UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT UNDER
SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31, 2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number:
000-50633
CYTOKINETICS,
INCORPORATED
(Exact name of registrant as
specified in its charter)
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Delaware
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94-3291317
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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Robert I.
Blum
President and Chief Executive Officer
280 East Grand Avenue
South San Francisco, CA 94080
(650) 624-3000
(Address, including zip code, or
registrants principal executive offices and telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common Stock, $0.001 par value
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The NASDAQ Global Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).* Yes
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The registrant has not yet been phased into the interactive data
requirements. |
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting and non-voting common
equity held by non-affiliates was $118.2 million computed
by reference to the last sales price of $2.37 as reported by the
NASDAQ Global Market, as of the last business day of the
Registrants most recently completed second fiscal quarter,
June 30, 2010. This calculation does not reflect a
determination that certain persons are affiliates of the
Registrant for any other purpose.
The number of shares outstanding of the Registrants common
stock on February 28, 2011 was 66,910,100 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Registrants Proxy Statement for its 2011
Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission, are incorporated by reference to
Part III of this Annual Report on
Form 10-K.
CYTOKINETICS,
INCORPORATED
FORM 10-K
Year Ended December 31, 2011
INDEX
1
PART I
This report contains forward-looking statements that are based
upon current expectations within the meaning of the Private
Securities Litigation Reform Act of 1995. We intend that such
statements be protected by the safe harbor created thereby.
Forward-looking statements involve risks and uncertainties and
our actual results and the timing of events may differ
significantly from the results discussed in the forward-looking
statements. Examples of such forward-looking statements include,
but are not limited to, statements about or relating to:
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guidance concerning revenues, research and development expenses
and general and administrative expenses for 2011;
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the sufficiency of existing resources to fund our operations for
at least the next 12 months;
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our capital requirements and needs for additional financing;
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the initiation, design, progress, timing and scope of clinical
trials and development activities for our drug candidates and
potential drug candidates conducted by ourselves or our
partners, such as Amgen, Inc. (Amgen), including the
anticipated timing for initiation of clinical trials and
anticipated dates of data becoming available or being announced
from clinical trials;
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the results from the clinical trials and non-clinical and
pre-clinical studies of our drug candidates and other compounds,
and the significance and utility of such results;
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our plans to file an investigational new drug application
(IND) for CK-2066260 with the U.S. Food and
Drug Administration (FDA);
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our and our partners, such as Amgens, plans or
ability to conduct the continued research and development of our
drug candidates and other compounds;
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our expected roles in research, development or commercialization
under our strategic alliances, such as with Amgen;
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the properties and potential benefits of, and the potential
market opportunities for, our drug candidates and other
compounds, including the potential indications for which they
may be developed;
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the sufficiency of the clinical trials conducted with our drug
candidates to demonstrate that they are safe and efficacious;
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our receipt of milestone payments, royalties, reimbursements and
other funds from current or future partners under strategic
alliances, such as with Amgen;
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our plans to seek strategic alternatives for our mitotic kinesin
inhibitor drug candidates with third parties;
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our ability to continue to identify additional potential drug
candidates that may be suitable for clinical development;
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our plans or ability to commercialize drugs with or without a
partner, including our intention to develop sales and marketing
capabilities;
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the focus, scope and size of our research and development
activities and programs;
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the utility of our focus on the cytoskeleton and our ability to
leverage our experience in muscle contractility to other muscle
functions;
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the issuance of shares of our common stock under our committed
equity financing facility entered into with Kingsbridge Capital
Limited (Kingsbridge) in 2007;
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our ability to protect our intellectual property and to avoid
infringing the intellectual property rights of others;
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expected future sources of revenue and capital;
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losses, costs, expenses and expenditures;
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future payments under loan and lease obligations and equipment
financing lines;
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potential competitors and competitive products;
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retaining key personnel and recruiting additional key personnel;
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expected future amortization of employee stock-based
compensation; and
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the potential impact of recent accounting pronouncements on our
financial position or results of operations.
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Such forward-looking statements involve risks and uncertainties,
including, but not limited to, those risks and uncertainties
relating to:
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Amgens decisions with respect to the timing, design and
conduct of development activities for omecamtiv mecarbil,
including decisions to postpone or discontinue research or
development activities relating to omecamtiv mecarbil;
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our ability to obtain additional financing;
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our receipt of funds and access to other resources under our
current or future strategic alliances;
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difficulties or delays in the development, testing, production
or commercialization of our drug candidates;
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difficulties or delays in or slower than anticipated patient
enrollment in our or our partners clinical trials;
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adverse side effects, including potential drug-drug
interactions, or inadequate therapeutic efficacy of our drug
candidates that could slow or prevent product approval
(including the risk that current and past results of preclinical
research or non-clinical or clinical development may not be
indicative of future clinical trials results);
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results from non-clinical studies that may adversely impact the
timing or the further development of our drug candidates and
potential drug candidates;
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the possibility that the FDA or foreign regulatory agencies may
delay or limit our or our partners ability to conduct
clinical trials or may delay or withhold approvals for the
manufacture and sale of our products;
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activities and decisions of, and market conditions affecting,
current and future strategic partners;
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our ability to enter into partnership agreements for any of our
programs on acceptable terms and conditions or in accordance
with our planned timelines;
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the conditions in our 2007 committed equity financing facility
with Kingsbridge that must be fulfilled before we can require
Kingsbridge to purchase our common stock, including the minimum
volume-weighted average share price;
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our ability to maintain the effectiveness of our registration
statement permitting resale of securities to be issued to
Kingsbridge by us in connection with our 2007 committed equity
financing facility;
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the availability of funds under our grant from the National
Institute of Neurological Disorders and Stroke in future periods;
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changing standards of care and the introduction of products by
competitors or alternative therapies for the treatment of
indications we target that may make our drug candidates
commercially unviable;
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the uncertainty of protection for our intellectual property,
whether in the form of patents, trade secrets or
otherwise; and
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potential infringement or misuse by us of the intellectual
property rights of third parties.
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In addition such statements are subject to the risks and
uncertainties discussed in the Risk Factors section
and elsewhere in this document. Operating results reported are
not necessarily indicative of results that may occur in future
periods.
3
Overview
We were incorporated in Delaware in August 1997 as Cytokinetics,
Incorporated. We are a clinical-stage biopharmaceutical company
focused on the discovery and development of novel small molecule
therapeutics that modulate muscle function for the potential
treatment of serious diseases and medical conditions. Our
research and development activities relating to the biology of
muscle function have evolved from our knowledge and expertise
regarding the cytoskeleton, a complex biological infrastructure
that plays a fundamental role within every human cell. Our
current research and development programs relating to the
biology of muscle function are directed to small molecule
modulators of the contractility of cardiac, skeletal and smooth
muscle.
Our cardiac muscle contractility program is focused on the
cardiac sarcomere, the basic unit of muscle contraction in the
heart. Our lead drug candidate from this program, omecamtiv
mecarbil (formerly known as CK-1827452), is a novel cardiac
muscle myosin activator. We have conducted a clinical
development program for omecamtiv mecarbil for the potential
treatment of heart failure, comprised of a series of Phase I and
Phase IIa clinical trials. In May 2009, Amgen acquired an
exclusive license to develop and commercialize omecamtiv
mecarbil worldwide, except Japan, subject to our development and
commercialization participation rights. Further details
regarding our strategic alliance with Amgen can be found below
in Item 1 of this report under Muscle Contractility
Focus Cardiac Muscle Contractility
Program Amgen Strategic Alliance.
CK-2017357 is the lead drug candidate from our skeletal
sarcomere activator program. The skeletal muscle sarcomere is
the basic unit of skeletal muscle contraction. CK-2017357 is
currently the subject of a Phase IIa clinical trials program. We
believe CK-2017357 may be useful in treating diseases or medical
conditions associated with skeletal muscle weakness or wasting.
In March 2010, CK-2017357 received an orphan drug designation
from the FDA for the treatment of amyotrophic lateral sclerosis
(also known as ALS or Lou Gehrigs disease). We are also
advancing a second, structurally distinct, fast skeletal muscle
sarcomere activator, CK-2066260, in non-clinical studies
intended to enable the filing of an IND with the FDA. Both of
these compounds selectively activate the fast skeletal muscle
troponin complex, which is a set of regulatory proteins that
modulates the contractility of the fast skeletal muscle
sarcomere.
In our smooth muscle contractility program, we are conducting
non-clinical development of compounds that directly inhibit
smooth muscle myosin, the motor protein central to the
contraction of smooth muscle. These compounds cause the
relaxation of contracted smooth muscle, and so may be useful as
potential treatments for diseases and conditions associated with
excessive smooth muscle contraction, such as bronchoconstriction
associated with asthma and chronic obstructive pulmonary disease.
Earlier research activities at the company were directed to the
inhibition of mitotic kinesins, a family of cytoskeletal motor
proteins involved in the process of cell division, or mitosis.
This research produced three drug candidates that have
progressed into clinical testing for the potential treatment of
cancer: ispinesib, SB-743921 and GSK-923295. Effective February
2010, our strategic alliance with GlaxoSmithKline
(GSK) relating to our mitotic kinesin inhibitors
terminated by mutual agreement. We are currently evaluating
strategic alternatives for these drug candidates with third
parties.
Two of our drug candidates directed to muscle contractility have
now demonstrated pharmacodynamic activity in patients: omecamtiv
mecarbil in patients with heart failure and CK-2017357 in
patients with ALS. In 2011, we expect to focus on translating
the observed pharmacodynamic activity of these compounds into
potentially meaningful clinical benefits for these patients. Our
potential drug candidate CK-2066260 has demonstrated
4
pharmacological activity in preclinical models. Following is a
summary of the planned clinical and non-clinical development
activities for our drug candidates and potential drug candidates
directed to muscle contractility:
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Potential/Drug
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Mechanism of
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Mode of
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Potential
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Planned 2011
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Candidate
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Action
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Administration
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Indication(s)
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Development Activities
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Omecamtiv mecarbil
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cardiac muscle myosin activator
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intravenous
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heart failure
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We anticipate that Amgen will initiate a Phase IIb clinical
trial in hospitalized acute heart failure patients with left
ventricular systolic dysfunction in 1H 2011.
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Omecamtiv mecarbil
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cardiac muscle myosin activator
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oral
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heart failure
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We and Amgen are discussing the development strategy for oral
formulations of omecamtiv mecarbil.
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CK-2017357
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fast skeletal muscle troponin activator
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oral
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diseases and conditions associated with muscle weakness or
wasting*
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We anticipate:
continuing our Phase IIa trial in
patients with claudication; data anticipated in 1H 2011.
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continuing our Phase IIa trial in
patients with myasthenia gravis; data anticipated by the end of
2011.
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initiating a Phase I drug-drug
interaction study in healthy volunteers in 1H 2011.
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initiating a Phase II multi-dose
trial in ALS patients mid-year 2011 following availability of
data from the riluzole arm from the drug-drug interaction study.
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CK-2066260
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fast skeletal muscle troponin activator
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oral
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diseases and conditions associated with muscle weakness or
wasting*
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We anticipate:
filing an IND by mid-year 2011.
initiating a first-in-humans Phase I
clinical trial in healthy volunteers in 2H 2011.
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e.g., ALS, claudication, sarcopenia, cachexia, myasthenia gravis |
During 2011, we intend to continue non-clinical development
activities associated with our smooth muscle myosin inhibitors.
All of our drug candidates and potential drug candidates have
arisen from our cytoskeletal research activities. Our focus on
the biology of the cytoskeleton distinguishes us from other
biopharmaceutical companies, and potentially positions us to
discover and develop novel therapeutics that may be useful for
the treatment of severe diseases and medical conditions. We
believe that this focus and the resulting knowledge and
expertise that we have developed, especially with our
proprietary technologies that permit us to evaluate the function
of cytoskeletal proteins in high information content biological
assays, has allowed us to increase the efficiency of our drug
discovery activities. Our research and development activities
since our inception in 1997 have produced five drug candidates
that have progressed into clinical testing and one potential
drug candidate currently in non-clinical development for which
we plan to file an IND. Each has a novel mechanism of action
compared to currently marketed drugs, which we believe validates
our focus on the cytoskeleton as a robust area for drug
discovery. We intend to leverage our experience in muscle
contractility in order to expand our current pipeline, and
expect to continue to be able to identify additional potential
drug candidates that may be suitable for clinical development.
5
Our
Corporate Strategy
Our goal is to discover, develop and commercialize novel drug
products that modulate muscle function in ways that may benefit
patients with disorders that cause serious diseases or medical
conditions, with the intent of establishing a fully integrated
biopharmaceutical company. We intend to achieve this by:
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Focusing on drug discovery and development activities
relating to the biology of muscle function. We
intend to capitalize on the knowledge and expertise we have
acquired in each of our cardiac, skeletal muscle and smooth
muscle contractility research and development programs. In these
programs, we are investigating potential treatments for diseases
or medical conditions where impaired regulation of the
contractile function of muscle plays a key role and such
diseases or conditions may be amenable to treatment by
modulation of muscle contractility, such as heart failure, and
medical conditions associated with skeletal muscle weakness or
wasting. Many of these diseases and medical conditions affect in
particular the growing population of aging patients, a
demographic that is the subject of increasing regulatory and
reimbursement attention. Accordingly, targeting unmet medical
needs in these areas may provide us competitive opportunities.
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Leveraging our cytoskeletal expertise and proprietary
technologies to increase the speed, efficiency and yield of our
drug discovery and development processes. We
believe that our unique understanding of the cytoskeleton and
our proprietary research technologies should enable us to
discover and potentially to develop drug candidates with novel
mechanisms of action that may offer potential benefits not
provided by existing drugs. We expect that we may be able to
leverage our expertise in muscle contractility to advance to
other muscle functions and similarly may impact serious medical
diseases and conditions. This may allow us to develop a
diversified pipeline of drug candidates in a cost-effective way
while managing risk.
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Building development and commercialization capabilities
directed at concentrated markets. We focus our drug
discovery and development activities on disease areas for which
there are serious unmet medical needs. In particular, we direct
our activities to potential commercial opportunities in
concentrated and tractable customer segments, such as hospital
specialists, that may be addressed by a smaller, targeted sales
force. In this manner, we believe that a company with limited
resources may be able to compete effectively against larger,
more established companies with greater financial and commercial
resources. For these opportunities, we intend to develop
clinical development and sales and marketing capabilities with
the goal of becoming a fully-integrated biopharmaceutical
company.
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Establishing select strategic alliances to support our drug
development programs while preserving significant development
and commercialization rights. We believe that
such alliances may allow us to obtain financial support and to
capitalize on the therapeutic area expertise and resources of
our partners that can potentially accelerate the development and
commercialization of our drug candidates. Where we deem
appropriate, we plan to retain certain rights to participate in
the development of drug candidates and commercialization of
potential drugs arising from our alliances, so that we can
expand and capitalize on our internal development capabilities
and build our commercialization capabilities.
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Muscle
Contractility Focus
Our long-standing interest in the cytoskeleton has led us to
focus our research and development activities on the biology of
muscle function, and in particular, small molecule modulation of
muscle contractility. We believe that our expertise in the
modulation of the contractility of each of cardiac, skeletal and
smooth muscle is an important differentiator for us. Our
preclinical and clinical experience in muscle contractility may
position us to discover and develop additional novel therapies
that have the potential to improve the health of patients with
severe and debilitating diseases or medical conditions.
Small molecules that affect muscle contractility may have
several applications for a variety of serious diseases and
medical conditions. For example, heart failure is a disease
often characterized by impaired cardiac muscle contractility
which may be treated by modulating the contractility of cardiac
muscle; certain neuromuscular diseases and medical conditions
associated with muscle weakness may be amenable to treatment by
enhancing the
6
contractility of skeletal muscle; and asthma and chronic
obstructive pulmonary disease are diseases in which constriction
of the airways may be treated by relaxation of the airway smooth
muscle.
Because each muscle type may be relevant to multiple diseases or
medical conditions, we believe we can leverage our expertise in
each of cardiac, skeletal and smooth muscle contractility to
more efficiently discover and develop as potential drugs
compounds that modulate the applicable muscle type for multiple
indications. In addition, muscle has biological functions other
than contractility. Accordingly, our knowledge and expertise
could also serve as an entry point to the discovery of novel
treatments for disorders involving muscle functions other than
muscle contractility, such as metabolism, growth and energetics.
We are currently developing a number of small molecule compounds
arising from our muscle contractility programs. Omecamtiv
mecarbil, a novel cardiac muscle myosin activator, was studied
by Cytokinetics in a series of Phase I and Phase IIa clinical
trials for the potential treatment of heart failure. Following
the exercise of its option, Amgen is responsible for the
clinical development of omecamtiv mecarbil, subject to
Cytokinetics development and commercialization
participation rights.
CK-2017357 is our lead drug candidate from our skeletal muscle
contractility program, and has been the subject of two Phase I
clinical trials in healthy volunteers. We have initiated three
Phase IIa clinical trials of CK-2017357. We have completed one
of these trials; the other two are ongoing. We plan to initiate
additional clinical trials of CK-2017357. Potential indications
for which this drug candidate may be useful include skeletal
muscle weakness associated with neuromuscular diseases and other
medical conditions characterized by skeletal muscle weakness or
wasting. We are also advancing a potential drug candidate from
this program, CK-2066260 in non-clinical studies intended to
enable the filing of an IND in 2011.
In addition, we are conducting research and non-clinical
development of compounds that inhibit smooth muscle myosin for
potential use as bronchodilators, vasodilators, or both. We are
continuing to conduct discovery, characterization and lead
optimization activities for other compounds with the potential
to modulate muscle contractility and other muscle functions,
such as growth, energetics and metabolism.
Cardiac
Muscle Contractility Program
Overview. Our cardiac muscle contractility
program is focused on the cardiac sarcomere, the basic unit of
muscle contraction in the heart. The cardiac sarcomere is a
highly ordered cytoskeletal structure composed of cardiac muscle
myosin, actin and a set of regulatory proteins. This program is
currently directed towards the discovery and development of
small molecule cardiac muscle myosin activators with the goal of
developing novel drugs to treat acute and chronic heart failure.
Cardiac muscle myosin is the cytoskeletal motor protein in the
cardiac muscle cell. It is directly responsible for converting
chemical energy into the mechanical force, resulting in cardiac
muscle contraction. This program is based on the hypothesis that
activators of cardiac muscle myosin may address certain adverse
properties of existing positive inotropic agents. Current
positive inotropic agents, such as beta-adrenergic receptor
agonists or inhibitors of phosphodiesterase activity, increase
the concentration of intracellular calcium, thereby increasing
cardiac sarcomere contractility. The effect on calcium levels,
however, also has been linked to potentially life-threatening
side effects. In contrast, our novel cardiac muscle myosin
activators work by a mechanism that directly stimulates the
activity of the cardiac muscle myosin motor protein, without
increasing the intracellular calcium concentration. They
accelerate the rate-limiting step of the myosin enzymatic cycle
and shift it in favor of the force-producing state. Rather than
increasing the velocity of cardiac contraction, this mechanism
instead lengthens the systolic ejection time, which results in
increased cardiac function in a potentially more
oxygen-efficient manner.
Background on Heart Failure Market. Heart
failure is a widespread and debilitating syndrome affecting
millions of people in the United States. The high and rapidly
growing prevalence of heart failure translates into significant
hospitalization rates and associated societal costs. About
5.7 million people in the United States have heart failure,
resulting in nearly one million hospital discharges with the
primary diagnosis of heart failure and approximately 300,000
deaths each year. For people over 65 years of age, heart
failure incidences approach 10 per 1000 and approximately 50% of
people diagnosed with heart failure will die within 5 years
of diagnosis. These numbers are increasing due to the aging of
the U.S. population and an increased likelihood of survival
following
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acute myocardial infarctions. The costs to society attributable
to the prevalence of heart failure are high, especially as many
chronic heart failure patients suffer repeated acute episodes.
Despite currently available therapies, readmission rates for
heart failure patients remain high. It is estimated that between
13% and 33% of patients initially admitted to the hospital for
chronic heart failure will be readmitted within 12 to
15 months of the initial admission. Mortality rates over
the five-year period following a diagnosis of heart failure are
approximately 60% in men and 45% in women. The high morbidity
and mortality in the setting of current therapies points to the
need for novel therapeutics that offer further reductions in
morbidity and mortality. The annual cost of heart failure to the
U.S. health care system is estimated to be
$39 billion. A portion of that cost is attributable to
drugs used to treat each of chronic and acute heart failure.
Approximately 70% of those costs are due to hospitalization,
home health and physician care. New drug therapies that could
reduce the number of hospitalizations could decrease the cost to
the health care system.
Amgen Strategic Alliance. In December 2006, we
entered into a collaboration and option agreement with Amgen to
discover, develop and commercialize novel small molecule
therapeutics that activate cardiac muscle contractility for
potential applications in the treatment of heart failure,
including omecamtiv mecarbil. The agreement provided Amgen with
a non-exclusive license and access to certain technology. The
agreement also granted Amgen an option to obtain an exclusive
license worldwide, except Japan, to develop and commercialize
omecamtiv mecarbil and other drug candidates arising from the
collaboration. In May 2009, Amgen exercised its option.
In connection with the exercise of its option, Amgen paid us an
exercise fee of $50.0 million. As a result, Amgen is now
responsible for the development and commercialization of
omecamtiv mecarbil and related compounds at its expense
worldwide (excluding Japan), subject to our development and
commercialization participation rights. Under the agreement,
Amgen will reimburse us for agreed research and development
activities we perform. The agreement provides for potential
pre-commercialization and commercialization milestone payments
of up to $600.0 million in the aggregate on omecamtiv
mecarbil and other potential products arising from research
under the collaboration, and royalties that escalate based on
increasing levels of annual net sales of products commercialized
under the agreement. The agreement also provides for us to
receive increased royalties by co-funding Phase III development
costs of drug candidates under the collaboration. If we elect to
co-fund such costs, we would be entitled to co-promote omecamtiv
mecarbil in North America and participate in agreed
commercialization activities in institutional care settings, at
Amgens expense.
Omecamtiv Mecarbil (formerly CK-1827452). Our
lead drug candidate from this program is omecamtiv mecarbil, a
novel cardiac muscle myosin activator. We conducted a clinical
trials program for omecamtiv mecarbil comprised of multiple
Phase I and Phase IIa clinical trials designed to evaluate the
safety, tolerability, pharmacodynamics and pharmacokinetic
profiles of both intravenous and oral formulations in a
diversity of patients, including patients with stable heart
failure and patients with ischemic cardiomyopathy. In these
trials, omecamtiv mecarbil exhibited generally linear,
dose-proportional pharmacokinetics across the dose ranges
studied. The adverse effects observed at intolerable doses in
humans appeared similar to the adverse findings which occurred
in preclinical safety studies at similar plasma concentrations.
These effects are believed to be related to the mechanism of
action of this drug candidate which, at intolerable doses,
resulted in an excessive prolongation of the systolic ejection
time (i.e.,the time in which the heart is contracting). However,
these effects resolved promptly with discontinuation of the
infusions of omecamtiv mecarbil.
We expect omecamtiv mecarbil to be developed as a potential
treatment across the continuum of care in heart failure both as
an intravenous formulation for use in the hospital setting and
as an oral formulation for use in the outpatient setting.
In September 2010, Cytokinetics and Amgen announced plans to
initiate a Phase IIb clinical trial of an intravenous
formulation of omecamtiv mecarbil in hospitalized patients with
acutely decompensated heart failure prior to initiating further
clinical trials of oral formulations of omecamtiv mecarbil. We
anticipate that, in the first half of 2011, Amgen will initiate
this trial, which will be conducted by Amgen in collaboration
with Cytokinetics. This trial is planned to be an international,
multicenter, randomized, double-blind, placebo-controlled study
in approximately 600 patients, enrolled sequentially in
three ascending-dose cohorts. In each cohort, patients will be
randomized to receive omecamtiv mecarbil or placebo. The primary
objective of the trial will be to evaluate the
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effect of 48 hours of intravenous omecamtiv mecarbil
compared to placebo on dyspnea (shortness of breath) in patients
with left ventricular systolic dysfunction hospitalized for
acute heart failure. The secondary objectives will be to assess
the safety and tolerability of three dose levels of intravenous
omecamtiv mecarbil compared with placebo and to evaluate the
effects of 48 hours of treatment with intravenous omecamtiv
mecarbil on additional measures of dyspnea, patients
global assessments, change in N-terminal pro brain-type
natriuretic peptide (a biomarker associated with the severity of
heart failure) and short-term clinical outcomes in these
patients. In addition, the trial will evaluate the relationship
between omecamtiv mecarbil plasma concentrations and
echocardiographic parameters in patients with acute heart
failure.
We and Amgen are discussing the development strategy for oral
formulations of omecamtiv mecarbil. We anticipate that these
plans may include studies designed to investigate the safety,
tolerability and pharmacokinetics of multiple oral formulations
of omecamtiv mecarbil.
Ongoing Research in Cardiac Muscle
Contractility. We have agreed with Amgen upon a
research plan focused on joint research activities in 2011 that
will be directed to potential next-generation compounds in our
cardiac muscle contractility program.
Skeletal
Muscle Contractility Program
Overview. Our skeletal muscle contractility
program is focused on the activation of the skeletal sarcomere,
the basic unit of skeletal muscle contraction. The skeletal
sarcomere is a highly ordered cytoskeletal structure composed of
skeletal muscle myosin, actin, and a set of regulatory proteins,
which include the troponins and tropomyosin. This program
leverages our expertise developed in our ongoing discovery and
development of cardiac sarcomere activators, including the
cardiac muscle myosin activator omecamtiv mecarbil.
Our skeletal sarcomere activators have demonstrated
pharmacological activity in preclinical studies that may lead to
new therapeutic options for diseases and medical conditions
associated with aging, muscle weakness and wasting and
neuromuscular dysfunction. The clinical effects of muscle
weakness and wasting, fatigue and loss of mobility can range
from decreased quality of life to, in some instances,
life-threatening complications. By directly improving skeletal
muscle function, a small molecule activator of the skeletal
sarcomere potentially could enhance functional performance and
quality of life in patients suffering from diseases or medical
conditions characterized or complicated by muscle weakness or
wasting. These may include diseases and medical conditions
associated with skeletal muscle weakness or wasting, such as
ALS, claudication (which usually refers to cramping pains and
fatigue in the leg muscles associated with peripheral artery
disease), myasthenia gravis, sarcopenia, post-surgical
rehabilitation and general frailty associated with aging, and
cachexia in connection with heart failure or cancer.
CK-2017357 is the lead potential drug candidate from this
program. We are also advancing another compound from this
program, CK-2066260, in non-clinical studies intended to enable
the filing of an IND. CK-2017357 and CK-2066260 are structurally
distinct and selective small molecule activators of the fast
skeletal sarcomere. These compounds activate the fast skeletal
muscle troponin complex by increasing its sensitivity to
calcium, leading to an increase in skeletal muscle contractility.
Each of CK-2017357 and CK-2066260 has demonstrated encouraging
pharmacological activity in preclinical models, and with respect
to CK-2017357, in healthy volunteers and ALS patients. We are
evaluating the potential indications for which CK-2017357 and
CK-2066260 may be useful. In a recent Phase IIa clinical trial
of CK-2017357 in ALS patients, evidence of potentially
clinically relevant pharmacodynamic effects was observed. In
March 2010, CK-2017357 received an orphan drug designation from
the FDA for the treatment of ALS. In July 2010, we were awarded
a grant in the amount of $2.8 million by the National
Institute of Neurological Disorders and Stroke, which is
intended to support research and development of CK-2017357 for
the potential treatment of myasthenia gravis for three years.
The grant was awarded under the American Recovery and
Reinvestment Act of 2009.
We have initiated three evidence of effect Phase IIa
clinical trials of CK-2017357: one trial in patients with ALS,
which was completed in December 2010, one ongoing trial in
patients with symptoms of claudication associated with
peripheral artery disease, and one ongoing trial in patients
with generalized myasthenia gravis. Our evidence of effect
clinical trials are intended to translate the mechanism of
action of CK-2017357, as demonstrated
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pharmacodynamically in healthy volunteers, to patients with
impaired muscle function and potentially to establish
statistically significant and clinically relevant evidence of
pharmacodynamic effects. These trials may then form the basis
for larger clinical trials designed to demonstrate proof of
concept.
Market Potential for CK-2017357, CK-2066260 and Other
Skeletal Sarcomere Activators. Limited options
exist for the treatment of ALS, which affects as many as 30,000
Americans, with an estimated 5,600 new cases diagnosed each year
in the U.S. ALS is 20% more common in men than women;
however, with increasing age, the prevalence becomes more equal
between men and women. The life expectancy of an ALS patient
averages two to five years from the time of diagnosis with 90 to
95% of those diagnosed with ALS having the sporadic form. Of the
remaining ALS patient population, 5 to 10% have a family history
of the disease (familial ALS). In cases of familial ALS, there
is a 50% chance each offspring will develop the disease. Death
is usually due to respiratory failure because of diminished
strength in the skeletal muscles responsible for breathing.
Peripheral artery disease (PAD) affects about
8 million Americans, 12 to 20% of whom over the age of
65 years. PAD is associated with significant morbidity and
mortality and has been estimated to impact the quality of life
of approximately 2 million symptomatic Americans. Estimates
of the proportion of PAD patients who have intermittent
claudication range from 10% to about one-third to one-half.
