Crinetics Pharmaceuticals, Inc. (CRNX) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. My name is Jess Fye. I'm a senior biotech analyst at JPMorgan, and we're continuing the 42nd Annual Healthcare Conference today with Crinetics. I'm joined by the company's CEO, Scott Struthers. He's going to give a presentation on the business, and then we're going to go into Q&A after that. [Operator Instructions] So with that, let me turn it over to Scott.

Thanks, Jess. Good afternoon, everybody. Thanks for having me. Thanks for coming. Thanks to those of you who supported us through the years. I'll refer you to our forward-looking statements, of course, which I'm sure you've all read carefully. So since the last time I was here a year ago, we're a very different company. The strategy we've been following since the beginning of the company hasn't changed, but it's beginning to bear real fruit. By the end of this decade, Crinetics will be the premier fully integrated endocrine company, and it's happening now. Patients around the world would be able to get our products in clinical development, candidates and discovery will be making our way into late-stage development and revenue from sales, we began to self-sustain the growth of this business. 2023 was a hugely successful year for us. We advanced the pipeline dramatically with paltusotine. We're poised for patient data from our second molecule 4894. Our balance sheet is strong, and we leveled up on several different dimensions. But 2024 and '25 are going to be transformative to us as we complete Phase III in acromegaly, submit our first NDA, make paltusotine broadly available to acromegaly patients around the world and keep the rest of the pipeline moving, including investing in new discovery programs. But how have we been able to do this? And why do we think we can keep on doing it? While our way remains unchanged since the beginning of the company. We have deep roots in endocrinology, myself and Alan and many others in the company have spent our entire careers studying endocrinology or working on drug discovery and development endocrinology. It's a wonderful branch of science and medicine. And we have also an unwavering personal commitment to the patients we've met and are hoping to help and help transform their lives through the science that we work on every day. We built a world-class in-house R&D capability, and it's bringing together the combined skills and experience to craft some very finely crafted molecules designed to harness endocrinology to make a difference in human health. And by following that way, we've built a remarkably deep pipeline. All of these have been internally discovered. All of them we own the rights to. And I think this is fairly exciting for us on many different levels. The lead program is approaching registration and we anticipate a PDUFA date in 2025. The second candidate is in Phase II with key patient data coming soon. And there's multiple programs in discovery, some almost on the verge of coming into development, targeting important diseases that can affect many millions of patients. And we're just getting started. So paltusotine is leading the way. It's our lead program for acromegaly and carcinoid syndrome. It exemplifies our commitment to personally -- purposely crafted medicines that I think you'll see in some of the data can really have a transformative effect on patients' daily lives. We've built a world-class development capability to bring us to this point, and that capability is now in place to let us take the next drug and the next drug and the drug after that into global development. And we use many of the same sites and centers for all of those. So I want to talk a moment about paltusotine as an example of how we approach things, and you'll see it applied throughout the rest of the program. So when we thought about this, starting this program, it was very much designed with the needs of the patient in mind. The current standard of care for people living with carcinoid syndrome or acromegaly, involves monthly deep subcu or depot injections that are given intramuscularly. Most of the time requiring time out of your day to visit a health care professional. And for many, they wear off towards the end of the month, meaning you need to go get these injections every 2 weeks or every 3 weeks. And just imagine that what this does in terms of trying to manage your life in addition to managing your disease and just normal everyday things. But also imagine what it would be like if you can get rid of all that and just take a pill every morning, one that can control your disease throughout the month that provides durable and stable control. And I think this could have a real impact on people's lives. And our goal with paltusotine is to help patients focus on living that life and not focus on managing their disease. Now, in September, we reported what I believe to be some of the best Phase III data in acromegaly, certainly that I've ever seen. We hit the primary endpoint with a very high responder rate and a very low placebo rate, all secondary endpoints were met, including ones measuring the effects of paltusotine on patient well-being in an acromegaly symptom diary, which has not been done in previous medications in this indication. It continues to be safe and well tolerated as it has throughout its clinical development. And I think this study showcases our commitment to running high-quality global trials. And you see it in things like a 4% placebo rate. It's -- a lot of us, especially in the investor community, take for granted running clinical trials, and we expect certain outcomes. It's hard, and you've got to follow every little thing going on around the world to make sure that you get this type of data, and we built a team that can do that and does it repeatedly. Now, beyond acromegaly, we're also developing paltusotine for carcinoid syndrome using the same model and know-how that we've already established in acromegaly. Carcinoid syndrome affects 30,000 patients in the U.S., and it's a cause by some of the subsets of neuroendocrine tumors. Patients to treat these are also taking some of the same depot injections that have the same impacts on acromegaly. It's the same medication. Our