Earnings Call Transcript - CYTK Q4 2021

Operator, Operator

Good afternoon and welcome to Cytokinetics' fourth quarter 2021 conference call. I will now turn the call over to Joanna Siegall, Cytokinetics' Senior Manager of Corporate Communications and Investor Relations. Please go ahead.

Joanna Siegall, Senior Manager of Corporate Communications and Investor Relations

Thanks. Good afternoon, and thanks for joining us on the call today. Robert Blum, President and Chief Executive Officer, will begin with a brief overview of the quarter and recent developments. Fady Malik, EVP of R&D, will then provide updates related to omecamtiv mecarbil and CK-136. Stuart Kupfer, SVP and Chief Medical Officer will provide an update on aficamten and reldesemtiv. Andrew Callos, EVP and Chief Commercial Officer, will discuss commercialization planning activities for omecamtiv mecarbil. Robert Wong, VP and Chief Accounting Officer, will provide a financial overview for the past quarter. And Ching Jaw, SVP and Chief Financial Officer, will discuss our 2022 financial guidance and corporate development strategies. Finally Robert Blum will provide closing comments and review expected key milestones for 2022. Please note that portions of the following discussion, including our responses to questions, contain statements that relate to future events and performance rather than historical facts and constitute forward-looking statements. Our actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in our SEC filings, including our current report regarding our fourth quarter 2021 financial results filed on Form 8-K today. We undertake no obligation to update any forward-looking statements after this call. Now I will turn the call over to Robert.

Robert Blum, President and Chief Executive Officer

Thank you, Joanna, and thanks again to everyone for joining us on the call today. We had a very productive fourth quarter with additional positives and progress continuing into the early part of this year. Most notably, we recently announced that the FDA accepted for filing our NDA for omecamtiv mecarbil, assigning a PDUFA date of November 30, 2022. This is an exciting milestone for our company, which has been made possible by dozens of clinical trials, thousands of clinical trial participants, and years of dedication from employees of Cytokinetics. We also announced the results of METEORIC-HF, which did not show an effect of treatment with omecamtiv mecarbil compared to placebo on exercise capacity in patients being treated with standard care medical therapy. While we are, of course, disappointed with this result, the NDA on file with the FDA is based on the results from GALACTIC-HF, and we do not expect the results from METEORIC-HF to impact the potential approval of omecamtiv mecarbil, given the safety profile was consistent with prior clinical trials. Turning to aficamten. We've made substantial progress in this program throughout 2021 and again already this year. During the quarter, we received breakthrough therapy designation from the FDA for aficamten. The Center for Drug Evaluation of the National Medical Products Administration also granted breakthrough therapy designation for aficamten for the treatment of symptomatic obstructive HCM in China. Additionally, just yesterday, we announced that SEQUOIA-HCM, the Phase III clinical trial of aficamten in patients with symptomatic obstructive HCM, has opened to enrollment. We also recently shared top line results from Cohort 3 of REDWOOD-HCM in patients treated with disopyramide, which is supportive of including this patient population in SEQUOIA-HCM. Later in this call, Stuart will detail our plans for expanding the development program for aficamten with additional trials to be underway this year. During Q4, we also progressed earlier-stage research programs to IND-enabling studies, and we are also planning to advance the clinical development of CK-136, our cardiac troponin activator. Fady will speak more to our objectives for this novel mechanism program in a moment. Underpinning our recent successes and support of our ambitious goals this year is our strong balance sheet and funding commitments that together represent over two years of cash runway, bolstered by two recent transactions on which Ching will elaborate further. We are entering an exciting new phase for our company. We've continued to expand our team and we're building new capabilities leading up to the potential approval and expected launch of omecamtiv mecarbil. At the same time, we've continued to work across our pipeline of late-stage programs with aficamten and reldesemtiv, as well as earlier stage programs including CK-136 and our preclinical activities, all progressing. Today, we look forward to sharing updates with you from all of these programs as well as our expected milestones for the year. And with that, I'll turn the call over to Fady to elaborate firstly on recent developments related to omecamtiv mecarbil and CK-136.

Fady Malik, Executive VP of R&D

Thanks, Robert. Last week, we announced the top line results of METEORIC-HF, evaluating the effect of 20 weeks of treatment with omecamtiv mecarbil compared to placebo on exercise capacity. This trial consisted of 276 participants, and there was no effect on the primary endpoint, which was the change in peak oxygen uptake or peak VO2, as measured by cardiopulmonary exercise testing from baseline to week 20. Adverse events were similar between the treatment arms, and it's important to note in this trial that we enrolled a lower-risk patient population than GALACTIC-HF and investigated a different hypothesis, namely increasing exercise capacity as opposed to reducing the risk of clinical outcomes. While medical therapies have demonstrated significant reductions in the risk of adverse clinical outcomes in heart failure patients with reduced ejection fraction, as was also observed with omecamtiv mecarbil and GALACTIC-HF, demonstrating an improvement in exercise capacity with the same medical therapies has been elusive. METEORIC-HF was an extremely well-conducted trial, performed under challenging circumstances given the pandemic. I want to congratulate the study team and the investigators for completing this trial as well as thank the patients for their participation. The full results, which are embargoed for now, will be presented at the ACC scientific session as a late-breaking clinical trial in April. We're continuing to pursue additional learnings from GALACTIC-HF. In the fourth quarter, we presented the results from a post-hoc analysis showing that treatment with omecamtiv mecarbil was associated with a significant reduction in the risk of stroke. This reduction may be related to the reduction in adverse events of atrial fibrillation or flutter as well as improvements in atrial and ventricular function that have been observed in GALACTIC-HF in previous clinical trials for omecamtiv mecarbil. At the upcoming ACC scientific session in April, we look forward to presenting new analyses from GALACTIC-HF, comparing the effect of omecamtiv mecarbil on the pre-specified subgroups of hospitalized patients versus outpatients. Plus our health economics and outcomes research colleagues in collaboration with Dr. Nihar Desai of the Yale School of Medicine and others will be presenting data on heart failure related to healthcare resource utilization as well as the associated intensity and cost of patients from GALACTIC-HF. As Robert mentioned, the NDA for omecamtiv mecarbil is under review by the FDA with a PDUFA date of November 30, 2022. I want to take a moment to congratulate and thank all the contributors to this filing as it represents many years of dedication in the pursuit of an innovative hypothesis for the potential benefit of patients with heart failure. Now back to pre-commercialization activities for omecamtiv mecarbil. On the medical affairs side, in the fourth quarter, we continued to expand the size and leadership of our therapeutic medical scientist team and began development of our managed healthcare medical science team as well. We also completed vendor selection for the medical contact center and finalized the governance and design of our investigator-sponsored study program. The medical affairs team will continue important educational activities, supportive of the potential launch of omecamtiv mecarbil driven by our 2022 strategic plan. Switching gears to CK-136, our investigational novel cardiac troponin activator. During the quarter, we presented preclinical data relating to its discovery and optimization. We also presented and published preclinical data on an analog of CK-136, showing that it increases contractility without negative impacts on myocardial energetics. We have started planning to enable advancing the development program for CK-136 before the end of the year. CK-136 has the potential to be differentiated from omecamtiv mecarbil, given its mechanism of action and our plans to investigate its potential safety and efficacy in adjacent populations of unmet need, such as heart failure with right ventricular dysfunction. With that, I'll turn the call over to Stuart to provide an update on aficamten and reldesemtiv.

