Cytokinetics Inc (CYTK) 2016 Q4 法說會逐字稿

Good afternoon, welcome ladies and gentlemen to the Cytokinetics fourth quarter 2016 conference call. At this time I would like to inform you that this call is being recorded, and that all participants are in listen-only mode. At the request of the Company, we will open the call for questions and answers after the presentation. 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 & 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 and VIGOR-ALS, the open-label extension of our ongoing Phase 3 clinical trial of tirasemtiv in patients with ALS, for those who complete VITALITY-ALS. Fady will then rejoin us to share an update on CK-2127107 or CK-107, and the ongoing and planned chemical trials. Sharon Barbari, our EVP of Finance and Chief Financial Officer, will then provide a financial overview for the quarter and year-end, as well as financial guidance for 2017. Robert will wrap things up with additional corporate updates, perspective, and corporate milestones for 2017, 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 can constitute forward-looking statements for purposes of the Safe Harbor Provisions of the Private Securities and 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 in our SEC filings, including our most recent 10-K, 10-Q, 10-K and 8-K. We undertake no obligation to update any forward-looking statements after this call. Now I will turn the call over to Robert.

Thank you Diane. Thanks again to everyone for joining us on the call today. We're pleased to have ended 2016 strong, with a fourth quarter marked by the same positive progress and momentum we demonstrated throughout the whole year. We have now begun 2017 executing well against the vision 2020 strategic roadmap we announced this time last year, with two Late Stage muscle biology drug candidates in Phase 3 programs. A third advancing in multiple Phase 2 trials, and research programs alone and in collaboration with our partners, advancing new compounds towards potential development.

All of this is occurring while we continue to execute well on our corporate and business development strategies. We ended 2016 with strong financials as we matured our business. In the fourth quarter the first clinical site was activated in GALACTIC-HF, the Phase 3 cardiovascular outcomes trial of omecamtiv mecarbil, which as you know is being conducted by Amgen in collaboration with Cytokinetics. Coincident with the start of the trial, we received a $26.7 million milestone payment during the fourth quarter.

Reflective of our confidence in and commitment to this program, we more recently announced that we agreed to sell Royalty Pharma, a 4.5% royalty on potential worldwide sales of omecamtiv mecarbil, in a $100 million transaction, included $90 million in cash and $10 million in Cytokinetics' common stock. We also announced that Cytokinetics agreed to exercise our option to co-invest with Amgen in the Phase 3 development program of omecamtiv mecarbil, and in exchange an incremental royalty of up to 4% on increasing worldwide sales of omecamtiv mecarbil outside of Japan.

Our co-funding at the $40 million level under our collaboration with Amgen, affords us the right to co-promote omecamtiv mecarbil in certain institutional care settings in North America, with reimbursement from Amgen for certain of our sales force activities. We're pleased to have completed this royalty monetization transaction with Royalty Pharma, as it provides us with capital to fund our co-investment in the Phase 3 clinical development program, as well as it provides us with additional working capital to support other key activities at the Company, as we advance our portfolio of first-in-class drug candidates.

In a moment Fady will provide an update on GALACTIC-HF, as well as the ongoing Phase 2 trial of omecamtiv mecarbil in Japanese patients with heart failure. He will also elaborate on data emerging from COSMIC-HF, which provides supportive evidence. During the quarter we announced the start of VIGOR-ALS, the open-label extension trial accompanying our ongoing Phase 3 trial for tirasemtiv, which is called VITALITY-ALS. We also announced the baseline characteristics for patients with ALS who have enrolled in VITALITY-ALS. We're pleased that these data shows that patients in VITALITY-ALS are comparable to those who enrolled in BENEFIT-ALS, as well as other recently conducted ALS trials. Andy will elaborate on these and other data recently presented at the ALS/MND meeting, which was held in December, as well as in published literature.

Notably we continue to see data supporting the correlation between FVC, or forced vital capacity, and SVC, slow vital capacity, as well as their predictive value on disease progression. We believe these emerging data auger will for a potential outcome of VITALITY-ALS. Finally, we are on track to complete enrollment in the first cohort of our ongoing Phase 2 clinical trial of CK-107 in patients with spinal musculature atrophy, or SMA, and we expect to begin cohort two during this first quarter, with data from both cohorts anticipated later this year.

