MyoKardia (MYOK) 10-Q2020 Q1 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2020

or

For the transition period from                      to                     

Commission File Number: 001-37609

MYOKARDIA, INC.

(Exact name of registrant as specified in its charter)

1000 Sierra Point Parkway

Brisbane, CA

(Address of principal executive offices)

94005

(Zip Code)

(650) 741-0900

(Registrant’s telephone number, including area code)

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

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, 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.

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 ☒

The number of outstanding shares of the registrant’s common stock on May 1, 2020 was 46,680,808 shares.

MYOKARDIA, INC.

TABLE OF CONTENTS

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PART I—FINANCIAL INFORMATION

MYOKARDIA, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

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

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MYOKARDIA, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

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

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MYOKARDIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

(Unaudited)

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

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MYOKARDIA, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

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

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MYOKARDIA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization

MyoKardia, Inc. (the Company) is a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious and neglected rare cardiovascular diseases. The Company’s initial focus is on the treatment of cardiomyopathies, a group of diseases of the heart muscle. MyoKardia’s pipeline includes: mavacamten and MYK-224, which are being studied for the treatment of hypertrophic cardiomyopathy; LUS-1, being studied for the treatment of diseases of diastolic dysfunction; and danicamtiv (formerly MYK-491) and ACT-1, being studied for the treatment of diseases of systolic dysfunction.  

MyoKardia’s most advanced programs are: mavacamten, which is in four clinical trials including a Phase 3 study in patients with hypertrophic cardiomyopathy (HCM); danicamtiv, which recently completed a Phase 2a multiple-ascending dose study in patients with stable systolic heart failure and is being advanced to a Phase 2 study in patients with genetic dilated cardiomyopathy; and MYK-224, which is in a Phase 1 randomized, placebo-controlled study in healthy volunteers.

The Company was incorporated on June 8, 2012 in Delaware and its corporate headquarters and operations are in Brisbane, California.

Liquidity

The Company has incurred significant operating losses since inception and has an accumulated deficit of $548.6 million as of March 31, 2020. The Company has relied on its ability to fund its operations through private and public equity financings and to a lesser extent, through a license and collaboration arrangement with a collaboration partner, Sanofi S.A. (Sanofi) via its subsidiary, Aventis Inc. The collaboration agreement ended on December 31, 2018 and the Company had no revenues relating to its Sanofi collaboration after December 31, 2018, nor has it received reimbursements of research and development expenses after June 30, 2019. The Company has not yet received regulatory approval to commercialize or sell any product and does not have customers. Management expects operating losses and negative operating cash flows to continue for the foreseeable future. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval, and commercialization of the Company’s products and product candidates and the achievement of a level of revenues adequate to support its cost structure. The Company’s ultimate success depends on the outcome of its research and development activities and anticipates the need to raise additional capital to fully implement its business plan.  The Company intends to raise such capital through the issuance of additional equity, debt and/or strategic alliances with partner companies. There is no assurance that such financing will be available or that such strategic alliances will be executed on terms acceptable to the Company, or at all.   

As of March 31, 2020, the Company had $360.1 million of cash, cash equivalents and short and long-term investments, which management believes will be sufficient to meet the Company’s anticipated operating and capital expenditure requirements for the twelve months following the date of issuance of these financial statements.  Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding. In addition, the Company is closely monitoring ongoing developments in connection with the COVID-19 pandemic, which may negatively impact its financial and operating results.

The Company will continue to assess its operating expenses and cash and cash equivalents and, if circumstances warrant, the Company will make appropriate adjustments to its operating plan.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited, include the Company’s accounts and those of its wholly-owned subsidiaries MyoKardia Australia Pty Ltd and MyoKardia Netherlands B.V., and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The condensed consolidated balance sheet at December 31, 2019, has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year or any interim period and should be read in conjunction with the audited financial statements for the year ended

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December 31, 2019 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019. The significant accounting policies used in preparation of these condensed consolidated financial statements for the periods shown are consistent with those discussed in notes to the consolidated financial statements in the Company’s 2019 Annual Report on Form 10-K and are updated below as necessary.

The Company currently operates in 1 business segment, which is the identification, development and commercialization of therapies for the treatment of serious and neglected rare cardiovascular diseases and has a single reporting unit and operating segment. These interim statements, in the opinion of management, reflect all normal recurring adjustments necessary for the fair statement of the Company’s financial position and results of operations for the interim periods ended March 31, 2020 and 2019, respectively.

