Biotechnology

Emerging Company Research

Cytokinetics Outperform (1)
February 6, 2013
Analysts

4Q12 reported; getting ready for two important data readouts in 2013
Summary: Cytokinetics reported 4Q12 results last night, and provided a pipeline update. 2013 will be a crucial year for CYTK, with a number of important data readouts, including data from the ATOMIC-AHF Phase IIb trial of omecamtiv mecarbil in patients with acute heart failure (mid-13), and the BENEFIT-ALS Phase IIb trial of tirasemtiv in ALS patients (YE13).

Simos Simeonidis, Ph.D. (646) 562-1386 simos.simeonidis @cowen.com Yatin Suneja (646) 562-1388 yatin.suneja@cowen.com

Enrollment on track for both key trials. Both the ATOMIC-AHF Phase IIb trial of omecamtiv mecarbil and the BENEFIT-ALS Phase IIb trial of tirasemtiv are on track to complete enrollment in 1H and by mid-year, respectively, and to read out mid-13 and by YE13, respectively. Other pipeline updates. Amgen and Cytokinetics are planning to initiate the Phase II COSMIC-HF trial in patients with HF and LVSD. The study will be conducted in two stages: in the first stage patients will receive qd oral doses of omecamtiv mecarbil for a shorter duration and in the second stage patients will receive qd oral doses for a longer duration. The study is designed to evaluate several modified-release oral formulations of omecamtiv mecarbil and to finalize the dose that will be used in the Phase III trial. The trial is expected to be initiated in 1Q13 and more details will be disclosed closer to its initiation. In addition, during 4Q12, Amgen initiated an open-label, single-dose, Phase I trial designed to evaluate the safety, tolerability and PK of omecamtiv mecarbil in patients with various degrees of renal insufficiency and in patients undergoing hemodialysis. 4Q12 numbers. CYTK spent $12.3M in 4Q12 ($9.2M in R&D, $3.1M in G&A), vs. the $12.7M ($8.6M in R&D, $2.9M in G&A, $1.2M in restructuring) spent in 4Q11, ending 4Q12 with $74M or $0.32/fully diluted share in cash. For 2013, CYTK guided for revenue in the $1M-$3M range, cash R&D expenses in the $40M-$44M range, cash G&A expenses in the $12M-$13M range, and for $4.8M in non-cash stock compensation.
2012 Actual 1.8 1.8 1.7 2.2 7.6 2013E Prior Current 1.0 0.9 51.0 0.8 31.0 0.7 1.0 80.6 84.0 83.0 2.3x 2014E Prior Current 42.4 42.0 4.5x 2015E Prior Current 2.1 90.5x

CYTK (02/05) Mkt cap Dil shares out Avg daily vol 52-wk range Dividend Dividend yield BV/sh Net cash/sh Debt/cap ROA (LTM) 5-yr fwd EPS growth (Norm)

$1.17 270.5MM 231.2MM 563.6K $0.6-1.3 Nil Nil NA $0.32 NA NA NA

FY Dec Q1 Q2 Q3 Q4 Year EV/S

Revenue $MM

EPS $
FY Dec Q1 Q2 Q3 Q4 Year P/E

S&P 500

1511.3

2012 Actual (0.13) (0.13) (0.07) (0.07) (0.37)

2013E Prior Current (0.13) (0.09) 0.15 (0.10) 0.07 (0.10) (0.10) 0.27 0.07 0.09 13.0x

2014E Prior Current (0.11) (0.09)

2015E Prior Current (0.23)

Please see addendum of this report for important disclosures.

