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Corcept (CORT) Reports Surprising Sales & Net Income for Q2-2017

09:38 EDT 2 Aug 2017 | Biotech Watcher

On Tuesday, August 1, 2017, Corcept Therapeutics’ (CORT) released its Q2-2017 results and held a conference call.  Our team also recently visited CEO Joe Belanoff at Corcept’s headquarters in Menlo Park, CA.  The following report is based on the visit as well Corcept’s Q2-2017 results.

Improving Financial Highlights


Q2-2017
Q1-2017
Net Sales
$  35.6M
$    27.6M
GAAP Net Income
$  12.6M
$  4.4M
Non-GAAP Net Income
$  16.0M
$  7.4M
Sales Guidance for FY2017
$125M - $135M
$145M - $155M

From Q1-2016 to Q1-2017, Corcept re[prted surprising improvements in net sales, net income, and updated sales guidance. Corcept has paid off its loan, and this adds over $5M per quarter in working capital.

Corcept is also experiencing an uptick in clinical development activities. We expect investors to reward CORT with higher valuations.

Background Reading

On July 10, 2017, we published an update and discussed the “new story” and new investors in Corcept. Corcept’s valuation isn’t derived from a typical basis for biotechs. CORT has attracted “value-investors” as well as the typical “high-risk, high-reward” oncology investors.

Financial Summary

Basic Facts for Quarter Ending June 30, 2017
(in Thousands except Share Price & Market Cap)

Q2-2017
Q1-2017
Q4-2016
Q3-2016
Q2-2016
Net Product Sales
$    35,559
$    27,599
$    23,811
$    21,725
$    19,724
  Cost of Sales
775
646
561
668
426
  R&D Expense
7,876
7,176
6,484
7,054
5,672
  SG&A Expenses
14,113
15,037
11,760
10,931
12,118
Total Operating Expenses
22,764
22,859
18,805
18,653
18,216
Net Income (Loss) from Operations
12,795
4,740
5,007
3,072
1,508
Net Income (Loss)
12,647
4,388
4,597
2,585
977
Total Comprehensive income (loss)
12,642
4,376
4,597
2,585
977
Basic & diluted earnings (loss) per share
0.10
0.04
0.04
0.02
0.01
Avg. Shares Outstanding
Basic & Diluted
113,249
123,011
112,867
121,189
111,902
118,866
110,652
116,419
110,034
115,330
Recent Price (per share)
       12.30
(8/1/17)
       9.67
(5/1/17)
       9.27
(3/6/17)
       6.92
(11/1/16)
       5.55
(8/2/16)
Market Capitalization
1.4B
1.1B
1.0B
765M
609M
Cash
67,659
37,976
51,536
47,865
41,789
Short-term Marketable Securities
To be revised with 10-Q
14,798
-
-
-

The sequential comparisons of quarterly results “tells the tale”.  The increased sales brought increasing margins and cash. You can see the accelerated improvement in the financial highlights for the two most recent quarters: Q1-2017 and Q2-2017. 

Royalty Financing Payments
Q1-2017 Obligation
$4.8M
Q2-2017 Obligation
$5.7M
Final Payment (July 2017)
$4.6M
 The trend of increasingly strong quarterly results should continue in 2H-2017.  Corcept has finally disposed of its payment obligation for the “synthetic royalty transaction”. This should provide about $5.5M of additional working capital per quarter.

Sales Revenues

Net Sales
Q2-2017
Q1-2017
Q4-2016
Q3-2016
Q2-2016
FY-2016 Total
1H-2017
Total
FY-2017
Guidance
$35.6M
$27.6M
$23.6M
$21.7M
$19.7M
$81.1M
$63.2
$145M-$155M







For Q1-2017, there was a distinct jump in net sales and a mild upward revision of sales guidance. For Q2-2017, there is an even larger jump in net sales and a robust revision of projected sales.

Net Sales Highlights
Q2-2017
Q1-2017
Q4-2016
FY-2017
Guidance
March 2017
FY-2017
Guidance
May 2017
FY-2017
Guidance
August 2017
$35.6M
(+29%)
$27.6M
(+17%)
$23.6M
(+8.8%)
$120M-$130M
$125M-$135
$145M-$155M









Corcept continues to slowly enlarge its sales force. It doesn’t take many sales for each new sales liaison to bring additional earnings. We expect the current sales trajectory to continue for the next couple years.

This is a far cry from pre-2012. We once projected a $60M peak market while bank analysts had similar forecasts.