Myasthenia gravis is a chronic, autoimmune, neuromuscular
disease and is the most common primary disorder of neuromuscular
transmission. The current prevalence of myasthenia gravis in the
U.S. is estimated to be 20 per
100,000 people between 53,000 and 60,000 cases.
The actual prevalence may be higher because myasthenia gravis is
frequently under diagnosed. Approximately 13,600 new cases of
myasthenia gravis are diagnosed each year.
We are evaluating other market opportunities for CK-2017357,
CK-2066260 and other compounds that may arise from our skeletal
muscle contractility program.
CK-2017357 Clinical Trials:
Phase I (healthy volunteers): During 2010, we
announced data from two Phase I clinical trials evaluating
CK-2017357. The first was a two-part, single-dose trial.
Part A of this trial was designed to assess the safety,
tolerability and pharmacokinetic profile of increasing single
oral doses of this drug candidate in healthy male volunteers and
to determine its maximum tolerated dose and associated plasma
concentrations. The maximum tolerated single dose of CK-2017357
in Part A of the trial was 2000 mg. Part B of
this trial was designed to assess the pharmacodynamic effects,
versus placebo, of CK-2017357 on skeletal muscle function after
single oral doses of 250, 500 and 1000 mg, and to assess
the relationship of the effects observed to the associated
plasma concentrations of CK-2017357, also in healthy male
volunteers. In Part B, CK-2017357 produced
concentration-dependent, statistically significant increases
versus placebo in the force developed by the tibialis anterior
muscle. In both Part A and Part B, CK-2017357 was
well-tolerated and no serious adverse events were reported. In
Part A, at the single dose that exceeded the maximum
tolerated dose, moderately severe dizziness and an episode of
syncope (a temporary loss of consciousness) were reported. In
both Part A and Part B, adverse events of dizziness
and euphoric mood appeared to increase in frequency with
escalating doses of CK-2017357; however, at the maximum
tolerated dose and below, all these adverse events were
characterized as mild in severity.
The second trial was a multiple-dose, Phase I clinical trial of
CK-2017357 designed to investigate the safety, tolerability and
pharmacokinetic profile of CK-2017357 after multiple oral doses
to steady state in healthy male volunteers. This trial evaluated
doses of 250 mg and 375 mg that produced plasma
concentrations in the range associated with pharmacodynamic
activity in Part B of the single-dose Phase I clinical
trial. At steady state, both the maximum plasma concentration
and the area under the CK-2017357 plasma concentration versus
time curve from before dosing until 24 hours after dosing
were generally dose-proportional. In general, systemic exposure
to CK-2017357 in this trial was high and inter-subject
variability was low. In addition, these multiple-dose regimens
of CK-2017357 were well-tolerated, and no serious adverse events
were reported. Adverse events included dizziness, headache and
euphoric mood. All these events were judged to have been mild in
severity, except for one complaint of dizziness that was
classified as moderately severe.
Phase IIa (ALS): In April 2010, we initiated
and in December 2010, we presented final data from a Phase IIa
evidence of effect clinical trial of CK-2017357 in ALS patients.
This trial was intended to determine whether the
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mechanism of action of CK-2017357 could produce a
pharmacodynamic signal in ALS patients that would warrant
further study. Accordingly, no specific primary endpoint was
designated. Instead, a broad range of parameters, including
patient and physician global assessments, measures of muscle
strength and fatigability and indices of pulmonary function,
were evaluated. The trial employed a randomized,
placebo-controlled, three-period crossover design, and was
intended to evaluate the pharmacokinetics and pharmacodynamics
of single doses of CK-2017357 in ALS patients. The trial
enrolled 67 patients. Patients were administered single
oral doses of placebo and of CK-2017357, at each of 250 mg
and 500 mg, in a double-blind fashion and in random order,
at least 6 days apart. Patients underwent the evaluations
described above before each dose, and again at 3, 6, and
24 hours afterwards.
Results from this trial were presented in December 2010 at the
Clinical Trials Session at the 21st International Symposium
on ALS/Motor Neurone Diseases. Both patients and investigators
perceived a positive change in the patients overall status
at six hours after dosing with CK-2017357, based on a global
assessment in which the patient and the investigator each
independently assessed whether the patient was
better, same, or worse
compared to just before dosing on that day. A clear relationship
was observed between improvements in these global assessments
and both the CK-2017357 dose and plasma concentration. The
investigators proposed that the improvements seen in the
patients and investigators global assessments may
have resulted from a decrease in the fatigability of the
patients muscles, as evidenced by data from a test of
sub-maximal
hand-grip fatigability. Certain parameters of pulmonary function
also trended towards improvement after treatment with
CK-2017357, which the investigators proposed might have
contributed to the improved patients and
investigators global assessments. The investigators also
concluded that these single doses of CK-2017357 appeared to be
safe and generally well-tolerated by the patients in this trial.
There were no serious adverse events judged to have been
drug-related, and most adverse events were classified by the
investigators as mild. Most reports of dizziness, the most
frequent and most clearly dose-related adverse event in the
trial, were classified as mild and none were determined to be
severe. We plan to present additional analyses of the data from
this trial during a Plenary Session at the 63rd Annual
Meeting of the American Academy of Neurology in April 2011 in
Honolulu, Hawaii.
Phase IIa (claudication): In June 2010, we
initiated a Phase IIa evidence of effect clinical trial of
CK-2017357 in patients with symptoms of claudication associated
with PAD. This clinical trial is a double-blind, randomized,
placebo-controlled, three-period crossover, pharmacokinetic and
pharmacodynamic study. At least 36 and up to 72 patients
may be enrolled in this trial. Patients are administered single
oral doses of placebo and of 2 different dose levels of
CK-2017357 in a double-blind fashion and in random order, at
least 6 days apart. These dose levels were originally
375 mg and 750 mg; however, as described below, the
protocol has been amended to lower the 750 mg dose to
500 mg. The primary objective of this clinical trial is to
evaluate the pharmacodynamic effects of single doses of
CK-2017357 on several measures of skeletal muscle function and
fatigability in these patients. The secondary objectives of this
trial are to evaluate and characterize the relationship, if any,
between the doses and plasma concentrations of CK-2017357 and
its pharmacodynamic effects and to evaluate the safety and
tolerability of CK-2017357 administered as single oral doses to
these patients. In October 2010, we conducted an interim review
of data from this trial that suggested potential pharmacodynamic
activity of CK-2017357 to increase skeletal muscle performance
in these patients. In addition, this review suggested that the
single oral doses of CK-2017357 administered were generally
well-tolerated by most patients in this trial. However, serious
adverse events were reported by two patients: dizziness and
mental confusion in one and dizziness and dyskinesia (or
abnormal movements) in the other. Both patients required
inpatient observation until their symptoms resolved. These
events were not life-threatening and appeared to resolve
spontaneously and completely without any additional treatment.
Following these observations, the protocol was amended to lower
the 750 mg dose to 500 mg. We are continuing to
conduct this trial and anticipate that data will be available
from this trial in the first half of 2011.
Phase IIa (myasthenia gravis): In January
2011, we initiated our third Phase IIa evidence of effect
clinical trial of CK-2017357. This clinical trial is a
double-blind, randomized, three-period crossover,
placebo-controlled, pharmacokinetic and pharmacodynamic study of
CK-2017357 in patients with generalized myasthenia gravis. At
least 36 and up to 78 patients may be enrolled in this
trial. Patients receive, in a double-blind fashion and in random
order, a single oral dose of placebo or 250 mg or
500 mg of CK-2017357, at least 7 days apart. The
primary objective of this trial is to assess the effects of
CK-2017357 on measures of muscle strength, muscle fatigue and
pulmonary function. The secondary objectives of this clinical
trial are to evaluate and characterize the relationship, if any,
between the doses and plasma concentrations of CK-2017357 and
its pharmacodynamic effects; to evaluate the
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safety and tolerability of CK-2017357 administered as single
doses to patients with myasthenia gravis; and to evaluate the
effect of CK-2017357 on investigator- and patient-determined
global functional assessment and the Modified MG Symptom Score,
an assessment combining patient reports and physician
evaluations to assess the severity of symptoms due to myasthenia
gravis. We are continuing to conduct this trial, and anticipate
that data will be available from this trial by the end of 2011.
CK-2017357 Planned Clinical Development:
In the first half of 2011, we anticipate initiating a Phase I
drug-drug interaction clinical trial of CK-2017357 administered
orally to healthy volunteers. This trial is intended to evaluate
the effects of CK-2017357 on the pharmacokinetics of riluzole
and other drugs as well as the pharmacokinetics of CK-2017357
when administered after a meal and when fasting.
In the first half of 2011, we anticipate initiating a
Phase II multiple-dose, safety, tolerability,
pharmacokinetic and pharmacodynamic clinical trial of CK-2017357
in ALS patients. This trial is expected to evaluate patients
receiving daily oral doses of CK-2017357 for up to 14 days.
The primary objective of this trial will be to evaluate the
safety and tolerability of multiple doses of CK-2017357 in
patients with ALS. In addition, patients will be asked to report
their ALS symptoms using the ALS Functional Rating Scale-Revised
(ALSFRS-R). Patients will also undergo tests of muscle
fatigability, certain indices of pulmonary function, and
patients and investigators global status
assessments. This Phase II trial may be initiated after we
have completed the initial part of the Phase I drug-drug
interaction trial, which will focus on drug-drug interaction
between riluzole and CK-2017357.
CK-2066260 Planned Clinical Development:
We anticipate that, in the first half of 2011, we will file an
IND with the FDA to perform a Phase I, first-time-in-humans
clinical trial of CK-2066260. We also anticipate initiating that
trial in healthy volunteers in the second half of 2011.
Ongoing Research in Skeletal Muscle Activators:
Our research on the direct activation of skeletal muscle
continues in two areas. In addition to continuing our work with
selective fast skeletal sarcomere activators from new structural
series, we are conducting translational research with our
existing series of skeletal sarcomere activators to explore the
potential clinical applications of this novel approach in
preclinical studies. We also have a research program aimed at
the discovery and validation of other chemically and
pharmacologically distinct mechanisms to activate the skeletal
sarcomere.
Smooth
Muscle Contractility Program
Overview. Smooth muscle is a non-striated form
of muscle that is found in the circulatory, respiratory,
digestive and genitourinary organ systems and is responsible for
the contractile properties of these tissues. The contractile
elements in non-striated muscle are not arranged into sarcomeres
and the regulation of smooth muscle differs from that in cardiac
and skeletal muscles. Smooth muscle contractility is driven by
smooth muscle myosin, a cytoskeletal motor protein that is
directly responsible for converting chemical energy into
mechanical force. Our smooth muscle contractility program is
focused on the discovery and development of small molecule
smooth muscle myosin inhibitors, and leverages our expertise in
muscle function and its application to drug discovery. Our
inhaled smooth muscle myosin inhibitors have demonstrated
pharmacological activity in preclinical models of
bronchoconstrictive diseases and may have applications for
indications such as asthma or chronic obstructive pulmonary
disease. Our smooth muscle myosin inhibitors, administered
orally or intravenously, have also demonstrated pharmacological
activity in preclinical models of vascular constriction. We
intend to continue to conduct non-clinical development of
compounds from this program.
Ongoing research in smooth muscle myosin
inhibitors. In May 2010, a poster summarizing
non-clinical data regarding our smooth muscle contractility
program was presented at the American Thoracic Societys
2010 International Conference.
We are continuing to conduct early research activities to
develop direct smooth muscle myosin inhibitor compounds for
potential use in acute or chronic settings. Our research focus
is to differentiate our compounds from existing drugs that are
bronchodilators or vasodilators that act by indirectly causing
smooth muscle relaxation, such
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as commonly used beta-agonists and calcium channel blockers. We
are particularly interested in potential applications for our
compounds where the benefits of currently available treatments
are constrained by adverse side effects or limited effectiveness.
Mitotic
Kinesin Inhibitors
We currently have three drug candidates for the potential
treatment of cancer: ispinesib, SB-743921 and GSK-923295. All of
these arose from our earlier research activities directed to the
role of the cytoskeleton in cell division and were progressed
under our strategic alliance with GSK. This strategic alliance
was established in 2001 to discover, develop and commercialize
novel small molecule therapeutics targeting mitotic kinesins for
applications in the treatment of cancer and other diseases.
Mitotic kinesins are a family of cytoskeletal motor proteins
involved in the process of cell division, or mitosis. Under this
strategic alliance, we focused primarily on two mitotic
kinesins: kinesin spindle protein (KSP) and
centromere-associated protein E (CENP-E). Inhibition
of KSP or CENP-E interrupts cancer cell division, causing cell
death. Ispinesib and SB-743921 are structurally distinct small
molecules that specifically inhibit KSP. GSK-923295 specifically
inhibits CENP-E.
We agreed with GSK to terminate our strategic alliance effective
February 28, 2010. We have retained all rights to
ispinesib, SB-743921 and GSK-923295, subject to certain royalty
obligations to GSK. GSK remains responsible for completing its
Phase I clinical trial of GSK-923295 in cancer patients, at its
expense. We are evaluating strategic alternatives for the future
development and commercialization of ispinesib, SB-743921 and
GSK-923295 with third parties.
Research
and Development Expense
Our research and development expense was $38.0 million,
$39.8 million and $54.0 million for 2010, 2009 and
2008, respectively, and $415.3 million for the period from
August 5, 1997 (date of inception) through
December 31, 2010.
Our
Patents and Other Intellectual Property
Our policy is to seek patent protection for the technologies,
inventions and improvements that we develop that we consider
important to the advancement of our business. As of
December 31, 2010, we had 120 issued U.S. patents and
over 200 additional pending U.S. and foreign patent
applications. We also rely on trade secrets, technical know-how
and continuing innovation to develop and maintain our
competitive position. Our commercial success will depend on
obtaining and maintaining patent protection and trade secret
protection for our drug candidates and technologies and our
successfully defending these patents against third-party
challenges. We will only be able to protect our technologies
from unauthorized use by third parties to the extent that valid
and enforceable patents cover them or we maintain them as trade
secrets.
With regard to our drug candidates directed to muscle biology
targets, we have a U.S. patent covering omecamtiv mecarbil
and a U.S. patent covering our skeletal muscle sarcomere
activators including, but not limited to,
CK-2017357,
each of which will expire in 2027 unless extended. We also have
additional U.S. and foreign patent applications pending for
each of our drug candidates and potential drug candidates. It is
not known or determinable whether other patents will issue from
any of our other pending applications or what the expiration
dates would be for any other patents that do issue. With regard
to our mitotic kinesin inhibitor drug candidates, we have a
U.S. patent covering ispinesib that will expire in 2020,
unless extended; a U.S. patent covering SB-743921 that will
expire in 2023, unless extended; and a U.S. patent covering
GSK-923295 that will expire in 2025, unless extended. We have
additional U.S. and foreign patent applications pending for
each of ispinesib, SB-743921 and GSK-923295. It is not known or
determinable whether patents will issue from any of these
applications or what the expiration dates would be for any other
patents that do issue.
All of our drug candidates are still in clinical development and
have not yet been approved by the FDA. If any of these drug
candidates is approved, then pursuant to federal law, we may
apply for an extension of the U.S. patent term for one
patent covering the approved drug, which could extend the term
of the applicable patent by up to a maximum of five additional
years.
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The degree of future protection of our proprietary rights is
uncertain because legal means may not adequately protect our
rights or permit us to gain or keep our competitive advantage.
Due to evolving legal standards relating to the patentability,
validity and enforceability of patents covering pharmaceutical
inventions and the claim scope of these patents, our ability to
enforce our existing patents and to obtain and enforce patents
that may issue from any pending or future patent applications is
uncertain and involves complex legal, scientific and factual
questions. The standards that the U.S. Patent and Trademark
Office and its foreign counterparts use to grant patents are not
always applied predictably or uniformly and are subject to
change. To date, no consistent policy has emerged regarding the
breadth of claims allowed in biotechnology and pharmaceutical
patents. Thus, we cannot be sure that any patents will issue
from any pending or future patent applications owned by or
licensed to us. Even if patents do issue, we cannot be sure that
the claims of these patents will be held valid or enforceable by
a court of law, will provide us with any significant protection
against competitive products, or will afford us a commercial
advantage over competitive products. For example:
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we or our licensors might not have been the first to make the
inventions covered by each of our pending patent applications
and issued patents;
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we or our licensors might not have been the first to file patent
applications for the inventions covered by our pending patent
applications and issued patents;
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others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights;
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some or all of our or our licensors pending patent
applications may not result in issued patents or the claims that
issue may be narrow in scope and not provide us with competitive
advantages;
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our and our licensors issued patents may not provide a
basis for commercially viable drugs or therapies or may be
challenged and invalidated by third parties;
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our or our licensors patent applications or patents may be
subject to interference, opposition or similar administrative
proceedings that may result in a reduction in their scope or
their loss altogether;
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we may not develop additional proprietary technologies or drug
candidates that are patentable; or
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the patents of others may prevent us or our partners from
discovering, developing or commercializing our drug candidates.
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The defense and prosecution of intellectual property
infringement suits, interferences, oppositions and related legal
and administrative proceedings are costly, time-consuming to
pursue and result in diversion of resources. The outcome of
these types of proceedings is uncertain and could significantly
harm our business.
Our ability to commercialize drugs depends on our ability to
use, manufacture and sell those drugs without infringing the
patents or other proprietary rights of third parties.
U.S. and foreign issued patents and pending patent
applications owned by third parties exist that may be relevant
to the therapeutic areas and chemical compositions of our drug
candidates and potential drug candidates. While we are aware of
certain relevant patents and patent applications owned by third
parties, there may be issued patents or pending applications of
which we are not aware that could cover our drug candidates.
Because patent applications are often not published immediately
after filing, there may be currently pending applications,
unknown to us, which could later result in issued patents that
our activities with our drug candidates could infringe.
Currently, we are aware of an issued U.S. patent, at least
one pending U.S. patent application and certain foreign
patent applications assigned to Curis, Inc. (Curis),
relating to certain compounds in the quinazolinone class.
Ispinesib falls into this class of compounds. We have opposed
the granting of certain of these patents to Curis in Europe and
in Australia. Curis or a third party may assert that the
manufacture, use, importation or sale of ispinesib may infringe
one or more of its patents. We believe that we have valid
defenses against the issued U.S. patent owned by Curis if
it were to be asserted against us. However, we cannot guarantee
that a court would find these defenses valid or that any
additional defenses would be successful. We have not attempted
to obtain a license to these patents. If we decide to seek a
license to these patents, we cannot guarantee that such a
license would be available on acceptable terms, if at all.
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The development of our drug candidates and the commercialization
of any resulting drugs may be impacted by patents of companies
engaged in competitive programs with significantly greater
resources. This could result in the expenditure of significant
legal fees and management resources.
We also rely on trade secrets to protect our technology,
especially where we do not believe patent protection is
appropriate or obtainable. However, trade secrets are often
difficult to protect, especially outside of the United States.
While we use reasonable efforts to protect our trade secrets,
our employees, consultants, contractors, partners and other
advisors may unintentionally or willfully disclose our trade
secrets to competitors. Enforcing a claim that a third party
illegally obtained and is using our trade secrets would be
expensive and time-consuming, and the outcome would be
unpredictable. Even if we are able to maintain our trade secrets
as confidential, our competitors may independently develop
information that is equivalent or similar to our trade secrets.
We seek to protect our intellectual property by requiring our
employees, consultants, contractors and other advisors to
execute nondisclosure and invention assignment agreements upon
commencement of their employment or engagement, through which we
seek to protect our intellectual property. Agreements with our
employees also preclude them from bringing the proprietary
information or materials of third parties to us. We also require
confidentiality agreements or material transfer agreements from
third parties that receive our confidential information or
materials.
For further details on the risks relating to our intellectual
property, please see the risk factors under Item 1A of this
report, including, but not limited to, the risk factors entitled
Our success depends substantially upon our ability to
obtain and maintain intellectual property protection relating to
our drug candidates and research technologies and If
we are sued for infringing third party intellectual property
rights, it will be costly and time-consuming, and an unfavorable
outcome would have a significant adverse effect on our
business.
Government
Regulation
The FDA and comparable regulatory agencies in state and local
jurisdictions and in foreign countries impose substantial
requirements upon the clinical development, manufacture,
marketing and distribution of drugs. These agencies and other
federal, state and local entities regulate research and
development activities and the testing, manufacture, quality
control, labeling, storage, record keeping, approval,
advertising and promotion of our drug candidates and drugs.
In the United States, the FDA regulates drugs under the Federal
Food, Drug and Cosmetic Act and implementing regulations. The
process required by the FDA before our drug candidates may be
marketed in the United States generally involves the following:
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completion of extensive preclinical laboratory tests,
preclinical animal studies and formulation studies, all
performed in accordance with the FDAs good laboratory
practice regulations;
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submission to the FDA of an investigational new drug application
(IND), which must become effective before clinical
trials may begin;
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performance of adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug candidate for each
proposed indication in accordance with good clinical practices;
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submission of a new drug application (NDA) to the
FDA, which must usually be accompanied by payment of a
substantial user fee;
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satisfactory completion of an FDA preapproval inspection of the
manufacturing facilities at which the product is produced to
assess compliance with current good manufacturing practice
(cGMP) regulations and FDA audits of select clinical
investigator sites to assess compliance with good clinical
practices (GCP); and
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FDA review and approval of the NDA prior to any commercial
marketing, sale or shipment of the drug.
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This testing and approval process requires substantial time,
effort and financial resources, and we cannot be certain that
any approvals for our drug candidates will be granted on a
timely basis, if at all.
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Preclinical tests include laboratory evaluation of product
chemistry, formulation and stability, and studies to evaluate
toxicity and pharmacokinetics in animals. The results of
preclinical tests, together with manufacturing information and
analytical data, are submitted as part of an IND application to
the FDA. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA, within the
30-day
period, raises concerns or questions about the conduct of the
clinical trial, including concerns that human research subjects
may be exposed to unreasonable health risks. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns
before the clinical trial can begin. Similar regulatory
procedures generally apply in those countries outside of the
United States where we conduct clinical trials. Our submission
of an IND or a foreign equivalent, or those of our
collaborators, may not result in authorization from the FDA or
its foreign equivalent to commence a clinical trial. A separate
submission to an existing IND must also be made for each
successive clinical trial conducted during product development.
Further, an independent institutional review board
(IRB) or its foreign equivalent for each medical
center proposing to conduct the clinical trial must review and
approve the plan for any clinical trial before it commences at
that center and it must monitor the clinical trial until
completed. The FDA, the IRB or their foreign equivalents, or the
clinical trial sponsor may suspend a clinical trial at any time
on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk.
Clinical Trials: For purposes of an NDA
submission and approval, clinical trials are typically conducted
in the following three sequential phases, which may overlap:
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Phase I: These clinical trials are initially
conducted in a limited population to test the drug candidate for
safety, dose tolerance, absorption, metabolism, distribution and
excretion in healthy humans or, on occasion, in patients. In
some cases, a sponsor may decide to conduct a Phase
Ib clinical trial, which is a second, safety-focused Phase
I trial typically designed to evaluate the pharmacokinetics and
tolerability of the drug candidate in combination with currently
approved drugs.
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Phase II: These clinical trials are generally
conducted in a limited patient population to identify possible
adverse effects and safety risks, to make an initial
determination of potential efficacy of the drug candidate for
specific targeted indications and to determine dose tolerance
and optimal dosage. Multiple Phase II clinical trials may
be conducted by the sponsor to obtain information prior to
beginning larger and more expensive Phase III clinical
trials. Phase IIa clinical trials generally are designed to
study the pharmacokinetic or pharmacodynamic properties and to
conduct a preliminary assessment of safety of the drug candidate
over a measured dose response range. In some cases, a sponsor
may decide to conduct a Phase IIb clinical trial, which is a
second, typically larger, confirmatory Phase II trial that
could, if positive and accepted by the FDA, serve as a pilot or
pivotal clinical trial in the approval of a drug candidate.
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Phase III: These clinical trials are commonly
referred to as pivotal clinical trials. If the Phase II
clinical trials demonstrate that a dose range of the drug
candidate is potentially effective and has an acceptable safety
profile, Phase III clinical trials are then undertaken in
large patient populations to further evaluate dosage, to provide
substantial evidence of clinical efficacy and to further test
for safety in an expanded and diverse patient population at
multiple, geographically dispersed clinical trial sites.
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In some cases, the FDA may condition approval of an NDA for a
drug candidate on the sponsors agreement to conduct
additional clinical trials to further assess the drugs
safety and effectiveness after NDA approval, known as
Phase IV clinical trials.
The clinical trials we conduct for our drug candidates, both
before and after approval, and the results of those trials, are
generally required to be included in a clinical trials registry
database that is available and accessible to the public via the
internet. A failure by us to properly participate in the
clinical trial database registry could subject us to significant
civil monetary penalties.
Health care providers in the United States, including research
institutions from which we or our partners obtain patient
information, are subject to privacy rules under the Health
Insurance Portability and Accountability Act of 1996 and state
and local privacy laws. In the European Union, these entities
are subject to the Directive 95/46-EC of the European Parliament
on the protection of individuals with regard to the processing
of personal data and individual European Union member states
implementing additional legislation. Other countries have
similar privacy legislation. We could face substantial penalties
if we knowingly receive individually identifiable health
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information from a health care provider that has not satisfied
the applicable privacy laws. In addition, certain privacy laws
and genetic testing laws may apply directly to our operations
and/or those
of our partners and may impose restrictions on the use and
dissemination of individuals health information and use of
biological samples.
New Drug Application. The results of drug
candidate development, preclinical testing and clinical trials
are submitted to the FDA as part of an NDA. The NDA also must
contain extensive manufacturing information. In addition, the
FDA may require that a proposed Risk Evaluation and Mitigation
Strategy, also known as a REMS, be submitted as part of the NDA
if the FDA determines that it is necessary to ensure that the
benefits of the drug outweigh its risks. The FDA may refer the
NDA to an advisory committee for review, evaluation and
recommendation as to whether the application should be approved.
The FDA often, but not always, follows the advisory
committees recommendations. The FDA may deny approval of
an NDA by issuance of a complete response letter if the
applicable regulatory criteria are not satisfied, or it may
require additional clinical data, including data in a pediatric
population, or an additional pivotal Phase III clinical
trial or impose other conditions that must be met in order to
secure final approval for an NDA. Even if such data are
submitted, the FDA may ultimately decide that the NDA does not
satisfy the criteria for approval. Data from clinical trials are
not always conclusive and the FDA may interpret data differently
than we or our partners do. Once issued, the FDA may withdraw a
drug approval if ongoing regulatory requirements are not met or
if safety problems occur after the drug reaches the market. In
addition, the FDA may require further testing, including
Phase IV clinical trials, and surveillance or restrictive
distribution programs to monitor the effect of approved drugs
which have been commercialized. The FDA has the power to prevent
or limit further marketing of a drug based on the results of
these post-marketing programs. Drugs may be marketed only for
the approved indications and in accordance with the provisions
of the approved label. Further, if there are any modifications
to a drug, including changes in indications, labeling or
manufacturing processes or facilities, we may be required to
submit and obtain prior FDA approval of a new NDA or NDA
supplement, which may require us to develop additional data or
conduct additional preclinical studies and clinical trials.
Satisfaction of FDA regulations and requirements or similar
requirements of state, local and foreign regulatory agencies
typically takes several years. The actual time required may vary
substantially based upon the type, complexity and novelty of the
drug candidate or disease. Typically, if a drug candidate is
intended to treat a chronic disease, as is the case with some of
our drug candidates, safety and efficacy data must be gathered
over an extended period of time. Government regulation may delay
or prevent marketing of drug candidates for a considerable
period of time and impose costly procedures upon our activities.
The FDA or any other regulatory agency may not grant approvals
for new indications for our drug candidates on a timely basis,
if at all. Even if a drug candidate receives regulatory
approval, the approval may be significantly limited to specific
disease states, patient populations and dosages or restrictive
distribution programs. Further, even after regulatory approval
is obtained, later discovery of previously unknown problems with
a drug may result in restrictions on the drug or even complete
withdrawal of the drug from the market. Delays in obtaining, or
failures to obtain, regulatory approvals for any of our drug
candidates would harm our business. In addition, we cannot
predict what future U.S. or foreign governmental
regulations may be implemented.
Orphan Drug Designation. Some jurisdictions,
including the United States, may designate drugs for relatively
small patient populations as orphan drugs. The FDA grants orphan
drug designation to drugs intended to treat a rare disease or
condition, which is generally a disease or condition that
affects fewer than 200,000 individuals in the United States. For
example, the FDA has granted CK-2017357 an orphan drug
designation for the treatment of ALS.
An orphan drug designation does not shorten the duration of the
regulatory review and approval process. If a drug based on a
drug candidate which has an orphan drug designation receives the
first FDA marketing approval for the indication for which the
designation was granted, then the approved drug is entitled to
orphan drug exclusivity. This means that the FDA may not approve
another companys application to market the same drug for
the same indication for a period of seven years, except in
certain circumstances, such as a showing of clinical superiority
to the drug with orphan exclusivity or if the holder of the
orphan drug designation cannot assure the availability of
sufficient quantities of the orphan drug to meet the needs of
patients with the disease or condition for which the designation
was granted. Competitors may receive approval of different drugs
or biologics for the indications for which the orphan drug has
exclusivity.
