UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

_______________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

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, including 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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

On October 26, 2022, there were 107,649,854 shares of common stock outstanding at a par value of $0.001 per share.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
CONDENSED CONSOLIDATED BALANCE SHEETS	3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	7
NOTES TO CONDENSED FINANCIAL STATEMENTS	9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21
ITEM 4. CONTROLS AND PROCEDURES	21
PART II. OTHER INFORMATION	22
ITEM 1. LEGAL PROCEEDINGS	22
ITEM 1A. RISK FACTORS	24
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	39
ITEM 4. MINE SAFETY DISCLOSURES	39
ITEM 5. OTHER INFORMATION	39
ITEM 6. EXHIBITS	40
SIGNATURES	41

2

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30, 2022		December 31, 2021
	(Unaudited)		(See Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	50,243	$	77,617
Short-term marketable securities	346,019		145,918
Trade receivables, net of allowances	29,414		27,625
Inventory	6,046		4,988
Prepaid expenses and other current assets	20,680		10,315
Total current assets	452,402		266,463
Strategic inventory	11,027		12,962
Operating lease right-of-use asset	1,707		514
Property and equipment, net of accumulated depreciation and amortization	801		1,002
Long-term marketable securities	4,895		112,277
Other assets	5,081		3,083
Deferred tax assets, net	57,342		27,455
Total assets	$	533,255	$	423,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,178	$	6,908
Accrued research and development expenses	13,771		12,442
Accrued and other liabilities	29,412		27,665
Short-term operating lease liability	1,707		526
Total current liabilities	53,068		47,541
Long-term accrued income taxes payable	6,823		409
Total liabilities	59,891		47,950
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock	—		—
Common stock	130		127
Treasury stock	(453,001)		(410,411)
Additional paid-in capital	648,831		591,349
Accumulated other comprehensive loss	(2,381)		(227)
Retained earnings	279,785		194,968
Total stockholders’ equity	473,364		375,806
Total liabilities and stockholders’ equity	$	533,255	$	423,756

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Product revenue, net	$	101,728	$	96,131	$	298,802	$	267,156
Operating expenses:
Cost of sales	1,339		1,275		3,905		3,927
Research and development	33,292		28,091		94,237		85,345
Selling, general and administrative	35,163		30,533		110,525		90,071
Total operating expenses	69,794		59,899		208,667		179,343
Income from operations	31,934		36,232		90,135		87,813
Interest and other income	1,070		72		1,780		457
Income before income taxes	33,004		36,304		91,915		88,270
Income tax benefit (expense)	1,604		(5,833)		(7,098)		(7,811)
Net income	34,608		30,471		84,817		80,459
Net income attributable to common stockholders	34,550		30,471		84,755		80,459
Basic net income per common share	$	0.32	$	0.26	$	0.80	$	0.69
Diluted net income per common share	$	0.30	$	0.24	$	0.73	$	0.63
Weighted-average shares outstanding used in computing net income per common share
Basic	107,125		115,791		106,479		116,297
Diluted	116,620		125,136		115,818		127,173

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Net income	34,608	30,471	84,817	80,459
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments, net of tax effect of $(23), $8, $449 and $85, respectively	74	(23)	(1,415)	(265)
Foreign currency translation loss, net of tax	(314)	(77)	(739)	(35)
Total comprehensive income	34,368	30,371	82,663	80,159

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	84,817	$	80,459
Adjustments to reconcile net income to net cash provided by operations:
Stock-based compensation	31,921		32,121
Amortization of interest income	2,121		3,805
Depreciation and amortization of property and equipment	599		783
Deferred income taxes	(29,438)		2,047
Non-cash amortization of right-of-use asset	1,623		1,487
Changes in operating assets and liabilities:
Trade receivables	(1,789)		(310)
Inventory	1,074		2,655
Prepaid expenses and other current assets	(10,365)		(2,288)
Other assets	(1,998)		894
Accounts payable	515		(3,961)
Accrued research and development expenses	1,329		(860)
Accrued and other liabilities	1,747		3,123
Long-term accrued income taxes	6,414		15
Operating lease liability	(1,635)		(1,505)
Net cash provided by operating activities	86,935		118,465
Cash flows from investing activities:
Purchases of property and equipment	(382)		(404)
Proceeds from maturities of marketable securities	161,718		308,864
Purchases of marketable securities	(258,422)		(312,805)
Net cash used in investing activities	(97,086)		(4,345)
Cash flows from financing activities:
Proceeds from issuance of common stock under our incentive award plan, net of issuance costs	3,596		13,182
Repurchase of common stock	—		(88,485)
Cash paid to satisfy statutory withholding requirement for net settlement of cashless option exercises and vesting of restricted stock grants	(20,819)		(20,319)
Net cash used in financing activities	(17,223)		(95,622)
Net (decrease) increase in cash and cash equivalents	(27,374)		18,498
Cash and cash equivalents, at beginning of period	77,617		76,190
Cash and cash equivalents, at end of period	$	50,243	$	94,688
Supplemental disclosure:
Exercise cost of shares repurchased for net settlement of cashless option exercises	$	21,975	$	9,705
Recognition of right-of-use asset and lease liability	$	2,816	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	116,735	$	122	$	516,140	$	(75,795)	$	415	$	82,456	$	523,338
Issuance of common stock upon exercise of options	1,832	2		10,081		—		—		—		10,083
Purchases of treasury stock	(1,282)	—		—		(33,540)		—		—		(33,540)
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(808)	—		—		(22,520)		—		—		(22,520)
Stock-based compensation	—	—		10,142		—		—		—		10,142
Other comprehensive loss, net of tax	—	—		—		—		(166)		—		(166)
Net income	—	—		—		—		—		23,465		23,465
Balance at March 31, 2021	116,477	$	124	$	536,363	$	(131,855)	$	249	$	105,921	$	510,802
Issuance of common stock upon exercise of options	855	1		6,660		—		—		—		6,661
Purchases of treasury stock	(1,365)	—		—		(29,170)		—		—		(29,170)
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(146)	—		—		(3,238)		—		—		(3,238)
Stock-based compensation	—	—		11,131		—		—		—		11,131
Other comprehensive loss, net of tax	—	—		—		—		(34)		—		(34)
Net income	—	—		—		—		—		26,523		26,523
Balance at June 30, 2021	115,821	$	125	$	554,154	$	(164,263)	$	215	$	132,444	$	522,675
Issuance of common stock upon exercise of options	904	1		6,224		—		—		—		6,225
Purchases of treasury stock	(1,220)	—		—		(25,775)		—		—		(25,775)
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(202)	—		—		(4,266)		—		—		(4,266)
Stock-based compensation	—	—		10,999		—		—		—		10,999
Other comprehensive loss, net of tax	—	—		—		—		(100)		—		(100)
Net income	—	—		—		—		—		30,471		30,471
Balance at September 30, 2021	115,303	$	126	$	571,377	$	(194,304)	$	115	$	162,915	$	540,229
Balance at December 31, 2021	105,940	$	127	$	591,349	$	(410,411)	$	(227)	$	194,968	$	375,806
Issuance of common stock upon exercise of options	586	1		6,543		—		—		—		6,544
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(305)	—		—		(7,037)		—		—		(7,037)
Stock-based compensation	—	—		10,825		—		—		—		10,825
Other comprehensive loss, net of tax	—	—		—		—		(1,124)		—		(1,124)
Net income	—	—		—		—		—		22,797		22,797
Balance at March 31, 2022	106,221	$	128	$	608,717	$	(417,448)	$	(1,351)	$	217,765	$	407,811
Issuance of common stock upon exercise of options and vesting of restricted stock	873	—		6,597		—		—		—		6,597
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(436)	—		—		(9,366)		—		—		(9,366)
Stock-based compensation	—	—		10,662		—		—		—		10,662
Other comprehensive loss, net of tax	—	—		—		—		(790)		—		(790)
Net income	—	—		—		—		—		27,412		27,412
Balance at June 30, 2022	106,658	$	128	$	625,976	$	(426,814)	$	(2,141)	$	245,177	$	442,326

