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Corcept Therapeutics Inc. (NASDAQ:CORT)

Q1 2014 Earnings Conference Call

May 7, 2014 4:30 PM ET

Executives

Charlie Robb – CFO

Joseph Belanoff – CEO and President

Steven Lo – VP and Chief Commercial Officer

Analysts

Boris Peaker – Oppenheimer

Kimberly Lee – Janney Capital Markets

Christopher James – Brinson Patrick

Operator

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

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

Charlie Robb

Thank you. Good afternoon. My name is Charlie Rob, I’m Corcept’s Chief Financial Officer. Joining me today is Dr. Joseph Belanoff, our Chief Executive Officer and Steven Lo, our Commercial Officer.

Thank you for participating in the call. Earlier today, we issued a news release disclosing our summary first quarter financial results. Complete results will be available when we file our quarterly report on Form 10-Q with the SEC. the release also announced that, we are discontinuing our Phase 3 trial mifepristone for the treatment of psychotic depression. To get a copy of this release, go to www.corcept.com and click investor’s tab. Today’s call is being recorded. A replay of the call will be available through May 21st at 1-888-843-7419 from the United States and 1-630-652-3042 internationally. The pass code is 37151424. It will also be available at corcept.com

Before I begin, I want to remind you that, statements made in this news release other than states of historical fact are forward-looking statements. These forward-looking statements including statements regarding the magnitude or timing of Corcept’s revenue and expenses are subject to known and unknown risk and uncertainties that might cause actual results to differ materially from those expressed or implied by such statements, including the pace of Korlym’s acceptance by physicians and patients, the reimbursement decisions of government or private insurers, the pace of enrollment in or the outcome of the company’s study of mifepristone in the treatment of triple-negative breast cancer, the effects of rapid technological change in competition, the protections afforded by Korlym’s orphan drug designation or by Corcept’s other intellectual property rights, or the cost, pace and success of Corcept’s product development efforts. These and other risks are set forth in the company’s SEC filings, all of which are available from the company’s website corcept.com or from the SEC’s website www.sec.gov. Corcept disclaims any intention or duty to update any forward-looking statement made in this press conference.

Before I turn the call over to Dr. Belanoff, I will recap our financial results. Our net revenue in the first quarter of 2014 was $4.4 million, compared to $1.7 million in the same period last year. We incurred a net loss of $13.9 million or $0.14 per share for the first quarter of 2014, compared to net loss of $12.1 million or $0.12 per share for the same period in 2013. The net loss for the first quarter of 2014 and the corresponding period in 2013 each included significant non-cash expenses of $2.4 million. After adjusting for these non-cash expenses, our net loss on a non-GAAP basis was $11.5 million or $0.11 for the first quarter of 2014, compared to $9.7 million or $0.10 per share for the same period in 2013.

The first quarter of 2014 net loss also included $3.3 million in performance bonuses paid to employees. No bonuses were paid in 2013. A reconciliation from GAAP net loss to non-GAAP net loss contained in table attached to or press release. Our cash balance on March 31st was $43.3 million, compared to $54.9 million in December 31, 2013.

Based on our performance in the first quarter and our expectations for the rest of the year, we are increasing our 2014 revenue guidance from a range of $24 million to $28 million for the year for the full year to a range of $25 million to $29 million for the full year.

As we have said in prior quarters, based on our current plans and expectations which include fully funding our Cushing syndrome commercialization efforts moving forward with our study Korlym for the treatment of triple-negative breast cancer and advancing to the clinic two of our next generation compounds, 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?

Joseph Belanoff

Thank you Charlie and thank all of you for joining us. Before I discuss our Cushing syndrome franchise oncology research and development of our next generation compounds I’ll describe the results of our interim analysis of data from our Phase 3 mifepristone for the treatment of psychotic depression.

