Cytokinetics Inc (CYTK) 2016 Q3 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Cytokinetics third-quarter 2016 conference call. (Operator Instructions). I will now turn the call over to Diane Weiser, Cytokinetics' Vice President of Corporate Communications and Investor Relations. Please go ahead.

Good afternoon, everyone, and thanks for joining us on the call today. Robert Blum, our President and Chief Executive Officer, will kick us off with highlights from the quarter. Then Fady Malik, our EVP of Research and Development, will provide an update on the Phase 3 development program for omecamtiv mecarbil. Andy Wolff, our SVP and Chief Medical Officer, will then provide updates on VITALITY-ALS, our ongoing Phase 3 clinical trial of tirasemtiv in patients with ALS, as well as on VIGOR-ALS, our recently started open-label extension trial for patients who complete VITALITY-ALS.

Fady will then rejoin us to share an update on CK-2127107, or CK-107, and the ongoing and planned clinical trials. Sharon Barbari, our EVP of Finance and Chief Financial Officer, will then provide a financial overview for the quarter and updated financial guidance for the remainder of the year, before Robert will wrap things up with additional corporate updates and perspectives before we open the call for questions.

Please note that portions of the following discussion, including our responses to questions, contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements for purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements may include statements relating to our financial guidance and goals, our strategic initiatives, our collaborations with Amgen and Astellas, clinical trials and the potential for eventual regulatory approval of our product candidates.

Our actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained under risk factors in our Form 10-Q for the quarter ended June 30, 2016, and our Form 10-Q for the quarter ended September 30, 2016, which we expect to file shortly. We undertake no obligation to update any forward-looking statements after this call. And now I will turn the call over to Robert.

Thank you, Diane, and thanks again to everyone for joining us on the call today. This has been a very busy and very productive quarter for us, and I am delighted with the progress we have made across our portfolio of late-stage drug candidates, as well as with each of our partners, Amgen and Astellas. Specifically, we achieved four key milestones this quarter that we will elaborate on during the call. First and foremost, we are advancing omecamtiv mecarbil into a Phase 3 clinical development program in collaboration with Amgen. And we are pleased to have agreement from the FDA on key elements of a special protocol assessment, or SPA, which we are currently finalizing with regulators.

We also know that Servier has exercised its option to sublicense the commercial rights for omecamtiv mecarbil in Europe and the Commonwealth of Independent States, including Russia, and as such will co-fund the Phase 3 program with Amgen. We understand these announcements have been highly anticipated by Wall Street and we are pleased that the many months of protocol development, statistical analyses, budgeting, regulatory interactions, market research, etc., now enable us to initiate sites for GALACTIC-HF, the pivotal Phase 3 cardiovascular outcomes trial in the fourth quarter of 2016. Fady will provide an update on this trial as well as additional data emerging from COSMIC-HF.

The second key milestone we achieved during the quarter was the completion of enrollment in VITALITY-ALS, our international Phase 3 clinical trial of tirasemtiv in patients with ALS. VITALITY-ALS enrolled more than 700 patients in approximately 80 centers in 11 countries. Results are expected in the fourth quarter of 2017. More recently, we announced the start of VIGOR-ALS, the open-label extension trial of tirasemtiv for patients who have completed their participation in VITALITY-ALS. Andy will elaborate on these trials in a moment.

Third, as we announced in July, we expanded our collaboration with Astellas relating to skeletal muscle activators to include ALS. More recently, we received Hart-Scott-Rodino clearance, which triggered a $65 million payment from Astellas that was received this month. As a result of this second expansion of our relationship with Astellas, we granted Astellas an option right for the development and commercialization of tirasemtiv, our first-in-class skeletal muscle activator. Cytokinetics will continue to develop and commercialize tirasemtiv in North America, Europe and other select countries. If Astellas exercises its option, Astellas will develop and commercialize tirasemtiv in other countries.

Additionally, we agreed to amend our collaboration agreement with Astellas to enable the development of CK-107 for the potential treatment of ALS and to extend our joint research program focused on the discovery of additional next-generation skeletal muscle activators through 2017. Fady will provide an update on each of our ongoing Phase 2 clinical trials of CK-107 in patients with each of SMA and COPD, respectively. He will also provide a preview of our planned Phase 2 clinical trial of CK-107 in patients with ALS. Finally, during the quarter we announced the initiation of IND-enabling studies for next-generation fast skeletal muscle activator under our collaboration with Astellas. That important research milestone triggered a $2 million payment.

