cept Therapeutics rporated(CORT) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents Corcept Therapeutics' unaudited condensed consolidated financial statements and notes for Q1 2023 and 2022 ITEM 1. FINANCIAL STATEMENTS Details Corcept Therapeutics' unaudited condensed consolidated financial statements and related notes for the first quarter of 2023 and 2022 CONDENSED CONSOLIDATED BALANCE SHEETS Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2023, and December 31, 2022 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) | (In thousands) | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $299,942 | $66,329 | | Short-term marketable securities | 165,115 | 365,343 | | Total current assets | 533,893 | 499,253 | | Total assets | $617,848 | $583,430 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 78,865 | 72,491 | | Total liabilities | 88,264 | 81,588 | | Total stockholders' equity | 529,584 | 501,842 | | Total liabilities and stockholders' equity | $617,848 | $583,430 | - Cash and cash equivalents significantly increased from $66.3 million at December 31, 2022, to $299.9 million at March 31, 2023, while short-term marketable securities decreased from $365.3 million to $165.1 million[11] CONDENSED CONSOLIDATED STATEMENTS OF INCOME Outlines the company's revenues, expenses, and net income for the three months ended March 31, 2023, and 2022 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Product revenue, net | $105,654 | $93,688 | | Total operating expenses | 90,801 | 66,919 | | Income from operations | 14,853 | 26,769 | | Net income | $15,879 | $22,797 | | Basic net income per common share | $0.15 | $0.22 | | Diluted net income per common share | $0.14 | $0.20 | - Net product revenue increased by 12.8% year-over-year, from $93.7 million in Q1 2022 to $105.7 million in Q1 2023. However, net income decreased by 30.4% from $22.8 million to $15.9 million, primarily due to a significant increase in total operating expenses[13] CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Details net income and other comprehensive income components for the three months ended March 31, 2023, and 2022 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) | (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------- | :-------------------------------- | :-------------------------------- | | Net income | $15,879 | $22,797 | | Other comprehensive income (loss): | | | | Unrealized gain (loss) on available-for-sale investments, net of tax effect | 605 | (1,019) | | Foreign currency translation gain (loss), net of tax | 111 | (105) | | Total comprehensive income | $16,595 | $21,673 | - Total comprehensive income decreased from $21.7 million in Q1 2022 to $16.6 million in Q1 2023, despite a positive shift in unrealized gains on available-for-sale investments[16] CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Summarizes cash flows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $25,957 | $35,247 | | Net cash provided by (used in) investing activities | $207,475 | $(50,496) | | Net cash provided by (used in) financing activities | $181 | $(506) | | Net increase (decrease) in cash and cash equivalents | $233,613 | $(15,755) | | Cash and cash equivalents, at end of period | $299,942 | $61,862 | - Net cash provided by operating activities decreased by 26.4% year-over-year[19] - Net cash from investing activities saw a significant positive swing, from a net outflow of $50.5 million in Q1 2022 to a net inflow of $207.5 million in Q1 2023, primarily due to proceeds from maturities of marketable securities[19] CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Presents changes in stockholders' equity, including common stock, additional paid-in capital, and retained earnings CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) | (In thousands) | Balance at Dec 31, 2022 | Balance at Mar 31, 2023 | | :------------- | :---------------------- | :---------------------- | | Common Stock (Shares) | 107,835 | 108,156 | | Common Stock (Amount) | $131 | $131 | | Additional Paid-in Capital | $662,342 | $679,848 | | Treasury Stock | $(456,148) | $(462,507) | | Retained Earnings | $296,386 | $312,265 | | Total Stockholders' Equity | $501,842 | $529,584 | - Total stockholders' equity increased from $501.8 million at December 31, 2022, to $529.6 million at March 31, 2023, driven by net income and stock-based compensation, partially offset by treasury stock purchases[21] NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Provides detailed explanations