View:
United States securities and exchange commission logo
December 20, 2022
Marc J.S. Wilson
Chief Financial Officer
Crinetics Pharmaceuticals, Inc.
10222 Barnes Canyon Road
Bldg. #2
San Diego, California 92121
Re: Crinetics
Pharmaceuticals, Inc.
Form 10-K for
Fiscal Year Ended December 31, 2021
Filed March 30,
2022
File No. 001-38583
Dear Marc J.S. Wilson:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Management s Discussion and Analysis of Financial Condition and
Results of Operations
Critical Accounting Policies and Estimates
Stock-based compensation expense , page 72
1. You state that you
establish the volatility rate used to determine the fair value of your
equity awards based on
the historical volatility of a group of similar companies in the
biotechnology industry
that are publicly traded. As the company has been a public
company since 2018,
please tell us why you believe this methodology is appropriate. In
this regard, tell us
what your estimated expected volatility would have been for each year
presented if you only
considered the company s expected and historical volatility rates
and not the volatility
rates of your peers. Further, explain why you did not use these
company only rates in
estimating the fair value of your stock options for those respective
periods, and tell us
when you no longer intend to consider the volatility rates of publicly
Marc J.S. Wilson
FirstName LastNameMarc Inc.
J.S. Wilson
Crinetics Pharmaceuticals,
Comapany20,
December NameCrinetics
2022 Pharmaceuticals, Inc.
December
Page 2 20, 2022 Page 2
FirstName LastName
traded peers in this estimate. We refer you to ASC718-10-55-37, and
question 6 in SAB
Topic 14.D.1. Lastly, please explain why the volatility used to
estimate your stock option
awards in 2021, 86%, is different from the volatility used for your
ESPP volatility
estimate, 91%. Direct us to disclosure included in your quarterly
report for the period
ended September 30, 2022 where the assumptions used to determine the
fair value of your
ESPP awards is discussed.
Equity Method Investment , page 72
2. Please provide us with a detailed analysis supporting your conclusion
that Radionetics
does not have sufficient equity at risk to finance its activities
without additional
subordinated financial support and therefore meets the definition of a
variable interest
entity (VIE). Address the following in your response:
Explain how you determined that Radionetics would not be able
to obtain other non-
subordinated sources of financing, if necessary.
Address your considerations of both quantitative and
qualitative factors, to the extent
considered in determining the sufficiency of equity at risk,
using the guidance in ASC
810-10-25-45 through 810-10-25-47.
Ensure that your analysis focuses on whether Radionetics was
structured, by design,
not to have sufficient equity at risk. In this regard, ASC
810-10-15-14 states that the
phrase "by design" refers to legal entities that meet the
conditions in this paragraph
because of the way they are structured.
ASC 810-10-25-47 states that the design of the legal entity and
the apparent
intentions of the parties that created the legal entity are
important qualitative
considerations. Clarify for us whether the formation of
Radionetics was essentially
the spin-off of your nonpeptide platform into a separate entity
funded with $30
million in private financing provided by 5AM Ventures and Frazier
Healthcare
Partners and how this factored into your analysis.
Results of Operations
Research and development expenses, page 75
3. We note the significant increase in your research and development
expenses in fiscal 2021
and that you have multiple programs/products in varying stages of
development and
clinical testing, and note that you expect your research and
development expenses to
increase. Please confirm that you will revise future filings to
provide more details about
your research and development expenses for each period presented,
including but not
limited to by product/program, internal versus external, as well as by
the nature of the
expenses. For example, in discussing the specific reasons for
significant changes
in research and development expenses, quantify the change by each
product candidate for
which significant investments were made during the periods. Refer to
Item 303(b) of
Regulation S-K. To the extent that you do not track expenses by
product candidate, please
disclose as such.
Marc J.S. Wilson
Crinetics Pharmaceuticals, Inc.
December 20, 2022
Page 3
Exhibits
4. Please explain to us your consideration of Item 601(b)(10) of
Regulation S-K in
determining whether to file as an exhibit the Collaboration and
License Agreement with
Radionetics.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Ibolya Ignat at 202-551-3636 or Angela Connell at
202-551-3426 with
any questions.
FirstName LastNameMarc J.S. Wilson Sincerely,
Comapany NameCrinetics Pharmaceuticals, Inc.
Division of
Corporation Finance
December 20, 2022 Page 3 Office of Life
Sciences
FirstName LastName