10-Q 1 cytk-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-50633

 

CYTOKINETICS, INCORPORATED

(Exact name of registrant as specified in its charter)

 

Delaware

94-3291317

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

350 Oyster Point Blvd.

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 624-3000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Common Stock, $0.001 par value

Trading symbol

 

CYTK

Name of each exchange on which registered

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

Number of shares of common stock, $0.001 par value, outstanding as of May 8, 2024: 104,853,918

 

 

 


CYTOKINETICS, INCORPORATED

TABLE OF CONTENTS FOR FORM 10-Q

FOR THE three months ended March 31, 2024

Page

Glossary of Terms

3

 

 

PART I. FINANCIAL INFORMATION

7

Item 1. Financial Statements (Unaudited)

7

Condensed Consolidated Balance Sheets

7

Condensed Consolidated Statements of Operations and Comprehensive Loss

8

Condensed Consolidated Statements of Stockholders’ Deficit

9

Condensed Consolidated Statements of Cash Flows

10

Notes to Condensed Consolidated Financial Statements

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

Item 4. Controls and Procedures

37

 

 

PART II. OTHER INFORMATION

38

Item 1. Legal Proceedings

38

Item 1A. Risk Factors

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3. Defaults Upon Senior Securities

68

Item 4. Mine Safety Disclosures

68

Item 5. Other Information

68

Item 6. Exhibits

70

 

 

SIGNATURES

72

 

2


Glossary of Terms

Unless the context requires otherwise, references to “Cytokinetics,” “the Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q refer to Cytokinetics, Incorporated and its subsidiaries. References to “Notes” in this Form 10-Q are to the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q. We also have used other specific terms in this Form 10-Q, most of which are explained or defined below:

Term/Abbreviation

 

Definition

2004 Plan

 

Cytokinetics’ Amended and Restated 2004 Equity Incentive Plan

2020 RTW Transactions

 

The transactions contemplated by the RTW Royalty Purchase Agreement, Ji Xing Aficamten License Agreement and the Common Stock Purchase Agreements, dated July 14, 2020, by and between Cytokinetics and the RTW Investors

2021 RTW Transactions

 

The transactions contemplated by the Ji Xing OM License Agreement and the Common Stock Purchase Agreements, dated December 20, 2021 by and between Cytokinetics and the RTW Investors

2022 RPI Transactions

 

The transactions contemplated by the RP Loan Agreement and the RP Aficamten RPA

2026 Notes

 

Cytokinetics’ 4% convertible senior notes due 2026

2027 Indenture

 

Indenture Agreement, dated July 6, 2022, between Cytokinetics and U.S. Bank Trust Company, as trustee

2027 Notes

 

Cytokinetics’ 3.50% convertible senior notes due 2027

ACA

 

Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act

ACACIA-HCM

 

Assessment Comparing Aficamten to Placebo on Cardiac Endpoints In Adults with Non-Obstructive HCM

ACC

 

American College of Cardiology

AHA

 

American Heart Association

ALS

 

amyotrophic lateral sclerosis (also known as Lou Gehrig’s Disease)

ALSFRS-R

 

ALS Functional Rating Scale – Revised

Amended ATM Facility

 

amended and restated Controlled Equity Offering Sales Agreement

Amgen Agreement

 

Collaboration and Option Agreement, dated December 29, 2006, as amended, between Cytokinetics and Amgen

ARR

 

absolute risk reductions

Astellas Agreement

 

License and Collaboration Agreement, dated June 21, 2013, between Cytokinetics and Astellas

Astellas FSRA Agreement

 

Fast Skeletal Regulatory Activator Agreement, dated April 23, 2020 between Cytokinetics and Astellas

Astellas OSSA Agreement

 

License and Collaboration Agreement for Other Skeletal Sarcomere Activators, dated April 23, 2020, as amended, between Cytokinetics and Astellas

cGMP

 

current Good Manufacturing Practice

Cantor

 

Cantor Fitzgerald & Co.

China

 

People's Republic of China (including the Hong Kong and Macau SARs)

CMC

 

Chemistry, Manufacturing and Controls

CMO

 

Contract Manufacturing Organizations

Common Stock

 

our common stock, par value $0.001 per share

Compensation Committee

 

Compensation and Talent Committee of Cytokinetics’ Board of Directors

Convertible Notes

 

2026 Notes and 2027 Notes

COURAGE-ALS

 

Clinical Outcomes Using Reldesemtiv on ALSFRS-R in a Global Evaluation in ALS

CPET

 

cardiopulmonary exercise testing

CRL

 

Complete Response Letter

3


CRO

 

Contract Research Organization

CV

 

cardiovascular

E.U. or EU

 

European Union

EEA

 

European Economic Area

EMA

 

European Medicines Agency

ESPP

 

employee stock purchase plan

Exchange Act

 

Securities Exchange Act of 1934, as amended

FDA

 

U.S. Food and Drug Administration

Final Payment Amount

 

As defined in Part I, Item 2 (Management’s Discussion and Analysis of Financial Conditions and Results of Operations) of this Quarterly Report on Form 10-Q – Sources and Uses of Cash, Royalty Pharma Transactions

FOREST-HCM

 

Five-Year, Open-Label, Research Evaluation of Sustained Treatment with Aficamten in HCM

FSRA

 

fast skeletal regulatory activator

FSTA

 

fast skeletal muscle troponin activator

Fundamental Change

 

As defined in the 2027 Indenture

GAAP

 

Generally Accepted Accounting Principles in the U.S.