www.cowen.com

Cytokinetics

Investment Thesis
Cytokinetics is utilizing its expertise in muscle biology to develop its two compounds for the treatment of heart failure (HF) and Amyotrophic Lateral Sclerosis (ALS): omecamtiv mecarbil, a compound partnered with Amgen, currently in a Phase II trial for the treatment of acute heart failure (AHF), and tirasemtiv (until recently known as CK-2017357), a wholly owned oral agent, currently in the 400-patient Phase IIb BENEFIT-ALS trial in patients with ALS. Both compounds have novel, and according to our KOL consultants, intriguing mechanisms of action, addressing significant unmet medical needs, and both represent substantial commercial opportunities. The (non-trivial) caveat here is that both compounds are relatively early in their clinical development and have not yet gotten to the point where we have significant evidence of their efficacy. Lets be clear right from the start: with both drugs in the promising, but early category, we think valuation is the most important part of the story at this point. Both of CYTKs compounds have novel and exciting from a scientific standpoint mechanisms of action, and either one or even both could succeed in their future clinical trials, and could end up becoming very significant drugs, since theyre both addressing considerable unmet medical needs, without any entrenched competitors. However, theyre both relatively early in their development, and in our and our consultants view, it is still too early to predict with any degree of real certainty their eventual fate. Nevertheless, with approximately $74M in cash in the bank, we can be a lot more positive about CYTKs current valuation of around $190M in EV. We view current valuation as attractive, and offering a favorable risk/reward for specialist biotech investors comfortable with the high-risk/highreward arena of biotech investing, especially in the very volatile small-cap space. Again: both clinical programs are exciting, but still early in their development, and we find it very difficult to have a strong opinion on either ones chances of success based on the currently available data; however, even by assuming very low probabilities of eventual success for each program (around 20-25% probability of success), and using conservative pricing and penetration assumptions, our NPV calculations point to significant potential upside in CYTK shares. Our heart failure experts are excited and cautiously optimistic about omecamtiv mecarbilOur heart failure consultants are intrigued by omecamtiv mecarbils mechanism of action (MOA), and the early data that point to an increase in the strength of muscle contraction by increasing the duration of the contraction, but without the side effects of increased blood pressure (BP) or increased heart rate (HR) that are seen with the inotropes that are currently used to treat heart failure. They view the data presented so far as promising, but caution that theres a lot of risk remaining, and its way too early to call. while our ALS KOL consultants views on tirasemtiv ran the gamut. Tirasemtiv has been studied in a number of Phase I and in three early Phase II trials, mainly looking at its PK/PD and safety profiles. It was recently tested in two Phase II trials (CY 4024 and CY 4025), where patients were dosed with and without standardof-care Rilutek. These data were presented at the April 2012 American Academy of Neurology meeting, and point to small trends in improvement in a number of efficacy metrics and to an overall benign safety profile, with the notable exception of dizziness, which was experienced by the majority of patients in both studies, but did not lead to any falls, according to the company. Our consultants views on tirasemtiv varied fairly widely, ranging from I am very encouraged by the overall dataset to I dont have much confidence that this drug will end up working. In

February 6, 2013

Cytokinetics

October 2012, the company initiated an international Phase IIb BENEFIT-ALS trial in 400 ALS patients, with data expected around YE13, and Cytokinetics has stated its intention to find an ex-U.S. partner for tirasemtiv, with plans to keep U.S. rights for itself. Amgen partnership provides cash and (at least some) validationIn January 2007, CYTK entered into a collaboration agreement with Amgen for the development of novel small molecule therapeutics that activate cardiac muscle. Under the terms of the agreement, CYTK received $42M in an upfront payment and $32.9M in an equity investment from Amgen, which received an option to get an exclusive worldwide, except Japan, license to develop and commercialize omecamtiv mecarbil. In May 2009, Amgen exercised its option and paid CYTK $50M to obtain that license. The agreement also gives CYTK the option to co-promote products in North America, and to receive increased royalties by co-funding Phase III development of product candidates. Finally, CYTK is entitled to receive up to $600M in milestones (which CYTK management has described as mostly pre-commercial), and double-digit royalties on sales. We like the deal with Amgen, since it provides (at least some) validation for omecamtiv mecarbil, along with the development expertise and financial support for this program. The terms of the deal appear favorable for CYTK, including the size of the milestones, and the fact that Amgen is paying for the whole development effort. but its worth remembering that omecamtiv mecarbil has been in the clinic for a while nowOmecamtiv mecarbils clinical development has been ongoing for a number of years, having entered the clinic in 2005. As early as late 2006, the company had announced oral bioavailability results from omecamtiv mecarbils trials with an oral formulation, that support advancement of an oral formulation of CK-1827452 (omecamtiv mecarbils original name) into Phase II clinical trials, while Phase II testing of omecamtiv mecarbils IV formulation started in early 2007. Five years later, we are still waiting for evidence that the compounds proposed mechanism of action could translate into a clinically significant benefit. So, on the one hand, we would not be at all surprised if omecamtiv mecarbil had an uphill battle gaining investor interest, at least until data from the Phase IIb ATOMIC trial become available. On the other hand, and acknowledging that they have come at the expense of patent life and capital, we believe that Cytokinetics and Amgen have gained significant experience with both the IV and oral formulations of the compound, and are much better positioned to move to the next stages of development. What about (finally) getting a partner for tirasemtiv? We see it as fairly likely. CYTK management has stated its interest in an ex-U.S. partnership for tirasemtiv for a while now, with plans to keep U.S. rights for itself in order to market the drug by building a neurology specialty sales force, even though we believe that a worldwide partnership could also be on the table, for the right economics. We believe that the companys intention to partner tirasemtiv, coupled with: 1) the dearth of attractive mid- to late-stage assets in the neurology space, 2) the resurgence of and increased interest in the orphan disease model in the past few years, and 3) pharmas ever-present need to replenish their pipelines, make a partnership fairly likely, in our view. And what could CYTK get for tirasemtiv in such a potential partnership? A look at comparable deals in the neuromuscular disease space. Even though its tough to analyze the size and potential structure of such a partnership, we also

