Corcept Therapeutics Incorporated — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise. The company discovers, develops and commercializes cortisol-modulating medicines. Its sole marketed product is Korlym for certain adults with Cushing’s syndrome.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Net product revenue | $57.7 | $27.6; up 109% |
| Cost of sales | $1.2; 2.0% of revenue | $0.6; 2.3% of revenue |
| Research and development | $17.1 | $7.2; up 137.6% |
| Selling, general and administrative | $18.4 | $15.0; up 22.6% |
| Income from operations | $21.0 | $4.7 |
| Net income | $17.5; $0.15 basic and $0.14 diluted per share | $4.4; $0.04 basic and diluted per share |
| Net cash provided by operating activities | $34.4 | $9.6 |
Revenue growth was primarily attributable to higher Korlym tablet sales; a January 2018 price increase accounted for approximately 8.8% of the increase in net revenue. Cost of sales as a share of revenue declined, which the company attributed to lower manufacturing costs and the price increase. Operating cash flow included $12.9 million collected from the former specialty pharmacy following settlement of litigation.
At March 31, 2018, cash and cash equivalents were $33.1 million and marketable securities were $107.3 million, totaling $140.4 million. Total current assets were $150.8 million and current liabilities were $27.7 million. Total stockholders’ equity was $215.2 million. The company had no outstanding debt: its Biopharma financing obligations were extinguished in July 2017, with no further payments due. Investing activities used $34.3 million, primarily for marketable-security purchases; financing activities provided $1.9 million, principally from stock-option exercises.
Material changes and operating developments
- Research and development spending increased with advancement of relacorilant and development of CORT118335 and CORT125281. Management expected R&D spending for the remainder of 2018 to exceed the comparable 2017 period.
- SG&A increased primarily due to compensation for an expanded sales force and higher volume-related pharmacy and distribution costs. Management expected SG&A to be higher in 2018 than in 2017.
- The company completed enrollment in a 30-patient Phase 2 relacorilant trial for Cushing’s syndrome and planned to begin a Phase 3 trial later in 2018. It was also conducting clinical programs in solid tumors, castration-resistant prostate cancer, and CORT118335, including a Phase 1 trial.
- Adoption of the new revenue recognition standard, ASC 606, had no impact on the financial statements.
Outlook, risks and contingencies
Management stated that, under its current plans for commercial operations and clinical development, it expected to fund operations without raising additional capital, while retaining the option to raise funds for strategic priorities. The filing discusses 2018 revenue guidance but the text provided does not include a clear numeric guidance value. Actual results may differ, and management cautioned that operating results for the quarter are not necessarily indicative of the remainder of 2018.
Korlym orphan-drug exclusivity for the approved Cushing’s syndrome indication was due to expire in February 2019. Corcept received a Paragraph IV notice from Teva concerning a proposed generic and sued in March 2018, triggering a statutory stay of FDA approval until the earlier of 30 months from receipt of the notice or a qualifying court decision. The outcome is uncertain. Other key risks include reliance on Korlym revenue, reimbursement and pricing pressures, clinical-development and regulatory uncertainty, and dependence on third-party manufacturers and a specialty pharmacy. The company reported no recorded loss contingency and did not believe other ordinary-course legal matters would have a material adverse effect.
Important facts for investors to verify
- Korlym sales growth, including the contribution from increased tablet volume versus the January 2018 price increase.
- Progress and timing of the planned relacorilant Phase 3 trial and the other clinical programs.
- Developments in the Teva patent litigation, generic-entry risk, and the company’s patent protection beyond orphan exclusivity.
- Whether cash generation and the $140.4 million cash-and-securities position remain sufficient as planned R&D and commercial spending rises.
- Changes in government rebates and other revenue deductions; the accrued government-rebate balance was approximately $10.0 million at quarter-end.