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Other regulatory requirements. Any drugs
manufactured or distributed by us or our partners pursuant to
FDA approvals or their foreign counterparts are subject to
continuing regulation by the applicable regulatory authority,
including recordkeeping requirements and reporting of adverse
experiences associated with the drug. Drug manufacturers and
their subcontractors are required to register their
establishments with the FDA and other applicable regulatory
authorities, and are subject to periodic unannounced inspections
by these regulatory authorities for compliance with ongoing
regulatory requirements, including cGMPs, which impose certain
procedural and documentation requirements upon us and our
third-party manufacturers. Failure to comply with the statutory
and regulatory requirements can subject a manufacturer to
possible legal or regulatory action, such as warning letters,
suspension of manufacturing, seizure of product, injunctive
action or possible civil penalties. We cannot be certain that we
or our present or future third-party manufacturers or suppliers
will be able to comply with the cGMP regulations and other
ongoing FDA and other regulatory requirements. If our present or
future third-party manufacturers or suppliers are not able to
comply with these requirements, the FDA or its foreign
counterparts may halt our clinical trials, require us to recall
a drug from distribution, or withdraw approval of the NDA for
that drug.
For further details on the risks relating to government
regulation of our business, please see the risk factors under
Item 1A of this report, including, but not limited to, the
risk factor entitled The regulatory approval process is
expensive, time-consuming and uncertain and may prevent our
partners or us from obtaining approvals to commercialize some or
all of our drug candidates.
Competition
We compete in the segments of the pharmaceutical, biotechnology
and other related markets that address cardiovascular diseases
and other diseases relating to muscle dysfunction, each of which
is highly competitive. We face significant competition from most
pharmaceutical companies and biotechnology companies that are
also researching and selling products designed to address
cardiovascular diseases and diseases and medical conditions
associated with skeletal muscle weakness and wasting. Many of
our competitors have significantly greater financial,
manufacturing, marketing and drug development resources than we
do. Large pharmaceutical companies in particular have extensive
experience in clinical testing and in obtaining regulatory
approvals for drugs. These companies also have significantly
greater research capabilities than we do. In addition, many
universities and private and public research institutes are
active in research of cardiovascular diseases and diseases where
there is muscle dysfunction, some in direct competition with us.
We believe that our ability to successfully compete will depend
on, among other things:
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our drug candidates efficacy, safety and reliability;
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the speed and cost-effectiveness at which we develop our drug
candidates;
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the selection of suitable indications for which to develop our
drug candidates;
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the successful completion of clinical development and laboratory
testing of our drug candidates;
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the timing and scope of any regulatory approvals we or our
partners obtain for our drug candidates;
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our or our partners ability to manufacture and sell
commercial quantities of our approved drugs to meet market
demand;
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acceptance of our drugs by physicians and other health care
providers;
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the willingness of third party payors to provide reimbursement
for the use of our drugs;
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our ability to protect our intellectual property and avoid
infringing the intellectual property of others;
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the quality and breadth of our technology;
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our employees skills and our ability to recruit and retain
skilled employees;
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our cash flows under existing and potential future arrangements
with licensees, partners and other parties; and
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the availability of substantial capital resources to fund
development and commercialization activities.
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Our competitors may develop drug candidates and market drugs
that are less expensive and more effective than our future drugs
or that may render our drugs obsolete. Our current or future
competitors may also commercialize competing drugs before we or
our partners can launch any drugs developed from our drug
candidates. These organizations also compete with us to attract
qualified personnel and potential parties for acquisitions,
joint ventures or other strategic alliances.
If omecamtiv mecarbil is approved for marketing by the FDA for
heart failure, it would compete against other drugs used for the
treatment of heart failure. These include generic drugs, such as
milrinone, dobutamine or digoxin and newer marketed drugs such
as nesiritide. Omecamtiv mecarbil could also potentially compete
against other novel drug candidates in development, such as
istaroxamine, which is being developed by Debiopharm Group;
bucindolol, which is being developed by ARCA biopharma, Inc.;
relaxin, which is being developed by Novartis; CD-NP, which is
being developed by Nile Therapeutics, Inc, and glial growth
factor (GGF-2) which is being developed by Acorda Therapeutics,
Inc. In addition, there are a number of medical devices being
developed for the potential treatment of heart failure.
With respect to CK-2017357, CK2066260 and other compounds that
may arise from our skeletal muscle contractility program,
potential competitors include Ligand Pharmaceuticals, Inc.,
which is developing LGD-4033, a selective androgen receptor
modulator, for muscle wasting; and GTx, Inc., which is
developing ostarine, a selective androgen receptor modulator,
for cancer cachexia. Acceleron Pharma, Inc. is conducting
clinical development with ACE-031, a myostatin inhibitor, and
related compounds to evaluate their ability to treat diseases
involving the loss of muscle mass, strength and function. We are
aware that other companies are developing potential new
therapies for ALS, such as Biogen Idec, Inc., Mitsubishi Tanabe
Pharma Corporation, Eisai Inc., Trophos SA, Isis
Pharmaceuticals, Inc. and Sangamo BioSciences, Inc. If
CK-2017357 or other of our skeletal muscle sarcomere activators
are approved for the treatment of claudication associated with
peripheral artery disease, they will compete with currently
approved therapies for the treatment of peripheral artery
disease. We are also aware that a number of companies are
developing potential new treatments for peripheral artery
disease or associated symptoms of claudication. If CK-2017357 or
other of our skeletal muscle sarcomere activators are approved
for the treatment of myasthenia gravis, they will compete with
currently approved therapies for the treatment of myasthenia
gravis, including but not limited to anticholinesterase agents,
such as pyridostigmine bromide and neostigmine bromide,
corticosteroids, such as prednisone, and immunomodulatory drugs,
such as azathiaprine and cyclosporine. We are also aware that a
number of companies are developing or commercializing in certain
markets potential new treatments for myasthenia gravis, such as
Benesis Corp. (GB-0998), Alexion Pharmaceuticals, Inc.
(eculizumab) and Astellas (tacrolimus).
For further details on the risks relating to our competitors,
please see the risk factors under Item 1A of this report,
including, but not limited to, the risk factor entitled
Our competitors may develop drugs that are less expensive,
safer or more effective than ours, which may diminish or
eliminate the commercial success of any drugs that we may
commercialize.
Employees
As of December 31, 2010, our workforce consisted of
105 full-time employees, 28 of whom hold Ph.D. or M.D.
degrees, or both, and 21 of whom hold other advanced degrees. Of
our total workforce, 76 are engaged in research and development
and 29 are engaged in business development, finance and
administration functions.
We have no collective bargaining agreements with our employees,
and we have not experienced any work stoppages. We believe that
our relations with our employees are good.
Available
Information
We file electronically with the Securities and Exchange
Commission (SEC) our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, or the Exchange Act. The public may
read or copy any materials we file with the SEC at the
SECs Public Reference Room at 100 F Street, NE,
Washington, DC 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at
19
1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding
issuers that file electronically with the SEC. The address of
that site is www.sec.gov.
You may obtain a free copy of our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
and amendments to those reports on the day of filing with the
SEC on our website at www.cytokinetics.com or by contacting the
Investor Relations Department at our corporate offices by
calling
650-624-3000.
The information found on our website is not part of this or any
other report filed with or furnished to the SEC.
In evaluating our business, you should carefully consider the
following risks in addition to the other information in this
report. Any of the following risks could materially and
adversely affect our business, results of operations, financial
condition or your investment in our securities, and many are
beyond our control. It is not possible to predict or identify
all such factors and, therefore, you should not consider any of
these risk factors to be a complete statement of all the
potential risks or uncertainties that we face.
Risks
Related To Our Business
We
have a history of significant losses and may not achieve or
sustain profitability and, as a result, you may lose all or part
of your investment.
We have generally incurred operating losses in each year since
our inception in 1997, due to costs incurred in connection with
our research and development activities and general and
administrative costs associated with our operations. Our drug
candidates are in the early stages of clinical testing, and we
and our partners must conduct significant additional clinical
trials before we and our partners can seek the regulatory
approvals necessary to begin commercial sales of our drugs. We
expect to incur increasing losses for at least several more
years, as we continue our research activities and conduct
development of, and seek regulatory approvals for, our drug
candidates, and commercialize any approved drugs. If our drug
candidates fail or do not gain regulatory approval, or if our
drugs do not achieve market acceptance, we will not be
profitable. If we fail to become and remain profitable, or if we
are unable to fund our continuing losses, you could lose all or
part of your investment.
We
will need substantial additional capital in the future to
sufficiently fund our operations.
We have consumed substantial amounts of capital to date, and our
operating expenditures will increase over the next several years
if we expand our research and development activities. We have
funded all of our operations and capital expenditures with
proceeds from private and public sales of our equity securities,
strategic alliances with Amgen, GSK and others, equipment
financings, interest on investments and government grants. We
believe that our existing cash and cash equivalents, short-term
investments and interest earned on investments should be
sufficient to meet our projected operating requirements for at
least the next 12 months. We have based this estimate on
assumptions that may prove to be wrong, and we could utilize our
available capital resources sooner than we currently expect.
Because of the numerous risks and uncertainties associated with
the development of our drug candidates and other research and
development activities, including risks and uncertainties that
could impact the rate of progress of our development activities,
we are unable to estimate with certainty the amounts of capital
outlays and operating expenditures associated with these
activities.
For the foreseeable future, our operations will require
significant additional funding, in large part due to our
research and development expenses and the absence of any
revenues from product sales. Until we can generate a sufficient
amount of product revenue, we expect to raise future capital
through strategic alliance and licensing arrangements, public or
private equity offerings and debt financings. We do not
currently have any commitments for future funding other than
grant funding for our myasthenia gravis preclinical and clinical
activities, and reimbursements, milestone and royalty payments
that we may receive under our collaboration and option agreement
with Amgen. We may not receive any further funds under that
agreement. Our ability to raise funds may be adversely impacted
by current economic conditions, including the effects of the
recent disruptions to the credit and financial markets in the
United States and worldwide. In particular, the pool of
third-party capital that in the past has been available to
development-stage companies such as ours has decreased
significantly in recent years, and such
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decreased availability may continue for a prolonged period. As a
result of these and other factors, we do not know whether
additional financing will be available when needed, or that, if
available, such financing would be on terms favorable to our
stockholders or us.
To the extent that we raise additional funds through strategic
alliances or licensing and other arrangements with third
parties, we will likely have to relinquish valuable rights to
our technologies, research programs or drug candidates, or grant
licenses on terms that may not be favorable to us. To the extent
that we raise additional funds by issuing equity securities, our
stockholders will experience additional dilution. To the extent
that we raise additional funds through debt financing, the
financing may involve covenants that restrict our business
activities. In addition, funding from any of these sources, if
needed, may not be available to us on favorable terms, or at
all, or in accordance with our planned timelines.
If we can not raise the funds we need to operate our business,
we will need to discontinue certain research and development
activities and our stock price likely would be negatively
affected.
We
depend on Amgen for the conduct, completion and funding of the
clinical development and commercialization of omecamtiv mecarbil
(formerly known as CK-1827452).
In May 2009, Amgen exercised its option to acquire an exclusive
license to our drug candidate omecamtiv mecarbil worldwide,
except for Japan. As a result, Amgen is responsible for the
clinical development and obtaining and maintaining regulatory
approval of omecamtiv mecarbil for the potential treatment of
heart failure worldwide, except Japan.
We do not control the clinical development activities being
conducted or that may be conducted in the future by Amgen,
including, but not limited to, the timing of initiation,
termination or completion of clinical trials, the analysis of
data arising out of those clinical trials or the timing of
release of data concerning those clinical trials, which may
impact our ability to report on Amgens results. Amgen may
conduct these activities more slowly or in a different manner
than we would if we controlled the clinical development of
omecamtiv mecarbil. For example, Amgen has informed us that it
now plans to initiate a Phase IIb clinical trial of an
intravenous formulation of omecamtiv mecarbil in hospitalized
patients with acutely decompensated heart failure prior to
initiating further clinical trials of oral formulations of
omecamtiv mecarbil. Amgen is responsible for filing future
applications with the FDA or other regulatory authorities for
approval of omecamtiv mecarbil and will be the owner of any
marketing approvals issued by the FDA or other regulatory
authorities for omecamtiv mecarbil. If the FDA or other
regulatory authorities approve omecamtiv mecarbil, Amgen will
also be responsible for the marketing and sale of the resulting
drug, subject to our right to co-promote omecamtiv mecarbil in
North America if we exercise our option to
co-fund Phase III development costs of omecamtiv
mecarbil under the collaboration. However, we cannot control
whether Amgen will devote sufficient attention and resources to
the clinical development of omecamtiv mecarbil or will proceed
in an expeditious manner, even if we do exercise our option to
co-fund the development of omecamtiv mecarbil. Even if the FDA
or other regulatory agencies approve omecamtiv mecarbil, Amgen
may elect not to proceed with the commercialization of the
resulting drug in one or more countries.
Amgen generally has discretion to elect whether to pursue or
abandon the development of omecamtiv mecarbil and may terminate
our strategic alliance for any reason upon six months prior
notice. If the initial results of one or more clinical trials
with omecamtiv mecarbil do not meet Amgens expectations,
Amgen may elect to terminate further development of omecamtiv
mecarbil or certain of the potential clinical trials for
omecamtiv mecarbil, even if the actual number of patients
treated at that time is relatively small. If Amgen abandons
omecamtiv mecarbil, it would result in a delay in or could
prevent us from commercializing omecamtiv mecarbil, and would
delay and could prevent us from obtaining revenues for this drug
candidate. Disputes may arise between us and Amgen, which may
delay or cause the termination of any omecamtiv mecarbil
clinical trials, result in significant litigation or cause Amgen
to act in a manner that is not in our best interest. If
development of omecamtiv mecarbil does not progress for these or
any other reasons, we would not receive further milestone
payments or royalties on product sales from Amgen with respect
to omecamtiv mecarbil. If Amgen abandons development of
omecamtiv mecarbil prior to regulatory approval or if it elects
not to proceed with commercialization of the resulting drug
following regulatory approval, we would have to seek a new
partner for clinical development or commercialization, curtail
or abandon that clinical development or commercialization, or
undertake and fund the clinical development of omecamtiv
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mecarbil or commercialization of the resulting drug ourselves.
If we seek a new partner but are unable to do so on acceptable
terms, or at all, or do not have sufficient funds to conduct the
development or commercialization of omecamtiv mecarbil
ourselves, we would have to curtail or abandon that development
or commercialization, which could harm our business.
We
have never generated, and may never generate, revenues from
commercial sales of our drugs and we will not have drugs to
market for at least several years, if ever.
We currently have no drugs for sale and we cannot guarantee that
we will ever develop or obtain approval to market any drugs. To
receive marketing approval for any drug candidate, we must
demonstrate that the drug candidate satisfies rigorous standards
of safety and efficacy to the FDA in the United States and other
regulatory authorities abroad. We and our partners will need to
conduct significant additional research and preclinical and
clinical testing before we or our partners can file applications
with the FDA or other regulatory authorities for approval of any
of our drug candidates. In addition, to compete effectively, our
drugs must be easy to use, cost-effective and economical to
manufacture on a commercial scale, compared to other therapies
available for the treatment of the same conditions. We may not
achieve any of these objectives. Currently, our only drug
candidates that have progressed into clinical development are:
omecamtiv mecarbil, our drug candidate for the potential
treatment of heart failure; CK-2017357, our drug candidate for
the potential treatment of diseases associated with aging,
muscle wasting and neuromuscular dysfunction; and ispinesib,
SB-743921 and GSK-923295, our drug candidates for the potential
treatment of cancer. We cannot be certain that the clinical
development of these or any future drug candidates will be
successful, that they will receive the regulatory approvals
required to commercialize them, or that any of our other
research programs will yield a drug candidate suitable for
clinical testing or commercialization. Our commercial revenues,
if any, will be derived from sales of drugs that we do not
expect to be commercially marketed for at least several years,
if at all. The development of any one or all of these drug
candidates may be discontinued at any stage of our clinical
trials programs and we may not generate revenue from any of
these drug candidates.
Clinical
trials may fail to demonstrate the desired safety and efficacy
of our drug candidates, which could prevent or significantly
delay completion of clinical development and regulatory
approval.
Prior to receiving approval to commercialize any of our drug
candidates, we or our partners must adequately demonstrate to
the FDA and foreign regulatory authorities that the drug
candidate is sufficiently safe and effective with substantial
evidence from well-controlled clinical trials. In clinical
trials we or our partners will need to demonstrate efficacy for
the treatment of specific indications and monitor safety
throughout the clinical development process and following
approval. None of our drug candidates have yet been demonstrated
to be safe and effective in clinical trials and they may never
be. In addition, for each of our current preclinical compounds,
we or our partners must adequately demonstrate satisfactory
chemistry, formulation, stability and toxicity in order to
submit an IND to the FDA, or an equivalent application in
foreign jurisdictions, that would allow us to advance that
compound into clinical trials. Furthermore, we or our partners
may need to submit separate INDs (or foreign equivalent) to
different divisions within the FDA (or foreign regulatory
authorities) in order to pursue clinical trials in different
therapeutic areas. Each new IND (or foreign equivalent) must be
reviewed by the new division before the clinical trial under its
jurisdiction can proceed, entailing all the risks of delay
inherent to regulatory review. If our or our partners
current or future preclinical studies or clinical trials are
unsuccessful, our business will be significantly harmed and our
stock price could be negatively affected.
All of our drug candidates are prone to the risks of failure
inherent in drug development. Preclinical studies may not yield
results that would adequately support the filing of an IND (or a
foreign equivalent) with respect to our potential drug
candidates. Even if the results of preclinical studies for a
drug candidate are sufficient to support such a filing, the
results of preclinical studies do not necessarily predict the
results of clinical trials. As an example, because the
physiology of animal species used in preclinical studies may
vary substantially from other animal species and from humans, it
may be difficult to assess with certainty whether a finding from
a study in a particular animal species will result in similar
findings in other animal species or in humans. For any of our
drug candidates, the results from Phase I clinical trials in
healthy volunteers and clinical results from Phase I and II
trials in patients are not necessarily indicative of the results
of larger Phase III clinical trials that are necessary to
establish whether
22
the drug candidate is safe and effective for the applicable
indication. Likewise, interim results from a clinical trial may
not be indicative of the final results from that trial.
In addition, while the clinical trials of our drug candidates
are designed based on the available relevant information, in
view of the uncertainties inherent in drug development, such
clinical trials may not be designed with focus on indications,
patient populations, dosing regimens, safety or efficacy
parameters or other variables that will provide the necessary
safety or efficacy data to support regulatory approval to
commercialize the resulting drugs. For example, in previously
conducted two-stage Phase II clinical trials designed to
evaluate the safety and efficacy of ispinesib as monotherapy in
the first- or second-line treatment of patients with different
forms of cancer, ispinesib did not satisfy the criteria for
advancement to Stage 2. In addition, individual patient
responses to the dose administered of a drug may vary in a
manner that is difficult to predict. Also, the methods we select
to assess particular safety or efficacy parameters may not yield
the same statistical precision in estimating our drug
candidates effects as may other alternative methodologies.
Even if we believe the data collected from clinical trials of
our drug candidates are promising, these data may not be
sufficient to support approval by the FDA or foreign regulatory
authorities. Preclinical and clinical data can be interpreted in
different ways. Accordingly, the FDA or foreign regulatory
authorities could interpret these data in different ways than we
or our partners do, which could delay, limit or prevent
regulatory approval.
Administering any of our drug candidates or potential drug
candidates may produce undesirable side effects, also known as
adverse effects. Toxicities and adverse effects observed in
preclinical studies for some compounds in a particular research
and development program may also occur in preclinical studies or
clinical trials of other compounds from the same program.
Potential toxicity issues may arise from the effects of the
active pharmaceutical ingredient itself or from impurities or
degradants that are present in the active pharmaceutical
ingredient or could form over time in the formulated drug
candidate or the active pharmaceutical ingredient. These
toxicities or adverse effects could delay or prevent the filing
of an IND (or a foreign equivalent) with respect to our drug
candidates or potential drug candidates or cause us or our
partners to modify, suspend or terminate clinical trials with
respect to any drug candidate at any time during the development
program. The FDA, other regulatory authorities, our partners or
we may modify, suspend or terminate clinical trials with our
drug candidates at any time. If these or other adverse effects
are severe or frequent enough to outweigh the potential efficacy
of a drug candidate, the FDA or other regulatory authorities
could deny approval of that drug candidate for any or all
targeted indications. Even if one or more of our drug candidates
were approved for sale as drugs, the occurrence of even a
limited number of toxicities or adverse effects when used in
large populations may cause the FDA to impose restrictions on,
or stop, the further marketing of those drugs. Indications of
potential adverse effects or toxicities which do not seem
significant during the course of clinical trials may later turn
out to actually constitute serious adverse effects or toxicities
when a drug is used in large populations or for extended periods
of time.
We have observed certain adverse effects in the clinical trials
conducted with our drug candidates. For example, in clinical
trials of omecamtiv mecarbil, doses that exceeded the maximum
tolerated dose were associated with complaints of chest
discomfort, palpitations, dizziness and feeling hot, increases
in heart rate, declines in blood pressure, electrocardiographic
changes consistent with acute myocardial ischemia and transient
rises in the MB fraction of creatine kinase and cardiac
troponins I and T, which are indicative of myocardial
infarction. In Phase IIa clinical trials of CK-2017357, adverse
events of dizziness, headache, fatigue, somnolence (sleepiness),
euphoric mood, muscle spasms, gait disturbance, muscular
weakness, nausea, and dysarthria (difficulty speaking) appeared
to increase in frequency with increasing doses of CK-2017357. In
clinical trials of ispinesib, the most commonly observed
dose-limiting toxicity was neutropenia, a decrease in the number
of a certain type of white blood cell that results in an
increase in susceptibility to infection.
Further, the administration of two or more drugs
contemporaneously can lead to interactions between them, and in
clinical trials, our drug candidates may interact with other
drugs that the trial subjects are taking. For example, many ALS
patients take riluzole, a commercially available treatment for
ALS. In a Phase IIa clinical trial of CK-2017357 in ALS
patients, we observed in the patients taking riluzole increases
in the blood plasma concentration of riluzole associated with
the administration of CK-2017357. Accordingly, we plan to
conduct a Phase I drug-drug interaction clinical trial intended
to evaluate the effects of CK-2017357 on the pharmacokinetics of
riluzole and other drugs to better understand the significance
of this finding. If this drug-drug interaction trial
23
produces materially adverse findings, it may call into question
the feasibility of developing CK-2017357 as a treatment for ALS.
In addition, clinical trials of omecamtiv mecarbil and
CK-2017357 enroll patients who typically suffer from serious
diseases which put them at increased risk of death. These
patients may die while receiving our drug candidates. In such
circumstances, it may not be possible to exclude with certainty
a causal relationship to our drug candidate, even though the
responsible clinical investigator may view such an event as not
study drug-related. For example, in a Phase IIa clinical trial
designed to evaluate and compare the oral pharmacokinetics of
both modified and immediate release formulations of omecamtiv
mecarbil in patients with stable heart failure, a patient died
suddenly after receiving the immediate release formulation of
omecamtiv mecarbil, without having reported any preceding
adverse events. The clinical investigator assessed the
patients death as not related to omecamtiv mecarbil.
However, the event was reported to the appropriate regulatory
authorities as possibly related to omecamtiv mecarbil because
the immediate cause of the patients death could not be
determined, and therefore, a relationship to omecamtiv mecarbil
could not be excluded definitively.
Any failure or significant delay in completing preclinical
studies or clinical trials for our drug candidates, or in
receiving and maintaining regulatory approval for the sale of
any resulting drugs, may significantly harm our business and
negatively affect our stock price.
Clinical
trials are expensive, time-consuming and subject to
delay.
Clinical trials are subject to rigorous regulatory requirements
and are very expensive, difficult and time-consuming to design
and implement. The length of time and number of trial sites and
patients required for clinical trials vary substantially based
on the type, complexity, novelty, intended use of the drug
candidate and safety concerns. We estimate that the clinical
trials of our current drug candidates will each continue for
several more years. However, the clinical trials for all or any
of these drug candidates may take significantly longer to
complete. The commencement and completion of our clinical trials
could be delayed or prevented by many factors, including, but
not limited to:
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delays in obtaining, or inability to obtain, regulatory or other
approvals to commence and conduct clinical trials in the manner
we or our partners deem necessary for the appropriate and timely
development of our drug candidates and commercialization of any
resulting drugs;
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delays in identifying and reaching agreement, or inability to
identify and reach agreement, on acceptable terms, with
prospective clinical trial sites and other entities involved in
the conduct of our clinical trials;
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delays or additional costs in developing, or inability to
develop, appropriate formulations of our drug candidates for
clinical trial use, including an appropriate modified release
oral formulation for omecamtiv mecarbil;
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slower than expected rates of patient recruitment and
enrollment, including as a result of competition for patients
with other clinical trials; limited numbers of patients that
meet the enrollment criteria; patients,
investigators or trial sites reluctance to agree to
the requirements of a protocol; or the introduction of
alternative therapies or drugs by others;
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for those drug candidates that are the subject of a strategic
alliance, delays in reaching agreement with our partner as to
appropriate development strategies;
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a regulatory authority may require changes to a protocol for a
clinical trial that then may require approval from regulatory
agencies in other jurisdictions where the trial is being
conducted;
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an institutional review board (IRB) or its foreign
equivalent may require changes to a protocol that then require
approval from regulatory agencies and other IRBs and their
foreign equivalents, or regulatory authorities may require
changes to a protocol that then require approval from the IRBs
or their foreign equivalents;
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for clinical trials conducted in foreign countries, the time and
resources required to identify, interpret and comply with
foreign regulatory requirements or changes in those
requirements, and political instability or natural disasters
occurring in those countries;
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lack of effectiveness of our drug candidates during clinical
trials;
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unforeseen safety issues;
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inadequate supply of clinical trial materials;
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uncertain dosing issues;
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failure by us, our partners, or clinical research organizations,
investigators or site personnel engaged by us or our partners to
comply with good clinical practices and other applicable laws
and regulations, including those concerning informed consent;
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inability or unwillingness of investigators or their staffs to
follow clinical protocols;
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inability to monitor patients adequately during or after
treatment;
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introduction of new therapies or changes in standards of
practice or regulatory guidance that render our drug candidates
or their clinical trial endpoints obsolete; and
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results from non-clinical studies that may adversely impact the
timing or further development of our drug candidates.
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We do not know whether planned clinical trials will begin on
time, or whether planned or currently ongoing clinical trials
will need to be restructured or will be completed on schedule,
if at all. Significant delays in clinical trials will impede our
ability to commercialize our drug candidates and generate
revenue and could significantly increase our development costs.
If we
fail to enter into and maintain successful strategic alliances
for our drug candidates, potential drug candidates or research
and development programs, we will have to reduce, delay or
discontinue our advancement of those drug candidates, potential
drug candidates and programs or expand our research and
development capabilities and increase our
expenditures.
Drug development is complicated and expensive. We currently have
limited financial and operational resources to carry out drug
development. Our strategy for developing, manufacturing and
commercializing our drug candidates and potential drug
candidates currently requires us to enter into and successfully
maintain strategic alliances with pharmaceutical companies or
other industry participants to advance our programs and reduce
our expenditures on each program. Accordingly, the success of
our development activities depends in large part on our current
and future strategic partners performance, over which we
have little or no control.
We have retained all rights to develop and commercialize
CK-2017357, CK-2066260, ispinesib, SB-743921 and GSK-923295. We
currently do not have a strategic partner for these drug
candidates. We are relying on GSK to complete its Phase I
clinical trial for GSK-923295. We expect to rely on one or more
strategic partners or other arrangements with third parties to
advance and develop each of CK-2017357, CK-2066260 and other
compounds from our skeletal muscle contractility program;
ispinesib, SB-743921 and GSK-923295; and our smooth muscle
myosin inhibitors. However, we may not be able to negotiate and
enter into such strategic alliances or arrangements on
acceptable terms, if at all, or in accordance with our planned
timelines.
We rely on Amgen to conduct non-clinical and clinical
development for omecamtiv mecarbil for the potential treatment
of heart failure. If Amgen elects to terminate its development
activities with respect to omecamtiv mecarbil, we currently do
not have an alternative strategic partner for this drug
candidate.
Our ability to commercialize drugs that we develop with our
partners and that generate royalties from product sales depends
on our partners abilities to assist us in establishing the
safety and efficacy of our drug candidates, obtaining and
maintaining regulatory approvals and achieving market acceptance
of the drugs once commercialized. Our partners may elect to
delay or terminate development of one or more drug candidates,
independently develop drugs that could compete with ours or fail
to commit sufficient resources to the marketing and distribution
25
of drugs developed through their strategic alliances with us.
Our partners may not proceed with the development and
commercialization of our drug candidates with the same degree of
urgency as we would because of other priorities they face. In
addition, new business combinations or changes in a
partners business strategy may adversely affect its
willingness or ability to carry out its obligations under a
strategic alliance.
If we are not able to successfully maintain our existing
strategic alliances or establish and successfully maintain
additional strategic alliances, we will have to limit the size
or scope of, or delay or discontinue, one or more of our drug
development programs or research programs, or undertake and fund
these programs ourselves. Alternatively, if we elect to continue
to conduct any of these drug development programs or research
programs on our own, we will need to expand our capability to
conduct clinical development by bringing additional skills,
technical expertise and resources into our organization. This
would require significant additional funding, which may not be
available to us on acceptable terms, or at all.