February 6, 2013

Cytokinetics

looked at a number of biotech/pharma partnerships that were announced in recent years in the neuromuscular disease space. Based on these comparable partnerships, in our valuation analysis, we have assumed that the company will be able to partner ex-U.S. rights to a big pharma, we expect that a partnership materializes in 2013, and that the company receives $50M in an upfront payment and another $30M each in 2016, 2018 and 2020, and $35M in 2023 upon achievement of certain milestones. The table below shows the details of the comparable partnerships we used in our analysis.
What Could CYTK Get For Tirasemtiv? A Look At Comparable Partnerships In The Neuromuscular Disease Space
Date Companies Compounds Amigal; Plicera and AT2220 Indication Upfront/milestones US rights Amicus retained US rights ex-US rights Shire has exUS rights Royalties Amicus will receive tiered, double-digit royalty on ex-US sales Additional details In October 2009, Amicus and Shire terminated the agreement. Amicus regained WW rights to all three compounds Fabry disease, Amicus received $50M in Gaucher disease, upfront and is entitled to receive and Pompe up to $390M in regulatory and disease sales milestones

Nov-07

Amicus/Shire

Jul-08

PTC/Genzyme

Ataluren (PTC124)

Genetic disorders due to nonsense mutations

PTC received $100M in upfront and is entitled to receive up to $337M in regulatory and sales milestones

PTC retained US rights

In September 2011, PTC regained worldwide rights to ataluren and Genzyme has an Genzyme has PTC will receive tiered, doubleoption to commercialize ex-US rights digit royalty on ex-US sales ataluren in indications other than nonsense mutation Duchenne/Becker muscular dystrophy (nmDBMD) Biogen has exUS rights Acorda will receive tiered, double-digit royalty on ex-US sales Acorda is responsible for development expenses in US and Biogen is responsible for development expenses ex-US

Jul-09

Acorda/Biogen

Ampyra

MS

Acorda received $110M in upfront and is entitled to receive up to $400M in regulatory and sales milestones Knopp received $80M in upfront ($60M in equity investment and $20M cash). Knopp is entitled to receive up to $265M in regulatory and sales milestones

Acorda retained US rights

Aug-10

Knopp/Biogen

Dexpramipexole

ALS

Biogen has WW rights

Knopp will receive tiered, double-digit royalty on WW sales

Biogen is responsible for all development expenses

Sep-10

Acceleron/Shire

ACE-031

Acceleron received $45M in Acceleron has Duchenne upfront and is entitled to receive U.S. and Shire has ROW Muscular up to $453M in regulatory and Canadian rights Dystrophy (DMD) sales milestones rights

Acceleron will receive royalty on product sales

Shire and Acceleron will share development costs in North America and Europe, and Shire will be responsible for development costs in other markets.

