CRNX - Crinetics Pharmaceuticals: Paltusotine Phase 3 Data Presented At ENDO

2023-08-17 03:43:57 ET

Summary

• Crinetics Pharmaceuticals has shown a significant increase in R&D and administrative expenses, leading to a widening net loss trajectory.
• The company's primary revenue source is the drug paltusotine, which has shown promising results in the treatment of acromegaly.
• Crinetics has a robust product pipeline, including potential treatments for Cushing's disease and neuroendocrine tumors.

Crinetics Pharmaceuticals (CRNX) has been at the forefront of advancing novel therapeutics aimed at addressing unmet medical needs. With a primary focus on rare endocrine diseases and endocrine-related tumors, the company's innovative approach has sparked interest among many investors and stakeholders in the healthcare sector. The company's commitment to leveraging its deep understanding of endocrine pathways to bring forth transformative therapies is laudable. As we delve deeper into their financials, product lineup, and more, we shall examine the potential the company holds in the evolving pharmaceutical landscape.

Financials

Crinetics Pharmaceuticals has showcased a considerable uptick in its expenditures for the second quarter of 2023, especially in comparison to the same period in 2022. Delving into the specifics, the company's R&D expenses surged to $40.6 million, marking an increase of $7.6 million from the previous year. This uptrend stems primarily from a substantial hike in personnel costs and a rise in consulting and outside services, with minor increases from other expenditures. Interestingly, while one might have expected a consistent rise in all segments of R&D, the firm managed to reduce net spending on manufacturing and development activities by $1.6 million. Such a decrease could potentially indicate strategic reallocation or optimization of resources.

On the administrative front, the expenses stood at $13.3 million, witnessing a growth of $2.8 million year-on-year, predominantly due to personnel costs. This signals an expansion in the company's administrative function, possibly hinting at scaling or further strengthening its operational backbone.

The firm's net loss trajectory widened by $8.6 million year-on-year, with Q2 2023 registering a loss of $51.0 million. Such a widening net loss is, to some extent, anticipated given the increased R&D and administrative outlays discussed above. However, it's imperative to note a silver lining in their revenue stream. The revenues for Q2 2023 were $1.0 million, a 150% increase from the $0.4 million recorded in 2022. The paltusotine licensing arrangement with Sanwa Kagaku Kenkyusho remains the primary source of these revenues, demonstrating its significance to Crinetics.

Perhaps most vital is the company's liquidity status. With unrestricted cash, cash equivalents, and investments at a substantial $264.5 million as of June 30, 2023, the company seems well-positioned in terms of capital. However, the decline from $334.4 million at the end of 2022 does beckon attention. Given the net loss of $51.0 million in just this quarter, and if similar expenses persist, the burn rate indicates that their cash runway, without additional financing or revenue inflows, could potentially last a little over a year. This situation emphasizes the significance of careful fiscal management and potential strategic actions to ensure future stability.

Product Pipeline

At the forefront of Crinetics' lineup is Paltusotine (oral SST2 Agonist) Acromegaly Carcinoid Syndrome , a drug with the potential to revolutionize acromegaly treatment. Unlike the current monthly injection approach, paltusotine's oral administration provides a notable convenience for patients. Paltusotine effectively addresses acromegaly, a condition caused by excessive growth hormone secretion from pituitary tumors. The drug’s mechanism, which hinges on the inhibition of growth hormone release, leads to decreased levels of IGF-1, which is a prominent disease biomarker. With two Phase 3 studies currently assessing the drug's efficacy and safety, the anticipation surrounding its results is palpable. The forthcoming data from these studies will be pivotal, not only for the company but for patients who seek an effective, convenient alternative treatment. Given the expected timeline, the submission of an NDA in 2024 indicates the company's confidence in paltusotine's potential.

Meanwhile, Crinetics' early-stage pipeline showcases the company's commitment to diversifying its therapeutic arsenal. CRN04894 , designed to address Cushing’s disease , adopts a unique approach by targeting excess adrenocorticotropic hormone (ACTH) secretion. Cushing’s disease, a result of an overactive pituitary tumor leading to excess cortisol production, can present with a myriad of complications. The potential of CRN04894, based on its promising in vitro and in vivo results, has set the stage for its Phase 1 study initiation. It represents an ambitious stride towards providing a more targeted and effective treatment option for those affected by the disease.

In addressing neuroendocrine tumors (NETs), CRN01941's development is significant. NETs, a group of malignancies with diverse origins, have a potential adversary in CRN01941. The drug's unique mechanism, where it halts the stimulating effects of the peptide hormone NKA on NK3R on tumor cells, could revolutionize the therapeutic approach to these tumors. Early preclinical data provides promising insights, and the commencement of a Phase 1 study further elevates expectations.

Crinetics Presents Advances in Endocrine Treatments

Crinetics recently displayed its research on paltusotine at ENDO 2023. Held in Chicago and sponsored by the Endocrine Society, this event is a highly respected venue for specialists in the field.

A significant highlight of the event was a presentation by Dr. Monica R. Gadelha, a renowned endocrinology professor from Universidade Federal do Rio de Janeiro. She unveiled the two-year outcomes from the ACROBAT Advance open-label extension study, showcasing the progress of paltusotine, a novel oral treatment for acromegaly, which demonstrated promising potential.

