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Corcept Therapeutics Inc (NASDAQ:CORT)

Q3 2013 Earnings Conference Call

November 7, 2013 17:00 ET

Executives

Dr. Joseph Belanoff - Chief Executive Officer

Charlie Robb - Chief Financial Officer

Steven Lo - Vice President, Commercial Operations

Analysts

Charles Duncan - Piper Jaffray

Christopher James - Brinson Patrick

Operator

Welcome to the Corcept Therapeutics’ Third Quarter 2013 Financial Results and Corporate Update Conference Call. My name is Alpha and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I would now like to turn the call over to Mr. Charlie Robb. Mr. Robb, you may begin.

Charlie Robb - Chief Financial Officer

Thank you. Good afternoon. I am Charlie Rob, Corcept Therapeutics’ Chief Financial Officer. Joining me today is Dr. Joseph Belanoff, our Chief Executive Officer and Steven Lo, our Vice President of Commercial Operations.

Thank you for participating in this call. Earlier today, we issued a press release giving our third quarter summary financial results. Complete results will be available when we file our third quarter report on Form 10-Q with the Securities and Exchange Commission. To obtain a copy of this release, go to www.corcept.com and click News. Today’s call is being recorded. A replay of the call will be available through November 21 at 1-888-843-7419 in the United States and 1-630-652-3042 internationally. The pass code is 3596700.

I remind you that we will be making forward-looking statements. Forward-looking statements include, but are not limited to revenue guidance for 2013, statements regarding increased revenue expectations as the Affordable Care Act enables patients to obtain healthcare insurance, the timing of an interim analysis of data and reported results from our Phase 3 trial of mifepristone for the treatment of psychotic depression, the timing of feedback and questions from the EMA and there are timing of reported findings from the University of Chicago regarding the study in humans of mifepristone in combination with chemotherapy for the treatment of metastatic triple-negative breast cancer.

The company’s actual results may differ materially from those anticipated in these forward-looking statements. Factors that may contribute to such differences include among others the pace of Korlym’s acceptance by physicians and patients, the pace of enrollment in or the outcome of the company’s Phase 3 trial of mifepristone for the treatment of psychotic depression, the protections afforded by Korlym’s orphan drug designation by Corcept’s patent portfolio or by the company’s other intellectual property rights, the effects of rapid technological change in competition or the cost pace and success of Corcept’s product development efforts including its ability to advance its next generation selective GR-II antagonists towards human use. We are not under any duty to update forward-looking statements, unless required by law.

Before I turn the call over to Dr. Belanoff, I will recap our financial results for the third quarter. But before I do that, let me begin by apologizing for the brief delay today in the timing of our earnings release. We concluded only a short while ago our license agreement with the University of Chicago regarding the use of mifepristone and other GR antagonists in the treatment of triple-negative breast cancer and we wanted to make sure that this important piece of information was included in the release. Dr. Belanoff will address his subject in detail, but I wanted to start off by noting that.

Now to the financial results. For the third quarter of 2013, we recognized net revenue of $2.6 million compared to $1.9 million in the first quarter – in the second quarter rather, an increase of 39%. We recorded a GAAP net loss for the quarter of $10.9 million or $0.11 per share compared to a net loss of $11.9 million or $0.12 per share in the prior quarter. After adjusting for significant non-cash expenses, net loss on a non-GAAP basis was $0.08 per share compared to $0.10 per share in the prior quarter. A reconciliation of non-GAAP net loss to GAP results is included in our press release.

The company’s cash balance as of September 30, 2013 was $63.2 million compared to $72.2 million at June 30, 2013. Our guidance for the 2013 fiscal year revenue is $9.6 million. We will provide guidance for fiscal 2014 revenue at our end of year conference call in February. Based on our current plans and expectations, we believe we will reach cash flow breakeven without having to raise additional funds.

I will now turn the call over to Dr. Belanoff. Joe?

Dr. Joseph Belanoff - Chief Executive Officer

Thank you, Charlie and thank you all for joining us. Many of you are familiar with Corcept and our first product Korlym, but for those of you who are not, I will provide some background. From its founding Corcept has been dedicated to research development and commercialization of medications to treat illnesses caused by excess cortisol activity. Cortisol as many of you know is often called the body’s stress hormone. As those of you who follow the company know excess cortisol activity has been shown to be a negative factor in many diseases. The archetype of disease of cortisol excess is Cushing syndrome. The disease usually caused by a solitary tumor. If the tumor can be removed surgically the patient is cured. However, the tumor cannot be removed, the patient’s health risks are dire and the disease can be lethal.

