Crinetics Pharmaceuticals(CRNX) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk, and internal controls for the reporting period Item 1. Condensed Financial Statements The unaudited condensed financial statements show increased assets and a larger net loss for the first half of 2021, driven by R&D expenses and stock offerings Condensed Consolidated Balance Sheets This section presents the company's financial position, highlighting assets, liabilities, and stockholders' equity as of June 30, 2021 Condensed Consolidated Balance Sheet Highlights | Account | June 30, 2021 (Unaudited, in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $178,771 | $93,087 | | Total current assets | $211,355 | $177,492 | | Total assets | $216,929 | $183,445 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $11,919 | $10,489 | | Total liabilities | $15,489 | $14,526 | | Total stockholders' equity | $201,440 | $168,919 | | Total liabilities and stockholders' equity | $216,929 | $183,445 | - Total assets increased primarily due to a significant rise in cash and cash equivalents, which grew from $93.1 million to $178.8 million, largely funded by stock offerings[7] - Total stockholders' equity increased from $168.9 million to $201.4 million, reflecting capital raised from stock issuances, which offset the accumulated deficit from net losses[11] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's revenues, expenses, and net loss for the three and six months ended June 30, 2021 Statement of Operations Highlights | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Grant revenues | $— | $— | $— | $71 | | Research and development | $20,487 | $12,607 | $38,071 | $26,469 | | General and administrative | $5,602 | $4,322 | $10,936 | $8,313 | | Loss from operations | $(26,089) | $(16,929) | $(49,007) | $(34,711) | | Net loss | $(26,095) | $(16,491) | $(48,996) | $(33,851) | | Net loss per share – basic and diluted | $(0.70) | $(0.53) | $(1.40) | $(1.21) | - Research and development expenses increased by 62.5% for the three-month period and 43.8% for the six-month period year-over-year, driving the larger net loss[16] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including the impact of net loss and common stock issuances - Total stockholders' equity increased from $168.9 million at the start of 2021 to $201.4 million at June 30, 2021, primarily driven by the issuance of common stock, which added $72.6 million, offsetting the net loss of $49.0 million for the period[19] Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Highlights | Activity | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(40,016) | $(28,085) | | Net cash provided by investing activities | $52,340 | $33,941 | | Net cash provided by financing activities | $73,360 | $114,632 | | Net change in cash, cash equivalents and restricted cash | $85,684 | $120,488 | - Cash used in operating activities increased by 42.5% year-over-year, reflecting higher net loss and changes in operating assets and liabilities[23] - Financing activities in the first six months of 2021 provided $73.4 million, primarily from the net proceeds of a common stock issuance[23] Notes to Condensed Consolidated Financial Statements This section provides additional disclosures and explanations supporting the condensed consolidated financial statements - The company is a clinical-stage pharmaceutical firm focused on rare endocrine diseases and has an accumulated deficit of $216.6 million as of June 30, 2021[26][30] - Management believes its cash, cash equivalents, and investment securities of $203.8 million are sufficient to fund requirements for at least the next 12 months[30] - In April 2021, the company completed a follow-on offering of common stock, raising net proceeds of approximately $72.6 million[63] - Subsequent to the quarter end, on July 28, 2021, the company entered into an agreement for a private placement of common stock, yielding gross proceeds of $15.0 million[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition, operational results, and liquidity, highlighting key drivers and future outlook Overview and Pipeline This section provides an overview of the company's business, strategic focus, and clinical development pipeline - Crinetics is a clinical-stage pharmaceutical company focused on developing novel therapeutics for rare endocrine diseases and endocrine-related tumors[79] - The lead product candidate, paltusotine, is in a Phase 3 development program for acromegaly, with top-line data from two placebo-controlled trials (PATHFNDR-1 and PATHFNDR-2) expected in 2023[80][82] - Other clinical-stage candidates include CRN04777 for congenital hyperinsulinism (HI) and CRN04894 for diseases of excess ACTH, such as Cushing's Disease[83][84] Results of Operations This section analyzes the company's financial performance, focusing on revenue, expenses, and net loss for the reporting periods Comparison of Three Months Ended June 30 | Expense Category | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Research and development | $20,487 | $12,607 | $7,880 | | General and administrative | $5,602 | $4,322 | $1,280 | | Total operating expenses | $26,089 | $16,929 | $9,160 | | Net loss | $(26,095) | $(16,491) | $(9,604) | Comparison of Six Months Ended June 30 | Expense Category | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Research and development | $38,071 | $26,469 | $11,602 | | General and administrative | $10,936 | $8,313 | $2,623 | | Total operating expenses | $49,007 | $34,782 | $14,225 | | Net loss | $(48,996) | $(33,851) | $(15,145) | - The increase in R&D expenses for Q2 2021 was primarily due to a $4.1 million increase in manufacturing and development activities and a $3.0 million increase in personnel costs[102] Liquidity and Capital Resources This section assesses the company's cash position, capital resources, and ability to fund future operations - As of June 30, 2021, the company had $203.8 million in unrestricted cash, cash equivalents, and investment securities and an accumulated deficit of $216.6 million[105] - Management believes existing capital resources are sufficient to fund operations for at least the next twelve months[108] - Net cash provided by financing activities was $73.4 million for the first six months of 2021, mainly from an underwritten follow-on offering in April 2021[107] - The company has an At-The-Market (ATM) offering agreement for up to $75.0 million, but did not issue any shares under this program in the first six months of 2021[111] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, including interest rate and foreign currency fluctuations, and their potential impact - The primary market risk is interest rate sensitivity on cash, cash equivalents, and investment securities, but due to their short-term nature, a sudden change in rates is not expected to have a material impact[114] - The company is subject to foreign currency exchange rate risk through its Australian subsidiary and foreign vendor contracts, though net gains and losses were not material for the periods presented[115] - Inflation has not had a material effect on the company's results of operations[116] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures, with no material changes reported - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[117] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[117] PART II — OTHER INFORMATION This section provides information on legal proceedings, risk factors, equity sales, and required exhibits Legal Proceedings The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[120] Risk Factors No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[121] Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales and details the use of IPO proceeds for corporate and clinical development - There were no unregistered sales of equity securities during the reporting period[121] - As of June 30, 2021, the company has used approximately $98.9 million of the net proceeds from its IPO for general corporate purposes and clinical development, with no material change in the planned use of proceeds[122] Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO and CFO certifications - The report includes required certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[127][128][129]