Corcept Therapeutics Inc (CORT) 2015 Q2 法說會逐字稿

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

(Operator Instructions)

Please note that this conference is being recorded. I would now like to turn the meeting over to Mr. Charlie Robb, Chief Financial Officer. Mr. Robb, may begin.

Thank you. Good afternoon. My name is Charles 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 second-quarter 2015 summary financial results, and a corporate update. To get a copy of this release, go to Corcept.com and click on the investors tab. Complete financial results will be available when we file our Form 10-Q with the SEC. Today's call is being recorded. A replay will be available through August 19 at 1-888-843-7419 in the United States, and 1-630-652-3042 internationally. The passcode will be 40261436.

Before we begin, I want to remind you that any statements during this call, other than 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 anticipated revenues and operating expenses for 2015 and beyond, the timing of pre-clinical and clinical trials and the results of such trials, the pace of Korlym's acceptance by physicians and patients, the anticipated contribution of our sales organization to our revenue growth and net income, the pace of enrollment in or the outcome of our clinical trials, and the advancement of our next generation selective GR modulators. The effects of rapid technological change and competition, the protections afforded by Korlym's orphan drug designation for Cushing's syndrome or our other intellectual property rights. Or the cost, pace and success of our product development efforts. These and other risks are set forth in our SEC filings, which are available at 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 this call.

Now, I will review our second-quarter financial results. Corcept's net revenue in the second quarter was $12 million, compared to $5.9 million in the second quarter of 2014, an increase of 104%. We are revising our 2015 full-year revenue guidance from $47 million to $53 million to $49 million to $53 million, which is a $2 million increase to the lower end of the range. Our net loss in the second quarter was $1.9 million or $0.02 per share, compared to $7.6 million or $0.07 per share in the second quarter of 2014. The second quarter of 2015 and 2014 included non-cash expenses of $2.3 million and $2.2 million respectively. Excluding these non-cash items, we generated net income on a non-GAAP basis of $369,000 in the second quarter of 2015, compared to a non-GAAP net loss of $5.4 million in the second quarter of 2014. A reconciliation of GAAP to non-GAAP income and loss is provided in our press release.

Our cash balance on June 30, 2015 was $37 million compared to $38 million one quarter ago. Based on our current plans and expectations, which include fully funding our Cushing's syndrome franchise, completing our Phase 1/2 study of Korlym for the treatment of triple negative breast cancer, and if that study produces positive results, conducting a Phase 3 study. Advancing CORT125134 to Phase 2 studies in both Cushing's syndrome and an oncology indication, and advancing to the clinic at least one more 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. Corcept develops and commercializes medications that modulate the effects of cortisol, widely known as the stress hormone. We market our first-generation cortisol modulator, Korlym, for the treatment of Cushing's syndrome, a life-threatening disease that affects approximately 20,000 patients in the United States. We are conducting a Phase 1/2 trial of Korlym as a treatment for triple negative breast cancer, a deadly disease with no FDA-approved treatment. We have developed a large portfolio of next-generation cortisol modulators, which we hope to develop into approved treatments for a wide range of serious diseases. Our lead next-generation compound, CORT125134, has completed Phase 1 and will begin two Phase 2 trials, one for the treatment of Cushing's syndrome, and another for the treatment of a yet to be chosen oncologic indication in the first quarter of 2016.

Before I discuss these topics in more detail, I want to take a minute to observe that last quarter, Corcept passed an important milestone. Excluding non-cash expenses, we earned a profit. Our non-GAAP net income of $369,000 was small, but it demonstrated a very important fact. Not only is our Cushing's syndrome business profitable on a standalone basis, it has the potential, now the demonstrated potential, to fund the rest of our activities, including development of the next generation treatment in our product pipeline. Very few biotech companies can make that claim.