We
depend on contract research organizations to conduct our
clinical trials and have limited control over their
performance.
We have used and intend to continue to use contract research
organizations (CROs) within and outside of the
United States to conduct clinical trials of our drug candidates,
such as CK-2017357. We do not have control over many aspects of
our CROs activities, and cannot fully control the amount,
timing or quality of resources that they devote to our programs.
CROs may not assign as high a priority to our programs or pursue
them as diligently as we would if we were undertaking these
programs ourselves. The activities conducted by our CROs
therefore may not be completed on schedule or in a satisfactory
manner. CROs may also give higher priority to relationships with
our competitors and potential competitors than to their
relationships with us. Outside of the United States, we are
particularly dependent on our CROs expertise in
communicating with clinical trial sites and regulatory
authorities and ensuring that our clinical trials and related
activities and regulatory filings comply with applicable laws.
Our CROs failure to carry out development activities on
our behalf according to our and the FDAs or other
regulatory agencies requirements and in accordance with
applicable U.S. and foreign laws, or our failure to
properly coordinate and manage these activities, could increase
the cost of our operations and delay or prevent the development,
approval and commercialization of our drug candidates. In
addition, if a CRO fails to perform as agreed, our ability to
collect damages may be contractually limited. If we fail to
effectively manage the CROs carrying out the development of our
drug candidates or if our CROs fail to perform as agreed, the
commercialization of our drug candidates will be delayed or
prevented.
We
have no manufacturing capacity and depend on our strategic
partners and contract manufacturers to produce our clinical
trial drug supplies for each of our drug candidates and
potential drug candidates, and anticipate continued reliance on
contract manufacturers for the development and commercialization
of our potential drugs.
We do not currently operate manufacturing facilities for
clinical or commercial production of our drug candidates or
potential drug candidates. We have limited experience in drug
formulation and manufacturing, and we lack the resources and the
capabilities to manufacture any of our drug candidates or
potential drug candidates on a clinical or commercial scale.
Amgen has assumed responsibility to conduct these activities for
the ongoing clinical development of omecamtiv mecarbil
worldwide, except Japan. We have relied on GSK to conduct these
activities for the clinical development of GSK-923295. For
CK-2017357, CK-2066260 and our other drug candidates and
potential drug candidates, we rely (and for omecamtiv mecarbil,
ispinesib and SB-743921, we have relied) on a limited number of
contract manufacturers. In particular, we rely on single-source
contract manufacturers for the active pharmaceutical ingredient
and the drug product supply for our clinical trials. We expect
to rely on contract manufacturers to supply all future drug
candidates for which we conduct clinical development. If any of
our existing or future contract manufacturers fail to perform
satisfactorily, it could delay clinical development or
regulatory approval of our drug candidates or commercialization
of our drugs, producing additional losses and depriving us of
potential product revenues. In addition, if a contract
manufacturer fails to perform as agreed, our ability to collect
damages may be contractually limited.
Our drug candidates and potential drug candidates require
precise high-quality manufacturing. The failure to achieve and
maintain high manufacturing standards, including failure to
detect or control anticipated or
26
unanticipated manufacturing errors or the frequent occurrence of
such errors, could result in patient injury or death,
discontinuance or delay of ongoing or planned clinical trials,
delays or failures in product testing or delivery, cost
overruns, product recalls or withdrawals and other problems that
could seriously hurt our business. Contract drug manufacturers
often encounter difficulties involving production yields,
quality control and quality assurance and shortages of qualified
personnel. These manufacturers are subject to stringent
regulatory requirements, including the FDAs current good
manufacturing practices regulations and similar foreign laws and
standards. Each contract manufacturer must pass a pre-approval
inspection before we can obtain marketing approval for any of
our drug candidates and following approval will be subject to
ongoing periodic unannounced inspections by the FDA, the
U.S. Drug Enforcement Agency and other regulatory agencies,
to ensure strict compliance with current good manufacturing
practices and other applicable government regulations and
corresponding foreign laws and standards. We seek to ensure that
our contract manufacturers comply fully with all applicable
regulations, laws and standards. However, we do not have control
over our contract manufacturers compliance with these
regulations, laws and standards. If one of our contract
manufacturers fails to pass its pre-approval inspection or
maintain ongoing compliance at any time, the production of our
drug candidates could be interrupted, resulting in delays or
discontinuance of our clinical trials, additional costs and
potentially lost revenues. In addition, failure of any third
party manufacturers or us to comply with applicable regulations,
including pre-or post-approval inspections and the current good
manufacturing practice requirements of the FDA or other
comparable regulatory agencies, could result in sanctions being
imposed on us. These sanctions could include fines, injunctions,
civil penalties, failure of regulatory authorities to grant
marketing approval of our products, delay, suspension or
withdrawal of approvals, license revocation, product seizures or
recalls, operational restrictions and criminal prosecutions, any
of which could significantly and adversely affect our business.
In addition, our existing and future contract manufacturers may
not perform as agreed or may not remain in the contract
manufacturing business for the time required to successfully
produce, store and distribute our drug candidates. If a natural
disaster, business failure, strike or other difficulty occurs,
we may be unable to replace these contract manufacturers in a
timely or cost-effective manner and the production of our drug
candidates would be interrupted, resulting in delays and
additional costs.
Switching manufacturers or manufacturing sites would be
difficult and time-consuming because the number of potential
manufacturers is limited. In addition, before a drug from any
replacement manufacturer or manufacturing site can be
commercialized, the FDA and, in some cases, foreign regulatory
agencies, must approve that site. These approvals would require
regulatory testing and compliance inspections. A new
manufacturer or manufacturing site also would have to be
educated in, or develop substantially equivalent processes for,
production of our drugs and drug candidates. It may be difficult
or impossible to transfer certain elements of a manufacturing
process to a new manufacturer or for us to find a replacement
manufacturer on acceptable terms quickly, or at all, either of
which would delay or prevent our ability to develop drug
candidates and commercialize any resulting drugs.
We may
not be able to successfully
scale-up
manufacturing of our drug candidates in sufficient quality and
quantity, which would delay or prevent us from developing our
drug candidates and commercializing resulting approved drugs, if
any.
To date, our drug candidates have been manufactured in small
quantities for preclinical studies and early-stage clinical
trials. In order to conduct larger scale or late-stage clinical
trials for a drug candidate and for commercialization of the
resulting drug if that drug candidate is approved for sale, we
will need to manufacture it in larger quantities. We may not be
able to successfully increase the manufacturing capacity for any
of our drug candidates, whether in collaboration with
third-party manufacturers or on our own, in a timely or
cost-effective manner or at all. If a contract manufacturer
makes improvements in the manufacturing process for our drug
candidates, we may not own, or may have to share, the
intellectual property rights to those improvements. Significant
scale-up of
manufacturing may require additional validation studies, which
are costly and which the FDA must review and approve. In
addition, quality issues may arise during those
scale-up
activities because of the inherent properties of a drug
candidate itself or of a drug candidate in combination with
other components added during the manufacturing and packaging
process, or during shipping and storage of the finished product
or active pharmaceutical ingredients. If we are unable to
successfully
scale-up
manufacture of any of our drug candidates in sufficient quality
and
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quantity, the development of that drug candidate and regulatory
approval or commercial launch for any resulting drugs may be
delayed or there may be a shortage in supply, which could
significantly harm our business.
The
mechanisms of action of our drug candidates and potential drug
candidates are unproven, and we do not know whether we will be
able to develop any drug of commercial value.
We have discovered and are currently developing drug candidates
and potential drug candidates that have what we believe are
novel mechanisms of action directed against cytoskeletal
targets, and intend to continue to do so. Because no currently
approved drugs appear to operate via the same biochemical
mechanisms as our compounds, we cannot be certain that our drug
candidates and potential drug candidates will result in
commercially viable drugs that safely and effectively treat the
indications for which we intend to develop them. The results we
have seen for our compounds in preclinical models may not
translate into similar results in humans, and results of early
clinical trials in humans may not be predictive of the results
of larger clinical trials that may later be conducted with our
drug candidates. Even if we are successful in developing and
receiving regulatory approval for a drug candidate for the
treatment of a particular disease, we cannot be certain that we
will also be able to develop and receive regulatory approval for
that or other drug candidates for the treatment of other
diseases. If we or our partners are unable to successfully
develop and commercialize our drug candidates, our business will
be materially harmed.
Our
success depends substantially upon our ability to obtain and
maintain intellectual property protection relating to our drug
candidates, potential drug candidates and research
technologies.
We own, or hold exclusive licenses to, a number of U.S. and
foreign patents and patent applications directed to our drug
candidates, potential drug candidates and research technologies.
Our success depends on our ability to obtain patent protection
both in the United States and in other countries for our drug
candidates and potential drug candidates, their methods of
manufacture and use, and our technologies. Our ability to
protect our drug candidates, potential drug candidates and
technologies from unauthorized or infringing use by third
parties depends substantially on our ability to obtain and
enforce our patents. If our issued patents and patent
applications, if granted, do not adequately describe, enable or
otherwise provide coverage of our technologies and drug
candidates and potential drug candidates, including omecamtiv
mecarbil, CK-2017357, CK-2066260, ispinesib, SB-743921 and
GSK-923295, we or our licensees would not be able to exclude
others from developing or commercializing these drug candidates.
Furthermore, the degree of future protection of our proprietary
rights is uncertain because legal means may not adequately
protect our rights or permit us to gain or keep our competitive
advantage.
Due to evolving legal standards relating to the patentability,
validity and enforceability of patents covering pharmaceutical
inventions and the claim scope of these patents, our ability to
enforce our existing patents and to obtain and enforce patents
that may issue from any pending or future patent applications is
uncertain and involves complex legal, scientific and factual
questions. The standards which the U.S. Patent and
Trademark Office and its foreign counterparts use to grant
patents are not always applied predictably or uniformly and are
subject to change. To date, no consistent policy has emerged
regarding the breadth of claims allowed in biotechnology and
pharmaceutical patents. Thus, we cannot be sure that any patents
will issue from any pending or future patent applications owned
by or licensed to us. Even if patents do issue, we cannot be
sure that the claims of these patents will be held valid or
enforceable by a court of law, will provide us with any
significant protection against competitive products, or will
afford us a commercial advantage over competitive products. In
particular:
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we or our licensors might not have been the first to make the
inventions covered by each of our pending patent applications
and issued patents;
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we or our licensors might not have been the first to file patent
applications for the inventions covered by our pending patent
applications and issued patents;
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others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights;
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some or all of our or our licensors pending patent
applications may not result in issued patents or the claims that
issue may be narrow in scope and not provide us with competitive
advantages;
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our and our licensors issued patents may not provide a
basis for commercially viable drugs or therapies or may be
challenged and invalidated by third parties;
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our or our licensors patent applications or patents may be
subject to interference, opposition or similar administrative
proceedings that may result in a reduction in their scope or
their loss altogether;
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we may not develop additional proprietary technologies or drug
candidates that are patentable; or
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the patents of others may prevent us or our partners from
discovering, developing or commercializing our drug candidates.
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Patent protection is afforded on a
country-by-country
basis. Some foreign jurisdictions do not protect intellectual
property rights to the same extent as in the United States. Many
companies have encountered significant difficulties in
protecting and defending intellectual property rights in foreign
jurisdictions. Some of our development efforts are performed in
countries outside of the United States through third party
contractors. We may not be able to effectively monitor and
assess intellectual property developed by these contractors. We
therefore may not be able to effectively protect this
intellectual property and could lose potentially valuable
intellectual property rights. In addition, the legal protection
afforded to inventors and owners of intellectual property in
countries outside of the United States may not be as protective
of intellectual property rights as in the United States.
Therefore, we may be unable to acquire and protect intellectual
property developed by these contractors to the same extent as if
these development activities were being conducted in the United
States. If we encounter difficulties in protecting our
intellectual property rights in foreign jurisdictions, our
business prospects could be substantially harmed.
We rely on intellectual property assignment agreements with our
corporate partners, employees, consultants, scientific advisors
and other collaborators to grant us ownership of new
intellectual property that is developed. These agreements may
not result in the effective assignment to us of that
intellectual property. As a result, our ownership of key
intellectual property could be compromised.
Changes in either the patent laws or their interpretation in the
United States or other countries may diminish the value of our
intellectual property or our ability to obtain patents. For
example, the U.S. Congress is currently considering bills
that could change U.S. law regarding, among other things,
post-grant review of issued patents and the calculation of
damages once patent infringement has been determined by a court
of law. If enacted into law, these provisions could severely
weaken patent protection in the United States.
If one or more products resulting from our drug candidates is
approved for sale by the FDA and we do not have adequate
intellectual property protection for those products, competitors
could duplicate them for approval and sale in the United States
without repeating the extensive testing required of us or our
partners to obtain FDA approval. Regardless of any patent
protection, under current law, an application for a generic
version of a new chemical entity cannot be approved until at
least five years after the FDA has approved the original
product. When that period expires, or if that period is altered,
the FDA could approve a generic version of our product
regardless of our patent protection. An applicant for a generic
version of our product may only be required to conduct a
relatively inexpensive study to show that its product is
bioequivalent to our product, and may not have to repeat the
lengthy and expensive clinical trials that we or our partners
conducted to demonstrate that the product is safe and effective.
In the absence of adequate patent protection for our products in
other countries, competitors may similarly be able to obtain
regulatory approval in those countries of generic versions of
our products.
We also rely on trade secrets to protect our technology,
particularly where we believe patent protection is not
appropriate or obtainable. However, trade secrets are often
difficult to protect, especially outside of the United States.
While we endeavor to use reasonable efforts to protect our trade
secrets, our or our partners employees, consultants,
contractors or scientific and other advisors may unintentionally
or willfully disclose our information to competitors. In
addition, confidentiality agreements, if any, executed by those
individuals may not be enforceable or provide meaningful
protection for our trade secrets or other proprietary
information in the event of unauthorized use or disclosure.
Pursuing a claim that a third party had illegally obtained and
was using our trade secrets would be expensive and
time-consuming, and the outcome would be unpredictable. Even if
we are able to maintain our trade secrets as confidential, if
our competitors independently develop information equivalent or
similar to our trade secrets, our business could be harmed.
29
If we are not able to defend the patent or trade secret
protection position of our technologies and drug candidates,
then we will not be able to exclude competitors from developing
or marketing competing drugs, and we may not generate enough
revenue from product sales to justify the cost of development of
our drugs or to achieve or maintain profitability.
If we
are sued for infringing third party intellectual property
rights, it will be costly and time-consuming, and an unfavorable
outcome would have a significant adverse effect on our
business.
Our ability to commercialize drugs depends on our ability to
use, manufacture and sell those drugs without infringing the
patents or other proprietary rights of third parties. Numerous
U.S. and foreign issued patents and pending patent
applications owned by third parties exist in the therapeutic
areas in which we are developing drug candidates and seeking new
potential drug candidates. In addition, because patent
applications can take several years to issue, there may be
currently pending applications, unknown to us, which could later
result in issued patents that our activities with our drug
candidates could infringe. There may also be existing patents,
unknown to us, that our activities with our drug candidates
could infringe.
Currently, we are aware of an issued U.S. patent and at
least one pending U.S. patent application assigned to
Curis, Inc., relating to certain compounds in the quinazolinone
class. Ispinesib falls into this class of compounds. The Curis
U.S. patent claims a method of inhibiting signaling by what
is called the hedgehog pathway using certain quinazolinone
compounds. Curis also has pending applications in Europe, Japan,
Australia and Canada with claims covering certain quinazolinone
compounds, compositions thereof and methods of their use. Two of
the Australian applications have been allowed and two of the
European applications have been granted. We have opposed the
granting of certain of these patents to Curis in Europe and in
Australia. Curis has withdrawn one of the Australian
applications. One of the European patents that we opposed was
recently revoked and is no longer valid in Europe. Curis has
appealed this decision.
Curis or a third party may assert that the manufacture, use,
importation or sale of ispinesib may infringe one or more of its
patents. We believe that we have valid defenses against the
issued U.S. patent owned by Curis if it were to be asserted
against us. However, we cannot guarantee that a court would find
these defenses valid or that any additional defenses would be
successful. We have not attempted to obtain a license to these
patents. If we decide to seek a license to these patents, we
cannot guarantee that such a license would be available on
acceptable terms, if at all.
Other future products of ours may be impacted by patents of
companies engaged in competitive programs with significantly
greater resources (such as Merck & Co., Inc., Merck
GmbH, Eli Lilly and Company, Bristol-Myers Squibb Company,
Novartis and AstraZeneca AB). Further development of these
products could be impacted by these patents and result in
significant legal fees.
If a third party claims that our actions infringe its patents or
other proprietary rights, we could face a number of issues that
could seriously harm our competitive position, including, but
not limited to:
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infringement and other intellectual property claims that, even
if meritless, can be costly and time-consuming to litigate,
delay the regulatory approval process and divert
managements attention from our core business operations;
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substantial damages for past infringement which we may have to
pay if a court determines that our drugs or technologies
infringe a third partys patent or other proprietary rights;
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a court prohibiting us from selling or licensing our drugs or
technologies unless the holder licenses the patent or other
proprietary rights to us, which it is not required to
do; and
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if a license is available from a holder, we may have to pay
substantial royalties or grant cross-licenses to our patents or
other proprietary rights.
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If any of these events occur, it could significantly harm our
business and negatively affect our stock price.
30
We may
undertake infringement or other legal proceedings against third
parties, causing us to spend substantial resources on litigation
and exposing our own intellectual property portfolio to
challenge.
Third parties may infringe our patents. To prevent infringement
or unauthorized use, we may need to file infringement suits,
which are expensive and time-consuming. In an infringement
proceeding, a court may decide that one or more of our patents
is invalid, unenforceable, or both. In this case, third parties
may be able to use our technology without paying licensing fees
or royalties. Even if the validity of our patents is upheld, a
court may refuse to stop the other party from using the
technology at issue on the ground that the other partys
activities are not covered by our patents. Policing unauthorized
use of our intellectual property is difficult, and we may not be
able to prevent misappropriation of our proprietary rights,
particularly in countries where the laws may not protect such
rights as fully as in the United States. In addition, third
parties may affirmatively challenge our rights to, or the scope
or validity of, our patent rights.
We may
become involved in disputes with our strategic partners over
intellectual property ownership, and publications by our
research collaborators and clinical investigators could impair
our ability to obtain patent protection or protect our
proprietary information, either of which would have a
significant impact on our business.
Inventions discovered under our current or future strategic
alliance agreements may become jointly owned by our strategic
partners and us in some cases, and the exclusive property of one
of us in other cases. Under some circumstances, it may be
difficult to determine who owns a particular invention or
whether it is jointly owned, and disputes could arise regarding
ownership or use of those inventions. These disputes could be
costly and time-consuming, and an unfavorable outcome could have
a significant adverse effect on our business if we were not able
to protect or license rights to these inventions. In addition,
our research collaborators and clinical investigators generally
have contractual rights to publish data arising from their work.
Publications by our research collaborators and clinical
investigators relating to our research and development programs,
either with or without our consent, could benefit our current or
potential competitors and may impair our ability to obtain
patent protection or protect our proprietary information, which
could significantly harm our business.
We may
be subject to claims that we or our employees have wrongfully
used or disclosed trade secrets of their former
employers.
Many of our employees were previously employed at universities
or other biotechnology or pharmaceutical companies, including
our competitors or potential competitors. Although no claims
against us are currently pending, we may be subject to claims
that these employees or we have inadvertently or otherwise used
or disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend
against these claims. If we fail in defending these claims, in
addition to paying monetary damages, we may lose valuable
intellectual property rights or personnel. A loss of key
research personnel or their work product could hamper or prevent
our ability to develop and commercialize certain potential
drugs, which could significantly harm our business. Even if we
are successful in defending against these claims, litigation
could result in substantial costs and distract management.
Our
competitors may develop drugs that are less expensive, safer or
more effective than ours, which may diminish or eliminate the
commercial success of any drugs that we may
commercialize.
We compete with companies that have developed drugs or are
developing drug candidates for cardiovascular diseases, cancer
and other diseases for which our drug candidates may be useful
treatments. For example, if omecamtiv mecarbil is approved for
marketing by the FDA for heart failure, that drug candidate
would compete against other drugs used for the treatment of
heart failure. These include generic drugs, such as milrinone,
dobutamine or digoxin and newer marketed drugs such as
nesiritide. Omecamtiv mecarbil could also potentially compete
against other novel drug candidates in development, such as
bucindolol, which is being developed by ARCA biopharma, Inc.;
relaxin, which is being developed by Novartis; CD-NP, which is
being developed by Nile Therapeutics, Inc., and glial growth
factor (GGF-2) which is being developed by Acorda Therapeutics,
Inc. In addition, there are a number of medical devices being
developed for the potential treatment of heart failure.
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With respect to CK-2017357, CK-2066260 and other compounds that
may arise from our skeletal muscle contractility program,
potential competitors include Ligand Pharmaceuticals, Inc.,
which is developing LGD-4033, a selective androgen receptor
modulator, for muscle wasting; and GTx, Inc., which is
developing ostarine, a selective androgen receptor modulator,
for cancer cachexia. Acceleron Pharma, Inc. is conducting
clinical development with ACE-031, a myostatin inhibitor, and
related compounds to evaluate their ability to treat diseases
involving the loss of muscle mass, strength and function. We are
aware that other companies are developing potential new
therapies for ALS, such as Biogen Idec, Inc., Mitsubishi Tanabe
Pharma Corporation, Eisai Inc., Trophos SA, Isis
Pharmaceuticals, Inc. and Sangamo BioSciences, Inc. If
CK-2017357 or other of our skeletal muscle sarcomere activators
are approved for the treatment of claudication associated with
peripheral artery disease, they will compete with currently
approved therapies for the treatment of peripheral artery
disease. We are also aware that a number of companies are
developing potential new treatments for peripheral artery
disease or associated symptoms of claudication. If CK-2017357 or
other of our skeletal muscle sarcomere activators are approved
for the treatment of myasthenia gravis, they will compete with
currently approved therapies for the treatment of myasthenia
gravis, including but not limited to anticholinesterase agents,
such as pyridostigmine bromide and neostigmine bromide,
corticosteroids, such as prednisone, and immunomodulatory drugs,
such as azathiaprine and cyclosporine. We are also aware that a
number of companies are developing or commercializing in certain
markets potential new treatments for myasthenia gravis, such as
Benesis Corp. (GB-0998), Alexion Pharmaceuticals, Inc.
(eculizumab) and Astellas (tacrolimus).
If approved for marketing by the FDA, depending on the approved
clinical indication, our anti-cancer drug candidates ispinesib,
SB-743921 and GSK-923295 would compete against existing cancer
treatments such as paclitaxel, docetaxel, vincristine,
vinorelbine, navelbine, ixabepilone and potentially against
other novel anti-cancer drug candidates that are currently in
development. These include compounds that are reformulated
taxanes, other tubulin binding compounds or epothilones. We are
also aware that Merck & Co., Inc., Eli Lilly and
Company, Bristol-Myers Squibb Company, AstraZeneca AB, Array
Biopharma Inc., ArQule, Inc., Alnylam, Inc. and others are
conducting research and development focused on KSP and other
mitotic kinesins.
Our competitors may:
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develop drug candidates and market drugs that are less expensive
or more effective than our future drugs;
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commercialize competing drugs before we or our partners can
launch any drugs developed from our drug candidates;
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hold or obtain proprietary rights that could prevent us from
commercializing our products;
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initiate or withstand substantial price competition more
successfully than we can;
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more successfully recruit skilled scientific workers and
management from the limited pool of available talent;
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more effectively negotiate third-party licenses and strategic
alliances;
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take advantage of acquisition or other opportunities more
readily than we can;
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develop drug candidates and market drugs that increase the
levels of safety or efficacy that our drug candidates will need
to show in order to obtain regulatory approval; or
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introduce therapies or market drugs that render the market
opportunity for our potential drugs obsolete.
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We will compete for market share against large pharmaceutical
and biotechnology companies and smaller companies that are
collaborating with larger pharmaceutical companies, new
companies, academic institutions, government agencies and other
public and private research organizations. Many of these
competitors, either alone or together with their partners, may
develop new drug candidates that will compete with ours. These
competitors may, and in certain cases do, operate larger
research and development programs or have substantially greater
financial resources than we do. Our competitors may also have
significantly greater experience in:
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developing drug candidates;
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undertaking preclinical testing and clinical trials;
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building relationships with key customers and opinion-leading
physicians;
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obtaining and maintaining FDA and other regulatory approvals of
drug candidates;
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formulating and manufacturing drugs; and
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launching, marketing and selling drugs.
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If our competitors market drugs that are less expensive, safer
or more efficacious than our potential drugs, or that reach the
market sooner than our potential drugs, we may not achieve
commercial success. In addition, the life sciences industry is
characterized by rapid technological change. If we fail to stay
at the forefront of technological change, we may be unable to
compete effectively. Our competitors may render our technologies
obsolete by improving existing technological approaches or
developing new or different approaches, potentially eliminating
the advantages in our drug discovery process that we believe we
derive from our research approach and proprietary technologies.
Our
failure to attract and retain skilled personnel could impair our
drug development and commercialization activities.
Our business depends on the performance of our senior management
and key scientific and technical personnel. The loss of the
services of any member of our senior management or key
scientific or technical staff may significantly delay or prevent
the achievement of drug development and other business
objectives by diverting managements attention to
transition matters and identifying suitable replacements. We
also rely on consultants and advisors to assist us in
formulating our research and development strategy. All of our
consultants and advisors are either self-employed or employed by
other organizations, and they may have conflicts of interest or
other commitments, such as consulting or advisory contracts with
other organizations, that may affect their ability to contribute
to us. In addition, if and as our business grows, we will need
to recruit additional executive management and scientific and
technical personnel. There is currently intense competition for
skilled executives and employees with relevant scientific and
technical expertise, and this competition is likely to continue.
Our inability to attract and retain sufficient scientific,
technical and managerial personnel could limit or delay our
product development activities, which would adversely affect the
development of our drug candidates and commercialization of our
potential drugs and growth of our business.
Any
future workforce and expense reductions may have an adverse
impact on our internal programs and our ability to hire and
retain skilled personnel.
In light of our continued need for funding and cost control, we
may be required to implement future workforce and expense
reductions, which may negatively affect our productivity and
limit our research and development activities. For example, as
part of our strategic restructuring and workforce reduction in
2008, we discontinued our early research activities in oncology.
Our future success will depend in large part upon our ability to
attract and retain highly skilled personnel. We may have
difficulty retaining and attracting such personnel as a result
of a perceived risk of future workforce reductions. In addition,
the implementation of workforce or expense reduction programs
may divert the efforts of our management team and other key
employees, which could adversely affect our business.
We may
expand our development and clinical research capabilities and,
as a result, we may encounter difficulties in managing our
growth, which could disrupt our operations.
We may have growth in our expenditures, the number of our
employees and the scope of our operations, in particular with
respect to those drug candidates that we elect to develop or
commercialize independently or together with a partner. To
manage our anticipated future growth, we must continue to
implement and improve our managerial, operational and financial
systems, expand our facilities and continue to recruit and train
additional qualified personnel. Due to our limited resources, we
may not be able to effectively manage the expansion of our
operations or recruit and train additional qualified personnel.
The physical expansion of our operations may lead to significant
costs and may divert our management and business development
resources. Any inability to manage growth could delay the
execution of our business plans or disrupt our operations.
33
We
currently have no sales or marketing staff and, if we are unable
to enter into or maintain strategic alliances with marketing
partners or to develop our own sales and marketing capabilities,
we may not be successful in commercializing our potential
drugs.
We currently have no sales, marketing or distribution
capabilities. We plan to commercialize drugs that can be
effectively marketed and sold in concentrated markets that do
not require a large sales force to be competitive. To achieve
this goal, we will need to establish our own specialized sales
force and marketing organization with technical expertise and
supporting distribution capabilities. Developing such an
organization is expensive and time-consuming and could delay a
product launch. In addition, we may not be able to develop this
capacity efficiently, cost-effectively or at all, which could
make us unable to commercialize our drugs. If we determine not
to market our drugs on our own, we will depend on strategic
alliances with third parties, such as Amgen, which have
established distribution systems and direct sales forces to
commercialize them. If we are unable to enter into such
arrangements on acceptable terms, we may not be able to
successfully commercialize these drugs. To the extent that we
are not successful in commercializing any drugs ourselves or
through a strategic alliance, our product revenues and business
will suffer and our stock price would decrease.
Risks
Related To Our Industry
The
regulatory approval process is expensive, time-consuming and
uncertain and may prevent our partners or us from obtaining
approvals to commercialize some or all of our drug
candidates.
The research, testing, manufacturing, selling and marketing of
drugs are subject to extensive regulation by the FDA and other
regulatory authorities in the United States and other countries,
and regulations differ from country to country. Neither we nor
our partners are permitted to market our potential drugs in the
United States until we receive approval of a new drug
application (NDA) from the FDA. Neither we nor our
partners have received marketing approval for any of
Cytokinetics drug candidates.
Obtaining NDA approval is a lengthy, expensive and uncertain
process. In addition, failure to comply with FDA and other
applicable foreign and U.S. regulatory requirements may
subject us to administrative or judicially imposed sanctions.
These include warning letters, civil and criminal penalties,
injunctions, product seizure or detention, product recalls,
total or partial suspension of production, and refusal to
approve pending NDAs or supplements to approved NDAs.
