Corcept Therapeutics Incorporated
Q4 2022 Earnings Call Transcript

Published: 28 Feb 2023

[Operator:]

Greetings, and welcome to the Corcept Therapeutics Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Atabak Mokari, CFO. Thank you. You may now begin.

[Atabak Mokari:]

Good afternoon, and thank you for joining us. I'm Atabak Mokari, Corcept's Chief Financial Officer. Today, we issued a press release announcing our financial results for the fourth quarter and providing a corporate update. A copy is available at corcept.com. Our 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 at the Investors Past Events tab of our website. Statements during this call other than statements of historical fact are forward-looking statements based on our plans and expectations that are subject to risks and uncertainties, which might cause actual results to differ materially from those such statements expressed or implied. These forward-looking statements are described in today's press release and the risks and uncertainties that may affect them are described in the press release and in our annual report on Form 10-K and our quarterly reports on Form 10-Q. Please refer to those documents for additional information. We disclaim any intention or duty to update forward-looking statements. Our revenue in the fourth quarter of 2022 was $103.1 million compared to $98.8 million in the fourth quarter of 2021. We expect our revenue growth to continue and have provided 2023 revenue guidance of $430 million to $450 million compared to 2022 revenue of $401.9 million. Net income was $16.6 million in the fourth quarter and $101.4 million for the full year 2022. Our cash and investments at December 31 was $436.6 million compared to $335.8 million at the end of the prior year. I will now turn the call over to Charlie Robb, our Chief Business Officer, to provide a legal update. Charlie?

[Charlie Robb:]

Thanks, Atabak. Since we last spoke, we have successfully terminated two lawsuits. On February 13, we announced that we had reached an agreement in principle settling all claims in the purported securities class action known as Melucci versus Corcept Therapeutics Incorporated. This lawsuit was brought by plaintiff's attorneys in March 2019. Since then, our position has not wavered. We said in March 2019 that we were confident in the strength of our legal position. Having spent four years litigating, we are even more confident. I, and I know I speak for my colleagues as well, am proud of Corcept in the way we do business. Allegations such as those asserted in the Melucci lawsuit are repugnant. We have looked forward to our day in court where we can explain publicly the reasons for our pride in what we do and the way we do it. That being said, litigation is a distraction for more important matters. Simply put, time spent preparing for trial is time not spent developing medications or helping patients. We presented with the chance to put the Melucci distraction behind us for an amount covered by our insurance; we felt compelled to accept. The second terminated case concerns Hikma Pharmaceuticals. In March 2021, we sued Hikma to prevent it from marketing generic Korlym in violation of our patents. As we announced in December, we have settled this case. Hikma to begin selling a generic version of Korlym in the United States beginning October 01, 2034, more than 11 years from now or earlier under circumstances customary for settlement agreements of this type. This is the same entry date as our previous settlement with Sun Pharmaceuticals. Finally, there was a development yesterday in our lawsuit against Teva. In March 2018, we sued Teva to prevent it from marketing a generic version of Korlym in violation of our patents. In April 2021, we filed for summary judgment based on Teva's infringement of our '214 patent. Teva, as expected, responded by filing its own motion for summary judgment. Summary judgment is a procedure whereby courts decide a case without holding a trial. Yesterday, the court denied both our motion and Teva's motion without prejudice and ordered the parties to begin negotiating a schedule for pre-trial activities. No trial date has been set. It is important to note that this change in the procedural posture of our action against Teva has not changed our point of view. We remain confident in the strength of our legal position and are very comfortable receiving the trial if necessary. I'll now turn the call over to Dr. Joseph Belanoff, our Chief Executive Officer. Joe?

