[10-Q] Crinetics Pharmaceuticals, Inc. Quarterly Earnings Report
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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(Zip code) |
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 July 29, 2025, the registrant had
CRINETICS PHARMACEUTICALS, INC. QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2025
TABLE OF CONTENTS
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Page |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Financial Statements (unaudited): |
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2 |
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Condensed Consolidated Balance Sheets |
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2 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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3 |
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Condensed Consolidated Statements of Stockholders’ Equity |
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4 |
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Condensed Consolidated Statements of Cash Flows |
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5 |
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Notes to Condensed Consolidated Financial Statements |
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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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16 |
Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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24 |
Item 4. |
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Controls and Procedures |
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24 |
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PART II — OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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Item 1A. |
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Risk Factors |
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25 |
Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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25 |
Item 3. |
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Defaults Upon Senior Securities |
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25 |
Item 4. |
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Mine Safety Disclosures |
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25 |
Item 5. |
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Other Information |
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25 |
Item 6. |
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Exhibits |
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26 |
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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2025 |
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2024 |
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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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Restricted cash |
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Investment securities, amortized cost of $ |
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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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Operating lease right-of-use assets |
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Restricted cash, net of current portion |
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Prepaid expenses and other assets, net of current portion |
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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 liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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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 |
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Accumulated deficit |
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( |
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Stock held in trust |
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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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2025 |
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2024 |
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2025 |
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2024 |
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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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Selling, 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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Other income (expense): |
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Interest income |
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Other income (expense), net |
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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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Loss on equity method investment |
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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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Unrealized loss on foreign currency |
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( |
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( |
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Total other comprehensive income (loss) |
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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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$ |
( |
) |
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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Stock Held in |
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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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Trust |
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Equity |
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Balance at April 1, 2025 |
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$ |
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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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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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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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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Stock held in trust under deferred compensation plan |
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— |
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— |
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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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— |
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Other 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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( |
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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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( |
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Balance at June 30, 2025 |
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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 January 1, 2025 |
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$ |
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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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Stock issued under Employee Stock Purchase Plan |
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— |
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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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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Stock held in trust under deferred compensation plan |
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— |
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— |
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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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— |
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Other comprehensive income |
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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, 2025 |
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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 April 1, 2024 |
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$ |
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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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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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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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— |
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Stock-based compensation |
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— |
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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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— |
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Other 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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$ |
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Balance on January 1, 2024 |
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$ |
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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 transaction costs |
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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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— |
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Stock issued under Employee Stock Purchase Plan |
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— |
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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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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other 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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$ |
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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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2025 |
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2024 |
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Operating activities: |
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Net loss |
|
$ |
( |
) |
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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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Changes in operating assets and liabilities: |
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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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( |
) |
Investing activities: |
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Purchases of investment securities |
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( |
) |
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( |
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Proceeds from sales and maturities of investment securities |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Net cash used in investing activities |
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( |
) |
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( |
) |
Financing activities: |
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Proceeds from issuance of common stock, net of commissions |
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Offering costs related to issuance of common stock |
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( |
) |
|
Proceeds from exercise of stock options and shares issued under Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Components of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Noncash investing and financing activities: |
|
|
|
|
|
|
||
Stock options exercised receivable |
|
$ |
|
|
$ |
|
||
Amounts accrued for purchases of property and equipment |
|
$ |
|
|
$ |
|
||
Stock held in trust |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
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 in 2008 and based in San Diego, California. The Company is focused on the discovery, development, and commercialization of novel therapeutics for endocrine diseases and endocrine-related tumors. The Company's lead product candidate is paltusotine, which is under review by the U.S. Food and Drug Administration in the United States for the treatment of acromegaly as PALSONIFYTM, under review by regulatory agencies in Europe for the treatment of acromegaly, and in clinical development for treatment of carcinoid syndrome associated with neuroendocrine tumors. The Company's second product candidate is atumelnant, which is in clinical development for congenital adrenal hyperplasia (“CAH”) and ACTH-Dependent Cushing’s Syndrome (“ADCS”). The Company is advancing additional product candidates through preclinical discovery and development studies.
The Company operates in one international business segment, which is the discovery, development and commercialization of novel therapeutics for endocrine diseases and endocrine-related tumors. Refer to Note 11, Segment Reporting, for further discussion on the Company's segment reporting.
Unaudited Interim Financial Information
The accompanying condensed consolidated financial statements are unaudited, and reflect all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair statement of the results for the interim periods presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The Company's condensed consolidated balance sheet for the year ended December 31, 2024 was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. The interim results presented herein are not necessarily indicative of the results expected for the full fiscal year or any other interim period. The Company's condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission ("SEC") on February 27, 2025 ("FY 2024 Form 10-K").
Reclassifications
Certain prior period amounts within the condensed consolidated statements of cash flows have been reclassified to conform to the current period presentation. These reclassifications had no effect on the net change in cash.