Regulatory approval of an NDA or NDA supplement is never
guaranteed, and the approval process typically takes several
years and is extremely expensive. The FDA and foreign regulatory
agencies also have substantial discretion in the drug approval
process. Despite the time and efforts exerted, failure can occur
at any stage, and we could encounter problems that cause us to
abandon clinical trials or to repeat or perform additional
preclinical testing and clinical trials. The number and focus of
preclinical studies and clinical trials that will be required
for approval by the FDA and foreign regulatory agencies varies
depending on the drug candidate, the disease or condition that
the drug candidate is designed to address, and the regulations
applicable to any particular drug candidate. In addition, the
FDA may require that a proposed Risk Evaluation and Mitigation
Strategy, also known as a REMS, be submitted as part of an NDA
if the FDA determines that it is necessary to ensure that the
benefits of the drug outweigh its risks. The FDA and foreign
regulatory agencies can delay, limit or deny approval of a drug
candidate for many reasons, including, but not limited to:
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they might determine that a drug candidate is not safe or
effective;
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they might not find the data from preclinical testing and
clinical trials sufficient and could request that additional
trials be performed;
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they might not approve our, our partners or the contract
manufacturers processes or facilities; or
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they might change their approval policies or adopt new
regulations.
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Even if we receive regulatory approval to manufacture and sell a
drug in a particular regulatory jurisdiction, other
jurisdictions regulatory authorities may not approve that
drug for manufacture and sale. If we or our partners fail to
receive and maintain regulatory approval for the sale of any
drugs resulting from our drug candidates, it would significantly
harm our business and negatively affect our stock price.
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If we
or our partners receive regulatory approval for our drug
candidates, we or they will be subject to ongoing obligations to
and continued regulatory review by the FDA and foreign
regulatory agencies, and may be subject to additional
post-marketing obligations, all of which may result in
significant expense and limit commercialization of our potential
drugs.
Any regulatory approvals that we or our partners receive for our
drug candidates may be subject to limitations on the indicated
uses for which the drug may be marketed or require potentially
costly post-marketing
follow-up
studies or compliance with a REMS. In addition, if the FDA or
foreign regulatory agencies approves any of our drug candidates,
the labeling, packaging, adverse event reporting, storage,
advertising, promotion and record-keeping for the drug will be
subject to extensive regulatory requirements. The subsequent
discovery of previously unknown problems with the drug,
including adverse events of unanticipated severity or frequency,
or the discovery that adverse effects or toxicities observed in
preclinical research or clinical trials that were believed to be
minor actually constitute much more serious problems, may result
in restrictions on the marketing of the drug or withdrawal of
the drug from the market.
The FDA and foreign regulatory agencies may change their
policies and additional government regulations may be enacted
that could prevent or delay regulatory approval of our drug
candidates. We cannot predict the likelihood, nature or extent
of adverse government regulation that may arise from future
legislation or administrative action, either in the United
States or abroad. If we are not able to maintain regulatory
compliance, we might not be permitted to market our drugs and
our business would suffer.
If
physicians and patients do not accept our drugs, we may be
unable to generate significant revenue, if any.
Even if our drug candidates obtain regulatory approval, the
resulting drugs, if any, may not gain market acceptance among
physicians, healthcare payors, patients and the medical
community. Even if the clinical safety and efficacy of drugs
developed from our drug candidates are established for purposes
of approval, physicians may elect not to recommend these drugs
for a variety of reasons including, but not limited to:
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introduction of competitive drugs to the market;
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clinical safety and efficacy of alternative drugs or treatments;
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cost-effectiveness;
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availability of coverage and reimbursement from health
maintenance organizations and other third-party payors;
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convenience and ease of administration;
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prevalence and severity of adverse side effects;
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other potential disadvantages relative to alternative treatment
methods; or
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insufficient marketing and distribution support.
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If our drugs fail to achieve market acceptance, we may not be
able to generate significant revenue and our business would
suffer.
The
coverage and reimbursement status of newly approved drugs is
uncertain and failure to obtain adequate coverage and
reimbursement could limit our ability to market any drugs we may
develop and decrease our ability to generate
revenue.
Even if one or more of our drug candidates is approved for sale,
the commercial success of our drugs in both domestic and
international markets will be substantially dependent on whether
third-party coverage and reimbursement is available for our
drugs by the medical profession for use by their patients, which
is highly uncertain. Medicare, Medicaid, health maintenance
organizations and other third-party payors are increasingly
attempting to contain healthcare costs by limiting both coverage
and the level of reimbursement of new drugs. As a result, they
may not cover or provide adequate payment for our drugs. They
may not view our drugs as cost-effective and
35
reimbursement may not be available to consumers or may be
insufficient to allow our drugs to be marketed on a competitive
basis. If we are unable to obtain adequate coverage and
reimbursement for our drugs, our ability to generate revenue
will be adversely affected. Likewise, current and future
legislative or regulatory efforts to control or reduce
healthcare costs or reform government healthcare programs, such
as the Patient Protection Affordable Care Act and the Health
Care and Education Reconciliation Act of 2010, could result in
lower prices or rejection of coverage and reimbursement for our
potential drugs. Changes in coverage and reimbursement policies
or healthcare cost containment initiatives that limit or
restrict reimbursement for any of our drug candidates that are
approved could cause our potential future revenues to decline.
We may
be subject to costly product liability or other liability claims
and may not be able to obtain adequate insurance.
The use of our drug candidates in clinical trials may result in
adverse effects. We cannot predict all the possible harms or
adverse effects that may result from our clinical trials. We
currently maintain limited product liability insurance. We may
not have sufficient resources to pay for any liabilities
resulting from a personal injury or other claim excluded from,
or beyond the limit of, our insurance coverage. Our insurance
does not cover third parties negligence or malpractice,
and our clinical investigators and sites may have inadequate
insurance or none at all. In addition, in order to conduct
clinical trials or otherwise carry out our business, we may have
to contractually assume liabilities for which we may not be
insured. If we are unable to look to our own or a third
partys insurance to pay claims against us, we may have to
pay any arising costs and damages ourselves, which may be
substantial.
In addition, if we commercially launch drugs based on our drug
candidates, we will face even greater exposure to product
liability claims. This risk exists even with respect to those
drugs that are approved for commercial sale by the FDA and
foreign regulatory agencies and manufactured in licensed and
regulated facilities. We intend to secure additional limited
product liability insurance coverage for drugs that we
commercialize, but may not be able to obtain such insurance on
acceptable terms with adequate coverage, or at reasonable costs.
Even if we are ultimately successful in product liability
litigation, the litigation would consume substantial amounts of
our financial and managerial resources and may create adverse
publicity, all of which would impair our ability to generate
sales of the affected product and our other potential drugs.
Moreover, product recalls may be issued at our discretion or at
the direction of the FDA and foreign regulatory agencies, other
governmental agencies or other companies having regulatory
control for drug sales. Product recalls are generally expensive
and often have an adverse effect on the reputation of the drugs
being recalled and of the drugs developer or manufacturer.
We may be required to indemnify third parties against damages
and other liabilities arising out of our development,
commercialization and other business activities, which could be
costly and time-consuming and distract management. If third
parties that have agreed to indemnify us against damages and
other liabilities arising from their activities do not fulfill
their obligations, then we may be held responsible for those
damages and other liabilities.
To the
extent we elect to fund the development of a drug candidate or
the commercialization of a drug at our expense, we will need
substantial additional funding.
The discovery, development and commercialization of new drugs is
costly. As a result, to the extent we elect to fund the
development of a drug candidate or the commercialization of a
drug, we will need to raise additional capital to:
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expand our research and development capabilities;
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fund clinical trials and seek regulatory approvals;
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build or access manufacturing and commercialization capabilities;
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implement additional internal systems and infrastructure;
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maintain, defend and expand the scope of our intellectual
property; and
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hire and support additional management and scientific personnel.
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Our future funding requirements will depend on many factors,
including, but not limited to:
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the rate of progress and costs of our clinical trials and other
research and development activities;
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the costs and timing of seeking and obtaining regulatory
approvals;
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the costs associated with establishing manufacturing and
commercialization capabilities;
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the costs of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
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the costs of acquiring or investing in businesses, products and
technologies;
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the effect of competing technological and market
developments; and
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the status of, payment and other terms, and timing of any
strategic alliance, licensing or other arrangements that we have
entered into or may establish.
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Until we can generate a sufficient amount of product revenue to
finance our cash requirements, which we may never do, we expect
to continue to finance our future cash needs primarily through
strategic alliances, public or private equity offerings and debt
financings. We cannot be certain that additional funding will be
available on acceptable terms, or at all. If we are not able to
secure additional funding when needed, we may have to delay,
reduce the scope of or eliminate one or more of our clinical
trials or research and development programs or future
commercialization initiatives.
Responding
to any claims relating to improper handling, storage or disposal
of the hazardous chemicals and radioactive and biological
materials we use in our business could be time-consuming and
costly.
Our research and development processes involve the controlled
use of hazardous materials, including chemicals and radioactive
and biological materials. Our operations produce hazardous waste
products. We cannot eliminate the risk of accidental
contamination or discharge and any resultant injury from those
materials. Federal, state and local laws and regulations govern
the use, manufacture, storage, handling and disposal of
hazardous materials. We may be sued for any injury or
contamination that results from our or third parties use
of these materials. Compliance with environmental laws and
regulations is expensive, and current or future environmental
regulations may impair our research, development and production
activities.
Our
facilities in California are located near an earthquake fault,
and an earthquake or other types of natural disasters,
catastrophic events or resource shortages could disrupt our
operations and adversely affect our results.
All of our facilities and our important documents and records,
such as hard copies of our laboratory books and records for our
drug candidates and compounds and our electronic business
records, are located in our corporate headquarters at a single
location in South San Francisco, California near active
earthquake zones. If a natural disaster, such as an earthquake
or flood, a catastrophic event such as a disease pandemic or
terrorist attack, or a localized extended outage of critical
utilities or transportation systems occurs, we could experience
a significant business interruption. Our partners and other
third parties on which we rely may also be subject to business
interruptions from such events. In addition, California from
time to time has experienced shortages of water, electric power
and natural gas. Future shortages and conservation measures
could disrupt our operations and cause expense, thus adversely
affecting our business and financial results.
Risks
Related To an Investment in Our Securities
We
expect that our stock price will fluctuate significantly, and
you may not be able to resell your shares at or at or above your
investment price.
The stock market, particularly in recent years, has experienced
significant volatility, particularly with respect to
pharmaceutical, biotechnology and other life sciences company
stocks, which often does not relate to the
37
operating performance of the companies represented by the stock.
Factors that could cause volatility in the market price of our
common stock include, but are not limited to:
|
|
|
|
|
announcements concerning any of the clinical trials for our
compounds, such as omecamtiv mecarbil for heart failure and
CK-2017357 and CK-2066260 for the potential treatment of
diseases associated with aging, muscle wasting and neuromuscular
dysfunction (including, but not limited to, the timing of
initiation or completion of such trials and the results of such
trials, and delays or discontinuations of such trials, including
delays resulting from slower than expected or suspended patient
enrollment or discontinuations resulting from a failure to meet
pre-defined clinical end-points);
|
|
|
|
announcements concerning our strategic alliance with Amgen or
future strategic alliances;
|
|
|
|
failure or delays in entering additional drug candidates into
clinical trials;
|
|
|
|
failure or discontinuation of any of our research programs;
|
|
|
|
issuance of new or changed securities analysts reports or
recommendations;
|
|
|
|
failure or delay in establishing new strategic alliances, or the
terms of those alliances;
|
|
|
|
market conditions in the pharmaceutical, biotechnology and other
healthcare-related sectors;
|
|
|
|
actual or anticipated fluctuations in our quarterly financial
and operating results;
|
|
|
|
developments or disputes concerning our intellectual property or
other proprietary rights;
|
|
|
|
introduction of technological innovations or new products by us
or our competitors;
|
|
|
|
issues in manufacturing our drug candidates or drugs;
|
|
|
|
market acceptance of our drugs;
|
|
|
|
third-party healthcare coverage and reimbursement policies;
|
|
|
|
FDA or other U.S. or foreign regulatory actions affecting
us or our industry;
|
|
|
|
litigation or public concern about the safety of our drug
candidates or drugs;
|
|
|
|
additions or departures of key personnel;
|
|
|
|
substantial sales of our common stock by our existing
shareholders, whether or not related to our performance;
|
|
|
|
volatility in the stock prices of other companies in our
industry or in the stock market generally.
|
These and other external factors may cause the market price and
demand for our common stock to fluctuate substantially, which
may limit or prevent investors from readily selling their shares
of common stock and may otherwise negatively affect the
liquidity of our common stock. In addition, when the market
price of a stock has been volatile, holders of that stock have
instituted securities class action litigation against the
company that issued the stock. If any of our stockholders
brought a lawsuit against us, we could incur substantial costs
defending the lawsuit. Such a lawsuit could also divert our
managements time and attention.
If the
ownership of our common stock continues to be highly
concentrated, it may prevent you and other stockholders from
influencing significant corporate decisions and may result in
conflicts of interest that could cause our stock price to
decline.
As of February 28, 2011, our executive officers, directors
and their affiliates beneficially owned or controlled
approximately 13.6% of the outstanding shares of our common
stock (after giving effect to the exercise of all outstanding
vested and unvested options and warrants). Accordingly, these
executive officers, directors and their affiliates, acting as a
group, will have substantial influence over the outcome of
corporate actions requiring stockholder approval, including the
election of directors, any merger, consolidation or sale of all
or substantially all of our assets or any other significant
corporate transactions. These stockholders may also delay or
prevent a change of control of us, even if such a change of
control would benefit our other stockholders. The significant
concentration
38
of stock ownership may adversely affect the trading price of our
common stock due to investors perception that conflicts of
interest may exist or arise.
Volatility
in the stock prices of other companies may contribute to
volatility in our stock price.
The stock market in general, and the NASDAQ Global Market
(NASDAQ) and the market for technology companies in
particular, have experienced significant price and volume
fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. Further, there
has been particular volatility in the market prices of
securities of early stage and development stage life sciences
companies. These broad market and industry factors may seriously
harm the market price of our common stock, regardless of our
operating performance. In the past, following periods of
volatility in the market price of a companys securities,
securities class action litigation has often been instituted. A
securities class action suit against us could result in
substantial costs, potential liabilities and the diversion of
managements attention and resources, and could harm our
reputation and business.
Our
common stock is thinly traded and there may not be an active,
liquid trading market for our common stock.
There is no guarantee that an active trading market for our
common stock will be maintained on NASDAQ, or that the volume of
trading will be sufficient to allow for timely trades. Investors
may not be able to sell their shares quickly or at the latest
market price if trading in our stock is not active or if trading
volume is limited. In addition, if trading volume in our common
stock is limited, trades of relatively small numbers of shares
may have a disproportionate effect on the market price of our
common stock.
Evolving
regulation of corporate governance and public disclosure may
result in additional expenses, use of resources and continuing
uncertainty.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley
Act of 2002, the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and new Securities and Exchange
Commission (SEC) regulations and NASDAQ Stock Market
LLC rules are creating uncertainty for public companies. We are
presently evaluating and monitoring developments with respect to
new and proposed rules and cannot predict or estimate the amount
of the additional costs we may incur or the timing of these
costs. For example, compliance with the internal control
requirements of Section 404 of the Sarbanes-Oxley Act has
to date required the commitment of significant resources to
document and test the adequacy of our internal control over
financial reporting. We can provide no assurance as to
conclusions of management or by our independent registered
public accounting firm with respect to the effectiveness of our
internal control over financial reporting in the future. In
addition, the SEC has adopted regulations that will require us
to file corporate financial statement information in a new
interactive data format known as XBRL beginning in 2011. We may
incur significant costs and need to invest considerable
resources to implement and to remain in compliance with these
new requirements.
These new or changed laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may
evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We
intend to maintain high standards of corporate governance and
public disclosure. As a result, we intend to invest the
resources necessary to comply with evolving laws, regulations
and standards, and this investment may result in increased
general and administrative expenses and a diversion of
management time and attention from revenue-generating activities
to compliance activities. If our efforts to comply with new or
changed laws, regulations and standards differ from the
activities intended by regulatory or governing bodies, due to
ambiguities related to practice or otherwise, regulatory
authorities may initiate legal proceedings against us, which
could be costly and time-consuming, and our reputation and
business may be harmed.
39
We
have never paid dividends on our capital stock, and we do not
anticipate paying any cash dividends in the foreseeable
future.
We have paid no cash dividends on any of our classes of capital
stock to date and we currently intend to retain our future
earnings, if any, to fund the development and growth of our
businesses. In addition, the terms of existing or any future
debts may preclude us from paying these dividends.
Risks
Related To Our Financing Vehicles and Investments
Our
committed equity financing facility with Kingsbridge may not be
available to us if we elect to make a draw down, may require us
to make additional blackout or other payments to
Kingsbridge, and may result in dilution to our
stockholders.
In October 2007, we entered into a committed equity financing
facility with Kingsbridge, which we amended in October 2010.
This committed equity financing facility entitles us to sell and
obligates Kingsbridge to purchase, from time to time through
March 31, 2011, shares of our common stock for cash
consideration up to an aggregate of $75.0 million, subject
to certain conditions and restrictions. To date, we have
received $20.9 million in gross proceeds under this
committed equity financing facility. Under this committed equity
financing facility, we have sold 8,936,547 shares and may
sell up to a maximum total of 9,779,411 shares. This is the
maximum number of shares we may sell to Kingsbridge without our
stockholders approval under the rules of the NASDAQ Stock
Market LLC. This limitation may further limit the amount of
proceeds we are able to obtain from this committed equity
financing facility.
Kingsbridge will not be obligated to purchase shares under this
committed equity financing facility unless certain conditions
are met, which include a minimum volume-weighted average price
of $2.00 for our common stock. As of the close of market on
March 9, 2011, the price for our common stock was $1.50. In
addition Kingsbridges obligations to purchase shares under
this facility are contingent upon the accuracy of our
representations and warranties made to Kingsbridge; our
compliance with laws; the effectiveness of the registration
statement registering for resale the shares of common stock to
be issued in connection with this committed equity financing
facility; and the continued listing of our stock on NASDAQ. In
addition, Kingsbridge may terminate this committed equity
financing facility if it determines that a material adverse
event has occurred affecting our business, operations,
properties or financial condition and if such condition
continues for a period of 10 days from the date Kingsbridge
provides us notice of such material adverse event. If we are
unable to access funds through this committed equity financing
facility, we may be unable to access additional capital on
reasonable terms or at all.
We are entitled, in certain circumstances, to deliver a blackout
notice to Kingsbridge to suspend the use of the resale
registration statement and prohibit Kingsbridge from selling
shares under the resale registration statement. If we deliver a
blackout notice in the 15 trading days following the settlement
of a stock sale, or if the registration statement is not
effective in circumstances not permitted by the agreement, then
we must make a payment to Kingsbridge, or issue Kingsbridge
additional shares in lieu of this payment. This payment or
issuance of shares is calculated based on the number of shares
actually held by Kingsbridge pursuant to the most recent sale of
stock under the committed equity financing facility and the
change in the market price of our common stock during the period
in which the use of the registration statement is suspended. If
the trading price of our common stock declines during a
suspension of the registration statement, the blackout payment
or issuance of shares could be significant.
When we choose to sell shares to Kingsbridge under this
committed equity financing facility, or issue shares in lieu of
a blackout payment, it will have a dilutive effect on our
current stockholders holdings, and may result in downward
pressure on the price of our common stock. The share price for
sales of stock to Kingsbridge under this committed equity
financing facility is discounted by up to 10% from the
volume-weighted average price of our common stock. If we sell
stock under this committed equity financing facility when our
share price is decreasing, we will need to issue more shares to
raise the same amount of cash than if our stock price was
higher. Issuances of stock in the face of a declining share
price will have an even greater dilutive effect than if our
share price were stable or increasing, and may further decrease
our share price.
40
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Our facilities consist of approximately 81,587 square feet
of research and office space. We lease 50,195 square feet
located at 280 East Grand Avenue, and 31,392 square feet at
256 East Grand Avenue, in South San Francisco, California
until 2018 with an option to renew the lease for an additional
three years. We believe that these facilities are suitable and
adequate for our current needs.
|
|
Item 3.
|
Legal
Proceedings
|
We are not a party to any material legal proceedings.
41
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our common stock is quoted on the NASDAQ Global Market under the
symbol CYTK, and has been quoted on this market
since our initial public offering on April 29, 2004. Prior
to such date, there was no public market for our common stock.
The following table sets forth the high and low closing sales
price per share of our common stock as reported on the NASDAQ
Global Market for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Closing Sale Price
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal 2009:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
2.87
|
|
|
$
|
1.45
|
|
Second Quarter
|
|
$
|
3.08
|
|
|
$
|
1.64
|
|
Third Quarter
|
|
$
|
5.30
|
|
|
$
|
2.71
|
|
Fourth Quarter
|
|
$
|
5.24
|
|
|
$
|
2.59
|
|
Fiscal 2010:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.54
|
|
|
$
|
2.91
|
|
Second Quarter
|
|
$
|
3.56
|
|
|
$
|
2.37
|
|
Third Quarter
|
|
$
|
2.80
|
|
|
$
|
2.08
|
|
Fourth Quarter
|
|
$
|
2.93
|
|
|
$
|
2.05
|
|
On February 28, 2011, the last reported sale price for our
common stock on the NASDAQ Global Market was $1.57 per share. We
currently expect to retain future earnings, if any, for use in
the operation and expansion of our business and have not paid
and do not in the foreseeable future anticipate paying any cash
dividends. As of February 28, 2011, there were 111 holders
of record of our common stock.
42
Equity
Compensation Information
Information regarding our equity compensation plans and the
securities authorized for issuance thereunder is set forth in
Part III, Item 12.
Comparison of Historical Cumulative Total Return Among
Cytokinetics, Incorporated, the NASDAQ Stock Market (U.S.) Index
and the NASDAQ Biotechnology Index(*)
|
|
|
(*) |
|
The above graph shows the cumulative total stockholder return of
an investment of $100 in cash from December 31, 2005
through December 31, 2010 for: (i) our common stock;
(ii) the NASDAQ Stock Market (U.S.) Index; and
(iii) the NASDAQ Biotechnology Index. All values assume
reinvestment of the full amount of all dividends. Stockholder
returns over the indicated period should not be considered
indicative of future stockholder returns. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
|
|
12/31/09
|
|
|
12/31/10
|
|
|
Cytokinetics, Incorporated
|
|
$
|
100.00
|
|
|
$
|
114.37
|
|
|
$
|
72.32
|
|
|
$
|
43.58
|
|
|
$
|
44.50
|
|
|
$
|
31.96
|
|
NASDAQ Stock Market (U.S.) Index
|
|
$
|
100.00
|
|
|
$
|
110.28
|
|
|
$
|
121.92
|
|
|
$
|
73.12
|
|
|
$
|
106.25
|
|
|
$
|
125.40
|
|
NASDAQ Biotechnology Index
|
|
$
|
100.00
|
|
|
$
|
101.02
|
|
|
$
|
105.65
|
|
|
$
|
92.31
|
|
|
$
|
106.74
|
|
|
$
|
122.76
|
|
The information contained under this caption Comparison of
Historical Cumulative Total Return Among Cytokinetics,
Incorporated, the NASDAQ Stock Market (U.S.) Index and the
NASDAQ Biotechnology Index shall not be deemed to be
soliciting material or to be filed with the Securities and
Exchange Commission (SEC), nor shall such
information be incorporated by reference into any future filing
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate it by reference into such filing.
Sales of
Unregistered Securities
None.
43
|
|
Item 6.
|
Selected
Financial Data
|
The following selected financial data should be read in
conjunction with Item 7, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and Item 8, Financial
Statements and Supplemental Data of this report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development revenues from related parties(2)
|
|
$
|
1,487
|
|
|
$
|
7,171
|
|
|
$
|
186
|
|
|
$
|
1,388
|
|
|
$
|
1,622
|
|
Research and development, grant and other revenues
|
|
|
1,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
License revenues from related parties(2)
|
|
|
|
|
|
|
74,367
|
|
|
|
12,234
|
|
|
|
12,234
|
|
|
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,577
|
|
|
|
81,538
|
|
|
|
12,420
|
|
|
|
13,622
|
|
|
|
3,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
38,013
|
|
|
|
39,840
|
|
|
|
53,950
|
|
|
|
53,388
|
|
|
|
49,225
|
|
General and administrative
|
|
|
14,199
|
|
|
|
15,626
|
|
|
|
15,076
|
|
|
|
16,721
|
|
|
|
15,240
|
|
Restructuring charges (reversals)
|
|
|
|
|
|
|
(23
|
)
|
|
|
2,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
52,212
|
|
|
|
55,443
|
|
|
|
71,499
|
|
|
|
70,109
|
|
|
|
64,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(49,635
|
)
|
|
|
26,095
|
|
|
|
(59,079
|
)
|
|
|
(56,487
|
)
|
|
|
(61,338
|
)
|
Interest and other, net(3)
|
|
|
172
|
|
|
|
(1,401
|
)
|
|
|
2,705
|
|
|
|
7,593
|
|
|
|
4,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(49,463
|
)
|
|
|
24,694
|
|
|
|
(56,374
|
)
|
|
|
(48,894
|
)
|
|
|
(57,115
|
)
|
Income tax provision (benefit)
|
|
|
(176
|
)
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(49,287
|
)
|
|
$
|
24,544
|
|
|
$
|
(56,374
|
)
|
|
$
|
(48,894
|
)
|
|
$
|
(57,115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.77
|
)
|
|
$
|
0.43
|
|
|
$
|
(1.14
|
)
|
|
$
|
(1.03
|
)
|
|
$
|
(1.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.77
|
)
|
|
$
|
0.42
|
|
|
$
|
(1.14
|
)
|
|
$
|
(1.03
|
)
|
|
$
|
(1.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net income (loss) per
common share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
64,165
|
|
|
|
57,390
|
|
|
|
49,392
|
|
|
|
47,590
|
|
|
|
36,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
64,165
|
|
|
|
57,961
|
|
|
|
49,392
|
|
|
|
47,590
|
|
|
|
36,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, investments, ARS and investment put
option related to ARS
|
|
$
|
72,845
|
|
|
$
|
114,727
|
|
|
$
|
76,892
|
|
|
$
|
139,764
|
|
|
$
|
109,542
|
|
Restricted cash
|
|
|
788
|
|
|
|
1,674
|
|
|
|
2,750
|
|
|
|
5,167
|
|
|
|
6,034
|
|
Working capital
|
|
|
66,174
|
|
|
|
96,735
|
|
|
|
36,033
|
|
|
|
95,568
|
|
|
|
127,228
|
|
Total assets
|
|
|
77,992
|
|
|
|
122,599
|
|
|
|
87,454
|
|
|
|
155,370
|
|
|
|
169,516
|
|
Long-term portion of equipment financing lines
|
|
|
152
|
|
|
|
985
|
|
|
|
2,615
|
|
|
|
4,639
|
|
|
|
7,144
|
|
Deficit accumulated during the development stage
|
|
|
(360,650
|
)
|
|
|
(311,363
|
)
|
|
|
(335,907
|
)
|
|
|
(279,533
|
)
|
|
|
(230,639
|
)
|
Total stockholders equity(1)
|
|
|
70,516
|
|
|
|
101,428
|
|
|
|
49,766
|
|
|
|
99,916
|
|
|
|
106,313
|
|
|
|
|
(1) |
|
In 2006, we sold 10,285,715 shares in two registered direct
offerings for net proceeds of approximately $66.9 million,
and sold 2,740,735 shares of common stock to Kingsbridge
Capital Limited (Kingsbridge) pursuant to the 2005
committed equity financing facility for net proceeds of
$17.0 million. In 2007, we sold 2,075,177 shares of
common stock to Kingsbridge pursuant to the 2005 committed
equity financing facility for net proceeds of $9.5 million.
In January 2007, we issued 3,484,806 shares of common stock
to Amgen for net proceeds of $32.9 million in connection
with a common stock purchase agreement with Amgen. In 2009, we
sold 3,596,728 shares of common stock to Kingsbridge
pursuant to the 2007 committed equity financing facility for net
proceeds of $6.9 million. In May 2009, we sold
7,106,600 shares of common stock in a registered direct
offering for net proceeds of approximately $12.9 million.
In 2010, we sold 5,339,819 shares of common stock to
Kingsbridge pursuant to the 2007 committed equity financing
facility for net proceeds of $14.0 million. See
Note 13 in the Notes to Financial Statements for further
details. |
|
(2) |
|
Revenues from related parties consisted of revenues recognized
under our research and development arrangements with related
parties, including Amgen and GSK. See Note 6 in the Notes
to Financial Statements for further details. |
|
(3) |
|
Interest and Other, net consisted of interest income/expense and
other income/expense. For the years ended December 31,
2010, 2009 and 2008, it also included unrealized gains (losses)
on our auction rate securities (ARS) and investment
put option related to the
Series C-2
ARS Rights issued to us by UBS AG. For the years ended
December 31, 2009, it also included warrant expense. See
Note 15 in the Notes to Financial Statements for further
details. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
This discussion and analysis should be read in conjunction with
our financial statements and accompanying notes included
elsewhere in this report. Operating results are not necessarily
indicative of results that may occur in future periods.
