cept Therapeutics rporated(CORT) - 2025 Q1 - Quarterly Report

PART I: Financial Information ITEM 1. Financial Statements As of March 31, 2025, the company's net product revenue increased by 7.1% to $157.2 million, but operating income and net income significantly declined due to increased selling, general, and administrative expenses, while the balance sheet remained robust with total assets at $846 million and cash flow from operations decreased substantially Condensed Consolidated Balance Sheets As of March 31, 2025, total assets slightly increased to $846 million, with a decrease in cash and cash equivalents offset by an increase in long-term marketable securities, while liabilities and stockholders' equity remained stable Balance Sheet Key Items (Units: Thousands of USD) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $89,819 | $127,665 | | Short-term marketable securities | $232,944 | $255,669 | | Long-term marketable securities | $248,041 | $219,831 | | Total assets | $846,455 | $840,553 | | Liabilities and Stockholders' Equity | | | | Total liabilities | $163,170 | $160,964 | | Stockholders' equity | $683,285 | $679,589 | | Total liabilities and stockholders' equity | $846,455 | $840,553 | Condensed Consolidated Statements of Income Net product revenue for Q1 2025 increased to $157.2 million, but a substantial rise in selling, general, and administrative expenses led to a sharp decline in operating income to $3.4 million and a decrease in net income to $20.5 million Quarterly Income Statement Comparison (Units: Thousands of USD, except per share data) | Indicator | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net product revenue | $157,214 | $146,808 | | Total operating expenses | $153,798 | $117,308 | | - Research and development expenses | $60,735 | $58,505 | | - Selling, general and administrative expenses | $90,660 | $56,268 | | Operating income | $3,416 | $29,500 | | Net income | $20,547 | $27,762 | | Diluted net income per share | $0.17 | $0.25 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities in Q1 2025 significantly decreased to $5.1 million due to lower net income and higher operating expenses, while financing activities resulted in a substantial outflow of $39.8 million primarily for stock repurchases Quarterly Cash Flow Comparison (Units: Thousands of USD) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,128 | $23,756 | | Net cash used in investing activities | ($3,171) | ($9,014) | | Net cash used in financing activities | ($39,803) | ($543) | | Net (decrease) increase in cash and cash equivalents | ($37,846) | $14,199 | | Cash and cash equivalents at end of period | $89,819 | $149,750 | Notes to Condensed Consolidated Financial Statements The notes provide detailed financial information, including the company's biopharmaceutical focus on cortisol-modulating drugs, a $200 million stock repurchase program, settlement of the Melucci lawsuit, and a Q1 2025 income tax benefit - The company is a commercial-stage biopharmaceutical company engaged in discovering and developing drugs that modulate the effects of cortisol hormones to treat serious endocrine, oncologic, metabolic, and neurological disorders. Its primary product is Korlym® and its authorized generic[22] - The company approved a stock repurchase program of up to $200 million in January 2024. In Q1 2025, the company repurchased 500,000 shares of common stock for $27.4 million[47][48] - The company settled the Melucci securities class action lawsuit, paying $14 million, which was fully reimbursed by its insurer, and the case is now closed[41] - Q1 2025 recorded an income tax benefit of $10.9 million, compared to an income tax expense of $7.2 million in the prior year, primarily due to increased stock-based compensation deductions and lower pre-tax income[61] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis reviews the company's operating results and financial condition, highlighting product revenue growth offset by declining operating income due to increased expenses, significant pipeline progress including FDA acceptance of relacorilant NDA, positive ROSELLA trial data, and anticipated higher R&D and SG&A expenses in 2025 Overview The company is a commercial-stage entity treating various severe diseases by modulating cortisol effects, with Korlym and its authorized generic for hypercortisolism, a proprietary portfolio of over 1,000 selective cortisol modulators, and multiple clinical programs in hypercortisolism, oncology, ALS, and metabolic diseases - The company is a commercial-stage entity dedicated to discovering and developing drugs that modulate the effects of cortisol hormones to treat serious endocrine, oncologic, metabolic, and neurological disorders[67] - The New Drug Application (NDA) for relacorilant in endogenous hypercortisolism was accepted by the FDA in March 2025, with a PDUFA target action date of December 30, 2025[75] - In ovarian cancer, the pivotal Phase 3 ROSELLA trial met its progression-free survival (PFS) endpoint, and interim analysis of overall survival (OS) was also positive[90] - For amyotrophic lateral sclerosis (ALS), the Phase 2 DAZALS trial of dazucorilant did not meet its primary endpoint but observed a statistically significant improvement in overall survival[98] Results of Operations Net product revenue for Q1 2025 increased to $157.2 million, driven by higher volume but partially offset by lower average prices, while research and development expenses slightly increased, and selling, general, and administrative expenses significantly rose, leading to a substantial decline in operating income Quarterly Operating Performance Comparison (Units: Millions of USD) | Item | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net product revenue | $157.2 | $146.8 | +7.1% | | Cost of sales | $2.4 | $2.5 | -4.0% | | Research and development expenses | $60.7 | $58.5 | +3.8% | | Selling, general and administrative expenses | $90.7 | $56.3 | +61.1% | - Revenue growth was driven by a 23.5% increase in volume, partially offset by a 13.3% decrease in average price due to increased sales of the authorized generic[105] - The significant increase in selling, general and administrative expenses was primarily due to higher employee compensation and increased sales and marketing activities to support existing and future potential product commercialization[112] Liquidity and Capital Resources As of March 31, 2025, the company held $570.8 million in cash, cash equivalents, and marketable securities, relying on product sales for funding and anticipating no additional financing needs, despite a significant decrease in net cash provided by operating activities and substantial cash outflow from financing activities primarily for stock repurchases - As of March 31, 2025, the company held a total of $570.8 million in cash, cash equivalents, and marketable securities[117] - Net cash provided by operating activities in Q1 2025 was $5.1 million, a significant decrease