Corcept Therapeutics Incorporated
Q2 2015 Earnings Call Transcript

Published: 6 Aug 2015

[Operator:]

Welcome to the Corcept Therapeutics Conference Call. My name is Cathilda, and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Charlie Robb, Chief Financial Officer. Mr. Robb, you may begin.

[Charles Robb:]

Thank you. Good afternoon. My name is Charles Robb, Corcept’s Chief Financial Officer. Joining me today is Dr. Joseph Belanoff, our Chief Executive Officer. Thank you all for participating in the call. Earlier today, we issued a news release giving our second quarter 2015 summary financial results and a corporate update. To get a copy of this release, go to corcept.com and click on Investors tab. Complete financial results will be available when we file our Form 10-Q with the SEC. Today’s call is being recorded. A replay will be available through August 19th at 1-888-843-7419 in the United States and 1-630-652-3042 internationally. The pass code will be 40261436. Before we begin, I want to remind you that any statements during this call other than the 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 anticipated revenues and operating expenses for 2015 and beyond, the timing of preclinical trials and clinical trial and results of such trials, the pace of Korlym’s acceptance by physicians and patients, the anticipated contribution of our sales organization to our revenue growth and net income, the pace of enrollment and or the outcome of our clinical trial in the advancement of our next generation selected GR modulators, the effects of rapid technological change in competition, the protections offered by Korlym’s orphan drug designation for Cushing syndrome or our other intellectual property rights or the costs, pace and success of our other product development efforts. These and other risks are set forth in our SEC filings, which are available at our website and corcept.com or from the SEC's website SEC.gov. We disclaim any intention or duty to update any forward-looking statement made during this press release. Now I will review our second quarter financial results. Corcept's net revenue in the second quarter was $12 million, compared to $5.9 million in the second quarter of 2014, an increase of 104%. We are revising our 2015 full year revenue guidance from $47 million to $53 million to $49 million to $53 million which is a $2 million increase to the lower end of the range. Our net loss in the second quarter was $1.9 million or $0.02 per share compared to $7.6 million or $0.07 per share in the second quarter of 2014. The second quarter of 2015 and 2014 included non-cash expenses of $2.3 million and $2.2 million respectively. Excluding these non-cash items, we generated net income on a non-GAAP basis of $369,00 in the second quarter of 2015 compared to a non-GAAP net loss of $5.4 million in the second quarter of 2014. A reconciliation of GAAP to non-GAAP income and loss is provided in our press release. Our cash balance on June 30, 2015 was $37 million, compared to $38 million one quarter ago. Based on our current plans and expectations, which include fully funding our Cushing's syndrome franchise, completing our Phase 1/2 study of Korlym for the treatment of triple negative breast cancer, and if that study produces positive results conducting a Phase 3 study, advancing CORT 125134 to Phase 2 studies in both Cushing syndrome and in oncology indication and advancing to the clinic at least one more of our next generation compounds, we believe we will reach cash flow breakeven without needing to raise additional funds. I will now turn the call over to Dr. Belanoff.

[Joseph Belanoff:]