7

Issuance of common stock under our incentive award plan	1,934	2		12,224		—		—		—		12,226
Shares purchased to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises	(981)	—		—		(26,187)		—		—		(26,187)
Stock-based compensation	—	—		10,631		—		—		—		10,631
Other comprehensive loss, net of tax	—	—		—		—		(240)		—		(240)
Net income	—	—		—		—		—		34,608		34,608
Balance at September 30, 2022	107,611	$	130	$	648,831	$	(453,001)	$	(2,381)	$	279,785	$	473,364

The accompanying notes are an integral part of these condensed consolidated financial statements

8

CORCEPT THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

Corcept Therapeutics Incorporated (collectively, “Corcept,” the “Company,” “we,” “us” and “our”) is a commercial-stage pharmaceutical company engaged in the discovery and development of medications to treat severe endocrine, oncologic, metabolic and neurological disorders by modulating the effects of the hormone cortisol. In 2012, the United States 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

We have prepared the following in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X: (i) condensed consolidated balance sheet as of September 30, 2022, (ii) condensed consolidated statements of income, comprehensive income and stockholders’ equity for the three- and nine-month periods ended September 30, 2022 and 2021, and (iii) condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2022 and 2021. These do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (which in the applicable periods consist only of normal, recurring adjustments) have been included. Operating results for the three- and nine-month periods ended September 30, 2022 are not necessarily indicative of the results for the remainder of 2022 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K. The December 31, 2021 balance sheet was derived from audited financial statements at that date.

There have been no material changes to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2021.

2. Composition of Certain Balance Sheet Items

Inventory

	September 30, 2022		December 31, 2021
	(in thousands)
Work in progress	$	11,171	$	11,450
Finished goods	5,902		6,500
Total inventory	17,073		17,950
Less strategic inventory classified as non-current	(11,027)		(12,962)
Total inventory classified as current	$	6,046	$	4,988

Because we rely on a single manufacturer to produce Korlym’s active pharmaceutical ingredient (“API”), we have purchased and hold significant quantities of API, included in work in progress inventory. We classify inventory we do not expect to sell within 12 months of the balance sheet date as “Strategic inventory,” a long-term asset.

9

Property and equipment, net of accumulated depreciation and amortization

	September 30, 2022		December 31, 2021
	(in thousands)
Furniture and equipment	$	1,220	$	1,157
Software	1,508		1,508
Leasehold improvements	1,597		1,262
Total property and equipment	4,325		3,927
Less accumulated depreciation and amortization	(3,524)		(2,925)
Property and equipment, net of accumulated depreciation and amortization	$	801	$	1,002

Accrued and other liabilities

	September 30, 2022		December 31, 2021
	(in thousands)
Accrued compensation	$	12,297	$	13,339
Government rebates	11,683		11,174
Legal fees	2,058		842
Accrued selling and marketing costs	1,602		1,351
Professional fees	909		150
Other	863		809
Total accrued and other liabilities	$	29,412	$	27,665

Other assets

As of September 30, 2022 and December 31, 2021, other assets included $4.9 million and $2.9 million of deposits for clinical trials, respectively.

3. Available-for-Sale Securities and Fair Value Measurements

The available-for-sale securities in our Condensed Consolidated Balance Sheets are as follows:

	September 30, 2022		December 31, 2021
	(in thousands)
Cash equivalents	$	24,973	$	45,088
Short-term marketable securities	346,019		145,918
Long-term marketable securities	4,895		112,277
Total marketable securities	$	375,887	$	303,283

10

The following table presents our available-for-sale securities grouped by asset type:

	Fair Value Hierarchy Level	September 30, 2022								December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
		(in thousands)
Corporate bonds	Level 2	$	151,372	$	—	$	(1,415)	$	149,957	$	125,370	$	3	$	(276)	$	125,097
Commercial paper	Level 2	118,993		—		—		118,993		30,963		—		—		30,963
Asset-backed securities	Level 2	8,423		—		(10)		8,413		57,801		—		(67)		57,734
U.S. Treasury securities	Level 1	73,952		—		(402)		73,550		44,473		—		(72)		44,401
Money market funds	Level 1	24,974		—		—		24,974		45,088		—		—		45,088
Total marketable securities		$	377,714	$	—	$	(1,827)	$	375,887	$	303,695	$	3	$	(415)	$	303,283

We estimate the fair value of marketable securities classified as Level 1 using quoted market prices obtained from a commercial pricing service for these or identical investments. We estimate the fair value of marketable securities classified as Level 2 using inputs that may include benchmark yields, reported trades, broker/dealer quotes and issuer spreads.

We periodically review our debt securities to determine if any of our investments is impaired due to the issuer’s poor credit or other reasons. If the fair value of our investment is less than our amortized cost, we evaluate quantitative and subjective factors – including, but not limited to, the nature of security, changes in credit ratings and analyst reports concerning the security’s issuer and industry, interest rate fluctuations and general market conditions to determine whether an allowance for credit losses is appropriate.

None of our investments, including those with unrealized losses, are impaired. Unrealized losses on our investments are due to interest rate fluctuations. We do not intend to sell investments that currently have unrealized losses and it is highly unlikely that we will sell any investment before recovery of its amortized cost basis, which may be at maturity. Accordingly, we have not recorded an allowance for credit losses for these investments.

We classified accrued interest on our marketable securities of $0.9 million and $1.4 million as of September 30, 2022 and December 31, 2021, respectively, as prepaid and other current assets on our condensed consolidated balance sheets.

As of September 30, 2022, all our marketable securities had original maturities of less than two years. The weighted-average maturity of our holdings was five months. As of September 30, 2022, our long-term marketable securities had remaining maturities of 18 months. None of our marketable securities changed from one fair value hierarchy to another during the three and nine months ended September 30, 2022.

4. Commitments and Contingencies

There have been no material changes in our obligations under contractual agreements described in our Annual Report on Form 10-K for the year ended December 31, 2021.

In the ordinary course of business, we may be subject to legal claims and regulatory actions that could have a material adverse effect on our business or financial position. We assess our potential liability in such situations by analyzing potential outcomes under various litigation, regulatory and settlement strategies. If we determine a loss is probable and its amount can be reasonably estimated, we accrue an amount equal to the estimated loss.

No losses and no provision for a loss contingency have been recorded to date. For further information about our ongoing legal matters, see Part II. Item 1, Legal Proceedings.

5. Leases

We lease our office facilities in Menlo Park, California. In March 2022, we amended our lease to extend its term from March 31, 2022 to June 30, 2023. As a result of this amendment, we recognized an additional right-of-use asset and corresponding lease liability of $2.8 million. The right-of-use asset and lease liability recognized equals the present value of the remaining payments due under our amended lease.