Source: Cowen and Company, SEC filings

What about tirasemtivs pricing? Are we talking Gilenya and Tysabri or Ampyra (or even Rilutek)? In terms of pricing, we have assumed that tirasemtiv would be launched at an average annual price tag of $50,000 (in todays dollars) in the U.S., and at a 20% discount to the U.S. pricing in the E.U. As a comparable, and in order to arrive at our pricing assumption, we used the current pricing of drugs approved in the U.S. for the treatment of multiple sclerosis (MS), which, as seen in the table below, average close to $50,000 per year, despite the fact that there are currently multiple options for physicians and patients, and thus, increased competition, with seven approved branded agents in the market.
Annual Cost Of Treatment With MS Drugs
Drug Betaseron Extavia Avonex Copaxone Rebif Tysabri Gilenya Company Bayer Novartis Biogen Teva Pfizer/Serono Elan Novartis US approval 1993 1993 1996 1996 2002 2004 2010 Dosing 1x/2 days 1x/2 days 1x/week 1x/day 3x/week 1x/4weeks 1x/day Average Route s.c. s.c. i.m. s.c. s.c. i.v. p.o. Type Interferon-beta 1b Interferon-beta 1b WAC $3,546 for 14 syringes $3,269 for 15 syringes $3,994 for 30 syringes $3,605 for 12 syringes $3,591 per vial $4,017 for 28 pills Annual Cost $46,100 $42,470 $45,958 $48,575 $46,865 $46,700 $57,545 $47,745

Interferon-beta 1a $885 for 30mcg vial glatiramer acetate Interferon-beta 1a alpha-4 integrin Fingolimod

Source: Cowen and Company, FDA label, PriceRx

February 6, 2013

Cytokinetics

We have assumed pricing in line with the MS drugs, even though we do hear the bear argument on pricing which could come in two flavors: A) why would this be priced any higher than Rilutek (around $13,000/year), especially when by the time tirasemtiv gets to the market, there would be a generic riluzole in the market? and B) convince me that payers will see this treatment as a Tysabri or Gilenya-type-ofproduct (i.e., deserving of the $50,000/year price tag) and not as more of an Ampyra (i.e., $12,000/year). On the face of it, these arguments are not without merit, especially in todays environment of increased attention and downward pressure on drug prices, and we dont believe that the answers are necessarily straightforward. However, we are making the assumption that if tirasemtiv succeeds in the subsequent trials and does make it to the market (and thats a big if, and we believe we have thus appropriately discounted the probability of success (POS) of each trial (POS of 35% for Phase IIb and 60% for Phase III)), such success would translate to a meaningful clinical benefit, and thus would be able to justify premium pricing for this product. Of course, this is all dependent on the Phase IIb and Phase III data, and it is thus also entirely possible that tirasemtiv could demonstrate just a minor improvement in either function and/or survival, which could translate to an approval, given the lack of other options, but not with premium pricing, i.e., it could end up being more in the Ampyra ballpark in terms of price, instead of the more expensive MS drugs.

February 6, 2013

Cytokinetics

Company Description
Cytokinetics is a biotechnology company focused on developing small-molecule therapeutics that modulate muscle function for the treatment of cardiac and neurological diseases. Cytokinetics two current clinical programs are omecamtiv mecarbil and tirasemtiv (formerly known as CK-2017357). Omecamtiv mecarbil is a novel, small-molecule, cardiac muscle, myosin activator, partnered worldwide with Amgen, and currently in the 600-patient ATOMIC-AHF Phase IIb trial in acute heart failure (AHF) patients, with data expected in mid-2013. Tirasemtiv is a novel, smallmolecule, fast skeletal muscle, troponin activator that recently completed two Phase IIa trials in Amyotrophic Lateral Sclerosis (ALS), is currently in the Phase IIb BENEFITALS trial in ALS, with data expected YE13. The companys preclinical pipeline includes CK-2127107, a follow-on molecule to tirasemtiv, expected to enter the clinic in 1H13. Cytokinetics was founded in 1997, is headquartered in South San Francisco, CA and has approximately 83 employees.
Cytokinetics: R&D Pipeline
Candidate nam e Omecamtiv mecarb il (IV) Omecamtiv mecarb il (oral) Tirasemtiv Tirasemtiv CK- 2 1 2 7 1 0 7 Total D rugs in D evelopm ent San Francisco, CA Indication Acute Heart Failure (AHF) Chronic Heart Failure (CHF) ALS Myasthenia gravis Neurological ind ications P- C I II III FILING MKT 1 0 4 0 0 0 Investor Relations Contact: Jodi Goldstein - 6 5 0 .6 2 4 .3 0 6 0 Com m ents Partnered with Amgen, ATOMIC- AHF Phase IIb d ata exp ected in mid - 2 0 1 3 Planning to initiate Phase II COSMIC- HF trial in CHF in 1 Q1 3 Initiated BENEFIT- ALS Phase IIb trial in ALS in Octob er 2 0 1 2 ; d ata exp ected YE1 3 Data from Phase IIa EoE trial announced in Novemb er 2 0 1 2 Initiate Phase I trial in 1 H1 3