Thank you, Charlie, and thank you all for joining us. Corcept develops and commercializes medications that modulate the effects of cortisol widely known as the stress hormone. We market our first generation cortisol modulator, Korlym for the treatment of Cushing syndrome, a life threatening disease that affects approximately 20,000 patients in the United States. We are conducting a Phase 1/2 trial Korlym as a treatment for triple negative breast cancer, a deadly disease with no FDA approved treatment. We have developed a large portfolio of next generation cortisol modulators which we hope to develop into approved treatments for a wide range of serious diseases. Our lead next generation compound CORT 125134 has completed Phase 1 and will begin two Phase 2 trials, one for the treatment of Cushing syndrome and another for the treatment of yet to be chosen oncologic indication in the first quarter of 2016. Before I discuss these topics in more detail, I want to take a minute to observe that last quarter Corcept passed an important milestone. Excluding non-cash expenses, we are under profit. Our non-GAAP net income of $369,000 was small, but it demonstrated a very important fact, not only as our Cushing syndrome business profitable on a standalone basis, it has the potential now that demonstrate a potential if on the rest of our activities including development of the next generation treatments in our product pipeline, very few biotech companies can make that claim. I’ll briefly review our key programs and start to answer your questions. With again offering Korlym to patients with Cushing syndrome in April 2012, since then our business is growing steadily. We expect that it will continue to do so. As you’ve just heard, we’re revising our revenue guidance for 2015 to between $49 and $53 million, which roughly double our total for 2014. Korlym sales grew last quarter because more physicians prescribed Korlym and the number of patients with Cushing syndrome taking the medication increased. Nonetheless there are many Cushing syndrome patients who could benefit from the medication, but who do not yet receive it. I said during our last call that we had recently increased the size of our salesforce by about 50%. Our newly hired sales representatives have completed their training and are now calling on positions. We look forward to their contributions to our growth in the second half of this year and beyond. Korlym is a powerful treatment for Cushing syndrome and we expect its growth for the treatment of that disease to continue. That being said we have identified next generation compounds that we believe may also effectively treat Cushing syndrome, but with important advantages. I have spoken before about Corcept’s portfolio priority selective GR antagonist. There are more than 300 such compounds all of which modulate cortisols activity but unlike Korlym do not bind to the progesterone receptor and so we’re not a board of passions and do not have the other side effects such as endometrial thickening associated with progesterone receptor blockade. Removing progesterone antagonism is medically and politically a very big deal. Our next generation compounds are not just another purple pill. CORT 125134 successfully completed Phase 1 and should advanced the Phase 2 as a potential treatment for Cushing syndrome in the first quarter of 2016. In addition to demonstrating the compound safety and tolerability, data from Phase 1 shows that CORT 125134 appears to share Korlym’s ability to potently reverse the effect of excess cortisol activity, which makes it a promising candidate to treat pushing syndrome. We look forward to testing its activity in patients with Cushing syndrome in its upcoming Phase 2 study. Our oncology program also made significant progress last quarter. We continue to dose patients in the efficacy portion of our Phase 1/2 trial of Korlym for the treatment of triple negative breast cancer. In this portion of the trial we plan to treat 20 women who have metastatic triple negative GR positive disease with a combination of Korlym and Halaven, brand name for eribulin. For those of you who are not familiar with triple negative breast cancer, let me provide some background. 40,000 women in the United States are diagnosed with the disease every year. There is no FDA approved treatment for triple negative breast cancer and the prognosis for patients with metastatic disease is poor. Triple negative means that these patients have tumors which do not express the estrogen progesterone or HER2 receptors. So treatments like Tamoxifen or Herceptin which are very effective for receptor positive breast cancer have no target and are ineffective. However, our soon to be published research indicates that significantly more than half of triple negative tumors express GR, the cortisol receptor to which Korlym competitively binds. We expect to have initial efficacy results of our phase 1/2 trial by the end of this year. If they are positive we will begin a Phase 3 trial in 2016. We are about to advance another compounds for the treatment of cancer CORT 125134. As I mentioned earlier, the compound's Phase 1 trial result show to be safe and well tolerated. In animal models of several solid tumor cancers, it appears to be even more potent than Korlym. We plan to advance CORT 125134 to Phase 2 for at least one oncologic indication in the first quarter of next year. We are reviewing candidate indications now and will make our development decision in the next few months. I would like to take a minute to explain why we believe in cortisol modulation whether using Korlym, CORT 125134 or another of our next generation compounds in help treat certain cancers. Cortisol suppress the body's immune response. In many circumstances this is beneficial. Without cortisol symptoms like those seen in autimmune diseases would be much more common. However, it is now clear that activating not suppressing the body's immune systems is beneficial in fighting certain cancers. This is reasoning