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CORT > SEC Filings for CORT > Form 10-Q on 8-May-2013All Recent SEC Filings

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Form 10-Q for CORCEPT THERAPEUTICS INC


8-May-2013

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 disorders associated with the steroid hormone 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 mifepristone, a potent glucocorticoid receptor II (GR-II) antagonist. On February 17, 2012, the FDA approved Korlym™ (mifepristone) 300 mg Tablets in the United States as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing's syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We made Korlym available to patients in April 2012 and have begun marketing the drug in the United States. We continue to develop the sales, marketing, medical affairs and logistical infrastructure needed to commercialize the drug. We also have an on-going phase 3 study of mifepristone, the active ingredient in Korlym, for treatment of the psychotic features of psychotic depression. We have discovered three series of novel selective GR-II antagonists.

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 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.

The FDA approved our NDA for Korlym on February 17, 2012. This approval allows us to market Korlym in the United States for its approved indication. We are carrying out our commercialization plans, including hiring a small number of medical science liaisons (MSLs) and sales representatives. We have also developed internet marketing capabilities and patient assistance programs to support physicians and patients. We began shipping Korlym to our specialty pharmacy in early April 2012, and the medicine first became available to patients on April 10, 2012. We finished hiring our team of MSLs in the third quarter of 2012. Our sales representatives received their initial training and were deployed to the field in the fourth quarter of 2012.

We have Orphan Drug Designations for Korlym from the FDA for the approved indication and from the European Commission for the treatment of endogenous Cushing's syndrome. Orphan Drug Designation in the United States 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 for the approved indication 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. Benefits of Orphan Drug Designation in the EU are similar to those in the United States, but include ten years of marketing exclusivity for the approved indication 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 mifepristone, the active ingredient in Korlym, for the treatment of the psychotic features of psychotic depression under an exclusive patent license from Stanford University. The FDA has granted "fast track" status to evaluate the safety and efficacy of mifepristone 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


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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 mifepristone in Study 06 developed higher drug plasma levels than did the groups of patients who received lower doses. Further, there was no discernible 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 mifepristone in that study. In August 2011, we published our analysis of these data in The Journal of Clinical Psychopharmacology. Based on this information, we are testing a mifepristone dose of 1200 mg once per day for seven days in Study 14.

In addition, we are using 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 the change in dose, as well as the other modifications to the protocol described above, should allow us to demonstrate the efficacy of mifepristone 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.

Enrollment in Study 14 is ongoing. Our goal is to enroll a sufficient number of patients by the end of 2013 to be able to perform a successful interim analysis. To help reach this goal, we began adding clinical sites in the fourth quarter of 2012 and had 23 active sites as of May 1, 2013.

Antipsychotic-induced Weight Gain Mitigation. In 2005, we announced the results of studies in rats that demonstrated that mifepristone 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 mifepristone 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 mifepristone compared to those who took Zyprexa plus placebo. Also, the addition of mifepristone 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 mifepristone to mitigate weight gain associated with the use of Johnson & Johnson's Risperdal®. This study confirmed and extended the earlier results seen with mifepristone 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 mifepristone 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 mifepristone is not approved for any indication. The purpose of these studies was to explore the hypothesis that GR-II antagonists, such as mifepristone 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 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 with the intent of developing a pipeline of products for proprietary use. Three distinct series of GR-II antagonists were identified. These compounds, like mifepristone, potently block the cortisol receptor (GR-II) but, unlike mifepristone, 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 composition of matter patents to us on each of the three series. Two additional composition of matter patent applications are pending.


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Several of our new compounds have demonstrated positive results in animal models for the prevention and reversal of anti-psychotic-induced weight gain. One of them, CORT 108297, is in exploratory phase 2a clinical trials and we plan to explore its potential use in other indications. We have identified other selective GR-II antagonists from our proprietary series that we believe may have utility as therapeutic agents in a variety of diseases. Our intent is to continue our discovery research program with the goal of identifying new selective GR-II antagonists and to manufacture and conduct pre-clinical development on one or more of these compounds and to submit Investigational New Drug (IND) applications with respect to the most promising of them, as we deem appropriate.

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 percent fat diet and high sucrose liquid. The results of these preclinical data were published in April 2011 in the journal Nutrition and Metabolism.

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 drug formulation and manufacturing, as well as designing, funding and overseeing clinical trials and conducting non-human clinical investigatory activities, such as toxicological testing;

• commercialization of Korlym, including hiring and training medical science liaisons and sales representatives, retention and management of third-party distribution partners, establishment of third-party coverage and reimbursement and patient assistance programs and marketing activities;

• discovery research;

• intellectual property prosecution and expansion; and

• regulatory affairs.

Historically, we have financed our operations and internal growth primarily through private placements of our preferred and common stock, the public sale of common stock and our capped royalty financing transaction, rather than through collaborative or partnership agreements.

