This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included elsewhere in this report. Operating results are not necessarily indicative of results that may occur in future periods.

This report contains forward-looking statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We intend that such statements be protected by the safe harbor created thereby. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements about or relating to:

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Such forward-looking statements involve risks and uncertainties, including, but not limited to:

In addition such statements are subject to the risks and uncertainties discussed in the “Risk Factors” section and elsewhere in this document. Such statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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When used in this report, unless otherwise indicated, “Cytokinetics,” “the Company,” “we,” “our” and “us” refers to Cytokinetics, Incorporated. CYTOKINETICS, and our logo used alone and with the mark CYTOKINETICS, are registered service marks and trademarks of Cytokinetics. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.

Overview

We were incorporated in Delaware in August 1997 as Cytokinetics, Incorporated. We are a late-stage biopharmaceutical company focused on the discovery and development of first-in-class muscle activators as potential treatments for debilitating diseases in which muscle performance is compromised and or declining. Our research and development activities relating to the biology of muscle function have evolved from our knowledge and expertise regarding the cytoskeleton, a complex biological infrastructure that plays a fundamental role within every human cell. Our most advanced research and development programs relate to the biology of muscle function and are directed to small molecule modulators of the contractility of skeletal or cardiac muscle. We are also conducting earlier-stage research directed to other compounds with the potential to modulate muscle contractility and other muscle functions, such as growth, energetics and metabolism.

Our drug candidates currently in clinical development are our skeletal muscle activators tirasemtiv and CK-2127107, and our cardiac muscle activator omecamtiv mecarbil. Tirasemtiv is being evaluated for the potential treatment of ALS. CK-2127107 is being evaluated for the potential treatment of spinal muscle atrophy (“SMA”) and chronic obstructive pulmonary disease (“COPD”) and for potential use in other indications associated with muscle weakness (including ALS) under a strategic alliance with Astellas established in June 2013 and expanded in December 2014 and July 2016. Omecamtiv mecarbil is being evaluated for the potential treatment of heart failure under a strategic alliance with Amgen established in 2006.

Muscle Contractility Programs

Skeletal Muscle Contractility Program

Tirasemtiv is our lead drug candidate from this program. We retain exclusive rights to tirasemtiv, subject to Astellas’ exercise of its option for a license to tirasemtiv (see “ Astellas’ Option on Tirasemtiv” below). We conducted a Phase 2 clinical development program for tirasemtiv, and we started a Phase 3 clinical development program for this drug candidate in patients with ALS in July 2015. In collaboration with Astellas, we are also developing another drug candidate from this program, CK-2127107, for potential indications associated with muscle weakness. We started a Phase 2 clinical trial for CK-2127107 in patients with SMA in December 2015. Astellas, in collaboration with Cytokinetics, started a Phase 2 clinical trial of CK-2127107 in patients with chronic obstructive pulmonary disease in June 2016. Tirasemtiv and CK-2127107 are structurally distinct and selective small molecules that activate the fast skeletal muscle troponin complex in the sarcomere by increasing its sensitivity to calcium, leading to an increase in skeletal muscle contractility. Each of tirasemtiv and CK-2127107 has demonstrated pharmacological activity in preclinical models and evidence of potentially clinically relevant pharmacodynamic effects in humans. We are evaluating other potential indications for which tirasemtiv and CK-2127107 may be useful.

Tirasemtiv.

Tirasemtiv (formerly known as CK-2017357), is a fast skeletal muscle troponin activator. Cytokinetics is developing this drug candidate for the potential treatment of ALS, and in July 2016, we entered into an agreement with Astellas (the “2016 Amendment”) to expand our collaboration on research, development and commercialization of skeletal muscle activators under the Amended and Restated License and Collaboration Agreement with Astellas (the “2014 Astellas Agreement”). The 2016 Amendment was subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and became effective on September 26, 2016, the date of such clearance. Under the 2016 Amendment, we granted Astellas an option to enter into a pre-negotiated agreement for a global collaboration for the development and commercialization of tirasemtiv. If Astellas exercises the option, Astellas will receive exclusive worldwide commercialization rights outside of our commercialization territory in North America, Europe and other select countries.

We conducted a Phase 2 clinical trials program for tirasemtiv, including a Phase 2b clinical trial in patients with ALS, known as BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS). Based on the results of BENEFIT-ALS, we started VITALITY-ALS (Ventilatory Investigation of Tirasemtiv and Assessment of Longitudinal Indices after Treatment for a Year in ALS) in July 2015. Tirasemtiv has been granted orphan drug designation and fast track status by the FDA and orphan medicinal product designation by the European Medicines Agency, in each case for the potential treatment of ALS.

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VITALITY-ALS is a multi-national, randomized, double-blind, placebo-controlled trial that was originally designed to enroll 445 patients with possible, probable or definite ALS diagnosed within 24 months, and with a baseline vital capacity > 70 % of predicted, based on age, sex, and height. Patients may be enrolled whether or not they are on riluzole therapy. The primary endpoint of the trial will assess change from baseline in SVC, to be assessed after 24 weeks of double-blind, placebo-controlled treatment. Secondary endpoints include time to decline from baseline in percent predicted SVC by > 20 percentage points or the onset of respiratory insufficiency or death; time to decline from baseline in percent predicted SVC to < 50 percent predicted or the onset of respiratory insufficiency or death; time to first occurrence of any use of assisted ventilation or death; time to decline in any of the three respiratory domains of the ALSFRS-R or death; and change in the Mega-Score of muscle strength.

Patients enrolled in VITALITY-ALS will receive two-weeks of open-label treatment with tirasemtiv administered at 250 mg/day and will then be randomized to double-blind treatment with placebo or one of three target tirasemtiv dose levels (250 mg/day, 375 mg/day, 500 mg/day) in a 3:2:2:2 ratio for a total of 48 weeks of randomized, double-blind, placebo-controlled treatment. Then in a four-week double-blind, tirasemtiv withdrawal phase, patients on tirasemtiv will be randomized either to continue the double-blind tirasemtiv dose they were receiving or to be withdrawn to placebo in a 1:1 ratio. Patients who had been receiving placebo during the 48 weeks of double-blind, placebo-controlled treatment will continue to receive placebo.

In January 2016, we amended the protocol of VITALITY-ALS to provide for an increase in the number of patients to be enrolled in the clinical trial from approximately 445 patients to approximately 600 patients. Increasing the number of patients enrolled in VITALITY-ALS will increase the statistical power to detect a difference in the primary efficacy endpoint (change from baseline in SVC at 24 weeks) between tirasemtiv and placebo.

In August 2016, we announced the completion of patient enrollment in VITALITY-ALS, enrolling over 700 patients in 81 centers in eleven countries. We convened the second Data Monitoring Committee Meeting for VITALITY-ALS to review unblinded safety and efficacy data; and the Committee recommended continuing the trial without modifications to the protocol.

In March 2016, we announced a research collaboration with Origent Data Sciences, Inc. (“Origent”) to refine and prospectively validate an Origent computer model to predict the course of ALS disease progression leveraging data from Cytokinetics’ clinical trials of tirasemtiv . Funded by Origent’s receipt of a grant from The ALS Association, this joint research program will enable the first prospective validation of the predictive model in a clinical trial setting. Previously, the Origent models predicting both function and survival of ALS patients have been validated using their internal and retrospective external datasets.

In the second quarter of 2016, the manuscript, “A randomized, placebo-controlled, double-blind phase IIb trial evaluating the safety and efficacy of tirasemtiv in patients with amyotrophic lateral sclerosis,” was published in the Amyotrophic Lateral Sclerosis and Frontotemporal Degeneration journal.

