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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-50679
CORCEPT THERAPEUTICS INCORPORATED
(Exact Name of Corporation as Specified in Its Charter)
Delaware 77-0487658
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
149 Commonwealth Drive
Menlo Park, CA 94025
(Address of principal executive offices) (zip code)
(650) 327-3270
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: 
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value CORT The Nasdaq Stock Market
Securities registered pursuant to Section 12 (g) of the Act: 
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Acts. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer Accelerated filer
Non-accelerated filer ☐   Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 
The aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2020 was $1,632,998,185, based on the closing price of $16.82 for shares of the Registrant’s common stock as reported on the Nasdaq Stock Market on June 30, 2020. Shares of common stock beneficially owned by each executive officer, director and holder of more than 10% of our common stock have been excluded, in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.
On February 17, 2021 there were 117,312,341 shares of common stock outstanding at a par value of $0.001 per share. 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2021 Annual Meeting of Stockholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III. 



TABLE OF CONTENTS
Form 10-K
For the year ended December 31, 2020
        Page
         
    PART I    
         
ITEM 1.    
1
         
ITEM 1A.    
         
ITEM 1B.    
         
ITEM 2.    
         
ITEM 3.    
         
ITEM 4.    
         
    PART II    
         
ITEM 5.    
         
ITEM 6.    
         
ITEM 7.    
         
ITEM 7A.    
         
ITEM 8.    
         
ITEM 9.    
         
ITEM 9A.    
         
ITEM 9B.    
         
    PART III    
         
ITEM 10.    
         
ITEM 11.    
         
ITEM 12.    
         
ITEM 13.    
         
ITEM 14.    
         
    PART IV    
         
ITEM 15.    
         
ITEM 16.
         
     



PART I
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (“Securities Act”). All statements contained in this Form 10-K, other than statements of historical fact, are forward-looking statements. When used in this report, the words “believe,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “may,” “will,” “should, “would,” “could,” “seek” and similar expressions are forward-looking statements based on management’s current expectations. The absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, statements about:
our ability to manufacture, market and sell Korlym® (mifepristone) 300 mg Tablets (“Korlym”);
our estimates regarding enrollment in and the completion dates of our clinical trials and the anticipated results of these trials;
the progress and timing of our research and development programs and the regulatory activities associated with them;
our ability to realize the benefits of orphan drug designation for Korlym and the impact of possible future competition for Korlym or our product candidates;
our estimates for future performance, including revenue and profits;
the timing of regulatory submissions seeking approval of product candidates and the commercialization of any product candidates that are approved;
our ability to manufacture, market, commercialize and achieve market acceptance for our product candidates;
uncertainties associated with obtaining and enforcing patents; and
estimates regarding our future revenue, income and capital requirements.
Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Actual events or results may differ materially for many reasons. For a more detailed discussion of the risks and uncertainties that may affect the accuracy of our forward-looking statements, see the “Risk Factors,” “Overview” and “Liquidity and Capital Resources” sections of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Form 10-K. You should also carefully consider the other reports and documents we file with the Securities and Exchange Commission (“SEC”).
Forward-looking statements in this Form 10-K reflect our view only as of the date of this report. Except as required by law, we undertake no obligation to update forward-looking statements.
Unless stated otherwise, all references in this document to “we,” “us,” “our,” “Corcept,” the “Company,” “our company” and similar words and phrases refer to Corcept Therapeutics Incorporated.
ITEM 1. BUSINESS
Overview
We are a commercial-stage company engaged in the discovery and development of drugs to treat severe metabolic, oncologic and psychiatric disorders by modulating the effects of the steroid hormone cortisol.
Cortisol plays a significant role in the body’s response to stress and is essential for survival. Cortisol influences metabolism and the immune system and contributes to emotional stability. Cortisol levels follow a diurnal rhythm that is essential to health, peaking upon awakening and decreasing during the day. Insufficient cortisol activity may lead to dehydration, hypotension, shock, fatigue and hypoglycemia. Excessive cortisol activity, known as hypercortisolism, may lead to a suppressed immune response, impaired glucose tolerance, diabetes, obesity, fatty liver disease, depressed mood, psychosis, wasting of the arms and legs, edema, fatigue, hypertension and other problems.
In addition, pre-clinical and clinical data suggest that cortisol reduces a patient’s immune response to oncogenesis, shields certain cancer cells from the apoptotic effects of chemotherapy and facilitates the growth of others. Pre-clinical and clinical data also indicate that modulating cortisol activity may improve outcomes in patients suffering from weight gain caused by antipsychotic medications (“AIWG”) and in patients with fatty liver disease and non-alcoholic steatohepatitis (“NASH”), precursors of liver fibrosis and cirrhosis.
1


Since 2012, we have marketed the cortisol modulator Korlym in the United States for the treatment of patients with a form of hypercortisolism known as endogenous Cushing’s syndrome. The challenge in treating a patient with Cushing’s syndrome is modulating cortisol’s effects without suppressing them below normal levels or disrupting cortisol’s normal diurnal rhythm. Simply reducing or destroying the ability of the body to make cortisol can cause serious harm. Cortisol activity can be modulated effectively by a drug that competes with cortisol as it attempts to bind to the glucocorticoid receptor (“GR”). We do not sell Korlym internationally.
Because Korlym’s active ingredient, mifepristone, reduces the binding of excess cortisol to GR, it can modulate the effects of abnormal levels and release patterns of cortisol without compromising cortisol’s healthy functions and rhythms. However, mifepristone also binds to the progesterone receptor (“PR”), thereby terminating pregnancy and causing other adverse effects, including endometrial thickening and vaginal bleeding, a debilitating condition suffered by a significant portion of women who take Korlym.
We have discovered more than 1,000 proprietary cortisol modulators that bind to GR but have no affinity for PR and so do not cause Korlym’s PR-related side effects. These novel molecules share Korlym’s affinity for the glucocorticoid receptor GR, but, unlike Korlym, do not bind to the PR and therefore do not cause effects arising from antagonism of progesterone activity, such as termination of pregnancy, endometrial thickening and vaginal bleeding. They are “selective” cortisol modulators. The composition of these compounds and their methods of use in a wide range of indications are covered by U.S. and foreign patents.
Our lead compounds have entered the clinic as potential treatments for a variety of serious disorders – Cushing’s syndrome, solid tumors (i.e., advanced, high-grade serous ovarian cancer, metastatic pancreatic cancer, castration-resistant prostate cancer and adrenocortical cancer with cortisol excess), AIWG and NASH.
COVID-19 Pandemic
Due to the COVID-19 pandemic, much of the world is subject to public health orders of varying degrees of stringency, including in California, where our headquarters are located, and the states where most of our clinical specialists and medical science liaisons live. Restrictions have also been implemented in the jurisdictions where our clinical trial sites are located. We are exempt from some of these restrictions in some jurisdictions because pharmaceutical companies are often deemed “essential businesses” that are allowed wider freedom to operate. Nonetheless, to protect the public health and the health of our employees, we are conducting a significant portion of our business by means of video and teleconferences and e-mail. Most of our third-party manufacturers, distributors (including the specialty pharmacy that dispenses Korlym), information technology service providers, law and accounting firms, clinical research organizations and others are also subject to pandemic-related restrictions.
Public health restrictions, as well as measures taken by patients, physicians, hospitals and medical clinics to reduce the risk of coronavirus infection have reduced our sales and made it difficult to grow our Korlym business. Many hospitals and medical practices have suspended or severely restricted visits by pharmaceutical company representatives, which has reduced the effectiveness of our sales and marketing efforts. When educating physicians about Cushing’s syndrome and Korlym’s potential to benefit their patients, close contact with our clinical specialists is important, especially for physicians who are new to the medication. While we have implemented a program of teleconference and video meetings, which are useful, they are not as effective as meeting in-person. Many physicians and patients have reduced the frequency of office visits, which, together with pandemic-related closures of laboratory facilities and imaging centers and the reluctance of many patients to leave their homes, has made diagnosing and optimally treating patients with Cushing’s syndrome difficult. All of these factors make it difficult to increase the number of patients who receive Korlym, which has reduced our sales, even though there remain many patients who could benefit from the medication but have not received it.
The pandemic’s impact on the pace of our clinical development programs has been variable. Enrollment has slowed significantly in trials of indications not considered immediately life-threatening, such as Cushing’s syndrome, CRPC, AIWG and NASH. In addition, to reduce the risk of COVID-19 transmission and preserve medical resources for the treatment of patients with COVID-19, some clinical sites have stopped enrolling new patients or have reduced the frequency with which physicians see study participants. Some sites have suspended or halted the initiation of new clinical trials. These changes have lengthened the time it will take to complete most of our development programs, although trials in patients with immediately life-threatening diseases, such as advanced pancreatic and ovarian cancer, have experienced many fewer disruptions and delays.
Please see the risk factor under Item 1A of this Annual Report, “The COVID-19 pandemic or other public health emergencies, natural disasters, terrorism or other catastrophes could disrupt our activities and render our own or our vendors’ facilities and equipment inoperable or inaccessible and require us to curtail or cease operations.”
2


Cushing’s Syndrome
Background. Cushing’s syndrome is the clinical manifestation of hypercortisolism. An estimated 10 to 15 of every one million people are diagnosed with Cushing’s syndrome each year, resulting in approximately 3,000 new patients and a patient population in the United States of about 20,000, approximately half of whom are cured by surgery. Cushing’s syndrome most often affects adults between the ages of 20 and 50.
Most people with Cushing’s syndrome have one or more of the following symptoms: high blood sugar, diabetes, high blood pressure, upper body obesity, rounded face, increased fat around the neck, thinning arms and legs, severe fatigue and weak muscles. Irritability, anxiety, cognitive disturbances and depression are also common. Cushing’s syndrome can affect every organ system in the body and can be lethal if not treated. The preferred treatment is surgery, which, if successful, can cure the disease. In approximately half of patients, surgery is not successful because the tumor cannot be located or removed completely. Depending on the type of tumor, surgery can also result in a range of complications.
Korlym to Treat Patients with Cushing’s Syndrome. We sell Korlym in the United States, using experienced sales representatives to call on physicians caring for patients with endogenous Cushing’s syndrome (hypercortisolism). Because many people who suffer from Cushing’s syndrome are undiagnosed or inadequately treated, we have developed and continue to refine and expand programs to educate physicians and patients about screening for hypercortisolism and the role Korlym can play in treating the disorder. We also have a field-based force of medical science liaisons.
We use one specialty pharmacy and one specialty distributor to distribute Korlym and provide logistical support to physicians and patients. Our policy is that no patient with Cushing’s syndrome will be denied access to Korlym for financial reasons. To help us achieve that goal, we fund our own patient support programs and donate money to independent charitable foundations that help patients pay for all aspects of their Cushing’s syndrome care, whether or not that care includes taking Korlym.
Relacorilant to Treat Patients with Cushing’s Syndrome. We are conducting two Phase 3 trials of our proprietary, selective cortisol modulator, relacorilant, as a potential treatment for hypercortisolism. Relacorilant was well-tolerated in its Phase 1 and Phase 2 trials. Patients in the Phase 2 trial exhibited meaningful improvements in glucose control and hypertension, as well as weight loss, improved liver function, coagulopathy, cognition, mood, insulin resistance and quality of life. Importantly, relacorilant shares Korlym’s affinity for GR, but unlike Korlym, has no affinity for PR and so does not cause the effects associated with PR affinity, including termination of pregnancy, endometrial thickening and vaginal bleeding. Relacorilant also does not appear to cause hypokalemia (low potassium), a potentially serious adverse event that is the leading cause of patients stopping treatment with Korlym. Forty-four percent of patients in Korlym’s pivotal trial experienced hypokalemia.
Our Phase 3 “GRACE” trial has a planned enrollment of 130 patients at sites in the United States, Canada, Europe and Israel. Each patient in GRACE will receive relacorilant for 22 weeks. Those who exhibit pre-specified improvements in hypertension or glucose metabolism will enter a 12-week, double-blind, “randomized withdrawal” phase, in which half of the patients will continue receiving relacorilant and the rest will receive placebo. GRACE’s primary endpoints are the rate and degree of relapse in patients receiving placebo compared to those continuing treatment with relacorilant. If successful, we expect GRACE to provide the basis for a new drug application (“NDA”) for relacorilant to treat patients with all etiologies of Cushing’s syndrome.
Last year, we initiated our double-blind, placebo-controlled Phase 3 “GRADIENT” trial to evaluate relacorilant as a potential treatment for patients whose Cushing’s syndrome is caused by an adrenal tumor. Patients with this etiology of Cushing’s syndrome typically have a more indolent course of disease, although their health outcomes are poor. This etiology of Cushing’s syndrome has not been rigorously studied. Patients with adrenal Cushing’s syndrome would benefit from an improved understanding of the role cortisol modulation may play in their treatment.
GRADIENT has a planned enrollment of 130 patients, half of whom will receive relacorilant and half of whom will receive placebo for 26 weeks. GRADIENT’s primary endpoints are improvements in hypertension and glucose metabolism. Many of the clinical sites in GRACE are participating in GRADIENT. Pandemic-related restrictions and disruptions have slowed enrollment in these trials.
The United States Food and Drug Association (“FDA”) and the European Commission (“EC”) have designated relacorilant as an orphan drug for the treatment of Cushing’s syndrome. In the United States, relacorilant’s orphan designation confers tax credits, reduced regulatory fees and, provided we obtain approval for the treatment of Cushing’s syndrome, seven years of exclusive marketing rights for the treatment of patients with Cushing’s syndrome. Benefits of orphan drug designation by the EC are similar, but also include protocol assistance from the European Medicines Agency (“EMA”), access to the EU’s centralized marketing authorization procedure and, if we obtain approval, ten years of exclusive marketing rights in the
3


