Corcept Therapeutics Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Financial statement amounts are in millions of dollars unless otherwise noted. Corcept commercializes Korlym (mifepristone) for certain adults with endogenous Cushing’s syndrome and develops other cortisol-modulating drug candidates.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Net product revenue | $16.061 | $10.102; up 59% |
| Cost of sales | $0.403 | $0.302 |
| Gross margin | Approximately 97.5% | Approximately 97.0% |
| Research and development | $4.634 | $4.377 |
| Selling, general and administrative | $10.432 | $9.453 |
| Operating income (loss) | $0.592 | $(4.030) |
| Interest and other expense | $(0.611) | $(0.800) |
| Net income (loss) | $(0.019) | $(4.830) |
| Cash from (used in) operating activities | $3.297 | $(1.777) |
- Revenue growth was attributed primarily to increased sales volume and price increases. Operating expenses rose 9.5% overall; R&D increased 5.9%, while SG&A increased 10.4%.
- Cash and cash equivalents were $40.744 million at March 31, versus $40.435 million at December 31, 2015. Current assets were $50.514 million and current liabilities $24.025 million; the current ratio was approximately 2.1.
- Cash increased by $0.309 million during the quarter. Investing activities used $0.022 million; financing activities used $2.966 million, including $3.041 million of payments on the Biopharma obligation.
- The Biopharma financing agreement has a fixed total repayment cap of $45 million. Corcept had paid $18.1 million through March 31 and made a further $3.3 million payment in April. The balance-sheet obligation was $25.041 million, split between $16.322 million current and $8.719 million long-term. Management expected full repayment in 2017.
- Accumulated deficit was $330.4 million. The company reported no off-balance-sheet arrangements.
Material changes and unusual items
- Corcept began recognizing specialty-distributor sales when sold to the distributor, effective January 1, 2016; previously recognition occurred upon the distributor’s subsequent sale. Such sales were less than 2% of Q1 revenue.
- In April, the board approved $2.5 million in bonuses to officers and employees for achievement of a milestone tied to starting the CORT125134 solid-tumor cancer trial. The expense is expected in Q2 2016.
- Corcept retrospectively adopted new debt-issuance-cost presentation guidance, netting those costs against the related obligation on the balance sheet.
Outlook, management commentary and risks
- Management said Korlym revenue supported operations and expected to fund current plans without additional capital, while noting it could raise funds for strategic priorities. The filing refers to 2016 net-product-revenue guidance but does not provide a clear guidance amount in the supplied text.
- Management expected R&D spending to increase as trials and discovery programs advance. Plans included reporting results from the Korlym/eribulin Phase 1/2 trial for metastatic triple-negative breast cancer by mid-2016; beginning a CORT125134 Phase 2 Cushing’s syndrome trial in Q2; and continuing CORT125134 development in solid tumors.
- Key risks include reliance on Korlym as the principal revenue source; uncertain adoption, insurance coverage and reimbursement; competition; regulatory and clinical-trial uncertainty; and dependence on single-source suppliers for Korlym’s active ingredient and tablets.
- The Biopharma agreement requires payments equal generally to 20% of covered product receipts until the cap is reached. Certain covenant breaches can increase the payment percentage to 50% and remove caps; a change of control or specified U.S. licensing transaction can accelerate the remaining amount.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. Corcept reported no material legal proceedings.
Most important facts for investors to verify
- Whether Korlym revenue growth, pricing and patient access support the company’s reported expectations and any separately issued 2016 revenue guidance.
- Whether operating cash flow remains positive after working-capital movements and payments under the Biopharma agreement.
- Progress, enrollment, safety and results for the Korlym/eribulin and CORT125134 trials, including whether trial outcomes require additional spending or larger studies.
- Ongoing supply availability and regulatory compliance at the two single-source Korlym manufacturers.
- The timing and terms of remaining Biopharma payments, including the April 2016 payment and any acceleration or covenant provisions.