Stuart Kupfer, SVP and Chief Medical Officer

Thanks, Fady. During the quarter, we were pleased to announce that the FDA granted breakthrough therapy designation for aficamten for the treatment of symptomatic obstructive HCM based largely on the data generated from the Phase II clinical trial, REDWOOD-HCM. HCM remains an area of high unmet need with few treatment options for patients who often experience many symptoms that impact their daily quality of life. A few weeks ago, we also shared top-line results from Cohort 3 of REDWOOD-HCM conducted in patients with obstructive HCM who were refractory despite treatment with the last line of medical therapy disopyramide. Results showed that substantial reductions were achieved in the average resting and post-Valsalva left ventricular outflow track gradients. These decreases were achieved with only modest decreases in average LV ejection fraction, with no patients whose ejection fraction fell below the pre-specified safety threshold of 50%. The pharmacokinetics and safety and tolerability profile of aficamten were consistent with prior experience in REDWOOD-HCM, and there were no treatment interruptions. We look forward to presenting the full results of Cohort 3 at the ACC Annual Scientific Session in April. Yesterday, we were pleased to announce the opening of enrollment in SEQUOIA-HCM, the Phase III registrational trial of aficamten. SEQUOIA-HCM is a randomized, double-blind, placebo-controlled international clinical trial designed to compare 24 weeks of treatment with aficamten or placebo in patients with symptomatic obstructive HCM, who have substantial outflow track gradient despite background medical therapy. The primary objective is to evaluate the change from baseline to week 24 in peak VO2, measured by CPET as a measure of exercise capacity. We expect to enroll 270 patients to aficamten or placebo in addition to standard care, randomized in a 1:1 ratio. Following the positive results of Cohort 3 of REDWOOD-HCM, patients whose background therapy includes disopyramide will also be eligible to enroll. Each patient will receive up to 4 escalating doses of aficamten or matching placebo, beginning with 5 milligrams once daily and escalating to 10, 15, or 20 milligrams once daily as needed to achieve target outflow track gradients. Dose escalation is based on echocardiography alone. Secondary objectives include evaluations of the change in KCCQ clinical symptom score and New York Heart Association Functional Class at week 12 and week 24. While the inclusion and exclusion criteria are summarized in yesterday's press release, one of the key criteria I want to call out is that we'll be enrolling patients with peak VO2 less than 80% of that predicted for each patient, indicating a clear and objective reduction in exercise performance. Therefore, we do expect to enroll a patient population whose decreased functional capacity is characterized by an objective rigorous measurement. We anticipate enrollment of SEQUOIA-HCM to take roughly 1 year and therefore, expect to enroll through the duration of this year. Meanwhile, we're continuing to enroll prior patients from REDWOOD-HCM into the open-label extension study, REDWOOD-HCM OLE. A great majority of patients from REDWOOD-HCM are choosing to continue into the open-label extension with 37 patients already included at sites that are open to enrollment. We look forward to sharing the first data cut from the open-label extension of REDWOOD-HCM later this year. This year, we also plan to expand the development program for aficamten. First, we plan to add Cohort 4 to REDWOOD-HCM to enroll symptomatic patients with non-obstructive HCM. This approach will enable us to move more expeditiously into a potential pivotal clinical trial in non-obstructive HCM thereafter. We expect to begin enrolling Cohort 4 at several sites starting in the United States very soon. It will include approximately 30 to 40 patients with non-obstructive HCM enrolled in an open-label fashion to escalating doses of aficamten of 5, 10, or 15 milligrams as informed by echocardiography. The primary objective will be safety and tolerability of aficamten in this patient population, but we'll also evaluate their biomarker and symptom responses. Further details of the design of Cohort 4 will be provided when we announce that it is open to enrollment. Second, later in 2022, we plan to start an additional Phase III clinical trial of aficamten in obstructive HCM to better understand its use relative to current standard care therapy. The results from this trial may be incorporated into treatment guidelines or an expansion of the label of aficamten, following its potential initial approval that may be based on the results of SEQUOIA-HCM. Our planning to conduct a second Phase III clinical trial of aficamten is further testament to our confidence in the next-in-class profile of aficamten. We look forward to sharing more details about the expansion of this important development program for aficamten throughout the year. Turning now to reldesemtiv. We continued enrolling patients in COURAGE-ALS, the Phase III clinical trial of reldesemtiv in ALS. As a reminder, this is a large international trial that will enroll 555 patients with ALS in the US, Canada, Australia, and Europe. And it builds on the results from FORTITUDE-ALS, the Phase II clinical trial, which showed that patients on all dose groups of reldesemtiv experienced less disease progression than patients on placebo with larger and clinically meaningful differences emerging over time. During the past quarter, we presented data from our ALS program at the International Symposium on ALS/MND. Among the presentations was an analysis of the baseline characteristics of the first 27 patients enrolled in COURAGE-ALS, which showed that the majority of patients enrolled at the time of analysis were middle or fast progressors as was intended by the inclusion criteria of COURAGE-ALS to increase the sensitivity of detecting a treatment effect. As we continue to enroll the potentially pivotal clinical trial this year, we expect the data monitoring committee to conduct the first interim analysis in the trial, which will assess for futility and has triggered 12 weeks after approximately 1/3 or more of the planned number of patients is randomized. We remain enthusiastic about what COURAGE-ALS may deliver for patients with ALS. These patients and their advocacy organizations are fighting tirelessly to support the development of new therapies for what is truly a terrible disease. These patients continue to inspire us every day. With that, I'll turn the call over to Andrew.

