Corcept Therapeutics' (CORT) CEO Joseph Belanoff on Q2 2014 Results - Earnings Call Transcript

Aug. 5.14 | About: Corcept Therapeutics (CORT)

Corcept Therapeutics Incorporated (NASDAQ:CORT)

Q2 2014 Results Earnings Conference Call

August 5, 2014, 05:00 PM ET

Executives

Charlie Robb – CFO

Joseph Belanoff – CEO and President

Steven Lo – VP and Chief Commercial Officer

Analysts

Christopher James - Brinson Patrick

Kimberly Lee - Janney Capital Markets

Operator

Welcome to the Corcept Therapeutics Conference Call. My name is Vakiva 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 will now turn the call over to Charlie Robb. Charlie, 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 Chief Commercial Officer. Thank you all for participating in the call.

Earlier today, we issued a news release disclosing our summary second quarter financial results. Complete results will be available when we file our quarterly report on Form 10-Q with the SEC. To get a copy of this release, go to www.corcept.com and click on investor’s tab.

Today’s call is being recorded. A replay will be available through August 19, at 1-888-843-7419 from the United States and 1-630-652-3042 internationally. The pass code will be 37738631.

Before we begin, I want to remind you that any statements during this call other than statements of historical fact are forward-looking statements. These forward-looking statements including statements regarding anticipated future revenues, the timing of clinical trials and clinical trial results and the advancement of additional compounds are subject to known and unknown risks 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 and/or the outcome of the company’s Phase 1 study of its next-generation selected GR antagonists, CORT 125134 and of its Phase 1 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 and/or by Corcept’s other intellectual property rights, or the cost, pace and success of Corcept’s other product development efforts. These and other risks are set forth in our SEC filings, all of which are available from our website www.corcept.com or from the SEC’s website www.sec.gov. We disclaim any intention or duty to update any forward-looking statement made during the call.

Now a recap of our financial results. Corcept’s net revenue in the second quarter was $5.9 million, compared to $4.4 million in the first quarter, an increase of 33%. Our net loss on a GAAP basis was $7.6 million or $0.07 per share compared to a net loss of $13.9 million or $0.14 per share in the first quarter.

Our net loss on a GAAP basis included significant non-cash expenses of $2.2 million in the second quarter of this year and $2.4 million in the first quarter. Excluding these our net loss on a non-GAAP basis was $5.4 million or $0.05 per share for the second quarter and $11.5 million or $0.11 per share for the first quarter.

As of June 30, 2014 we held cash and cash equivalents of $34 million. Based on our performance in Q2 and our expectations for the rest of the year, we are reiterating our guidance that full year 2014 net revenue will be between $25 million and $29 million.

As we have said in prior quarters, based on our current plans and expectations, which include fully funding our Cushing syndrome franchise, completing our Phase 1 study of Korlym for the treatment of triple-negative breast cancer and advancing to the clinic at least two of our next generation compounds, we believe we will reach cash flow breakeven without needing to raise additional funds.

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

Joseph Belanoff

Thank you, Charlie and thank you all for joining us.

Before I discuss Corcept’s accomplishments last quarter, I want to give a brief overview of the company’s broader purpose and how our current activities advance that purpose.

Our aim is to develop medications that exploit the therapeutic potential of cortisol modulation in a wide range of serious illnesses. Cortisol commonly known as the stress hormone is essential for life. There are cortisol receptors in almost every tissue of the body. However, abnormal cortisol levels or disorder of cortisol rhythm can cause severe illnesses and sometimes death.

In some diseases, even usual cortisol activity can be damaging. For example, activation of the cortisol receptor helps ovarian cancer and certain types of breast cancer resist chemotherapy and appears to promote tumor growth and castration resistant prostate cancer.

Do you all know we marked our first generation cortisol modulator Korlym for the treatment of patients with Cushing syndrome, a life threatening orphan disease that affects approximately 20,000 patients in the United States. I’ll speak more about our Crushing syndrome business in a moment.