I will briefly review our key programs, then stop to answer your questions. We began offering Korlym to patients with Cushing's syndrome in April of 2012. Since then, our business has grown steadily. We expect that it will continue to do so. As you just heard, we are revising our revenue guidance for 2015 to between $49 million and $53 million, which is roughly double our total for 2014. Korlym sales grew last quarter because more physicians prescribed Korlym, and the number of patients with Cushing's syndrome taking the medication increased. Nonetheless, there are many Cushing's syndrome patients who could benefit from the medication, but who do not yet receive it. I said during our last call that we had recently increased the size of our sales force by about 50%. Our newly-hired sales representatives have completed their training, and are now calling on physicians. We look forward to their contributions to our growth in the second half of this year and beyond.

Korlym is a powerful treatment for Cushing's syndrome, and we expect its growth for the treatment of that disease to continue. That being said, we have identified next-generation compounds that we believe may also effectively treat Cushing's syndrome, but with important advantages. I have spoken before about Corcept's portfolio of proprietary selective GR antagonists. There are more than 300 such compounds, all of which modulate cortisol activity, but unlike Korlym, do not bind to the progesterone receptor, and so are not abortifacients, and do not have the other side effects, such as endometrial thickening associated with progesterone receptor blockade.

Removing progesterone antagonism is medically and politically a very big deal. Our next-generation compounds are not just another purple pill. CORT125124 successfully completed Phase 1 and should advance to Phase 2 as a potential treatment for Cushing's syndrome in the first quarter of 2016. In addition to demonstrating the compound's safety and tolerability, data from Phase 1 showed that CORT125134 appears to share Korlym's ability to potently reverse the effect of excess cortisol activity, which makes it a promising candidate to treat Cushing's syndrome. We look forward to testing its activity in patients with Cushing's syndrome in its upcoming Phase 2 study.

Our oncology program also made significant progress last quarter. We continued to dose patients in the efficacy portion of our Phase 1/2 trial of Korlym for the treatment of triple negative breast cancer. In this portion of the trial, we plan to treat 20 women who have metastatic, triple-negative, GR-positive disease, with a combination of Korlym and Halaven, Eisai's brand name for eribulin. For those of you that are not familiar with triple negative breast cancer, let me provide some background. 40,000 women in the United States are diagnosed with the disease every year. There is no FDA-approved treatment for triple negative breast cancer, and the prognosis for patients with metastatic disease is poor. Triple negative means that these patients have tumors which do not express the estrogen, progesterone, or HER-2 receptors, to treatments like tamoxifen or Herceptin, which are very effective for receptor-positive breast cancer, have no target, and are ineffective. However, our soon-to-be-published research indicates that significantly more than half of triple-negative tumors express GR, the cortisol receptor to which Korlym competitively binds. We expect to have initial efficacy results of our Phase 1/2 trial of the end of this year. If they are positive, we will begin a Phase 3 trial in 2016.

We are about to advance another compound for the treatment of cancer, CORT125134. As I mentioned earlier, the compound's Phase 1 trial results show it to be safe and well-tolerated. In animal models of several solid tumor cancers, it appears to be even more potent than Korlym. We plan to advance CORT125134 to Phase 2 for at least one oncologic indication in the first quarter of next year. We are reviewing candidate indications now, and will make our development decision in the next few months.

I would like to take a minute to explain why we believe cortisol modulation, whether using Korlym, CORT125134 or another of our next-generation compounds, can help treat some cancers. Cortisol suppresses the body's immune response. In many circumstances this is beneficial. Without cortisol, symptoms like those seen in autoimmune diseases would be much more common. However, it is now clear that activating, not suppressing the body's immune system, is beneficial in fighting certain cancers. This is the reasoning behind the use of PD1 inhibitors. Similarly, for certain tumors, cortisol, acting through GR, the glucocorticoid receptor, appears to suppress the immune response and stimulate the tumor's growth. GR modulators like Korlym or CORT125134 seem to reverse this effect. The mechanism I have just described has been the focus of our own research, and have substantial in vitro, in vivo, and clinical work by investigators at the University of Chicago, and other academic institutions.