I am very proud of Cytokinetics' many accompaniments in the third quarter and I'm grateful to everyone in our Company who contributed to make them happen. Importantly, as Sharon will elaborate with our updated guidance, our pro forma cash position is strong, with approximately 18 months of going forward cash, and that doesn't include the milestone payments we expect to receive from Amgen. Sharon will have more to say about that as well.

Let me now turn the call over to Fady so he can update you on GALACTIC-HF, the Phase 3 heart failure outcomes trial of omecamtiv mecarbil.

Thanks, Robert. Together with Amgen, we are extremely pleased to advance omecamtiv mecarbil into a Phase 3 development program with the start of a large cardiovascular outcomes clinical trial expected in the fourth quarter of 2016. As Robert indicated, the decision to proceed into a Phase 3 development program follows extensive planning and protocol development, regulatory and partnering interactions -- partner interactions, and following the results of COSMIC-HF, our Phase 2 clinical trial evaluating omecamtiv mecarbil in patients with chronic heart failure.

As you may recall, the data from COSMIC-HF were first presented in a late-breaking clinical trials session at the American Heart Association scientific session in 2015. Additional results were presented at Heart Failure 2016, the annual Congress of the Heart Failure Association of the European Society of Cardiology, in May; and more recently in September, at the Heart Failure Society of America scientific meeting, or HFSA. I will address the HFSA data in a moment.

The pivotal cardiovascular outcomes trial has been named GALACTIC-HF, our global approach to lowering adverse cardiac outcomes through improving contractility in heart failure, and follows our astrophysical theme from the prior large Phase 2 trials, ATOMIC-AHF and COSMIC-HF. The detailed trial design for GALACTIC-HF is now posted on clinicaltrials.gov, so I will provide an overview of the key design details.

The primary objective of this double-blind, randomized, placebo-controlled, multicenter study is to determine if treatment with omecamtiv mecarbil, when added to standard of care, is superior to standard of care in reducing the risk of cardiovascular death or heart failure events in patients with higher-risk chronic heart failure and reduced ejection fraction. The primary outcome measure is time to cardiovascular death or first heart failure event, which is defined as either a hospitalization for heart failure or other urgent treatment for worsening heart failure.

Secondary outcome measures include time to cardiovascular death, time to first heart failure hospitalization, all-cause death, and patient-reported outcomes, as measured by the Kansas City cardiomyopathy questionnaire total symptom score. The study will enroll approximately 8,000 patients with a history of symptomatic chronic heart failure who are either hospitalized or have had a hospitalization or admission to an emergency room for heart failure within a year prior to screening.

Patients also need to have an elevated BNP or NT-proBNP. They will be classed NYHA class 2 to 4 and must have an LVEF of less than or equal to 35%. These inclusion criteria define a higher-risk population than the patients we studied in COSMIC-HF, but not quite as high risk as the population we studied in ATOMIC-AHF. Importantly, the study is powered to detect a clinically meaningful decrease in cardiovascular mortality, the first of the secondary endpoints. As Robert mentioned, we also have agreement from FDA on key elements of a SPA and we are working with regulators to finalize the protocol.

GALACTIC-HF will be conducted by Amgen at its and Servier's expense in many hundreds of investigational sites throughout the world, including Japan. With respect to the expected inclusion of Japan in the global Phase 3 program, our ongoing Phase 2 clinical trial of omecamtiv mecarbil in Japan is proceeding well. To date, all sites have been activated and we expect to complete enrollment by the end of 2016 or early in 2017 with results expected in 2017. This trial in Japan is expected to inform the potential participation of Japanese investigational sites in GALACTIC-HF in 2017.

Furthermore, in addition to GALACTIC-HF, Cytokinetics will conduct a second Phase 3 study at Amgen's expense. The objective of this trial will be to determine the effect of omecamtiv mecarbil compared to placebo on exercise performance and left ventricular remodeling in patients with symptomatic heart failure. That Phase 3 trial is still in the planning stages and we should have more to say about its design and timing in 2017.