treatment goals with carcinoid syndrome are to reduce the urgency and frequency of excess bowel movements to reduce the flushing that can be quite debilitating, but also to reduce the potentially severe complications such as carcinoid heart disease. And again, as with acromegaly, let people focus on life, not managing their disease with these monthly injections. And I know we like to look at statistical data, and I have some of that for you. But to me, looking at the effect on an individual patient really help bring that to light. And this is just one of the subjects in the study. And if you look at our data release from last December, you can see a couple of other examples. But here's somebody with no prior therapy in the reddish brown bars, there's a number of bowel movements and you see the -- sorry, in the brownish bars is bowel movements and then the red bars are flushes. And you see in the flushing that this person had up to 9, 8, 7 a day and bowel movements 4, 5 times a day. Now, put yourself in the place of this. This is -- you wouldn't be able to work your way through this day's meetings. And then the day after they started taking paltusotine, the flushing went to 0, and it stayed at 0 throughout the treatment period. And on bowel movements, it went down to normal, which is 1 to 3 per day. So this is the type of thing that a somatostatin analog can do for a patient with carcinoid syndrome. And of course, as you look at the population, we show the statistics here on the left, number of excess bowel movements, so this is more than 3 per day. On the right, frequency of flushing, and this -- any flushing is abnormal, and both were reduced by 65%. In addition to this, we've shown benefits on the severity of flushing, the urgency of bowel movements and we're measuring a variety of other dimensions of how this impacts patients' lives. So this is the initial data set. It was roughly 23 patients, 36 patients have now been enrolled. That data will report out later this quarter, early next quarter. I think we said the first half. And that will be a more full data set. But in addition to building a world-class R&D organization, as you've seen, we're also trying to build a business. Together, acromegaly and carcinoid syndrome represent a significant market opportunity where we intend to be the dominant player. Acromegaly alone represents an USD 800 million opportunity. And for carcinoid syndrome, it's already a $1 billion market. But surprisingly, there are many patients not yet on somatostatin analogs. And presumably, since we know it works, the existing drugs still work for somatostatin -- for carcinoid syndrome. It's got to be something around burden of care or access to care that's keeping them from that. So we see that as a growth opportunity. And we're working hard to understand the details of the patient journey in both these populations and particularly in carcinoid syndrome. So we understand what we need to do in our Phase III program, which I anticipate starting later this year to fully bring out the potential benefits and uses to optimize the label we get in carcinoid syndrome. Over the past year, actually year plus, we've also been aggressively building out our commercial capabilities and understandings in these specific markets. We've been working with pituitary centers, I mean, Alan and I for decades, but as a company now for the life of the company as well as the top KOLs. But many of these also overlap at the sites with the top KOLs and centers for neuroendocrine tumors. But we're also digging a little deeper into exactly who are the people at these institutions that are writing the scripts that patients are filling, so that we make sure we have a detailed plan when we're ready for launch. Also, not surprisingly, as we begin to learn about the market and test different messaging, we're finding that the data from PATHFNDR-1 is really resonating with this community and generating a great deal of excitement, both in the acromegaly prescribers and in the carcinoid syndrome prescribers. Beyond the HCPs, we're really starting to work on understanding the payer perspective. It's super important in getting to new drugs -- getting new drugs out to patients who need them. So our Chief Commercial Officer has hired a VP of Market Access. She is building out her team. We've talked to more than half the top payers already and beginning to understand what are their concerns. And we know that they appreciate some of the benefits, both to the patient and to the economics of the health care system that an oral pharmacy benefit could provide. We've also done work on some of the more logistical aspects like getting our third-party logistics underway, and we're finalizing specialty pharmacy agreements to make sure we can provide full service options to the patients and the physicians to get the drug to them as easily as possible. And finally, this is also about transforming the company into one that is ready for commercial at all levels, including from an IT and a compliance and you shouldn't underestimate the lift that's required. But we're on it. And leading the way with paltusotine, behind it, we built a very strong R&D capability that we're now deploying to help increasingly more patients with each new candidate entering development. And the one right after paltusotine is 4894, which is an ACTH antagonist. The lead indication there is congenital adrenal hyperplasia, which affects about 27,000 patients in the U.S. Now, in patients with congenital adrenal hyperplasia, they can't make cortisol and they make too much adrenal androgens exemplified by the one A4 on the bottom left. But it's not just about normalizing those adrenal androgens. In women, we want to help restore normal menstrual cycles. In men, they have these testicular adrenal rest tumors, which both cause pain and impair fertility. And so in both men and women, we hope to improve fertility. We also hope to prevent the consequences of androgen excess in the pediatric population, which can be long-lasting, including a typical genitalia, precocious puberty, short stature, and hirsutism. And what we find is, right now, the prescribers are a bit stuck because the only tool they have is glucocorticoids. And