GALACTIC-HF

 

Global Approach to Lowering Adverse Cardiac Outcomes Through Improving Contractility in Heart Failure

GCP

 

Good Clinical Practice

GDPR

 

General Data Protection Regulation ((EU) 2016/679)

HCM

 

hypertrophic cardiomyopathy

HFpEF

 

heart failure with preserved ejection fraction

HFrEF

 

heart failure with reduced ejection fraction

HFSA

 

Heart Failure Society of America

HHS

 

U.S. Department of Health and Human Services

HIPAA

 

The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act

ICER

 

Institute for Clinical and Economic Review

IND

 

Investigational New Drug

IRA

 

Inflation Reduction Act of 2022

IRB

 

Institutional Review Board

Ji Xing

 

Ji Xing Pharmaceuticals Limited and/or its affiliates, including Ji Xing Pharmaceuticals Hong Kong Limited

Ji Xing Aficamten License Agreement

 

License and Collaboration Agreement, dated July 14, 2020, by and between Cytokinetics and Ji Xing Pharmaceuticals Limited

Ji Xing Agreements

 

Ji Xing Aficamten License Agreement and Ji Xing OM License Agreement

Ji Xing OM License Agreement

 

License and Collaboration Agreement, dated December 20, 2021, by and between Cytokinetics and Ji Xing Pharmaceuticals Limited

KCCQ

 

Kansas City Cardiomyopathy Questionnaire

KCCQ-OSS

 

KCCQ Overall Summary Score

Lenders

 

Silicon Valley Bank and Oxford Finance LLC

LVEF

 

left ventricular ejection fraction

LVOT

 

left ventricular outflow tract

LVOT-G

 

left ventricular outflow tract gradient

4


MAA

 

Marketing Authorization Application

MAPLE-HCM

 

Metoprolol vs Aficamten in Patients with LVOT Obstruction on Exercise Endpoints Capacity in HCM

Mavacamten Royalty

 

certain payments on the net sales of products containing the compound mavacamten pursuant to the Research Collaboration Agreement, dated August 24, 2012, between Cytokinetics and MyoKardia, Inc.

NDA

 

New Drug Application

nHCM

 

non-obstructive HCM

NOLs

 

net operating loss carryforward

NYHA

 

New York Heart Association

oHCM

 

obstructive HCM

OLE

 

Open-Label Extension

Ownership Change

 

As defined in Part II, Item 1A (Risk Factors) of this Quarterly Report on Form 10-Q, General Risks

Oxford

 

Oxford Finance LLC

Oyster Point Lease

 

Lease, dated July 24, 2019, by and between Cytokinetics and KR Oyster Point 1, LLC, as amended

Partial Redemption Limitation

 

As defined in the 2027 Indenture

PSU

 

Performance Stock Unit

Radnor Lease

 

As defined in Part I, Item 1 (Financial Statements (Unaudited)), Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q - Note 9 (Commitments and Contingencies) – Operating Leases

REDWOOD-HCM

 

Randomized Evaluation of Dosing With CK-274 in Obstructive Outflow Disease in HCM

REDWOOD-HCM OLE

 

Randomized Evaluation of Dosing With CK-274 in Obstructive Outflow Disease in HCM Open Label Extension

REMS

 

Risk Evaluation and Mitigation Strategy

RP Aficamten RPA

 

Revenue Participation Right Purchase Agreement, dated January 7, 2022, by and between Cytokinetics and Royalty Pharma Investments 2019 ICAV

RP Loan Agreement

 

Development Funding Loan Agreement, dated January 7, 2022, by and among Royalty Pharma Development Funding, LLC and Cytokinetics

RP OM Liability

 

As defined in Part I, Item 1 (Financial Statements (Unaudited)), Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q - Note 6 (Agreements with Royalty Pharma) – 2017 RP Omecamtiv Mecarbil Royalty Purchase Agreement

RP OM RPA

 

Royalty Purchase Agreement, dated February 1, 2017, by and between the Cytokinetics and RPI Finance Trust, as amended by Amendment No. 1, dated January 7, 2022

RPDF

 

Royalty Pharma Development Funding, LLC

RPFT

 

RPI Finance Trust

RPI ICAV

 

Royalty Pharma Investments 2019 ICAV

RSU

 

Restricted Stock Unit

RTW ICAV

 

RTW Investments ICAV for RTW Fund 1

RTW Investors

 

RTW Master Fund, Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund Limited

RTW Royalty Holdings

 

RTW Royalty Holdings Designated Activity Company

RTW Royalty Purchase Agreement

 

Royalty Purchase Agreement, dated July 14, 2020, between Cytokinetics and RTW Royalty Holdings

Section 382

 

Section 382 of the Internal Revenue Code

5


Securities Act

 

Securities Act of 1933, as amended

SEQUOIA-HCM

 

Safety, Efficacy, and Quantitative Understanding of Obstruction Impact of Aficamten in HCM

SGLT2

 

sodium-glucose cotransporter-2

SMA

 

spinal muscular atrophy

SPA

 

Special Protocol Assessment

Tax Act

 

Tax Cuts and Jobs Act

Term Loan Agreement

 

Loan and Security Agreement, dated as of October 19, 2015, by and among Cytokinetics, Oxford Finance LLC and Silicon Valley Bank and Loan and Security Agreement, dated as of May 17, 2019, by and among Cytokinetics, Oxford Finance LLC and Silicon Valley Bank

U.S. or US

 

United States

This Form 10-Q includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.

