Corcept Therapeutics Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. Amounts are in U.S. dollars; financial statement figures are in millions unless noted. Corcept was a development-stage pharmaceutical company transitioning to commercialization after FDA approval of Korlym on February 17, 2012. The company released Korlym for sale on April 10, after quarter-end.
Financial performance and position
| Metric | Q1 2012 | Q1 2011 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.542 | $4.924; down 28% |
| Selling, general and administrative expense | $7.487 | $2.174 |
| Total operating expenses | $11.029 | $7.098 |
| Net loss | $11.034 | $7.101 |
| Basic and diluted loss per share | $0.13 | $0.09 |
| Net cash used in operating activities | $10.157 | $7.295 |
At March 31, cash and cash equivalents were $42.627 million, versus $39.635 million at December 31, 2011; working capital was $39.2 million. Total assets were $42.887 million, total current liabilities $3.570 million, and stockholders’ equity $39.317 million. The filing reports no outstanding debt balance. No meaningful operating margin is presented because the company had no quarterly revenue and incurred an operating loss.
Cash increased $2.992 million during the quarter: operating activities used $10.157 million, investing activities used $0.007 million, and financing activities provided $13.156 million. Financing included approximately $12.9 million of net proceeds from warrant exercises and replacement warrant sales, plus approximately $0.267 million from other warrant exercises.
Material changes and unusual items
- SG&A rose substantially as Corcept prepared to launch Korlym, including increased commercialization staffing and professional services. Q1 SG&A included approximately $1.3 million of non-cash performance-based option expense following FDA approval and approximately $1.6 million in employee bonuses tied to approval.
- R&D declined, mainly because prior-year NDA preparation, Korlym manufacturing development, and certain clinical work were higher in Q1 2011. Spending on the psychotic-depression phase 3 study increased modestly.
- The March financing included exercise of approximately 4.2 million existing warrants at $2.96 per share and issuance of replacement warrants covering approximately 4.2 million shares at $4.05 per share, exercisable through March 29, 2015. The transaction was partly purchased by entities affiliated with directors and significant stockholders.
- There was no collaboration revenue in Q1; legacy Eli Lilly-funded study activities had ended by mid-2009.
Outlook, risks and contingencies
- Management expected available capital to fund operations through Q1 2013, including the Korlym launch and planned clinical and research programs. It warned that additional financing might be needed thereafter and could be unavailable or dilutive.
- Management expected operating cash use and SG&A to increase during the remainder of 2012 as commercialization expands. It forecast lower full-year 2012 R&D than in 2011, as reduced Cushing’s syndrome study costs were expected to outweigh increases in other programs.
- Key execution risks include Korlym adoption, pricing and reimbursement, and the company’s ability to build commercial capabilities. Corcept had no established product-sales revenue in the reported quarter.
- Manufacturing is a material risk: the company relied on a single API supplier and a single tablet supplier. The tablet supplier planned to suspend commercial production temporarily in Q4 2012 while relocating; a potential backup tablet manufacturer had completed stability batches and analytical methods, but FDA approval as an alternate source was not assured. The API supply agreement was due to expire in November 2012, and extension discussions had begun.
- Corcept had approximately $3.9 million of purchase commitments for 2012: $2.8 million for mifepristone API and $1.1 million for Korlym tablets.
- The phase 3 trial of mifepristone for psychotic depression continued. Enrollment had been slower than anticipated, and the filing cautioned that trial results, timing, and eventual regulatory approval were uncertain. FDA approval of Korlym also required post-marketing studies, including a ketoconazole interaction study and a drug-utilization study.
- The filing identified risks from potential side effects, competition, regulatory and patent uncertainty, limited product-liability insurance, and the political and public perception of mifepristone. No material legal proceedings were reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Korlym’s commercial launch, early sales, physician uptake, and patient access and reimbursement after April 10, 2012.
- Whether the company maintained its stated cash runway through Q1 2013, considering launch costs, clinical spending, and actual sales.
- Progress in extending API supply and obtaining FDA approval for the backup tablet manufacturer ahead of the planned Q4 supplier relocation.
- Enrollment and outcome timing for the psychotic-depression phase 3 study, and required Korlym post-marketing studies.
- Potential dilution from warrants and other equity financing; the filing reported 88,616,768 common shares outstanding on May 1, 2012.