Business context and reporting period
Corcept Therapeutics is a commercial-stage pharmaceutical company developing cortisol-modulating drugs. Its marketed product, Korlym, treats certain adults with endogenous Cushing’s syndrome. This Form 10-Q covers the quarter and nine months ended September 30, 2020; financial statements are unaudited. Unless otherwise noted, amounts below are in millions of dollars.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Net product revenue | $86.3 | $81.5 | $268.1 | $218.6 |
| Operating income | $24.7 | $33.0 | $97.7 | $76.6 |
| Net income | $21.6 | $26.3 | $80.0 | $64.8 |
| Diluted earnings per share | $0.17 | $0.22 | $0.65 | $0.53 |
- Q3 revenue grew 5.9%; management attributed the entire increase to Korlym’s higher average price. Nine-month revenue rose 22.7%, with 60.8% of the increase from price and the remainder from higher shipments.
- Q3 operating margin was 28.6%, versus 40.5% a year earlier; nine-month operating margin improved to 36.4% from 35.0%. Q3 net income fell 17.9%, while nine-month net income increased 23.5%.
- Research and development expense increased 48% in Q3 to $33.9 and 34% year to date to $86.5, mainly from greater oncology and endocrinology program spending and development staff costs. Selling, general and administrative expense rose 9% in Q3 to $26.5 and 9% year to date to $79.6.
- Cost of sales was 1.4% of revenue in Q3 and 1.6% year to date, compared with 1.8% and 1.9% in the prior-year periods; the company cited higher Korlym pricing and lower manufacturing cost.
- Operating cash flow for the first nine months was $116.9, up from $87.7. Cash and cash equivalents were $30.6 at September 30. Cash, cash equivalents and marketable securities totaled $444.2, compared with $315.3 at December 31, 2019. Investing cash outflow of $130.5 primarily reflected purchases of marketable securities.
- Current assets were $463.5 and current liabilities $43.0. Total liabilities were $44.4; the filing reports no debt. Stockholders’ equity was $489.7. Marketable securities had a weighted-average maturity of five months.
Changes, outlook and material matters
- Korlym price increases, a lower share of patients covered by lower-reimbursing Medicaid, and mandated government-program price increases supported revenue. Interest and other income declined as market interest rates fell.
- Management said it expected to fund current commercial and development plans without raising additional funds, and expected 2020 R&D and SG&A expenses to exceed 2019 levels. The filing refers to public 2020 revenue guidance but does not provide a clear guidance value.
- COVID-19 disrupted physician access, patient diagnosis and treatment, clinical-site enrollment and trial activity. Management said the effects on 2020 revenue and expenses and on development timelines were uncertain; oncology trials in life-threatening conditions had experienced fewer disruptions.
- Generic competition is a significant risk. Teva’s 30-month FDA approval stay expired in August 2020, and the company disclosed that Teva may market its generic Korlym at any time despite ongoing disputes. The Teva trial date was vacated, with no replacement date set; a PTAB decision on Teva’s challenge to one patent was expected around November 19, 2020. Sun’s FDA approval stay remained subject to the terms described in the filing.
- The company relies on a single supplier for Korlym active pharmaceutical ingredient and a single specialty pharmacy for dispensing and collecting payments. It committed $5.9 to buy additional API, with $4.4 remaining payable at September 30.
- The filing reports a securities class action and two shareholder derivative actions, as well as patent litigation with Teva and Sun. Management said it could not predict outcomes; no loss contingency provision had been recorded.
- As a subsequent event, on November 3 the board approved a stock repurchase program of up to $200, effective through September 30, 2021 unless changed or terminated. Repurchases are not required.
- Pipeline programs include Phase 3 relacorilant trials in Cushing’s syndrome and a Phase 3 pancreatic cancer study, plus oncology and metabolic-disease studies of other candidates. The company expected ovarian cancer Phase 2 data in the first half of 2021.
Important facts for investors to verify
- Current status and potential commercial timing of Teva’s generic Korlym, the patent proceedings and Sun litigation.
- Korlym shipment, pricing and patient-access trends, including any continuing effects of COVID-19 and payer mix.
- Clinical-trial enrollment, timelines and results for relacorilant and other development programs.
- The exact 2020 revenue guidance referenced in the filing, and how actual results compare with it.
- Execution of the $200 million repurchase authorization, API supply commitments and reliance on key vendors.
- Developments in the disclosed class action and derivative litigation and any resulting financial exposure.