Crinetics Pharmaceuticals(CRNX) - 2021 Q4 - Annual Report

Part I Business Crinetics Pharmaceuticals is a clinical-stage company developing oral nonpeptide therapeutics for rare endocrine diseases and tumors, with a pipeline including Paltusotine and CRN04777 Business Overview and Pipeline Crinetics is a clinical-stage pharmaceutical company focused on developing oral small-molecule therapeutics for rare endocrine diseases and tumors, with a diverse pipeline and a radiopharmaceutical collaboration - The company focuses on discovering and developing oral nonpeptide (small molecule) therapeutics for rare endocrine diseases and endocrine-related tumors[12] Product Candidate Pipeline Summary | Product Candidate | Target/Mechanism | Indication(s) | Development Stage | | :--- | :--- | :--- | :--- | | Paltusotine | SST2 Agonist | Acromegaly, Neuroendocrine Tumors (NETs) | Phase 3 (Acromegaly), Phase 2 (NETs) | | CRN04777 | SST5 Agonist | Congenital Hyperinsulinism (HI) | Phase 1 Complete, Phase 2 Planned | | CRN04894 | ACTH Antagonist | Cushing's Disease, CAH, EAS | Phase 1 Ongoing | | PTH Antagonist | PTH Receptor Antagonist | Hyperparathyroidism (PHPT), HHM | Preclinical | - In October 2021, Crinetics co-founded Radionetics Oncology, granting an exclusive worldwide license for radiotherapeutics in exchange for a majority equity stake, potential milestones over $1.0 billion, and royalties[20] Our Strategy The company's strategy focuses on becoming a leader in rare endocrine disease treatment by advancing oral therapies, expanding its pipeline, and retaining commercial rights, with a recent licensing exception for Japan - Focus on rare endocrine diseases and tumors with significant unmet medical need, aiming to advance the standard of care with orally available therapies[23] - Leverage an experienced discovery team to expand the therapeutic pipeline, targeting peptide hormone GPCRs[23] - Intends to retain significant development and commercial rights, with a license agreement for paltusotine commercialization in Japan entered in February 2022[23] Paltusotine (SST2 Agonist Program) Paltusotine is an oral, selective SST2 agonist in Phase 3 development for acromegaly and Phase 2 for neuroendocrine tumors, with topline data for both expected in 2023 - Paltusotine is an oral selective nonpeptide SST2 agonist for treating acromegaly and NETs, holding FDA orphan drug designation for acromegaly[30] - Two Phase 3 trials for acromegaly, PATHFNDR-1 and PATHFNDR-2, are ongoing with topline data expected in 2023, aiming to support broad registration[15][40] - A Phase 2 trial of paltusotine for NETs with carcinoid syndrome has been initiated, with topline data also expected in 2023[30][40] - In February 2022, the company licensed exclusive rights to Sanwa Kagaku Kenkyusho Co., Ltd. for paltusotine development and commercialization in Japan[15][30] CRN04777 (SST5 Agonist Program) CRN04777 is an oral, selective SST5 agonist for congenital hyperinsulinism, having completed Phase 1 with positive proof-of-concept and planning Phase 2 initiation in H2 2022, holding rare pediatric and orphan drug designations - CRN04777 is an oral SST5 agonist for congenital HI, holding rare pediatric disease designation from the FDA and orphan drug designation from the EMA[16][43] - Positive top-line data from Phase 1 single and multiple ascending dose cohorts, announced in September 2021 and March 2022, demonstrated pharmacologic proof-of-concept[16][47] - The company plans to initiate a Phase 2 clinical study in the second half of 2022 following regulatory discussions[16][49] CRN04894 (ACTH Antagonist Program) CRN04894 is an oral, nonpeptide ACTH antagonist for diseases of ACTH excess, with positive Phase 1 single ascending dose data showing cortisol reduction, and multiple ascending dose data expected in Q2 2022, followed by further clinical studies in H2 2022 - CRN04894 is an oral ACTH antagonist for diseases of ACTH excess such as Cushing's disease and CAH[17][50] - Positive data from the single ascending dose cohorts of the Phase 1 study, announced in August 2021, showed the drug was well-tolerated and reduced cortisol levels[18][55] - Topline data from the multiple ascending dose portion of the Phase 1 study are expected in Q2 2022, with plans to initiate subsequent clinical studies in H2 2022[18][50][55] Competition The company faces significant competition from established pharmaceutical and biotech companies across its therapeutic areas, including acromegaly, neuroendocrine tumors, congenital hyperinsulinism, and ACTH excess disorders - For acromegaly, paltusotine competes with injected somatostatin analogs and Amryt Pharma's oral octreotide product, MYCAPSSA[56][58] - For congenital HI, CRN04777 would compete with the only approved therapy, diazoxide (Teva), and off-label octreotide use, alongside other developers like Rezolute and Eiger Biopharmaceuticals[58] - For Cushing's disease and CAH, CRN04894 faces competition from adrenal enzyme inhibitors, glucocorticoid receptor antagonists, and cortisol synthesis inhibitors[59] Intellectual Property The company actively protects its technology through patents, with key product patents expiring between 2037 and 2040, and