[Joseph Belanoff:]

Thank you, Charlie. Our Cushing's syndrome business is built on a solid foundation, a life-saving medication promoted by a commercial team that puts the interest of patients first. Leading endocrinologists increasingly believe that there are considerably more patients with Cushing's syndrome than was once assumed. Korlym is an excellent treatment for patients with Cushing's syndrome and there are many eligible patients who have yet to receive it. We are extremely optimistic about the growth potential of our Cushing's syndrome business and are making substantial investments to improve the screening and treatment of these patients. We are providing 2023 revenue guidance of $430 million to $450 million. In addition to generating substantial cash in 2022, we significantly advanced the clinical development programs of our proprietary selective cortisol modulators, relacorilant, dazucorilant and miricorilant. We expect to make further progress in the next 12 months with the submission of relacorilant's NDA in Cushing's syndrome and enrollment of our confirmatory Phase 3 trial of relacorilant in platinum-resistant ovarian cancer, Phase 2 trial of dazucorilant in ALS, and Phase 2 trial of miricorilant in NASH. Since inception, our research and development efforts have built upon the hypothesis the cortisol modulation can be a powerful therapeutic mechanism in many serious disorders. Our proprietary compounds modulate cortisol's effects by binding to the glucocorticoid receptor, or GR. They do not bind to the progesterone receptor, so it don't cause some of Korlym's, our approved product's, most serious off-target effects. Interestingly, while our compounds modulate cortisol's activity without modulating progesterone's activity, they are not identical. Some cross the blood-brain barrier, others do not. Some perform best in models of solid tumors, others are more potent in models of metabolic disease. Some appear to be tissue-specific, others have more global effects. These diverse qualities allow us to study a wide variety of disorders. Currently, we are conducting programs in ovarian, adrenal and prostate cancer, ALS, NASH and, of course, Cushing's syndrome. We are investigating cortisol modulation's role in other diseases and have additional compounds in clinical and preclinical development. Our Cushing's syndrome business has funded all of these activities and will continue to do so. As most of you know, we are evaluating relacorilant for the treatment of hypercortisolism in two Phase 3 trials

[Operator:]

Thank you. At this time, we'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Matt Kaplan with Ladenburg Thalmann. Please proceed with your question.

[Raymond Wu:]

Hi, guys. This is Raymond in for Matt. Thanks for taking our question today. Congrats on all the progress. I just wanted to ask perhaps on the ALS program. Specifically, kind of what endpoints are you kind of looking for in the study? Is it ALSFRS? And do you have any specific guidance from the FDA if the study could serve as the basis for the NDA pilot? Thanks. And I have one more question. Thanks.

[Joseph Belanoff:]

Yes, [Matt] (ph). I wanted to reintroduce you to Bill Guyer, who is our Chief Development Officer. Bill will address that question.

[Bill Guyer:]

Great. Thank you. Appreciate the question. So, again, DAZALS is like Phase 2 [indiscernible] randomized double-blind, placebo-controlled trial, evaluating the safety and efficacy of dazucorilant in patients with ALS. In this Phase 2 trial, we're going to look at 198 patients. The primary endpoint is a 24-week endpoint where we're going to be evaluating those patients related to placebo. And we're going to look at the efficacy and change from baseline for the ALS functional rating scale, and that is a validated FDA endpoint, as well as other primary endpoints of safety to assess the safety and efficacy -- or the safety of dazucorilant patients with ALS. And these are all validated endpoints with the FDA. And if we complete this trial and we see positive results, this could end up with an NDA.

[Raymond Wu:]

So, appreciate the color. And I guess, maybe just for the NASH program, what would you like to see from the Phase 1b that is kind of increase your confidence as you enter the Phase 2 study? And is it possible you would try multiple dosing regimens? Thanks.

[Joseph Belanoff:]

Yes, that is the goal. That's a great question. Since, this is an open label trial, we're evaluating all the various different dose. And our goal has been to find the right dose or dosing regimen where we get a progressive fat loss over time with then no ALT rises, and hopefully, we see ALT improvements. We believe we've identified multiple doses or dosing regimens to move into Phase 2, [where] (ph) we've seen that progressive fat loss over time and no ALT rises. And so yes, our plan is to move to Phase 2 in the fourth quarter of this year.

[Raymond Wu:]

Okay. Appreciate that. Thanks. And I'll hop back in the queue.

[Operator:]

Our next question is from the line of Dennis Ding with Jefferies. Please proceed with your questions.

[Dennis Ding:]

Hi, guys. Thanks for taking my questions. I just have one around the base business. Maybe talk about the pushes and pulls on 2023 revenue in terms of what can get you towards the high end versus the low end of your guidance? And perhaps what are some of the different assumptions for you to get there? And as a follow-up, maybe remind us of the seasonality issue for Q1? And when might we get better visibility towards growth acceleration in 2023? Thank you.