You may remember that at the December 2013 San Antonio Breast Cancer Symposium, the Chicago team reported the successful findings of their clinical study of Korlym in combination with nab-paclitaxel to treat metastatic triple negative breast cancer. Of the six patients in their study whose tumors were GR-positive, two had a complete response to treatment, two had partial response, and one had stable disease. These are exceptional results. All of the women in the study had previously failed at least one course of taxane-based chemotherapy, and yet five of the six appeared to benefit when Korlym was added to their taxane-based treatment.

There is reason to believe that cortisol modulation will work in other solid tumors that express GR. For instance, the University of Chicago investigators are conducting a follow-up study of Korlym in combination with a different chemotherapeutic regimen, gemcitabine and carboplatin, to treat patients with ovarian cancer, in addition to treating patients with triple negative breast cancer. In castrate-resistant prostate cancer, extensive in vitro and in vivo work shows that cortisol activation of GR is a path to tumor growth. Accordingly, GR modulation by Korlym, CORT125134, or another of our selective GR antagonists, when used in combination with an androgen deprivation agent such as enzalutamide, can be a potent treatment. A separate group of investigators at the University of Chicago is conducting 108 patient Phase 1/2 study of Korlym, in combination with enzalutamide, to treat the disease. We have licensed the intellectual property to this therapeutic approach, and will be following the Chicago study closely.

I have discussed three cancers whose tumors express GR that we believe may respond to treatment with the GR modulators such as Korlym or CORT125134, triple negative breast cancer, ovarian cancer, and castration-resistant prostate cancer. There may be other solid tumors where this strategy could be beneficial. We have tested a wide variety of solid tumors, and have found that many, but not all, express GR. We will use this data, along with our own research and research by independent investigators at the University of Chicago and elsewhere, to select indications for further study, beginning with a Phase 2 study of CORT125134 in early 2016.

Our work in Cushing's syndrome and oncology touches on only a small part of cortisol modulation's therapeutic potential. Because there are receptors for cortisol in nearly every tissue of the body, excessive or disordered cortisol activity can cause or exacerbate many illnesses. In addition to Cushing's syndrome in cancer, therapeutic targets for medications that modulate cortisol's activity include severe metabolic, psychiatric, and even an ophthalmologic disease. This is why our collaborations with academic investigators around the world are so important. As these researchers increase our understanding of cortisol modulation, we will be able to bring forward compounds from our portfolio of proprietary selective cortisol modulators, match them to therapeutic targets, and advanced the most promising candidates to clinical study. This is the development model that gave birth to our work in triple negative breast cancer. We believe it will be just as productive and cost-effective in a wide range of serious diseases.

I will give two different types of examples to illustrate how this development model works. Last quarter, I mentioned to you that academic researchers in the Netherlands had shown that CORT118335 both prevents and reverses the effects of non-alcoholic fatty liver disease in mice. We are now conducting IND-enabling studies of that compound, and will advance it to human study if its results are positive. Separately, independent investigators in the United States are currently conducting a Phase 2 trial of Korlym for the treatment of central serous retinopathy, a serious ophthalmologic disease. If those results are positive, we will strongly consider initiating a Phase 3 trial of Korlym in that indication. These are just a couple of examples that have bubbled up from the more than 30 collaborations we have underway. Cortisol modulation is a critical medical platform, and we are the leader in advancing it.

To sum up, our Cushing's syndrome business grew again last quarter, as it has every quarter since Korlym's launch. On a non-GAAP basis, we generated our first profit. We expect growth to continue and to be able to reach cash flow breakeven without having to raise additional funds. We have revised our 2015 revenue guidance to between $49 million and $53 million. In vitro and early clinical data suggests that CORT125134 may treat Cushing's syndrome with Korlym's efficacy, but without the side effects that come with Korlym's progesterone antagonism. The compound's Phase 2 study for the treatment of Cushing's syndrome should start early next year.

