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Edited Transcript of CYTK earnings conference call or presentation 21-Feb-19 9:30pm GMT

Q4 2018 Cytokinetics Inc Earnings Call

South San Francisco Mar 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Cytokinetics Inc earnings conference call or presentation Thursday, February 21, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew A. Wolff

Cytokinetics, Incorporated - Senior VP & Chief Medical Officer

* Ching W. Jaw

Cytokinetics, Incorporated - Senior VP & CFO

* Diane Weiser

Cytokinetics, Incorporated - VP of IR & Corporate Communications

* Fady Ibraham Malik

Cytokinetics, Incorporated - EVP of Research & Development

* Peter S. Roddy

Cytokinetics, Incorporated - Senior VP & CAO

* Robert I. Blum

Cytokinetics, Incorporated - CEO, President & Director

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Conference Call Participants

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* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Jason Nicholas Butler

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Jeff Hung

Morgan Stanley, Research Division - Equity Analyst

* Joseph Pantginis

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Pete George Stavropoulos

Cantor Fitzgerald & Co., Research Division - Associate Analyst

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Presentation

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Operator [1]

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Good Afternoon and welcome, ladies and gentlemen, to the Cytokinetics Fourth Quarter 2018 Conference Call. At this time, I would like to inform you that this call is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the call for question and answers after the presentation.

I would now turn the call over to Diane Weiser, Cytokinetics' Vice President of Corporate Communications and Investor Relations. Please go ahead.

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Diane Weiser, Cytokinetics, Incorporated - VP of IR & Corporate Communications [2]

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Good afternoon, everyone, and thank you for joining us today. Robert Blum, our President and Chief Executive Officer, will kick off the call with introductory comments about the current state of our business.

Fady Malik, our EVP of Research and Development will provide updates on our cardiac muscle program, including the Phase 3 development of omecamtiv mecarbil, our cardiac myosin activator and the Phase 1 development of AMG 594, our cardiac troponin activator, both under our collaboration with Amgen, as well as the development of CK-274, our wholly owned cardiac myosin inhibitor.

Then Andy Wolff, our SVP and Chief Medical Officer, will share updates on our skeletal muscle program, focused on the development of reldesemtiv as well as for our next-generation fast skeletal muscle troponin activator, both of which we are advancing under our collaboration with Astellas.

Pete Roddy, our SVP and Chief Accounting Officer, will provide a financial overview for the quarter and Ching Jaw, our SVP and Chief Financial Officer, will discuss our 2019 financial guidance and corporate development strategies before Robert concludes with additional thoughts on the company and expected milestones.

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. We undertake no obligation to update any forward-looking statements after this call.

And now I will turn the call over to Robert.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [3]

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Thank you, Diane, and thanks again to everyone for joining us on the call today. The fourth quarter of 2018 was productive for Cytokinetics and consistent with the progress we demonstrated throughout the whole year, both in execution of our clinical development programs as well as in advancing new compounds from research into development. Altogether, the achievements during 2018 position us well for major milestones in 2019.

2018 was a year marked by expansion and extension of our industry-leading muscle biology pipeline, with two new INDs submitted for compounds we advanced into development: CK-274, our wholly owned next-in-class cardiac myosin inhibitor; and AMG 594, our cardiac troponin activator, which we're advancing in collaboration with Amgen.

Together with Amgen, in the past quarter and throughout 2018, we continued enrollment in GALACTIC-HF, the Phase 3 cardiovascular outcomes clinical trial of omecamtiv mecarbil. We are on track to complete enrollment in the first half of the year and to conduct the first interim analysis for GALACTIC, which is designed around futility during the first half of this year. Because the data monitoring committee for GALACTIC held meetings on an approximately quarterly basis over the past two years and made no recommendations for changes to the conduct of the trial, we remain optimistic.

In 2019, we are now within two years of the anticipated results from GALACTIC, which is amongst the largest clinical trials of heart failure patients ever conducted. Moreover, the opportunity for a new medicine that may meaningfully improve outcomes in heart failure is uncommonly large relative to most in the biopharmaceutical sector and increasing over time. Millions of patients in the US alone suffer from heart failure with unacceptably high morbidity and mortality risk and the prevalence of heart failure is only expected to grow more and more with the aging demographics.

Despite a slower-than-expected initial launch trajectory, the most recent product entry, Novartis's Entresto, is on track to generate billions in annual sales. To be clear, we believe omecamtiv mecarbil has the potential to demonstrate clinical benefit over currently available treatments and may, therefore, become foundational to standard of care. As such, the upside given our deal with Amgen affords Cytokinetics an unusual opportunity for shareholders and other company stakeholders.

Alongside GALACTIC, in the last quarter, we conducted readiness activities for METEORIC, our second Phase 3 clinical trial of omecamtiv mecarbil, which will focus on the potential effects of omecamtiv mecarbil on exercise performance in patients with heart failure and systolic dysfunction. Just this morning, we announced the start of that trial.

