American Society of Clinical Oncology's breast cancer symposium, we announced interim data from the Phase I portion of the ongoing Phase I/II clinical trial of Ispinesib administered as monotherapy as a first line treatment in chemotherapy naive patients with locally advanced or metastatic breast cancer.

These preliminary data suggest that Ispinesib has been well tolerated when dosed on days one and 15 of the 28-day cycle at doses up to 12 milligrams per meter squared, with the most frequent adverse event being neutropenia.

In 13 patients evaluable for safety and efficacy, the best responses observed to date were investigator-reported tumor reductions of 30% or greater in the sum of the target lesion diameters, as has now been reported in three patients. One of these patients had an investigator-reported partial response according to the response evaluation criteria in solid tumors, or [re-cysts].

We continue to enroll and dose escalate patients in the Phase I portion of this trial, designed to determine the maximum tolerated dose and dose limiting toxicity on this dosing schedule.

As Robert also mentioned, recently, at the triple meeting in Geneva, Switzerland, a poster was presented containing preclinical and clinical data in which the authors concluded that SB-921, our second novel KSP inhibitor, demonstrated potent activity in preclinical models of diffuse large B cell lymphoma both in vitro and in vivo, which provides additional scientific rationale for continuation of our currently ongoing Phase I/II clinical trial in patients with Hodgkin or non-Hodgkin lymphoma.

We continue to enroll and dose escalate patients in the Phase I portion of this trial, in which we have observed two partial responses. Turning to GSK-295, our CENP-E inhibitor, also, at this same meeting, our partner, GSK, presented three posters from preclinical and clinical trials of GSK-295.

The first preclinical poster determined that positron emission tomography using 18 fluorode deoxyglucose imaging may provide a means of evaluating pharmacodynamic activity in patients treated with GSK-295.

The second preclinical poster concluded that GSK-295 has dose-dependent pharmacodynamic activity in COLO 205 human xenografts. Results from a third poster that summarized clinical data from an ongoing Phase I dose escalation file for GSK-295 concluded that the drug is well tolerated at the doses evaluated to date. GSK continues to enroll and dose escalate patients in this Phase I trial. With that update on our clinical development progress in the third quarter, I will now turn the call back over to Sharon, who will detail our third quarter 2008 financials.

Thank you, Andy. For the third quarter ending September 30, 2008, our net loss, which included $2.5 million in restructuring charges, was $16.3 million or $0.33 per share compared to a net loss of $11.3 million or $0.24 per share for the same period in 2007.

Revenues from research and development collaborations for the third quarter of 2008 were $3.1 million compared to $4.1 million for the same period in 2007. Revenues for the third quarter of 2008 and 2007 were primarily derived from our collaboration and option agreement with Amgen. Total research and development, or R&D, expenses in the third quarter of 2008 were $13.5 million compared to $13.2 million for the same period in 2007.

The increase in R&D expenses in the third quarter of 2008 compared to the same period in 2007 was primarily due to increased spending for clinical outsourcing costs, offset, in part, by lower personnel expenses.

From a program perspective, for the third quarter of 2008, approximately 38% of our R&D expenses were attributable to our cardiac contractility development and research activities, 14% to our mitotic kinesin development and research activities, and 41% to our other research and preclinical development activities. Our other research and preclinical programs include our programs directed toward smooth and skeletal muscle contractility.

Total administrative and general expenses, or G&A expenses, for the third quarter of 2008 were $3.8 million compared to $4.1 million for the same period in 2007. The decrease in G&A expenses in the third quarter of 2008 compared to the same period in 2007 was primarily due to lower patent and legal fees and personnel expenses.

We also reported results from our operations for the nine months ended September 30, 2008. Revenues from research and development collaborations for the nine months ended September 30, 2008 were $9.3 million compared to revenues of $10.5 million for the same period in 2007.

The decrease in collaborative research revenues for the first nine months of 2008 as compared to the same period in 2007 was primarily the result of lower revenue from our collaboration and license agreement with GSK.