Liquidity
From inception, the Company has devoted substantially all of its efforts to drug discovery and development, conducting preclinical studies and clinical trials, and pre-commercial infrastructure build-out and related activities. 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, 2025, the Company had $
The Company expects to continue to incur net losses for the foreseeable future and believes it may need to raise substantial additional capital to accomplish its business objectives 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 as may be required, 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 prospects. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future.
6
Significant Accounting Policies
There have been no material changes to the Company's significant accounting policies from the FY 2024 Form 10-K, except as follows:
Deferred Compensation Plan
The Company has a non-qualified deferred compensation plan that provides directors and certain employees the ability to defer receipt of current cash compensation and vested restricted stock units until a later date. The assets are held in a trust (the “Rabbi Trust”) and participants have the option to invest their cash deferrals in a fixed income investment, a defined set of mutual funds, and, with respect to deferrals of restricted stock units, in Company common stock. The Company has made an accounting policy election to assess instruments held in the Rabbi Trust at the instrument level. The assets of the Rabbi Trust are subject to the claims of creditors in the event that the Company becomes insolvent.
The deferred compensation liability related to cash deferrals as of June 30, 2025 and December 31, 2024 was $
Investments in shares of the Company's common stock are included as stock held in trust, in the Company’s condensed consolidated balance sheets. The participant's deferred compensation liability attributable to the participants' investments in shares of the Company's common stock are included within common stock and paid-in capital in the Company’s condensed consolidated balance sheets.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and accompanying notes. The estimates in the Company’s condensed consolidated financial statements include, but are not limited to, recoverability and useful lives of long-lived assets, accruals, valuation of stock-based awards, fair values of financial instruments, and revenue recognition.
Recent Accounting Pronouncements Not Yet Adopted
ASU 2023-09
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). 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 for 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.
ASU 2024-03
In November 2024, the FASB issued ASU No. 2024-03, Income Statement–Reporting Comprehensive Income–Expense disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregated disclosure of income statement expenses for public business entities ("PBEs"). ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. 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.
7
2. 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, 2025 and December 31, 2024 (in thousands):
|
|
As of June 30, 2025 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Market |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Market |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Available-for-sale investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Agency obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of June 30, 2025 and December 31, 2024, available-for-sale investment securities by contractual maturity were as follows (in thousands):
|
|
As of June 30, 2025 |
|
|
As of December 31, 2024 |
|
||||||||||
|
|
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, 2025 and December 31, 2024 (in thousands):
|
|
As of June 30, 2025 |
|
|||||||||||||||||||||
|
|
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 |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Corporate debt securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
|
|
As of December 31, 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 |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Corporate debt securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
The Company reviewed its investment holdings as of June 30, 2025 and December 31, 2024 and determined that the decrease 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
8
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
AGÕæÈ˹ٷ½ized gains (losses) were immaterial for the three and six months ended June 30, 2025 and 2024. Accrued interest receivable on available-for-sale securities was $
3. FAIR VALUE MEASUREMENTS
Fair value measurements 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, 2025 and December 31, 2024 were as follows (in thousands):
|
|
As of June 30, 2025 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation plan (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1)
The Company’s policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were
4
Prepaid expenses and other assets consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Prepaid clinical costs |
|
$ |
|
|
$ |
|
||
Interest receivable |
|
|
|
|
|
|
||
Prepaid subscriptions |
|
|
|
|
|
|
||
Deferred compensation plan |
|
|
|
|
|
|
||
Loyal preferred stock (see Note 7) |
|
|
|
|
|
|
||
Prepaid research and development costs |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other assets |
|
|
|
|
|
|
||
Less prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets, net of current portion |
|
$ |
|
|
$ |
|
||
9
Property and equipment, net consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Leasehold improvements |
|
$ |
|
|
$ |
|
||
Lab equipment |
|
|
|
|
|
|
||
Office equipment |
|
|
|
|
|
|
||
Computers and software |
|
|
|
|
|
|
||
Property and equipment at cost |
|
|
|
|
|
|
||
Less accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
Accounts payable and accrued expenses consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued outside services and professional fees |
|
|
|
|
|
|
||
Accrued clinical trial costs |
|
|
|
|
|
|
||
Accrued research and development costs |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
5
The Company's lease obligations primarily consist of operating leases for its headquarters in San Diego, California, entered into in 2022 and expiring on the date immediately preceding the one hundred thirty-seventh (137th) month anniversary of the lease payment start date (the "2022 Lease"), and for a facility in San Diego, California, expiring in August 2025 (the "2018 Lease").