Overview
We are a clinical-stage biopharmaceutical company focused on the
discovery and development of novel small molecule therapeutics
that modulate muscle function for the potential treatment of
serious diseases and medical conditions. Our research and
development activities relating to the biology of muscle
function have evolved from our knowledge and expertise regarding
the cytoskeleton, a complex biological infrastructure that plays
a fundamental role within every human cell. Our current research
and development programs relating to the biology of muscle
function are directed to small molecule modulators of the
contractility of cardiac, skeletal and smooth muscle. We have,
and intend to continue, to leverage our experience in muscle
contractility in order to expand our
45
current pipeline into new therapeutic areas, and expect to
continue to be able to identify additional potential drug
candidates that may be suitable for clinical development.
Our cardiac muscle contractility program is focused on cardiac
muscle myosin, a motor protein that powers cardiac muscle
contraction. Our lead drug candidate from this program,
omecamtiv mecarbil (formerly known as CK-1827452), is a novel
cardiac muscle myosin activator. We have conducted a clinical
development program for omecamtiv mecarbil for the potential
treatment of heart failure, comprised of a series of Phase I and
Phase IIa clinical trials. In May 2009, Amgen acquired an
exclusive license to develop and commercialize omecamtiv
mecarbil worldwide, except Japan, subject to our development and
commercialization participation rights.
CK-2017357 is the lead drug candidate from our skeletal
sarcomere activator program. The skeletal muscle sarcomere is
the basic unit of skeletal muscle contraction. CK-2017357 is
currently the subject of a Phase IIa clinical trials program. We
believe CK-2017357 may be useful in treating diseases or medical
conditions associated with skeletal muscle weakness or wasting.
In March 2010, CK-2017357 received an orphan drug designation
from the U.S. Food and Drug Administration
(FDA) for the treatment of amyotrophic lateral
sclerosis (also known as ALS or Lou Gehrigs disease). We
are also advancing a second, structurally distinct, fast
skeletal muscle sarcomere activator, CK-2066260, in non-clinical
studies intended to enable the filing of an investigational new
drug application (IND) with the FDA in 2011. Both of
these compounds selectively activate the fast skeletal muscle
troponin complex, which is a set of regulatory proteins that
modulates the contractility of the fast skeletal muscle
sarcomere.
In our smooth muscle contractility program, we are conducting
non-clinical development of compounds that directly inhibit
smooth muscle myosin, the motor protein central to the
contraction of smooth muscle, causing the relaxation of
contracted smooth muscle. Compounds from this program may be
useful as potential treatments for diseases and conditions
associated with excessive smooth muscle contraction, such as
bronchoconstriction associated with asthma and chronic
obstructive pulmonary disease.
Earlier research activities at the company were directed to the
inhibition of mitotic kinesins, a family of cytoskeletal motor
proteins involved in the process of cell division, or mitosis.
This research produced three drug candidates that have
progressed into clinical testing for the potential treatment of
cancer: ispinesib, SB-743921 and GSK-923295. Effective February
2010, our strategic alliance with GlaxoSmithKline
(GSK) relating to our mitotic kinesin inhibitors
terminated by mutual agreement. We are currently evaluating
strategic alternatives for these drug candidates with third
parties.
Two of our drug candidates directed to muscle contractility have
now demonstrated pharmacodynamic activity in patients: omecamtiv
mecarbil in patients with heart failure and CK-2017357 in
patients with ALS. Our potential drug candidate CK-2066260 has
demonstrated pharmacological activity in non-clinical studies.
In 2011, we expect to focus on translating the pharmacodynamic
activity observed in these compounds into potentially meaningful
clinical benefits for these patients.
Muscle
Contractility Programs
Cardiac
Muscle Contractility
Our lead drug candidate from this program is omecamtiv mecarbil,
a novel cardiac muscle myosin activator. In December 2006, we
entered into a collaboration and option agreement with Amgen to
discover, develop and commercialize novel small molecule
therapeutics that activate cardiac muscle contractility for
potential applications in the treatment of heart failure,
including omecamtiv mecarbil. In May 2009, Amgen exercised its
option under this agreement to obtain an exclusive license
worldwide, except Japan, to develop and commercialize omecamtiv
mecarbil and other drug candidates arising from the
collaboration, and subsequently paid us an option exercise fee
of $50.0 million. As a result, Amgen is now responsible for
the development and commercialization of omecamtiv mecarbil and
related compounds, at its expense worldwide, except Japan,
subject to our development and commercialization participation
rights. Under the agreement, Amgen will reimburse us for agreed
research and development activities we perform. The agreement
provides for potential pre-commercialization and
commercialization milestone payments of up to
$600.0 million in the aggregate on omecamtiv mecarbil and
other potential products arising from research under the
collaboration, and royalties that escalate based on increasing
levels of
46
annual net sales of products commercialized under the agreement.
The agreement also provides for us to receive increased
royalties by co-funding Phase III development costs of drug
candidates under the collaboration. If we elect to co-fund such
costs, we would be entitled to co-promote omecamtiv mecarbil in
North America and participate in agreed commercialization
activities in institutional care settings, at Amgens
expense.
We expect omecamtiv mecarbil to be developed as a potential
treatment across the continuum of care in heart failure both as
an intravenous formulation for use in the hospital setting and
as an oral formulation for use in the outpatient setting.
In September 2010, Cytokinetics and Amgen announced plans to
initiate a Phase IIb clinical trial of an intravenous
formulation of omecamtiv mecarbil in hospitalized patients with
acutely decompensated heart failure prior to initiating further
clinical trials of oral formulations of omecamtiv mecarbil. We
anticipate that, in the first half of 2011, Amgen will initiate
this trial, which will be conducted by Amgen in collaboration
with Cytokinetics.
We and Amgen are discussing the development strategy for oral
formulations of omecamtiv mecarbil. We anticipate that these
plans may include studies designed to investigate the safety,
tolerability and pharmacokinetics of multiple oral formulations
of omecamtiv mecarbil. We have agreed with Amgen upon a research
plan focused on joint research activities in 2011 that will be
directed to potential next-generation compounds in our cardiac
muscle contractility program.
The clinical trials program for omecamtiv mecarbil may proceed
for several years, and we will not be in a position to generate
any revenues or material net cash flows from sales of this drug
candidate until the program is successfully completed,
regulatory approval is achieved, and the drug is commercialized.
Omecamtiv mecarbil is at too early a stage of development for us
to predict if or when this may occur. We funded all research and
development costs associated with this program prior to
Amgens option exercise in May 2009. We recorded research
and development expenses for activities relating to our cardiac
muscle contractility program of approximately $1.6 million,
$9.9 million and $20.9 million in the years ended
December 31, 2010, 2009 and 2008, respectively. We
recognized research and development revenue from Amgen of
$1.5 million in 2010, consisting of reimbursements of
full-time employee equivalent (FTE) and other
expenses. We recognized research and development revenue from
Amgen of $7.1 million in the 2009, consisting of
$4.0 million for the transfer of our existing inventories
of omecamtiv mecarbil and related reference materials to Amgen
and $3.1 million for reimbursements of FTEs and other costs.
We anticipate that our expenditures relating to the research and
development of compounds in our cardiac muscle contractility
program will increase if we participate in the future
advancement of omecamtiv mecarbil through clinical development.
Our expenditures will also increase if Amgen terminates
development of omecamtiv mecarbil or related compounds and we
elect to develop them independently, or if we elect to co-fund
later-stage development of omecamtiv mecarbil or other compounds
in our cardiac muscle contractility program under our
collaboration and option agreement with Amgen.
Skeletal
Muscle Contractility
CK-2017357 is the lead potential drug candidate from this
program. We are also advancing another compound from this
program, CK-2066260, in non-clinical studies intended to enable
the filing of an IND in 2011. CK-2017357 and CK-2066260 are
structurally distinct and selective small molecule activators of
the fast skeletal sarcomere. These compounds act on fast
skeletal muscle troponin. Activation of troponin increases its
sensitivity to calcium, leading to an increase in skeletal
muscle contractility.
Each of CK-2017357 and CK-2066260 has demonstrated encouraging
pharmacological activity in preclinical models and, with respect
to CK-2017357, in healthy volunteers and ALS patients. In a
recent Phase IIa clinical trial of CK-2017357 in ALS patients,
evidence of potentially clinically relevant pharmacodynamic
effects was observed. We are evaluating the potential
indications for which CK-2017357 and CK-2066260 may be useful.
In March 2010, CK-2017357 received an orphan drug designation
from the FDA for the treatment of ALS. In July 2010, we were
awarded a grant in the amount of $2.8 million by the
National Institute of Neurological Disorders and Stroke, which
is intended to support research and development of CK-2017357
for the potential treatment of myasthenia gravis for three
years. The grant was awarded under the American Recovery and
Reinvestment Act of 2009. We recognized
47
revenue of $0.4 million under this grant arrangement in
2010, which we recorded as research and development, grant and
other revenues.
Early in 2010, we announced data from two Phase I clinical
trials evaluating CK-2017357 in healthy volunteers. The first
trial established a maximum tolerated single dose of CK-2017357
of 2000 mg. Also in this trial, CK-2017357 produced
concentration-dependent, statistically significant increases
versus placebo in the force developed by the tibialis anterior
muscle. CK-2017357 was well-tolerated and no serious adverse
events were reported. The second Phase I trial was a study of
multiple doses of CK-2017357. At steady state, both the maximum
plasma concentration and the area under the CK-2017357 plasma
concentration versus time curve from before dosing until
24 hours after dosing were generally dose-proportional. In
general, systemic exposure to CK-2017357 in this trial was high
and inter-subject variability was low. In addition, these
multiple-dose regimens of CK-2017357 were well-tolerated, and no
serious adverse events were reported.
We have initiated three evidence of effect Phase IIa
clinical trials of CK-2017357: one trial in patients with ALS,
which was completed in December 2010, one ongoing trial in
patients with symptoms of claudication associated with
peripheral artery disease (PAD), and one ongoing
trial in patients with generalized myasthenia gravis. Our
evidence of effect clinical trials are randomized, double-blind,
placebo-controlled, three-period cross-over studies of single
doses of CK-2017357 intended to translate the mechanism of
action of CK-2017357, as demonstrated pharmacodynamically in
healthy volunteers, to patients with impaired muscle function
and potentially to establish statistically significant and
clinically relevant evidence of pharmacodynamic effects. These
trials may then form the basis for larger clinical trials
designed to demonstrate proof of concept.
In April 2010, we initiated and in December 2010, we completed a
Phase IIa evidence of effect clinical trial of CK-2017357 in ALS
patients. 67 patients were enrolled in this trial. Results
from this trial were presented in December 2010 at the Clinical
Trials Session at the 21st International Symposium on
ALS/Motor Neurone Diseases. Increases in multiple clinically
relevant pharmacodynamic assessments were observed, and the two
doses of CK-2017357 administered (250 mg and 500 mg)
exhibited dose-proportional pharmacokinetics. The investigators
also concluded that these single doses of CK-2017357 appeared to
be safe and generally well-tolerated by the patients in this
trial. There were no serious adverse events judged to have been
drug-related, and most adverse events were classified by the
investigators as mild. Most reports of dizziness, the most
frequent and most clearly dose-related adverse event in the
trial, were classified as mild and none were determined to be
severe. We plan to present additional analyses of the data from
this trial during a Plenary Session at the 63rd Annual
Meeting of the American Academy of Neurology in April 2011 in
Honolulu, Hawaii.
In June 2010, we initiated a Phase IIa evidence of effect
clinical trial of CK-2017357 in patients with symptoms of
claudication associated with PAD. At least 36 and up to
72 patients may be enrolled in this trial. The dose levels
originally administered in this trial were 375 mg and
750 mg. In October 2010, we conducted an interim review of
data from this trial that suggested potential pharmacodynamic
activity of CK-2017357 to increase skeletal muscle performance
in these patients. In addition, this review suggested that
single oral doses of CK-2017357 were generally well-tolerated by
most patients in this trial. However, serious adverse events
were reported by two patients: dizziness and mental confusion in
one and dizziness and dyskinesia (or abnormal movements) in the
other. Both patients required inpatient observation until their
symptoms resolved. These events were not life-threatening and
appeared to resolve spontaneously and completely without any
additional treatment. Following these observations, the protocol
was amended to lower the 750 mg dose to 500 mg. We are
continuing to conduct this trial and anticipate that data will
be available from this trial in the first half of 2011.
In January 2011, we initiated our third Phase IIa evidence of
effect clinical trial of CK-2017357 in patients with generalized
myasthenia gravis. At least 36 and up to 78 patients may be
enrolled in this trial. Patients receive a single oral doses of
placebo or 250 mg or 500 mg of CK-2017357. The primary
objective of this trial is to assess the effects of CK-2017357
on measures of muscle strength, muscle fatigue and pulmonary
function. The secondary objectives of this clinical trial are to
evaluate and characterize the relationship, if any, between the
doses and plasma concentrations of CK-2017357 and its
pharmacodynamic effects; to evaluate the safety and tolerability
of CK-2017357 administered as single doses to patients with
myasthenia gravis; and to evaluate the effect of CK-2017357 on
investigator- and patient-determined global functional
assessment and the Modified MG Symptom Score, an assessment
combining patient reports and physician evaluations to assess
the severity of symptoms due to
48
myasthenia gravis. We are continuing to conduct this trial, and
anticipate that data will be available from this trial by the
end of 2011.
In the first half of 2011, we anticipate initiating a Phase I
drug-drug interaction clinical trial of CK-2017357 administered
orally to healthy volunteers. This trial is intended to evaluate
the effects of CK-2017357 on the pharmacokinetics of riluzole
and other drugs as well as the pharmacokinetics of CK-2017357
when administered after a meal and when fasting.
In the first half of 2011, we anticipate initiating a
Phase II multi-dose, safety, tolerability, pharmacokinetic
and pharmacodynamic clinical trial of CK-2017357 in ALS
patients. This trial is expected to evaluate patients receiving
daily oral doses of CK-2017357 for up to 14 days. The
primary objective of this trial will be to evaluate the safety
and tolerability of multiple doses of CK-2017357 in patients
with ALS. In addition, patients will be asked to report their
ALS symptoms using the ALS Functional Rating Scale-Revised
(ALSFRS-R). Patients will also undergo tests of muscle
fatigability, certain indices of pulmonary function, and
patients and investigators global status
assessments. This Phase II trial may be initiated after we
have completed the initial part of the Phase I drug-drug
interaction trial, which will focus on drug-drug interaction
between riluzole and CK-2017357.
We anticipate that, in the first half of 2011, we will file an
IND with the FDA to perform a Phase I, first-time-in humans
clinical trial CK-2066260. We also anticipate initiating a
first-in-humans
Phase I clinical trial of CK-2066260 in healthy volunteers in
the second half of 2011.
CK-2017357 and CK-2066260 are at too early a stage of
development for us to predict if or when we will be in a
position to generate any revenues or material net cash flows
from its commercialization. We currently fund all research and
development costs associated with this program. We recorded
research and development expenses for activities relating to our
skeletal muscle contractility program of approximately
$29.1 million, $17.5 million and $10.5 million in
the years ended December 31, 2010, 2009 and 2008,
respectively. We anticipate that our expenditures relating to
the research and development of compounds in our skeletal muscle
contractility program will increase significantly if and as we
advance CK-2017357, CK-2066260 or other compounds from this
program into and through development.
Smooth
Muscle Contractility
Our smooth muscle contractility program is focused on the
discovery and development of small molecule smooth muscle myosin
inhibitors which may be useful as potential treatments for
diseases and conditions associated with excessive smooth muscle
contraction, and leverages our expertise in muscle function and
its application to drug discovery. Our inhaled smooth muscle
myosin inhibitors have demonstrated pharmacological activity in
preclinical models of bronchoconstrictive diseases and may have
applications for indications such as asthma or chronic
obstructive pulmonary disease. Our smooth muscle myosin
inhibitors, administered orally or intravenously, have also
demonstrated pharmacological activity in preclinical models of
vascular constriction. We intend to continue to conduct
non-clinical development of compounds from this program.
In May 2010, a poster summarizing non-clinical data regarding
our smooth muscle contractility program was presented at the
American Thoracic Societys 2010 International Conference.
Our smooth muscle myosin inhibitors are at too early a stage of
development for us to predict if or when we will be in a
position to generate any revenues or material net cash flows
from their commercialization. We currently fund all research and
development costs associated with this program. We recorded
research and development expenses for activities relating to our
smooth muscle contractility program of approximately
$1.9 million, $5.0 million and $7.3 million in
the years ended December 31, 2010, 2009 and 2008,
respectively. We anticipate that our expenditures relating to
the research and development of compounds in our smooth muscle
contractility program will increase significantly if and as we
advance compounds from this program into and through development.
Mitotic
Kinesin Inhibitors
We currently have three drug candidates for the potential
treatment of cancer: ispinesib, SB-743921 and GSK-923295. All of
these arose from our earlier research activities directed to the
role of the cytoskeleton in cell division
49
and were progressed under our strategic alliance with GSK. This
strategic alliance was established in 2001 to discover, develop
and commercialize novel small molecule therapeutics targeting
mitotic kinesins for applications in the treatment of cancer and
other diseases. Mitotic kinesins are a family of cytoskeletal
motor proteins involved in the process of cell division, or
mitosis. Under this strategic alliance, we focused primarily on
two mitotic kinesins: kinesin spindle protein (KSP)
and centromere-associated protein E (CENP-E).
Inhibition of KSP or CENP-E interrupts cancer cell division,
causing cell death. Ispinesib and SB-743921 are structurally
distinct small molecules that specifically inhibit KSP.
GSK-923295 specifically inhibits CENP-E.
In November 2006, we amended our strategic alliance with GSK and
assumed responsibility, at our expense, for the continued
research, development and commercialization of inhibitors of
KSP, including ispinesib and SB-743921, and other mitotic
kinesins, other than CENP-E. GSK retained an option to resume
responsibility for the development and commercialization of
either or both of ispinesib and SB-743921. This option expired
at the end of 2008. We agreed with GSK to terminate our
strategic alliance effective February 28, 2010. We have
retained all rights to ispinesib, SB-743921 and GSK-923295,
subject to certain royalty obligations to GSK. GSK remains
responsible for completing its Phase I clinical trial of
GSK-923295 in cancer patients, at its expense. Following
GSKs completion of its Phase I clinical trial of
GSK-923295, we will be responsible for any further research and
development costs associated with GSK-923295.
Each of ispinesib, SB-743921 and GSK-923295 is at too early a
stage of development for us to predict if or when we will be in
a position to generate any revenues or material net cash flows
from its commercialization. We currently are responsible for all
research and development costs associated with ispinesib and
SB-743921. We recorded research and development expenses for
activities relating to our mitotic kinesins oncology program of
approximately $1.0 million, $3.6 million and
$7.0 million in the years ended December 31, 2010,
2009 and 2008, respectively. We received and recognized as
revenue, reimbursements from GSK for patent expenses related to
our mitotic kinesins oncology program of zero, $45,000 and
$0.2 million for the years ended December 31, 2010,
2009 and 2008, respectively. We have completed the Phase I
portion of each of the Phase I/II clinical trials for ispinesib
and SB-743921. GSK is completing the current Phase I clinical
trial of GSK-923295. We do not currently intend to conduct any
further development of these drug candidates ourselves. We are
evaluating strategic alternatives for the future development and
commercialization of ispinesib, SB-743921 and GSK-923295 with
third parties. We may not be able to enter into an agreement
regarding such a strategic alternative on acceptable terms, if
it all.
Development
Risks
The successful development of any of our drug candidates is
highly uncertain. We cannot estimate with certainty or know the
exact nature, timing and costs of the activities necessary to
complete the development of any of our drug candidates or the
date of completion of these development activities due to
numerous risks and uncertainties, including, but not limited to:
|
|
|
|
|
decisions made by Amgen with respect to the development of
omecamtiv mecarbil;
|
|
|
|
the uncertainty of the timing of the initiation and completion
of patient enrollment and treatment in our clinical trials;
|
|
|
|
the possibility of delays in the collection of clinical trial
data and the uncertainty of the timing of the analyses of our
clinical trial data after these trials have been initiated and
completed;
|
|
|
|
our potential inability to obtain additional funding and
resources for our development activities on acceptable terms, if
at all, including, but not limited to, our potential inability
to obtain or retain partners to assist in the design,
management, conduct and funding of clinical trials;
|
|
|
|
delays or additional costs in manufacturing of our drug
candidates for clinical trial use, including developing
appropriate formulations of our drug candidates;
|
|
|
|
the uncertainty of clinical trial results, including variability
in patient response;
|
|
|
|
the uncertainty of obtaining FDA or other foreign regulatory
agency approval required for the clinical investigation of our
drug candidates;
|
50
|
|
|
|
|
the uncertainty related to the development of commercial scale
manufacturing processes and qualification of a commercial scale
manufacturing facility; and
|
|
|
|
possible delays in the characterization, formulation and
manufacture of potential drug candidates.
|
If we fail to complete the development of any of our drug
candidates in a timely manner, it could have a material adverse
effect on our operations, financial position and liquidity. In
addition, any failure by us or our partners to obtain, or any
delay in obtaining, regulatory approvals for our drug candidates
could have a material adverse effect on our results of
operations. A further discussion of the risks and uncertainties
associated with completing our programs on schedule, or at all,
and certain consequences of failing to do so are discussed
further in the risk factors entitled We have never
generated, and may never generate, revenues from commercial
sales of our drugs and we may not have drugs to market for at
least several years, if ever, Clinical trials may
fail to demonstrate the desired safety and efficacy of our drug
candidates, which could prevent or significantly delay
completion of clinical development and regulatory approval
and Clinical trials are expensive, time-consuming and
subject to delay, and other risk factors.
Revenues
Our current revenue sources are limited, and we do not expect to
generate any revenue from product sales for several years, if at
all. We have recognized revenues from our strategic alliances
with Amgen and GSK for license fees and agreed research
activities.
In December 2006, we entered into our collaboration and option
agreement with Amgen, under which we received an upfront,
non-refundable, non-exclusive license and technology access fee
of $42.0 million. In connection with entering into the
agreement, we also entered into a common stock purchase
agreement with Amgen. In January 2007, we issued
3,484,806 shares of our common stock to Amgen for net
proceeds of $32.9 million, of which the $6.9 million
purchase premium was recorded as deferred revenue. Through May
2009, we amortized the upfront non-exclusive license and
technology access fee and stock purchase premium to license
revenue ratably over the maximum term of the non-exclusive
license, which was four years. In June 2009, we recognized as
revenue the remaining balance of $21.4 million of the
related deferred revenue when Amgen exercised its option,
triggering the end of the non-exclusive license period. In June
2009, we received a non-refundable option exercise fee from
Amgen of $50.0 million, which we recognized in revenue as
license fees from a related party. We may receive additional
payments from Amgen upon achieving certain pre-commercialization
and commercialization milestones. Milestone payments are
non-refundable and are recognized as revenue when earned, as
evidenced by the achievement of the specified milestones and the
absence of ongoing performance obligations.
We have received reimbursements from Amgen for agreed research
and development activities, which we recorded as revenue as the
related expenses were incurred. We may be eligible to receive
further reimbursements from Amgen for agreed research and
development activities, which we will record as revenue if and
when the related expenses are incurred. We record amounts
received in advance of performance as deferred revenue. Revenues
related to the reimbursement of FTEs were based on negotiated
rates intended to approximate the costs for our FTEs.
Revenues from GSK in 2006 were based on negotiated rates
intended to approximate the costs for our FTEs performing
research under the strategic alliance and our
out-of-pocket
expenses, which we recorded as the related expenses were
incurred. GSK paid us an upfront licensing fee, which we
recognized ratably over the strategic alliances initial
five-year research term, which ended in June 2006. In 2007, we
received a $1.0 million milestone payment from GSK relating
to its initiation of a Phase I clinical trial of GSK-923295.
Milestone payments are non-refundable and are recognized as
revenue when earned, as evidenced by achievement of the
specified milestones and the absence of ongoing performance
obligations. We record amounts received in advance of
performance as deferred revenue. The revenues recognized to date
are non-refundable, even if the relevant research effort is not
successful. In December 2008, GSKs option to license
ispinesib and SB-743291 expired and all rights to these drug
candidates remain with us under the collaboration and license
agreement, subject to our royalty obligations to GSK. We agreed
with GSK to terminate this strategic alliance, effective
February 28, 2010. We have retained all rights to develop
and commercialize ispinesib, SB-743921 and GSK-923295, subject
to certain royalty obligations to GSK.
51
Because a substantial portion of our revenues for the
foreseeable future will depend on achieving development and
other pre-commercialization milestones under our strategic
alliance with Amgen, our results of operations may vary
substantially from year to year.
If one or more of our drug candidates is approved for sale as a
drug, we expect that our future revenues will most likely be
derived from royalties on sales from drugs licensed to Amgen
under our strategic alliance and from those licensed to future
partners, and from direct sales of our drugs. We retain a
product-by-product
option to co-fund certain Phase III development activities
under our strategic alliance with Amgen, thereby potentially
increasing our royalties and affording us co-promotion rights in
North America. If we exercise our co-promotion rights under this
strategic alliance, we are entitled to receive reimbursement for
certain sales force costs we incur in support of our commercial
activities.
Research
and Development
We incur research and development expenses associated with both
partnered and unpartnered research activities. We expect to
incur research and development expenses for omecamtiv mecarbil
for the potential treatment of heart failure in accordance with
agreed upon research and development plans with Amgen. We expect
to incur research and development expenses for the continued
conduct of preclinical studies and non-clinical and clinical
development for CK-2017357, CK-2066260 and other skeletal
sarcomere activators for the potential treatment of diseases and
medical conditions associated with muscle weakness or wasting,
preclinical studies and non-clinical development of our smooth
muscle myosin inhibitor compounds for the potential treatment of
diseases and medical conditions associated with
bronchoconstriction, vascular constriction, or both, and our
research programs in other disease areas.
Research and development expenses related to our strategic
alliance with GSK consisted primarily of costs related to
research and screening, lead optimization and other activities
relating to the identification of compounds for development as
mitotic kinesin inhibitors for the treatment of cancer. Prior to
June 2006, certain of these costs were reimbursed by GSK on an
FTE basis. From 2001 through November 2006, GSK funded the
majority of the costs related to the clinical development of
ispinesib and SB-743921. In November 2006, under our amended
collaboration and license agreement with GSK, we assumed
responsibility for the continued research, development and
commercialization of inhibitors of KSP, including ispinesib and
SB-743921, and other mitotic kinesins other than CENP-E, at our
sole expense.
Research and development expenses related to any development and
commercialization activities we elect to fund consist primarily
of employee compensation, supplies and materials, costs for
consultants and contract research and manufacturing, facilities
costs and depreciation of equipment. From our inception through
December 31, 2010, we incurred costs of approximately
$136.4 million for research and development activities
relating to our cardiac muscle contractility program,
$65.0 million for our skeletal muscle contractility
program, $28.3 million for our smooth muscle contractility
program, $71.9 million for our mitotic kinesin inhibitors
program, $53.7 million for our proprietary technologies and
$60.0 million for other research programs.
General
and Administrative Expenses
General and administrative expenses consist primarily of
compensation for employees in executive and administrative
functions, including, but not limited to, finance, human
resources, legal, business and commercial development and
strategic planning. Other significant costs include facilities
costs and professional fees for accounting and legal services,
including legal services associated with obtaining and
maintaining patents and regulatory compliance. We expect that
general and administrative expenses will increase in 2011.
Restructuring
In September 2008, we announced a restructuring plan to realign
our workforce and operations in line with a strategic
reassessment of our research and development activities and
corporate objectives
We completed all restructuring activities and recognized all
anticipated restructuring charges by December 31, 2009.
52
Stock
Compensation
The following table summarizes stock-based compensation related
to stock options, restricted stock awards and employee stock
purchases for 2010, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Research and development
|
|
$
|
1,871
|
|
|
$
|
2,345
|
|
|
$
|
2,794
|
|
General and administrative
|
|
|
2,146
|
|
|
|
2,561
|
|
|
|
2,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation included in operating expenses
|
|
$
|
4,017
|
|
|
$
|
4,906
|
|
|
$
|
5,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $4.8 million of
total unrecognized compensation cost related to non-vested stock
options granted under our stock plans. We expect to recognize
that cost over a weighted-average period of 2.5 years. In
addition, through 2008, we continued to amortize deferred
stock-based compensation recorded for stock options granted
prior to our initial public offering. The remaining balance
became fully amortized in 2008.
Income
Taxes
We account for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts
expected to be realized. We did not record an income tax
provision in the year ended December 31, 2008 because we
had a net taxable loss in that period. We recorded an income tax
provision of $150,000 in 2009 due to alternative minimum tax
(AMT). However, due to the Department of the
Treasurys further guidance clarifying that utilization of
the AMT net operating loss (NOL) was not limited to
90% as part of the
5-year NOL
carryback provision brought about by the Worker, Homeownership,
and Business Assistance Act of 2009, the 2009 AMT liability
was reversed in 2010. In addition to the $150,000 benefit
related to the AMT liability, we also recognized a $26,000
benefit related to the monetization of the federal research tax
credit for a total benefit of approximately $176,000 in 2010.