Turning to other clinical updates, last month at HFSA we announced the presentation of additional results from COSMIC-HF that showed omecamtiv mecarbil may improve symptoms versus placebo in patients with moderate to severe heart failure symptoms after 20 weeks of double-blind treatment, as measured by the Kansas City cardiomyopathy questionnaire, or KCCQ, total symptom score, one of the subdomains of a self-administered questionnaire that measures quality of life in patients with heart failure. This was good news, as it showed an association between self-reported patient symptom improvement alongside the improvements we have seen in cardiac structure and function in patients receiving omecamtiv mecarbil versus placebo.

Now I will turn the call over Andy to provide an update on tirasemtiv, including VITALITY-ALS and its open-label extension trial that we recently started.

Thanks, Fady. As Robert mentioned, during the quarter we completed enrollment in VITALITY-ALS, our Phase 3 trial designed to assess the effects of tirasemtiv versus placebo on slow vital capacity, or SVC, and other measures of skeletal muscle strength in patients with ALS. VITALITY-ALS enrolled more than 700 patients across 11 countries in North America and Western Europe. In that regard, we are very pleased that we exceeded our target and fully 25% of our total enrollment came from our European sites. With enrollment completed, we believe that we will have 90% power to detect a difference between tirasemtiv and placebo of 6 percentage points in the primary endpoint, which is the change from baseline to 24 weeks in slow vital capacity. We look forward to the presentation of baseline demographic data from VITALITY-ALS at the International Symposium on ALS/MND in Dublin, Ireland, in December.

Also during the third quarter, we convened a second data monitoring committee meeting for VITALITY-ALS to review unblinded safety and efficacy data. We are pleased to report today that, after their review, the committee recommended continuing VITALITY-ALS without any modifications or changes to the trial protocol. Moving forward, we recently announced that the first patient has been enrolled in VIGOR-ALS, which stands for ventilatory investigations in global open label research on tirasemtiv in ALS. VIGOR-ALS is our open label extension trial in tirasemtiv for patients who have completed VITALITY-ALS. The primary objective of the trial is to assess the long-term safety and tolerability of tirasemtiv in patients with ALS. The primary endpoint is the incidence of adverse events in the patient population.

We'll also be measuring secondary endpoints in VIGOR-ALS similar to those in VITALITY-ALS, including time to first use of assisted ventilation or death, time to the first occurrence of respiratory insufficiency or death, decline in the percent predicted slow vital capacity from baseline, decline in the ALSFRSr score from baseline, the slope of the change from baseline in percent predicted vital capacity, and the slope of the change from baseline in ALSFRSr. We believe that VIGOR-ALS may provide supplemental safety data alongside the results from VITALITY-ALS to support potential registration for tirasemtiv for patients with ALS.

Now I will turn the call back over to Fady to provide an update on CK-107, our next-generation fast scalable troponin activator.

Thanks, Andy. As Robert previously mentioned, another key milestone we achieved during the third quarter was the expansion of our global collaboration with Astellas to provide for the development of CK-107 in patients with ALS. Under our expanded collaboration, we and Astellas have agreed on a development plan under which Cytokinetics will conduct a Phase 2 clinical trial of CK-107 in patients with ALS in 2017 at the expense of Astellas. Afterwards, Astellas and Cytokinetics may then collaborate on the design and conduct of a potential global registration program for CK-107 in ALS.

We are excited to explore another skeletal muscle activator for the potential treatment of ALS because CK-107 may offer a broader therapeutic index compared to tirasemtiv, given that it is structurally distinct and was designed not to cross the blood-brain area to the same extent as tirasemtiv. In the Phase 1 clinical studies, CK-107 did not appear to be associated as frequently with lightheadedness and dizziness as we observed with tirasemtiv.

Turning now to our ongoing Phase 2 clinical trials with CK-107, we have recently intensified our enrollment activities at sites participating in CY 5021, our ongoing Phase 2 trial of CK-107 in adolescent and adult patients with SMA. Enrollment increased during the quarter and we are seeing a good balance of ambulatory and nonambulatory patients enrolled. As we mentioned in our Q2 earnings call, additional sites in Canada are being activated, with the first sites expected this quarter. We believe we will complete enrollment in cohort one in the fourth quarter of 2016 and expect data from cohort one and cohort two by mid-2017.

Our second Phase 2 clinical trial of CK-107, in patients with COPD, also continues to enroll. Astellas is conducting this randomized, double-blind, placebo-controlled, two-period crossover trial designed to assess the effects of CK-107 on physical function in approximately 40 patients with COPD, all enrolled in the United States. Lastly, I am pleased to share that we have plans to start another Phase 2 clinical trial of CK-107 in yet another patient population in 2017. And we will have more to say about this in our Q4 earnings call.