Our oncology program continues to advance. By the end of the year, we expect initial efficacy results of our Phase 1/2 trial of Korlym in combination with chemotherapy to treat triple negative breast cancer. A Phase 3 trial could be underway by mid-2016. CORT125134 should be in Phase 2 for an oncology indication by early 2016. Finally, we continued to advance our other compounds from our proprietary library of selective GR modulators. Our collaboration with independent investigators around the world suggests that there are many serious diseases for which cortisol modulation might provide treatments, and we look forward to sharing the results of this work as soon as it is available. I will stop here and answer any questions. Thank you.

(Operator Instructions)

Charles Duncan, Piper Jaffray.

First of all, congratulations on the results in the quarter, and secondly, thanks for taking my questions.

Sure.

So, I had a question on the current Korlym business, and then on the pipeline. And the question on the current business is, you have raised guidance to lower end, which makes sense to me. What do you think is the biggest input to revenue growth? Is it increasing the prescriber base, is it increasing the number of patients, or is it increasing the duration or the dosing that patients are exposed to?

Charles, first, thank you for calling in on an August day. That is very nice of you, particularly in the late afternoon. I would like to reintroduce you to Sean Maduck, who is our Vice President of Sales and Marketing at Corcept. You heard from Sean at the last call, but I think he really is in a very good position to answer your question.

Joe, thank you, and thanks for the question. I think I will start off by reiterating what Joe said during the call, mainly Korlym sales in the last quarter because more physicians prescribed Korlym and the number of patients, an increase in the number of patients taking the medication increase as well. In terms of what are the main drivers of that in the market? We have learned a lot about our market since launch, and we have become far more effective, I think, in telling the Korlym story. Endocrinologists are becoming far more familiar with our product, and through that we're getting extended face time with them, and we are able to get into much deeper conversations about all ideologies of Cushing's syndrome including pituitary, ectopic, and adrenal. And because of that, they are now far more receptive as to how Korlym could benefit their patients, and are becoming increasingly more confident in treating medically with our product. Through that, they're now actively looking for and testing more patients who could benefit from the product. It is a factor of more physicians prescribing, more patients being prescribed the product, and all of our efforts around that.

Okay. That is helpful. So, do you feel like a physician are getting a better handle on using Korlym, relative to some of the other approaches that have been used to treat Cushing's in the past?

Yes. I just want to underscore Sean's point. I think that it was really, Charles, I know you followed the story for a very long time. It was really just, for those who haven't, just to highlight some of the history of it, Korlym was approved on a 50-patient open label study on its PDUFA date, without an advisory panel, with 17 doctors participating, because the efficacy was very, very [hot]. In terms of clinical global response, virtually every patient responded. That was a great advantage, but at the beginning, hardly any physicians had used Korlym, it was a new mechanism, and hadn't understood it prior to that point.

Our commercial team has worked very, very hard to increase the awareness of the medication, how it works, and so forth. I think that we're still early, even though this is an adoption-oriented launch, we are still relatively early in that process. We're not seeing a leveling off of the increase of interest, and we know that this is a sale that will require some sophistication. It really is, I think, just moving long same way that it has, just with a broader and broader base every single month.

Okay. That is helpful, Joe. Now, as you have mentioned we have covered this stock for some time, and I have always been primarily driven by the broad potential applicability of the platform, and so I wanted to ask you about that. Clearly you are starting to articulate that aspect of the story and I appreciate that. I wanted to, however, you mentioned the triple negative breast cancer trial. Would you anticipate an update at the San Antonio breast cancer meeting coming up here in December?

Well, it is a terrific venue, and it would be great to be able to present information at that point. I can't promise that, because we'll have to see how the study is going, but certainly that would be a nice aim, for us if we could. That is a conference which is very well covered.

And should you see some favorable responses in TNBC, it would seem that, given the completely unmet clinical need there, it would make sense to file for a breakthrough therapy designation. Would you anticipate that possibility being the case?

As with everything else we do, Charles, it really is going to be driven by the data, and we will look at every opportunity to advance the treatment as quickly as we can, if it looks like the results warrant it.

Okay. Final question, and then I will hop back in the queue. You mentioned something interesting, that about 50% or so of triple negative breast cancer tumors, or tumors with women with triple negative breast cancer expressed -- highly express GR. I'm wondering if you are considering that as a potential stratification strategy for future studies?