As the operating lease for our facilities does not expressly state an interest rate, we calculated the present value of remaining lease payments using a discount rate equal to the interest rate we would pay on a collateralized loan with monthly

11

payments and a term equal to the monthly payments and remaining term of our lease. We recognize operating lease payments as expenses using the straight-line method over the term of the lease.

Operating lease expense for the three and nine months ended September 30, 2022 was $0.6 million and $1.7 million, respectively, compared to $0.5 million and $1.6 million, respectively, for the comparable periods in 2021.

Our right-of-use assets and related lease liabilities were as follows (in thousands, except weighted average amounts):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022			2021
Cash paid for operating lease liabilities	$	578	$	530	$	1,687		$	1,574
Right-of-use assets obtained in exchange for new operating lease obligations	$	—	$	—	$	2,816		$	—
Weighted-average remaining lease term					9 months			6 months
Weighted-average discount rate					4.0		%	4.8		%

As of September 30, 2022, future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

2022 (remainder)	$	578
2023	1,157
Total lease payments	1,735
Less imputed interest	(28)
Present value of operating lease liabilities	$	1,707

6. Stockholders’ Equity

Incentive Award Plan

We have one stock option plan – the Corcept Therapeutics Incorporated 2012 Incentive Award Plan (the “2012 Plan”). In December 2021, our Board of Directors authorized a 4.2 million increase in the shares available for grant under the 2012 Plan.

Stock Options

During the three and nine months ended September 30, 2022, we issued 1.9 million and 3.3 million, respectively, shares of our common stock upon the exercise of stock options. Some option holders exercised their options on a “net exercise” basis, pursuant to which they surrendered to us, and we purchased from them, at the then current market price, shares equal in value to the associated exercise price and tax withholding obligations. During the three and nine months ended September 30, 2022, we purchased 1.0 million and 1.7 million shares in connection with option net exercises and paid $15.4 million and $20.6 million, respectively, to satisfy associated tax withholding obligations.

During the three and nine months ended September 30, 2021, we issued 0.9 million and 3.6 million, respectively, shares of our common stock upon the exercise of stock options. During the three and nine months ended September 30, 2021, we purchased 0.2 million and 1.2 million shares in connection with option net exercises and paid $2.3 million and $20.3 million, respectively, to satisfy associated tax withholding obligations.

We recorded purchased shares as treasury stock on our condensed consolidated balance sheets at cost. As of September 30, 2022 and December 31, 2021, we had 23.0 million and 21.3 million treasury shares outstanding, respectively.

Restricted Stock Units (“RSUs”)

During the three months ended March 31, 2022, we granted employees 0.2 million RSUs with a weighted-average grant date fair value of $19.34 per share. No RSUs were granted during the three months ended June 30, 2022 and September 30, 2022.

Restricted Stock Awards (“RSAs”)

During the three and nine months ended September 30, 2022, we granted employees 0.2 million and 0.3 million RSAs with a weighted-average grant date fair value of $26.19 and $25.20 per share, respectively. RSAs include voting and dividend

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rights and are therefore “participating” shares for the purpose of calculating basic and diluted net income per share. See “Note 7” below.

Employee Stock Purchase Plan (“ESPP”)

In February 2022, we adopted an ESPP that allows employees to set aside, by means of payroll deductions, up to ten percent of their annual cash compensation for the purchase of our common stock. Shares are issued to participating employees from the 2012 Plan on March 1st and September 1st of each year (or, if those dates fall on holidays or weekends, on the first business day thereafter) at the then-current fair market value of our stock, as determined at the close of trading on those days. Payroll deductions for participating employees began April 1, 2022, and the first purchase under the plan took place on September 1, 2022.

For each purchased share, the participating employee will receive one matching share, also issued from the 2012 Plan if certain conditions are met. There is no vesting requirement for shares issued pursuant to the ESPP purchase. The matching share will be granted in the form of a RSA that will vest at one year from the respective ESPP purchase date, net of any applicable tax withholding. The vesting condition on the RSA is that the participating employee hold the corresponding share purchased under the ESPP for one year from the purchase date. Shares purchased pursuant to the ESPP as well as any matching shares issued upon satisfaction of the one-year holding requirement may be held, sold or otherwise transferred at the employee’s sole discretion.

Stock-based Compensation

Stock-based compensation expense associated with stock options and awards of restricted stock is measured at the grant date based on the fair value of the award, and is recognized, net of forfeitures, as expense over the remaining requisite service period on a straight-line basis.

The Company values restricted stock at the closing market price of the Company’s common stock on the date of grant.

The following table summarizes our stock-based compensation by account:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation capitalized in inventory	$	77	$	47	$	197	$	151
Cost of sales	19		12		49		38
Research and development	3,149		3,434		9,706		10,764
Selling, general and administrative	7,386		7,506		22,166		21,319
Total stock-based compensation	$	10,631	$	10,999	$	32,118	$	32,272

7. Net Income Per Share

We compute our basic and diluted net income per share in conformity with the two-class method required for companies with participating shares. Under the two-class method, net income is determined by allocating net income between common stock and unvested RSAs. We compute basic net income per share by dividing our net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. We compute diluted net income per share by dividing our net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potentially dilutive stock options and unvested RSUs, less unvested RSAs. We use the treasury stock method to determine the number of dilutive shares of common stock resulting from stock options and unvested RSUs.

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The following table shows the computation of net income per share for each period:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Numerator:
Net income attributable to common stockholders	$	34,550	$	30,471	$	84,755	$	80,459
Denominator:
Weighted-average shares used to compute basic net income per common share	107,125		115,791		106,479		116,297
Dilutive effect of employee stock options and unvested RSUs	9,495		9,345		9,339		10,876
Weighted-average shares used to compute diluted net income per common share	116,620		125,136		115,818		127,173
Net income per share attributable to common stockholders
Basic	$	0.32	$	0.26	$	0.80	$	0.69
Diluted	$	0.30	$	0.24	$	0.73	$	0.63

As of September 30, 2022, we had 23.5 million stock options, 0.2 million RSUs and 0.2 million RSAs outstanding. As of September 30, 2021, we had 25.5 million stock options outstanding and no RSUs or RSAs outstanding.

We excluded from the computation of diluted net income per share, on a weighted-average basis, 7.5 million and 7.2 million stock options and unvested RSUs outstanding during the three and nine months ended September 30, 2022, respectively, and 5.3 million and 4.1 million stock options outstanding during the three and nine months ended September 30, 2021, respectively, because including them would have reduced dilution.

8. Income Taxes

We recorded income tax benefit of $1.6 million for the three months ended September 30, 2022 and income tax expense of $7.1 million for the nine months ended September 30, 2022. In the three and nine months ended September 30, 2021, our income tax expense was $5.8 million and $7.8 million, respectively. The income tax benefit during the three months ended September 30, 2022 was due to excess tax deductions from stock-based compensation compared to income tax expense in the corresponding period in 2021. The decrease in income tax expense during the nine months ended September 30, 2022 was due to increased tax credits that were generated and utilized in the current year compared to the corresponding period in 2021.

Our effective tax rate differs from the federal statutory rate due to state income taxes and the non-deductible portion of our stock-based compensation, which increased our tax expense, offset by research and development tax credits and the excess tax deduction arising from the exercise of employee stock options, which reduced our taxable income.

