Form 10-Q
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`Page 1 of 76
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`10-Q 1 d357533d10q.htm FORM 10-Q
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`Table of Contents
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`FORM 10-Q
`
`(cid:95) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`For the quarterly period ended June 30, 2012
`
`or
`(cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`For the transition period from to
`
`Commission File Number:
`000-50679
`
`CORCEPT THERAPEUTICS
`INCORPORATED
`
`(Exact Name of Corporation as Specified in Its Charter)
`
`Delaware
`(State or other jurisdiction of
`incorporation or organization)
`
`77-0487658
`(I.R.S. Employer Identification No.)
`
`149 Commonwealth Drive
`Menlo Park, CA 94025
`(Address of principal executive offices, including zip code)
`
`(650) 327-3270
`(Registrant’s telephone number, including area code)
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
`the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
`required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:95) No (cid:133)
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
`any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
`this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
`such files). Yes (cid:95) No (cid:133)
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`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
`or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting
`company” in Rule 12b-2 of the Exchange Act. (Check one.)
`
`Large Accelerated Filer (cid:133)
`Non-accelerated filer (cid:133) (Do not check if a smaller reporting company)
`
`Accelerated Filer
`(cid:95)
`Smaller Reporting Company (cid:133)
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
`Act). Yes (cid:133) No (cid:95)
`
`On August 2, 2012 there were 99,681,768 shares of common stock outstanding at a par value of $0.001 per share.
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`Form 10-Q
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`Table of Contents
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`Page 3 of 76
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`TABLE OF CONTENTS
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`PART I. FINANCIAL INFORMATION
`ITEM 1. FINANCIAL STATEMENTS
`CONDENSED BALANCE SHEETS
`CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
`CONDENSED STATEMENTS OF CASH FLOWS
`NOTES TO CONDENSED FINANCIAL STATEMENTS
`ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
`RESULTS OF OPERATIONS
`ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
`ITEM 4. CONTROLS AND PROCEDURES
`
`PART II. OTHER INFORMATION
`ITEM 1. LEGAL PROCEEDINGS
`ITEM 1A. RISK FACTORS
`ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
`ITEM 3. DEFAULTS UPON SENIOR SECURITIES
`ITEM 4. MINE SAFETY DISCLOSURES
`ITEM 5. OTHER INFORMATION
`ITEM 6. EXHIBITS
`SIGNATURES
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`2
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`4
`4
`4
`5
`6
`7
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`15
`22
`23
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`24
`24
`24
`44
`44
`44
`44
`45
`46
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`CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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`•
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`•
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`•
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`•
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`•
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`This Quarterly Report on Form 10-Q (Form 10-Q) contains forward-looking statements within the meaning of
`Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
`amended, or the Securities Act. All statements contained in this Form 10-Q other than statements of historical fact are
`forward-looking statements. When used in this report or elsewhere by management from time to time, the words
`“believe,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “may,” “will,” “should,” “seeks” and similar
`expressions are forward-looking statements. Such forward-looking statements are based on current expectations, but the
`absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements
`made in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about:
`our ability to manufacture, market, commercialize and achieve market acceptance for Korlym™ (mifepristone)
`•
`300mg Tablets;
`our ability to realize the benefits of Orphan Drug Designation of Korlym in the United States and the European
`Union (EU);
`the progress and timing of our research, development and clinical programs and the timing of regulatory
`activities, including post-approval actions by the United States Food and Drug Administration (FDA) for
`mifepristone for the treatment of the psychotic features of psychotic depression;
`our estimates of the dates by which we expect to report results of our clinical trials and the anticipated results of
`these trials;
`the timing of the market introduction of future product candidates, including any other compound in our families
`of selective GR-II antagonists;
`our ability to manufacture, market, commercialize and achieve market acceptance for our future product
`candidates, including mifepristone for the treatment of the psychotic features of psychotic depression and any
`other compound in our families of selective GR-II antagonists;
`uncertainties associated with obtaining and enforcing patents;
`our estimates for future performance, including revenue and profits; and
`our estimates regarding our capital requirements and our needs for, and ability to obtain, additional financing.
