Corcept Therapeutics Inc (CORT) 2016 Q4 法說會逐字稿

Welcome to the Corcept Therapeutics conference call. My name is Karen 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.

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 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-K with the SEC.

Today's call is being recorded. A replay will be available through February 13th 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 made 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 by 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 selected cortisol modulators, including CORT118335 and CORT125281; the protections afforded by Korlym's orphan drug designation for Cushing's syndrome; and our other intellectual property rights, including the composition of matter patents covering our selective cortisol modulators 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 forward-looking statements 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 (sic -- see press release "a 59% 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 31th 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 a 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 in CORT118335 and repaying the balance of our capped royalty financing obligation. I will now turn the call over to Dr. Belanoff. Joe?

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 produce 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 traditional funds.

As I've said on prior calls, we see no leveling off in our Cushing's syndrome business. We expect revenue in 2017 of 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 face, increased fat 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 every organ system in the body and 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 excelled in 2016 because the clinical specialists we began adding to our field sales force in mid 2016 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 require between the physicians 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, 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 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 glucocortoid receptor, or GR.

In some women, Korlym's affinity for PR causes endometrial thickening and irregular vaginal bleeding. These side effects are not life-threatening and are manageable, but patients and physicians would strongly prefer to avoid them. Affinity for PR is also what makes Korlym an abortifacient. 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 potently modulates activity of GR, as Korlym does, but does not bind to PR.

Our trial is 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 this study by the end of this year.

One of the challenges of identifying patients with Cushing's syndrome is that their symptoms overlap 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 diagnoses Cushing's syndrome and begins treating the patient with Korlym, the patient's cortisol levels are not a reliable indicator that the optimal dose of Korlym has been reached. Cortisol modulators such as Korlym are effective treatments for Cushing's syndrome because they compete with cortisol and GR, reducing the excess cortisol activity that is causing the patient's disease. They do not lower the patient's cortisol level.

Cortisol and synthetic analogs of cortisol stimulate expression of the gene FKBP5. In CORT125134's Phase 1 trial 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 CLIA-validated assay to measure nab-paclitaxel 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 whose 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 result.

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 raise 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 may be 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 Eisai's 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 whose GR status was not known.

As determined using the response evaluation criteria in solid tumors, or RECIST criteria, results in this group were as follows: 4 patients initiated a partial response, defined as a 30% or greater reduction in tumor size; 8 had stable disease, and 11 had progressive disease. One patient who has exhibited a partial response remains on therapy.

These data compare favorably to results in patients with metastatic triple-negative breast cancer who received Halaven monotherapy, as reported by [Aodi] in the Annals of Oncology in 2012. 6 of the 23 patients in our trial to treat progression-free survival longer than the upper bound for progression-free survival reported by Aodi. In addition, median 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 at 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, Cegene'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 the 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-centered Phase 2 study of Korlym combined with the androgen modulator enzalutamide, the Astellas Medivation 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 Sawyers' group at Sloan-Kettering, very early in treatment with XTANDI, colonies of tumor cells emerge in 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 molecule's 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 anti-psychotic-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. By 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 the gene expression assay that we hope will help physicians diagnose and more effectively treat patients with the disorder. Successful development of CORT125134 and other assays 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 in 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 Abraxane 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 Abraxane 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 patients 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. 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.

(Operator Instructions)

Charles Duncan, Piper Jaffray.

Hi guys, first of all, congratulations on a good year of progress and 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. I am wondering if you can provide a little bit of additional color on some of your assumptions regarding that top-line 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.

Yes, very glad to do it, Charles, and glad to have you on the phone. Really, I can take you to the final statement first and then break it down for you. We are seeing growth very much as we have seen it for the last years. We see more doctors each month, more new prescribers, and more multiple prescribers from doctors who have prescribed a single time. So in really 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 had previously passed over. We had several instances in the last year where doctors said, I've been treating someone with diabetes for 10 years, and I know they are compliant with medications and they're not getting better. I'm going to go back and see if they really have an issue related to Cushing's syndrome, to hypercortisolism. 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 beginning-of-the-funnel testing is taking place.