What fewer people know is that mifepristone, Korlym’s generic name has shown promise in human studies as a treatment for many illnesses besides Crushing syndrome. These include the type of triple-negative breast cancer, central serous retinopathy and ophthalmologic disorder, alcoholism, posttraumatic stress disorder and weight gain induced by antipsychotic medications.

Adding illnesses where cortisol modulation has shown promise in animal and cell based models, extends the list of therapeutic possibilities to include ovarian cancer, castrate resistant prostate cancer, cocaine addiction, ALS, metabolic syndrome and Alzheimer’s disease.

Mifepristone is the appropriate compound to advance for some of these indications. For example, we are testing mifepristone in our Phase 1 study of triple-negative breast cancer but we have also developed a large portfolio of proprietary next-generation cortisol receptor antagonists that unlike mifepristone do not block the progesterone receptor and so do not terminate pregnancy.

Some of these compounds perform better than the mifepristone in animal and in vitro models of human disease including triple-negative breast cancer.

In the coming quarters, we will advance several of these proprietary molecules to the clinic and we’ll gather the data we need to determine the illnesses for which they hold the most potential.

We first made Korlym available to patients with Crushing syndrome in April 2012. Crushing syndrome is the archetype of disease of cortisol excess. This is usually caused by a tumor that produces cortisol for ACTH, which stimulates the body to produce cortisol.

The tumor can be removed surgically, the patient is cured. However, the tumor cannot be removed; the elevated cortisol levels caused by the tumor can make the patient extremely ill and can be lethal.

There are approximately 10,000 patients with crushing syndrome in the United States for whom surgery cannot provide a care. Korlym’s mechanism of action in Crushing syndrome is straightforward. Crushing syndrome patients suffer from the effects of excess cortisol. Korlym reduces the ill effects of this excess by comparatively blocking cortisol one of its two receptors.

At this June’s Endocrine Society Meeting, we offered tangible evidence in just how well Korlym works. Results from the long-term extension study of our pivotal Phase 3 study showed maintenance of key Korlym benefits.

We also presented case study showing the remarkable degree to which Korlym has also benefited patients who have been treated once the medication became available for commercial use.

Because Korlym works so well, physicians who prescribe it for one of their patients are often impressed with its effects and prescribe it for other patients. Our financial results this quarter reflect a continuing increase in the number of repeat Korlym prescribers as well as steady progress in introducing new physicians and patients to the medication.

Still only a small percentage of patients who could benefit from Korlym have received it so far and we expect growth in Korlym sales for Crushing syndrome to continue.

I would like to speak for a moment about the role we believe Cortisol modulation can play in oncology. As I mentioned earlier, substantial clinical and preclinical work suggest that stimulation of the cortisol receptor protects some triple-negative breast cancer tumors from the beneficial effects of chemotherapy.

Last quarter we began dosing patients in our study of mifepristone in combination with chemotherapy for the treatment of triple-negative breast cancer disease, which affects approximately 40,000 women each year in the United States.

There is no FDA approved treatment for triple-negative breast cancer. This is Phase 1 dose finding study with a 20 patient efficacy extension arm. Initial results will be available next year.

Our trial expands the work of University Of Chicago investigators who reported successful findings from their own clinical study of mifepristone in triple-negative breast cancer last December at the 2013 San Antonio Breast Cancer Symposium.

These investigators are currently carrying out study of mifepristone in combination with another chemotherapy regimen in the treatment of both triple-negative breast cancer and ovarian cancer. They hypothesized method of action in all of these studies is that blockade of the cortisol receptor prevents tumor cells from escaping chemotherapy.

In addition to triple-negative breast cancer and ovarian cancer, there is evidence that mifepristone may also help treat castrate resistant prostate cancer, a form of the disease with a poor prognosis.

Dr. Russel Szmulewitz of the University of Chicago who has begun a Phase 2 study of mifepristone in combination with enzalutamide in the treatment castrate resistant prostate cancer.