`
`•
`•
`•
`
`Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual
`events or results may differ materially from those discussed in the forward-looking statements as a result of various
`factors. For a more detailed discussion of such forward-looking statements and the potential risks and uncertainties that
`may impact upon their accuracy, see Part II, Item 1A, “Risk Factors” and the “Overview” and “Liquidity and Capital
`Resources” sections of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of
`Operations” included in this Quarterly Report on Form 10-Q. These forward-looking statements reflect our view only as
`of the date of this report. Except as required by law, we undertake no obligations to update any forward-looking
`statements. Accordingly, you should also carefully consider the factors set forth in other reports or documents that we file
`from time to time with the Securities and Exchange Commission (SEC).
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`Form 10-Q
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`Table of Contents
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`ITEM 1. FINANCIAL STATEMENTS
`
`PART I. FINANCIAL INFORMATION
`
`CORCEPT THERAPEUTICS INCORPORATED
`CONDENSED BALANCE SHEETS
`(In thousands)
`
`Assets
`Current assets:
`Cash and cash equivalents
`Trade receivables
`Inventory
`Prepaid expenses and other current assets
`Total current assets
`Property and equipment, net of accumulated depreciation
`Other assets
`Total assets
`
`Liabilities and stockholders’ equity
`Current liabilities:
`Accounts payable
`Accrued clinical expenses
`Accrued compensation
`Other accrued liabilities
`Deferred revenue
`Total current liabilities
`Commitments (Note 4)
`Stockholders’ equity:
`Preferred stock
`Common stock
`Additional paid-in capital
`Accumulated deficit and comprehensive loss
`Total stockholders’ equity
`Total liabilities and stockholders’ equity
`
`Page 5 of 76
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`June 30,
`2012
`(Unaudited)
`
`December 31,
`2011
`(See Note 1)
`
`$ 34,899
`355
`2,437
`608
`38,299
`59
`260
`$ 38,618
`
`$
`
`4,235
`640
`294
`621
`26
`5,816
`
`$
`
`$
`
`$
`
`39,635
`—
`—
`140
`39,775
`26
`32
`39,833
`
`3,611
`644
`238
`533
`—
`5,026
`
`—
`89
`259,901
`(227,188)
`32,802
`$ 38,618
`
`—
`84
`243,281
`(208,558)
`34,807
`39,833
`
`$
`
`The accompanying notes are an integral part of these condensed financial statements.
`
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`CORCEPT THERAPEUTICS INCORPORATED
`CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
`(Unaudited)
`(In thousands, except per share data)
`
`Product sales, net
`Operating expenses:
`Cost of sales
`Research and development
`Selling, general and administrative
`Total operating expenses
`Loss from operations
`Interest and other income, net
`Other expense
`Net loss and comprehensive loss
`
`Basic and diluted net loss per share
`Weighted average shares outstanding used in computing basic and diluted
`net loss per share
`
`Three Months Ended
`June 30,
`
`2012
`875
`
`$
`
`2011
`$ —
`
`Six Months Ended
`June 30
`
`2012
`875
`
`$
`
`2011
`$ —
`
`—
`48
`—
`48
`11,127
`6,210
`6,203
`2,668
`4,840
`13,238
`2,666
`5,751
`15,967
`19,496
`8,869
`8,467
`(15,967)
`(18,621)
`(8,869)
`(7,592)
`1
`—
`(1)
`—
`(17)
`(9)
`(12)
`(5)
`$ (7,597) $ (8,882) $(18,630) $(15,983)
`
`$ (0.09) $ (0.11) $ (0.22) $ (0.19)
`
`88,621
`
`84,010
`
`86,521
`
`82,396
`
`The accompanying notes are an integral part of these condensed financial statements.
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`CORCEPT THERAPEUTICS INCORPORATED
`CONDENSED STATEMENTS OF CASH FLOWS
`(Unaudited)
`(In thousands)
`
`Operating activities
`Net loss
`Adjustments to reconcile net loss to net cash used in operations:
`Depreciation and amortization of property and equipment
`Expense related to stock options
`Changes in operating assets and liabilities:
`Trade receivables
`Inventory
`Prepaid expenses and other current assets
`Other assets
`Accounts payable
`Accrued clinical expenses
`Deferred revenue
`Other liabilities
`Net cash used in operating activities
`Investing activities
`Purchases of property and equipment
`Net cash used in investing activities
`Financing activities
`Proceeds from issuance of common stock and warrants, including collection of notes receivable,
`net of issuance costs
`Net cash provided by financing activities
`Net increase in cash and cash equivalents
`Cash and cash equivalents, at beginning of period
`Cash and cash equivalents, at end of period
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`Page 7 of 76
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`Six Months Ended
`June 30,
`
`2012
`
`2011
`
`$(18,630) $(15,983)
`
`8
`3,271
`
`1
`1,449
`
`(355)
`(2,437)
`(468)
`(228)
`624
`(4)
`26
`144
`(18,049)
`
`—
`—
`(37)
`72
`1,474
`(16)
`—
`(1,462)
`(14,502)
`
`(41)
`(41)
`
`—
`—
`
`13,354
`13,354
`(4,736)
`39,635
`$ 34,899
`
`42,154
`42,154
`27,652
`24,578
`$ 52,230
`
`The accompanying notes are an integral part of these condensed financial statements.
