Corcept Therapeutics Inc. — FY2013 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2013. The filing was signed March 14, 2014. Figures below are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Business context
Corcept is a pharmaceutical company focused on cortisol-related metabolic, psychiatric and cancer disorders. Its commercial product, Korlym (mifepristone), was approved in the U.S. in 2012 for a defined group of adults with endogenous Cushing’s syndrome. The company’s business remained dependent on growing Korlym sales, while it funded clinical development of mifepristone and selective glucocorticoid receptor antagonists.
Financial performance and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Net product sales | $10.36 million | $3.31 million |
| Cost of sales | $0.14 million | $0.09 million |
| Research and development | $20.47 million | $14.07 million |
| Selling, general and administrative | $31.24 million | $25.41 million |
| Operating loss | $(41.50) million | $(36.27) million |
| Net loss | $(46.01) million | $(38.05) million |
| Basic and diluted loss per share | $(0.46) | $(0.41) |
| Cash and cash equivalents at year-end | $54.88 million | $93.03 million |
| Working capital at year-end | $45.57 million | $86.70 million |
- FY2013 product sales increased about 213% year over year. Reported cost of sales was low, but Corcept cautioned that a substantial share of manufacturing costs had been expensed before Korlym’s approval; reported gross margin therefore may not represent future production economics.
- Net cash used in operations was $37.06 million, versus $36.02 million in 2012. Cash fell by $38.16 million during 2013; the company attributed operating cash use principally to commercialization and R&D.
- At year-end, current liabilities were $12.74 million and the Biopharma financing obligation was carried at approximately $35.07 million, including $5.74 million classified as current. The agreement provides for payments capped at $45 million in total, generally based on 20% of covered-product sales and certain licensing receipts.
- FY2013 Q4 net product sales were $4.12 million, compared with $1.38 million in Q4 2012. Quarterly net loss was $11.12 million in both periods.
Material changes and developments
- Korlym sales rose from $3.31 million to $10.36 million as commercialization expanded. In July 2013, Corcept moved its specialty-pharmacy business to a consignment model, with sales recognized upon delivery to patients.
- R&D expense rose 45% year over year, primarily reflecting increased activity in the Phase 3 psychotic-depression study. SG&A increased 23%, largely due to commercial infrastructure and sales, marketing and support costs.
- Corcept submitted an EU marketing authorization application for Korlym in October 2013. In January 2014, it began a Phase 1 study of mifepristone with eribulin for triple-negative breast cancer.
- Cash and working capital declined materially, while stockholders’ equity fell from $61.78 million to $21.02 million. The company reported an accumulated deficit of $292.62 million.
Outlook, risks and unusual items
- Management expected 2014 R&D spending to be approximately at the 2013 level and SG&A to increase with commercialization activity. It anticipated lower operating cash use in 2014, assuming Korlym sales growth; the filing text provided here does not state a clear numerical value for 2014 revenue guidance.
- Management expected an interim analysis of the first 226 patients in Study 14 in Q2 2014. Positive results could support an NDA submission by year-end 2014; the trial’s prior Phase 3 studies did not meet their primary efficacy endpoints, and the interim analysis carries statistical and execution risk.
- Corcept depended on single-source suppliers for Korlym’s active ingredient and tablets. Its API agreement with PCAS was due to expire March 31, 2014; AAI’s tablet facility still required successful validation batches and a long-term supply agreement was under negotiation.
- The Biopharma agreement requires payment of 20% of covered-product sales, with scheduled quarterly caps in 2014 and 2015; the rate can rise to 50% and caps can lapse after specified uncured breaches. A change of control or certain U.S. licensing arrangements can accelerate the remaining amount due, up to the $45 million cap.
- Corcept reported a $4.52 million non-operating expense in 2013, primarily reflecting accretion of interest on the Biopharma obligation. It also disclosed $3.2 million of discretionary bonuses approved in February 2014, to be expensed in Q1 2014.
- Other key risks include uncertain physician adoption and reimbursement, competition, regulatory and clinical-trial uncertainty, mifepristone-related public perception, and potential dilution or financing constraints. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Korlym’s sales trajectory, patient access, reimbursement, return reserves and the concentration or credit quality of receivables.
- 2014 revenue guidance and cash-use assumptions, including whether commercial growth can offset higher commercialization and development costs.
- Study 14 interim-analysis results, the required statistical threshold, and any resulting change in trial timing or regulatory plans.
- Renewal of API supply, completion of AAI validation, manufacturing capacity and the full commercial cost of goods as previously expensed inventory is used.
- Biopharma payment calculations, covenants, security interests and potential acceleration under a change of control.
- The company’s audited financial statements received an unqualified audit opinion; management and the auditor also reported effective internal control over financial reporting as of December 31, 2013.