behind the use of PD1 inhibitors. Similarly, for certain tumor, cortisol acting through GR, glucocorticoid receptor appears to suppress the immune response and stimulate the tumors' growth. GR modulators like Korlym or CORT 125134, seem to reverse this effect. The mechanism I just described has been the focus of our own research and have substantial in vitro, in vivo and clinical work by investigators of the university of Chicago and other academic institutions. You may remember that at the December 2013 San Antonio Breast Cancer Symposium the Chicago team reported the successful findings of the clinical study of Korlym in combination with nab-Paclitaxel to treat metastatic triple negative breast cancer. On the six patients in their study whose tumors were GR positive, two had a complete response to treatment, two had a partial response and one had stable disease. These are exceptional results, all of the women in this study have previously failed at least one course of taxane-based chemotherapy and yet five of the six appeared to benefit when Korlym was added to their taxane-based treatment. There is a reason to believe that cortisol modulation will work in other solid tumors that expressed GR. For instance the University of Chicago investigators are conducting a follow up study of Korlym in combination with a different chemotherapeutic regimen, Gemcitabine and Carboplatin to treat patients with ovarian cancer in addition to treating patients with triple negative breast cancer. In castrate-resistant prostate cancer extensive in vitro and in vivo work shows the cortisol activation of GR is a path to tumor growth. Accordingly, GR modulation by Korlym, CORT 125134 or another of our selected GR antagonist, when used in combination with an androgen-deprivation agent such as enzalutamide could be a potent treatment. A separate group of investigators at the University of Chicago is conducting 108 patient Phase 1/2 study of Korlym in combination with enzalutamide to treat the disease. We are licensing intellectual property to this therapeutic approach and will be following the Chicago study closely. I have discussed three cancers, where tumors express GR that we believe may respond to treatment with the GR modulators such as Korlym or CORT 125134; triple negative breast cancer, ovarian cancer and castration-resistant prostate cancer. There may be other solid tumors when this strategy could be beneficial. We have tested a wide variety of solid tumors and have found that many, but not all express GR. We've used this data along with our own research and research by independent investigator at the University of Chicago and elsewhere to select indications for further study beginning with the Phase 2 study of CORT 125134 in early 2016. Our work in Cushing syndrome and oncology touches on only a small part of cortisol modulation's therapeutic potential. Because there are receptors for cortisol and nearly every tissue of the body, excessive or distortive cortisol activity can cause or exacerbate many illnesses. In addition to Cushing syndrome and cancer, therapeutic targets for medications that modulate cortisol’s activity include severe metabolic, psychiatric and even an ophthalmologic disease. This is why our collaborations with epidemic investigators around the world are so important. As these researchers increase our understanding of cortisol modulation, we’ll be able to bring forward compounds from our portfolio proprietary selective cortisol modulators and match them to therapeutic targets and advance the most promising candidates to clinical study. This is the development model that gave birth to our working triple negative breast cancer; we believe it will be as productive and cost effective in a wide range of serious diseases. I will give two different types of example to illustrate how these development model works. Last quarter I mentioned that academic researchers in the Netherlands has shown the CORT 118335 will potently reverses the affects of non-alcoholic fatty liver disease in mice. We are now conducting IND enabling studies of that compound and will advance it to human study if its results are positive. Separately independent investigators in United States are currently conducting a Phase 2 trial of Korlym for the treatment of central serous retinopathy, a serious ophthalmologic disease. If those results are positive we will strongly consider initiating a Phase 3 trial of Korlym in that indication. These are just a couple of examples that are bubbled up in the more than 30 collaborations we have underway. Cortisol modulation is a critical medical platform and we are the leader in advancing it. To sum up our Cushing syndrome business grew again last quarter as it had every quarter since Korlym’s launch. On a non-GAAP basis we generated our first profit. We expect growth to continue and to be able to reach cash flow breakeven without having to raise additional funds and provides our 2015 revenue guidance to between 49 million and $53 million. In vitro, an early clinical data suggest that CORT 125134 may treat Cushing syndrome with Korlym’s efficacy but without the side effects that come with Korlym’s progesterone antagonism, the compound's Phase 2 study for the treatment of Cushing syndrome to start early next year. Our oncology program continues to advance. By the end of the year we expect initial efficacy results of our Phase 1/2 trial of Korlym in combination with chemotherapy to treat triple negative breast cancer. Our Phase 3 trial could be underway by mid-2016, CORT 125134 should be in Phase 2 for an oncology indication by early 2016. Finally we continue to advance our other compounds from our priority library of selected GR modulators. Our collaboration with independent investigators around the world suggested there are many serious diseases for which cortisol modulation might provide treatments and we look forward to sharing the results of this work as soon as it is available. I’ll stop here and answer any questions. Thank you.