Based upon the weight of available evidence, which includes our
historical operating performance, reported cumulative net losses
since inception and difficulty in accurately forecasting our
future results, we maintained a full valuation allowance on the
net deferred tax assets as of December 31, 2010, 2009 and
2008. The valuation allowance was determined pursuant to the
accounting guidance for income taxes, which requires an
assessment of both positive and negative evidence when
determining whether it is more likely than not that deferred tax
assets are recoverable. We intend to maintain a full valuation
allowance on the U.S. deferred tax assets until sufficient
positive evidence exists to support reversal of the valuation
allowance. The valuation allowance increased by
$15.6 million in 2010, decreased by $9.56 million in
2009, and increased by $23.9 million in 2008.
We also follow the accounting guidance that defines the
threshold for recognizing the benefits of tax return positions
in the financial statements as more-likely-than-not
to be sustained by the taxing authorities based solely on the
technical merits of the position. If the recognition threshold
is met, the tax benefit is measured and recognized as the
largest amount of tax benefit that, in our judgment, is greater
than 50% likely to be realized. We are currently not undergoing
any income tax examinations. In general, the statute of
limitations for tax liabilities for these years remains open for
the purpose of adjusting the amounts of the losses and credits
carried forward from those years.
We had federal net operating loss carryforwards of approximately
$329.7 million and state net operating loss carryforwards
of approximately $174.8 million before federal benefit at
December 31, 2010. If not utilized, the federal and state
operating loss carryforwards will begin to expire in various
amounts beginning 2020 and 2011, respectively. The net operating
loss carryforwards include deductions for stock options. When
utilized, the portion related to stock option deductions will be
accounted for as a credit to stockholders equity rather
than as a reduction of the income tax provision.
We had research credit carryforwards of approximately
$9.7 million and $9.5 million for federal and
California state income tax purposes, respectively, at
December 31, 2010. If not utilized, the federal
carryforwards will expire in various amounts beginning in 2021.
The California state credit can be carried forward indefinitely.
53
In general, under Section 382 of the Internal Revenue Code,
a corporation that undergoes an ownership change is
subject to limitations on its ability to utilize its pre-change
net operating losses and tax credits to offset future taxable
income. Our existing net operating losses and tax credits are
subject to limitations arising from previous ownership changes.
Future changes in our stock ownership, some of which are outside
of our control, could result in an ownership change under
Section 382 of the Internal Revenue Code and result in
additional limitations. During the year ended December 31,
2007, we conducted a study and determined that we would not be
able to utilize a portion of our federal research credit as a
result of such a restriction. Accordingly, we reduced our
deferred tax assets and the corresponding valuation allowance by
$0.8 million. As a result, the research credit amount as of
December 31, 2007 reflects the restriction on our ability
to use the credit.
Accounting guidance for income taxes provides that a tax benefit
from an uncertain tax position may be recognized when it is more
likely than not that the position will be sustained upon
examination, including resolutions of any related appeals or
litigation processes, based on the technical merits. It also
provides guidance on measurement, derecognition, classification,
interest and penalties, accounting in interim periods,
disclosure and transition.
The unrecognized tax benefits on our research credits are based
on our evaluation of the underlying research expenditures. We
have reduced the respective deferred tax assets and valuation
allowance to reflect the unrecognized tax benefits. These
adjustments did not have any impact on the income tax expense.
Interest accrued related to unrecognized tax benefits and
penalties were zero for 2010 and 2009. We account for interest
related to unrecognized tax benefits and penalties by
classifying both as income tax expense in the financial
statements in accordance with the accounting guidance for
uncertainty in income taxes. We do not expect our unrecognized
tax benefits to change materially over the next twelve months.
Results
of Operations
Years
ended December 31, 2010, 2009 and 2008
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Years Ended December 31,
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Research and development revenues from related parties
|
|
$
|
1.5
|
|
|
$
|
7.1
|
|
|
$
|
0.2
|
|
|
$
|
(5.6
|
)
|
|
$
|
6.9
|
|
Research and development, grant and other revenues
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
License revenues from related parties
|
|
|
|
|
|
|
74.4
|
|
|
|
12.2
|
|
|
|
(74.4
|
)
|
|
|
62.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
2.6
|
|
|
$
|
81.5
|
|
|
$
|
12.4
|
|
|
$
|
(78.9
|
)
|
|
$
|
69.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded total revenues of $2.6 million,
$81.5 million and $12.4 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Research and development revenues from related parties refers to
research and development revenues from our strategic alliances
with Amgen and, through 2009, GSK. Research and development
revenues from Amgen were $1.5 million in 2010,
$7.1 million in 2009 and zero in 2008. Research and
development revenues of $1.5 million from Amgen in 2010
represented reimbursements of FTE and out of pocket expenses.
Research and development revenues of $7.1 million from
Amgen in 2009 consisted of $4.0 million for the transfer of
the majority of our existing inventories of omecamtiv mecarbil
and related reference materials, and $3.1 million for FTE
and out of pocket expense reimbursements.
Research and development revenues from GSK were zero, $45,000
and $0.2 million in 2010, 2009 and 2008, respectively.
Research and development revenues from GSK in 2009 and 2008
consisted of patent expense reimbursements. In December 2008,
GSKs option to license each of ispinesib and SB-743921 as
provided under the parties collaboration and license
agreement expired. Accordingly, we retain all rights to both
ispinesib and SB-743921, subject to certain royalty obligations
to GSK. In December 2009, we and GSK agreed to terminate the
54
collaboration and license agreement, effective February 28,
2010. We have retained all rights to ispinesib, SB-743921, and
GSK-923295, subject to certain royalty obligations to GSK.
In July 2010, the National Institute of Neurological Disorders
and Strokes awarded us a grant to support research and
development of CK-2017357 directed to the potential treatment
for myasthenia gravis for a period of up to three years. We
recognized grant revenue of $0.4 million under this grant
arrangement in 2010. We are eligible to receive additional funds
of up to $2.4 million through 2013 under this grant.
In November 2010, we were notified by the Internal Revenue
Service that we would receive total cash grants of
$0.7 million based on our applications for certain
investments in qualified therapeutic discovery projects under
Section 48D of the Internal Revenue Code. The grants relate
to certain research and development costs we incurred in 2009 in
connection with our cardiac, skeletal and smooth muscle
contractility programs. We received and recognized as grant
revenue $0.7 million under this grant in 2010.
License revenues from related parties refers to license revenues
from our strategic alliance with Amgen. License revenues were
zero, $74.4 million and $12.2 million in 2010, 2009
and 2008, respectively. License revenues for 2009 consisted of
the May 2009 $50.0 million option exercise fee from Amgen
and the recognition of deferred revenue of the remaining
$24.4 million related to the 2006 upfront non-exclusive
license and technology access fee and stock purchase premium
from Amgen. License revenue of $12.2 million in 2008
consisted of amortization of the 2006 upfront non-exclusive
license and technology access fee and stock purchase premium
from Amgen.
Deferred revenue related to the Amgen strategic alliance was
zero and $0.8 million at December 31, 2010 and 2009,
respectively. The deferred revenue balance at December 31,
2009 related to Amgens prepayment of FTE reimbursements.
Research
and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Years Ended December 31,
|
|
(Decrease)
|
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
|
(In millions)
|
|
Research and development expenses
|
|
$
|
38.0
|
|
|
$
|
39.8
|
|
|
$
|
54.0
|
|
|
$
|
(1.8
|
)
|
|
$
|
(14.2
|
)
|
Research and development expenses decreased $1.8 million in
2010 compared to 2009, and decreased $14.2 million in 2009
compared to 2008. The decrease in 2010 was primarily due to a
decrease of $2.3 million in personnel expenses, partially
offset by increases of $0.3 million in outsourcing costs
related to our muscle contractility clinical trial programs and
$0.3 million in laboratory expenses. The decrease in 2009
was primarily due to decreases in clinical and preclinical
outsourcing costs of $9.8 million related to our cardiac
muscle contractility and mitotic kinesin inhibitors clinical
trial programs and preclinical outsourcing costs,
$2.2 million for personnel-related costs and
$2.0 million for laboratory and facility related costs.
From a program perspective, the decline in research and
development spending in 2010 compared to 2009 was due to
decreases of $8.3 million for our cardiac muscle
contractility program, $3.1 million for our smooth muscle
contractility program, $2.6 million for our mitotic kinesin
inhibitors program and $1.0 million for our proprietary
technologies, partially offset by increases of
$11.6 million for our skeletal muscle contractility program
and $1.6 million for our other research and preclinical
programs. The decline in research and development spending in
2009 compared to 2008 was due to decreases of $11.0 million
for our cardiac muscle contractility program, $2.3 million
for our smooth muscle contractility program, $3.4 million
for our mitotic kinesin inhibitors program, $1.9 million
for our proprietary technologies and $2.6 million for our
other research and preclinical programs, partially offset by an
increase of $7.0 million for our skeletal muscle
contractility program.
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Years Ended December 31,
|
|
|
(Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Cardiac muscle contractility
|
|
$
|
1.6
|
|
|
$
|
9.9
|
|
|
$
|
20.9
|
|
|
$
|
(8.3
|
)
|
|
$
|
(11.0
|
)
|
Skeletal muscle contractility
|
|
|
29.1
|
|
|
|
17.5
|
|
|
|
10.5
|
|
|
|
11.6
|
|
|
|
7.0
|
|
Smooth muscle contractility
|
|
|
1.9
|
|
|
|
5.0
|
|
|
|
7.3
|
|
|
|
(3.1
|
)
|
|
|
(2.3
|
)
|
Mitotic kinesin inhibitors
|
|
|
1.0
|
|
|
|
3.6
|
|
|
|
7.0
|
|
|
|
(2.6
|
)
|
|
|
(3.4
|
)
|
Proprietary technologies
|
|
|
|
|
|
|
1.0
|
|
|
|
2.9
|
|
|
|
(1.0
|
)
|
|
|
(1.9
|
)
|
All other research programs
|
|
|
4.4
|
|
|
|
2.8
|
|
|
|
5.4
|
|
|
|
1.6
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
$
|
38.0
|
|
|
$
|
39.8
|
|
|
$
|
54.0
|
|
|
$
|
(1.8
|
)
|
|
$
|
(14.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical development timelines, likelihood of success and total
completion costs vary significantly for each drug candidate and
are difficult to estimate. We anticipate that we will determine
on an ongoing basis which research and development programs to
pursue and how much funding to direct to each program, taking
into account the scientific and clinical success of each drug
candidate. The lengthy process of seeking regulatory approvals
and subsequent compliance with applicable regulations requires
the expenditure of substantial resources. Any failure by us to
obtain and maintain, or any delay in obtaining, regulatory
approvals could cause our research and development expenditures
to increase and, in turn, could have a material adverse effect
on our results of operations.
We expect our research and development expenditures to increase
in 2011 compared to 2010. As part of our strategic alliance with
Amgen, we expect to continue development of our drug candidate
omecamtiv mecarbil for the potential treatment of heart failure.
We expect to continue development of our drug candidate
CK-2017357 and our potential drug candidate CK-2066260 for the
potential treatment of diseases and medical conditions
associated with muscle weakness or wasting. We expect to
continue research and development of our smooth muscle myosin
inhibitor compounds, which may be useful for the potential
treatment of diseases and medical conditions associated with
bronchoconstriction or vasoconstriction. We anticipate that
research and development expenses for 2011 will be in the range
of $42.0 million to $47.0 million. Non-cash expenses
such as stock-based compensation and depreciation of
approximately $2.5 million are included in our estimate of
2011 research and development expenses.
General
and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Years Ended December 31,
|
|
(Decrease)
|
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
|
(In millions)
|
|
General and administrative expenses
|
|
$
|
14.2
|
|
|
$
|
15.6
|
|
|
$
|
15.1
|
|
|
$
|
(1.4
|
)
|
|
$
|
0.5
|
|
General and administrative expenses decreased $1.4 million
in 2010 compared with 2009, and increased $0.5 million in
2009 compared with 2008. The decrease in 2010 was primarily due
to lower personnel expenses of $1.3 million. The increase
in 2009 was primarily due to an increase in personnel expenses
of $1.2 million, partially offset by a decrease in legal
expenses of $0.7 million. The $1.2 million increase in
personnel expense in 2009 was primarily due to no employee
bonuses being paid for 2008 and a special bonus totaling
$1.5 million being paid to all employees in July 2009 in
recognition of our employees contributions which resulted
both in Amgen exercising its option for an exclusive license to
omecamtiv mecarbil and related compounds and in our closing of
the registered direct equity offering in 2009, partially offset
by decreases in salaries and stock-based compensation.
We expect that general and administrative expenses will increase
in 2011. We anticipate general and administrative expenses to be
in the range of $15.0 million to $17.0 million.
Non-cash expenses such as stock-based compensation and
depreciation of approximately $2.3 million are included in
our estimate of 2011 general and administrative expenses.
56
Interest
and Other, net
Components of Interest and Other, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
|
|
|
|
|
in Interest and
|
|
|
|
|
|
|
Other
|
|
|
|
Years Ended December 31,
|
|
|
Income, Net
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Unrealized gain (loss) on auction rate securities
(ARS) (Note 3 and Note 4)
|
|
$
|
2.4
|
|
|
$
|
1.0
|
|
|
$
|
(3.4
|
)
|
|
$
|
1.4
|
|
|
$
|
4.4
|
|
Unrealized gain (loss) on investment put option related to ARS
Rights (Note 3 and Note 4)
|
|
|
(2.4
|
)
|
|
|
(1.0
|
)
|
|
|
3.4
|
|
|
|
(1.4
|
)
|
|
|
(4.4
|
)
|
Warrant expense
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
1.6
|
|
|
|
(1.6
|
)
|
Interest income and other income
|
|
|
0.4
|
|
|
|
0.6
|
|
|
|
3.2
|
|
|
|
(0.2
|
)
|
|
|
(2.6
|
)
|
Interest expense and other expense
|
|
|
(0.2
|
)
|
|
|
(0.4
|
)
|
|
|
(0.5
|
)
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and Other, net
|
|
$
|
0.2
|
|
|
$
|
(1.4
|
)
|
|
$
|
2.7
|
|
|
$
|
1.6
|
|
|
$
|
(4.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments that we designate as trading securities are reported
at fair value, with gains or losses resulting from changes in
fair value recognized in earnings and included in Interest and
Other, net. We classified our investments in ARS as trading
securities as of December 31, 2009 and 2008.
Warrant expense of $1.6 million for 2009 is related to the
change in the fair value of the warrant liability in connection
with our registered direct equity offering in May 2009.
Interest income and other income consists primarily of interest
income generated from our cash, cash equivalents and
investments. Interest income and other income decreased in 2010
compared to 2009, and in 2009 compared to 2008, primarily due to
lower market interest rates earned on our investments.
Interest expense and other expense primarily consists of
interest expense on borrowings under our equipment financing
lines and, for 2009 and 2010, interest expense on our loan with
UBS Bank USA that originated in January 2009. The decreases in
interest and other expense in 2010 compared to 2009, and in 2009
compared to 2008, were primarily due to lower outstanding
balances on our equipment financing lines, partially offset by
interest on our loan with UBS.
Liquidity
and Capital Resources
From August 5, 1997, our date of inception, through
December 31, 2010, we funded our operations through the
sale of equity securities, equipment financings, non-equity
payments from collaborators, government grants and interest
income.
Our cash, cash equivalents and investments, excluding restricted
cash, totaled $72.8 million at December 31, 2010, down
from $114.7 million including ARS and the investment put
option related to ARS Rights at December 31, 2009. See
Note 3, Cash Equivalents and Investments in the
Notes to Financial Statements for further discussion of
Investments in Auction Rate Securities and Investment Put Option
Related to Auction Rate Securities Rights. The decrease of
$41.9 million primarily resulted from our net loss of
$49.3 million and the repayment of $10.2 million on
our loan with UBS, partially offset by $14.0 million net
proceeds from the 2007 committed equity financing facility with
Kingsbridge.
We have received net proceeds from the sale of equity securities
of $350.3 million from August 5, 1997, the date of our
inception, through December 31, 2010, excluding sales of
equity to GSK and Amgen. Included in these proceeds are
$94.0 million received upon closing of the initial public
offering of our common stock in May 2004. In connection with
execution of our collaboration and license agreement in 2001,
GSK made a $14.0 million equity investment in Cytokinetics.
GSK made additional equity investments in Cytokinetics in 2003
and 2004 of $3.0 million and $7.0 million,
respectively.
57
In 2005, we entered into our first committed equity financing
facility with Kingsbridge pursuant to which Kingsbridge
committed to finance up to $75.0 million of capital for a
three-year period. Subject to certain conditions and
limitations, from time to time under this committed equity
financing facility, at our election, Kingsbridge purchased
newly-issued shares of our common stock at a price between 90%
and 94% of the volume weighted average price on each trading day
during an
eight-day,
forward-looking pricing period.
We received gross proceeds from draw downs and sales of our
common stock to Kingsbridge under this facility as follows:
2005 gross proceeds of $5.7 million from the
sale of 887,576 shares, before offering costs of $178,000;
2006 gross proceeds of $17.0 million from the
sale of 2,740,735 shares; and 2007 gross
proceeds of $9.5 million from the sale of
2,075,177 shares. No further draw downs are available to us
under the 2005 Kingsbridge committed equity financing facility.
In October 2007, we entered into a new committed equity
financing facility with Kingsbridge, pursuant to which
Kingsbridge committed to finance up to $75.0 million of
capital for a three-year period. In October 2010, the 2007
committed equity financing facility was amended to extend its
expiration date until the first to occur of March 31, 2011
or the purchase by Kingsbridge of the maximum number of shares
under the CEFF. Subject to certain conditions and limitations,
which include a minimum volume-weighted average price of $2.00
for our common stock, from time to time under this facility, at
our election, Kingsbridge is committed to purchase newly-issued
shares of our common stock at a price between 90% and 94% of the
volume- weighted average price on each trading day during an
eight-day,
forward-looking pricing period. The maximum number of shares we
may issue in any pricing period is the lesser of 2.5% of our
market capitalization immediately prior to the commencement of
the pricing period or $15.0 million. As part of this
arrangement, we issued a warrant to Kingsbridge to purchase
230,000 shares of our common stock at a price of $7.99 per
share, which represents a premium over the closing price of our
common stock on the date we entered into this facility. This
warrant became exercisable beginning six months after the
October 2007 issuance date and will remain exercisable for a
period of three years thereafter. We may sell a maximum of
9,779,411 shares under this facility (exclusive of the
shares underlying the warrant). Under the rules of the NASDAQ
Stock Market LLC, this is approximately the maximum number of
shares we may sell to Kingsbridge without our stockholders
approval. This restriction limits the amount of proceeds we are
able to obtain from this committed equity financing facility. We
are not obligated to sell any of the $75.0 million of
common stock available under this facility and there are no
minimum commitments or minimum use penalties. The committed
equity financing facility does not contain any restrictions on
our operating activities, any automatic pricing resets or any
minimum market volume restrictions. In 2009, we received gross
proceeds of $6.9 million by selling 3,596,728 shares
of our common stock to Kingsbridge under the 2007 committed
equity financing facility, before offering costs of
$0.1 million. In 2010, we received gross proceeds of
$14.0 million by selling 5,339,819 shares of our
common stock to Kingsbridge under the facility. As of
March 10, 2011, up to 842,864 shares of our common
stock remain available for sale under the 2007 committed equity
financing facility.
In January 2007, we received a $42.0 million upfront
license fee from Amgen in connection with our entry into our
collaboration and option agreement in December 2006.
Contemporaneously with entering into this agreement, we entered
into a common stock purchase agreement with Amgen under which
Amgen purchased 3,484,806 shares of our common stock at a
price per share of $9.47, including a premium of $1.99 per
share, and an aggregate purchase price of approximately
$33.0 million. After deducting the offering costs, we
received net proceeds of approximately $32.9 million. These
shares were issued, and the related proceeds received, in
January 2007. In June 2009, we received a $50.0 million
option exercise fee from Amgen.
In May 2009, pursuant to a registered direct equity offering, we
entered into subscription agreements with selected institutional
investors to sell an aggregate of 7,106,600 units for a
price of $1.97 per unit. Each unit consisted of one share of our
common stock and one warrant to purchase 0.50 shares of our
common stock. Accordingly, a total of 7,106,600 shares of
common stock and warrants to purchase 3,553,300 shares of
common stock were issued and sold in this offering. The gross
proceeds of the offering were $14.0 million. In connection
with the offering, we paid placement agent fees to two
registered broker-dealers totaling $0.8 million. After
deducting the placement agent fees and the offering costs, we
received net proceeds of approximately $12.9 million from
the offering.
As of December 31, 2010, we have received
$100.6 million in non-equity payments from Amgen and
$54.5 million in non-equity payments from GSK.
58
Under equipment financing arrangements, we received
$23.7 million from August 5, 1997, the date of our
inception, through December 31, 2010. Interest earned on
investments, excluding non-cash amortization/accretion of
purchase premiums/discounts, was $1.4 million,
$1.6 million and $2.9 million in 2010, 2009 and 2008,
respectively, and $29.3 million from August 5, 1997,
the date of our inception, through December 31, 2010.
Net cash used in operating activities was $44.8 million in
2010 and primarily resulted from our net loss of
$49.3 million less $4.0 million of non-cash
stock-based compensation expense. Net cash provided by
operations was $8.4 million in 2009 and primarily resulted
from net income of $24.5 million, partially offset by a
$23.7 million decrease in deferred revenue. Net income in
the period primarily resulted from the recognition of
$74.4 million of license revenue and $7.1 million of
research and development revenue from Amgen, partially offset by
cash operating expenses. We had no deferred revenue at
December 31, 2010, compared to a balance of
$0.8 million as of December 31, 2009. The balance of
deferred revenue at December 31, 2009 consisted of
Amgens prepayments of FTE reimbursements. Net cash used by
operating activities in 2008 was $61.3 million and
primarily resulted from our net loss of $56.4 million.
Deferred revenue decreased $12.1 million in 2008 to
$24.5 million at December 31, 2008 from
$36.6 million at December 31, 2007. The decrease was
primarily due to the $12.2 million amortization of deferred
Amgen license revenue.
Net cash provided by investing activities in 2010 was
$34.2 million and primarily consisted of proceeds from
sales and maturities of investments (including ARS), net of cash
used to purchase investments, of $33.8 million. Net cash
used in investing activities was $53.5 million in 2009 and
primarily represented cash used to purchase investments, net of
proceeds from the maturity of investments (including ARS), of
$54.1 million. Restricted cash totaled $0.8 million at
December 31, 2010, down from $1.7 million at
December 31, 2009, with the decrease due to the contractual
semi-annual reductions in the amount of security deposit
required by General Electric Capital Corporation (GE
Capital) in connection with our equipment financing credit
lines. Net cash used in investing activities was
$10.0 million in 2008 and primarily represented cash used
in purchase of investments, net of proceeds from the maturity of
investments, of $11.9 million. Restricted cash totaled
$2.8 million at December 31, 2008, down from
$5.2 million at December 31, 2007. This decrease was
due to the contractual semi-annual reduction in the amount of
security deposit required by GE Capital in connection with our
equipment financing credit lines.
Net cash provided by financing activities was $2.5 million
in 2010 and primarily consisted of proceeds from drawdowns under
our 2007 committed equity financing facility with Kingsbridge of
$14.0 million, net of issuance costs, partially offset by
repayments of our loan with UBS of $10.2 million. Net cash
provided by financing activities was $28.8 million in 2009
and primarily consisted of net proceeds from our May 2009
registered direct equity offering of $12.9 million,
proceeds from our loan from UBS Bank USA of $12.4 million,
and drawdowns under our 2007 committed equity financing facility
with Kingsbridge of $6.8 million, net of issuance costs.
Net cash used in financing activities was $3.5 million in
2008 and primarily represented principal payments of
$4.1 million on our equipment financing credit lines with
GE Capital.
Auction Rate Securities (ARS). Our
short-term investments at December 31, 2009 included (at
par value) $17.9 million of ARS. These ARS were intended to
provide liquidity via an auction process that reset the
applicable interest rate at predetermined calendar intervals,
allowing investors to either roll over their holdings or gain
immediate liquidity by selling such interests. With the
liquidity issues experienced in global credit and capital
markets, these ARS experienced multiple failed auctions
beginning in February 2008, as the amount of securities
submitted for sale exceeded the amount of purchase orders. As a
result, the ARS ceased to be liquid.
The fair values of the ARS as of December 31, 2009 were
estimated utilizing a discounted cash flow analysis. The fair
value of our investments in ARS as of December 31, 2009 was
determined to be $15.5 million. Changes in the fair value
of the ARS, excluding the sale of ARS, were recognized in
current period earnings in Interest and Other, net. Accordingly,
in the year ended December 31, 2010, we recognized
unrealized gains of $2.4 million on our ARS to reflect the
change in fair value, and the sale of $17.9 million of our
ARS at par value. In the year ended December 31, 2009, we
recognized unrealized gains of $1.0 million on our ARS to
reflect the change in fair value and the sale of
$2.1 million of ARS at par value.
In connection with the failed auctions of our ARS, which were
marketed and sold by UBS AG and its affiliates, in October 2008,
we accepted a settlement with UBS AG pursuant to which UBS AG
issued to us the Series C-2 Auction Rate Securities Rights (the
ARS Rights). The ARS Rights provided us the right to
receive the par value of
59
our ARS, i.e., the liquidation preference of the ARS plus
accrued but unpaid interest at any time between June 30,
2010 and July 2, 2012.
The enforceability of the ARS Rights resulted in a put option,
which we recognized as a separate freestanding instrument that
was accounted for separately from the ARS. As of
December 31, 2009, we recorded $2.4 million as the
fair value of the investment put option related to the ARS
Rights, classified in short-term assets on the balance sheet. On
June 30, 2010, we exercised the ARS Rights, requiring that
UBS AG purchase our remaining outstanding ARS at par value of
$7.5 million. Accordingly, on the settlement date of
July 1, 2010, UBS AG deposited the proceeds of
$7.5 million into our money market account. The investment
put option related to the ARS Rights was extinguished at that
time.
In connection with the settlement with UBS AG relating to our
ARS, we entered into a loan agreement with UBS Bank USA and UBS
Financial Services Inc. On January 5, 2009, we borrowed
approximately $12.4 million under the loan agreement, with
our ARS held in accounts with UBS Financial Services, Inc. as
collateral. As of June 2010, the remaining balance of the loan
with UBS was fully repaid.
See Note 3, Cash Equivalents and Investments
and Note 4, Fair Value Measurements in the
Notes to Financial Statements for further discussion of
Investments in Auction Rate Securities and Investment Put Option
Related to Auction Rate Securities Rights.
Shelf Registration Statement. In November
2008, we filed a shelf registration statement with the SEC,
which was declared effective in November 2008. The shelf
registration statement allows us to issue shares of our common
stock from time to time for an aggregate initial offering price
of up to $100 million. As of March 10, 2011,
$76.2 million remains available to us under this shelf
registration statement, assuming all outstanding warrants are
exercised in cash. The specific terms of offerings, if any,
under the shelf registration statement would be established at
the time of such offerings.
As of December 31, 2010, future minimum payments under our
loan and lease obligations were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
|
|
|
One to
|
|
|
Three to
|
|
|
After
|
|
|
|
|
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Five Years
|
|
|
Total
|
|
|
Operating lease(1)
|
|
$
|
2,950
|
|
|
$
|
5,890
|
|
|
$
|
6,555
|
|
|
$
|
8,826
|
|
|
$
|
24,221
|
|
Equipment financing line
|
|
|
833
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,783
|
|
|
$
|
6,042
|
|
|
$
|
6,555
|
|
|
$
|
8,826
|
|
|
$
|
25,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Our long-term commitment under operating lease relates to
payments under our facility lease in South San Francisco,
California, which expires in 2018. |
In future periods, we expect to incur substantial costs as we
continue to expand our research programs and related research
and development activities. We plan to continue to support the
clinical development of our cardiac muscle myosin activator
omecamtiv mecarbil for the potential treatment of heart failure
and research of potential next-generation compounds as part of
our strategic alliance with Amgen. We plan to continue clinical
development of our fast skeletal troponin activator CK-2017357
for the potential treatment of diseases and conditions related
to skeletal muscle weakness or wasting. We plan to continue to
conduct non-clinical development of our fast skeletal troponin
activator CK-2066260 and, following clearance of an IND,
clinical development. We plan to progress one or more of our
smooth muscle myosin inhibitor compounds through non-clinical
and clinical development. We expect to incur significant
research and development expenses as we advance the research and
development of our other compounds from our muscle contractility
programs through research to candidate selection.
Our future capital uses and requirements depend on numerous
factors. These factors include, but are not limited to, the
following:
|
|
|
|
|
the initiation, progress, timing, scope and completion of
preclinical research, non-clinical development and clinical
trials for our drug candidates and potential drug candidates;
|
|
|
|
the time and costs involved in obtaining regulatory approvals;
|
60
|
|
|
|
|
delays that may be caused by requirements of regulatory agencies;
|
|
|
|
Amgens decisions with regard to funding of development and
commercialization of omecamtiv mecarbil or other compounds for
the potential treatment of heart failure under our collaboration;
|
|
|
|
our level of funding for the development of current or future
drug candidates;
|
|
|
|
the number of drug candidates we pursue;
|
|
|
|
the costs involved in filing and prosecuting patent applications
and enforcing or defending patent claims;
|
|
|
|
our ability to establish and maintain selected strategic
alliances required for the development of drug candidates and
commercialization of our potential drugs;
|
|
|
|
our plans or ability to expand our drug development
capabilities, including our capabilities to conduct clinical
trials for our drug candidates;
|
|
|
|
our plans or ability to establish sales, marketing or
manufacturing capabilities and to achieve market acceptance for
potential drugs;
|
|
|
|
the expansion and advancement of our research programs;
|
|
|
|
the hiring of additional employees and consultants;
|
|
|
|
the expansion of our facilities;
|
|
|
|
the acquisition of technologies, products and other business
opportunities that require financial commitments; and
|
|
|
|
our revenues, if any, from successful development of our drug
candidates and commercialization of potential drugs.
|
We believe that our existing cash and cash equivalents,
investments and interest earned on investments will be
sufficient to meet our projected operating requirements for at
least the next 12 months.