Andrew Callos, EVP and Chief Commercial Officer

Thanks, Stuart. During the fourth quarter, we continued to build our commercial capabilities, systems, organization, and infrastructure while executing against our go-to-market strategy in the US for omecamtiv mecarbil across market access, sales, and marketing. First, market access progress includes furthering our pricing strategy and distribution approach, while we continue to engage with all major payers with plans to expand our payer interactions to include the results from GALACTIC-HF in the coming months. Second, with our marketing team in place, the brand strategy, as well as the product positioning that highlights the benefits of omecamtiv mecarbil and how it addresses unmet needs in the treatment of heart failure with reduced ejection fraction has been finalized, and we continue to progress the development of our launch campaign. Finally, activity supportive of building and deploying our sales force for the potential launch continues. We have finalized sales force size and structure. Furthermore, key customers have been identified across hospitals and cardiologists, and field territory boundaries have been designed. We expect our sales force size to be around 200 FTEs and consistent with our gated approach, the hiring of sales force representatives will occur after the approval of the drug by the FDA. As we have stated previously, our strategy has been based on this gated build remaining prudent in spending and initiating activities in line with key derisking events. The recent announcement of acceptance of our NDA by the FDA is one of those events, which has triggered the start of certain activities and some additional hiring in key longer lead time positions, including first-line field managers, sales operations, commercial learning and development, and further expansion of our ETOR, patient services, and access distribution strategy. Still, our overall team will only be about 1/3 of our expected post-approval headcount as the majority of our spending and FTEs will not occur until approval, including hiring our field representatives, media purchases, and patient support programs. For aficamten, we've engaged with global health technology assessment organizations during the past quarter to better understand value drivers that would be supportive of access in key European markets. In 2022, we will complete our US go-to-market strategy for aficamten and continue to conduct market research with payers, physicians, and patients to inform this potential entry as a new treatment for hypertrophic cardiomyopathy. And with that, I will turn the call over to Robert Wong.

Robert Wong, VP and Chief Accounting Officer

Thanks, Andrew. I'll review our cash revenue and spending for the fourth quarter of 2021. We ended the fourth quarter with $623.7 million in cash and investments. This cash balance does not include $150 million in proceeds received from transactions executed in late 2021 and early 2022. Our revenue in the fourth quarter of 2021 came primarily from $54.9 million of license revenue recognized from the transaction with Ji Xing. Our fourth quarter 2021 R&D expenses increased to $43.5 million from $29.2 million in the fourth quarter of 2020, primarily due to increases in spending for clinical development activities for our cardiac muscle inhibitor programs, COURAGE-ALS, facility expenses, and regulatory filing costs. More than 60% of our R&D expenses were attributable to our cardiovascular programs, and the remainder of our expenses were attributable to our skeletal muscle programs and early research activities. Our fourth quarter 2021 G&A expenses were $33.8 million, up from $13.9 million in the fourth quarter of 2020 due primarily to higher outside service spending in anticipation of the potential commercial launch of omecamtiv mecarbil, an increase in personnel-related costs, including stock-based compensation, and facility expenses for our new headquarters. And now Ching will review our financial outlook and corporate development strategy.

Ching Jaw, SVP and Chief Financial Officer

Thanks, Robert. Today, we announced our financial guidance for 2022. The company anticipates 2022 revenue will be in the range of $20 million to $25 million. Operating expenses will be in the range of $380 million to $400 million, and net cash utilization will be approximately $365 million to $385 million. Our current cash balance of approximately $724 million, plus additional committed capital expected to be earned from Royalty Pharma upon the dosing of the first patient in SEQUOIA-HCM represents more than 2 years of forecast based on our projected operating expenses and net cash utilization range for 2022. Given the PDUFA date of November 30 for omecamtiv mecarbil and our approach to only hire the majority of the sales force post-NDA approval, I expect a relatively slow ramp-up in commercial spending in 2022. Most of the sales and marketing spend for the commercial launch of omecamtiv mecarbil, for example, related to sales force, media purchases, and patient support program spending will not occur until 2023 if omecamtiv mecarbil receives approval in late 2022. And therefore, we do not expect significant post-approval related increases in spending until 2023. Our strong balance sheet is supported by two recent transactions. During the fourth quarter, we announced the expansion of our collaboration with Ji Xing Pharmaceuticals by entering into an exclusive license and collaboration agreement to develop and commercialize omecamtiv mecarbil for HFrEF in Greater China. Cytokinetics also entered into a common stock purchase agreement that provided for the sale and issuance to entities affiliated with RTW Investments of shares of Cytokinetics common stock with an aggregate purchase price of $20 million at a price per share of $39.125. In January 2022, we announced that Royalty Pharma will provide Cytokinetics long-term capital of up to $300 million primarily to support the potential commercialization of omecamtiv mecarbil and further development of aficamten. It will be available to us in five tranches, including an initial tranche of $50 million, which was received upon closing of the deal and four additional tranches. Those four additional tranches totaling $250 million will be accessible in $25 million increments subject to certain conditions upon the occurrence of milestones related to omecamtiv mecarbil and aficamten. Each tranche that Cytokinetics draws down will be followed by an interest-free payment-free period of six calendar quarters, after which equal installment repayments will be required over the following 34 calendar quarters. The total amount of interest and principal repayment will total 1.9 times the amount drawn. Additionally, Royalty Pharma purchased from Cytokinetics a revenue participation right on aficamten of 4.5% on sales up to $1 billion and 3.5% for sales above $1 billion, subject to certain step-downs. In exchange, Royalty Pharma will pay to Cytokinetics a total of up to $150 million, including $50 million at closing and two additional $50 million tranches, each conditional upon the initiation of potential pivotal clinical trials for obstructive HCM and non-obstructive HCM, respectively. Consistent with our past practices, we will aim to end 2022 with more than two years of forward cash runway, given the potential for increased spending in 2023 and 2024 to support the planned commercial launch of omecamtiv mecarbil and our expanded R&D pipeline. We expect to pursue additional business development as well as potential financing and/or other corporate development deals again in 2022. And with that, I'll turn the call back over to Robert Blum.

