Corcept Therapeutics Inc (CORT) 2017 Q1 法說會逐字稿

Welcome to the Corcept Therapeutics Conference Call. My name is Victoria, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

And now, I would turn the call over to Charlie Robb. Charlie, you may begin.

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

Earlier today, we issued a news release giving our first quarter financial results, a corporate update and an upward revision of our 2017 revenue guidance. For a copy of this release, go to corcept.com and click the Investors tab. Complete financial results will be available when we file our first quarter Form 10-Q.

Today's call is being recorded. A replay will be available through May 15 at 1 (888) 843-7419 from the United States and 1 (630) 652-3042 internationally. The passcode will be 44704595.

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 financial results 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 clinical trials of CORT125134 to treat patients with Cushing's syndrome and solid-tumor cancers; the clinical attributes and advancement of our selective 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 patients with Cushing's syndrome, 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 duty to update forward-looking statements made during this call.

Now, I'll review our financial results. Corcept's revenue in the first quarter was $27.6 million compared to $16.1 million in the first quarter of last year, a 72% increase. Our first quarter GAAP net income was $0.04 per share compared to GAAP breakeven in the first quarter of 2016. Excluding the noncash expense of stock-based compensation and accreted interest on our capped royalty financing obligation, our non-GAAP net income for the first quarter was $0.06 per share, up from $0.02 per share in the first quarter last year.

Our cash and investments at quarter-end increased to $57.3 million, up from $51.5 million at December 31, 2016, and $40.7 million at the close of the first quarter last year. Our increase in cash is after payment of $4.8 million under our royalty obligation, which we're on track to retire completely with our next quarterly payment.

We expect our revenue growth to continue. Based on our strong commercial performance in the first quarter and our expectations for the rest of the year and beyond, we've increased our 2017 revenue guidance to between $125 million and $135 million. 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 II trials of our proprietary selective cortisol modulator CORT125134 in both Cushing syndrome and solid-tumor cancers; advancing to the clinic our next-generation cortisol modulators, including CORT125281 and CORT118335 and repaying the balance of our royalty obligation.

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

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

Corcept had an excellent quarter. As Charlie mentioned, our revenue increased 72% to $27.6 million. We generated GAAP net income of $0.04 per share and non-GAAP net income of $0.06 per share. Our cash and investments increased by $5.7 million, even as we funded our growing clinical development programs. We now raised our 2017 revenue guidance to between $125 million and $135 million. And we continue to anticipate significant growth in 2018, 2019 and beyond. These results are especially impressive because we produced them in the first quarter of the year, which is our most challenging quarter commercially.

Every January, many insurance companies require patients to obtain reauthorization of their Korlym coverage. This practice is common for orphan medications. Even though we help patients navigate this bureaucratic process and, in many cases, insurance coverage continues without interruption, some patients briefly lose coverage. In keeping with our guiding principle that the health of our patients comes first, we provide Korlym free of charge to patients whose insurance coverage temporarily lapses, but our first quarter revenue was reduced while we clear this annual insurance hurdle.

As is true in prior quarters, our Cushing's syndrome business excelled because our clinical specialists continued to become more productive. Cushing's syndrome is a complex disease. Even a highly skilled clinical specialist must spend significant time with a physician, often 5 to 7 visits before that physician writes their first Korlym prescription. Since Cushing's syndrome is a chronic illness and Korlym is a chronic treatment for it, it takes some time, often 4 months or longer, before the full impact of the patient is seen -- full economic impact of the patient is seen.

We now have 31 clinical specialists and continue to hire experienced high-quality candidates as we identify them. The latest class of 5 was trained in the fourth quarter of 2016. We look forward to their contributions later this year and beyond.

As I do not want my justified attention to the talent and hard work of our commercial team to skew our 2 other fundamental reasons for our success. First, Korlym is an effective medication. For almost all patients, it works very well. For some, it is life-transforming.

As you'll recall, Cushing's syndrome is caused by a tumor that produces either excess cortisol or ACTH, a hormone that causes the body to produce cortisol. Symptoms vary from patient to patient and include impaired glucose tolerance, high blood pressure, central obesity, increased fat around the neck, thinning arms and legs, weak muscles and severe fatigue. Irritability, anxiety, cognitive disturbances and depression are also common. Hypercortisolism can affect every organ system in the body and could be lethal if not treated.

