Corcept Therapeutics Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Unaudited interim financial statements. Corcept commercializes Korlym for a defined group of adults with endogenous Cushing’s syndrome and is developing additional cortisol-modulating medicines.
Financial performance
| Metric | Three months ended Sept. 30, 2015 | Three months ended Sept. 30, 2014 | Nine months ended Sept. 30, 2015 | Nine months ended Sept. 30, 2014 |
|---|---|---|---|---|
| Net product revenue | $13.3m | $7.3m | $35.3m | $17.5m |
| Cost of sales | $0.3m | $0.2m | $1.0m | $0.6m |
| Research and development | $3.6m | $3.0m | $11.3m | $14.6m |
| Selling, general and administrative | $9.3m | $9.1m | $28.1m | $26.9m |
| Operating income (loss) | $0.1m | $(5.1)m | $(5.1)m | $(24.5)m |
| Net income (loss) | $(0.6)m | $(6.0)m | $(7.4)m | $(27.5)m |
| Basic and diluted loss per share | $(0.01) | $(0.06) | $(0.07) | $(0.27) |
Revenue rose about 82% in Q3 and doubled for the nine-month period, which management attributed to higher sales volume and price increases. Gross margin was approximately 98% in Q3 and 97% for the nine months, versus approximately 97% and 96%, respectively, in 2014. Nine-month R&D declined 22% primarily because the Phase 3 psychotic-depression trial was discontinued in May 2014; spending on new compounds increased. SG&A increased 4.5% for the nine months, mainly due to staffing and consulting costs.
Financial position and cash flow
- Cash and cash equivalents were $36.5m at September 30, 2015, up from $24.2m at December 31, 2014. Current assets were $45.2m and current liabilities $18.8m.
- Nine-month operating cash use was $1.0m, compared with $26.0m in 2014; investing cash use was $0.03m. Financing provided $13.3m, including $19.7m of net proceeds from exercises of options and warrants, offset partly by $6.4m of payments under the Biopharma financing agreement.
- The Biopharma capped-royalty obligation has a fixed maximum repayment of $45.0m. The balance sheet reported $13.5m current and $16.1m long-term, or $29.6m in total carrying value. Corcept had paid $12.3m through September 30 and made a further $2.8m payment in October. Payments generally equal 20% of covered-product net sales, subject to terms and caps; a change of control can accelerate the unpaid amount.
- Stockholders’ equity was $13.5m, compared with a deficit of $3.4m at year-end 2014. The increase included warrant exercises and other equity activity.
Outlook, developments and risks
- Management expected cash-flow breakeven without additional fundraising, based on anticipated Korlym revenue and current development plans, but said it may raise funds for strategic priorities. No specific 2015 revenue guidance amount is stated in the supplied filing text.
- Corcept expected initial efficacy results from its Korlym/eribulin Phase 1/2 triple-negative breast cancer study by year-end 2015. It planned to start Phase 2 studies of CORT125134 in Cushing’s syndrome and an oncology indication in Q1 2016, and to advance at least one other next-generation compound toward clinical development in 2016.
- Management expected R&D spending to increase as trials and discovery programs advance; SG&A could also rise as the commercial business grows. Forecasts depend on Korlym adoption, insurance coverage and reimbursement, trial outcomes, enrollment, regulatory requirements, and manufacturing supply.
- Key risks include dependence on Korlym as the principal source of near-term revenue; single-source suppliers for the active ingredient and tablets; competition and reimbursement pressure; clinical and regulatory uncertainty; and the financing agreement’s payment, covenant, collateral and acceleration provisions. Corcept also disclosed that mifepristone’s association with pregnancy termination may affect public perception and commercial acceptance.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and no material change in contractual obligations during the nine months. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether Korlym revenue growth, pricing and patient access persist, and how rebates, chargebacks and patient assistance affect net revenue.
- Whether the cash-flow-breakeven expectation remains realistic after planned increases in R&D and commercial spending, and whether additional capital is needed.
- Progress and results of the triple-negative breast cancer trial and the timing and cost of planned CORT125134 studies.
- Future Biopharma payments and the effect of the agreement’s covenants, payment caps, collateral and change-of-control acceleration on liquidity and strategic options.
- Reliability of the two single-source Korlym manufacturers and the adequacy of inventory to meet demand.
- Potential shareholder dilution: March 2015 warrant exercises generated approximately $17.1m net proceeds, including exercises by entities affiliated with directors; shares outstanding increased during the period.