Under the terms of the 2018 Lease and 2022 Lease, the Company provided the lessors with irrevocable letters of credit in the amounts of $
As of June 30, 2025, the Company's future minimum payments under non-cancellable operating leases were as follows (in thousands):
Year ending December 31, |
|
Minimum |
|
|
2025 (six months) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Total operating lease liabilities |
|
|
|
|
Less operating lease liabilities, current |
|
|
( |
) |
Operating lease liabilities, non-current |
|
$ |
|
|
Operating lease cost was $
The Company's contracts do not provide readily determinable implicit rates, and as such, the Company used the estimated incremental borrowing rate based on the information available at the adoption, commencement, or remeasurement date.
|
|
As of June 30, 2025 |
|
As of December 31, 2024 |
|
Weighted-average remaining lease term (years) |
|
|
|
||
Weighted-average discount rate |
|
|
|
10
Other information related to leases was as follows (in thousands):
|
|
Six months ended June 30, |
|
|
|||||
|
|
2025 |
|
|
2024 |
|
|
||
Supplemental cash flows information |
|
|
|
|
|
|
|
||
Operating cash flow used for operating leases |
|
$ |
|
|
$ |
|
|
||
6
Litigation
From time to time, the Company may be subject to various claims and suits arising in the ordinary course of business. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position or results of operations.
7. REVENUE RECOGNITION
Sanwa Kagaku Kenkyusho Co., Ltd
On February 25, 2022, the Company and Sanwa Kagaku Kenkyusho Co., Ltd. ("Sanwa"), entered into a license agreement (the “Sanwa License”) whereby the Company granted Sanwa an exclusive license to develop and commercialize paltusotine in Japan.
In exchange, the Company received a $
Initially, the Company determined that the transaction price amounted to the upfront payment of $
During the six months ended June 30, 2024, the Company achieved a $
Deferred revenue consisted of the following (in thousands):
|
|
Six months ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Deferred revenue additions, excluding amounts recognized as revenue during the period |
|
|
|
|
|
|
||
Revenue recognized |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
|
|
|
|
|
||
Less deferred revenue, current |
|
|
( |
) |
|
|
( |
) |
Deferred revenue, non-current |
|
$ |
|
|
$ |
|
||
During the three and six months ended June 30, 2025, $
On June 14, 2022, the Company and Sanwa, entered into a clinical supply agreement (the "Sanwa Clinical Supply Agreement") whereby the Company is responsible for manufacturing and supplying certain materials to Sanwa for specified activities under the During each of the three and six months ended June 30, 2025 and each of the three and six months ended June 30, 2024, $
11
Cellular Longevity, Inc., doing business as Loyal
On March 24, 2023, the Company granted Cellular Longevity Inc., doing business as Loyal ("Loyal") an exclusive license to develop and commercialize CRN01941 for veterinary use. In return, the Company received a $
8. STOCKHOLDERS’ EQUITY
Stock Offerings
On March 1, 2024, the Company completed a private placement of
On October 10, 2024, the Company completed an underwritten public offering of
ATM Offerings
On August 13, 2019, the Company entered into a Sales Agreement (as amended, the “2019 Sales Agreement”) with SVB Leerink LLC and Cantor Fitzgerald & Co. (collectively, the “Sales Agents”), under which the Company could, from time to time, sell up to $
On June 21, 2024, the Company entered into a Sales Agreement (the “2024 Sales Agreement”) with the Sales Agents under which the Company may, from time to time, sell up to $
During the three and six months ended June 30, 2025, and as of date of this report,
9. EQUITY INCENTIVE PLANS
2021 Employment Inducement Incentive Award Plan
In December 2024, the Company amended the Company's 2021 Employment Inducement Incentive Award Plan (the "2021 Inducement Plan") to increase the number of shares of the Company’s common stock available for future issuance under the 2021 Inducement Plan to
2018 Incentive Award Plan
As of June 30, 2025,
The 2018 Plan contains a provision that allows annual increases in the number of shares available for issuance on the first day of each calendar year through
2018 Employee Stock Purchase Plan
As of June 30, 2025,
12
The ESPP contains a provision that allows annual increases in the number of shares available for issuance on the first day of each calendar year through
Stock Awards
Stock Options
Activity under the Company’s stock option plans during the six months ended June 30, 2025 was as follows:
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
|
|
|
|
|
Average |
|
|
Average |
|
|
Intrinsic |
|
||||
|
|
Options |
|
|
Exercise |
|
|
Remaining |
|
|
Value |
|
||||
|
|
Outstanding |
|
|
Price |
|
|
Term |
|
|
(000’s) |
|
||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Forfeited and expired |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Restricted Stock Units
The Company’s restricted stock unit ("RSU") activity during the six months ended June 30, 2025, was as follows:
|
|
Restricted Stock |
|
|
Weighted- |
|
||
|
|
Units |
|
|
Average |
|
||
|
|
Outstanding |
|
|
Grant Date |
|
||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Balance at June 30, 2025 |
|
|
|
|
$ |
|
||
Employee Stock Purchase Plan
During the six months ended June 30, 2025, the Company issued approximately
Stock-Based Compensation Expense
Stock-based compensation expense for the equity awards issued by the Company to employees and non-employees for the periods presented below was as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Included in research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Included in selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
A summary of the Company's total unrecognized stock-based compensation expense, as of June 30, 2025, is as follows:
|
|
Unrecognized Stock-Based |
|
|
Average Remaining |
|
|
|
Compensation Expense |
|
|
Vesting Period |
|
|
|
(in thousands) |
|
|
(in years) |
|
Stock option awards |
|
$ |
|
|
||
RSU awards |
|
$ |
|
|
||
ESPP |
|
$ |
|
|
||
13
10
In October 2021, the Company licensed its radiotherapeutics technology to Radionetics Oncology, Inc. in exchange for
In August 2023, the Company participated in a refinancing transaction, exercising the warrant to purchase
In June 2024, the Radionetics license was amended to reduce development targets, reverting certain rights to the Company, and the Company is eligible to receive total potential sales milestones in excess of $
Although Radionetics is a variable interest entity ("VIE"), the Company determined it is not the primary beneficiary and does not consolidate Radionetics’ results due to lack of control over key decisions, which rest with Radionetics’ independent board and management. As of June 30, 2025, the Company held a
R. Scott Struthers, Ph.D., the Company’s President and Chief Executive Officer, serves as chairman of the Radionetics board of directors. Pursuant to such arrangement, Dr. Struthers receives consideration in the form of both equity and a $
11. SEGMENT REPORTING
The Company operates in a single reportable segment. The chief operating decision maker ("CODM"), its founder and chief executive officer, assesses performance based on condensed consolidated net loss as reported on the condensed consolidated statement of operations and comprehensive loss, supplemented by certain additional significant expense details reflected in the table below. There have been no changes in the determination of segmentation or the measurements used to determine reported segment loss or segment total assets discussed in the Company's FY 2024 Form 10-K.