Reconciliation of Cash, Cash Equivalents, and Restricted Cash as Reported in Consolidated Statements of Cash Flows

Cash as reported in the consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents and restricted cash as presented on the consolidated balance sheets. Restricted cash at March 31, 2020 and December 31, 2019 represents cash balances held as security in connection with the Company’s facility lease agreements. The following table provides a reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets to the total shown in the consolidated statements of cash flows (in thousands):

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trials accrued liabilities, income tax valuation allowance and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-18 (Topic 808), Clarifying the Interaction Between Topic 808 and Topic 606, which provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13 (Topic 820), Fair Value Measurement, which modifies the disclosure requirements in Topic 820 by removing requirements for disclosing (i) amounts of and reasons for transfers between the Level 1 and Level 2 hierarchies, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The ASU 2018-13 amendment also adds requirements for disclosure of changes in unrealized gains and losses for the period relating to Level 3 fair value measurements and other factors considered in the valuation of Level 3 investments. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements.

In June 2016, the FASB issued ASU No. 2016-13 (Topic 326), Financial Instruments –Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses

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should be estimated when the fair value of the debt securities is below their associated amortized costs. The Company adopted this amendment in the first quarter of 2020 and the adoption did not have a material impact to the Company’s financial statements. 

3. Sanofi License and Collaboration Agreement

Sanofi (Aventis Inc.)

Agreement Overview, Termination and Repurchase of Royalty Rights

Until December 31, 2018 the Company had an exclusive license and collaboration agreement (Collaboration Agreement) with Aventis Inc., a wholly-owned subsidiary of Sanofi S.A. (Sanofi). On December 31, 2018, Sanofi notified the Company of its intent to terminate the collaboration, specifically, Sanofi elected not to continue with the mavacamten, MYK-224 and danicamtiv programs.  As a result, cost sharing and Sanofi’s reimbursement of our research and development costs for mavacamten and MYK-224 ended in the first half of 2019.  At that time Sanofi had continuing rights to royalties in the event of commercialization of the mavacamten and MYK-224 programs. In July 2019, the Company repurchased those rights from Sanofi for $80.0 million.  Neither the Company nor Sanofi have any material continuing rights or obligations under the Collaboration Agreement.

4. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities, including short-term and long-term investments and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s financial instruments, including accounts payable and accrued liabilities and other current liabilities approximate fair value due to their short-term maturities.

Marketable securities are stated at their estimated fair values. The counterparties to the agreements relating to the Company’s investment securities consist of the U.S. Treasury, governmental agencies, various major corporations and financial institutions with high credit standing. The carrying amounts for financial instruments consisting of cash and cash equivalents, receivable from collaboration partner, accounts payable and accrued liabilities approximate fair value due to their short maturities.

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs other than quoted market prices included in Level 1 are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

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The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

The following table is a summary of amortized cost, unrealized gain and loss, and fair value of the Company’s marketable securities by contractual maturities (in thousands):

5. Leases

The Company determines if an arrangement is or contains a lease at inception. Operating lease right-of-use (ROU) assets and liabilities are presented separately on our consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term beginning at the commencement date. As the Company’s leases do not provide enough information to determine an implicit interest rate, the Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. The operating lease ROU assets also include any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

In September 2018, the Company entered into a lease agreement (the “Lease”) for approximately 129,800 square feet of office and laboratory space in Brisbane, California, which is now the Company’s corporate headquarters. The Company performed an evaluation of the Lease and determined it is an operating lease. The lease commencement date was in January 2020 and on the commencement date, the Company recognized $52.6 million of ROU asset and lease liability on its consolidated balance sheet in accordance with ASC 842. The Lease grants the Company an option to extend the Lease for an additional 10-year period. This optional period was not included in the measurement of the ROU asset or lease liability as it was not reasonably certain that the Company would exercise the option. The Lease requires the Company to share in prorated operating expenses and property taxes based upon actual amounts incurred. These expenses were classified as variable lease costs due to the Company’s election to account for each separate lease component and the non-lease components associated with that lease component as a single lease component.

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The Lease provides for annual base rent of approximately $5.5 million in the first year of the lease term. The annual base rent for the second twelve months will be approximately $8.5 million, which will increase on an annual basis beginning from the 25th month to approximately $11.1 million for the tenth year of the lease.