European Union (“EU”) for the treatment of patients with Cushing’s syndrome. The EC based its orphan designation on its finding that there was plausible evidence of relacorilant’s efficacy and potential to confer significant clinical benefit compared to already approved treatments.
In neither the United States nor the EU does orphan drug designation shorten the drug approval process, make approval more likely or prevent competitors from marketing other drugs for the treatment of Cushing’s syndrome.
FKBP5 Gene Expression Assay. The tests used to diagnose patients with hypercortisolism and optimize their treatment are imprecise and often fail to identify patients with less severe manifestations of the disease. We have developed an assay to measure expression of the gene FKBP5, which is stimulated by cortisol activity, and have completed analytical validation pursuant to the Clinical Laboratory Improvement Amendments (“CLIA”). Clinical data indicate that FKBP5 levels are high in patients suffering from hypercortisolism (i.e., excess cortisol activity), but subside when they are successfully treated. We are testing this hypothesis in the GRACE trial. We believe successful development of this assay will enable physicians to identify new patients with hypercortisolism more easily and to better treat those already in their care.
Oncology
There is substantial in vitro, in vivo and clinical evidence that cortisol’s activity allows certain solid tumors to resist treatment. In some cancers, cortisol activity promotes tumor growth. In other cancers, cortisol stimulates genes that retard cellular apoptosis. Cortisol also suppresses the body’s immune response. However, activating, not suppressing, the immune system is beneficial in fighting certain cancers. Adding a cortisol modulator to a treatment regimen may help the patient’s immune system combat the disease. Many types of solid tumors express GR and are potential targets for cortisol modulation therapy, among them pancreatic, ovarian, castration-resistant prostate and adrenocortical cancer. We own, or have exclusively licensed, several patents covering the use of cortisol modulators to treat pancreatic, cervical, breast and prostate cancers.
Relacorilant in Patients with Solid Tumors. In July 2020, we completed enrollment in our 178-patient, controlled, Phase 2 trial of relacorilant in combination with nab-paclitaxel in patients with advanced, high-grade serous ovarian tumors. We randomized two-thirds of the patients to receive relacorilant plus nab-paclitaxel, while the rest receive nab-paclitaxel alone. The trial’s primary endpoint is progression-free survival, as measured using the Response Evaluation Criteria in Solid Tumors. Secondary endpoints include overall response rate, duration of response, best overall response and overall survival. We expect data from this trial to be available in the first half of 2021.
We are also conducting a Phase 3 trial (“RELIANT”) of relacorilant plus nab-paclitaxel to treat patients with metastatic pancreatic cancer. RELIANT is expected to enroll 80 patients, all of whom will receive relacorilant plus nab-paclitaxel. We plan to perform an interim analysis of data from the first 43 patients (the last of which enrolled in January 2021) in the first half of 2021.
We have initiated an open-label, Phase 1b trial of relacorilant plus the PD-1 checkpoint inhibitor pembrolizumab in 20 patients with advanced adrenocortical cancer with cortisol excess. Because adrenocortical tumors produce cortisol, these patients suffer from both cancer and Cushing’s syndrome. Our trial will evaluate whether relacorilant can, by reducing the effects of excess cortisol activity, treat these patients’ Cushing’s syndrome and, by reversing cortisol-induced immune suppression, help pembrolizumab achieve its maximum tumor-killing effect.
Cortisol Modulators to Treat Patients with CRPC. Because androgens stimulate prostate tumor growth, androgen deprivation is a common treatment for metastatic prostate cancer. Tumors eventually escape androgen deprivation therapy through the proliferation of cells for which cortisol’s stimulation of GR and cortisol’s stimulation of mutated androgen receptors are primary growth factors. Combining a cortisol modulator with an androgen modulator such as Xtandi (enzalutamide) may block this escape route.
We are conducting a dose-finding trial of our proprietary, selective cortisol modulator exicorilant in combination with Xtandi in patients with metastatic CRPC. Independently, investigators at the University of Chicago are conducting a dose-finding trial of relacorilant combined with Xtandi in the same patient population. We are providing relacorilant.
Relacorilant has been designated an orphan drug in both the United States and the EU for the treatment of pancreatic cancer. In addition, we hold U.S. and international patents covering relacorilant’s composition of matter and U.S. patents covering its use to treat patients with pancreatic and ovarian cancer. In addition, we own or have exclusively licensed U.S. and European patents covering relacorilant’s composition of matter and its use to treat a variety of disorders, including pancreatic cancer, castration-resistance prostate cancer (“CRPC”) and other solid tumors.
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Metabolic Disorders
Antipsychotic-Induced Weight Gain (“AIWG). In animal models, our proprietary selective cortisol modulator miricorilant prevents and reverses the weight gain caused by the antipsychotic medication olanzapine. These findings are similar to the results generated with mifepristone in the same animal models and from placebo-controlled clinical trials in which mifepristone significantly reduced the weight gain and adverse metabolic effects experienced by healthy subjects administered olanzapine or the antipsychotic medication risperidone. The results of these trials were published in the journals Advances in Therapy, Gross et al (2009) and Obesity, Gross et al (2010).
Extensive pre-clinical and clinical data suggest that our propriety, selective cortisol modulator miricorilant can prevent weight gain and other metabolic side-effects caused by antipsychotic medications such as olanzapine. In a double-blind, placebo-controlled Phase 1b trial, 96 healthy subjects received daily doses of olanzapine (10 mg) and either miricorilant (600 mg or 900 mg) or placebo for 14 days. Study participants who received miricorilant gained less weight than subjects receiving placebo. In addition, markers of liver damage that rise temporarily at the start of olanzapine therapy increased less sharply in subjects receiving miricorilant, suggesting that miricorilant may have protective effects in the liver.
We are conducting two Phase 2, double-blind, placebo-controlled trials of miricorilant in the reversal of AIWG – “GRATITUDE” and “GRATITUDE II.”
GRATITUDE has a planned enrollment of 100 patients with schizophrenia or bipolar disorder with recent weight gain at 30 sites in the United States. Study participants will receive their established antipsychotic medication and either miricorilant (600 mg) or placebo for 12 weeks. GRATITUDE II has a planned enrollment of 150 patients with schizophrenia and long-standing AIWG at 35 centers in the United States. The primary endpoint in both trials is reduction in body weight.
NASH. Miricorilant is potent in animal models of fatty liver and liver fibrosis, which are precursors of cirrhosis. We are conducting a double-blind, placebo-controlled, Phase 2 trial that is expected to enroll 150 patients with NASH, as determined by MRI, at 15 sites in the United States. Patients will receive a daily dose of miricorilant (600 mg or 900 mg) or placebo for 12 weeks. The primary endpoint is reduction in liver fat content.
Development of our Other Selective Cortisol Modulators
Our portfolio of proprietary selective cortisol modulators consists of four structurally distinct series totaling more than 1,000 compounds, including relacorilant, exicorilant and miricorilant. These compounds potently bind to GR but not the progesterone, estrogen or androgen receptors. We hold U.S. and foreign patents covering these compounds and their methods of use in a wide range of indications. We have applied, and will continue to apply, for patents covering the composition and method of use of our products and product candidates. See “Business – Intellectual Property.”
Many of our proprietary compounds have demonstrated positive results in animal or in vitro models of cortisol modulation. One such molecule, CORT113176, has shown promise in animal models of amyotrophic lateral sclerosis (“ALS”). It has completed Phase 1 and we plan to advance it to Phase 2 as a potential treatment for that disease. We plan to continue identifying selective cortisol modulators and advancing the most promising of them towards the clinic.
Studies by Independent Investigators
For many years we have advanced our understanding of cortisol modulation by supporting the work of independent academic investigators. These researchers have studied the potential utility of mifepristone or our proprietary selective cortisol modulators in a wide range of disorders, including central serous retinopathy, post-traumatic stress disorder, anxiety, alcoholism, cocaine addiction, Alzheimer’s disease, ALS, Cushing’s syndrome, metabolic syndrome, atherosclerosis, fatty liver disease and solid tumors, including triple-negative breast, prostate, ovarian and non-small cell lung cancers, as well as sarcoma and melanoma.
Clinical Trial Agreements
We typically conduct our clinical trials with the assistance of clinical research organizations (“CROs”). ICON plc is helping us conduct our GRACE and GRADIENT trials. IQVIA Inc. is helping us conduct our Phase 2 trial of relacorilant to treat patients with metastatic ovarian cancer and our dose-finding trial of exicorilant to treat patients with CRPC. Medpace, Inc. is helping us conduct our GRATITUDE, GRATITUDE II and RELIANT trials. We may terminate our agreements with ICON and IQVIA on 60 days’ written notice. Our agreement with Medpace may be terminated by us without cause at any time.
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Research and Development Spending
We incurred $114.8 million, $89.0 million and $75.2 million of research and development expenses in the years ended December 31, 2020, 2019 and 2018, respectively, which accounted for 51 percent, 46 percent and 47 percent, respectively, of our total operating expenses in those years.
Manufacturing Korlym
We rely on contract manufacturers to produce Korlym and our product candidates. In March 2014, we entered into an agreement with Produits Chimiques Auxiliaires et de Synthese SA (“PCAS”) to produce mifepristone, the active pharmaceutical ingredient (“API”) in Korlym. In 2018, we amended this agreement and extended its term to December 31, 2021, with two one-year renewals that will occur automatically unless either party gives 12 months advance written notice of its intent not to renew. The amendment also provides for exclusivity between PCAS and Corcept, unless PCAS is unable to meet our requirements, in which case we may purchase mifepristone from another supplier.
We have agreements with two third-party manufacturers to produce and bottle Korlym tablets.
Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act (“FDCA”)
The FDCA establishes an approval process for generic versions of already approved (or “Innovator”) drugs through the submission of an Abbreviated New Drug Application (“ANDA”). The proposed generic drug must have the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, as the Innovator drug. ANDAs are termed “abbreviated” because they need not include data establishing safety or efficacy. Generally, generic applicants must only demonstrate that their product is bioequivalent to, or performs in the same manner as, the Innovator drug.
ANDA applicants must certify that any patents listed by the owner of the Innovator drug in the Orange Book are expired, invalid or will not be infringed by the manufacture, use or sale of the proposed generic product. This is known as a “Paragraph IV certification.” If the owner of the Innovator drug sues the ANDA applicant for infringement of one or more Orange Book patents within 45-days of receiving notice of a Paragraph IV certification, the FDA approval of the ANDA application is automatically stayed until the earlier of (i) 30 months from the receipt of the Paragraph IV certification or (ii) a trial court decision finding the asserted Orange Book patents are invalid, unenforceable or not infringed. This prohibition is commonly referred to as the “30-month stay.” Owners of Innovator drugs regularly challenge paragraph IV certifications and trigger 30-month stays.
We are engaged in ANDA litigation with Teva Pharmaceuticals USA, Inc. (“Teva”) and Sun Pharmaceutical Industries Limited (“Sun Ltd.”) with respect to their proposed generic versions of Korlym. In addition, Teva challenged the validity of one of our patents in a post grant review (“PGR”) proceeding before the Patent Trial and Appeal Board (“PTAB”). In November 2020, the PTAB decided all of Teva’s claims in this PGR in Corcept’s favor. Teva has until March 12, 2021 to file its appeal brief with Federal Circuit Court of Appeals. In addition, on February 1, 2021, we received a Paragraph IV Notice Letter advising that Hikma Pharmaceuticals USA Inc. (“Hikma”) submitted an ANDA to the FDA seeking authorization from the FDA to manufacture, use or sell a generic version of Korlym in the United States. Under the terms of the Hatch Waxman Act, we have until March 15, 2021 to bring suit against Hikma.
See “Part I, Item 3, Legal Proceedings.”
Competition for Korlym
Korlym competes with established treatments, including surgery, radiation and other medications, including “off-label” uses of drugs such as ketoconazole, an anti-fungal medication. Korlym also competes with Signifor® (pasireotide) Injection and Isturisa® (osilodrostat). Both drugs are sold by the Italian pharmaceutical company Recordati S.p.A. (“Recordati”). Both drugs are approved by the FDA for the treatment of adult patients with Cushing’s disease who are not candidates for pituitary surgery or for whom surgery did not work. Cushing’s disease is a subset of Cushing’s syndrome. In the EU, Isturisa is also approved as a treatment for Cushing’s syndrome.
The orphan drug marketing exclusivity period for Korlym ended in February 2019, which means a competitor that receives FDA approval for a generic equivalent of Korlym may market its drug to patients with Cushing’s syndrome, provided doing so would not infringe any of our patents. Korlym may also experience competition from new compounds. Strongbridge Biopharma plc is seeking approval in the United States and Europe to market levoketoconazole, a chiral form of the commonly-prescribed cortisol synthesis inhibitor ketoconazole, as a treatment for patients with Cushing’s syndrome.
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Intellectual Property
Patents and other proprietary rights are important to our business. We own ten U.S. composition of matter patents covering our selective cortisol modulators and 55 U.S. patents covering the use of cortisol modulators to treat a variety of serious disorders, including Cushing’s syndrome and own an extensive portfolio of patents in countries around the world. We have applied, and will continue to apply, for U.S. and foreign patents covering the composition and method of use of our products and product candidates.
Korlym. The composition of matter patent covering Korlym’s active ingredient, mifepristone, has expired. The only other FDA-approved use of mifepristone is to terminate pregnancy. We hold 16 U.S. method of use patents listed in the FDA Orange Book covering various uses of Korlym in the treatment of patients with Cushing’s syndrome, with additional patent applications that may be suitable for listing in the Orange Book under examination at the USPTO. Our current Orange Book patents have expiration dates ranging from 2028 to 2038.
To protect our market for Korlym we rely on (1) our method of use patents, (2) the significant restrictions imposed by the FDA on the use of mifepristone to terminate pregnancy and (3) the different patient populations, administering physicians and treatment settings between the use of mifepristone to terminate pregnancy and to treat Cushing’s syndrome.
Oncology. We have exclusively licensed eight U.S. method of use patents from the University of Chicago covering the use of glucocorticoid receptor antagonists, including mifepristone, in the treatment of castration-resistant prostate cancer in combination with androgen deprivation agents and triple-negative breast cancer in combination with anti-cancer agents. This license also covers related applications in countries around the world. See “Business - License Agreements.”
Other Method of Use Patents. In addition to our patents relating to Cushing’s syndrome, we own U.S. and foreign patents for the use of cortisol modulators in the treatment of pancreatic cancer, weight gain caused by antipsychotic medications, mild cognitive impairment, delirium, catatonia, psychosis induced by interferon-alpha therapy, migraine headaches, gastroesophageal reflux disease, neurological damage in premature infants and in the treatment of diseases using combination steroid and GR antagonist therapy. We own patents covering the optimization of mifepristone plasma levels in the treatment of patients suffering from disorders, including Cushing’s syndrome, amenable to treatment with mifepristone. We also own patents covering prevention and treatment of stress disorders, improvement of therapeutic response to electroconvulsive therapy and inhibition of cognitive deterioration in adults with Down’s Syndrome. The expiration dates of these patents and their foreign counterparts range from 2020 to 2039.
Composition of Matter Patents Covering Our Proprietary, Selective Cortisol Modulators. We have ten U.S. composition of matter patents containing claims relating to our next-generation cortisol modulators. Foreign counterparts of five of these patents have issued in Europe. The expiration dates of these patents and their foreign counterparts range from 2025 to 2034.
We have filed, in appropriate jurisdictions, foreign patent applications corresponding to our U.S. patents and applications. We cannot assure you that any of our patent applications will result in the issuance of patents, that any issued patent will include claims of the breadth we are seeking, or that competitors or other third-parties will not successfully challenge or circumvent our patents if they are issued.
We believe our patents are valid and do not infringe the patents or other proprietary rights of others. Accordingly, we believe we are not obligated to pay royalties relating to the use of intellectual property to any third parties except the University of Chicago, from which we have licensed certain patents.
License Agreements
We have exclusively licensed from the University of Chicago eight U.S. patents for (a) the use of cortisol modulators in the treatment of triple-negative breast cancer, and (b) the use of cortisol modulators to treat castration-resistant prostate cancer. We are required to pay the University of Chicago customary milestone fees and royalties on revenue from products commercialized under the issued patents or patents that may issue pursuant to the pending applications. Our license will end upon expiration of the licensed patents in 2031 and 2033 or upon notification by us to the University of Chicago. Three patents that were licensed from Stanford University expired in October 2018. See “Business – Intellectual Property.”
Government Regulation
Prescription pharmaceutical products are subject to extensive pre- and post-approval regulation governing the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of the products under the Federal Food, Drug and Cosmetic Act. All of our product candidates require regulatory approval by government agencies prior to commercialization and are subject to continued regulatory oversight thereafter. Before a new drug may be marketed in the United States the FDA generally requires completion of preclinical laboratory and animal testing, performance of adequate and
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well-controlled human clinical trials to establish the safety and efficacy of the proposed drug’s intended use and approval by the FDA. Complying with these and other federal and state statutes and regulations involves significant time and expense.
If the FDA approves the marketing of a new drug, physicians may prescribe it to patients in the United States. The FDA may withdraw its approval at any time if compliance with regulatory standards is not maintained. The drug developer must submit periodic reports to the FDA, including reports of adverse patient experiences, which could cause the FDA to impose marketing restrictions through labeling changes or remove the drug from the market. The FDA may also require post-approval studies, referred to as “Phase 4 studies,” to monitor or further explore the effect of approved products, and may limit marketing of the drug based on the results of such studies.
The FDA imposes complex regulations regarding the promotion and sale of pharmaceuticals, including standards for direct-to-consumer advertising, off-label promotion, and industry-sponsored scientific and educational activities. Failure to abide by these regulations can result in penalties including the issuance of a warning letter directing a company to correct deviations from FDA regulations, mandated modification of promotional materials and labeling and the issuance of corrective information in addition to state and federal civil and criminal penalties.
Facilities involved in the manufacture of drugs must comply with FDA-mandated current Good Manufacturing Practices regulations (“cGMP”) and are subject to periodic inspection by the FDA and other regulatory authorities. Failure to comply with statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, including suspension of manufacturing or a product recall.
Marketing Approvals Outside the United States
If we choose to distribute our product candidates outside the United States, we (or our potential future partners) will have to complete an approval process similar to the one imposed by the FDA. The approval procedure and the time required for approval vary from country to country and may involve additional preclinical and clinical trials. Foreign approvals may not be granted on a timely basis, or at all. Regulatory approval of pricing is required in most countries other than the United States, which pricing may be too low to generate an acceptable return. We are not seeking regulatory approval to market Korlym outside the United States.
Coverage and Reimbursement
Sales of our products will depend, in part, on the extent to which they will be covered by government health care programs and commercial insurance and managed healthcare organizations. Third-party payers are increasingly limiting coverage and reducing reimbursements for medical products and services, although this trend has not to-date had a material impact on the amount or timing of our revenues. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures could limit our revenue. Decreases in third-party reimbursement for our products or a decision by a third-party payer to not cover our products could reduce our sales and have a material adverse effect on our results of operations and financial condition.
Other Healthcare Laws
We are subject to healthcare regulation and enforcement by the federal government and the states where we conduct business. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physicians’ sunshine laws and regulations. Foreign governments have comparable regulations.
The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject to evolving interpretations. In the past, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them to have committed a violation. The majority of states also have anti-kickback laws which establish similar prohibitions and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.
Additionally, the civil False Claims Act prohibits knowingly presenting or causing the presentation of a false, fictitious or fraudulent claim for payment to the U.S. government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. In addition, the government may assert
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that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Violations of the False Claims Act can result in very significant monetary penalties and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. We expect that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program. In addition, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, imposes certain requirements relating to the privacy, security and transmission of protected health information on HIPAA covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, and their business associates who conduct certain activities for or on their behalf involving protected health information on their behalf. Even when HIPAA does not apply, according to the Federal Trade Commission or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 U.S.C § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule.
In addition, there has been increased federal and state regulation of payments made to physicians and other healthcare providers. The Patent Protection and Affordable Care Act (“ACA”), among other things, imposes new reporting requirements on drug manufacturers for payments made by them to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain health care professionals beginning in 2022 and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in significant civil monetary penalties for any payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers must report such payments to the government by the 90th day of each calendar year. Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.
State and foreign laws and regulations restrict business practices in the pharmaceutical industry and complicate our compliance efforts. For example, some states require companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the federal government’s compliance guidance or otherwise restrict payments to healthcare providers and other potential referral sources. Some states require manufacturers to file reports relating to pricing and marketing information. Some state and local governments require the public registration of pharmaceutical sales representatives.
Certain state and foreign laws also govern the privacy and security of health information in ways that differ significantly from one another and are not preempted by HIPAA. For example, California recently enacted legislation, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context. In Europe, the General Data Protection Regulation, or GDPR, went into effect in May 2018 and imposes stringent data protection requirements for controllers and processors of personal data of persons within the EU. The GDPR applies to any company established in the EU as well as to those outside the EU if they collect and use personal data in connection with the offering of goods or services to individuals in the EU or the monitoring of their behavior. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition, the United Kingdom leaving the EU could also lead to further legislative and regulatory changes. It remains unclear how the United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfer to the United Kingdom from the EU will be regulated, especially following the United Kingdom’s departure from the EU on January 31, 2020. However, the United Kingdom has transposed the GDPR into domestic law with the Data Protection Act 2018, which remains in force following the United Kingdom’s departure from the EU.
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The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.
Data Privacy and Security
Numerous state, federal and foreign laws and regulations govern the collection of, disclosure of, use of, access to, transfer of, and confidentiality and security of health-related and other personal information, and could apply now or in the future to our operations or the operations of our partners. For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, imposes requirements relating to the privacy, security and transmission of protected health information on HIPAA covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, and their business associates who conduct certain activities for or on their behalf involving protected health information on their behalf. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by the U.S. Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. Further, entities that knowingly receive individually identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA may be subject to criminal penalties.
Even when HIPAA does not apply, according to the Federal Trade Commission or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
Certain state and foreign laws also govern the privacy and security of health information in ways that differ significantly from one another and are not preempted by HIPAA. For example, California recently enacted legislation, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for health-related information, including clinical trial data, it may regulate or impact our processing of personal information depending on the context. Further, the California Privacy Rights Act (CPRA), recently passed in California. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.
In Europe, the General Data Protection Regulation, or GDPR, went into effect in May 2018 and imposes stringent data protection requirements for controllers and processors of personal data of persons within the EU. The GDPR applies to any company established in the EU or the EEA as well as to those outside the EU or the EEA if they collect and use personal data in connection with the offering of goods or services to individuals in the EU or the monitoring of their behavior. In addition, the GDPR increases the scrutiny of transfers of personal data from clinical trial sites located in the EEA to the United States and other jurisdictions that the EC does not recognize as having “adequate” data protection laws; in July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the EU-US Privacy Shield and imposing further restrictions on use of the standard contractual clauses, which could increase our costs and our ability to efficiently process personal data from the EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition, the United Kingdom leaving the EU could also lead to further legislative and regulatory changes. Relatedly, following the United Kingdom’s withdrawal from the European Economic Area and the European Union, and the expiry of the transition period, companies have to comply with both the GDPR and the GDPR
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as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which may expose us to further compliance risk.
Employees
We are managed by experienced pharmaceutical executives and also enlist the expertise of independent advisors with extensive pharmaceutical experience. As of December 31, 2020, we had 236 employees. We consider our employee relations to be good. Our employees are not covered by a collective bargaining agreement.
We seek to hire, retain and motivate smart, ethical, hard-working employees, officers and directors. To achieve this goal, we offer a collegial work environment where creativity, collaboration and initiative are encouraged. We offer competitive salaries and industry-leading health benefits. To align our people’s goals with Corcept’s goals, we offer annual performance-based cash bonuses and stock-based compensation.
About Corcept
We were incorporated in the State of Delaware on May 13, 1998. Our registered trademarks include Corcept® and Korlym®. Other service marks, trademarks and trade names referred to in this document are the property of their respective owners.
Available Information
We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, and we therefore file periodic reports, proxy statements and other information with the SEC relating to our business, consolidated financial statements and other matters. The SEC maintains an Internet site, www.sec.gov, that contains reports, proxy statements and other information regarding issuers such as Corcept.
For more information about Corcept, including free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, visit our website at www.corcept.com or the SEC’s website, www.sec.gov. The information found on or accessible through our website is not incorporated into, and does not form a part of, this Form 10-K.
ITEM 1A. RISK FACTORS
Investing in our common stock involves significant risks. Before investing, carefully consider the risks described below and the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties described below are the ones we believe may materially affect us. Many of them have been or may become exacerbated by the COVID-19 pandemic. There may be others of which we are unaware that could materially harm our business or financial condition and cause the price of our stock to decline, in which case you could lose all or part of your investment.
Summary of Principal Risks
The following bullet points summarize the principal risks we face, each of which could adversely affect our business, operations, and financial results. For clarity of presentation, we have arranged these risks by the part of our business they most directly affect – (i) commercial operations, (ii) research and development, (iii) capital need and financial results, (iv) intellectual property and (v) our stock price. A sixth group of “general risks” lists risks that affect our business as a whole.
Risks Related to our Commercial Activities
Failure to generate sufficient revenue from the sale of Korlym would harm our financial results and would likely cause our stock price to decline.
The COVID-19 pandemic or other public health emergencies, natural disasters, terrorism or other catastrophes could disrupt our activities and render our own or our vendors’ facilities and equipment inoperable or inaccessible and require us to curtail or cease operations.
If generic versions of Korlym are approved and successfully commercialized, our business, results of operations and financial position would be adversely affected.
Other companies offer or are attempting to develop different medications to treat patients with Cushing’s syndrome. The availability of competing treatments could limit our revenue from Korlym.
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If we cannot continue to obtain acceptable prices or adequate insurance coverage and reimbursement for Korlym, we will be unable to generate significant revenues.
We depend on vendors to manufacture Korlym’s active ingredient, form it into tablets, package it and dispense it to patients. We also depend on vendors to manufacture the API and capsules or tablets for our product candidates. If our suppliers become unable or unwilling to perform these functions and we cannot transfer these activities to replacement vendors in a timely manner, our business will be harmed.
Risks Related to our Research and Development Activities
Clinical drug development is lengthy, expensive and often unsuccessful. Results of early studies and trials are often not predictive of later trial results. Failure can occur at any stage of drug development. Our efforts to discover, develop and commercialize our product candidates may not succeed.
The COVID-19 pandemic has made initiating and advancing our clinical development programs more difficult.
Vendors manufacture and distribute the drug product we use in our trials, conduct and manage some of our clinical trials and perform data collection and analysis. Failure of these vendors to perform their duties or meet expected timelines may prevent or delay approval of our product candidates.
Our products and product candidates may cause undesirable side effects that halt their clinical development, prevent their regulatory approval, limit their commercial potential or cause us significant liability.
Risks Related to our Capital Needs and Financial Results
We may need additional capital to fund our operations or for strategic reasons. Such capital may not be available on acceptable terms or at all.
Risks Relating to Our Intellectual Property
To succeed, we must secure and maintain adequate patent protection for the composition and methods of use of our proprietary, selective cortisol modulators and for the use of Korlym to treat Cushing’s syndrome and other disorders.
Third parties may allege that our patents infringe their rights. Defending against such allegations may result in costly litigation and may require us to obtain a license or bar us from commercializing our product candidates or Korlym for a new indication.
Risks Related to Our Stock
The price of our common stock fluctuates widely and is likely to continue to do so. Opportunities for the sale of shares at any particular time may be limited.
Our stock price may decline if our financial performance does not meet the guidance we have provided to the public, estimates published by research analysts or other investor expectations.
General Risks
We are subject to government regulation and other legal obligations relating to privacy and data protection. Compliance with these requirements is complex and costly. Failure to comply could materially harm our business.
We may be unable to obtain or maintain regulatory approvals for our product or product candidates.
Anti-takeover provisions in our charter and bylaws and under Delaware law may make an acquisition of us or a change in our management more expensive or difficult, even if an acquisition or a management change would be beneficial to our stockholders.
We rely heavily on information technology systems to conduct our business. A breakdown or breach of these systems or our failure to protect confidential information concerning our business, patients or employees could interrupt the operation of our business and subject us to liability.
Our officers, directors and principal stockholders, acting as a group, could significantly influence corporate actions.
Risk Factors - Discussion
The following section discusses the principal risks listed above, as well as other risks we believe to be material.
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Risks Related to our Commercial Activities
Failure to generate sufficient revenue from the sale of Korlym would harm our financial results and would likely cause our stock price to decline.
Our ability to generate revenue and to fund our commercial operations and development programs is dependent on the sale of Korlym to treat patients with Cushing’s syndrome. Physicians will prescribe Korlym only if they determine that it is preferable to other treatments, even if those treatments are not approved for Cushing’s syndrome. Because Cushing’s syndrome is rare, most physicians are inexperienced diagnosing or caring for patients with the illness and it can be hard to persuade them to identify appropriate patients and treat them with Korlym.
Many factors could limit our Korlym revenue, including:
the preference of some physicians for off-label treatments for Cushing’s syndrome, such as ketoconazole;
competition from non-medical treatments, such as surgery and radiation;
natural disasters or other catastrophes, such as the COVID-19 pandemic, that reduce the ability or willingness of physicians to see patients or of patients to bear the risk of leaving their homes to seek medical care;
the introduction of competing treatments, including generic versions of Korlym;
lack of availability of government or private insurance, which may be exacerbated if (i) the U.S. Supreme Court strikes down the Affordable Care Act, which greatly increased the number of Americans with health insurance or (ii) significant increases in unemployment cause patients to lose employer-provided private health insurance and either shift to Medicaid, which reimburses Korlym at a significantly lower price, or become uninsured, which would decrease our revenue and increase the burden on our financial assistance and free drug programs and on the independent charities we support; and
negative publicity and political concerns about Korlym’s active ingredient, mifepristone, which is approved in another drug for the termination of pregnancy
Failure to generate sufficient Korlym revenue could prevent us from fully funding our planned commercial and clinical activities and would likely cause our stock price to decline.
The COVID-19 pandemic or other public health emergencies, natural disasters, terrorism or other catastrophes could disrupt our activities and render our own or our vendors’ facilities and equipment inoperable or inaccessible and require us to curtail or cease operations.
COVID-19, a serious and sometimes fatal illness, has spread to every country in the world and throughout the United States. Many countries, including most states of the United States, have reacted by instituting quarantines, “lockdowns” and other public health restrictions on leisure activities, work and travel. In California, where our headquarters are located, and in the states where our clinical specialists and medical science liaisons live and work, residents are subject to significant public health restrictions. Attempts by some states to lift these restrictions have led to a sharp increase in the number of new COVID-19 infections, hospitalizations and deaths, which in turn has led to the reimposition of restrictions, as well as to voluntary reductions in public activities by residents concerned for their health. Although many jurisdictions consider pharmaceutical companies as “essential businesses” with wide freedom to operate, we have been managing our business primarily by video conference, teleconference and email. We rely on third-party manufacturers, distributors (including the specialty pharmacy that dispenses Korlym), information technology and software service providers, law and accounting firms, clinical research organizations and consultants who are subject to, or may become subject to, pandemic-related controls. If these third parties cannot perform the services we require in a timely way and we cannot successfully implement replacements or workarounds, our business, results of operations and financial condition could be harmed.
COVID-19 has made it more difficult to interact with physicians who treat patients with Cushing’s syndrome. Steps physicians have taken to reduce the risk of COVID-19 infection in their practices include reducing the frequency of patient office visits and barring office visits by third parties, including our clinical specialists and medical science liaisons. Pandemic-related closures of clinical laboratories and imaging centers, as well as the reluctance of patients to leave the safety of their homes, has made it difficult for many physicians to identify patients who may benefit from Korlym, begin their treatment, titrate to an optimum dose and maintain their regimen, which has reduced our revenue. If physicians do not prescribe Korlym to new patients or have difficulty increasing a patient’s Korlym dose to its optimal level, or if patients already receiving Korlym discontinue treatment, our revenue will be unlikely to grow and may decline further.
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Other natural or man-made disasters could harm our business, operating results and financial condition. Our headquarters are in the San Francisco Bay Area, which experiences earthquakes. Our specialty pharmacy, tablet manufacturers and warehouses are in areas subject to hurricanes and tornadoes. Political considerations relating to mifepristone put us and our manufacturers at increased risk of protests and disruptive events. If a disaster were to occur, we might not be able to operate our business. Our insurance, if available at all, would likely be insufficient to cover losses resulting from disasters or other business interruptions.
If generic versions of Korlym are approved and successfully commercialized, our business, results of operations and financial position would be adversely affected.
The marketing exclusivity provided by Korlym’s orphan drug designation expired in February 2019, which means other companies may now seek to introduce generic equivalents of Korlym for the treatment of Cushing’s syndrome, provided they receive FDA approval and can show that they would not infringe our applicable patents or that those patents are invalid or unenforceable. If our patents are successfully challenged and a generic version of Korlym becomes available, our sales of Korlym tablets and their price could decline rapidly and significantly, which would reduce our revenue and materially harm our results of operations and financial position. Competition from a generic version of Korlym may also cause our revenue to be materially less than the public guidance we have provided, which would likely cause the price of our common stock to decline.
We have sued Teva and Sun in Federal District Court with respect to their proposed generic versions of Korlym. In addition, Teva has challenged the validity of one of our patents in a proceeding before the Patent Trial and Appeals Board. Legal action to enforce or defend intellectual property rights is complex, costly and involves significant commitments of management time. There can be no assurance of a successful outcome. Please see “Part I, Item 3, Legal Proceedings.” Furthermore, the 30-month stay provided by the Hatch-Waxman Act expired on August 2, 2020, which means Teva now has final approval from the FDA to market its generic version of Korlym and may choose to do so at any time, notwithstanding any ongoing litigation or administrative disputes with us. Even if we prevail in our legal actions and Teva withdraws its product and pays us damages, the temporary availability of a generic version of Korlym would materially harm our results of operations and financial condition.
On February 1, 2021, we received a Paragraph IV notice from Hikma stating that is seeking FDA approval to market a generic version of Korlym. It is likely that other companies will do the same. While we will vigorously protect our intellectual property, there can be no assurance our efforts will be successful.
Other companies offer or are attempting to develop different medications to treat patients with Cushing’s syndrome. The availability of competing treatments could limit our revenue from Korlym.
Since 2012, a medication owned by the Italian pharmaceutical company Recordati-S.p.A., the somatostatin analogue Signifor® (pasireotide) Injection, has been marketed in both the United States and the EU for adult patients with Cushing’s disease (a subset of Cushing’s syndrome). On March 6, 2020, the FDA granted Recordati approval to market another cortisol synthesis inhibitor, Isturisa® (osilodrostat) tablets, to treat patients with Cushing’s disease. Osilodrostat is approved in the EU for the treatment of patients with Cushing’s syndrome. Osilodrostat has been designated an orphan drug in both the EU and the United States.
Strongbridge Biopharma plc (“Strongbridge”) has received orphan drug designation in the United States and the EU for the use of the cortisol synthesis inhibitor levoketoconazole to treat patients with Cushing’s syndrome. Levoketoconazole is an enantiomer of the generic anti-fungal medication, ketoconazole, that is prescribed off-label to treat patients with Cushing’s syndrome. Strongbridge has completed two Phase 3 trials, which met their primary endpoints of reducing cortisol synthesis, and expects to submit a new drug application (“NDA”) to the FDA in the first quarter of 2021.
If we cannot continue to obtain acceptable prices or adequate insurance coverage and reimbursement for Korlym, we will be unable to generate significant revenues.
The commercial success of Korlym depends on the availability of adequate insurance coverage and reimbursement. Government payers, including Medicare, Medicaid and the Veterans Administration, as well as private insurers and health maintenance organizations, are increasingly attempting to contain healthcare costs by limiting reimbursement for medicines. If government or private payers cease to provide adequate and timely coverage and reimbursement for Korlym, physicians may not prescribe the medication and patients may not purchase it, even if it is prescribed. In addition, delays in coverage for individual patients may reduce our revenues.
The COVID-19 pandemic has caused a global economic contraction that may last a long time. Significant increases in unemployment stemming from the pandemic may cause some patients to lose their employer-sponsored insurance and may increase patient reliance on Medicaid (which pays significantly less for Korlym) and our financial assistance and free drug
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programs and on the independent charities we support. There may also be delays in coverage as patients secure authorization for Korlym treatment from a new insurer. If the pandemic causes any of these effects, our revenue would decline and our charitable donation expense would increase.
In many foreign markets, drug prices and the profitability of prescription medications are subject to government control. In the United States, we expect that there will continue to be federal and state proposals for similar controls. Also, the trends toward managed health care in the United States and recent laws and legislation intended to increase the public visibility of drug prices and reduce the cost of government and private insurance programs could significantly influence the purchase of health care services and products and may result in lower prices for Korlym.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. The Patient Protection and Affordable Care Act, or ACA, which was passed in 2010, substantially changed the way health care is financed by both governmental and private insurers. The ACA, among other things, expanded Medicaid program eligibility and access to commercial health insurance coverage, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and promoted a new Medicare Part D coverage gap discount program. The ACA also appropriated funding to comparative clinical effectiveness research, although it remains unclear how the research will affect Medicare coverage and reimbursement or how new information will influence other third-party payer policies.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, the Tax Cuts and Jobs Acts (the “Tax Act”) was enacted, which, among other things, removed penalties for not complying with the individual mandate to carry health insurance. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when the decision will be made or how these decisions, subsequent appeals, if any, and the Supreme Court will rule. In addition, there may be other efforts to challenge, replace or repeal the ACA that may affect the law or our business. Any new limitations on, changes to, or uncertainty with respect to the ability of individuals to enroll in governmental reimbursement programs or other third-party payer insurance plans could reduce Korlym sales, which in turn could affect our ability to successfully develop and commercialize new products.
Other legislative and regulatory changes have been proposed and adopted in the United States since the ACA was enacted. These changes included an aggregate reduction in Medicare payments to providers of 2 percent per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. In addition, the American Taxpayer Relief Act of 2012, which further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Moreover, the federal government and the individual states in the United States have become increasingly active in developing proposals, passing legislation and implementing regulations designed to control drug pricing, including price or patient reimbursement constraints, discounts, formulary flexibility, marketing cost disclosure and transparency measures.
These new laws and the regulations and policies implementing them, as well as other healthcare-related measures that may be adopted in the future, could materially reduce our ability to develop and commercialize our product candidates.
The unfavorable public perception of mifepristone may limit our ability to sell Korlym.
The active ingredient in Korlym, mifepristone, is approved by the FDA in another drug for the termination of early pregnancy. As a result, mifepristone is the subject of considerable debate in the United States and elsewhere. Public perception of mifepristone may limit the acceptance of Korlym by patients and physicians. Even though we have taken measures to minimize the chance that Korlym will accidentally be prescribed to a pregnant woman, physicians may choose not to prescribe Korlym to a woman simply to avoid the risk of terminating a pregnancy.
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We depend on vendors to manufacture Korlym’s active ingredient, form it into tablets, package it and dispense it to patients. We also depend on vendors to manufacture the API and capsules or tablets for our product candidates. If our suppliers become unable or unwilling to perform these functions and we cannot transfer these activities to replacement vendors in a timely manner, our business will be harmed.
A single third-party manufacturer, PCAS, supplies the API in Korlym. Two other third-party manufacturers produce and bottle Korlym tablets. Our agreement with PCAS automatically renews for two one-year terms, unless either party provides 12-months’ written notice of its intent not to renew. A single specialty pharmacy, Optime Care, Inc. (“Optime”) dispenses Korlym directly to patients and collects payments from insurers representing approximately 99 percent of our revenue. If Optime does not adhere to its agreements with payers, it may not be able to collect some or all of the payments due to us. Our agreement with Optime has a five-year term and renews upon the written consent of both parties, subject to customary termination provisions, including the right of Optime to terminate in the event of a material breach by us that we do not cure in a reasonable period of time after receiving written notice. In addition, we may terminate the agreement for convenience. In the event any of these vendors fails to perform its contractual obligations to us or is materially impaired in its performance by the COVID-19 pandemic or for any other reason, we may experience disruptions and delays in our supply chain and our ability to deliver Korlym to patients, which would adversely affect our business, results of operations and financial position.
The facilities used by our vendors to manufacture and package the API and drug product for Korlym and our product candidates must be approved by the FDA and, in some cases, the European Medicines Agency (“EMA”). We do not control the activities of these vendors, including whether they maintain adequate quality control and hire qualified personnel. We are dependent on them for compliance with the regulatory requirements known as current good manufacturing practices (“cGMPs”). If our vendors cannot manufacture material that conforms to our specifications and the strict requirements of the FDA or others, they will not be able to maintain regulatory authorizations for their facilities and we could be prohibited from using the API or drug product they have provided. If the FDA, EMA or other regulatory authorities withdraw regulatory authorizations of these facilities, we may need to find alternative vendors or facilities, which would be time-consuming, complex and expensive and could significantly hamper our ability to develop, obtain regulatory approval for and market our products. Sanctions could be imposed on us, including fines, injunctions, civil penalties, refusal of regulators to approve our product candidates, delays, suspensions or withdrawals of approvals, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could harm our business.
We may not have adequate insurance to cover our exposure to product liability claims.
We may be subject to product liability or other claims based on allegations that Korlym or one of our product candidates has harmed a patient. Such a claim may damage our reputation by raising questions about Korlym or our product candidates’ safety and could prevent or interfere with product development or commercialization. Less common adverse effects of a pharmaceutical product are sometimes not known until long after the product is approved for marketing. Because the active ingredient in Korlym is used to terminate pregnancy, clinicians using Korlym in clinical trials and physicians prescribing the medicine to women must take strict precautions to ensure that it is not administered to pregnant women. Failure to observe these precautions could result in significant product liability claims.
Our insurance may not fully cover our potential product liabilities. Inability to obtain adequate insurance coverage could inhibit development of our product candidates or result in significant uninsured liability. Defending a lawsuit could be costly and divert management from productive activities.
If we are unable to maintain regulatory approval of Korlym for the treatment of patients with Cushing’s syndrome or if we fail to comply with other requirements, we will be unable to generate revenue and may be subject to penalties.
We are subject to oversight by the FDA and other regulatory authorities in the United States and elsewhere with respect to our research, testing, manufacturing, labeling, distribution, adverse event reporting, storage, advertising, promotion, recordkeeping and sales and marketing activities. These requirements include submissions of safety information, annual updates on manufacturing activities and continued compliance with FDA regulations, including cGMPs, good laboratory practices and good clinical practices (“GCP”). The FDA enforces these regulations through inspections of us and the laboratories, manufacturers and clinical sites we use. Foreign regulatory authorities have comparable requirements and enforcement mechanisms. Discovery of previously unknown problems with a product or product candidate, such as adverse events of unanticipated severity or frequency or deficiencies in manufacturing processes or management, as well as failure to comply with FDA or other U.S. or foreign regulatory requirements, may subject us to substantial civil and criminal penalties, injunctions, holds on clinical trials, product seizure, refusal to permit the import or export of products, restrictions on product marketing, withdrawal of the product from the market, product recalls, total or partial suspension of production, refusal to approve pending NDAs or supplemental NDAs, and suspension or revocation of product approvals.
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We may be subject to civil or criminal penalties if our marketing of Korlym violates FDA regulations or health care fraud and abuse laws.
We are subject to FDA regulations governing the promotion and sale of medications. Although physicians are permitted to prescribe drugs for any indication they choose, manufacturers may only promote products for their FDA-approved use. All other uses are referred to as “off-label.” In the United States, we market Korlym to treat hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and for whom surgery has failed or is not an option. We provide promotional materials and training programs to physicians covering the use of Korlym for this indication. The FDA may change its policies or enact new regulations at any time that restrict our ability to promote our products.
If the FDA were to determine that we engaged in off-label promotion, the FDA could require us to change our practices and subject us to regulatory enforcement actions, including issuance of a public “warning letter,” injunction, seizure, civil fine or criminal penalties. Other federal or state enforcement authorities might act if they believe that the alleged improper promotion led to the submission and payment of claims for an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Even if it is determined that we are not in violation of these laws, we may receive negative publicity, incur significant expenses and be forced to devote management time to defending our position.
In addition to laws restricting off-label promotion, we are also subject to federal and state healthcare fraud and abuse laws and regulations designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. The U.S. healthcare laws and regulations that may affect our ability to operate include, but are not limited to:
the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
federal false claims laws, including, without limitation, the False Claims Act, which prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Pharmaceutical companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as allegedly providing free product to or entering into “sham” consulting arrangements with customers to induce such customers to purchase, order or recommend the company’s products in violation of the Anti-Kickback Statute and federal false claims laws and regulations; reporting to pricing services inflated average wholesale prices that were then used by certain governmental programs to set reimbursement rates; engaging in the promotion of “off-label” uses that caused customers to submit claims to and obtain reimbursement from governmental payers for non-covered “off-label” uses; and submitting inflated best price information to the Medicaid Drug Rebate Program; the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
the federal Civil Monetary Penalties law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier;
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
federal “sunshine” laws, including the federal Physician Payment Sunshine Act, that require transparency regarding financial arrangements with health care providers, such as the reporting and disclosure requirements imposed by the ACA on drug manufacturers regarding any “transfer of value” made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain health care professionals beginning in 2022, teaching hospitals, and ownership or investment interests held by physicians and their immediate family members. Manufacturers are required to submit reports detailing these financial arrangements by the 90th day of each calendar year;
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; and state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information.
The risk of being found in violation of these laws and regulations is increased by the fact that many of them have not been definitively interpreted by regulatory authorities or the courts and their provisions are open to a variety of interpretations. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under them, it is possible that some of our business activities, including our relationships with physicians and other healthcare providers (some of whom recommend, purchase and/or prescribe our products) and the manner in which we promote our products, could be subject to challenge. We are also exposed to the risk that our employees, independent contractors, principal investigators, consultants, vendors, distributors, and contract research organizations (“CROs”) may engage in fraudulent or other illegal activity. Although we have policies and procedures prohibiting such activity, it is not always possible to identify and deter misconduct and the precautions we take may not be effective in controlling unknown risks or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with applicable laws and regulations.
If we violate any of the laws described above or any other government regulations, we may be subject to civil and criminal penalties, damages, fines, exclusion from governmental health care programs, a corporate integrity agreement or other agreement to resolve allegations of non-compliance, individual imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our financial results and ability to operate.
Risks Related to our Research and Development Activities
Clinical drug development is lengthy, expensive and often unsuccessful. Results of early studies and trials are often not predictive of later trial results. Failure can occur at any stage of drug development. Our efforts to discover, develop and commercialize our product candidates may not succeed.
Clinical development is expensive, lengthy and often unsuccessful. Data from clinical trials are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The results from early clinical trials are often not predictive of results in later clinical trials. Product candidates may fail to show the desired safety and efficacy traits despite having produced positive results in preclinical studies and initial clinical trials. Many companies have suffered significant setbacks in late-stage clinical trials due to lack of efficacy or unanticipated or unexpectedly severe adverse events.
Our current clinical trials may prove inadequate to support marketing approvals. Even trials that generate positive results may have to be confirmed in much larger, more expensive and lengthier trials before we could realistically seek regulatory approval of a product candidate.
Clinical trials may be delayed by many factors, including:
slow patient enrollment or delayed activation of clinical trial sites due to the COVID-19 pandemic or other factors;
delays obtaining regulatory permission to start a trial, changes to the size or design of a trial or changes in regulatory requirements for a trial already underway;
inability to secure acceptable terms with vendors and an appropriate number of clinical trial sites;
delays or inability to obtain institutional review board (“IRB”) approval at prospective trial sites;
failure of patients or investigators to comply with the clinical trial protocol;
unforeseen safety issues; and
negative findings of inspections of clinical sites or manufacturing operations by us, the FDA or other authorities.
A trial may also be suspended or terminated by us, the trial’s data safety monitoring board, the IRBs governing the sites where the trial is being conducted or the FDA for many reasons, including failure to comply with regulatory requirements or
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clinical protocols, negative findings in an inspection of our clinical trial operations or trial sites by the FDA or other authorities, unforeseen safety issues, failure to demonstrate a benefit or changes in government regulations. Disruptions caused by the COVID-19 pandemic increase the likelihood of delays in initiating or completing our planned and ongoing clinical trials. Please see the risk factor, “The COVID-19 pandemic has made conducting our clinical development programs more difficult.”
During the development of a product candidate, we may decide, or the FDA or other regulatory authorities may require us, to conduct more pre-clinical or clinical studies or to change the size or design of a trial already underway, which could delay or prevent the completion of development and increase its cost. Even if we conduct all of the clinical trials and supportive studies that we consider appropriate and the results are positive, we may not receive regulatory approval.
The COVID-19 pandemic has made initiating and advancing our clinical development programs more difficult.
We conduct clinical trials at sites in the United States, Canada, Europe and Israel. In all of these places, authorities have imposed significant public health restrictions of varying degrees of severity which are likely to persist until a COVID-19 vaccine or effective treatment is widely available. In addition, physicians, patients and medical institutions have changed their behavior in an attempt to reduce the risk of infection that makes clinical trials more expensive, time-consuming and risky to initiate and conduct.
Some of the sites where we are conducting clinical trials have stopped enrolling new patients or reduced the frequency with which enrolled patients see their physicians. Some clinical sites have temporarily stopped initiating new trials. Many patients are reluctant to participate in procedures required by our clinical trial protocols because they fear infection. In general, COVID-19 has slowed the pace of our clinical trials, including our studies in Cushing’s syndrome, AIWG and NASH. Studies of diseases perceived to be acutely life-threatening, such as advanced solid tumors, have been experienced less delay and disruption.
If COVID-19 remains prevalent, we may experience additional disruptions, which could have a material adverse impact on our clinical trial plans and timelines, including:
delays in enrolling patients in our clinical trials;
delays in clinical site initiation, including difficulties in recruiting clinical investigators and staff;
delays in receiving authorizations from local regulatory authorities and internal review boards to initiate clinical trials or amend existing protocols;
delays in clinical sites receiving necessary supplies and materials due to interruptions in local and global shipping;
changes in local regulations that require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs or cause us to suspend or discontinue a trial in the affected jurisdiction;
diversion of healthcare resources, including facilities, supplies and staff, away from the conduct of clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, patient visits and follow-up, study procedures and data collection, that could affect the integrity of clinical trial data, due to limitations on travel;
the infection of patients enrolled in our clinical trials with COVID-19, which could affect the results of the clinical trial, including by increasing the number of observed adverse events or by causing patients to drop out of the study;
patient discontinuations due to fear of infection with COVID-19;
interruptions or delays in preclinical studies due to restricted or limited operations at laboratory facilities;
delays in necessary interactions with local regulators, ethics committees and other third parties and contractors due to limitations in employee resources or the furlough of government employees;
limitations caused by the sickness of our employees or their families or the desire of employees to avoid contact with large groups of people; and
the possible refusal of the FDA or other regulatory authorities to accept data from clinical trials in affected geographies.
The extent to which the COVID-19 pandemic affects our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
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Vendors manufacture and distribute the drug product we use in our trials, conduct and manage some of our clinical trials and perform data collection and analysis. Failure of these vendors to perform their duties or meet expected timelines may prevent or delay approval of our product candidates.
Third-party clinical investigators and clinical sites enroll patients and CROs manage many of our trials and perform data collection and analysis. Although we control only certain aspects of these third-parties’ activities, we are responsible for ensuring that every study adheres to its protocol and meets regulatory and scientific standards. If any of our vendors does not perform its duties or meet expected deadlines or fails to adhere to applicable GCP, or if the quality or accuracy of the data it produces is compromised, affected clinical trials may be extended, delayed or terminated and we may be unable to obtain approval for our product candidates. Failure of our manufacturing vendors to perform their duties or comply with cGMPs may require us to recall drug product or repeat clinical trials, which would delay regulatory approval. If our agreements with any of these vendors terminate, we may not be able to enter into alternative arrangements in a timely manner or on reasonable terms.