But really, the short answer to your question, Charles, is it's really the same growth factors as 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, in our revenue estimate as well.

Okay, that's helpful, Joe. And then I want to ask you a question about 134, about just thinking about the answer you just gave. The gene, the genetic test, FKBP5, seems like a paradigm shift. It gives you something to offer to the physicians to measure. And I'm wondering if you have a sense for the current patients on Korlym, what percentage of them demonstrate that type phenotype?

I really do think, and of course, 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 are actually very crude. There are measures of cortisol circulating in the bloodstream or what's left over in the urine, or what's leftover in the saliva. And frankly, what's going on in your blood, urine, or saliva is really irrelevant to the symptoms that you develop 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 we're really at the beginnings of our testing. We've described it; there's actually a very nice paper in the Journal of Clinical Endocrinology and Metabolism, which 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 or 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 will 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.

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 press you 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 and you titrate to effect? And isn't that very similar to what you saw with Korlym? And therefore, my conclusion would be that trial should read out positively, but what's your thought on that?

Well, you are correct, and let me again, just give context for the whole audience. What we have really found with Korlym is that titrated to the correct dose, virtually every patient responds. And we suspect that when 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 have yet to treat a patient before this trial with Cushing's syndrome with CORT125134. This is the 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, basically ranges from the first half is 50, 100, 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 -- I think that this trial has a significantly higher degree of technical success than most trials, including many trials I have worked on, is that we were really able to get into phase 1 pharmacodynamic results that indicated that 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 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 antagonists.

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

Thank you, Charles.

Alan Leong, BioWatch News.

Thanks for taking my questions. Congratulations to both you, Joe and Charlie, for the wonderful year. And also an additional congratulations, I'm crossing my fingers that you'll be able to have the FKBP5 test go forward.

A couple questions. When you look at the next couple of years, a number of cards have been turned over. And moreover, you're [signed] to expand your clinical programs. And just wanted to have you, if you could comment on Corcept's [story] going forward, you've always been able to increase earnings but now you will be increasing your clinical program. Is it more just the game for the next couple of years will be just keeping cash-flow neutral and expanding your programs or will it be becoming a more profitable enterprise?

Alan, you raise 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 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 ramp for our Korlym revenues matches it well.

We really think that what's going to make the ultimate success for the Company and most benefit for patients is several of the programs that I have talked about today, and others that may 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. Sean Maduck, in the commercial area has done a tremendous job with the people working for him to do that. We're very pleased with the growth in Cushing's syndrome with Korlym.

But one of the 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 efficacious as 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 heard 100% of what you said, Alan. I hope that was on track.

It was. It was. Our earning estimates from four years ago, we'd have to eat a little bit of crow. I had another question on the cortisol modulation and the cancer program. Hopefully a checkpoint inhibitor. You talked about how cortisol in the bloodstream helps depress the immune system, and that the checkpoint inhibitor is working in conjunction.

You and I have discussed this; the checkpoint inhibitors there's a large section of people that it does not -- a number of cancer patients that don't respond to it. Wondering if you could provide some color on how what you hope to accomplish and what you hope to see with your drug platform when they're paired with cortisol on the checkpoint inhibitors?

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, is a very important one. The checkpoint inhibitors are a wonderful new treatment, and certainly if you're Jimmy Carter, you're very pleased that they came along when they did.

But unfortunately, the response rate to checkpoint inhibitors is not really all that high. Maybe a quarter of the patients actually respond to them. And I think that there's a tremendous amount of work going on right now to figure out a priority who they're 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, and what they're treated with different agents in cancer, is actually low because cortisol levels and cortisol activity is high. 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 a 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 among them.

Thanks, hope to see you soon.

Okay. Thank you, Alan.

(Operator Instructions)

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.