As of March 31, 2020, the Company has capitalized $10.6 million of leasehold improvements within property and equipment and amortizes it over the lease term.

Supplemental balance sheet information related to operating leases was as follows (in thousands, except lease term and discount rate).

Information related to operating lease activity during the three months ended March 31, 2020 and 2019 was as follows (in thousands):

Future annual payments of operating lease liabilities as of March 31, 2020 are as follows (in thousands):

 The operating leases require the Company to share in prorated operating expenses and property taxes based upon actual amounts incurred; those amounts are not fixed for future periods and, therefore, are not included in the future commitments listed above.

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6. Balance Sheet Components

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from two to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term. Upon retirement or sale, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statement of operations and comprehensive loss.

Property and equipment consist of the following (in thousands):

Depreciation expense was $0.8 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

7. Commitments and Contingencies

Purchase Commitments

The Company conducts product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites. The Company has contractual arrangements with these organizations; however, these contracts are generally cancelable on 30 days’ notice and the obligations under these contracts are largely based on services performed.

Contingencies

From time to time, the Company may have contingent liabilities that arise in the ordinary course of business activities. The Company accrues for such liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There were 0 contingent liabilities requiring accrual or disclosure as of March 31, 2020 or December 31, 2019.

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Guarantees and Indemnifications

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to certain of these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification arrangements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future but have not yet been made.

The Company indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws and agreements providing for indemnification entered into with its officers and directors. The term of the indemnification period lasts as long as an officer or director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity.

The maximum amount of potential future indemnification of directors and officers is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with its exposure and may enable it to recover a portion of any future amounts paid.

The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations for any period presented.

8. Stockholders’ Equity

On January 3, 2020, the Company entered into a sales agreement with a sales agent to establish an at-the-market (ATM) offering program, under which the Company is permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $200 million. As of March 31, 2020, no securities have been issued pursuant to the ATM agreement.

In March 2019, the Company completed a follow-on offering and issued 5,663,750 shares of common stock at a price of $51.00 per share, which included 738,750 shares sold directly to the underwriters upon exercise of their over-allotment option. During the three months ended March 31, 2019, the Company received proceeds totaling approximately $271.2 million from the offering, net of underwriting discounts and commissions and offering expenses.

Common Stock Reserved for Issuance

The Company has reserved shares of common stock for issuance as follows:

9. Stock-Based Compensation

The Company classifies stock-based compensation expense in the accompanying condensed consolidated statements of operations and comprehensive loss based on the department to which a recipient belongs. The following table sets forth stock-based compensation expense related to equity awards granted to employees and consultants for all periods presented (in thousands):

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The following summarizes option and other equity award activity under the 2012 Equity Incentive Plan and 2015 Stock Option and Incentive Plan: 

Restricted stock units (“RSUs”) settle into shares of common stock upon vesting and the fair value is the market price on the date of grant.

In relation to stock options and awards that vest upon the achievement of performance criteria, there was $0.3 million and 0 in stock-based compensation expense recorded for the three months ended March 31, 2020 and 2019, respectively. The Company begins to recognize expenses related to these stock options and awards during the period upon concluding that certain performance criteria are considered probable.

10. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

As of March 31, 2020, the Company has contributions from plan participants of $1.0 million under the 2015 ESPP, which if converted, would be equivalent to approximately 20,000 shares based on 85% of the stock price at the beginning of the offering period. As of March 31, 2019, the Company had contributions from plan participants of $0.7 million under the 2015 ESPP, which if converted, would have been equivalent to approximately 15,000 shares based on 85% of the stock price at the beginning of the offering period.

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11. Income Taxes

Deferred tax assets and deferred tax liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.  

The Company does not recognize a tax benefit for uncertain tax positions unless it is more likely than not that the position will be sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit potentially recorded for these positions is measured at the largest amount of cumulative benefit that has greater than a 50 percent likelihood of being realized upon ultimate settlement. Deferred tax assets that do not meet these recognition criteria are not recorded and the Company recognizes a liability for uncertain tax positions that may result in tax payments. If such unrecognized tax benefits were realized and not subject to valuation allowances, the entire amount would impact the tax provision.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted by the United States Congress on March 27, 2020. The Company has not participated in any provision of the CARES Act to date and has decided not to apply for a loan under the Paycheck Protection Program (“PPP”) component of this legislation.  The CARES Act did not impact the Company’s provision for income taxes or consolidated financial statements for the three months ended March 31, 2020.