Source: Cowen and Company, Cytokinetics

Cytokinetics: Upcoming Milestones

Milestones Initiate Phase II COSMIC-HF trial of oral formulations of omecamtiv mecarbil in HF Initiate Phase I trial of CK-2127107 in healthy volunteers Complete enrollment in 3rd cohort of ATOMIC-AHF Phase IIb trial of omecamtiv mecarbil Complete enrollment in BENEFIT-ALS Phase IIb trial of tirasemtiv in ALS Full data from ATOMIC-AHF Phase IIb trial of omecamtiv mecarbil Data from BENEFIT-ALS Phase IIb trial of tirasemtiv in ALS
Source: Cowen and Company, Cytokinetics

Timing 1Q 2013 1H 2013 1H 2013 mid-2013 mid-2013 YE 2013

February 6, 2013

Cytokinetics

CYTK: Quarterly P&L ($MM)

($MM) Tirasemtiv revenues US Sales EU royalties License/milestone revenues - Tirasemtiv Total Tirasemtiv revenues Omecamtiv mecarbil revenues US royalties in AHF EU royalties in AHF US royalties in CHF EU royalties in CHF License/milestone revenues - Omecamtiv mecarbil Total Omecamtiv mecarbil revenues 2010A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Q1:11A 0.0 0.0 0.0 0.0 Q2:11A 0.0 0.0 0.0 0.0 Q3:11A 0.0 0.0 0.0 0.0 Q4:11A 0.0 0.0 0.0 0.0 2011A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Q1:12A 0.0 0.0 0.0 0.0 Q2:12A 0.0 0.0 0.0 0.0 Q3:12A 0.0 0.0 0.0 0.0 Q4:12A 0.0 0.0 0.0 0.0 2012A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Q1:13E 0.0 0.0 0.0 0.0 Q2:13E 0.0 0.0 0.0 0.0 Q3:13E 0.0 0.0 0.0 0.0 Q4:13E 0.0 0.0 50.0 50.0 2013E 0.0 0.0 50.0 50.0 0.0 0.0 0.0 0.0 30.0 30.0

0.0 0.0 0.0 0.0 0.4 0.4

0.8 0.0 9.2 3.3 0.0 12.5 0.0

0.0

0.0 0.0 0.0 0.0 0.7 0.4

1.1 0.0 10.5 4.2 0.0 14.7 0.0

0.0

0.0 0.0 0.0 0.0 1.0 0.4

1.4 0.0 8.9 3.2 0.0 12.1 0.0

0.0

0.0 0.0 0.0 0.0 $0.0 0.7

0.8 0.0 8.6 2.9 1.2 12.7 0.0

0.0

0.0 0.0 0.0 0.0 1.2 0.6

1.8 0.0 0.0

0.0

0.0 0.0 0.0 0.0 1.5 0.3

1.8 0.0 0.0

0.0

0.0 0.0 0.0 0.0

0.0

0.0

0.0 0.0 0.0 0.0 1.4 0.3

2.2 0.0 9.2 3.1 0.0 12.3 0.0

0.0

0.0 0.0 0.0 0.0

0.0

0.0

0.0 0.0 0.0 0.0

0.0

0.0

0.0 0.0 0.0 0.0

0.0

0.0

0.0 0.0 0.0 30.0

30.0

0.0

R&D revenues from related parties R&D grant and other revenues
% US sales

1.5 1.1

2.1 1.9

1.4 0.3
1.7 0.0

5.5 1.5

0.6 0.3
0.9 0.0 11.0 3.3 0.0 14.3 (13.4) 0.0 0.0 0.0 (13.4) 0.0 0% (13.4)