Astellas’ Option on Tirasemtiv

In connection with the execution of the 2016 Amendment, we received a $15.0 million non-refundable option fee for the grant of the option on tirasemtiv, in October 2016. Prior to Astellas’ exercise of the option, we will continue to conduct the Phase 3 development program of tirasemtiv, including the Phase 3 clinical trial for tirasemtiv in patients with ALS known as VITALITY-ALS (Ventilatory Investigation of Tirasemtiv and Assessment of Longitudinal Indices after Treatment for a Year in ALS), at our own expense to support regulatory approval in the U.S., EU and certain other jurisdictions, and we will retain the final decision making authority on the development of tirasemtiv. If Astellas exercises the option, we will grant Astellas an exclusive license to develop and commercialize tirasemtiv (“License on Tirasemtiv”) outside our commercialization territory of North America, Europe and other select countries (“Cytokinetics’ Territory”) under a Tirasemtiv License and Collaboration Agreement (“Tirasemtiv License Agreement”). Each party would be primarily responsible for the further development of tirasemtiv in its territory and have the exclusive right to commercialize tirasemtiv in its territory.

If Astellas exercises its option for a global collaboration for the development and commercialization of tirasemtiv, we will receive an option exercise payment ranging from $25.0 million (if exercise occurs following receipt of data from the VITALITY-ALS trial) to $80.0 million (if exercise occurs following receipt of FDA approval). In addition, we are eligible to receive a potential milestone payment from Astellas associated with our initiation of the VIGOR-ALS open-label extension trial for tirasemtiv. Such milestone would be $30.0 million; provided, however, that the amount will be reduced to $15 million if (i) Astellas elects to pay such milestone payment at the time the trial commences (if prior to Astellas’ exercise of its option on tirasemtiv) or (ii) Astellas has exercised said option as of the time the trial commences. We will be responsible for the development costs of tirasemtiv during the option period, but if Astellas’ exercises the option after the defined review period following receipt of data from VITALITY-ALS, Astellas will at the time of option exercise reimburse us for a share of any additional costs incurred after such review period.

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If Astellas exercises the option for tirasemtiv, the parties will share the future development costs of tirasemtiv in North America, Europe and certain other countries (with Cytokinetics bearing 75% of such shared costs and Astellas bearing 25% of such costs) and Astellas will be solely responsible for the development costs of tirasemtiv specific to its commercialization territory. Contingent upon the successful development of tirasemtiv, we may receive milestone payments up to $100.0 million for the initial indication and up to $50.0 million for each subsequent indication. If tirasemtiv is commercialized, Astellas will pay us royalties (at rates ranging from the mid-teens to twenty percent) on sales of tirasemtiv in Astellas’ Territory, and we will pay Astellas royalties (at rates up to the mid-teens) on sales of tirasemtiv in the Cytokinetics Territory, in each case subject to various possible adjustments.

The Company concluded that the option to obtain the License on Tirasemtiv is a substantive option, and is therefore not considered a deliverable at the execution of the 2016 agreement. The Company determined that the Tirasemtiv License Agreement is contingent upon the exercise of the Option on Tirasemtiv, and is therefore not effective during the periods presented, since the option has not been exercised as of the latest balance sheet date. In addition, the Company did evaluate the consideration set to be received for the License on Tirasemtiv in relation to the fair value of the License on Tirasemtiv, and determined that it was not being provided at a significant incremental discount.

The Company further determined that the Option Fee of $15 million was deemed to be a prepayment towards the License on Tirasemtiv, and therefore deferred revenue recognition either until the option is exercised, or until the option expires unexercised, at which point the $15 million receipt would be added to the 2016 Amendment consideration, to be allocated to the units of accounting. The Option on Tirasemtiv expires following the receipt of the approval letter from tirasemtiv from the FDA.

Refer to Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements, for the accounting treatment, including the allocation of consideration to the units of accounting, and the revenue recognition of License Revenue and Research and Development Revenue, under the 2016 Amendment.

The clinical trials program for tirasemtiv may proceed for several years, and we will not be in a position to generate any revenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and the drug is commercialized. Tirasemtiv is at too early a stage of development for us to predict if or when this may occur. Our expenditures are expected to increase as we continue to progress tirasemtiv towards potential registration.

CK-2127107 and Other Skeletal Muscle Activators

Astellas Strategic Alliance . CK-2127107 is being developed jointly by Cytokinetics and Astellas.

On July 27, 2016, the Company and Astellas entered into the 2016 Amendment to expand their collaboration on the research, development and commercialization of skeletal muscle activators under the 2014 Astellas Agreement (as amended, the “Current Astellas Agreement”) including an expansion of the collaboration with Astellas to include the development of CK-2127107 (“CK-107”), a next-generation fast skeletal troponin activator, for the potential treatment of ALS, as well as the possible development in ALS of other fast skeletal regulatory activators licensed to Astellas under the 2014 Astellas Agreement. The 2016 Amendment also extends the existing joint research program focused on the discovery of additional next-generation skeletal muscle activators through 2017, including sponsored research at Cytokinetics. Finally, under the 2016 Amendment, the Company granted Astellas an option to enter into a pre-negotiated agreement for a global collaboration for the development and commercialization of tirasemtiv (“Option on Tirasemtiv”), as discussed above.

The 2016 Amendment was subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and became effective on the date of such clearance, on September 26, 2016 (the “Amendment Effective Date”).

Addition of ALS as an Added Indication (CK-107and other fast skeletal activators)

In connection with the execution of the 2016 Amendment, the Company received a non-refundable upfront amendment fee of $35 million. In addition, the Company received the accelerated payment of a $15 million milestone for the initiation of the first Phase 2 clinical trial of CK-107 as the lead compound in ALS that was otherwise provided for in the 2014 Astellas Agreement, as if such milestone has been achieved upon the execution of the 2016 Amendment. The parties will share equally the costs of developing CK-107 in ALS for potential registration and marketing authorization in the U.S. and Europe, provided that (i) Astellas has agreed to solely fund Phase 2 development costs of CK-107 in ALS subject to a right to recoup the Company’s share of such costs plus a 100% premium by reducing future milestone and royalty payments to the Company and (ii) the Company may defer (but not eliminate) a portion of its co-funding obligation for development activities after Phase 2 for up to 18 months, subject to certain conditions. The Company has the right to co-fund its share of such Phase 2 development costs on a current basis, in which case there would not be a premium due to Astellas. Cytokinetics will also receive approximately $44.2 million in additional sponsored research and development funding through 2018 which includes Astellas’ funding of Cytokinetics’ conduct of the Phase 2 clinical development of CK-2127107 in ALS (approximately $39.1 million) as well as the continuing research collaboration (approximately $5.1 million).

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Pursuant to the 2016 Amendment, the Company and Astellas will collaborate to develop CK-107 in ALS. Astellas will be primarily responsible for the development of CK-107 in ALS, but the Company will conduct the Phase 2 clinical trial of CK-107 in ALS and will share in the operational responsibility for later clinical trials. Subject to specified guiding principles, decision making will be by consensus, subject to escalation and, if necessary, Astellas’ final decision making authority on the development (including regulatory affairs), manufacturing, medical affairs and commercialization of CK-107 and other fast skeletal regulatory activators in ALS.

The Company determined that the deliverables under the Amendment included (1) the ALS License, (2) ALS Development Services through 2018, and (3) Research Services through 2017. Deliverables that do not provide standalone value have been combined with other deliverables to form a unit of accounting that collectively has standalone value, with revenue being recognized on the combined unit of accounting, rather than the individual deliverables. There are no rights of return provisions for the delivered items in the Astellas agreements.

The Company considered the 2016 Amendment to be a modification of the 2014 Astellas Agreement. The remaining deliverables under the 2014 Astellas Agreement are: (1) the SMA license; (2) Research Services in connection with the Research Plan (through 2016); and (3) SMA Development Services in connection with the Development Plan. The Company evaluated the components and consideration of the 2016 Amendment against other Phase 2 collaboration out license arrangements, and determined that the new 2016 deliverables had standalone value and are delivered at fair value. Therefore no reallocation of consideration to the 2014 deliverables was required.