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You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2019, included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (SEC) on February 27, 2020 (the “Annual Report”).

Special note regarding forward-looking statements

This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious cardiovascular diseases. Our goal is to be the world’s leading precision cardiovascular medicine company. Precision medicine involves discovering and developing therapies that integrate clinical and molecular information based on the biological basis of disease. Our strategy is to identify homogenous subgroups of patients with a given cardiovascular disease, understand the causal factors underlying that subgroup’s condition and develop targeted therapies designed to correct the common underlying defect leading to abnormal cardiac contraction or relaxation within each subgroup.

Our lead clinical-stage candidate is mavacamten, a novel, oral, allosteric modulator of cardiac myosin being developed for the treatment of hypertrophic cardiomyopathy (HCM). Mavacamten is intended to reduce cardiac muscle contractility by inhibiting the excessive myosin-actin cross-bridge formation that underlies the excessive contractility, left ventricular hypertrophy and reduced compliance characteristic of HCM. In 2016, mavacamten was granted Orphan Drug Designation by the United States Food and Drug Administration (FDA) for the treatment of symptomatic obstructive HCM.  We are currently conducting a Phase 3 pivotal study of mavacamten, known as EXPLORER-HCM in patients with symptomatic obstructive (New York Heart Association Class II or III) HCM.  Enrollment in the EXPLORER-HCM study completed in August 2019 at clinical sites in the United States, Europe, and Israel. Topline data from the EXPLORER-HCM study are anticipated in the second quarter of 2020. Pending the outcome of this study, we plan to file a New Drug Application seeking regulatory approval of mavacamten for the treatment of obstructive HCM.

In addition to the EXPLORER-HCM study of mavacamten, we are conducting a MAVA long-term extension (LTE) study of mavacamten in patients who have completed our Phase 3 EXPLORER-HCM study or the Phase 2 MAVERICK-HCM in non-obstructive HCM. To protect the safety of study participants, investigators and staff, and to ensure consistent and appropriate clinical trial conduct in light of the COVID-19 pandemic, we have temporarily suspended the rollover of patients from EXPLORER into the MAVA-LTE study and plan to resume enrollment when conditions permit.  

MAVERICK-HCM is a Phase 2 clinical trial initiated in 2018 for the potential treatment of symptomatic non-obstructive HCM. In November 2019, we reported positive top-line results and established safety and tolerability of mavacamten in non-obstructive HCM over a treatment period of 16 weeks. Additional data were reported in March 2020. Meaningful reductions in biomarkers of cardiac stress were observed in patients receiving mavacamten versus those in the placebo cohort and clear signals of clinical benefit were noted in a subgroup with elevated cardiac filling pressures and in a pre-specified group of patients at higher risk for morbidity and mortality. Based on the safety and pharmacologic benefits observed in the MAVERICK-HCM study, we plan to advance mavacamten into additional studies in defined groups of patients with non-obstructive HCM and heart failure with preserved ejection fraction (HFpEF).

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Patient enrollment in the VALOR-HCM study was previously planned to begin in the second quarter of 2020. In March of 2020 we announced that patient enrollment in the VALOR-HCM study would be delayed due to the global outbreak of COVID-19.  The VALOR-HCM study is designed to evaluate mavacamten as a therapeutic alternative to septal reduction therapy (SRT) in obstructive HCM patients. SRT is a highly invasive procedure consisting of a surgical or catheter-based therapy that eliminates or reduces the left ventricular outflow tract obstruction. We will begin enrollment of the study when conditions safely permit.

We are also conducting PIONEER-OLE, an open label extension study of obstructive HCM patients from our Phase 2 PIONEER study.  Data for twelve patients at 48 weeks of treatment with mavacamten were consistent with prior safety and efficacy observations at the 12, 24, and 36-week readouts. Highlights of the data included continued safety and tolerability and sustained clinical benefits, including reductions in left ventricular outflow tract (LVOT) gradient, improvements in New York Heart Association functional class and improvement of multiple biomarkers toward normal ranges. A reduction in septal wall thickness, a defining characteristic of HCM, as well as an improvement in patient reported quality of life, as measured by the Kansas City Cardiomyopathy Questionnaire were also reported.

Our second clinical-stage candidate is danicamtiv, designed to increase the contractility of the heart (systolic function) with minimal or no effect on myocardial relaxation and compliance (diastolic function) by acting directly on the proteins in the heart muscle responsible for contraction.