On the neuromuscular side of the business, in Q4 2018, we completed enrollment of FORTITUDE-ALS, our Phase 2 clinical trial of reldesemtiv in patients with ALS, surpassing our target of 450 patients. We believe that underscores our leadership in developing investigational medicines in ALS and the enthusiasm for the mechanism of fast skeletal muscle troponin activation. We look forward to results from FORTITUDE-ALS in the next quarter and believe that reldesemtiv has potential to slow the ruthless progression of respiratory decline without confounding adverse effects that we observed with tirasemtiv.

In 2018, we generated data in our Phase 2 study of reldesemtiv in patients with SMA, demonstrating improvements in six-minute walk distance, an exercise test of aerobic capacity and endurance. This is the first time we believe that a muscle-directed therapy was shown to improve ambulatory function in adult patients with SMA. We believe these data offer encouraging prospects for the growing population of patients expected to live longer with SMA.

More recently, we announced feedback from the FDA confirming that six-minute walk distance is an acceptable primary efficacy endpoint and we're now discussing potential next steps with our partner, Astellas, as we await results from FORTITUDE-ALS.

Lastly, in Q4 2018, we began the Phase 1 evaluation of CK-274. We unveiled details regarding this next-in-class cardiac myosin inhibitor at our Q4 R&D day and, as then elaborated, we believe it may represent a best-in-class opportunity in an area that we pioneered several years ago and which may benefit from learnings we have gained in other development programs.

We've discussed differentiated intrinsic properties of CK-274 and over time, we'll describe a development program that we believe may expand on the clinical footprint for this emerging class of drug candidates. Fady will have more to say momentarily about recent progress that sets the stage for more innovations that may follow.

In sum, our accomplishments in 2018 position us well for 2019 and we remain optimistic about our R&D prospects as well as the corporate development opportunities they may afford. Now I'll turn the call over to Fady to elaborate on progress within our cardiovascular programs.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [4]

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Thank you, Robert. As Robert mentioned, GALACTIC-HF, a Phase 3 cardiovascular outcomes clinical trial being conducted by Amgen under our collaboration, continues to progress well. Enrollment is nearing 90% of its planned 8,000 patients, with over 7,000 patients randomized to date. The baseline characteristics of these patients are consistent with them being at high risk for cardiovascular mortality in heart failure events as intended by the trial's design. We expect to complete enrolling patients in GALACTIC-HF during the first half of 2019.

Additionally, we are on track, based on the number of accrued events for the data monitoring committee, or DMC, to conduct a planned interim analysis for futility in the first half of 2019. As a reminder, the second planned interim analysis in GALACTIC-HF, which includes an assessment of potential efficacy, will occur in 2020.

The DMC has been meeting regularly, including again during the recent quarter. The DMC reviews the unblinded data from GALACTIC-HF and has continued to recommend no changes to the conduct of the ongoing trial. And we've been encouraged by that feedback.

During the fourth quarter and as recently as last month, we participated in investigator meetings around the world, including Tokyo, Rome, Buenos Aires, Dallas and San Diego. Each meeting includes investigators and study coordinators whose dedication to GALACTIC-HF and continued enthusiasm for a novel investigational medicine is energizing and leaves us grateful for their contributions to this important clinical trial.

Also, during the quarter, we conducted readiness activities toward initiating METEORIC-HF, the second Phase 3 clinical trial of omecamtiv mecarbil, planned to be conducted by Cytokinetics in collaboration with Amgen. As Robert mentioned, this trial just opened for enrollment and will focus on the potential effect of omecamtiv mecarbil to increase the reduced exercise performance in patients with heart failure.

Moving to the expansion of our cardiac pipeline, during the quarter we initiated the Phase 1 study, CY-6011 of CK-274 in healthy volunteers. CK-274 is our wholly owned cardiac myosin inhibitor, which we are developing for the potential treatment of hypertrophic cardiomyopathy.

As a reminder, this first study of CK-274 is a double blind, randomized, placebo-controlled, multipart, single and multiple ascending dose clinical trial of CK-274 to assess safety and tolerability. We are now escalating doses in the single ascending dose portion of the study and have initiated the multiple ascending dose portion of this study as well.

As we have said, we designed CK-274 to reduce the hypercontractility that is associated with hypertrophic cardiomyopathy and with potential best-in-class properties for safety and efficacy. Preclinical data showed that CK-274 reversed and reduced the thickening and stiffening of the heart in a predicable dose in exposure-dependent fashion.

The preclinical pharmacokinetics of CK-274 were characterized, evaluated, and optimized for potential once-daily dosing and flexible titration to a personalized dose which [we believe] physicians will value. Further, CK-274 showed a shallow dose response curve and a wide pharmacodynamic window suggesting broad clinical utility.

As we continue to map the development for this potentially best-in-class therapy, our goal is to deliver treatments that optimize and restore balance to heart function for the 1 in 500 people that may suffer from HCM. We have had the opportunity to meet with key opinion leaders in the field of hypertrophic cardiomyopathy and recently held two advisory board meetings, one in the US and one in Europe, to inform our approach to the ongoing development program. There's great interest in a potential best-in-class therapy for patients with hypertrophic cardiomyopathy and the target product profile we presented was well received.