The Company concluded that there are two units of accounting; the ALS License and the Research and Development services. The Company also determined that the ALS License has standalone value since (1) Astellas received a worldwide license for ALS, to perform further research in the field of ALS, to develop and use CK-107 to make, have make, sell or otherwise commercialize CK-107 in ALS; (2) Astellas has the right to sublicense the rights to CK-107 in ALS to a third party; and (3) Astellas has the technical capabilities to advance further development on CK-107 in ALS, without the continued involvement of the Company.

Refer to Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements, for the accounting treatment, including the allocation of consideration to the units of accounting, and the revenue recognition of License Revenue and Research and Development Revenue, under the 2016 Amendment.

During the three and nine months ended September 30, 2016, the Company recorded $50.0 million in license revenue under the 2016 Amendment.

During the three and nine months ended September 30, 2016, the Company recorded no research and development revenue from Astellas, under the 2016 Amendment.

2014 Astellas Agreement

In December 2014, we entered into the 2014 Astellas Agreement. This agreement superseded the License and Collaboration Agreement between Cytokinetics and Astellas of June 2013 (the “Original Astellas Agreement”). The 2014 Astellas Agreement expanded the objective of the collaboration of advancing novel therapies for diseases and medical conditions associated with muscle weakness to include SMA and potentially other neuromuscular indications for CK-2127107 and other fast skeletal troponin activators, in addition to the non-neuromuscular indications provided for in the Original Astellas Agreement.

Under the 2014 Astellas Agreement, we expanded the exclusive license previously granted Astellas under the Original Astellas Agreement to co-develop and commercialize CK-2127107 for potential application in non-neuromuscular indications worldwide to include certain neuromuscular indications as well. Concurrent with the expanded collaboration, the companies agreed to advance CK-2127107 into Phase 2 clinical development. Cytokinetics started a Phase 2 clinical trial of CK-2127107 in patients with SMA in December 2015. The development program may include other neuromuscular indications as the companies may agree. Cytokinetics and Astellas will jointly develop and may jointly commercialize CK-2127107 and other fast skeletal troponin activators in neuromuscular indications. Astellas will be responsible for the costs associated with the development of all collaboration products, including CK-2127107, subject to Cytokinetics’ option to co-fund certain development costs as described below.

Under the 2014 Astellas Agreement, the companies extended through 2016 their joint research program to identify next- generation skeletal muscle activators to be nominated as potential drug candidates. This research will be conducted at Astellas’ expense.

Refer to Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements, for the accounting treatment, including the revenue recognition of research and early development milestone, under the Current Agreement.

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During the three and nine months ended September 30, 2016, the Company recorded $2.0 million in milestone revenue for research under this agreement, related to the initiation of IND-enabling studies for a fast skeletal muscle activator. During the three and nine months ended September 30, 2015, the Company recorded no milestone revenue for research under this agreement. The Company is eligible to receive up to $2.0 million in research milestone payments under the collaboration for each future potential drug candidate. Cytokinetics retains an option to conduct early-stage development for certain agreed indications at its initial expense, subject to reimbursement if development continues under the collaboration. Under the 2014 Astellas Agreement, Cytokinetics also retains an option to co-promote collaboration products containing fast skeletal muscle activators for neuromuscular indications in the U.S., Canada and Europe, in addition to its option to co-promote other collaboration products in the U.S. and Canada as provided for in the Original Astellas Agreement. Astellas will reimburse Cytokinetics for certain expenses associated with its co-promotion activities. Under the 2014 Astellas Agreement, Astellas has exclusive rights to co-develop and commercialize CK-2127107 and other fast skeletal troponin activators in SMA and potentially other indications and other novel mechanism skeletal muscle activators in all indications, subject to certain Cytokinetics’ development and commercialization rights. Cytokinetics may co-promote and conduct certain commercial activities in the U.S., Canada and Europe under agreed scenarios.

Cytokinetics received an upfront payment of $30.0 million in connection with the execution of the 2014 Astellas Agreement. Also, in conjunction with the execution of the 2014 Astellas Agreement, we also entered into a common stock purchase agreement which provided for the sale of 2,040,816 shares of our common stock to Astellas at a price per share of $4.90 and an aggregate purchase price of $10.0 million, which was received in December 2014. Pursuant to this agreement, Astellas agreed to certain trading and other restrictions with respect to our common stock. Concurrently, Cytokinetics earned a $15.0 million milestone payment relating to Astellas’ decision to advance CK-2127107 into Phase 2 clinical development. Cytokinetics is also eligible to potentially receive over $20.0 million in reimbursement of sponsored research and development activities during the three years of the collaboration following through 2017.

During the three months ended September 30, 2016 and 2015, the Company recorded $3.0 million and $4.1 million, respectively, in license revenue based on the proportional performance model under the 2014 Astellas Agreement. During the nine months ended September 30, 2016 and 2015, the Company recorded $9.0 million and $6.5 million, respectively, in license revenue based on the proportional performance model under the 2014 Astellas Agreement. As of September 30, 2016, $11.1 million license revenue remains deferred under the 2014 Astellas Agreement. Pursuant to the 2014 Astellas Agreement, the Company recognized research and development revenue from Astellas for reimbursements of internal costs of certain full-time employee equivalents, supporting collaborative research and development programs, and of other costs related to those programs. The Company is eligible to potentially receive over $20.0 million in reimbursement of sponsored research and development activities during the three years of the collaboration through 2017. During the three months ended September 30, 2016 and 2015, the Company recorded research and development revenue from Astellas of $3.0 million and $3.0 million, respectively, under the 2014 Astellas Agreement. During the nine months ended September 30, 2016 and 2015, the Company recorded research and development revenue from Astellas of $9.5 million and $4.8 million, respectively, under the 2014 Astellas Agreement.

Under the Current Astellas Agreement, based on the achievement of pre-specified criteria, Cytokinetics may receive over $600.0 million in milestone payments relating to the development and commercial launch of collaboration products, including up to $95.0 million relating to CK-2127107 in non-neuromuscular indications, and over $100.0 million in development and commercial launch milestones for CK-2127107 in each of SMA, ALS and other neuromuscular indications. Cytokinetics may also receive up to $200.0 million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the 2014 Astellas Agreement. If Astellas commercializes any collaboration products, Cytokinetics will also receive royalties on sales of such collaboration products, including royalties ranging from the high single digits to the high teens on sales of products containing CK-2127107. Cytokinetics also holds an option to co-fund certain development costs for CK-2127107 and other compounds in exchange for increased milestone payments and royalties; such royalties may increase under certain scenarios to exceed twenty percent. In addition to the foregoing development, commercial and sales milestones, Cytokinetics may also receive payments for the achievement of pre-specified milestones relating to the joint research program.

The clinical trials programs for CK-2127107 may proceed for several years, and we will not be in a position to generate any revenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and the drug is commercialized. CK-2127107 is at too early a stage of development for us to predict if or when this may occur. Our expenditures will increase if Astellas terminates development of CK-2127107 or related compounds and we elect to develop them independently, or if we conduct early-stage development for certain agreed indications at our initial expense, subject to reimbursement if development continues under the collaboration.

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CK-2127107 Clinical Development

Phase 2 Clinical Development:  Cytokinetics, in partnership with Astellas, started a Phase 2 clinical trial of CK-2127107 in patients with SMA in December 2015. The clinical trial is designed to assess effects of CK-2127107 on multiple measures of muscle function in both ambulatory and non-ambulatory patients with SMA, a severe, genetic neuromuscular disease that leads to debilitating muscle wasting and progressive, often fatal, muscle weakness. The primary objective of this double-blind, randomized, placebo-controlled clinical trial is to determine the potential pharmacodynamic effects of a suspension formulation of CK-2127107 following multiple oral doses in patients with Type II, Type III, or Type IV SMA. Secondary objectives are to evaluate the safety, tolerability and pharmacokinetics of CK-2127107. The trial will enroll seventy-two patients in two sequential, ascending dose cohorts (two cohorts of 36 patients each, stratified half ambulatory and half non- ambulatory).

