Crinetics Pharmaceuticals(CRNX) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Financial Statements Crinetics Pharmaceuticals reported no revenue and a net loss of $76.8 million for the nine months ended September 30, 2021, with total assets at $209.4 million and stockholders' equity at $193.6 million Condensed Consolidated Balance Sheets Total assets increased to $209.4 million by September 30, 2021, driven by higher cash and equivalents, while stockholders' equity rose to $193.6 million | Balance Sheet Items (In thousands) | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $161,536 | $93,087 | | Investment securities | $31,789 | $77,793 | | Total current assets | $203,973 | $177,492 | | Total assets | $209,359 | $183,445 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $12,440 | $10,489 | | Total liabilities | $15,769 | $14,526 | | Total stockholders' equity | $193,590 | $168,919 | | Total liabilities and stockholders' equity | $209,359 | $183,445 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss widened to $27.9 million for Q3 2021 and $76.8 million for the nine-month period, primarily due to increased research and development expenses | Operating Results (In thousands, except per share data) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Grant revenues | $— | $— | $— | $71 | | Research and development | $21,580 | $13,699 | $59,651 | $40,168 | | General and administrative | $6,227 | $4,752 | $17,163 | $13,065 | | Total operating expenses | $27,807 | $18,451 | $76,814 | $53,233 | | Loss from operations | $(27,807) | $(18,451) | $(76,814) | $(53,162) | | Net loss | $(27,851) | $(18,320) | $(76,847) | $(52,171) | | Net loss per share – basic and diluted | $(0.73) | $(0.56) | $(2.13) | $(1.76) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $65.7 million for the nine months ended September 30, 2021, offset by $88.8 million from financing activities | Cash Flow Summary (In thousands) | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(65,689) | $(46,089) | | Net cash provided by investing activities | $45,315 | $9,109 | | Net cash provided by financing activities | $88,823 | $114,474 | | Net change in cash, cash equivalents and restricted cash | $68,449 | $77,494 | | Cash, cash equivalents and restricted cash at end of period | $162,036 | $118,320 | Notes to Condensed Consolidated Financial Statements Notes detail the company's clinical focus, financial position with $193.3 million cash, and the formation of Radionetics Oncology as a key subsequent event - The company is a clinical-stage pharmaceutical firm focused on therapeutics for rare endocrine diseases and tumors. In October 2021, it formed Radionetics Oncology, Inc. with partners to develop radiopharmaceuticals, in which it maintains an equity interest[23] - As of September 30, 2021, the company had an accumulated deficit of $244.5 million but believes its $193.3 million in unrestricted cash, cash equivalents, and investments is sufficient to fund operations for at least the next 12 months[27] - In 2021, the company completed an underwritten follow-on offering in April raising $72.6 million net, a private placement in July for $15.0 million gross, and another follow-on offering in October raising approximately $161.9 million net[59] - Subsequent to the quarter end, on October 18, 2021, the company formed Radionetics Oncology, licensing its radiotherapeutics technology platform in exchange for a majority stake, a warrant, potential sales milestones over $1.0 billion, and single-digit royalties[71][72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical pipeline advancements, increased operating expenses leading to a $76.8 million net loss, and substantial equity funding to support future operations Overview and Pipeline The company, a clinical-stage pharmaceutical firm, is advancing its pipeline with lead candidate paltusotine in Phase 3 for acromegaly and recently formed Radionetics Oncology - Paltusotine (SST2 Agonist): A Phase 3 development program for acromegaly has been initiated, with top-line data expected in 2023[80] - CRN04777 (SST5 Agonist): Currently in a Phase 1 study for congenital hyperinsulinism, with positive topline data announced in September 2021[81] - CRN04894 (ACTH Antagonist): In a Phase 1 study for diseases of excess ACTH, preliminary data showed dose-dependent reductions in cortisol[83] - Radionetics Oncology, Inc.: Formed in October 2021 with partners to develop radiopharmaceuticals, with Crinetics licensing its technology for a majority equity stake, potential milestones, and royalties[85] Results of Operations Operating results show widening net losses for Q3 and the nine months ended 2021, primarily due to increased research and development expenses and personnel costs | Expense Comparison (In thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $21,580 | $13,699 | $7,881 | | General and administrative | $6,227 | $4,752 | $1,475 | | Net loss | $(27,851) | $(18,320) | $(9,531) | | Expense Comparison (In thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $59,651 | $40,168 | $19,483 | | General and administrative | $17,163 | $13,065 | $4,098 | | Net loss | $(76,847) | $(52,171) | $(24,676) | - The increase in R&D expenses for the nine-month period was driven by a $9.4 million rise in manufacturing and development activities and an $8.8 million increase in personnel costs[103][105] Liquidity and Capital Resources The company held $193.3 million in cash and investments as of September 30, 2021, bolstered by $161.9 million from an October offering, providing sufficient liquidity for the next 12 months - The company had $193.3 million in unrestricted cash, cash equivalents, and investment securities as of September 30, 2021[106] - Net cash used in operating activities increased to $65.7 million for the nine months ended Sep 30, 2021, up from $46.1 million in the prior year period, due to increased development activities and personnel costs[106] - In October 2021, the company completed an underwritten public offering, raising approximately $161.9 million in net proceeds[111] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are interest rate sensitivity on its short-term investments and foreign currency exposure, neither of which is currently material - The company's primary market risk is interest rate sensitivity, but its short-term investment portfolio mitigates material impact from rate changes[114] - Foreign currency exchange rate risk from its Australian subsidiary and foreign vendor contracts has not had a material adverse effect to date[115] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - As of September 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[117] - No material changes occurred in internal control over financial reporting during the third quarter of 2021[117] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[120] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Approximately $106.5 million of the 2018 IPO proceeds have been used for general corporate purposes and development programs as of September 30, 2021 - As of September 30, 2021, the company has used approximately $106.5 million of its 2018 IPO proceeds for general corporate purposes and development programs[122]