Corcept Therapeutics Incorporated — 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing is an annual report, not a quarterly filing; fourth-quarter figures are noted separately below. Corcept develops and commercializes cortisol-modulating medicines. Its marketed product, Korlym (mifepristone), is approved for certain adults with endogenous Cushing syndrome.
Financial performance and position
| Metric | 2016 | 2015 | Change / context |
|---|---|---|---|
| Net product sales | $81.3 million | $50.3 million | Up 61.7%, attributed primarily to higher sales volume and price increases |
| Cost of sales | $2.1 million | $1.4 million | 2.5% of net sales, versus 2.7% |
| Gross profit / margin | $79.3 million / 97.5% | $48.9 million / 97.3% | Calculated from reported sales and cost of sales |
| Research and development | $23.8 million | $15.4 million | Up 54.6%, mainly from CORT125134 development and added clinical staff |
| Selling, general and administrative | $45.2 million | $36.9 million | Up 22.4%, primarily from hiring, bonuses and sales commissions |
| Operating income (loss) | $10.2 million | ($3.4 million) | Operating margin approximately 12.5% |
| Net income (loss) | $8.1 million; $0.07 per share | ($6.4 million); ($0.06) per share | First profitable year reported in the selected-period data |
| Cash from operating activities | $18.4 million | $3.1 million | Increase primarily attributed to higher sales volume |
| Cash and cash equivalents | $51.5 million | $40.4 million | Year-end balance |
| Working capital | $38.3 million | $28.1 million | Current assets were $65.7 million; current liabilities were $27.4 million |
| Biopharma obligation | $14.7 million current; no long-term portion | $15.0 million current and $12.5 million long-term | Revenue-linked obligation; $29.9 million of the $45.0 million cap paid by year-end |
Fourth-quarter 2016 net sales were $23.8 million and net income was $4.6 million, compared with $15.0 million and $1.0 million, respectively, in fourth-quarter 2015. The filing reports no material off-balance-sheet arrangements. Corcept reported an accumulated deficit of $322.3 million despite its 2016 profit.
Material changes and business developments
- Net sales rose substantially, while operating expenses also increased; the company moved from an operating loss and net loss in 2015 to operating and net income in 2016.
- Research and development spending increased as CORT125134 advanced into patient trials. Two trials were enrolling: a Phase 2 Cushing syndrome trial and a Phase 1/2 combination trial with Abraxane for solid tumors.
- A Phase 1/2 Korlym-plus-eribulin trial in metastatic triple-negative breast cancer reported four partial responses, eight cases of stable disease and 11 cases of progressive disease among 23 patients. Median progression-free survival was 11.1 weeks; the filing compares this with 7.2 weeks in a separate historical monotherapy study.
- Corcept said it expected to begin clinical trials of CORT118335 and CORT125281 in 2017.
- Corcept paid $14.8 million under its Biopharma financing agreement in 2016. It made an additional $4.8 million payment in February 2017 and expected to complete repayment during 2017.
Outlook, risks and unusual items
- Management expected 2017 research and development and selling, general and administrative expenses to exceed 2016 levels. It stated that current plans could be funded without additional capital and anticipated positive cash flow in 2017; additional financing remained possible. The 2017 revenue guidance amount is not provided in the supplied filing text.
- The Biopharma agreement requires payments tied to covered-product sales and certain licensing receipts, up to $45.0 million. The payment rate and caps can change upon specified covenant breaches, and remaining amounts can accelerate upon a change of control or certain U.S. licensing transactions.
- Korlym is the company’s sole marketed product and a key source of revenue. Risks include physician adoption, reimbursement and pricing pressure, competition, and potential safety or regulatory issues.
- Corcept relies on single-source suppliers for Korlym’s active ingredient and tablets, and one specialty pharmacy for dispensing. A disruption could affect supply or sales.
- Clinical development carries substantial uncertainty: trials may be delayed, fail to demonstrate safety or efficacy, or require further investment. The company also highlighted intellectual-property, regulatory, healthcare-compliance, and mifepristone-related public-perception risks.
- Corcept reported no material legal proceedings. Its financial statements and internal control over financial reporting received unqualified auditor opinions; management assessed disclosure controls as effective.
Important facts for investors to verify
- Whether Korlym sales growth, pricing and patient access can be sustained, and how much of reported growth reflects volume versus price increases.
- The amount and assumptions underlying 2017 revenue guidance, which is referenced but not quantified in the supplied text.
- Progress, enrollment, safety findings and results from CORT125134 and other clinical programs, including whether planned 2017 trial starts occurred.
- Completion and final cash impact of the Biopharma obligation, including the February 2017 payment and any subsequent payments.
- Supplier and specialty-pharmacy continuity, inventory sufficiency, and exposure to reimbursement, regulatory or product-safety changes.
- Potential dilution from stock options: 17.7 million options were outstanding at December 31, 2016; the filing also reports 112.7 million common shares outstanding at that date.