These are increasingly hopeful times for patients with SMA, and we congratulate Biogen and Ionis on the recent approval of nusinersen, for the treatment of SMA in pediatric and adult patients. Fady will provide an update on our SMA trial, the ongoing Phase 2 trial in patients with COPD, which is being ducted by Astellas, as well as two additional trials to begin this year. One in patients with ALS to be conducted by Cytokinetics, and the other one in elderly patients with limited mobility to be conducted by Astellas. We certainly have a lot going on. Let me turn the call over to Fady, so he can first update you on omecamtiv mecarbil.

Thanks Robert. As you know, in the fourth quarter Amgen in collaboration with Cytokinetics activated the first site and started GALACTIC-HF Phase 3 clinical outcomes trial, cardiovascular outcomes trial, with omecamtiv mecarbil. As we ended year and we began 2017, start-up activities are under way, and sites are now enrolling patients. We were monitoring site activation and enrollment, and things appear to be running on schedule. The trial will enroll approximately 8,000 symptomatic chronic heart failure patients, in approximately 900 sites and 35 countries, who are either currently hospitalized for the primary reason of heart failure, or have had hospitalization or admission to an emergency room for heart failure within a year prior to screening. As a reminder, our joint decision to advance omecamtiv mecarbil into the Phase 3 program, was based on the review of results from prior clinical trials. Including COSMIC-HF, our Phase 2 clinical trial evaluating omecamtiv mecarbil in patients with chronic heart failure, which was published in The Lancet during the quarter.

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. Enrollment was completed in the fourth quarter, and we expect results in Q3. This trial which is mostly focused on safety and pharmacokinetics is expected to inform the potential participation of Japanese investigational sites in GALACTIC-HF later this year or early in 2018.

In addition to GALACTIC-HF we are in the planning stages for another Phase 3 clinical trial designed to examine the effect of omecamtiv mecarbil on exercise tolerance and cardiac function. This trial will be conducted by Cytokinetics in collaboration, and as funded by Amgen. We expect to have more to say about this trial later this year.

Turning to other clinical updates during the past quarter, additional results from COSMIC-HF were presented at the HA Annual Meeting, showing that oral dosing of omecamtiv mecarbil over 20 weeks improved left atrial structure and function in these patients. In addition to the observed decreases in left ventricular size and NT pro-brain natriuretic P, we believe these data from COSMIC-HF provides further evidence for the potential of omecamtiv mecarbil to reverse both ventricular and atrial enlargement with patients with chronic heart failure. Now I will turn the call over to Andy, to provide an update on tirasemtiv.

Thanks Fady. As Robert mentioned, during the quarter we began enrolling patients into VIGOR-ALS, our open-label extension trial of tirasemtiv, for patients who have completed VITALITY-ALS. The primary objective of VIGOR-ALS 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 this patient population. We are collecting 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, decline in percent predicted FPC from baseline, decline in ALSFRS-R score from baseline, slope of the change from baseline in percent predicted SVC, and slope of the change from baseline in ALSFRS-R. The majority of patients who complete VITALITY-ALS are transitioning to VIGOR-ALS, and we believe that VIGOR-ALS may provide supplemental safety data, alongside results from VITALITY-ALS to support the potential registration for tirasemtiv for patients with ALS.

There were also several compelling podium and poster presentations at the ALS MND Annual Meeting held in December last year in Dublin. Dr. Jeremy Shefner presented baseline characteristics of patients enrolled in VITALITY-ALS, which are similar to those from BENEFIT-ALS, and other recently conducted clinical trials in patients with ALS. You can see the details in the press release we issued in December. As in previous trials of tirasemtiv, the most common adverse events observed during the open-label lead in phase were dizziness, fatigue, and nausea.

Approximately 24% of patients withdrew from VITALITY-ALS during the two week open-label lead-in phase, primarily due to adverse events, similar to the rate of early termination we observed during the first two weeks of tirasemtiv treatment in BENEFIT-ALS. This suggests that our strategy to extend the open-label lead-in period from one week in BENEFIT-ALS to two weeks in VITALITY-ALS, may be working to decrease the number of patients who do not tolerate the starting tirasemtiv dose of 250 milligrams per day, who are then randomized to double-blind treatment and subsequently drop out.

In other words, it's better for the conduct of the trial that such patients who really don't tolerate even the lowest dose of tirasemtiv drop out from the open-label phase of VITALITY-ALS, rather than following randomization. Additionally in collaboration with Origent Data Sciences, we have presented a poster demonstrating the results from the first part of our collaborative research, to refine and prospectively validate an Origent machine-based learning model to predict the course of ALS disease progression, using placebo data from BENEFIT-ALS, and data from other ALS trials in the Pro-Act database.

