Business context and reporting period
Corcept Therapeutics Incorporated filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2014. The company commercializes Korlym (mifepristone) in the United States for a specified group of adults with endogenous Cushing’s syndrome and continues clinical development of mifepristone and selective glucocorticoid receptor antagonists.
Financial performance and position
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Net product sales | $7.282 million | $2.634 million | $17.537 million | $6.242 million |
| Cost of sales | $0.235 million | $0.040 million | $0.624 million | $0.082 million |
| Research and development | $3.047 million | $5.155 million | $14.583 million | $13.903 million |
| Selling, general and administrative | $9.103 million | $7.179 million | $26.872 million | $23.723 million |
| Operating loss | $(5.103) million | $(9.740) million | $(24.542) million | $(31.466) million |
| Net loss | $(6.006) million | $(10.906) million | $(27.488) million | $(34.887) million |
| Basic and diluted loss per share | $(0.06) | $(0.11) | $(0.27) | $(0.35) |
- Sales increased substantially year over year, while losses narrowed. Q3 R&D declined 40.9%; nine-month R&D rose 4.9%. SG&A increased 26.8% in Q3 and 13.3% year to date, including higher staffing and commercial costs and 2014 bonuses.
- Reported cost of sales was 3.2% of sales in Q3 and 3.6% year to date, versus 1.5% and 1.3% in the comparable 2013 periods. The company cautioned that these figures do not reflect the full production cost of product sold, because certain materials and manufacturing costs had been expensed before FDA approval.
- Cash and cash equivalents were $26.780 million at September 30, 2014, down from $54.877 million at December 31, 2013. Nine-month operating cash use was $25.973 million, compared with $29.392 million in 2013. Investing cash use was $0.174 million; financing cash use was $1.950 million.
- Total assets were $37.159 million and total current liabilities were $12.486 million. Stockholders’ equity was a deficit of $1.317 million, compared with positive equity of $21.017 million at year-end 2013.
- The Biopharma capped-royalty obligation had a $34.651 million carrying value ($8.661 million current; $25.990 million long-term). The aggregate repayment cap is $45 million; $4.313 million had been paid through September 30, with a further $1.6 million paid in October. Payments generally equal 20% of covered-product sales and certain licensing receipts, subject to terms and caps.
Material changes, outlook and commentary
- Management said it believed the company would reach cash-flow breakeven without additional fundraising, while noting it could choose to raise capital and that financing might not be available on acceptable terms. Cash use for the remainder of 2014 and future periods was expected to be significantly lower than comparable 2013 periods, as Korlym receipts grow relative to spending and financing payments.
- Management expected Q4 2014 R&D expense to be significantly below Q4 2013 following termination of the psychotic-depression study; Q4 SG&A was expected to be approximately level with Q4 2013. The filing refers to 2014 net-revenue guidance but the supplied filing text does not provide a clear guidance amount.
- Study 14, a Phase 3 trial of mifepristone for psychotic depression, was discontinued in May 2014 after interim review indicated it was unlikely to meet its primary endpoint with statistical significance. Management said resources would be redirected to other programs.
- The Phase 1 study of mifepristone plus chemotherapy for triple-negative breast cancer was enrolling; results were expected in 2015. Enrollment also began in September 2014 in a Phase 1 study of CORT125134, a selective GR-II antagonist. The company planned to advance at least one additional compound into clinical development over the following year.
- The EU marketing application for Korlym was submitted in October 2013. The filing identifies clinical, regulatory, reimbursement, commercialization, manufacturing, intellectual-property and financing uncertainties. Korlym’s active ingredient and tablet supply each relied on a single-source manufacturer, although new long-term supply agreements were entered in 2014.
- No material legal proceedings or off-balance-sheet arrangements were reported. Management assessed disclosure controls as effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent Korlym sales growth, payer coverage and patient uptake against the company’s 2014 revenue guidance; the guidance figure is not clear in the supplied text.
- Cash consumption, cash-flow progress and the timing and amount of Biopharma payments, including the October 2014 payment.
- Whether the reported low cost-of-sales ratio persists as previously expensed inventory is consumed and production costs change.
- Progress and results for the triple-negative breast cancer and selective GR-II antagonist programs, including CORT125134.
- Manufacturing continuity and regulatory compliance at the single-source API supplier and tablet manufacturer.
- Potential dilution and future share supply: 101.141 million common shares were outstanding at September 30, 2014; 14.890 million options and 8.044 million warrants were outstanding and excluded from diluted loss per share as antidilutive.