As of March 31, 2013, we had an accumulated deficit of $258.7 million. Our historical operating losses have resulted principally from our research and development activities, including clinical trial activities for mifepristone, discovery research, non-clinical activities such as toxicology and carcinogenicity studies, manufacturing process development and regulatory activities, as well as selling, general and administrative expenses, including the commercial launch of Korlym. We may continue to incur net losses over at least the next few years as we continue our mifepristone and selective GR-II antagonist discovery and clinical development programs, apply for regulatory approvals, 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 mifepristone and other clinical trials, uncertainties associated with securing financing, uncertainties associated with obtaining and enforcing patents, our investment in manufacturing set-up, the management of our supply chain, 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 products.

Results of Operations

Net Product Sales - Net product sales includes product revenue resulting from sales to our customers, reduced by 1) trade allowances, such as discounts for prompt payment and distributor fees, 2) estimated government rebates and chargebacks, 3) reserves for expected product returns and 4) estimated costs of our patient assistance program.


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In April 2012, we made Korlym commercially available in the United States through a specialty pharmacy that sells to individual patients and a specialty distributor that sells to hospital pharmacies. For the three-month period ended March 31, 2013, we recognized $1.7 million in net product sales compared with none in the comparable period in 2012. To calculate net product sales, we deducted from gross sales estimates of prompt-pay discounts, distribution service fees, rebates and chargebacks owed to government payors and patient assistance program costs, which amounts are not material for the quarter ended March 31, 2013.

Based on our limited experience marketing Korlym, it is difficult for us to forecast its sales for any future periods.

Cost of sales - Cost of sales includes the cost to manufacture Korlym (which includes material, third-party manufacturing costs and indirect personnel and other overhead costs) based on units sold in the current period, as well as the cost of stability testing and distribution. We began capitalizing Korlym production costs as inventory following approval by the FDA to market Korlym on February 17, 2012. Prior to Korlym's approval, we expensed all costs related to the manufacturing of product (including stability costs and manufacturing overhead) as incurred, classifying these costs as research and development expense. A portion of the product manufactured prior to FDA approval is available for us to use commercially.

Cost of sales was $20,000 for the three-month period ended March 31, 2013, which equals 1.2 percent of net product sales for the same period. The majority of these costs related to stability testing. The amount and timing of stability testing varies from period to period as determined by FDA regulations and our production schedule and is not a fixed percentage of our sales volumes. In addition, the cost of manufacturing Korlym reflected in our cost of sales in 2013, and for some period thereafter, will not reflect the full cost of production because we have previously expensed the majority of the raw materials, labor and overhead costs incurred to produce the product sold during this period. We expect that our cost of sales of Korlym as a percentage of net product sales will fluctuate from period to period during 2013 and for some time thereafter as product manufactured prior to FDA approval, which is already fully expensed, is consumed.

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 management and analysis expenses, 5) regulatory costs, 6) the costs of manufacturing development, including the development and activities to qualify a second tablet manufacturing site, 7) the costs of manufacture and / or acquisition of clinical trial materials and material used in registration and validation batches included in the NDA submission for Korlym and 8) other costs associated with the preparation and prosecution of the Korlym NDA or other FDA submissions related to Korlym or other product candidates.

Research and development expenses increased 20 percent to $4.3 million for the three-month period ended March 31, 2013 from $3.5 million for the comparable period in 2012.

During the three-month period ended March 31, 2013, as compared to the corresponding period in 2012, there was a net decrease of $462,000 in staffing and consultancy costs primarily because the first quarter of 2012 included cash bonuses awarded on FDA approval of Korlym to employees working in research and development in the amount of $474,000, including related payroll taxes. After adjusting for the effect of these bonuses, there was a net increase of $12,000 in staffing and consulting costs between the periods.

Clinical trial costs related to our phase 3 product candidates reflected a net increase of $443,000 during the first quarter of 2013, as compared to the corresponding period of 2012. During the three-month period ended March 31, 2013 as compared to the corresponding period in 2012, there was an increase of $727,000 related to our phase 3 study with mifepristone for the treatment of psychotic depression, which was partially offset by decreases of $137,000 related to drug-drug interaction and other NDA-supportive studies with Korlym and $147,000 related to the clinical trials with Korlym in the treatment of Cushing's syndrome.

During the first quarter of 2013, as compared to the corresponding period in 2012, there were also net increases of $256,000 related to research and development efforts regarding our new GR-II antagonists, an increase of $250,000 related to other products and $220,000 in research grants to further basic scientific research regarding GR-II antagonism.


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

                                                                  Three-Months Ended
                                                                       March 31,
Project                                                           2013            2012
                                                                      (in thousands)
Development programs:
Psychotic Depression                                           $    1,506        $   523
Cushing's syndrome                                                    538          1,415
Selective GR-II antagonists                                         1,464          1,071
Unallocated activities, including NDA supportive studies
and manufacturing, regulatory and pre-clinical activities             601            415
Stock-based compensation                                              148            118

Total research and development expense                         $    4,257        $ 3,542

We expect that research and development expenditures will likely increase during the remainder of 2013 as compared to 2012, due to the cost of expanding enrollment in our phase 3 study of mifepristone in the treatment of psychotic depression and increased spending on the development of our next-generation selective GR-II antagonists. Research and development expenses in 2014 and beyond will depend on our strategic priorities. See also, "Liquidity and Capital Resources".