By 2020, Corcept should have its next-generation drug, CORT125134 on the market. This will strongly expand the Cushing’s market. The upward sales trajectory will thus continue for the next few years.

The current sales force targets endocrinologists who treat Cushing’s syndrome. This same sales group can become the nucleus for targeting metabolic markets (e.g. obesity, diabetes). A distinctly different sales team will be required for the oncology market.

Product Notes

Corcept has its own platforms that are glucocorticoid receptor modulators, many with inhibitory actions. Corcept’s drug competitively bind to the glucocorticoid receptor (GR), thus inhibiting the action of cortisol, the stress hormone.

Cushing’s Syndrome

The increase in overall sales revenue is broadly based, with more patients on prescription and more physicians doing the prescribing.  Upon Korlym’s approval, weguessed that it would initially have a slow sales uptake. This should not be the case for CORT125134.

If CORT125134 is shown to be similarly effective, then we expect a rapid sales uptake. It lacks a few key side effects associated with Korlym and isn't anabortifacient. There are still large, culturally conservative areas of the United States where endocrinologists avoid prescribing Korlym to females, even if they suffer from Cushing’s syndrome.

Larger Market than Expected

On the conference call, CEO Joe Belanoff said that surgery is successful in only 50% of patients, much less than the 80+% being claimed by neurosurgeons. This causes "many physicians and some investors to understimate the number of patients who are candidates for Korlym".  We were once among those who accepted the standard figures...which were apparently wrong.

Why Dose Titration?

While Korlym and CORT125134 bind to the GR receptor, and thereby crowd out cortisol, it’s also a “numbers game”. With enough circulating cortisol, it can mitigate Corcept’s drugs. Cortisol level is an idiosyncratic issue.

What’s high for me, might be almost normal for you.

With Cushing’s syndrome, there’s a great range of cortisol levels (and receptor behavior), unique to the individual. The endocrinologist must engage in dose titration to optimize treatment. Endocrinologists will typically start by “underdosing” Korlym and gradually raising levels until symptom relief is obtained.

FKBP5 Gene Expression Assay Tool

This test measures the actual GR receptor activity. If this test is validated, this should guide endocrinologists to faster titration. It should also aid in the diagnosis of hypercortisolemia (excessive cortisol activity) and referral for treatment with Corcept’s drug.   

The immediate application is for Cushing’s syndrome. This is important and should help expand Corcept’s market for this indication. The FKBP5 tool may someday be used for other indications.

FKBP5 (is) a glucocorticoid receptor (GR)-binding protein implicated in various psychiatric disorders and alcohol withdrawal severity.”[1]

We expect Corcept to include measurements from this tool for future in-house, clinical trials. This tool may someday be used for Corcept's other indications. 

Metabolic Syndrome

While many investors are focused on Corcept’s oncology franchise, CORT118335presents an interesting opportunity for treating metabolic syndrome. This will be deployed towards big indications. CEO Belanoff confirmed that a Phase I trial will be launched in August 2017.

Corcept already has early proof of concept for treating diabetes and obesity – you can view the treatment of Cushing’s syndrome with Korlym as a “warm-up”. Will Corcept’s drugs treat be able to treat a substantial portion of patients with diabesity? We will soon find out.

Corcept is looking to test CORT118335 against fatty liver disease as well as general metabolic syndrome. Independent investigators are already using a related drug, mifepristone, to treat obesity and diabetes.[2]

In addition, we would not be surprised if Corcept also treated weight gain due to antipsychotics. It has been several years, but Corcept used mifepristone[3] in two successful Phase IIa trials for this indication. During the conference call, CEO Belanoff said: It also works well in animal models of antipsychotic induced weight gain.

Summary Thoughts on CORT118335

CORT118335 is effective across a wide range of metabolic disease markers (e.g. blood lipids, weight, glucose tolerance) in animal models. We believe the risk-reward for Corcept’s drugs may be better for metabolic syndrome versus cancer. The first two clinical trial results should prove our hunch.

Weight Gain Due to Antipsychotics

This was an early indication that was pursued by Corcept. We heard little since 2013, as Corcept was focused on other activities. If you’re new to this indication, this is big.

Why not pursue all overweight people?

Weight-loss drugs have a checkered history with the FDA. These patients are considered to have largely created their own problem and need to check it with diet and exercise.  The FDA bar can be quite high.

On the other hand, weight gain due to antipsychotics is another matter. These patients are “victims of medical treatment”. The weight gain is high and the diabetic risk is substantially raised.