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`CORCEPT THERAPEUTICS INCORPORATED
`NOTES TO CONDENSED FINANCIAL STATEMENTS
`
`1. Summary of Significant Accounting Policies
`Description of Business and Basis of Presentation
`Corcept Therapeutics Incorporated was incorporated in the state of Delaware on May 13, 1998, and our facilities are
`located in Menlo Park, California. Corcept is a pharmaceutical company engaged in the discovery, development and
`commercialization of drugs for the treatment of severe metabolic and psychiatric disorders. Since our inception in May
`1998, we have been developing our lead product, Korlym™. Mifepristone, the active ingredient in Korlym, is a potent
`glucocorticoid receptor II (GR-II) antagonist, which means that it blocks the effects of cortisol throughout the body. On
`February 17, 2012, the United States Food and Drug Administration (FDA) approved Korlym (mifepristone) 300 mg
`Tablets in the United States as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism
`in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have
`failed surgery or are not candidates for surgery. We released Korlym for sale on April 10, 2012. We also have a clinical
`program for the use of mifepristone, the active ingredient in Korlym, for the treatment of the psychotic features of
`psychotic depression. We are currently conducting a phase 3 study for this indication. In addition, we have discovered
`three series of novel selective glucocorticoid receptor II (GR-II) antagonists. Unless otherwise stated, all references in
`these financial statements to “we,” “us,” “our,” “Corcept,” the “Company,” “our company” and similar designations refer
`to Corcept Therapeutics Incorporated.
`
`We were considered to be in the development stage prior to the second quarter of 2012 when we recorded significant
`revenue from our planned principal operations following commercialization of Korlym.
`
`The accompanying unaudited balance sheet as of June 30, 2012, statements of comprehensive loss for the three- and
`six-month periods ended June 30, 2012 and 2011, and statements of cash flows for the six-month periods ended June 30,
`2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles for interim financial
`information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
`of the information and footnotes required by U.S. generally accepted accounting principles for complete financial
`statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered
`necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30,
`2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or any other
`period. These financial statements and notes should be read in conjunction with the financial statements for the year ended
`December 31, 2011 included in our Annual Report on Form 10-K. The accompanying balance sheet as of
`December 31, 2011 has been derived from audited financial statements at that date.
`
`Use of Estimates
`The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
`management to use assumptions and make estimates to form judgments about the carrying value of assets and liabilities
`reported in the financial statements and accompanying notes, the value of which we cannot readily determine from other
`sources. Actual results could differ materially from those estimates.
`
`We evaluate our estimates and assumptions on an ongoing basis, including those related to our discounts for prompt
`payment of sales invoices, chargebacks and rebates, patient assistance, potential product returns, excess/obsolete
`inventories, allowances for doubtful accounts, accruals of clinical and preclinical expenses and contingent liabilities. We
`base our estimates on relevant experience and on other specific assumptions that we believe are reasonable.
`
`We update these assumptions and estimates as new information becomes available. Any changes in estimates are
`recorded in the period of the change.
`
`Cash and Cash Equivalents
`We invest our excess cash in bank deposits, money market accounts, corporate debt securities, and obligations of the
`U.S. government and U.S. government sponsored entities. We consider all highly liquid investments purchased with
`maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents are carried at fair
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`value, which approximates cost and, as of June 30, 2012 and December 31, 2011, all of our funds were invested in cash
`and cash equivalents that consist of a money market fund maintained at a major U.S. financial institution.