Our ability to physically inspect our vendors and clinical sites has been limited by the COVID-19 pandemic and associated public health restrictions, which increases the risk that failures to meet applicable requirements will go undetected.
Obtaining regulatory approval of product candidates in foreign jurisdictions would be costly and difficult. Failure to obtain such approvals would prevent us from commercializing our product candidates outside the United States.
We may seek to commercialize our products in international markets, which would require us to receive a marketing authorization and, in many cases, pricing approval, from the appropriate regulatory authorities. These approval processes include all of the risks associated with the FDA’s approval process and, in some cases, more. Approval procedures vary between countries and can require additional pre-clinical or clinical studies. Obtaining approval may take longer than it does in the United States. Although approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by others, failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.
Our products and product candidates may cause undesirable side effects that halt their clinical development, prevent their regulatory approval, limit their commercial potential or cause us significant liability.
Patients in clinical trials report changes in their health, including new illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not these conditions were caused by the drug candidate being studied or something else. As we test our product candidates in larger, longer and more extensive clinical trials, or as use of them becomes more widespread if we receive regulatory approval, patients may report serious adverse events that did not occur or went undetected in previous trials. Many times, serious side effects are only detected in large-scale, Phase 3 clinical trials or following commercial approval.
Adverse events reported in clinical trials can slow or stop patient recruitment, prevent enrolled patients from completing a trial and could give rise to liability claims. Regulatory authorities could respond to reported adverse events by interrupting or halting our clinical trials or limiting the scope of, delaying or denying marketing approval. If we elect, or are required by authorities, to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates or products may be harmed, and our ability to generate product revenues from them may be delayed or eliminated.
If one of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events, potentially significant negative consequences could result, including but not limited to:
regulatory authorities may suspend, limit or withdraw approvals of such product;
regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts and other safety information about the product;
we may be required to change the way the product is administered or conduct additional studies or clinical trials;
we may be required to create a Risk Evaluation and Mitigation Strategy (REMS), which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;
the product may become less competitive;
we may be subject to fines, injunctions or the imposition of criminal penalties; and
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we could be sued and held liable for harm caused to patients;
Any of these events could seriously harm our business.
We need to increase the size of our organization and may experience difficulties in managing growth.
Our commercial and research and development efforts are constrained by our limited administrative, operational and management resources. To date, we have relied on a small management team. Growth will impose significant added responsibilities on members of management, including the need to recruit and retain additional employees. Our financial performance and ability to compete will depend on our ability to manage growth effectively. To that end, we must:
manage our sales and marketing efforts, clinical trials, research and manufacturing activities effectively;
hire more management, clinical development, administrative and sales and marketing personnel; and
continue to develop our administrative systems and controls.
Failure to accomplish any of these tasks, which will be more difficult during the COVID-19 pandemic, could harm our business.
If we lose key personnel or are unable to attract more skilled personnel, we may be unable to pursue our product development and commercialization goals.
Our ability to operate successfully and manage growth depends upon hiring and retaining skilled managerial, scientific, sales, marketing, and financial personnel. The job market for qualified personnel is intensely competitive. We depend on the principal members of our management and scientific staff. Any officer or employee may terminate his or her relationship with us at any time and work for a competitor. We do not have employment insurance covering any of our personnel. The loss of key individuals could delay our research, development and commercialization efforts.
Risks Related to our Capital Needs and Financial Results
We may need additional capital to fund our operations or for strategic reasons. Such capital may not be available on acceptable terms or at all.
We are dependent on revenue from the sale of Korlym and our cash reserves to fund our commercial operations and development programs. If Korlym revenue declines significantly, we may need to curtail our operations or raise funds to support our plans. We may also choose to raise funds for strategic reasons. We cannot be certain funding will be available on acceptable terms or at all. The COVID-19 pandemic has increased volatility and may reduce liquidity in the equity markets, which would make raising additional capital more difficult and expensive. Equity financing would cause dilution, debt financing may involve restrictive covenants. Neither type of financing may be available to us on attractive terms or at all. If we obtain funds through collaborations with other companies, we may have to relinquish rights to one or more of our product candidates. If our revenue declines and our cash reserves are depleted, and if adequate funds are not available from other sources, we may have to delay, reduce the scope of, or eliminate one or more of our development programs.
If we are unable to obtain or maintain orphan designation for our product candidates our financial results may be negatively affected.
In the United States and the EU, orphan drug designation confers financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and reduction of fees or fee waivers. Although we have received orphan drug designation for relacorilant for the treatment of patients with Cushing’s syndrome and patients with pancreatic cancer in both the United States and EU, we may be unable to maintain these designations or to obtain designations for our other product candidates, which may negatively affect our financial results.
Risks Relating to Our Intellectual Property
To succeed, we must secure and maintain adequate patent protection for the composition and methods of use of our proprietary, selective cortisol modulators and for the use of Korlym to treat Cushing’s syndrome and other disorders.
Patents are uncertain, involve complex legal and factual questions and are frequently the subject of litigation. The patents issued or licensed to us may be challenged at any time. Competitors may take actions we believe infringe our intellectual property, causing us to take legal action to defend our rights. Intellectual property litigation is lengthy, expensive and requires significant management attention. Outcomes are uncertain. If we do not protect our intellectual property, competitors may erode our competitive advantage. Please see “Part I, Item 3, Legal Proceedings.”
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Our patent applications may not result in issued patents and patents issued to us may be challenged, invalidated, held unenforceable or circumvented. Our patents may not prevent third parties from producing competing products. The foreign countries where we may someday operate may not protect our intellectual property to the extent the laws of the United States do. If we fail to obtain adequate patent protection in other countries, others may produce products in those countries based on our technology.
Third parties may allege that our patents infringe their rights. Defending against such allegations may result in costly litigation and may require us to obtain a license or bar us from commercializing our product candidates or Korlym for a new indication.
Our development and commercialization of Korlym or our selective cortisol modulators may give rise to claims that our patents or the patents we have licensed infringe the rights of others, which may require us to engage in costly, time-consuming and possibly unsuccessful litigation. If it is determined that one of our products or product candidates infringe others’ patent rights, we may have to obtain licenses to those rights or delay or suspend commercial activity while we attempt to design around the infringed patent. If our efforts fail, we may be unable to commercialize the infringing product or product candidate. We do not have liability insurance for patent infringement.
We do not believe that we infringe any patents or other proprietary rights. We are not obligated to pay royalties relating to the use of intellectual property except to the University of Chicago. To maintain our licenses from the University of Chicago, we must make milestone and royalty payments. If we do not comply with our obligations under these licenses, we may lose the right to commercialize cortisol modulators, including mifepristone, for the treatment of TNBC and CRPC.
Our patents concerning mifepristone cover its use, not its composition, which may make it harder to prevent patent infringement.
We own or have exclusively licensed issued U.S. patents covering the use of cortisol modulators, including mifepristone, to treat a variety of disorders. A method of use patent covers only a particular use of a compound, not its composition. Because our patents do not cover the composition of mifepristone, we cannot prevent others from commercializing mifepristone to treat disorders not covered by our method of use patents. The availability of mifepristone for these disorders may enable patients to obtain mifepristone from other companies for indications covered by our patents. Although such “off-label” use would violate our patents, effectively monitoring compliance and enforcing our rights may be difficult and costly. Mifepristone is sold in the United States by Danco Laboratories for the termination of pregnancy. We cannot be certain that patients with Cushing’s syndrome will not be able to obtain mifepristone from Danco or another company, should that company receive approval to market mifepristone for any indication.
Risks Related to Our Stock
The price of our common stock fluctuates widely and is likely to continue to do so. Opportunities for the sale of shares at any particular time may be limited.
We cannot assure investors that a liquid trading market for our common stock will exist at any particular time. As a result, holders of our common stock may not be able to sell shares quickly or at the current market price. During the 52-week period ended February 17, 2021, our average daily trading volume was approximately 1,466,131 shares and the intra-day sales prices per share of our common stock on The Nasdaq Stock Market ranged from $9.70 to $31.18. As of February 17, 2021, our officers, directors and principal stockholders beneficially owned approximately 16 percent of our common stock.
Our stock price can experience extreme price and volume fluctuations that are unrelated or disproportionate to our operating performance or prospects. Securities class action lawsuits are often instituted against companies following periods of stock market volatility. Such litigation is costly and diverts management’s attention from productive efforts.
Factors that may cause the price of our common stock to fluctuate rapidly and widely include:
changes in the expected or actual timing of our competitors’ potential development programs, including developments in ANDA litigation and proceedings before the PTAB and the announcement of ANDA filings seeking approval for generic versions of Korlym;
general market and economic conditions, including the economic, social and emotional costs and dislocations arising from the COVID-19 pandemic;
actual or anticipated variations in our operating results or changes to any public guidance we have provided;
actual or anticipated timing and results of our clinical trials;
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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
short selling of our common stock, the publication of speculative opinions about our business or other market manipulation activities by third parties that are intended to lower our stock price or increase its volatility;
changes in estimates or recommendations by securities analysts or the failure of our performance to meet the published expectations of those analysts or any public guidance we have provided;
actual or anticipated regulatory approvals of our product candidates or of competing products;
purchases or sales of our common stock by our officers, directors or stockholders;
changes in laws or regulations applicable to our product candidates or our competitors’ products;
technological innovations by us, our collaborators or our competitors;
changes in the trading volume of our common stock;
conditions in the pharmaceutical industry, including the market valuations of companies similar to Corcept;
additions or departures of key personnel;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
additional financing activities; and
our cash and short-term investment position.
Our stock price may decline if our financial performance does not meet the guidance we have provided to the public, estimates published by research analysts or other investor expectations.
The guidance we provide as to our expected 2021 revenue is only an estimate of what we believe is realizable at the time we give such guidance. It is difficult to predict our revenue and our actual results may vary materially from our guidance. The effect on our business of the COVID-19 pandemic is difficult to estimate. In addition, the rate of physician adoption of Korlym and the actions of government and private payers is uncertain. We may experience competition from generic versions of Korlym, which our public revenue guidance does not anticipate. We may not meet our financial guidance or other investor expectations for other reasons, including those arising from the risks and uncertainties described in this report and in our other public filings and public statements. Research analysts publish estimates of our future revenue and earnings based on their own analysis. The revenue guidance we provide may be one factor they consider when determining their estimates.
General Risk Factors
We are subject to government regulation and other legal obligations relating to privacy and data protection. Compliance with these requirements is complex and costly. Failure to comply could materially harm our business.
We and our partners are subject to federal, state and foreign laws and regulations concerning data privacy and security, including HIPAA and the EU General Data Protection Regulation, or the GDPR. These and other regulatory frameworks are evolving rapidly as new rules are enacted and existing ones updated and made more stringent.
In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy, laws, and federal and state consumer protection laws and regulations (e.g., Section 5 of the FTC Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
Even when HIPAA does not apply, according to the Federal Trade Commission or the FTC, violating consumers’ privacy or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a
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company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. For example, the California Confidentiality of Medical Information Act imposes restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. Further, on June 28, 2018, California enacted the California Consumer Privacy Act, or the CCPA, which took effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Similar laws have been proposed at the federal level and in other states.
The GDPR went into effect in 2018 and has become binding against all EEA member states. It imposes stringent requirements for controllers and processors of personal data, particularly with respect to clinical trials. The GDPR provides that EEA member states may make their own further laws and regulations limiting the processing of health data, which could limit our ability to use and share personal data or could cause our costs to increase and harm our business and financial condition. In addition, the GDPR increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. Recent legal developments have also created complexity and compliance uncertainty regarding certain transfers of information from the EEA to the United States. For example, on June 16, 2020, the Court of Justice of the European Union (“CJEU”) declared the EU-U.S. Privacy Shield framework to be invalid. As a result, Privacy Shield is no longer a valid mechanism for transferring personal data from the EU to the United States. Moreover, it is uncertain whether the standard contractual clauses will also be invalidated by the European courts or legislature. The GDPR imposes substantial fines for breaches of data protection requirements, which can be up to four percent of global revenue for the preceding financial year or €20 million, whichever is greater, and it also confers a private right of action on data subjects for breaches of data protection requirements. Compliance with European data protection laws is a rigorous and time intensive process that may increase our cost of doing business, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm in connection with our European activities. Additionally, following the United Kingdom’s withdrawal from the EU, we have to comply with the GDPR and separately the GDPR as implemented in the United Kingdom, each regime having the ability to fine up to the greater of €20 million/ £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk.
Complying with U.S. and foreign privacy and security laws and regulations is complex and costly. Failure to comply by us or our vendors could subject us to litigation, government enforcement actions and substantial penalties and fines, which could harm our business.
We rely heavily on information technology systems to conduct our business. A breakdown or breach of these systems or our failure to protect confidential information concerning our business, patients or employees could interrupt the operation of our business and subject us to liability.
We store valuable confidential information relating to our business, patients and employees on our computer networks and on the networks of our vendors. In addition, we rely heavily on internet technology, including video conference, teleconference and file-sharing services, to conduct business during the COVID-19 pandemic. Despite the implementation of security measures, our networks and the networks of our vendors are subject to the risk of cyberattacks, “phishing” attacks, computer hackers, service provider or vendor error, or malfeasance or other intentional or unintentional acts by third parties and bad actors, including vendors, computer viruses, unauthorized access, natural disasters, terrorism, war and internet and electrical failures. They may also be manipulated by criminals seeking to commit fraud or theft.
COVID-19 may increase our cybersecurity risks, due to our reliance on internet technology and the number of our employees that are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. In addition, system failures could cause the loss, theft, exposure, or unauthorized access or use of valuable clinical trial data as a result of accidents, errors or malfeasance by our employees, independent contractors or others working with us or on our behalf or otherwise disrupt our clinical and commercial activities and be expensive and time-consuming to remedy. Our servers and systems, and those of our vendors, may be vulnerable to computer malware, break-ins, denial-of-service attacks, and similar
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disruptions from unauthorized tampering with our computer systems, which could result in someone obtaining unauthorized access to our confidential information, including our clinical data, or the confidential information of our patients or employees.
The computer systems of the CRO that managed one of our early-stage clinical trials was breached and confidential information, including information about some of the patients who participated in our trial, was exposed. Under applicable law, this breach is the responsibility of the CRO, which has notified the affected patients and is cooperating closely with regulatory and law enforcement authorities. We do not expect this breach to have any impact on our development programs or financial performance.
We have experienced “phishing” attacks and other unauthorized access to certain data and information. There is no assurance that our cybersecurity systems and processes will be effective in preventing unauthorized access in the future. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that remain undetected for an extended period.
Disruptions or security breaches that result in the disclosure of confidential or proprietary information could cause us to incur liability and delay or otherwise harm our research, development and commercialization efforts. We may be liable for losses suffered by patients or employees or other individuals whose confidential information is stolen as a result of a breach of the security of the systems that we or third parties and our vendors store this information on, and any such liability could be material. Even if we are not liable for such losses, any breach of these systems could expose us to material costs in notifying affected individuals, as well as regulatory fines or penalties. In addition, any breach of these systems could disrupt our normal business operations and expose us to reputational damage and harm our business, operating results and financial condition. Any insurance we maintain against the risk of this type of loss may not be sufficient to cover actual losses, or may not apply to the circumstances relating to any particular loss.
We are dependent on the continued functioning of the FDA and other federal instrumentalities. Inadequate funding of these instrumentalities, their partial or complete closure, their diversion of resources to work on pandemic-related issues, or their inability to hire and retain talented professionals could materially harm our business.
The government’s ability to carry out its mandated functions is affected by a variety of factors, including adequate government funding, the ability to hire and retain key personnel, statutory, regulatory and policy changes, possible diversion of resources and limited operating capacity and diversion of resources caused by the COVID-19 pandemic or other events that may reduce the government’s ability to perform routine functions. Disruptions at the FDA and other agencies may slow the time to review new drug applications and respond to other inquiries. Disruptions at the Securities and Exchange Commission (“SEC”) may temporarily stop its ability to review and approve proposed financing transactions. Several times in the last few years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down and many regulatory agencies, including the FDA and SEC, have had to furlough employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impair the FDA, SEC and other authorities’ ability to process our submissions, which could materially harm our business.
Separately, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Changes in federal, state and local tax laws may reduce our net earnings.
Our earnings are subject to federal, state and local tax. We offset a portion of our earnings using net operating losses and our taxes using research and development tax credits, which reduces the amount of tax we pay. Some jurisdictions require that we pay taxes or fees calculated as a percentage of sales, payroll expense, or other indicia of our activities. Please see “Part IV, Item 16, Notes to Consolidated Financial Statements - Income Taxes.” Changes to existing tax laws that we cannot control or predict could materially increase the amount of taxes and fees we must pay. For example, an increase in income tax rates or a reduction or elimination of net operating losses and research and development tax credits could significantly increase our tax expense, which would reduce our net income and adversely affect our results of operations.
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We may be unable to obtain or maintain regulatory approvals for our product or product candidates.
We cannot promote a product candidate unless the FDA or comparable foreign regulatory authorities approves it, which may not happen. Obtaining regulatory approval of a drug is difficult, uncertain, lengthy and expensive. Failure can occur at any stage. In order to receive FDA approval, we must demonstrate to the FDA’s satisfaction that the new drug is safe and effective for its intended use and that our manufacturing processes comply with cGMPs. Our inability or the inability of our vendors to comply with applicable FDA and other regulatory requirements can result in delays in or denials of new product approvals, warning letters, fines, consent decrees restricting or suspending manufacturing operations, injunctions, civil penalties, recall or seizure of products, total or partial suspension of product sales and criminal prosecution. Any of these or other regulatory actions could materially harm our business and financial condition.
If we receive regulatory approval for a product candidate, we will be subject to ongoing FDA requirements and oversight, such as continued safety and other reporting requirements and post-marketing restrictions. If we are not able to maintain regulatory compliance, we may not be permitted to develop our product candidates or market our products and may be subject to product recalls or seizures. Any regulatory approvals for our product candidates may require costly post-marketing studies. Future governmental action or changes in FDA policy or personnel may also result in delays or rejection of an NDA or supplemental NDA.
We may face competition from companies with greater financial, technical and marketing resources than our own.
The pharmaceutical industry is competitive and subject to rapid technological change. Our potential competitors include large pharmaceutical companies, which have greater clinical, marketing and sales resources than our own and may develop and commercialize medications that are superior to and less expensive than ours, which could negatively affect our financial results.
If we acquire products or product candidates, we will incur significant costs and may not realize the benefits we anticipate.
We may acquire a product or product candidate that complements our strategic plan. Such an acquisition may give rise to unforeseen difficulties and costs and may absorb significant management attention. We may not realize the anticipated benefits of any acquisition, which could dilute our stockholders’ ownership interest or cause us to incur significant expenses and debt.
Our ability to compete could be diminished if we are unable to protect our trade secrets and proprietary information.
In addition to patents, we rely on a combination of confidentiality, nondisclosure and other contractual provisions, laws protecting trade secrets and security measures to protect our proprietary information. These measures may not be adequate, in which case competitors could exploit our proprietary information to our disadvantage. If employees, consultants or anyone else breaches their agreements with us regarding our proprietary information, we may not have adequate remedies for the breach.
Research analysts may not continue to provide or initiate coverage of our common stock or may issue negative reports.
The market for our common stock may be affected by the reports financial analysts publish about us. If any of the analysts covering us downgrades or discontinues coverage of our stock, the price of our common stock could decline rapidly and significantly. Paucity of research coverage may also adversely affect our stock price.
Sale of a substantial number of shares of our common stock may cause its price to decline.
Sales of a substantial number of shares of our stock in the public market could reduce its price. As additional shares of our stock become available for public resale, whether by the exercise of stock options by employees or directors or because of an equity financing by us, the supply of our stock will increase, which could cause its price to fall. Substantially all of the shares of our stock are eligible for sale, subject to applicable volume and other resale restrictions.
Changes in laws and regulations may significantly increase our costs, which could harm our financial results.
New laws and regulations, as well as changes to existing laws and regulations, including statutes and regulations concerning taxes and the development, approval, and marketing of medications, the provisions of the ACA requiring the reporting of aggregate spending related to health care professionals, the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and by The Nasdaq Stock Market have and will likely continue to increase our cost of doing business and divert management’s attention from revenue-generating activities.
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We may fail to comply with our public company obligations, including securities laws and regulations. Such compliance is costly and requires significant management attention.
The federal securities laws and regulations, including the corporate governance and other requirements of the Sarbanes-Oxley Act of 2002, impose complex and continually changing regulatory requirements on our operations and reporting. These developing requirements will continue to increase our compliance costs. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate the effectiveness of, and provide a management report with respect to, our internal controls over financial reporting. It also requires that the independent registered public accounting firm auditing our consolidated financial statements must attest to and report on the effectiveness of our internal controls over financial reporting. If we are unable to complete the required assessment and report or if our independent registered public accounting firm is unable to issue an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors could lose confidence in our financial reporting and our stock price would likely decline.
Anti-takeover provisions in our charter and bylaws and under Delaware law may make an acquisition of us or a change in our management more expensive or difficult, even if an acquisition or a management change would be beneficial to our stockholders.
Provisions in our charter and bylaws may delay or prevent an acquisition of us or a change in our management. Some of these provisions allow us to issue preferred stock without any vote or further action by the stockholders, require advance notification of stockholder proposals and nominations of candidates for election as directors and prohibit stockholders from acting by written consent. In addition, a supermajority vote of stockholders is required to amend our bylaws. Our bylaws provide that special meetings of the stockholders may be called only by our Chairman, President or the Board of Directors and that the authorized number of directors may be changed only by resolution of the Board of Directors. These provisions may prevent or delay a change in our Board of Directors or our management, which our Board of Directors appoints. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law. Section 203 may prohibit large stockholders, in particular those owning 15 percent or more of our outstanding voting stock, from merging or combining with us. These provisions in our charter and bylaws and under Delaware law could reduce the price that investors would be willing to pay for shares of our common stock.
Our officers, directors and principal stockholders, acting as a group, could significantly influence corporate actions.
As of February 17, 2021, our officers and directors beneficially owned approximately 16 percent of our common stock. Acting together, these stockholders could significantly influence any matter requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combinations. The interests of this group may not always coincide with our interests or the interests of other stockholders and may prevent or delay a change in control. This significant concentration of share ownership may adversely affect the trading price of our common stock because many investors perceive disadvantages to owning stock in companies with controlling stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease 36,062 square feet of office space in Menlo Park, California for our corporate facilities. Our current lease expires in March 2022.
ITEM 3. LEGAL PROCEEDINGS
Teva ANDA Litigation.
In February 2018, we received a Paragraph IV Notice Letter advising that Teva had submitted an Abbreviated New Drug Application (“ANDA”) to the FDA seeking authorization to manufacture, use or sell a generic version of Korlym in the United States prior to the expiration of certain of our patents related to Korlym - U.S. Patent No. 8,921,348 (the “’348 patent”) and U.S. Patent No. 9,829,495 (the “’495 patent”) - which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). Teva’s February 5, 2018 Notice Letter alleges that the ’348 patent, with an expiration date in August 2028, and the ’495 patent, with an expiration date in August 2036, will not be infringed by Teva’s proposed product, are invalid and/or are unenforceable. On March 15, 2018, we filed a lawsuit in the U.S. District Court for the District of New Jersey against Teva for infringement of these patents. On October 12, 2018, Teva received tentative approval from the FDA for its ANDA. In accordance with the Hatch-Waxman Act, however, as a result of filing a timely lawsuit against Teva, FDA final approval of Teva’s ANDA was stayed for 30 months, until August 1, 2020.
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On July 6, 2018, we filed an amended complaint against Teva, asserting infringement of U.S. Patent No. 9,943,526 (the “’526 patent”). On February 8, 2019, we filed a second lawsuit against Teva, asserting infringement of U.S. Patent Nos. 10,166,242 (the “ʼ242 patent”), 10,166,243 (the “ʼ243 patent”) and 10,195,214 (the “ʼ214 patent”). On December 13, 2019, we filed a third lawsuit against Teva, asserting infringement of U.S. Patent Nos. 10,500,216 (the “ʼ216 patent”). The District Court consolidated our lawsuits against Teva into a single action and set a trial date of February 2, 2021. On September 24, 2020, the Court vacated the February 2, 2021 trial date and ordered the parties to complete trial preparations by March 17, 2021. A new trial date has not been set.
No new 30-month stay resulted from the filing of the amended complaint or new lawsuits.
On May 7, 2019, Teva submitted to the PTAB a petition for post-grant review (“PGR”) of the ’214 patent, which we opposed. On November 20, 2019, the PTAB granted Teva’s petition. On November 19, 2020, the PTAB issued a decision upholding the validity of the ’214 patent against all of Teva’s claims. Teva has until March 12, 2021 to file its appeal brief with Federal Circuit Court of Appeals.
We will vigorously enforce our intellectual property rights relating to Korlym, but cannot predict the outcome of these matters.
Sun ANDA Litigation
On June 10, 2019, we received a Paragraph IV Notice Letter advising that Sun had submitted an ANDA to the FDA seeking authorization to manufacture, use or sell a generic version of Korlym in the United States prior to the expiration of certain of our patents related to Korlym listed in the Orange Book (the “Korlym Patents”).
The Notice Letter alleges that the Korlym Patents will not be infringed by Sun Ltd.’s proposed product, are invalid and/or are unenforceable. On July 22, 2019, we filed a lawsuit in the U.S. District Court for the District of New Jersey against Sun Pharma Global FZE (“Sun FZE”), Sun Pharma Global Inc. (“Sun Pharma”), Sun Pharmaceutical Industries, Inc. (“Sun Inc.”), and Sun Ltd. (collectively, “Sun”) for infringement of the ’348, ’214, and ’495 patents. On January 23, 2020, we filed an amended complaint against Sun asserting infringement of the ’216 patent. Sun has denied our allegations.
In accordance with the Hatch-Waxman Act, as a result of filing a timely lawsuit against Sun, FDA approval of Sun Ltd.’s ANDA will be stayed until the earlier of (i) 30 months from our June 10, 2019 receipt of Sun Ltd.’s Paragraph IV Notice Letter or (ii) a District Court decision finding that the ’348, ’214, and ’495 patents are invalid, unenforceable or not infringed.
We will vigorously enforce our intellectual property rights relating to Korlym, but cannot predict the outcome of this matter.
Hikma Paragraph IV Notice Letter
On February 1, 2021, we received a Paragraph IV Notice Letter advising that Hikma had submitted an ANDA to the FDA seeking authorization to manufacture, use or sell a generic version of Korlym in the United States.
The Notice Letter contains Paragraph IV certifications against certain of our patents related to Korlym, specifically U.S. Patent Nos. ’348, ’495, 10,006,924 (the “ʼ924 patent”), ’526, 10,151,763 (the “ʼ763 patent”), ’242, ’243, ’214, 10,231,983 (the “ʼ983 patent”), 10,314,850 (the “ʼ850 patent”), 10,495,650 (the “ʼ650 patent”), ʼ216, 10,660,904 (the “ʼ904 patent”), 10,780,097 (the “ʼ097 patent”), 10,842,800 (the “ʼ800 patent”), and 10,842,801 (the “ʼ801 patent”) (collectively, the “Korlym Patents”), which are listed in the Orange Book. The Notice Letter alleges that the Korlym Patents will not be infringed by Hikma’s proposed product, are invalid and/or are unenforceable.
We intend to vigorously enforce our intellectual property rights relating to Korlym, but we cannot predict the outcome of any litigation that could be filed.
Other matters
On March 14, 2019, a purported securities class action complaint was filed in the U.S. District Court for the Northern District of California by Nicholas Melucci (Melucci v. Corcept Therapeutics Incorporated, et al., Case No. 5:19-cv-01372-LHK). The complaint named us and certain of our executive officers as defendants asserting violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and alleges that the defendants made false and materially misleading statements and failed to disclose adverse facts about our business, operations, and prospects. The complaint asserts a putative class period stemming from August 2, 2017 to February 5, 2019 and seeks unspecified monetary relief, interest and attorneys’ fees. On October 7, 2019, the Court appointed a lead plaintiff and lead counsel. The lead plaintiff’s consolidated complaint was filed on December 6, 2019.
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We moved to dismiss the consolidated complaint on January 27, 2020. Rather than oppose our motion to dismiss, on March 20, 2020, the lead plaintiff filed a second amended complaint. On May 11, 2020, we moved to dismiss the second amended complaint. We received plaintiff’s opposition to our motion on June 25, 2020 and filed our reply on July 27, 2020. On November 20, 2020, the Court granted our motion to dismiss in full and granted plaintiff leave to file a third amended complaint, which plaintiff did on December 21, 2020. On February 19, 2021, we filed our motion to dismiss the third amended complaint. Plaintiff’s opposition to our motion is due on April 20, 2021 and our reply is due on June 4, 2021.
We will respond vigorously to plaintiff’s claims but cannot predict the outcome of this matter.
On September 30, 2019, a purported shareholder derivative complaint was filed in the United States District Court for the District of Delaware by Lauren Williams, and captioned Lauren Williams v. G. Leonard Baker, et al., Civil Action No. 1:19-cv-01830. The complaint named our board of directors, including our Chief Executive Officer and Chief Financial Officer as defendants and us as nominal defendant. The complaint alleges breach of fiduciary duty, violation of Section 14(a) of the Exchange Act, insider selling, misappropriation of insider information and waste of corporate assets and seeks damages in an amount to be proved at trial. On October 23, 2019, this action was stayed pending a resolution of our motions to dismiss the Melucci litigation. We will respond to this complaint vigorously but cannot predict the outcome of this matter.
On December 19, 2019, a second purported shareholder derivative complaint was filed in the United States District Court for the District of Delaware by Jeweltex Pension Plan, and captioned Jeweltex Pension Plan v. James N. Wilson, et al., Civil Action No. 1:19-cv-02308. The complaint named our board of directors, including our Chief Executive Officer, as well as our Chief Financial Officer as defendants and Corcept Therapeutics Incorporated as nominal defendant. The complaint seeks to allege causes of action for breach of fiduciary duty, violation of section 14(a) of the Exchange Act, waste of corporate assets, contribution and indemnification, aiding and abetting, and gross mismanagement. The complaint seeks an amount of damages to be proved at trial. On April 6, 2020, this action was stayed pending a resolution of our motions to dismiss the Melucci litigation. On December 20, 2020, the case was further stayed pending a resolution of Corcept’s forthcoming motion to dismiss the third amended complaint. We will respond to this complaint vigorously but cannot predict the outcome of this matter.
In addition to the matters described above, we are involved from time to time in other legal proceedings in the ordinary course of business. Although the outcome of any pending matters and the amount, if any, of our ultimate liability with respect to them cannot be predicted with certainty, we do not believe that the ultimate outcome of such matters will have a material adverse effect on our business, results of operations or financial position.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on The Nasdaq Capital Market under the symbol “CORT.”
Stockholders of Record and Dividends
As of February 17, 2021, we had 117,312,341 shares of common stock outstanding held by 29 stockholders of record. Because almost all of our common stock is held by brokers, nominees and other institutions on behalf of stockholders, we are unable to estimate the actual number of our stockholders. We have never declared or paid cash dividends. We do not anticipate paying cash dividends in the foreseeable future.
Sale of Unregistered Securities
None.
Repurchases of Securities
The following table contains information relating to the repurchases of our common stock as part of a publicly announced stock repurchase program (“Stock Repurchase Program”) in the three months ended December 31, 2020 (in thousands, except per share data):
Fiscal Period Total Number of Shares Purchased Average Price Paid Per Share
Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program(1)
October 1, 2020 to October 31, 2020 —  $ —  $ — 
November 1, 2020 to November 30, 2020 450  21.05  190,526 
December 1, 2020 to December 31, 2020 22.64  190,331 
Total 459  $ 21.08  $ 190,331 
(1) On November 3, 2020, our Board of Directors authorized the repurchase of up to $200 million of our common stock pursuant to our Stock Repurchase Program. Unless terminated or suspended prior, the Stock Repurchase Program will remain in effect until September 30, 2021.
The following table contains information relating to the repurchases of our common stock as part of the cashless net exercises of stock options in the three months ended December 31, 2020 (in thousands, except per share data):
Fiscal Period
Total Number of Shares Purchased(2)
Average Price Paid Per Share Approximate Dollar Amount of Shares
October 1, 2020 to October 31, 2020 —  $ —  $ — 
November 1, 2020 to November 30, 2020 31  22.88  714 
December 1, 2020 to December 31, 2020 58  24.74  1,443 
Total 89  $ 24.09  $ 2,157 
(2) In November 2020, we issued 50,000 shares of common stock as part of a net-share settlement of a cashless option exercise, of which 31,225 shares were tendered to us in satisfaction of related exercise costs. In December 2020, we issued 89,902 shares of common stock as part of a net-share settlement of a cashless option exercise, of which 58,324 shares were tendered to us in satisfaction of related exercise costs.
Market Performance Graph
The graph and the accompanying text below is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filings by us under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.
We have elected to use the Nasdaq US Benchmark TR Index and Nasdaq Biotechnology Index (consisting of a group of 120 companies in the biotechnology sector, including us) for purposes of the performance comparison that appears below,
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which shows the cumulative stockholder return assuming the investment of $100 and the reinvestment of any dividends and is based on the returns of the component companies weighted according to their market capitalizations.
The graph shows the cumulative total stockholder return assuming the investment of $100 and the reinvestment of any dividends and is based on the returns of the component companies weighted according to their market capitalizations as of the end of the period for which returns are indicated. We have never paid dividends on our common stock.
The return shown in the graph below for our common stock is not necessarily indicative of future performance. We do not make or endorse any predictions as to future stockholder returns.
Five-Year Cumulative Total Returns of our Common Stock (CORT),
the Nasdaq US Benchmark TR Index (NQUSBT) and
the Nasdaq Biotechnology Index (NBI)
CORT-20201231_G1.JPG
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The selected financial data set forth below are derived from our audited consolidated financial statements. The statement of operations data for the years ended December 31, 2020, 2019 and 2018 and the balance sheet data as of December 31, 2020 and 2019 are derived from our audited consolidated financial statements included in this Annual Report. The statement of operations data for the years ended December 31, 2017 and 2016 and the balance sheet data as of December 31, 2018, 2017 and 2016 have been derived from our audited financial statements, which are not included in this Annual Report. Our historical results are not necessarily indicative of our results for any future period. The selected financial data set forth below should be read in conjunction with our financial statements, the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report.
  Year Ended December 31,
  2020 2019 2018 2017 2016
  (In thousands, except per share data)
Statement of Operations Data:          
Product revenue, net $ 353,874  $ 306,486  $ 251,247  $ 159,201  $ 81,321 
Operating expenses:
Cost of sales
5,582  5,504  5,215  3,554  2,058 
Research and development
114,764  89,017  75,247  40,376  23,844 
Selling, general and administrative
105,326  100,359  81,289  62,416  45,240 
Total operating expenses
225,672  194,880  161,751  106,346  71,142 
Income from operations 128,202  111,606  89,496  52,855  10,179 
Interest and other income (expense), net 3,400  5,070  2,657  (49) (2,039)
Income before income taxes 131,602  116,676  92,153  52,806  8,140 
Income tax expense (benefit) 25,591  22,495  16,743  (76,316) — 
Net income $ 106,011  $ 94,181  $ 75,410  $ 129,122  $ 8,140 
Net income per share:
Basic
$ 0.92  $ 0.82  $ 0.65  $ 1.14  $ 0.07 
Diluted
$ 0.85  $ 0.77  $ 0.60  $ 1.04  $ 0.07 
Weighted average shares – basic
115,412  114,349  115,343  113,527  110,566 
Weighted average shares – diluted
124,194  122,566  126,688  124,515  116,139 
Includes certain non-cash expenses, of the following:
Stock-based compensation
Cost of sales
$ 66  $ 144  $ 259  $ —  $ — 
Research and development
11,222  9,541  7,012  3,743  1,312 
Selling, general and administrative
22,251  19,628  16,476  9,618  5,746 
Total stock-based compensation
33,539  29,313  23,747  13,361  7,058 
Non-operating expense related to accretion of interest on long-term obligation —  —  —  456  1,929 
Total non-cash expenses $ 33,539  $ 29,313  $ 23,747  $ 13,817  $ 8,987 
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  December 31,
  2020 2019 2018 2017 2016
  (In thousands)
Balance Sheet Data:          
Cash, cash equivalents and investments $ 476,892  $ 315,314  $ 206,760  $ 104,025  $ 51,536 
Working capital 431,007  268,517  201,247  94,616  38,315 
Total assets 571,731  412,312  311,694  220,537  68,753 
Debt obligation - current portion —  —  —  —  14,664 
Total stockholders’ equity 523,338  371,182  275,882  190,968  41,379 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition and is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes to financial statements, risk factors and other disclosures included in this Form 10-K. Our consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of such forward-looking statements and the potential risks and uncertainties that may affect their accuracy, see “Forward-Looking Statements” included in “Risk Factors” in this Form 10-K and the “Overview” and “Liquidity and Capital Resources” sections of this MD&A.
Overview
We are a commercial-stage company engaged in the discovery and development of drugs that treat severe metabolic, oncologic and psychiatric disorders by modulating the effects of the hormone cortisol. Since 2012, we have marketed Korlym® (mifepristone) for the treatment of patients who suffer from Cushing’s syndrome. Our portfolio of proprietary selective cortisol modulators consists of four structurally distinct series totaling more than 1,000 compounds, including relacorilant, exicorilant and miricorilant.
Cushing’s Syndrome
Korlym. We sell Korlym in the United States, using experienced sales representatives to call on physicians caring for patients with endogenous Cushing’s syndrome (hypercortisolism). Because many people who suffer from Cushing’s syndrome are undiagnosed or inadequately treated, we have developed and continue to refine and expand programs to educate physicians and patients about screening for hypercortisolism and the role Korlym can play in treating the disorder. We also have a field-based force of medical science liaisons.
We use one specialty pharmacy and one specialty distributor to distribute Korlym and provide logistical support to physicians and patients. Our policy is that no patient with Cushing’s syndrome will be denied access to Korlym for financial reasons. To help us achieve that goal, we fund our own patient support programs and donate money to independent charitable foundations that help patients pay for all aspects of their Cushing’s syndrome care, whether or not that care includes taking Korlym.
Relacorilant. We are conducting two Phase 3 trials of our proprietary, selective cortisol modulator, relacorilant, as a treatment for patients with Cushing’s Syndrome.
Our Phase 3 GRACE trial is expected to enroll 130 patients at sites in the United States, Canada, Europe and Israel. Each patient in GRACE will receive relacorilant for 22 weeks. Patients who exhibit pre-specified improvements in hypertension or glucose metabolism enter a 12-week, double-blind, “randomized withdrawal” phase in which half of the patients continue receiving relacorilant and the rest receive placebo. If successful, we expect GRACE to provide the basis for a new drug application to treat patients with all etiologies of Cushing’s syndrome.
Our Phase 3 GRADIENT trial is expected to enroll 130 patients whose Cushing’s syndrome is caused by an adrenal tumor. Half of patients will receive relacorilant for 26 weeks and half will receive placebo. Many of the clinical sites in GRACE are participating in GRADIENT.
The United States Food and Drug Association (“FDA”) and the European Commission (“EC”) have designated relacorilant as an orphan drug for the treatment of Cushing’s syndrome. In the United States, relacorilant’s orphan designation confers tax credits, reduced regulatory fees and, provided we obtain approval, seven years of exclusive marketing rights for the treatment of patients with Cushing’s syndrome. Benefits of orphan drug designation by the EC are similar, but also, include protocol assistance from the European Medicines Agency (“EMA”), access to the centralized marketing authorization procedure in the European Union (“EU”) and, if we obtain approval, ten years of exclusive marketing rights in the EU for the treatment of patients with Cushing’s syndrome.
Oncology
Relacorilant in Patients with Solid Tumors. In July 2020, we completed enrollment in a 178-patient, controlled Phase 2 trial of relacorilant in combination with nab-paclitaxel in patients with advanced, high-grade serous ovarian tumors, which we
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are conducting at sites in the United States and Europe. We expect top-line data from this trial to be available in the first half of 2021.
In addition, our Phase 3 RELIANT trial of relacorilant plus nab-paclitaxel in patients with metastatic pancreatic cancer is expected to enroll 80 patients, all of whom will receive relacorilant plus nab-paclitaxel. We expect to complete an interim analysis of data from the first 43 patients in the first half of 2021.
We are also conducting an open-label, Phase 1b trial of relacorilant plus the PD-1 checkpoint inhibitor pembrolizumab in 20 patients with advanced adrenocortical cancer with cortisol excess.
Cortisol Modulators in Patients with CRPC. We are conducting an open label, dose-finding trial of our proprietary, selective cortisol modulator exicorilant in combination with Xtandi in patients with metastatic CRPC. Investigators at the University of Chicago are conducting a dose-finding trial of relacorilant combined with Xtandi in the same patient population. We are providing relacorilant.
Metabolic Diseases
Antipsychotic-Induced Weight Gain (“AIWG”). We are studying our selective cortisol modulator miricorilant as a potential treatment for AIWG. In 2020, we completed a double-blind, placebo-controlled Phase 1b trial, in which 96 healthy subjects received daily doses of the antipsychotic medication olanzapine (10 mg) and either miricorilant (600 mg or 900 mg) or placebo for 14 days. Study participants who received miricorilant gained less weight than subjects receiving placebo. In addition, markers of liver damage that rise temporarily at the start of olanzapine therapy increased less sharply in subjects receiving miricorilant.
Our double-blind, placebo-controlled, Phase 2 GRATITUDE trial is studying the ability of miricorilant to reverse recent AIWG, with a planned enrollment of 100 patients with schizophrenia or bipolar disorder at 30 sites in the United States. Study participants receive their established antipsychotic medication plus either miricorilant or placebo for 12 weeks. Our double-blind, placebo-controlled Phase 2 GRATITUDE II trial is studying the ability of miricorilant to reverse long-standing AIWG in 120 patients with schizophrenia at 35 centers in the United States.
Liver Disease. We are conducting a double-blind, placebo-controlled, Phase 2 trial of miricorilant as a potential treatment for NASH. The trial has a planned enrollment of 150 patients at 15 sites in the United States. Patients will receive a daily dose of miricorilant (600 mg or 900 mg) or placebo for 12 weeks.
Continued Discovery and Development
Our selective cortisol modulator CORT113176, which has shown promise in animal models of amyotrophic lateral sclerosis (or “ALS”), has completed its Phase 1 trial. We plan to advance it to Phase 2 as a potential treatment for that disease. In addition, we continue to identify selective cortisol modulators and plan to advance the most promising of them towards the clinic.
COVID-19 Pandemic
Much of the world is subject to pandemic-related public health restrictions, including in California, where we are headquartered, and in the states where we sell Korlym and where our clinical trial sites are located. Most of our third-party manufacturers, distributors (including the specialty pharmacy that dispenses Korlym), information technology service providers, law and accounting firms, clinical research organizations and others are also subject to pandemic-related restrictions.
These restrictions, as well as measures voluntarily undertaken by patients, physicians, hospitals and medical clinics to reduce the risk of coronavirus infection have reduced our revenue and make it difficult to grow our Korlym business. The pandemic’s impact on the pace of our clinical development programs has been variable. Enrollment has slowed significantly in trials of indications not considered immediately life-threatening, such as Cushing’s syndrome, CRPC, AIWG and NASH. In addition, some clinical sites have stopped enrolling new patients or have reduced the frequency with which physicians see study participants. Some sites have suspended or halted the initiation of new clinical trials. These changes lengthen the time it takes us to complete our development programs, although trials in patients with immediately life-threatening diseases, such as advanced pancreatic and ovarian cancer, have experienced many fewer disruptions and delays.
Please see "COVID-19 Pandemic" under Item 1 of this Annual Report and the risk factor under Item 1A of this Annual Report, “The COVID-19 pandemic or other public health emergencies, natural disasters, terrorism or other catastrophes could disrupt our activities and render our own or our vendors’ facilities and equipment inoperable or inaccessible and require us to curtail or cease operations.”
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Results of Operations
Net Product Revenue Net product revenue is gross product revenue from sales to our customers less deductions for estimated government rebates and chargebacks.
Net product revenue was $353.9 million for the year ended December 31, 2020, compared to $306.5 million and $251.2 million for the years ended December 31, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, higher sales volumes accounted for 31.9 percent, 58.4 percent and 85.7 percent of the increases in net revenue, respectively, as we shipped Korlym to more patients. Increases in the average price of Korlym tablets accounted for the remainder of the increases. The increase in Korlym’s price for the year ended December 31, 2020 was due to a relative decrease in the number of patients covered by Medicaid (which reimburses Korlym at a lower rate), a statutorily-mandated increase in the price paid by other government programs, one price increase that took effect on August 1, 2019 and another on January 1, 2020.
Cost of sales Cost of sales includes the cost of API, tableting, packaging, personnel, overhead, stability testing and distribution.
Cost of sales was $5.6 million for the year ended December 31, 2020, compared to $5.5 million and $5.2 million for the years ended December 31, 2019 and 2018, respectively. The dollar value of our cost of sales increased in both years due to greater sales unit volumes. Cost of sales was 1.6 percent, 1.8 percent and 2.1 percent of our net product revenue for the years ended December 31, 2020, 2019 and 2018, respectively. Cost of sales as a percentage of revenue declined due to an increase in the average price of Korlym as well as a decrease in its cost of manufacture.
Research and development expenses – Research and development expenses include the cost of (1) recruiting and compensating development personnel, (2) clinical trials, (3) drug product and preclinical studies in support of clinical trials and regulatory submissions, (4) discovery research and (5) the development of drug formulations and manufacturing processes.
Research and development expenses increased to $114.8 million for the year ended December 31, 2020 from $89.0 million for the comparable period in 2019. The increase was due to increased spending on the advancement of our oncology and endocrinology development programs and on the recruitment and compensation of development personnel.
Research and development expenses increased to $89.0 million for the year ended December 31, 2019 from $75.2 million in 2018. The increase was primarily due to increased spending on the recruitment and compensation of development personnel and on the discovery and advancement of new selective cortisol modulators, partially offset by the completion of drug-drug interaction studies related to relacorilant.
  Year Ended December 31,
  2020 2019 2018
(in thousands)
Development programs:      
Oncology $ 34,163  $ 21,098  $ 11,965 
Endocrinology $ 48,435  $ 35,988  $ 18,392 
Pre-clinical and clinical selective cortisol modulators $ 11,580  $ 11,120  $ 29,380 
Unallocated activities, including pre-clinical, manufacturing and regulatory activities $ 9,364  $ 11,270  $ 8,498 
Stock-based compensation $ 11,222  $ 9,541  $ 7,012 
Total research and development expense $ 114,764  $ 89,017  $ 75,247 
It is difficult to predict the timing and cost of development activities, which are subject to many uncertainties and risks, including inconclusive or negative results, slow patient enrollment, adverse side effects and difficulties in the formulation or manufacture of study drugs and the lack of drug-candidate efficacy. In addition, clinical development is subject to intensive government oversight and regulations that may change unpredictably and without notice. We expect our research and development expense to be higher in 2021 than in 2020 as our clinical programs advance. Research and development spending in future years will depend on the outcome of our pre-clinical and clinical trials and our development plans.
Selling, general and administrative expenses - Selling, general and administrative expenses include (1) compensation of employees, consultants and contractors engaged in commercial and administrative activities, (2) the cost of vendors supporting commercial activities and (3) legal and accounting fees.
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Selling, general and administrative expenses increased to $105.3 million for the year ended December 31, 2020 from $100.4 million for the comparable period in 2019. The increase in selling, general and administrative expenses was primarily due to increases in employee recruiting and compensation expenses, increased legal and marketing costs, volume-related pharmacy and other distribution costs and professional service fees.
Selling, general and administrative expenses increased to $100.4 million for the year ended December 31, 2019 from $81.3 million for the comparable period in 2018. The increase in selling, general and administrative expenses was primarily due to increased spending on the recruitment and compensation of additional employees, increased legal and marketing costs, and added distribution expenses arising from increased Korlym sales volumes.
We expect our selling, general and administrative expenses to be higher in 2021 than in 2020 due to increased commercial and administrative activities arising from increased sales volumes, litigation and administrative support for increased research and development activities.
Interest and other income - Interest and other income for the years ended December 31, 2020, 2019 and 2018 was $3.4 million, $5.1 million and $2.7 million, respectively, and consisted primarily of interest income from marketable securities. Interest and other income decreased for the year ended December 31, 2020 from the comparable period in 2019 primarily due to market-wide reductions in interest rates. The increase from the year ended December 31, 2019 from the comparable period in 2018 was due to growth in our holdings of cash and marketable securities.
Income tax expense - Income tax expense for the years ended December 31, 2020, 2019 and 2018 was $25.6 million, $22.5 million, and $16.7 million, respectively. The increases in income tax expense during the years ended December 31, 2020, 2019 and 2018 were primarily due to increases in net income and decreased discrete benefits from exercises of non-qualified stock options.
Liquidity and Capital Resources
Since 2015, we have relied on revenues from the sale of Korlym to fund our operations. Based on our current plans and expectations, we expect to fund our operations and planned research and development activities without needing to raise additional funds, although we may choose to raise additional funds for other reasons. If we were to raise funds, equity financing would be dilutive. Debt financing could involve restrictive covenants. Funds raised through collaborations with other companies may require us to relinquish certain rights in our product candidates.
As of December 31, 2020, we had cash, cash equivalents and marketable securities of $476.9 million, consisting of cash and cash equivalents of $76.2 million and marketable securities of $400.7 million, compared to cash and cash equivalents of $31.3 million and marketable securities of $284.0 million as of December 31, 2019.
The cash in our bank accounts and our marketable securities could be affected if the financial institutions holdings them were to fail or severely adverse conditions were to rise in the markets for public or private debt securities. We have never experienced a loss or lack of access to cash.
Net cash provided by operating activities for the years ended December 31, 2020, 2019 and 2018 was $152.0 million, $136.1 million and $115.7 million, respectively. These increases were primarily due to greater revenue, as a result of an increase in Korlym’s price as well as shipping Korlym to more patients.
Net cash used in investing activities for the years ended December 31, 2020, 2019 and 2018 was $119.3 million, $117.8 million and $90.8 million, respectively, primarily due to increased purchases of marketable securities with cash generated by our operating activities.
Net cash provided by financing activities for the year ended December 31, 2020 was $12.2 million. Net cash used in financing activities for the years ended December 31, 2019 and 2018 was $28.6 million and $14.3 million, respectively. For the same periods, stock option exercises provided $23.2 million, $8.4 million and $9.3 million, respectively. We repurchased an aggregate of $9.7 million of our common stock during the year ended December 31, 2020 pursuant to our program to repurchase up to $200 million of our common stock (the “Stock Repurchase Program”). In the first quarter of 2020, we purchased from our Chief Executive Officer $0.3 million of our common stock at the current market price to provide him liquidity to satisfy tax liability arising from his net (cashless) exercise in 2019 of stock options that were about to expire. We repurchased an aggregate of $31.0 million and $23.7 million during the years ended December 31, 2019 and 2018, respectively, pursuant to our program to repurchase up to $100 million of our common stock that expired on June 30, 2019. During the years ended December 31, 2020 and 2019, we also acquired 0.1 million and 0.5 million shares at a cost of $1.1 million and $6.1 million, respectively, in satisfaction tax withholding requirements for the settlement of employee option exercises. We had no such transactions in 2018.
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As of December 31, 2020, we had retained earnings of $82.5 million.
Contractual Obligations and Commitments
The following table presents our estimates of obligations under contractual agreements as of December 31, 2020.
Contractual Obligations Total Less than
1 year
1-3
Years
3-5
Years
More than
5 Years
  (in thousands)
Manufacturing purchase commitments(1)
$ 159  $ 159  $ —  $ —  $ — 
Lease obligations(2)
$ 2,639  $ 2,109  $ 530  $ —  $ — 
Research and development studies(3)
$ 116  $ 116  $ —  $ —  $ — 
Total other contractual obligations $ 2,914  $ 2,384  $ 530  $ —  $ — 
(1) As of December 31, 2020, we had no remaining commitments to purchase API from PCAS and have a $0.2 million commitment to purchase Korlym tablets.
(2) In October 2019, we amended our office lease to add more space and extend its term from March 31, 2020 through March 31, 2022 for the original office space and on April 1, 2020, the lease term would begin for additional space through March 31, 2022. In June 2020, we amended our office lease to commence the additional space on June 15, 2020. As of December 31, 2020, the remaining minimum rental payments due under the lease were $2.6 million.
(3) In December 2013, we entered into an agreement with Quotient Sciences Limited (“Quotient”), a clinical research organization, to assist in the management and conduct of our Phase 1 studies of miricorilant and our other selective cortisol modulators. As of December 31, 2020, the total non-cancelable commitment under the agreement was approximately $0.1 million.
We have other contractual payment obligations and purchase commitments, the timing of which are contingent on future events, including the initiation and completion of manufacturing projects. In March 2014, we entered into a long-term agreement with one contract manufacturer, PCAS to produce mifepristone, the API for Korlym. On July 25, 2018, we amended this agreement to add a second manufacturing site and extend its term to December 31, 2021, with two one-year automatic renewals, unless either party provides 12 months advance written notice of its intent not to renew. The amendment provides exclusivity between PCAS and Corcept. If PCAS is unable to meet our requirements, we may purchase mifepristone from another supplier.
We have agreements with two third-party manufacturers to produce and bottle Korlym tablets.
We enter into contracts in the normal course of business with CROs for preclinical studies and clinical trials. The contracts are cancellable, with varying provisions regarding termination. If a contract with a specific vendor were to be terminated, we would only be obligated for products and services we had received as of the effective date of the termination and any applicable cancellation fees.
Net Operating Loss Carryforwards
See Note 9, Income Taxes in our audited consolidated financial statements.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and judgments that affect the amount of assets, liabilities and expenses we report. We base our estimates on historical experience and on other assumptions we believe to be reasonable. Actual results may differ from our estimates. Our significant accounting policies are described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K. We believe the following accounting estimates and policies to be critical:
Net Product Revenue
To determine net product revenue, we deduct from sales the cost of our patient co-pay assistance program and our estimates of (i) government chargebacks and rebates, (ii) discounts provided to our SD for prompt payment and (iii) reserves for expected returns. We record these estimates at the time we recognize revenue and update them as new information becomes available. Our estimates take into account our understanding of the range of possible outcomes. If results differ from our estimates, we adjust our estimates, which changes our net product revenue and earnings. We report any changes in the period they become known to us, even if they concern transactions occurring in prior period.
38


