Corcept Therapeutics Incorporated — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 23, 2021. Corcept is a commercial-stage biopharmaceutical company whose marketed product is Korlym, for certain adults with endogenous Cushing’s syndrome. It is also developing selective cortisol modulators for endocrine, oncology and metabolic indications.
Financial performance and position
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net product revenue | $353.9 million | $306.5 million | +15.5% |
| Operating income | $128.2 million | $111.6 million | +14.9% |
| Net income | $106.0 million | $94.2 million | +12.6% |
| Diluted EPS | $0.85 | $0.77 | +10.4% |
| Operating cash flow | $152.0 million | $136.1 million | +11.7% |
- Gross margin was approximately 98.4% and operating margin approximately 36.2%, versus approximately 98.2% and 36.4%, respectively, in 2019. Net margin was approximately 30.0%, compared with 30.7%.
- R&D expense rose to $114.8 million from $89.0 million, mainly reflecting increased oncology and endocrinology development spending and hiring. SG&A increased to $105.3 million from $100.4 million.
- At year-end, cash, cash equivalents and marketable securities totaled $476.9 million, compared with $315.3 million a year earlier. Working capital was $431.0 million. The balance sheet reported no debt obligation.
- Cash used in investing activities was $119.3 million, primarily from purchases of marketable securities; financing activities provided $12.2 million. The company repurchased $9.7 million of stock under its repurchase program during 2020.
- FY2020 quarterly revenue was $93.2 million, $88.6 million, $86.3 million and $85.7 million. Q4 net income was $26.0 million, versus $29.4 million in Q4 2019; Q4 revenue was $85.7 million, versus $87.9 million.
Material changes and business developments
- Revenue growth reflected both greater Korlym sales volume and higher average price. The filing attributes the price increase to payer mix, a government-program price adjustment and price increases effective August 2019 and January 2020.
- COVID-19 restrictions and changes in patient and physician behavior hindered diagnosis, treatment and commercial outreach, reducing sales growth. Enrollment also slowed in several trials, particularly in Cushing’s syndrome, CRPC, AIWG and NASH; trials in advanced ovarian and pancreatic cancer were less disrupted.
- Corcept completed enrollment in a 178-patient Phase 2 ovarian cancer trial of relacorilant plus nab-paclitaxel in July 2020. It continued Phase 3 trials of relacorilant in Cushing’s syndrome and metastatic pancreatic cancer, and Phase 2 trials of miricorilant for antipsychotic-induced weight gain and NASH.
Outlook, risks and contingencies
- Management expected R&D and SG&A expenses to be higher in 2021 than in 2020. The supplied filing text refers to public 2021 revenue guidance but does not provide a clear guidance figure.
- Management stated that, based on current plans and expectations, existing resources and Korlym revenue should fund planned operations and R&D without additional financing; it may nevertheless raise capital for other reasons.
- Generic competition is a material risk. Teva had FDA final approval for a generic Korlym product after the 30-month stay expired in August 2020, while patent litigation remained ongoing. Corcept received a Hikma Paragraph IV notice in February 2021 and said it intended to enforce its patents. Sun’s ANDA litigation was also ongoing. Outcomes and timing are uncertain.
- Other commercial risks include competition from approved or developing Cushing’s treatments, reimbursement and pricing pressure, reliance on a single specialty pharmacy and a single API supplier, and Korlym’s progesterone-receptor-related adverse effects.
- Corcept reported ongoing securities class-action and shareholder derivative matters. It said it could not predict their outcomes and did not record a loss contingency; management did not believe ordinary-course matters would ultimately materially affect its business or financial position.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The audit highlighted the inventory excess-and-obsolescence reserve as a critical audit matter, citing sensitivity to forecast demand, product life cycle, competition and purchase commitments.
Important facts for investors to verify
- Latest status and potential timing of Teva, Sun and Hikma generic-entry and patent proceedings, including any effect on Korlym pricing and sales.
- Subsequent Korlym revenue trends, payer mix and the continuing commercial impact of COVID-19.
- Clinical enrollment, readouts and regulatory progress for relacorilant and miricorilant programs, and whether management’s expected 2021 cost increases materialized.
- Current cash and investment balances, repurchases, and any updated financing plans or revenue guidance.
- Inventory levels and reserve assumptions, given the auditor’s critical audit matter and Corcept’s dependence on a single API manufacturer.