Corcept Therapeutics Incorporated — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Corcept is a commercial-stage pharmaceutical company; its marketed product is Korlym (mifepristone) for certain adults with endogenous Cushing’s syndrome. Financial amounts below are in U.S. dollars.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net product revenue | $93.7 million | $79.4 million | Up 18.0% |
| Cost of sales | $1.3 million | $1.3 million | Cost was 1.3% of revenue, versus 1.6% |
| Research and development | $28.1 million | $29.0 million | Down 3.1% |
| Selling, general and administrative | $37.5 million | $29.5 million | Up 27.2% |
| Income from operations | $26.8 million | $19.6 million | Up 36.3% |
| Net income | $22.8 million | $23.5 million | Down 2.8% |
| Diluted earnings per share | $0.20 | $0.18 | Up from $0.18 |
| Net cash provided by operating activities | $35.2 million | $25.4 million | Up $9.8 million |
Revenue growth reflected higher sales volume, which accounted for 53.6% of the increase, and higher average Korlym prices following increases effective January 1, 2022 and March 1, 2021. Operating margin was approximately 28.6%, versus 24.7%. Net income declined despite higher operating income, principally as the income tax line shifted from a $3.6 million benefit in Q1 2021 to $4.1 million expense in Q1 2022.
At March 31, 2022, cash and cash equivalents were $61.9 million and marketable securities were $306.2 million, for combined cash, cash equivalents and securities of $368.1 million. Current assets were $388.2 million and current liabilities were $57.2 million. Total liabilities were $60.3 million; the filing reports no borrowings. Operating cash flow was $35.2 million. Investing activities used $50.5 million, mainly reflecting net purchases of marketable securities; financing activities used $0.5 million. Cash and cash equivalents decreased $15.8 million during the quarter.
Material changes and company developments
- SG&A increased by $8.0 million, attributed to employee compensation, legal fees, and sales and marketing expenses. R&D declined as spending on the ovarian cancer Phase 2 trial and pancreatic cancer Phase 3 trial decreased, partly offset by higher recruiting, compensation, and other development-program costs.
- The company said it expects both R&D and SG&A expense to be higher in 2022 than in 2021.
- Corcept amended its Menlo Park office lease in March 2022, extending the term to June 30, 2023 and recognizing a $2.8 million right-of-use asset and lease liability.
- There were no open-market share repurchases in the quarter. The company acquired 305,000 shares for $7.0 million through net settlement of employee and executive option exercises, primarily to satisfy exercise costs and tax withholding.
- Marketable securities had $1.4 million of unrealized losses at quarter-end, attributed to interest-rate fluctuations; management stated the investments were not impaired and it did not intend to sell them before recovery or maturity.
Outlook, pipeline, risks and contingencies
- Management stated that existing resources were expected to fund operations and planned R&D for the next 12 months and beyond, while noting it could raise capital for other reasons. No specific 2022 revenue guidance figure is provided in this filing text.
- Corcept was conducting two Phase 3 relacorilant trials for Cushing’s syndrome, GRACE and GRADIENT. It planned to initiate a pivotal Phase 3 trial of relacorilant with nab-paclitaxel for platinum-resistant ovarian cancer in Q2 2022, following reported Phase 2 results. These were company-reported trial results and plans, not regulatory approvals.
- Other programs included Phase 2 miricorilant trials for antipsychotic-induced weight gain, a Phase 1b miricorilant dose-finding trial in presumed NASH, and development of dazucorilant for ALS. The NASH Phase 2a trial had been suspended after elevated liver enzymes in four of five treated patients; the abnormalities resolved after treatment stopped.
- COVID-19 restrictions and related patient and physician behavior continued to impede Korlym commercial growth and slow enrollment in some clinical trials. Management noted effects varied by program and expected impediments to continue while restrictions or risk-reducing behavior persisted.
- Generic competition remains a significant risk. Corcept’s Teva litigation continued, with summary-judgment motions concerning one patent briefed and no ruling timetable stated. The filing warns Teva may choose to market its FDA-approved generic while litigation continues. A Sun settlement permits generic entry beginning October 1, 2034 or earlier under customary settlement circumstances. Hikma litigation was ongoing; the 30-month FDA stay was stated to expire August 1, 2023.
- A securities class action had certain claims proceeding to discovery, and related shareholder derivative actions were stayed pending resolution of that litigation. Separately, 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, prior authorizations, and reimbursement. The company said it was not currently considered a defendant and was cooperating. No loss contingency provision had been recorded; the company stated it could not predict outcomes.
- Tax law changes effective in 2022 required R&D expenditures to be amortized for tax purposes rather than deducted immediately. Corcept said it had capitalized the expenses, contributing to accrued income taxes payable of $11.5 million, compared with $0.5 million at year-end 2021.
- Other key risks include reliance on Korlym revenue, a single API supplier and a single specialty pharmacy, clinical and regulatory uncertainty, reimbursement and drug-pricing changes, and potential supply or trial disruption. Disclosure controls were assessed as effective, with no material quarter-on-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether Korlym volume growth and pricing can be sustained, and how payer mix, rebates, competition, and pandemic-related access affect net revenue.
- Progress, enrollment, timing, and outcomes for the GRACE and GRADIENT trials and the planned ovarian cancer Phase 3 trial; also monitor miricorilant liver safety and the alternative NASH dosing study.
- Developments in Teva and Hikma patent litigation, potential generic entry, and the Sun settlement’s entry provisions.
- Any material developments in the New Jersey federal investigation and the securities and derivative litigation; the filing reports no recorded loss provision but outcomes remain uncertain.
- Whether cash generation and the $368.1 million liquidity position remain sufficient as management expects R&D and SG&A spending to increase.