You may recall this joint research program funded by a grant from the ALS Association to Origent Data Sciences, may enable the first prospective validation of the predictive model in a clinical trial setting, using baseline data from VITALITY-ALS, to predict the outcome of individual patients randomized to placebo, before the database is locked and unblinded. The data presented at the meeting showed that FDC measurements, that is forced VITALITY capacity measurements, could be used to predict slow vital capacity values, of ALS patients using the machine-based learning technique. We hope that predictive algorithms arising from this collaboration may ultimately accelerate clinical trials in patients with ALS, by allowing the randomization of many fewer patients to placebo, supplemented by so-called virtual control arms based on these models. We look forward to further data from this research.

Next during the quarter a manuscript published in Amyotrophic Lateral Sclerosis and Frontal Temporal Degeneration by Pinto and DeCarvayo, demonstrated that forced and slow vital capacity, were strongly correlated and declined similarly in patients with ALS. This is important for the community, as slow vital capacity is gaining ground as the preferred respiratory measure in clinical trials, and in practice based on its accuracy and ease-of-use particularly among valvular onset patients, who often have difficulty maintaining a seal between their lips and the spirometer, when performing the forced vital capacity maneuver.

Furthermore, numerous publications have reported that forced vital capacity and the rate of decline in force the vital capacity are strong predictors of disease progression, and downstream clinical events. Consequently this strong correlation between forced and slow vital capacity throughout the course of ALS, suggests that slow vital capacity should also be a predictor of disease progression and outcomes.

Finally, we recently learned that the ALS Association submitted its recommended guidance document to FDA. As you may recall, this has been a community wide initiative that several of us at Cytokinetics have participated in, with the objective to guide the accelerated regulatory review, and approval of new medicines for ALS. The recommended guidance includes reference to respiratory measures, such as slow vital capacity, as clinically meaningful endpoints that may be suitable for potential registration studies. We look forward to potential feedback from the FDA regarding this draft guidance document in 2017.

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

Thanks Andy. As Robert mentioned, we have nearly completed enrollment of cohort 1 in the Phase 2 clinical trial of CK-107 in adolescents and adults with SMA. Following a review of the blinded aggregate safety and pharmacokinetic data from cohort 1, we expect to begin cohort 2 during this first quarter. We expect cohort 2 will enroll more quickly than did cohort 1, since investigator sites are now all up and running, and since we have added sites in Canada. It's truly exciting time for SMA patients, with the recent approval of nusinersen, now marketed as Spinraza.

We believe there will be a strong uptake initially in type 1 patients in particular, given the fact that these patients previously had no treatment options. We are encouraged that treatment with Spinraza could allow SMA patients to live a longer and more functional life, although they may still suffer from residual muscular weakness and dysfunction. Since CK-107 is a different mechanism of action, people believe it may prove complementary to Spinraza, and potentially further improve muscle function and physical performance in these patients.

In addition to our trial a second Phase 2 clinical trial of CK-107 being conducted by Astellas in patients with COPD, continue to enroll in the fourth quarter. Initiation of the third clinical trial of CK-107 is expected in the coming months. Astellas plans to conduct this Phase 1b clinical trial to assess the effect of CK-107 in elderly adults with physical frailty and limited mobility. The study will examine the impact of treatment with CK-107 on physical performance. We will have more to say about this clinical trial in an upcoming conference call, and once dosing has been initiated.

Finally, during the last quarter we continued plans to initiate a fourth clinical trial of CK-107, this one in patients with ALS. Which we will conduct at the expense of Astellas. We will have more to say about this additional trial as we get closer to study start in mid-2017. We are enthusiastic about the breadth of the CK-107 development program, now with four clinical trials advancing across the diverse population of patients with compromised muscle function, and we are pleased that Astellas shares our vision for this promising mechanism.

So with that update, I'll now turn the call over to Sharon, for an update on our financials.

Thanks Fady. As our press release contains detailed financial results for the fourth quarter of 2016, I'll refer you to that public statement for the details of our P&L and balance sheet. We ended the fourth quarter with approximately $163.9 million in cash, cash equivalents, and investments. On a pro forma basis including the $100 million we received from Royalty Pharma in February, our cash and cash equivalents represents approximately 24 months of going forward net cash burn, based on our 2017 financial guidance, which I'll cover in just a moment.

