Corcept Therapeutics Incorporated — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Financial statements are unaudited. Corcept is a commercial-stage pharmaceutical company whose marketed product is Korlym for certain adults with endogenous Cushing’s syndrome; it is also developing cortisol modulators for additional indications.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Net product revenue | $88.6 | $72.3 | $181.8 | $137.1 |
| Income from operations | $35.3 | $24.6 | $73.0 | $43.6 |
| Net income | $28.3 | $20.2 | $58.4 | $38.5 |
| Diluted EPS | $0.23 | $0.17 | $0.48 | $0.31 |
| Operating margin | 39.8% | 34.1% | 40.1% | 31.8% |
| Net margin | 32.0% | 27.9% | 32.1% | 28.1% |
- Revenue increased 22.6% year over year in Q2 and 32.6% for the first half. Management attributed growth to shipments to more patients and higher average Korlym prices, including price increases and changes in payer mix.
- Q2 operating expenses were $53.3 million, including $26.5 million of R&D and $25.6 million of selling, general and administrative expense. First-half R&D was $52.6 million and SG&A was $53.1 million.
- For the six months, operating cash flow was $86.5 million, compared with $49.2 million in 2019. Investing activities used $66.2 million, mainly reflecting purchases of marketable securities; financing activities provided $7.0 million. Cash and cash equivalents increased to $58.5 million from $31.3 million at year-end.
- At June 30, cash, cash equivalents and marketable securities totaled approximately $409.6 million. Current assets were $438.3 million and current liabilities $42.2 million. The filing reports no debt; liabilities included operating lease obligations.
- Total assets were $497.8 million and stockholders’ equity was $453.7 million. The company reported $34.8 million in retained earnings, versus an accumulated deficit of $23.6 million at December 31, 2019.
Changes, outlook and commentary
- Profitability rose faster than revenue year over year. Cost of sales was 1.4% of Q2 revenue, versus 1.9% in Q2 2019; management attributed the lower ratio primarily to higher average Korlym prices.
- Management expects 2020 R&D and SG&A expenses to exceed 2019 levels as clinical programs and commercial and administrative activities expand. The filing refers to public 2020 revenue guidance but does not provide a clear numerical guidance value in the supplied text.
- Development programs include Phase 3 relacorilant trials for Cushing’s syndrome and metastatic pancreatic cancer, a Phase 2 relacorilant ovarian cancer trial, and miricorilant studies in antipsychotic-induced weight gain. The company said ovarian cancer trial enrollment was complete and expected data in the first half of 2021.
- COVID-19 effects remained uncertain. Reduced physician access and patient visits may hinder Korlym diagnosis and uptake; some clinical sites slowed or paused enrollment or trial starts, potentially extending development timelines. Management said no trial participants had stopped for pandemic-related reasons as of the filing.
- Corcept committed to purchase an additional 400 kilograms of Korlym active pharmaceutical ingredient for $5.9 million. It relies on a single supplier for that ingredient and holds strategic inventory because of this supply concentration.
Risks, contingencies and unusual items
- Generic competition and patents: Teva and Sun have filed applications seeking to market generic Korlym and are in patent litigation. The Teva 30-month FDA approval stay was due to expire August 1, 2020; the filing warns Teva could elect to market after August 2 despite ongoing disputes. The consolidated Teva trial was set for February 2021, and a PTAB decision concerning one patent was expected around November 2020. Outcomes are uncertain.
- Other litigation: The company disclosed a securities class action and two stayed shareholder derivative actions. It had not recorded a loss contingency provision and could not predict outcomes.
- Operating and development risks: Dependence on Korlym revenue, payer coverage and reimbursement, a specialty pharmacy and third-party manufacturers; clinical, regulatory and safety uncertainty; and pandemic-related disruption could affect results and timelines.
- Tax and equity items: First-half income tax expense was $17.1 million, versus $7.4 million in 2019, primarily reflecting fewer discrete benefits from option exercises. In February, Corcept purchased $0.3 million of its CEO’s shares to provide liquidity for tax obligations related to an earlier option exercise. Option exercises and stock-based compensation also contributed to share-count and equity changes.
- Management stated that, based on current plans, it expects to fund operations without raising additional funds, while retaining the option to raise capital. Future financing could dilute shareholders or carry restrictive terms.
Important facts for investors to verify
- Korlym revenue growth, patient volume, average pricing and payer mix, particularly under pandemic conditions.
- Developments in Teva and Sun patent cases, the PTAB proceeding, and any generic launch or FDA action.
- Clinical enrollment, timing and results for relacorilant and miricorilant programs, including the expected ovarian cancer data timing.
- Supplier and specialty-pharmacy continuity, API inventory sufficiency, and the timing and cash impact of the $5.9 million purchase commitment.
- Actual 2020 revenue and expense performance against company guidance; the supplied filing text does not state the numerical revenue guidance.
- Potential financial effects of the securities and derivative litigation; no loss amount was clearly estimable or accrued in this filing.