Corcept Therapeutics Incorporated — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; balance-sheet comparisons are to December 31, 2012. The filing was signed May 8, 2013. Corcept is a pharmaceutical company developing and commercializing treatments for metabolic and psychiatric disorders. Its commercial product, Korlym (mifepristone), was approved in the U.S. for a defined Cushing’s syndrome-related indication and launched in April 2012.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Net product sales | $1.717 million | No sales |
| Cost of sales | $0.020 million | No cost of sales |
| Research and development | $4.257 million | $3.542 million |
| Selling, general and administrative | $8.383 million | $7.487 million |
| Operating loss | $10.943 million | $11.029 million |
| Interest and other expense | $1.141 million | $0.005 million |
| Net loss | $12.084 million | $11.034 million |
| Basic and diluted loss per share | $0.12 | $0.13 |
| Cash used in operating activities | $11.554 million | $10.157 million |
- Cash and cash equivalents were $81.460 million at March 31, down from $93.032 million at year-end. Current assets were $84.201 million and current liabilities $8.243 million.
- The company reported an accumulated deficit of $258.690 million. It had no net cash proceeds from financing activities in Q1 2013; Q1 2012 financing included $13.156 million from common stock and warrants.
- The Biopharma capped-revenue financing had a $32.795 million carrying value, including accrued interest, and a maximum repayment obligation of $45 million. Payments are generally 20% of covered-product sales and certain contingent receipts, subject to terms and caps; first payment was due in July 2013. Q1 interest expense included $1.115 million of non-cash accretion.
- Reported cost of sales was only 1.2% of sales, but management cautioned that this does not reflect the full production cost: much of the materials and manufacturing costs for product sold had been expensed before FDA approval.
Material changes versus the prior period
- Korlym generated its first reported quarterly sales, $1.717 million, versus none in Q1 2012. Management said sales forecasting remained difficult given limited commercialization experience.
- R&D rose 20% year over year, mainly reflecting increased spending on the psychotic-depression Phase 3 study and selective GR-II antagonist programs; some prior-year approval-related bonuses affected the comparison.
- SG&A rose 12%, reflecting commercialization and infrastructure spending. Q1 2012 included FDA-approval-related cash bonuses and $1.3 million of performance-based stock compensation; excluding those items, 2013 staffing and commercialization costs were higher.
- Net loss increased despite a slightly narrower operating loss, principally because of interest accretion under the 2012 Biopharma financing.
Outlook, management commentary and key risks
- Management expected R&D and SG&A expenses, as well as operating cash use, to increase during the remainder of 2013. Drivers include expanding the psychotic-depression Phase 3 trial, developing selective GR-II antagonists, and continuing Korlym commercialization. Korlym revenue was expected to offset only part of spending; the company provided no revenue forecast.
- Study 14 enrollment was ongoing. The company’s goal was sufficient enrollment by year-end 2013 to permit a possible interim analysis; it had 23 active sites as of May 1, 2013. The timing, whether an analysis would occur, and the outcome were uncertain.
- Manufacturing and supply are concentrated: the filing describes a single-source API supplier and highlights the need to secure supply agreements and qualify manufacturing capacity. The original tablet manufacturer had suspended production while relocating; the second tablet site had FDA approval, but a commercial supply agreement was still being negotiated.
- Sales concentration is significant: 98.5% of Q1 2013 sales were to one specialty-pharmacy customer. Demand, physician adoption, reimbursement, product returns and competition could affect revenue.
- The company may need additional capital and stated funding might not be available on acceptable terms. Additional equity could dilute shareholders; debt could impose restrictive terms. Management also warned that the Biopharma payment obligations, covenant breaches, or acceleration upon specified events could adversely affect liquidity.
- Other principal risks include clinical-trial delays or failure, regulatory and post-marketing requirements, product safety and liability, competition, intellectual-property disputes, and public perception of mifepristone. No material legal proceedings were reported. Management said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent Korlym sales, customer concentration, reimbursement and patient demand, and whether revenue growth supports commercialization costs.
- Execution and timing of API and tablet supply agreements, manufacturing capacity, and adequacy of strategic inventory.
- Study 14 enrollment progress, interim-analysis plans and results, and the cost and timing of the Phase 3 program.
- Cash burn and funding needs against the $81.460 million quarter-end cash balance, including Biopharma payments beginning in July 2013 and the agreement’s covenants and acceleration provisions.
- Whether reported product economics improve as pre-approval inventory is consumed and full manufacturing costs enter cost of sales.