The first cohort of patients is receiving 150 mg of CK-2127107 dosed twice daily for eight weeks; the second cohort of patients will receive 450 mg of CK-2127107 dosed twice daily or a lower dose, depending on the data from the first cohort. At the conclusion of the trial, approximately 24 patients will have been randomized to placebo, approximately 24 patients to 150 mg of CK-2127107 twice daily and approximately 24 patients to 450 mg of CK-2127107 twice daily (or a lower dose, pending the review of data from the first cohort). In each of these three treatment groups of approximately 24 patients each, roughly half will be ambulatory and half will be non-ambulatory. Multiple assessments of skeletal muscle function and fatigability will be performed including respiratory assessments, upper limb strength and functionality for non-ambulatory patients, as well as six-minute walk and timed-up-and-go for ambulatory patients.

During the third quarter of 2016, we continued enrollment of the Phase 2 clinical trial of CK-2127107 in patients with SMA, in collaboration with Astellas. We expect to complete enrollment of cohort 1 of our Phase 2 trial of CK-2127107 in patients with SMA in the fourth quarter of 2016.

In June 2016, Astellas, in collaboration with Cytokinetics, started a Phase 2 clinical trial of CK-2127107 in patients with chronic obstructive pulmonary disease. Astellas is conducting this randomized, double-blind, placebo controlled two period crossover clinical trial designed to assess the effect of CK-2127107 on physical function in patients with COPD. The trial is expected to enroll approximately 40 patients in the United States and is designed to assess the effect of CK-2127107 compared to placebo on exercise tolerance. Additionally, the trial will assess the cardiopulmonary and neuromuscular effect of CK-2127107 relative to placebo and the effect of CK-2127107 on resting spirometry relative to placebo. The safety, tolerability and pharmacokinetics of CK-2127107 also will be assessed. We expect Astellas to complete enrollment in a Phase 2 clinical trial of CK-2127107 in patients with COPD in 2017.

Ongoing Research in Skeletal Muscle Activators.

Our research on the direct activation of skeletal muscle continues in two areas. We are conducting translational research in preclinical models of disease and muscle function with fast skeletal muscle troponin activators to explore the potential clinical applications of this novel mechanism in diseases or conditions associated with skeletal muscle dysfunction. We also intend to conduct preclinical research on other chemically and pharmacologically distinct mechanisms to activate the skeletal sarcomere. We are conducting a joint research program with Astellas directed to the discovery of next-generation skeletal muscle activators. Under the Current Astellas Agreement, the joint research program will continue in 2017 and Astellas will reimburse us for certain research activities. We advanced a next-generation skeletal muscle activator into IND-enabling studies in 2016 and earned a $2.0 million milestone.

Cardiac Muscle Contractility Program

Our lead drug candidate from this program is omecamtiv mecarbil, a novel cardiac muscle myosin activator. We expect omecamtiv mecarbil to be developed as a potential treatment across the continuum of care in heart failure both for use in the hospital setting and for use in the outpatient setting. During the quarter, we participated with Amgen in regulatory meetings with the FDA, EMA and Health Canada intended to inform the design of a Phase 3 development program for omecamtiv mecarbil. We also conducted various clinical, non-clinical, chemistry, manufacturing, and controls (CMC), and planning activities in collaboration with Amgen to support the potential advancement of omecamtiv mecarbil into a Phase 3 development program. In September 2016, we announced Amgen’s decision to advance omecamtiv mecarbil into Phase 3 clinical development with a cardiovascular outcomes clinical trial expected to initiate in the fourth quarter of 2016. We are continuing our joint research with Amgen directed to next-generation compounds in our cardiac muscle contractility program in 2016.

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Amgen Strategic Alliance . In December 2006, we entered into a collaboration and option agreement with Amgen to discover, develop and commercialize novel small molecule therapeutics, including omecamtiv mecarbil, that activate cardiac muscle contractility for potential applications in the treatment of heart failure (the “Amgen Agreement”). The agreement granted Amgen an option to obtain an exclusive license worldwide, except Japan, to develop and commercialize omecamtiv mecarbil and other drug candidates arising from the collaboration. In May 2009, Amgen exercised its option. As a result, Amgen became responsible for the development and commercialization of omecamtiv mecarbil and related compounds at its expense worldwide (excluding Japan), subject to our development and commercialization participation rights. Amgen will reimburse us for certain research and development activities we perform under the collaboration.

In June 2013, Cytokinetics and Amgen executed an amendment to the Amgen Agreement to include Japan, resulting in a worldwide collaboration (the “Amgen Agreement Amendment”). Under the terms of the Amgen Agreement Amendment, we received a non-refundable upfront license fee of $15.0 million in June 2013. Under the Amgen Agreement Amendment, we conducted a Phase 1 pharmacokinetic study intended to support inclusion of Japan in a potential Phase 3 clinical development program and potential global registration dossier for omecamtiv mecarbil. Amgen reimbursed us for the costs of this study. In addition, we are eligible to receive additional pre-commercialization milestone payments relating to the development of omecamtiv mecarbil in Japan of up to $50.0 million, and royalties on sales of omecamtiv mecarbil in Japan. In conjunction with the Amgen Agreement Amendment, we also entered into a common stock purchase agreement which provided for the sale of 1,404,100 shares of our common stock to Amgen at a price per share of $7.12 and an aggregate purchase price of $10.0 million which was received in June 2013. Pursuant to this agreement, Amgen agreed to certain trading and other restrictions with respect to our common stock.

Under the Amgen Agreement, as amended, the Company is eligible to receive over $350.0 million in development milestone payments which are based on various clinical milestones, including the initiation of certain clinical studies, the submission of a drug candidate to certain regulatory authorities for marketing approval and the receipt of such approvals. These clinical milestones include an approximately $27.0 million milestone relating to the start of GALACTIC-HF. The Company is also eligible to receive up to $300.0 million in commercial milestone payments provided certain sales targets are met. In addition, we are eligible to receive royalties that escalate based on increasing levels of annual net sales of products commercialized under the agreement. The Amgen Agreement also provides for us to receive increased royalties by co-funding Phase 3 development costs of omecamtiv mecarbil and other drug candidates under the collaboration. If we elect to co-fund such costs, we would be entitled to co-promote the co-funded drug in North America and participate in agreed commercialization activities in institutional care settings, at Amgen’s expense.

In July 2013, Amgen announced that it had granted an option to commercialize omecamtiv mecarbil in Europe to Servier, with Cytokinetics’ consent, pursuant to an Option, License and Collaboration Agreement (the “Servier Agreement”). The option and related commercialization sublicense to Servier, is subject to the terms and conditions of the Amgen Agreement.

In August 2016, we entered into a Letter Agreement with Amgen and Servier (the “Letter Agreement”), which (i) expands the territory of the sublicense to Servier to include specified countries in the Commonwealth of Independent States (“CIS”) and (ii) provides that, if Amgen’s rights under the Amgen Agreement, as amended, are terminated with respect to the territory of such sublicense, the sublicensed rights previously granted by Amgen to Servier under the Servier Agreement will remain in effect and become a direct license or sublicense of such rights by us to Servier, on substantially the same terms as set forth in the Servier Agreement, including but not limited to Servier’s payment of its share of agreed development costs and future milestone and royalty payments to us. The Letter Agreement does not otherwise modify our rights and obligations under the Amgen Agreement, as amended, or create any additional financial obligations of Cytokinetics, unless we otherwise agrees in writing. Amgen remains responsible for the performance of its obligations under the Amgen Agreement, as amended, relating to Europe and the CIS, including the payment of milestones and royalties relating to the development and commercialization of omecamtiv mecarbil in Europe and the CIS.