Revenues for the fourth quarter of 2016 were $33.1 million, compared to $9.8 million during the same period in 2015, revenues for the fourth quarter of 2016 included $3.2 million of license revenues, and $3.6 million of research and development revenues from our collaboration with Astellas, $26 million from our collaboration with Amgen, and $0.3 million in research and development revenues from our collaboration with the ALS Association. Revenues from our collaboration with Amgen included $26.7 million in a milestone payment, and $0.6 million in research and development revenue, partially offset by a payment of $1.3 million related to Cytokinetics' option to co-fund a Phase 3 clinical trial for an increased royalty percentage on omecamtiv mecarbil. Revenues for the same period in 2015 were comprised of $5.1 million of license revenues, and $4 million of research and development revenues from our collaboration with Astellas, and $0.6 million of research and development revenues were our collaboration with Amgen.

Our fourth quarter 2016 R&D expenditures totaled $18.8 million, from a program perspective for the fourth quarter approximately 86% of our R&D expenditures were attributable tour skeletal muscular contractility programs, which includes both expenses associated with tirasemtiv and CK-107 development. 11% to our cardiac muscular contractility program, and 3% to our other research activities. Our year-to-date 2016 R&D expenditures told $59.9 million, and from a program perspective for the year, approximately 82% of our R&D expenses were attributable to our skeletal muscular contractility programs, 14% to our cardiac muscular contractility program, and 4% to our research activities.

Today we also announced our financial guidance for 2017. The Company anticipates cash revenue will be in the range of $21 million to $23 million. Cash R&D expenses will be in the range of $108 million to $112 million, and cash G&A expenses will be in the range of $30 million to $32 million. This guidance excludes approximately $7 million in unearned revenue from the 2014 amendment of our collaboration with Astellas, which will be recognized in 2017 under Generally Accepted Accounting Principles. In addition, any potential milestones that may be achieved in accordance with our collaboration agreements with our partners Amgen and Astellas have also been excluded. This guidance also excludes an estimated $8.9 million in noncash related operating expenses, primarily related to stock compensation expense.

We are beginning 2017 in a very strong financial position, with the further expansion of our collaboration with Astellas in 2016, and the recent monetization of a portion of the omecamtiv mecarbil royalty with Royalty Pharma, we have provided a solid foundation upon which to further advance our first-in-class development programs. With that, I'll now turn the call back over to Robert.

Thank you, Sharon. 2016 was a very productive and successful year, and I want to thank our entire team at Cytokinetics, as well as those that are collaboration partners for the significant progress across our portfolio. In the last year we advanced our collaboration with Amgen, and we expanded our collaboration with Astellas. The two taken together align our interests for our cardiac and skeletal muscular programs. We generated compelling data from our innovative research collaboration with Origent Data Sciences, we advanced yet another next-generation skeletal muscular activator into IND-enabling studies through our research collaboration with Astellas. And as you heard from Sharon, we also ended the year with a very strong balance sheet, which enable is us to hit the ground running in 2017 which is already off to a great start.

This is important as we plan for key milestones in 2017, including Phase 2 data and pivotal Phase 3 results in our cardiac and skeletal muscle programs. Ongoing research initiatives, alone and with our partners, and importantly preparations for regulatory and potential commercial activities. Our recent decision to co-invest in the Phase 3 development program for omecamtiv mecarbil, reflects our commitment to the promise of this first-in-class drug candidate, as well as our plans to build a commercial infrastructure, as would be facilitated by our partner. Our ability to finance this big step forward through a creative royalty monetization transaction with Royalty Pharma, further demonstrates our strategy to monetize and multiply our investments in innovative R&D programs to advance our corporate development. 2017 looks to be another extremely busy, productive, and potentially meaningful year for Cytokinetics.

We look forward to the Phase 2 data from our SMA trial which will inform and guide the further development of next-generation skeletal muscular activators, at the same time we begin studying CK-107 in patients with ALS, as well as in elderly patients with limited mobility. As mentioned, we also will see Phase 3 data from VITALITY-ALS we believe. We know the investment, physician, and patient communities alike, will be anxiously awaiting these results, and we remain hopeful that the results may take us one step closer to realizing the promise of tirasemtiv, for those people living with ALS, who are in desperate need of a new medicine.