During the three and nine months ended September 30, 2022, unrecognized tax benefits increased by $0.6 million and $1.6 million, respectively. As of September 30, 2022, the Company had unrecognized tax benefits of $8.4 million that, if recognized, would reduce the Company’s effective tax rate and approximately $2.4 million of unrecognized tax benefits that would not reduce the effective tax rate, because they would be offset by an increase in the valuation allowance.

Each quarter, we assess the likelihood that we will generate sufficient taxable income to use our federal and state deferred tax assets. Except for the valuation allowances that offsets the value of our California net deferred tax assets, we have determined that it is more likely than not we will realize the benefit related to our deferred tax assets. To the extent we increase a valuation allowance, we will include an expense in the Condensed Consolidated Statement of Comprehensive Income in the period in which such determination is made.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. Congress has considered legislation that would defer the amortization requirement to later years, but as of September 30, 2022, the requirement has not been modified.

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Accordingly, we have capitalized our research and development expenses for tax purposes, resulting in higher cash paid for taxes as compared to prior years.

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ITEM 2.  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 condensed consolidated financial statements and the accompanying notes to financial statements, risk factors and other disclosures included in this Form 10-Q. Our condensed 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” within the meaning of the federal securities laws. For a complete discussion of such statements and the potential risks and uncertainties that may affect their accuracy, see the “Risk Factors” section of this Form 10-Q 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 to treat severe endocrine, oncologic, metabolic and neurological disorders by modulating the effects of the hormone cortisol. Since 2012, we have marketed Korlym (mifepristone) for the treatment of patients suffering from Cushing’s syndrome. Our portfolio of proprietary selective cortisol modulators consists of four structurally distinct series totaling more than 1,000 compounds.

Cushing’s Syndrome

Korlym. We sell Korlym in the United States, using experienced clinical 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 patients with 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 (named GRACE and GRADIENT) of our proprietary, selective cortisol modulator, relacorilant, as a treatment for patients with Cushing’s syndrome. Relacorilant was well-tolerated in its Phase 1 and Phase 2 trials. Patients in the Phase 2 trial exhibited meaningful improvements in glucose control, hypertension, weight, liver function, coagulopathy, cognition, mood, insulin resistance and quality of life measures. Relacorilant shares Korlym’s affinity for the glucocorticoid receptor (“GR”), but, unlike Korlym, has no affinity for the progesterone receptor (“PR”), and so is not the “abortion pill” and does not cause other effects associated with PR affinity, including endometrial thickening and vaginal bleeding. Relacorilant also does not appear to cause hypokalemia (low potassium), a potentially serious condition that is a leading cause of patients stopping treatment with Korlym. Forty-four percent of patients in Korlym’s pivotal trial experienced hypokalemia.

In the GRACE trial, each patient receives relacorilant for 22 weeks. Patients who exhibit pre-specified improvements in hypertension and/or glucose metabolism enter a 12-week, double-blind, “randomized withdrawal” phase, in which half of the patients continue receiving relacorilant and half receive placebo. The trial’s primary endpoint is the rate and degree of relapse in patients receiving placebo measured against the rate and degree of relapse in those continuing relacorilant. GRACE has a planned enrollment of 130 patients with Cushing’s syndrome at sites in the United States, Canada, Europe and Israel. If successful, we expect GRACE to provide the basis for a new drug application (“NDA”) for relacorilant as a treatment for patients with any etiology of endogenous Cushing’s syndrome.

Our second Phase 3 trial of relacorilant, GRADIENT, is studying patients whose Cushing’s syndrome is caused by a benign adrenal tumor. These patients often exhibit less severe symptoms or have a more gradual course of disease than patients with other etiologies of Cushing’s syndrome, although their health outcomes are ultimately poor. Half of the patients in GRADIENT will receive relacorilant for 22 weeks and half will receive placebo. The trial’s primary endpoints are improvements in glucose metabolism and hypertension. The planned enrollment for this study is 130 patients. Many of the clinical sites in GRACE are also participating in GRADIENT.

The United States Food and Drug Administration (“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

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confers tax credits, reduced regulatory fees and, provided we obtain approval for the treatment of patients with Cushing’s syndrome, seven years of exclusive marketing rights. 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

There is substantial evidence that cortisol activity at the GR reduces the efficacy of certain anti-cancer therapies and that modulating cortisol’s activity may help anti-cancer treatments achieve their intended effect. In some cancers, cortisol retards cellular apoptosis – the tumor-killing effect many treatments are meant to stimulate. In other cancers, cortisol activity promotes tumor growth. Cortisol also suppresses the body’s immune response; activating – not suppressing – the immune system is beneficial in fighting certain cancers. Many types of solid tumors express the GR and are potential targets for cortisol modulation therapy, among them ovarian, adrenal and prostate cancer.

Relacorilant in Patients with Advanced Ovarian Cancer. In May 2021, we announced preliminary results from our 178-patient, controlled, multi-center, Phase 2 trial of relacorilant combined with nab-paclitaxel in patients with platinum-resistant ovarian cancer. Study participants were randomized to one of three treatment arms: 60 women received 150 mg of relacorilant intermittently (the day before, the day of and the day after their weekly nab-paclitaxel infusion) and 58 women received a daily relacorilant dose of 100 mg per day in addition to nab-paclitaxel. Sixty women received nab-paclitaxel alone. The trial’s primary endpoint was progression-free survival (i.e., the time from random assignment in a clinical trial to disease progression or death from any cause or “PFS”).

Patients in both of the relacorilant plus nab-paclitaxel treatment arms experienced longer PFS than did the patients who received nab-paclitaxel alone. Patients who received a higher dose of relacorilant intermittently exhibited a statistically significant improvement in median PFS (5.6 months versus 3.8 months, hazard ratio: 0.66; p-value: <0.038). Patients who received a lower dose of relacorilant daily exhibited a median PFS that was 1.5 months longer than did the patients who received nab-paclitaxel alone (5.3 months versus 3.8 months, hazard ratio: 0.83; p-value: not significant). Patients who received relacorilant intermittently also had a longer median duration of response (“DoR”) (5.6 months versus 3.7 months, hazard ratio: 0.36; p-value: 0.006) compared to those who received nab-paclitaxel alone.

In March 2022, we announced overall survival (“OS”) data from this trial. OS was assessed after a pre-determined number of patient deaths had occurred. At the time of database cutoff, 128 of the 178 patients who enrolled in the study had died. Patients who received relacorilant intermittently lived longer (median OS: 13.9 months versus 12.2 months, hazard ratio: 0.67; p-value: 0.066) compared to those who received nab-paclitaxel alone.

Safety and tolerability of relacorilant plus nab-paclitaxel were comparable to nab-paclitaxel monotherapy.

In June 2022, we initiated a pivotal Phase 3 trial (“ROSELLA”). ROSELLA has a planned enrollment of 360 women with recurrent, platinum-resistant ovarian cancer, randomized 1:1 to receive either relacorilant plus nab-paclitaxel or nab-paclitaxel monotherapy. The primary endpoint is PFS, with overall survival as a key secondary endpoint. Patients in ROSELLA will have received prior bevacizumab therapy, which is the standard of care in the United States for patients with platinum-resistant ovarian cancer. Women with a history of tumors that do not respond to initial platinum-based treatments (i.e., women with “primary platinum-refractory” disease) and those who have received more than three prior lines of therapy will be excluded.