Moving to AMG 594, recall it is a novel, selective, oral, small molecule, cardiac troponin activator, discovered under our joint research program with Amgen. The Phase 1 study is now underway and is being conducted by Amgen in collaboration with Cytokinetics to assess the safety and tolerability of AMG 594 and its potential to increase cardiac function. We expect results this year and also expect to elaborate on development plans during 2019.

I'm pleased to highlight the productivity of our growing cardiovascular pipeline and I look forward to continued progress. With 26 million people suffering from heart failure worldwide, novel approaches to treatment are crucial to reduce symptoms, hospitalizations, and death. We believe that our longstanding expertise in muscle biology, cardiac function, and clinical development serves to our advantage as we advance three drug candidates in the area.

And now I'll turn the call over to Andy to provide updates and perspectives on our skeletal muscle program with a focus on reldesemtiv.

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Andrew A. Wolff, Cytokinetics, Incorporated - Senior VP & Chief Medical Officer [5]

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Thanks, Fady. As Robert mentioned, we recently announced feedback from the FDA that six-minute walk distance is an acceptable primary efficacy endpoint for our potential registration program for reldesemtiv in patients with SMA who have maintained ambulatory function.

We are pleased with that confirmation as this same endpoint has been used for the approval of several therapies to treat such diseases as pulmonary hypertension, Pompe disease, as well as Morquio and Hunter syndromes to name a few and its natural history is well characterized in older patients with SMA, informing how we may proceed from here.

As to potential secondary endpoints, we are currently evaluating several global functional scales, including the SMA Health Index or SMA HI. As you'll recall, a post hoc analysis of the Phase 2 clinical study of reldesemtiv in patients with SMA correlated changes from baseline in the six-minute walk distance at 450 mg twice daily, with changes from baseline in the nine individual domains of the SMA HI and the SMA HI total score to reflect decreasing disease burden, as measured by the SMA HI.

This correlation was nominally statistically significant for four of the nine domains, including fatigue and activity participation as well as the SMA HI total score, suggesting that as six-minute walk distance increased disease burden assessed by the SMA HI decreased during treatment with reldesemtiv. We are also considering other secondary endpoints that read on both motor function and fatigue and we are convening advisory boards with key opinion leaders.

In terms of next steps, Cytokinetics is now conducting a Phase 1 study of reldesemtiv in healthy volunteers, designed to assess whether higher doses than were evaluated in the Phase 2 study of patients with SMA may result in higher plasma concentrations. We expect data from this study in the second quarter. Meanwhile, we continue to discuss potential next steps regarding the development program for reldesemtiv in SMA with Astellas.

Turning to FORTITUDE-ALS, our ongoing Phase 2 clinical trial of reldesemtiv in patients with ALS, during the fourth quarter we completed enrollment and more recently conducted the last patient dosing. We look forward to reporting results from this large international trial in the second quarter. Completion of enrollment in FORTITUDE-ALS marked an important step towards advancing the first potential muscle-directed medicine for people living with ALS who desperately need new therapies that increase muscle force, power, and the time to muscle fatigue.

In December, at the International Symposium on ALS/MND in Glasgow, we announced the presentation of baseline characteristics and demographics of patients enrolled in the trial. Baseline characteristics of patients enrolled in FORTITUDE-ALS are similar to those of other recent large clinical trials in ALS, including BENEFIT-ALS and VITALITY-ALS. That is encouraging considering that our prior trials informed the design of FORTITUDE-ALS.

In addition, posters presented at the conference contained data from an analysis of the correlation between slow vital capacity measured at home and in the clinic in FORTITUDE-ALS; additional analyses from VITALITY-ALS, the Phase 3 clinical trial of tirasemtiv in patients with ALS; new results from IMPACT-ALS of patient and caregiver survey conducted by the ALS association and funded in part by Cytokinetics; and results from analyses conducted by Origent Data Sciences on the validation of machine-learning models to predict ALS disease progression using data from VITALITY-ALS.

Cytokinetics continues to innovate and lead the way related to the potential of new treatments for ALS. Details of these posters were included in a press release during the past quarter, so I won't elaborate here. Suffice it to say, the data presented reflects our ongoing commitment to learn as much as we can from our trials and to support the ALS community with data and insights to advance clinical trial design and execution.

Finally, under our collaboration with Astellas, we are advancing CK-601, a next generation selective fast skeletal muscle troponin activator for the potential treatment of neuromuscular and non-neuromuscular conditions. We are also continuing our joint research program focused on pursuing skeletal muscle activation to improve muscle force, power and time-to-muscle fatigue.

And now I will turn the call over to Pete to provide an update on our financials.

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Peter S. Roddy, Cytokinetics, Incorporated - Senior VP & CAO [6]

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Thank you, Andy. I'll touch on our cash, revenue and spending and then Ching will give a review of our guidance for 2019 and our corporate development strategies. More details of our actual results are included in the press release itself.