In an 11-week study, subjects gained an astonishing amount of weight. Those who took Zyprexa had gained 18.7 pounds; Seroquel, 13.4 pounds; Risperdal, 11.7 pounds; and Abilify, 9.7 pounds. All but Abilify saw significant increases in metabolic markers such as triglyceride and cholesterol levels, along with glucose and insulin levels. This study has been replicated multiple times.

In 2007, Eli Lily settled a class action lawsuit against its antipsychotic for hundreds of millions – for failing to adequately warn against diabetic risk. “Internal documents show that Lilly’s own clinical trials found that 16 percent of people taking Zyprexa gained more than 66 pounds after a year on the drug.”

It’s no surprise that Eli Lily provided funds for Corcept’s earlier research towards preventing weight gain due to antipsychotics.

Top Antipsychotics
Company
Drug
US Sales
2016
Notes
Johnson & Johnson
Invega Sustenna
(paliperidone)
$1.3B
Active metabolite of risperidone.
Sumitomo Dainippon
Latuda
(lurasidone)
> $1.2B
Sumitomo forecasts over $1.5B for North American market in  FY2017. Exclusivity expires in 2019.
AstraZeneca
Seroquel XR
(quetiapine)
$633M

Otsuka
Abilify Maintena
(aripiprazole)
$428M

Vraylar
Allegran
-
New Drug – Sold $53.6M in USA for Q1-2017- Rapid market uptake

Oncology

According to Belanoff, CORT125281, will be paired with Xtandi to treat metastatic prostate cancer in a clinical trial to be launched in November 2017. This assumes that the earlier Phase Ia trial in healthy adults will prove safety (launched in September 2017).


Milestones

Corcept Sponsored Trials

Cushing’s Syndrome
There are perhaps 7,000 to 10,000 patients in the USA that should benefit from this treatment. Nevertheless, the diagnostic category may greatly expand with middle-aged and older adults who are impacted byadrenal incidentilomas. This used to be called “subclinical Cushing’s Syndrome”. Korlym or a next-generation drug targets the metabolic consequences of the disease.

CORT 125134 is a next generation, selective GR-antagonist. It is good at blocking the glucocorticoid receptor (GR), but unlike Korlym it does not block the progesterone receptors. This means that it will lack some of Korlym’s side effects, and it will also lack its ability to terminate pregnancies. 
Phase IIa Top-Line Results (30 pts)
  CORT 125134
  Group 1: 100 mg/day for 4 weeks, then 150 mg/day for 4 weeks,
  then 200 mg/day for 4 weeks.
  Group 2: 250 mg/day for 4 weeks, then 300 mg/day for 4 weeks,
  then 350 mg/day for 4 weeks.
Q1-2018
  Results
Q3-2017
Solid Tumors
CORT125134 is in a Phase I/II trial to treat solid tumors including breast and ovarian cancer. In the Phase I part, CORT125134 is paired with Abraxane. Dose cohorts are employed to seek the maximum tolerated dose (MTD). There will likely be nothing interesting to report until most of the cohorts have been treated; the beginning dose levels are so low that efficacy is moot.

CORT125134 has interesting promise. Besides lacking a couple side effects associated with Korlym, the animal models show potential superiority for treating solid tumors.

CORT 125134 appears to perform better than Korlym in mouse models of TNBC and castration-resistant prostate cancer. It also demonstrated good results with ovarian cancer cells in the lab. It is similar to Korlym but lacks some of its side effects.

If the trial progresses to Phase II, then CORT125134 will be paired with different agents, including a checkpoint inhibitor.
Phase I Results – CORT 125134 + Abraxane – (Up to 42 Pts)
  Maximum Tolerated Dose, Advanced Cancer
2H-2017*
  Phase II Launch – Expansion Cohorts – (~20 pts per Cohort, 84 total)
  CORT125134 + Abraxane (ovarian & triple-negative breast cancer)
  CORT125134 + Different Agents (inc. checkpoint inhibitors)
Q4-2017
Prostate Cancer
CEO Belanoff mentioned CORT 125281 stood out with treating rodent models of prostate cancer including castrated animals. There will be close attention from the cancer community on trials involving GR antagonists for treating prostate cancers that are resistant to enzalutamide and abiraterone.  

If the Phase I goes well, Corcept plans to pair CORT125281 with Xtandi. 

The University of Chicago is also running a trial involving Korlym and the trial should be completed in December 2017 with results being released soon after completion. 
  Phase Ia Launch – CORT125281 + Xtandi – Healthy Patients
Sept. 2017
  Phase 1b Launch – CORT125281 + Xtandi – Metastatic Prostate Cancer
Nov. 2017
Metabolic Syndrome
CEO Belanoff mentioned thatCORT118335produced promising results in animal models of fatty liver disease including a reduction of white fat in the liver and other organs.Additional work with metabolic syndrome is being conducted by independent investigators. 