0.5 0.3
0.8 0.0 11.8 3.5 0.0 15.3 (14.5) 0.0 0.0 0.0 (14.5) 0.0 0% (14.5)

0.5 0.2
0.7 0.0 12.0 3.5 0.0 15.5 (14.8) 0.0 0.0 0.0 (14.8) 0.0 0% (14.8)

0.4 0.2
80.6 0.0 13.0 3.6 0.0 16.6 64.0 0.0 0.0 0.0 64.0 0.0 0% 64.0

2.0 1.0

Total revenue COGS R&D SG&A Restructuring charges (reversals) Total Operating expenses Operating Income/Loss Other income (expense), net Interest expense Interest income Pretax income Income tax expense Tax rate Net Income (Loss) GAAP EPS Basic Diluted Basic shares Diluted shares

2.6 0.0 38.0 14.2 0.0 52.2 (49.6) 0.2 0.0 0.0 (49.5) (0.2) 0% (49.3)

4.0 0.0 37.2 13.6 1.2 52.0 (48.0) 0.1 0.0 0.0 (47.9) 0.0 0% (50.7)

7.6 0.0 35.0 11.7 (0.1) 46.7 (39.1) 0.1 0.0 0.0 (39.0) 0.0 0% (40.3)

83.0 0.0 47.8 13.9 0.0 61.7 21.3 0.0 0.0 0.0 21.3 0.0 0% 21.3

8.7 3.1 (0.0) 11.8 (9.9) 0.0 0.0 0.0 (9.9) 0.0 0% (9.9)

8.2 2.6 (0.0) 10.8 (9.0) 0.0 0.0 0.0 (8.9) 0.0 0% (10.3)

8.8 3.0 (0.0) 11.8 (10.1) 0.0 0.0 0.0 (10.0) 0.0 0% (10.0)

(11.8) 0.0 0.0 0.0 (11.7) 0.0 0% (11.7)

(13.6) 0.0 0.0 0.0 (13.6) 0.0 0% (16.5)

(10.7) 0.0 0.0 0.0 (10.6) 0.0 0% (10.6)

(11.9) 0.0 0.0 0.0 (11.9) 0.0 0% (11.9)

(10.1) 0.0 0.0 0.0 (10.1) 0.0 0% (10.1)

($0.77) ($0.77) 64.2 77.0

($0.18) ($0.18) 66.9 81.1

($0.23) ($0.23) 71.2 100.6

($0.15) ($0.15) 72.3 100.6

($0.16) ($0.16) 72.8 102.4

($0.72) ($0.72) 70.8 96.2

($0.13) ($0.13) 76.1 106.8

($0.13) ($0.13) 81.2 221.6

($0.07) ($0.07) 134.2 228.9

($0.07) ($0.37) ($0.07) ($0.37) 142.4 231.2 108.5 197.1

($0.09) ($0.10) ($0.09) ($0.10) 143.9 233.5 145.3 235.8

($0.10) ($0.10) 146.8 238.2

$0.43 $0.27 148.2 240.6

$0.15 $0.09 146.0 237.0

Source: Cowen and Company, SEC filings

CYTK: Annual P&L ($MM)

($MM) Tirasemtiv revenues US Sales EU royalties License/milestone revenues - Tirasemtiv Total Tirasemtiv revenues Omecamtiv mecarbil revenues US royalties in AHF EU royalties in AHF US royalties in CHF EU royalties in CHF License/milestone revenues - Omecamtiv mecarbil Total Omecamtiv mecarbil revenues 2010A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2011A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2012A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2013E 0.0 0.0 50.0 50.0 0.0 0.0 0.0 0.0 30.0 30.0 2014E 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.0 40.0 2015E 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2016E 0.0 0.0 30.0 30.0 0.0 0.0 0.0 0.0 0.0 0.0 2017E 86.6 0.0 0.0 86.6 0.0 0.0 0.0 0.0 100.0 100.0