CYTOKINETICS and our C-shaped logo are registered trademarks of Cytokinetics in the U.S. and certain other countries. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.

The information contained on our website, our Facebook, Instagram, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.

6


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) (Unaudited)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

119,976

 

 

$

113,024

 

Short-term investments

 

 

498,985

 

 

 

501,800

 

Accounts receivable

 

 

834

 

 

 

1,283

 

Prepaid expenses and other current assets

 

 

18,909

 

 

 

11,944

 

Total current assets

 

 

638,704

 

 

 

628,051

 

Long-term investments

 

 

15,376

 

 

 

40,534

 

Property and equipment, net

 

 

68,018

 

 

 

68,748

 

Operating lease right-of-use assets

 

 

78,170

 

 

 

78,987

 

Other assets

 

 

7,814

 

 

 

7,996

 

Total assets

 

$

808,082

 

 

$

824,316

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,967

 

 

$

21,507

 

Accrued liabilities

 

 

40,123

 

 

 

42,641

 

Short-term operating lease liabilities

 

 

18,230

 

 

 

17,891

 

Current portion of long-term debt

 

 

11,520

 

 

 

10,080

 

Other current liabilities

 

 

6,015

 

 

 

10,559

 

Total current liabilities

 

 

88,855

 

 

 

102,678

 

Term loan, net

 

 

56,822

 

 

 

58,384

 

Convertible notes, net

 

 

549,790

 

 

 

548,989

 

Liabilities related to revenue participation right purchase agreements, net

 

 

390,219

 

 

 

379,975

 

Long-term operating lease liabilities

 

 

118,554

 

 

 

120,427

 

Other non-current liabilities

 

 

2

 

 

 

186

 

Total liabilities

 

 

1,204,242

 

 

 

1,210,639

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

105

 

 

 

102

 

Additional paid-in capital

 

 

1,852,155

 

 

 

1,725,823

 

Accumulated other comprehensive loss

 

 

(539

)

 

 

(10

)

Accumulated deficit

 

 

(2,247,881

)

 

 

(2,112,238

)

Total stockholders’ deficit

 

 

(396,160

)

 

 

(386,323

)

Total liabilities and stockholders’ deficit

 

$

808,082

 

 

$

824,316

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data) (Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Revenues:

 

 

 

 

 

 

Research and development revenues

 

$

835

 

 

$

2,113

 

Milestone revenues

 

 

 

 

 

2,500

 

Total revenues

 

 

835

 

 

 

4,613

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

81,570

 

 

 

79,421

 

General and administrative

 

 

45,500

 

 

 

49,665

 

Total operating expenses

 

 

127,070

 

 

 

129,086

 

Operating loss

 

 

(126,235

)

 

 

(124,473

)

Interest expense

 

 

(7,103

)

 

 

(6,961

)

Non-cash interest expense on liabilities related to revenue participation right purchase agreements

 

 

(10,218

)

 

 

(6,280

)

Interest and other income, net

 

 

7,913

 

 

 

6,425

 

Net loss

 

$

(135,643

)

 

$

(131,289

)

Net loss per share — basic and diluted

 

$

(1.33

)

 

$

(1.38

)

Weighted-average number of shares used in computing net loss per share — basic and diluted

 

 

101,924

 

 

 

95,164

 

Other comprehensive (loss) gain:

 

 

 

 

 

 

Unrealized (loss)/gain on available-for-sale securities, net

 

 

(556

)

 

 

1,945

 

Foreign currency translation adjustments

 

 

27

 

 

 

 

Comprehensive loss

 

$

(136,172

)

 

$

(129,344

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ Deficit

(In thousands, except share data) (Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2023

 

 

101,637,922

 

 

$

102

 

 

$

1,725,823

 

 

$

(10

)

 

$

(2,112,238

)

 

$

(386,323

)

Exercise of stock options

 

 

1,466,359

 

 

 

2

 

 

 

29,530

 

 

 

 

 

 

 

 

 

29,532

 

Vesting of restricted stock units

 

 

695,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld related to net share settlement of equity awards

 

 

(274,256

)

 

 

 

 

 

(18,449

)

 

 

 

 

 

 

 

 

(18,449

)

Issuance of common stock under at-the-market offering, net of issuance costs

 

 

1,237,460

 

 

 

1

 

 

 

93,639

 

 

 

 

 

 

 

 

 

93,640

 

Exercise of warrants, net

 

 

11,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

21,612

 

 

 

 

 

 

 

 

 

21,612

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(529

)

 

 

 

 

 

(529

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(135,643

)

 

 

(135,643

)

Balance, March 31, 2024

 

 

104,773,960

 

 

$

105

 

 

$

1,852,155

 

 

$

(539

)

 

$

(2,247,881

)

 

$

(396,160

)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2022

 

 

94,833,975

 

 

$

94

 

 

$

1,481,590

 

 

$

(3,590

)

 

$

(1,585,994

)

 

$

(107,900

)

Exercise of stock options

 

 

369,298

 

 

 

 

 

 

3,547

 

 

 

 

 

 

 

 

 

3,547

 

Vesting of restricted stock units

 

 

668,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld related to net share settlement of equity awards

 

 

(262,829

)

 

 

 

 

 

(10,517

)

 

 

 