Robert Blum, President and Chief Executive Officer

Thank you, Ching. We expect that 2022 will be another transformational year for our company. The work we've engaged in during the fourth quarter of 2021 and the early part of this year has set us up well to execute against ambitious goals set forth in our Vision 2025, beginning with what may be the regulatory approval of our first potential medicine as well as the expansion of our development programs for aficamten, alongside of progress with reldesemtiv and the advancement into the clinic of earlier-stage candidates and advancement through the clinic of CK-136. Additionally, as Ching mentioned, we're pleased with the recent licensing agreement for omecamtiv mecarbil in China. As we stated, it's our intention to launch omecamtiv mecarbil in the US and do that alone, but we're actively pursuing opportunities to potentially partner omecamtiv mecarbil in Europe as well as in Japan, and we're remaining focused on long-term strategies of sensitively building out our organization. We look forward to sharing more about those corporate development strategies later and throughout this year. And now I'll recap our expected milestones for 2022. For omecamtiv mecarbil, we expect to launch omecamtiv mecarbil in the United States, pending potential FDA approval, which may come in Q4 2022. For aficamten, we expect to continue enrollment in SEQUOIA-HCM throughout 2022. We expect to begin enrolling patients with non-obstructive HCM in a cohort 4 of REDWOOD-HCM that will occur in this first quarter of 2022, and we expect to begin a second Phase III clinical trial of aficamten in obstructive HCM later in the second half of 2022. And we expect to share data from the open-label extension study for patients who are completing REDWOOD-HCM throughout 2022. For CK-136, we expect to reactivate the development program in this year 2022. For reldesemtiv, we expect the data monitoring committee to conduct its first interim analysis from COURAGE-ALS in 2022. And for ongoing research, we expect to advance new muscle-directed compounds and conduct IND-enabling studies for one to two potential drug candidates in this calendar year. Operator, with that, we can now open up the call to questions, please.

Operator, Operator

We will now begin our question-and-answer session. Our first question will come from Carter Gould with Barclays.

Carter Gould, Analyst

We just have a question on the decision to launch the second Phase III study for aficamten. If you could talk about how this trial will be different versus SEQUOIA. And second, is this a result of an ask from the FDA or EMA?

Robert Blum, President and Chief Executive Officer

So I’ll start and then turn it over to Fady and Stuart. But firstly, it is not in response to any request we received from the FDA. Rather instead, it underscores our confidence in a next-in-class candidate that we think it’s incumbent upon us to advance the field as could ultimately lead to broader labeling, and we think that aficamten affords us that opportunity. We’re not going to elaborate too much on its design right now, but I will ask Fady and Stuart if there’s anything further they want to add. I’ll just maybe add that there are lots of important scientific questions regarding therapeutic intervention in this patient population. They all aren’t answered by SEQUOIA, but additional studies may contribute to understanding where therapy may be positioned in guidelines or maybe effective under different situations. And as Robert said, we’ll provide more details as we get closer to initiating this Phase III trial. But we’ll emphasize it wasn’t in response to any specific feedback from regulators.

Operator, Operator

Your next question will come from the line of Justin Kim with Oppenheimer.

Justin Kim, Analyst

Just a couple from me. I know the METEOR data are still fresh in the hands of the team, but I was curious if there's any observations on peak VO2 reliability as an endpoint, particularly during COVID-19? Just trying to sort of understand whether there was any variability observed based on patients' enrollment before or during the pandemic?

Robert Blum, President and Chief Executive Officer

It's a tough question to answer, absent being able to share the data as we will soon enough at ACC. But maybe, Fady, do you want to speak to that?

Fady Malik, Executive VP of R&D

Yes. I believe it's a pertinent question since we conducted this trial during a difficult period. I have to say, the quality of the data is surprisingly good considering that there are very few missing CPET tests, and the quality and variability were quite close to our expectations. In general, cardiopulmonary exercise testing appears to be a very objective way to evaluate exercise capacity, and there isn't much of a placebo effect involved. Thus, I think the overall approach and the pandemic, despite its challenges, resulted in a significant outcome in this trial.

Justin Kim, Analyst

Okay. Great. And maybe just one on the sort of fourth cohort. Given the lack of rental options for symptomatic non-obstructive disease, would you anticipate these patients to skew maybe more towards the severe side in non-obstructive patients? I'm just kind of curious to know what the specific clinical activity measures might advance the programs to broader, larger studies?

Robert Blum, President and Chief Executive Officer

Fady, do you want to take that?

Fady Malik, Executive VP of R&D

I'll start, and then I'll turn it over to Stuart. I think it's still to be seen. I think you see the spectrum of symptoms that you see in the obstructive patients as well. They're going to be less severe and more severely affected patients. We will skew based on our enrollment criteria a little bit towards the more symptomatic patient population. But I don't think that there's reason to expect notably different severity compared to what we see in obstructive populations. Stuart, anything you want to add to that?

Stuart Kupfer, SVP and Chief Medical Officer

Yes. I mean I agree, certainly, just by the factor is symptomatic indicates the degree of disease progression, and we'll be tracking circulating biomarkers as well to sort of characterize the severity of the disease. And so that will essentially inform us how we proceed and how these patients perform or how the safety profile looks in terms of the next study.

Operator, Operator

Your next question will come from the line of Anupam Rama with JPMorgan.

Anupam Rama, Analyst

Maybe just following on Carter's question on the second aficamten obstructive study. I know you're not talking about the trial designs too much, but are these going to be two independent or completely different populations that you'll be enrolling, say, in SEQUOIA versus the second Phase III? Or will there be some overlap in patient phenotype?

Robert Blum, President and Chief Executive Officer

It's a good question. Obviously, in light of the fact that they're both going to be directed to patients with obstructive HCM, there's going to be some overlap, but they're really intended to ask and answer different questions. One should not be codependent on the other. And as we've already indicated, we expect SEQUOIA-HCM to be a lone sufficient and pivotal for potential registration. Perhaps that's the best I can do right now without elaborating on the design, which we don't intend to do today. But Fady, anything you want to add?