of accounting policies, balance sheet items, commitments, and subsequent events - Corcept Therapeutics Incorporated is a commercial-stage pharmaceutical company focused on discovering and developing medications by modulating cortisol effects, with Korlym approved for Cushing's syndrome since 2012[22] - The company relies on a single manufacturer for Korlym's active pharmaceutical ingredient (API) and classifies inventory not expected to be sold within 12 months as 'Strategic inventory' (long-term asset)[26] - The company reached a proposed settlement of $14.0 million for the Melucci litigation, fully covered by insurers, with an accrued liability and corresponding insurance recovery receivable recorded as of March 31, 2023[40] - In April 2023, the company amended its office lease, extending it through June 30, 2024, and leased additional space, expecting to record a $0.3 million right-of-use asset and corresponding lease liability[66] - A tender offer to repurchase up to 7.5 million shares of common stock commenced on March 6, 2023, and expired on March 31, 2023, resulting in the repurchase of 6.6 million shares for $145.4 million on April 5, 2023[67] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's analysis of Corcept's financial condition, operational results, and key business drivers for Q1 2023 Overview Introduces Corcept Therapeutics as a commercial-stage pharmaceutical company focused on cortisol modulation - Corcept Therapeutics is a commercial-stage pharmaceutical company focused on discovering and developing medications for severe endocrine, oncologic, metabolic, and neurological disorders by modulating cortisol effects[71] - The company has marketed Korlym (mifepristone) for Cushing's syndrome since 2012 and possesses a portfolio of over 1,000 proprietary selective cortisol modulators[71] Cushing's Syndrome Discusses Korlym sales and ongoing Phase 3 trials for relacorilant in Cushing's syndrome treatment - Corcept sells Korlym in the U.S. for endogenous Cushing's syndrome, utilizing sales representatives and patient support programs to address underdiagnosis and ensure patient access[72][73] - The company is conducting two Phase 3 trials (GRACE and GRADIENT) for relacorilant, a selective cortisol modulator for Cushing's syndrome, which, unlike Korlym, lacks affinity for the progesterone receptor and does not cause hypokalemia[74][75][76] - Relacorilant has received orphan drug designation from the FDA and EC, providing tax credits, reduced regulatory fees, and exclusive marketing rights (seven years in the U.S., ten years in the EU) upon approval[77] Oncology Outlines clinical trials for relacorilant in ovarian, adrenal, and prostate cancers, leveraging cortisol modulation - Cortisol modulation may enhance anti-cancer therapies by reducing cortisol activity at the GR, which can otherwise reduce efficacy, promote tumor growth, or suppress immune response[78] - A Phase 2 trial of relacorilant combined with nab-paclitaxel in platinum-resistant ovarian cancer showed statistically significant improvement in median progression-free survival (PFS) for patients receiving intermittent higher doses (5.6 months vs. 3.8 months, p=0.038)[79][80] - A pivotal Phase 3 trial (ROSELLA) was initiated in June 2022 to replicate these positive results in 360 women with recurrent, platinum-resistant ovarian cancer, with PFS as the primary endpoint[82] - The company is also conducting a Phase 1b trial of relacorilant plus pembrolizumab for metastatic or unresectable adrenal cancer with cortisol excess and plans a Phase 2 trial of relacorilant plus enzalutamide for prostate cancer[84][85][86] Amyotrophic Lateral Sclerosis ("ALS") Details the Phase 2 DAZALS trial for dazucorilant in ALS patients, following promising preclinical results - Corcept initiated a Phase 2 trial (DAZALS) in October 2022 for dazucorilant, a selective cortisol modulator, in 198 ALS patients, following promising preclinical results that showed improved motor performance and reduced neuroinflammation[87] Metabolic Diseases Reviews miricorilant's development for NASH and Antipsychotic-Induced Weight Gain, including trial updates - The Phase 2a trial of miricorilant for NASH was suspended in April 2021 due to elevated liver enzymes, but an ongoing Phase 1b dose-finding trial has identified doses that reduce liver fat without excessive irritation, with a Phase 2 trial planned for Q4 2023[88] - Miricorilant is also being studied for Antipsychotic-Induced Weight Gain (AIWG), with plans for