Segment revenue and significant segment expenses which are regularly reported to the CODM are included within the table below and are reconciled to condensed consolidated net loss:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Paltusotine |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Atumelnant |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Early research and development programs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Research and development personnel expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Research and development stock-based compensation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other research and development (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total research and development expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
External selling, general and administrative expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Selling, general and administrative personnel expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Selling, general and administrative stock-based compensation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total selling, general and administrative expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on equity method investment |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Segment and consolidated net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1)
14
12. 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, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Stock option awards |
|
|
|
|
|
|
||
Unvested RSU awards |
|
|
|
|
|
|
||
Estimated shares of common stock expected to be purchased under the ESPP |
|
|
|
|
|
|
||
Stock held in trust under deferred compensation plan |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Forward Looking Statements
The following discussion and other parts of this quarterly report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, the impact of international conflicts, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview
We are a clinical-stage pharmaceutical company focused on the discovery, development and commercialization of novel therapeutics for endocrine diseases and endocrine-related tumors. We have built a highly productive drug discovery and development organization with extensive expertise in endocrine G protein coupled receptors, or GPCRs. We have discovered a pipeline of nonpeptide (small molecule) new chemical entities that target peptide GPCRs to address unmet needs for people with endocrine diseases and related tumors. Our lead product candidate is paltusotine, which is under review by the U.S. Food and Drug Administration, or FDA, in the United States, or U.S., for the treatment of acromegaly as PALSONIFYTM, under review by regulatory agencies in Europe for the treatment of acromegaly, and in clinical development for treatment of carcinoid syndrome associated with neuroendocrine tumors. Our second product candidate is atumelnant, which is in clinical development for congenital adrenal hyperplasia, or CAH and ACTH-Dependent Cushing’s Syndrome, or ADCS. We are advancing additional product candidates through preclinical discovery and development studies. Our vision is to build the premier, endocrine-rooted global pharmaceutical company dedicated to improving the lives of patients.
Key Pipeline Updates
The following represents a summary of notable business updates and events:
Paltusotine
Atumelnant
16
Early-Stage Pipeline:
International Expansion:
Financial operations overview
To date, we have devoted substantially all of our resources to drug discovery, conducting preclinical studies and clinical trials, obtaining and maintaining patents related to our product candidates, licensing activities, and the provision of selling, general and administrative support for these operations and commercial preparedness. We have recognized revenues from various research and development grants and license and collaboration agreements, but do not have any products approved for sale and have not generated any product sales. We have funded our operations primarily through our grant and license revenues, and offerings of our preferred and common stock.
17
We have incurred cumulative net losses since our inception. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials, continue our research and development activities and conduct preclinical studies, hire additional personnel, protect our intellectual property and incur costs associated with being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance premiums, and investor relations costs.
We do not expect to generate any revenues from product sales unless and until we successfully obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other sources as may be required, including potentially, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, scale back or discontinue the development of our existing product candidates, our commercialization efforts or our efforts to expand our product pipeline.