Government Rebates
Korlym is eligible for purchase by, or qualifies for reimbursement from, Medicaid and other government programs that are eligible for rebates on the price they pay for Korlym. To determine the appropriate amount to reserve against these rebates, we identify Korlym sold to patients covered by government-funded programs, apply the applicable government discount to these sales and then estimate the portion of total rebates we expect will be claimed. We then (i) deduct this reserve from revenue in the period to which the rebates relate and (ii) include in accrued expenses on our consolidated balance sheet a current liability of equal amount.
Chargebacks
Although we sell Korlym to the SD at full price, some of the government entities to which the SD sells receive a discount. The SD recovers such discounts by reducing its payment to us (this reduction is called a “chargeback”). Chargebacks sometimes relate to Korlym sold to SD in prior periods. We deduct from our revenue in each period chargebacks claimed by the SD for Korlym we sold to the SD that period. We also create a reserve for chargebacks we estimate the SD will claim in future periods against Korlym it purchased in the current period but has not yet resold. We determine the amount of this reserve based on our experience with SD chargebacks and our understanding of the SD’s customer base and business practices. We deduct this reserve from revenue and include in accrued expenses on our consolidated balance sheet a current liability of equal amount.
Patient Assistance Program and Charitable Support
It is our policy that no patient be denied Korlym due to inability to pay. We provide financial assistance to eligible patients whose insurance policies have high deductibles or co-payments and deduct the amount of such assistance from gross revenue. We determine the assistance we provide each patient by applying our program guidelines to that patient’s financial position and their insurance policy’s co-payment and deductible requirements. We also donate cash to charities that help patients with financial need pay for the treatment of Cushing’s syndrome (which treatment may not include Korlym). We do not include in our revenue payments these charities make on behalf of patients receiving Korlym. We provide Korlym at no cost to patients without insurance who do not qualify for charitable support.
Sales Returns
For safety reasons, federal law prohibits patients from returning Korlym they have received. Korlym sold to our SD is subject to return. We deduct the amount of Korlym we estimate the SD will return from each period’s gross revenue. We base our estimates on quantitative and qualitative information including, but not limited to, historical return rates, the amount of Korlym held by the SD and projected demand. If we cannot reasonably estimate returns with respect to a particular sale, we defer recognition of revenue until we can make a reasonable estimate. To date, returns have not been material.
Leases
We account for leases in accordance with ASC 842, Leases, which requires lease transactions with terms longer than 12 months to be recognized on the balance sheet as a liability (“lease liabilities”), offset by an asset of equal amount (“right-of-use assets”).
We recognize right-of-use assets and lease liabilities at lease commencement. We measure lease liabilities based on the present value of lease payments over the lease term discounted by the rate equal to the rate we would pay on a loan with monthly payments and a term equal to the monthly payments and remaining term of our lease. We estimate our incremental borrowing rate based on bank quotes and an analysis of public companies with debt and credit carrying terms similar to our lease term. We do not include in the lease term options to extend or terminate the lease unless it is reasonably certain at commencement that we will exercise any such options. We account for the lease components separately from non-lease components for our operating leases.
Inventory and Cost of Sales
We value inventory at the lower of cost or net realizable value and determine the cost of inventory we sell using the specific identification method, which approximates a first-in, first-out basis. We assess our inventory levels at each reporting period and write down inventory that is either expected to be at risk of expiration prior to sale, or has a cost basis in excess of its expected net realizable value, or for which there are inventory quantities in excess of expected requirements. We destroy expired inventory and recognize the related costs as cost of sales in that period’s statement of comprehensive income.
Cost of sales includes the cost of manufacturing Korlym, including materials, third-party manufacturing costs and indirect personnel and other overhead costs, based on the number of Korlym tablets for which we recognize revenue, as well as costs of stability testing, logistics and distribution incurred during the applicable period.
39


