Corcept Therapeutics' (CORT) CEO Joseph Belanoff on Q4 2016 Results - Earnings Call Transcript

| About: Corcept Therapeutics (CORT)
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Corcept Therapeutics Incorporated (NASDAQ:CORT) Q4 2016 Earnings Conference Call January 30, 2017 5:00 PM ET


Charlie Robb - CFO

Joseph Belanoff - CEO


Charles Duncan - Piper Jaffray

Alan Leong - BioWatch News


Welcome to the Corcept Therapeutics Conference Call. My name is Karen 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 will now turn the call over to Charlie Robb. Charlie, you may begin.

Charlie Robb

Good afternoon. My name is Charlie Robb, Corcept's Chief Financial Officer. Joining me today is Dr. Joseph Belanoff, our Chief Executive Officer. Thank you all for participating in the call.

Earlier today, we issued a news release giving our preliminary fourth quarter and full year 2016 financial results, our 2017 revenue guidance and the corporate update. To get a copy of this release, go to and click on the Investors' tab. Complete financial results will be available when we file our Form 10-K with the SEC. Today's call is being recorded. A replay will be available through February 13, at 888-843-7419 from the United States and 630-652-3042 internationally. The passcode will be 44112876.

Before we begin, I want to remind you that any statements during this call, that are not statements of historical fact, are forward-looking statements subject to known and unknown risks and uncertainties that might cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements include statements regarding our preliminary financial results for 2016 and our revenue guidance and expense estimates for 2017 and beyond. The anticipated contributions of our sales organization, the cost, timing and results of preclinical and clinical trials, whether conducted by us or independent investigators, including our Phase 2 trial of CORT125134 for Cushing's syndrome and our Phase 1/2 trial of CORT125134 to treat solid tumor cancers.

The clinical attributes and advancement of our other selective cortisol modulators including CORT118335 and CORT125281, the protections afforded by Korlym's orphan designation for Cushing's syndrome and our other intellectual property rights including the composition of matter patents covering our selective cortisol modulators to and patents concerning the use of cortisol modulators to treat triple negative breast cancer, castration-resistant prostate cancer and other indications. These and other risks are set forth in our SEC filings, which are available at our website, or from the SEC's website. We disclaim any intention or duty to update any forward-looking statement made during this call.

Now, I'll review our estimated fourth quarter and full year financial results. Corcept's preliminary revenue in the fourth quarter was $23.8 million compared to $15 million in the fourth quarter of 2015, a 62% increase. In the fourth quarter, our preliminary GAAP net income was $0.04 per share, compared to GAAP net income of $0.01 per share in the fourth quarter of 2015. Our preliminary GAAP net income for the full year was $0.07 per share, compared to a net loss of $0.06 per share in 2015. We expect our growth to continue. With 2017 revenue being between $115 million and $125 million, our cash balance at year end increased to $51.5 million, up from $47.8 million at September 30 and $40.4 million a year ago at December 31, 2015. Our increase in cash is after payment of principal and interest under our capped royalty financing arrangement. We expect to make our final payment under that obligation in July of this year.

These numbers are preliminary; our final audited results will be available when we file our Form 10-K. As we have said in past calls, we believe revenue from our Cushing's syndrome business together with our cash on hand will be sufficient to fund our planned activities, which include fully funding our Cushing's syndrome franchise, conducting Phase 2 trials of our proprietary selective cortisol modulator CORT125134 in both Cushing's syndrome and solid tumor cancers, advancing to the clinic our next generation cortisol modulators, CORT125281 and CORT118335, and repaying the balance of our capped royalty financing obligation.

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

Joseph Belanoff

Thank you, Charlie and thank you all for joining us. Corcept had a very good year in 2016. As Charlie mentioned, our revenue increased 62% to $81.3 million. We generated GAAP net income of $0.04 per share in the fourth quarter and $0.07 per share for the full year.