Let me just give a little context for my answer. I know you know the story well, but others may not. It has not been a standard screening to look for the cortisol receptor on triple negative tumors. University of Chicago first developed an academic assay, but if you go to the older academic literature, it was very sparse and it basically said that about one quarter of these tumors, perhaps, had the GR receptor on it.

We just completed the largest tumor bank screening for GR that had ever been done, and as I mentioned, we are recovering academics, we publish everything, and we will publish this soon. But what it showed is it was not 25%, it wasn't 100%, but it was considerably more than 50%, which really says that this is a very worthwhile target for a substantial group of women who have this disease. Really I think it is moving along in that way. Now, in that context, Charles, could I have your question again?

So, is that possibly a factor that you look at to stratify patients within a study, in a Phase 3? Or is it even possible that in the future that you could use that in the commercial setting?

Now I fully understand your question. The answer is that we anticipate that we will use GR positivity as a way for patients with triple negative breast cancer to enter or not enter our study. We really feel very strongly that if patients do not have, sadly, if they do not have a GR target, we will not actually bring that forward. At this point in time, it really is our first thought, that this will be, we will have developed and bring along through Phase 3, into commercialization a companion diagnostic, and would anticipate at this point, that it would in fact be part of our label. Obviously, we will have to see what the data shows, and we'll make decisions along the way, but that is how we are looking at the situation right now.

Okay. That is helpful. Thanks for the added color. Congrats on the quarter.

Christopher James, FBR & Company.

Let me also add my congratulations on a really good quarter, and thanks for taking my questions, as well. Joe, I guess, what can you tell us? What are you seeing in terms of patients that are coming aboard with respect to disease severity, relative to your initial launch? Are you also seeing an increase in average dose?

Yes. Two different questions, but first, good to hear from you, Chris. The first question is really a very interesting one. Just to be blunt about it, in our study, we saw in some sense the doctors' biggest train wrecks, the patients who entered this study, really had no other treatment, and so entered. I think, what was really very heartening is that those very, very sick patients did quite well. I think over time, patients with more moderate Cushing's syndrome had begun to get treated with Korlym.

It is our strong opinion that there is nobody who has a mild case of Cushing's syndrome. It is a bad disease, but there are patients who have really severe illness, where they're on death's door, and there are patients who have a more chronic indolent, but very -- but also powerful illness. Yes, we have actually seen more and more treatment of patients who have more moderate disease, as opposed to the most severe patients. The titration question is an interesting one, and a little bit more complex than you might think. I think I've mentioned before on the conference calls that the average dose in the clinical trial is about 750 milligrams. What we actually had real work to do was, explain to endocrinologists, how the initial dose, 300 milligrams, was probably not going to be the most effective dose for many of their patients. That work is actually also in publication at this point, come forward, and I think people that will really understand that better as our sales force has explained it, and as the literature comes out.

So on the one hand, you have patients who have somewhat more mild illness. On the other hand, you have patients who probably have not been fully titrated to their optimum dose in the past. I think those two forces kind of go with each other in combination. I can tell you that over time, we have seen a modest increase in dose, and if you are asking my personal opinion, I think that will probably continue to increase over time, even as patients with more moderate disease enter our patient group.

Great. That is helpful. And then on the expanded sales force, when do you think we'll see the full incremental effect of that expanded sales force? Do you think we should think about this as a 3Q event or a 4Q event?

Thanks. This is Sean Maduck, that is a great question. I will touch on that, but before I go into the specialist piece, I want to add a new piece -- or highlight another relevant field point that did have an impact in Q2, that will also carry forward. We have announced historically that we did increase the size of the sales force, the clinical specialist organization to 25 in Q1, but we also expanded our sales leadership team. We now have four active regional managers overseeing this group. Their leadership has really benefited both our veteran, as well as our new-hired clinical specialists, and has helped increase the effectiveness of the field in Q2.