Revenues
To date, our revenues have been mainly derived from research grant awards and licenses, including our Collaboration and License Agreement with Radionetics Oncology, Inc., or the Radionetics License, our license agreement with Sanwa Kagaku Kenkyusho Co., Ltd., or the Sanwa License, and our license agreement with Cellular Longevity, Inc. doing business as Loyal, or the Loyal License. We have also entered into a clinical supply agreement, or the Sanwa Clinical Supply Agreement, whereby we are responsible for manufacturing and supplying certain materials to Sanwa Kagaku Kenkyusho Co., Ltd. for specified activities under the Sanwa License. As our data exchange performance obligation under the Sanwa License is fulfilled, we expect to recognize as revenues the deferred revenue amounts included in the accompanying condensed consolidated balance sheets as of June 30, 2025. We will recognize royalty and milestone revenues under our license agreements if and when appropriate under the relevant accounting rules (see Note 7 to our condensed consolidated financial statements). Our revenues of $1.0 million and $0.4 million for the three months ended June 30, 2025 and 2024, respectively, and $1.4 million and $1.0 million for the six months ended June 30, 2025 and 2024, respectively, were derived from the Sanwa License and the Sanwa Clinical Supply Agreement. We have not generated any revenues from the commercial sale of approved products, and we may never generate revenues from the commercial sale of our product candidates for at least the foreseeable future, if ever. However, we submitted a New Drug Application, or NDA, to the FDA, for PALSONIFY for the proposed treatment and long-term maintenance therapy of acromegaly and subsequently received notification of acceptance from the FDA on the status of the NDA submission and were granted a Prescription Drug User Fee Act, or PDUFA, Target Action Date of September 25, 2025.
Research and development
To date, our research and development expenses have related primarily to discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
Our direct research and development expenses consist principally of external costs, such as fees paid to CROs, investigative sites and consultants in connection with our clinical trials, preclinical and non-clinical studies, and costs related to manufacturing clinical trial materials. The majority of our third-party expenses during the three and six months ended June 30, 2025 and 2024 related to the research and development of paltusotine, atumelnant, and discovery. We deploy our personnel and facility related resources across all of our research and development activities.
18
Our clinical development costs may vary significantly based on factors such as:
We plan to increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and the discovery of new product candidates. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We may need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Selling, general and administrative
Selling, general and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, insurance costs, and commercial planning expenses. We also incur expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, as well as corporate strategy and business development, corporate communications, and investor relations costs associated with operating as a public company. We anticipate that our selling, general and administrative expenses will increase in the future to support our continued research and development activities and, if any of our product candidates receive marketing approval, commercialization activities.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and leases. We base our estimates on historical experience, known trends and events, information received from third parties and various other factors that we believe are reasonable under the circumstances at the time the estimates are made, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, please see the section entitled
19
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” contained in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to our critical accounting estimates discussed therein.
Results of Operations
Comparison of the three and six months ended June 30, 2025 and 2024
The following table summarizes our results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):
|
|
Three months ended June 30, |
|
|
$ |
|
|
% |
|
|
|
Six months ended June 30, |
|
|
$ |
|
|
% |
|
|
||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
||||||||
Revenues |
|
$ |
1,031 |
|
|
$ |
399 |
|
|
$ |
632 |
|
|
|
158 |
|
% |
|
$ |
1,392 |
|
|
$ |
1,039 |
|
|
$ |
353 |
|
|
|
34 |
|
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
|
80,301 |
|
|
|
58,344 |
|
|
|
21,957 |
|
|
|
38 |
|
% |
|
|
156,541 |
|
|
|
111,685 |
|
|
|
44,856 |
|
|
|
40 |
|
% |
Selling, general and administrative |
|
|
49,842 |
|
|
|
24,838 |
|
|
|
25,004 |
|
|
|
101 |
|
% |
|
|
85,368 |
|
|
|
45,666 |
|
|
|
39,702 |
|
|
|
87 |
|
% |
Total operating expenses |
|
|
130,143 |
|
|
|
83,182 |
|
|
|
46,961 |
|
|
|
56 |
|
% |
|
|
241,909 |
|
|
|
157,351 |
|
|
|
84,558 |
|
|
|
54 |
|
% |
Loss from operations |
|
|
(129,112 |
) |
|
|
(82,783 |
) |
|
|
(46,329 |
) |
|
|
56 |
|
% |
|
|
(240,517 |
) |
|
|
(156,312 |
) |
|
|
(84,205 |
) |
|
|
54 |
|
% |
Other income, net |
|
|
13,475 |
|
|
|
8,728 |
|
|
|
4,747 |
|
|
|
54 |
|
% |
|
|
28,106 |
|
|
|
15,797 |
|
|
|
12,309 |
|
|
|
78 |
|
% |
Loss before equity method investment |
|
|
(115,637 |
) |
|
|
(74,055 |
) |
|
|
(41,582 |
) |
|
|
56 |
|
% |
|
|
(212,411 |
) |
|
|
(140,515 |
) |
|
|
(71,896 |
) |
|
|
51 |
|
% |
Loss on equity method investment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
% |
|
|
— |
|
|
|
(470 |
) |
|
|
470 |
|
|
|
(100 |
) |
% |
Net loss |
|
$ |
(115,637 |
) |
|
$ |
(74,055 |
) |
|
$ |
(41,582 |
) |
|
|
56 |
|
% |
|
$ |
(212,411 |
) |
|
$ |
(140,985 |
) |
|
$ |
(71,426 |
) |
|
|
51 |
|
% |
Revenues. Revenues during the three and six months ended June 30, 2025 and the three and six months ended June 30, 2024 related to the Sanwa License and the Sanwa Clinical Supply Agreement.