R&D revenues from related parties R&D grant and other revenues
% US sales

1.5 1.1

2.1 1.9

5.5 1.5

2.0 1.0

2.0 0.0

2.1 0.0

2.1 0.0

2.2 0.0

Total revenue COGS R&D SG&A Restructuring charges (reversals) Total Operating expenses Operating Income/Loss Other income (expense), net Interest expense Interest income Pretax income Income tax expense Tax rate Net Income (Loss) GAAP EPS Basic Diluted Basic shares Diluted shares

2.6 0.0 38.0 14.2 0.0 52.2 (49.6) 0.2 0.0 0.0 (49.5) (0.2) 0% (49.3)

4.0 0.0 37.2 13.6 1.2 52.0 (48.0) 0.1 0.0 0.0 (47.9) 0.0 0% (50.7)

7.6 0.0 35.0 11.7 (0.1) 46.7 (39.1) 0.1 0.0 0.0 (39.0) 0.0 0% (40.3)

83.0 0.0 47.8 13.9 0.0 61.7 21.3 0.0 0.0 0.0 21.3 0.0 0% 21.3

42.0 0.0 53.0 15.0 0.0 68.0 (26.0) 0.0 0.0 0.0 (26.0) 0.0 0% (26.0)

2.1 0.0 54.1 15.3 0.0 69.4 (67.3) 0.0 0.0 0.0 (67.3) 0.0 0% (67.3)

32.1 0.0 59.5 51.6 0.0 111.1 (78.9) 0.0 0.0 0.0 (78.9) 0.0 0% (78.9)

188.8 13.0
15%

65.4 59.0 0.0 137.4 51.3 0.0 0.0 0.0 51.3 2.6 5% 48.8

($0.77) ($0.77) 64.2 77.0

($0.72) ($0.37) ($0.72) ($0.37) 70.8 96.2 108.5 197.1

$0.15 $0.09 146.0 237.0

($0.09) ($0.09) 281.0 291.9

($0.23) ($0.26) ($0.23) ($0.26) 292.2 303.5 303.9 315.7

$0.15 $0.15 316.1 328.3

Source: Cowen and Company, SEC filings

February 6, 2013

Cytokinetics

Positives
1. We view current valuation as attractive, and as offering favorable risk/reward. 2. Both lead compounds attempt to address significant unmet medical needs, and markets with substantial commercial potential, without the presence of entrenched competitors. 3. There is strong scientific rationale, including a novel mechanism of action, backing the development of both omecamtiv mecarbil and tirasemtiv. 4. According to our heart failure and ALS clinical consultants, the currently available clinical data from the omecamtiv mecarbil and tirasemtiv trials are promising, albeit early. 5. The Amgen partnership and continued investment in the omecamtiv mecarbil program partially de-risks this molecule, at least from a financial perspective, for CYTK investors.

Negatives
1. Both omecamtiv mecarbil and tirasemtiv are still early in their clinical development and neither has yet demonstrated strong evidence of their efficacy. Thus, we believe that there is significant clinical development risk remaining, and that both molecules could end up failing in subsequent trials due to lack of efficacy, safety/tolerability issues, or both. 2. Both heart failure and ALS are among the most challenging areas in drug development, with multiple failures in each one. 3. Cytokinetics has not successfully developed a clinical program yet, and has had a number of clinical programs fail, a factor which may keep some investors away from CYTK shares. 4. The impact of the dizziness observed in the tirasemtiv trials and of the ischemia seen in a small number of patients in the omecamtiv trials thus far would have to be addressed in subsequent trials, or could end up being an impediment to the compounds eventual clinical and/or commercial success. 5. Omecamtiv mecarbil has been in early stages of development (Phase I and early Phase II) for a relatively long period of time; on the one hand, we view this as a positive, since the companies have been able to collect a significant amount of clinical information about this molecule; on the other hand, the compounds perception, by some investors and clinicians, may be, at least partially, tainted by the fact that it has not entered into more advanced testing until now.