Data monitoring committee for this study has totals the results in the first 226 patients indicated that although the response rate of mifepristone is higher than response rate to placebo, the difference did not reach statistical significance and was unlikely to do so with full study enrollment of 450 patients. As a result, we are stopping this study and we will redirect our resources to more promising programs.

The study raised no safety issues. I have no quantitative information for you in regard to the analysis. All that detail will come out in time. We will certainly release it and then ultimately publish it. But there are few qualitative things I can tell you about this study for your interest. One is that, mifepristone placebo at all of the end points but again with not statistical significance. Again, as we seen in previous studies, the patients who developed the higher plasma drug level of mifepristone had greater improvement in dose with a plasma drug level of mifepristone. And last the comparator placebo in the first week and then anti-depressing alone with the remaining seven weeks of the study had a high response rate, a response rate that was exceeded again by mifepristone but not with statistical significance.

So, it is important to keep in mind of course that, we always had a broader purpose, which is to grown up by our own research and the research of academic investigators. Cortisol modulation as evidenced by mifepristone in our proprietary library next generation molecules has therapeutic potential in many illnesses. The FDA’s approval for Korlym for Cushing’s syndrome is an example of this potential. As I work with mifepristone and oncology progresses in our next generation compounds moving to the clinic, we hope to provide others. We use resources formally here to mark for psychotic depression to pursue these broader goals particularly our oncology program.

As many of you follow Corcept know, Cushing’s syndrome is caused by tumor that produces cortisol or ACTH which stimulate the body that produce cortisol. If the tumor can be removed surgically the patient is cured. However, the tumor cannot be removed, the patients can die and disease can be lethal. Korlym is approved in 2012 to treat these patients. As number of new and repeat Korlym prescribers continues to increase and their familiarity with the medicine and its benefit grow, we expect this growth to accelerate. Charlie has already mentioned, we’ve raised our 2014 revenue guidance to $25 million to $22 million for the full year.

I’d like to speak a bit about our oncology program here. Increasing evidence shows that three cancers are stimulated by the shared mechanism of excess cortisol activity. Here is a bit about each of them. Last quarter, we announced the start of our Phase 1 trial of mifepristone in combination with adrenal to treat triple-negative breast cancer, the deadly disease for which is there is no approved treatment and one that affects about 40,000 women each year.

Our study filed to work at University of Chicago investigators who reported successful findings for their own clinical trial by the mifepristone in the triple-negative breast cancer last December at the 2013 San Antonio Breast Cancer Symposium. We have licensed patient rights in the University of Chicago covering the use of the competitive GI tag including mifepristone in combination with anti-cancer agents to treat triple-negative breast cancer.

It’s fair to say that, we begin enrolling patients in our own trail and expected to report initial safety and efficacy data in the first half of 2015. There is also evident that two other deadly cancers ovarian cancer and castrate resistant prostate cancer and stimulated by excess cortisol activity. Their study is underway of mifepristone in combination with chemotherapy as a potential treatment for each of them. Those of you who follow up clinicaltrails.gov already know that University of Chicago is conducting a Phase 2 study of mifepristone in combination with enzalutamide for the treatment castrate resistant prostate cancer.

While we exploring the mifepristone’s potential in oncology, we’re about to start to development of the leading drug candidates to my library of more than 3,000 proprietary selected. Like well, these next generation compounds comparatively block to receptor for cortisol but they do not lock the progesterone receptor and do not terminate pregnancy. We planned to advance these molecules to the clinic in a next few quarters. With not yet selected, which indicates we plan to study, but triple negative breast cancer and Cushing syndrome are candidates are our other oncology psychiatric and metabolic illnesses.

To sum up, our Korlym revenue from the treatment of Cushing syndrome is on track to reach between $25 million and $29 million this year. We are redeploying funds formally for a psychotic depression program to support development of mifepristone and our next generation compound and more promising areas particularly oncology. Our many academic laboratory just continue to look explore the use mifepristone is a potential treatment for a wide range of indications. Our leading next generations molecules will into the clinic this year and next this potential treatments bring a wide range of illnesses that the mifepristone can reach. We look forward to a productive year and I’ll stop here and answer any questions.