Many factors can affect the cost and timing of our trials including inconclusive results requiring more clinical trials, slow patient enrollment, adverse side effects in study patients, insufficient supplies of medicine for our clinical trials and real or perceived lack of effectiveness or safety of the drug in our trials. The cost and timing of development of our selective GR-II antagonists will depend on the success of our efforts and any difficulties that we may encounter. 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.

Selling, general and administrative expenses - Selling, general and administrative expenses include 1) internal personnel, a contracted sales force and other consultancy costs related to administrative and commercialization activities, including facilities costs and non-cash stock-based compensation, 2) expenses of third-party vendors that we engage to execute our commercial plans related to Korlym, including marketing and promotion, strategy development, market research and analytics, reimbursement support services, pharmacovigilance, distribution and other logistical needs, 3) medical educational grants and 4) legal, accounting and other professional fees.

For the three-month period ended March 31, 2013, selling, general and administrative expenses increased 12 percent to $8.4 million from $7.5 million for the comparable period in 2012.

During the first quarter of 2013 as compared to the corresponding period in 2012, staffing and consultancy costs reflected a net decrease of $1.7 million. The three-month period ended March 31, 2012 included $1.6 million related to cash bonuses awarded to employees and officers working in selling, general and administrative functions and $1.3 million of non-cash stock-based compensation related to awards that vested in February 2012 upon the FDA approval of Korlym. After adjusting for these items, there was a $1.2 million increase in staffing and consultancy costs during the period as compared to 2012, due primarily to additional resources necessary to commercialize Korlym, of which $214,000 represented increases in non-cash stock-based compensation costs.

During the three-month period ended March 31, 2013, as compared to the corresponding period of 2012, there was an increase in other professional services costs related to commercialization activities of $1.3 million, which included $565,000 related to our contracted sales force and $523,000 related to market research and marketing materials. In addition, there were increases of $1.3 million between these periods in other support costs, such as education, training and conference costs, medical education grants and donations, facilities and technology costs, travel and fleet vehicle costs, legal, insurance and other service fees.


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We expect that selling, general and administrative expenses will increase during the remainder of 2013 as compared to 2012 in regard to activities directly associated with product commercialization and the need to continue building our administrative infrastructure to support these activities. The level of selling, general and administrative activities and related expenses in 2014 and future years will be largely dependent on our assessment of the staff and other services necessary to support product commercialization and our continued clinical development activities and the availability of additional funds. See also, "Liquidity and Capital Resources."

Interest and other expense - Interest and other expense for the three-month period ended March 31, 2013 was $1.1 million as compared to $5,000 for the comparable period in 2012. This increase is primarily due to the inclusion in the three-month period ended March 31, 2013 of interest expense related to our Financing Agreement with Biopharma, which was entered into subsequent to the comparable period in 2012, in August 2012. Interest expense will increase during 2013, as compared to 2012, due to the inclusion of interest on the long-term obligation during the full year of 2013.

Non-GAAP Financial Measures

We prepare our condensed financial statements and footnotes thereto, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q, in accordance with U.S. Generally Accepted Accounting Principles (GAAP). To supplement our financial results presented on a GAAP basis, we use non-GAAP measures of net loss that exclude significant non-cash expenses related to stock-based compensation expense and the accretion of interest expense under our capped royalty financing transaction. We use this non-GAAP measure of net loss to manage our business and believe that it may help investors better evaluate our past financial performance and potential future results. Non-GAAP measures should not be considered in isolation or as a substitute for comparable GAAP accounting and investors should read them in conjunction with our financial statements and notes thereto prepared in accordance with GAAP. The non-GAAP measure of net loss we use may be different from, and not directly comparable to, similarly titled measures used by other companies.

                                                                 Three-months Ended
                                                                      March 31,
                                                             2013                  2012
                                                                    (in thousands,
                                                              except for per share data)
GAAP net loss                                            $     (12,084 )      $      (11,034 )
Significant non-cash expenses:
Stock-based compensation
Research and development                                           148                   118
Selling, general and administrative                              1,162                 2,270

Total stock-based compensation                                   1,310                 2,388
Accretion of interest expense related to long-term
obligation                                                       1,115                    -

Non-GAAP net loss, as adjusted for significant
non-cash expenses                                        $      (9,659 )      $       (8,646 )

GAAP basic and diluted net loss per share                $       (0.12 )      $        (0.13 )

Non-GAAP basic and diluted net loss per share, as
adjusted for significant non-cash expenses               $       (0.10 )      $        (0.10 )

Shares used in computing basic and diluted net loss
per share                                                       99,814                84,420
. . .
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