We ended the fourth quarter with $199 million in cash, cash equivalents, and investments. Our cash includes $10 million from our drawdown of debt following the availability of Phase 2 data for reldesemtiv in SMA and as specified in our loan agreement.

Our revenue in Q4 2018 came primarily from our strategic alliance with Astellas and includes both cash and noncash revenue recognized under ASC606, the new accounting rules this year.

Moving to expenses, we reduced our fourth quarter 2018 R&D expenses to $23.3 million from $26.3 million in Q4 2017. About 45% of our R&D expenses were attributable to our skeletal muscle contractility programs, primarily for development in clinical trials for reldesemtiv, 33% to our cardiac muscle contractility programs, and 22% to our other research activities.

These changes reflect, as expected, increases for spending on our recently announced cardiac myosin inhibitor program and in particular, CK-274. The initial spending, including expenses that will be reimbursed by Amgen for the startup of METEORIC-HF and spending for reldesemtiv, primarily related to the conduct of FORTITUDE-ALS and reimbursed by Astellas. These were more than offset by appropriate decreases for tirasemtiv spending.

Our fourth quarter 2018 G&A expenses fell to $7.6 million from $10.3 million in Q4 2017. Our Q4 2017 spending included support for pre-commercial work for tirasemtiv. Ching will take it from here to provide our guidance for 2019 and corporate development strategies.

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Ching W. Jaw, Cytokinetics, Incorporated - Senior VP & CFO [7]

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Thanks, Pete. Today, we announced our financial guidance for 2019. The company anticipates cash revenue will be in the range of $28 million to $32 million. Operating expenses will be in the range of $110 million to $115 million and net cash utilization will be approximately $85 million to $90 million. With cash of $199 million at the end of 2018, we entered 2019 with over 24 months of cash runway, given our 2019 guidance.

Net cash utilization for 2019 will be less than 2018, given that we fully paid off the $40 million co-funding option for the Phase 3 development of omecamtiv mecarbil in 2018 and the fact that majority of costs associated with the conduct of METEORIC-HF and FORTITUDE-ALS for 2019 are reimbursed under our collaborations with Amgen and Astellas, respectively. And Amgen is responsible for expenses related to AMG 594.

Our corporate development strategy remains to manage our cash through the expected readout of results from GALACTIC-HF in 2021. As has been our historical practice, we are seeking to raise additional capital through a potential collaboration relating to our cardiac myosin inhibitor program, including CK-274, which we expect to advance to Phase 2 later this year.

We continue to make progress towards a potential deal and our focus to preserving key economics, control, and other rights for Cytokinetics under partnership that may afford us opportunity for an additional research and development program that we could resource on our own.

We have been successful monetizing our leadership in muscle biology through deals in the past and remain optimistic that we can do the same in this area. At the same time, we are evaluating other mechanisms to raise capital, which may include among other things project financing. We also are eligible to receive collaboration milestone payments over the next several years, which are not factored into our 2019 guidance and could provide further opportunity to expand cash runway.

And with that, I will now turn the call back over to Robert.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [8]

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Thank you, Ching. So we entered 2019 energized about our outlook, particularly given the number of inflection points we anticipate just in the first half of this year. With a proven and productive research engine having already generated five compounds that are currently advancing through various stages of development and a strong financial position, we're poised to execute well on our vision 2020, our strategic initiative designed to deepen, expand, and mature our pipeline.

We remain optimistic regarding our probability of successes and also recognize that upcoming milestones may shift the future direction of the company. Our annual strategic planning process provides us with a clear direction and roadmap to critically evaluate the most impactful and valuable R&D programs, warranting incremental investment to ensure the best returns to benefit patients and shareholders.

We've maintained an uncommon agility to ensure we can quickly realign as may be needed and continue to execute on our corporate strategy to diversify risk as well as to build optionality and contingencies into our planning while staying focused to advancing novel investigational medicines to benefit patients.

Our outlook has never been stronger and we're proud that our pioneering work in the discovery of novel drug candidates, designed to modulate sarcomere function has translated into an expanded pipeline of investigational medicines to treat some of the most devastating diseases of muscle dysfunction and weakness.

Now I'll recap our expected milestones for 2019. For omecamtiv mecarbil, we expect to complete enrollment of patients in GALACTIC-HF during the first half of 2019 and we expect the first interim analysis for futility of GALACTIC-HF to occur in the first half of 2019. We also expect to conduct METEORIC-HF in patients with heart failure throughout 2019.

For CK-274, we expect data from the Phase 1 study of CK-274 in healthy subjects in the second half of 2019. For AMG 594, we expect that Amgen will continue conducting the Phase 1 study throughout 2019. And for reldesemtiv, we expect results from FORTITUDE-ALS, in the second quarter of 2019.

And for our preclinical research, we expect to continue research activities under our joint research program with Astellas directed to the discovery of next-generation skeletal muscle activators throughout 2019. We also expect to continue our other muscle biology focused research including the expansion of our research activities beyond the contractility of muscle towards the energetics, growth and metabolism of muscle.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from the line of Joe Pantginis of H.C. Wainwright.