[Joseph Belanoff:]

Good, Dennis. Thank you for those questions. I want to again reintroduce you to Sean Maduck, who is the President of the Endocrinology division. And Sean is responsible for all of our business in Cushing's syndrome. He'll be glad to answer that question.

[Sean Maduck:]

Hi, Dennis. Thank you for the question. I think your question was directly in regards to sort of the range. Our range is driven by the number of patients that we add to our active patient base. Our pricing is known and our average dose and patient retention rates have been stable for many years. So, where we fall within the range is really driven by the number of patients that we add to our base. And that's the -- the pushes and pulls are constant. It's really about patient pulls.

[Dennis Ding:]

Right. But as a follow-up maybe talk about what can you do or what are you guys doing in terms of initiatives that are ongoing that could drive more patient adds versus driving less patient adds, appreciating that there is competition out there?

[Sean Maduck:]

Yes. No, great question. So, look, I'll start by just saying the evidence is clear that there are more hypercortisolism patients out there than we once thought. Physicians as they become more educated about screening and about treatment options that are available to them, more patients are going to be diagnosed and treated. And our job as an organization is to maximize our position touch points, continue to raise disease awareness, educate on screening and then educate on the benefits of Korlym. And the evolving market and our execution will really drive that growth into 2023 and beyond. In terms of initiatives, obviously, we have many going on, but there's a couple I want to touch on that I think are very important for the organization. The first is the growth of our sales force. Last year, we had 45 clinical specialists. We currently have 55, going to 60 in the next couple of months. Physician awareness of the potential for Cushing's syndrome in their patient population has increased substantially. And we think that, that disease awareness and our streamlined training efforts will make our clinical specialist more productive and for our newest clinical specialist more productive more rapidly. In terms of the second initiative, which is more long term, is what was just discussed and that's the CATALYST study, the Phase 4 Korlym study that we announced on the call today. It's not going to have an impact in 2023. But it's the largest prospective study that's ever been done in this patient population. As Joe stated, the investigators are a very prominent group of diabetologists and they are representative of a group of physicians that we have not historically called on. So, we believe that patients with difficult-to-control diabetes and -- is a very rich patient population for hypercortisolism. And I believe that this study will provide the definitive prevalence and treatment data needed to encourage increased screening and ultimately treatment for this patient group.

[Dennis Ding:]

Got it. Thanks. And then, on the seasonality question for Q1 and growth reacceleration towards the back half of the year?

[Sean Maduck:]

Yes. So, we always see a hit in the first quarter, because of the insurance reauthorizations and the doughnut hole this year has been no different than any other. But yes, I guess that's all I would add there. I don't know if there's anything else, Joe, you'd like to add?

[Joseph Belanoff:]

Dennis, I really do understand what you're asking about. Yes, as Sean said, one of the issues, not just for Korlym, but for all medications, particularly orphan medications is that insurance companies make decisions get a reauthorization at the beginning of the year. And that's obviously our job to see if we can turn those -- help those get turned around as quickly as possible. One of the things I'll just point out is that it's been our philosophy from the beginning of the company, but anytime a patient gets a prescription for Cushing's syndrome, they get the medication regardless of whether or not they have insurance. So, they continue to get that medication. We never leave a patient off of that medication. But getting them back on paid insurance as they have before is, in some sense, a maneuver that occurs every year. The quicker we do that, the more it adds back to first quarter revenues. And then, once that's in place, we're on our ark for the rest of the year.

[Dennis Ding:]

Got it. Thank you.

[Joseph Belanoff:]

Sure.

[Operator:]

Our next question is from the line of Greg Fraser with Truist. Please proceed with your question.

[Greg Fraser:]

Good afternoon, folks. Thanks for taking the question. I got on a little late, I apologize if you covered this already. But I was hoping you could comment on the protocol for the CATALYST study and talk about the enrollment criteria, the types of patients that will be enrolled? And I'm curious about it, it seems like it's a study that -- obviously, it's quite large and it's unprecedented. It seems like a study that could potentially capture patients that would otherwise be started on Korlym. I know you're -- the study will be run by docs that you're not calling on, it sounds like. But could this create a headwind for new starts on Korlym? Or am I thinking about that the wrong way?

