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CORT > SEC Filings for CORT > Form 10-Q on 8-Nov-2011All Recent SEC Filings

Show all filings for CORCEPT THERAPEUTICS INC

Form 10-Q for CORCEPT THERAPEUTICS INC


8-Nov-2011

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a pharmaceutical company engaged in the discovery, development and commercialization of drugs for the treatment of severe metabolic and psychiatric disorders. Our focus is on those disorders that are associated with a steroid hormone called cortisol. Elevated levels and abnormal release patterns of cortisol have been implicated in a broad range of human disorders. Since our inception in May 1998, we have been developing our lead product candidate, Korlym (formerly referred to as CORLUX), a potent glucocorticoid receptor II (GR-II) antagonist, that blocks the activity of cortisol. We have also discovered three series of novel selective GR-II antagonists and have moved CORT 108297, a compound from one of these series, into clinical development. Unless otherwise stated, all references in this document to "we," "us," "our," "Corcept," the "Company," "our company" and similar designations refer to Corcept Therapeutics Incorporated.

Cushing's Syndrome. Cushing's Syndrome is a disorder caused by prolonged exposure of the body's tissues to high levels of the hormone cortisol. Sometimes called "hypercortisolism," it is relatively uncommon and most often affects adults aged 20 to 50. An estimated 10 to 15 of every one million people are newly diagnosed with this syndrome each year, resulting in approximately 3,000 new patients and an estimated prevalence of 20,000 patients with Cushing's Syndrome in the United States. We submitted a New Drug Application (NDA) to the United States Food and Drug Administration (FDA) in April 2011 for the use of Korlym for the treatment of the signs and symptoms of endogenous Cushing's Syndrome. In June 2011, we received notification from the FDA that this application had been accepted for filing and that the Prescription Drug User Fee Act (PDUFA) goal date for completion of its review is February 17, 2012. In August 2011, we were advised by the FDA that no advisory committee meeting will be scheduled in connection with its review of this NDA; this decision does not alter the PDUFA goal date for completion of review. Our submission included a proposal for our Risk Evaluation and Mitigation Strategies (REMS). We are developing plans and engaging third-party vendors to support a commercial launch of Korlym in the United States, if it is approved by the FDA. In October 2011, we received notification that the FDA had accepted our proposed brand name, Korlym, for our lead product candidate in the treatment of endogenous Cushing's Syndrome.

The Investigational New Drug application (IND) for the evaluation of Korlym for the treatment of the signs and symptoms of Cushing's Syndrome was opened in September 2007. During the IND process, the FDA indicated that a single 50-patient open-label study may provide a reasonable basis for the submission of an NDA for this indication. We completed enrollment in this Phase 3 study in June 2010. This open-label Phase 3 study evaluated the response of two patient groups to Korlym treatment: one included patients who were glucose intolerant, regardless of blood pressure level, and one included patients who had been diagnosed with hypertension but had normal glucose tolerance. The patients in both of these groups were being treated for their symptoms before study entry; Korlym was added to their existing medications. In December 2010 we announced that both groups in this study achieved their primary endpoints. In January 2011 we announced positive results for the key secondary endpoint of global clinical improvement. All of the patients in the study were included in one group for this endpoint.

Statistically significant improvement in the primary endpoint was achieved for each group with 60% responding in the group of patients with abnormal glucose tolerance with or without a diagnosis of hypertension (the "glucose intolerant group") and 38% responding in the group of patients with a diagnosis of hypertension (the "hypertensive group") . The patients in the study, whether included in the "glucose intolerant group" or the "hypertensive group" for the purpose of evaluating the primary endpoints, were evaluated as a single group on the key secondary endpoint of "global clinical improvement"; 87% of patients showed significant clinical improvement as evaluated by an independent board of three physicians highly experienced in the treatment of Cushing's Syndrome. A review of the safety data indicates that Korlym had an acceptable risk-benefit profile in this Phase 3 study. Eighty-eight percent of the patients who completed the Phase 3 study opted to enter our long-term extension study.

Adverse events reported in this Phase 3 study related to treatment included signs and symptoms of adrenal insufficiency, endometrial thickening and hypokalemia, all of which were consistent with earlier published reports. The majority of the serious adverse events (SAEs) reported in the study were not related to Korlym treatment, as determined by the clinical investigators. All of the treatment-related SAEs resolved with clinical management. Detailed data from this study were presented as part of a session titled "Will Medical Management Replace Surgery for Cushing's Syndrome?" on June 4, 2011 at the Endocrine Society's 93rd Annual Meeting.