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [2]

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Two questions if you don't mind based on the advancement -- how advanced the programs are. So first on METEORIC, congrats on getting this started. Curious how you're looking to control the placebo or control arm with regard to the potential for not the placebo effect but rather the training effect for any potential impact in closing the statistical bounds, if you will, because patients when they do something more, it's less of a -- like I said placebo effect but more of a training effect?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [3]

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Good question. I'll turn that firstly to Fady.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [4]

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Yes, hi, Joe. I think the answer really lies in the test that we're employing, which is in cardiopulmonary exercise testing. So the nice thing about that particular measure of exercise performance is that you can objectively assess when someone is putting in a maximum effort.

Training is often related to not necessarily getting in better shape, because in this trial there's only two assessments that are five months apart, so there's not likely to be a training effect. But it's getting better accustomed to the assessment and also putting more effort into it.

With cardiopulmonary exercise testing, you exercise people to their anaerobic threshold and you can -- which means that they have exceeded their oxygen-carrying capacity of their muscles -- of their heart to deliver blood to their muscles. You basically begin to see byproducts in the bloodstream, carbon dioxide being exhaled by these patients to a greater extent. And you know that you've reached their peak of exercise.

And in order to get into the trial, the inclusion criteria requires that they get to this anaerobic threshold or else they're not included in the trial. And so it provides if you will a relatively objective measure that patients have reached the end of their exercise performance.

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Andrew A. Wolff, Cytokinetics, Incorporated - Senior VP & Chief Medical Officer [5]

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And I can also tell you having done a number of clinical trials with exercise endpoints, none of them as technically precise as cardiopulmonary exercise testing but just treadmill exercise testing you do see a training effect. You almost always do. But that's taken out in the analysis of variance.

And if the drug is effective, while there's a training effect on both active treatment and placebo, if you just like -- like let's say you do four different tests. And you'll just see the second one is a little better than first, the third one is a little better than the second and so forth and so on. But that's true for both groups.

If the drug works, the increase from placebo is still better on treatment than -- I mean the difference is still detectable and that -- it's a period effect is really what it is -- comes out in the analysis of variance.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [6]

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Does that answer your question?

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [7]

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No, it certainly does. Very helpful. And then my second question has to do with 274 if you don't mind. I guess -- very exciting program and thank you for -- in your prepared comments delineating your BD goals around the drug. But I guess maybe Robert, can you start with, from a higher level or in general why you're so excited about this program?

And then maybe -- you did have some more prepared comments and Fady did as well about why it's potentially more differentiated on the safety front, especially with, like you said, the shallow therapeutic window and how you're maybe less concerned for this drug and profile versus other types of cardiac inhibitors?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [8]

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So it's a good question. So to be clear, we conceived of this program area many years ago and the original therapeutic hypothesis originated here at Cytokinetics. We're the experts in this area both in terms of mechanistic biology but also in the way of how best to elucidate that in the pharmacology. And we've given a lot of thought to this area not only with respect to certain lead chemical matter but also how this might ultimately open a window onto expanded indications.

I think there's no substitute for what we've learned in the way of developing cardiac myosin activators for how that informs decisions we're going to be making with respect to cardiac myosin inhibitors, underscore plural because we ultimately have multiple compounds that we're advancing in parallel.

But I think there's a lot that we've learned here in terms of formulation sciences, in terms of placebo-corrected effects, in terms of how best to elaborate on the PK-PD profile that frankly we could not have known had we not done the very careful work we did with omecamtiv mecarbil in a very long, comprehensive Phase 2 clinical trials program.

That informs the approach we're taking with CK-274 and also other molecules as we contemplate development initially in HCMs but also potentially in other indications as well. And I think we're good students of the biology to best understand what are the ideal intrinsic properties of a compound with regard to its clinical profile in order to optimize for what could be best-in-class potential.

So I don't take lightly the opportunity here. I think it's a quite important one. But I think going forward we have a great deal of information that's wind in our sails in terms of how we might be able to best proceed. It starts with verifying in Phase 1 that CK-274 does have some of the properties that we indicated we thought it did based on preclinical evidence at our R&D day and then moving rapidly in Phase 2. Our expectation is we could be in Phase 2 this year and be generating data from the pharmacodynamics of CK-274 to in fact validate the approach that I've outlined.

I don't know Fady if you want to add anything to that.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [9]

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I think you covered it pretty comprehensive. Is there anything you want me to add there, Joe?

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [10]

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No, like -- you also covered a lot of it in your prepared comments, so thank you very much for the added details, guys.

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Operator [11]

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Your next question comes from the line of Charles Duncan of Cantor Fitzgerald.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division - Associate Analyst [12]

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This is Pete on for Charles. I'd like to congratulate you on all the pipeline progress during 2018 and the expansion in the last two quarters.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [13]

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Thank you.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division - Associate Analyst [14]

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So my question is around METEORIC-HF. So the peak oxygen uptake is an important parameter in assessing functional capacity of patients with heart failure. And the peak oxygen uptake levels during the cardiopulmonary exercise test is the primary endpoint for the study. What kind of change from baseline would be considered clinically significant and would sort of have an impact on the quality of life on these patients?