In September 2016, Amgen and Servier announced Servier’s decision to exercise its option to commercialize omecamtiv mecarbil in Europe as well as the CIS, including Russia.

We recorded reimbursement of sponsored research and development activities in connection with our strategic alliance with Amgen of $0.6 million and $0.6 million, respectively in the three months ended September 30, 2016 and 2015, and $1.8 million and $1.9 million, respectively in the nine months ended September, 2016 and 2015. See Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements, for a further discussion of our revenue recognition policy under our agreement with Amgen.

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Omecamtiv Mecarbil Clinical Development

Omecamtiv mecarbil has been the subject of an extensive Phase 1 and Phase 2 clinical trials program. In November 2015, we announced the results of COSMIC-HF (Chronic Oral Study of Myosin Activation to Increase Contractility in Heart Failure), the last Phase 2 trial of omecamtiv mecarbil completed prior to the decision to advance this drug candidate to Phase 3 clinical development. COSMIC-HF was designed to assess the pharmacokinetics and tolerability of omecamtiv mecarbil dosed orally in patients with heart failure and left ventricular systolic dysfunction and its effects on echocardiographic measures of cardiac function. An intravenous formulation of omecamtiv mecarbil was studied in a Phase 2b clinical trial known as ATOMIC-AHF (Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure), which was designed to evaluate the safety and efficacy of omecamtiv mecarbil in patients with left ventricular systolic dysfunction who are hospitalized with acute heart failure.

Phase 2 Clinical Development Program

COSMIC-HF . COSMIC-HF was a Phase 2, double-blind, randomized, placebo-controlled, multicenter, clinical trial designed to assess the pharmacokinetics and tolerability of omecamtiv mecarbil dosed orally in patients with heart failure and left ventricular systolic dysfunction as well as its effects on echocardiographic measures of cardiac function. COSMIC-HF was conducted by Amgen in collaboration with Cytokinetics. The trial began with two dose escalation cohorts of 40 patients each, randomized 1:1:1:1 to placebo or one of three different modified release oral formulations of omecamtiv mecarbil for seven days. The dose of omecamtiv mecarbil in the first of these two dose escalation cohorts was 25 mg twice daily; in the second, it was 50 mg twice daily. The purpose of the dose escalation cohorts was to select one of the three modified release oral formulations of omecamtiv mecarbil for further evaluation in a larger group of patients treated for a longer period of time.

The expansion phase of COSMIC-HF was designed to evaluate the pharmacokinetics, pharmacodynamics, safety and tolerability of the modified release oral formulation   omecamtiv mecarbil selected based on the results of the two dose escalation cohorts in 448 patients with chronic heart failure and left ventricular systolic dysfunction. Patients were randomized 1:1:1 to receive either placebo or treatment with omecamtiv mecarbil 25 mg twice daily or a dose titration group where 25 mg twice daily dosing could be increased to 50 mg twice daily depending on plasma concentrations of   omecamtiv mecarbil after two weeks of treatment with the 25 mg dose.

In November 2015, the results from the expansion phase of COSMIC-HF (Chronic Oral Study of Myosin Activation to Increase Contractility in Heart Failure) were presented in a Late-Breaking Clinical Trial session at the American Heart Association Scientific Sessions 2015 in Orlando, Florida. Data from the expansion phase showed that dose titration controlled patient exposure to omecamtiv mecarbil. Approximately 60 percent of patients in the dose titration group escalated dosing to 50 mg twice daily. The study met its primary pharmacokinetics objective.

Following 20 weeks of treatment, statistically significant improvements were observed in pre-specified secondary endpoint measures of cardiac function in the dose titration group, compared to placebo. Systolic ejection time increased by 25.0 msec ( p <0.001), stroke volume increased by 3.63 mL ( p= 0.022) and heart rate decreased by 2.97 beats per min ( p =0.007). Left ventricular end-systolic and end-diastolic dimensions decreased by 1.79 mm ( p =0.003) and 1.29 mm ( p= 0.013), respectively, and were associated with statistically significant reductions in left ventricular end-systolic and end-diastolic volumes. N-terminal pro-brain natriuretic peptide (NT-proBNP) decreased by 970 pg/mL ( p =0.007). Additionally, in the 25 mg twice daily group, there were statistically significant increases in systolic ejection time and stroke volume and a decrease in NT-proBNP. All changes are from baseline compared to placebo. The pharmacodynamic effects of   omecamtiv mecarbil were generally dose dependent and larger in patients that received oral dosing with 50 mg twice daily.

Increases in systolic ejection time (SET) and stroke volume, and decreases in LV end-systolic volume, were similar after both 12 and 20 weeks of treatment with omecamtiv mecarbil; however, LV end-diastolic volume decreased progressively from 12 to 20 weeks, with the decrease after 20 weeks nearly twice that observed after 12 weeks. NT-proBNP (a biomarker that is elevated in heart failure, with higher elevations reflecting more severe heart failure) also fell progressively over time and, of particular note, had declined even further four weeks after treatment discontinuation (-1306 ± 376 pg/mL; p=0.0006). Heart rate also declined significantly after 2, 12 and 20 weeks of treatment ranging from 2-4 beats per minute and returning nearly to baseline four weeks after treatment discontinuation (-1.2±1.2 beats/min: p = 0.29).

Adverse events (AEs), including serious AEs, in patients on   omecamtiv mecarbil were comparable to placebo. The incidence of adjudicated deaths (2.7 percent died on placebo, 1.4 percent died on omecamtiv mecarbil), myocardial infarction (1.34 percent on placebo, 0.34 percent on   omecamtiv mecarbil) and unstable angina (0 percent on placebo, 0.34 percent on   omecamtiv mecarbil) was similar. Other cardiac AEs were generally balanced between placebo and active treatment groups. In the   omecamtiv mecarbil groups, compared to placebo, cardiac troponin increased by 0.001 ng/mL and 0.006 ng/mL (median change from baseline at week 20) in the 25 mg twice daily group and dose titration group, respectively. Events of increased troponin (n=278 across all treatment groups) were independently adjudicated and none were determined to be myocardial ischemia or infarction.

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On April 4, 2016, we announced the start of a Phase 2 clinical trial of omecamtiv mecarbil in Japanese subjects with heart failure and reduced ejection fraction.

Also in March 2016, the manuscript, “Acute Treatment with Omecamtiv Mecarbil to Increase Contractility in Acute Heart Failure, The ATOMIC-AHF Study,” was published in the Journal of the American College of Cardiology. Results from this trial were first presented at the European Society of Cardiology Meeting in 2013.

During 2016, we participated with Amgen in regulatory meetings with the FDA, EMA and Health Canada intended to inform design of a potential Phase 3 development program for omecamtiv mecarbil. We also conducted various clinical; non-clinical; chemistry, manufacturing, and controls (CMC), and planning activities in collaboration with Amgen to support the potential advancement of omecamtiv mecarbil into a Phase 3 development program. In September 2016, we announced Amgen’s decision to advance omecamtiv mecarbil into Phase 3 clinical development with a cardiovascular outcomes clinical trial expected to initiate in the fourth quarter of 2016. As part of the Phase 3 clinical trials program, Cytokinetics and Amgen are also planning a potential exercise performance/cardiac function clinical trial to be conducted by Cytokinetics. Amgen will be responsible for reimbursing us for the out-of-pocket development costs associated with this clinical trial.

In September 2016, additional results from COSMIC-HF were presented in a Rapid Fire Abstract Session at the Hart Failure Society of America Scientific Meeting in Orlando, Florida. The results showed that omecamtiv mecarbil may improve symptoms in patients with moderate to severe heart failure symptoms versus placebo after 20 weeks of double-blind treatment, as measured by the Kansas City Cardiomyopathy Questionnaire Total Symptom Score (TSS), one of the sub-domains of a self-administered questionnaire that measures quality-of-life in patients with heart failure. At week 20, the TSS was increased (with increases in the score reflecting improvement) in a dose-related fashion, with a 4.9 point improvement in the PK-guided dose titration group (p=0.03). This improvement was greater among patients who were moderately to severely symptomatic at baseline, with the largest magnitude in the PK-guided dose titration treatment group (6.5, p=0.09). Patients who were asymptomatic or mildly symptomatic had modest improvements in the TSS.