We recently announced interim results from a Phase 2a multiple-ascending dose clinical trial of danicamtiv, in patients with stable heart failure. This trial follows the completion of two single-ascending dose Phase 1 studies, in healthy volunteers and in patients with dilated cardiomyopathy, a disease of systolic dysfunction that can result in heart failure. After seven days of treatment with danicamtiv, the average increase in stroke volume, a measure of the amount of blood pumped from the left ventricle, was greater than 10% relative to baseline, on a placebo-adjusted basis. No impact on measures of diastolic function, or the heart’s ability to relax and fill, was observed. Patient enrollment into the Phase 2 study of danicamtiv in patients with genetic dilated cardiomyopathy was previously scheduled to begin in the second quarter of 2020. In March of 2020 we announced that patient enrollment into that study would be delayed due to the impact of COVID-19. We will begin enrollment when conditions safely permit.

In August 2019, we commenced dosing healthy volunteers in a Phase 1 study of small molecule MYK-224. The randomized, placebo-controlled Phase 1 study is designed to evaluate the safety, tolerability and pharmacokinetics of MYK-224. In March of 2020 we announced that due to the impact of COVID-19 we have temporarily suspended enrollment of healthy volunteers in the study. We plan to resume enrollment as soon as conditions safely permit.

The ultimate impacts of COVID-19 on our business are currently unknown. We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders. We cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions may have on our business or strategy, including the effects on our ongoing and planned clinical development activities and prospects, or on our financial and operating results.

Financial Overview

We have not generated net income from operations and, as of March 31, 2020, had an accumulated deficit of $548.6 million, primarily as a result of research and development and selling, general and administrative expenses. We have not generated any revenue from product sales since our inception and have funded our operations primarily through the issuance of equity securities and payments from Sanofi pursuant to our Collaboration Agreement with Sanofi that was terminated in December 2018. We expect to incur significant and increasing losses from operations for the foreseeable future and we can provide no assurance that we will ever generate significant revenue or profits. As of March 31, 2020, we have cash and cash equivalents of $131.2 million, short-term investments of $218.8 million and long-term investments of $10.1 million.

On January 3, 2020, we entered into a sales agreement with a sales agent to establish an at-the-market (ATM) offering program, under which we are permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $200 million. As of March 31, 2020, no securities have been issued pursuant to the ATM agreement.

Termination of Sanofi Collaboration

Until December 31, 2018 we had an exclusive Collaboration Agreement with Sanofi. On December 31, 2018, Sanofi notified us of its intent to terminate our collaboration, specifically, Sanofi elected not to continue with the mavacamten, MYK-224 and danicamtiv programs.  As a result, cost sharing and Sanofi’s reimbursement of our research and development costs for mavacamten and MYK-224 ended in the first half of 2019.  At that time Sanofi had continuing rights to royalties in the event of commercialization

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of the mavacamten and MYK-224 programs. In July 2019, we repurchased those rights from Sanofi for $80.0 million.  Neither we nor Sanofi have any material continuing rights or obligations under the Collaboration Agreement.

Components of Operating Results

Operating Expense

Research and Development Expenses

Research and development expenses consist of salaries and benefits, including stock-based compensation, lab supplies and facility costs and fees paid to contract manufacturing organizations (CMOs) and clinical research organizations (CROs) to conduct certain research and development activities on our behalf. Research and development expenses are shown net of amounts that Sanofi agreed to reimburse us under the cost sharing program for research and development activities. Payments made prior to the receipt of goods or services are capitalized until the goods or services are received.

Research and development expenses incurred in the development and potential commercialization of mavacamten, danicamtiv and other product candidates are shown net of zero and $9.9 million in reductions in expense due to Sanofi research and development reimbursements during the three months ended March 31, 2020 and 2019, respectively as follows (in thousands):

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist principally of salaries and benefits, including stock-based compensation, professional fees for legal, consulting, audit and tax services, market research, rent and other general operating expenses not otherwise classified as research and development expenses.

Interest and Other Income, Net

Interest and other income, net consists primarily of interest income earned on our cash and cash equivalents, short-term investments and long-term investments.