Now, onto your question about our new hires, in terms of, have we seen any activity to date? The answer will be no. Our new specialists have really recently completed all their training, and we expect to see some of the contribution coming from them in Q3, with that really ramping up in Q4. We have a very extensive training program here at Corcept. Korlym is a complicated sale, and CSes -- clinical specialists need to have high clinical acuity, and be very well-versed in both the disease and our mechanism of action in order to be effective. It takes some time to build relationships and be productive in territories. Just to reiterate, we will see some activity in Q3, with ramping up in Q4.

Great. That is really helpful. And then, I guess onto triple-negative. The UC data, as you pointed out, Joe, seemed phenomenal. I guess, what response rate are you targeting? I don't know if you can say that publicly -- but what response rate are you targeting to really think about going directly into a pivotal? Do you think you need to replicate those phenomenal results, seen at University of Chicago?

I think it would be wonderful, but highly unexpected if we, almost any trial of an oncologic agent had an 80% response rate. No. We don't expect to replicate that result, although it was wonderful for that smaller group of patients. On the other hand, just for a basis of comparison, I fortunately follow the space, Medivation recently did a study in triple negative breast cancer, and their response rate with enzalutamide was 7%, and they were not terribly unenthusiastic about that.

So, the question you raise is a complicated one. I'm not sure exactly what response rate is going to excite us. Certainly, 80% would excite us but this, I guess I have to again, go back to context. This is an enormously sick group of patients. These are patients who have failed every other therapy, and sadly, we have had already in our clinical trial, patients who passed away between when they consented and they got their first dose of medication. It just shows you how acutely ill these patients are. So, in some sense, any response rate that is reasonable is worthy of bringing the medication forward. I don't have a specific percentage for you, and we'll actually have to look carefully as we get the data. As you know, the data is not just response rate but increase in survival time, and so forth.

Right. Okay. Maybe just two more on the pipeline, and then I will jump back in the queue. You mentioned CORT125 going into a tumor type, you didn't specify which type. I guess, is it safe to assume that it will be one of those three tumor types you discussed, or are you potentially thinking about other tumor types?

We are trying to think more broadly at this point, because as I said, we recently completed a screening of other solid tumors, and found that there was GR represented in a fair group of them. Not all of them, which actually gave me confidence in the assay work, but in a fair group of them. We do actually have in vitro data of 125134 in triple negative breast cancer, castrate-resistant prostate cancer, and ovarian cancer. We actually have in vivo data in both triple negative breast cancer and castrate-resistant prostate cancer at this time. So they certainly are the head of the line, but we are really taking a careful look to see if we want to broaden this, because we feel like the strategy might have real legs in other forms of solid tumors. It's a serious topic of consideration. It is probably going to take another two months of thinking -- two or three months of thinking, to get through it, but by the latter part of the year, we will know where we are going.

Great. That is helpful. And then, finally, on prostate, just wondering, just given the biology and the papers that have come out, how should we think about the potential of mifepristone? Should this be something we think about in combination with enzalutamide or in enzalutamide's failures?

An important question. As far as we can see, mifepristone by itself does not have particular oncologic benefits. It really is in combination with other treatments, and I will speak to yours specifically. What really appears, this is a topic of a New England Journal editorial, I guess, about a year ago, is that enzalutamide, which is a terrific medication, shortly after its given, and it is a powerful androgen receptor and antagonist, colonies of cells which are GR positive, and where GR is the growth factor, begins to develop. Broadly one can say that eventually enzalutamide resistance, a fair portion of that is just GR positivity. What we are really looking for is blocking another exit route for the tumor. And the combination is really what is being tested. So the study at the University of Chicago is enzalutamide versus enzalutamide plus mifepristone.

Great, that is helpful. And again, congrats on a really nice quarter. Thank you, Chris. I appreciate the questions.

We have no further questions at this time. We would like to thank you. Please go ahead.

Thank you very much, and we will talk to you next quarter.

Thank you. With this, we conclude today's conference. Thank you for your participation. You may now disconnect.