Research and development expenses. The increase of $22.0 million and $44.9 million in research and development expenses during the three and six months ended June 30, 2025, respectively, compared to the prior year periods was primarily due to an increase in headcount, manufacturing activities and increased clinical costs driven by the advancement of our clinical programs and the expansion of our preclinical portfolio, as outlined below.
20
The following table summarizes our primary external and internal research and development expenses for the three and six months ended June 30, 2025 and 2024 (in thousands):
|
|
Three months ended June 30, |
|
|
$ |
|
% |
|
|
|
Six months ended June 30, |
|
|
$ |
|
% |
|
|
||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
Change |
|
|
|
2025 |
|
|
2024 |
|
|
Change |
|
Change |
|
|
||||||||
External research and development expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Clinical trials |
|
$ |
15,326 |
|
|
$ |
9,153 |
|
|
$ |
6,173 |
|
|
67 |
|
% |
|
$ |
26,827 |
|
|
$ |
19,542 |
|
|
$ |
7,285 |
|
|
37 |
|
% |
Contract manufacturing |
|
|
7,422 |
|
|
|
5,721 |
|
|
|
1,701 |
|
|
30 |
|
% |
|
|
16,174 |
|
|
|
11,974 |
|
|
|
4,200 |
|
|
35 |
|
% |
Preclinical studies |
|
|
3,318 |
|
|
|
2,271 |
|
|
|
1,047 |
|
|
46 |
|
% |
|
|
5,910 |
|
|
|
4,116 |
|
|
|
1,794 |
|
|
44 |
|
% |
Outside services |
|
|
10,180 |
|
|
|
7,151 |
|
|
|
3,029 |
|
|
42 |
|
% |
|
|
19,497 |
|
|
|
12,371 |
|
|
|
7,126 |
|
|
58 |
|
% |
Other external research and development |
|
|
15 |
|
|
|
9 |
|
|
|
6 |
|
|
67 |
|
% |
|
|
30 |
|
|
|
13 |
|
|
|
17 |
|
|
131 |
|
% |
Total external research and development expenses |
|
|
36,261 |
|
|
|
24,305 |
|
|
|
11,956 |
|
|
49 |
|
% |
|
|
68,438 |
|
|
|
48,016 |
|
|
|
20,422 |
|
|
43 |
|
% |
Internal expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Personnel expenses |
|
|
26,200 |
|
|
|
18,159 |
|
|
|
8,041 |
|
|
44 |
|
% |
|
|
53,673 |
|
|
|
36,586 |
|
|
|
17,087 |
|
|
47 |
|
% |
Stock-based compensation |
|
|
13,099 |
|
|
|
11,491 |
|
|
|
1,608 |
|
|
14 |
|
% |
|
|
24,918 |
|
|
|
19,056 |
|
|
|
5,862 |
|
|
31 |
|
% |
Facilities and related |
|
|
2,992 |
|
|
|
3,114 |
|
|
|
(122 |
) |
|
(4 |
) |
% |
|
|
6,002 |
|
|
|
5,671 |
|
|
|
331 |
|
|
6 |
|
% |
Other internal research and development |
|
|
1,749 |
|
|
|
1,275 |
|
|
|
474 |
|
|
37 |
|
% |
|
|
3,510 |
|
|
|
2,356 |
|
|
|
1,154 |
|
|
49 |
|
% |
Total internal research and development expenses |
|
|
44,040 |
|
|
|
34,039 |
|
|
|
10,001 |
|
|
29 |
|
% |
|
|
88,103 |
|
|
|
63,669 |
|
|
|
24,434 |
|
|
38 |
|
% |
Total research and development expenses |
|
$ |
80,301 |
|
|
$ |
58,344 |
|
|
$ |
21,957 |
|
|
38 |
|
% |
|
$ |
156,541 |
|
|
$ |
111,685 |
|
|
$ |
44,856 |
|
|
40 |
|
% |
The increase in the majority of the categories above for the three and six months ended June 30, 2025 since the corresponding prior period is as a result of the advancement of our clinical programs and the expansion of our preclinical portfolio.