 

 

 

 

 

(10,517

)

Stock-based compensation

 

 

 

 

 

 

 

 

15,194

 

 

 

 

 

 

 

 

 

15,194

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,945

 

 

 

 

 

 

1,945

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(131,289

)

 

 

(131,289

)

Balance, March 31, 2023

 

 

95,609,279

 

 

$

94

 

 

$

1,489,814

 

 

$

(1,645

)

 

$

(1,717,283

)

 

$

(229,020

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

9


CYTOKINETICS, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

 

 

Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(135,643

)

 

$

(131,289

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Non-cash interest expense on liabilities related to revenue participation right purchase agreements

 

 

10,244

 

 

 

6,313

 

Stock-based compensation expense

 

 

21,612

 

 

 

15,194

 

Non-cash lease expense

 

 

995

 

 

 

935

 

Depreciation of property and equipment

 

 

2,331

 

 

 

1,848

 

Realized gain on investment, net

 

 

 

 

 

34

 

Interest receivable and amortization on investments

 

 

(5,224

)

 

 

(3,037

)

Non-cash interest expense related to debt

 

 

1,879

 

 

 

6,888

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

449

 

 

 

(859

)

Prepaid and other assets

 

 

(6,630

)

 

 

(1,627

)

Accounts payable

 

 

(10,294

)

 

 

(8,106

)

Accrued and other liabilities

 

 

(5,579

)

 

 

(7,755

)

Operating lease liabilities

 

 

(1,712

)

 

 

(120

)

Other non-current liabilities

 

 

(1,935

)

 

 

(705

)

Net cash used in operating activities

 

 

(129,507

)

 

 

(122,286

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of investments

 

 

(142,655

)

 

 

(89,779

)

Maturities of investments

 

 

175,296

 

 

 

250,701

 

Sales of investments

 

 

 

 

 

4,977

 

Purchases of property and equipment

 

 

 

 

 

(402

)

Net cash provided by investing activities

 

 

32,641

 

 

 

165,497

 

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of finance lease liabilities

 

 

(227

)

 

 

(207

)

Repayment of term loan

 

 

(705

)

 

 

 

Proceeds from issuance of common stock related to at-the-market offering, net of issuance costs

 

 

93,640

 

 

 

 

Proceeds from issuance of common stock under equity incentive and stock purchase plans

 

 

29,532

 

 

 

3,547

 

Taxes paid related to net share settlement of equity awards

 

 

(18,449

)

 

 

(10,517

)

Net cash provided by (used in) financing activities

 

 

103,791

 

 

 

(7,177

)

Effect of exchange rate changes

 

 

27

 

 

 

 

Net increase in cash, cash equivalents, and restricted cash

 

 

6,952

 

 

 

36,034

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

113,399

 

 

 

67,182

 

Cash, cash equivalents, and restricted cash, end of period

 

$

120,351

 

 

$

103,216

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash paid for interest

 

$

10,206

 

 

$

40

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Right-of-use assets recognized in exchange for operating lease obligations

 

$

178

 

 

$

 

Amounts unpaid for purchases of property and equipment

 

$

1,754

 

 

$

473

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

10


CYTOKINETICS, INCORPORATED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and Significant Accounting Policies

Cytokinetics, Incorporated was incorporated under the laws of the state of Delaware on August 5, 1997. The Company is a late-stage biopharmaceutical company focused on the discovery and development of novel small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions.

Our financial statements contemplate the conduct of our operations in the normal course of business. We have incurred an accumulated deficit of approximately $2.2 billion since inception and there can be no assurance that we will attain profitability. We had a net loss of $135.6 million and net cash used in operations of $129.5 million for the three months ended March 31, 2024. Cash, cash equivalents, and investments decreased to $634.3 million as of March 31, 2024 from $655.4 million as of December 31, 2023. We anticipate that we will have operating losses and net cash outflows in future periods.

We are subject to risks common to late-stage biopharmaceutical companies including, but not limited to, development of new drug candidates, dependence on key personnel, and the ability to obtain additional capital as needed to fund our future plans. Our liquidity will be impaired if sufficient additional capital is not available on terms acceptable to us. To date, we have funded operations primarily through sales of our common stock, contract payments under our collaboration agreements, sales of future revenues and royalties, debt financing arrangements and interest income. Until we achieve profitable operations, we intend to continue to fund operations through payments from strategic collaborations, additional sales of equity securities, grants and debt financings. We have never generated revenues from commercial sales of our drugs and may not have drugs to market for at least several years, if ever. Our success is dependent on our ability to enter into new strategic collaborations and/or raise additional capital and to successfully develop and market one or more of our drug candidates. We cannot be certain that sufficient funds will be available from such a financing or through a collaborator when required or on satisfactory terms. Additionally, there can be no assurance that our drug candidates will be accepted in the marketplace or that any future products can be developed or manufactured at an acceptable cost. These factors could have a material adverse effect on our future financial results, financial position and cash flows.

Based on the current status of our research and development activities, we believe that our existing cash, cash equivalents and investments will be sufficient to fund cash requirements for at least the next 12 months after the issuance of this Quarterly Report on Form 10-Q. If, at any time, our prospects for financing our research and development programs decline, we may decide to reduce research and development expenses by delaying, discontinuing or reducing our funding of one or more of our research or development programs. Alternatively, we might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation

Our condensed consolidated financial statements include the accounts of Cytokinetics and our wholly-owned subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements include all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair statement of our financial information. These interim results are not necessarily indicative of results to be expected for the full fiscal year or any future interim period. The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The financial statements and related disclosures have been prepared with the presumption that users of the interim financial statements have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our estimates on an ongoing basis. We base our estimates on our historical experience and also on assumptions that we believe are reasonable; however, actual results could significantly differ from those estimates.