further study despite previous Phase 2 trials not showing reversal of AIWG, based on preclinical and published trial results suggesting potential to prevent weight gain[89] COVID-19 Pandemic Assesses the ongoing negative impact of the COVID-19 pandemic on Korlym revenue and clinical trial enrollment - The COVID-19 pandemic has negatively impacted Korlym's revenue growth and slowed enrollment in some clinical development programs, particularly for non-life-threatening indications like Cushing's syndrome[90][91] Inflation Reduction Act of 2022 Examines the implications of the IRA on share repurchases, corporate taxes, and drug pricing for the company - The Inflation Reduction Act of 2022 (IRA) introduces a 1% excise tax on share repurchases (effective 2023) and a 15% corporate alternative minimum tax (CAMT) (effective 2024), though CAMT is not expected to significantly affect consolidated financial statements[92] - The IRA also allows CMS to negotiate prices for certain Medicare Part B/D drugs and requires manufacturers to pay rebates if prices increase faster than inflation, which is anticipated to significantly limit revenue from Medicare patients and reduce profits starting in 2025[92][93] Results of Operations Analyzes product revenue, operating expenses, and other financial items for the three months ended March 31, 2023 Net Product Revenue (in thousands) | Period | 2023 | 2022 | Change (%) | | :----- | :--- | :--- | :--------- | | Q1 | $105,654 | $93,688 | 12.8% | - The increase in net product revenue was driven by 42.9% higher sales volumes and a price increase effective January 1, 2023[95] Operating Expenses (in thousands) | Expense Category | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--------------- | :------ | :------ | :--------- | :--------- | | Cost of sales | $1,386 | $1,250 | $136 | 10.9% | | R&D | $40,851 | $28,120 | $12,731 | 45.3% | | SG&A | $48,564 | $37,549 | $11,015 | 29.3% | | Total Operating Expenses | $90,801 | $66,919 | $23,882 | 35.7% | - Research and development expense increased significantly by 45.3% to $40.9 million, primarily due to increased spending on development programs (Oncology, Cushing's syndrome, Metabolic diseases, Pre-clinical/ALS) and employee compensation[98][99] - Selling, general and administrative expense rose by 29.3% to $48.6 million, mainly due to increased sales and marketing activities and employee compensation[101] Other Financial Items (in thousands) | Item | Q1 2023 | Q1 2022 | Change ($) | | :--- | :------ | :------ | :--------- | | Interest and other income | $3,581 | $80 | $3,501 | | Income tax expense | $2,555 | $4,052 | $(1,497) | - Interest and other income increased substantially due to higher cash and investment balances and market-wide increases in interest rates[103] Liquidity and Capital Resources Evaluates the company's cash position, operating cash flow, and funding strategy for future operations - Corcept relies on Korlym sales revenue to fund operations and expects to continue doing so without needing additional funds for the next 12 months and beyond, though it may choose to raise funds for strategic reasons[104][105] Cash, Cash Equivalents, and Marketable Securities (in millions) | Item | March 31, 2023 | December 31, 2022 | | :--- | :------------- | :---------------- | | Cash, cash equivalents, and marketable securities | $465.1 | $436.6 | | Cash and cash equivalents | $299.9 | $66.3 | | Marketable securities | $165.1 | $370.3 | - Net cash provided by operating activities decreased to $26.0 million in Q1 2023 from $35.2 million in Q1 2022, primarily due to increased operating expenses[108] - Net cash provided by investing activities significantly increased to $207.5 million in Q1 2023 from a net use of $50.5 million in Q1 2022, mainly due to reallocating cash from marketable securities maturities to cash equivalents in anticipation of a tender offer[109] Contractual Obligations and Commitments Confirms no material changes to contractual payment obligations and purchase commitments during Q1 2023 - Contractual payment obligations and purchase commitments did not materially change during the three months ended March 31, 2023, as disclosed in the Annual Report on Form 10-K for December 31, 2022[112] Off-Balance Sheet Arrangements States that the company has no off-balance sheet arrangements to report - The company has no off-balance sheet arrangements[113] Critical Accounting Policies and Estimates Confirms no material changes to critical accounting policies and estimates