Corcept Therapeutics Incorporated — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; filed May 8, 2015. Financial statement amounts below are in U.S. dollars. Corcept commercializes Korlym for a defined group of adults with endogenous Cushing’s syndrome and is developing additional cortisol-modulating therapies.
Financial performance
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Net product revenue | $10.102 million | $4.405 million |
| Cost of sales | $0.302 million; 3.0% of revenue | $0.174 million; 4.0% of revenue |
| Research and development | $4.377 million | $7.285 million |
| Selling, general and administrative | $9.453 million | $9.805 million |
| Operating loss | $4.030 million | $12.859 million |
| Interest and other expense | $0.800 million | $1.071 million |
| Net loss | $4.830 million; $0.05 per share | $13.930 million; $0.14 per share |
| Net cash used in operating activities | $1.777 million | $11.060 million |
Revenue increased approximately 129%, driven primarily by higher Korlym sales volume and price increases. Gross profit was approximately $9.8 million, or 97.0% of net product revenue. The filing does not provide a separate reported operating margin.
Liquidity, debt and capital
- Cash and cash equivalents were $37.953 million at March 31, 2015, up from $24.248 million at December 31, 2014. Current assets were $44.186 million and current liabilities were $15.526 million.
- Cash rose primarily because March warrant exercises generated approximately $17.1 million in net proceeds (the MD&A describes approximately $17.2 million received). About 3.1 million shares issued in the exercises, generating $5.9 million gross proceeds, went to entities affiliated with directors.
- Corcept used $1.777 million in operating cash and $0.034 million in investing cash; financing activities provided $15.516 million, including $17.381 million in reported net proceeds from equity exercises and $1.865 million in payments on the financing obligation.
- The Biopharma capped-royalty obligation had a $32.8 million carrying value, including $10.658 million classified current. The agreement requires aggregate payments up to $45 million; $7.7 million had been paid through March 31, with a further $2.1 million payment made in April. Payments generally equal 20% of covered-product sales, subject to contractual terms and caps.
- Stockholders’ equity was $10.572 million, versus a $3.388 million deficit at year-end, reflecting the equity proceeds. Accumulated deficit was $328.830 million. Common shares outstanding were 107,754,561 on May 1, 2015.
Changes versus the prior period
- Korlym revenue growth substantially narrowed the quarterly net loss and operating cash use compared with Q1 2014.
- R&D expense fell about 40%, mainly because the Phase 3 psychotic-depression study was discontinued in May 2014; spending on selective GR antagonists increased.
- SG&A decreased about 4%, primarily due to lower staffing and consultancy costs. Management expects commercialization-related SG&A to rise in the remainder of 2015 and beyond.
- Outstanding warrants fell to none at March 31, 2015, after the March exercises; the exercises increased shares outstanding and diluted existing shareholders.
Outlook, commentary and principal risks
- Management expects to reach cash-flow breakeven without additional fundraising under its current plans, while noting it may raise funds for strategic priorities and that additional financing may not be available on acceptable terms. The company has incurred losses since inception and may continue to incur losses.
- Management expected net cash use during the remainder of 2015 and future periods to be significantly lower than comparable 2014 periods. R&D spending was expected to be significantly lower in Q2 2015 than in Q2 2014, then increase as clinical programs advance.
- The filing refers to company guidance for 2015 net product revenue, but the guidance amount is not provided in the supplied filing text.
- The Phase 1/2 Korlym-plus-eribulin study for triple-negative breast cancer had entered its efficacy phase, with 20 patients planned; results were expected by year-end 2015. Corcept expected to advance CORT125134 into Phase 2 studies for oncology and Cushing’s syndrome in Q1 2016.
- Key risks include dependence on Korlym, uncertain physician adoption and insurance reimbursement, competition, regulatory and clinical-trial uncertainty, and reliance on single-source suppliers for the active ingredient and tablets. The filing also identifies potential mifepristone safety, manufacturing, intellectual-property, financing and Biopharma covenant risks.
- No material legal proceedings were reported. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Actual 2015 Korlym revenue against management’s guidance; the guidance figure is not clear in the supplied text.
- Whether sales growth, pricing, patient access and reimbursement support management’s cash-flow-breakeven expectation.
- Cash use, equity dilution and the timing and amount of payments under the $45 million Biopharma agreement, including the April payment.
- Progress and results of the triple-negative breast cancer efficacy phase and the planned CORT125134 development timeline.
- Supply continuity and regulatory compliance at the company’s single-source API and tablet manufacturers.