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [15]

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Yes, I think the answer to that question is based on what people have looked at in terms of the correlation of improvement in peak oxygen uptake and clinical outcomes. We are running a clinical outcomes trial that'll obviously speak more directly to that. But in the past, changes anywhere from a half to 1 milliliter per kilo per minute have been shown to be associated with improvement in outcomes. And so I think you can assume that those are clinically meaningful effects that would be consistent with an improvement in exercise tolerance that's meaningful to the patients.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division - Associate Analyst [16]

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And one more question, during the screening process for enrollment for this study, what's sort of the maximum/minimum percent of a predicted normal value for peak oxygen uptake would you require for enrollment?

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [17]

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So the enrollment criteria required of patients at entry into the trial can only achieve 70% of their predicted peak oxygen uptake for age, sex, weight and so forth. So we're looking specifically to enroll patients that not only tell us their exercise tolerance is decreased but have objective evidence of it as well.

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Operator [18]

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Your next question comes from the line of Ted Tenthoff of Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [19]

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Hey guys, thanks for the update and I echo congratulations on all of the progress really since R&D day, a lot going on on really the muscle front and the cardiac front. So firstly if I may, kind of put in perspective for us what to expect from FORTITUDE if you can, appreciating that ALS is a difficult area. With all the experience you guys have here, what should we expect for FORTITUDE? What would be a win in your guys' book?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [20]

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So I'll start and then maybe turn it over to you, Andy. Keep in mind that FORTITUDE-ALS resembles in many ways studies that we've already conducted albeit with a different drug candidate, that being tirasemtiv. We've enrolled upwards of 2,000 patients with ALS in clinical trials and we've learned a lot through that experience in the way of design of FORTITUDE-ALS.

And obviously the end point, the primary efficacy endpoint is built around slow vital capacity, something that we've evaluated now in the same centers using the same assessments and assessors. So that factors into the fidelity of the assessment that we think increases the probability of us meeting the objectives based on the trial design. But I'll turn it over to Andy to talk about what would constitute a clinically meaningful effect and based on what we learned previously.

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Andrew A. Wolff, Cytokinetics, Incorporated - Senior VP & Chief Medical Officer [21]

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So if you'll recall, we saw a highly statistically significant slowing of the decline in slow vital capacity in BENEFIT-ALS. The decline was about a third as fast as in patients on placebo.

And we also saw again a slowing of the rate of decline in vital capacity in VITALITY-ALS, but as you'll recall that primary analysis, being an intent to treat analysis, was I think substantially confounded by the number of people who were off treatment but remained in study and contributed primary endpoint measurements of vital capacity when they hadn't been taking drug for literally months.

But if you looked at the people that stayed on drug, you saw something not dissimilar to what we saw in BENEFIT-ALS, which basically had everybody on drug. So I think we've demonstrated twice that if patients take a fast skeletal muscle troponin activator, patients with ALS we can demonstrate a slowing in the decline of vital capacity.

And reldesemtiv is much better tolerated than tirasemtiv. We've seen fewer dropouts and we're seeing a different pattern of dropouts. They don't drop out early for adverse events that we have known to be associated with drug as they did with tirasemtiv. They drop out more or less randomly throughout the course of this study and often with adverse events that may well reflect disease progression more than drug intolerance.

So it's a much better tolerated drug. And consequently in the primary analysis if we were to see a difference from placebo in vital capacity in the same range as we saw in BENEFIT-ALS or even somewhat less, 6 percentage points, even maybe 4 percentage points and particularly with a p value less than 0.05 on the primary endpoint, I don't think there's any way that can't be a win.

We've also measured ALS FRSR, as one would usually do in an ALS trial, and that may provide additional support. And we also have some exploratory measures that actually haven't been in a clinical trial before but which are very promising that provide quantitative evaluations of speech, which declines in many patients with ALS, obviously and handwriting.

So obviously for the -- for it to be a clear win we need a significant result on the primary endpoint. But I think seeing positive trends or certainly nominally significant results on some of those other endpoints would make it an even bigger win.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [22]

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I'll just add a couple of annotations to that. Based on our prior experience we expect that placebo patients will likely decline 2 to 3 percentage points, absolute percentage points in their slow vital capacity. So as Andy's pointing out, if we see that the patients receiving investigational drug are declining 1% per month or 2% per month that could represent a significant separation of those curves.

The good news is that, as we presented in December, the baseline characteristics for patients enrolled in FORTITUDE-ALS resemble very closely those enrolled in the other studies. So that increases our confidence that we've designed the right study to ask and answer these questions.

The last thing I'll add is this is a study that's comparing three different doses of reldesemtiv over 12 weeks to placebo and, therefore, it will be nice to see some dose-related response as well.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [23]

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Yes, very helpful. And then if I may just to kind of follow up on that, let's say -- kind of both sides of the coin here, let's say the study is positive, what would be potential next steps?

