Corcept Therapeutics Incorporated

Good day and welcome to the Corecept Therapeutics conference call. Today's conference is being recorded. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 to ask a question. At this time, I would like to turn the conference over to Charlie Robe. Please go ahead, sir.

Thank you. Good afternoon, everyone. Today we issued a press release announcing our financial results for the second quarter and providing a corporate update. A copy is available at coursep.com. Complete 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 18th at 888-203-1112. in the United States, and 719-457-0820 internationally. The passcode will be 680-0706. 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 express or imply. These risks and uncertainties include, but are not limited to, Our ability to operate our business and achieve our goals during the COVID-19 pandemic and thereafter, including our ability to generate revenue and cash reserves sufficient to fund our commercial operations and development programs, the availability of competing treatments, including generic versions of Corlum, the initiation or outcome of litigation, our ability to obtain acceptable prices or adequate insurance coverage and reimbursement for Corlum, and risks related to the development of our product candidates, including their clinical attributes, regulatory approvals, mandates, Oversight, and other requirements, and the impact of the COVID-19 pandemic on our employees, consultants, and vendors, as well as on physicians, patients, insurers, regulators, and the practice of medicine generally. These and other risks are set forth in our SEC filings, which are available at our website and the SEC's website. On this call, forward-looking statements include those concerning our 2020 revenue guidance, cash flow and expected growth, Impact of the COVID-19 pandemic on our commercial operations, financial performance, clinical development programs, physicians, payers, and patients. Physician awareness of hypercortisolism and the selection of corallum is the optimum medical treatment. The timing, cost, and outcome of litigation, including our lawsuits against Teva Pharmaceuticals and Sun Pharmaceuticals and Teva's challenge to our intellectual property before the Patent, Trial, and Appeals Board. The scope and protective power of our intellectual property, the benefits of orphan drug designation, the progress, enrollment, timing, design, and results of our clinical trials, and the clinical and commercial attributes of relacoralin, hexacoralin, miracoralin, and our other selective cortisol modulators. We disclaim any intention or duty to update forward-looking statements. Our revenue for the second quarter was $88.6 million, a 23% increase from the second quarter of 2019. It was $4.7 million lower than in the first quarter of this year, primarily because in March some patients refilled their prescriptions a few days earlier than usual so as to have a small amount of extra medicine on hand to safeguard against pandemic-related delivery delays. These early refills increased our first quarter tablet shipments and revenue. When patients consumed their small safety stocks in the second quarter, they postponed refilling the prescriptions by a few days, which decreased our second quarter tablet shipments and revenue by a similar amount. Let me illustrate with a hypothetical example. A patient who filled her Corlin prescription on March 2nd, and who would normally have refilled on April 2nd, instead refills on March 29th. That is to say, in the first quarter rather than the second quarter. In April, when it becomes clear that no deliveries are being delayed, she consumes those few extra tablets, and rather than refilling her prescription on April 29th, waits until May 2nd, skipping April. She then returns to her normal monthly refill cadence, receiving another shipment on June 2nd. This patient received six shipments in the first half of 2020, an average of one per month, as one would expect. But four of those shipments were in the first quarter, and only two were in the second. Variations in refill timing, such as I just described, caused our shipments of Coraline tablets and our revenue to increase in March, then decrease in the second quarter by a comparable amount, then resume their normal cadence. In effect, about $4 million of revenue we would have recognized in the second quarter got shifted to March. We did not see this sort of early refill behavior in the second quarter. Our second quarter gap net income was $28.3 million compared to $20.2 million in the same period last year, excluding non-cash expenses related to stock-based compensation and the utilization of deferred tax assets together with related income tax effects. Non-GAAP net income in the second quarter was $39.7 million compared to $31.0 million in the second quarter of 2019. Our cash and investments increased $60.6 million in the second quarter to a balance of $409.6 million at June 30th. Now, a brief legal update. In March 2018, we sued Teva Pharmaceuticals and Federal District Court to stop it from marketing a generic version of Coraline in violation of our patents. Our lawsuit stayed final FDA approval of Teva's proposed product for 30 months, a period which ended at midnight on August 1st. Discovery is underway. Trial is set to begin February 2nd, 2021. In addition, Teva has challenged the validity of one of our patents, the 214 patent, in a proceeding known as a post-grant review, or PGR, before the U.S. Patent Office's Patent Trial and Appeals Board, or PTAB. Briefing in the PGR is complete. Oral argument is set for September 2nd. We expect the PTAB's decision on November 19th. The losing party may appeal to the Federal Circuit Court of Appeals, during which time those portions of the PTAB decision that are under appeal will have no effect. Federal Circuit Appeals usually take about one year to resolve. The soonest we expect definitive resolution of the PGR is the fourth quarter of 2021. Sun Pharmaceuticals is also seeking to market generic corallum. Our lawsuit against Sun has stayed final FDA approval of Sun's proposed product until the earlier of December 8, 2021, that is, next year, and a decision by the district court that the patents we have asserted against Sun are invalid, unenforceable, or not infringed. Despite overlaps in subject matter and legal issues, our dispute with Sun is separate from our litigation against Teva and is following its own timeline. A Markman hearing in the Sun case is set for November of this year. No trial date has been set. The impact of the COVID-19 pandemic on the timing of these disputes is impossible to know with certainty. We do not expect delays in the PGR because the Patent Office conducts much of its work, including PTAB hearings, remotely as a matter of course. Predicting the ultimate timing of our district court litigation is more difficult. The judge hearing our Teva and Sun lawsuits has not delayed our February trial date with Teva or our November Markman hearing in the Sun case. That being said, I would not be surprised if our district court timelines are extended. Of course, we will be ready whether there are delays or not. We're confident in our intellectual property and look forward to putting our case before the judge. I will now turn the call over to Dr. Joseph Belanoff, our Chief Executive Officer. Joe? Thank you, Charlie.