While our work and the work of active collaborators explore into mifepristone’s potential in oncology we’re about to start clinical development of the leading drug candidates from our library of more than 300 proprietary selected cortisol antagonists.

As I have said, these next generation compounds comparatively block the receptor for cortisol, but not the receptor for progesterone and so do not terminate pregnancy. They also have the valuable characteristic of behaving differently from each other in important respects.

Some of the compounds get into the brain, some do not, some have potent metabolic effects. Others are even more effective than mifepristone in animal models of triple-negative breast cancer. We plan to advance our lead module CORT 125134 to clinic this month. Additional compounds will enter the clinic next year.

We have not yet selected which indications we plan to study. The Crushing syndrome and triple-negative breast cancer are high on our list.

To sum up our revenue for Korlym for the treatment of Crushing syndrome grew 33% last quarter and is on track to reach between $25 million and $29 million this year.

Our non-GAAP net loss excluding our significant non-cash expenses narrowed from $0.11 per share in the first quarter to $0.05 per share in the second. As we have said for the past year, we expect to reach cash flow breakeven without having to raise additional funds.

Our clinical activities in the research hub, our many academic collaborators continue to advance cortisol modulation as a potential treatment for many indications.

Our study of mifepristone in the treatment of triple-negative breast cancer will produce initial efficacy data next year. The lead compound from our portfolio of next generation cortisol antagonist will enter the clinic next month with others to follow next year. Cortisol modulation is an important therapeutic platform and we are very pleased to be the industry leader in its exploration.

I will stop here and answer any questions.

Question-and-Answer Session

Operator

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question is going to come from Christopher James of the Brinson Patrick Securities. Please go ahead.

Christopher James - Brinson Patrick

Hi, good afternoon and thanks for taking my questions and congratulations on your progress this quarter. I guess my first question is related to Korlym and I think you haven’t given much on launch metrics in the past but is there anything can share with us regarding patient numbers or duration of therapy at this time.

Charlie Robb

Hey Chris, this is Charlie Robb. As you know this is -- we consider every quarter exactly which metrics to release and there are many as you know. However I think it’s a single product company selling our product for single indication. Revenue is really the best metric by which to measure our progress and that’s why we provide revenue guidance that we feel is the best disclosure right now.

Christopher James - Brinson Patrick

Got it. Sounds good. Just moving into the European, the EMA; is there an update on the questions and what sort of feedback have you received that you can share with us.

Joseph Belanoff

Yes Chris. We received the 120 day list of questions, the known extensive list from the European authorities and we are in process now of preparing that reply. It actually will be in shortly and so we are on track as we’ve spoken to before. So I guess since the last time we’ve spoken that for us has actually advancing in the way I’ve described.

Christopher James - Brinson Patrick

Good. Okay and then on the second generation compounds, could you discuss maybe in a little greater detail what went into the selection of this particular molecule and what about the PKPD profile that was attractive that drove the decision to advance this before.

Joseph Belanoff

Yeah, it’s interesting question and I think I just wanted to remunerate something which I just said before, which is that these -- and in fact just to give a little history to everybody, what we’re really set out to do at the beginning of this program was to essentially design mifepristone without progesterone antagonism because we felt that it's a really medical advance to take away the progesterone antagonism and its potential for termination of pregnancy.

There are also medical side effects of progesterone antagonism and it essentially if you could remove from the molecule it would have real clinical benefit, so that was generally what we are trying to do in the program and frankly it was real medicinal chemistry feat to figure that out because the receptors that are for receptors of course are very homologous some additional chemistry team led by Hazel Hunt really did a fantastic job in being able to figure out that problem.

Now what's interesting about that is it’s a complicated receptor system so while all of these compounds comparatively antagonize cortisol, block cortisol and none of them block progesterone they are not identical to each other.

On how they interact with this nuclear receptor maybe tissue specific, it could certainly be activity specific and as you pointed out there’re going to actually be even pharmacokinetic differences between the molecules.