If, at any time, our prospects for internally financing our
research and development programs decline, we may decide to
reduce research and development expenses by delaying,
discontinuing or reducing our funding of development of one or
more of our drug candidates or potential drug candidates or of
other research and development programs. Alternatively, we might
raise funds through strategic relationships, public or private
financings or other arrangements. There can be no assurance that
funding, if needed, will be available on attractive terms, or at
all, or in accordance with our planned timelines. Furthermore,
financing obtained through future strategic relationships may
require us to forego certain commercialization and other rights
to our drug candidates. Similarly, any additional equity
financing may be dilutive to stockholders and debt financing, if
available, may involve restrictive covenants. Our failure to
raise capital as and when needed could have a negative impact on
our financial condition and our ability to pursue our business
strategy.
Off-balance
Sheet Arrangements
As of December 31, 2010, we did not have any relationships
with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special
purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. In addition, we do not
engage in trading activities involving non-exchange traded
contracts. Therefore, we are not materially exposed to
financing, liquidity, market or credit risk that could arise if
we had engaged in these relationships. We do not have
relationships or transactions with persons or entities that
derive benefits from their non-independent relationship with us
or our related parties.
61
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based on our financial statements,
which have been prepared in accordance with accounting
principles generally accepted in the United States. The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and related disclosure of
contingent assets and liabilities. We review our estimates on an
ongoing basis. We base our estimates on historical experience
and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more
detail in the notes to our financial statements included in this
Form 10-K,
we believe the following accounting policies to be critical to
the judgments and estimates used in the preparation of our
financial statements.
Investments
Available-for-sale
and trading investments. Our investments have
consisted of ARS, municipal and government agency bonds,
commercial paper, U.S. government treasury securities, and
money market funds. We designated all investments, except for
our ARS held by UBS, as
available-for-sale.
Therefore, they are reported at fair value, with unrealized
gains and losses recorded in accumulated other comprehensive
income. During the fourth quarter of fiscal year 2008, we
reclassified our ARS held by UBS from
available-for-sale
to trading securities. Investments that we designate as trading
assets are reported at fair value, with gains or losses
resulting from changes in fair value recognized in earnings. See
Notes to Financial Statements
Note 3 Cash Equivalents and Investments
for further detailed discussion. Investments with original
maturities greater than three months and remaining maturities
less than one year are classified as short-term investments.
Investments with remaining maturities greater than one year are
classified as long-term investments.
Other-than-temporary
impairment. All of our
available-for-sale
investments are subject to a periodic impairment review. We
recognize an impairment charge when a decline in the fair value
of our investments below the cost basis is judged to be
other-than-temporary.
Factors considered by management in assessing whether an
other-than-temporary
impairment has occurred include: the nature of the investment;
whether the decline in fair value is attributable to specific
adverse conditions affecting the investment; the financial
condition of the investee; the severity and the duration of the
impairment; and whether we have the intent and ability to hold
the investment to maturity. When we determine that an
other-than-temporary
impairment has occurred, the investment is written down to its
market value at the end of the period in which we determine that
an
other-than-temporary
decline occurred. The amortized cost of debt securities in this
category is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in
interest income. Realized gains and losses and declines in value
judged to be
other-than-temporary,
if any, on
available-for-sale
securities are included in other income or expense. The cost of
securities sold is based on the specific identification method.
Interest and dividends on securities classified as
available-for-sale
are included in Interest and Other, net.
Revenue
Recognition
We recognize revenue when the following criteria have been met:
persuasive evidence of an arrangement exists; delivery has
occurred or services have been rendered; the fee is fixed or
determinable; and collectability is reasonably assured.
Determination of whether persuasive evidence of an arrangement
exists and whether delivery has occurred or services have been
rendered are based on managements judgments regarding the
fixed nature of the fee charged for research performed and
milestones met, and the collectability of those fees. Should
changes in conditions cause management to determine these
criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.
Research and development revenues, which are earned under
agreements with third parties for agreed research and
development activities, may include non-refundable license fees,
research and development funding, cost reimbursements and
contingent milestones and royalties. Our revenue arrangements
with multiple elements are divided into separate units of
accounting if certain criteria are met, including whether the
delivered element has stand-alone value to the customer and
whether there is objective and reliable evidence of the fair
value of the undelivered items. The consideration we receive is
allocated among the separate units based on their respective
fair
62
values, and the applicable revenue recognition criteria are
applied to each of the separate units. Non-refundable license
fees are recognized as revenue as we perform under the
applicable agreement. Where the level of effort is relatively
consistent over the performance period, we recognize total fixed
or determined revenue on a straight-line basis over the
estimated period of expected performance.
We recognize milestone payments as revenue upon achievement of
the milestone, provided the milestone payment is non-refundable,
substantive effort and risk is involved in achieving the
milestone and the amount of the milestone is reasonable in
relation to the effort expended or risk associated with the
achievement of the milestone. If these conditions are not met,
we defer the milestone payment and recognize it as revenue over
the estimated period of performance under the contract as we
complete our performance obligations.
Research and development revenues and cost reimbursements are
based upon negotiated rates for our FTEs and actual
out-of-pocket
costs. FTE rates are negotiated rates that are based upon our
costs, and which we believe approximate fair value. Any amounts
received in advance of performance are recorded as deferred
revenue. None of the revenues recognized to date are refundable
if the relevant research effort is not successful. In revenue
arrangements in which both parties make payments to each other,
we evaluate the payments to determine whether payments made by
us will be recognized as a reduction of revenue or as expense.
Revenue we recognize may be reduced by payments made to the
other party under the arrangement unless we receive a separate
and identifiable benefit in exchange for the payments and we can
reasonably estimate the fair value of the benefit received.
Funds received from third parties under grant arrangements are
recorded as revenue if we are deemed to be the principal
participant in the grant arrangement as the activities under the
grant are part of our development programs. If we are not the
principal participant, the grant funds are recorded as a
reduction to research and development expense. Grant funds
received are not refundable and are recognized when the related
qualified research and development costs are incurred and when
there is reasonable assurance that the funds will be received.
Funds received in advance are recorded as deferred revenue.
Preclinical
Study and Clinical Trial Accruals
A substantial portion of our preclinical studies and all of our
clinical trials have been performed utilizing third-party
contract research organizations (CROs) and other
vendors. For preclinical studies, the significant factors used
in estimating accruals include the percentage of work completed
to date and contract milestones achieved. For clinical trial
expenses, the significant factors used in estimating accruals
include the number of patients enrolled, duration of enrollment
and percentage of work completed to date. We monitor patient
enrollment levels and related activities to the extent possible
through internal reviews, correspondence and status meetings
with CROs and review of contractual terms. Our estimates are
dependent on the timeliness and accuracy of data provided by our
CROs and other vendors. If we have incomplete or inaccurate
data, we may under-or overestimate activity levels associated
with various studies or clinical trials at a given point in
time. In this event, we could record adjustments to research and
development expenses in future periods when the actual activity
levels become known. No material adjustments to preclinical
study and clinical trial expenses have been recognized to date.
Stock-Based
Compensation
We apply the accounting guidance for stock compensation, which
establishes the accounting for share-based payment awards made
to employees and directors, including employee stock options and
employee stock purchases. Under this guidance, stock-based
compensation cost is measured at the grant date based on the
calculated fair value of the award, and is recognized as an
expense on a straight-line basis over the employees
requisite service period, generally the vesting period of the
award.
Under the guidance for stock compensation for non-employees, we
measure the fair value of the award each period until the award
is fully vested.
As required under the accounting rules, we review our valuation
assumptions at each grant date and, as a result, from time to
time we will likely change the valuation assumptions we use to
value stock based awards granted in future periods. The
assumptions used in calculating the fair value of share-based
payment awards represent managements best estimates at the
time, but these estimates involve inherent uncertainties and the
application of
63
management judgment. As a result, if conditions change and we
use different assumptions, our stock-based compensation expense
could be materially different in the future. In addition, we are
required to estimate the expected forfeiture rate and recognize
expense only for those shares expected to vest. If our actual
forfeiture rate is materially different from our estimate, the
stock-based compensation expense could be significantly
different from what we have recorded in the current period.
Income
taxes
We account for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts
expected to be realized. We did not record an income tax
provision in the year ended December 31, 2008 because we
had a net taxable loss in that period. We recorded an income tax
provision of $150,000 in 2009 due to alternative minimum tax
(AMT). However, due to the Department of the
Treasurys further guidance clarifying that utilization of
the AMT net operating loss (NOL) was not limited to
90% as part of the
5-year NOL
carryback provision brought about by the Worker, Homeownership,
and Business Assistance Act of 2009, the 2009 AMT liability
was reversed in 2010. In addition to the $150,000 benefit
related to the AMT liability, we also recognized a $26,000
benefit related to the monetization of the federal research tax
credit for a total benefit of approximately $176,000 in 2010.
Based upon the weight of available evidence, which includes our
historical operating performance, reported cumulative net losses
since inception and difficulty in accurately forecasting our
future results, we maintained a full valuation allowance on the
net deferred tax assets as of December 31, 2010, 2009 and
2008. The valuation allowance was determined pursuant to the
accounting guidance for income taxes, which requires an
assessment of both positive and negative evidence when
determining whether it is more likely than not that deferred tax
assets are recoverable. We intend to maintain a full valuation
allowance on the U.S. deferred tax assets until sufficient
positive evidence exists to support reversal of the valuation
allowance. The valuation allowance increased by
$15.6 million in 2010, decreased by $9.56 million in
2009, and increased by $23.9 million in 2008.
We also follow the accounting guidance that defines the
threshold for recognizing the benefits of tax return positions
in the financial statements as more-likely-than-not
to be sustained by the taxing authorities based solely on the
technical merits of the position. If the recognition threshold
is met, the tax benefit is measured and recognized as the
largest amount of tax benefit that, in our judgment, is greater
than 50% likely to be realized. We are currently not undergoing
any income tax examinations. In general, the statute of
limitations for tax liabilities for these years remains open for
the purpose of adjusting the amounts of the losses and credits
carried forward from those years.
Interest accrued related to unrecognized tax benefits and
penalties were zero for 2010 and 2009. We account for interest
related to unrecognized tax benefits and penalties by
classifying both as income tax expense in the financial
statements in accordance with the accounting guidance for
uncertainty in income taxes. We do not expect our unrecognized
tax benefits to change materially over the next twelve months.
Recent
Accounting Pronouncements
See Recent Accounting Pronouncements in Note 1,
Organization and Significant Accounting Policies in
the Notes to Financial Statements for a discussion of recently
adopted accounting pronouncements and accounting pronouncements
not yet adopted, and their expected impact on our financial
position and results of operations.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Interest
Rate and Market Risk
Our exposure to market risk is limited to interest rate
sensitivity, which is affected by changes in the general level
of U.S. interest rates, particularly because the majority
of our investments are in short-term debt securities. The
primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we
receive without significantly increasing risk. We are exposed to
the impact of interest rate changes and changes in the market
values of our investments. Our interest income is sensitive to
changes in the general level of
64
U.S. interest rates. Our exposure to market rate risk for
changes in interest rates relates primarily to our investment
portfolio. We have not used derivative financial instruments in
our investment portfolio. We invest the majority of our excess
cash in U.S. Treasuries and, by policy, limit the amount of
credit exposure in any one issuer and investment class, with the
exception of obligations of the U.S. Treasury and federal
agencies, for which there are no such limits. We protect and
preserve our invested funds by attempting to limit default,
market and reinvestment risk. Investments in both fixed-rate and
floating-rate interest-earning instruments carry a degree of
interest rate risk. Fixed-rate securities may have their fair
market value adversely impacted due to a rise in interest rates,
while floating-rate securities may produce less income than
expected if interest rates fall. Due in part to these factors,
our future investment income may fall short of expectations due
to changes in interest rates.
To minimize risk, we maintain our portfolio of cash and cash
equivalents and short- and long-term investments in a variety of
interest-bearing instruments, including U.S. government and
agency securities, high grade municipal and U.S. bonds and
money market funds. Our investment portfolio of short- and
long-term investments is subject to interest rate risk, and will
fall in value if market interest rates increase.
Our cash and cash equivalents are invested in highly liquid
securities with maturities of three months or less at the time
of purchase. Consequently, we do not consider our cash and cash
equivalents to be subject to significant interest rate risk and
have therefore excluded them from the table below. On the
liability side, our equipment financing lines carry fixed
interest rates and therefore also may be subject to changes in
fair value if market interest rates fluctuate. We do not have
any foreign currency or derivative financial instruments.
The table below presents the principal amounts and weighted
average interest rates by year of maturity for our equipment
financing lines and investment portfolio (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Beyond 2013
|
|
|
Total
|
|
|
2010
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$
|
54,125
|
|
|
$
|
1,206
|
|
|
|
|
|
|
|
|
|
|
$
|
55,331
|
|
|
$
|
55,331
|
|
Average interest rate
|
|
|
0.28
|
%
|
|
|
0.42
|
%
|
|
|
|
|
|
|
|
|
|
|
0.29
|
%
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment financing lines
|
|
$
|
833
|
|
|
$
|
152
|
|
|
|
|
|
|
|
|
|
|
$
|
985
|
|
|
$
|
947
|
|
Average interest rate
|
|
|
7.31
|
%
|
|
|
7.25
|
%
|
|
|
|
|
|
|
|
|
|
|
7.30
|
%
|
|
|
|
|
65
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
CYTOKINETICS,
INCORPORATED
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
66
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Cytokinetics,
Incorporated:
In our opinion, the accompanying balance sheets and the related
statement of operations, stockholders equity (deficit) and
cash flows present fairly, in all material respects, the
financial position of Cytokinetics, Incorporated at
December 31, 2010 and December 31, 2009, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 2010 and
cumulatively, for the period from August 5, 1997 (date of
inception) to December 31, 2010 in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control over
Financial Reporting under Item 9A. Our responsibility is to
express opinions on these financial statements and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PRICEWATERHOUSECOOPERS
LLP
San Jose, CA
March 10, 2011
67
CYTOKINETICS,
INCORPORATED
(A Development Stage Enterprise)
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except
|
|
|
|
share and per share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,514
|
|
|
$
|
25,561
|
|
Short-term investments
|
|
|
54,125
|
|
|
|
71,266
|
|
Investments in auction rate securities
|
|
|
|
|
|
|
15,542
|
|
Investment put option related to auction rate securities rights
|
|
|
|
|
|
|
2,358
|
|
Related party accounts receivable
|
|
|
46
|
|
|
|
180
|
|
Related party notes receivable
|
|
|
|
|
|
|
9
|
|
Prepaid and other current assets
|
|
|
1,813
|
|
|
|
2,005
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
73,498
|
|
|
|
116,921
|
|
Long-term investments
|
|
|
1,206
|
|
|
|
|
|
Property and equipment, net
|
|
|
2,321
|
|
|
|
3,713
|
|
Restricted cash
|
|
|
788
|
|
|
|
1,674
|
|
Other assets
|
|
|
179
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
77,992
|
|
|
$
|
122,599
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,119
|
|
|
$
|
1,683
|
|
Accrued liabilities
|
|
|
5,372
|
|
|
|
5,935
|
|
Short-term portion of equipment financing lines
|
|
|
833
|
|
|
|
1,616
|
|
Deferred revenue
|
|
|
|
|
|
|
751
|
|
Loan with UBS
|
|
|
|
|
|
|
10,201
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,324
|
|
|
|
20,186
|
|
Long-term portion of equipment financing lines
|
|
|
152
|
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,476
|
|
|
|
21,171
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Convertible preferred stock:
|
|
|
|
|
|
|
|
|
Authorized: 10,000,000 shares in 2010 and 2009
|
|
|
|
|
|
|
|
|
Issued and outstanding: zero shares in 2010 and 2009
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value:
|
|
|
|
|
|
|
|
|
Authorized: 170,000,000 shares in 2010 and 2009
|
|
|
|
|
|
|
|
|
Issued and outstanding: 66,907,600 shares in 2010 and
61,275,036 shares in 2009
|
|
|
67
|
|
|
|
61
|
|
Additional paid-in capital
|
|
|
431,103
|
|
|
|
412,729
|
|
Accumulated other comprehensive income
|
|
|
(4
|
)
|
|
|
1
|
|
Deficit accumulated during the development stage
|
|
|
(360,650
|
)
|
|
|
(311,363
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
70,516
|
|
|
|
101,428
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
77,992
|
|
|
$
|
122,599
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
August 5, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development revenues from related parties
|
|
$
|
1,487
|
|
|
$
|
7,171
|
|
|
$
|
186
|
|
|
$
|
49,096
|
|
Research and development, grant and other revenues
|
|
|
1,090
|
|
|
|
|
|
|
|
|
|
|
|
4,045
|
|
License revenues from related parties
|
|
|
|
|
|
|
74,367
|
|
|
|
12,234
|
|
|
|
112,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,577
|
|
|
|
81,538
|
|
|
|
12,420
|
|
|
|
166,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
38,013
|
|
|
|
39,840
|
|
|
|
53,950
|
|
|
|
415,290
|
|
General and administrative
|
|
|
14,199
|
|
|
|
15,626
|
|
|
|
15,076
|
|
|
|
130,362
|
|
Restructuring charges (reversals)
|
|
|
|
|
|
|
(23
|
)
|
|
|
2,473
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
52,212
|
|
|
|
55,443
|
|
|
|
71,499
|
|
|
|
548,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(49,635
|
)
|
|
|
26,095
|
|
|
|
(59,079
|
)
|
|
|
(382,026
|
)
|
Interest and other, net
|
|
|
172
|
|
|
|
(1,401
|
)
|
|
|
2,705
|
|
|
|
21,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(49,463
|
)
|
|
|
24,694
|
|
|
|
(56,374
|
)
|
|
|
(360,676
|
)
|
Income tax provision (benefit)
|
|
|
(176
|
)
|
|
|
150
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(49,287
|
)
|
|
$
|
24,544
|
|
|
$
|
(56,374
|
)
|
|
$
|
(360,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.77
|
)
|
|
$
|
0.43
|
|
|
$
|
(1.14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.77
|
)
|
|
$
|
0.42
|
|
|
$
|
(1.14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in computing net income
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
64,165
|
|
|
|
57,390
|
|
|
|
49,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
64,165
|
|
|
|
57,961
|
|
|
|
49,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
During the
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Income
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
(Loss)
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.015 per share
|
|
|
147,625
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
Issuance of common stock to founders at $0.015 per share in
exchange for cash in January 1998
|
|
|
563,054
|
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,015
|
)
|
|
|
(2,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 1998
|
|
|
710,679
|
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
(2,015
|
)
|
|
|
(2,005
|
)
|
Issuance of common stock upon exercise of stock options for cash
at $0.015-$0.58 per share
|
|
|
287,500
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Issuance of warrants, valued using Black-Scholes model
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
(237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,341
|
)
|
|
|
(7,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 1999
|
|
|
998,179
|
|
|
|
1
|
|
|
|
356
|
|
|
|
(114
|
)
|
|
|
(8
|
)
|
|
|
(9,356
|
)
|
|
|
(9,121
|
)
|
Issuance of common stock upon exercise of stock options for cash
at $0.015-$0.58 per share
|
|
|
731,661
|
|
|
|
1
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
|
|
|
|
|
|
86
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,079
|
)
|
|
|
(13,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2000
|
|
|
1,729,840
|
|
|
|
2
|
|
|
|
643
|
|
|
|
(106
|
)
|
|
|
78
|
|
|
|
(22,435
|
)
|
|
|
(21,818
|
)
|
Issuance of common stock upon exercise of stock options for cash
at $0.015-$1.20 per share
|
|
|
102,480
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
Repurchase of common stock
|
|
|
(33,334
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
Compensation expense for acceleration of options
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
190
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,874
|
)
|
|
|
(15,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,684
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2001
|
|
|
1,798,986
|
|
|
|
2
|
|
|
|
745
|
|
|
|
(58
|
)
|
|
|
268
|
|
|
|
(38,309
|
)
|
|
|
(37,352
|
)
|
Issuance of common stock upon exercise of stock options for cash
at $0.015-$1.20 per share
|
|
|
131,189
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
Repurchase of common stock
|
|
|
(3,579
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228
|
)
|
|
|
|
|
|
|
(228
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,080
|
)
|
|
|
(23,080
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
CYTOKINETICS,
INCORPORATED
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
During the
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Income
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
(Loss)
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Balances, December 31, 2002
|
|
|
1,926,596
|
|
|
$
|
2
|
|
|
$
|
809
|
|
|
$
|
(50
|
)
|
|
$
|
40
|
|
|
$
|
(61,389
|
)
|
|
$
|
(60,588
|
)
|
Issuance of common stock upon exercise of stock options for cash
at $0.20-$1.20 per share
|
|
|
380,662
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,369
|
|
|
|
(4,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
768
|
|
|
|
|
|
|
|
|
|
|
|
768
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,685
|
)
|
|
|
(32,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2003
|
|
|
2,307,258
|
|
|
|
2
|
|
|
|
5,646
|
|
|
|
(3,651
|
)
|
|
|
46
|
|
|
|
(94,074
|
)
|
|
|
(92,031
|
)
|
Issuance of common stock upon initial public offering at $13.00
per share, net of issuance costs of $9,151
|
|
|
7,935,000
|
|
|
|
8
|
|
|
|
93,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,004
|
|
Issuance of common stock to related party for $13.00 per share
|
|
|
538,461
|
|
|
|
1
|
|
|
|
6,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
Issuance of common stock to related party
|
|
|
37,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to common stock upon initial
public offering
|
|
|
17,062,145
|
|
|
|
17
|
|
|
|
133,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133,172
|
|
Issuance of common stock upon cashless exercise of warrants
|
|
|
115,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.20-$6.50 per share
|
|
|
404,618
|
|
|
|
|
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430
|
|
Issuance of common stock pursuant to ESPP at $8.03 per share
|
|
|
69,399
|
|
|
|
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
557
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
Deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
2,198
|
|
|
|
(2,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,598
|
|
|
|
|
|
|
|
|
|
|
|
1,598
|
|
Repurchase of unvested stock
|
|
|
(16,548
|
)
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(234
|
)
|
|
|
|
|
|
|
(234
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,198
|
)
|
|
|
(37,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2004
|
|
|
28,453,173
|
|
|
|
28
|
|
|
|
243,239
|
|
|
|
(4,251
|
)
|
|
|
(188
|
)
|
|
|
(131,272
|
)
|
|
|
107,556
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.58-$7.10 per share
|
|
|
196,703
|
|
|
|
1
|
|
|
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
371
|
|
Issuance of common stock pursuant to ESPP at $4.43 per share
|
|
|
179,520
|
|
|
|
|
|
|
|
763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
763
|
|
Issuance of common stock upon cashless exercise of warrants
|
|
|
14,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon drawdown of committed equity
financing facility at $6.13-$7.35 per share, net of issuance
costs of $178
|
|
|
887,576
|
|
|
|
1
|
|
|
|
5,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,547
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
Amortization of deferred stock-based compensation, net of
cancellations
|
|
|
|
|
|
|
|
|
|
|
(439
|
)
|
|
|
1,799
|
|
|
|
|
|
|
|
|
|
|
|
1,360
|
|
Repurchase of unvested stock
|
|
|
(20,609
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174
|
|
|
|
|
|
|
|
174
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,252
|
)
|
|
|
(42,252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
CYTOKINETICS,
INCORPORATED
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
During the
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Income
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
(Loss)
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Balances, December 31, 2005
|
|
|
29,710,895
|
|
|
$
|
30
|
|
|
$
|
249,521
|
|
|
$
|
(2,452
|
)
|
|
$
|
(14
|
)
|
|
$
|
(173,524
|
)
|
|
$
|
73,561
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.20-$7.10 per share
|
|
|
354,502
|
|
|
|
|
|
|
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
559
|
|
Issuance of common stock pursuant to ESPP at a weighted price of
$4.43 per share
|
|
|
193,248
|
|
|
|
|
|
|
|
856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
856
|
|
Issuance of common stock pursuant to registered direct offerings
at $6.60 and $7.00 per share, net of issuance costs of $3,083
|
|
|
10,285,715
|
|
|
|
10
|
|
|
|
66,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,917
|
|
Issuance of common stock upon drawdown of committed equity
financing facility at $5.53-$7.02 per share
|
|
|
2,740,735
|
|
|
|
3
|
|
|
|
16,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,957
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,421
|
|
Amortization of deferred stock-based compensation, net of
cancellations
|
|
|
|
|
|
|
|
|
|
|
(138
|
)
|
|
|
1,358
|
|
|
|
|
|
|
|
|
|
|
|
1,220
|
|
Repurchase of unvested stock
|
|
|
(1,537
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
(61
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,115
|
)
|
|
|
(57,115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2006
|
|
|
43,283,558
|
|
|
|
43
|
|
|
|
338,078
|
|
|
|
(1,094
|
)
|
|
|
(75
|
)
|
|
|
(230,639
|
)
|
|
|
106,313
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.58-$7.10 per share
|
|
|
259,054
|
|
|
|
1
|
|
|
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
512
|
|
Issuance of common stock pursuant to ESPP at a weighted price of
$4.49 per share
|
|
|
179,835
|
|
|
|
|
|
|
|
807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
807
|
|
Issuance of common stock upon drawdown of committed equity
financing facility at $4.43-$4.81 per share
|
|
|
2,075,177
|
|
|
|
2
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,542
|
|
Issuance of common stock to related party for $9.47 per share,
net of issuance costs of $57
|
|
|
3,484,806
|
|
|
|
3
|
|
|
|
26,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,009
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,833
|
|
Amortization of deferred stock-based compensation, net of
cancellations
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
720
|
|
Repurchase of unvested stock
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
74
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,894
|
)
|
|
|
(48,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007
|
|
|
49,282,362
|
|
|
|
49
|
|
|
|
379,730
|
|
|
|
(329
|
)
|
|
|
(1
|
)
|
|
|
(279,533
|
)
|
|
|
99,916
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.58-$3.37 per share
|
|
|
95,796
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131
|
|
Issuance of common stock pursuant to ESPP at a weighted price of
$2.85 per share
|
|
|
164,451
|
|
|
|
|
|
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468
|
|
Issuance of restricted stock at a price of $0.001 per share
|
|
|
397,960
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of restricted stock
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
5,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,277
|
|
Amortization of deferred stock-based compensation, net of
cancellations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
329
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,374
|
)
|
|
|
(56,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
CYTOKINETICS,
INCORPORATED
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
During the
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock-Based
|
|
|
Income
|
|
|
Development
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
(Loss)
|
|
|
Stage
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share data)
|
|
|
Balances, December 31, 2008
|
|
|
49,939,069
|
|
|
$
|
50
|
|
|
$
|
385,605
|
|
|
$
|
|
|
|
$
|
18
|
|
|
$
|
(335,907
|
)
|
|
$
|
49,766
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.20-$4.95 per share
|
|
|
492,003
|
|
|
|
|
|
|
|
588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
Issuance of common stock pursuant to ESPP at a weighted price of
$1.66 per share
|
|
|
149,996
|
|
|
|
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249
|
|
Issuance of common stock and warrants pursuant to registered
direct offering at $1.97 per share, net of issuance costs of
$1,062
|
|
|
7,106,600
|
|
|
|
7
|
|
|
|
14,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,522
|
|
Issuance of common stock upon drawdown of committed equity
financing facility at $1.80-$2.29 per share, net of issuance
costs of $98
|
|
|
3,596,728
|
|
|
|
4
|
|
|
|
6,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,850
|
|
Cancellation of restricted stock
|
|
|
(9,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,906
|
|
Tax benefit from stock based compensation
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
(17
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,544
|
|
|
|
24,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2009
|
|
|
61,275,036
|
|
|
|
61
|
|
|
|
412,729
|
|
|
|
|
|
|
|
1
|
|
|
|
(311,363
|
)
|
|
|
101,428
|
|
Issuance of common stock upon exercise of stock options for cash
at $0.58-$2.00 per share
|
|
|
176,433
|
|
|
|
1
|
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198
|
|
Issuance of common stock pursuant to ESPP at a weighted price of
$1.70 per share
|
|
|
134,237
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228
|
|
Issuance of common stock upon drawdown of committed equity
financing facility at $2.05-$3.15 per share, net of issuance
costs of $1)
|
|
|
5,339,819
|
|
|
|
5
|
|
|
|
13,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,957
|
|
Cancellation of restricted stock
|
|
|
(17,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
4,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,017
|
|
Reversal of tax benefit from stock based compensation
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,287
|
)
|
|
|
(49,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2010
|
|
|
66,907,600
|
|
|
$
|
67
|
|
|
$
|
431,103
|
|
|
$
|
|
|
|
$
|
(4
|
)
|
|
$
|
(360,650
|
)
|
|
$
|
70,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
73