[Joseph Belanoff:]

Hey, Greg, just sort of sorting this out, I want to give the first part to Bill, who is conducting the study. So, Bill, can you answer the questions about protocol.

[Bill Guyer:]

So, CATALYST is an example that I think we are showing our continued investment in our compounds whether approved or investigational. And the CATALYST, as Sean had mentioned, is the largest study of this kind. We're going to be testing two really rigorous important points. One is to understand the prevalence of hypercortisolism in patients with difficult to control type 2 diabetes. And the second is to understand the efficacy and safety of Korlym in these patients. And in that patient population, we're going to be looking at 1,000 patients, in where we're going to be simply testing them for hypercortisolism with a simple DST. And from there, we're going to be then evaluating them for those who are positive will then be selected to and have a choice to go into the second part of the study, which is that treatment part of the study. As Sean had also previously mentioned, we're working with the top diabetologists. And while this is a large study, these diabetologists have thousands of patients in their practice. And have already identified many of them who could meet the inclusion and exclusion criteria of this study. And when you look at that inclusion and exclusion criteria, I'll give you a few points there. It's for adult patients who are aged 18 to 80; those who are difficult to control diabetes, and that's defined simply by having a hemoglobin A1C of greater than 7.5, but less than 11.5; and are taking multiple anti-hyperglycemic drugs; plus many other things. But that's the simple design of the trial of how to get in. We believe by working with these top diabetologists, that we've designed a trial that's easy to enroll and we're on track to start the trial this -- next month in March and complete enrollment of this trial by the end of this year.

[Joseph Belanoff:]

Second part of the question, Greg, I'm going to give you to Sean.

[Sean Maduck:]

Yes, thank you. And the question was whether or not this study will impact potentially Korlym patients that would have been on Korlym previously. The answer to that is no. Remember, this is a group of physicians not only are they not prescribing Korlym today, they're not even aware that these hypercortisolism patients exist in their practice. They are treating these patients for their diabetes and aren't aware. So, again, let me go back to what I said a moment ago is just that the hope of this study is that, that will provide definitive prevalence in treatment data that will help, I'll say, sway and motivate this group of physicians who currently aren't treating or diagnosing.

[Greg Fraser:]

That's very helpful. Thank you. Can you help with how to think about the growth for SG&A and R&D this year given the investments that you're making on the commercial side and also on the clinical side with the CATALYST study?

[Atabak Mokari:]

Sure. Greg, it's Atabak. I'll take that one. We have -- as you know, we've historically been profitable and fund to remain profitable. Our R&D expenses will increase as we invest in our development programs and invest in programs to advance. And on the SG&A side, Sean discussed, continued investments we're making on the commercial side there. So, you'll see some increases on both sides there.

[Greg Fraser:]

Got it. Okay. Last question, I just wanted to ask about the reason. You recently had the class action settlement. Curious about what do you think that might mean if anything for the other several cases that are pending and also for the DOJ investigation? Thank you.

[Joseph Belanoff:]

Charlie?

[Charlie Robb:]

Yes, sure. So, just the brief background for those who haven't followed the story. We've been in this -- defending the class action or purported class action lawsuit since 2018, so quite some time. And we -- over time, as we prepared for trial some day in the distant future, we started off confident in our position and confident the way we were doing business and we really only got more so as things developed and as we got over [indiscernible] and around and really reviewed all of the possible evidence, we just felt better and better, but had the opportunity recently to settle it. Because when I said that litigation is a distraction for more important matters, I really hope that everyone will really take that on board. And imagine you had a day where you could spend your time helping to move a drug -- promising drug candidate through say the regulatory process or the development process or you can review a giant stack of emails from three years ago. And that's really the difference between settling and not settling. So, we chose to settle when we had an opportunity to do so on advantageous terms. Now what you're referring to are there are a handful of sort of associated civil cases brought by plaintiff's law firms sort of around the country. They think of these as sort of like the pilot fish that attack -- attach themselves to sharks as they move through the ocean and try to survive off the food that escapes from the shark's mouth, that's what these lawsuits are like. And there are a handful of them. We will dispose of those, one way or the other, shortly following. This is my expectation, but you never -- one never can tell. But one thing I can say for sure is that we're very, very confident in our legal position with respect to them. So that's what Melucci securities class action portends for those ancillary cases. I think with respect to the Department of Justice, course, I have no idea what the attorneys at the Department of Justice are thinking. However, my understanding is that generally speaking, the Department of Justice does pay attention to what happens as you would imagine and sort of not loosely related, but sort of parallel civil case. There's no actual legal connection between the Department of Justice action, our inquiry and the Melucci class action, but they probably have their eye on it. And I don't know what they're thinking because they don't and wouldn't tell me obviously. But I hope what they see is what we see, which is a settlement on very advantageous terms for the company, which reflects the sort of the confidence that we have in the way we do business. So, I hope that's the impression they take away from it and that colors their thinking, but of course, I cannot be sure. And that inquiry proceeds and we'll just have to see how that plays out. We are very comfortable with respect to that inquiry also.

