CORCEPT THERAPEUTICS INC annual report, FY2015

Business context and reporting period

Corcept Therapeutics’ Form 10-K covers the fiscal year ended December 31, 2015; the filing also reports unaudited fourth-quarter results. The company develops cortisol-modulating medicines and commercializes Korlym (mifepristone) in the United States for a specified group of adults with endogenous Cushing’s syndrome. Its pipeline includes mifepristone for triple-negative breast cancer (TNBC) and selective cortisol modulators, including CORT125134.

Financial performance and liquidity

Net product sales rose approximately 89% year over year, primarily on higher sales volume. Fourth-quarter 2015 sales were $15.0 million, and the company recorded quarterly net income of $959,000 after losses in the first three quarters. FY 2015 GAAP loss per share was $0.06; the company’s adjusted non-GAAP measure showed net income of $2.5 million, excluding specified non-cash stock compensation and financing-agreement interest accretion.

At year-end, cash and cash equivalents were $40.4 million, working capital was $28.1 million, total assets were $51.9 million, and stockholders’ equity was $18.5 million. The Biopharma financing obligation had a $27.5 million carrying value, including $15.0 million classified as current; its total repayment cap is $45.0 million. The company had paid $15.1 million by year-end and paid a further $3.0 million in February 2016. Operating cash flow improved substantially, while financing cash flow included $17.1 million from warrant exercises and $5.2 million from option exercises. Outstanding common shares rose to 109.6 million at year-end from 101.4 million a year earlier.

Material changes versus the prior comparable period

• Revenue increased from $26.6 million to $50.3 million, while the gross margin remained high and edged up.
• Net loss narrowed by about $25.0 million; operating loss also declined substantially as sales grew.
• R&D expense fell 16%, mainly reflecting the 2014 discontinuation of the Phase 3 psychotic-depression trial; increased TNBC, drug-interaction, and selective-modulator work partly offset the reduction.
• SG&A increased about 6%, reflecting sales-force growth and higher commercial infrastructure costs, partly offset by lower sales and marketing costs.
• Cash and cash equivalents increased $16.2 million. Operating cash generation and warrant/option proceeds were offset in part by $9.2 million of payments under the Biopharma agreement.

Outlook, commentary, risks, and unusual items

Management expected 2016 R&D and SG&A expenses to exceed 2015 levels as clinical programs and Korlym commercialization expand. Planned development included reporting TNBC trial results by mid-2016 and starting Phase 2 CORT125134 trials for Cushing’s syndrome and solid-tumor cancers by the end of the first quarter of 2016. Management stated that current plans were expected to be funded without additional capital, but noted that financing could still be sought; a numeric 2016 revenue guidance value is not provided in the supplied filing text.

• Commercial performance depends heavily on Korlym adoption, reimbursement and continued access to a small Cushing’s syndrome market; competition and potential safety findings could impair sales.
• Manufacturing relies on single-source suppliers for both mifepristone API and Korlym tablets, creating supply and quality risks.
• Clinical and regulatory outcomes remain uncertain; early trial results may not predict success in larger trials or approval.
• The Biopharma agreement directs 20% of covered product sales and certain licensing proceeds to repayment, up to $45 million. Certain breaches can raise the rate to 50%; a change of control or specified U.S. licensing can accelerate the unpaid balance.
• The company reported no material legal proceedings. Management and the independent auditor concluded internal control over financial reporting was effective at year-end; the financial statements received an unqualified audit opinion.

Important facts for investors to verify

• Korlym sales growth, patient access, reimbursement deductions, and the sustainability of the reported gross margin.
• Progress, enrollment, safety, and results of the TNBC and CORT125134 trials, including whether planned timelines were achieved.
• Cash burn and funding needs as planned R&D and commercial spending rise; confirm the precise revenue guidance from the relevant company release, as its amount is not clear in the supplied filing text.
• Remaining Biopharma repayments, covenant compliance, payment acceleration terms, and the effect of the agreement on cash available to shareholders.
• Single-source supplier continuity and inventory adequacy, plus dilution from outstanding options and future equity awards.