11


Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires disclosure of significant segment expenses and other segment items by reportable segment. The ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. The ASU becomes effective January 1, 2025.

Note 2 — Net Loss Per Share

The following instruments were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been antidilutive (in thousands):

 

 

March 31, 2024

 

 

March 31, 2023

 

Options to purchase common stock

 

 

11,095

 

 

 

12,362

 

Warrants to purchase common stock

 

 

 

 

 

13

 

Restricted stock and performance units

 

 

1,692

 

 

 

1,438

 

Shares issuable related to the ESPP

 

 

65

 

 

 

49

 

Shares issuable upon conversion of 2026 Notes

 

 

2,003

 

 

 

2,003

 

Shares issuable upon conversion of 2027 Notes

 

 

10,572

 

 

 

10,572

 

Total shares

 

 

25,427

 

 

 

26,437

 

 

Note 3 — Research and Development Arrangements

Ji Xing Omecamtiv Mecarbil License and Collaboration Agreement

On December 20, 2021, we entered into the Ji Xing OM License Agreement, pursuant to which we granted to Ji Xing an exclusive license to develop and commercialize omecamtiv mecarbil in China and Taiwan. Under the terms of the Ji Xing OM License Agreement, we received a $50.0 million nonrefundable payment from Ji Xing comprised of a $40.0 million payment as consideration for the rights granted by us to Ji Xing and $10.0 million attributable to our having submitted to FDA an NDA for omecamtiv mecarbil. We may be eligible to receive from Ji Xing additional payments totaling up to $330.0 million for the achievement of certain commercial milestone events in China and Taiwan in connection to omecamtiv mecarbil. In addition, Ji Xing will pay us tiered royalties in the mid-teens to the low twenties range on the net sales of pharmaceutical products containing omecamtiv mecarbil in China and Taiwan, subject to certain reductions for generic competition, patent expiration and payments for licenses to third party patents. The Ji Xing OM License Agreement, unless terminated earlier, will continue on a market-by-market basis until expiration of the relevant royalty term.

In addition to the Ji Xing OM License Agreement, we entered into common stock purchase agreements with each of the RTW Investors, pursuant to which we sold and issued an aggregate of 0.5 million shares of our common stock at a price per share of $39.125 and an aggregate purchase price of $20.0 million. The closing of the transaction occurred on December 31, 2021.

Ji Xing Aficamten License and Collaboration Agreement

On July 14, 2020, we entered into the Ji Xing Aficamten License Agreement, pursuant to which we granted to Ji Xing an exclusive license to develop and commercialize aficamten in China and Taiwan. Under the terms of the Ji Xing Aficamten License Agreement, we received from Ji Xing a nonrefundable upfront payment of $25.0 million. Under the terms of the Ji Xing Aficamten License Agreement, we may be eligible to receive from Ji Xing milestone payments totaling up to $200.0 million for the achievement of certain development and commercial milestone events in connection to aficamten in the field of oHCM, and/or nHCM and other indications. In addition, Ji Xing will pay us tiered royalties in the low-to-high teens range on the net sales of pharmaceutical products containing aficamten in China and Taiwan, subject to certain reductions for generic competition, patent expiration and payments for licenses to third party patents. The Ji Xing Aficamten License Agreement, unless terminated earlier, will continue on a market-by-market basis until expiration of the relevant royalty term.

12


Accounting for the Ji Xing License and Collaboration Agreements

We assessed the arrangements of the Ji Xing OM License Agreement and the Ji Xing Aficamten License Agreement in accordance with ASC 606 and concluded that there is one performance obligation relating to the license of functional intellectual property for each agreement. The performance obligation was satisfied, and we recognized the residual allocation of arrangement consideration as revenue of $54.9 million in 2021 for the Ji Xing OM License Agreement and $36.5 million in 2020 for the Ji Xing Aficamten License Agreement. Due to the nature of development, including the inherent risk of development and approval by regulatory authorities, we are unable to estimate if and when the development milestone payments could be achieved or become due and, accordingly, we consider the milestone payments to be fully constrained and exclude the milestone payments from the initial transaction price.

The consideration related to sales-based milestone payments, including royalties, will be recognized when the related sales occur under the sales and usage-based royalty exception of ASC 606 as these amounts have been determined to relate predominantly to the license.

We re-evaluate the probability of achievement of development milestones and any related constraints each reporting period. We will include consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

We recognized a $2.5 million milestone from Ji Xing in 2023 for the initiation of a phase 3 clinical trial for aficamten in nHCM which was collected in the fourth quarter of 2023.

Research and development revenue from Ji Xing for the three months ended March 31, 2024 and 2023 was $0.8 million and $0.3 million, respectively, related to certain development cost reimbursements.

We had accounts receivable from Ji Xing of $0.8 million as of March 31, 2024 and $0.3 million as of December 31, 2023.

Astellas

The Company and Astellas entered into the Astellas FSRA Agreement on April 23, 2020. As a result of the Astellas FSRA Agreement, the Company will now have exclusive control and responsibility for the Company's future development and commercialization of reldesemtiv, CK-601 and other FSRA compounds and products, and accordingly, Astellas has agreed to terminate its license to all FSRA compounds and related products.

