Corcept Therapeutics Inc. — Q3 2021 Form 10-Q
Business context and reporting period. This commercial-stage pharmaceutical company markets Korlym (mifepristone) for certain adults with endogenous Cushing’s syndrome and develops selective cortisol modulators for additional indications. This filing reports the quarter and nine months ended September 30, 2021; financial amounts below are in millions unless noted.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net product revenue | $96.1 | $86.3 | $267.2 | $268.1 |
| Income from operations | $36.2 | $24.7 | $87.8 | $97.7 |
| Net income | $30.5 | $21.6 | $80.5 | $80.0 |
| Diluted EPS | $0.24 | $0.17 | $0.63 | $0.65 |
| Operating cash flow | Not separately presented for the quarter | $118.5 | $116.9 |
Q3 revenue increased 11.4% year over year, with management attributing growth to higher patient volume and a Korlym price increase effective March 1, 2021. Nine-month revenue edged down 0.4%, reflecting lower sales volume—primarily the pandemic’s impact in Q1—partly offset by higher average price. Q3 operating and net margins were approximately 37.7% and 31.7%, respectively, versus 28.6% and 25.1%; nine-month margins were approximately 32.9% and 30.1%, versus 36.4% and 29.8%.
Operating expenses for the first nine months were $179.3 million, up from $170.4 million. R&D declined to $85.3 million from $86.5 million, mainly because of oncology trial timing and enrollment completion, partly offset by greater preclinical and personnel costs. SG&A rose to $90.1 million from $79.6 million, reflecting increased compensation and sales and marketing costs. Cost of sales was $3.9 million, or 1.5% of revenue, compared with $4.3 million, or 1.6%.
At September 30, cash, cash equivalents and marketable securities totaled $495.2 million, compared with $476.9 million at year-end 2020. Current assets were $401.9 million and current liabilities $44.8 million. The balance sheet reports no debt. Nine-month investing cash use was $4.3 million; capital expenditures were $0.4 million. Financing cash use was $95.6 million, including $88.5 million of stock repurchases and $20.3 million of cash paid for tax withholding on net-settled option exercises, partly offset by option-exercise proceeds.
Changes, outlook and material developments
- Management expected 2021 R&D expense to be approximately flat with 2020 and SG&A to be higher. It said current plans and expectations could be funded without raising additional capital, while reserving the option to raise funds for other reasons. No specific revenue guidance amount is stated in the supplied filing text.
- The $200 million repurchase program expired September 30, 2021. Across the program, the company repurchased 4.3 million shares for $98.2 million at an average $22.69 per share.
- Relacorilant was in two Phase 3 Cushing’s syndrome trials. Following positive Phase 2 ovarian-cancer results, the company planned to begin a pivotal Phase 3 trial in Q1 2022 and expected updated overall-survival data in Q1 2022.
- The company suspended its Phase 2a NASH trial in April 2021 after elevated liver enzymes occurred in four of five treated patients and resolved after treatment stopped. A Phase 1b dose-finding study was initiated to assess an alternative regimen.
- COVID-19 restrictions and patient behavior continued to impede Korlym growth and slow enrollment in some trials, including Cushing’s syndrome and antipsychotic-induced weight gain studies. Management reported less disruption in trials for immediately life-threatening cancers.
Risks, contingencies and unusual items
- Korlym revenue is central to funding operations and development. The company relies on a single supplier for Korlym’s active ingredient and a single specialty pharmacy for dispensing; supply interruption or pharmacy collection problems could harm results. It also holds strategic inventory because of this supply-chain exposure.
- Generic competition and patent outcomes are significant risks. The company settled Sun litigation, granting Sun a right to sell a generic beginning October 1, 2034, or earlier under customary settlement circumstances. Teva and Hikma litigation remained ongoing; the filing warns that Teva could begin marketing a generic notwithstanding litigation.
- A securities class action had some claims allowed to proceed to discovery; related shareholder derivative cases remained stayed. The company stated it could not predict outcomes. It had recorded no loss contingency provision as of quarter-end.
- Other key risks include clinical-trial failure or delay, adverse effects, regulatory and pricing changes, reimbursement pressure, competition, and pandemic-related disruption. The filing also describes cybersecurity, privacy, and vendor-performance risks.
- Stock-based compensation was $32.3 million for the first nine months, versus $25.3 million a year earlier. Income tax expense was $7.8 million versus $20.8 million, primarily due to increased excess tax benefits from option exercises; unrecognized tax benefits totaled $7.2 million that could affect the effective tax rate.
Investor verification priorities
- Track Korlym prescription volume, net pricing, rebate deductions and the durability of the Q3 rebound after the pandemic-related Q1 volume decline.
- Verify progress and results for the relacorilant Phase 3 Cushing’s trials, planned oncology Phase 3 study, and miricorilant dose-finding work following the NASH safety signal.
- Monitor Teva and Hikma litigation, the Sun settlement’s terms and review, and any generic launch or related effect on Korlym sales.
- Assess whether rising SG&A, stock-based compensation and share repurchases remain consistent with operating cash generation and the company’s stated funding plans.
- Review the continuing effects of COVID-19 on patient access, commercial growth, trial enrollment and third-party manufacturing and distribution.