Korlym was approved in 2012 to treat this group of patients. We have just concluded our most successful quarter. Korlym revenue grew by 40%, but more importantly we have substantial increases in new prescriptions, more prescriptions from repeat prescribers and more effective adherence from our patients. Several factors appeal the success and increase our optimism about the future. We have better identified potential prescribers of Korlym and we have gotten better at explaining Korlym’s mechanism of action.

At the end of the third quarter the FDA issued a strong warning about off label use of ketoconazole in treating Cushing syndrome. While most of the medical information in this warning was not new, it reminded physicians of the pros and cons of using ketoconazole given the availability of newly approved medications. A recent article by De Bono et al published in the peer review journal, PLoS One, has focused attention on a rarely treated group of patients with Cushing syndrome, those with the adrenal adenomas. It has been increasingly recognized that while their cases tend to manifest with more mild symptoms, the long-term consequences are troubling and often life threatening.

Now surprisingly mifepristone the active ingredient in Korlym was effective in treating these patients. The article estimates that taking into account adrenal adenoma patients more than doubles previous estimates of a number of patients with Cushing syndrome. As I have said before Korlym’s most important commercial characteristic is also what’s important medical characteristic, it works.

I also want to address Corcept’s other strategic priorities our ongoing Phase 3 study of mifepristone for the treatment of psychotic depression, potential additional indications for mifepristone and development of our next generation selective cortisol antagonists. As its name suggest psychotic depression is a severe episodic illness consist during a major depression coupled with psychosis which means illusions or hallucinations. Unlike Cushing syndrome it is not an orphan disease. Psychotic depression reflects roughly 2 million to 3 million people in the United States. People suffering from it are 70 times more likely to commit suicide and those who do not have the disease. There is no FDA approved treatment.

Our current Phase 3 trial is investigating whether Korlym administered with a dose of 1200 milligram per day for seven days will lead to a rapid and sustained improvement in these patients’ psychotic symptoms. We feel that we have learned a great deal about the relationship between Korlym’s plasma level and response rate and our use of centralized rating in this study will help improve optimum chances for success. We are working with the FDA to finalize the details of the statistical analysis plan for interim analysis of trials data. We will share the material details of our plan once they are final.

I am pleased to say that enrollment in our Phase 3 trial in psychotic depression has progressed faster than we had anticipated. We now expect to perform our interim analysis and release results in the second quarter of 2014 one quarter earlier than we had previously announced. If the results are positive we plan to submit an NDA in the fourth quarter of next year. As we discussed in previous conference calls high level academic research has shown that modulating cortisol activity may have utility in treating in many diseases. Psychiatric including alcohol dependence early Alzheimer’s disease and post traumatic stress disorder. Metabolic including antipsychotic induced weight gain and oncologic including ovarian prostate and breast cancer in combination with chemotherapy.

On our call last quarter I described the positive in vitro and in vivo animal studies conducted and published by investigators from the University of Chicago examining mifepristones used in treating models of triple negative breast cancer refractory to standard chemotherapy. And I remind you if you don’t that are no FDA approved treatments for triple negative breast cancer. Today, I am even more pleased to announce that on December 12 at the San Antonio Breast Cancer Symposium the University of Chicago investigators who will reports the results of the first human study using mifepristone to help treat this lethal cancer.

I would also like to add as Charlie mentioned earlier that we announced in our release that we have licensed patent rights from the University of Chicago which cover the use of the competitive GR antagonists, including the mifepristone in combination with chemotherapy to treat this disease.

An important chapter for Corcept’s increasingly near future is the development of our second generation compounds. We have produced more than 300 proprietary selective GR-II antagonists that like Korlym competitively block the receptor for cortisol, but do not block the progesterone receptor and therefore do not terminate pregnancy. We have selected several of these compounds for future development. Although the outcome of this work is still in the future, we hope our efforts will yield several new and important medications. So while we are pleased with the growth in this quarter’s revenue, we do not believe it tells the whole Corcept’s story. Revenues are becoming reproducible and predictable. So we now feel comfortable providing perspective revenue guidance. We see a substantial group of patients who are now doing clinically well on Korlym who are uninsured or underinsured becoming paying customers next year because of the Affordable Care Act.