As I hope is evident, within the next year or two we hope to generate abundant data elucidating the safety, tolerability, pharmacokinetics and pharmacodynamic effects of CK-107 on multiple measures of physical function in an array of different populations which will clearly informed the development path forward. We are pleased that Astellas shares our vision for a broad development program for these multiple skeletal muscle activators.

And with that update, I will now turn the call over to Sharon for an update on our financials.

Thank you, Fady. As our press release contains detailed financial results for the third quarter of 2016, I will refer you to that public statement for the details of our P&L and balance sheet. We ended the third quarter with approximately $86 million in cash, cash equivalents and investments, which represents approximately 18 months of going forward net cash burn based on our revised 2016 financial guidance, which we announced today and I will cover in more detail in a moment. The cash balance at the end of the third quarter does not include the $65 million related to the expansion of our collaboration with Astellas, which we received in October, but it is included in our guidance for the year.

Revenues for the third quarter of 2016 were $59 million compared to $7.9 million during the same period in 2015. Revenues for the third quarter of 2016 included $53 million of license revenues, $3 million of research and development revenue and $2 million of milestone payments from our collaboration with Astellas, $0.6 million in research and development revenues from our collaboration with Amgen, and $0.3 million in research and development revenues from our collaboration with ALSA, and $0.2 million in milestone revenue from our collaboration with MyoKardia. Revenues for the same period in 2015 were comprised of $4.1 million of license revenues and $3.2 million of research and development revenues from our collaboration with Astellas, and $0.6 million of research and development revenues from our collaboration with Amgen.

Our third quarter 2016 R&D expenditures totaled $19.3 million. From a programs perspective, for the third quarter approximately 88% of our R&D expenses were attributable to our skeletal muscle contractility programs, which include both expenses attributed to tirasemtiv and CK-107 development, 9% to our cardiac muscle contractility program, and 3% to our other research activities.

Today we also updated our financial guidance for 2016. Our guidance is on a cash basis, and as we announced last month, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1996, or HSR Act, in connection with the expansion of our collaboration with Astellas. With this clearance, the related $65 million upfront payment was due within 30 days of the effective date and we received it earlier this week. The company anticipates cash revenue will be in the range of $84 million to $87 million. Cash R&D expenses will be in the range of $65 million to $67 million, and cash G&A expenses will be in the range of $23 million to $26 million.

Our revenue guidance includes the $65 million in cash received from the expansion of our collaboration with Astellas for ALS. Under generally accepted accounting principles, $50 million was recognized in September and the remaining $15 million for the option on tirasemtiv will be recognized upon the exercise of their option for a license to tirasemtiv for ALS. The guidance also includes a $2 million milestone payment from Astellas triggered by the initiation of IND-enabling studies for a next-generation fast skeletal muscle activator in September. This guidance does not include a milestone payment of $27 million relating to the start of GALACTIC-HF, which we expect to be paid in Q4 2016.

The decrease in R&D expenditures for 2016 reflects the estimated timing of costs associated with VITALITY-ALS and VIGOR-ALS in 2016. The increase in G&A expenses includes additional costs associated primarily with commercial readiness activities for tirasemtiv and increased outsourced costs associated with the recent expansion of our Astellas collaboration. This guidance excludes approximately $13.5 million in unearned revenue from the 2014 amendment of our collaboration with Astellas, which will be recognized in 2016 for the Astellas SMA development plan under generally accepted accounting principles.

And lastly, this guidance excludes an estimated $7.2 million in non-cash-related operating expenses primarily related to stock compensation expense. With that, I will now turn to call back over to Robert.

Thank you, Sharon. As I said at the outset of the call, it has been a very productive third quarter and I am pleased with the collective achievements of our colleagues here at Cytokinetics and in collaboration with our partners. As we look ahead to 2017, it is rewarding to see Cytokinetics continue to mature as a late-stage biopharmaceutical company, soon to have two large-scale Phase 3 programs underway, a broad Phase 2 trials program in progress, and still robust preclinical research initiatives, some undertaken by ourselves and others in collaboration with our partners Amgen and Astellas.

We are executing well against our strategy to leverage partnerships to fund continued research, development and potential commercialization of our drug candidates as we mature our Company operations and advance our strategic vision. We believe we are striking a good balance between advancing our first-generation novel mechanism programs towards potential registration while ensuring we also continue to pursue next-generation programs as contingencies and franchise builders, and doing both in a fiscally prudent way, primarily leveraging non-dilutive capital.

