cept Therapeutics rporated(US:CORT)2022-11-02 16:00PART I. FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2022, are presented Condensed Consolidated Balance Sheets Total assets grew to $533.3 million by Sep 30, 2022, driven by marketable securities, with liabilities and equity increasing Condensed Consolidated Balance Sheets (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $452,402 | $266,463 | | Total assets | $533,255 | $423,756 | | Total current liabilities | $53,068 | $47,541 | | Total liabilities | $59,891 | $47,950 | | Total stockholders' equity | $473,364 | $375,806 | Condensed Consolidated Statements of Income Q3 2022 net income was $34.6 million on $101.7 million revenue, showing overall growth Financial Performance (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $101,728 | $96,131 | $298,802 | $267,156 | | Income from operations | $31,934 | $36,232 | $90,135 | $87,813 | | Net income | $34,608 | $30,471 | $84,817 | $80,459 | | Diluted net income per share | $0.30 | $0.24 | $0.73 | $0.63 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $86.9 million, with investing activities using $97.1 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,935 | $118,465 | | Net cash used in investing activities | ($97,086) | ($4,345) | | Net cash used in financing activities | ($17,223) | ($95,622) | | Net (decrease) increase in cash | ($27,374) | $18,498 | Notes to Condensed Financial Statements Notes detail the company's cortisol modulator business, strategic inventory, and R&D tax impact - Corcept is a commercial-stage pharmaceutical company focused on discovering and developing medications that modulate the effects of cortisol for severe endocrine, oncologic, metabolic, and neurological disorders. Its primary commercial product is Korlym, approved in 2012 for treating hyperglycemia in certain patients with endogenous Cushing's syndrome26 - The company holds significant quantities of Korlym's active pharmaceutical ingredient (API) from a single manufacturer, classifying inventory not expected to be sold within 12 months as a long-term asset called "Strategic inventory"30 - Beginning in 2022, the Tax Cuts and Jobs Act of 2017 requires the company to capitalize and amortize R&D expenditures for tax purposes (over 5 years for U.S. and 15 for foreign), resulting in higher cash paid for taxes compared to prior years6870 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, Korlym revenue, clinical trials, COVID-19 impacts, and liquidity Overview Corcept markets Korlym and advances cortisol modulators, with clinical trials ongoing and COVID-19 impacts - The company is conducting two Phase 3 trials for relacorilant in Cushing's syndrome (GRACE and GRADIENT) and initiated a pivotal Phase 3 trial (ROSELLA) for relacorilant combined with nab-paclitaxel in platinum-resistant ovarian cancer777887 - The company is studying miricorilant for antipsychotic-induced weight gain (AIWG) in two Phase 2 trials (GRATITUDE and GRATITUDE II), with data expected by the end of 2022939598 - The COVID-19 pandemic has reduced Korlym revenue by making it harder for physicians to see patients and has slowed enrollment in clinical trials for conditions not considered immediately life-threatening101102 Results of Operations Net product revenue grew in Q3 and YTD 2022 due to Korlym sales, with R&D and SG&A expenses rising Revenue Growth Analysis (YTD ended Sep 30) | Metric | Nine Months 2022 | Nine Months 2021 | Change | | :--- | :--- | :--- | :--- | | Net product revenue | $298.8M | $267.2M | +11.8% | - Sales volume accounted for 60.7% of the increase - Price increases accounted for the remaining growth106 Research & Development Expense by Program (in thousands) | Program | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Oncology | $13,000 | $12,549 | | Cushing's syndrome | $23,082 | $21,893 | | Metabolic diseases | $17,734 | $16,129 | | Total R&D Expense | $94,237 | $85,345 | - Selling, general and administrative (SG&A) expenses increased to $110.5 million for the nine months ended Sep 30, 2022, from $90.1 million in the prior year, due to higher employee compensation, sales and marketing activities, and legal fees115 Liquidity and Capital Resources The company funds operations via Korlym sales, holding $401.2 million in cash, despite decreased operating cash flow - As of September 30, 2022, the company had $401.2 million in cash, cash equivalents, and marketable securities, up from $335.8 million at year-end 2021121 - Net cash from operating activities decreased to $86.9 million for the first nine months of 2022 from $118.5 million in 2021, primarily due to higher deferred income taxes from the capitalization of R&D costs123 - Net cash used in financing activities was $17.2 million in the first nine months of 2022, compared to $95.6 million in the same period of 2021. The decrease was mainly because the company did not repurchase stock under its program in 2022, whereas it spent $88.5 million on repurchases in 2021125 Quantitative and Qualitative Disclosures About Market Risk Market risks from debt investments did not materially change during the nine months ended