Cytokinetics, Inc. (CYTK)

[Solantey]

New SeekingAlpha Article:

Cytokinetics Binary Failure Provides Solid Buying Opportunity

http://seekingalpha.com/article/2178873-cytokinetics-binary-failure-provides-solid-buying-opportunity

From the article:

Partnerships and related buyout scenario

Although the most significant drug has failed its primary endpoint, there are other products that offer significant monetary support for the company via partnerships. These partnerships in place could provide Cytokinetics over $1 billion if all the elements are achieved.

Of this $1 billion, the two drugs involved in these deals could earn Cytokinetics approximately $500 million associated with the preclinical milestone portion of the equation.

Because of the way one of its partnerships is structured, the logic exists for a buyout. The reason is pretty simple. The relationship with Amgen (AMGN) for its cardiac muscle drug, omecamtiv mecarbil, creates the opportunity for very large payments to flow Cytokinetics' way. Within this partnership, the company is eligible for up to $650 million in milestone and commercialization payments. Cytokinetics would also have an opportunity for royalty payments on future sales, while Amgen would be responsible for sales and marketing expenses along the way. Now that the market cap has been decimated to a mere $160 million or so, we think it's a good bet they would rather pay a few hundred million dollars for the entire company and simply buy out Cytokinetics. This is of course if Amgen felt it was possible for Cytokinetics to achieve any reasonable percentage of these milestone/commercialization payments. If Amgen offered half of what is potentially due Cytokinetics, which is about $325M, this would represent double the current Cytokinetics stock price while still relieving Amgen of paying potentially much more down the road.

Cytokinetics is currently engaged in a Phase II trial for omecamtiv mecarbil, known as COSMIC-HF, designed to evaluate the safety and efficacy of a novel cardiac muscle activator in patients with heart failure and left ventricular dysfunction.

In parallel, Cytokinetics has begun making preparations for the Phase I clinical trial of omecamtiv mecarbil, known as CY 1211. This trial is a single-center, placebo controlled, double-blind study comparing the pharmacokinetics of omecamtiv mecarbil between healthy Japanese and Caucasian volunteers.

Cytokinetics expects both the enrollment of patients in the expansion phase of COSMIC-HF, as well as the conduct of CY 1211 to be completed in 2014.

Another significant partnership that the company has is with Astellas Pharma Inc. Under the agreement, the company granted Astellas an exclusive license to co-develop and jointly commercialize CK-2127107. CK-2127107 is a skeletal muscle activator structurally distinct from tirasemtiv, for potential application in non-neuromuscular indications worldwide. Obviously, now that tirasemtiv has failed, it is good to know that it is structurally distinct.

Cytokinetics will be primarily in charge of the Phase I clinical trials and certain Phase II readiness activities for CK-2127107, while Astellas will be primarily responsible for the conduct of subsequent development and commercialization activities for the drug.

Based on the achievement of pre-specified criteria, Cytokinetics may receive over $250 million in milestone payments relating to the development and commercial launch of collaboration products, including up to $112 million in development and commercial launch milestones for CK-2127107. The company may also receive up to $200 million in payments for the achievement of pre-specified net sales milestones of all collaboration products under the Astellas agreement.