Korlym works by competing with cortisol at the glucocorticoid receptor, GR for short, the receptor to which cortisol binds when cortisol levels are elevated. Korlym modulates the effects of cortisol and the patient's symptoms abate. In our Phase III trial, 87% of the patients, as adjudicated by independent outside experts, experienced significant clinical improvement.

Remember, many of our patients began taking Korlym after therapies such as ketoconazole, a generic antifungal agent that has the side effect of lowering cortisol levels by inhibiting cortisol production, failed them. The fact that Korlym can help patients after the traditionally used cortisol synthesis inhibitors have failed is something physicians remember and is one of the reasons first-time prescribers often become multiple prescribers.

A second important reason for our growth is that physicians have become more sensitive to the dangers of less severe hypercortisolism, which is significantly more prevalent in the severe cases that, until recently, defined most doctors understanding of the disorder. It's increasingly understood that even moderate or mild cortisol excess, a condition many physicians used to dismiss with a watch-and-wait stance, is highly likely to produce detrimental symptoms over time.

Important papers published by Dr. Diana Lopez in the Annals of Internal Medicine and by Dr. Valentina Morelli in the Journal of Clinical Endocrinology and Metabolism reviewed the health outcomes of patients with mildly accessible cortisol activity and found significantly increased morbidity and mortality. Awareness of this factor is causing many physicians to take a second look at patients in their care who exhibit one or more symptoms of Cushing's syndrome such as glucose intolerance or hypertension, but who have not responded to conventional therapies for those conditions. In many cases, they discover that these patients have demonstratively excessive cortisol activity.

As many of you know, we are advancing the proprietary compound CORT125134 that we believe will greatly expand the market for cortisol modulators as a treatment for Cushing's syndrome. CORT125134 is a selective cortisol modulator that may offer Korlym's benefits without some of its drawbacks.

Korlym modulates activity at the progesterone receptor, abbreviated as PR, as well as 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 what makes the active ingredient in Korlym the abortion pill. A drug that effectively modulated cortisol, but had no affinity for PR and none of the abortion pill's medical and political toxicity would undoubtedly be a superior medication.

CORT125134's Phase II trial is a single-arm dose-ranging study that will enroll 30 patients at sites in the United States and Europe. Enrollment is in progress, and we expect results by the end of this year.

We are also developing a CLIA-validated assay that we believe will become a powerful tool for diagnosing and optimally treating patients with Cushing's syndrome. The assay will measure activity of the gene, FKBP5.

Cortisol stimulates FKBP5 gene expression. In healthy subjects in our Phase I study, FKBP5 levels increased substantially when patients were administered prednisone, a synthetic analogue to cortisol, but remained unchanged when Korlym or CORT125134 was co-administered with prednisone. This is a very strong indication that CORT125134 will act similarly to Korlym in treating patients with Cushing's syndrome.

Korlym works by reducing cortisol's activity. This is obvious to the doctor as they see their patient's symptoms improve. However, because GR modulators like Korlym or CORT125134 do not reduce cortisol levels, the patient's improving health is not accompanied by a decrease in cortisol levels. Our expectation is that FKBP5 expression will decline as cortisol activity returns to normal levels and the patient's symptoms abate.

We believe our assay will, among other things, help physicians monitor the reduction in cortisol activity and arrive at an optimal dosing regimen. We expect work on this -- we expect to complete work on this assay this year.

I will now turn to our oncology program. There are 2 mechanisms by which cortisol modulation may prove to be an effective oncology therapy. First, in cancers or tumors expressed 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 this apoptosis-suppressing genes by adding a cortisol modulator to the chemotherapy regimen should allow that regimen to achieve its optimal effect.

Second, cortisol modulation may help the immune system fight cancer. As you know, there is much interest in oncological therapies which stimulate the body's immune system to fight the disease. Cortisol suppresses the immune system. The physiologic and psychological stress of cancer and its treatment raise cortisol activities 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.

The Phase I/II trial of Korlym in combination with eribulin to treat patients with triple-negative breast cancer that we completed last year showed the combination of Korlym and chemotherapy was clinically active and deserve further study.