In our Phase 2 trial, women who met the entry criteria for ROSELLA and received relacorilant intermittently experienced significantly improved PFS (median: 7.3 months versus 3.7 months, hazard ratio: 0.40; p-value: 0.005) and OS (median: 17.9 months versus 12.6 months, hazard ratio: 0.38; p-value: 0.011) relative to patients in the comparator arm. The patients in the intermittent arm also experienced a significant improvement in DoR relative to those in the comparator arm (median: 5.6 months versus 3.1 months, hazard ratio: 0.29; p-value: 0.016).

Relacorilant in Patients with Adrenal Cancer with Cortisol Excess. We are conducting an open-label, Phase 1b trial of relacorilant plus the PD-1 checkpoint inhibitor pembrolizumab in patients with metastatic or unresectable adrenal cancer whose tumors produce cortisol. The trial is examining whether adding relacorilant to pembrolizumab therapy reduces cortisol-activated immune suppression sufficiently to help pembrolizumab achieve its intended tumor-killing effect. Relacorilant is also expected to treat the patients’ Cushing’s syndrome generated by their tumors’ excess production of cortisol.

Relacorilant in Patients with Prostate Cancer. Androgen deprivation is the standard treatment for prostate cancer because androgens stimulate prostate tumor growth. Tumors often escape androgen deprivation therapy when cortisol’s activity at the GR stimulates tumor growth. Combining a cortisol modulator with an androgen modulator may block this escape route.

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Our collaborators at the University of Chicago plan to initiate a randomized, placebo-controlled Phase 2 trial of relacorilant plus enzalutamide in patients with prostate cancer, pre-prostatectomy. We are providing relacorilant and placebo for the study and have licensed patents covering the use of relacorilant combined with anticancer agents such as enzalutamide in the treatment of patients with this indication.

Metabolic Diseases

Antipsychotic-Induced Weight Gain (“AIWG”). In the United States, six million people take antipsychotic medications such as olanzapine and risperidone to treat illnesses such as schizophrenia, bipolar disorder and depression. While these drugs are very effective, they often cause rapid and sustained weight gain, other metabolic disturbances and, ultimately, cardiovascular disease. Patients taking these medications experience a 10 to 25-year reduction in life expectancy, due largely to increased cardiovascular events, such as heart attacks and strokes. 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. The results of this study were published in the Journal of Clinical Psychopharmacology (Hunt et al., 2021) and are consistent with the findings of similar studies we conducted in healthy volunteers using mifepristone (published in Advances in Therapy and Obesity in 2009 and 2010).

Based on these positive results in healthy subjects and compelling pre-clinical data, we are conducting two double-blind, placebo-controlled, Phase 2 trials of miricorilant – GRATITUDE and GRATITUDE II.

GRATITUDE is evaluating whether a daily dose of miricorilant (600 mg) can reverse recent AIWG. Study participants receive their established antipsychotic medication plus either miricorilant or placebo for 12 weeks. GRATITUDE has enrolled patients with schizophrenia or bipolar disorder and is being conducted at 30 sites in the United States.

GRATITUDE II is evaluating whether a daily dose of miricorilant can reverse long-standing AIWG. Study participants receive their established antipsychotic medication plus either miricorilant (600 mg or 900 mg daily) or placebo for 26 weeks. GRATITUDE II has enrolled patients with schizophrenia and is being conducted at 35 sites in the United States.

The primary endpoint in both the GRATITUDE and GRATITUDE II trials is the change in body weight from baseline, relative to placebo. We are also measuring other important metabolic endpoints. In both trials, all patients have completed their course of treatment. Data is expected by the end of 2022.

Liver Disease. We are studying miricorilant as a potential treatment for nonalcoholic steatohepatitis (“NASH”). In April 2021, we suspended our Phase 2a trial after observing elevated liver enzymes, as well as large, rapid reductions in liver fat, in four of the five patients who had received miricorilant. Liver enzyme levels in all affected patients returned to baseline or below baseline after miricorilant was withdrawn. We are conducting a Phase 1b dose-finding trial in patients with presumed NASH to see if an alternative miricorilant dosing regimen can reduce liver fat without causing excessive liver irritation.

Amyotrophic Lateral Sclerosis (“ALS”)

We have initiated a Phase 2 trial of our selective cortisol modulator dazucorilant (the “DAZALS” trial) in patients with ALS. DAZALS has a planned enrollment of 198 patients, randomized 1:1:1 to receive either 150 mg or 300 mg of dazucorilant or placebo daily for 24 weeks. The primary endpoint is the difference between dazucorilant and placebo on the ALS Functional Rating Scale-Revised (ALSFRS-R) total score.

COVID-19 Pandemic

Public health restrictions put in place to reduce the impact of the global COVID-19 pandemic, as well as measures voluntarily undertaken by patients, physicians, hospitals and medical clinics, 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. Some of our trials of indications not considered immediately life-threatening, such as Cushing’s syndrome, have experienced slower enrollment. In addition, some clinical sites have reduced the frequency with which physicians see study participants. Our trials in patients with immediately life-threatening diseases, such as our Phase 2 trial in women with platinum-resistant ovarian cancer, have not encountered delays.

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We expect that pandemic-related impediments to our business will continue so long as there are COVID-19 public health restrictions and/or risk-reducing behavior by physicians and patients.

Please see the risk factor under Item 1A of this Quarterly Report, “The COVID-19 pandemic has adversely affected and is continuing to adversely affect our business. 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.”

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 $101.7 million and $298.8 million for the three and nine months ended September 30, 2022, respectively, compared to $96.1 million and $267.2 million for the comparable periods in 2021. Sales volume accounted for 43.8 percent and 60.7 percent of the increases, respectively. Increases in the average price of Korlym accounted for the remaining growth due to price increases effective January 1, 2022 and March 1, 2021.

Cost of sales – Cost of sales includes the cost of API, tableting, packaging, personnel, overhead, stability testing and distribution.

Cost of sales was $1.3 million and $3.9 million for the three and nine months ended September 30, 2022, respectively, compared to $1.3 million and $3.9 million for the comparable periods in 2021. Cost of sales as a percentage of revenue was 1.3 percent for each of the three and nine months ended September 30, 2022, compared to 1.3 percent and 1.5 percent for the comparable periods in 2021. The decrease in cost of sales as a percentage of revenue for the nine months ended September 30, 2022 was due to reduced manufacturing costs.

Research and development expense – Research and development expense includes 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 expense was $33.3 million and $94.2 million for the three and nine months ended September 30, 2022, respectively, compared to $28.1 million and $85.3 million for the comparable periods in 2021. The increases were primarily due to increased spending on employee compensation expenses and the advancement of our development programs.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Development programs:
Oncology	$	5,370	$	4,521	$	13,000	$	12,549
Cushing’s syndrome	6,891		5,779		23,082		21,893
Metabolic diseases	6,593		5,009		17,734		16,129
Pre-clinical and early-stage selective cortisol modulators	5,938		6,379		17,055		16,736
Unallocated activities, including manufacturing and regulatory activities	5,351		2,969		13,660		7,274
Stock-based compensation	3,149		3,434		9,706		10,764
Total research and development expense	$	33,292	$	28,091	$	94,237	$	85,345

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 lack of drug-candidate efficacy. In addition, clinical development is subject to government oversight and regulations that may change without notice. We expect our research and development expense to be higher in 2022 than in 2021 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.