Ongoing Research in Cardiac Muscle Contractility

We are continuing our joint research program with Amgen directed to next-generation compounds in our cardiac muscle contractility program in 2016. Under the Amgen Agreement, Amgen reimburses us for certain research activities we perform.

The clinical trials program for omecamtiv mecarbil may proceed for several years, and we will not be in a position to generate any revenues or material net cash flows from sales of this drug candidate until the program is successfully completed, regulatory approval is achieved, and the drug is commercialized. Omecamtiv mecarbil is at too early a stage of development for us to predict if or when this may occur. We funded all research and development costs associated with this program prior to Amgen’s option exercise in May 2009. We anticipate that our expenditures relating to the research and development of compounds in our cardiac muscle contractility program will increase if we participate in the future advancement of omecamtiv mecarbil through clinical development. Our expenditures will also increase if Amgen terminates development of omecamtiv mecarbil or related compounds and we elect to develop them independently, or if we elect to co-fund later-stage development of omecamtiv mecarbil or other compounds in our cardiac muscle contractility program under our collaboration and option agreement with Amgen.

Beyond Muscle Contractility

We have developed preclinical expertise in the mechanics of skeletal, cardiac and smooth muscle that extends from proteins to tissues to intact animal models. Our translational research in muscle contractility has enabled us to better understand the potential impact of small molecule compounds that increase skeletal or cardiac muscle contractility and to apply those findings to the further evaluation of our drug candidates in clinical populations. In addition to contractility, the other major functions of muscle include metabolism, growth and energetics, with each of these functions playing a role in certain diseases that could benefit from novel mechanism treatments. Accordingly, our knowledge of muscle contractility may serve as an entry point to the discovery of novel treatments for disorders involving muscle functions other than muscle contractility. We are leveraging our current understandings of muscle biology to investigate new ways of modulating these other aspects of muscle function for other potential therapeutic applications.

Development Risks

The successful development of any of our drug candidates is highly uncertain. We cannot estimate with certainty or know the exact nature, timing and costs of the activities necessary to complete the development of any of our drug candidates or the date of completion of these development activities due to numerous risks and uncertainties, including, but not limited to:

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If we fail to complete the development of any of our drug candidates in a timely manner, it could have a material adverse effect on our operations, financial position and liquidity. In addition, any failure by us or our partners to obtain, or any delay in obtaining, regulatory approvals for our drug candidates could have a material adverse effect on our results of operations. A further discussion of the risks and uncertainties associated with completing our programs as planned, or at all, and certain consequences of failing to do so are discussed further in the risk factors entitled “We will need substantial additional capital in the future to sufficiently fund our operations,” “We have never generated, and may never generate, revenues from commercial sales of our drugs and we may not have drugs to market for at least several years, if ever,” “Clinical trials may fail to demonstrate the desired safety and efficacy of our drug candidates, which could prevent or significantly delay completion of clinical development and regulatory approval” and “Clinical trials are expensive, time-consuming and subject to delay,” and other risk factors.

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Research and development revenues from related parties refers to research and development revenues from our strategic alliances with Astellas and Amgen. Research and development revenue for the third quarter of 2016 and 2015 included research and development revenues from Astellas of $5.0 million and $3.2 million, respectively, and consisted of reimbursements of internal costs of certain full-time employee equivalents, reimbursements of research and development expenses, and research and development milestone fees; and research and development revenues from Amgen of $0.6 million and $0.6 million, respectively, and consisted of reimbursements of internal costs of certain full-time employee equivalents. Research and development revenue for the first nine months of 2016 and 2015 included research and development revenues from Astellas of $11.5 million and $8.2 million, respectively, and consisted of reimbursements of internal costs of certain full-time employee equivalents, and other research and development expenses; and research and development revenues from Amgen of $1.8 million and $1.9 million, respectively, and consisted of reimbursements of internal costs of certain full-time employee equivalents. The increase in research and development revenues from related parties for the three and nine months ended September 30, 2016, compared to the same periods in 2015, was primarily due to the timing of research and development activities under the Astellas collaboration agreement.

Research and development, grant and other revenues in the third quarter and in the first nine months of 2016, consisted of $0.3 million and $0.8 million, respectively, of research and development revenues from our collaboration with The ALS Association (“ALSA”). In July 2015, we were awarded a $1.5 million grant from ALSA (the “ALSA Grant”) to support the conduct of VITALITY-ALS as well as the collection of clinical data and plasma samples from patients in VITALITY-ALS in order to help advance the discovery of potentially useful biomarkers in ALS.

License revenues from related parties refers to license revenues from our strategic alliance with Astellas. License revenues from related parties for the third quarter of 2016 and 2015 were $53.0 million and $4.1 million, respectively, and primarily consisted of the recognition of the $50.0 million upfront license fee received from Astellas under the 2016 Amendment, using the proportional performance model. License revenues from related parties for the first nine months of 2016 and 2015 were $59.0 million and $8.8 million, respectively, and consisted of the recognition of the $50.0 million upfront license fee received from Astellas under the 2016 Amendment, using the proportional performance model. The increase in license revenue from related parties for the third quarter of 2016, compared to the same period in 2015, and the increase in license revenues from related parties for the three and nine months ended September 30, 2016, compared to the same periods in 2015, was primarily due to the license revenue associated with the expansion of the Astellas collaboration agreement, which was effective in September 2016. Refer to Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements, for the accounting treatment, including the allocation of consideration to the units of accounting, and the revenue recognition of License Revenue and Research and Development Revenue, under the 2016 Amendment.

The increase in research and development expenses for the three months ended September 30, 2016, compared to the same period in 2015, was primarily due to an increase of $6.6 million in outsourced preclinical and clinical costs mainly associated with the ongoing VITALITY-ALS and CK-2127107 trials, and an increase of $1.1 million in personnel related expenses due to increased headcount costs and increased non-cash stock compensation expense.

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The increase in research and development expenses for the first nine months of 2016, compared to the same period in 2015, was primarily due to an increase of $9.5 million in outsourced clinical costs, an increase of $3.5 million in personnel related expenses due to increased headcount and increased non-cash stock compensation expense, partially offset by a decrease of $3.6 million in outsourced preclinical costs mainly associated with clinical manufacturing activities. The increase in outsourced clinical costs comprised of an increase of $14.0 million in outsourced clinical costs mainly associated with the ongoing VITALITY-ALS and CK-2127107 trials, offset by a $4.5 million litigation settlement in June 2016 from a contract research organization for our BENEFIT-ALS clinical trial which was concluded in 2014.

The following presents our research and development expenses by program for the three and nine months ended September 30, 2016 and 2015, respectively (in thousands):

From a program perspective, the increase in research and development spending for the third quarter of 2016, compared to the same period in 2015, was primarily due to increased spending of $8.1 million for our skeletal muscle contractility program, which included the clinical program for tirasemtiv for the treatment of ALS, and the clinical programs for CK-2127107 under our collaboration with Astellas, and increased spending of $0.3 million for our cardiac muscle contractility program, partially offset by decreased spending of $0.6 million for our other research programs. The $8.1 million increase in our skeletal muscle contractility program spending mainly comprised of an increase of $6.8 million in research and development spending associated with tirasemtiv for the treatment of ALS and an increase of $1.2 million in research and development spending associated with CK-2127107, respectively.