Critical Accounting Estimates

See Part I, Item 7, “Critical Accounting Estimates” in our Annual Report. There have been no material changes to our critical accounting estimates disclosed in our Annual Report.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

The following table compares the operating results (in thousands):

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* Not meaningful

Research and Development Expenses

Research and development expenses increased $25.7 million, or 98%, from $26.2 million for the three months ended March 31, 2019 to $51.9 million for the three months ended March 31, 2020. The increase in research and development expenses was primarily due to the following:  

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $6.4 million, or 47%, from $13.6 million for the three months ended March 31, 2019 to $19.9 million for the three months ended March 31, 2020. The increase in selling, general and administrative expenses was primarily due to the following:  

Interest and Other Income, Net

Interest and other income decreased $0.4 million, or 16%, from $2.3 million for the three months ended March 31, 2019 to $1.9 million for the three months ended March 31, 2020. The decrease in interest income was primarily due to interest earned on lower invested balances and lower interest rates on investments.

Liquidity and Capital Resources

We consider the following when assessing our liquidity and capital resources (in thousands):

Since inception, we have funded our operations primarily through the issuance of our equity securities and payments from Sanofi pursuant to the Collaboration Agreement, which was terminated in December 2018. All our investments are in investment-grade securities.

On January 3, 2020, we entered into a sales agreement with a sales agent to establish an at-the-market (ATM) offering program, under which we are permitted to offer and sell, from time to time, shares of common stock having a maximum aggregate offering price of up to $200 million. As of March 31, 2020, no securities have been issued pursuant to the ATM agreement.

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In March 2019, we completed a follow-on offering in which we issued 5,663,750 shares of our common stock at a price of $51.00 per share, including 738,750 shares sold directly to the underwriters upon exercise of their option to purchase up to 738,750 shares of our common stock within 30 days of the offering. We received proceeds totaling approximately $271.2 million from the offering, net of underwriting discounts, commissions and offering expenses.

We believe we have sufficient financial resources to meet our business requirements for the 12 months following the date of this Quarterly Report on Form 10-Q.  We expect to incur substantial expenditures in the foreseeable future for the advancement of our precision medicine platform, the development and potential commercialization of our product candidates and the discovery, development and potential commercialization of any additional product candidates we may pursue. Furthermore, if our clinical trials for mavacamten are successful, or our other product candidates, including danicamtiv, enter into late-stage clinical trials or more advanced discovery and development stages, we may need to raise additional capital in order to further advance our product candidates towards regulatory approval. We will continue to seek additional financing to develop our product candidates and fund operations for the foreseeable future through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to other technologies, product candidates or programs that we would prefer to develop and commercialize ourselves.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the periods presented below (in thousands):

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2020 was $59.9 million and was primarily due to the net loss for the period of $69.9 million, adjusted for non-cash stock-based compensation expense of $10.8 million and depreciation of $0.8 million, offset by amortization of discount on investment of $0.4 million. Changes in working capital primarily consisted of decreases of $1.5 million in accrued liabilities and $0.5 million in accounts payable, offset by a decrease of $0.2 million in prepaid expenses.

Net cash used in operating activities for the three months ended March 31, 2019 was $38.0 million and was primarily due to the net loss for the period of $37.5 million, adjusted for non-cash stock-based compensation expense of $7.0 million and depreciation of $0.5 million, offset by amortization of discount on investment of $0.3 million.  Changes in working capital primarily consisted of a $9.9 million decrease in prepayments from our collaboration partner, a $2.0 million increase in accounts payable and a $0.7 million decrease in other long-term liabilities.

Investing Activities

Cash provided by investing activities for the three months ended March 31, 2020 was $87.9 million and consisted primarily of sales and maturities of investments of $4.0 million and $96.5 million, respectively, offset by cash outflows of $12.6 million for leasehold improvements and purchases of equipment related to the occupancy of our new corporate headquarters in Brisbane, California in January 2020.

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Cash used in investing activities for the three months ended March 31, 2019 was $13.5 million and consisted primarily of purchases of investments of $32.7 million and purchases of equipment of $0.8 million, offset by sales and maturities of investments of $4.0 million and $16.0 million, respectively.

Financing Activities

Cash provided by financing activities for the three months ended March 31, 2020 was $1.8 million and consisted of proceeds from common stock option exercises.

Cash provided by financing activities for the three months ended March 31, 2019 was $271.8 million and consisted of proceeds from the issuance of common stock in connection with a follow-on offering of $271.5 million, net of underwriter’s discount and funds received as a result of common stock option exercises of $0.3 million.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations during the three months ended March 31, 2020, as compared to those disclosed in our Annual Report.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates or exchange rates. As of March 31, 2020, we had cash, cash equivalents and investments (short-term and long-term) of $360.1 million, consisting of interest-bearing money market accounts and money market funds, which would be affected by changes in the general level of United States interest rates. However, due to the short-term maturities of our cash and cash equivalents and the low- risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair value of our cash, cash equivalents or investments.