during the fiscal quarter - There were no material changes to the company's critical accounting policies and estimates during the fiscal quarter ended March 31, 2023[115] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Confirms no material changes to market risks, primarily related to cash, cash equivalents, and marketable securities - Market risks related to cash, cash equivalents, and marketable securities (debt instruments with maturities under 24 months) did not materially change during Q1 2023[116] ITEM 4. CONTROLS AND PROCEDURES Management confirms effective disclosure controls and no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[117] - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2023[118] PART II. OTHER INFORMATION Presents other required information, including legal proceedings, risk factors, equity sales, and exhibits ITEM 1. LEGAL PROCEEDINGS Details ongoing legal proceedings, including patent litigation, a securities class action settlement, and a government subpoena Teva Litigation Outlines patent infringement lawsuits against Teva Pharmaceuticals regarding generic Korlym, with ongoing trial dates - Corcept filed a lawsuit against Teva Pharmaceuticals in March 2018 for infringement of Korlym patents ('214 and '216) after Teva submitted an ANDA for a generic version[121] - The PTAB upheld the validity of the '214 patent in November 2020, a decision affirmed by the Federal Circuit Court of Appeals in December 2021, closing that specific matter[122] - A new lawsuit was filed against Teva on March 17, 2023, for infringement of U.S. patents 10,842,800 and 10,842,801, with a trial date set for September 27, 2023, for both pending matters[123][124] Hikma ANDA Litigation and Settlement Describes the patent infringement litigation and subsequent settlement with Hikma Pharmaceuticals for generic Korlym - Corcept sued Hikma Pharmaceuticals in March 2021 for patent infringement related to Korlym after Hikma submitted an ANDA for a generic version[126][127] - The litigation was resolved on December 7, 2022, granting Hikma the right to sell a generic Korlym version in the U.S. starting October 1, 2034, or earlier under customary settlement terms[128] Other Matters Covers the Melucci securities class action settlement, shareholder derivative complaints, and a USAO subpoena - A proposed settlement of $14.0 million was reached on February 8, 2023, to resolve the Melucci securities class action litigation, fully covered by insurers and awaiting court approval[130] - Multiple shareholder derivative complaints (Lauren Williams, Jeweltex Pension Plan, Joel B. Ritchie) alleging breach of fiduciary duty and other claims have been stayed pending resolution of the Melucci litigation[131][132][133] - The company received a records subpoena from the NJ USAO in November 2021, investigating potential criminal or civil violations related to Korlym's sale, promotion, and relationships with healthcare professionals, with Corcept cooperating as an entity whose conduct is within scope[135] ITEM 1A. RISK FACTORS Outlines significant risks to Corcept's business, including commercial, R&D, intellectual property, and regulatory factors Summary of Principal Risks Summarizes key risks such as revenue generation, generic competition, regulatory changes, and intellectual property - Principal risks include failure to generate sufficient Korlym revenue, adverse effects from the COVID-19 pandemic, impact of generic Korlym versions, and new government regulations (e.g., IRA) on pricing and reimbursement[148] - Research and development risks involve potential failure of product candidates, lengthy and expensive clinical trials, and delays caused by the COVID-19 pandemic or vendor performance[148] - Intellectual property risks center on securing and maintaining adequate patent protection for proprietary compounds and Korlym[142] - Stock-related risks include wide price fluctuations, potential decline if financial performance misses guidance, and limited opportunities for investors to sell shares[143][148] - General risks encompass reliance on information technology, potential breakdowns or breaches, and the failure to protect confidential information[144] Risk Factors – Discussion Provides a detailed discussion of various risks impacting Korlym revenue, clinical development, and operational stability - Failure to generate sufficient Korlym revenue due to physician preferences for competing treatments, generic versions, or lack of insurance coverage would harm