[Greg Fraser:]

Great. Thanks for taking the questions.

[Operator:]

Our next question is from the line of Arthur He with H.C. Wainwright. Please proceed with your question.

[Arthur He:]

Hey, good afternoon, gentlemen. This is Arthur on for RK. Thanks for taking my question. So, first one is regarding the Cushing business. Could you give us some color from your perspective there about the in-person clinical interactions in the second -- in fourth quarter and also what you see in the first quarter this year?

[Sean Maduck:]

Yes. No, thanks for the question. The question was what are the in-person interactions in the fourth quarter of last year and into this year. And in the past, we've discussed some of the obstacles that we faced because of COVID restrictions. And I'll tell you that through the fourth quarter and today, our in-person interactions are at about 80% to 90% of pre-COVID levels. And we expect that to be our new baseline. Some previously accessible physicians closed their doors to industry during the pandemic. And I believe that some of those will keep restrictions in place permanently. So, we're utilizing alternative means as a company to get in front of these physicians, whether it be virtual meetings, digital marketing and educational programs to try to make up some of that gap and we've seen some success on that.

[Arthur He:]

Awesome. Thanks for the color. And so, regarding the ovarian cancer study, could you give us more color on enrollment status? And so far, how many sites are active for now?

[Joseph Belanoff:]

Bill?

[Bill Guyer:]

Probably, I'll give you some color around there. Well, I won't give you exact metrics on it, because we don't really talk about metrics, but I'll give you more color. Momentum has continued and is tracking to expectations for our ovarian cancer Phase 3 trial. We expect to fully enroll this trial by the end of this year. And we believe that because we've got great collaborators like the GOG, which is the Gynecological Oncology Group here in the United States and ENGOT, which is the European Network of Gynecological Oncology Trial group. Those groups are helping us get enrolled in number of sites that we need and we determine we need about 125 sites globally. And of those sites, we've had an investigator meeting in the United States and it was probably the most positive investigator meeting we've ever had, where we talked about all of the data and the investigators in the US came away with the excitement and the benefit that they saw for relacorilant that could be used in combination with nab-paclitaxel. Next week, we're having an investigator meeting in Europe with all of the top investigators, I think there's about 50 investigators attending that investigator meeting, and we expect to see the same result of them seeing the same -- and having the same excitement of relacorilant plus nab-paclitaxel for women in their practice. So, we expect very positive things now and moving forward to this trial.

[Arthur He:]

Thanks so much for the color. My last question is again regarding your capital allocation strategy. With decent amount of cash, do you guys have any idea on the capital allocation? Thanks.

[Joseph Belanoff:]

Yes. Arthur, thank you, and thank you everyone for all of your questions. Look, we have a cash producing business as we have for many, many years. And so, the exciting thing is we have very good things in Corcept in which to invest it. Our clinical programs are advancing. And as you know, as they succeed and go into later-stage studies, the programs become more expensive to do. Of course, success is a good thing. We're very glad spend money in that way. And so, we're really always taking a careful look at what -- where our money goes. It's not a secret we get solicited all the time from earnest investment bankers who have things that they would like us to invest in. We, of course, take a careful look at that. But at this point, we really believe that the best thing for us to invest in is the business that we're doing in Corcept. And so, we will proceed in that way. Anything changes, I will let you know, of course. Thank you. And so, I want to thank all of you for tuning in this quarter. Hopefully, big progress in the next three months, and look forward to seeing you at that point in time. So, good rest of the week. Thank you.

[Operator:]

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.