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`CORCEPT THERAPEUTICS INCORPORATED
`NOTES TO CONDENSED FINANCIAL STATEMENTS, continued
`
`Credit Risks and Concentrations
`We have a concentration of credit risk related to our cash and cash equivalents. We are exposed to credit risk in the
`event of default by the financial institutions holding these funds to the extent of the amount recorded on our balance sheet.
`We mitigate this risk by investing in a money market fund that invests primarily in short-term U.S. Treasury notes and
`bills. For the six-month periods ended June 30, 2012 and 2011, we experienced no loss or lack of access to cash and cash
`equivalents in our operating or investment accounts.
`
`Beginning with the commercialization of Korlym in April 2012, we are also exposed to credit risk in regard to our
`trade receivables. We have only two customers — one specialty pharmacy and one specialty distributor, which are
`subsidiaries of the same corporate parent. We extend credit to these customers based on their individual creditworthiness
`and that of their shared parent organization. We monitor our exposure and will record a reserve against uncollectible trade
`receivables as necessary.
`
`We also have a concentration of risk in regard to the manufacture of our product. As of June 30, 2012, we had one
`manufacturer of Korlym tablets, which has indicated that it will temporarily suspend commercial production in the fourth
`quarter of 2012 while it relocates to a new facility. We have a contract with a potential second Korlym tablet
`manufacturer, to which we have transferred the production process and which has produced regulatory stability batches
`and established the required analytical testing methods. In June 2012, we submitted a New Drug Application (NDA)
`supplement to the FDA requesting approval of this manufacturer as a source of Korlym tablets. The Prescription Drug
`User Fee Act due date for the FDA’s response is October 27, 2012. If we are not able to qualify the new manufacturer and
`our pre-existing supplier is unable to make Korlym tablets in the quantities that we require, we may not have adequate
`inventory of Korlym tablets to meet demand.
`
`Fair Value Measurements
`Financial instruments are categorized in a fair value hierarchy that prioritizes the information used to develop
`assumptions for measuring fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets
`for identical assets or liabilities (Level 1 input), then to quoted prices (in non-active markets or in active markets for
`similar assets or liabilities), inputs other than quoted prices that are observable for the asset or liability, and inputs that are
`not directly observable, but that are corroborated by observable market data for the asset or liability (Level 2 input), then
`the lowest priority to unobservable inputs, for example, our own data about the assumptions that market participants
`would use in pricing an asset or liability (Level 3 input). Fair value is a market-based measurement, not an entity-specific
`measurement, and a fair value measurement should therefore be based on the assumptions that market participants would
`use in pricing the asset or liability.
`
`No assets or liabilities in our financial statements are required to be measured at fair value other than our investment
`portfolio.
`
`Trade Receivables
`Trade receivables are recorded net of customer allowances for prompt payment and data services, doubtful accounts
`and sales returns. See the discussion below under “Net Product Sales” regarding the methods for estimation of these
`allowances and sales returns. Our estimate of the allowance for doubtful accounts is determined based on existing
`contractual payment terms, actual payment patterns of our customers and individual customer circumstances. To date, we
`have determined that an allowance for uncollectible trade receivables is not required.
`
`Inventory
`We consider regulatory approval of product candidates to be uncertain, and product manufactured prior to regulatory
`approval may not be sold unless regulatory approval is obtained. We expense the manufacturing costs for product
`candidates incurred prior to regulatory approval as research and development expense as we incur them. When regulatory
`approval of a product is obtained, we begin capitalizing manufacturing costs related to the approved product into
`inventory.
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`CORCEPT THERAPEUTICS INCORPORATED
`NOTES TO CONDENSED FINANCIAL STATEMENTS, continued
`
`We value our inventories at the lower of cost or net realizable value. We determine the cost of inventory using the
`specific identification method on a first-in, first-out basis. We analyze our inventory levels quarterly and write down
`inventory that has become obsolete or has a cost basis in excess of its expected net realizable value, as well as any
`inventory quantities in excess of expected requirements. Any expired inventory is disposed of and the related costs are
`recognized as cost of sales in the statement of comprehensive loss.
`
`Net Product Sales
`We sell Korlym to a specialty pharmacy and a specialty distributor, which subsequently resell Korlym to patients and
`healthcare providers. We recognize product revenues from sales of Korlym upon delivery to our customers as long as
`(i) there is persuasive evidence that an arrangement exists between ourselves and the customer, (ii) collectability is
`reasonably assured and (iii) the price is fixed or determinable. In order to conclude that the price is fixed or determinable,
`we must be able to (i) calculate gross product revenues from the sales to our customers and (ii) reasonably estimate net
`product revenues.