Under the Astellas FSRA Agreement, Astellas agreed to pay one-third of the out-of-pocket clinical development costs which may be incurred in connection with the Company’s Phase 3 clinical trial of reldesemtiv in ALS, up to a maximum contribution by Astellas of $12 million. Astellas also agreed to non-cash contributions to the Company, which included the transfer of its existing inventories of active pharmaceutical ingredient of reldesemtiv and CK-601. As of December 31, 2023, we have billed and collected from Astellas up to the maximum contribution of $12.0 million. On March 31, 2023, we announced that we will discontinue COURAGE-ALS, our Phase 3 clinical trial of reldesemtiv in patients with ALS, and COURAGE-ALS OLE.

We had no research and development revenue from Astellas for the three months ended March 31, 2024. Research and development revenue from Astellas was $1.8 million for the three months ended March 31, 2023.

Note 4 — Fair Value Measurements

We value our financial assets and liabilities at fair value, defined as the price that would be received for assets when sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information reasonably available. Accordingly, we use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider the security issuers’ and the third-party issuers’ credit risk in our assessment of fair value.

13


We classify fair value based on the observability of those inputs using a hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement):

Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or through corroboration with observable market data; and

Level 3 — Unobservable inputs, for which there is little or no market data for the assets or liabilities, such as internally-developed valuation models.

Fair Value of Financial Assets:

The follow tables set forth the fair value of our financial assets, which consists of cash equivalents and investments classified as available-for-sale securities, that were measured on a recurring basis (in thousands):

 

 

 

 

March 31, 2024

 

 

 

Fair Value
Hierarchy
Level

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

Money market funds

 

Level 1

 

$

108,635

 

 

$

 

 

$

 

 

$

108,635

 

U.S. Treasury securities

 

Level 1

 

 

60,920

 

 

 

 

 

 

(46

)

 

 

60,874

 

U.S. Government agency securities

 

Level 2

 

 

104,159

 

 

 

11

 

 

 

(149

)

 

 

104,021

 

Commercial paper

 

Level 2

 

 

239,642

 

 

 

18

 

 

 

(229

)

 

 

239,431

 

Corporate obligations

 

Level 2

 

 

114,179

 

 

 

14

 

 

 

(164

)

 

 

114,029

 

 

 

 

$

627,535

 

 

$

43

 

 

$

(588

)

 

$

626,990

 

 

 

 

 

 

December 31, 2023

 

 

 

Fair Value
Hierarchy
Level

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

Money market funds

 

Level 1

 

$

77,429

 

 

$

 

 

$

 

 

$

77,429

 

U.S. Treasury securities

 

Level 1

 

 

34,625

 

 

 

13

 

 

 

(15

)

 

 

34,623

 

U.S. Government agency securities

 

Level 2

 

 

175,301

 

 

 

87

 

 

 

(133

)

 

 

175,255

 

Commercial paper

 

Level 2

 

 

252,956

 

 

 

156

 

 

 

(59

)

 

 

253,053

 

Corporate obligations

 

Level 2

 

 

92,384

 

 

 

103

 

 

 

(142

)

 

 

92,345

 

 

 

 

 

$

632,695

 

 

$

359

 

 

$

(349

)

 

$

632,705

 

No credit losses on debt securities were recognized during the three months ended March 31, 2024 or 2023. In its evaluation to determine expected credit losses, management considered all available historical and current information, expectations of future economic conditions, the type of security, the credit rating of the security, and the size of the loss position, as well as other relevant information. The Company does not intend to sell, and is unlikely to be required to sell, any of these available-for-sale investments before their effective maturity or market price recovery.

Note 5 — Balance Sheet Components

A reconciliation of cash, cash equivalents, and restricted cash reported in the accompanying condensed consolidated balance sheets to the amount reported within the accompanying condensed consolidated statements of cash flows was as follows (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

Cash and cash equivalents

 

$

119,976

 

 

$

113,024

 

Restricted cash

 

 

375

 

 

 

375

 

Total cash, cash equivalents, and restricted cash as reported within our consolidated statement of cash flows

 

$

120,351

 

 

$

113,399

 

As of March 31, 2024, our restricted cash balance of $0.4 million is used to collateralize letters of credit.

14


Accrued liabilities were as follows (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

Accrued liabilities:

 

 

 

 

 

 

Clinical and preclinical costs

 

$

9,163

 

 

$

5,880

 

Compensation related

 

 

16,167

 

 

 

29,255

 

Other accrued expenses

 

 

14,793

 

 

 

7,506

 

Total accrued liabilities

 

$

40,123

 

 

$

42,641

 

 

Note 6 — Agreements with Royalty Pharma

On January 7, 2022, we announced that we had entered into the 2022 RPI Transactions with affiliates of Royalty Pharma International plc.

The RP Loan Agreement and the RP Aficamten RPA described below, are determined to be debt instruments subsequently measured at amortized cost and were entered into with parties that were at the time of our entry into the 2022 RPI Transactions affiliated and in contemplation of one another. We used the relative fair value method and made separate estimates of the fair value of each freestanding financial instrument and then allocated the proceeds in proportion to those fair value amounts. Arrangement consideration for the RP Loan Agreement and the RP Aficamten RPA totaled $150 million, consisting of the two $50 million upfront payments for the signing of the RP Loan Agreement and the RP Aficamten RPA and milestone of $50 million for initiation of the first pivotal trial in oHCM for aficamten that was deemed probable at the signing of the agreements.

