Corcept Therapeutics Incorporated — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. The company commercializes Korlym for certain patients with Cushing’s syndrome and is developing additional cortisol-modulating drug candidates. Unless stated otherwise, financial figures below are in millions of dollars.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Net product revenue | $64.4 | $42.8 | $184.4 | $105.9 |
| Operating income | $23.0 | $13.6 | $64.6 | $31.2 |
| Net income | $17.7 | $13.8 | $53.4 | $30.8 |
| Diluted earnings per share | $0.14 | $0.11 | $0.42 | $0.25 |
| Operating cash flow | Not stated separately | Not stated separately | $94.1 | $36.1 |
- Revenue increased 51% for Q3 and 74% year to date. Management attributed growth primarily to higher Korlym tablet sales; January 2018 price increases contributed approximately 16.8% and 12.7% of the respective revenue increases.
- Operating margin was approximately 35.6% in Q3 versus 31.8% a year earlier, and 35.0% for the nine-month period versus 29.4%. Cost of sales was 2.0% of revenue in both 2018 periods, compared with 2.3% in 2017.
- R&D expense rose to $18.9 million for Q3 and $56.5 million year to date, principally reflecting advancement of relacorilant and development of CORT118335 and CORT125281. SG&A increased to $21.3 million and $59.7 million, driven primarily by commercial-force compensation and distribution costs.
- Cash and cash equivalents were $33.9 million; marketable securities totaled $162.8 million. Combined cash and marketable securities were $196.7 million at September 30, up from $104.1 million at year-end 2017. Current assets were $224.2 million and current liabilities $40.2 million.
- Operating cash flow was $94.1 million for the first nine months. Investing activities used $89.0 million, mainly for net purchases of marketable securities; financing activities used $2.3 million, including $8.9 million of share repurchases and $6.6 million from option exercises.
- No debt remained: the Biopharma financing obligation and related security interests had been extinguished in July 2017. The filing reports an accumulated deficit of $139.7 million.
Changes, outlook and material matters
- For the nine months, revenue grew faster than operating expenses; R&D more than doubled year over year. Net income also increased, notwithstanding higher income tax expense.
- 2018 income tax expense was $6.0 million in Q3 and $12.8 million year to date, primarily reflecting reductions in deferred tax assets as net operating losses were used, plus state taxes in jurisdictions without available carryforwards.
- Management said it expects to fund its stated commercial and development plans without raising additional funds, while noting it may elect to raise capital. It expected 2018 R&D and SG&A spending to exceed 2017 levels. The supplied filing text does not provide a clear numerical revenue or earnings guidance figure.
- Relacorilant’s Phase 3 Cushing’s syndrome trial was underway, with an expected enrollment of 130 patients. Other programs included relacorilant in solid tumors, CORT125281 in prostate cancer, and a Phase 1 study of CORT118335. Timelines and costs remain subject to clinical and regulatory uncertainties.
- Korlym orphan-drug exclusivity for the approved indication was due to expire in February 2019. Teva had filed an ANDA seeking approval of a generic; the company sued over patents, and the court denied Teva’s motion to dismiss on October 23, 2018. The FDA had tentatively approved Teva’s ANDA, but final approval was then barred by exclusivity and the litigation stay. A separate challenge to a Korlym patent was also identified.
- The company authorized repurchases of up to $100 million through June 30, 2019. It repurchased 674,000 shares in Q3 for $8.9 million, at an average $13.21 per share; $91.1 million remained authorized at quarter-end.
- Supply and commercialization risks include reliance on single-source manufacturers for Korlym ingredients/tablets and on one specialty pharmacy for approximately 99% of revenue. Management reported no provision for loss contingencies and no material change in market risk or internal controls.
Key facts for investors to verify
- Korlym sales growth, pricing, payer coverage, and the adequacy of reserves for government rebates and chargebacks.
- Developments and outcomes in the Teva ANDA litigation and the separate patent challenge, especially around the February 2019 exclusivity expiration.
- Enrollment, safety, efficacy, and timing of relacorilant and other clinical programs, alongside the rising R&D spend.
- Continuity and regulatory compliance of the company’s single-source manufacturers and specialty pharmacy.
- Use of the remaining repurchase authorization and its effect on cash available for operations and development.