March 20, 2015 Corcept Therapeutics, Inc. NEUTRAL Current Recommendation Prior Recommendation Outperform Date of Last Change 03/20/2015 Current Price (03/19/15) $5.85 Target Price $6.25 (CORT-NASDAQ) SUMMARY Corcept posted a loss of $0.03 per share in the fourth quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of $0.06 and a loss of $0.10 in the year-ago quarter. Corcept generated revenues of $9.0 million, up 119% year over year. Corcept s Korlym is approved as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing s syndrome, who have type II diabetes mellitus or glucose intolerance. We are positive on the growth prospects of Korlym and Corcept s efforts on label expansion of the drug. However, we would like to wait and watch how the expansion efforts work out. Hence, we downgrade our recommendation to Neutral. SUMMARY DATA 52-Week High $5.85 52-Week Low $1.74 One-Year Return (%) 42.68 Beta 1.49 Average Daily Volume (sh) 303,213 Shares Outstanding (mil) 101 Market Capitalization ($mil) $591 Short Interest Ratio (days) 28.77 Institutional Ownership (%) Insider Ownership (%) Annual Cash Dividend $0.00 Dividend Yield (%) 0.00 5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2015 Estimate P/E using 2016 Estimate Zacks Rank *: Short Term 1 3 months outlook 3 Hold * Definition / Disclosure on last page Risk Level * Average Type of Stock Large-Growth Industry Med-Drugs Zacks Industry Rank * 66 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 2 A 2 A 3 A 4 A 10 A 2014 4 A 6 A 7 A 9 A 27 A 2015 48 E 2016 Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 -$0.11 A -$0.11 A -$0.10 A -$0.10 A -$0.42 A 2014 -$0.13 A -$0.06 A -$0.05 A -$0.03 A -$0.27 A 2015 -$0.14 E 2016 Note: Quarterly figures may not sum up to annual numbers due to rounding off. Projected EPS Growth - Next 5 Years % 2015 Zacks Investment Research, All Rights reserved. www.zacks.com 10 S. Riverside Plaza, Chicago IL 60606
OVERVIEW Corcept Therapeutics Incorporated is engaged in the discovery, development and commercialization of drugs for the treatment of severe metabolic, psychiatric and oncologic disorders. Corcept s lead drug, Korlym (mifepristone) 300 mg, was approved by the FDA in Feb 2012 as a oncedaily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing s syndrome, who have type II diabetes mellitus or glucose intolerance. The company s revenues in 2014 came in at $26.6 million, up from $10.4 million in 2013. REASONS TO BUY REASONS TO SELL Promising Growth prospects for Korlym: Korlym is Corcept s lead drug. Korlym enjoys orphan drug designation in the U.S. for the approved indication. The drug also enjoys the orphan status in Europe for the treatment of endogenous Cushing s syndrome. The company is striving hard to commercialize Korlym further by deploying medical science liaisons and sales representatives. Label Expansion of Korlym: Corcept is currently working on developing the drug for additional indications. It has initiated a phase I safety and efficacy study on Korlym in combination with eribulin for the treatment of triple-negative breast cancer in Jan 2014. The company plans to conduct the study in two phases. Corcept completed the first dose finding portion of the study in Jan 2015 and has initiated enrolling patients in the second efficacy phase. This phase will enroll 20 patients suffering from relapsed, metastatic, GR-positive triple-negative breast cancer. Results are expected by the end of 2015. We expect the successful label expansion of Korlym to boost the top line significantly. Other Compounds in Development: Corcept initiated a discovery research program to identify and patent selective GR-II antagonists with the intent of developing a pipeline of products for proprietary use and discovered three distinct series of GR-II antagonists. All three compounds have been issued composition of matter patents by the U.S. Patent & Trademark Office and the European Patent Office. The company identified several new compounds that demonstrated positive results in animal testing or in-vitro models for the prevention and reversal of a variety of diseases such as amyotrophic lateral sclerosis (Lou Gehrig s disease), Alzheimer s disease, anti-psychotic-induced weight gain, breast, ovarian and prostate cancer in combination with a chemotherapeutic agent among others. Corcept commenced enrolment in a phase I study on one of these new compounds, CORT125134. The primary objectives of the study are to assess the safety, tolerability and pharmacokinetics of the candidate in healthy human volunteers. Results from the study are expected