cept Therapeutics rporated(CORT) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Corcept Therapeutics reported net product revenue of $117.7 million for Q2 2023, a 14% increase year-over-year, and $223.4 million for the first six months of 2023, with net income for the quarter at $27.5 million and a strong financial position of $363.3 million in cash, cash equivalents, and marketable securities Condensed Consolidated Statements of Income For the three months ended June 30, 2023, net product revenue increased to $117.7 million, but income from operations decreased to $29.6 million due to higher operating expenses, while net income remained relatively flat at $27.5 million Condensed Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Product revenue, net | $117,715 | $103,386 | +13.9% | | Total operating expenses | $88,132 | $71,954 | +22.5% | | Income from operations | $29,583 | $31,432 | -5.9% | | Net income | $27,528 | $27,412 | +0.4% | | Diluted net income per common share | $0.25 | $0.24 | +4.2% | Condensed Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Product revenue, net | $223,369 | $197,074 | +13.3% | | Total operating expenses | $178,933 | $138,873 | +28.8% | | Income from operations | $44,436 | $58,201 | -23.6% | | Net income | $43,407 | $50,209 | -13.5% | | Diluted net income per common share | $0.38 | $0.44 | -13.6% | Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $524.6 million from $583.4 million at year-end 2022, primarily due to reduced marketable securities and increased treasury stock, while total liabilities rose to $103.0 million and stockholders' equity declined to $421.6 million Key Balance Sheet Items (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $172,377 | $66,329 | | Total current assets | $432,588 | $499,253 | | Total assets | $524,625 | $583,430 | | Total liabilities | $103,011 | $81,588 | | Total stockholders' equity | $421,614 | $501,842 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash from operating activities increased to $68.2 million, investing activities provided $183.4 million due to a shift from marketable securities, and financing activities used $145.6 million primarily for common stock repurchases Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $68,243 | $53,287 | | Net cash provided by (used in) investing activities | $183,378 | $(92,296) | | Net cash used in financing activities | $(145,573) | $(3,262) | | Net increase (decrease) in cash | $106,048 | $(42,271) | - The company repurchased common stock for $145.4 million in connection with a Tender Offer during the first six months of 2023[32] Notes to Condensed Financial Statements The notes detail key accounting policies and events, including a $14.0 million Melucci litigation settlement fully covered by insurance, a March 2023 tender offer repurchasing 6.6 million shares for $145.4 million, and $23.1 million in stock-based compensation expense for the first six months of 2023 - The company reached an agreement in principle to settle the Melucci litigation for a one-time payment of $14.0 million, which will be fully covered by insurers[45] - In March 2023, the company commenced a tender offer and subsequently purchased 6.6 million shares of its common stock for an aggregate price of $145.4 million[49] Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $11,892 | $10,662 | | Six Months Ended June 30 | $23,125 | $21,487 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 14% year-over-year revenue growth in Q2 2023 to higher sales volumes and a price increase, while advancing its clinical pipeline with multiple Phase 3 and Phase 2 trials, expecting higher R&D expenses in 2023, and confirming sufficient capital for at least the next 12 months - The company is a commercial-stage pharmaceutical firm focused on modulating the hormone cortisol to treat severe disorders, with its main product being Korlym®, approved for Cushing's syndrome[35][87] - Key clinical development programs include: - Relacorilant: Two Phase 3 trials (GRACE and GRADIENT) for Cushing's syndrome and a pivotal Phase 3 trial (ROSELLA) for ovarian cancer - Dazucorilant: A Phase 2 trial (DAZALS) for Amyotrophic Lateral Sclerosis (ALS) - Miricorilant: A planned Phase 2b trial for Nonalcoholic steatohepatitis (NASH) and a planned Phase 1 trial for preventing antipsychotic-induced weight gain[89][120][123] Results of Operations Highlights (Three Months Ended June 30) | Metric (in millions) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net product revenue | $117.7 | $103.4 | +13.8% | | Research and development | $43.3 | $32.8 | +32.0% | | Selling, general and administrative | $43.3 | $37.8 | +14.6% | - The company expects to fund its operations and planned R&D activities for the next 12 months and beyond without needing to raise additional funds, based on current plans and expectations[199] Quantitative and Qualitative Disclosures About Market Risk The company states that its market risks as of June 30, 2023, primarily associated with cash, cash equivalents, and marketable securities, have not materially changed from those disclosed in its 2022 Annual Report on Form 10-K - There were no material changes in the company's market risks during the six months ended June 30, 2023[243] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[203] - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2023[244] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ongoing patent infringement litigation with Teva Pharmaceuticals regarding a generic Korlym, settled a similar suit with Hikma, reached an agreement to settle the Melucci securities class action for $14.0 million fully covered by insurance, and is cooperating with a subpoena from the U.S. Attorney's Office - The company is in ongoing patent litigation with Teva Pharmaceuticals over its ANDA for a generic version of Korlym, with a trial scheduled for September 27, 2023[245][184] - Litigation with Hikma Pharmaceuticals was resolved via a settlement agreement in December 2022, granting Hikma the right to sell a generic version of Korlym beginning October 1, 2034, or earlier under certain circumstances[188] - The Melucci securities class action lawsuit has been resolved in principle with a proposed settlement of $14.0 million, which will be paid in full by the company's insurers[141] - The company received a subpoena from the U.S. Attorney's Office for the District of New Jersey in November 2021 seeking information on the sale and promotion of Korlym and is cooperating with the investigation[191][261] Risk Factors The company identifies several key risks, including high dependence on Korlym revenue and threats from generic competition and the Inflation Reduction Act, inherent uncertainties in clinical trials, intellectual property protection, reliance on third-party manufacturers, and potential stock price volatility - Commercial Risk: The company's financial results are highly dependent on the sale of Korlym, and the successful commercialization of a generic version would adversely affect business[149][170] - Regulatory and Pricing Risk: The Inflation Reduction Act of 2022 (IRA) is expected to significantly limit revenue from Medicare patients through inflation rebates and future price negotiations, potentially reducing profits[153][157][159] - Competition Risk: Other approved medications for Cushing's syndrome, such as Isturisa® and Recorlev®, compete with Korlym and could reduce its market share[139][152] - Development Risk: The company's efforts to develop and commercialize new product candidates are lengthy, expensive, and may not succeed, as failure can occur at any stage of clinical development[174][261] - Supply Chain Risk: The company relies on a single third-party manufacturer for Korlym's active pharmaceutical ingredient (API), and any disruption could harm the business[164][165] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, but repurchased 6.6 million shares for $145.4 million through a tender offer in April 2023, and acquired 202,040 shares for approximately $4.8 million via cashless net exercises of stock options Issuer Purchases of Equity Securities (Tender Offer) | Period | Total Shares Purchased | Average Price Per Share | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | April 2023 | 6,610,000 | $22.00 | $145,428 | | May 2023 | 0 | N/A | $0 | | June 2023 | 0 | N/A | $0 | | Total | 6,610,000 | $22.00 | $145,428 | Issuer Purchases of Equity Securities (Cashless Exercises) | Period | Total Shares Purchased | Average Price Per Share | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | April 2023 | 13,461 | $22.58 | $304 | | May 2023 | 166,673 | $24.03 | $4,005 | | June 2023 | 21,906 | $23.44 | $514 | | Total | 202,040 | $23.87 | $4,823 |