Question-and-Answer Session

Operator

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions]. And we have Boris Peaker from Oppenheimer online questions. Please go ahead.

Boris Peaker – Oppenheimer

Hi. Good evening and thanks for taking my questions. So with Korlym, could you just kind a breakdown in terms of the growth of the top-line? How much of that came from price versus demand and into the same context, how aggressive you planned to be with pricing over the next several years?

Joseph Belanoff

Charlie?

Charlie Robb

Yes. With respect to pricing, we get over price increase in the quarter, toward the end of the quarter and pricing is something that is a matter of policy we consider continually. We do not have any set plans for the future price increases but it is something that we look at every quarter. As for the percentage of growth from the quarter that was attributable to the price increase, I would say approximately 50% of the growth came from the price increase and the balance from other factors.

Boris Peaker – Oppenheimer

Okay. I see. Now, I just have a pipeline question as well. Looking at your earlier stage chart of ingenious. I’m just curious now that you’re investigating Korlym in various indications and some in different tumor types, would you also investigate your earlier stage ingenious in some of these malignancies and if so you’re going pick one for each separate malignancy and how do you see transitioning your pipeline into the oncology space?

Charlie Robb

Yes. Thank you, Boris. I understand your question and just to repeat it broadly I think what you’re asking is what we’re doing with our next generation compound in regard to oncology? And I just have to give a little bit of pre-amble before I answer that question which has been a really interesting thing that we found overtime.

So there will be initial plan for our next generation compounds were essentially to discover mifepristone without progesterone ingenious and so cortisol kind of modulator wasn’t in a board of fashion. It’s turned out overtime that’s nuclear receptor system is quite complicated and that we have many compounds all of which who blocked cortisol and don’t block progesterone but they varied from each other.

As a consequence, so we really do think that, overtime these compounds may have individual attributes for treating different illnesses. And as I said, I think in our earlier conference call, into the broader sense, there are some that are potent in creating weight loss or some in potent in creating some sensitivity, there is something came into the brain, and there is something don’t enter the brain, but now to extend that to oncology.

What I can tell you is that, we already begin our preliminary screening of these molecules in oncologic mediums, particularly triple-negative breast cancer and there is a various responses. We actually had compounds which are more potent than mifepristone and treating animal model and cell based models of triple-negative breast cancer and some of which are less potent or even not potent at all in that. So, that screening is now taking place but yes we do anticipate at in this first group of new molecules that we’re bringing forward, one or more of them will be for oncologic indications.

Boris Peaker – Oppenheimer

So, is it safe to say that and it’s my last question that your investigation of Korlym in these oncologic indication is more just a proof-of-concept to confirm the mechanism and not necessarily with the intention of taking to market or do you intend to take it market specifically?

Joseph Belanoff

Well, I’m glad to asked, because we absolutely intend to bring the mifepristone and it should prove efficacious to market for these diseases particularly triple-negative breast cancer. So, no, it’s not just proof-of-concept. We think that a mifepristone can actually potentially be quite effective in these oncologic treatments particularly triple-negative breast cancer and we developed the other compounds as we kind of go along. The mifepristone is well ahead of any of them.

Boris Peaker – Oppenheimer

Okay, great. Thanks for taking my questions.

Operator

And today’s question comes from Kimberly Lee from Janney Capital. Please go ahead.

Joseph Belanoff

Hey, Kim.

Kimberly Lee – Janney Capital Markets

Good afternoon. Thanks for taking the questions. First of all, can you give us some launch metrics here as far as any how many scripts that are written in and how many physicians you have targeted recently? I know you haven’t given large metrics on the past but if you are able to now and if not when would you feel comfortable of doing so? And also secondly, if you could give us an update on the European regulatory front that will be great. Thanks.

