2023-12-27 10:00:08 ET
Summary
- Cytokinetics' share price surged after announcing positive results from the phase 3 SEQUOIA-HCM trial of aficamten.
- Aficamten showed better efficacy, safety, and convenience compared to Camzyos, positioning it as a potential best-in-class drug.
- The results warrant an increased valuation range and further increase the probability of the company being acquired.
Shares of Cytokinetics, Incorporated ( CYTK ) surged when the company announced results from the phase 3 SEQUOIA-HCM trial of aficamten that exceeded investor expectations. My base case was aficamten matching the efficacy and safety of Camzyos (mavacamten) and that the stock could be worth between $55 and $65 per share. The results look better than that base case scenario, and I now believe aficamten will be the best-in-class drug with a lot more attractive profile compared to Camzyos - very strong efficacy, what looks like better safety, and a far less onerous titration schedule.
This kind of profile deserves a much higher valuation range, which I am now increasing to a $94 to $108 per share range. I believe that the probability of the company being acquired is even higher than before the results were announced.
Aficamten's phase 3 results - bullish case met
Matching Camzyos' efficacy was a requirement for Cytokinetics and aficamten as there is no place on the market for a second-to-market and inferior drug, although one could say that there was a better titration schedule as a potential commercialization angle.
Fortunately for Cytokinetics, there will be no need for that, and the company showed better efficacy, safety, and convenience of aficamten compared to Camzyos.
On efficacy, aficamten met the primary endpoint with very high statistical significance - it improved exercise capacity compared to placebo by increasing peak oxygen uptake, or pVO 2 , measured by cardiopulmonary exercise testing ("CPET") by a least square mean difference of 1.74 mL/kg/min and a p-value of 0.000002. This compares very favorably to Camzyos' 1.4 mL/kg/min improvement.
We are yet to see the results on the 10 secondary endpoints that aficamten met with statistical significance and how they compare to Camzyos, but odds are the results are at least as good, and likely similarly better.
Safety is very important, and aficamten exceeded expectations on this front as well. Aficamten was well-tolerated in the trial, with an adverse event profile comparable to placebo. Treatment-emergent serious adverse events were even less frequent in patients treated with aficamten at 5.6% versus 9.3% in the placebo group. Core echocardiographic left ventricular ejection fraction ("LVEF") was observed to be below 50% in only 5 patients or 3.5% on aficamten compared to 1 patient or 0.7% on placebo. Cytokinetics also said that there were no instances of worsening heart failure or treatment interruptions due to low LVEF.
What about Camzyos? In its phase 3 trial, treatment-emergent adverse events were similar to placebo with 10 (8%) compared to 11 (9%), so, we can say, with the caveat of cross-trial comparisons, that aficamten did better, especially considering the identical 9% rate in the placebo groups in both trials. On the LVEF side of the safety profile, 7 patients on Camzyos had transient decreases in LVEF to less than 50% and 3 patients on Camzyos had protocol-driven temporary treatment discontinuation for LVEF dropping below the 50% threshold.
Overall, every data point shared by Cytokinetics points to aficamten being better than Camzyos.
Valuation update and buyout prospects
These results exceeded my base case scenario , under which I valued Cytokinetics between $55 and $65 per share. This was based on it grabbing 35% to 40% market share in a two-product market by the late 2020s.
The bullish case being materialized is at least good enough for the market share to flip in aficamten's favor by the late 2020s, and I now expect aficamten to be a $3 billion drug, plus or minus $200 million, by then. This increases the valuation range from $55-65 per share to $94 at the low end of the range and $108 at the high end of the range.
This translates to a market cap of approximately $10 billion to $11.5 billion, and this may still be a conservative valuation given what looks like clear superiority over Camzyos and the $13 billion Bristol-Myers Squibb (BMY) paid for Myokardia to get their hands on Camzyos. But as I said in my previous article, my assumption is still that the size of the market is not as large as BMY assumed when acquiring Myokardia.
I also believe these results increase the probability of a buyout, even considering they were relatively high before the company reported the results. Aficamten would be a natural fit for the cardiovascular portfolios of Novartis ( NVS ) or AstraZeneca ( AZN ), the two companies rumored to be interested in acquiring Cytokinetics.
Conclusion
It is not often that we see as clean or as positive phase 3 results from a clinical trial as was the case with Cytokinetics and aficamten today. The SEQUOIA-HCM phase 3 results exceeded expectations on both efficacy and safety, and they compare very well to Camzyos. The better cross-trial efficacy and safety on top of the less onerous titration schedule of aficamten position the product candidate well to compete against Camzyos. The results also further increase the probability of Cytokinetics being acquired, and I would not be surprised to see the buyout price come close to or exceed the high end of my increased $94-108 valuation range on Cytokinetics.
Of course, I take no credit for the positive outcome, as I was neutral and on the sidelines heading into this readout. However, I am now bullish on the company's prospects and a potential buyer if the stock pulls back to $60 per share or lower.
For further details see:
Cytokinetics: Clear Win For Aficamten In SEQUOIA-HCM Phase 3 Trial (Upgrade)