some intellectual property is subject to U.S. government regulations due to funding - Issued patents for paltusotine in the U.S. and Japan are estimated to expire in 2037, excluding potential extensions[63] - Issued patents for CRN04894 in the U.S. are estimated to expire in 2039, and patent applications for CRN04777, if issued, are estimated to expire in 2040[63] - Intellectual property generated through U.S. government SBIR Grants is subject to federal regulations, including potential government rights under the Bayh-Dole Act[63][166] Government Regulation The company's products are subject to extensive regulation by the FDA and foreign authorities, encompassing drug development, clinical trials, special designations like Orphan Drug status, post-approval compliance, and broader healthcare reform and privacy laws - The FDA drug development process requires extensive preclinical testing and multi-phase human clinical trials to establish safety and efficacy before NDA submission[69][71] - The company has obtained Orphan Drug Designation for paltusotine (acromegaly) and CRN04777 (congenital HI), potentially providing seven years of market exclusivity in the U.S[78][119] - The business is subject to healthcare reform measures like the ACA, impacting pricing, reimbursement, and market access, along with federal and state anti-kickback and false claims laws[88][89] - The company must comply with data privacy and security laws such as HIPAA in the U.S. and GDPR in Europe, governing personal and health information handling[92] Risk Factors The company faces substantial risks including significant operating losses, early-stage product development uncertainties, lengthy and costly clinical trials, reliance on third-party manufacturing, and challenges related to intellectual property and market competition - The company has a limited operating history, incurred significant operating losses with a $275.3 million accumulated deficit as of December 31, 2021, and anticipates continued losses[101] - The company relies on third parties for manufacturing and clinical trials, increasing risks related to supply, cost, and regulatory compliance (cGMP, GCP)[126][128] - The COVID-19 pandemic could continue to adversely impact business operations, including drug manufacturing, nonclinical activities, and clinical trial enrollment and completion[113] - The company's success depends on protecting its intellectual property, but patents may not be issued, may be challenged, or may expire prematurely[162] Properties The company leases a 29,499 square foot facility in San Diego, California, serving as its corporate headquarters and R&D functions, with the lease expiring in August 2025 - The company leases a 29,499 square foot facility in San Diego, California for its corporate headquarters and R&D functions[203] - The current lease expires in August 2025, with a five-year extension option[203] Legal Proceedings As of the report date, Crinetics Pharmaceuticals is not a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[204] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Select Market under "CRNX", has never paid cash dividends, and IPO proceeds have been used for general corporate purposes, primarily product development - Common stock is listed on the Nasdaq Global Select Market under the ticker symbol "CRNX"[208] - The company has never declared or paid cash dividends and intends to retain future earnings to finance business operations[209] - As of December 31, 2021, all proceeds from the July 2018 IPO have been used for general corporate purposes, including product development[210] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2021, the company reported a net loss of $107.6 million, an increase from 2020, driven by higher R&D and G&A expenses, partially offset by $1.1 million in license revenue, with $333.7 million in cash and investments deemed sufficient for at least 12 months of operations Results of Operations In 2021, total revenues were $1.1 million from license agreements, while R&D expenses increased by $27.3 million to $84.3 million and G&A expenses rose by $6.5 million to $24.5 million, resulting in a net loss of $107.6 million Comparison of Results of Operations (2021 vs. 2020) (in thousands) | (In thousands) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,078 | $71 | $1,007 | | Research and development | $84,255 | $56,998 | $27,257 | | General and administrative | $24,525 | $18,026 | $6,499 | | Total operating expenses | $108,780 | $75,024 | $33,756 | | Loss from operations | ($107,702) | ($74,953) | ($32,749) | | Net loss | ($107,641) | ($73,812) | ($33,829) | - The increase in R&D expenses in 2021 was primarily due to a $13.5 million increase in manufacturing and development activities and a $12.3 million increase in personnel and related costs[237] - The increase in G&A expenses in 2021 was mainly due to a $4.5 million increase in personnel-related costs and a $2.1 million increase in spending on recruiting, consulting, and pre-commercialization activities[237] Liquidity and Capital Resources As of December 31, 2021, the company held $333.7 million in cash and investments, deemed sufficient for at least one year, having raised