Corcept Therapeutics Incorporated — 2014 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014. The filing also reports unaudited fourth-quarter results. This is an annual filing, not a standalone quarterly report. Amounts below are in U.S. dollars.
Business context
Corcept is a pharmaceutical company focused on drugs that modulate cortisol activity. Its marketed product, Korlym (mifepristone), is approved in the United States for certain adults with endogenous Cushing’s syndrome and hyperglycemia. The company’s revenue was generated from Korlym; it had no other marketed products. Its development pipeline included a Phase 1/2 study of Korlym with eribulin for GR-positive triple-negative breast cancer and a Phase 1 study of selective GR antagonist CORT125134.
Financial performance and liquidity
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Net product sales | $26.6 million | $10.4 million |
| Cost of sales | $0.9 million | $0.1 million |
| Gross profit on product sales | $25.7 million | $10.2 million |
| Gross margin | 96.7% | 98.6% |
| Research and development expense | $18.4 million | $20.5 million |
| Selling, general and administrative expense | $34.9 million | $31.2 million |
| Loss from operations | $(27.6) million | $(41.5) million |
| Net loss | $(31.4) million | $(46.0) million |
| Net loss per share, basic and diluted | $(0.31) | $(0.46) |
| Net cash used in operating activities | $27.4 million | $37.1 million |
| Cash and cash equivalents at year-end | $24.2 million | $54.9 million |
| Working capital at year-end | $16.7 million | $45.6 million |
| Total assets at year-end | $34.6 million | $63.1 million |
| Stockholders’ equity (deficit) at year-end | $(3.4) million | $21.0 million |
Net sales increased approximately 156% year over year. Gross margin is based on reported cost of sales; it benefited from sales of inventory whose pre-approval manufacturing costs had been expensed previously. The company said the majority of that pre-approval material had been consumed by year-end and expected future cost of sales to include the full product cost.
Cash and cash equivalents fell by $30.6 million during 2014. Operating cash use was partly offset by $1.8 million from option exercises; financing cash outflows included $4.9 million of payments under the Biopharma agreement. The filing reports no off-balance-sheet arrangements.
The Biopharma financing agreement provided $30.0 million in 2012 and requires payments totaling up to $45.0 million, principally 20% of covered-product net sales and certain licensing or contingent receipts. Corcept had paid $5.9 million through year-end and made a further $1.9 million payment in February 2015. The reported obligation carrying value was $33.9 million at December 31, 2014, including $9.4 million current and $24.5 million long-term. A change of control or specified U.S. licensing event can accelerate the remaining obligation.
Fourth-quarter results and changes versus prior period
- Q4 2014 net product sales were $9.0 million, compared with $4.1 million in Q4 2013.
- Q4 2014 gross profit was $8.8 million, compared with $4.1 million in Q4 2013.
- Q4 2014 net loss was $3.9 million, or $0.04 per share, compared with a net loss of $11.1 million, or $0.11 per share, in Q4 2013.
- For the full year, net loss narrowed by $14.6 million, while operating expenses increased by $2.3 million. Lower R&D spending, including reduced psychotic-depression trial costs, was partly offset by higher commercialization and administrative spending.
- Operating cash use improved by $9.7 million year over year, but year-end cash declined substantially as the company funded operations and made Biopharma payments.
Outlook, commentary, risks and unusual items
- Management expected 2015 R&D expense to be lower than in 2014, as costs for the oncology and CORT125134 studies would only partly offset savings from stopping the psychotic-depression Phase 3 study. It expected commercialization-related SG&A to be slightly higher. The filing refers to 2015 net-revenue guidance but does not provide a clear numerical value.
- Management expected cash use in 2015 and subsequent periods to be significantly below 2014 levels and stated its belief that the company could reach cash-flow breakeven without additional fundraising. It also cautioned that additional funding might be sought and could be unavailable on acceptable terms.
- In May 2014, Corcept discontinued its Phase 3 mifepristone trial for psychotic depression after the data monitoring committee concluded the primary endpoint was unlikely to be met with statistical significance. The company said it would redeploy resources to other programs.
- Corcept completed the dose-finding portion of the Korlym/eribulin breast-cancer study and began its efficacy phase, planned for 20 patients. It expected results by year-end 2015. This small study was not considered sufficient to establish safety or efficacy definitively or, by itself, to support approval.
- CORT125134 entered Phase 1 in September 2014; results were expected in Q2 2015. The company planned to advance at least one additional selective GR antagonist into clinical development over the following year.
- The EMA marketing application for Korlym in the EU, submitted in October 2013, remained subject to regulatory review.
- Key risks include dependence on Korlym for revenue; uncertain adoption, coverage and reimbursement; ongoing losses and reduced liquidity; a single-source supplier for both the active ingredient and tablets; clinical and regulatory uncertainty; competition; and patent, product-liability and healthcare-compliance risks. Mifepristone’s association with pregnancy termination may also affect acceptance and distribution.
- The company reported no material legal proceedings. The financial statements received an unqualified audit opinion; management and the auditor concluded internal control over financial reporting was effective as of December 31, 2014.
Most important facts for investors to verify
- Korlym sales growth, patient uptake, net pricing, payer coverage and reimbursement—and whether the company’s separate 2015 revenue guidance supplies the numerical target omitted from this filing.
- Cash runway and the assumptions behind management’s cash-flow-breakeven expectation, given year-end cash of $24.2 million, ongoing operating losses and the Biopharma payment burden.
- Reported gross margin versus the fully loaded future cost of Korlym, after previously expensed pre-approval manufacturing costs are no longer available to offset cost of sales.
- Progress, enrollment, safety findings and efficacy results for the breast-cancer and CORT125134 trials, as well as the timing and outcome of the EU application.
- Supply continuity and inventory sufficiency with single-source manufacturers, and compliance with the Biopharma agreement’s covenants and acceleration provisions.