from $23.8 million in the prior year, primarily due to lower net income resulting from increased operating expenses[119] - Net cash used in financing activities in Q1 2025 was $39.8 million, primarily for the stock repurchase program ($27.4 million) and net settlement of employee stock options[121] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Market risks related to the company's cash, cash equivalents, and marketable securities, primarily consisting of debt instruments with original maturities under 24 months, did not significantly change during Q1 2025 - As of March 31, 2025, the company's market risk did not significantly change compared to what was disclosed in the annual report as of December 31, 2024[125] ITEM 4. Controls and Procedures As of March 31, 2025, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective, with no significant changes to internal control over financial reporting during the quarter - Management assessed and concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[126] - No changes significantly affecting or likely to significantly affect the company's internal control over financial reporting occurred during the quarter ended March 31, 2025[127] PART II: Other Information ITEM 1. Legal Proceedings The company is involved in multiple legal proceedings, including an appeal in the Teva Korlym patent litigation, antitrust lawsuits filed by Teva and Aetna, ongoing shareholder derivative suits, and a subpoena from the U.S. Attorney's Office regarding Korlym sales and promotion - In the patent litigation with Teva, the district court ruled on December 29, 2023, that Teva's generic product did not infringe Corcept's patents, a decision Corcept has appealed. Teva launched its generic product in January 2024[130] - Teva filed an antitrust lawsuit against Corcept in June 2024. Additionally, Aetna and other companies filed similar lawsuits in February 2025[132][133] - The company received a subpoena for records related to Korlym sales and promotion from the U.S. Attorney's Office for the District of New Jersey in November 2021, with the government investigating potential criminal or civil violations[139] ITEM 1A. Risk Factors The company faces significant risks across commercial activities, including generic competition and pricing pressure, research and development uncertainties, intellectual property challenges, stock-related volatility, and general risks such as political instability, cybersecurity threats, and complex data privacy regulations Risks Related to our Commercial Activities The company's commercial activities face multiple risks, including competition from Korlym generics, potential sales limitations due to public perception of mifepristone and abortion regulations, restricted drug pricing and reimbursement from government regulations like the Inflation Reduction Act, and heavy reliance on a few suppliers and a single specialty pharmacy - Teva launched a generic version of Korlym in January 2024, which could materially harm the company's operating results and financial condition[157] - New laws like the Inflation Reduction Act (IRA) may limit the company's revenue from Medicare patients and could significantly reduce profits in 2026 and beyond[163][165] - The company relies on a single specialty pharmacy, Optime, for product distribution and processing over 99% of revenue collections. Operational difficulties or failure by Optime could adversely affect the company's business, operating results, and financial condition[169] Risks Related to our Research and Development Activities The company's research and development activities are highly uncertain, characterized by lengthy, expensive, and often unsuccessful clinical drug development, reliance on third-party vendors whose failures could cause delays, and the potential for investigational drugs to cause adverse side effects, hindering approval or commercialization - Clinical drug development is lengthy, expensive, and frequently unsuccessful. Results from early studies and trials often do not predict outcomes in later trials[190] - The company relies on third-party vendors for critical clinical trial activities, such as drug distribution, trial management, and data analysis. Failures by these vendors could prevent or delay the approval of investigational drugs[187][189] - Investigational drugs may cause adverse side effects, leading to cessation of clinical development, prevention of regulatory approval, limitation of commercial potential, or significant liability[197] Risks Related to our Intellectual Property The company may face challenges in obtaining, maintaining, or asserting patent protection for its proprietary selective cortisol modulators and their uses, as intellectual property litigation is time-consuming, expensive, and uncertain, with patents constantly subject to challenge and unpredictable outcomes in legal actions to protect rights - Patents are uncertain, involve complex legal and factual issues, and are frequently subject to litigation. Patents granted to or licensed by the company may be challenged at any time[204] General Risk Factors The company faces various general risks, including unpredictable political, legal, and economic uncertainties, potential business disruptions and liabilities from IT system failures or data breaches, and high compliance costs and severe penalties associated with complex domestic and international data privacy regulations - U.S. government policies regarding tariffs, trade, and funding for critical agencies are unpredictable and could harm the company's clinical and commercial interests[214] - The company relies on information technology for its operations, and IT system failures or security breaches, particularly phishing and data breaches, could disrupt business and lead to liabilities[228][229] - The company must comply with complex U.S. and foreign privacy and security laws and regulations, such as HIPAA, GDPR, and CCPA, incurring high compliance costs, with violations potentially leading to substantial fines and business disruption[221][224][225] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the reporting period, but the company repurchased 500,000 shares for $27.4 million under its stock repurchase program in March 2025, with $156.9 million remaining available, and also repurchased 342,000 shares related to employee stock options and restricted stock vesting Q1 2025 Stock Repurchase Activity (Units: Thousands, except per share price) | Period | Total shares repurchased | Average price paid per share | Maximum amount yet to be repurchased under the plan | | :--- | :--- | :--- | :--- | | January 2025 | — | — | $184,329 | | February 2025 | — | — | $184,329 | | March 2025 | 500 | $54.84 | $156,896 | | Total | 500 | $54.84 | $156,896 | - In Q1 2025, the company also repurchased 342,000 shares for a total purchase price of $21.1 million due to cashless net settlement of employee stock options and vesting of restricted stock[239]