Corcept Therapeutics Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Corcept is a commercial-stage pharmaceutical company whose principal marketed product is Korlym for certain patients with endogenous Cushing’s syndrome; it is also developing selective cortisol modulators for additional indications.
Financial performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Net product revenue | $81.5 million | $64.4 million | $218.6 million | $184.4 million |
| Operating income | $33.0 million | $23.0 million | $76.6 million | $64.6 million |
| Net income | $26.3 million | $17.7 million | $64.8 million | $53.4 million |
| Diluted EPS | $0.22 | $0.14 | $0.53 | $0.42 |
| Operating margin | 40.5% | 35.6% | 35.0% | 35.0% |
- Q3 revenue increased about 26% year over year; nine-month revenue increased about 19%. Management attributed growth to more patients and a higher average Korlym price, reflecting reduced government rebates and chargebacks and a price increase effective August 1, 2019.
- Research and development expense was $22.8 million for Q3 and $64.7 million year to date, versus $18.9 million and $56.5 million, respectively. Selling, general and administrative expense was $24.2 million and $73.2 million, versus $21.3 million and $59.7 million.
- Cost of sales was 1.8% of revenue in Q3 and 1.9% year to date, compared with 2.0% in each 2018 comparison period. The filing attributes the lower ratios primarily to Korlym’s higher price.
- Cash from operating activities was $87.7 million for the first nine months, compared with $94.1 million in 2018. The prior-year period included a $12.9 million receipt from a former specialty pharmacy.
- At September 30, cash and cash equivalents were $44.9 million and marketable securities were $221.9 million, totaling approximately $266.9 million. Current assets were $267.3 million and current liabilities $32.4 million. The company reported no borrowings; total liabilities were $32.6 million, including lease obligations.
- Nine-month investing cash outflow was $55.8 million, primarily reflecting net marketable-security purchases; financing cash outflow was $28.5 million, including $31.0 million of share repurchases. The repurchase program expired June 30, 2019; 4.6 million shares were repurchased over its life for $54.6 million.
Business developments, outlook, and risks
- Korlym’s orphan-drug exclusivity expired in February 2019. Corcept has Orange Book-listed patents it believes protect the product and is litigating against generic applicants Teva and Sun; Teva also has a pending patent review proceeding. Outcomes and timing are uncertain.
- Pipeline work includes a Phase 3 relacorilant trial for Cushing’s syndrome, a Phase 2 relacorilant trial in ovarian cancer, and development of miricorilant and exicorilant for other indications. The filing describes clinical development as costly and subject to enrollment, safety, efficacy, manufacturing, and regulatory uncertainty.
- Management expects 2019 R&D and SG&A expenses to exceed 2018 levels and expects both categories to increase in 2020. No specific revenue-guidance figure is provided in the supplied filing text. Management says current plans are expected to be funded without additional capital, though it may raise funds for other reasons.
- Key operating risks include dependence on Korlym revenue, generic competition and patent outcomes, reimbursement and pricing pressures, and reliance on a single API manufacturer and a single specialty pharmacy. The company also highlights clinical, regulatory, product-liability, and supply risks.
- On October 23, 2019, after the quarter, Corcept amended its office lease to add space and extend the lease through March 2022. Incremental minimum payments are $1.6 million in 2020, $2.1 million in 2021, and $0.5 million in 2022.
- The filing reports a securities class action and a shareholder derivative action, in addition to the patent disputes. No loss contingency provision was recorded; management said it could not predict outcomes.
Most important facts for investors to verify
- Whether Korlym’s volume and pricing growth continues, particularly after the August 2019 price increase and expiration of exclusivity.
- Developments and potential timing in Teva and Sun generic litigation and the patent review proceedings.
- Enrollment, safety, efficacy, and milestone updates for relacorilant, miricorilant, and exicorilant trials, alongside expected R&D spending.
- Whether operating cash generation and the stated ability to fund current plans remain consistent with actual commercial and clinical spending.
- Potential financial or operational effects of the pending securities and derivative cases and the company’s concentrated manufacturing and distribution relationships.