In addition, we are also exposed to foreign currency exchange rate risk inherent in our contracts with research institutions and contract research organizations as certain services are performed by them outside the United States. We have payments due to one Australian vendor in foreign currency. A significant movement in the Australian dollar may have a material impact on our financial position in the future.

We do not believe that inflation, interest rate changes or exchange rate fluctuations had a significant impact on our results of operations for any periods presented.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), refers to controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2020, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

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Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

We are not currently a party to any material litigation or other material legal proceedings.

You should consider carefully the following risk factors, together with all the other information in this report, including our consolidated financial statements and notes thereto, and in our other public filings with the SEC. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business.

Risks Related to Our Precision Medicine Platform and the Discovery and Development of Our Product Candidates

The precision medicine approach we are taking to discover and develop drugs for serious diseases of systolic or diastolic dysfunction is novel and may never lead to marketable products.

We have concentrated our therapeutic product research and development efforts on the application of precision medicine to the treatment of cardiovascular diseases, and our future success depends on the successful development of products based on our precision medicine platform and the continued development of this platform. We believe we are the first company to apply precision medicine to the treatment of cardiovascular disease, and neither we nor any other company has received regulatory approval to market therapeutics specifically targeting the underlying cause of cardiomyopathy. The scientific discoveries that form the basis for our efforts to discover and develop product candidates are novel, and the scientific evidence to support the feasibility of developing product candidates based on these discoveries is both preliminary and limited. If we do not successfully develop and commercialize product candidates based upon our technological approach, we will not become profitable and the value of our common stock may decline.

Further, our focus, which has been solely on precision medicine for the development of drugs for diseases of cardiac muscle contraction as opposed to multiple, more proven technologies for drug development, increases the risks associated with the ownership of our common stock. If we are not successful in developing any product candidates using our precision medicine platform, we may be required to change the scope and direction of our product development activities. In that case, we may not be able to identify and implement successfully an alternative product development strategy, which would materially and adversely affect our business, financial condition and results of operations.

We depend heavily on the success of mavacamten, danicamtiv and MYK-224, our initial product candidates. Other than mavacamten, danicamtiv and MYK-224, all of our other programs are in discovery or preclinical development. Preclinical testing and clinical trials of our product candidates may not be successful. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the identification of our initial product candidates, mavacamten and MYK-224 for the treatment of hypertrophic cardiomyopathy (HCM) and danicamtiv for the treatment of dilated cardiomyopathy (DCM). We are currently evaluating mavacamten, danicamtiv and MYK-224 in clinical trials, and, if these product candidates fail to demonstrate safety or efficacy in their respective target indications to the satisfaction of the FDA or other comparable regulatory authorities, we will need to identify and rely on other product candidates or target indications, or both, for clinical development. All of our other programs are still in discovery or preclinical development. Our ability to generate revenue from product sales, which we do not expect will occur for years, if ever, will depend heavily on the successful development and eventual commercialization of mavacamten, danicamtiv, MYK-224 or other product candidates that we may identify from our precision medicine platform.

The success of mavacamten, danicamtiv, MYK-224 and any other product candidates that we discover and develop will depend on many factors, including the following:

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If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

Preclinical and clinical drug development involves a lengthy and expensive process with an uncertain outcome, and observations and results from earlier studies and trials may not be applicable or predictive in future clinical trials.

Preclinical and clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the preclinical development or clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. For example, although our preclinical observations and data generated from our Phase 1 and Phase 2 clinical trials of mavacamten support our hypothesis that mavacamten has the potential to reduce cardiac muscle contractility and our belief that such data have demonstrated clinical proof of mechanism in both HCM patients and healthy volunteers, we have not completed placebo controlled clinical trials of mavacamten in larger populations using the current dosing strategy, inclusion/exclusion criteria, and endpoints of EXPLORER-HCM. In addition, our precision medicine platform is based on a translational medicine approach. Translational medicine, or the application of basic scientific findings to develop therapeutics that promote human health, is subject to a number of inherent risks. In particular, scientific hypotheses formed from preclinical or early clinical observations may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements and our protocols. The initial clinical data from our Phase 1 and Phase 2 clinical trials of mavacamten, as well as our Phase 1 and 2 clinical trials of danicamtiv, are preliminary in nature, and the clinical development of mavacamten and danicamtiv is not complete. Early positive data may not be repeated or observed in ongoing or future trials involving our product candidates. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. There is a high failure rate for drugs and biologics proceeding through clinical trials, particularly in the field of cardiovascular medicine. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and any such setbacks in our clinical development could have a material adverse effect on our business and operating results.