We also look forward to the start of GALACTIC-HF, our hopefully definitive heart failure outcomes trial of omecamtiv mecarbil to be funded by Amgen and Servier. As you may recall, Cytokinetics has an option to co-fund certain costs associated with the Phase 3 program in exchange for increased royalties. We are in discussions with potential financial partners and we hope to secure non-dilutive capital to make this investment through a potential royalty monetization deal which we may anticipate closing in the coming months.

Our recently extended and expanded deal with Astellas further validates our leadership in muscle biology and reflects our collective commitment to bring multiple novel skeletal muscle activators to patients suffering from devastating diseases of impaired muscle function and muscle weakness. As you heard, we and Astellas have very ambitious plans to study several skeletal muscle activators across an array of patient populations. At a time when our industry faces intensifying criticism on the relative value of medicines that have been available for decades, we are proud of our strategy to innovate and hopefully bring forward first-in-class potential therapies that may meaningfully impact patient lives.

As further testament to our values and our commitment to patients and in support of patients with ALS and patients with SMA and their loved ones, we have recently scaled up our partnership with the ALS Association on both the national and the local levels. Our employees were busy this quarter supporting a variety of awareness, education and fundraising activities in connection with ALS, as well as others in support of SMA, including local walks, bike rides and similar activities. Specifically, we participated in Every Drop Adds Up, the ALS Association's new campaign that evolved from the Ice Bucket Challenge. We take our commitment to the patient communities we serve very seriously and we are gratified to participate in critical initiatives as we work in parallel with the advocacy community to advance our muscle biology-directed drug candidates that they so desperately need.

Now, let me recap our expected milestones this quarter and for the remainder of the year. For omecamtiv mecarbil we expect to initiate sites for GALACTIC-HF in the fourth quarter. For tirasemtiv we expect data from VITALITY-ALS in the fourth quarter of 2017. And for CK-107 we expect to complete enrollment of cohort one in CY 5021, the Phase 2 clinical trial with patients with SMA, in the fourth quarter. And for preclinical research we expect to continue research activities under our joint research program with Amgen, directed to the discovery of next-generation cardiac muscle activators and also under our joint research program with Astellas, directed to the discovery of next-generation skeletal muscle activators.

And operator, with that we can now open up the call, please, to questions.

(Operator Instructions). Joe Pantginis, ROTH Capital Partners.

A couple logistical questions first. Can you remind us with regard to the Astellas collaboration -- or, I'm sorry, option for tirasemtiv, what the timeline is -- or that they have to respond within?

Good question. So there is no specific timeline under which they are required to exercise their option. They can exercise their option at different time points. And depending on when they exercise their option, they may be responsible for different payments and a different proportion of going-forward costs.

Okay, that's helpful. And then if I could just switch to GALACTIC, first I would say can you elaborate on the primary endpoint in the terms of the defining of a heart failure event? It seems a little different than previous trials, say, PARADIGM.

Good question. It is different and purposefully so. I will turn it over to Fady to answer your question.

The traditional endpoint that has been used is time to first cardiovascular death or first heart failure hospitalization. And we use the term heart failure events to describe a slightly wider set of events than just a hospitalization. It's to include patients that make urgent visits to an emergency room, for instance, require intravenous therapy, or they might be admitted into an observation unit because of the need for intensification of therapy, in particular intravenous therapy.

Those sorts of events are, frankly, not going to be the majority. The majority of events will still be traditional heart failure hospitalizations. But as we go forward into the future, especially in the United States, we are going to see physicians and hospitals develop and implement strategies to keep patients out of the hospital when they have their heart failure exacerbations. And the endpoint was designed to hopefully capture those events as well rather than to lose them.

And in particular, looking -- PARADIGM looked at this. There was a presentation at AHA last year. And those patients had subsequent events that were just as morbid as those that were actually hospitalized, in fact.

Understood. Thank you for that. And then just one little nitpicky thing about GALACTIC, if you can discuss it, with regard to the statistical plan. Are there prespecified groups with regard to the class? Because 2 to 4 is pretty wide-ranging with regard to, say, patient activity and severity. So are there prespecified groups?

Yes. There are certainly prespecified subgroups upon which the analysis will be conducted. I can't remember if we specify individual heart failure classes. I don't think we do, actually. But I don't think that that is that significant. Most trials don't subdivide patients that way when they do their analyses.

Okay, understood. Thanks a lot, guys.

Ritu Baral, Cowen and Company.

I'm going to focus on VITALITY and VIGOR. How has study conduct in the dropout rate in VITALITY gone? How has general compliance and tolerability gone?

Good question. So I hope I will be able to answer it to your satisfaction. I'll start by making a few comments and then turn it over to Andy, see if he wants to elaborate. But firstly, as we did mention on this call, the DMC recently convened a meeting. And as you know, they have access to the unblinded data. And in reviewing that data they recommended we proceed without making any changes to the protocol. So that's their second meeting associated with the review of these data. Otherwise, we are blinded, as you may know, to these data. And we really don't have a glimpse into what may be tolerability or otherwise early terminations beyond what we see at the superficial and headline level. So I don't think we really have ability to comment on what you are asking.

Andy, is there anything more that I should add?

No, I don't think so.

Got it. And then on the open label extension, VIGOR, Andy, you went through what you were going to be monitoring from adverse events all the way to down to percentage FEC and ALSFRS. Is the frequency at which you are measuring these any different than in VITALITY?

Well, the dose titration needs to be the same as in VITALITY. We wouldn't want to change that. Some patients who will be coming on to treatment in VIGOR-ALS will never have had tirasemtiv, other than the two weeks of open label treatment that they had before they were randomized into VITALITY-ALS. So, they will need to go through the same dose titration schedule with the opportunity to down titrate, much as in VITALITY-ALS. And that means some more frequent visits toward the beginning. But then after that we do space them out so that it's not so burdensome on the patient and they don't have to come back so frequently.

So, like, every six months or every three months? (multiple speakers)

I think it's three. It's three.

Okay. Got it. Thanks for taking the questions, guys.

Jason Butler, JMP.

Just first on omecamtiv, can you provide any details around the dose and titration schedule and PK monitoring related to the dose titration for the study?

Yes, indeed. As you may be able to see from the posting on clinicaltrials.gov, it's similar but not the same as how we performed those dosing and escalations in PK in the COSMIC-HF study. So I'll ask Fady to elaborate on that and point out the differences.

So, in COSMIC we employed a dose titration. All patients started at 25 milligrams twice a day. At two weeks they had a trough plasma sample that was measured for omecamtiv mecarbil concentration. And if their level was below 200, then they would escalate to 50 milligrams twice a day. And if the level was above 200 they would stay at 25 milligrams. In COSMIC we ended up with about 60%, 65% of the patients getting to the 50 milligrams twice a day and about 35% of the patients staying at 25 milligrams twice a day.

In GALACTIC, we employ basically a very similar strategy, except we have included an intermediate dose of 37.5 milligrams. So everyone starts at 25. At two weeks they have the plasma concentration drawn. And then subsequently they are up-titrated based on that single concentration. And in this case they are either up-titrated to 50 milligrams if they are under 200. Or, if they are above 200 but below another cut off, then they are titrated up to 37.5 milligrams. And so the goal there was to get more patients up into the same range, sort of better equalize the exposure between the patients at 25, 37.5 and 50.

And the strategy then has one other adjustment, in that another plasma concentration is checked at about eight weeks -- or six weeks, rather. And if there's any further adjustment downwards that's required, it's performed at that point. And that's basically it. There is some monitoring over the course of the trial but no further adjustments are then spec'd out.

Okay, that's helpful. And then just for CK-107, as you are thinking about development plans in ALS, are there any specific trial design differences that you think about? You've spoken about the differences between 107 and omecamtiv. Does that lend itself to any trial design differences or patient population differences when you look to starting trials there?

So it's a good question. I think we are good students of the clinical research that we ourselves have performed with tirasemtiv. And the BENEFIT-ALS study of tirasemtiv teaches us some things that we want to put into practice in a Phase 2 study of CK-107. So we did learn that the ALSFRS, while a very important measure of disease progression, is perhaps not the best primary endpoint for what would be a study of shorter-term duration. like we might anticipate in the Phase 2 study of CK-107.

So, while we should measure it, it's unlikely going to be the primary endpoint. More likely, we will look at vital capacity as measured by slow vital capacity, in large part because of what we have learned from our own experience with tirasemtiv. We also will have, obviously, different dosing approaches, given that this is a different compound that is enabling a different approach than was the case with tirasemtiv. Maybe I'll turn to you, Andy, and you, Fady, to see if there's anything I might should also mention.