Fady Malik, Executive VP of R&D

No, I think that’s clear. I believe we will focus on patients with obstructive HCM. There are many scientific questions to consider regarding how to implement therapy in these patients and what outcomes might result from it. We don't want to suggest that we plan to explore some of those questions to better inform the field, but we are not ready to share any details at this stage of the process.

Robert Blum, President and Chief Executive Officer

We’re not trying to be coy. All we’re trying to do is make certain that we get it organized before we start describing it in its design for the fact that we do want to get SEQUOIA HCM off and running, and then we’ll soon enough be able to elaborate on what this next trial will look like.

Operator, Operator

Your next question will come from Akash Tewari with Jefferies.

Unidentified Analyst, Analyst

Could you provide more information on why the team is enrolling in another Phase III aficamten study? Are you considering a head-to-head study against mava? Additionally, what will be the cost of this trial? Our second question is about mava as a long-term extension for non-obstructive HCM, where we previously saw that 21% of patients on the long-term extension had their LVEF drop below 50% despite being on a stable dose. Can you share any insights on the stability of LVEF for patients in Cohort 1 and 2 of Redwood? Have any of these patients required a dose adjustment after 10 weeks, and have they experienced a drop in their LVEF below 50%?

Robert Blum, President and Chief Executive Officer

So I'll take the first one and maybe ask Fady and Stuart to speak to the data from the open-label extension. Again, we're not going to speak to the specific design of this second Phase III study. I can tell you that the costs associated with that study are more likely going to be borne in 2023 than in 2022. We do expect to start the second Phase III study this year, but the majority of that spending will not hit our P&L this year. I won't comment on whether it's going to be a head-to-head comparison with another drug or not for the fact that that's not our intention today. Instead, our intention is to say that for the fact that now we've raised additional capital and for our confidence in its next-in-class profile, we do believe that it's our obligation to advance the category as should be enabling of potential further expansions in labeling in accordance with standard of care. And I think that's the best we're going to be able to do today. Fady or Stuart, do you want to talk about LVEF and the open-label extension?

Fady Malik, Executive VP of R&D

Sure. We are planning to present data from an open-label extension in the coming year, so we won't provide any details at this time. However, I think the data from the first three cohorts of REDWOOD-HCM are quite informative regarding what we might expect in the long term. You may recall that there were no patients who required treatment interruptions during those cohorts, which highlights the relatively wide therapeutic index of aficamten. We will need to continue monitoring this with the longer-term experience we will gain from the open-label extension of REDWOOD as well as the SEQUOIA-HCM, a 24-week trial.

Robert Wong, VP and Chief Accounting Officer

It's not for us to comment on another company's drug candidate, how it's performing in a clinical study. What I can tell you is what Stuart just said, is we're pretty comfortable that the dosing and the dose regimen that is echo-guided demonstrated in cohorts 1, 2, and 3 that it was producing predictable exposures that could be maintained.

Operator, Operator

Your next question will come from Charles Duncan with Cantor Fitzgerald.

Charles Duncan, Analyst

Congratulations to Robert and the team on the acceptance of the OMI NDA and the start of the cohort. I have a two-part question regarding exercise capacity for Fady, followed by a question for Ching. First, considering the METEORIC results, how do you reconcile those findings with the mechanism we've discussed before? Do you think this could affect the perception of clinical value for OMI? Second, regarding the conduct of the METEORIC study, were there any insights obtained from that study that could improve the execution of the SEQUOIA study with aficamten?

Robert Blum, President and Chief Executive Officer

Good questions. Fady?

Fady Malik, Executive VP of R&D

Regarding the results we observed in METEORIC, the lack of impact on exercise tolerance could have several potential explanations, although they are speculative and should not be viewed as definitive insights on the results. It is well established that omecamtiv mecarbil enhances exercise performance and overall cardiac function, as evidenced by previous clinical trials. However, the patients in METEORIC were relatively stable, which raises questions about how much their cardiac performance affects their exercise ability. These patients experience heart failure and significant skeletal muscle dysfunction, leading to energetic deficits in the skeletal muscle alongside cardiac issues. The interplay between these factors is not thoroughly understood. It is notable that other therapies or devices which improve cardiac function often have much more pronounced effects on exercise performance. Thus, it is possible that the increase in cardiac performance from the drug is insufficient to result in noticeable improvements in exercise capabilities for these patients.

Charles Duncan, Analyst

That makes sense. And then the risk on afi on the conduct of that study? Or...

Fady Malik, Executive VP of R&D

Yes, I think the other aspect to consider is whether this affects the clinical value of omecamtiv. In my view, it does not. Most of the focus has been on clinical outcomes. While a positive study would have been preferable and would have set omecamtiv apart from other heart failure therapies that influence clinical outcomes, similar to those therapies, there is no impact on exercise capacity. Therefore, our market research indicates that we haven't observed a significant negative effect from the absence of a benefit in that area. Regarding the takeaways for SEQUOIA, there is a notable advantage in having completed a large international Phase III trial with an endpoint measured in the same manner as the one we plan for SEQUOIA. We now have extensive experience regarding potential pitfalls in testing, site training, what to observe, and how to qualify sites, among other factors. Additionally, when assessing METEORIC, the quality of the data and its execution were outstanding, which positions us well to replicate that success in SEQUOIA.

Ching Jaw, SVP and Chief Financial Officer

I'm not ready to give 2023 guidance, but I think it's safe to say that the expenses in 2023 are expected to be higher than 2022. And in terms of percent of the range, we're not breaking it down today. But as Andrew outlined, the spending in 2022 in commercial for omecamtiv mecarbil is roughly 1/3 of the total spend that we will anticipate once omecamtiv is launched and the commercial spending reaches steady state.

Robert Blum, President and Chief Executive Officer

In 2022, what percent was marketing and the marketing spend is really quite modest. If you mean commercial and inclusive of that is supply chain, distribution, logistics, as well as other commercial expenses beyond marketing, then it starts to become a bit more notable, but it's still quite significantly smaller than that, which is going to even one of our clinical trials. So I wouldn't be focused on the marketing spend in 2022 as a big driver of increased spending. Much of that increased spending in 2022 versus 2021, for instance, relates to the fact that it's a full year of COURAGE-ALS, a full year of SEQUOIA, as well as the additional clinical trials that you heard about today. Why did we choose to do the deals that we did in December and January in large part? It's in order to be able to be in a position to substantially expand the development program for aficamten as we announced today.