The initial consideration was allocated as follows (in thousands):

 

 

Fair Value

 

 

Proceeds

 

 

Allocation

 

Units of Accounting:

 

 

 

 

 

 

 

 

 

Revenue Participation Right Purchase Agreement

 

$

69,498

 

 

$

100,000

 

 

$

89,571

 

Development Funding Loan Agreement

 

 

46,887

 

 

 

50,000

 

 

 

60,429

 

Total consideration

 

$

116,385

 

 

$

150,000

 

 

$

150,000

 

2022 RP Loan Agreement

Under the RP Loan Agreement, we were initially entitled to receive up to $300.0 million in term loans, $50.0 million of which was disbursed to us on closing and the remaining $250.0 million scheduled to have been available to us upon our satisfaction of customary disbursement conditions and certain development conditions by specific deadlines, as follows:

$50.0 million of tranche 2 term loans during the one year period following the receipt on or prior to March 31, 2023 of marketing approval from FDA of omecamtiv mecarbil;
$25.0 million of tranche 3 term loans during the one year period following the commercial availability of a diagnostic test measuring levels of omecamtiv mecarbil to support the final FDA label language applicable to such drug, subject to such commercial availability and the conditions to the tranche 2 term loans having occurred on or prior to March 31, 2023;
$75.0 million of tranche 4 term loans during the one year period following the receipt on or prior to September 30, 2024 of positive results from SEQUOIA-HCM, the Phase 3 trial for aficamten; and
$100.0 million of tranche 5 term loans during the one year period following the acceptance by the FDA on or prior to March 31, 2025 of an NDA for aficamten, subject to the conditions to the tranche 4 term loans having occurred on or prior to September 30, 2024.

As a result of our receipt of a CRL on February 28, 2023, in connection to our NDA for omecamtiv mecarbil, we have not satisfied the conditions to the availability of the tranche 2 and tranche 3 loans under the RP Loan Agreement.

In December 2023, we announced positive topline results from SEQUOIA-HCM, the Phase 3 trial for aficamten. This entitled us to receive $75.0 million under tranche 4 during the one year period following the receipt of the positive results and requires us to complete a minimum mandatory draw of at least $50.0 million of the $75.0 million available.

The remaining $100.0 million under tranche 5 remains available for disbursement to us, subject to satisfaction of the conditions described above.

15


Each term loan under the RP Loan Agreement matures on the 10 year anniversary of the funding date for such term loan and is repayable in quarterly installments of principal, interest and fees commencing on the last business day of the seventh full calendar quarter following the calendar quarter of the applicable funding date for such term loan, with the aggregate amount payable in respect of each term loan (including interest and other applicable fees) equal to 190% of the principal amount of the term loan for the tranche 1, tranche 4 and tranche 5 term loans and 200% of the principal amount of the term loan for tranche 2 and tranche 3 term loans (such amount with respect to each term loan, “Final Payment Amount”). We accounted for amounts initially drawn under the RP Loan Agreement using the effective interest method which resulted in an effective interest rate of 7.65% over the ten-year term. As of the date of the prepayment or maturity of the term loan (or the date such prepayment or repayment is required to be paid), we will be required to pay an additional amount equal to $34.6 million accreted over the term of the loan. We have made our first payment in the fourth quarter of 2023.

We may prepay the term loans in full (but not in part) at any time at our option by paying an amount equal to the unpaid portion of Final Payment Amount for the outstanding term loans under the RP Loan Agreement; provided that if the conditions for either the tranche 4 term loans or the tranche 5 term loans have been met, we must have borrowed at least $50 million principal amount of the tranche 4 or 5 term loans. In addition, the term loans under the RP Loan Agreement are repayable in full at the option of either us or the lender in an amount equal to the unpaid portion of Final Payment Amount for the outstanding term loans upon a change of control of Cytokinetics.

Future minimum payments under the existing borrowing under RP Loan Agreement are (in thousands):

Years ending December 31:

 

 

 

2024 remainder

 

$

8,640

 

2025

 

 

11,520

 

2026

 

 

11,520

 

2027

 

 

11,520

 

2028

 

 

11,520

 

Thereafter

 

 

37,440

 

Future minimum payments

 

 

92,160

 

Less: Unamortized interest and loan costs

 

 

(23,818

)

Term Loan, net

 

$

68,342

 

As of March 31, 2024, the estimated fair value of our RP Loan Agreement was $51.9 million. The fair value was estimated based on Level 3 inputs.

2022 RP Aficamten Royalty Purchase Agreement

In addition, on January 7, 2022, we entered into the RP Aficamten RPA with RPI ICAV, pursuant to which RPI ICAV purchased rights to certain revenue streams from net sales of pharmaceutical products containing aficamten by us, our affiliates and our licensees in exchange for up to $150.0 million in consideration, $50.0 million of which was paid on the closing date, $50.0 million of which was paid to us in March 2022 following the initiation of the first pivotal trial in oHCM for aficamten, and $50.0 million of which was paid to us in September 2023 following the initiation of the first pivotal clinical trial in nHCM for aficamten. The RP Aficamten RPA also provides that the parties will negotiate terms for additional funding if we achieve proof of concept results in certain other indications for aficamten, with a reduction in the applicable royalty if we and RPI ICAV fail to agree on such terms in certain circumstances.