Our cash balance increased by $11.1 million. These results are especially impressive because we produced them even as we advanced our existing clinical development programs and initiated new ones. We are confident that our Korlym revenue will keep pace with our increased development spending and it will be able to pay for our planned activities without needing to raise additional funds. As I've said on prior calls, we see no leveling off in our Cushing's syndrome business. We accepted revenue in 2017 between $115 million and $125 million.

Before I touch on the reasons for our growth in 2016 and our positive outlook for 2017 and beyond, let me provide a bit of background. As many of you know, our first product, the cortisol modulator Korlym treats patients with endogenous Cushing's syndrome, a disease which is caused by a tumor that produces either excess cortisol or ACTH, a hormone that causes the body to produce cortisol. It is a serious disorder. Symptoms vary from patient to patient and include high blood sugar, diabetes, high blood pressure, upper body obesity, rounded base increase right around the neck, thinning arms and legs, severe fatigue and weak muscles. Irritability, anxiety, cognitive disturbances and depression are also common.

Cushing's syndrome can affect any organ system in the body that can be lethal if not treated. There are about 20,000 patients diagnosed with Cushing's syndrome in the United States, approximately half of whom have been cured by surgery. The rest are candidates for treatment with Korlym. Our Cushing's syndrome business exceled in 2016 because the clinical specialists we began adding to our field sales force in mid-2015 and in the quarter since then have become increasingly productive. Cushing's syndrome is a complex rare disease, even a highly skilled, extensively trained clinical specialist must spend significant time with a physician, often five to seven visits before that physician writes their first Korlym prescription.

After a prescription is written, careful coordination is often required between the physician and our specialty pharmacy, reimbursement specialist and patient advocates. This process takes time and a strong commitment to optimally helping patients. The commercial results of this good work follow but since Cushing's syndrome is a chronic illness and Korlym is a chronic treatment for it; it takes time before the full economic impact of any specific patient is seen. We continue to hire experienced, high quality representatives as we identify them. We're now have 31 clinical specialists and expect to add more this year continuing the careful deliberate approach that has worked well and hiring only when we find exactly the right people. We look forward to their contributions in 2017 and beyond.

One of the key elements of our plan for protecting and expanding our Cushing's syndrome franchise is developing a next generation medication that offers Korlym's benefits but without some of its drawbacks. Although Korlym is a very effective medication, it modulates activity at the progesterone receptor, abbreviated as PR, as well as the cortisol receptor, also known as the glucocorticoid receptor or GR. In some women Korlym's affinity for PR causes endometrial thickening and irregular vaginal bleeding. The side effects are not life-threatening and are manageable, the patients and physicians would strongly prefer to avoid them. Affinity for PR is also what makes Korlym in a board [indiscernible]. A drug that effectively modulated cortisol but had no affinity for PR would be a superior medication.

Our lead candidate with these qualities, the proprietary cortisol modulator, CORT125134 has entered Phase 2 testing. Preclinical and Phase 1 data show that CORT125134 totally modulates activity at GR as Korlym does but does not bind to PR. Our trial as a single arm dose ranging study that will enroll 30 patients at sites in the United States and Europe. We expect to report results of the study by the end of this year. One of the challenges of identifying patients with Cushing's syndrome is that their symptoms overlap and symptoms of more common disorders. For example, while most patients with Cushing's syndrome have glucose intolerance or diabetes, most patients with diabetes don't have Cushing's syndrome.

Until Korlym was introduced, many physicians did not make an effort to identify the handful of patients whose diabetes stems from Cushing's syndrome from the hundreds of patients in their care with garden-variety diabetes. This behavior is beginning to change. However, even if a physician correctly diagnosis Cushing's syndrome and begins treating the patient with Korlym, the patients cortisol levels are not a reliable indicator that the optimal dose of Korlym has been reached. Cortisol modulators or just Korlym are effective treatments for Cushing's syndrome because they compete with cortisol at GR reducing the excess cortisol activity that is causing the patients disease, they do not lower the patients cortisol level.