The following table summarizes our research and development expenses by program for the three and six months ended June 30, 2025 and 2024 (in thousands):
|
|
Three months ended June 30, |
|
|
$ |
|
% |
|
|
|
Six months ended June 30, |
|
|
$ |
|
% |
|
|
||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
Change |
|
|
|
2025 |
|
|
2024 |
|
|
Change |
|
Change |
|
|
||||||||
Paltusotine |
|
$ |
14,047 |
|
|
$ |
12,182 |
|
|
$ |
1,865 |
|
|
15 |
|
% |
|
$ |
30,653 |
|
|
$ |
25,419 |
|
|
$ |
5,234 |
|
|
21 |
|
% |
Atumelnant |
|
|
10,935 |
|
|
|
5,029 |
|
|
|
5,906 |
|
|
117 |
|
% |
|
|
18,194 |
|
|
|
8,962 |
|
|
|
9,232 |
|
|
103 |
|
% |
Early research and development programs |
|
|
9,595 |
|
|
|
6,549 |
|
|
|
3,046 |
|
|
47 |
|
% |
|
|
16,643 |
|
|
|
11,873 |
|
|
|
4,770 |
|
|
40 |
|
% |
Personnel expenses |
|
|
26,200 |
|
|
|
18,159 |
|
|
|
8,041 |
|
|
44 |
|
% |
|
|
53,673 |
|
|
|
36,586 |
|
|
|
17,087 |
|
|
47 |
|
% |
Stock-based compensation |
|
|
13,099 |
|
|
|
11,491 |
|
|
|
1,608 |
|
|
14 |
|
% |
|
|
24,918 |
|
|
|
19,056 |
|
|
|
5,862 |
|
|
31 |
|
% |
Other |
|
|
6,425 |
|
|
|
4,934 |
|
|
|
1,491 |
|
|
30 |
|
% |
|
|
12,460 |
|
|
|
9,789 |
|
|
|
2,671 |
|
|
27 |
|
% |
Total research and development expenses |
|
$ |
80,301 |
|
|
$ |
58,344 |
|
|
$ |
21,957 |
|
|
38 |
|
% |
|
$ |
156,541 |
|
|
$ |
111,685 |
|
|
$ |
44,856 |
|
|
40 |
|
% |
The increase in research and development programs for the three and six months ended June 30, 2025 as compared to the prior year periods was primarily due to clinical and manufacturing costs associated with paltusotine for the treatment of carcinoid syndrome and atumelnant, pre-clinical and manufacturing costs for early research and development programs, and increase in headcount and other increases to support the overall increased activities in various programs.
Selling, general and administrative expenses. The increase of $25.0 million and $39.7 million in selling, general and administrative expenses during the three and six months ended June 30, 2025 , respectively, compared to the prior year periods was primarily due to the increase in personnel expenses of $12.0 million (including $5.6 million of stock-based compensation expense) and $20.0 million (including $8.3 million of stock-based compensation expense) for the three and six months ended June 30, 2025, respectively, when compared to the same periods in 2024. The remainder of the increase is primarily attributable to an increase in outside services of $10.3 million and $16.0 million for the three months and six months ended June 30, 2025, respectively, as compared to the prior year periods. These increases are attributable to the increase in headcount and increase in selling and other general and administrative costs to support our overall growth and the planned commercial launch of PALSONIFY.
21
Other income, net. The increase of $4.7 million and $12.3 million in other income during the three and six months ended June 30, 2025 since the corresponding periods in the prior year was primarily due to an increase in income generated by our investment securities.
Liquidity and Capital Resources
Our financial condition is summarized as follows:
|
|
June 30, |
|
|
December 31, |
|
|
$ Change |
|
|
% Change |
|
|
||||
Cash and cash equivalents |
|
$ |
53,726 |
|
|
$ |
264,545 |
|
|
$ |
(210,819 |
) |
|
|
(80 |
) |
% |
Investment securities |
|
|
1,142,634 |
|
|
|
1,089,524 |
|
|
|
53,110 |
|
|
|
5 |
|
% |
Cash, cash equivalents and investment securities |
|
$ |
1,196,360 |
|
|
$ |
1,354,069 |
|
|
$ |
(157,709 |
) |
|
|
(12 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Working capital |
|
$ |
1,148,868 |
|
|
$ |
1,315,704 |
|
|
$ |
(166,836 |
) |
|
|
(13 |
) |
% |
Accumulated deficit |
|
$ |
(1,164,521 |
) |
|
$ |
(952,110 |
) |
|
$ |
(212,411 |
) |
|
|
22 |
|
% |
Based on our current and anticipated level of operations, we believe that our existing capital resources, together with income generated by our investment securities, will be sufficient to satisfy our current and projected funding requirements for at least the next twelve months. However, our forecast of the period through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Our future capital requirements will depend on many factors, including:
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. In addition, our ability to access financing on the terms we anticipate, or at all, may be impacted by volatility in global credit and financial markets, including as a result of inflation, rising interest rates, fluctuation in the value of the U.S. dollar and the effects, if any, of evolving international trade policies and government actions relating to tariffs. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
22
If we raise funds through collaborations, licenses, and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
ATM Offering
On June 21, 2024, we entered into a Sales Agreement, or the 2024 Sales Agreement, with SVB Leerink LLC and Cantor Fitzgerald & Co., or the Sales Agents, under which we may, from time to time, sell up to $350.0 million of shares of our common stock through the Sales Agents, or the 2024 ATM Offering. We are not obligated to, and we cannot provide any assurances that we will continue to, make any sales of the shares under the 2024 Sales Agreement. The 2024 Sales Agreement may be terminated by either Sales Agent (with respect to itself) or us at any time upon 10 days’ notice to the other parties, or by either Sales Agent, with respect to itself, at any time in certain circumstances, including the occurrence of a material adverse change. We will pay the Sales Agents a commission for their services in acting as agent in the sale of common stock in an amount equal to 3% of the gross sales price per share sold. During the three and six months ended June 30, 2025 and as of date of this report, no shares of common stock had been sold under the 2019 ATM Offering or the 2024 ATM Offering Agreement.