Investigators at the University of Chicago are now leading a definitive study. With funding from Celgene, they and their investigators are conducting a double-blind placebo-controlled multicenter Phase II trial of Korlym in combination with nab-paclitaxel, Celgene's drug, Abraxane, in 64 patients with advanced triple-negative breast cancer. We are providing Korlym.

While the University of Chicago researchers investigate the use of Korlym in triple-negative breast cancer, we are advancing CORT125134 in combination with Abraxane to treat patients with a range of solid-tumor cancers. Our trial is currently in its dose-finding phase. We expect to open expansion cohorts by the end of the year.

Although the disease targets have not yet been chosen, triple-negative breast cancer, ovarian cancer and pancreatic cancer are likely targets. In addition, we may initiate a clinical trial of CORT125134 in combination with a checkpoint inhibitor.

Cortisol modulation may also help treat castration-resistant prostate cancer, which is a particularly serious form of the disease. Because androgens stimulate prostate tumor growth, androgen-deprivation, also known as chemical castration, is a common treatment for prostate cancer.

Investigators at the University of Chicago showed and Charles Sawyers' group at Sloan Kettering confirmed that very early in treatment with the androgen receptor antagonist enzalutamide, colonies of tumor cells emerged in which cortisol, through its stimulation of GR, is the primary growth factor. Combining a cortisol modulator with an androgen modulator such as enzalutamide, the Astellas Medivation drug, XTANDI, from the outset of treatment may block this cancer escape route.

University of Chicago investigators are leading an 84-patient controlled multicenter Phase II study of Korlym combined with 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.

Following very promising preclinical results, we are also advancing one of our own proprietary selective cortisol modulators, CORT125281, as a treatment in combination with XTANDI for this disease. Phase I for this compound should begin next quarter.

As a reminder, we have exclusively licensed intellectual property from the University of Chicago covering the use of any cortisol modulator in combination with any anticancer agent to treat patients with triple-negative breast cancer and have any cortisol modulator and any androgen deprivation agent to treat castration-resistant prostate cancer.

For the past few quarters, I've reminded you that CORT118335, another of our proprietary selective cortisol modulators, is 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. CORT118335's Phase I trial will begin early next quarter. Should the results be positive, I'll have more to say about our plans for advancing this exciting compound in coming quarters.

To sum up, Corcept had an excellent first quarter. Despite the commercial challenges posed at the start of every year by insurance reauthorizations, our revenue grew to $27.6 million, an increase of 72% from the first quarter last year. We have increased our 2017 revenue guidance for the second time this year to between $125 million and $135 million. We generated a GAAP profit for the quarter of $4.4 million. And we expect -- continue to expect our Cushing's syndrome revenue to fully fund our planned activities.

We will soon have results of our Phase II trial of CORT125134 in Cushing's syndrome. CORT125134 promises to offer Korlym's efficacy, but without some of its side effect. Importantly, it is also not the abortion pill. We are also developing a gene expression assay that will help physicians diagnose and more effectively treat patients with the disorder. Successful development of CORT125134 and of our assay will, in our view, significantly expand the Cushing's syndrome market and extend our hold on it for years to come.

University of Chicago investigators are leading a Celgene-financed double-blind placebo-controlled multicenter Phase II trial of Korlym in combination with Abraxane. Our trial of CORT125134 in combination with Abraxane continues to enroll patients, and we expect to open expansion cohorts by the end of the year.

University of Chicago investigators are also leading a multicenter-controlled Phase II trial pairing Korlym with XTANDI to treat patients with castration-resistant prostate cancer. We began -- we plan to begin Phase I testing of CORT125281 and, if results are positive, begin a Phase II trial of CORT125281 in combination with XTANDI to treat patients with this serious disease.

Finally, one of our most promising proprietary compounds, CORT118335, will begin its Phase I trial early next quarter. If the results are positive, we will advance it to Phase II for the treatment of fatty liver disease and potentially other metabolic disorders.

Thank you. I'll stop now to answer questions.

(Operator Instructions) And our first question comes from Tazeen Ahmad from BoA.

This is Peter Stapor on for Tazeen. I have a few questions related to some of the metrics that have driving revenue guidance. So if you guys could talk about things like the volume increases versus price increases, new versus continuing patient, discontinuation rates and maybe the average doses that patients are on? If I can a follow-up also.

Sure. This is Charlie. So we did take a price increase on January 1 of 9.4%. The thing to remember about that though is because of Medicaid pricing regulations and so forth, that amounts to about a 7% effective increase for us over our portfolio. So we did take a price increase January 1.