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In July 2007, we received Orphan Drug Designation from the FDA for Korlym for the treatment of endogenous Cushing's Syndrome. Orphan Drug Designation is a special status granted by the FDA to encourage the development of treatments for diseases or conditions that affect fewer than 200,000 patients in the United States. Drugs that receive Orphan Drug Designation obtain seven years of marketing exclusivity from the date of drug approval, as well as tax credits for clinical trial costs, marketing application filing fee waivers and assistance from the FDA in the drug development process. In October 2011, the European Commission granted to us Orphan Designation for Korlym for the treatment of endogenous Cushing's Syndrome (hypercortisolism) in the European Union (EU). Benefits of Orphan Drug Designation in the EU are similar to those in the U.S., but include ten years of marketing exclusivity in all 27 member states, free scientific advice during drug development, access to a centralized review process and a reduction or complete waiver of fees levied by the European Medicines Agency.

Psychotic Depression. We are also developing Korlym for the treatment of the psychotic features of psychotic major depression under an exclusive patent license from Leland Stanford Junior University (Stanford University). Psychotic major depression will hereafter be referred to as psychotic depression. The FDA has granted "fast track" status to evaluate the safety and efficacy of Korlym for the treatment of the psychotic features of psychotic depression.

In March 2008, we began enrollment in Study 14, our ongoing Phase 3 trial in psychotic depression. The protocol for this trial incorporates what we have learned from our three previously completed Phase 3 trials. It attempts to address the established relationship between increased drug plasma levels and clinical response and attempts to decrease the random variability observed in the results of the psychometric instruments used to measure efficacy. In one of the previously completed Phase 3 trials, Study 06, we prospectively tested and confirmed that patients whose plasma levels rose above a predetermined threshold statistically separated from both those patients whose plasma levels were below the threshold and those patients who received placebo; this threshold was established from data produced in earlier studies.

As expected, the group of patients who took 1200 milligrams (mg) of Korlym in Study 06 developed higher drug plasma levels than did the groups of patients who received lower doses. Further, there was no discernable difference in the incidence of adverse events between patients who received placebo in Study 06 and those who received 300 mg, 600 mg or 1200 mg of Korlym in that study. Based on this information, we are using a Korlym dose of 1200 mg once per day for seven days in Study 14.

In addition, we are utilizing a third party centralized rating service to independently evaluate the patients for entry into the study as well as to evaluate their level of response throughout their participation in the study. We believe the centralization of this process will improve the consistency of rating across clinical trial sites and reduce the background statistical noise that was observed in earlier studies and is endemic to psychopharmacologic studies. We believe that this change in dose, as well as the other modifications to the protocol, should allow us to demonstrate the efficacy of Korlym in the treatment of the psychotic symptoms of psychotic depression. In mid-2009, to conserve financial resources, we reduced the number of clinical sites in this study to eight and extended the timeline for its completion.

Antipsychotic-induced Weight Gain Mitigation. In 2005, we announced the results of studies in rats that demonstrated that Korlym both reversed the weight gain associated with the ongoing use of olanzapine and mitigated the weight gain associated with the initiation of treatment with olanzapine (the active ingredient in Zyprexa). The results from this study were published in the journal Brain Behavioral Research in early 2006. This study was paid for by Eli Lilly and Company (Eli Lilly).

During 2007, we announced positive results from our clinical proof-of-concept study in lean healthy male volunteers evaluating the ability of Korlym to mitigate weight gain associated with the use of Zyprexa. The results showed a statistically significant reduction in weight gain in those subjects who took Zyprexa plus Korlym compared to those who took Zyprexa plus placebo. Also, the addition of Korlym to treatment with Zyprexa had a beneficial impact on secondary metabolic measures such as fasting insulin, triglycerides and abdominal fat, as indicated by waist circumference. Eli Lilly provided Zyprexa and financial support for this study, the results of which were published in the journal Advances in Therapy in 2009. In January 2009, we announced positive results from a similar proof-of-concept study evaluating the ability of Korlym to mitigate weight gain associated with the use of Johnson & Johnson's Risperdal. This study confirmed and extended the earlier results seen with Korlym and Zyprexa, demonstrating a statistically significant reduction in weight gain and in the secondary metabolic endpoints of fasting insulin, triglycerides and abdominal fat, as indicated by waist circumference. The results from the study of Korlym and Risperdal were presented at several scientific conferences, including the American Diabetes Association meeting in June 2009, and were published in the journal Obesity in 2010.