in the second quarter of 2015. Corcept plans to advance this candidate in a phase II study for both an oncology indication and Cushing s syndrome in early 2016 assuming positive results from the phase II study. Meanwhile, another compound, CORT108297 has completed phase I trials and the company is contemplating its potential use in psychiatric and other central nervous system disorders. Dependence on Korlym for Growth: Corcept is solely dependent on Korlym for growth. A decline in Korlym sales will largely hinder the company s growth prospects. Moreover, Korlym faces stiff competition from Novartis drug Signifor, which was approved by the FDA in Dec 2012 for the treatment of adult patients with Cushing s disease who are not candidates for pituitary surgery or for whom surgery failed. Signifor received marketing approval in the EU in Apr 2012. Equity Research CORT Page 2
RECENT NEWS Setback for Korlym: Corcept s efforts to expand Korlym s label received a setback in May 2014, when it announced that it discontinues the study on Korlym (study 14) for the treatment of psychotic depression. This came on the heels of an interim analysis that revealed that the study failed to meet its primary endpoint, which was a rapid and sustained reduction in the patients' psychotic symptoms with statistical significance. Thereafter, the Independent Data Monitoring Committee declared the study was unlikely to generate a statistically significant result even after full enrollment. Any such setbacks will be detrimental to company s growth prospects. Corcept Reports Narrower Loss Mar 4, 2015 Corcept posted a loss of $0.03 per share in the fourth quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of $0.06 and a loss of $0.10 in the year-ago quarter. Corcept generated revenues of $9.0 million in the fourth quarter of 2014, up 119% year over year. In Apr 2012, Corcept launched Korlym in the U.S. The drug is approved in the U.S. and the EU as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adults suffering from endogenous Cushing s syndrome, who have type II diabetes or glucose intolerance. We note that Corcept enjoys orphan drug designation for Korlym from the FDA for the approved indication. Selling, general and administrative expenses were $8.0 million in the fourth quarter of 2014, up 7% from the year-ago quarter. Research and development expenses declined 42.3% in the third quarter to $3.8 million. Pipeline Update Corcept dosed the first of 20 patients for the phase I/II trial on Korlym in combination with eribulin for the treatment of glucocorticoid receptor-positive (GR-positive) triple-negative breast cancer. The trial will evaluate the efficacy of Korlym for the indication. The results of the trial are expected in 2015. VALUATION Corcept posted a loss of $0.03 per share in the fourth quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of $0.06 and a loss of $0.10 in the year-ago quarter. Corcept generated revenues of $9.0 million in the fourth quarter of 2014, up 119% year over year. Corcept s Korlym is approved as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing s syndrome who have type II diabetes mellitus or glucose intolerance. We are positive on the growth prospects of Korlym and Corcept s efforts on label expansion of the drug. However, we would like to wait and watch how the expansion efforts work out. Hence, we downgrade our recommendation to Neutral. Based on the 2015 sales estimate, the stock is trading at 12.3 compared to 22.9x for its peer group. Our $6.25 target price is based on 13.1x our 2015 sales estimate Equity Research CORT Page 3
Key Indicators P/S F1 P/S F2 Est. 5-Yr EPS Gr% P/CF P/S Corcept Therapeutics (CORT) 12.3 21.8 Peer Group Average 22.9 31.1 P/E 5-Yr High P/E 5-Yr Low Flamel Technologies SA (FLML) 3.6 22.1 Cardiome Pharma Corp. (CRME) 4.2 4.7 Merus Labs International Inc. (MSLI) 2.7 7.5 PTC Therapeutics, Inc. (PTCT) 81.1 90.2 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA Corcept Therapeutics (CORT) 95.0 95.0 2.0-426.4-7.2 0.0-14.3 Industry Average 8.2 8.2 8.2-92.9 0.0 0.0-2.7 S&P 500 6.2 9.8 3.2 25.4 2.0 Equity Research CORT Page 4
Earnings Surprise and Estimate Revision History Equity Research CORT Page 5
DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of CORT. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1141 companies covered: Outperform - 15.6%, Neutral - 78.4%, Underperform 5.7%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Lead Analyst QCA Copy Editor Reason for Update Ekta Bagri Arpita Dutt Sayantani Sinharoy 4Q14 Earnings Equity Research CORT Page 6