So in the end all of those characteristic go into [move] (ph) in which we are advancing molecules into the clinic. Now of course the first thing is they have to be bioavailable and I can tell you based on all of our animal models that once that we have frontline or bioavailable, they have to be able to be formulated. All of our molecules that are ahead of the line do that as well.

What’s interesting beyond that is we have some sense from animal models who how these molecules work. As I’ve mentioned before, two models were used. Ones related to metabolism and the other’s related to the ability to prevent tumor progression in transgenic animals with triple-negative breast cancer and they don’t act identically.

Some of more potent than mifepristone. Some are more potent than each other. Some are less potent and so really always the combination of factors, which led to the ranking of our compounds as they entered the clinic.

The one thing that I really do also want to point out is that until we really test these molecules in humans, we won’t have the pure sense of where they’re going to be most effective in disease state and that information will emerge over the next of couple of years.

Christopher James - Brinson Patrick

Great thanks again and thanks for the overview. It’s very helpful.

Joseph Belanoff

Thank you.

Operator

Thank you. And then our next question is going to come from Steve Byrne from Bank of America Merrill Lynch. Please go ahead.

Unidentified Analyst

Hi this is Sarah on for Steve. Thanks for taking the question. The first one is on CORT 125. I guess what will you be looking for in the Phase 1 study to determine what indication your plans proceed there.

Joseph Belanoff

The first thing and the most important thing in Phase 1 study as I am sure you know, but point out for the whole audience is tolerability. Is this a drug which can actually be taken safely and usefully by people, so that of course comes first but we actually will get some pharmacodynamic information in the Phase 1 study relating to essential metabolic effects of the drug and so we will have a little bit of data, which will point us in the right direction for where to go next.

Just again to reiterate a point I made earlier, there are two corporate priorities. One is we have a very good sense of the Crushing syndrome market, and we’re looking for a compound which potentially in the long run might improve upon mifepristone by removing its progesterone antagonism.

We’re also very, very interested in the mechanism related to oncology as a specific 125134 has been tested in each of those models. It actually seems to in animal to be quite effective but human data will tell us how effective it is and we’ll make our decision as to which direction to go as soon as we have some.

Unidentified Analyst

Okay and then on Korlym, I guess I don’t know if you can give any more color on price versus volume in the second quarter and then just a little more detail on the new and repeat prescribers and then a just a tack on to that, if there is -- based on a seismic data that you presented and was there any significant feedback from doctors that you think could influence sales going forward for the second half of the year?

Joseph Belanoff

Well, I am just going to introduce Steve Lo who is our Chief Commercial Officer and I’ll let him answer that question.

Steve Lo

Hi, good afternoon. I think you had a three-part question. So I will try to answer each one of them in sequence. Your first question was regarding our growth this quarter and whether it was related to price. We did not a take a price increase in the second quarter. Our last price increase was March 1 of this year.

And then secondly, I think your question related to prescribers. We are very pleased to see this quarter that we increased both the number of prescribers in the new prescriber category as well as repeat prescribers and so those two categories contributed to our growth and then finally I think your question was related to a lot of the information that was presented at the Endocrine Society meeting.

There were approximately 8,000 endocrinologists from across the world in attendance and the feedback that we certainly received based on case study that was presented including poster etcetera was again just very positive feedback about the use of Korlym in Crushing syndrome and I think that also has contributed to the increase in the number of new prescribers.

Unidentified analyst

Okay. Thank you. That was very helpful.

Operator

Thank you. And then our next question is going to come from Kimberly Lee from Janney Capital. Please go ahead.

Kimberly Lee - Janney Capital Markets

Good afternoon. Thank you for taking the question. A couple of questions here. You got to advancing two products into the clinic by the end of this year and I know you said you are advancing one in the next few weeks. What do you expect to advance the second product. Do you still maintain that as by the end of this year?