these are the same glucocorticoids you use for inflammation, for example. And they end up giving high levels of glucocorticoids to try and suppress these adrenal androgens, which causes a whole set of other problems associated with too much glucocorticoids like weight gain or hypertension or bone disease. And so one of the other treatment goals is to enable physiologic dosing of glucocorticoids, physiologic replacement. So to deal with this, to address this, we employ the tools of endocrinology. The hypothelamic pituitary adrenal axis is one of the great stories in endocrinology. The pituitary controls the secretion of ACTH by the -- sorry, the hypothalamus controls the secretion of ACTH by the pituitary. There's a couple of different factors that do that, corticotropin-releasing factor and arginine vasopressin. ACTH is then acting at the adrenal where it stimulates production normally of cortisol, but in these patients just day 4. And there's a couple of different ways that ACTH is regulated. And so now we're starting to see the effect of CRF antagonist in CAH and ability to start to suppress A4. And we're targeting this ACTH receptor because there's no other way to stimulate the adrenal with ACTH than through that receptor. So we think that's a lower level, more complete possible blockade. And that is now in a Phase II study that is targeting, as I said, the ACTH receptor and trying to achieve maximal A4 suppression with data coming out -- preliminary data coming out now in the second quarter. And the way to think about it is like shown on this diagram. So first, many patients on glucocorticoids come in with very elevated A4 levels. And we've seen now in some of the trial populations in Phase III, levels of 600, 700, over 1,000, depending on the study population. When normal is really 200 or below and actually quite a bit lower than that for many different types of populations. And to get there, they're on multiples of what they should take for glucocorticoids, and that's shown in that upper gray box on the right. Now, what we've seen with the ACTH antagonist is the ability to suppress this part of the way, which is fabulous. And so when you add a CRF antagonist, you can eliminate the CRF dependent part of the A4 secretion. And then as you lower A4, you can adjust down glucocorticoids and get some patients down into normal glucocorticoids normal A4 levels. But an ACTH receptor antagonist blocks all the signaling or can block all the signaling to the adrenal. So we expect that to, not only be able to achieve the CRF dependent levels of suppression, but also all the other activity of ACTH that's going at the adrenal. So we expect that to be able to have lower levels of A4 suppression, which should enable better achievement of physiologic glucocorticoid replacement. But we're not stopping at 4894, we're also developing multiple preclinical programs, and the next 2 on deck are shown here. On the left, are antagonists of the parathyroid hormone receptor or PTH, and this is for hyperparathyroidism or too much parathyroid. You're probably aware of some of the work being done on hypo for too little. Well, this is the opposite too much. So -- but we can induce hyperparathyroidism in a rat by giving them a pump infusing excess PTH and you see here the vehicle group with excess PTH causes a severe hypercalcemia. And then if you give back the PTH antagonist, we bring them back to normal levels of calcium. This is the same type of thing one would do in a hyperparathyroid patient. We're now at the final candidates. They're in several molecules, are in toxicology studies, should enter IND-enabling work this year. The one slightly behind that is the TSH antagonist for Graves' disease. Graves' disease affects 1% to 2% of the population. Many of those patients go on to get Graves ophthalmopathy or more recently referred to as thyroid eye disease, probably because it's a lot easier to say than ophthalmopathy. But we can induce this model in a mouse, it's caused in people by an antibody which activates the TSH receptor. So we take those same antibodies, give it to a mouse, thyroid hormone levels go up. And with those TSH antagonist, we can bring them back to normal. Now, this isn't quite at the candidate selection stage, but we got a lot of really good molecules, and we're just trying to solve the last little pharmaceutical problems to make them a real drug. And like every program in here, we're making thousands of molecules to make sure we get the one that is good enough to go into millions of people because you don't skip on discovery because you're going to live with that molecule for the next 20 years, first in development and then in commercial. This stuff is really hard to do. You're optimizing 20, 30 different dimensions with difficult chemistry and difficult assays, and you need a lot of different experts. But this is what we've really been working out our entire careers and entire life of the company is crafting small molecule drugs at peptide hormone receptors, and there's a lot of different peptides out there. They touch every part of every cell in the body. But continuing this story in the coming years will lead to tremendous growth and value creation. 2024 sets the stage by submitting our first NDA and advancing additional indications and candidates. But 2025 will be a real inflection point as we come up on our first PDUFA date and FDA willing our first launch. Going into the second half of the decade, we expect multiple additional launches, a continuous stream of clinical milestones. As sales of paltusotine grows, we'll become self-sustaining, and we'll continue to invest in our discovery and development efforts because there's lots of patients out there that can benefit from intervening in these peptide hormone and other endocrine systems. Endocrinology has the impact to -- the ability to impact almost all aspects of human health, and we're just getting started. So thank you for your attention, and I believe we're going to have the rest of the management team come up for some Q&A. Happy to take your questions. So I have with me to my left, Jim Hassard, our Chief Commercial Officer; Alan Krasner, our Chief Endocrinologist; and Marc Wilson, our Chief Financial Officer.