Importantly we have built an organization that does not pivot on a single program or drug candidate. We are proud to have built a diversify pipeline of novel muscle activators with a validated research engine, that may produce upwards of three or more INDs over the next few years, while also our later stage drug candidates continue to advance in clinical trials. With that, now let me turn to our expected milestones for 2017.

For tirasemtiv we expect results from VITALITY-ALS in the fourth quarter of 2017, and we expect to continue to enroll patients who complete VITALITY-ALS into VIGOR-ALS, the open-label extension trial, throughout 2017. For CK-107 we expect data from a Phase 2 clinical trial in patients with SMA to occur in the second half of 2017. We expect Astellas to continue enrollment in an ongoing Phase 2 clinical trial of CK-107 in patients with COPD also in 2017. We expect Astellas to begin a Phase 1b clinical trial of CK-107 in elderly patients with limited mobility that to occur in the first half of 2017, and we expect to begin a Phase 2 clinical trial of CK-107 in patients with ALS, that to occur we expect in mid-2017.

And for omecamtiv mecarbil we expect to continue to enroll patients with chronic hard failure in GALACTIC-HF, our Phase 3 clinical trial of omecamtiv mecarbil throughout 2017. And we also expect data from the Phase 2 clinical trial of omecamtiv mecarbil in Japanese patients with chronic hard failure, that we expect in Q3 2017. For our pre-clinical 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. As well we expect to advance our own proprietary programs. Operator, with that we can now open the call up to questions, please.

Certainly. (Operator Instructions). Comes from the line of Jason Butler with JMP Securities.

Hi Jason.

Hi. This is Harry on for Jason. Three questions. First on tirasemtiv I just wanted to get a sense of what proportion in the VITALITY trial, what proportion of the 25 patients dropping out in the penetration phase are doing so in the first versus the second week?

I am sorry. What proportion of patients dropping out in the trial are doing so in the first week?

In the first versus the second week?

We have not disclosed that. That's not something that was disclosed in Jeremy Shefner's presentation. I don't think that would be right for us to be disclosing that on this earnings call.

Got it. On VIGOR-ALS I guess just, are you able to answer what proportion of patients are not enrolling into it? I know you said the majority are in fact doing so, but for those who are not, what are the driving, kind of overarching reasons?

Well, we haven't been specific about that, too, but it is I will say nearly all of them. And of two that I know of among dozens who have been eligible, one just couldn't swallow the tablets anymore, and another actually, unfortunately, died between their last dose of tirasemtiv and the follow-up visit a month later, which is also the first dose of VIGOR-ALS. So I don't know of any single patient who elected not to continue. That doesn't mean there aren't any, but I don't know of any.

I think what you're hearing is that these are patients who very far advanced in their disease, at the time that they may be eligible for VIGOR-ALS, but I think we draw some comfort from the fact that it appears that nearly all of the patients who are able to proceed are choosing to.

Great. And last question on CK-107 SMA. Are the patients taking Spinraza, are they excluded from the trial?

Are patient who are coming into Spinraza, are they excluded from our SMA trial?

Yes. (Multiple Speakers).

Yes. We don't have a specific exclusion with regards to Spinraza in the trial, but we didn't include it, because at least during what we anticipate to be enrolling cohort 2, we don't think it will be much of an issue. Our trial is not enrolling patients under the age of 12 years old, and most of the initial uptake in nusinersen has been in the much younger patients.

Okay. Thank you for taking the questions.

Sure thing.

Our next question is from the line of Charles Duncan with Piper Jaffray.

Hi Charles.

Hi, guys. Thanks for taking the question and congratulations on a good quarter of progress. My first question is regarding the new information that Andy mentioned, both the recent publication, as well as the ALS guidance doc that they wanted to put forth. I'm just wondering when you think about slow vital capacity, do you have any new perspectives on the clinical benefit, or clinical value that you would like to see out of tirasemtiv in the VITALITY study?

So we certainly can share with you how we thought about powering the study, and in that way you can understand what we expect from this trial based on what we saw in BENEFIT-ALS. Maybe I will turn it to you, Andy.

Well, you may recall that after 12 weeks of double-blind treatment in the Phase 2b study BENEFIT-ALS, there was a separation of 6 percentage points between the patients who took tirasemtiv and had their vital capacity fall at approximately 1 percentage point per month, and the patients on placebo who were falling at approximately 3 percentage point per month. Those curves were separating throughout the 12 weeks of the trial, and there is no reason to imagine that they wouldn't continue to separate for the following 12 weeks on treatment now in VITALITY-ALS.