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Selling, general and administrative expense – Selling, general and administrative expense includes (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.

Selling, general and administrative expense was $35.2 million and $110.5 million for the three and nine months ended September 30, 2022, respectively, compared to $30.5 million and $90.1 million for the comparable periods in 2021. The increases were primarily due to increased employee compensation expenses, sales and marketing activities and legal fees.

We expect our selling, general and administrative expense to be higher in 2022 than in 2021 due to increased commercial and administrative activities, including litigation and administrative support for increased research and development and marketing efforts. 

Interest and other income – Interest and other income was $1.1 million and $1.8 million for the three and nine months ended September 30, 2022, respectively, compared to $0.1 million and $0.5 million for the comparable periods in 2021. The increases were due to a higher cash and investments balance and market-wide increases in interest rates.

Income tax benefit (expense) – Income tax benefit was $1.6 million for the three months ended September 30, 2022 and income tax expense was $7.1 million for the nine months ended September 30, 2022 compared to income tax expense of $5.8 million and $7.8 million for the comparable periods in 2021. The income tax benefit during the three months ended September 30, 2022 was due to excess tax deductions from stock-based compensation compared to the corresponding period in 2021. The decrease in income tax expense during the nine months ended September 30, 2022 was due to increased tax credits that were generated and utilized in the current year compared to the corresponding period in 2021.

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 over the next 12 months and beyond 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 and funds raised through collaborations with other companies may require us to relinquish certain rights in our product candidates.

As of September 30, 2022, we had cash, cash equivalents and marketable securities of $401.2 million, consisting of cash and cash equivalents of $50.2 million and marketable securities of $350.9 million, compared to cash, cash equivalents and marketable securities of $335.8 million, consisting of cash and cash equivalents of $77.6 million and marketable securities of $258.2 million as of December 31, 2021.

The cash in our bank accounts and our marketable securities could be reduced or our access to them restricted if the financial institutions holding them were to fail or severely adverse conditions were to arise in the markets for public or private debt securities. We have never experienced a lack of access to cash or material realized losses.

Net cash provided by operating activities was $86.9 million for the nine months ended September 30, 2022, compared to $118.5 million for the comparable period in 2021. This decrease was primarily due to higher deferred income taxes resulting from the capitalization of research and development costs for tax purposes.

Net cash used by investing activities was $97.1 million for the nine months ended September 30, 2022, compared to $4.3 million for the comparable period in 2021. The change was primarily due to allocation of cash generated from our operating activities towards marketable securities rather than share repurchases.

Net cash used in financing activities was $17.2 million for the nine months ended September 30, 2022, compared to $95.6 million for the comparable period in 2021. In the nine months ended September 30, 2022, we spent $20.8 million acquiring shares of our common stock in connection with the net exercise of employee and executive stock options, offset by $3.6 million received from the issuances of common stock under our incentive award plan. In the comparable period in 2021, we spent $108.8 million acquiring shares of our common stock ($88.5 million pursuant to our Stock Purchase Program that expired on September 30, 2021 and $20.3 million in connection with the net exercise of employee and director stock options), offset by $13.2 million received from the exercise of stock options.

As of September 30, 2022, we had retained earnings of $279.8 million.

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Contractual Obligations and Commitments

Our contractual payment obligations and purchase commitments are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Our payment obligations and purchase commitments did not change materially during the nine months ended September 30, 2022. See Note 4 to our Unaudited Condensed Consolidated Financial Statements for more information regarding our purchase commitments.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Our condensed 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 discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There were no changes that occurred during the fiscal quarter covered by this report that materially affected, or are reasonably likely to materially affect, our critical accounting policies and estimates.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks as of September 30, 2022 are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. The market risks associated with our cash, cash equivalents and marketable securities, which consist entirely of debt instruments with original maturities of less than 24 months, did not change materially during the nine months ended September 30, 2022.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of September 30, 2022, 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 September 30, 2022, 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.

Changes in internal control over financial reporting. Our Chief Financial Officer and other members of management evaluated the changes in our internal control over financial reporting during the quarter ended September 30, 2022 and concluded that there was no change during the quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Teva Litigation

In February 2018, we received a Paragraph IV Notice Letter advising that Teva Pharmaceuticals USA, Inc. (“Teva”) had submitted an Abbreviated New Drug Application (“ANDA”) to the FDA seeking authorization to manufacture and sell a generic version of Korlym prior to the expiration of patents related to Korlym that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). On March 15, 2018, we filed a lawsuit in the United States District Court for the District of New Jersey against Teva for infringement of our patents. On October 12, 2018, Teva received tentative approval from the FDA for its ANDA. In accordance with the Hatch-Waxman Act, however, FDA final approval of Teva’s ANDA was stayed until August 1, 2020.

On July 6, 2018, we filed an amended complaint, and on February 8, 2019, we filed a separate lawsuit against Teva, asserting infringement of several patents, including U.S. Patent No. 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, which it later vacated. A new trial date has not been set.

On May 7, 2019, Teva submitted to the Patent Trial and Appeal Board (“PTAB”) a petition for post-grant review (“PGR”) of the ’214 patent. On November 20, 2019, the PTAB agreed to initiate the PGR, and on November 19, 2020 issued a decision upholding the validity of the ’214 patent in its entirety. Teva appealed its loss to the Federal Circuit Court of Appeals, which on December 7, 2021, ruled in our favor.

The time for Teva to appeal or seek reconsideration of these adverse decisions has passed. This matter is closed.

This lawsuit against Teva currently asserts the ‘214 patent and the ‘216 patent. The parties have completed briefing cross-motions for summary judgment regarding infringement of the ’214 patent. There is no timetable as to when the Court will rule on these motions and there are currently no further calendared dates for the litigation.

We will vigorously enforce our intellectual property rights relating to Korlym but cannot predict the outcome of this matter.

Sun ANDA Litigation and Settlement

On June 10, 2019, we received a Paragraph IV Notice Letter advising that Sun Pharma Global FZE, Sun Pharma Global, Inc., Sun Pharmaceutical Industries, Inc. and Sun Ltd. (collectively, “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.

On July 22, 2019, we filed a lawsuit in the United States District Court for the District of New Jersey against Sun for infringement of our patents. On January 23, 2020, we filed an amended complaint against Sun asserting infringement of two additional patents.

On June 9, 2021, we entered into an agreement with Sun resolving this litigation. Pursuant to the agreement, we have granted Sun the right to sell a generic version of Korlym in the United States beginning October 1, 2034 or earlier under circumstances customary for settlement agreements of this type.

Hikma ANDA Litigation

On February 1, 2021, we received a Paragraph IV Notice Letter advising that Hikma Pharmaceuticals USA Inc. (“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, alleging that these patents will not be infringed by Hikma’s proposed product, are invalid and/or are unenforceable.

On March 12, 2021, we filed a lawsuit in the United States District Court for the District of New Jersey against Hikma for infringement of the ’214 patent, the ʼ216 patent, U.S. Patent Nos. 10,842,800 and U.S. Patent Nos. 10,842,801. The 30-month stay of FDA approval of Hikma’s ANDA expires on August 1, 2023. Hikma responded to our complaint on May 17, 2021, denying our claims. Discovery is set to close in April 2023. No trial date has been set.

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We intend to vigorously enforce our intellectual property rights relating to Korlym but cannot predict the outcome of this matter.