Accruals of Research and Development Costs
We base our accruals for discovery research, preclinical studies and clinical trials on our estimates of work completed, milestones achieved, patient enrollment and past experience with similar activities. Our estimates include assessments of information from contract research organizations and the status of our own research, development and administrative activities.
Stock-based compensation
We account for stock-based compensation under the fair value method, based on the value of the award at the grant date. To date, our stock-based compensation has consisted entirely of option grants, which we value using the Black-Scholes model. We recognize stock-based compensation expense over the applicable vesting period, net of estimated forfeitures. If actual forfeitures differ from our estimates, we adjust stock-based compensation expense accordingly.
We recognize the expense of options granted to non-employees based on their fair value at the time of vesting.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected tax consequences of our future financial and operating activities. Under ASC 740, we determine deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the tax rates in effect for the year in which we expect such differences to reverse. If we determine that it is more likely than not that we will not generate sufficient taxable income to realize the value of some or all of our deferred tax assets (net of our deferred tax liabilities), we establish a valuation allowance offsetting the amount we do not expect to realize. We perform this analysis each reporting period and reduce or increase the size of our valuation allowance accordingly.
The deferred tax assets that we record each period depend primarily on our ability to generate future taxable income in the United States. Each period, we evaluate the need for a valuation allowance against our deferred tax assets and, if necessary, adjust the valuation allowance so that net deferred tax assets are recorded on our balance sheet only to the extent we conclude it is more likely than not that these deferred tax assets will be realized. If our outlook for future taxable income changes significantly, our assessment of the need for, and the amount of, a valuation allowance may also change.
We also account for uncertain tax positions in accordance with ASC 740, which requires us to adjust our consolidated financial statements to reflect only those tax positions that are more-likely-than-not to be sustained upon review by federal or state examiners. We recognize in the consolidated financial statements the largest expected tax benefit that has a greater than 50 percent likelihood of being sustained on examination by the taxing authorities. We report interest and penalties related to unrecognized tax benefits as income tax expenses.
Recently Issued Accounting Pronouncements
See Note 1, Basis of Presentation and Summary of Significant Accounting Policies in our audited consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk
The primary objective of our investment activities is to preserve principal. As of December 31, 2020, the fair value of our cash and cash equivalents and marketable securities was $476.9 million. Our marketable securities consisted primarily of commercial paper, corporate notes, asset-backed securities, repurchase agreements, U.S. Treasury securities and a money market fund invested in short-term U.S. Treasury securities maintained at a major U.S. financial institution. To minimize our exposure to interest rate and other market risks, we have limited the maturities of our investments to less than three years, with the duration of our portfolio not to exceed two years. Due to the short-term nature and high liquidity of these instruments, an increase or decrease in market interest rates by 25 basis points would not have a material impact on the total value of our portfolio as of December 31, 2020.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements required by this item are set forth beginning at page F-1 and are incorporated herein by reference.
40


