Crinetics Pharmaceuticals(CRNX) - 2023 Q2 - Quarterly Report

Stock-Based Compensation - Crinetics Pharmaceuticals reported stock-based compensation expense of $10.175 million for the three months ended June 30, 2023, compared to $7.131 million for the same period in 2022, representing an increase of approximately 42.9%[23] - The company recognized total stock-based compensation expense of $18.271 million for the six months ended June 30, 2023, up from $12.886 million in the same period of 2022, reflecting a year-over-year increase of about 42.1%[23] - As of June 30, 2023, unrecognized stock-based compensation costs related to option awards, restricted stock units, and ESPP were $92.4 million, $15.2 million, and $2.8 million, respectively, expected to be recognized over 2.2 years, 3.5 years, and 1.4 years[23] Collaboration and Investments - In August 2023, the company exercised a warrant to purchase 3,407,285 shares of Radionetics common stock and invested $5.0 million to acquire 14,404,656 shares of preferred stock in Radionetics, increasing its ownership to approximately 63% of Radionetics common stock[24] - The company amended its Collaboration and License Agreement with Radionetics to include additional sales milestones of up to $15 million[24] - The company owns approximately 63% of Radionetics common stock and 25% of Radionetics preferred stock following recent transactions[51] - The Collaboration and License Agreement with Radionetics was amended to include additional sales milestones of up to $15 million, bringing total potential sales milestones to over $1.0 billion[51] Product Development and Pipeline - Paltusotine, the lead product candidate, targets a market where branded somatostatin peptide drugs generated approximately $2.8 billion in global sales in 2022 for treating acromegaly and neuroendocrine tumors[29] - The company focuses on developing oral nonpeptide therapeutics that target peptide GPCRs, aiming to improve treatment options for endocrine diseases[28] - The company has a pipeline of product candidates, including CRN04894, which is in clinical development for diseases of excess adrenocorticotrophic hormone, including Cushing's disease[28] - Paltusotine maintained IGF-1 levels in acromegaly patients for up to 103 weeks, comparable to prior injected SRL therapy[31] - Enrollment in the PATHFNDR-2 study was completed in August 2023 with a total of 112 subjects, including 46 treatment-naïve patients[31] - Topline data from the PATHFNDR-1 study is expected in September 2023, while data from PATHFNDR-2 is anticipated in Q1 2024[31] - CRN04894 demonstrated pharmacologic proof-of-concept with reductions in both basal cortisol and elevated cortisol following an ACTH challenge[32] - The Phase 2 study of CRN04894 in CAH patients was initiated after the IND was allowed to proceed in February 2023, with data expected in 2024[34] - CRN04777 showed dose-dependent suppression of insulin secretion in healthy volunteers, supporting its potential for once-daily administration[35] - The company is developing antagonists of the parathyroid hormone for the treatment of primary hyperparathyroidism and humoral hypercalcemia of malignancy, with a development candidate expected to be selected in 2023[36] Financial Performance - Revenues for the three months ended June 30, 2023, were $988 million, a 125% increase from $439 million in the same period of 2022[40] - Total operating expenses for the six months ended June 30, 2023, were $104.64 million, up from $80.44 million in the same period of 2022, representing a 30% increase[40] - Net loss for the three months ended June 30, 2023, was $50.98 million, compared to a net loss of $42.38 million for the same period in 2022, reflecting an increase of 20%[40] - Net loss per share for the three months ended June 30, 2023, was $(0.94), compared to $(0.81) for the same period in 2022[40] - For the six months ended June 30, 2023, the net loss was $96,974,000 compared to a net loss of $77,002,000 for the same period in 2022, representing a 26% increase in losses[54] - The company experienced a net cash used in operating activities of $86,453,000 for the six months ended June 30, 2023, compared to $41,519,000 for the same period in 2022, reflecting a 108% increase in cash outflow[54] - Net cash provided by investing activities was $80,191,000 for the six months ended June 30, 2023, compared to a net cash used of $217,655,000 in the prior year[54] - The company anticipates continuing to incur net losses for the foreseeable future due to ongoing operational costs[158] Research and Development Expenses - Research and development expenses for the three months ended June 30, 2023, were $40.64 million, up from $32.99 million in the same period of 2022, indicating a 23% increase[40] - The company incurred total research and development expenses of $40.64 million for the three months ended June 30, 2023, an increase of $7.645 million compared to $32.995 million for the same period in 2022[127] - Research and development expenses increased to $79.1 million for the six months ended June 30, 2023, up $17.9 million (29.2%) from $61.2 million in 2022[155] - The company anticipates a continued increase in research and development expenses as it advances product candidates and discovers new ones[143] Cash and Investments - As of June 30, 2023, the company had an accumulated deficit of $536.1 million and $264.5 million in unrestricted cash, cash equivalents, and investment securities, sufficient to meet funding requirements for at least the next 12 months[61] - Cash, cash equivalents, and investment securities totaled $264.5 million as of June 30, 2023, with an accumulated deficit of $536.1 million[158] - The company expects its existing capital resources and investment income to meet funding requirements for at least the next twelve months[164] Lease Obligations - The Company entered into a non-cancellable operating lease for a facility in San Diego with an initial term of seven years, expiring in August 2025, and an option to extend for an additional five years[102] - The future minimum lease payments under the 2022 Lease are expected to be $0.5 million per month, starting after a six-month rent abatement in the first year, with annual increases of 3%[102] - As of June 30, 2023, the Company's total future minimum lease payments under non-cancellable operating leases amounted to $2.779 million, with a total operating lease liability of $2.565 million[106] Revenue Recognition - The Company has generated revenue from licensing and supply agreement arrangements, recognizing revenues when promised goods or services are transferred to customers[81] - The Company evaluates the measure of progress for revenue recognition based on the cost-to-cost method, measuring progress based on the ratio of costs incurred to total estimated costs[77] - License revenues for 2023 were primarily derived from the Sanwa License and the Loyal License, with $0.4 million recognized from the Sanwa Clinical Supply Agreement during the three and six months ended June 30, 2023[139] Other Financial Information - Interest income for the three months ended June 30, 2023, was $2.11 million, compared to $0.72 million in the same period of 2022, marking a 194% increase[40] - Other income increased to $2.0 million for the three months ended June 30, 2023, compared to $0.7 million in 2022, a rise of 185.7%[154] - Other income, net, increased to $4.0 million for the six months ended June 30, 2023, compared to $0.9 million in 2022, a rise of $3.1 million (344.4%)[157] Legal and Compliance - The company maintains effective disclosure controls and procedures as of June 30, 2023, at a reasonable assurance level[170] - There have been no material changes to the risk factors since the last report[174] - The company is not currently involved in any material legal proceedings[173]