Corcept Therapeutics Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Corcept is a commercial-stage pharmaceutical company; Korlym sales fund operations while the company develops cortisol-modulating drug candidates.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net product revenue | $103.4 million | $91.6 million | $197.1 million | $171.0 million |
| Operating income | $31.4 million | $31.9 million | $58.2 million | $51.6 million |
| Net income | $27.4 million | $26.5 million | $50.2 million | $50.0 million |
| Diluted EPS | $0.24 | $0.21 | $0.44 | $0.39 |
- Q2 revenue increased 12.9% year over year; management attributed 76% of the increase to higher sales volume and the remainder to Korlym price increases. First-half revenue rose 15.2%.
- Q2 operating income declined 1.6% despite higher sales, as operating expenses increased. First-half operating income rose 12.8%; first-half net income was nearly unchanged.
- Q2 R&D expense increased to $32.8 million from $28.2 million; SG&A rose to $37.8 million from $30.0 million. For the first half, R&D was $60.9 million and SG&A was $75.4 million. Management expects both expense categories to be higher for full-year 2022 than in 2021.
- Cost of sales was 1.3% of revenue in Q2 and the first half, versus 1.5% and 1.6%, respectively, in the prior-year periods; management cited lower manufacturing costs.
- At June 30, cash, cash equivalents and marketable securities totaled $382.0 million, versus $335.8 million at December 31, 2021. Current assets were $419.0 million and current liabilities $49.1 million. No debt is reported on the balance sheet.
- First-half operating cash flow was $53.3 million, down from $69.8 million. Investing used $92.3 million, primarily reflecting net purchases of marketable securities; financing used $3.3 million. Cash and cash equivalents decreased by $42.3 million to $35.3 million.
- Total assets were $496.4 million and stockholders’ equity was $442.3 million. The company reported $1.9 million of unrealized losses on available-for-sale investments, attributed to interest-rate fluctuations, and stated the securities were not impaired.
Material changes and operating developments
- Revenue growth reflected volume and price increases. Average share counts were lower than a year earlier, contributing to higher per-share earnings; the company reported no open-market stock repurchases in the first half of 2022, compared with $62.7 million of repurchases in the first half of 2021.
- Corcept is conducting Phase 3 Cushing’s syndrome trials of relacorilant (GRACE and GRADIENT). It began the Phase 3 ROSELLA trial of relacorilant with nab-paclitaxel for platinum-resistant ovarian cancer in June 2022. The company expected results from its miricorilant GRATITUDE trials by year-end 2022 and said it was initiating a Phase 2 dazucorilant trial in ALS.
- A prior Phase 2a miricorilant NASH trial was suspended in 2021 after elevated liver enzymes and rapid liver-fat reductions in four of five treated patients; Corcept is evaluating an alternative dosing regimen in a Phase 1b study.
- In March 2022, Corcept extended its Menlo Park office lease to June 2023, recognizing $2.8 million in additional right-of-use assets and lease liabilities.
Outlook, risks and contingencies
- Management said existing resources are expected to fund operations and planned R&D for the next 12 months and beyond, while noting that additional financing could be pursued. No numeric 2022 revenue guidance is stated in the supplied filing text.
- Corcept expects COVID-19-related effects to continue to impede commercial growth and some clinical-trial enrollment. It also identifies clinical development, safety, regulatory, reimbursement, manufacturing and supply continuity as material risks.
- Korlym is exposed to generic competition and patent litigation. The Sun settlement permits generic sales beginning October 1, 2034, or earlier under specified circumstances. Teva litigation remains ongoing; the filing says Teva has FDA approval and could choose to market its generic product while litigation continues. Hikma litigation is also pending, with the 30-month FDA approval stay expiring August 1, 2023.
- A federal securities class action has proceeded to discovery, with discovery scheduled to close in April 2023; related shareholder derivative cases are stayed. The U.S. Attorney’s Office for the District of New Jersey is investigating matters involving Korlym sales and promotion, healthcare-professional relationships and payments, and reimbursement. The company says it is cooperating and is not currently considered a defendant. No loss contingency was accrued.
- Corcept plans to transition Korlym specialty-pharmacy services from Optime to Orsini. Optime’s agreement was extended through September 30, 2022; Orsini’s agreement provides for an initial term through August 31, 2027. The company warns that the transition could disrupt dispensing, data transfer or patient services.
- Beginning in 2022, tax rules require R&D costs to be amortized for tax purposes rather than deducted immediately. Corcept says this increased cash taxes; it also contributed to lower first-half operating cash flow through higher deferred income taxes.
Important facts for investors to verify
- Korlym revenue trends, including the relative contribution of patient volume, pricing, payer mix and rebates.
- Progress and results for GRACE, GRADIENT, ROSELLA and other clinical programs, including safety findings and trial timelines.
- Developments in Teva and Hikma litigation, potential generic entry, and the terms and review status of the Sun settlement.
- Updates on the federal investigation and securities litigation, including any change to the company’s assessment of potential exposure.
- Execution of the Optime-to-Orsini transition and any effect on patient access, dispensing, collections or revenue.
- Cash generation, cash-tax effects of R&D amortization, and whether management’s stated funding outlook remains appropriate.