The combination of Zyprexa or Risperdal and Korlym is not approved for any indication. The purpose of these studies was to explore the hypothesis that GR-II antagonists, such as Korlym and our next generation of selective GR-II antagonists, would mitigate weight gain associated with antipsychotic medications. The group of medications known as second generation antipsychotic medication, including Zyprexa, Risperdal, Clozaril and Seroquel, are widely used to treat


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schizophrenia and bipolar disorder. All medications in this group are associated with treatment-emergent weight gain of varying degrees and carry a warning in their labels relating to treatment-emergent hyperglycemia and diabetes mellitus.

Selective GR-II Receptor Antagonists. In 2003, we initiated a discovery research program to identify and patent selective GR-II antagonists to develop a pipeline of products for proprietary use. Three distinct series of GR-II antagonists were identified. These compounds, like our lead product candidate Korlym, potently block the cortisol receptor (GR-II) but, unlike Korlym, they do not appear to block the PR (progesterone), ER (estrogen), AR (androgen) or GR-I (mineralocorticoid) receptors. Both the United States Patent & Trademark Office (USPTO) and the European Patent Office (EPO) have issued to us composition of matter patents on all of the three series. A fourth composition of matter patent application is pending.

In 2007, we conducted a human microdosing study of one of our newly identified selective GR-II antagonists, CORT 108297, with Xceleron Limited utilizing its Accelerator Mass Spectrometry technology. In this microdosing study, we evaluated CORT 108297, a compound which develops particularly high plasma and brain concentrations in an animal model. In May 2008, we announced the results from this study, which demonstrated that CORT 108297 was extremely well absorbed, demonstrated good bioavailability and had a half-life that appears compatible with once-a-day oral dosing. In addition, further pharmacokinetic testing of CORT 108297 in a rat model indicated that a ten-fold increase in oral dose (5 milligrams per kilogram (mg/kg) to 50 mg/kg) led to a proportional increase in the amount of compound detected in plasma.

In September 2008, we signed a second agreement with Eli Lilly, under which Eli Lilly agreed to provide funding and provide olanzapine for two studies to test the effectiveness of CORT 108297 in rat models of olanzapine-induced weight gain. In January 2009, we announced top-line results from these studies of CORT 108297 and olanzapine. The results from the studies of both the prevention and reversal of antipsychotic-induced weight gain were positive and statistically significant. The results of these studies were presented at the International Society of Psychoneuroendocrinology and the World Congress of Biological Psychiatry conferences in July 2009 and were published in June 2010 in the journal Diabetes Obesity Metabolism.

At the American Diabetes Association conference in June 2009, there was also a presentation of preclinical data from another study of CORT 108297 conducted at Stanford University. This study demonstrated that CORT 108297 suppresses body weight gain and improves insulin sensitivity in healthy mice fed a 60% fat diet and high sucrose liquid. The results of these preclinical data were published in April 2011 in the journal Nutrition and Metabolism.

The manufacturing and preclinical development of CORT 108297 began late in 2008 and resulted in the submission of an IND to the FDA in December 2009 for the prevention of weight gain induced by antipsychotic medication. Phase 1b/2a studies of this drug are in progress.

In addition, we are continuing research and pre-clinical efforts to identify additional selective GR-II antagonists for clinical study.

General

Our activities to date have included:

product development, including designing, funding and overseeing clinical trials and conducting non-clinical activities such as toxicological testing;

discovery research;

regulatory affairs;

intellectual property prosecution and expansion; and

preparations for the commercialization of our lead product candidate.

Historically, we have financed our operations and internal growth primarily through private placements of our preferred and common stock and the public sale of common stock rather than through collaborative or partnership agreements. Therefore, we have no research funding or collaborative payments payable to us.