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file with the SEC is recorded, processed, summarized and filed within the time periods specified in the SEC’s rules and forms and that such information is accumulated and discussed with our management, including our Chief Executive Officer and Chief Financial Officer, so as to allow timely decisions regarding disclosure. Management recognizes that controls and procedures, no matter how well designed and operated, can only provide reasonable, not absolute, assurance the desired control objectives will be met. In reaching a reasonable level of assurance, management has weighed the cost of contemplated controls against their intended benefits. The design of any system of controls is based on management’s assumptions about the likelihood of future events. We cannot assure you that our controls will achieve their stated goals under all possible conditions. Changes in future conditions may render our controls inadequate or may cause our degree of compliance with them to deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As of December 31, 2020, our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on their evaluation, they concluded that they are effective.
There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of externally-reported consolidated financial statements in accordance with U.S. GAAP. As discussed in Item 9A(a) above, internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that their objectives have been met.
As of December 31, 2020, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the officers who certify our financial reports and to the members of the Company’s senior management and board of directors as appropriate to allow timely decisions regarding required disclosure at the reasonable assurance level.
Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting. It is set forth below.
(c) Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Corcept Therapeutics Incorporated
Opinion on Internal Control over Financial Reporting
We have audited Corcept Therapeutics Incorporated’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Corcept Therapeutics Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
41


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2020 and 2019, the related consolidated statements comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 23, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Redwood City, California
February 23, 2021
ITEM 9B. OTHER INFORMATION
None.
42


PART III
Certain information required by Part III is omitted from this Form 10-K because we expect to file with the U.S. Securities and Exchange Commission, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, a definitive proxy statement (“Proxy Statement”), pursuant to Regulation 14A in connection with the solicitation of proxies for our 2021 Annual Meeting of Stockholders, and certain information included therein is incorporated herein by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference.
43


PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Form 10-K
(1) Financial Statements:
(2) Financial Statement Schedules:
All schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
(3) Exhibits:
Item 601 of Regulation S-K requires the exhibits listed below. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified.
(A)    EXHIBITS
Exhibit Number Description of Document
3.1
3.2
   
4.1
   
4.2
4.3
   
4.4
   
4.5
   
4.6
   
44


Exhibit Number Description of Document
10.1
   
10.2#
   
10.3† 
   
10.4
   
10.5†
   
10.6†
   
10.7†
10.8
   
10.9†
   
10.10†
   
10.11†
   
10.12†
10.13#
   
10.14†
   
10.15
   
10.16#
   
10.17#
   
10.18
   
45


Exhibit Number Description of Document
10.19
   
10.20
   
10.21#
   
10.22
10.23#
   
10.24
   
10.25
   
10.26#
   
10.27†
   
10.28†
10.29#
   
10.30#
10.31#
10.32†
10.33†
   
10.34
10.35
10.36
10.37
46


Exhibit Number Description of Document
10.38
10.39†
10.40†
10.41†
10.42
10.43
23.1
   
24.1
   
31.1
   
31.2
   
32.1
   
32.2
   
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.DEF XBRL Definition Linkbase Document
101.LAB XBRL Labels Linkbase Document
101.PRE XBRL Presentation Linkbase Document
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document
# Confidential treatment granted
Management contract or compensatory plan or arrangement
ITEM 16. FORM 10-K SUMMARY
None.
47


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  CORCEPT THERAPEUTICS INCORPORATED
   
  By: /s/ JOSEPH K. BELANOFF
    Joseph K. Belanoff, M.D.,
    Chief Executive Officer and President
  Date: February 23, 2021
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Joseph K. Belanoff and Charles Robb, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
48


Signature   Title   Date
/s/ JOSEPH K. BELANOFF   Chief Executive Officer, President and Director   February 23, 2021
Joseph K. Belanoff, M.D.   (Principal Executive Officer)    
         
/s/ CHARLES ROBB   Chief Financial Officer and Secretary    February 23, 2021
Charles Robb   (Principal Financial Officer)    
         
/s/ JOSEPH DOUGLAS LYON Chief Accounting Officer February 23, 2021
Joseph Douglas Lyon (Principal Accounting Officer)
/s/ JAMES N. WILSON   Director and Chairman of the Board of Directors   February 23, 2021
James N. Wilson        
         
/s/ GREGG ALTON Director February 23, 2021
Gregg Alton
/s/ G. LEONARD BAKER, JR.   Director   February 23, 2021
G. Leonard Baker, Jr.        
/s/ GILLIAN CANNON Director February 23, 2021
Gillian Cannon
/s/ DAVID L. MAHONEY   Director   February 23, 2021
David L. Mahoney        
/s/ KIMBERLY PARK   Director   February 23, 2021
Kimberly Park        
/s/ DANIEL N. SWISHER, JR   Director   February 23, 2021
Daniel N. Swisher, Jr.        
49


CORCEPT THERAPEUTICS INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Corcept Therapeutics Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Corcept Therapeutics Incorporated (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
2


Inventory Excess and Obsolescence Reserve
Description of the Matter
As of December 31, 2020, the Company had $21.2 million of inventory which included $1.7 million of raw materials, $12.9 million of work in progress and $6.6 million of finished goods. As disclosed in Note 1, inventories are stated at the lower of cost or net realizable value. The Company assesses its inventory levels each reporting period and writes down inventory that is either expected to be at risk of expiration prior to sale, or has a cost basis in excess of its expected net realizable value, or for which there are inventory quantities in excess of expected requirements.