I think specifically what our experience with CK-107 to date suggests that the tolerability is sufficiently better than that of tirasemtiv that there won't be a requirement to titrate patients to their intended dose. And we can just start them on whatever dose to which they are randomized. And I think that alone is a significant simplification of the design. It improves the packaging of the drug and makes it easier for the sites. It means that we don't need to bring the patients back maybe quite so frequently at the beginning. So, there may be other minor differences. I think that's the big one.

Yes, we may have enrolled more patients with ALS into clinical trials than nearly any, if not all companies. And therefore we will circle with our clinical investigative sites to see what else they might recommend. There may be an opportunity to pilot some other potential endpoints related to muscle strength. These are things that we will seek their advice on before we may choose to finalize a protocol, perhaps later this year or early next year. Our goal would be, under the collaboration with Astellas, to get this study started sometime by mid-2017.

Okay, great. And then just one last question, and I understand if there's not a lot of details you can give here. But you mentioned the royalty monetization transaction you are considering. Can you just help us understand what the potential range of terms that you would view as viable or feasible to move forward with this?

It's probably premature to go too much into detail, as you suspected. But I will tell you what we are doing, is we are engaging with a number of different types of funds, both those that are classically focused to royalties only as well as other funds. And we favor transactions that will pivot more along the lines of the incremental royalty. That's what we'll be discussing, and it's still somewhat early days in this process, but our hope is that we are in a position to proceed forward with a transaction that would be predominantly, if not solely, non-dilutive.

That said, this will be a conversation that we as a management team have with our Board and we'll vet multiple different summaries of terms. This is something that we haven't decided to do. This is something that we are considering as we take a pulse of the market. And we will consider this over the course of these next several months. And we should have, hopefully, more to say about this towards the end of this year and next year, as we may be in a better position to pinpoint what kinds of deals are available to us and what might meet with our interest.

Great, that's helpful. Thanks for taking the questions.

Charles Duncan, Piper Jaffray.

This is actually Sarah on for Charles. So, two quick questions. I think you mentioned that Amgen will be running a second Phase 3 in heart failure. Just curious if you can share any more details and if that is a gating step in terms of submitting an NDA in the US.

Yes. Just to clarify, the second Phase 3 study that's currently contemplated is one we expect that Cytokinetics would conduct, but at the expense of our partners Amgen and also Servier. And therefore this is a study that we are still discussing. We obviously will need to have further conversations with Amgen and potentially also with regulatory authorities. But in concept, the goal is to potentially do another trial that would be smaller. It would likely be in hundreds of patients, not thousands. And it would be a study that would be aimed towards answering questions about the potential for reverse remodeling with chronic treatment of omecamtiv mecarbil in heart failure patients.

And therefore, we saw in COSMIC-HF results that were extremely encouraging about that opportunity and that potential. But ultimately, that has to be addressed in a controlled clinical trial aimed at that specific hypothesis. And we would expect that that's a study that would start later than GALACTIC-HF. It may, in fact, finish earlier. And that's a study that we would likely operationalize but at the expense of our partner. And therefore, that's something that still needs to be fully vetted, discussed and agreed.

Okay, thank you. And then sorry if I missed this, but it seems like your R&D is up a good amount quarter over quarter. What's behind that? Can we expect burn to remain at these levels?

Just to repeat the question, you said that our R&D expense is going up; what's behind that?

Yes. So that really has to do with the cost of the VITALITY-ALS clinical trial. The trial is now fully enrolled, and we anticipate that, now that patients are all on drug, and obviously you are going to get a little bit of a curve on this, but you are going to have costs going up. And then as patients -- more and more patients start to roll off, the cost of VITALITY will go down. But we won't really see the impact of that until next year.

All right, thanks for taking my questions.

(Operator Instructions). And we have no questions in queue at this time, sir.

Okay. Thank you, operator. So to repeat, the third quarter was indeed a productive one for Cytokinetics. And as you heard today, we look forward to several key milestones in the near term as well as through 2017. These are promising times for our Company and also our pipeline, both, as are both well served by our stronger financial position and prospects. Thank you to all the participants on our teleconference today for your continued support and interest in our Company. And operator, with that we can conclude the call.

This does conclude today's conference call, ladies and gentlemen. You may now disconnect.