From a program perspective, the increase in research and development spending for the first nine months of 2016, compared to the same period in 2015, was primarily due to increased spending of $9.3 million for our skeletal muscle contractility program, which included the clinical program for tirasemtiv for the treatment of ALS, and the clinical programs for CK-2127107 under our collaboration with Astellas, and increased spending of $1.6 million for our cardiac muscle contractility program, partially offset by decreased spending of $1.4 million for our other research programs. The $9.3 million increase in our skeletal muscle contractility program spending mainly comprised of an increase of $11.8 million in research and development spending associated with the tirasemtiv for the treatment of ALS, and an increase of $2.3 million in research and development spending associated with CK-2127107, respectively, partially offset by a $4.5 million litigation settlement in June 2016 from a contract research organization for our BENEFIT-ALS clinical trial which was concluded in 2014.

Clinical development timelines, likelihood of success and total completion costs vary significantly for each drug candidate and are difficult to estimate. We anticipate that we will determine on an ongoing basis which research and development programs to pursue and how much funding to direct to each program, taking into account the scientific and clinical success of each drug candidate. The lengthy process of seeking regulatory approvals and subsequent compliance with applicable regulations requires the expenditure of substantial resources. Any failure by us to obtain and maintain, or any delay in obtaining, regulatory approvals could cause our research and development expenditures to increase and, in turn, could have a material adverse effect on our results of operations.

We expect our research and development expenditures to increase significantly in 2016 compared to 2015. We expect to continue the Phase 3 clinical development of our drug candidate tirasemtiv for the potential treatment of ALS. Under our strategic alliance with Astellas, we expect to continue development of our drug candidate CK-2127107 for the potential treatment of SMA, COPD, ALS and potentially other diseases and medical conditions associated with muscle weakness or wasting. Under our strategic alliance with Amgen, we expect to continue development of our drug candidate omecamtiv mecarbil for the potential treatment of heart failure.

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The increase in general and administrative expenses in the third quarter of 2016, compared to the same period in 2015, was primarily due to an increase of $1.3 million in personnel related expenses due to increased headcount and increased non-cash stock compensation expense, an increase of $0.4 million in outsourced costs mainly related to commercial development and information technology, and an increase of $0.2 million in corporate and patent legal fees.

The increase in general and administrative expenses in the first nine months of 2016, compared to the same period in 2015, was primarily due to increased spending of $3.3 million in personnel related expenses due to increased headcount and increased non-cash stock compensation expense, an increase of $1.9 million in outsourced costs related to commercial development, grants and sponsorships, and accounting and finance, and an increase of $1.6 million in corporate and patent legal fees.

We anticipate that general and administrative expenses in 2016 will increase significantly compared to 2015, mainly due to increased headcount.

Interest Expense

Interest expense increased in the third quarter of 2016 and for the first nine months of 2016, compared to the same periods in 2015, due to interest expense related to the long-term debt obligations which commenced in fourth quarter 2015.

Critical Accounting Policies

The accounting policies that we consider to be our most critical (i.e., those that are most important to the portrayal of our financial condition and results of operations and that require our most difficult, subjective or complex judgments), the effects of those accounting policies applied and the judgments made in their application are summarized in “ Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. There has been no material change to our critical accounting policies since then.

Recent Accounting Pronouncements

See Note 1, “Recent Accounting Pronouncements” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations.

Liquidity and Capital Resources

From August 5, 1997, our date of inception, through September 30, 2016, we funded our operations through the sale of equity securities, non-equity payments from collaborators, long term debt, capital equipment financings, grants and interest income. Due to our substantial research and development expenditures, we have generated significant operating losses since our inception. Our expenditures are primarily related to research and development activities. As of September 30, 2016, we had available cash, cash equivalents and investments of $86.3 million.

Original Astellas Agreement

In June 2013, we entered into the Original Astellas Agreement (see Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements). In July 2013, we received an upfront non-refundable license payment of $16.0 million in connection with the execution of the Original Astellas Agreement. Pursuant to that agreement we were eligible to potentially receive over $24.0 million in reimbursement of sponsored research and development activities during the initial two years of the collaboration. In addition, the agreement also provided for payments for the achievement of pre-specified milestones relating to the joint research and development program. During the three months and nine months ended September 30, 2016 and 2015, the Company recognized no revenues for milestones achieved under the Original Astellas Agreement. The $15.0 million milestone payment which was paid in January 2015 was recognized in 2014.

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2014 Astellas Agreement

In December 2014, we entered into the 2014 Astellas Agreement, which superseded the Original Astellas Agreement (see Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements). Under the terms of the 2014 Astellas Agreement, we received a non-refundable upfront license fee of $30.0 million in January 2015. In conjunction with the 2014 Astellas Agreement, we also entered into a common stock purchase agreement pursuant to which we sold 2,040,816 shares common stock to Astellas at a price per share of $4.90. The aggregate purchase price of $10.0 million was received in December 2014. We determined the fair value of the stock issued to Astellas to be $9.1 million. The excess of cash received over fair value of $0.9 million was deferred and will be recognized as revenue as services are performed over approximately 24 months.

We are eligible to potentially receive over $20.0 million in reimbursement of sponsored research and development activities during the three years of the collaboration through 2017. In addition, we may also receive payments for the achievement of pre-specified milestones relating to the 2014 Astellas Agreement.

Based on the achievement of pre-specified criteria, Cytokinetics may receive over $600.0 million in milestone payments relating to the development and commercial launch of collaboration products, including up to $95.0 million relating to CK-2127107 in non-neuromuscular indications, and over $100.0 million in development and commercial launch milestones for CK-2127107 in each of SMA, ALS and other neuromuscular indications. Cytokinetics may also receive up to $200.0 million in payments for achievement of pre-specified sales milestones related to net sales of all collaboration products under the 2014 Astellas Agreement. If Astellas commercializes any collaboration products, Cytokinetics will also receive royalties on sales of such collaboration products, including royalties ranging from the high single digits to the high teens on sales of products containing CK-2127107. Cytokinetics also holds an option to co-fund certain development costs for CK-2127107 and other compounds in exchange for increased milestone payments and royalties; such royalties may increase under certain scenarios to exceed twenty percent. In addition to the foregoing development, commercial launch and sales milestones, Cytokinetics may also receive payments for the achievement of pre-specified milestones relating to the joint research program.

2016 Astellas Amendment (Inclusion of ALS as an Added Indication and Option on Tirasemtiv)

In July 2016, Cytokinetics entered into the 2016 Amendment to the 2014 Astellas Agreement. Under the 2016 Amendment, we granted Astellas an option to enter into a pre-negotiated agreement for a global collaboration for the development and commercialization of tirasemtiv. If Astellas exercises the option, Astellas will receive exclusive worldwide commercialization rights for Astellas outside Cytokinetics’ commercialization territory in North America, Europe and other select countries. In addition, the 2016 Amendment expands our collaboration with Astellas to include the development of CK-2127107 for the potential treatment of ALS, as well as other fast skeletal regulatory activators licensed to Astellas under the 2014 Agreement. Finally, the 2016 Amendment extends the existing joint research program focused on the discovery of additional next-generation skeletal muscle activators through 2017, including sponsored research at Cytokinetics.

The 2016 Amendment was subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and beacame effective on September 26, 2016, the date of such clearance.

In connection with the execution of the 2016 Amendment, we received a $15.0 million non-refundable option fee for the grant of the option on tirasemtiv. Prior to Astellas’ exercise of the option, we will continue the development of tirasemtiv, including the VITALITY-ALS trial, at our own expense to support regulatory approval in the U.S., EU and certain other jurisdictions and will retain the final decision making authority on the development of tirasemtiv. If Astellas exercises the option, we will grant Astellas an exclusive license to develop and commercialize tirasemtiv outside Cytokinetics’ own commercialization territory of North America, Europe and other select countries. Each party would be primarily responsible for the further development of tirasemtiv in its territory and have the exclusive right to commercialize tirasemtiv in its territory.