And if I may, let's say it comes back and it's negative, is this something where maybe those resources would be redeployed to take 274 further yourselves or is the goal really to find a partner to kind of help build out in hypertrophic cardiomyopathy? Thank you.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [24]

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I think you're asking a very good question and it's the one that I was pointing to by some of my comments. I think we're coming up on an important pivot point for reldesemtiv with respect to neuromuscular indications. And while we have very encouraging data in SMA and we have a, we think, clear regulatory path, we want to see the ALS data before we might make any final commitments in determinations.

If the ALS data were unequivocally negative, it might prompt us to reconsider our commitment to this area in favor of investing more on our own in other programs like you mentioned, CK-274. So we're going to learn a lot about reldesemtiv and CK-274 in the next few months and I think that has to factor into our corporate development thinking in the second half of the year.

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Operator [25]

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Your next question comes from the line of Jeff Hung of Morgan Stanley.

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [26]

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For GALACTIC, can you remind us what to expect for the futility analysis? And then if successful, whether anything will be reported beyond the study continuing as planned?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [27]

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Yes, it's a very good question. It's something we need to be explicitly clear about. I'll turn that over to Fady.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [28]

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So the DMC will have access to the unblinded data set and be able to compare obviously treatment to placebo. But in making their assessment of whether to continue the trial or not, they will only tell us just that in terms of you should continue the trial or we have found grounds for stopping the trial.

We will not have any other information with regards to the analyses in which they base the decision. Unless in the event that they decided to recommend to stop the trial, we would probably look at the basis for that recommendation and then go from there. But we would not expect it at the time of a -- this futility analysis occurring to be able to speak to any of the data that is accumulated in the trial.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [29]

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Yes, so just to be clear, we may very well only be informed the study should continue and that's what we would report. Nobody should expect data in that scenario because we would not have access to any such data only that the DMC thought it was appropriate to continue the study because in that scenario we would not have triggered the futility.

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [30]

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Okay, great. And then for omecamtiv mecarbil, I guess what are the next triggers for potential milestones and are any expected with a futility analysis?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [31]

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So you're referring to milestone payments?

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [32]

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Yes.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [33]

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Yes, so we're not in a position where under our collaboration agreement with Amgen, we're able to disclose what are those milestones that trigger payments. Unfortunately, that's not something that we have the ability to freely disclose. It's something that, as we would get closer to such milestones, we could have Amgen's approval to do so but that's not something we've sought in this instance.

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Operator [34]

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Your next question comes from the line of Chad Messer of Needham.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [35]

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For 274, can you just help set some clear expectations for what we can expect from this healthy volunteer study data in the second half? Is it solely limited to pharmacokinetics and safety or are there some other measures that you might be able to get out of these volunteers that might be hinting at efficacy?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [36]

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Good question. So let's parse it into what can we expect from healthy volunteers in Phase 1 and what might we then expect from the continuation in Phase 2. I'll turn it over to Fady to address that.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [37]

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Yes, so in Phase 1 we're not only sampling blood for plasma concentrations and determining pharmacokinetics. But we're also conducting echocardiograms and characterize its effect on cardiac function. So and then additionally, as you mentioned, safety and tolerability.

So at the end of Phase 1, we should have at least a signal of the pharmacodynamic effect of the drug, which is to reduce injection fraction. Unlike many trials in Phase 1, we're not going to dose to intolerance here because intolerance would obviously be harmful to the healthy participants. But we -- our goal is to be able to describe the initial part of the dose response curve and its pharmacokinetics.

Then in transitioning to Phase 2, in patients that have hypertrophic cardiomyopathy or hypercontractile and importantly have an outflow gradient, meaning an obstruction of blood flow leaving the heart that generates a pressure gradient across the outflow track, we can look to see how the drug modulates both cardiac function and that outflow gradient, which tends to be more sensitive to the drug effect than say injection fraction. Normal healthy participants don't have an outflow gradient, so the outflow gradient in a normal person is zero. So there's nothing to measure there in that regard.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [38]

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Yes, that's very, very helpful. Then just one other question, Robert you talked about Entresto briefly in your prepared comments. I think your point was there's obviously a lot of unmet need in heart failure. A drug like that, which isn't terribly innovative -- that are not terribly innovative can do so well. Just wondering if there are any other lessons to be learned from that drug's launch and initial experience that can be applied to omecamtiv?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [39]

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Sure, so firstly, you didn't hear me say that Entresto wasn't truly innovative. I actually think it is innovative and I think it addressed an unmet need. But it's true that it addresses a different unmet need than what we think might be the case with omecamtiv mecarbil.

There are lessons to be learned there. The trial that one conducts with regard to registration should represent real world clinical practice. It should conform to as best as possible guideline-mandated treatments so that there are, for the standard of care, patients who are treated with the best available medicines for heart failure. It should have good geographic distribution. And ultimately there are things that one should be doing alongside of the conduct of clinical research in anticipation of potential commercialization.

There are additional studies much like what we're doing with METEORIC but there's also other real world evidence that can be gleaned from mining databases from healthcare systems and understanding what ultimately can translate into budget impact and utilization to facilitate what will be the conversation subsequent to marketing authorization that speak to market access. And pharmacoeconomic and other models need to be developed in order to be able to facilitate what will ultimately be the best integration of the new medicine into standard of care.