Doctors understand the relative advantages of Korlym and increasingly feel comfortable prescribing it. Results from the first human study of mifepristone and a lethal variant of breast cancer will be announced in a month. Our psychotic depression study is enrolling well and we expect to announce its results in the first half of next year. Our proprietary compounds many of which are being studied pre-clinically in major academic centers will be in the clinic next year. Many of you have asked me individually when is the time to start paying attention to Corcept. The answer is now. I will stop here and answer any questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Charles Duncan from Piper Jaffray. Please go ahead.

Charles Duncan - Piper Jaffray

Hi, Joe. Thanks for taking my question and congratulations on the progress in the quarter. I wanted to ask you a question regarding that interim I am wondering if you can provide any additional color, thanks for the information on timing, but what would be the interim driven by with that psychotic depression stuff?

Dr. Joseph Belanoff

I am not sure I exactly understand your question, Charles. I mean, as you know the primary endpoint for the study has never varied and it’s been the same basically for all of our studies, a rapid and sustained reduction in psychosis. The interim analysis is really setup to see if in fact we can stop the study early because of efficacy, which is shown at that point. And I know you are quite familiar with our situation, but for those who are not, our hope is that the answer to that question will be a positive study and the answer will be robust enough that it will support the submission and then filing acceptance of the FDA shortly after. So we are really in the final details, Charles, of working out exactly kind of the technicalities of what’s going to be in the stopping arrangements for that study. And I think in the near future, we will be able to reveal that to the public, but at this moment in time, we are still in negotiations.

Charles Duncan - Piper Jaffray

Okay, that helps. The second question that I have is regarding the second generation compounds, I know that you have been working on that, can you provide any I’ll call it guidance in terms of progressing them to an IND or at least identifying a development candidate?

Dr. Joseph Belanoff

Yes, I think, excuse me, there is echo over the line, the echo is still there. Okay, very good. Yes, I want to just repeat in case anyone didn’t hear Charles question, he is asking about guidance on the second generation compounds. And as you know, we have been working on these compounds for a while just to remind people what they vary in a very prominent way from Korlym and if they don’t block for the progesterone receptor and are not potential board of fashions, but they are potent blockers of the GR-II receptor, the receptor that we blocked for cortisol for its clinical effect. And I think as some of you know, we actually already have one compound in Phase 1 with those qualities and our goal is to actually have two more next year into the clinic through their IND. And just an important characteristic and again I know this is repetitive for people who know the story very well.

But very interesting finding in the development of these drugs was that although they were designed to be centrally Korlym without progesterone antagonism, they are and they all do that. They vary from one another in interesting ways. In fact there was a recent publication in the PNAS journal about one of them CORT 108297, which really highlighted its differences from simply Korlym without progesterone antagonism. So some of the compounds appear to be better at reducing weight gain, some are better at increasing insulin sensitivity, some get into the brain, some don’t get into the brain and so they don’t all operate in exactly the same way. And our hope is that over time they will be from this library of compounds four or five will emerge for different disorders, where cortisol antagonism might have utilities, but their specific qualities point them to one disease as opposed to another. But the short answer to your question Charles is that we hope that by the end of 2013 we will have human clinical studies in progress with three of them – end of 2014 I am sorry.

Charles Duncan - Piper Jaffray

Got you. Thanks.

Dr. Joseph Belanoff

Okay. Alan (indiscernible).

Unidentified Analyst

Looking from the quarter I would like to ask couple of questions. One is congratulations on the uptick of the drug and I remember your comments from last time about turning the corner. Can you give a little commentary about what’s affecting the acceleration? Is it the familiarity of the endocrinologists to the drug or is it the ketoconazole warning or is it dropouts from the competitor drug, just provide some general color what’s offering to push this trend forward?

Dr. Joseph Belanoff

Well, I don’t think there is a single element, Alan although you have highlighted three important ones. I mean, this is truly an adoption-oriented launch and that every single physician in some sense have to be convinced with their own particular reasons before they begin the use of the medication. As I have said all along, the hardest sale was taking a doctor from zero patients treated to one patient treated. This is a drug that had a mechanism that may have not used before. It had the baggage of being the abortion pill. And so as a consequence I think that the initial uptake was slowed by that, but once doctors actually begin to use the medicine, a lot of these concerns really dropped away. I also thought we got much better at targeting patients who – targeting doctors who treat these patients we made a real in-house effort to do that. And I think that was a portion of it. I thought we really got better at communicating with these doctors specifically about what their concerns were to address their concerns about the medication.