Joseph Belanoff

Okay, yes. In fact we had not given the launch metrics I think that you’re asking about in the past and we are not prepared to give them now, although we always considered that decision. We can actually speak to the number of physicians that we’re targeting at this point which I think was one of your questions and I will let Steve answer that.

Steven Lo

Sure. So, number one, we do target only the [entreprenology] audience. There are approximately 3,000 entreprenologist that we target and I would like to say that, on top of that, we have been really pleased with increasing the number of prescribers on Korlym as Joe mentioned and subsequently we have added quite a few patients. So, we do look at metrics in terms of prescribers, patients and payers and on all three of those we certainly have seen progress in our second full year of launch.

And then to answer your question about really in Europe right now, we have actually received the [license], we have applied for approval of the NAA, we have received 120 day questions and are actually in a process right now for preparing responses. That’s a very recent event.

Kimberly Lee – Janney Capital Markets

Great and just a follow up here. The percentage of physicians that you are targeting, what percentage should enable to penetrate so far and that’s one follow up.

Joseph Belanoff

Yes. I’m not sure what you’re mean by penetration. I think part of what we do there are many degrees of education to physicians and that varies. I think what I’m more excited about next week we will be at American Association of Clinical Endocrinology and many of these physicians have treated patients with Korlym will actually presenting some of their thesis there. So, again to recap, we haven’t disclosed the percent penetration but I will say that amongst the 3,000 that we target, we put them into various tiers in terms of high potential and I think we’re feeling pleased that we have been able to reach both academic and community physicians on that target list.

Kimberly Lee – Janney Capital Markets

Great. And as far as your skills the payback as to some of the assumptions that go into why this up revenue guidance, is it more because of the price increase or other things like increase in the number of patients that you expect on trials? Thanks.

Joseph Belanoff

I think I just answered that question broadly and then can move on which is that we have upped our guidance, because we see the business growing and we think it’s growing in terms of number of patients we are seeing and a number of doctors who are becoming more comfortable with Korlym. Next question please.

Operator

And the next question comes from Steve Byrne from Bank of America. Please go ahead.

Unidentified Analyst

Hi. This is Sarah instead of Steve. Thanks for taking the questions. So, Korlym sales sequentially we are up modestly, do you see any specific hurdles to adoption such as either physician reluctance identifying the right patient and are any competition from other product or do you think it has some seasonality or could you provide more color on the number?

Joseph Belanoff

I can provide a little bit more color on it and again this is not a new issue but one that we think we really beginning to overcome is to that, the new mechanism of action to this drug, it works in a way that entreprenologist who could not had for treatment of Cushing syndrome. I think there are as Steve said growing number of physicians who are prescribed Korlym, but there are also many, many physicians who have not yet prescribed Korlym, who could quick prescribe Korlym and I think there is really opportunity for growth in that area. And your second question?

Unidentified Analyst

I guess so you touched upon specifically but you raised your guidance, is there anything you are seeing in the past couple of months that have driven you to raise this or has there been a meaningful penetration in the past couple of months?

Joseph Belanoff

And I apology I forgotten for a second you ask about seasonality for a second. The answer is, I think there really is the seasonality to this. I think January is the time particularly for orphan drug companies where churns changes, where payer assistance program, more deductibles end up getting paid by the company’s that support these sorts of program.

So I do think there is a bit of seasonality. I think the main reason that we again have raised our guidance is that, although we saw the business grow quite a bit over the course of last year, we are continuing to see to grow further this year, and we don’t really see kind of a top end to that at this point. In fact, we think we are really just getting into the peak of the growth. So, we felt that there is only our estimate of where we would be in the course of the year was greater than it was three months ago that we share that guidance publicly.

Unidentified Analyst

Okay. Thank you. And then just a follow-up with the EU process moving along, what are your current commercialization plans for the region?