Common Stock and Common Stock Equivalents
As of July 29, 2025, outstanding shares of common stock were 94.2 million, outstanding stock options were 15.0 million, unvested restricted stock units were 2.2 million, and shares expected to be purchased under the 2018 Employee Stock Purchase Plan, or ESPP, were 0.4 million.
Cash Flows
We have incurred cumulative net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of June 30, 2025, we had unrestricted cash, cash equivalents and investment securities of $1.2 billion and an accumulated deficit of $1.2 billion.
The following table provides information regarding our cash flows for the six months ended June 30, 2025 and 2024 (in thousands):
|
|
Six months ended June 30, |
|
|
$ |
|
|
% |
|
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
||||
Net cash used in operating activities |
|
$ |
(174,303 |
) |
|
$ |
(100,500 |
) |
|
$ |
(73,803 |
) |
|
|
73 |
|
% |
Net cash used in investing activities |
|
|
(48,008 |
) |
|
|
(53,332 |
) |
|
|
5,324 |
|
|
|
(10 |
) |
% |
Net cash provided by financing activities |
|
|
11,492 |
|
|
|
401,097 |
|
|
|
(389,605 |
) |
|
|
(97 |
) |
% |
Net change in cash, cash equivalents and restricted cash |
|
$ |
(210,819 |
) |
|
$ |
247,265 |
|
|
$ |
(458,084 |
) |
|
|
(185 |
) |
% |
Operating Activities. The increase in cash used in operations was primarily attributable to higher net loss due to higher personnel costs to support our growth, increase in research and development expenses to support our pipeline, and increase in pre-commercialization costs to support the commercialization of Palsonify. The net cash used in operating activities during the six months ended June 30, 2025 was primarily due to our net loss of $212.4 million adjusted for $41.0 million of noncash charges and a $2.9 million change in operating assets and liabilities. Net cash used in operating activities during the six months ended June 30, 2024 was primarily due to our net loss of $141.0 million adjusted for $28.4 million of noncash charges, primarily for stock-based compensation, and a $12.1 million change in operating assets and liabilities.
Investing activities. Investing activities consist primarily of purchases of investment securities and, to a lesser extent, the cash outflow associated with purchases of property and equipment, offset by proceeds from maturities and sale of investment securities
Financing activities. The net cash provided by financing activities during 2025 resulted from proceeds received from the exercise of stock options and shares issued under the ESPP, and the net cash provided by financing activities during the same period in 2024 resulted from proceeds received from the sale of common stock and cash received from the exercise of stock options and shares issued under the ESPP.
23
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For a discussion of our market risks, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in our 2024 Annual Report on Form 10-K. There have been no material changes to any of these risks since December 31, 2024.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission, or SEC, and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2025 at the reasonable assurance level.
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any material legal proceedings. From time to time, we are involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 1A. Risk Factors
We do not believe that there have been any material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
The following members of our Board of Directors and/or officers adopted, modified, or terminated a trading arrangement that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c):
Name |
|
Title of Director or Officer |
|
Action |
|
Date of Action |
|
Duration of Plan |
|
Total Shares of Common Stock to be Sold |
|
|
|
|
January 3, 2025 - December 31, 2025 |
|
Up to |
||||
|
|
|
|
August 20, 2025 - September 2, 2026 |
|
Up to |
||||
|
|
|
|
January 1, 2026 - December 19, 2026 |
|
Up to |
25
Item 6. Exhibits
EXHIBIT INDEX
Exhibit |
|
Incorporated by Reference |
Filed |
|||
Number |
Exhibit Description |
Form |
File No. |
Exhibit |
Filing Date |
Herewith |
3.1 |
Amended and Restated Certificate of Incorporation |
8-K |
001-38583 |
3.3 |
7/20/2018 |
|
3.2 |
Amended and Restated Bylaws |
8-K |
001-38583 |
3.1 |
12/12/2023 |
|
4.1 |
Specimen Stock Certificate Evidencing the Shares of Common Stock |
S-1/A |
333-225824 |
4.1 |
7/9/2018 |
|
31.1 |
Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
|
|
|
|
X |
31.2 |
Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
|
|
|
|
X |
32.1* |
Certification of Chief Executive Officer and Chief Financial Officer pursuant 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
|
|
|
|
X |
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document |
|
|
|
|
X |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
|
X |
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
|
|
|
X |
* The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Crinetics Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Crinetics Pharmaceuticals, Inc. |
||
|
|
|
|
|
Date: August 7, 2025 |
|
By: |
|
/s/ R. Scott Struthers, Ph.D. |
|
|
|
|
R. Scott Struthers, Ph.D. |
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
(Principal executive officer) |
|
|
|
|
|
Date: August 7, 2025 |
|
By: |
|
/s/ Tobin Schilke |
|
|
|
|
Tobin Schilke |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(Principal financial and accounting officer) |
27
Source:
