Corcept Therapeutics Incorporated — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Corcept is a commercial-stage pharmaceutical company whose revenue is primarily from Korlym, approved for certain adults with endogenous Cushing’s syndrome. Financial amounts below are in millions of dollars unless noted.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net product revenue | $101.7 | $96.1 | $298.8 | $267.2 |
| Income from operations | $31.9 | $36.2 | $90.1 | $87.8 |
| Net income | $34.6 | $30.5 | $84.8 | $80.5 |
| Diluted EPS | $0.30 | $0.24 | $0.73 | $0.63 |
| Operating cash flow | Not presented by quarter | $86.9 | $118.5 |
Revenue rose 5.8% in Q3 and 11.8% year to date. Management attributed growth to sales volume and Korlym price increases. Operating expenses increased 16.5% in Q3 and 16.4% year to date, with higher research and development and selling, general and administrative costs. Approximate operating margin was 31.4% in Q3 versus 37.7% a year earlier, and 30.2% year to date versus 32.9%. Approximate net margin was 34.0% in Q3 versus 31.7%, and 28.4% year to date versus 30.1%.
At September 30, cash and cash equivalents were $50.2, marketable securities were $350.9, and total cash, cash equivalents and marketable securities were $401.2, compared with $335.8 at December 31, 2021. Current assets were $452.4 and current liabilities $53.1. The filing reports no debt. Stockholders’ equity was $473.4. Nine-month operating cash flow was $86.9; investing cash outflow was $97.1, mainly reflecting purchases of marketable securities, and financing cash outflow was $17.2. The company reported $20.8 of cash paid for shares withheld in connection with option exercises and awards; it made no separate common-stock repurchases in the period.
Changes, outlook and business developments
- Q3 operating income declined despite revenue growth, primarily as operating expenses rose. Nine-month net income increased modestly, while operating cash flow fell by $31.5, primarily due to higher deferred income taxes associated with tax treatment of research and development spending.
- Management said it expected 2022 research and development and selling, general and administrative expenses to exceed 2021 levels as clinical programs and commercial, administrative and litigation activities advance. It expects available resources to fund planned operations and research and development for the next 12 months and beyond, without needing to raise additional funds under current plans. No numeric revenue guidance is provided in the filing text.
- Development programs include Phase 3 relacorilant trials in Cushing’s syndrome (GRACE and GRADIENT), a Phase 3 ovarian cancer trial (ROSELLA), and trials of miricorilant and dazucorilant. Management expected data from the completed-treatment GRATITUDE and GRATITUDE II trials by year-end 2022. The NASH Phase 2a trial had been suspended after elevated liver enzymes in four of five treated patients; a dose-finding trial was ongoing.
- Management said COVID-19 continued to impede Korlym commercial growth and slow some clinical programs, particularly Cushing’s syndrome trials. It also cited development uncertainty, including trial enrollment, safety and efficacy, and reliance on external manufacturers and service providers.
- Korlym supply depends on a single API manufacturer. The company holds strategic inventory because of this dependency. Available-for-sale investments had $1.8 of unrealized losses, attributed to interest-rate movements; management said the investments were not impaired.
Legal matters and other material risks
- Teva’s Korlym generic litigation remained pending; the court had no set timetable for ruling on summary-judgment motions. The filing warns Teva could elect to market its FDA-approved generic while litigation continues. The Sun litigation was settled, allowing Sun to launch a generic from October 1, 2034 or earlier under customary settlement conditions. Hikma litigation was ongoing; the 30-month FDA approval stay was due to expire August 1, 2023.
- A securities class action and related shareholder derivative cases remained unresolved; the derivative cases were stayed pending the class action. The company said it could not predict outcomes and had recorded no loss provision for contingencies.
- A U.S. Attorney’s Office investigation covers Korlym sales and promotion, healthcare-professional relationships and payments, and prior authorizations and reimbursement. The government told Corcept it was not currently considered a defendant, but that its conduct was within the investigation’s scope; Corcept said it was cooperating.
- Other principal risks include generic competition, reimbursement and drug-pricing changes, ongoing COVID-19 impacts, clinical and regulatory setbacks, and potential legal or regulatory consequences related to product promotion. The filing also notes mifepristone’s association with abortion medication as a possible reputational and commercial risk.
Key facts for investors to verify
- Whether Korlym revenue growth continues, and how much reflects volume versus price; management attributed year-to-date growth to both.
- Progress and results for GRACE, GRADIENT, ROSELLA, GRATITUDE, GRATITUDE II, and the miricorilant NASH dose-finding trial.
- Developments in Teva and Hikma generic litigation, the Hikma stay deadline, and any generic market entry.
- Any change in the U.S. Attorney’s Office investigation, securities litigation, or related derivative actions.
- Cash generation, investment balances and unrealized losses, and the effect of R&D tax amortization requirements on cash taxes.