Also in connection with the execution of the 2016 Amendment, we received a non-refundable upfront amendment fee of $35.0 million. We also received the accelerated payment of a $15.0 million milestone payment for the initiation of the first Phase 2 clinical trial of CK-2127107 as the lead compound in ALS that was otherwise provide for in the 2014 Astellas Agreement, as if such milestone has been achieved upon the execution of the 2016 Amendment. The parties will share equally the costs of developing CK-2127107 in ALS for potential registration and marketing authorization in the U.S. and Europe, provided that (i) Astellas has agreed to solely fund Phase 2 development costs of CK-2127107 in ALS, subject to a right to recoup Cytokinetics’ share of such costs plus a 100% premium by reducing future milestone and royalty payments to Cytokinetics, and (ii) Cytokinetics may defer (but not eliminate) a portion of its co-funding obligation for development activities after Phase 2 for up to 18 months, subject to certain conditions. Cytokinetics has the right to co-fund its share of such Phase 2 development costs on a current basis, in which case there would not be a premium due to Astellas. We are also eligible to potentially receive approximately $44.2 million in additional sponsored research and development funding through 2018 which includes Astellas’ funding of Cytokinetics’ conduct of the Phase 2 clinical development of CK-2127107 in ALS (approximately $39.1 million) as well as the continuing research collaboration (approximately $5.1 million).

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If Astellas exercises its option for a global collaboration for the development and commercialization of tirasemtiv, Cytokinetics will receive an option exercise payment ranging from $25.0 million (if exercise occurs following receipt of data from the VITALITY-ALS trial) to $80.0 million (if exercise occurs following receipt of FDA approval). In addition, we are eligible to receive a potential milestone payment from Astellas associated with Cytokinetics’ initiation of the VIGOR-ALS open-label extension trial for tirasemtiv. Such milestone would be $30.0 million; provided, however, that the amount will be reduced to $15.0 million if (i) Astellas elects to pay such milestone payment at the time the trial commences (if prior to Astellas’ exercise of its option on tirasemtiv) or (ii) Astellas has exercised said option as of the time the trial commences. Cytokinetics will be responsible for the development costs of tirasemtiv during the option period, but if Astellas’ exercises the option after the defined review period following receipt of data from VITALITY-ALS, Astellas will at the time of option exercise reimburse Cytokinetics for a share of any additional costs incurred after such review period.

If Astellas exercises the option for tirasemtiv, the parties will share the future development costs of tirasemtiv in North America, Europe and certain other countries (with Cytokinetics bearing 75% of such shared costs and Astellas bearing 25% of such costs), and Astellas will be solely responsible for the development costs of tirasemtiv specific to its commercialization territory. Contingent upon the successful development of tirasemtiv, we may receive milestone payments up to $100.0 million for the initial indication and up to $50.0 million for each subsequent indication. If tirasemtiv is commercialized, Astellas will pay us royalties (at rates ranging from the mid-teens to twenty percent) on sales of tirasemtiv in Astellas’ territory, and we will pay Astellas royalties (at rates up to the mid-teens) on sales of tirasemtiv in our commercialization territory, in each case subject to various possible adjustments.

Amgen Agreement Amendment

In June 2013, we entered into the Amgen Agreement Amendment, which expanded our strategic alliance to include Japan (see Note 4, “Related Party Research and Development Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements). Under the terms of the Amgen Agreement Amendment, we received a non-refundable upfront license fee of $15 million in June 2013. In conjunction with the Amgen Agreement Amendment, we also entered into a common stock purchase agreement pursuant to which we sold 1,404,100 shares common stock to Amgen at a price per share of $7.12. The aggregate purchase price of $10.0 million was received in June 2013. We determined the fair value of the stock issued to Amgen to be $7.5 million. The excess of cash received over fair value of $2.5 million was deferred and was recognized as revenue as services were performed over approximately 12 months.

Under the Amgen Agreement as amended, we are eligible for potential pre-commercialization and commercialization milestone payments of over $650.0 million in the aggregate on omecamtiv mecarbil and other potential products arising from research under the collaboration, and royalties that escalate based on increasing levels of annual net sales of products commercialized under the agreement.

Amgen and the Company agreed to further extend the term of the research program in 2016. Under the amended Amgen Agreement, we are entitled to receive reimbursements of internal costs for certain full-time employee equivalents during 2016, as well as potential additional milestone payments related to the research activities.

Cantor Fitzgerald

On September 4, 2015, we entered into a $40.0 million Controlled Equity Offering Sales Agreement (“CE Offering”) with Cantor Fitzgerald & Co., pursuant to which we issue and sold, through September 30, 2016, 808,193 shares for total net proceeds of approximately $8.7 million. As of September 30, 2016, $31.3 million remains available to us under the September 2015 Registration Statement.

Warrants issued in June 2012 Public Offerings

On June 20, 2012, we entered into underwriting agreements for two separate, concurrent offerings of our securities (the “June 2012 Public Offerings”). The warrants issued in the June 2012 Public Offerings became exercisable upon issuance and will remain exercisable until June 25, 2017. In August 2016, warrants to purchase 104,533 shares of our common stock at an exercise price of $5.28 per share were exercised in accordance with the June 2012 Public Offerings underwriting agreements. In September 2016, we issued 690,580 shares of common stock related to cashless exercise of warrants. As of September 30, 2016, warrants to purchase 4,168,914 shares of our common stock were outstanding and exercisable.

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October 2015 Loan Agreement

On October 19, 2015 and February 10, 2016, we entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford,”) as the collateral agent and a lender, and Silicon Valley Bank (“SVB,”) as a lender (Oxford and SVB collectively the “Lenders”) to fund our working capital and other general corporate needs, for Term A and Term B, respectively. We can, in our sole discretion, draw down an additional $10.0 million under the Loan Agreement from the Lenders, at any time prior to March 31, 2017, subject to Cytokinetics’ satisfaction of specified conditions precedent related to the earlier of (i) the occurrence of an equity even as described in the Loan Agreement, or (ii) specified results from the Company’s VITALITY-ALS Phase 3 trial of tirasemtiv, each as specified in the Loan Agreement. As of September 30, 2016 we received $29.8 million from these loan and security agreements for Term A and Term B, net of issuance cost. See Note 8, “Long-Term Debt” of the Notes to Consolidated Financial Statements for further details.

Sources and Uses of Cash

Our cash, cash equivalents and investments totaled $86.3 million at September 30, 2016, compared to $111.6 million at December 31, 2015. The decrease of $25.3 million was primarily due to cash used in operating activities of $40.8 million, partially offset by net proceeds of $15.0 million received from long-term debt.

Net cash used in operating activities was $40.8 million for the nine months ended September 30, 2016 and was largely due to the ongoing research and development activities, and general and administrative spend to support those activities. The net income of $7.8 million for the nine months ended September 30, 2016 included non-cash stock based compensation of $5.3 million. At September 30, 2016, deferred revenue of $26.1 million related to the deferral of revenue for Astellas based on the proportional performance model; and related party accounts receivable included $65 million that was received from Astellas in October 2016, related to the 2016 Astellas Amendment.

Net cash used in investing activities was $10.1 million for the first nine months of 2016 was primarily due to purchases of investments, exceeding proceeds from the maturity of investments, by $9.4 million.

Net cash provided by financing activities was $16.2 million for the first nine months of 2016 and primarily consisted of net proceeds received of $15.0 million from long-term debt.

Shelf Registration Statements.

In November 2013 we filed a shelf registration statement with the SEC, which was declared effective in December 2013 (the “December 2013 Shelf”). The December 2013 Shelf allowed us to issue common stock and preferred stock, and/or warrants to purchase any of such securities with a total value of up to $150.0 million. As of September 30, 2016, $109.7 million remains available to us under the December 2013 Shelf. The specific terms of offerings, if any, under the December 2013 Shelf will be established at the time of such offerings.

As of September 30, 2016, our contractual obligations are as follows (in thousands):