Corcept Therapeutics Incorporated — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. The filing also reports unaudited fourth-quarter results. Corcept is a commercial-stage pharmaceutical company whose revenue came primarily from Korlym, approved in the U.S. for certain adults with endogenous Cushing’s syndrome. It is developing selective cortisol modulators for Cushing’s syndrome, cancer and other conditions.
Key financial results
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Net product revenue | $251.2 million | $159.2 million |
| Cost of sales | $5.2 million | $3.6 million |
| Research and development | $75.2 million | $40.4 million |
| Selling, general and administrative | $81.3 million | $62.4 million |
| Operating income | $89.5 million | $52.9 million |
| Net income | $75.4 million | $129.1 million |
| Diluted earnings per share | $0.60 | $1.04 |
| Cash from operating activities | $115.7 million | $60.9 million |
Revenue increased 57.8%, primarily from higher sales volume; the company did not raise Korlym’s price in 2018. Cost of sales was 2.1% of revenue. Derived operating and net margins were approximately 35.6% and 30.0%, respectively.
Fourth-quarter 2018 revenue was $66.8 million versus $53.3 million in Q4 2017; net income was $22.0 million versus $98.3 million. The unusually high 2017 net income reflected a $76.3 million income-tax benefit, largely from releasing a valuation allowance on deferred tax assets; 2018 recorded $16.7 million of tax expense.
At year-end, cash, cash equivalents and marketable securities totaled $206.8 million, compared with $104.0 million a year earlier. Working capital was $201.2 million; total liabilities were $35.8 million. No debt obligation remained after the financing agreement was extinguished in 2017. Investing cash outflow was $90.8 million, mainly reflecting purchases of marketable securities. The company repurchased $23.7 million of stock in 2018.
Material changes and business developments
- Research and development spending rose to $75.2 million as relacorilant and other cortisol-modulator programs advanced; selling, general and administrative expenses also increased with commercial and administrative growth.
- Relacorilant’s Phase 3 Cushing’s syndrome trial was underway. Other programs included a Phase 2 ovarian cancer study with Abraxane and early-stage trials in solid tumors and castration-resistant prostate cancer. Phase 2 trials of CORT118335 for NASH and antipsychotic-induced weight gain were planned.
- The company settled its dispute with former specialty pharmacy Dohmen in January 2018 and recovered $12.9 million of Korlym receivables.
- Corcept authorized a $100 million stock-repurchase program in August 2018; $76.3 million remained authorized at year-end. It reported no cash dividends.
Outlook, risks and contingencies
Management expected 2019 research and development and selling, general and administrative expenses to exceed 2018 levels as development programs and commercial activities expanded. Management stated that it expected existing resources and planned operations to fund current plans without additional capital, while retaining the option to raise funds. The filing does not provide a clear numerical 2019 revenue forecast in the supplied text.
- Korlym concentration and competition: Revenue depends on Korlym sales. The product’s U.S. orphan-drug exclusivity expired February 17, 2019, increasing the relevance of generic competition. Teva’s ANDA received tentative FDA approval, but final approval was subject to a statutory stay and patent litigation. A separate patent review of the ’348 patent was instituted by the PTAB; outcomes were uncertain.
- Supply and distribution concentration: Corcept relied on single-source suppliers for Korlym’s active ingredient and tablets and a single specialty pharmacy for patient dispensing. It held additional inventory as a mitigation measure.
- Clinical and regulatory uncertainty: Product candidates may fail, trials may be delayed or produce inconclusive results, and approvals are not assured. The company’s commercial and development plans also depend on reimbursement, manufacturing quality and regulatory compliance.
- Other exposures: Risks include patent challenges, pricing and reimbursement pressure, product-liability exposure, and reliance on estimates for rebates, chargebacks and other revenue deductions. The company disclosed no off-balance-sheet arrangements. Auditors gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Korlym sales growth, prescription demand, realized pricing and the sustainability of revenue growth.
- Developments and potential timing in the Teva ANDA litigation and PTAB review, including any effect on generic-entry risk.
- Relacorilant trial enrollment, timing, safety and efficacy results, and progress in other pipeline programs.
- Whether increased R&D and commercial spending remains supported by operating cash flow and the reported liquidity position.
- Reliability of single-source manufacturing and specialty-pharmacy arrangements, and adequacy of inventory and revenue reserves.