Corcept Therapeutics Incorporated — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017; comparisons are with the corresponding 2016 periods unless noted. Corcept is a pharmaceutical company commercializing Korlym for certain adults with endogenous Cushing’s syndrome and developing other cortisol modulators.
Financial performance and position
| Metric | Q3 2017 | Nine months 2017 |
|---|---|---|
| Net product revenue | $42.8 million, up from $21.7 million | $105.9 million, up from $57.5 million |
| Cost of sales | $1.0 million; 2.3% of revenue | $2.4 million; 2.3% of revenue |
| Research and development | $11.7 million | $26.7 million |
| Selling, general and administrative | $16.5 million | $45.6 million |
| Operating income | $13.6 million | $31.2 million |
| Net income | $13.8 million; diluted EPS $0.11 | $30.8 million; diluted EPS $0.25 |
- Revenue increased approximately 97% in Q3 and 84% for the nine-month period. Management attributed growth to higher sales volume and the January 2017 price increase; the price increase accounted for about 7.2% and 7.7% of the respective revenue increases.
- Operating expenses rose to $29.1 million in Q3 from $18.7 million, and to $74.8 million for nine months from $52.3 million. R&D growth reflected relacorilant development and additional clinical staff; SG&A growth reflected expansion of the sales organization and higher professional-services fees.
- Operating margin was approximately 31.9% in Q3 and 29.4% for nine months, compared with approximately 14.1% and 9.0% in 2016.
- Nine-month operating cash flow was $36.1 million, versus $13.8 million. Investing cash outflow was $46.0 million, mainly purchases of marketable securities; financing cash outflow was $10.5 million, including debt payments.
- At September 30, cash and cash equivalents were $31.1 million and marketable securities were $45.6 million, or $76.7 million combined. Total current assets were $93.9 million; current liabilities were $24.4 million. Stockholders’ equity was $86.3 million, and accumulated deficit was $291.5 million.
- The Biopharma revenue-linked financing obligation was fully paid off in July 2017 with a final $4.6 million payment. No further payments are due; the balance sheet reported no remaining obligation.
Material changes, outlook and risks
- Corcept changed its exclusive specialty pharmacy from Dohmen to Optime Care on August 10, 2017. The company reported updating sales, inventory and receivables controls in connection with the transition.
- Dohmen litigation is ongoing. Dohmen sued over termination of its services agreement and later added a trade-secret claim; Corcept separately sued Dohmen. Dohmen has placed $12.9 million of collected Korlym receivables in escrow rather than transferring the funds to Corcept. Corcept recorded the amount in other assets and said it could not reasonably estimate any potential loss; no loss contingency was accrued.
- Management said current plans—including commercial operations and clinical trials—are expected to be funded without additional capital, though Corcept may raise funds for strategic priorities. Management cautioned that equity financing could dilute stockholders and debt could carry restrictive covenants. The filing refers to public 2017 revenue guidance but does not provide a clear guidance value in the supplied text.
- Management expected R&D and SG&A spending for the remainder of 2017 to exceed the comparable 2016 period. It also expected no further interest expense in 2017 following repayment of the financing obligation.
- Development programs include relacorilant Phase 2 work in Cushing’s syndrome and a Phase 1/2 combination trial in solid tumors; the company planned to open a metastatic pancreatic cancer cohort in Q4 2017. It also planned a dose-ranging CORT125281-plus-enzalutamide trial in metastatic castration-resistant prostate cancer in Q4.
- Key risks include reliance on Korlym as the principal revenue source; reimbursement, pricing and competition risks; dependence on single-source manufacturers and third-party clinical providers; clinical and regulatory uncertainty; and the Dohmen dispute. Corcept also reported holding significant Korlym inventory because it relies on single-source manufacturers.
Important facts for investors to verify
- Whether Korlym prescription volume and net revenue growth continue, and how pricing, rebates and patient-assistance costs affect revenue.
- Resolution of the Dohmen litigation, access to the $12.9 million escrowed receivables, and any operational effects of the pharmacy transition.
- Clinical-trial enrollment, timing and results for relacorilant and other candidates, including the stated Q4 2017 trial plans.
- Korlym supply continuity and inventory adequacy given reliance on single-source manufacturers.
- Cash generation and spending relative to the $76.7 million of cash, cash equivalents and marketable securities, and whether additional financing becomes necessary.