Corcept Therapeutics Incorporated (NASDAQ: CORT) today announced the completion of a private placement of 9,000,000 shares of its common stock at a price of $1.00 per share, pursuant to a definitive agreement entered into today with accredited investors. The investors are led by Paperboy Ventures LLC, who is currently a significant shareholder of Corcept. Sutter Hill Ventures, Alta Partners, LLP, venture capital firms that are currently significant shareholders in Corcept, and members of the Corcept Board of Directors, Joseph C. Cook, Jr., James A. Harper, David L. Mahoney, Alan F Schatzberg, M.D. and James N. Wilson, are also investors. In addition, investors in this financing round included Black Point Group, LLP, Vaughn Bryson and Daniel Bradbury.Already a good short-term investment, as the stock is now at $1.21 a share. If you've read my prior writings about Corcept, you can see that I'm highly skeptical about it's main product, Corlux (mifepristone/RU-486), which is aiming to treat psychotic depression. Although the company has tried to spin negative findings as actually being positive, it's hard to see how a series of studies showing poor efficacy will lead to helping patients in any meaningful fashion. Might the latest influx of cash help out the Corcept insiders who hold a major stake in the company? Sure.
Conflicts of Interest: It appears that Dr. Alan Schatzberg bought 50,000 shares in the latest round of funding. It has been reported previously that Schatzberg has written quite positive comments about Corlux in journals and some have questioned whether his financial stake in the company has skewed his judgment on the topic. I want everyone to consider the following conundrum...
Schatzberg holds about 4.83 million shares of Corcept currently. So, if Corlux bombs a clinical trial, is he going to:
A. Immediately report the negative results in a press release
B. Move publishing the negative results in a scientific journal to the top of his to-do list
C. Spin the results in a very favorable fashion (or make sure that someone who writes the press release and/or scientific paper does so)
D. Just bury it entirely (probably not an option with such a small company that likely announces most if not all of its trials beforehand)
If I was in a position where I had such a large financial stake, I'd have a hell of a time doing A. or B. When large dollar amounts are at stake, it's not easy to say, "Hey, this product doesn't seem to work" and watch your stock holdings evaporate. This is why conflicts of interest are a problem.
Some academic researchers really are just in it for the money. I think they are a very small minority. I bet that most researchers who end up with big-time conflicts of interest start off thinking, "Hey, this could be a great new form of treatment for condition X." Then, hey, why not make some money while you're doing God's work, helping to heal people. We're an entrepreneurial society, so we tend to believe that people should be rewarded for having an enterprising spirit. Now, if the product turns out to not be so effective and/or to have some unpleasant side effects, then look at the predicament... Here's the conflict -- help people with condition X or help my own cash flow?
Or say I'm a doctor who makes some good money on the side giving "educational" speeches to fellow physicians about a drug, say, Zyprexa. When I find out that said drug is linked to numerous health problems, do I bring that up in my speeches, knowing fully that such discussion is likely going to get me canned from the speaking circuit?
The list of potential examples could go on for days.