Shares of Corcept Therapeutics (NASDAQ: CORT) gained over 11% last month, according to data provided by S&P Global Market Intelligence. The double-digit rise might seem impressive, but it comes on the heels of a report by the Southern Investigative Reporting Foundation (SIRF) that painted the company and its main profit generator, Korlym, a drug approved to treat Cushing's syndrome, in a negative light. That caused the stock to plunge in late January. As a result, shares have posted a year-to-date loss of 6% through the first week of March.
Management may have been able to regain control of the narrative surrounding the company and Korlym when it announced fourth-quarter and full-year 2018 operating results in late February. The drug continued to grow sales at a healthy clip, the business is comfortably profitable, and a next-generation therapy is progressing through clinical trials. Is that enough for investors to overlook the red flags uncovered by SIRF?
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The business grew revenue to $251 million and operating income to $89 million in 2018, marking year-over-year increases of 58% and 69%, respectively. Corcept Therapeutics ended the year with $206 million in cash and cash equivalents and expects full-year 2019 revenue in the neighborhood of $300 million. Despite the progress and optimism for near-term growth, the stock trades at just 11 times future earnings and less than 6 times sales.
That's likely due in large part to the recent reporting by SIRF, which uncovered multiple red flags for Corcept. The most damning allegations surround the safety profile of Korlym. The Food and Drug Administration's adverse-events reporting system listed 37 deaths for patients taking the drug through the first nine months of 2018, although the drug may not be responsible for those deaths. Meanwhile, the company didn't respond to a European regulatory rejection of the drug, instead just deciding to move on altogether, which is a little curious considering the financial success of the drug franchise in the United States.
Investors and shareholders of Corcept should certainly read the SIRF investigative report in full. It's not a short-seller report, but real journalism -- which means the findings shouldn't be dismissed. If the report forces physicians to take a more cautious approach to prescribing Korlym, then it could be devastating for the business. Investors will find out the impact, if any, when first-quarter 2019 results are released this spring.
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