Joseph Belanoff

Yeah. We are still actually thinking about which way to go with that. We obviously have gotten to approval yet that’s still in future and we are considering both doing it independently and considering doing it with a partner, both of this have been on the table now and as we get more information I will answer to each of those accounts, potential partnerships and our own marketing research and our ability to sale the drug there will make that decision.

Unidentified Analyst

Okay, great. Thank you.

Joseph Belanoff

Sure.

Operator

And the next question comes from [inaudible] Please go ahead.

Unidentified Analyst

Hi, Joe. Thanks for taking my questions. I have a couple.

Joseph Belanoff

Sure.

Unidentified Analyst

So, first thing is making sure there has been a number of early proof-of-concept trials in human and some of them completed and some of them some are ongoing. It’s a wonderfully large portfolio. On the other hand, you can be breakeven and have a rather conservative expenditure rate for that. I wondered if you can provide a little color of how you want to navigate. You got a number of indications already among your independent investigation, that’s really looks very promising on the other hand a possible conservative burn rate.

Joseph Belanoff

Yeah. Alan, thank you for asking that question. It really allows me to give a kind of broader view of the whole company at this point. We are very pleased where we are with Korlym for Cushing syndrome. Steven Lo grown and successfully commercialized the drug to this point and we think there is really substantially growth still to be have. And as Charlie in his introduction, we believe that growth in the revenues that we will produce and the case that we already have on hand will allow us to be self-funding.

So, you are absolutely right that. That is itself quite a good and interesting business. And other thing you mentioned I think is also I just sort of plunk about it. We have always been a company with more ideas than money and that’s because we have lots of ideas. We collaborate with I guess about at this point about 30 different academic investigators around the world and again I notified the company for quite a while that triple-negative breast cancer program came at about in years and making collaboration with investigators of University of Chicago, and again I know because you follow this we have many programs like that around.

We just finished actually a Board meeting and one of the things we’ve really discussed was what are our priorities, because we have many disorders from which to choose to direct both mifepristone and even a wider group for our new compound. I think within the style that we always used which is conservative spending but look to the future we are going to make our clinical choices.

Now as you know in December the oncologic results although for small number of patients were so strong that we really felt that we could not just leave that in the hands of the academic investigators anymore but needed to move that in-house to be able to spread moving forward and we are not surprised if there are treatment of other disorders, which produce this kinds of results we will make that change. But I want to return to the beginning, Korlym for Cushing syndrome is what drives us. That’s really the engine for the financing of the company and we continue to see that improve overtime. We will be able to do more and more things.

Unidentified Analyst

Joe, this question is for you and it’s kind of a gut checking for you asking this in public. You initially guide into Corcept with I believe the psychotic indication and now that on the shelf. Have you comment on what Corcept means to you professionally and what the company looks like going forward to you?

Joseph Belanoff

I think that we have to get to replace Barbara when she retires, but I will try to answer to your question. I did in fact personally treated first five patients ever with mifepristone for psychotic depression and developing the initial intellectual property with faculty at San Fermin that ultimately became the foundation for Corcept.

Now at the time, which is now quite a few years ago, 15 years ago, there were some people who were interested in cortisol modulation as a disease factor but there are many, many more those people like and research has taken place in many disorders beside the psychiatric disorders I was initially interested, including the one of course Cushing syndrome and oncologic things we’re talking about, other metabolic disease even ophthalmologic diseases.

So yes, I will answer in both ways. It’s disappointing day because our study results have always given us a signal that mifepristone would be useful in psychotic depression. I think the real difficult for us has been design a study which can produce that result in a statically significant consistent way. As you know that’s been a problem for many CNS programs and obviously this one is mine, so I have the greatest amount of interest in it.

I would say that, if we really get out there in the future to design study that might produce a result that would make expenditure money worth it. We can reconsider going back to psychotic depression potentially one of our new compound, but really in the current time I think we have kind of matched that, what we think we can do to make these study one of the best way that we can and because so many other areas with cortisol modulation we have tremendous amount of knowledge and the ability in context to gain even more knowledge are really just a better source of our funds.