Nevertheless, to be conservative, we have 90% power to detect only the 6 percentage point difference that we saw in BENEFIT-ALS. So in other words, if VITALITY-ALS were to recapitulate BENEFIT-ALS for the first 12 weeks of treatment, and then for some reason the curves were just to decline in parallel after that, we would still have 90% power to detect that. However, my personal opinion is that it's more likely they'll just continue to decline, and separate from one another, the two curves over the entire 24 weeks, the first 24 weeks of VITALITY-ALS, so that we will see a larger treatment difference than 6 percentage points. More on the order of 12 percentage point, in which we have well over 90% power to demonstrate that difference in the change from baseline in vital capacity.

So I think the chances of the trial being positive on vital capacity are as good as we can possibly make them, and we have always said that based on our conversations with regulatory authorities, if the trial is clearly and robustly positive on the primary endpoint of change from baseline and vital capacity, certain secondary endpoints, like some we mentioned earlier today, time to first use of assisted ventilation, time to a decline in vital capacity by 20 percentage points, et cetera, only need to be trending, and wouldn't need to be statistically significant to form the basis of a registration, which we he think would probably be viewed as two studies, because the second one now VITALITY-ALS would be viewed as confirmatory of the result we saw in BENEFIT-ALS. So does that answer your question?

It mostly does. I appreciate that reminder and additional color on the design of VITALITY, but with regard to the recent publication and the guidance, can we assume that your powering assumptions and the design of VITALITY are congruous, or at least consistent with what the community would like to see?

I think we can. I mean given that the guidance document, which I believe you can still see, you can get it from the ALS Association website, makes very clear that the proposal of the ALS community that authored this draft guidance document, which included most of our investigators, patients with ALS, representatives of ALS advocacy groups, and representatives from biopharmaceutical companies developing drugs in the ALS, including me, made very clear that they knew vital capacity among other end points, as an appropriate primary end point for registration studies.

Charles, I don't know if you're just trying to get a sense of whether the magnitude of difference is, if there's any comment on that in the guidance, and there isn't any specific number per se of the treatment difference that would be thought to be clinically meaningful.

Yes. That's of course part of it, but at least it sounds like that endpoint increasingly is being appreciated, and I would argue that maybe a few years ago that wasn't necessarily widely held. Last question just quickly hopping over to 107. You mentioned a new ALS trial, and I know you will probably talk more about that as you actually start it, but I'm wondering how it's perhaps contemplated to be different than VITALITY. Is it just that it's with 107 versus tirasemtiv, or are there other design features that may be--?

Sure thing. I'll start.

(inaudible).

Sure thing. I'll start and I'll turn it over to Fady. So we learned a lot from the conduct of BENEFIT-ALS, that we are applying in the design of this Phase 2 study, and as we are also conducting VITALITY ALS, we continue to learn things. So I'll turn it over to Fady new to speak to that which we have commented on publicly, and of course we will share more once the study is up and running.

Yes. I think it's contemplated in the Phase 2 study, so it's not going to be the same duration as VITALITY, it will be shorter. It will be more similar to BENEFIT-ALS. We have seen that vital capacity can serve both as a good clinical marker of efficacy, but also as a very sensitive marker of drug effect, and so as we did in BENEFIT, see an effect on slow vital capacity in the span of 12 weeks, you can get that we may take a similar approach in this Phase 2 trial, to examine both the efficacy and dose response of CK-107 on that variable.

That is helpful. Thank you for the added color.

Thank you, Charles.

Our next question is from the line of Mara Goldstein with Cantor.

Hi, Mara.

Mara, your line is open. Mara Goldstein, your line is open. We will move on to our next question, which is Ritu Baral with Cowen.

Hi Ritu.

Hi. It's Kevin on for Ritu. Thanks for taking the question. Questions. Could you further comment on the trial conduct for CK-107 and SMA, and what your expectations are for efficacy in the data that will be released?

Sure thing. So as we have stated before, this is not a study as designed that is hypothesis testing, but rather instead is designed to generate hypotheses that may be further elaborated in studies in Phase 3. So here, as you know from the study design as we have spoken about it publicly. we're dividing patients into two cohorts, a lower dose and a higher dose. Cohort 1 which is concluding, has enrolled patients receiving either placebo or a lower dose, and cohort 2, which will begin in this quarter, we expect will enroll patients receiving placebo or a higher dose. And in each case the cohorts are divided roughly half and half. Those patients who are ambulatory, and those who are not. And we do different assessments, depending on whether the patients are ambulatory or not.

