Corcept Therapeutics Incorporated — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts below are in U.S. dollars; financial amounts are in millions unless stated otherwise. The company is a commercial-stage pharmaceutical business whose marketed product is Korlym for certain adults with endogenous Cushing’s syndrome, alongside a pipeline of cortisol-modulating drug candidates.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net product revenue | $117.7 | $103.4 | $223.4 | $197.1 |
| Operating income | $29.6 | $31.4 | $44.4 | $58.2 |
| Net income | $27.5 | $27.4 | $43.4 | $50.2 |
| Diluted earnings per share | $0.25 | $0.24 | $0.38 | $0.44 |
| Operating margin | 25.1% | 30.4% | 19.9% | 29.5% |
- Revenue increased 13.9% in Q2 and 13.3% for the first half. Management attributed growth to higher sales volumes and a January 1, 2023 price increase. Higher volume accounted for 33.3% of the Q2 increase and 37.7% of the first-half increase.
- Q2 operating income declined 5.9% despite revenue growth, as operating expenses rose. First-half net income declined 13.5%; higher research and development and selling, general and administrative costs more than offset revenue growth. Q2 net income was approximately flat year over year.
- Research and development expense was $43.3 million in Q2 and $84.1 million in the first half, up from $32.8 million and $60.9 million. Selling, general and administrative expense was $43.3 million and $91.8 million, up from $37.8 million and $75.4 million, respectively. Cost of sales was 1.3% of revenue in both comparable periods.
- Cash, cash equivalents and marketable securities totaled $363.3 million at June 30, 2023, versus $436.6 million at December 31, 2022. Cash and cash equivalents were $172.4 million; short-term marketable securities were $190.9 million. Current assets were $432.6 million and current liabilities $93.1 million. The filing reports no debt balance.
- First-half operating cash flow was $68.2 million, compared with $53.3 million in 2022. Investing activities provided $183.4 million, primarily reflecting maturities of securities and allocation of proceeds to cash equivalents ahead of the tender offer. Financing activities used $145.6 million, including the tender-offer repurchase.
Material changes and notable items
- On April 5, 2023, the company repurchased 6.6 million shares at $22 per share for $145.4 million, following a tender offer for up to 7.5 million shares. The buyback contributed to lower cash and total stockholders’ equity; weighted-average shares were also lower year over year.
- Interest and other income rose to $3.3 million in Q2 and $6.9 million for the first half, from $0.6 million and $0.7 million, respectively, due to higher market interest rates.
- Accrued and other liabilities increased to $52.2 million from $30.8 million at year-end, including higher income taxes payable and government rebates.
Outlook, pipeline, and risks
- Management expects to fund operations and planned research and development for the next 12 months and beyond without additional financing, based on current plans. It expects 2023 research and development and selling, general and administrative expenses to exceed 2022 levels.
- Pipeline programs include Phase 3 relacorilant trials in Cushing’s syndrome (GRACE and GRADIENT), the Phase 3 ROSELLA ovarian cancer trial, and Phase 2 dazucorilant study in ALS. Management planned to begin a miricorilant Phase 2b liver-disease trial and a Phase 1 study focused on preventing antipsychotic-induced weight gain in Q4 2023; a collaborator planned a relacorilant prostate-cancer Phase 2 trial in Q3 2023. Trial outcomes, enrollment, safety, and regulatory review remain uncertain.
- The company reached an agreement in principle to settle the Melucci securities litigation for $14.0 million, stated to be fully covered by insurers. Court approval remained outstanding at June 30, 2023; the balance sheet showed a $14.0 million accrued settlement and matching insurance recovery receivable.
- Teva litigation over Korlym patents remained pending, with a September 27, 2023 trial date stated in the filing. The company cautioned that Teva had FDA approval for its generic and might launch while litigation continued. A separate Teva patent challenge had concluded in Corcept’s favor. Under a Hikma settlement, generic Korlym sales were permitted beginning October 1, 2034, or earlier under customary settlement circumstances.
- The U.S. Attorney’s Office for the District of New Jersey was investigating matters relating to Korlym sales and promotion, healthcare-professional relationships and payments, and reimbursement. The company said it was cooperating and was not currently considered a defendant.
- Key commercial risks include generic competition, reliance on a single Korlym API manufacturer and one specialty pharmacy, reimbursement and pricing changes, and the Inflation Reduction Act. Management expects IRA provisions taking effect in 2025 to significantly limit revenue from Medicare patients and potentially reduce profits.
Important facts for investors to verify
- Korlym sales growth, the relative contribution of price versus volume, and whether increased expenses continue to compress operating margins.
- Progress, enrollment, safety findings, and milestone timing for the relacorilant, dazucorilant, and miricorilant trials.
- Developments in the Teva patent cases, including any generic launch, and final court approval and insurance coverage of the Melucci settlement.
- Status and potential consequences of the federal investigation, and any material developments in the stayed shareholder derivative cases.
- Korlym supply continuity and the effect of reimbursement, pricing, and IRA changes on revenue and cash generation.
- Use of cash following the tender offer and the company’s stated expectation that existing resources will fund operations and planned development.