`
`We calculate gross product revenues based on the price that we charge our customers. We estimate our net product
`revenues by deducting from our gross product revenues (a) trade allowances, such as discounts for prompt payment and
`distributor fees, (b) estimated government rebates and chargebacks, (c) reserves for expected product returns and
`(d) estimated costs of patient assistance programs. We initially record estimates for these deductions at the time we
`recognize the gross revenue. We update our estimates on a recurring basis as new information becomes available.
`
`Trade Allowances: We offer our customers a discount on Korlym sales for payment within 30 days. We also offer
`them a small discount for the provision of data services. We expect our customers to earn these discounts and accordingly
`deduct them in full from gross product revenues and trade receivables at the time we recognize such revenues.
`
`Rebates and Chargebacks: We contract with Medicaid and other government agencies so that Korlym will be eligible
`for purchase by, or qualify for partial or full reimbursement from, such government programs. We estimate the rebates and
`chargebacks that we are obligated to provide to government programs and deduct these estimated amounts from our gross
`product sales at the time the revenues are recognized. We base our estimates of these rebates and chargebacks upon (i) the
`discount rates applicable to government-funded programs and (ii) information obtained from our vendors regarding the
`percentage of sales by our customers to patients who are covered by entities or programs that are eligible for such rebates
`and chargebacks.
`
`Allowances for Patient Assistance Program: We provide financial assistance to eligible patients whose insurance
`policies require them to pay high deductibles and co-pays. We estimate the cost of assistance to be provided under this
`program by applying our actual experience regarding such assistance to our estimate of the percentage of our sales in the
`period that will be provided to patients covered by the program.
`
`Sales Returns: Our customers have the right to return Korlym beginning six months before the labeled expiration date
`and ending 12 months after the labeled expiration date. This right of return is extended to our specialty distributor
`channel’s hospital customers who, generally, have the right to return only unopened bottles. The expiration date for our
`current Korlym inventory is two years after the manufacture of the tablets. We estimate the amount of Korlym that we
`believe will be returned and deduct that estimated amount from gross revenue at the time we recognize such revenue.
`When estimating future returns, we analyze quantitative and qualitative information including, but not limited to, actual
`return rates, the amount of product in the distribution channel, the expected shelf life of such product, current and
`projected product demand, the introduction of competing products that may erode demand, and broad economic and
`industry-wide indicators. If we cannot reasonably estimate product returns with respect to a particular sale, we defer
`recognition of revenue from that sale until we can make a reasonable estimate.
`
`Cost of Sales
`Cost of sales includes the cost of product (the cost to manufacture Korlym, which includes material, third-party
`manufacturing costs and indirect personnel and other overhead costs) based on units for which revenue is recognized in
`the current period, as well as costs of stability testing, logistics and distribution of the product. We began capitalizing
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`Korlym production costs as inventory following approval by the FDA on February 17, 2012. Prior to receiving the FDA
`approval for Korlym, we expensed all costs related to the manufacturing of the product (including stability costs and
`manufacturing overhead) as incurred; we classified these costs as research and development expense. A portion of the
`product manufactured prior to FDA approval is available for us to use commercially.
`
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`Form 10-Q
`
`Table of Contents
`
`Page 14 of 76
`
`CORCEPT THERAPEUTICS INCORPORATED
`NOTES TO CONDENSED FINANCIAL STATEMENTS, continued
`
`Research and Development
`Research and development expenses consist of costs incurred for research and development activities that we
`sponsor, which costs are expensed as incurred. These costs include direct expenses, such as the cost of clinical trials, pre-
`clinical studies, manufacturing development, preparations for submissions to the FDA and efforts to prosecute and defend
`those submissions and the development of second-generation compounds, as well as research and development-related
`overhead expenses. We also expense as incurred nonrefundable payments to third parties and our cost of acquiring
`technologies and materials used in research and development that have no alternative future use.
`
`We base our cost accruals for clinical trials, research and preclinical activities on estimates of work completed under
`service agreements, milestones achieved, patient enrollment and past experience with similar contracts. Our estimates of
`work completed and associated cost accruals include our assessments of information from third-party contract research
`organizations and the overall status of clinical trial and other development and administrative activities.
