Corcept Therapeutics Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Financial statements are unaudited. Corcept develops cortisol-modulating medicines and markets Korlym (mifepristone) for certain adults with endogenous Cushing syndrome.
Financial results and position
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Net product revenue | $27.6 million | $16.1 million; up 71.8% |
| Cost of sales | $0.6 million | $0.4 million; 2.3% of revenue versus 2.5% |
| Research and development | $7.2 million | $4.6 million; up 54.9% |
| Selling, general and administrative | $15.0 million | $10.4 million; up 44.1% |
| Operating income | $4.7 million | $0.6 million |
| Net income (loss) | $4.4 million | $(0.02) million |
| Basic and diluted EPS | $0.04 | $(0.00) |
| Operating cash flow | $9.6 million | $3.3 million |
Operating margin was approximately 17.2%, compared with 3.7% a year earlier. Cash, cash equivalents and marketable securities totaled $57.3 million at quarter-end, including $38.0 million in cash and cash equivalents and $19.3 million in marketable securities. The company reported current assets of $66.7 million and current liabilities of $25.8 million. Stockholders’ equity was $49.6 million; accumulated deficit was $317.9 million.
Cash and cash equivalents fell $13.6 million during the quarter, largely because Corcept invested $19.3 million in marketable securities. Financing cash outflows included $4.8 million in payments on the Biopharma obligation; stock-option exercises generated $1.1 million. The obligation has a fixed total repayment cap of $45.0 million. Corcept had paid $34.7 million by March 31 and made a further $5.7 million payment in April; management expected to repay it fully in July 2017. No long-term portion was reported on the quarter-end balance sheet.
Changes and business developments
- Revenue growth reflected higher Korlym sales volume and price increases. The filing does not provide a separate breakdown of volume and price contributions.
- R&D spending rose primarily due to advancement of CORT125134 and hiring clinical-development employees. SG&A growth primarily reflected expansion of the sales organization.
- Corcept began investing in marketable securities in January 2017; the portfolio consisted of U.S. Treasury securities, commercial paper and corporate bonds, with a seven-month weighted-average maturity.
- Q1 2017 net income included $2.7 million of stock-based compensation and $0.3 million of accretion of interest expense. The company’s non-GAAP adjusted net income was $7.4 million, excluding these non-cash items; this is a supplemental measure, not GAAP income.
Outlook, commentary and risks
- Management expected positive cash flow for 2017 and believed current plans could be funded without additional capital. Plans include commercial operations and clinical development; the company reserved the option to raise funds for strategic priorities.
- Corcept expected R&D and SG&A expenses to be higher in the remainder of 2017 than in the comparable 2016 period. The filing refers to 2017 revenue guidance but does not state its numerical value in the provided text.
- CORT125134 was being studied in enrolling trials for Cushing syndrome and in combination with nab-paclitaxel for solid tumors. Corcept expected CORT118335 and CORT125281 to enter Phase 1 trials in 2017. These candidates remain subject to clinical, regulatory and commercial uncertainty.
- Key risks include reliance on Korlym as the principal revenue source; reimbursement, adoption and pricing uncertainty; competition; dependence on single-source manufacturers and specialty-pharmacy distribution; regulatory and product-safety risks; and the uncertain timing, cost and outcomes of clinical trials.
- The Biopharma agreement is secured by specified intellectual-property and related collateral. A change of control or certain covenant defaults can accelerate payment; a change of control could also make an acquisition less attractive. Management reported no material legal proceedings and no material changes in contractual commitments during the quarter.
- Management stated that disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Confirm the numerical 2017 revenue guidance in the company’s relevant public statements; it is not specified in the provided filing text.
- Track Korlym revenue growth, pricing, reimbursement, patient access and the concentration of revenue in this product.
- Verify completion and amount of the Biopharma obligation’s final payment, expected in July 2017, and the resulting cash-flow impact.
- Monitor enrollment, safety and results for CORT125134 trials and whether the expected Phase 1 starts for CORT118335 and CORT125281 occurred.
- Assess whether rising commercial and development expenses remain supported by operating cash generation and available liquidity.