Corcept Therapeutics Inc. — Q2 2019 Form 10-Q
Business context and period. Corcept is a commercial-stage pharmaceutical company developing cortisol-modulating medicines. Its marketed product, Korlym (mifepristone), treats certain patients with endogenous Cushing’s syndrome. This summary covers the quarter and six months ended June 30, 2019; amounts are in U.S. dollars.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Net product revenue | $72.3 million | $62.3 million | $137.1 million | $120.0 million |
| Operating income | $24.6 million | $20.6 million | $43.6 million | $41.6 million |
| Net income | $20.2 million | $18.2 million | $38.5 million | $35.7 million |
| Diluted earnings per share | $0.17 | $0.14 | $0.31 | $0.28 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $49.2 million | $49.6 million |
- Q2 revenue increased 16.0% year over year; six-month revenue increased 14.3%, primarily on higher Korlym sales volume as more patients were served.
- Q2 operating margin was approximately 34.1% versus 33.1%; six-month operating margin was approximately 31.8% versus 34.7%. Cost of sales remained 1.9% of revenue in both comparable periods.
- Q2 R&D expense rose to $21.7 million from $20.5 million; six-month expense rose to $41.9 million from $37.6 million. Q2 SG&A increased to $24.6 million from $20.0 million; six-month SG&A increased to $49.0 million from $38.4 million. Management cited added personnel, development activity, legal and marketing costs, and distribution costs.
- At June 30, cash and cash equivalents were $58.1 million, short- and long-term marketable securities totaled $167.6 million, and total cash, cash equivalents and securities were $225.7 million. Total assets were $328.7 million and stockholders’ equity was $298.1 million.
- Total liabilities were $30.6 million, including $1.1 million of current operating lease liability. The filing reports no debt balance. Operating cash flow was $49.2 million; investing cash use was $1.5 million and financing cash use was $31.2 million for the six months.
Material changes, outlook and risks
- Cash and cash equivalents rose from $41.6 million at year-end 2018; total marketable securities rose from $165.1 million to $167.6 million. Corcept repurchased 2.8 million shares for $31.0 million in the first half; the $100 million repurchase program expired June 30, 2019, after $54.6 million of total purchases.
- Management expected 2019 R&D and SG&A expenses to exceed 2018 levels as programs and commercial activity expanded. It expected to fund its current plans from available resources and Korlym revenue without needing additional capital, though it could raise funds for other reasons. The filing provides no clear numerical revenue guidance in the supplied text.
- Development priorities include a Phase 3 relacorilant trial for Cushing’s syndrome; a Phase 2 relacorilant/Abraxane ovarian cancer trial; planned Phase 3 work in pancreatic cancer; and miricorilant and exicorilant programs. Clinical outcomes, enrollment, safety, manufacturing and regulatory requirements create material uncertainty.
- Korlym’s orphan exclusivity expired in February 2019. Generic competition is a key risk: Teva and Sun have filed ANDAs, and Corcept is litigating to enforce its patents. A PTAB review of a Korlym patent was instituted; the company cannot predict outcomes. Sun litigation was filed after quarter-end.
- Other risks include reliance on Korlym sales, reimbursement and pricing pressure, competition, dependence on single manufacturers and a specialty pharmacy, product safety and regulatory compliance, and a pending securities class action. The company reported no loss contingency accrual and no material adverse effect expected from ordinary-course legal matters.
- Operating lease accounting was adopted January 1, 2019, adding a right-of-use asset and lease liability of approximately $1.9 million; the office lease expires March 31, 2020.
Investor facts to verify
- Whether Korlym patient growth and revenue momentum continue, and how payer coverage, rebates and product pricing affect net sales.
- Developments and timing in Teva and Sun generic litigation, the patent review proceedings, and any effect on Korlym’s exclusivity or sales.
- Relacorilant and other pipeline trial enrollment, safety, efficacy and milestone timing, especially the Cushing’s syndrome and oncology programs.
- Whether expense growth and stock-based compensation remain consistent with revenue growth and management’s funding expectations.
- Potential liabilities or developments from the securities class action and other legal or regulatory matters.