Auditing management's estimates for excess and obsolete inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company's control. In particular, the obsolete and excess inventory calculations are sensitive to significant assumptions, including the expected demand for the Company’s products, assumptions about the drug’s life cycle, the effect on demand of competitive products and the Company's purchase commitments.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve process including management’s review of the significant assumptions described above and controls over the completeness and accuracy of the information used to develop the estimate.

Our substantive audit procedures included, among others, evaluating methodologies used and data utilized in the analysis for inventory expected to be at risk for expiration or excess. We evaluated purchase commitments or alternative uses, compared forecasted demand to historical trends, compared actual inventory levels to forecasted demand requirements and evaluated the sensitivity of sales forecast assumptions on the amount of inventory reserves recorded.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2001.
Redwood City, California
February 23, 2021
3


CORCEPT THERAPEUTICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
  December 31,
  2020 2019
ASSETS    
Current assets:    
Cash and cash equivalents $ 76,190  $ 31,269 
Short-term marketable securities 364,506  244,693 
Trade receivables, net of allowances 26,198  19,928 
Inventory 4,910  5,424 
Prepaid expenses and other current assets 6,697  6,044 
Total current assets 478,501  307,358 
Strategic inventory 16,247  11,981 
Operating lease right-of-use asset 2,509  3,446 
Property and equipment, net of accumulated depreciation 1,675  1,050 
Long-term marketable securities 36,196  39,352 
Other assets 5,000  3,448 
Deferred tax assets, net 31,603  45,677 
Total assets $ 571,731  $ 412,312 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $ 10,554  $ 7,537 
Accrued clinical expenses 13,704  6,477 
Accrued and other liabilities 21,186  23,269 
Short-term operating lease liability 2,050  1,558 
Total current liabilities 47,494  38,841 
Long-term operating lease liability 501  1,903 
Long-term accrued income taxes 398  386 
Total liabilities 48,393  41,130 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 10,000 shares authorized and no shares outstanding at December 31, 2020 and December 31, 2019
—  — 
Common stock, par value $0.001 per share, 280,000 shares authorized and 122,586 issued and 116,735 outstanding at December 31, 2020 and 119,767 shares issued and 114,549 outstanding at December 31, 2019
122  120 
Treasury stock; at cost; 5,851 shares of common stock at December 31, 2020 and 5,218 shares of common stock at December 31, 2019
(75,795) (62,704)
Additional paid-in capital 516,140  457,060 
Accumulated other comprehensive gain 415  261 
Retained earnings (accumulated deficit) 82,456  (23,555)
Total stockholders’ equity 523,338  371,182 
Total liabilities and stockholders’ equity $ 571,731  $ 412,312 
The accompanying notes are an integral part of these consolidated financial statements.
4


CORCEPT THERAPEUTICS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
Year Ended December 31,
2020 2019 2018
Product revenue, net $ 353,874  $ 306,486  $ 251,247 
Operating expenses:
Cost of sales 5,582  5,504  5,215 
Research and development 114,764  89,017  75,247 
Selling, general and administrative 105,326  100,359  81,289 
Total operating expenses 225,672  194,880  161,751 
Income from operations 128,202  111,606  89,496 
Interest and other income 3,400  5,070  2,657 
Income before income taxes 131,602  116,676  92,153 
Income tax expense 25,591  22,495  16,743 
Net income $ 106,011  $ 94,181  $ 75,410 
Other comprehensive income:
Net unrealized (loss) gain on available-for-sale investments, net of tax impact of $15, $(104) and $22
(50) 327 
Foreign currency translation gain, net of tax 204  — 
Total comprehensive income $ 106,165  $ 94,512  $ 75,415 
Basic net income per share $ 0.92  $ 0.82  $ 0.65 
Diluted net income per share $ 0.85  $ 0.77  $ 0.60 
Weighted average shares outstanding used in computing net income per share
Basic 115,412  114,349  115,343 
Diluted 124,194  122,566  126,688 
The accompanying notes are an integral part of these consolidated financial statements.
5


CORCEPT THERAPEUTICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  Year Ended December 31,
  2020 2019 2018
Cash flows from operating activities:      
Net income $ 106,011  $ 94,181  $ 75,410 
Adjustments to reconcile net income to net cash provided by operations:      
Stock-based compensation 33,539  29,313  23,747 
Amortization (accretion) of interest income 1,303  (1,738) (1,721)
Depreciation and amortization of property and equipment 525  703  236 
Deferred income taxes 14,089  16,877  14,067 
Non-cash amortization of right-of-use asset 1,712  1,468  — 
Others 148  —  — 
Changes in operating assets and liabilities:      
Trade receivables (6,270) (2,340) (2,288)
Other receivable —  —  12,896 
Inventory (3,514) (1,044) (7,779)
Prepaid expenses and other current assets (653) 1,696  (5,071)
Other assets (1,552) (3,398) — 
Accounts payable 3,161  (735) (389)
Accrued clinical expenses 7,227  2,956  1,274 
Accrued and other liabilities (2,083) (517) 5,044 
Long-term accrued income taxes 12  147  239 
Operating lease liability (1,685) (1,452) — 
Net cash provided by operating activities 151,970  136,117  115,665 
Cash flows from investing activities:      
Purchases of property and equipment (1,238) (1,088) (298)
Proceeds from maturities of marketable securities 302,089  182,295  142,655 
Purchases of marketable securities (420,114) (299,035) (233,124)
Net cash used in investing activities (119,263) (117,828) (90,767)
Cash flows from financing activities:      
Proceeds from exercise of stock options, net of issuance costs 23,226  8,419  9,322 
Repurchase of common stock (9,945) (30,975) (23,657)
Cash paid to satisfy statutory withholding requirement for the net settlement of cashless option exercise (1,067) (6,089) — 
Net cash provided by (used in) financing activities 12,214  (28,645) (14,335)
Net increase (decrease) in cash and cash equivalents 44,921  (10,356) 10,563 
Cash and cash equivalents, at beginning of period 31,269  41,625  31,062 
Cash and cash equivalents, at end of period $ 76,190  $ 31,269  $ 41,625 
Supplemental disclosure:
Income taxes paid $ 10,856  $ 6,744  $ 1,351
Cost of shares repurchased for net settlement of cashless option exercise $ 2,079  $ 1,983  $
Recognition of right-of-use asset and lease liability $ 775  $ 4,913  $
The accompanying notes are an integral part of these consolidated financial statements
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CORCEPT THERAPEUTICS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands) 
Common Stock Additional
Paid-in
Capital
Treasury Stock Accumulated
Other
Comprehensive
Income (Loss)
Retained Earnings (Accumulated
Deficit)
Total
Stockholders'
Equity
Shares Amount
Balance at December 31, 2017 114,717  $ 115  $ 384,074  $ —  $ (75) $ (193,146) $ 190,968 
Issuance of common stock upon exercise of options 2,121  9,320  —  —  —  9,322 
Stock-based compensation related to employee and director options —  —  23,834  —  —  —  23,834 
Other comprehensive loss, net of tax —  —  —  —  — 
Purchase of treasury stock (1,807) —  —  (23,657) —  —  (23,657)
Net income —  —  —  —  —  75,410  75,410 
Balance at December 31, 2018 115,031  117  417,228  (23,657) (70) (117,736) 275,882 
Issuance of common stock upon exercise of options 2,929  10,399  —  —  —  10,402 
Shares tendered to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises (631) —  —  (8,072) —  —  (8,072)
Stock-based compensation related to employee and director options —  —  29,201  —  —  —  29,201 
Stock-based compensation related to non-employee options —  —  232  —  —  —  232 
Other comprehensive income, net of tax —  —  —  —  331  —  331 
Purchase of treasury stock (2,780) —  —  (30,975) —  —  (30,975)
Net income —  —  —  —  —  94,181  94,181 
Balance at December 31, 2019 114,549  120  457,060  (62,704) 261  (23,555) 371,182 
Issuance of common stock upon exercise of options 2,819  25,303  —  —  —  25,305 
Shares tendered to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises (154) —  (3,146) —  —  (3,146)
Stock-based compensation related to employee and director options —  —  33,777  —  —  —  33,777 
Other comprehensive income, net of tax —  —  —  —  154  —  154 
Purchases of treasury stock (479) —  —  (9,945) —  —  (9,945)
Net income —  —  —  —  —  106,011  106,011 
Balance at December 31, 2020 116,735  $ 122  $ 516,140  $ (75,795) $ 415  $ 82,456  $ 523,338 
The accompanying notes are an integral part of these consolidated financial statements
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CORCEPT THERAPEUTICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8


1. Basis of Presentation and Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
Corcept Therapeutics Incorporated is a commercial-stage pharmaceutical company engaged in the discovery and development of medications that treat severe metabolic, oncologic and psychiatric disorders by modulating the effect of the hormone cortisol. In 2012, the U.S. Food and Drug Administration (“FDA”) approved Korlym (“mifepristone”) 300 mg tablets, as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We have discovered and patented four structurally distinct series of selective cortisol modulators, consisting of more than 1,000 compounds. We are developing compounds from these series as potential treatments for a broad range of serious disorders.
We were incorporated in the State of Delaware in May 1998. Our headquarters are located in Menlo Park, California.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Principles of Consolidation
Our consolidated financial statements include the financial position and results of operations of Corcept Therapeutics UK Limited, our wholly owned subsidiary, which we incorporated in the United Kingdom in March 2017.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
We reevaluate our estimates and assumptions each quarter, including those related to revenue recognition, recognition and measurement of income tax assets and liabilities, inventory, allowances for doubtful accounts and other accrued liabilities, including our bonus accrual, clinical trial accruals and stock-based compensation.
Fair Value Measurements
We value financial instruments using assumptions we believe third-party market participants would use. When choosing which assumptions to make when determining the value of a financial instrument, we look first for quoted prices in active markets for identical instruments (“Level 1 inputs”). If no Level 1 inputs are available, we consider (i) quoted prices in non-active markets for identical instruments; (ii) active markets for similar instruments; (iii) inputs other than quoted prices for the instrument; and (iv) inputs that are not directly observable, but that can be corroborated by observable data (“Level 2 inputs”). In the absence of Level 2 inputs, we rely on unobservable inputs, such as our estimates of the assumptions market participants would use in pricing the instrument (“Level 3 inputs”).
Cash and Cash Equivalents and Marketable Securities
We consider highly liquid investments that will mature in three months or less from the time we purchase them to be cash equivalents. Cash equivalents are valued using Level 1 inputs, which approximate our cost.
We invest the majority of our funds in marketable securities, primarily corporate notes, U.S. Treasury securities, asset-backed securities, commercial paper and repurchase agreements. We classify our marketable securities as available-for-sale securities and report them at fair value as “cash equivalents” or “marketable securities” on our consolidated balance sheet, with related unrealized gains and losses included in stockholders' equity. Realized gains and losses and permanent declines in value are included in “interest and other income (expense)” on our consolidated statement of comprehensive income.
Credit and Concentration Risks
Our cash, cash equivalents and marketable securities are held in one financial institution. We are subject to credit risk from our cash equivalents and marketable securities. We limit our investments to U.S. Treasury obligations and high-grade corporate debt, asset-backed securities and repurchase agreements with less than a 36-month maturity at the time of purchase.
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CORCEPT THERAPEUTICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

These investments are diversified and do not expose us to concentrations of credit risk. We have never experienced a loss in, or lack of access to, our operating or investment accounts.
We have a single-source manufacturer of mifepristone, the active pharmaceutical ingredient (API), in Korlym - Produits Chimiques Auxiliaires et de Synthèse SA (PCAS). If PCAS is unable or unwilling to manufacture API in the amounts and time frames required, we may not be able to manufacture Korlym in a timely manner. In order to mitigate this risk, we have purchased and hold in inventory a reserve quantity of mifepristone API.
We have a concentration of risk in regard to the distribution of our product. A single specialty pharmacy, Optime Care, Inc. (“Optime”), dispenses Korlym to patients for us. Optime is an independent third party. Its unwillingness or inability to dispense Korlym to patients in a timely manner would harm our business.
We sell the Korlym that Optime dispenses directly to patients, with title to the medicine passing directly from us to the patient upon the patient’s receipt of the drug. Our receivables risk is spread among various third-party payers - pharmacy benefit managers, insurance companies, government programs and private charities. We extend credit to third-party payers based on their creditworthiness. We monitor our exposure and record an allowance against uncollectible trade receivables as necessary. To date, we have not incurred any credit losses.
Inventory and Cost of Sales
Regulatory approval of product candidates is uncertain. Because product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained, we record the cost of manufacturing our product candidates as research and development expenses at the time such costs are incurred. We capitalize to inventory manufacturing costs related to Korlym.
We value inventory at the lower of cost or net realizable value and determine the cost of inventory we sell using the specific identification method, which approximates a first-in, first-out basis. We assess our inventory levels at each reporting period and write down inventory that is either expected to be at risk of expiration prior to sale, or has a cost basis in excess of its expected net realizable value, or for which there are inventory quantities in excess of expected requirements. We destroy expired inventory and recognize the related costs as cost of sales in that period’s statement of comprehensive income.
Cost of sales also includes the cost of manufacturing Korlym, including materials, third-party manufacturing costs and indirect personnel and other overhead costs, based on the number of Korlym tablets for which we recognize revenue, as well as costs of stability testing, logistics and distribution.
We classify inventory we do not expect to sell or use in clinical studies within 12 months of the balance sheet date as strategic inventory, a non-current asset.
Net Product Revenue
We sell Korlym directly to patients through a single specialty pharmacy. We also sell Korlym to a specialty distributor (“SD”), for which we recognize revenue at the time the SD receives Korlym. SD sales were less than one percent of our net revenue in the years ended December 31, 2020, 2019 and 2018.
To determine our revenue from the sale of Korlym, we (i) identify our contract with each customer; (ii) identify the obligations of Corcept and the customer under the contract; (iii) determine the contracted transaction price; (iv) allocate the transaction price to the contract’s performance obligations, which in our case consists of delivering Korlym to the customer; and (v) recognize revenue once Korlym has been delivered, provided we deem it probable that we will collect the payment due to us.
Confirmation of coverage by private or government insurance or by a third-party charity is a prerequisite for selling Korlym to a patient.
To determine net product revenue, we deduct from sales the cost of our patient co-pay assistance program and our estimates of (a) government chargebacks and rebates, (b) discounts provided to our SD for prompt payment and (c) reserves for expected Korlym returns. We record these estimates at the time we recognize revenue and update them as new information becomes available. Our estimates take into account our understanding of the range of possible outcomes. If results differ from our estimates, we adjust our estimates, causing a change to our net product revenue and earnings. We report any changes in the period they become known, even if they concern transactions occurring in prior periods.
Government Rebates: Korlym is eligible for purchase by, or qualifies for reimbursement from, Medicaid and other government programs that are eligible for rebates on the price they pay for Korlym. To determine the appropriate amount to
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CORCEPT THERAPEUTICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

reserve against these rebates, we identify Korlym sold to patients covered by government-funded programs, apply the applicable government discount to these sales, then estimate the portion of total rebates we expect will be claimed.
Chargebacks. Although we sell Korlym to the SD at full price, some of the government entities to which the SD sells receive a discount. As it makes such sales, SD recovers the full amount of any related discounts by reducing its payment to us (this reduction is called a “chargeback”). Chargebacks sometimes relate to Korlym purchased by the SD in prior periods. We deduct from our revenue in each period chargebacks claimed by the SD for Korlym it purchased in that period. We also create each period a reserve for chargebacks we estimate the SD will claim in future periods against Korlym it has not yet resold. We determine the amount of this reserve based on our experience with SD chargebacks and our understanding of the SD’s customer base and business practices. We then deduct this reserve from revenue and include in accrued expenses on our consolidated balance sheet a current liability of equal amount.
Patient Assistance Program and Charitable Support: It is our policy that no patient be denied Korlym due to inability to pay. We provide financial assistance to eligible patients whose insurance policies have high deductibles or co-payments and deduct the amount of such assistance from gross revenue. We determine the assistance we provide each patient by applying our program guidelines to that patient’s financial position and their insurance policy’s co-payment and deductible requirements for the purchase of Korlym. We donate cash to charities that help patients with financial need pay for the treatment of Cushing’s syndrome. We do not include payments from these charities in revenue, but as a deduction to selling, general and administrative expenses. We provide Korlym at no cost to uninsured patients who do not qualify for charitable support.
Sales Returns: Federal law prohibits the return of Korlym sold to patients. Sales to our SD are subject to return. We deduct the amount of Korlym we estimate the SD will return from each period’s gross revenue. We base our estimates on quantitative and qualitative information including, but not limited to, historical return rates, the amount of Korlym held by the SD and projected demand. If we cannot reasonably estimate returns with respect to a particular sale, we defer recognition of revenue until we can make a reasonable estimate. To date, returns have not been significant.
The following table summarizes activity in each of the product revenue allowance and reserve categories for the year ended December 31, 2020:
Chargebacks Government Rebates Total
(in thousands)
Balance at December 31, 2017: $ 927  $ 7,961  $ 8,888 
Provision recorded during the period 2,687  28,628  31,315 
Provision related to prior period sales —  532  532 
Credit or payments made during the period (3,268) (25,988) (29,256)
Balance at December 31, 2018: 346  11,133  11,479 
Provision related to current period sales 783  24,374  25,157 
Provision related to prior period sales —  (95) (95)
Credit or payments made during the period (852) (27,203) (28,055)
Balance at December 31, 2019: 277  8,209  8,486