Those patients who switched from injected somatostatin receptor ligands to paltusotine maintained stability in critical measures like insulin-like growth factor 1 and the acromegaly symptom diary score, a measure of daily symptom experiences. Impressively, the vast majority of participants favored paltusotine over injections after one year. According to Dr. Gadelha, the consistent outcomes of paltusotine suggest that it could become a long-term oral substitute, a considerable step forward in patient-centered care.

Simultaneously, Crinetics revealed information on two other potential medications: a PTH1R antagonist for primary hyperparathyroidism and a TSH receptor antagonist for thyroid eye disease associated with Graves' disease. While these conditions are different, they both fall within the field of endocrinology where enhanced treatment options are needed. Early research indicates that these drugs may effectively alleviate disease symptoms, creating hope for their future clinical progression.

Potential Risks

Paltusotine, a somatostatin receptor type 2 (SSTR2) agonist, has a primary mechanism of action that focuses on inhibiting the release of growth hormone. However, this very specificity can be a double-edged sword. There exists the possibility that paltusotine might not bind with adequate affinity or might dissociate too quickly from the receptor, rendering the drug less effective. Further, continuous agonism could lead to receptor desensitization, where the receptor's responsiveness diminishes over time. There's also the concern about off-target effects; if paltusotine interacts with other somatostatin receptors or entirely different receptors, unforeseen side effects may arise.

Moving on to CRN04894, which targets the ACTH pathway. While the idea of blocking ACTH to prevent cortisol production seems straightforward, complexities arise when considering the nuanced endocrine feedback loops. For instance, If CRN04894 excessively suppresses ACTH, the body could respond by increasing its production to counterbalance, potentially causing a surge in ACTH levels after discontinuation of the drug. There's also the inherent risk associated with any antagonist; if it doesn't selectively bind to ACTH receptors or if it's too potent, it might disrupt the adrenal axis in unexpected ways.

CRN01941, the neurokinin 3 receptor (NK3R) antagonist, is another intriguing candidate. It operates on the principle of blocking neurokinin A ((NKA)) from stimulating NK3R on tumor cells. However, NK3R is not exclusive to tumor cells. Interfering with NK3R signaling could have implications on other physiological processes where the receptor plays a role. Moreover, tumors, given their genetic heterogeneity, could potentially bypass the NK3R pathway, finding alternative mechanisms to sustain their growth. This adaptive resistance could make CRN01941 less effective over time.

Competitors

One of the foremost contenders in the acromegaly space is Ipsen ( OTCPK:IPSEY ), with their product Somatuline Depot ( lanreotide ). Lanreotide, like paltusotine, targets the somatostatin receptors to inhibit growth hormone release. However, it's a peptide-based therapy requiring injections, unlike the oral small molecule approach of paltusotine. This brings about challenges related to patient compliance, as frequent injections can be a deterrent. Moreover, the longer pharmacokinetic profile of peptides might lead to fluctuations in drug levels, potentially causing side effects or diminished efficacy.

Another significant competitor is Novartis ( NVS ), with their offering Sandostatin LAR (octreotide) , which again, works on the somatostatin pathway. The mode of delivery for octreotide is also injection-based. Furthermore, there are concerns regarding potential gallstone formation with long-term use of octreotide. In contrast, paltusotine, being an oral regimen, might offer a better side effect profile and user-friendly administration.

In the Cushing's disease landscape, Corcept Therapeutics ( CORT ) has developed Korlym (mifepristone) as a cortisol receptor antagonist. While it presents a novel mode of action by blocking the effects of cortisol at the receptor level, it doesn't directly address the upstream overproduction of cortisol, which CRN04894 aims to achieve by inhibiting ACTH's effects. Moreover, mifepristone's interaction with progesterone receptors can result in off-target effects, potentially leading to complications like endometrial thickening.

Advanced Accelerator Applications , a subsidiary of Novartis, has developed Lutathera, a peptide receptor radionuclide therapy. While this offers a targeted approach to kill tumor cells, it involves radiation, which carries risks, especially in terms of off-target effects and potential long-term carcinogenicity. In comparison, CRN01941's targeted small molecule approach offers a safer and more direct method to halt tumor growth.

Valuation

At a market capitalization of $915 million, Crinetics is currently trading at a price-to-book ratio of 3.6 based on its TTM revenue. This is markedly above the sector's average P/B ratio of 2.13. Yet, it's crucial to evaluate this within the company's unique context.

The heightened valuation metrics, in part, can be justified by the company's expansive foray into endocrine treatments. The potential of paltusotine, coupled with promising pipelines like CRN04894 and CRN01941, lends credence to anticipations of significant revenue streams in the future. Add to this the firm's dedication to nonpeptide oral medications that act on peptide hormone receptors, and the growth trajectory becomes more lucid. Once these therapies make it to market, as the competitor comparison indicates, it is likely they will take the lead and move the company to significant profitability quickly, reversing its financials from its currently arguably questionable clinical-stage balance sheet.

Conclusion

Crinetics stands out as a pioneering figure in the endocrine disease landscape, distinguished by its inventive small molecule approach. The transition from injectables to oral medications, particularly in the treatment of acromegaly, signifies a significant enhancement in patient compliance and overall quality of life. Furthermore, with paltusotine nearing its final stages of clinical evaluation, and two promising candidates in the preclinical phase, the company's product pipeline is robust and diverse.

However, potential investors should consider inherent risks and competition in the biotech sector. While Crinetics appears well-positioned for market disruption, the success of their candidates relies on upcoming clinical data and regulatory approvals. The company's innovative solutions for unmet endocrine disorder needs generate excitement, but cautious investors should closely monitor trial outcomes and evolving competition in the near future.

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