Other Matters

On March 14, 2019, a purported securities class action complaint was filed in the United States 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 “Melucci litigation”). 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 extending 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.

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 withdrew its consolidated complaint and filed a second amended complaint. On May 11, 2020, we moved to dismiss the second amended complaint. On November 20, 2020, the Court granted our motion to dismiss, while granting plaintiff leave to file a third amended complaint, which plaintiff did on December 21, 2020. On February 19, 2021, we moved to dismiss this third amended complaint. Plaintiff filed its opposition to our motion on April 20, 2021 and we filed our reply on June 4, 2021.

On August 24, 2021, the Court granted our motion in part, but also denied it in part. Certain of plaintiff’s claims have proceeded to discovery. Discovery is currently scheduled to close in March 2023.

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, captioned Lauren Williams v. G. Leonard Baker, et al., Civil Action No. 1:19-cv-01830. The complaint named our board of directors, Chief Executive Officer and current Chief Business 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. On December 20, 2020, the case was further stayed pending a resolution of our motion to dismiss the third amended complaint in the Melucci litigation. On September 30, 2021, the case was further stayed pending a resolution of 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, captioned Jeweltex Pension Plan v. James N. Wilson, et al., Civil Action No. 1:19-cv-02308. The complaint named our board of directors, Chief Executive Officer and current Chief Business Officer as defendants, and us as nominal defendant. The complaint alleges 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 damages in an amount 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 our motion to dismiss the third amended complaint in the Melucci litigation. On September 30, 2021, the case was further stayed pending a resolution of the Melucci litigation.

We will respond to this complaint vigorously but cannot predict the outcome of this matter.

On January 31, 2022, a purported shareholder derivative complaint was filed in the Delaware Court of Chancery by Joel B. Ritchie, captioned Joel B. Ritchie v. G. Leonard Baker, et al., Case No. 2022-0102-SG. The complaint named our board of directors, Chief Executive Officer, current Chief Business Officer and President of Corcept Endocrinology as defendants, and us as nominal defendant. The complaint alleges a single cause of action for breach of fiduciary duty. The complaint seeks damages in an amount to be proved at trial. On April 20, 2022, the case was further stayed pending a resolution of the Melucci litigation.

We will respond to this complaint vigorously but cannot predict the outcome of this matter.

In November 2021, we received a records subpoena from the United States Attorney’s Office for the District of New Jersey (the “NJ USAO”) pursuant to Section 248 of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) seeking information relating to the sale and promotion of Korlym, our relationships with and payments to health

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care professionals who can prescribe or recommend Korlym and prior authorizations and reimbursement for Korlym. The NJ USAO has informed us that it is investigating whether any criminal or civil violations by us occurred in connection with the matters referenced in the subpoena. It has also informed us that it does not currently consider us a defendant but rather an entity whose conduct is within the scope of the government’s investigation.

In addition to the above-described matters, we are involved from time-to-time in other legal proceedings arising in the ordinary course of our business. Although the outcome of any such matters and the amount, if any, of our liability with respect to them cannot be predicted with certainty, we do not believe that they will have a material adverse effect on our business, results of operations or financial position.

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 quarterly report, including our condensed 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 has adversely affected and is continuing to adversely affect our business.

•If generic versions of Korlym are successfully commercialized, our business, results of operations and financial position would be adversely affected.

•New laws, government regulations, or changes to existing laws and regulations could make it difficult or impossible for us to obtain acceptable prices or adequate insurance coverage and reimbursement for Korlym, which would adversely affect our results of operations and financial position.

Risks Related to our Research and Development Activities

•Our efforts to discover, develop and commercialize our product candidates may not succeed. 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 time.

•The COVID-19 pandemic has lengthened the time it takes to initiate and advance some of our clinical trials.

•Vendors perform many of the activities necessary to carry out our clinical trials, including drug product distribution, trial management and oversight and 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.

•We may be unable to obtain or maintain regulatory approvals for our product or product candidates, which would prevent us from commercializing 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 Relating to our Intellectual Property

•To succeed, we must secure, maintain and effectively assert 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.

Risks Related to our Stock

•The price of our common stock fluctuates widely and is likely to continue to do so. Opportunities for investors to sell shares may be limited.

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•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 rely on information technology to conduct our business. A breakdown or breach of our information technology 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.

Risk Factors - Discussion

The following section discusses the principal risks listed above, as well as other risks we believe to be material.

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 competing treatments for Cushing’s syndrome, including off-label treatments and generic versions of Korlym, should any such generic versions be introduced;

•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; and

•lack of availability of government or private insurance, the shift of a significant number of patients to Medicaid, which reimburses Korlym at a significantly lower price, or the introduction of government price controls or other price-reducing regulations.

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 has adversely affected and is continuing to adversely affect our business.

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, reacted by instituting quarantines, “lockdowns” and other public health restrictions on leisure activities, work and travel. Although pandemic-related restrictions have been eased or removed in some places, including California, our business remains subject to pandemic-related controls, which may become more restrictive at any time. 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 difficult to grow our commercial business. Many physicians have reduced the frequency of patient office visits and barred office visits by third parties, including our clinical specialists and medical science liaisons. In addition, many patients have postponed visits to their physicians or testing at clinical laboratories or imaging centers. These precautions have made it harder for physicians to identify patients who may benefit from Korlym, begin their treatment, arrive at an optimum dose and maintain their patients’ regimens.

We cannot predict the duration of these impacts on our business or how severe future impacts may be, including supply-chain disruptions and inflationary impacts. 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.

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If generic versions of Korlym are 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 Korlym’s approved indication, provided such parties 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.

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. We have sued Teva and Hikma in Federal District Court with respect to their proposed generic versions of Korlym. In November 2020, the PTAB ruled against Teva in a challenge Teva had brought to one of our patents, a ruling which the Federal Circuit Court of Appeals has affirmed. We had also sued Sun with respect to its proposed generic version of Korlym, although we settled that lawsuit in June 2021. The terms of our settlement with Sun are subject to customary review by the Federal Trade Commission and Department of Justice. Please see “Part II, Item 1, Legal Proceedings.” Because Teva has received FDA approval, Teva may choose to begin marketing its generic product at any time, notwithstanding our ongoing litigation. We would seek a court order stopping such a course of action, but even if we were to prevail (i.e., Teva were to withdraw its product and pay us damages), the temporary availability of a generic version of Korlym might materially harm our results of operations and financial condition.

It is likely that other companies will seek FDA approval to market a generic version of Korlym. While we will vigorously protect our intellectual property, there can be no assurance our efforts will be successful.

Natural disasters, some possibly related to the increasing effects of climate change, could damage or destroy clinical trial sites, our office spaces, the residences of our employees or the facilities or residences of our vendors, contractors or consultants, which could significantly harm our operations.

We are vulnerable to natural disasters, including earthquakes, fires, hurricanes, floods, blizzards and the extended periods of extreme heat, cold and precipitation made more frequent and severe by global warming. For example, our headquarters are in the San Francisco Bay Area, which experiences earthquakes, wildfires and flooding. Our specialty pharmacy, tablet manufacturers and warehouses are in areas subject to hurricanes and tornadoes. All our activities, as well as the activities of our vendors, consultants, clinical investigators, patients, physicians and regulators, are subject to the risks posed by global warming.