financial results and stock price[147][148][149] - The COVID-19 pandemic continues to adversely affect business by reducing patient office visits, hindering physician identification of eligible patients, and slowing clinical trial enrollment[150][151][152] - Successful commercialization of generic Korlym versions, despite ongoing patent litigation, could rapidly and significantly reduce Korlym sales and price, materially harming financial position[153][154] - New laws like the Inflation Reduction Act (IRA) could make it difficult to obtain acceptable prices or adequate reimbursement for Korlym, potentially reducing revenue and profits, especially from Medicare patients[158][159][161] - Dependence on single third-party manufacturers for Korlym's API and specialty pharmacies for distribution poses risks of supply chain disruptions and delays if vendors fail to perform or comply with regulations[164][165][166] - The unfavorable public perception of mifepristone (Korlym's active ingredient) due to its use in abortion, exacerbated by recent legal decisions, may limit Korlym sales and draw hostile attention, even though it's not approved for pregnancy termination[167][168] - Clinical drug development is lengthy, expensive, and unpredictable; product candidates may fail to show efficacy or acceptable safety, or trials may be delayed or terminated due to various factors, including slow patient enrollment or unforeseen safety issues[182][183][184] - The company may need additional capital if Korlym revenue declines or for strategic reasons, and such funding may not be available on acceptable terms, potentially leading to delays or elimination of development programs[197] - The price of common stock fluctuates widely due to factors like operating results, clinical trial outcomes, intellectual property disputes, and market conditions, and may decline if financial performance does not meet public guidance or analyst estimates[201][202] - Reliance on information technology means breakdowns or breaches of systems, or failure to protect confidential information, could interrupt business operations and lead to liability, especially with increased remote work and cyber threats[213][215] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Reports no unregistered equity sales and details issuer purchases of common stock through cashless option exercises Issuer Purchases of Equity Securities Details the company's common stock repurchases, including shares acquired through cashless net exercises of options - No unregistered sales of equity securities occurred during the reporting period[226] Issuer Purchases of Equity Securities (Q1 2023) | Fiscal Period | Total Number of Shares Purchased (1) | Average Price Per Share (in dollars) | Total Purchase Price of Shares (2, in dollars) | | :------------ | :----------------------------------- | :---------------------- | :--------------------------------- | | Jan 1 - Jan 31, 2023 | 40 | $22.10 | $887 | | Feb 1 - Feb 28, 2023 | 11 | $23.03 | $244 | | Mar 1 - Mar 31, 2023 | 246 | $21.21 | $5,228 | | Total | 297 | $21.40 | $6,359 | - The company paid $1.1 million to satisfy tax withholding obligations associated with the net-share settlement of cashless option exercises[228] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Confirms no defaults upon senior securities to report for the period - Not applicable; there were no defaults upon senior securities[229] ITEM 4. MINE SAFETY DISCLOSURES States that mine safety disclosures are not applicable to the company's operations - Not applicable; there are no mine safety disclosures[230] ITEM 5. OTHER INFORMATION Indicates that no other information is reported in this section - No other information is reported in this section[231] ITEM 6. EXHIBITS Lists exhibits filed with the Form 10-Q, including corporate documents, lease amendments, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, an Eighth Amendment to Office Lease Agreement, Rule 13a-14(a)/15d-14(a) Certifications, 18 U.S.C. Section 1350 Certifications, and XBRL formatted financial statements[233] SIGNATURES Contains the official signatures of Corcept Therapeutics' executive officers, certifying the report's submission SIGNATURES Presents the official signatures of Corcept Therapeutics' executive officers, certifying the report's submission - The report is duly signed by Joseph K. Belanoff, M.D. (Chief Executive Officer), Atabak Mokari (Chief Financial Officer), and Joseph D. Lyon (Chief Accounting Officer) on May 3, 2023[237]