I want to start by commending our clinical specialists, patient advocates, and medical science liaisons who have worked hard and successfully to assure patients continued access to Quorum during the COVID-19 pandemic. Over the past quarter, we have seen physicians adapt their practices so they can safely care for their patients. Managing the complex, multi-step process of diagnosing and treating patients with Cushing syndrome is hard even under normal conditions. Adding the stress and uncertainty of Zoom office visits, patients who are reluctant to leave the safety of their homes and limited access to laboratory and scanning centers increases the challenge. In-person meetings of our clinical specialists and medical science liaisons with physicians and their staff are quite limited at this point. Our commercial team has done an excellent job devising ways to support physicians by video and teleconference, but these methods are just developing. We are focused intently on helping physicians provide optimal care because COVID-19 is especially dangerous for patients with Cushing syndrome. The coronavirus enters cells by binding to the ACE2 receptor. Cortisol causes the ACE2 receptor to proliferate, putting patients with Cushing syndrome at heightened risk. In addition, excess cortisol activity suppresses the immune system. As a result, patients with Cushing syndrome are four to five times more likely to suffer from severe infections of any type. Hypercortisolism also increases the risk of blood clots and thromboembolism. a leading cause of death in patients with COVID-19. I want to underscore our full confidence in the commercial potential of Coralim and its planned successor, Relacoralint. There remain many patients who could benefit from treatment with the cortisol modulator who have not yet received it. The challenges temporarily posed by the pandemic are likely to vary in their impact and are subject to rapid change. We believe Any further changes will be manageable and have reaffirmed our standing revenue guidance of $355 to $375 million. We are now testing our proprietary selective modulator, Relacoralint, our planned successor to Coralim for patients with Cushing syndrome in two Phase III trials. Like Coralim, Relacoralint achieves its effect against Cushing syndrome by competing with cortisol to bind to the glucocorticoid receptor, GR for short. Unlike Coralim, Relacoralin does not bind to the progesterone receptor, PR for short, which means it does not cause the off-target effects including termination of pregnancy, endometrial thickening, and vaginal bleeding caused by Coralim's affinity for PR. By a different mechanism, Relacoralin also does not appear to cause hypokalemia, low potassium, a serious side effect experienced by 44% of patients in Coralim's pivotal trial that is a leading cause of Coralim discontinuation today. Relacoralin's clinical data have been positive. Patients in its Phase II trial experienced meaningful improvements in hypertension and glucose control, as well as in a variety of secondary endpoints. There were no Relacoralin-induced instances of endometrial thickening, vaginal bleeding, or hypokalemia. A poster presentation of Relacoralin's Phase II results can be found at the Investors Post Events tab of our website. Brella Corlin's Phase III GRACE trial, G-R-A-C-E trial, which we believe will serve as the basis for our NDA submission, continues to enroll patients and open additional clinical trial sites. Recruitment is now underway at 60 sites in the United States, Canada, Europe, and Israel. Planned enrollment is 130 patients. We expect to submit our NDA in the second quarter of 2022. We dosed the first patient in relacoralin's other phase three trial as a treatment for patients with Cushing syndrome, Gradient, last week. Gradient will study relacoralin's effects in patients whose Cushing syndrome is caused by an adrenal adenoma or adrenal hyperplasia. Although patients with this etiology of Cushing syndrome usually have a less rapid decline in their condition, they ultimately have poor health outcomes. Gradient is the first controlled study in patients with this etiology of Cushing syndrome. Study participants will receive either relacoralin or placebo for 22 weeks. The trial's primary endpoints will be statistically significant improvements in either hypertension or glucose metabolism. Planned enrollment is 130 patients at sites in the United States and Europe. Many of the investigators who are participating in GRACE will also participate in Gradient. You can find the poster presentation of Gradient's design at the Research and Pipeline Publications tab of our website. I will now turn to our Oncology program, which has its origin in theories postulated by our academic collaborators at the University of Chicago more than 12 years ago. Our program now consists of multiple clinical trials, one of which, our controlled Phase II trial in patients with recurrent platinum-resistant ovarian cancer, just completed enrollment. We are investigating three mechanisms by which cortisol modulation may be helpful in the treatment of cancer. Cortisol activity blunts the effects of chemotherapy by suppressing the