And then I think there were some other important effects, one of which is that although I don’t think it affected third quarter very much, the warning of FDA about ketoconazole, a medication approved as an antifungal, but one that had been used for years because of the side effect essentially to treat Cushing syndrome. This warning really highlighted the issues with ketoconazole and I think it made doctors at least consider now that there were improved medications perhaps going into different direction. I think that is a portion of it. I also do think that the article that I brought forward about adrenal adenomas that’s a group of patients who have increasingly been troubling to doctors who have done very little with them, because more and more research shows that their disease while milder really is worthy a treatment, but surgery is often a dramatic treatment and drastic treatment that may create a different disease or lack of activity that’s problematic. And so I think that is just at the beginning really of being an area that we need to address with physicians. And I do think again without a great deal of information besides anecdotal, but I can’t tell you yes, we do have patients on Korlym now who previously were on Signifor. And of course we don’t know because of HIPPA rules exactly what drove them in our direction, but we do know that some of them have actually gone that group.

Unidentified Analyst

I am going to ask a question about how you are selecting the compounds that go into taking in clinic on the next generation compound. I recognized this will be – it might be a complicated answer, but what kind of things are you considering for pushing things forward, is it the particular market, particular fit of the drug or maybe even just get their pharmacokinetics of the drug or is it kind of the all the above or but I would be curious to have your comment what will be driving your choice for the indications?

Dr. Joseph Belanoff

Again, it’s not a single answer, Alan, but I think the key things are the pharmacodynamic qualities of the medication for instance a medication which didn’t get into the brain would not have great utility for a CNS disease even if it was a potent GR-II antagonist in the rest of the body, so that’s certainly a part of it. Some of it is also our own internal really knowledge. For instance, we know a lot about how to run a trial for Cushing syndrome. We know a lot about how to run a trial for psychotic depression. Those are areas, where if we have the medication, which is on the fence between one disorder or another it may push us in that direction. But mostly I think at this point, at this sort of early stage, it’s characterizing the specific qualities of each of these medications and as best we can in animal models, testing where we think the first IND should take us clinically. Alright, thank you Alan.

Unidentified Analyst

Well, thank you very much.

Dr. Joseph Belanoff

Next question?

Operator

We have Christopher James from Brinson Patrick. Please go ahead.

Christopher James - Brinson Patrick

Hi, thanks. Good afternoon and thanks for taking my question and congrats on the quarter. I think you addressed this a bit, but I was going to follow up on the ketoconazole, do you have a sense of what percentage of patients are currently taking ketoconazole off label?

Dr. Joseph Belanoff

We really don’t have a percent of what patients, we know that for years and years, ketoconazole has been the sort of go-to medication, was really all that was basically available. And so that many physicians for whatever the issues with ketoconazole, it was one that endocrinologist felt was their best medical opportunity to treat the disease. I don’t know what percentage of it is although I can tell you that anyone who has been in endocrinologic fellowship for the last 20 years is familiar with ketoconazole and they have seen their mentors prescribe it as well. So there is a sizable number of patients over the years of at least being considered for ketoconazole, the exact percent I don’t know.

Christopher James - Brinson Patrick

Great, thank you. And could you tell us about the, I don’t know, if you have addressed this earlier, but the current adherence rate for Korlym and how are endos perceiving the issue of uterine bleeding what sort of feedback are you getting from the, I think you said you have 19 sales folks now and the MSLs as well?

Dr. Joseph Belanoff

Okay. Two different questions, Chris. And I just want to make sure I understood the first one, going at one, give me the first one again.

Christopher James - Brinson Patrick

I am sorry, the current adherence rate?

Dr. Joseph Belanoff

Well, the adherence rate, yes, so we have not publicly talked about the current adherence rate, but I will give you just a little bit of feedback. And I know with your medical background, you really understand this, is that there are some medicines that you can take really and hardly know that you are taking them. And it’s really a problem as a doctor treating a patient. If someone has – taking antihypertensive medication, they might go weeks between taking the medication, not really notice a difference although that’s not what your doctors would prefer. This is a medication where people become symptomatic relatively quickly if they stop taking it. You may remember from our clinical trial that we had an essentially FDA enforced washout period between our acute study and our extension study of six weeks. And we started to get calls after a week or two from investigators that their patients were relapsing, it’s taking too long. So this disease relapses quickly in the absence of treating with this medication.