So we saw really robust data from the PATHFNDR-1 study. And now that we're on the cusp of PATHFNDR-2 data, can you just recap the differences between the 2 trials and talk about the extent to which PATHFNDR-1 could support high likelihood of success for PATHFNDR-2?

Alan?

Sure. PATHFNDR-1 and PATHFNDR-2 represent a package of data, which address pretty much the broad spectrum of acromegaly patients that would like to cover in our NDA. PATHFNDR-1 were the well-controlled patients already on the injection treatments who switched from paltusotine versus placebo. And that's some of the data Scott showed you in the presentation that turned out very well with very strong response rates on drug, very low response rates on placebo. That's the maintenance population. PATHFNDR-2 is about the treatment population that is patients with acromegaly who are not controlled and -- not controlled biochemically and not treated currently. So that would include patients who are truly naive to medical therapy, patients who need medical therapy, but have not been treated for 4 months prior to entering into the study, or patients who are controlled on medical therapy, sort of like in PATHFNDR-1 but who are willing to wash out of that -- those injections during a screening period. What these patients all have in common is, when they are randomized to receive either treatment or placebo, they all start out with a high IGF-1. This is the registrational biochemical endpoint, and paltusotine would be expected to lower IGF-1 in a way that is superior to placebo. So in terms of read-through, I think PATHFNDR-1 data were very, very clear that paltusotine effectively lowers IGF-1. And based on that, I would expect read-through to PATHFNDR-2. The goal for PATHFNDR-2 is much the same as it was in PATHFNDR-1 to show an increased rate of IGF-1 normalization at the end of treatment compared to placebo.