Some are overlapping some are not, but you can see in our clinicaltrials.gov posting, that we're looking at both respiratory and ambulatory assessments, as well as other things, to best understand how this mechanism may translate into adolescents and adults with SMA. So this is a study that is well informed by pre-clinical data, as well as things that we have learned from Phase 1 studies in healthy volunteers, but I think the bottom line here, is that being that this is a first time study in patients with SMA, there is still a lot we need to learn about how the assessments may correspond with the drug candidate mechanism of action, and hence why the study is designed the way it is.

Okay. I may have missed it, but are you looking at SVC? I don't remember seeing it on the clinicaltrials.gov?

Yes. We don't look at SVC in the SMA population, they're more used to doing forced vital capacities, so same thing vital capacity, but that is one of the endpoints that we are examining. A number of different measures of muscle strength, the Hammersmith score, which is a scale that's used in SMA to assess physical function, and an upper limb module that specifically assesses upper limb function, and in the ambulatory patients a six-minute walk, and time to get up and go, for example are some of the measures that we are using.

Okay. Could you comment on trial conduct within at least the first cohort that has been completed?

What do you mean trial conduct in that case?

Your expectations that you have seen with the first cohort of patients, for patients that receive placebo and drug, obviously it's double-blind placebo controlled, so you don't know who is who, but are they as expected, drop outs, et cetera?

So you are asking about do we have any insight into the results of the study, and the answer is no. The study we remain blinded to those data.

Okay. And then the last question is, you had a nice deal with Royalty Pharma in Q1, and including those deals recently done, could you comment on your cash run, when do you expect your cash to lead you to?

So on a pro forma basis that is set at year-end, so we had $163 million, we added another $100 million to the balance sheet with the Royalty Pharma transaction, and so with the guidance that I provided today, that gives us approximately 24 months of going forward cash.

Okay. Great. Thank you for taking my questions.

Thank you.

Our next question is from the line of Vernon Bernadino with FBR & Company.

Hi Vernon.

Hi Robert. Hi Andy, Fady, and Diane. Thanks for taking my questions and congratulations also from me for a progressive year. I just wanted some housekeeping things, just to confirm the $40 million paid to Amgen is included in the R&D guidance expense for 2017?

Actually that is included, Vernon, this is Sharon. That is included in the revenue guidance, the treatment for that because it's part of a collaboration is that it's a reduction to collaboration revenue, and so it will be included, and it is included in the guidance for 2017. It's not a full 40, because the payments are made over eight quarters.

Okay. That's right. Eight quarters. And then the $90 million from Royalty Pharma, how will that be reported again?

So we're still working through the accounting treatment with our auditors, and we'll be able to provide an update for that in Q1.

Terrific. Thanks, Sharon. Regarding CK-107, can you remind us how CK-107 may be targeted as to what type of ALS patient?

Sure. I'll mention that as similar to tirasemtiv, there's nothing about the mechanism of action that would suggest that any of the particular genotypes of ALS patients would benefit more than others, so we're not considering narrowing the population so much in the inclusion and the exclusion criteria. It will look more like what we have done with others of our clinical trials.

And would that study also be somewhat hypothesis generating, or will it be, the trial will be a little bit more firm, as far as targeting?

Sure. So in as much as we have already evaluated this mechanism of action of fast skeletal troponin activation in patients with ALS, we already have a good idea how that may translate into certain efficacy parameters. As such that study, and again we'll elaborate more once it begins, will have a primary efficacy endpoint.

Terrific. And I know you have a whole slew of your own internal compounds skeletal, muscle, and so on, that you could advance if you had of course tons of cash, but are there acquisition opportunities that you're looking at out there?

So if you're asking us, are we evaluating potential acquisition opportunities, the answer really is no. That's not something that's on the critical path for our corporate development right now. I could definitely imagine if we have a commercial stage company that is in the business of selling drugs in ALS, or in heart failure, that would become more of a priority for us, but at the present time, as you already surmised, we have already a portfolio of drug candidates, potential drug candidates emerging out of our research, that represent I think the highest priorities for us in development.

Therefore, along those lines, last question for me. When may we see perhaps a candidate, and/or a program come out of the pre-clinical research?