Total R&D expenses for the nine months ended September 30, 2008 were $42.5 million compared to $39.4 million for the same period in 2007. The increase in R&D expenses in the nine months of 2008 over the same period in 2007 was primarily due to higher clinical outsourcing and laboratory costs.

From a program perspective, for the first nine months of 2008, approximately 37% of our R&D expenses were attributable to our cardiac contractility development and research activities, 14% to our mitotic kinesin development and research activities, and 43% to our other research and preclinical development activities. Our other research and preclinical programs include our programs directed smooth and skeletal muscle contractility.

Total G&A expenses for the nine months ended September 30, 2008 were $12.2 million compared to $12.6 million for the same period in 2007. The decreased spending in the first nine months of 2008 compared to the same period in 2007 was primarily due to lower legal fees, which was partially offset by an increase in spending for outside services and personnel expenses.

The net loss for the nine months, which included $2.5 million in restructuring charges, was $45.5 million or $0.92 per share compared to a net loss of $35.6 million or $0.76 per share for the same period in 2007.

As of September 30, 2008, our cash, cash equivalents, restricted cash and long-term investments totaled $91.6 million. I'd like to remind you that in addition to our cash balance and long-term investments of $91.6 million for the quarter, the company continues to have available to it a committed equity financing facility with Kingsbridge Capital, Limited.

Under this facility, we have the ability to access the lesser of up to $75 million or amounts equal to the fair market value of 19.9% of our outstanding shares, at our discretion.

We anticipate our full year 2008 cash operating expenses to be between $76 million and $81 million, including severance costs and our current assumptions associated with costs related to our clinical trials and consultants.

As a result of our restructuring, the company's cash operating expenses are anticipated to decrease between $12 million to $16 million in 2009 as compared to our cash operating expenses in 2008.

That concludes the financial portion of today's call. And with that, I'll now turn the call over to Robert.

Thank you, Sharon. To conclude, I'd like to review the rationale for our recent restructuring, elaborate on the associated reprioritization of research activities, and detail how we see this affecting the company going forward.

During the quarter, we underwent a difficult, but strategically necessary transformation of the company. In doing so, we reduced our headcount by 29%, or 45 people, across both oncology research and administrative functions.

As a result, going forward, we plan on focusing our research activities within the area of muscle biology and building on the expertise and knowledge that we have garnered with the discovery and development of our lead drug candidate, CK-452.

Our skeletal and smooth muscle contractility research programs have each already produced encouraging preclinical data that suggests that we may be able to develop drugs targeted to muscle that may have potential therapeutic benefit for serious unmet medical needs.

As you may recall, last quarter, we announced the selection of a development compound that is a selective activator or the skeletal sarcomere. That compound has demonstrated pharmacological activity in nonclinical models that read on skeletal muscle weakness and point to potential clinical indications associated with neuromuscular diseases or other conditions tied to muscle wasting.

In addition, we are also advancing novel smooth muscle inhibitors in lead optimization activities, with a goal of selecting a development compound in the coming months.

The company's scientists have characterized these compounds in pharmacology studies and have demonstrated encouraging evidence of potential efficacy for inhaled formulations of certain of these compounds in preclinical bronchoconstriction models related to asthma and other reactive airways disorders.

To be clear, Cytokinetics remains committed to novel research programs and development pipeline expansion. Our ongoing research activities are focused on building a valuable and sustainable pipeline for Cytokinetics in muscle biology beyond our current four clinical development compounds, CK-452, Ispinesib, SB-921, and GSK-295.

With our new focus, we believe we are better positioned to deliver shareholder value.

It should be noted that although we have terminated our early research programs in oncology, we remain committed to progressing ongoing oncology clinical trials programs for each of our two novel KSP inhibitors, Ispinesib and SB-921, through to the end of Phase I. We are pleased with the safety profile and clinical activity exhibited by both of these oncology drug candidates to date.

Dosing each of these anticancer compounds on a schedule of once every 14 days is now allowing us to achieve greater dose densities than have been possible in previous clinical trials.