Joseph Belanoff

No, no. As I just said in my talk, we are going to have one go into clinic this year and one into the clinic next year or at least two. There may be more than two but that’s where we are staying right now. One into the clinic in coming months and one in 2015.

Kimberly Lee - Janney Capital Markets

Okay. Because previously on the Q1 call I believe you guided to two products this year, but so it’s one this year and one next year. Okay. Thanks for the clarity. And then as far as prostate cancer goes I know it's an investigator-sponsored study, can you go into a little more detail what stage of the prostate cancer that you’re targeting and how do you think your product will be differentiated from and how will it fit in the competitive landscape? Thanks.

Joseph Belanoff

Well, you said something important. This is an investigator study. It’s being run by the University of Chicago. We’re providing mifepristone for that study and it is in patients with castrate resistant symptom metastatic prostate cancer and I think again just to make sure everyone is on the same page with this, prostate cancer is an illness that many patients is curable at the outset.

For other patients, they get it when they’re so old that it really doesn’t affect their life course but for a group of patients who get it when they are younger and for whom surgery initially is not curable or it’s already metastatic the people who really have a very difficult course.

And the primary treatment for them is reducing the activity of antigens needed by reducing the activity of antigen either by reducing antigen level or blocking the antigen receptor and in many cases specifically that as I mentioned, enzalutamide severely very potent antigen receptor antagonist and it’s obviously been a successful drug in treating these patients. Except that for many of them eventually the disease begins to break through that treatment and the disease advances.

And one of the things in there was actually and editorial about this in the Journal of Medicine I believe in March a few months ago was that essentially what happens in these tumors is that as they begin to present in increasing numbers receptors for cortisol, the GR receptor and as a consequence that GR receptor then becomes the growth factor for tumors and so in some extent enzalutamide resistance is actually very advancement cortisol activity to the GR receptor.

And the idea of study again it's an investigator study, but one where we understand the science and are supporting it, is that if you use the drugs in combination perhaps you can prevent that escape and people can actually maintain without their tumors advancing and we’ll find out whether that’s true or not, but that really is an interesting body of science pulled out of Sloan Kettering a year ago and then added to the University of Chicago that speak to these questions.

Kimberly Lee - Janney Capital Markets

Okay great. Thanks for that. And just two questions for Charlie here. You mentioned that you expect that your cash position to reach a cash flow breakeven and when do you expect that to happen?

Charlie Robb

Well we haven’t said when expect it to happen, but we have said in the past and it remains the case that we run the business including the activities that we’ve spoken about today for between $10 million and $12 million a quarter in cash spent on average.

So then you can net against that our revenue and we’ve guided to $25 million to $29 million this year and then based on whatever growth curve you use to get that endpoint you can pick your date.

Kimberly Lee - Janney Capital Markets

Okay. Very helpful and lastly, what accounted for the what looks like a pretty sizeable decrease in operating expenses in 2Q and would you say that 2Q expenses would be a good base to start third quarter and beyond?

Charlie Robb

Yeah, I think that the first quarter as we mentioned at the time was higher because of what we paid as bonus for the prior year's performance in that quarter, so there was that expense in that quarter, which obviously doesn’t repeat over the rest of the year and yes the lower spending in the range of just $10 million to $12 million that we can run the business on and you can use that as your point.

Kimberly Lee - Janney Capital Markets

Great. Thanks.

Operator

Thank you. And then our next question is going to come from Ravi Mehrotra from Credit Suisse. Please go ahead. Your line is open.

Unidentified Analyst

Hi. This is Kunal actually asking the question on behalf of Ravi. So I just wanted to know in terms of timing, are we still going to see the data for triple-negative breast cancer early next year and then on the prostate cancer trial, when would we see that data?

Charlie Robb

Well two different questions and in fact I have to enlarge the answer a little bit. We expect to see -- answer this new question, we expect to see data from the triple-negative breast cancer early next year when it’s bound up to enough patients where we can release it publicly, it will be sometime in 2015, but I would not say it’s not going to be early next year and so I want to just make that difference.