The loss of life, property damage and disruptions to electrical power distribution, communications, travel and shipping caused by natural disasters could make it difficult or impossible to conduct our commercial activities or complete our drug discovery activities or clinical trials. Patients may be unwilling or unable to travel to clinical trial sites, for example, or clinical materials or data may be lost.

Our insurance, if available at all, would likely be insufficient to cover losses resulting from disasters or other business interruptions.

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 European Union (“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.

On December 30, 2021, Xeris Biopharma Holdings, Inc. received FDA approval to market the cortisol synthesis inhibitor Recorlev® (levoketoconazole) to treat patients with Cushing’s syndrome in the United States. Levoketoconazole is an enantiomer of the generic anti-fungal medication, ketoconazole, that is prescribed off-label to treat patients with Cushing’s syndrome.

Osilodrostat and levoketoconazole have been designated orphan drugs in both the EU and the United States.

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Physician preference for any of these medications, or for the off-label use of generic medications such as ketoconazole, to treat patients with Cushing’s syndrome could reduce our revenue materially and harm our results of operations, which would cause our stock price to decline.

New laws, government regulations, or changes to existing laws and regulations could make it difficult or impossible for us to obtain acceptable prices or adequate insurance coverage and reimbursement for Korlym, which would adversely affect our results of operations and financial position.

The commercial success of Korlym depends on the availability of acceptable pricing and 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, pricing and reimbursement for Korlym, physicians may not prescribe the medication and patients may not purchase it, even if it is prescribed, or the price we receive may be reduced, which would reduce our revenue.

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 legislative initiatives to contain healthcare costs. The Patient Protection and Affordable Care Act (“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.

Other legislative and regulatory changes have been 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, 2022, and a 1 percent reduction from May 1, 2022 through June 30, 2022, unless additional Congressional action is taken. In addition, the American Taxpayer Relief Act of 2012, 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. In March 2021, the American Rescue Plan Act of 2021 was also signed into law, which, among other things, eliminated the statutory cap on drug manufacturers’ Medicaid Drug Rebate Program rebate liability, effective January 1, 2024. Under current law enacted as part of the ACA, drug manufacturers’ Medicaid Drug Rebate Program rebate liability is capped at 100% of the average manufacturer price for a covered outpatient drug. 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.

There also continue to be federal and state initiatives to contain healthcare costs, in part informed by the current atmosphere of mounting criticism of prescription drug costs in the United States. We expect governmental oversight and scrutiny of pharmaceutical companies will continue to increase and there will continue to be proposals to change the healthcare system in ways that could harm our ability to sell Korlym profitably. We anticipate that the United States Congress, state legislatures and regulators may implement healthcare policies intended to curb healthcare costs, such as federal and state controls on reimbursement for drugs (including under Medicare and commercial health plans), new or increased requirements to pay prescription drug rebates and penalties to government health care programs and policies that require drug companies to disclose and justify the prices they charge. For example, measures have been introduced in Congress that would impose caps on prescription drug prices and would require manufacturers to negotiate drug pricing with the government.

Recently enacted 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 Korlym revenues and our ability to develop and commercialize our product candidates.

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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 active pharmaceutical ingredient (“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, Produits Chimiques Auxiliaires et de Synthese SA (“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. We use a single specialty pharmacy, Optime, to dispense Korlym and perform related pharmacy operations, patient support and related services, including the collection of 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 extends to March 31, 2024, 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 our 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”) or the Medicines and Healthcare products Regulatory Agency (“MHRA”). 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, MHRA 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.

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. On June 24, 2022, the United States Supreme Court published its decision in the case of Dobbs v. Jackson Women's Health Organization (“Dobbs”), which overturned Roe v. Wade, the 1973 Supreme Court decision establishing a woman’s right to terminate her pregnancy, subject to certain limitations. Dobbs has stimulated many states to enact laws making abortion illegal in virtually every circumstance, including during early pregnancy. More laws banning or heavily restricting termination of pregnancy may be adopted and existing laws may be made more restrictive. Heightened public perception of mifepristone as an abortifacient may draw the attention of hostile state government officials or political activists to Korlym – even though Korlym is not approved for the termination of pregnancy, we do not promote it for that use and we have taken measures to minimize the chance that it will accidentally be prescribed to a pregnant woman. In addition, physicians and patients may choose not to use Korlym as a treatment for Cushing’s syndrome simply to avoid the risk of terminating a pregnancy.

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.

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If we are unable to maintain regulatory approval of Korlym 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 (“GCPs”). 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 new drug applications (“NDAs”) or supplemental NDAs, and suspension or revocation of product approvals.

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,” untitled 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 prohibiting 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 United States 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;

•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;

•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;

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•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, certain non-physician practitioners, teaching hospitals and ownership or investment interests held by physicians and their immediate family members;

•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.

In November 2021, we received a records subpoena from the United States Attorney’s Office for the District of New Jersey (the “NJ USAO”) seeking information relating to the sale and promotion of Korlym, our relationships with and payments to health care professionals who can prescribe or recommend Korlym and prior authorizations and reimbursement for Korlym. The NJ USAO has informed us that it is investigating whether any criminal or civil violations by us occurred in connection with the matters referenced in the subpoena. It has also informed us that it does not currently consider us a defendant but rather an entity whose conduct is within the scope of the government’s investigation. We are cooperating with the investigation. Please see “Part II, Item 1, Legal Proceedings.”

If we are found in violation of 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

Our efforts to discover, develop and commercialize our product candidates may not succeed. 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 time.

Clinical development is costly, time-consuming and unpredictable. Positive 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 seek regulatory approval.

Clinical trials may take longer to complete, cost more than expected and fail for many reasons, including:

•failure to show efficacy or acceptable safety;

•slow patient enrollment or delayed activation of clinical trial sites due to the COVID-19 pandemic or other factors;

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•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 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, thereby increasing their costs. Please see the risk factor, “The COVID-19 pandemic has lengthened the time it takes to initiate and advance some of our clinical trials.”

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, thereby delaying or preventing the completion of development and increase its cost. Even if we conduct the clinical trials and supportive studies that we consider appropriate and the results are positive, we may not receive regulatory approval. Following regulatory approval, there are significant risks to its commercial success, such as development of competing products by other companies or the reluctance of physicians to prescribe it.

The COVID-19 pandemic has lengthened the time it takes to initiate and advance some of our clinical trials.

We conduct clinical trials at sites in the United States, Canada, Europe and Israel. In the United States, Canada and Europe, authorities have imposed significant public health restrictions of varying degrees of severity which are likely to persist as long as COVID-19 public health concerns remain. In addition, physicians, patients and medical institutions have changed their behavior in an attempt to reduce the risk of infection, which makes clinical trials more expensive, time-consuming and risky to initiate and conduct.

Some of the sites where we are conducting clinical trials have, from time-to-time, 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. Studies of diseases perceived to be acutely life-threatening, such as our Phase 2 trial in women with platinum-resistant ovarian cancer, did not experience delay or disruption.

We may continue to experience disruptions from the COVID-19 pandemic, which could have a material adverse impact on our clinical trial plans and timelines, including:

•delays in enrolling patients or the loss of enrolled patients due to COVID-19 related restrictions;

•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;

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•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 or public health restrictions implemented by clinical trial sites which make trial participation more time consuming or difficult;

•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; and

•limitations caused by the sickness of our employees or their families or the desire of employees to avoid contact with large groups of people.

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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