Operator, Operator

Your next question will come from Madhu Kumar with Goldman Sachs.

Robert Palermo, Analyst

This is Rob on for Madhu. I was just wondering, can you please remind us of what the futility analysis criteria for the potential second half looking to COURAGE-ALS?

Robert Blum, President and Chief Executive Officer

Sure. I'll turn to Fady and Stuart for that.

Stuart Kupfer, SVP and Chief Medical Officer

So the question is about the upcoming futility analysis?

Robert Palermo, Analyst

Yes, correct. What's the criteria?

Stuart Kupfer, SVP and Chief Medical Officer

Well, as we mentioned in the call, we won't conduct that until we have about 1/3 of the patients who have reached 12 weeks of treatment. It's a pretty straightforward futility analysis. Essentially, we're assessing whether reldesemtiv is showing a trend of greater benefit versus placebo. I mean, that's kind of the bottom line. So not such a high bar, but we certainly want to have some level of confidence before we continue to advance the trial. So that's really the objective of the first interim.

Robert Blum, President and Chief Executive Officer

This first futility along this study design provides for a second interim analysis as well. But this futility analysis is really designed to ensure that there’s no adverse consequence of the addition of reldesemtiv to standard of care. Therefore, to Stuart’s point, it’s not a particularly high bar. We expect to be able to proceed through. Our goal is to be able to know that we’re doing at least as well as we saw in FORTITUDE-ALS and then seeing those effects as could be amplified over longer periods of time. So the first futility will be a lower bar; the next interim could provide for a higher bar.

Operator, Operator

Your next question will come from Jeff Hung with Morgan Stanley.

Melina Santoro, Analyst

This is Melina on for Jeff. So I guess just following up for COURAGE. In addition to sample size, can you talk a little bit more about the things we're doing in elements of the study design that will help increase the chances for success? And then our second question, just a quick one for CK-136. Was it kind of a question of reprioritization that you're now reacting the program later this year? Or what was kind of the decision to now reactivate the program?

Robert Blum, President and Chief Executive Officer

Sure. I'll start with the second question. We wanted to make sure we had the additional resources, cash and otherwise to be able to advance CK-136. To remind you, this was a compound previously that was partnered with Amgen and we needed to provide for the transition under our collaboration with Amgen to be able to fully independently progress it forward, and that's what we're doing now. But in the second half of 2021, we were ready for this in part to ensure that we could finish what we started. Our intention is to pick up where CK-136 left off under our Amgen collaboration, advance it forward in Phase I and be in a position to make a decision about potential Phase II as soon as we can. So you'll see more about CK-136. We're pretty excited about this molecule. It's a novel mechanism, and we think it affords an opportunity to be studied in some key indications with high unmet need, and therefore, you'll hear more about that this year. With respect to COURAGE-ALS in your first question, I'll turn it to Stuart and Fady, but I'll start by saying sample size is just one of the things that we're looking at based on learnings from FORTITUDE-ALS and in discussions with regulatory authorities; we've designed COURAGE-ALS to enrich for what we hope will be a treatment effect based on things that we have previously observed.

Stuart Kupfer, SVP and Chief Medical Officer

Yes, that’s exactly right. What we learned from FORTITUDE-ALS really, I think, strengthens the study design and increases the probability of success, not the least of which is the dose selection, right? We selected a dose of 300 milligrams BID. We think that was optimal in terms of the benefit-risk profile. Another major element, which Robert was alluding to, is enriching the population for patients that are medium or fast progressors. And I mentioned this in the call – during the call. And the reason for that is based on, again, results from FORTITUDE, showing that those patients that are actually demonstrating the largest magnitude of treatment benefit. So with that, the patient population where there was less progression compared to placebo. This is kind of what you might expect be the greater ability to detect treatment effect in a population that is progressing more rapidly. So sort of increasing the sensitivity, the likelihood of demonstrating a treatment benefit. There are other elements as well. I won’t go into a lot of detail, but we put a lot of thought into the design of the study to improve patient engagement and participation. Obviously, these patients have a lot of difficulty with mobility and just being for transportation to the clinic is very difficult. So most of our visits are actually remote visits. And so I think compared to other trials that have been conducted in ALS, this one is relatively easy for patients to participate in. So it has significantly less burden. And hopefully, that will improve patient retention and engagement.

Operator, Operator

Your next question will come from Dane Leone with Raymond James.

Sean McCutcheon, Analyst

This is Sean on for Dane. Just kind of maybe a little bit of detail would be good on the endpoints for the Redwood cohort 4. How do they compare and contrast to the MAVERICK study? And then kind of how do those secondary endpoints, maybe functional endpoints point you to a potential pivotal?

Robert Blum, President and Chief Executive Officer

Yes. I think the MAVERICK study taught us some things. I thought it was a good study, and it demonstrates that BNP is an effective biomarker for this mechanism of action in this population, but we can also go further as we intend to do in Cohort 4. Pretty soon, we'll be posting on ClinicalTrials.gov, the design and endpoints for the study. But Fady or Stuart, do you want to say anything else at this time?

Stuart Kupfer, SVP and Chief Medical Officer

No, I was just going to basically say reflecting what Robert said, we will elaborate in detail when we’re ready to start. But in terms of the objectives being safety and tolerability and those findings, I think you can get some sense of the kind of endpoints we’ll be incorporating.

Operator, Operator

Your next question will come from Jason Butler with JMP Securities.

Jason Butler, Analyst

Robert, just one on omecamtiv for me. Just in terms of the 200-person sales force, can you speak to what proportion of the target audience that allows you to focus on from the start and how that breaks down between hospitals or physicians that spend a lot of time in hospitals versus outpatient heart failure clinics?

Robert Blum, President and Chief Executive Officer

Sure. We'll turn to Andrew to answer that, please.

Andrew Callos, EVP and Chief Commercial Officer

Sure. Relative to sales force, we’re focused on the majority of cardiologists who treat worsening heart failure. I would say it’s probably in the 60% to 70% range. And there is some overlap, obviously, between cardiologists who treat in the hospital compared to just spend time in the hospital. So, there will be kind of duplicate coverage for those cardiologists who cover both. And then your kind of final point of your question in terms of relative sizing, we’re probably about 60 — 65% focused on — just in terms of headcount, focused on outpatient cardiologists and the balance of them focused on hospitals. A lot easier to cover the hospitals, there's probably about — there’s a little less than 1,000 hospitals we’re focused on and less than 10,000 cardiologists, and maybe that’s just another way to think about it.