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Addendum
STOCKS MENTIONED IN IMPORTANT DISCLOSURES
Ticker CYTK Company Name Cytokinetics

ANALYST CERTIFICATION Each author of this research report hereby certifies that (i) the views expressed in the research report accurately reflect his or her personal views about any and all of the subject securities or issuers, and (ii) no part of his or her compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report. IMPORTANT DISCLOSURES Cowen and Company, LLC and or its affiliates make a market in the stock of CYTK securities. Cowen and Company, LLC and/or its affiliates managed or co-managed a public offering of CYTK within the past twelve months. Cowen and Company, LLC and/or its affiliates received in the past 12 months compensation for investment banking services from CYTK. CYTK is or was in the past 12 months a client of Cowen and Company, LLC; during the past 12 months, Cowen and Company, LLC provided IB services. CYTK has been client(s) of Cowen and Company, LLC in the past 12 months. Cowen and Company, LLC compensates research analysts for activities and services intended to benefit the firm's investor clients. Individual compensation determinations for research analysts, including the author(s) of this report, are based on a variety of factors, including the overall profitability of the firm and the total revenue derived from all sources, including revenues from investment banking. Cowen and Company, LLC does not compensate research analysts based on specific investment banking transactions. DISCLAIMER This research is for our clients only. Our research is disseminated primarily electronically and, in some cases, in printed form. Research distributed electronically is available simultaneously to all Cowen and Company, LLC clients. All published research, including required disclosures, can be obtained on the Firms client website, www.cowenresearch.com. Further information on any of the above securities may be obtained from our offices. This report is published solely for information purposes, and is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any state where such an offer or solicitation would be illegal. Other than disclosures relating to Cowen and Company, LLC, the information herein is based on sources we believe to be reliable but is not guaranteed by us and does not purport to be a complete statement or summary of the available data. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. Notice to UK Investors: This publication is produced by Cowen and Company, LLC, which is regulated in the United States by FINRA and is disseminated in the United Kingdom by Cowen International Limited ("CIL"). In the United Kingdom, Cowen and Company is a Trading Name of CIL. It is communicated only to persons of a kind described in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted to any other person without the consent of CIL. Copyright, User Agreement and other general information related to this report 2013 Cowen and Company, LLC. Member NYSE, FINRA and SIPC. All rights reserved. This research report is prepared for the exclusive use of Cowen clients and may not be reproduced, displayed, modified, distributed, transmitted or disclosed, in whole or in part, or in any form or manner, to others outside your organization without the express prior written consent of Cowen. Cowen research reports are distributed simultaneously to all clients eligible to receive such research

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prior to any public dissemination by Cowen of the research report or information or opinion contained therein. Any unauthorized use or disclosure is prohibited. Receipt and/or review of this research constitutes your agreement not to reproduce, display, modify, distribute, transmit, or disclose to others outside your organization the contents, opinions, conclusion, or information contained in this report (including any investment recommendations, estimates or price targets). All Cowen trademarks displayed in this report are owned by Cowen and may not be used without its prior written consent. Cowen and Company, LLC. New York (646) 562-1000 Boston (617) 946-3700 San Francisco (415) 646-7200 Chicago (312) 577-2240 Cleveland (440) 331-3531 Atlanta (866) 544-7009 London (affiliate) 44-207-071-7500

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Rating Outperform (1) Neutral (2) Underperform (3)
(a) Assumptions: Time horizon is 12 months; S&P 500 is flat over forecast period.

Definition Stock expected to outperform the S&P 500 Stock expected to perform in line with the S&P 500 Stock expected to underperform the S&P 500

COWEN AND COMPANY RATING ALLOCATION (a)

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(a) As of 12/31/2012. (b) Corresponds to "Outperform" rated stocks as defined in Cowen and Company, LLC's rating definitions (see above). (c) Corresponds to "Neutral" as defined in Cowen and Company, LLC's ratings definitions (see above). (d) Corresponds to "Underperform" as defined in Cowen and Company, LLC's ratings definitions (see above). Note: "Buy," "Hold" and "Sell" are not terms that Cowen and Company, LLC uses in its ratings system and should not be construed as investment options. Rather, these ratings terms are used illustratively to comply with NASD and NYSE regulations.

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