Cortisol and synthetic analogs of cortisol stimulate expression of the gene, FKBP5. In CORT125134's Phase 1 trails in healthy subjects, FKBP5 expression increased substantially when patients were administered prednisone, a synthetic steroid that is similar to cortisol. FKBP5 expression remained unchanged when Korlym or CORT125134 was administered with prednisone. This is a very strong indication that CORT125134 will act similarly to Korlym in treating patients with Cushing's syndrome. We are developing a clear validated assay to measure FKBP5 gene expression. If we are successful, we will be able to offer physicians a powerful tool for diagnosing and optimally treating patients with Cushing's syndrome. In fact, measuring FKBP5 activity is part of CORT125134's Phase 2 study. We expect to complete work on this assay this year.

I will now turn to our oncology program. Let me first explain briefly why we believe cortisol modulation may prove to be a potent oncology treatment. In cancers who tumors express GR such as triple negative breast, ovarian and pancreatic cancer; cortisol stimulates genes that retard apoptosis, the programmed cell death that many chemotherapies are intended to provoke. Preventing the stimulation of these apoptosis suppressing genes by adding a cortisol modulator to a chemotherapy regimen should allow the chemotherapeutic regimen to achieve its optimum results.

Cortisol modulation also appears to work through a second more systemic mechanism. As you know, there is much interest in therapies that stimulate the body's immune system to fight cancer. Cortisol suppresses the immune system, in fact, the physiologic and psychological stress of cancer and its treatment raised cortisol activity above normal levels creating even greater immunosuppression. Cortisol modulators counter this effect in cancers that are particularly susceptible to the body's immune response such as melanoma, cortisol modulation maybe useful even without a companion agent.

In December we announced efficacy results of our Phase 1/2 trial of Korlym in combination with eribulin, the generic name for e-sized drug, Halaven, to treat patients with triple negative breast cancer. The trial studied 21 patients with GR positive tumors, one with a GR negative tumor and one's GR status was not known. As determined using the response evaluation criteria in solid tumors or resist criteria, results in this group were as follows; four patients exhibited a partial response to finance a 30% or greater reduction in tumor, eight had stable disease and 11 had progressive disease. One patient who has exhibited a partial response remains on therapy. These data compare favorably to result in patients with metastatic triple negative breast cancer who received Halaven monotherapy as reported by Aogi in the annals of oncology in 2012. Six of the 23 patients in our trial achieved progression free survival, longer than the upper bound for progression-free survival reported by Aogi.

In addition, meeting and progression-free survival in our trial was 11.1 weeks compared to 7.2 weeks for patients in the Halaven monotherapy study. These results show that the combination of Korlym and chemotherapy appears to be active and warrants a larger controlled study. This study is now taking place. Investigators of the University of Chicago have received funding from Celgene to lead a double-blind placebo-controlled multi-center Phase 2 trial of Korlym in combination with nab-paclitaxel, Celgene's drug Abraxane and 64 patients with advanced triple negative breast cancer, we are providing Korlym.

We are also conducting a Phase 1/2 trial of our proprietary selective cortisol modulator, CORT125134 in combination with Abraxane to treat patients with solid tumor cancers. The dose-finding portion of this study is in progress and we expect to open expansion cohorts in triple negative breast cancer and ovarian cancer by the end of the year. As a reminder, we have exclusively licensed intellectual property covering the use of any cortisol modulator in combination with any anti-cancer agent to treat patients with triple negative breast cancer from the University of Chicago.

University of Chicago investigators are also leading an 84-patient controlled multi-center Phase 2 study of Korlym combined with the androgen modulator, enzalutamide, the Astellas metavision [ph] drug Xtandi to treat patients with metastatic castration resistant prostate cancer. The Department of Defense and the Prostate Cancer Foundation are funding the trial. Astellas is providing Xtandi, we are providing Korlym. As shown by investigators at the University of Chicago and confirmed by Charles Flayer's Group at Sloan Catering [ph], very early in treatment with Xtandi, colonies of tumor cells are merging which cortisol through its stimulation of GR is the primary tumor growth factor. Combining a cortisol modulator with an androgen modulator such as Xtandi from the outset of treatment may block this cancer escape route.

One of our proprietary selective cortisol modulators, CORT125281 has shown great promise in animal models of castration resistant prostate cancer. In the second quarter we plan to begin this molecules Phase 1 trial. If the results are positive, we will initiate a Phase 2 trial of CORT125281 in combination with Xtandi before the end of the year. We have also licensed the University of Chicago's intellectual property covering the use of any cortisol modulator and any androgen deprivation agent to treat castration resistant prostate cancer. I will close this section by reminding you that CORT118335, another of our proprietary selective cortisol modulators appears very active in animal models of fatty liver disease and antipsychotic induced weight gain, serious disorders that affect millions of people in the United States. We will begin CORT118335's Phase 1 trial in the second quarter of this year.

To sum up, Corcept had an excellent 2016. Revenue from our Cushing's syndrome business reached $81.3 million for the year, an increase of 62% from 2015. We generated a GAAP profit for the quarter and the year and expect the cash generated by our Cushing's syndrome business will continue to fully fund our planned activities. Our cash balance increased by $11.1 million. Our development programs are advancing; at year end we will have results of our Phase 2 trial of CORT125134 in Cushing's syndrome. CORT125134 promises to offer Korlym's benefits but without some of its side-effects. We are also developing a gene expression assay that we hope will help physicians diagnose and more effectively treat patients with a disorder. Successful development of CORT125134 and our assay will in our view significantly expand the Cushing's syndrome market and extend our hold on it for years to come.

Our oncology program continues to progress. The encouraging results of our Phase 1/2 trial of Korlym in combination with Halaven and patients with triple negative breast cancer have led to a Celgene financed double-blind placebo-controlled multi-center Phase 2 trial of Korlym in combination with Abraxene led by University of Chicago investigators. In addition, we expect to open expansion cohorts in our Phase 1/2 trial of CORT125134 in combination with Abraxene to treat patients with triple negative breast cancer and ovarian cancer by the end of the year. University of Chicago investigators are also leading a multi-center controlled Phase 2 trial pairing Korlym and Xtandi to treat patients with castration resistant prostate cancer. We plan to begin our own Phase 2 trial of CORT125281 in combination with Xtandi to treat with this disease by the end of this year.

Finally, one of our most-promising proprietary compounds, CORT118335 will begin its Phase 1 trial this year. If the results are positive, we will advance it to Phase 2 for the treatment of fatty liver disease and potentially other metabolic disorders. Thank you. I'll stop here and answer questions.

Question-and-Answer Session


Thank you. [Operator Instructions] And we have our first question from Charles Duncan from Piper Jaffray.

Charles Duncan

Hi guys, first of all congratulations on a good year of progress, revenue growth and thanks for taking our question. I wanted to ask you a little bit about 2017 revenue guidance; it looks like some pretty interesting growth. And I'm wondering if you can provide a little bit of additional color on some of your assumptions regarding that topline growth, is it increased penetration across prescribers or within a prescriber base; any increases in price? Just provide us a little more information on the assumptions behind that guidance.

Joseph Belanoff

Yes, very glad to do it Charles and glad to have you on the phone. You know, really -- just -- I can sort of take you to the final statement first and then breakdown for you. We are seeing growth very much as we have seen it for the last years. We did see more doctors each month, more new prescribers and more multiple prescribers from doctors who have prescribed a single time. So -- and really, kind of every sense it's very similar to where the patients have come from before which is a variety of places. I think what's interesting about it and it's one of the things I alluded to in my presentation is we really are now starting to have physicians take a more careful look at seeing if there are patients with Cushing's syndrome who they previously passed over. We had several instances in the last year where doctor said, you know, I have been treating some with diabetes for 10 years and then I know they are complaint with medications, they are not getting better. I'm going to go back and see if they really have an issue related to Cushing's syndrome to hyper-cortisolism; and in several of those cases, nearly half of those cases that was found to be the case.

And I think that as we were able to really explain that to other physicians, that sort of beginning of the funnel testing is taking place. But really the short answer to your question Charles, it's really the same growth factors since we've had previously, more doctors who are entering the prescriber base and physicians who have had good success with their first patients prescribing to more patients. As you know we did actually have a price increase at the beginning of the year about 9% gross, and that is of course in our estimates as well and our revenue estimate as well.

Charles Duncan

Okay, that's helpful Joe. And then I want to ask you a question about 124 but just kind of thinking about the answer you just gave. The gene -- the genetic test, FKBP5, seems like kind of a paradigm shift. It gives you something to offer to the physicians to measure and I guess I'm wondering if you have a sense for the current patients on Korlym, what percentage of them demonstrate that phenotype?

Joseph Belanoff

Well, I really do think and of course you know, fingers crossed and we're hopeful. I'm glad you said it, I really do think that this is a paradigm shift if it turns out to be successful. And I'll explain to everyone why that's the case. Right now the measures that we have for cortisol and actually very crude, the measures of cortisol circulating in the blood stream or what's left over in the year end or what's left over in the saliva; and frankly what's going on in your blood, urine or saliva is really irrelevant to the symptoms that you've developed with Cushing's syndrome; what really is important is the activity at the cellular level, and this if it proves to be successful is a very good measure of what's actually happening at the cellular level. So you know, we're really at the beginnings of our testing; we've described it there is actually very nice paper in Journal of Clinical Endocrinology and Metabolism, it really explains what happens when exogenous glucocorticoids like prednisone are given and as I talked about in my presentation, how those effects can be readily reversed by drugs like Korlym and CORT125134.

So we're really hoping that if this is the case five years from now, people won't be talking about the crude measures that are currently being used and we'll be talking about the more accurate measures that really relate to cortisol activity as opposed to cortisol level, and I really do think that that will be a great tool in terms of both diagnosis of disease and in terms of optimally treating people. Now to answer your specific question, we're really just beginning that work right now to see if patients of Cushing's syndrome actually in fact have the elevation that we expect. And as I mentioned, that is part of the measures that we're looking at in CORT125134's Phase 2 study.

Charles Duncan

Okay. And then regarding the ongoing study with 134 in Cushing's syndrome, as you mentioned it's an open label study, so I'm not really going to pursue on how the study is going; if you have any perspective on that but more importantly, could you just remind us of the design -- isn't it the case that you dose -- you have a couple of doses that you're starting with and you titrated [ph] effect has very similar to what you saw with Korlym and therefore my conclusion would be that that I shouldn't read out positively but what's your thought on that?

Joseph Belanoff

Well, you are correct and let me again just get context for the whole audience. What we've really found with Korlym is that titrated to the correct dose, virtually every patient responds and we suspect that CORT125134 since it's similar mechanistically will also in fact require this titration to get to the optimal dose for each patient. Now remember, we've yet to treat a patient you know, before this trial with Cushing's syndrome with CORT125134, this is initial trial in patients. I'll come back to that in a second because I think we have more information than one usually does at this point but that is in fact the case, and so what the Phase 2 study is really testing is a variety of doses -- you know, basically ranges from -- you know, the first half 50, 100 and 150 milligrams; and then 200, 250 and 300 milligrams over a dose range that we actually think will provide efficacy but until we actually test those patients we won't know that for sure.

I think the reason why we have -- I think that this trial has a significantly higher degree of technical success than most trials, including many trials I've worked on as we're really are able to get in Phase 1 pharmacodynamic results that indicated the CORT125134 was very similar to Korlym and as a consequence we really think we're on the right track in terms of where we're dosing the medication, but of course, we'll have to wait for these results to see it. I just want to use this just as an opportunity to point out that again CORT125134 is very similar in terms of its mechanistic action with cortisol but does not touch the progesterone receptor and as a consequence takes away really the tag of the abortion pill and progesterone -- the medical effects of progesterone antagonist.

Charles Duncan

Okay, I think that's it. Thanks for taking my questions. I'll hop back in the queue.


And our next question comes from Alan Leong from BioWatch News.

Alan Leong

Thanks for taking my questions. Congratulations to both of you, Joe and Charlie, what a wonderful year. And also additional congratulations on costs and my thing is that you'll be able to have the FKBP5 test go forward. Couple of questions; you -- you know, you look at the next couple of years in number of cards are being turned over, so moreover you're starting to expand your clinical program and just wanted to have you -- if you could comment on [indiscernible] going forward, it's always -- you enable to increase earnings but now you will be increasing the clinical program to get more -- to gain from the next couple of years would be just keeping the task [ph] on neutral and expanding the program or will be becoming a more profitable enterprise?

Joseph Belanoff

Alan, you really raised a good point and I appreciate you bringing it up because I want to make sure that the whole audience really understands that. Our goal, although we were profitable this year and actually you know, have added cash every quarter, our real goal is to be cash flow breakeven. We have a vibrant growing development program and we're really fortunate that the rent for our Korlym revenues matches it well. We really think that what's going to make the ultimate success for the company and the most benefit for patients is several of the programs that I talked about today and others that they've come along as well really hitting and we can provide care to a much greater number of patients than we currently do today. So really the goal is to fund our development program, Shama Duke [ph] in the commercial area has done a tremendous job with the people working to do that.

We're very pleased that the growth in Cushing's syndrome with Korlym but one other things I really want to mention is that a critical thing that I think we've done is prove that a substantial market exists in Cushing's syndrome that if you bring forward a medication which is -- as application is Korlym or as CORT125134 hopes to be; then the market for Cushing's syndrome is significantly bigger than I think people estimated it was at the beginning. How big it is only time will tell but I think one of the critical things we've done commercially is really to show that this is a market that people really do have to pay attention to economically, at the same time as our patients pay attention to it and get better.

So I hope that answers your question; I wasn't positive, I hear 100% of what you said Alan, I hope that was on-track.

Alan Leong

It was, it was. Our earnings estimate before years ago, what we have [indiscernible]. Another question on the cortisol modulation and Xtandi program, hopefully the plan at the checkpoint inhibitors and you talked about how cortisol in the bloodstream helps deduct the immune system and that the checkpoint inhibitor is working in conjunction. You know, even I discussed that the checkpoint inhibitors is a large section of people got [indiscernible] number of classifications that don't respond to -- what do you think [indiscernible] and what do you hope to accomplish and what you hope to see with your platform under cortisol and with the checkpoint inhibitors?

Joseph Belanoff

Yes, Alan, and again if I haven't heard you correctly, please let me know. But I think the point you're making, if I understood it correctly, it's a very important one. The checkpoint inhibitors are a wonderful new treatment, and certainly if you're Jimmy Carter [ph], you're very pleased that they came along when they did. But unfortunately, the response rate of the checkpoint inhibitors is not really all that high, maybe a quarter of the patients actually respond to them and I think that there is a tremendous amount of work going on right now to figure out a priority [ph] who they are going to be but I don't think that's really known at this point. I think the idea is that the immune suppression that exists when people have cancer, in fact what they are treated with different agents in cancer is actually low because cortisol levels and cortisol activity is high and I think the idea really is that if you used a checkpoint inhibitor in combination with a more general immune strengthener like a GR modulator, you might be able to get significantly higher response rate. Time will tell if that's true, we have some animal data that indicates that it is true but we're really just at the beginning of the process. I think the most heartening thing is that people really do now understand that the immune system is very important in the fight against cancer and cortisol frankly, is your primary immune hormone. So I think modulation of it makes a lot of sense and work is certainly beginning on that. We're among them.

Alan Leong

Thanks. That's pretty clear.


[Operator Instructions].

Joseph Belanoff

Alright, it looks like we have wrapped up questions for today. As always, we're very, very glad to take any of your other questions offline but I want to thank you for listening to the call and look forward to talking to you next quarter.


Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating, you may now disconnect.

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