As such, we believe we are amassing clinical activity in the form of tumor shrinkage, reported as partial responses in each trial. At the end of the Phase I portion of each of these trials, we will evaluate our future development options for each drug candidate in light of costs associated with advancing that program.

As a reminder, GSK has an option on each of these two drug candidates exercisable between now and the end of the year. Were GSK to exercise one or both of these options, they would be required to pay an exercise fee and assume forward development costs, thereby reducing our expected 2009 spending in this program area.

Now, turning to key milestones. On the cardiovascular side of our business, in November, we plan on presenting data from the ongoing Phase II-A trial of the IV form of CK-452 in patients with stable heart failure at the annual meeting of the American Heart Association in New Orleans, Louisiana.

In the fourth quarter, we anticipate that data will be available from our ongoing Phase II-A trial of CK-452 in patients with ischemic cardiomyopathy and angina.

With respect to our oncology drug candidates, in December, we plan on presenting data from the ongoing Phase I portion of our open label, nonrandomized Phase I/II clinical trial designed to evaluate Ispinesib as monotherapy administered as a first line treatment for chemotherapy naive patients with locally advanced or metastatic breast cancer at the 31st annual San Antonio breast cancer symposium in San Antonio, Texas.

In December, we plan on presenting additional data from the Phase I portion of our ongoing Phase I/II clinical trial of SB-921 as a potential treatment of patients with Hodgkin or non-Hodgkin lymphoma at the annual American Society of Hematology meeting in San Francisco.

On the corporate milestone front, we anticipate providing the required clinical data from our CK-452 Phase II-A clinical trials program to Amgen by the end of 2008 in order to inform the potential exercise of Amgen's option under the strategic alliance between the companies.

In the most recent quarter, Cytokinetics continued to work diligently, ensuring that despite external factors, our clinical development programs at multiple sites around the world were progressing properly.

In addition, we focused on our planned clinical activities in 2009. With CK-452, we are actively preparing for the Phase II-B trial program, with a manufacturing of drug product and development of clinical trial designs that benefit from consultative inputs from both Amgen and key opinion leaders from across the heart failure community.

On the oncology side, we have committed to see both of our development programs through to the end of Phase I and execute it in line with that objective during the last quarter.

While, like everyone, we also are closely monitoring economic conditions and the financial markets, with $91.6 million in cash and long-term investments and access to our Kingsbridge facility, we are focused on what we believe to be the most important matters at this time, executing against our clinical milestones for the remainder of 2008 and continuing to work towards creating a strong foundation for a solid pipeline, all with the goal of putting us in a sustainable position heading into and throughout 2009 and afterwards.

That concludes the formal portion of our call today and, Operator, I'd now like to open up the call to questions.

Thank you. (Operator Instructions)

Your first question comes from the line of Michael Aberman of Credit Suisse.

Hi, guys. Thanks for taking the questions.

The first question, the full enrollment in the safety trial ongoing in Georgia, can you talk to us about -- since, within two days of enrollment, you kind of move on to the oral, can you confirm how many patients have moved on to the oral dosing stage?

So, just to start, and then I'll turn it over to Andy. We have completed the enrollment and, as you may guess, with these studies, that can enroll quickly.

We, in this particular study, have over-enrolled the study. So, as a function of that, while the study design called for 90 patients, 45 from each cohort, we have over-enrolled it.

Now, to your question about how many patients then have initiated treatment, we can say that we have initiated treatment and are concluding treatment then in all of those patients, but have not concluded treatment in all of those now over 90 patients.

So, Michael, what you're asking is the number of patients who were started in IV treatment, but then, for whatever reason, didn't go on to oral treatment.

There are a small number of them, but I wouldn't want to give the exact number.

Is there a difference between cohorts? Can you see a difference between cohort one and cohort two?

Not in any meaningful way, no.

Is there any interim safety analysis in the second cohort or the next data point will be the full presentation?

The final analysis is the next thing.