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Charles Duncan from Piper Jaffray.

[Charles Duncan:]

I had a question on the current Korlym business and then on the pipeline, and the question on the current business is, you raised guidance to lower end which make sense to me. What do you think is the biggest input to revenue growth? Is it increasing the prescriber base? Is it increasing the number of patients? Or is it increasing the duration or the dosing the patients are exposed to?

[Joseph Belanoff:]

Hey Chuck we’ll first thank you for calling in on an August day; i'ts very nice of you, particularly in the late afternoon. I’d like reintroduce you onto Sean Maduck, who is our Vice President of sales and marketing at Corcept. You heard from Sean at the last call, but I think he really is in a very good position to answer your question.

[Sean Maduck:]

Hi Joe, thank you and thanks for the question. I think I’ll start-up by reiterating what Joe said during the call, I mean mainly Korlym sales grew last quarter, because more physicians prescribe Korlym, and the number of patients -- with an increase in the number of patients taking the medication increased as well. In terms of what are the main drivers of that in the market, we've learned a lot about our market since launch and we've become far more effective I think in telling that Korlym story. Endocrinologists are becoming far more familiar with our product. I am sure that we are getting extended base time with them, but then I am not able to get into a much deeper conversions about all the etiologies of Cushing center including pituitary, ectopic and adrenal. And because of that they’re now far more receptive with that, and how far it could benefit their patients, and are becoming increasingly more confident in treating medically with our products. And through that we’re now actively looking forward and testing more patients who could benefit from the product. So it’s a factor of more physicians prescribing, more patients being prescribed the product, and all our effort is around them.

[Charles Duncan:]

So you feel like physicians are getting a better handle on using Korlym relative to some of the other approaches that have been used to treat Cushing’s in the past?

[Joseph Belanoff:]

Yes, I just want to underscore Sean’s point. I think that it is really -- Charles, I know you follow the story for a very long time. It was really -- but those who haven’t, just to highlight some of the history of it; Korlym was approved on a 50-patient open label study; on it's PDUFA day without an advisory panel with 17 doctors participating, because the efficacy was very-very high. In terms of clinical global response virtually every patient responded. You know it's is a great advantage. But at the beginning hardly any physicians had used Korlym, this new mechanism hadn’t understood prior to that point. Our commercial team has worked very-very hard to increase the awareness of the medication how it works and so forth. And I think that we are still early even though in adoption oriented launch, we’re still relatively early in that process. We're not seeing a level letting off of the increase of interest. And we know that this is a sale that requires some sophistication. So, really as I think just moving along in the same way that it has just with the broader and broader base every single month.

[Charles Duncan:]

And now as you mentioned we've covered this -[indiscernible] some time and I’ve always been primarily driven by the broad potential applicability of the platform. So I wanted to ask you about that, clearly you are starting to articulate that aspect of the story and I appreciate that. I wanted to -- however you mentioned the triple negative breast cancer trial, then would you anticipate and update at the San Antonio breast cancer meeting coming up here in December?

[Joseph Belanoff:]

Yes, it's a terrific venue, and it will be great to be able to present information at that point. I can't promise that, because we’ll have to see how the study is going. But certainly that would be a nice venue for us, if we could because that’s a conference which is very well covered.

[Charles Duncan:]

And should you see some favorable responses in TNBC, it was seen that given the completely unmet clinical need there would makes sense to file for breakthrough therapy designation. Would you anticipate that possibly be the case?

[Joseph Belanoff:]

Well as with everything else we do Charles, really it's going to be driven by the data and we will look at every opportunity to advance the treatment as quickly as we can if it looks like the results are warranted.

