Corcept Therapeutics Incorporated — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; comparisons are with Q1 2018 unless otherwise noted. Corcept is a commercial-stage pharmaceutical company whose marketed product is Korlym for certain patients with endogenous Cushing’s syndrome; it is also developing selective cortisol modulators. Financial amounts below are in millions of dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / prior date | Change |
|---|---|---|---|
| Net product revenue | $64.8 | $57.7 | Up 12%; management attributed the increase primarily to higher sales volume. |
| Cost of sales | $1.2 | $1.2 | Cost of sales was 1.9% of revenue versus 2.0%. |
| Research and development | $20.2 | $17.1 | Up 19%, largely from clinical-development staffing and discovery/preclinical work. |
| Selling, general and administrative | $24.4 | $18.4 | Up 32%, reflecting hiring and retention, distribution costs, and professional fees. |
| Income from operations | $19.0 | $21.0 | Down 10%. |
| Net income | $18.3 | $17.5 | Up 5%; basic EPS was $0.16 vs. $0.15 and diluted EPS $0.15 vs. $0.14. |
| Operating cash flow | $23.7 | $34.4 | Lower mainly because Q1 2018 included a $12.9 receipt from the former specialty pharmacy. |
| Cash, cash equivalents and marketable securities | $215.8 at March 31, 2019 | $206.7 at December 31, 2018 | Increased by about $9.1. |
Gross margin was approximately 98.1% versus 98.0%; operating margin was approximately 29.2% versus 36.4%, and net margin approximately 28.2% versus 30.3%. These percentages are calculated from reported revenue and expenses. Q1 2019 net cash used in investing activities was $0.4 million and net cash used in financing activities was $15.3 million. Financing outflows included $13.6 million of share repurchases and $4.2 million for statutory withholding on a cashless option exercise. Cash and cash equivalents were $49.7 million; short- and long-term marketable securities were $166.1 million. Working capital was approximately $182.6 million. The filing reports no debt balance; no debt is shown on the balance sheet.
Material changes and balance-sheet items
- Revenue growth was offset by higher R&D and SG&A spending, and operating income declined despite higher net income. The lower income tax expense—$1.8 million versus $3.8 million—was primarily attributable to discrete benefits from stock-option activity.
- Corcept repurchased 1.2 million shares for $13.6 million at an average $11.61 per share during the quarter. $62.8 million remained available under the $100 million authorization, which was scheduled to run through June 30, 2019 unless changed or suspended.
- Adoption of lease accounting guidance on January 1, 2019 added approximately $1.9 million of right-of-use assets and lease liabilities; management said adoption had no material retained-earnings impact. Current lease liability was $1.5 million.
- Inventory totaled $15.4 million, including $10.4 million classified as strategic inventory. The company cited reliance on single-source suppliers for Korlym’s active ingredient and tablets.
Outlook, developments and risks
- Management said it expected to fund current plans without raising additional capital, based on available resources and Korlym revenue. It expected 2019 R&D and SG&A expenses to exceed 2018 levels. The supplied filing text does not provide a clear numerical 2019 revenue guidance value.
- Development programs included Phase 3 relacorilant for Cushing’s syndrome; Phase 2 relacorilant plus Abraxane for ovarian cancer; additional relacorilant oncology studies; CORT125281 with Xtandi for prostate cancer; and CORT118335 studies for antipsychotic-associated weight gain and planned NASH trials. Trial outcomes, enrollment, safety and regulatory review remain uncertain.
- Korlym’s U.S. orphan-drug marketing exclusivity expired February 17, 2019. Corcept relies on patents and was litigating Teva’s proposed generic; Teva had received tentative FDA approval, while final approval was subject to the statutory stay and litigation. Neptune’s challenge to a Korlym patent had been instituted for inter partes review. On May 7, 2019, after quarter-end, Teva petitioned for post-grant review of another asserted patent; the PTAB had not decided whether to institute review.
- A purported securities class action filed March 14, 2019 alleges violations of federal securities laws and seeks unspecified relief. The company stated it could not predict the outcomes of litigation; it had recorded no loss-contingency provision. The filing also disclosed the European Medicines Agency’s May 2019 recommendation for orphan designation of relacorilant, after the reporting date.
- Key business risks include generic entry or patent challenges affecting Korlym, dependence on Korlym sales and reimbursement, reliance on third-party manufacturers and a specialty pharmacy, clinical and regulatory uncertainty, and potential competition. Management cautioned that quarterly results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Whether Korlym sales growth and patient access can continue, and how payer coverage, rebates, competition or a generic launch may affect revenue.
- Developments and timing in the Teva ANDA case, related patent reviews, and the securities class action.
- Clinical-trial progress, enrollment, safety and results for relacorilant and other development candidates, as well as the company’s spending plans.
- Whether cash generation and the $215.8 million cash-and-investment position remain sufficient to fund planned operations, including commercial and clinical programs and any further repurchases.
- Supply continuity for Korlym given the disclosed single-source manufacturing dependencies.