genes that trigger apoptosis, the program cell death chemotherapy is meant to cause. By reversing cortisol's anti-apoptotic effect, cortisol modulation may also allow chemotherapy to achieve its full cancer killing potential. We have tested this hypothesis in an open-label Phase 1-2 trial in which patients with advanced solid tumors received relacoralin combined with nabpaclitaxel, that's Celgene's drug, Abraxine. Our results were striking. Tumors in 7 of 25 patients with metastatic pancreatic cancer and in 5 of 11 patients with platinum-resistant ovarian cancer either shrank or ceased growing for 16 weeks or longer. Two patients with metastatic pancreatic cancer exhibited tumor shrinkage for more than 50 weeks. One patient's ovarian tumor exhibited shrinkage for 65 weeks. The tumors in all of these patients had progressed despite multiple lines of prior therapy, including therapy with taxanes. You can find our poster presentation of these results at the investors slash past events tab of our website. We're excited to report that in July, we closed enrollment in our 178 patient controlled Phase 2 study of relacoralin plus napaclitaxel in patients with recurrent platinum-resistant ovarian cancer, a disease with a very poor prognosis. All of the patients in the trial received napaclitaxel. One-third of them also received relacoralin every day. Another third of them received relacoralin the day before, the day of, and the day after each infusion with napaclitaxel. The trial's primary endpoint is progression-free survival, with secondary endpoints including objective response rate, duration of benefit, and overall survival. We expect results in the first half of next year. We're equally excited to report that in June, we began dosing patients in a Phase III trial of Vrelacoralin plus nabpaclitaxel in patients with metastatic pancreatic cancer, a disease for which there are no good treatment options. The trial is called RELIANT. Reliant is an open-label trial in which 80 patients will receive Relic Oralant plus Napak Ataxel with the primary endpoint being objective response rate assessed by resist criteria with secondary endpoints including progression-free survival and overall survival. Reliant will be conducted at 30 sites in the United States. We will perform an interim analysis of data from the first 40 patients and expect to have results of that analysis in the first half of next year. It is important to note that the expected response rate of patients with such advanced disease to navpaclitaxel monotherapy is zero. For this reason, we believe sufficiently positive results in Reliant would support accelerated approval. Cortisol activity suppresses the immune system, an effect that is often beneficial as it controls the inflammatory response and helps protect against autoimmune diseases. Unfortunately, cortisol-induced immune suppression limits the body's ability to kill tumor cells and blunts the efficacy of medications such as checkpoint inhibitors, which enlist the immune system to fight cancer. Modulating cortisol activity bolsters the immune system and may help checkpoint inhibitors and other immunotherapies achieve their full potential. This quarter, we are starting an open-label Phase 1b trial of reliquarylin plus the PD-1 checkpoint inhibitor, pembrolizumab, Merck's drug, Keytruda, in 20 patients with advanced adrenocortical cancer. Because adrenocortical tumors produce cortisol, these patients also suffer from Cushing syndrome. Our trial will examine whether relaclorin can, by reducing the effects of excess cortisol activity, treat these patients' Cushing syndrome, and by reversing cortisol-induced immune suppression, help pembrolizumab achieve its maximum effect. We presented posters at this year's virtual ASCO and AACR with preclinical and clinical biomarker data supporting this hypothesis. They are available at the Research and Pipeline Publications tab of our website. I will conclude with an update on our program in metabolic diseases. As many of you know, we are developing a proprietary cortisol modulator, Miracorlent, as a treatment for antipsychotic-induced weight gain and non-alcoholic steatohepatitis, or NASH. Like relacoralant and hexacoralant, miracoralant is a selective cortisol modulator binding potently to GR but not PR. Miracoralant was safe and well-tolerated in its Phase I trial. Millions of patients rely on antipsychotic medications to treat schizophrenia, bipolar disorder, major depression, and other serious illnesses. Unfortunately, patients often pay a terrible price in the form of extreme weight gain, impaired glucose and lipid metabolism, and other manifestations of metabolic syndrome. These adverse effects reduce patient adherence and pose major health risks of their own. For example, death by heart attack or stroke is common in patients taking antipsychotic medication. Cardiovascular disease is the leading cause of death in patients with schizophrenia. Cortisol modulators are potent in animal models of antipsychotic-induced weight gain. More importantly, we have conducted three double-blind, placebo-controlled clinical trials in which a cortisol modulator meaningfully reduced weight gain and other