approximately $234.6 million from follow-on offerings and $15.0 million from a private placement in 2021 - As of December 31, 2021, the company had $333.7 million in unrestricted cash, cash equivalents, and investment securities[243] - In 2021, the company raised net proceeds of approximately $72.6 million from an April follow-on offering, $15.0 million from a July private placement, and $162.0 million from an October follow-on offering[245] - The company believes its existing cash, cash equivalents, and investments will be sufficient to fund operations for at least one year from the 10-K filing date[243] Cash Flows In 2021, net cash used in operating activities increased to $88.6 million, net cash used in investing activities was $56.5 million, and net cash provided by financing activities was $252.7 million, leading to a $107.6 million net increase in cash Comparison of Cash Flows (2021 vs. 2020) (in thousands) | (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($88,588) | ($62,027) | | Net cash (used in) provided by investing activities | ($56,483) | $217 | | Net cash provided by financing activities | $252,679 | $114,571 | | Net change in cash, cash equivalents and restricted cash | $107,608 | $52,761 | - The increase in cash used in operating activities was primarily due to increased development and manufacturing activities for paltusotine and other programs, along with higher personnel costs[239] - Cash from financing activities in 2021 was primarily from net proceeds of $234.6 million from follow-on public offerings and $15.0 million from a private placement[240] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its short-term cash and investments, which is not expected to be material, and it also faces unhedged foreign currency exchange rate risk from international operations - The primary market risk is interest rate sensitivity on its portfolio of cash, cash equivalents, and investment securities, though the impact is expected to be minimal due to the short-term nature of the instruments[247] - The company is subject to foreign currency exchange rate risk from contracts with foreign vendors and its Australian subsidiary, but does not hedge this risk[248] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2021, with no material changes during Q4 2021 - As of December 31, 2021, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective[253] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2021[254] Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for Items 10 through 14, covering directors, executive officers, corporate governance, compensation, and security ownership, is incorporated by reference from the company's 2022 Annual Meeting of Stockholders proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for the 2022 annual meeting of stockholders[260][262][264][265][266] Part IV Exhibits, Financial Statement Schedules This section lists documents filed as part of the Form 10-K, including consolidated financial statements, the independent auditor's report, and the Exhibit Index - This item includes the consolidated financial statements of Crinetics Pharmaceuticals, Inc. and the report from its independent registered public accounting firm, BDO USA, LLP[270] - A list of exhibits filed with the Annual Report is set forth on the Exhibit Index[270] Financial Statements Consolidated Balance Sheets As of December 31, 2021, Crinetics reported total assets of $351.0 million, driven by increased cash and investments, with total liabilities at $19.1 million and stockholders' equity growing to $332.0 million from stock offerings Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $200,695 | $93,087 | | Investment securities | $133,012 | $77,793 | | Total current assets | $344,720 | $177,492 | | Total assets | $351,015 | $183,445 | | Total current liabilities | $15,995 | $10,489 | | Total liabilities | $19,071 | $14,526 | | Total stockholders' equity | $331,944 | $168,919 | Consolidated Statements of Operations and Comprehensive Loss For 2021, Crinetics reported a net loss of $107.6 million, or ($2.80) per share, primarily due to increased R&D and G&A expenses, partially offset by $1.1 million in license revenue Statement of Operations Data (in thousands, except per share data) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total revenues | $1,078 | $71 | $1,193 | | Research and development | $84,255 | $56,998 | $41,506 | | General and administrative | $24,525 | $18,026 | $13,519 | | Loss from operations | ($107,702) | ($74,953) | ($53,832) | | Net loss | ($107,641) | ($73,812) | ($50,422) | | Net loss per share | ($2.80) | ($2.42) | ($2.09) | Consolidated Statements of Cash Flows In 2021, net cash used in operating activities was $88.6 million, net cash used in investing activities was $56.5 million, and net cash provided by financing activities was $252.7 million, leading to a $107.6 million net increase in cash Cash Flow Data (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($88,588) | ($62,027) | | Net cash (used in) provided by investing activities | ($56,483) | $217 | | Net cash provided by financing activities | $252,679 | $114,571 | | Net change in cash, cash equivalents and restricted cash | $107,608 | $52,761 |