Okay. How many patients do you plan on enrolling in this cohort five, both placebo and treatment?

It's eight, as the others have been.

So, it's going to be eight treatment and eight placebo?

No, no, no. It will be a crossover design like the other cohorts, with the major difference being this is just one treatment of active 452 targeting that concentration of 650 nanograms per ML and one placebo treatment in random order. So, they only get treated twice in this cohort.

Can I just ask a housekeeping question? In terms of your guidance for this year's expenses, how much do you anticipate being restructuring expense?

The $2.5 million that we originally estimate are the expenses, some of which were taken in the third quarter, some of which will be taken in the fourth quarter.

So, it seems form that that we should see a bump in expenses for the fourth quarter.

Well, you'll see potentially a bump in the expenses in the fourth quarter, but not related to the restructuring. It's going to be related to the conclusion of the ongoing clinical trials.

Okay. I think that's all I have for now. I appreciate it. I'll get back in the queue if I think of something else.

Thanks, Michael.

Your next question comes from the line of Mark Monane of Needham & Company.

Hi, Mark.

Thank you. Hi, Robert. Good afternoon from New York City, a nice day here. The question for you is starting with one of your concluding comments, Robert, on the Phase II-B trial. Is this something that Cytokinetics is planning to run regardless of what the Amgen decision is or will this be changed potentially based on the Amgen decision? How should we think about this?

So, the Phase II-B study that we are currently contemplating and designing is one that is benefiting from inputs from Amgen and we are designing it together with Amgen, with the possibility that were they to exercise, they would then be responsible for paying the costs. However, if Amgen were not to exercise, then that would be a study that Cytokinetics would proceed to do independently.

Okay. And so, I guess Amgen is there participating with the philosophy that they will be there for the onset of that trial, the initiation of that trial, or they will not be there for the initiation of that trial? Is that right, this will be part of the decision-making process, the outcome of the decision-making process?

You would have to ask Amgen that, but I suspect that Amgen is making its decision not based on Phase II-B, but rather the data that we are submitting to them, which is from the Phase II-A clinical trials program.

Sure. I guess I'm trying to get around any cognitive dissidence they may have any terms of helping design a trial that they may or may not be responsible for or they may or may not be involved in. Up to now, it seems they've been giving thoughtful input, but this trial is really going to be based on their decision to go forward or not. Can you outline the timeline for that decision?

I'm not sure I understand the question so well.

When you give Amgen the package for their review, does the clock start at that point of time? What's the timeline for a decision from Amgen?

Yes. So, the data that we're obligated to provide to Amgen, which was agreed when we entered into this alliance initially, is data that we will provide by the end of the year. That starts the clock.

That clock, which I can't, as you know, for matters of confidentiality, go into, has a defined time period associated with it and as we would expect to enter Phase II-B, it would be hopefully with Amgen together in alignment with us, but we would engage with the conduct of the study without Amgen if they had not exercised.

So, we would go forward in the sponsorship of that study without Amgen if they chose not to exercise. But, however, to underscore, they're involved right now in the design of the study and we hope that means that they're positively considering exercising, but, of course, there are no guarantees.

So, just to be concrete about it, excuse my opaqueness, the trial will start either with Amgen if they make a decision they want to be part of the program or without Amgen if they make a decision they do not want to exercise their option, and the fate of the program will be concurrent with Amgen's decision. Is that correct?

Yes, I think that's right. If we have initiated Phase II-B without Amgen, it's because they let their option lapse.

Very good. That was helpful. Now, in terms of what you expect to learn from cohort one and cohort two, can you and Andy help us understand -- obviously, you don't have the data now, but what information will you get from those two trials that you think can inform the Phase II-B or ongoing studies here?

Okay. So, you referred to cohort one and cohort two.

I'm sorry. Of the Phase II-A trial, looking at the IV and oral portion that Mike was talking about.

Okay. Right. So, that one particular trial in ischemic cardiomyopathy and angina patients, as you point, has two cohorts, one, a lower dose cohort targeting a lower CMAX plasma concentration and a second cohort targeting a higher CMAX plasma concentration.