Cushing’s syndrome patients, especially those with mild disease, are “human models” for metabolic syndrome. Corcept’s patentfor treating fatty liver disease is now published in the US and Europe. 

Why CORT118335 rather than Korlym?

Cushing’s syndrome requires a drug that has wide dispersion through the body (Korlym). On the other hand, metabolic syndrome, especially involving NASH disease, requires a drug that is well absorbed by the liver (CORT118335). CORT118335’s targeting is inappropriate for Cushing’s syndrome. 

About two years ago,we also underscored CORT118335’s potential use for treating alcohol withdrawal in animalmodels.
  Phase I/II Launch – Non-Alcoholic Fatty Liver Disease
  CORT 118335
Aug. 2017
    *Guesstimate

Independent Investigator Sponsored Trials
Korlym (Mifepristone)
GR+ Triple Negative Breast Cancer – Because of the experience with a recent trial (involving carboplatin and gemcitabine), investigators are reportedly limiting the number of patients with more than 2 previous chemotherapy regimens.
  Phase II Results (University of Chicago) (64 pts)
  Korlym + Abraxane
2H-2018
Prostate Cancer
  Xtandi ± Mifepristone - (University of Chicago) - 108 pts
Q1-2018*
Advanced Non-Small Cell Lung Cancer
Corcept is listed as a collaborator in the study. It is an open-label design, in patients with metastatic NSCLC who have failed 2+ prior chemotherapies. It is hoped that mifepristone as a monotherapy will increase the median progression-free survival time to 15 weeks and overall survival time of 16 months. We are a bit queasy because we do not view Corcept’s drugs as monotherapies for treating cancer.
  Phase II Top-line Results(Cooper Institute) (40 Pts)
  300mg/day in 28-day cycles
2019*
Central Serous Chorioretinopathy
  Phase II Top-line Results  (STOMP-CSCR) (30 pts)
  300mg or 900mg/day for 4 weeks
AAO 2017
Nov. 11-14
Ethanol Withdrawal
  Phase II Results (Scripps – San Diego) (150 pts)
  Placebo, 600 mg, 1200 mg/day; 7 days
Q3-2020*
  Phase I/II Results (Brown University) (20 pts)
  Crossover, Double-Blind, 600 mg/day, 7 days
Q1-2018*
  Phase IV MIFCOG TRIAL Results(King’s College – London) (120 pts)
Cognitive Impairment & Depression in Alcoholics
Double-blind, 12-Month Follow-up 
  600 mg/daily for 1st week, 400 mg/daily for 2nd week
Q3-2017*
  Phase II Results in Heavy Drinkers (Johns Hopkins) (150 pts)
  6 doses of Mifepristone vs. CORT125134 vs. Placebo
Q1-2022
Cocaine Relapse Prevention
The trial information was updated in Q4-2016. It is still unclear when the results will be released, but at least the study recruitment is over (it took 6 years).
  Phase II/III Results (NY State Psychiatric Institute) (59 pts)
  600mg, 3x/wk. for 4 weeks 
Q1-2018*
Metabolic Syndrome
  Crossover, Double-Blind
Q1-2018*
Middle-Aged & Older Adults (Stanford University) – Results – 40 pts
Q3-2017*
Mid-2020

Our Thoughts

Corcept surprised Wall Street with strong sales and higher than expected net income.
With these quarterly results, CORT should attract “value investors” who are interested in Corcept’s story as a profitable biotech company. On the downside, some long-time investors may sell part their positions. We expect this to occur within the next few months.

Corcept’s new investors are mostly “value investors” or oncology investors. Nevertheless, Corcept’s foray into treating metabolic syndrome should not be ignored. The risk-reward may be higher than the cancer indication – you should stay tuned to the early clinical results in this indication.

(At the time this post was written, one or more BioWatch authors held a position in CORT)



[1]Qiu B, Luczak SE, et al. (2016). The FKBP5 Gene Affects Alcohol Drinking in Knockout Mice and Is Implicated in Alcohol Drinking in Humans. International Journal of Molecular Sciences, 17, doi:10.3390/ijms17081271
[2]Mifepristone is the active ingredient within Corcept’s Korlym.
[3]Mifepristone is the active ingredient within Corcept’s Korlym.

Original Article: Corcept (CORT) Reports Surprising Sales & Net Income for Q2-2017

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