The -- we have not -- we don't release particular numbers involving patients on therapy, average dose or that sort of thing, but what I would stress is that I think our -- the growth in the quarter and what we're seeing -- we're expecting throughout the year is really broadly based. It's more doctors, more first-time prescribers, more multiple prescribers bringing in additional patients, and that was really what was -- what drove the growth for the quarter.

Got you. That's helpful. And could you talk about how you account for discounting on the income statement, please?

Discounting of what?

Gross to net discount that you provide patients.

Well, we -- because we sell directly to patients, we have actually pretty very good insight into what sort of discounts from our full price that we expect to see.

And if I could just backup a little bit for those who are on the call who weren't as familiar with this, essentially, when we sell drugs to Medicaid patients, which is the Veterans Administration, which have a lower government-mandated price than the market price, we set aside a reserve to account for the fact that we will eventually have to rebate that difference to the government. This is what all drug companies do.

And so as we sell to patients, if we know that they are a Medicaid patient or a VA patient, we deduct from our revenue before reporting it, the discount we expect to see. So the revenue you're seeing is, in fact, the funds we expect to and always have collected. Does that -- okay. Good.

Yes.

Our next question comes from Charles Duncan from Piper Jaffray.

This is Sarah, on for Charles. So first, yes, so first I wanted to hear what you believe is driving the increased awareness and desire to treat more mild hypercortisolism. Is that a function of your sales force being out there or broader trends you see in the treatment?

Yes. That's a -- I'm just going to repeat the question. I think one of the most important things that's really going on at this point in time is that we are seeing a broader interest in Cushing's syndrome. And I think that it's really coming from 2 different places.

One, it's really simple. The academic literature and the studies have actually now begun to show that even what was previously considered less severe hypercortisolism is a real disease. I mean, maybe a good analogy to use is that for many, many years, you've had Cushing's syndrome sort of the equivalent as if you had high blood pressure if your blood pressure was 220 over 110. And now, we're really starting to realize that with hypercortisolism, the equivalent of blood pressure at 160 over 90 really needs treatment.

But I think the second aspect of it is we now have a treatment. Prior to the approval of Korlym, which is the first drug approved by the FDA for Cushing's syndrome, the only real treatments were surgical. And I think that really meant that physicians were loath to actually get involved unless something was really in a severe situation.

So we think both of those things, the fact that the data has now produced it -- produced results showing that hypercortisolism is really a disease of consequence and the fact that there is now something to treat it with, coupled with our better abilities to talk about what's going on and the increasing evidence, all really has come together to allow the market to grow.

That's helpful. And just one follow-up on the model. Can you provide some context around the SG&A, which was somewhat up quarter-over-quarter, if it's due to the additional reps? And should we expect this to hold steady or continue to increase during the year?

Well, the increase in SG&A primarily does relate to increased compensation expenses. We just increased our sort of both administrative staff, clinical staff, larger sales force and the incentive compensation that comes with the commercial results we produced in the fourth -- in the first quarter.

And so how should we think about it for the rest of the year?

Well, the overall caveat, remember, is that we run our -- our aim is to run a breakeven business. That being said, I think the -- we hire sales reps, as Sean will say, as we find really good qualified people. So we may add those here and there. But generally speaking, I think the increase in SG&A spending over the course of the year shouldn't be anything particularly material.

So let me just make sure because I know you know the story well, but there are listeners on the phone who don't. I mean, our goal really has been, and as I talked about it now for years, is to be self-funding. And we have done that now for many, many quarters in a row. We're in a fortunate situation that the growth in our clinical programs has matched very well our ramp in our commercial activity. And I think that's really the best way to think of Corcept. We are a self-funding company with a vibrant clinical platform that's in development, and the growth in our commercial revenue matches it quite well.

Our next question comes from Christopher James from Ladenburg Thalmann.

So on 125134, what are your plans after you get the data? And specifically, do you see a potential path to accelerated approval?

And then, as a follow-up to that, how -- can you comment on how quickly you can start the Phase III and what the size and scope of that could be?

All right. Well, again, Chris, I just want to make sure everyone is aware of our -- the situation and kind of understand it in context.

