* Amgen to pay Cytokinetics $50 mln upfront fee
* To make delayed payments of up to $600 mln
* Worldwide license excludes Japan
* Cytokinetics shares surge 45 pct (Recasts; adds analyst’s comments, updates share movement)
May 26 (Reuters) - Amgen Inc (AMGN.O) exercised its option for an exclusive license to develop and commercialize Cytokinetics Inc’s (CYTK.O) heart failure drug under an existing agreement, lending a significant boost to Cytokinetics’ cash position.
Cytokinetics’ shares soared 45 percent to touch a high of $3.02, making them one of the top percentage gainers on Nasdaq.
The cash generated from the program and financing removes a financial overhang and provides Cytokinetics with sufficient capital through 2012, Lazard Capital Markets analyst Joel Sendek wrote in a research note.
Sendek, who maintained his “buy” rating and a price target of $5.00 on Cytokinetics stock, estimates that the company will end its second quarter with about $135 million in cash.
As of March 31, the company had cash and cash equivalents totaling $48.5 million.
“Amgen’s exercise of its option to this program not only adds significant cash to our balance sheet, but also will have an effect to our net cash burn and extend our financial runway,” Cytokinetics’ Chief Executive Robert Blum said on a conference call with analysts.
Under the terms of the 2006 collaboration and option agreement, Amgen will pay Cytokinetics a non-refundable fee of $50 million and future performance-based payments of up to $600 million, the companies said in a joint statement.
“We will end the year anywhere from 20 to 24 months worth of going-forward cash and it could be higher than that once we have clarity on the expense reimbursement,” Cytokinetics’ Chief Financial Officer Sharon Barbari said.
Amgen, which exercised its option to license Cytokinetics’ cardiac contractility program under the deal, said it intends to move the heart failure drug, CK-1827452, forward rapidly into larger and more definitive clinical trials. The drug is currently in a mid-stage trial.
The license is worldwide but excludes Japan, the companies said.
“We anticipate Japanese partnering for this program to occur in early 2010 following Amgen’s validation, yielding an additional $35 million up-front payment and double-digit royalties,” Lazard’s Sendek said.
Cytokinetics also has the option to earn increased royalties by sharing certain late-stage development costs and by doing so, could co-promote products in North America.
Cytokinetics shares were up nearly 28 percent at $2.66 in Tuesday afternoon trade on Nasdaq, while Amgen shares were up about 1 percent at $49.92. (Reporting by Shailesh Kuber and Jennifer Robin Raj in Bangalore; Editing by Gopakumar Warrier, Deepak Kannan and Aradhana Aravindan)