E Corcept Therapeutics: Discounted Biotech Company Offers Exceptional Risk Profile And Lucrative Proprietary Pipeline

Corcept Therapeutics (CORT) is a deeply undervalued small cap company that will be the dark horse of the biotech industry in 2019.

The rapid growth company sells Korlym, a medication available to Cushing’s syndrome patients who do not qualify for surgery. Efficient marketing of the drug has allowed Corcept to grow revenues at a 90% CAGR over the past five years while only penetrating about 15% of the total addressable market. This trend is all but certain to continue on the heels of a litigative victory over Teva, which secured Korlym revenues and exclusivity through 2021.

With earnings ​projected​ to grow over 60% in 2019, Corcept is a propitious investment opportunity for the value investor.

“I think we will look back at this moment as one where the bright future of Corcept came fully into view.”

                 
- Joseph Belanoff, CEO

At first glance, Corcept Therapeutics may seem like a value trap with a fickle revenue structure. In my initial assessment, I was put off by the fact that Korlym is the sole revenue source for Corcept, an obvious indication of a precarious business structure in most cases. My sentiment quickly changed, though, when I recognized the certitude of future revenues & hidden value of the Corcept pipeline.

Reliable Revenues

Corcept’s blockbuster drug, Korlym, is the go-to treatment option for people suffering from Cushing’s syndrome who do not qualify for surgery. Though no patients pay full price out of pocket, an annual supply of the drug runs about $200,000. An estimated 20,000 people in the US suffer from Cushing’s syndrome, with 3,000 new cases each year. Roughly half of these patients do not qualify for surgery, meaning the Korlym TAM is about $2 billion with $300 million added annually.

The current patient base of Korlym is 1,400 (est.), meaning only 14% of the market has been penetrated. Management has done well to optimize future prescription growth by sparsing the Korlym physician network across 48 states. This structure is highly conducive to prescriber growth. Over half of the prescriptions for Korlym in 2018 were written by new physicians (i.e. by physicians who had never previously prescribed Korlym), a clear indication of robust growth.

It came as no surprise when big pharma generic kingpin Teva filed an Abbreviated New Drug Application for a generic version of Korlym last February, which wiped out 38% of Corcept’s market cap. In the year since, Corcept shares have failed to recover in spite of positive litigative updates and successful protective measures put in place for Cushing’s segment revenues.

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Disclosure: I have no positions in any stocks/funds mentioned in this article, and have no plan to initiate exposure in any stocks/funds mentioned in this article in the next 48 hours. I wrote this ...

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Harry Goldstein 3 weeks ago Member's comment

Interesting pick. I wasn't familiar with this company.

Andrew Roberts 3 weeks ago Author's comment

Thanks for reading, Harry.

Beating Buffett 3 weeks ago Member's comment

Nice find!

Andrew Roberts 3 weeks ago Author's comment

Thanks for reading!

BreakingBad News 3 weeks ago Member's comment

Impressive.

Andrew Roberts 3 weeks ago Author's comment

Thanks Walter!