UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 5, 2024, the registrant had
CRINETICS PHARMACEUTICALS, INC. QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2024
TABLE OF CONTENTS
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Page |
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Item 1. |
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2 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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3 |
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4 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
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6 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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29 |
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Item 4. |
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30 |
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Item 1. |
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31 |
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Item 1A. |
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31 |
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Item 2. |
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31 |
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Item 3. |
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31 |
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Item 4. |
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31 |
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Item 5. |
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31 |
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Item 6. |
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32 |
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1
PART I — FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Crinetics Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
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June 30, |
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December 31, |
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2024 |
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2023 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investment securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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10,881 |
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Operating lease right-of-use assets |
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Investment in Radionetics |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
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$ |
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Accrued compensation and related expenses |
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Deferred revenue |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, non-current |
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Deferred revenue, non-current |
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Other non-current liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock and paid-in capital, $ |
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Accumulated other comprehensive income (loss) |
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( |
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Accumulated deficit |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
2
Crinetics Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
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Three months ended June 30, |
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Six months ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Other income (expense): |
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Interest income |
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Other expense, net |
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( |
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( |
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( |
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( |
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Total other income, net |
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Loss before equity method investment |
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( |
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( |
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( |
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( |
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Loss on equity method investment |
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( |
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Net loss |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss per share: |
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Net loss per share - basic and diluted |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Weighted average shares - basic and diluted |
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Other comprehensive income (loss): |
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Unrealized gain (loss) on investment securities |
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$ |
( |
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$ |
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$ |
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$ |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
3
Crinetics Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
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Common Stock |
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Common stock |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Capital |
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Income (loss) |
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Deficit |
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Equity |
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Balance at April 1, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Other |
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— |
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— |
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— |
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Comprehensive loss |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock, net of $ |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Comprehensive loss |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance on April 1, 2023 |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Issuance of common stock, net of $ |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance on June 30, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance on January 1, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Issuance of common stock, net of $ |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance on June 30, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
4
Crinetics Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Six months ended |
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June 30, |
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2024 |
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2023 |
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Operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Reconciliation of net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation and amortization |
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Noncash lease expense |
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Accretion of purchase discounts and amortization |
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( |
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( |
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Loss on disposal of property and equipment |
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Loss on equity method investment |
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Noncash license revenues |
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( |
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Increase (decrease) in cash resulting from changes in: |
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Prepaid expenses and other assets |
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( |
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Accounts payable and accrued expenses, compensation and related expenses |
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Deferred revenue |
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( |
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Operating lease liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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Investing activities: |
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Purchases of investment securities |
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( |
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( |
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Maturities of investment securities |
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Purchases of property and equipment |
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( |
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( |
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Net cash (used in) provided by investing activities |
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( |
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Financing activities: |
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Proceeds from issuance of common stock, net of $ |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Components of cash, cash equivalents and restricted cash: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Noncash investing and financing activities: |
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Stock issued under Employee Stock Purchase Plan |
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$ |
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$ |
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Stock options exercised receivable |
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$ |
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$ |
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Amounts accrued for purchases of property and equipment |
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$ |
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$ |
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Private company shares received under licensing arrangement |
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$ |
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$ |
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See the accompanying notes to these unaudited condensed consolidated financial statements.
5
Crinetics Pharmaceuticals, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. ORGANIZATION AND BASIS OF PRESENTATION
Description of Business
Crinetics Pharmaceuticals, Inc. (the “Company”) is a clinical-stage pharmaceutical company incorporated in Delaware on November 18, 2008, and based in San Diego, California. The Company is focused on the discovery, development, and commercialization of novel therapeutics for rare endocrine diseases and endocrine-related tumors. In January 2017, the Company established a wholly-owned Australian subsidiary, Crinetics Australia Pty Ltd (“CAPL”), in order to conduct various preclinical and clinical activities for its development candidates.
Unaudited Interim Financial Information
The accompanying interim condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, and the related disclosures are unaudited. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2024 and the results of its operations and cash flows for the six months ended June 30, 2024 and 2023 in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or any other interim period.
These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company's Annual Report on Form 10-K filed with the SEC on February 28, 2024. The condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited consolidated financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
Principles of Consolidation and Foreign Currency Transactions
The condensed consolidated financial statements include the accounts of the Company and CAPL. All intercompany accounts and transactions have been eliminated in consolidation. The functional currency of both the Company and CAPL is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the balance sheet date except for nonmonetary assets, which are remeasured at historical foreign currency exchange rates in effect at the date of transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in other income (expense), in the condensed consolidated statements of operations and comprehensive loss and were not material for all periods presented.
Segment Reporting
Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in
Liquidity
From inception, the Company has devoted substantially all of its efforts to drug discovery and development, and conducting preclinical studies and clinical trials. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. The Company has experienced net losses and negative cash flows from operating activities since its inception and has an accumulated deficit of $
As of June 30, 2024, the Company had $
The Company expects to continue to incur net losses for the foreseeable future and believes it will need to raise substantial additional capital to accomplish its business plan over the next several years. The Company plans to continue to fund its losses from operations and capital funding needs through a combination of equity offerings, debt financings or other sources, including potential collaborations, licenses, and other similar arrangements. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and
6
prospects. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During the six months ended June 30, 2024, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of common stock subject to repurchase and stock options outstanding under the Company’s stock option plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities on loss per share would be antidilutive.
Potentially dilutive securities (in common stock equivalent shares) not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in thousands):
|
|
As of June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Employee stock purchase plan |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Recent Accounting Pronouncements
ASU 2023-07
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures (“Topic 280”), which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Lastly, the amendment requires that a public entity that has a single reportable segment provide all the disclosures required by ASU 2023-07 and all existing segment disclosures in Topic 280. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its condensed consolidated financial statements and accompanying notes.
ASU 2023-09
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its condensed consolidated financial statements and accompanying notes.
7
3. INVESTMENT SECURITIES
The Company reports its available-for-sale investment securities at their estimated fair values. The following is a summary of the available-for-sale investment securities held by the Company as of June 30, 2024 and December 31, 2023 (in thousands):
|
|
As of June 30, 2024 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
As of December 31, 2023 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of June 30, 2024 and December 31, 2023, available-for-sale investment securities by contractual maturity were as follows (in thousands):
|
|
As of June 30, 2024 |
|
|
As of December 31, 2023 |
|
||||||||||
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Due after one year through five years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following is a summary of the available-for-sale investment securities by length of time in a net loss position as of June 30, 2024 and December 31, 2023 (in thousands):
|
|
As of June 30, 2024 |
|
|||||||||||||||||||||
|
|
Less Than 12 Months |
|
|
More Than 12 Months |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
||||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government obligations |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
Agency obligations |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate debt securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
8
|
|
As of December 31, 2023 |
|
|||||||||||||||||||||
|
|
Less Than 12 Months |
|
|
More Than 12 Months |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
||||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government obligations |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Agency obligations |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Certificates of deposit |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
The Company reviewed its investment holdings as of June 30, 2024 and December 31, 2023 and determined that the decline in fair value is attributable to changes in interest rates and not credit quality, and as the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. Therefore, there were
4. FAIR VALUE MEASUREMENTS
Investment Securities
The Company holds investment securities that consist of highly liquid, investment grade debt securities. The Company determines the fair value of its investment securities based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.
Financial assets measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 were as follows (in thousands):
|
|
As of June 30, 2024 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Certificates of deposit |
|
|
|
|
|
|
|
|
| |||||||