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. We may experience delays in our ongoing clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Additionally, although we believe that our precision medicine approach should eliminate the need for mavacamten to undergo the large outcomes-based studies that are often required for cardiovascular drugs as a condition to regulatory approval by the FDA or other regulatory authorities, regulatory authorities may nevertheless require us to conduct additional trials or generate additional data, including potential trials studying the interaction of our product candidates with other therapeutics commonly administered in the patient populations we are seeking to treat, which would increase the time and cost of our

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clinical development process. Furthermore, we will need to conduct larger clinical trials, and the FDA may subsequently require us to evaluate a larger number of patients than we presently anticipate, or to assess other endpoints besides those presently contemplated, in order to support regulatory approval.

Clinical trials can be delayed for a variety of reasons, including:

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, or suspension or termination is recommended by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authorities. The FDA or other regulatory authorities may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authorities, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

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Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, and, if applicable under any collaboration or similar agreement, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing to commence and complete our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates. If patients are unwilling to participate in our clinical trials because of a lack of familiarity with our approach to the treatment of cardiovascular diseases, negative publicity from adverse events in biotechnology or the fields of precision medicine or cardiovascular disease or for other reasons, including competitive clinical trials for similar patient populations, our timelines for recruiting patients, conducting clinical trials and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our product candidates or termination of our clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a study, to complete our clinical trials in a timely manner. Patient enrollment is affected by factors including:

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In particular, each of the conditions in which we are evaluating or plan to evaluate our product candidates are rare genetic disorders or involve segmented patient populations with limited patient pools from which to draw for clinical trials. To date, the HCM and DCM patient populations have not been extensively evaluated in clinical trials. As a result, enrollment in our ongoing and planned clinical trials is difficult to predict and may take longer or cost more than we anticipate.

We plan to seek initial marketing approval in the United States. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory agencies. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.

We may not be successful in our efforts to identify or discover potential product candidates.

The success of our business depends primarily upon our ability to identify, develop and commercialize therapeutics for the treatment of cardiovascular diseases based on our precision medicine approach. A key element of our initial strategy is to use our precision medicine platform to identify and study compounds that can be used to correct or offset the abnormal contraction caused by HCM and DCM. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

If we are unable to identify suitable compounds for preclinical and clinical development, we may be forced to abandon our development efforts for a research program or programs and we will not be able to obtain product revenues in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.

Any of our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval, limit the scope of any approved label or market acceptance or result in other significant negative consequences following marketing approval, if any.

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Adverse events or other unintended side effects or safety signals caused by our product candidates could cause us, IRBs or ethics committees, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. For example, through additional studies, we may determine that although mavacamten has been shown to be specific to striated muscle, which includes both skeletal and cardiac muscle, and selective for cardiac muscle, it may target myosin in skeletal muscle, which could result in unintended adverse effects.

We have observed adverse events in our clinical trials of mavacamten. Results of our ongoing and planned trials could reveal a high and unacceptable severity and prevalence of these or other adverse events in subjects treated with our product candidates. Additionally, if the adverse events we have observed are deemed to be unacceptable or other unacceptable side effects or safety signals are observed in any ongoing or subsequent preclinical studies or clinical trials of our product candidates, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. Any adverse effects encountered in our preclinical studies or clinical trials, whether or not drug-related, could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Additionally, adverse effects may represent safety signals that could influence the benefit-risk assessment for further development or commercialization of a product candidate and may warrant further clinical or nonclinical investigation, consultation with health authorities, changes to product labeling or guidelines for its safe use, or other scientific or regulatory actions. Any of these occurrences may harm our business, financial condition and prospects significantly.

Further, if any of our future products, if and when approved for commercial sale, cause serious or unexpected adverse events, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our future products and impair our ability to generate revenues from the commercialization of these products.

Risks Related to Government Regulation

We currently do not have regulatory approval to market any of our product candidates. The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA, EMA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval for many reasons, including the following: