Corcept Therapeutics Inc (CORT) 2014 Q2 法說會逐字稿

Welcome to the Corcept Therapeutics conference call. My name is Lakila, and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded. I will now turn the call over to Charlie Robb. Charlie, you may begin.

Thank you. Good afternoon. My name is Charles 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 Corcept.com, and click on the investors tab.

Today's call is being recorded. A replay will be available through August 19th 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 in or the outcome of the Company's Phase I study of its next generation selective GR antagonist CORT-125134 and of its Phase I 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 other product development efforts. These and other risks are set forth in our SEC filings, all of which are available from our website, Corcept.com, or from the SEC's website, SEC.gov. We disclaim any intention or duty to update any forward-looking statement made during the call.

Now, I'll recap 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 30th, 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's syndrome franchise, completing our Phase I 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?

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 disordered 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 it appears to promote tumor growth in castration-resistant prostate cancer. As you all know, we market our first generation cortisol modulator, Korlym, for the treatment of patients with Cushing's syndrome, a life-threatening orphan disease that afflicts approximately 20,000 patients in the United States.

I'll speak more about our Cushing's syndrome business in a moment. What fewer people though is that mifepristone, Korlym's generic name, has shown promise in human studies as a treatment for many illnesses besides Cushing's syndrome. These include a type of triple-negative breast cancer, central serous retinopathy, an opthalmologic disorder, alcoholism, post traumatic stress disorder, and weight gain induced by anti-psychotic 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 I 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 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 will gather the data we need to determine the illnesses for which they hold the most potential.

We first made Korlym available to patients with Cushing's syndrome in April 2012. Cushing's syndrome is the archetypal disease of cortisol excess. It is usually caused by a tumor that produces cortisol or ACTH, which stimulates the body to produce cortisol.

If the tumor can be removed surgically, the patient is cured. However, if 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 Cushing's syndrome in the United States for whom surgery can not provide a cure.

Korlym's mechanism of action in Cushing's syndrome is straightforward. Cushing's syndrome patients suffer from the effects of excess cortisol. Korlym reduces the ill effects of this excess by competitively blocking cortisol at one of its two receptors.

At this June's Endocrine Society Meeting, we offered tangible evidence of just how well Korlym works. Results from the long-term extension study of our pivotal Phase III showed maintenance of key Korlym benefits. We also presented case studies, 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 Cushing's syndrome to continue.

I'd 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 suggests that stimulation of the cortisol receptor protects some triple-negative breast cancer tumors from the beneficial effects from chemotherapy.

Last quarter, we began dosing patients in our study of mifepristone in combination with chemotherapy for the treatment of triple-negative breast cancer, a disease which afflicts approximately 40,000 women each year in the United States. There is no FDA approved treatment for triple-negative breast cancer.

This is a Phase I 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 a study of mifepristone in combination with another chemotherapy regimen, in the treatment of both triple-negative breast cancer, and ovarian cancer. The hypothesized method of action in all of these studies is that blockade of 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, formerly a disease with a very poor prognosis. Dr. Russell Szmulewitz of the University of Chicago has begun a Phase II study of mifepristone in combination with enzalutamide, in the treatment of castrate-resistant prostate cancer.

While our work and the work of our academic collaborators explore mifepristone's potential in oncology, we are 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 competitively block the receptor for cortisol, but not the receptor for progesterone, so they 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 molecule, 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, but Cushing's syndrome and triple-negative breast cancer are high on our list.

To sum up, our revenue from Korlym for the treatment of Cushing's syndrome drew 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 and the research of 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 antagonists 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'll stop here and answer any questions.

(Operator Instructions)

Our first question is going to come from Christopher James out of Brinson Patrick securities. Please go ahead.

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

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

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

Yes, Chris. We received the 120 day list of questions, an extensive list from the European authorities, and we're in the process now of preparing that reply. Actually, will be in shortly. And so we're on track, as we've spoken to before. So I guess, since the last time we've spoken, that process has actually advanced in the way I've described.

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 PK-PD profile that was attractive, that drove the decision to advance this one forward?

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

There are also medical effects from progesterone antagonism, that, if in some sense, you could remove from the molecule, it would have real clinical benefit. That was generally what we were trying to do in the program, and it frankly was a real medicinal chemistry feat to figure that out, because the receptors for progesterone and cortisol are very homologous, and our medicinal chemistry team, led by Hazel Hunt really did a fantastic job 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, competitively antagonize cortisol, block cortisol, and none of them block progesterone, they're not identical to each other. How they react with this nuclear receptor, may be tissue specific, certainly be activity specific, and as you point out, there can actually be pharmacokinetic differences between the molecules.

So in the end, all of those characteristics go into the order 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 our animal molecules, the ones that we have front in line are quite bioavailable. They have to be able to formulated. All of the molecules that are at the head of the line do that as well.

What's interesting beyond that is, we have some sense from animal models of how these molecules will work. As I mentioned before, two models we use, one is related to metabolism, another is related to the ability to prevent tumor progression in transgenic animals with triple negative breast cancer. And they don't act identically there. Some are more potent than mifepristone, some are more potent than each other. Some are less potent.

So really it was 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 purest sense of where they are going to be most effective in disease states, and that information will emerge over the next couple of years.

Great. Thanks again and thanks for the overview. Very helpful.

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

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 I study to determine what indication you'll plan to proceed with?

Well, the first thing, and the most important thing in a Phase I study, as I'm sure you know, but I 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 I study, relating to essentially 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, reiterate a point I made earlier, there are two corporate priorities. One is, we have a very good sense of the Cushing's 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 I said, 125134 has been tested in each of those models. It actually seems to, in animals, 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.

Okay. And then on Korlym, I guess, I don't know if you can give my 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 just to tack onto that, if there is -- based on the seismic data you presented at Endo, was there any significant feedback from doctors that you think could influence sales going forward for the second half of the year?

I'm going to introduce Steve Lo, who is our Chief Commercial Officer, and let him answer that question.

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 take a price increase in the second quarter. Our last price increase was March 1st of this year.

And then secondly, I think your question related to prescribers. We're 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 have received, based on the case studies that were presented including posters, et cetera, was again, just very positive feedback about the use of Korlym in Cushing's syndrome, and I think that also has contributed to the increase in the number of new prescribers.

Okay. Thank you. That was very helpful.

Thank you. And then our next question is going to come from Kim Lee from Janney Capital. Please go ahead. Your line is open.

Good afternoon. Thank you for taking the questions. A couple of questions here. You guided to advancing two products into the clinic by the end of this year, and I know you have said you're advancing one in the next few weeks. When do you expect to advance the second product? Do you still maintain that it's by the end of this year?

No, no, as I said in my talk, we're going to have one go into the 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 stand right now, one into the clinic in the coming months and one in 2015.

Okay. Because previously on the Q1 call, I believe you guided to two products this year. So it's one this year and one next year.

Right.

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 stages of 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.

Well, Kim, 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 is it in patients with castrate-resistant metastatic prostate cancer.

And again, just to make sure everyone is on the same page with this, prostate cancer is an illness that for 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. For a group of patients who get it, when they're younger and for whom surgery initially is not curable, or it's already metastatic, people really have a difficult course.

The primary treatment for them is reducing the activity of the androgens, either by reducing androgen level, or blocking the androgen receptor and the medication specifically that I mentioned, enzalutamide, is a very, very potent androgen 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.

One of the things, and there was actually an editorial about this in the New England Journal of Medicine, I believe in March, a few months ago, was that essentially what happens in these tumors is they begin to present in increasing numbers receptors for cortisol, the GR receptor. As a consequence, that GR receptor then becomes the growth factor for tumors. In some sense, enzalutamide resistance is actually the advancement of cortisol activity through the GR receptor, and the idea of the 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.

