Why Cytokinetics (CYTK) Stock Price Was Down 17% on Thursday

Core Viewpoint - Cytokinetics (CYTK) shares fell over 17% following a complex funding deal with Royalty Pharma (RPRX) and a public offering priced at a 16% discount to the previous closing price, raising concerns among investors about the deal's structure and implications for future buyouts [1][8]. Funding Deal with Royalty Pharma - The funding deal expands the existing collaboration with Royalty Pharma, allowing Cytokinetics to receive up to $575 million in total [1]. - Cytokinetics will receive $50 million upfront and could access an additional $175 million within 12 months post-approval of aficamten for obstructive hypertrophic cardiomyopathy (oHCM), repayable over 10 years [2]. - The deal revises a previous royalty agreement, with Royalty Pharma now entitled to 4.5% on annual net sales up to $5 billion and 1% above that, compared to the previous terms of 4.5% up to $1 billion and 3.5% thereafter [3]. Additional Funding for Drug Development - Cytokinetics will receive $100 million upfront for a late-stage study on omecamtiv mecarbil, with potential fixed payments and royalties contingent on FDA approval [4]. - An additional $50 million will fund a proof-of-concept study for CK-586, with Royalty Pharma having the option to invest up to $150 million for late-stage development [5]. - Royalty Pharma will also invest $50 million in Cytokinetics' common stock, totaling $250 million upon closing the transaction [6]. Investor Sentiment and Market Impact - Despite the funding boost, investor sentiment is negative due to the deal's complexity and perceived favorability towards Royalty Pharma, raising concerns about long-term payment liabilities [7]. - The deal is seen as reducing the likelihood of a buyout, particularly after Novartis reportedly dropped interest in acquiring Cytokinetics [8]. - Year-to-date, Cytokinetics' stock has declined by 41.3%, contrasting with a 4.4% decline in the industry [8]. Public Offering Details - Cytokinetics announced a secondary offering of approximately 9.8 million shares at $51 per share, aiming to raise $500 million, with a potential total of $575 million if underwriters fully exercise their options [10][11]. - The offering price represents a discount compared to the previous closing price of $59.23, contributing to investor dissatisfaction [12]. Pipeline and Regulatory Plans - With no marketed products, Cytokinetics relies on its pipeline for growth, with plans to submit regulatory filings for aficamten in oHCM to the FDA in Q3 2024 and to the EMA in Q4 2024 [13]. - If approved, aficamten will compete with Bristol Myers' Camzyos, the first FDA-approved drug for oHCM [14].