We are in the development stage and have incurred significant losses since our inception. We have not generated any revenue other than the revenue under the agreements with Eli Lilly discussed above, and do not expect to generate significant revenue until Korlym has been approved by the FDA for marketing in the United States, if at all. As of September 30, 2011, we had an accumulated deficit of $198.6 million. Our historical operating losses have resulted principally from our research and development activities, including clinical trial activities for Korlym and CORT 108297, discovery research, non-clinical activities such as toxicology and carcinogenicity studies, manufacturing process development and regulatory activities, as


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well as general and administrative expenses, including preparations for the commercial launch of Korlym for Cushing's Syndrome should we receive regulatory approval. We expect to continue to incur net losses over at least the next few years as we continue our Korlym and CORT 108297 clinical development programs, apply for regulatory approvals, continue discovery and initiate development of other selective GR-II antagonists for various indications, acquire and /or develop treatments in other therapeutic areas, establish sales and marketing capabilities and expand our operations.

Our business is subject to significant risks, including the risks inherent in our research and development efforts, the results of our Korlym and CORT 108297 clinical trials, uncertainties associated with securing financing, uncertainties associated with obtaining and enforcing patents, our investment in manufacturing set-up, the lengthy and expensive regulatory approval process and competition from other products. Our ability to successfully generate revenues in the foreseeable future is dependent upon our ability, alone or with others, to finance our operations and develop, obtain regulatory approval for, manufacture and market our lead product.

Results of Operations

Collaboration revenue - Collaboration revenue relates to services rendered in connection with our agreements with Eli Lilly discussed above under the caption "Overview-Antipsychotic-Induced Weight Gain Mitigation." Under these agreements, Eli Lilly agreed to supply the Zyprexa and olanzapine and pay for the costs of the studies. We were required to perform development activities as specified in the agreements and we were reimbursed based on the costs associated with the conduct of the trial and the preparation and packaging of clinical trial materials. Revenue was recognized as we provided the services specified in the agreements.

We did not recognize any revenue under the agreements during any period in 2011 or 2010 and none will be recognized in the future as we completed all of the activities relating to these agreements by mid-2009.

Research and development expenses - Research and development expenses include 1) the personnel costs related to our development activities, including facilities costs and non-cash stock-based compensation, 2) the costs of discovery research,
3) costs associated with IND-enabling activities and pre-clinical studies, 4) costs of clinical trials, including trial preparation, enrollment, site monitoring and data analysis expenses, 5) regulatory costs, 6) the costs of manufacturing development, 7) the costs of manufacture and / or acquisition of clinical trial materials and material used in registration batches included in the NDA submission for Korlym for the treatment of Cushing's Syndrome and 8) other costs associated with the preparation and prosecution of the NDA.

Research and development expenses decreased 38% to $3.2 million for the three-month period ended September 30, 2011 from $5.2 million for the comparable period in 2010. For the nine-month period ended September 30, 2011, research and development expenses increased 1% to $14.4 million from $14.3 million for the nine-month period ended September 30, 2010.

During the third quarter and first nine months of 2011 as compared to the corresponding periods in 2010, there were increases of approximately $495,000 and $2.3 million, respectively, in consultancy and staffing costs due to the additional resources necessary for the preparation, submission and prosecution of the NDA, and to assist in the management of other research and development activities. Approximately $65,000 and $260,000 of the increases during the three-and nine-month periods, respectively, are related to non-cash stock-based compensation costs.

Korlym manufacturing costs increased approximately $1.4 million during the first nine months of 2011 as compared to the corresponding period in 2010, due to the acquisition of active pharmaceutical ingredient for Korlym and the initiation of manufacturing development work at a potential back-up site for the manufacture of Korlym. The cost of Korlym manufacturing activities for the third quarter of 2011 decreased approximately $75,000 as compared to the same quarter in 2010. There was also an increase during the first nine months of 2011 as compared to the corresponding period in 2010, of approximately $345,000 in research and manufacturing related to our proprietary, selective new GR-II antagonists. Costs related to these new compounds were approximately the same for the third quarter of 2011 and 2010. In addition, there was an increase of approximately $305,000 during the first nine months of 2011 as compared to the corresponding period in 2010, related to increased attendance at and financial support for medical conferences and seminars in support of our Cushing's Syndrome program. Costs related to such conferences and seminars were approximately the same for the third quarter of 2011 and 2010.