We'll find out whether that's true or not. But there really is an interesting body of science pulled out of Sloan Kettering a year ago, and out of the University of Chicago that speak to these questions.

Okay. Great. Thanks for that. And just two questions for Charlie here. You mentioned that you expect with your cash position to reach cash flow breakeven. When do you expect that to happen?

Well, we haven't said when we 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. Based on whatever growth curve you use to get to that end point, you can pick your date.

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

Yes, I think that the first quarter, as we mentioned at the time, was higher because we paid a 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 is in the range of this $10 million to $12 million, that we can run the business on, and you can use that as your point.

Great. Thanks.

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

Hi. This is actually Koon asking a question on behalf of Ravi. So I just wanted to know in terms of timing when we might -- 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?

Well, two different questions. In fact, I have to enlarge the answer a little bit. We expect to see -- and have to answer this nuanced 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, will be sometime in 2015, but I would not say it's going to be early next year. So I want to just make that difference.

Now, two other things to point out. One is, the University of Chicago, who is really the leader in this mechanism of action and field of research, is doing two studies. One is with mifepristone in triple-negative breast cancer and ovarian cancer, the other is what I described in castrate-resistant prostate cancer. We're not really in control of their timing, as they do it. They will release the information, obviously they would like to move as quickly as they can, and I think they are very excited about what they're finding, but I can't promise you those dates, because they're not really ours to have any control over.

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 in your Cushing and triple-negative breast cancer animal models, in terms of efficacy?

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

Now, will it affect in the human disease state of Cushing's syndrome? We'll have to find out. As best we can tell, it has the metabolic profile that 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 ballpark, for at least as good as mifepristone, in its animal model. We've already had of course -- we've 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.

Okay. Thank you.

Thank you. And then our next question is going to come from Alan Leong from BioWatch News. Please go ahead.

This is Alan. Good to hear from you, Joe.

Yes, Alan, good to hear from you.

General color. I'd like to get some general color on the evolution of clients and physicians who are being treated in Cushing's. At the beginning, the physicians are really putting really serious patients onto mifepristone. You and I have talked about this before, about much more moderate forms of Cushing's being treated by mifepristone.

If you have some color on how that's evolving. And maybe even the evolving profile of the endocrinologists. Since the beginning you talked about the Company having to reach them out in the community. So how much of profile for both is starting to vary?

Alan, I think I understand the question and let me repeat it. And again, Alan's followed the story for a long time. For those of you who have not, I want to give you a few details. What Alan's talking about is, initially what we saw in our clinical trial, was that patients with very severe Cushing's syndrome were the patients who physicians were most likely to enter.

Frankly, we felt kind of their biggest train wrecks were the people who they entered in the study. As they saw the medicine was effective, they entered more moderately ill patients. As we entered the clinic I think we see essentially the same thing. The physicians often enter their most ill patient, and then they enter less ill patients as they feel more and more comfortable with the medicine. I can tell you, we have definitely made in-roads in the group of patients who have less severe Cushing's syndrome.

Mifepristone, it's a potent insulin sensitizing drug. If you remember, Cortisol is insulin desensitizing. Mifepristone is insulin sensitizing, and that's why for the target system of hyperglycemia, it's very potent in anyone who has hyperglycemia with Cushing's syndrome. Regardless of whether they have severe other symptoms or not. We have started to see some in-roads in that.

What's interesting to 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 has got doctors treating patients in more disparate areas than we did think initially. And what we have found is that by adding salespeople, as we have done in the first part of this year, we have added revenues and treated more patients, and we're going to follow up on that by adding additional salespeople over the course of the year, to make sure that all of our ground is covered, and we're really getting to any patient who might have a chance to be positively affected by Korlym.

Thanks.

All right.

And we have no additional questions at this time.

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.

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