metabolic adverse events caused by antipsychotic medications. In two of these trials, healthy subjects received daily doses of either olanzapine or risperidone, along with either mifepristone, the active ingredient in coralline, or placebo. Subject to receive coralline experienced significantly less weight gain and other metabolic adverse events than those who received placebo. These results were published in the journal's Advances in Therapy and Obesity in 2009 and 2010. Unfortunately, we could not advance mifepristone because its qualities as an abortive fashion disqualify it as a treatment for common disorders. Miracoralline can be advanced, however, because it is a selective cortisol modulator with no affinity for the PR. It is not the abortion pill and, if approved, could be widely distributed. Last quarter, we completed a double-blind, placebo-controlled Phase 1b trial in which healthy subjects receive olanzapine and either 600 milligrams of miracloralin, 900 milligrams of miracloralin, or placebo for 14 days. Study participants who received miracloralin gained significantly less weight than those who received placebo. In addition, they exhibited a significantly smaller increase in triglycerides and in the liver enzymes AST and ALT, markers of liver damage that rise at the onset of olanzapine therapy. The full results of this study will be published later this year. Our double-blind, placebo-controlled Phase II trial of miracluralin to reverse recent antipsychotic-induced weight gain, known as gratitude, is in progress. 100 patients with schizophrenia will receive, in addition to their established dose of antipsychotic medication, either 600 milligrams of miracoralant or placebo for 12 weeks. Gratitude will be conducted at approximately 20 centers across the United States. I'm pleased to announce that we have completed, one quarter ahead of schedule, development of a miracoralant formulation available for use in Phase III trials and beyond. As a result, we have moved up the start of two additional mirror-chlorolent trials. This quarter, we plan to start a placebo-controlled, double-blind, Phase II trial in patients with long-standing antipsychotic-induced weight gain called Gratitude II. By year-end, we also plan to start a double-blind, placebo-controlled, Phase II trial of mirror-chlorolent in patients with NASH, a serious liver disease that affects millions of patients. In animal models, mirror-chlorolent Prevents and reverses both fatty liver and liver fibrosis, two precursors of NASH. Corsept had a strong second quarter. We have reaffirmed our revenue guidance. Our cash and investments grew by $60 million to $410 million. Our strong financial position allows us to advance our growing portfolio of drug candidates, even in times of great uncertainty. Recently, our development programs achieved significant milestones. More are on the horizon. Although the COVID-19 pandemic continues to slow enrollment and make site activation more difficult, recruitment continues at 60 sites in Rela-Corlin's pivotal GRACE trial, with an expected NDA submission in the second quarter of 2022. In addition, enrollment is now underway in Gradient, a double-blind Phase III trial of Rela-Corlin in patients with Cushing syndrome from an adrenal origin, an understudied etiology of the disease. Our clinical trials in oncology have been less affected by the pandemic, most likely because our study participants are so gravely ill. They must seek treatment, no matter the conditions. We have completed enrollment in our controlled phase two trial of reliquarylin plus napaclitaxel in patients with recurrent platinum-resistant ovarian cancer. We will have results in the first half of next year. Our Phase III Reliant trial of relicoralin plus nabpaclitaxel in patients with metastatic pancreatic cancer is underway. We expect to perform an interim analysis of data from Reliant's first 40 patients in the first half of next year. We believe sufficiently positive results from Reliant will qualify relicoralin for accelerated approval in this indication. This quarter, we plan to start an open-label Phase Ib trial of relicoralin combined with a PD-1 checkpoint inhibitor Pembrolizumab to treat patients with advanced adrenal cancer. Finally, by the end of this year, we expect to select a dose for advancement in a controlled phase two trial of Exacoralant in combination with Enzalutamide to treat patients with castration-resistant prostate cancer. Our program in metabolic diseases has also made significant gains. Enrollment and site activation have resumed in our double blind placebo-controlled phase two trial of Miracoralant to reduce Recent antipsychotic-induced weight gain, although the COVID-19 pandemic continues to slow the pace of both activities. Completion of formulation work in Miracle-Orient has allowed us to advance the start dates of our other planned trials. Gratitude II, a double-blind, placebo-controlled Phase II trial of Miracle-Orient patients with long-standing antipsychotic-induced weight gain, is planned to start in the third quarter. We plan to start a double-blind, placebo-controlled Phase 2 trial of Miracoron and patients with NASH by year-end.