Cytokinetics CEO Robert Blum blamed investor frustration over a deal with Royalty Pharma on a “hijacked” narrative that the company would be better off selling itself than continuing on its own.
On Wednesday, Cytokinetics announced an up to $575 million deal with Royalty Pharma and a $500 million public offering to fund the potential launch of aficamten for a rare heart disease and to run another Phase 3 study for omecamtiv mecarbil, which was rejected by the FDA last year. The news sent Cytokinetics shares $CYTK down 17% on Thursday morning amid investor frustration that a rumored deal for the company might never happen.
In an interview with Endpoints News on Thursday morning, Blum said the company’s “plan A” has always been to build Cytokinetics into a sustainable cardiology business.
Blum rejected the idea that “the best way for Cytokinetics to maximize shareholder value is to dress up the company for sale.”
“In recent months, I think that narrative was hijacked by some who felt like this company would be better sold than to continue along its intentions,” he said. “Why should anyone assume that the best way to maximize shareholder value is to necessarily sell a company rather than to build something that’s a more enduring growth story around an area of science and pharmacology that we know better than anyone else?”
Cytokinetics is planning to file for FDA approval of aficamten in the third quarter after the program read out positive Phase 3 results in December, triggering buyout speculation. A few weeks later at the JP Morgan Healthcare Conference, The Wall Street Journal reported that Novartis was in talks to acquire Cytokinetics and its market cap soared above $10 billion.
A buyout never materialized. Blum declined to comment Thursday beyond saying that Cytokinetics has “talked to multiple companies about multiple things” and is acting on its fiduciary responsibilities appropriately. “It would be wrong for anyone to assume that we’re confused about what that means,” Blum said. He said that a “plan B” for the company could be a sale.
Can Cytokinetics compete?
If approved, aficamten would go up against Bristol Myers Squibb’s Camzyos in obstructive hypertrophic cardiomyopathy (oHCM). Competing against any large drugmaker in a commercial launch is a tall task, and much of the investor frustration stems from uncertainty about Cytokinetics’ ability to do so, Mizuho analyst Salim Syed said.
“That’s certainly the debate, right? When you consider the likes of who they have to go up against here,” Syed said. “This is the common debate for smid-cap companies: Can you do it?”
Blum expressed confidence that Cytokinetics can win, saying that while Camzyos has done a “formidable job” since its launch, the drug has only reached about 5% to 7% of eligible patients. There’s enough room for both Camzyos and aficamten on the market, he said.
“We believe that the two companies together can build a category, not unlike where you’ve seen in other cardiology sectors,” Blum said. “We don’t believe we need to compete with BMS to meaningfully return value for our science and shareholders.”
Syed published the results of an anonymous investor survey on Wednesday evening. Respondents slammed Blum over the Royalty Pharma deal, with comments ranging from simpler ones like “bad,” “awful” and “terrible,” to longer answers questioning Cytokinetics management, calling them “tone deaf” and “a liability.”
The survey singled out the decision to run another trial for omecamtiv mecarbil as the most befuddling aspect of Wednesday’s news. “People didn’t think that it was coming back. Now, the company’s spending money on that asset, and the risk is seemingly solely being borne by Cytokinetics, not so much Royalty Pharma,” Syed said.
Blum said he’d seen the survey and was “disappointed” about some of the comments. But he also said that most responses came from people who work at hedge funds and usually focus on M&A exits as value drivers.
“It wasn’t that long ago that some of the same hedge fund investors were against our investments in aficamten when we were developing omecamtiv and indicating to us that we should put a lockbox around omecamtiv and not invest in anything else,” Blum said.