On the other hand, our patients were like everybody else in the world, they forget to refill their prescriptions, they get behind. When they get behind, they feel worse. And sometimes, that makes them not pickup the phone. So one of the interesting places where we have actually seen an increase in adherence, I think that’s been very helpful is that we now as you know last quarter switched to a different central pharmacy. And that pharmacy is really adept at dealing with this group of patients. They really specialize in orphan disorders. And I think it’s really been very much in the patient’s best interest in terms of their clinical improvement that this pharmacy in some sense is all over them to make sure that they refill their prescriptions on time and keep their medicine going. So I think that’s been a real factor. And they also think that just as time has gone along and physicians and patients have recognized at staying on the real medicine has real benefit. That’s pushed towards a high adherence rate, but specifically, we have not actually spoken to specific adherence numbers at this point.

Christopher James - Brinson Patrick

Okay.

Dr. Joseph Belanoff

And you see your second question was, go ahead Chris.

Christopher James - Brinson Patrick

I am sorry not uterine bleeding, but uterine thickening.

Dr. Joseph Belanoff

Yes, so basically, what Chris is referring to is that because the drug has quality of being a progesterone antagonist, and I think I have said this before, my anticipation was that in all patients, all women, it would cause endometrial thickening. To some reason, it doesn’t cause it in all patients, I am not really sure why and I also thought that in all patients with endometrial thickening, you get irregular vaginal bleeding. And then again it’s only a relatively low percentage of those people, again I don’t know why, but I will say this, it is a real side effect of the medication, but in the context of the medication’s benefits, it seems to be really a trade-off that patients are willing to make. At this point and I think we had announced previously, there were at least three women who decided after months and months of treatment, they were getting so much benefit from the medication that they would actually have a hysterectomy to deal with that problem and stay on the medication. Fortunately, this is not a problem for 100% of women, but it is a real issue, it is a genuine side effect of the medication and I think has to be balanced against the other clinical benefits they are receiving by physician.

Christopher James - Brinson Patrick

Okay.

Dr. Joseph Belanoff

Thanks.

Christopher James - Brinson Patrick

And then one last quick follow-up to the San Antonio Breast, can you – do you think you will be able to get any sort of orphan exclusivity in this indication potentially?

Dr. Joseph Belanoff

Yes, I think that we are actually in the process of thinking about what that would entail. And I think it’s also as you know with the orphan disorder, it’s really a question of just patient numbers. And by all of that research, we have done at this point if we decide to go in this direction there is certainly less than 200,000 people with triple-negative breast cancer.

Christopher James - Brinson Patrick

Okay, great. Thanks for taking my questions. Congrats.

Dr. Joseph Belanoff

Thank you.

Operator

Our next question comes from Steve Bryan from Bank of America. Please go ahead.

Unidentified Analyst

Hi, this is actually Sarah on for Steve. Would you kind of provide like what the average doses that most patients are now using?

Dr. Joseph Belanoff

Yes, we have not provided the average dose for patients have been using specifically, but we have actually talked about what the average dose of patients in our clinical trial was, because we think that over time, the current patients are really no different and we will move to that average dose. And for round numbers, that’s approximately 750 milligrams.

Unidentified Analyst

Okay. And then you took on – you recently took a price increase on October 1, do you expect this trend to continue maybe price increases twice a year or could you provide anymore color on that?

Dr. Joseph Belanoff

I don’t think we have a lot more color really to provide on that. We think that this is a valuable treatment and it seems to have appealed to patients. We will obviously take that into account as we look at all the other things we are thinking about.

Unidentified Analyst

Okay. And then one last one on the European market, do you have any update on transfer named-patient sales until potential approval or CHMP opinion in 1Q?

Dr. Joseph Belanoff

Just because I talked for a while and I would like to introduce and Charlie has already spoken, I’d like to also just introduce you to Steve Lo who runs all of our commercial activities and let him briefly address that question.

Unidentified Analyst

Okay.

Steven Lo

Great, thanks Joe. Sarah, I believe your question was do we have a named-patient program? We actually do. It’s through Idis. And so the bridge between the approval to now, is the fact that we do have a named-patient program which Idis is our partner. They are a well-known entity that helps distribute medicines like this to patients in those territories. And we have received some interest from these countries thus far.

Unidentified Analyst

Okay, thank you.

Dr. Joseph Belanoff - Chief Executive Officer

I think that concludes our questions. So thank you very much to all of you for listening and really looking forward to seeing you at the next easy opportunity for both of us. Thank you.

Operator

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.

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