Pursuant to the RP Aficamten RPA, RPI ICAV purchased the right to receive a percentage of net sales equal to 4.5% for annual worldwide net sales of pharmaceutical products containing aficamten up to $1 billion and 3.5% for annual worldwide net sales of pharmaceutical products containing aficamten in excess of $1 billion, subject to reduction in certain circumstances. Our liability to RPI ICAV is referred to as the “RP Aficamten Liability”.

We account for the RP Aficamten Liability as a liability primarily because we have significant continuing involvement in generating the related revenue stream from which the liability will be repaid. If and when aficamten is commercialized and royalties become due, we will recognize the portion of royalties paid to RPI ICAV as a decrease to the RP Aficamten Liability and a corresponding reduction in cash.

The carrying amount of the RP Aficamten Liability is based on our estimate of the future royalties to be paid to RPI ICAV over the life of the arrangement as discounted using an imputed rate of interest. The imputed rate of interest on the carrying value of the RP Aficamten Liability was approximately 24.8% and 22.4% as of March 31, 2024 and 2023, respectively.

16


2017 RP Omecamtiv Mecarbil Royalty Purchase Agreement

In February 2017, we entered into the RP OM RPA pursuant to which we sold a portion of our right to receive royalties from Amgen on future net sales of omecamtiv mecarbil to RPFT for a one-time payment of $90 million, which is non-refundable even if omecamtiv mecarbil is never commercialized. Concurrently, we entered into a common stock purchase agreement with RPFT through which RPFT purchased 875,656 shares of the Company’s common stock for $10.0 million. We allocated the consideration and issuance costs on a relative fair value basis to our liability to RPFT related to sale of future royalties under the RP OM RPA (the “RP OM Liability”) and the common stock sold to RPFT, which resulted in the RP OM Liability being initially recognized at $92.3 million. The RP OM RPA provides for the sale of a royalty to RPFT of 4.5% on worldwide net sales of omecamtiv mecarbil, subject to a potential increase of up to an additional 1% under certain circumstances. As a result of our receipt of a CRL on February 28, 2023 in connection to our NDA for omecamtiv mecarbil, pursuant to the terms of the RP OM RPA, the applicable royalty rate will increase to a maximum of 5.5% if omecamtiv approval obtains FDA approval at any time after June 30, 2023.

As a result of the termination of the Amgen Agreement and pursuant to our obligations under the RP OM RPA, we and RPFT amended the RP OM RPA on January 7, 2022 to preserve RPFT’s rights under the RP OM RPA by providing for direct payments by us to RPFT of up to 5.5% of our and our affiliates and licensees worldwide net sales of omecamtiv mecarbil. The RP OM RPA, as amended, had no impact on the original accounting for the $92.3 million associated with the RP OM Liability established in February 2017.

We account for the RP OM Liability as a liability primarily because we have significant continuing involvement in generating the related revenue stream from which the liability will be repaid. If and when omecamtiv mecarbil is commercialized and royalties become due, we will recognize the portion of royalties paid to RPFT as a decrease to the RP OM Liability and a corresponding reduction in cash.

The carrying amount of the RP OM Liability is based on our estimate of the future royalties to be paid to RPFT over the life of the arrangement as discounted using an imputed rate of interest. The excess of future estimated royalty payments over the $92.3 million of allocated proceeds, less issuance costs, is recognized as non-cash interest expense using the effective interest method. The imputed rate of interest on the carrying value of the RP OM Liability was approximately 0.1% and 1.9% as of March 31, 2024 and 2023, respectively.

Accounting for the Royalty Pharma Royalty Purchase Agreements

We periodically assess the amount and timing of expected royalty payments using a combination of internal projections and forecasts from external sources. To the extent such payments are greater or less than our initial estimates or the timing of such payments is materially different than its original estimates, we will prospectively adjust the amortization of the RP OM Liability and the RP Aficamten Liability and the effective interest rate.

There are a number of factors that could materially affect the amount and timing of royalty payments, a number of which are not within our control. The RP OM Liability and the RP Aficamten Liability are recognized using significant unobservable inputs. The estimates of future royalties requires the use of several assumptions such as: the probability of clinical success, the probability of regulatory approval, the estimated date of a product launch, estimates of eligible patient populations, estimates of prescribing behavior and patient compliance behavior, estimates of pricing, payor reimbursement and coverage, and sales ramp. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of the RP OM Liability and the RP Aficamten Liability.

We recorded $50.0 million of additional consideration associated with the 2022 RP Aficamten Royalty Purchase Agreement upon receipt of the cash in the third quarter of 2023.

We review our assumptions on a regular basis and our estimates may change in the future as we refine and reassess our assumptions.

Changes to the RP Aficamten Liability and the RP OM Liability are as follows (in thousands):

 

 

RP Aficamten Liability

 

 

RP OM Liability

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Beginning balance, January 1

 

$

180,591

 

 

$

105,117

 

 

$

199,384

 

 

$

195,384

 

Initial carrying value

 

 

 

 

 

 

 

 

 

 

 

 

Interest accretion

 

 

10,239

 

 

 

5,363

 

 

 

(21

)

 

 

917

 

Amortization of issuance costs

 

 

 

 

 

 

 

 

26

 

 

 

33

 

Ending balance, March 31

 

$

190,830

 

 

$