The first thing to really talk about is CORT125134's activity. For those of you who followed the company for a while, you may remember that we really were able to show in Phase I that the drug, which is -- Phase Is are really primarily done for safety purposes. It was certainly safe and tolerated at the doses we were using it. But it also, as we could indicate by testing it against the use of prednisone, was a potent cortisol modulator on the same order as Korlym.

So it put us into Phase II with a different kind of set of facts than you often have in a development program. And we are in the process of doing our Phase II study, which is a dose-finding study for patients with Cushing’s syndrome, first-time aim with patients. And it's moving along in the pace that we've described. Now, what happens next is clearly going to be dependent on the results, but we feel confident, because of what we've seen before, that the results will be good results.

Now, what after that? Well, the most obvious thing is that a Phase III program will begin. And as you would expect, because we want to prepare for this, we've already begun to think about what a Phase III study might look like and how we take that to the finish line.

And the only other thing, Chris, I could really say at this point is we're considering all options. We're very aware of the change in regulatory stance that's been come down in the past years. We obviously look carefully where it's going to be in this year. And our greatest goal, of course, is to bring what we think is a better medication to patients as quickly as we can and we'll avail ourselves of any possibilities that will allow that to happen.

That's helpful. And then, as a -- just one last follow-up on the CLIA-validated tests. How do you envision physicians, when you put it in their hands, actually using the tests to optimize patients? And then, what are your plans for future development, in particular with second gen?

Okay. And again, Chris, I'm just going to offer a little bit more information because I know you know the story well, but I want to make sure our listeners understand it.

Up until really at this point in time in hypercortisolism, in Cushing’s syndrome, the ways that cortisol was measured was not by its activity, but like, for instance, what was spilled over into the urine or what was floating around in the bloodstream. But just to be frank about it, like, who cares what's in your urine or in your blood stream? But nonetheless, it was all the -- the only way we could -- that sort of was measured.

What really makes the difference is what's happening at the cellular level in terms of activity? How much are you turning on the cell to do all the downstream things that cortisol might do or, frankly, any other hormone might do? And so we really think that, that is a much more sensitive way both to measure how patients are doing in terms of cortisol activity and even as -- if the data supports it, even whether they, in fact, have hypercortisolism at all.

So we're not certain where this is going to get. We're really going systematically one study at a time. Frankly, the first study was to show that, it's in progress right now, is do, in fact, as we would hypothesize new patients with Cushing’s syndrome have elevated expression of this gene compared to normals. And we'll be able to present those results as the year goes along.

But ultimately, we think this sort of tool, much like, say, PSA is for prostate cancer, a real measure of what's going on at the cellular level, if it, in fact, comes through is a far superior way of looking at what's going on in the disease state been something, like I said, what spills over into a patient's urine. What spills over -- essentially, what spills over into a patient's urine is a like it was in diabetes when you had a test to see whether or not a dipstick in someone's urine showed glucose. Diabetes has actually moved far past that. And our hope is that hypercortisolism will as well.

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

I have a question. I want to follow-up. It was actually from Chris' inquiry. Have you looked at the gene expression assay, too? The rationale behind it is also being discussed in the scientific area with respect to other indications. If I'm not mistaken, metabolic, psychiatric and alcohol with no indications. Are there any implications beyond -- possibly beyond Cushing's for this, too? And can you provide any further color on this? And I've always talked the sub, but can you comment about possibilities as a screening tool also?

Well, again, just to make sure everyone understands the context of your question, Alan. Yes, we think that cortisol activity is meaningful in many diseases states, of which Cushing's is only the most obvious and one right in front of us. We think -- and, in fact, I just -- just to digress for one second, we think tests of this type are very meaningful for other endocrinologic diseases, even things that Corcept are -- Corcept isn't working on. It just hasn't existed to this point.

But to answer your question directly, we really do think that if this, in fact, pans out as a true test of cortisol activity that it will have meaning in Cushing's syndrome, psychiatric diseases, oncologic diseases and any other place where we think hypercortisolism really has an effect. It's really a changed way and, we think, improved way of looking at the disease state. And time will tell if our hypothesis is right, but the early testing so far has really gone along in the way that we expect it and hoped it would.

All right. Well, listen. Thank you, all, very much for taking time late in the day to listen to us. We'll be back next quarter and really appreciate your interest and attention. Bye-bye.

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