Corcept Therapeutics Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Corcept is a commercial-stage pharmaceutical company whose revenue is primarily from Korlym for endogenous Cushing’s syndrome; it is also developing cortisol modulators for endocrine, oncology and metabolic indications.
Key financial results
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Net product revenue | $93.2 million | $64.8 million | +43.8% |
| Income from operations | $37.7 million | $19.0 million | +98.9% |
| Net income | $30.1 million | $18.3 million | +64.5% |
| Diluted EPS | $0.25 | $0.15 | +66.7% |
| Cash from operating activities | $33.3 million | $23.7 million | +40.5% |
- Operating margin was approximately 40.4%, versus 29.2%; net margin was approximately 32.2%, versus 28.2%.
- Revenue growth reflected both higher Korlym volume and higher average price. The company attributed 51.2% of the increase to volume; price increases, a lower Medicaid patient mix and higher prices paid by certain government programs accounted for the remainder.
- Operating expenses were $55.5 million, up from $45.9 million. R&D rose to $26.1 million from $20.2 million, primarily with increased oncology and endocrinology program spending and development personnel costs. SG&A rose to $27.5 million from $24.4 million.
- Income tax expense increased to $9.1 million from $1.8 million. The filing cites reduced discrete tax benefits from stock-option exercises as a primary reason for the increase.
Balance sheet and liquidity
- At March 31, 2020, cash and cash equivalents were $84.5 million and marketable securities were $264.5 million, totaling $349.0 million, compared with $315.3 million at December 31, 2019.
- Total assets were $445.5 million; total liabilities were $36.0 million; stockholders’ equity was $409.5 million. No borrowings are reported. Liabilities include operating lease obligations.
- Operating cash flow was $33.3 million. Investing activities provided $19.7 million, primarily reflecting marketable-security maturities exceeding purchases; financing activities provided $0.2 million.
- Management said current plans, including planned commercial and development programs, could be funded without raising additional capital, while noting it may choose to raise funds. No numerical revenue guidance is stated in the supplied filing text.
Material changes, outlook and risks
- Management expects 2020 R&D and SG&A expenses to exceed 2019 levels as clinical programs and commercial, administrative and litigation activity expand.
- COVID-19 created uncertainty for revenue and expenses. Restrictions on physician visits, reduced patient visits and diagnostic access could impede Korlym starts and growth; trial-site enrollment and study activity were slowed or paused, potentially lengthening development timelines.
- Korlym supply depends on a single API manufacturer. In March 2020, Corcept committed to purchase an additional 400 kg of API for $5.9 million to support future demand; strategic inventory was $11.1 million at quarter-end.
- Generic competition is a significant risk. Teva and Sun ANDA litigation remained ongoing; the Teva trial was set for February 2021, and the filing noted Teva could seek to market a generic after the 30-month stay expires on August 1, 2020. A PTAB decision had upheld all claims of the challenged ’348 patent, and Neptune did not appeal.
- The company reported a securities class action and shareholder derivative actions; it could not predict their outcomes. No loss contingency provision had been recorded. Corcept also disclosed a $0.3 million purchase of its CEO’s shares at $13.54 per share to provide liquidity for tax obligations.
Important facts for investors to verify
- Whether Korlym volume and pricing trends continue, including the effects of payer mix, rebates and reimbursement.
- COVID-19’s actual effects on commercial access, clinical-trial timelines, suppliers and 2020 results.
- Developments and timing in Teva and Sun generic litigation, patent proceedings and potential generic entry.
- Progress, costs and milestones for relacorilant and the company’s other clinical programs, alongside management’s expense outlook.
- Liquidity and API supply adequacy, including the status of the $5.9 million purchase commitment and dependence on a single API supplier.