Corcept Therapeutics Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. The company discovers, develops and commercializes cortisol-modulating medicines. Its only marketed product was Korlym, approved in the U.S. for certain adults with Cushing’s syndrome.
Financial performance
| Metric | Q2 2018 | Q2 2017 | First half 2018 | First half 2017 |
|---|---|---|---|---|
| Net product revenue | $62.3 million | $35.6 million | $120.0 million | $63.2 million |
| Operating income | $20.6 million | $12.8 million | $41.6 million | $17.5 million |
| Net income | $18.2 million | $12.6 million | $35.7 million | $17.0 million |
| Diluted earnings per share | $0.14 | $0.10 | $0.28 | $0.14 |
| Operating cash flow | Not separately presented | Not separately presented | $49.6 million | $25.1 million |
- Revenue increased approximately 75% in Q2 and 90% in the first half, primarily from higher Korlym tablet volume. The January 2018 price increase accounted for approximately 14% and 11% of the respective revenue increases.
- Cost of sales was 1.9% of revenue in both 2018 periods, compared with 2.2% in 2017, reflecting lower manufacturing costs and the higher Korlym price. Operating expenses rose substantially: first-half R&D increased to $37.6 million from $15.1 million, and SG&A to $38.4 million from $29.2 million.
- Income tax expense was $6.8 million for the first half, up from $0.2 million, mainly reflecting use of net operating loss carryforwards and taxes in states where the company had no such carryforwards.
- At June 30, cash and cash equivalents were $31.2 million and short-term marketable securities were $128.8 million, or approximately $160.0 million combined. Current liabilities were $30.9 million; the filing reports no outstanding debt. Stockholders’ equity was $243.5 million.
- First-half investing cash outflow was $55.5 million, mainly reflecting net purchases of marketable securities. Cash and cash equivalents increased by $0.1 million during the period.
Changes, outlook and significant developments
- Management expects 2018 R&D and SG&A expenses to exceed 2017 levels as clinical programs and commercial activity expand. No specific revenue guidance figure is provided in the supplied filing text.
- Management said current plans—including Cushing’s syndrome commercial operations and development programs—could be funded without additional capital, while noting it may raise funds for strategic or other reasons.
- The company completed enrollment in a 35-patient Phase 2 relacorilant trial for Cushing’s syndrome; low-dose cohort results were described as positive, while the high-dose cohort remained under evaluation. Management planned to start a Phase 3 trial in 2018. Oncology and other development programs included relacorilant, CORT125281 and CORT118335.
- Korlym’s U.S. orphan-drug exclusivity for the Cushing’s syndrome indication was due to expire in February 2019. Teva had filed an ANDA seeking to market a generic; Corcept sued, and the statutory stay of FDA approval applies subject to the stated legal conditions. Teva moved to dismiss the amended complaint. The outcome is uncertain. Neptune also petitioned for inter partes review of a Korlym-related patent in August 2018.
- On August 9, 2018, after quarter-end, the board approved a stock repurchase program of up to $100 million through June 30, 2019. Repurchases are discretionary and no specific number of shares is required.
- Key business risks include reliance on Korlym revenue, generic competition and patent disputes, insurance coverage and pricing pressure, dependence on single-source manufacturers and a single specialty pharmacy, and the uncertain timing, cost and outcomes of clinical trials. The company reported no recorded loss contingency and no material change in market risk during the first half.
Important facts for investors to verify
- Korlym prescription growth, net pricing, payer coverage and the assumptions behind rebate and chargeback reserves.
- Progress and results of the relacorilant Phase 2 program and planned Phase 3 trial, plus development timelines and spending for other candidates.
- Developments in the Teva ANDA litigation, Neptune patent review, and implications of the February 2019 orphan-exclusivity expiration.
- Whether operating cash generation and the approximately $160.0 million cash-and-investment balance remain sufficient as R&D and commercial expenses increase.
- Potential dilution and capital allocation following stock-option exercises and the announced, discretionary $100 million repurchase authorization.