Cytokinetics Continues Sliding on Sector Weakness Print
By Brian Wilson-Lead Contributor   
Thursday, 24 October 2013 08:47
Last week, we expressed our opinion that the biotech sector was becoming quite expensive, and that investors might want to use more caution with some of the companies that have seen extreme outperformance since the start of the year. Although the prospects remain quite bright for most pharmaceutical developers, new investors are facing an uphill battle if they are buying these unprofitable companies at inflated, premium valuations.

However, in the last week or so, we’ve seen some significant devaluation of a most of these biotechs. This has made the risk/reward profile more favorable for many of the more promising companies that we follow, which presents more opportunity for investors who are looking to increase exposure to the sector.

 In this article, we will be discussing Cytokinetics (NASDAQ: CYTK) – one of the many biotechs that look relatively attractive going into 2014. This company’s pipeline consists primarily of two drugs – Tirasemtiv and Omecamtiv Mercarbil. These drugs induce muscle contractions, and may have use in muscle degenerative disorders and cardiovascular disorders.

CYTK is up nearly 70% for the year, although the company has now dropped about 50% from three months ago. Note that the company also decided to undergo a rare 1-for-6 reverse split in June 2013, reflecting its stronger financial position due to the Amgen partnership.

Cytokinetics is still having trouble holding its ground after the company reported results from the ATOMIC-AHF study in September – a mid-stage trial that was conducted for its drug Omecamtiv Mercarbil (CK-1827452). Although the company was not expecting much from the trial, the fact that the primary endpoint wasn’t reached still seems to bother Wall Street a lot.

ATOMIC-AHF was a 613 patient, randomized, double-blind and placebo-controlled Phase II study that started in April 2011 and ended at the start of this month (September 2013). Patients enrolled in the trial were adults that had already been hospitalized for heart failure in the left ventricle. These patients had not received particular drugs that strengthen the heart’s capacity to constrict, and were not on mechanical support.

The patients were divided into three escalating dose cohorts, and evaluated throughout a 48 hour period while on IV omecamtiv mercabil or placebo. The ratio between omecamtiv and placebo patients was 1:1.

The primary endpoint of ATOMIC-AHF was related to dyspnea (difficulty with breathing) in patients with worsening heart failure. To numerically evaluate this a 7-point Likert scale was used. A statistically significant improvement in the omecamtiv arm versus the placebo arm was not established (p=.33), although patient outcomes did improve with increased dosing of omecamtiv.

The safety endpoints were established and met at the conclusion of the trial, although this was unsurprising. Omecamtiv mercabil has already established a strong safety profile during its Phase I development, which tested the drug on hundreds of patients.

While the failure of this trial was a setback for Cytokinetics and Amgen, it does not threaten the heavily supported development program for Omecamtiv mercabil. This trial studied patients in a very short timeframe with an unreliable primary endpoint. In addition, investors should note that the pharmacokinetic data is still quite valuable for the development program.

Investors should note that the truly important data release will be from the COSMIC-HF trial, which will test the oral formulation of the drug over a longer (12-week) timeframe. This trial has significantly higher chance of succeeding, and will establish the drug more prominently for Phase III development. These results will not be available until mid-2014 at the earliest, so investors looking to play this data release will have to be patient.


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