Maybe we can spend a minute on the commercial potential for paltusotine, specifically thinking about acromegaly. Is it possible to walk through a framework about how to think about that peak sales potential?

Jim?

Sure. Thanks, Jess. So I think the numbers that Scott shared are the numbers that we look at and that is what's the market, what's the price, and then, obviously, what's the market share. In terms of the market overall, we do look at about 11,000 patients within the acromegaly space. There are -- about 2/3 of those 11,000 are on a somatostatin analog and injectable currently. There are about 30% of the patients that are actually on monotherapy dopamine agonist. And so we look at the opportunity across both the somatostatin analogs and across the dopamine agonist as well. In terms of price, we're looking at right now about a $70,000 list price per year for each acromegaly patient. And again, we really feel that comparatively, we've got a better opportunity to manage the gross to net within that price point. So we're thinking about a much closer net price to that $70,000 mark. I think the big question for us is share, obviously. And so in terms of that framework, how will we influence share? It's a relatively small market in terms of the endocrinologists that are in the space. 80% of the prescriptions are written by about 200 endocrinologists at 40 pituitary centers. And the additional maintenance of those patients is conducted by an additional 800 endocrinologists. So a total of about 1,000 targets for us to influence market share on that front.

You mentioned having better gross to nets, you think, than the injectables. Where are the gross to nets for the injectables?

Yes. So the gross to nets currently for both Somatuline and for Sandostatin are in the range of 30% to 40%, and that's a function of essentially the buy-and-bill market and discounts, rebates and the constant maintenance of the average selling price within that space. So we really do feel that we've got as an oral in the specialty pharmacy space, in the rare space, we've got a better opportunity to manage that gross to net.

So assuming PATHFNDR-2 is successful, what are some reasons why 100% of the patients on injectable therapy would not eventually adopt paltusotine?

So it's the same question, Jess.

100% market share. I was just going to say, Jess, you've been speaking to Scott, my boss. So I think, first of all, successful PATHFNDR-2 will give us the broadest possible label in combination with PATHFNDR-1. So we'll have the opportunity to look at both switch and treatment of acromegaly patients. When we think about the successful -- PATHFNDR-1, as viewed by key opinion leaders in this space, we've had a number of advisory boards post PATHFNDR-1, and they view this as not just successful, but really exceeding expectations. So it has added a great deal of confidence. That 83% response rate has given physicians a great deal of confidence that they can switch from their injectables to the oral. So that has helped out a great deal. But I do think that the #1 thing that we've got to be aware of is just habit. It's physician habit in terms of prescribing and a lot of that is going to be mobilizing patients to really talk to their physicians about their experience on injectables, tolerability issues that they may be having, efficacy issues that they may be having, certainly, the pain of injections and really get those patients to speak to their physicians again to break that habit.

That's an interesting point about mobilizing patients since the physicians don't feel the pain of the shots. What are your kind of techniques or tactics you're going to use to do that?

Yes. So I think you'll see this year, we're going to start a disease state education campaign with physicians, first of all. Just there is a lot of published data in this space on, again, the experience of patients with standard of care. We'll start on that front with physicians and closer to launch, we'll run the same type of campaign with patients. We've already been testing this and almost universally, patients do experience these breakthrough symptoms or an issue of tolerability and certainly, the pain of injection. But these are stoic patients. It's taken a long time for them to get diagnosed with acromegaly and they've known this therapy of injectable SRLs now for some time. But universally, they will tell you if they had an oral option, they would take that oral option. So it's really getting that dialogue between patient and physician mobilized and enacted, especially as we head into launch.

But in addition to just that messaging and communications, we're putting in place a patient and physician services hub so that we can help those physicians manage the prior auths, for example, help the patients deal with their insurance companies, have somebody to talk to if they need help getting this all worked out because I think we all experienced this in the room. And certainly, my friends that are prescribers feel a lot of frustration with actually making the system work for you to actually get the medicines you need. And with our patient and physician services hub, we can help them with that in a compliant way.