It is a safety study and, as such, I'll turn to Andy to elaborate on what we may learn from the safety parameters that were being evaluated.

So, to elaborate further on the design, patients receive an infusion overnight of 452 or placebo and then they undergo an exercise test during that infusion of study drug on the following morning.

And patients whose exercised tolerance does not deteriorate relative to the shorter of their two baseline pre-study exercise tests are then discharged with oral drug, which they take for six days, with the final dose on the morning of the seventh day. So, the primary safety endpoint looks at the proportion of patients, if any, who stop exercising at a stage earlier than they did at baseline and stop exercising because of angina.

There are a number of other secondary endpoints related to that, just the number of patients who stop exercising early for any reason, the number of patients who stop exercising at any time because of angina, overall duration of exercise on low dose versus high dose versus placebo.

So, the exercise data will be looked at. Certainly, cardiac biomarkers, such as troponin and MBCT-K, both from the intravenous and the oral portions of the study, will be looked at. Overall adverse event data will be looked at.

Those are the primary things. Obviously, there is the typical evaluation of ECG and laboratory parameters and vital sign. But I think the main interest in this study is whether or not exercise tolerance deteriorates meaningfully in the presence of 452 versus placebo in these types of patients.

Are you also going to evaluate the inverse situation that exercise tolerance could improve and is that potentially attributable to the drug?

It's conceivable that with improved systolic ventricular function, the patients may indeed exercise for longer, but the study is not powered probably to evaluate that to a statistically significant degree. It's really looking for growth differences and tolerability.

That was helpful. And then a question on the cash. Sharon, can you outline for us, and Robert, about the status of the restricted cash and any auction rate securities on the current valuation?

Okay. So, we have par value. So, on restricted cash, we only have a very small portion, I think it's $2.7 million or $2.5 million worth of restricted cash that's attributable to our equipment lease line.

And then on the long-term investments, we include 18.2 million of auction rate securities and with a par value on those of about $20 million. We recently received with the investment portfolio manager that we did have, we have entered into a settlement agreement with them. That's part of one of the settlement agreements that many of these institutions have, which will then afford us the ability to have liquidity with respect to those investments.

That was helpful. Thanks very much for the added information.

Thanks, Mark.

And your remarks on events in the fourth quarter.

Thank you so much.

Your next question comes from the line of Charles Duncan of JMP Securities.

Hi, Charles.

Hi, folks. Congratulations, first of all, on the completion of the enrollment in that second cohort.

Appreciate that. That was actually, as you can appreciate, quite an accomplishment for this most recent quarter.

Yes. That's a big study, big accomplishment. I wanted to turn us to the AHA meeting. You said that you're going to present more information from the stable heart failure trial. Is that going to be from cohort four? Do you expect any information from cohort five and do you think that will just drive statistical significance or result in new observations?

You can expect to see some cohort four data. You won't see any cohort five data. It's just too early for us to be able to give you any of that. And there will be, I am sure, some analyses that Dr. Cleland will present that you haven't seen before. I shouldn't really say too much more than that about what will be presented.

I appreciate that. That's all right. And then do you anticipate having some sort of corporate presence there and perhaps be able to take a look at any ischemic cardiomyopathy data at AHA or would that be top line later after that meeting?

We will have a corporate presence there. We're going to have several members of the Cytokinetics team there as we would for this being an important cardiovascular meeting.

We aren't going to have data from the ongoing ischemic cardiomyopathy study. That trial will be, we expect, top lined in the fourth quarter and as to when that data would otherwise be presented in full, we can't say yet, not yet knowing when we'll have that data in hand.

Okay. Thanks, Robert. The other question is regarding the cardiac catheterization lab study looking at oxygen consumption.

That looks to be a pretty interesting study. You said '09, '09 is a long year. Is that very likely perhaps front end weighted?

