Corcept Therapeutics Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015; financial statements are unaudited. Dollar amounts below are in millions unless stated otherwise.
Business context
Corcept develops and commercializes medicines that modulate cortisol activity. Its sole marketed product was Korlym (mifepristone), approved for certain adults with endogenous Cushing’s syndrome. The company was also developing Korlym for triple-negative breast cancer and selective glucocorticoid receptor antagonists, including CORT125134.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Net product revenue | $11.956 | $5.851 | $22.058 | $10.255 |
| Cost of sales | $0.439 | $0.215 | $0.741 | $0.389 |
| Gross margin | 96.3% | 96.3% | 96.6% | 96.2% |
| Research and development | $3.341 | $4.252 | $7.718 | $11.537 |
| Selling, general and administrative | $9.342 | $7.965 | $18.795 | $17.769 |
| Operating loss | $(1.166) | $(6.581) | $(5.196) | $(19.440) |
| Net loss | $(1.936) | $(7.552) | $(6.766) | $(21.481) |
| Basic and diluted loss per share | $(0.02) | $(0.07) | $(0.06) | $(0.21) |
- Revenue rose 104% in Q2 and 115% in the first half, attributed to higher sales volume and price increases.
- R&D declined 21% in Q2 and 33% in the first half, primarily because the Phase 3 psychotic-depression trial was discontinued in May 2014; spending on selective GR antagonists increased.
- SG&A increased 17% in Q2 and 6% in the first half, mainly due to increased staffing and consultancy costs.
- Operating cash use was $1.916 for the first half, versus $20.044 in 2014. Cash at period-end was $37.048, up from $24.248 at year-end 2014. Investing cash use was $0.034; financing provided $14.750, including approximately $17.1 of net proceeds from warrant exercises and $3.953 of obligation payments.
- At June 30, current assets were $44.691 and current liabilities $17.430; the current ratio was approximately 2.6. Stockholders’ equity was $11.526, compared with a $3.388 deficit at year-end 2014.
- The Biopharma financing agreement requires payments totaling up to $45.0, generally 20% of covered-product sales and certain contingent receipts. Corcept had paid $9.832 through June 30 and paid a further $2.5 in July. The balance sheet showed $12.034 current and $19.399 long-term; these amounts reflect estimates and are not the remaining total repayment cap.
Outlook, risks and notable items
- Management said it expected to reach cash-flow breakeven without additional fundraising under current plans, but may raise funds for strategic priorities. No specific 2015 revenue guidance figure is provided in the filing text supplied here.
- Management expected R&D spending to increase as programs advance. Initial efficacy results from the Korlym triple-negative breast cancer trial were expected by year-end 2015; Phase 2 trials of CORT125134 for Cushing’s syndrome and an oncology indication were expected to begin in Q1 2016.
- Key business risks include dependence on Korlym and its adoption, insurance coverage and reimbursement, competition, regulatory and clinical-trial uncertainty, and reliance on single-source suppliers for both the active ingredient and tablets.
- The Biopharma agreement includes covenants and security interests; certain defaults can raise the sales-payment rate, and a change of control or specified U.S. licensing event can accelerate amounts due. The filing reports no material legal proceedings and no material change to contractual commitments during the half-year.
- Approximately 6.2 million shares were issued upon warrant exercises in March, producing about $17.1 million in net proceeds; roughly 3.1 million shares were issued to entities affiliated with directors. Shares outstanding were 108.229 million at June 30.
Important facts for investors to verify
- Whether Korlym’s revenue growth and pricing are sustainable, and how patient access and reimbursement affect sales.
- Current status, enrollment, safety and results timing for the breast cancer trial and planned CORT125134 trials.
- Cash-burn trajectory and management’s assumptions behind its cash-flow-breakeven expectation.
- Payment estimates, covenant compliance and acceleration provisions under the Biopharma agreement.
- Supply continuity and regulatory compliance of the company’s two single-source manufacturers.