Operator, Operator

Your next question will come from Salim Syed with Mizuho.

Michael Linden, Analyst

This is Mike Linden standing in for Salim. I have a couple of questions regarding aficamten. First, regarding SEQUOIA, I understand enrollment has just begun. What is the comfort level for enrollment in the U.S. given the potential approval of mavacamten in April? Additionally, what factors might encourage patients to enroll, considering the possibility of being placed on a placebo as opposed to having access to mavacamten? My second question is also about aficamten. Although you can't discuss pricing yet and it's still early, there seems to be some differences in how analysts are predicting peak sales for mavacamten compared to aficamten in the obstructive HCM market. One major factor influencing these predictions is pricing, and there's a significant variance in expectations, especially with ICER estimating mavacamten at $12,000 to $15,000 annually, while Myocardia's previous figures were much higher. Could you help clarify the market size for obstructive HCM and what comparable markets we should consider?

Robert Blum, President and Chief Executive Officer

Sure. So, why don't we start with your second question first and I'll turn to Andrew. I will tell you for quite a long time, we've been pointing to price and value in this category as being different than sometimes put forward by Myocardia and echoed by Wall Street analysts. We're taking note of the ICER commentary. We also expect BMS is pretty savvy about these things and knows what it's doing in terms of how it's ultimately going to be priced in accordance with expected demand and as well as value assumptions. Where that ultimately sorts out in terms of gross to net, I think is something that we'll be observing. We obviously have our own scenarios, but for a product that's just entering Phase III, you'll please forgive us if we don't disclose anything about how we intend to ultimately be pricing. Andrew, anything you want to add to that?

Andrew Callos, EVP and Chief Commercial Officer

Yes. I think the only thing to add when considering forecasting is that it will likely not fall within the ICER price range, and I suspect it won't be at the higher end you've seen either. It will probably be somewhere in between. A useful analogy might be to examine price and prevalence relationships. This is a rare disease, currently diagnosed in fewer than 200,000 patients in the U.S. This information could provide some insight into potential pricing. As you look at forecasting over time, there are symptomatic treatments available, along with surgical options. However, there isn't an effective pharmaceutical treatment that addresses the underlying condition until these products are approved. If we consider the 190,000 prevalence and believe that the actual prevalence could be three to four times higher due to increasing diagnosis rates, and then consider the price point, it seems likely that over time, most patients will be treated. Hopefully, this provides some inputs or thoughts for modeling, but I won't comment further beyond that.

Robert Blum, President and Chief Executive Officer

To your first question, which spoke to enrollment, the projection that Stuart put forward of approximately a year, give or take, that's with the full knowledge that we expect mavacamten to be approved in Q2. I do think that that drug should likely be embraced and will be launched successfully. I think BMS will be effective at commercializing that first-in-class compound. But at the same time, we feel pretty good about our projections for how we expect SEQUOIA to enroll both because aficamten affords a next-in-class profile and because of the fact that in a clinical trial, patients have access to care and resource intensity that isn't always available outside of a clinical trial, especially as would be through an open-label extension. But we're not banking on the U.S. alone. Obviously, we're enrolling patients in other geographies, too. Fady or Stuart, anything you want to add to that?

Stuart Kupfer, SVP and Chief Medical Officer

Yes. Well, I will add that patients who enroll in SEQUOIA will, of course, have the opportunity to enroll in the open-label extension, right? So there's an advantage to having aficamten for long-term treatment at no cost. I think that can be appealing as well.

Fady Malik, Executive VP of R&D

It's important to remember that we're not dealing with a rapidly progressive and fatal disease, which complicates enrollment if there is an existing drug available. These patients often have lived with their symptoms for years, and the decision to enter a clinical trial or start another medication is ultimately up to them. However, we believe it remains quite appealing for them to participate in a clinical trial and receive long-term open-label treatment at no cost once the study concludes. We'll see how that unfolds.

Robert Blum, President and Chief Executive Officer

SEQUOIA is going to be enrolling in a very large number of clinical trial centers. So that goes a long way towards enabling us to be confident in what will be roughly 1 year to enroll the full complement of patients.

Operator, Operator

Your next question will come from Yasmeen Rahimi with Piper Sandler.

Yasmeen Rahimi, Analyst

Robert, so, two questions. I absolutely respect your decision on providing more color on the design of the second aficamten HCM study. But I would like to understand, Fady, from you, can you maybe help us understand obstructive hcm patient populations better? Like how do we segment these patients? Like I know you alluded to mild to moderate in terms of symptoms. But if you could speak a little bit more granularly in regards to the spectrum of disease, that could be helpful? And then the second question is about non-obstructive HCM study. Given that we have seen the failure with another mycin binding inhibitor in non-obstructive HCM, what confidence do you have that you should be able to see success in this population?

Fady Malik, Executive VP of R&D

Sure, Yasmeen. Good to talk to you. I think in terms of obstructive HCM, there’s a whole spectrum of disease. You have patients who have fairly mild obstruction but may have other different parts of their ventricle that contribute to abnormal filling and potentially symptoms. You have patients that have high levels of obstruction but maybe not very much symptoms. Obviously, you have patients with high levels of obstruction and significant symptoms. And then finally, you have patients in whom medical therapy isn’t really controlling their disease and they have to consider surgical or invasive options in terms of septal ablation. I think in a nutshell, that is sort of the spectrum of patients and we’re focused really on the symptomatic patients with a significant degree of obstruction for studies of aficamten and in this field in general. But there are other populations to consider as well. In terms of your second question with regards to non-obstructive HCM, by definition, these patients don’t have obstruction of blood flow leaving their heart, but they have thickened strip ventricles with problems with filling. You viewed MAVERICK as a failure, but I think you have to be cautious in the way you think about that. MAVERICK was a study that was relatively small, not very long. And it had a lot of clinical endpoints, which probably were underpowered with regards to assessing clinical events or clinical outcomes, symptoms, or exercise performance. If you could measure exercise performance in a study of 50 people, we wouldn’t need to do SEQUOIA in the study of 270 people. And do you know in this population whether treatment is sufficient for 16 weeks versus do you need much longer treatment 6 months to 12 months, for instance? So, I think the key in a Phase II study of non-obstructive HCM is asking whether there are signals that read on the potential in a Phase III trial to impact a more clinically relevant outcome. Might you see indications of reverse remodeling? Might you see biomarker changes and other things? And then moving to Phase III to better design and implement a Phase III trial, where you test the impact of those things on clinically meaningful endpoints. So, I don’t view MAVERICK as a total failure. I think it pointed to the impact of the mechanism of action on certain biomarkers, which are potentially predictive of long-term benefit in the area. But obviously, we still have to build that bridge from Phase I to Phase III.