There are two other things to point out, one is the University of Chicago who really is kind of a leader in this mechanism of action in this field of research is doing two studies. One is with mifepristone in triple-negative breast cancer and ovarian cancer and the other is as described in the castrate resistant prostate cancer.

We’re not really in control of their timing as they do it. They will release the information. Obviously they will like to move as quickly as they can and I think they are very excited about their finding but I can’t promise you those dates because they are not really ours to have any control over.

Unidentified Analyst

Okay thank you and just maybe a quick follow-up on that. On CORT 125134 could you comment on how this compound compares to mifepristone and your Cushing and triple-negative breast cancer animal models in terms of efficacy?

Charlie Robb

So what I can tell you is that to divide those answers you asked about Cushing syndrome and triple-negative breast cancer. I can tell you that in Cushing syndrome which we test in animal models by essentially antagonizing the effect of a cortisol agonist like for those of you would know a drug like prednisone, 125134 definitely does that.

Okay. Now will it effect in the human diseased state of Cushing syndrome, we will have to find out but as best we can tell, it has been metabolic profile if you would expect to see in a drug like mifepristone. CORT 125134 in side-by-side animal models with triple-negative breast cancer performs at an equal level, now, again, better by a little, depends on the study, worse by a little, the study, I would say certainly in the ball part for at least as good as mifepristone looked in its animal model.

Now we already have -- we had human data with mifepristone, which brings our information about that drug to a much higher level but at the same point in time you would have thought that they had equal promise.

Unidentified Analyst

Okay. Thank you.

Operator

Thank you. And then our next question is going to come from [Alex] (ph) from BioWatch News. Please go ahead.

Alan Leong - BioWatch News

This is Alan. It’s good to hear from you Joe.

Joseph Belanoff

Yes Alan good to hear from you.

Alan Leong - BioWatch News

General color, I would like to get some general color on the evolution of clients and physicians who are being treated in Cushings. At the beginning the physicians are really putting really serious patients on to mifepristone and then I talked about this before but about much more moderate forms of Cushings being treated by mifepristone.

If you have some color on how that’s evolving and maybe even the evolving profile of endocrinology, at the beginning you talked about having to -- the company having to reach the mountain of that community. So how much of profile for both is starting to vary.

Joseph Belanoff

Yeah I think I understand the question and let me repeat it and [Alan] (ph) this story for a long time so for those of you who have not I wanted to just give you a few details.

What I was talking about is initially what we saw in our clinical trial was that patients with very severe Cushing syndrome were the patients who -- physicians were most likely to enter. Frankly we felt like their biggest train wrecks were the people who they entered in the study but as they saw the medicine was effective, they entered more moderately ill patients and as we’ve gone into the clinic, I think we essentially the same thing, the physician offer to enter their most ill patient and then they enter less ill patients as they feel more comfortable with the medicine.

I can tell you we have definitely made inroads in the group of patients who have less severe Cushing syndrome. Mifepristone is a potent insulin sensitizing drug. If you remember cortisol, it’s insulin desensitizing. Mifepristone is insulin sensitizing and that’s why for the target symptom of hyperglycemia, it’s very potent in anyone who has hyperglycemia with Cushing syndrome, but regardless of whether they have severe other symptoms or not and we have started to see some inroads in there.

Now what’s interesting in your second question, one of the places that we are going to expand over the course of the year is to add additional sales reps.

We have found that this is a market that doctors are treating patients in more desperate area than we did think initially and what we found is that by adding sales people as we have done in the first part of this year, we’ve added revenues and treated more patients and we’re going to follow-up on that by adding additional sales people over the course of the year and make sure that all of our ground is covered and we’re really getting to any patient that might have a chance to positively affected by Korlym.

Alan Leong - BioWatch News

Thanks.

Operator

Thank you and we have no additional questions at this time.

Joseph Belanoff

Well, I want to thank everyone for calling in and looking forward to another good quarter and I’ll talk to you in three months.

Operator

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

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