[Charles Duncan:]

And then final question, then I'll hop back in the queue, you mentioned something interesting that about 50% or so triple negative breast cancer tumors or tumors in women with triple negative breast cancer express, highly express GR. I’m wondering if you are considering that as a potential stratification strategy for future studies.

[Joseph Belanoff:]

Let me just give a little context to answer. I know you know the story well, but others may not. It has not been a standard screening to look for the cortisol receptor on triple negative tumors. University of Chicago first developed and academic assay, but if you go to the older academic literature it was very sparse and it basically said that about a quarter of these tumors perhaps had the GR receptor on it, you just can’t see - the largest tumor bag screening for GR that had ever been done and as I mentioned we are covering academics, we publish and we will publish this soon but what it showed that it was not 25% nor was it 100% but it was considered more than 50% which really says that this is a very worldwide target for substantial group of women who have this disease. But really I think is moving along in that way. Now in that context Charles, can I have your question again?

[Charles Duncan:]

Yes, is that possible factor that you look at two stratify patients with and study in phase 3 or is it even possible that in the future that you could use that in the commercial setting?

[Joseph Belanoff:]

Okay. Now I fully understand your question. And the answer is that we anticipate that we will use GR positivity as a way for patient with triple negative breast cancer to enter or not enter our study we really feel very strongly that patients do not have, sadly if they do not have a GR target we will not actually bring that forward. But at this point in time it really is our first thought that this will be, we will have developed and bring along through phase 3 into commercialization a companion diagnostic and would anticipate at this point that that it would in fact be part of our label. Obviously we will have to see what the data share is and I will make decisions along that way, but that's how we are looking at the situation right now.

[Operator:]

Our next question comes from Christopher James from FBR & Company.

[Christopher James:]

Alright guys, good afternoon and let me also add my congratulations on a really good quarter and thanks for taking my question as well. Joe, what can you tell us, what have you seen in terms of new patients that are coming aboard with respect to disease severity of relative to your initial launch. And are you also seeing an increase in average dose?

[Joseph Belanoff:]

Yes. So two different questions, but first good to hear from you Chris. The first question is it really very interesting when just as we about it. In our study we saw in some sense that doctor's biggest trainer act, the patients willing to study have really had no other treatment and so entered in. I think what was really very heartening is that those are very, very sick patients did quite well and I think overtime patients with more moderate Cushing Syndrome have again to get treated with Korlym. Now it's our strong opinion that nobody there does not have a mild case of Cushing Syndrome, it is a bad disease but there are patients who have got really severe and there are patients who have the more chronic, but also powerful illness. And yes we have actually seen more and more treatment of patients who have more moderate disease as opposed to the most of your patients. Now the titration question is an interesting one and a little bit more complex than you might think. I have mentioned before in the conference calls that the average dose in the clinical trial is about 750 milligrams and what we actually had, it will work to do is explain endocrinologist, how the initial dose 300 milligrams was probably not going to be the most effective dose for many of their patients. Now what was actually pulse in the publication at this point come forward and I think the people will really understand that better as our sales force is explained and that the literature comes out. So on the one hand you have patients who do have somewhat more mild -- on the other hand you have patients who probably have not been fully traded to our optimum dose in the past and I think those two forces kind of involve with each other in combination. I can tell you that overtime we have seen a modest increase in dose and if you are asking my personal opinion I think that that will probably continue to increase overtime even as patients with more moderate disease and there are patients of group.

[Christopher James:]

Great. That's helpful. And then on the expanded salesforce. When do you think we will see the full incremental effect of that expanded salesforce. Do you think we should think about this as a 3Q event or a 4Q event?