It's hard to say at this point. As you know, with us, we've been typically, by precedent, conservative until we have enough information on enrollment to be able to tell you with some high degree of confidence when it will be presented. It's too early in the enrollment of that study to say. So, the best I can say right now is '09.

Okay. And then my last question is for Sharon. On that committed equity financing facility, can you give us a little bit more color on, if you did that with Kingsbridge, would those shares be locked up? Is there any requirement to hold that stock? And what discount would you put that stock to Kingsbridge?

So, the way the facility is structured is there are discounts between 6% and 10%, depending on where the stock price is, and those are contractual discount rates that are already part of the structure. And then from the standpoint of if they are locked up, they are not locked up, but they are not allowed to short those shares. I can speak to what we have seen as being the practice with Kingsbridge, and they tend to hold a portion of what they purchase and then, over time, then look to match up a buyer with themselves in order to trade the shares are something that doesn't put a lot of pressure on the stock when it comes back into the marketplace.

That makes sense. It's a nice deal. What about the minimum tranche size and price?

So, the minimum, there's no minimum from a tranche size. Every time we do a draw, it can be up to 2.5% of our market cap and it's over an eight-day period that those shares then get priced.

If, at any point in time, the stock price fell below $2 a share, even if we were in a draw, then that day would be removed from the pricing period. So, anything below $2 a share we would not have access to that facility.

Okay. Good deal. Thanks for the added information.

Thank you, Charles.

Your next question comes from the line of Joel Sendek of Lazard Capital.

Good afternoon, Joel.

Thanks. A couple of financial questions. So, I was just confused doing the math, or maybe I just didn't hear it right, Sharon. With regard to the fourth quarter, what will the approximate cash burn be?

I didn't say specifically for the fourth quarter. What I did give was $76 million to $81 million for the full year, including the restructuring expenses, and that was the current projection for where we believe we will be with respect to winding down some of the clinical trials that are currently ongoing.

So, if I subtract out your cash burn year to date, that gives me a number like $30 million.

From a math perspective, that's about right. And I think what you have to look at is we're projecting where we're going to be by year end based on the activities we had. We know it's going to be within the range that we've provided you. It could be lower, but at this point in time, that's what we have as the projection.

Okay. That's helpful. And then just looking out at the runway that you have, if you bake in the facility and the conversion and the auction rate and all that and you reduce burn, it looks like you have about two years of runway. Is that about accurate?

Somewhere between 18 months and 22 months, potentially.

The reason why it's hard to calibrate is it had so much to do with our options that are outstanding. Were either Amgen or GSK, much less both of Amgen and GSK, to exercise, it really does significantly increase the cash on the balance sheet and significantly reduce our operating burn.

And along those lines, is that the top end of your range when you gave the 76 to 81, plus or minus the 16 or the 12, or is the opt-ins and the milestone payments over and above that?

No. Those are over and above. So, what we're just focusing on is cash operating expenses. So, we're not focusing on the revenue influx from that perspective.

The 76 to 81 refers to cash consumption in 2008 and the operating expenditures would be reduced presumably with one or both options exercised in 2009.

Right.

Understood. Okay, great, great. That clears it up. Okay. Thanks a lot.

Thank you, Joel.

Your next question comes from the line of Meg Malloy of Goldman Sachs.

Hi, Meg.

Hi. Thanks very much. A couple of quick ones. First, just housekeeping.

Sharon, could you give us the option expense breakout by operating expense line? And then on the 18 to 22 months, just to make sure I have that in correct context, that implies no exercise of option by either GSK or Amgen?

It implies, on the expense side, that a certain level of operating expenses that we would be managing to. It does not include the revenue. We're just looking at the expense side. But if they opt-in and Amgen opts in and exercises their option, that would reduce your net income or your net cash flow, but it's not included in the operating expense numbers that we're quoting you.

I'm sorry. If they opt in --

If the opt in, we get an option fee from them that would be included in revenue and they take over the clinical trials.

I understand that. So, this 18 months to 22 months of runway implies no option from either Amgen or GSK, right?

That's right, on the revenue side. Right.