There were net decreases in clinical trial costs of approximately $1.9 million and $4.1 million, respectively, during the third quarter and first nine months of 2011, as compared to the corresponding periods of 2010. Clinical trial cost decreases during the three- and nine-month periods ended September 30, 2011, as compared to the same periods in 2010, included decreases of (i) approximately $1.3 million and $3.2 million, respectively, related to drug-drug interaction and other NDA-


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supportive studies with Korlym, (ii) approximately $210,000 and $450,000, respectively, related to the clinical trials with Korlym for the treatment of Cushing's Syndrome and (iii) approximately $210,000 and $250,000, respectively, related to the clinical trial with Korlym for the treatment of psychotic depression. During the third quarter and first nine months of 2011 as compared to the corresponding periods in 2010, there were net decreases of approximately $645,000 and $160,000, respectively, related to clinical studies with CORT 108297.

During the first nine months of 2011 as compared to the corresponding period in 2010, there was also a decrease of approximately $220,000 related to the IND-enabling work on CORT 108297, as that product was moved into the clinic during 2010. The cost of these activities decreased approximately $35,000 during the third quarter of 2011 as compared to the same quarter in 2010.

Below is a summary of our research and development expenses by major project:

                                                     ThreeMonths Ended            Nine Months Ended
                                                       September 30,                September 30,
Project                                              2011          2010          2011           2010
                                                      (in thousands)               (in thousands)
Korlym
Cushing's Syndrome                                $    1,605      $ 1,333      $   7,170      $  3,678
Psychotic Depression                                     359          672          1,336         1,940
Selective GR-II antagonists                              730        1,373          3,599         3,658
Unallocated activities, including
NDA-supportive studies and manufacturing,
regulatory and pre-clinical activities                   424        1,801          1,818         4,840
Stock-based compensation                                 110           45            432           170

Total research and development expense            $    3,228      $ 5,224      $  14,355      $ 14,286

We expect that research and development expenditures will increase during the remainder of 2011 as compared to 2010 due to the prosecution of our NDA filing for Korlym for the treatment of Cushing's Syndrome, increased manufacturing activities for pre-validation and validation batches of Korlym, continuation of our long-term extension study in Cushing's Syndrome, continuation of our Phase 3 study of Korlym for the treatment of psychotic depression and the continued development of CORT 108297 and our other proprietary selective GR-II antagonists, which costs will be only partially offset by decreases in the costs related to the completion of our Phase 3 study in Cushing's Syndrome. Research and development activities and expenses in 2012 and future years will be largely dependent on the availability of additional funds to finance clinical development plans. See also, "Liquidity and Capital Resources".

Many factors can affect the cost and timing of our trials including inconclusive results requiring additional clinical trials, slow patient enrollment, adverse side effects in study patients, insufficient supplies for our clinical trials and real or perceived lack of effectiveness or safety of the drug candidates in our trials. The cost and timing of development of our selective GR-II antagonists will be dependent on our success in the effort and any difficulties that may be encountered. In addition, the development of all of our product candidates will be subject to extensive governmental regulation. These factors make it difficult for us to predict the timing and costs of the further development and approval of our product candidates.

General and administrative expenses - General and administrative expenses consist primarily of the costs of administrative personnel and related facility costs along with legal, accounting and other professional fees and the costs of executing on our commercial plans related to Korlym, including conducting market research and engaging third-party vendors to provide market analytics and to support distribution and other logistical needs, if Korlym is approved by the FDA.

For the three-month period ended September 30, 2011, general and administrative expenses increased 71% to $3.2 million from $1.9 million for the comparable period in 2010. For the nine-month period ended September 30, 2011, general and administrative expenses increased 51% to $8.0 million from $5.3 million for the nine-month period ended September 30, 2010. During the third quarter and first nine months of 2011 as compared to the corresponding periods in 2010, staffing and consultancy costs increased approximately $1.1 million and $2.2 million, respectively, due primarily to additional resources necessary to engage in preparations for the potential commercialization of Korlym for Cushing's Syndrome, approximately $345,000 and $610,000 of which represented increases for the respective comparable periods in noncash stock-based compensation costs related to stock options granted to employees, directors and consultants. There was also an increase in legal costs related to patents, commercialization planning and other corporate matters of approximately $180,000 and


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$410,000, respectively, during the third quarter and first nine months of 2011 as compared to the corresponding periods of 2010.

We expect that general and administrative expenses will increase during the remainder of 2011 as compared to 2010 in regard to activities directly associated with preparations for potential product commercialization and the need to increase our administrative infrastructure to support these activities. The level of general and administrative activities and related expenses in 2012 and future years will be largely dependent on our assessment of the staff necessary to support expected product commercialization and our continued clinical development activities and the availability of additional funds. See . . .

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