So we already announced in 2016, a compound moving from research into IND-enabling studies, and we expect there may be others in 2017. We haven't given a specific timeline on when those INDs may be filed and Phase 1 could initiate, but we'll do that through this year.

Okay. Great. Thanks for taking my question and congratulations again.

Thank you, Vernon.

Our next question is from the line of Chad Messer with Needham & Company.

Hi Chad.

Hi. Thanks for taking my question, and let me add my congratulations on a very strongly performed end of 2016, and beginning 2017. This is more of a mechanistic question, so for tirasemtiv and 107, you are describing them as skeletal muscle activators, but based on some of the data that we have with tirasemtiv and ALS, and then even just looking at some of the indications like COPD, and even SMA it seems there may be some kind of special level of efficacy on pulmonary function, or maybe it's just that is easiest to measure. I don't know if you could comment about how the particular effect on increasing pulmonary function, has sort of guided your thinking about developing this drug? Maybe even had you contemplating potential other indications? I know your collaboration with Astellas contemplates doing perhaps even more than you have already announced?

So thanks for the question. It's a good question why do pulmonary functions seemingly sense the indicator of drug effect, I think you may have answered your own question. One is that, you can measure the skeletal muscle function as reflected by vital capacity quite accurately, more so than with many other skeletal muscle functions, and people can reproducibly do vital capacity measurements, and there is very good normalization of vital capacity, based on size and sex and weight, and all of those things. And so it's proven to be a very sensitive measure of drug effect. The other is potentially that the diaphragm is one of the only skeletal muscles that is constantly at work. So like the heart, which beats all of the time, the diaphragm is also constantly contracting, and it is unusual in that way in the skeletal muscle, and that may also render it more susceptible to drug effects, in terms of slowing the decline of its function. As opposed to muscles that spend most of their time at rest. So those I think are the major two hypotheses behind why we see that as a sensitive muscle of drug effect in our studies.

And maybe I know I kind of rolled it out in a complicated way, but another part of that was how would that, how does that influence how you might think about other potential indications for I presume would be 107 that you are pursuing?

Right.

That you would pursue?

I think it does. So even with earlier studies of tirasemtiv, for example we conducted a study in Miocene gravis, and there we looked at vital capacity, and saw an improvement in vital capacity in that indication. It's an important aspect of that disease. There are other diseases where vital capacity plays a role, and for example Duchennes muscular dystrophy is another one. And so where you have a sensitive marker of drug effect, is a good place to go, and it does color our thinking a little bit, but we probably won't comment specifically on what other indications we may pursue on that basis.

But this is why having a collaboration like the one we have with Astellas is so important, because not only have they purchased an option on tirasemtiv outside of North America and Europe, but also in collaborating on CK-107 in two neural muscular, as well as two non neuromuscular indications, advancing a compound currently in IND-enabling studies, and continuing to perform joint research. It underscores how deep and broad they are expecting this potential to be, across an array of indications associated with muscle impairment and muscle weakness. So I think we're thinking about this in a very long-term way, around lifecycle management, across an extensive clinical trials program, and I think that is ideally what you would want in any partner when you are pursuing a novel pharmacology.

Yes. No. I appreciate it. I think I definitely get that you could have a very broad franchise here, with this classic compounds, but thank you for the added comments.

Thank you.

Next question is from the line of Mara Goldstein with Cantor.

Hi Mara. Welcome back.

Hi. Thanks so much. I appreciate it. Just a classification on GALACTIC-HF. For those patients who are treated at the hospitals for current hospitalizations, are there any time constraints with respect to onset of treatment with omecamtiv?

So in GALACTIC, if I understood your question right, in GALACTIC for the patient that are hospitalized, they just need to be off oxygen, off intravenous diuretics, and then are eligible to begin omecamtiv mecarbil while they're in the hospital, and there is no time constraints if you will, between when they came in to the hospital, or when they're leaving the hospital, but they need to be what I would think of ,as a stabilized inpatient, sort of aiming towards discharge.

Okay. All right. Thanks so much for that. I appreciate it.

Thank you.

Thank you. (Operator Instructions). And we have no questions in the queue.

Thank you, Operator. So thank you to all the participants on our teleconference today. 2016 was indeed a positive year for us, for patients, and also for shareholders. 2017 holds promise as well. We appreciate your continued support, and your interest in Cytokinetics. And Operator, with that we can conclude the call, please.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.