September 30, 2022 - Market risks associated with cash, cash equivalents, and marketable securities did not change materially during the nine months ended September 30, 2022131 Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2022, with no material internal control changes - Management, including the CEO and CFO, concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective132 - There were no changes during the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting133 PART II. OTHER INFORMATION Legal Proceedings Corcept faces patent infringement lawsuits, a settled generic suit, securities class action, and a U.S. Attorney's investigation - The company is in ongoing patent infringement litigation against Teva and Hikma regarding their attempts to market generic versions of Korlym. A trial date has not been set in the Teva case, and discovery in the Hikma case is set to close in April 2023139145 - In June 2021, the company settled its patent litigation with Sun Pharma, granting Sun the right to sell a generic version of Korlym beginning October 1, 2034, or earlier under certain circumstances143 - In November 2021, the company received a subpoena from the U.S. Attorney's Office for the District of New Jersey investigating potential criminal or civil violations related to the sale and promotion of Korlym. The company is cooperating with the investigation157158 - The company is defending against a securities class action lawsuit (Melucci v. Corcept) and several related shareholder derivative complaints, which are currently stayed pending resolution of the Melucci litigation148152154 Risk Factors This section details significant business risks, including Korlym reliance, generic competition, R&D uncertainty, and IP litigation Risks Related to Commercial Activities Korlym sales face risks from generic competition, COVID-19, price controls, and single-source vendor reliance - The company's financial results depend on revenue from its single commercial product, Korlym. Failure to generate sufficient revenue would harm financial results176177 - The commercialization of generic versions of Korlym would adversely affect business. The company is in active litigation with Teva and Hikma to defend its patents184185186 - The company relies on a single third-party manufacturer (PCAS) for Korlym's API and a single specialty pharmacy (Optime) for distribution, creating significant vendor dependency risk204205 Risks Related to Research and Development Activities Drug development is long, expensive, and uncertain, with COVID-19 causing trial delays and CRO reliance posing risks - Clinical drug development is a lengthy, expensive, and often unsuccessful process. Early positive results are not predictive of later trial success, and failure can occur at any time223224 - The COVID-19 pandemic has slowed the pace of clinical trials, particularly for non-life-threatening conditions like Cushing's syndrome, by delaying patient enrollment and site initiation229230231 - The company relies on third-party vendors like CROs to manage trials. Failure of these vendors to perform their duties, meet timelines, or adhere to GCPs can delay or prevent the approval of product candidates235236 Risks Relating to Intellectual Property Success depends on securing and defending patent protection for products, as patent litigation is complex and uncertain - The company's success depends on its ability to secure and defend adequate patent protection for its products and product candidates. Patent litigation is uncertain, complex, and expensive248249 General Risks General risks include managing growth, data privacy compliance, cybersecurity threats, and insider stock influence - The company is subject to complex and evolving federal, state, and foreign laws regarding data privacy and security (e.g., HIPAA, GDPR, CCPA), and failure to comply could result in significant penalties and harm the business263264270 - The company relies heavily on information technology and is at risk of cybersecurity breaches, malware, and phishing attacks, which could result in the misuse of confidential data and disrupt operations272273 - As of October 26, 2022, officers and directors beneficially owned approximately 18% of the company's common stock, allowing them to significantly influence corporate actions288 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred, but 981,000 shares were repurchased for $26.2 million in Q3 2022 - There were no unregistered sales of equity securities during the period covered by this report289 Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased (thousands) | Average Price Per Share | Total Purchase Price (thousands) | | :--- | :--- | :--- | :--- | | July 2022 | 563 | $26.35 | $14,834 | | August 2022 | 327 | $27.51 | $8,988 | | September 2022 | 91 | $25.87 | $2,365 | | Total | 981 | $26.69 | $26,187 | Other Disclosures This section confirms no defaults on senior securities, no mine safety disclosures, and no other Item 5 information - The report indicates no defaults upon senior securities, no mine safety disclosures, and no other information to be reported for the period292293294