So all-in-all, I think everyone here is really very optimistic. We think this platform has a lot of legs to it and it is disappointing personally to not been able to get this treatment to patient with psychotic depression but we did our best.

Unidentified Analyst

All right. Thank you.

Operator

And we have Christopher James from Brinson Patrick online with question. Please go ahead.

Christopher James – Brinson Patrick

Hi, there. Thanks for taking my questions and let me add my thoughts to the folks involved in study in 2014. My first question is specifically on the Korlym’s Cushing opportunity. Have you seen any additional growth this quarter or benefits effects from the key to cortisol restrictions around to Cushing indication or you heard anything specifically from the doctor targeting around this?

Joseph Belanoff

Well, let me just review that actually. I think obviously you understand but just for the remainder of the audience. Ketoconazole is an antifungal agent which has been used off label for many years because really nothing else available to treat patients with Cushing syndrome basically one of its toxic side effects is essentially a closing of the adrenal vein and it reduces the production of cortisol. And as Chris has pointed out, several months ago, I guess in the fall of the year, the FDA put out a warning about toxicity of this drug and basically put out essentially notice that physician that use this drug, take a little function test on a weekly basis to see how that part of people health is progressing.

Now to your question, yes, I think that there are now in number of patients who are taking Korlym increasing number who have once taken ketoconazole. So, I do think it is the factor in the growth of our business, but we also think that as the only approved drug for all forms Cushing syndrome that the drug has a lot offer on its own even away from ketoconazole. So ketoconazole actually is a spear to a conversation with a physician, but I think the attributes of Korlym also stand on there.

Christopher James – Brinson Patrick

Great. That’s helpful. Then one final just a quick housekeeping, how should view R&D expense given that PMB study results and the shift to oncology for 2014? Do you have a sense of what’s percentage of R&D on oncology versus non-oncology will be going forward?

Joseph Belanoff

We haven’t released that information yet Chris, but keep in mind, that the studies at this point we’re doing in oncology relatively small studies not particularly expensive studies. Obviously the closing of this psychotic depression program does release some cash, but these studies the once that already talked about are already funded in our budget.

Christopher James – Brinson Patrick

Okay. Thanks for taking my questions.

Operator

Final question comes from Ravi Mehrotra from Credit Suisse. Please go ahead.

Unidentified Analyst

Hi. This is Kunal actually asking the question on behalf of Ravi. I just had a question regarding the readout for the oncology program next year. I noticed on your Phase 1 that your initial part of it will not be looking at GR positive patients, but in those expansion parts you will be. I just want to know in the early 2015 release, will we be seeing data on dose expansion part or it’s still early days on baseline?

Joseph Belanoff

Well. Again this is Joe and I think probably many of you familiar. Phase 1 study on oncology is actually treating patients. So, they’re getting both safety as well as efficacy data. Now it is true and I think you raise an important distinction, in the dose finding portion of the study, which is the first part of it, we will be treating people who have potentially metastatic but not triple-negative breast cancer and even with patients who have triple-negative breast cancer not all of them will have PR positive breast cancer.

So, that is study is mainly about tolerability and picking the right dose for the next part of the study although some efficacy data will be clean from that because there will be some patients in data who fit the profile of who we will be study in the expansion phase which are triple-negative breast cancer whose tumor also have receptors for cortisol. So because it’s an open-label study, as soon in some sense that data is batched and we will release it, I don’t know exactly when that’s going to be but as soon as we actually kind of gotten to each bridge point, we will release the information that we can.

Unidentified Analyst

Okay. Thank you.

Joseph Belanoff

Sure. All right. Well it sounds like we’ve run out of questions. So, I’m going to end the call here. Thank you all very much for listening in and look forward to talking to you next quarter.

Operator

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

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