[Sean Maduck:]

That's a great question. I will touch on that, but before I go into discussion space I want to add an increase of or highlight another relevant field point that did have a an impact in Q2 that will also carry forward, we have announced historically that we did increase the size of the sales force account specialist organization to 25 in Q1, but we also expanded our sales leadership team and we now have four active regional managers who are seeing this group. So their leadership has really benefited both our veteran as well as new hired clinical specialist and has helped our increase affecting this other field in Q2. So now onto your question about new hires, in terms of have we seen activity to date the only answer I will be know, I mean our new specialist are really recently completed all their training and we expect to see some of contribution coming from them in Q3 with that really ramping up in Q4. We have a very extensive training program here at Corcept, Korlym is a complicate in sale and CS is clinical specialist, need to have [indiscernible] and be very well versed in both the disease and our mechanism of action more to be a factor than and it take some time to build relationships and be productive in territory, so just to reiterate, we will see some activity in Q3 with ramping up in Q4.

[Christopher James:]

Great that's really helpful. And I guess on to triple negative, the UC data as you pointed out you will see in phenomenal, I guess what response rate are you targeting, I don't know if you can say that publically, but what response rate are you targeting to really think about going directly into a pivotal and do you think you need to replicate those phenomenal results seen at University of Chicago?

[Joseph Belanoff:]

Well, I think it would be wonderful but highly unexpected if we unless any trial of micro [indiscernible] agent had an 80% response rate, and so we don't expect to replicate that result although it was wonderful for that smaller group of patients. On the other hand, just for a basis of comparison, of course we filed the space with medication recently did a study in triple negative breast cancer, and the response rate would have been 7% and they were not terribly unenthusiastic about that. So the question you raises is a complicate one, I’m not sure exactly what response rate is going to excite us, certainly 80% will excite us, but this, I guess I have to again pull back to context this is an enormously sick group patients. These are patients who have failed every other therapy and sadly we’ve had already in our clinical patients who passed away between when consensus it and they got their first dose of medication. It is shows you how acutely ill these patients are, so in some sense any response rates that so reasonable is worthy of bringing the medication forward, I don't have a specific percentage for you and luckily have to carefully as we get the data because as you know the data is not just response rate, but things very increasing survival plan and so forth.

[Christopher James:]

Right, okay and then maybe just two more on pipeline. And then I’ll jump back in the queue, you mentioned Core 125, going into tumor type getting specify which type, I guess it is safe to assume that it will be one of those three tumor types to discuss or are you potentially thinking about other tumor types?

[Joseph Belanoff:]

Well, we’re trying to think more broadly at this point, because just recently completed a screening of other solid tumors and found that there was GR represented in a fair group of them, not all of them, which actually give me contents of how it work, but in a fair group of them, now we do actually have in vitro data the 125, and 134 in triple negative breast cancer, castration- resistant prostate cancer and ovarian cancer and we actually in vivo data in both triple negative breast cancer and castration-resistant prostate cancer at this point in time. So they certainly are headed the line, but we are really taking a careful look to see if we want to promise because we feel like the strategy might have a real legs in other forms of solid tumors, so it's a series top of the consideration, it’s probably going to take another two months of thinking, two three months of thinking to get through it, but by the latter part of the year we know where we are going.

[Christopher James:]

Great that's helpful and then finally on prostate, just wondering, just given the biology and the papers that have come out, how should we think about the potential of mifepristone, should this be is something. You something think about in combination with enzalutamide or in enzalutamide failures?

[Joseph Belanoff:]

Yes, important question, as far as we can see mifepristone by itself does not have particular oncologic benefits it really is in combination with other treatments and. And I’ll speak to you specifically. What really appears and this is a topic of a [indiscernible] journal editorial, I guess about a year ago. It's that enzalutamide which is a terrific medication, and shortly after it as given and you know it's a powerful androgen receptor antagonist; colonies of cells which are GR positive and where GR is the growth factor, begins to develop. Broadly one could say that eventually enzalutamide resistance, a fair portion of that is its GR positivity. So what we’re looking for is blocking another exit route for the tumor and the combination is really what’s been tested. So the study of University of Chicago is enzalutamide versus enzalutamide plus mifepristone

[Operator:]

Thank you. We have no further questions at this time. We will like to thank you. Please go ahead.

[Joseph Belanoff:]

Yes. Thank you very much and we’ll talk to you next quarter.

[Operator:]

Thank you. With this we conclude today’s conference. Thank you for your participation. You may now disconnect.