We think that omecamtiv has the potential to become foundational for standard of care. And given the millions of patients with heart failure, that means that we need to be working cooperatively and constructively not only with clinicians but also regulatory authorities and also payers in order to best understand how a drug candidate like omecamtiv mecarbil should best fit in for what types of patients and at what cost.

And those are things that we and Amgen are on top of. Those are things that matter and I think you're seeing the impact of some of those activities now in the uptake with Entresto, but it was difficult at first in large part because this arena had not seen a new medicine for heart failure in quite some time. So immediately the antibody reactions went up that put in place certain impediments that have since been eroded as I think Novartis and Entresto have done a good job demonstrating the clinical and pharmacoeconomic value.

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Operator [40]

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The last question comes from the line of Jason Butler of JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [41]

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First one covers both AMG 594 and CK-274. When you think about the different mechanisms here and the ECG assessments you'll get in healthy volunteers, what do we know from both omecamtiv and other heart failure or contractility disease drugs that speak to how useful that ECG information will be in reading to potentially predictive of efficacy in later stage trials?

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [42]

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Just a point of information, you said ECG but I think you might have meant echocardiogram?

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [43]

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Echocardiogram, yes, yes, sorry.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [44]

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Okay, I'll turn it over to Fady.

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Fady Ibraham Malik, Cytokinetics, Incorporated - EVP of Research & Development [45]

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We think it's very predictive. If you look at omecamtiv mecarbil for which we have the most information, we've generated echocardiographic data in healthy volunteers, in patients with chronic, stable heart failure, patients with acute heart failure and then in COSMIC, another study of patients with chronic stable heart failure.

And what you see in terms of the PK-PD response, the relationship of exposure to response is that they're virtually identical in all those different populations and trials. So I think the healthy volunteer data is quite useful in terms of understanding how it may respond in this setting.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [46]

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Yes, I would also say it's not just the echocardiographic evidence that informs what we might, should be doing with CK-274 based on our clinical experience developing omecamtiv mecarbil. We've learned about limitations and advantages of echocardiographic data in order to inform how to approach a Phase 3 trial design.

But we also learned about how absent a placebo in certain subjective measures one could be misled in order to inappropriately select dose for what could be advancement to Phase 3. And that's where I think we've been rigorous in the way we've conducted Phase 2 clinical trials with omecamtiv mecarbil, learning from placebo-corrected effects much like we will with CK-274 as well.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [47]

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Okay, great. And then second question just on reldesemtiv. You talked in your prepared comments about the SMA program and how you're thinking about secondary endpoints on top of the six-minute walk test. Can you just speak to specifically how you're thinking about the relevance of the Hammersmith test at this point for this patient population?

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Andrew A. Wolff, Cytokinetics, Incorporated - Senior VP & Chief Medical Officer [48]

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I don't really think it is particularly relevant to these older kids and adults. It really does look at the ability of infants and very small children to execute developmental milestones. I think a six-minute walk test is far more relevant.

And if regulatory authorities want something more global, we had some encouraging data with the SMA health index that was specifically developed for this population by someone with a lot of experience in developing these sorts of patient reported outcome measures and then getting them endorsed by FDA. So I just -- I don't see a need to do Hammersmith. It's really not designed for this population of SMA patients.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [49]

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Admittedly the Hammersmith is validated in that another drug has been approved based on Hammersmith. But I do think that our conversation with FDA has revealed that they believe (A) six-minute walk distance is an acceptable primary efficacy endpoint, but (B) that there may be other global secondary endpoints that could provide affirmation of an effect we might see on six-minute walk distance.

And that could even include components of the Hammersmith or, as Andy points out, the SMA HI or other global scales. And we're still learning in this area. We're having lots of conversations about what would be considered validated and would have high test, retest reliability in order to be able to be suitable for use in a clinical trial. And we'll have more to say about that down the road.

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Operator [50]

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I would now like to turn the call over to Robert Blum for closing remarks.

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Robert I. Blum, Cytokinetics, Incorporated - CEO, President & Director [51]

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Thank you, operator, and thank you to all participants on our teleconference today. We very much appreciate your continued support, your interest in Cytokinetics and I'll also underscore that, as you heard us describe on this call today, there's a lot of new information that's coming forward in the next quarter, such that we'll have information about CK-274. We'll understand a lot more about reldesemtiv and a potential path forward there. And obviously, we also have pointed to the concluding of enrollment in GALACTIC and the first interim, which is designed around the potential for futility.

So these are very busy times at Cytokinetics. You saw yesterday we announced the start of a new clinical trial of AMG 594, this morning the start of a Phase 3 study with omecamtiv METEORIC. I want to firstly thank all of our employees for all of the very hard work they've put forward to make these things happen and we look forward to updating shareholders with regard to our progress and what that may mean for the company as we roll forward in the second half of the year and beyond.

With that operator, we can now conclude the call. Thank you.

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Operator [52]

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This concludes today's conference call. You may now disconnect.