`
`Segment Reporting
`We determine our operating segments based on the way we organize our business to make operating decisions and
`assess performance. We have only one operating segment, which concerns the discovery, development and
`commercialization of pharmaceutical products.
`
`Stock-Based Compensation
`Stock-based compensation for employee and director options
`We account for stock-based compensation of option grants to employees and directors under the fair value method,
`based on the fair value-based measurement of the award at the grant date. For service-based awards, we recognize expense
`over the requisite service period. For options with performance-based vesting criteria, we begin to recognize expense over
`the requisite service period when we believe there is a high degree of probability (i.e., greater than 70 percent) of
`achieving the vesting criteria.
`
`Stock-based compensation expense related to non-employees
`We recognize the expense of options granted to non-employees based on the fair-value based measurement of the
`option grants at the time of vesting. For service-based awards, we recognize expense over the requisite service period. For
`options with performance-based vesting criteria, we recognize expense based on the minimum number of shares that will
`vest over time as the criteria are met based on the Black-Scholes valuation of the vested shares.
`
`2. Fair Value of Financial Instruments
`As of June 30, 2012 and December 31, 2011, we had invested our financial assets in a money market fund that can be
`converted to cash at par on demand. We measured these funds, which totaled approximately $34.9 million and
`$39.6 million as of June 30, 2012 and December 31, 2011, respectively, at fair value, which approximates cost, as of the
`respective dates and classified them as Level 1 assets in the fair value hierarchy for financial assets.
`
`We realized no gains or losses on investments during the three-month periods ended June 30, 2012 and 2011. We
`determined the cost of securities sold using the specific identification method.
`
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`Form 10-Q
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`Table of Contents
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`Page 15 of 76
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`CORCEPT THERAPEUTICS INCORPORATED
`NOTES TO CONDENSED FINANCIAL STATEMENTS, continued
`
`3. Composition of Certain Balance Sheet Items
`The following tables present the composition of certain balance sheet items as of June 30, 2012 and
`December 31, 2011. All amounts are in thousands.
`
`Inventory
`
`Raw materials
`Work in progress
`Finished goods
`Total inventory
`
`June 30,
`2012
`$1,248
`1,164
`25
`$2,437
`
`As we had no product approved by the FDA as of December 31, 2011, we had no inventory value on our balance
`sheet as of that date.
`
`Other Accrued Liabilities
`
`Professional fees
`Commercialization costs
`Legal fees
`Manufacturing costs
`Other
`
`Total
`
`June 30,
`2012
`$ 351
`30
`112
`27
`101
`$ 621
`
`$
`
`December 31,
`2011
`292
`80
`46
`78
`37
`533
`
`$
`
`4. Commitments
`During the six months ended June 30, 2012, we placed purchase orders with Produits Chimiques Auxiliaires et de
`Synthese SA (PCAS) for the acquisition of mifepristone, the active pharmaceutical ingredient (API) in Korlym, for
`delivery during 2012 for aggregate commitments of approximately $2.8 million, approximately $1.2 million of which we
`received and recorded as inventory prior to June 30, 2012. See Note 8, for an additional purchase order placed with PCAS
`in July 2012.
`
`As of June 27, 2012, we signed an amendment to the lease for our office space that reflected an expansion of the
`space and extended our occupancy through December 2013. The aggregate commitment for base rent through the term of
`the amendment is approximately $630,000, approximately $202,000 of which will be incurred during the remainder of
`2012. The amended lease provides us with an option to extend the lease for one additional year.
`
`5. Capital Stock
`On March 3, 2012, two investors exercised warrants for the purchase of our common stock with exercise prices
`ranging from $2.77 to $2.96 per share. As a result, we issued 93,082 shares of common stock and generated aggregate
`proceeds of approximately $267,000.
`
`On March 29, 2012, we issued approximately 4.2 million shares of our common stock upon the exercise of warrants
`that we had issued in a private placement transaction in April 2010 at an exercise price of $2.96 per share and sold new
`warrants to the same investors to purchase approximately 4.2 million shares of common stock at an exercise price of $4.05
`per share. The new warrants are exercisable through March 29, 2015. We generated net proceeds in these transactions of
`approximately $12.9 million, after the deduction of issuance costs. Venture capital funds, trusts and other entities affiliated
`with members of our Board of Directors purchased approximately 40 percent of the securities sold in this transaction, with
`the remainder being purchased by other qualified