Operator, Operator

Your next question will come from Rohit Bhasin with Needham & Company.

Rohit Bhasin, Analyst

This is Rohit on for Serge. Just in regards to the METEORIC-HF trial, did this trial change the way you think about potential investments for marketing omecamtiv upon approval?

Robert Blum, President and Chief Executive Officer

I'll start and maybe turn to Andrew, but I'll say definitely not. We made the decisions to do what we're doing based on GALACTIC and GALACTIC alone. While we had hoped to see effects from METEORIC that would be additive to what we saw with GALACTIC, the fact that the results are neutral in METEORIC doesn't subtract from what has us excited about omecamtiv from GALACTIC. I'll tell you that omecamtiv joins a long list of heart failure drugs that have not demonstrated improvement in exercise stamina. And while we thought we had a good therapeutic hypothesis that warranted testing, we feel confident that the METEORIC results are telling us that this drug candidate, much like many others, isn't translating into an effect on exercise stamina. However, it has already demonstrated in a substantially larger clinical trial, GALACTIC, much, much larger, and much longer treatments, that it had effects on hard clinical outcomes, including a composite of death and heart failure-related events, and our investment decisions are predicated on that. Andrew, anything you want to add to that?

Andrew Callos, EVP and Chief Commercial Officer

You covered it really well, Robert. The only thing maybe I would add is that we had done some market research with physicians to get their feeling on METEORIC, had it been positive, neutral, or negative. Had it been positive, then it certainly would have been additive as Robert described. But given where it netted out, we're not really anticipating any impact at all, and it changes nothing on our positioning, nothing in our overall strategy, nothing in our investment in field force size. I mean, all continues as planned.

Robert Blum, President and Chief Executive Officer

And to that effect, it’s not just investments in commercialization, but investments in life cycle management. As we think about potential approval for omecamtiv down the road, we are already contemplating what would be other studies that we think we would want to initiate in 2023 and 2024.

Operator, Operator

Your next question will come from Emanuela Branchetti with H.C. Wainwright.

Emanuela Branchetti, Analyst

I was wondering if you can help us gauge the awareness around omecamtiv in the clinical community? And what do you envision will be important in driving the adoption if the drug is approved? How long do you think we will have to wait to see omecamtiv inclusion in the American guidelines, for example? And do you think this will constitute a key point post-approval?

Robert Blum, President and Chief Executive Officer

Good question. So awareness is a function of a number of things, including the activity associated with clinical research and to what extent those investigators are themselves engaged actively in the management of patients with heart failure. For the fact that omecamtiv mecarbil was developed in the United States and also globally for so many years across so many studies, awareness is reasonably high. Andrew can speak to that in more quantitative ways from market research. I'll also point out that as we're intending to go to market with omecamtiv mecarbil, the guidelines will matter importantly. As Fady can speak to, they are being updated now with more frequency. We do expect that omecamtiv is going to be reflected in guidelines shortly post-approval. And that's one contributor to what could be early adoption. Another one is market access, and that's where we're going to be a bit more conservative, as Andrew can speak. So why don't we start with Andrew asking him to comment first and then Fady afterwards.

Andrew Callos, EVP and Chief Commercial Officer

Sure. So on awareness, there's actually really good awareness relative to where omecamtiv mecarbil is in the registration status. Unaided, we're about 1 in 10 cardiologists aware of omecamtiv, which is actually very high for unaided awareness when you don't have a commercial presence in the marketplace. Over half of cardiologists when aided, when you just talk about mechanism, etc., are certainly aware of it. So we have really good awareness going into a launch. Relative to adoption, one of the things you see across pretty much all launches is adoption is generally slow in the beginning. Some of that is due to awareness as you've asked, and others is due to just uptake by payers over time. So, we're expecting broad payer access probably 12 to 14 months after launch. But we certainly know that uptake will be slow maybe for the first 12 or 14 months as we start to build more of that payer access and patient access, especially with Medicare, where most patients are and there's a very defined timeline to get Medicare access. So hopefully that helps. Fady?

Fady Malik, Executive VP of R&D

Yes. Thanks, Andrew. I think with regards to guidelines, as Robert indicated, the guideline committees have acknowledged the more rapid pace of heart failure research and the availability of new data that may drive heart failure care and in parallel, the need to potentially update guidelines to incorporate new evidence as it’s generated. So, while they may go through a process of a complete rewrite of the guidelines every few years, I think the guideline committees in the U.S. are beginning to think about smaller updates to the guidelines in the intermediate periods. We would hope with the data that we have and particularly with an approval that guideline committees may look to see where to incorporate omecamtiv mecarbil into the standard of care.

Operator, Operator

And at this time, there are no further questions in queue. I would now like to turn it back over to Robert Blum for closing remarks.

Robert Blum, President and Chief Executive Officer

Thank you, operator, and thanks to everybody on the call today. I'll make my concluding comments brief. We ended 2021 on a high note. Lots of progress in our R&D pipeline as well as in preparations for 2022. We executed at the end of the year and early part of this year on some key transactions that afford us a stronger balance sheet as well as more forward cash runway. We started this year already on a high note with regard to the designation of the NDA for omecamtiv under standard review in our expected PDUFA date later this year as well as with the Cohort 3 of REDWOOD-HCM and the start of SEQUOIA-HCM. So we're firing on all cylinders, and we're feeling pretty good about how this can be another transformational year. We appreciate everybody's interest in the company and the progress we're making. We look forward to keeping you abreast of that progress and prospects throughout this year. With that, operator, we can now conclude the call. Thanks very much.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.