Okay. And then on the ESO expense?

You're talking about the stock option expense.

Yes.

That we can provide to you when we provide the 10-Q. I don't have that with me today broken down by R&D and G&A.

Okay. Not a problem. Not a problem. And then if I might, then, just for Andy, could you detail the protocol for the cardiac catheterization study? I think you have done so before, but I just think it would be helpful to get a review.

So, patients that are undergoing a clinically indicated coronary angiogram are then studied if they don't require an intervention to look at hemodynamic parameters that can only be obtained invasively by having catheters in the left ventricle and in the coronary sinus.

And so in that way, we can measure, at baseline, the amount of oxygen that the heart is taking up and then, also, various measures of cardiac work that are particularly accurate because they're obtained, again, with a pressure catheter in the left ventricle.

And then we infuse the drug and then repeat these measurements and can assess whether myocardial oxygen consumption has been affected by the drug and whether the ventricular systolic performance has been -- we're pretty sure that systolic function will go up, it always has. The real question is whether or not that's in association with an increase in the consumption of oxygen by the heart.

So, preclinically, Meg, we had seen that CK-452 was associated with improved systolic performance, without also increasing oxygen consumption and energy consumption and, as a function of that, it looks to be differentiated then from other inotropic mechanisms, and we want to see if we can recapitulate that now in humans.

The design of the study was the subject of a poster presentation a couple of weeks ago at the HFSA. That's on our Website. It's on clintrials.gov and we can also send it to you, if you'd like.

Thanks. No. Actually, Chris has done so. Thanks a lot.

Sure thing.

Your next question comes from the line of George Zavoico of Cantor Fitzgerald.

Good afternoon, George.

Hi, good afternoon. Hi, everyone. A couple of quick questions, because I think things have been covered pretty well so far.

With regard to the cardiac cath study, you guys had kind of a slow start. Have you actually done a patient yet accordingly? I think you had some patients that were enrolled, but due to the criteria, they didn't follow through with the study?

We had opened enrollment long before we had actually initiated dosing, you are correct. Since then, we have initiated dosing, meaning we have dosed patients, plural, and we have opened up additional sites.

So, I'd say it's now up and running better and over the next quarter or so, we'll be in a better position to see what kind of run rate we've got.

How many patients? This is a small trial, right? It's only a dozen or so, right?

It's a lead-in phase and then a second phase, 18 patients, I believe, six in the lead-in, 12 to follow. As a function of that, it's not a large study, but that's not to suggest it's easy to do and, therefore, it requires very specialized centers and techniques, technologies and monitoring.

So, it's not the kind of study that's going to enroll like, say, the ischemic cardiomyopathy study did, which enrolled quite rapidly. This one will enroll more slowly, but how slowly and over what timeframe, I'll have to defer until we see enrollment.

We're now seeing enrollment in more than one center and that's a positive.

I'm glad you pointed out that that was plural. The Amgen option, if it's exercised, what's the upfront? Have you disclosed that?

Yes. They would pay us $50 million.

Okay. And regarding the Phase II ICM study, these are patients that are undergoing voluntary testing, right? I mean, these aren't patients who are not because of an acute event.

No, no, no. These are actually patients who shouldn't have had a recent acute event, according to the protocol, and then they undergo exercise testing as part of a clinical investigation.

As you know, that's a fairly common tool in clinical investigation, exercise performance of various types.

Okay. And so these patients, because they haven't had a recent acute event, they're basically not on any other IV drugs, right?

No, they're not.

Is there an exercise test at the end of the seven days?

No.

And finally, after this trial, I guess these patients will have been on 452 for seven days. That will be the longest time any humans anyway have been on the drug. Is that correct?

That is correct, yes.

All right. Great. Thank you very much. That's all.

Thank you, George.

There are no further questions at this time.

Thank you, Operator. I'd like to thank all the participants for their continued interest in Cytokinetics.

With that, Operator, we can conclude the call. Everyone have a good day.

Thank you again for participating in today's conference call. You may now disconnect.