Cytokinetics, Incorporated (NASDAQ: CYTK) received long-term funding capital from Royalty Pharma plc (RPRX) to support the commercial launch of omecamtiv mecarbil and the further development of aficamten. Furthermore, Cytokinetics sold royalties on future worldwide sales of aficamten to Royalty Pharma. The combined value of both transactions is $450 million.
Following the news, shares of Cytokinetics lost 9.4% on January 7 to close at $35.15, while shares of Royalty Pharma gained 3.8% on the same day.
Based in California, U.S., Cytokinetics, Inc. is a biopharmaceutical company, that develops muscle activators and muscle inhibitors as potential treatments for diseases characterized by impaired or declining muscle function.
Omecamtiv Mecarbil & Aficamten
Omecamtiv mecarbil is a cardiac-specific myosin activator that has been granted Fast Track Designation by the U.S. Food and Drug Administration (FDA). It is being studied for its potential role in the treatment of left ventricular systolic heart failure. It was also the subject of a positive Phase-3 clinical trial in patients with heart failure with reduced ejection fraction.
Aficamten is an investigational, next-generation cardiac myosin inhibitor meant for the treatment of hypertrophic cardiomyopathy. It was granted Breakthrough Therapy Designation by the FDA.
Details of the Transaction
According to the terms of the deal, Royalty Pharma will extend approximately $300 million in capital to Cytokinetics to support the commercial launch of omecamtiv mecarbil, and the further development of aficamten and for other general corporate purposes.
The assigned capital will be allotted in five tranches, with an initial tranche of $50 million. Upon the occurrence of certain regulatory and clinical development milestones related to both the molecules, four additional tranches will be granted worth $250 million.
All the tranches have an interest-free and payment-free period of six calendar quarters. The next 34 calendar quarters will include installment repayments worth 1.9 times the amount drawn.
Furthermore, with respect to aficamten, Royalty Pharma has purchased a royalty of 4.5% on sales up to $1 billion, and 3.5% on sales above $1 billion, subject to certain potential step-downs.
In exchange, Royalty Pharma will pay up to $150 million, with an initial payment of $50 million at closing and two incremental payments of $50 million, subject to the initiation of potential pivotal clinical trials for oHCM and nHCM, respectively.
The current round of funding from Royalty Pharma will help Cytokinetics build an industry-leading cardiovascular franchise in cardiac myosin modulation aided by access to at least two years of cash. The funding is based on expected 2022 expenditures that include planned commercialization activities and expanded pipeline development programs.
CEO Comments
Cytokinetics’ CEO, Robert I. Blum, commented, “These corporate development transactions continue our history of monetizing our leadership in muscle biology through creative deal making and provide further optionality, capital efficiencies and financial resources to expand our cardiovascular development and commercialization programs.”
Royalty Pharma’s CEO, Pablo Legorreta, stated, “Royalty Pharma is excited to support the company at this important stage of transformation towards a commercial organization with an exciting late stage pipeline addressing unmet medical needs in multiple cardiovascular diseases.”
Wall Street’s Take
Following the news, one of the Top Analysts from JMP Securities Jason Butler, reiterated a Buy rating on the stock, with a price target of $48 (36.6% upside potential).
Overall, the stock has a Strong Buy consensus rating based on 9 unanimous Buys. The average Cytokinetics stock forecast of $55.44 implies 57.7% upside potential from current levels.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 100% Bullish on CYTK stock, compared to a sector average of 69%.
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