Corcept Therapeutics Inc. — Q1 2014 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2014; balance-sheet comparisons are to December 31, 2013. Corcept commercializes Korlym (mifepristone) for a defined group of adults with endogenous Cushing’s syndrome and is developing mifepristone and selective glucocorticoid receptor antagonists for other indications.
Financial performance and liquidity
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Net product sales | $4.405 million | $1.717 million; up about 157% |
| Cost of sales | $0.174 million | $0.020 million |
| Research and development | $7.285 million | $4.257 million |
| Selling, general and administrative | $9.805 million | $8.383 million |
| Operating loss | $12.859 million | $10.943 million |
| Net loss | $13.930 million; $0.14 per share | $12.084 million; $0.12 per share |
| Net cash used in operating activities | $11.060 million | $11.554 million |
Reported cost of sales was 4.0% of net sales, but management cautioned that it did not reflect the full cost of production: some raw-material, labor and overhead costs had been expensed before FDA approval. Accordingly, the reported gross margin should not be treated as a normalized product margin.
Cash and cash equivalents were $43.618 million at quarter-end, down from $54.877 million at year-end. Total current assets were $48.120 million and current liabilities were $15.242 million. Total assets were $52.831 million. The Biopharma financing obligation had a $35.1 million carrying value, including $6.896 million classified as current; its maximum aggregate repayment is $45 million. The company paid about $0.995 million under the agreement during the quarter and a further $1.0 million in April.
Material changes and notable items
- Higher Korlym sales were accompanied by a larger net loss: R&D rose 71% and SG&A rose 17% year over year.
- Management attributed much of the increase in personnel costs to bonuses awarded and paid in February 2014: $0.815 million in R&D functions and $2.5 million in SG&A functions.
- In May 2014, after quarter-end, Corcept announced it would discontinue its Phase 3 psychotic-depression study because an interim review indicated it was unlikely to meet its primary endpoint with statistical significance. The company said it would redeploy resources to other programs.
- Corcept began enrolling patients in a Phase 1 study of mifepristone with eribulin for triple-negative breast cancer; initial results were expected in the first half of 2015.
- In March, Corcept entered a five-year mifepristone supply agreement with PCAS and a CRO agreement for a Phase 1 study of a new compound, with an approximately $2.6 million commitment expected to be spent over about one year. In April, it entered a three-year Korlym tablet manufacturing agreement with AAI, with no minimum purchase obligation; validation-batch manufacturing had begun.
Outlook, risks and contingencies
Management expected 2014 R&D spending for the remainder of the year to be approximately in line with 2013, as lower psychotic-depression spending was expected to be offset by increased work on next-generation compounds. SG&A was expected to be slightly higher for the remainder of 2014. Management expected net cash use for the remainder of 2014 to be lower than in corresponding 2013 periods, citing anticipated Korlym sales growth; this is forward-looking and subject to uncertainty. The filing refers to 2014 net-revenue guidance, but the text provided does not state a clear guidance amount.
Key risks include reliance on Korlym for near-term revenue, uncertain physician adoption and reimbursement, ongoing losses and possible need for additional financing, clinical and regulatory uncertainty, and dependence on single-source suppliers for Korlym’s active ingredient and tablets. The Biopharma agreement requires payments tied to covered-product sales and certain other receipts; change of control can accelerate the remaining amount due, up to the $45 million cap. Corcept reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2014.
Important facts for investors to verify
- Whether Korlym sales growth continues and whether payer coverage, patient access and physician adoption support management’s revenue expectations.
- The actual 2014 revenue guidance and how reported product costs change as pre-approval inventory is consumed and manufacturing costs are fully reflected.
- The impact of discontinuing Study 14 on spending, pipeline priorities and any plans for psychotic depression.
- Progress and timing of the triple-negative breast cancer study, new-compound development, and the EMA review process for Korlym.
- Successful validation and ongoing supply from PCAS and AAI, and future cash use, financing needs and payments under the Biopharma agreement.